Business Interruption Insurance and Landlord Insurance Loss of Rent Cover examined
Business interruption insurance is an additional form of coverage that can be included in a business insurance policy. Many commercial landlords require their tenants to have such insurance. In the event of the temporary shut down of a business, business interruption covers continuing expenses or replaces lost profits.
General extent of cover
The standard wording of most business interruption insurance policies that we have reviewed requires the presence of three factors:

Damage, which is usually required to be damage to the insured’s premises or physical property (for example, from fire, theft or vandalism or flooding) that was covered under the insured’s property policy.
The damage occurs at the insured premises or situation of risk.
The damage causes an interruption that resulted in a loss of business income

The obvious example is a situation where a fire damages business premises.  Business interruption insurance is there to cover the loss of profits or revenue that occurs while the business is closed for repairs and restocking.
Obviously, the Coronavirus does not cause any damage, nor does it occur at the insured’s premises (called the “situation of risk” under many policies).
An additional clause in the business interruption section of the policy may cover an outbreak of infectious disease or contagion occurring within a certain area of the premises, provided that it results in, for example, “the closure or evacuation of the whole or part of the Situation by order of a competent public authority”.
Clauses such as this are designed to include cover for interruption as a result of outbreaks of infectious diseases such as legionnaires disease or measles. Ordinarily, however, these outbreaks are localised in nature.  As such the policy will usually exclude quarantinable diseases under the Quarantine Act or Biosecurity Act.
Coronavirus has become a notifiable disease under both pieces of legislation, meaning that there is essentially no insurance protection for disruptions to business arising from Coronavirus.
Specific situations in which cover may still be available 
In the absence of any cover under the general wording of the policy, it is then necessary to review other endorsements or forms of cover under the policy.
If the business holds special risks insurance then there may be possible covers for supply chain disruption or protection from the negligence, personal injury or worker’s compensation claims.
In each situation, the policy should be carefully reviewed against the claims or losses incurred by the business.
Landlord Insurance – Loss of Rent
A brief word on landlord’s loss of rent cover.
The above issues – ie, a requirement that the loss result from damage to property – are generally not relevant to the question of whether landlord’s insurance that includes cover for loss of rent.  There are no exclusions for lockdown or quarantine events and in most cases, what is required is simply that the tenant has ceased paying rent.
However, your ability to make a claim under the policy may depend on the specific wording of the policy, including certain trigger events before your policy will respond.
Some policies will pay on a claim where financial loss is shown, but others will have additional requirements (as examples):

to issue notices of default or termination to the tenant before making a claim
that the tenant has vacated the premises before making a claim

Effect of the New Code
Under the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (the “Code”) landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period).

A member of our property and real estate team, Dan Ronan, recently published an analysis on commercial leasing principles which dissect and comments on the Code.

This will preclude a claim under many existing policies.
However, tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under the Code and a material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code, meaning that rights of termination may become available at that time.
Warning – review your policy carefully
Do not assume that insurance cover is not available – policies are not a single standard and include many variations in wording and extent of cover.  It is important to review the particular wording of the policy and consider any other endorsements or extensions of cover that may be available.
Consult with your insurer or broker, but don’t take their word for granted if cover is declined and seek second opinions where necessary.
If any landlords and tenants require assistance in negotiating commercial leasing relief, then please contact Bill Purcell, Jacob Duane or Daniel Ronan in our Property and Real Estate team.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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The Queensland Government has announced its intention to introduce legislation for the protection of residential tenants during the COVID-19 pandemic and beyond.
It appears that the main objective of the new legislation will be to stop the eviction of tenants who are unable to pay their rent because of the pandemic crisis.
The announcement states that there will be a retrospective freeze on evictions “as of Sunday, 29 March 2020. It is not clear what that means. What if a residential tenant was evicted on 3 April 2020? Presumably, the intention is to freeze the commencement of eviction proceedings which have been on or after 29 March and which are still in train.
It also appears that the new legislation will permit residential tenants to remain in possession where the leases expire during the current crisis and give them a 6 months option for renewal.
Under existing law, residential tenants have the right to end their residential tenancies without grounds but remain liable in those circumstances for losses suffered by landlords.  It appears that the new legislation will allow residential tenants to terminate their leases if they cannot pay rent because of the pandemic – and to do so free of ongoing obligations to landlords.
We have published a number of articles commenting on issues affecting landlords brought on by COVID-19. These can be accessed below:

Commercial Leasing Principles for SME During COVID-10 – Analysis
Commercial Tenancy Code of Conduct – Coronavirus Pandemic

Finally, the legislation will be introduced with the aim of protecting and supporting persons experiencing domestic and family violence. They will be permitted to leave in a hurry and terminate their occupancy (or co-occupancy) arrangements without paperwork and to have their bonds returned.
Despite the “spin” which the Queensland Government has put on the announcement of this package of changes, the package does not appear to be of any benefit to property owners.

Learn more about the Government’s rental approach on The Residential Rental Hub.

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
 
 
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As we set out in our prior article, COVID-19/Coronavirus – What Happens If You’re Ordered To Shut Down?, one must consider that at the time of drafting the Fair Work Act 2009 (Cth) (the “Act”), the legislature had not anticipated that the provisions therein would be applied to what is effectively a national shut down (or partial shutdown as the case may be) affecting all businesses.
The Federal Government has responded by accepting that the current provisions of the Act are not appropriate or adequate to deal with these unprecedented events and circumstances.  Moreover, most modern awards have now required significant temporary amendments enacted by the Fair Work Commission to allow employers and employees to reach an agreement about the temporary reduction of ordinary hours and roster changes.
Yesterday, the Federal Government introduced urgent amendments to the Act (“Amendments“), to allow access to the JobKeeper scheme by way of significant wage subsidies and increased employment flexibility for employers (and employees) to agree to temporary changes to an employee’s ordinary employment conditions (where the normal employment conditions cannot be performed as a direct result of the COVID-19 pandemic).
Importantly, and as we set out in detail below, the wage subsidy payment is not an upfront payment to eligible employers to pass onto their employees, but rather reimbursement for payments already made by the employer to their employees.
What Will The New JobKeeper Legislation Provide?
Businesses affected by direct State and/or Federal Government directions or alternatively, out of economic necessity to ensure the survival of the business and the preservation of jobs, will be, if eligible, able to access the new JobKeeper scheme.  Under that scheme, the Federal Government will subsidise the wage liabilities of qualifying employers, based on $1500 per employee per fortnight.
A business will be eligible for the JobKeeper payment if:

the business (with a turnover less than $1 billion) has suffered a reduction in turnover of at least 30% compared to the same period last year; or
the business (with a turnover of $1 billion or more) has suffered a reduction in turnover of 50% compared to the same period last year.

The process for working out the required threshold loss of turnover may be challenging for many reasons including but not limited to the nature of the business, acquisitions made by the business in the preceding 12 months, alternative accounting practices undertaken to record turnover, et cetera.
We strongly recommend that you speak with your business’ accounting experts to ascertain whether your business will likely be eligible for the scheme, as the cash flow exposure to the business will be significant (and potentially catastrophic) if it is ultimately determined that your business is ineligible to receive the JobKeeper scheme.  An employer’s eligibility for the JobKeeper scheme will also have a direct impact on whether the employer can apply for the new Commercial Tenancy Code.  To learn more about the Commercial Tenancy Code, refer to the articles below:

Commercial Tenancy Code of Conduct – Overview – Coronavirus Pandemic
Commercial Leasing Principles for SME During COVID-19 – Analysis

The JobKeeper scheme will be backdated to 30 March so that payments can be claimed with effect from that date. However, the employer, in order to receive the wage subsidy, will be required to have paid the $1,500 payment to the employee prior to the ATO reimbursing the employer (section 789GD of the Amendments). Again, we strongly recommend that you obtain independent accounting advice about your business’ eligibility to receive the wage subsidy prior to making payments to your employees.
789GDA Minimum Payment Guarantee 
If a JobKeeper payment is payable to an eligible employer (for an eligible employee), the employer must ensure that the total amount payable to the employee in respect of a fortnight period is not less than the greater of the following:

the amount of JobKeeper payment payable to the employer for the employee for the fortnight (the $1,500);
the amount payable to the employee in relation to the performance of work during the fortnight (effectively, if the employee works over and above the $1,500, the employer must make payment of the additional wage earned by the employee for that period – we consider that this provision relates to employees that are working their ordinary hours or at least, a reduction of their ordinary hours (by agreement) which results in remuneration over and above the fortnightly wage subsidy).

789GDB  Hourly Rate of Pay Guarantee
This Amendment provides that an employee’s base hourly rate of pay is to be no less than the base hourly rate of pay that would have been applicable to the employee in the ordinary course of their employment. The base hourly rate of pay is the amount specified in the workplace instrument governing the employee’s minimum employment conditions or the amount worked out using the method set out in that workplace instrument.  As such, this guarantee is simply a confirmation of minimum hourly rates provided for in an Award or other workplace instrument – that is, employees must not be paid below these rates for the hours they actually work.
A workplace instrument is a modern award or registered agreement (such as an Enterprise Agreement) and any State or Federal law regulating employment relationships (such as legislation dealing with Workers’ Compensation, Workplace Health and Safety, Discrimination, et cetera).
An employment contract is not a workplace instrument, so the base rate may be different to the rate provided in the contract of employment.
789GDC JobKeeper Enabling Direction – Stand Down/Partial Stand Down
We consider that this Amendment is essentially for there to be more flexible stand down arrangements than were allowed by section 524 of the Act (the relevant pre-existing stand down provision). Importantly, it appears that stand down arrangements have been extended to allow a ‘partial stand down’ of an employee’s employment as opposed to the full stand down mandated by section 524 of the Act (where the employee cannot be usefully employed to perform the entirety of his/her ordinary position).
The ‘partial stand down’ appears to now permit a JobKeeper enabling direction to be made by the employer to reduce the number of hours the employee is required to work, by reason that the employee cannot be usefully employed for the entirety of their normal days and/or hours, but can be usefully employed for a reduced number of hours (due to circumstances beyond the business’ control and which are directly attributable to the COVID 19 pandemic and/or government initiatives to slow the transmission of COVID 19).
The employer will be required to pay the employee the base hourly rate of pay for the actual hours the employee works. Moreover, if the actual hours worked by the employee during a fortnight exceeds the $1,500 wage subsidy, the employer will be required to pay the amount over and above the wage subsidy –put simply, the employer will be required to ‘top-up’ the difference.
Section 789GDC (1) provides as follows:

after the commencement of this section, an employer of an employee gave the employee a direction (the job keeper enabling stand down direction) to:
not work on a day or days on which the employee would usually work; or
work for a lesser period than the period which the employee would ordinarily work on a particular day or days; or
work a reduced number of hours (compared with the employee’s ordinary hours of work);

  during a period (the JobKeeper enabling stand down period).
If the JobKeeper enabling stand down direction applies, the employer is still required to pay at least the full amount of the wage subsidy to the employee, taking into consideration the minimum payment guarantee and the hourly rate guarantee – but the employer is not otherwise required to make payments to the employee.
For the purposes of subparagraph 789GDC(1)(a)(iii), the reduced number of hours the employee is required to work may be zero – that is, the employee may not be required to attend work during this period and still receive the wage subsidy (effectively, a complete stand down of the employees’ employment because they cannot be usefully employed in any capacity).
Most simply, the employer can only give a Jobkeeper enabling direction if the affected employee cannot be usefully employed for all or part of their ordinary hours of work during the period of the direction (whether that is a full stand down or partial stand down).
In light of the Amendments, we consider that a JobKeeper enabling direction will prevail over any existing employment terms under a contract, modern award, or Enterprise Agreement.  Other JobKeeper enabling directions available to employers include:

alternative duties of work to be performed by the employee (section 789GE);
alternative locations of work (789GF);
varied the days/hours of work (section 789GG – although this section relates to employees retained in their fulltime employment but required to work alternative hours and/or days to that of their ordinary hours and days of work);
taking of authorised annual leave (section 789GJ – authorised annual leave can be taken at half pay, although the employee must retain a leave balance of no less than 2 weeks).

Other Considerations to Make When an  Employer Intends to Make a JobKeeper Enabling Direction

The direction must be reasonable and based on the employer’s reasonable belief that the direction is necessary to preserve the ongoing employment of the employee and/or its entire (or part thereof) workforce;
The employer must pay at least the full amount of the JobKeeper subsidy directly to the employee – noting, again, that the employer must pay such amounts to the employee out of its own pocket and then (hope to) be reimbursed by the Government;
The employee’s rate of pay cannot be reduced for the hours which the employee actually works once a direction has been given. The employee must be paid for the hours they work at least at the relevant minimum rate of pay;
The employer has a duty of care to ensure the direction can be performed safely and any ‘new’ assigned duties are within the employee’s skills, competencies and mandated qualifications to perform such duties.

780GM Consultation
A JobKeeper enabling direction will not apply unless the employer:

gave the employee written notice of the employer’s intention to give the JobKeeper enabling direction; and
the employer gave notice:

at least three days before the direction was given; or
the employee genuinely agreed to a lessor notice period; and

the employer consulted the employee about the proposed JobKeeper enabling direction;
the employer must keep a written record of a consultation with the employee;

Importantly, it remains unclear whether a prior stand down direction or agreement to reduce hours of work will apply retrospectively (notwithstanding that the earlier steps taken by the employer out of economic necessity were reasonable and consistent with the new scheme).
Accordingly, we recommend that the employer again consults with their employees about the proposed JobKeeper enabling direction they intend to make. We also recommend that employers who have already taken prior steps which are consistent with the new scheme, seek the reimbursement for those payments made.  However, until further direction from the Federal Government and/or the ATO is provided (about prior consistent steps taken by employers), there is no certainty that prior amounts equal to the wage subsidy paid by an eligible employer will be reimbursed until the further consultation has been undertaken in accordance with the new JobKeeper scheme.
789GU Employee Requests for Secondary Employment, Training, etc
In response to a direction, an employee can request approval to take on a second job, or to be provided with training or professional development. The employer must consider that request and not unreasonably refuse that request.
The Role of the Fair Work Commission (“FWC’)
The FWC will have a significant enforcement/arbitration role to perform in the implementation of the Amendments. An employee will be able to challenge a JobKeeper enabling direction, and the FWC will have the jurisdiction intervene and set aside a direction, only after considering the ‘fairness between the parties concerned’.
If the FWC intervenes, one may reasonably query how will the ‘fairness’ and ‘reasonableness’ of the employer’s direction will be assessed, given the inevitable balancing of interests between the employer and the employer. We consider that the employer will likely be given necessary liberty to establish that the directions were given to ensure the preservation of the employee’s job and that of the employers’ entire workforce. However, there will likely be substantial scrutiny if the FWC considers that the employer has engaged in opportunistic abuse of the JobKeeper scheme.
Employers must be mindful that when deciding to enact a JobKeeper enabling direction, that they may face significant fines (civil penalties) if it is ultimately determined that they have engaged in opportunistic abuse of the JobKeeper scheme.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
 
 
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Commercial Leasing: Sharing the pain in a “Proportionate, measured manner”
The National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19.
Without a doubt, the impacts on the commercial leasing sector brought on by the coronavirus pandemic have been extreme.
With ever-changing restrictions impacting on foot traffic and patronage, many businesses who rely on customer traffic have seen severe reductions in cash flow, often impacting on their ability to pay fixed expenses, including lease payments.
Tenants are suffering cash flow problems by reduced turnover and wages for any retained staff, and the obligations on landlords to maintain mortgage repayments and outgoings will continue despite the pandemic.
Consequently, it is unavoidable that commercial leasing rent payments under leases are at risk.
The Commonwealth Government should be applauded for the roll-out of the JobSeeker and JobKeeper incentives. This first tranche of economic assistance focused on assisting those that have lost jobs (JobSeeker), and the other aimed at helping businesses to retain staff (JobKeeper).
The National Cabinet has now released next tranche being the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (the “Code”).
The Code is to apply through each state and territory legislation and is not intended to override the legislation of each jurisdiction but “…aims to complement it during the COVID-19 crisis period.”
That said, the Code does not apply to all tenancies. The Code will apply to landlords and tenants who are eligible for the JobKeeper program and who have an annual turnover of less than $50 million. The apparent intent is for the Code to capture small to medium business.
One of our recent articles noted that it is crucial for landlords and tenants to openly discuss these issues that are affecting both to seek a commercial outcome. Maintaining an honest and open dialogue should never be discouraged. As a result, commercial agreements with respect to moving past the pandemic may be achieved.
Types of Conduct
This type of conduct is also reflected in the Overarching Principles of the Code where landlords and tenants are to generally:

discuss relevant issues, to negotiate appropriate temporary leasing arrangements, and to work towards achieving mutually satisfactory outcomes;
negotiate in good faith;
act in an open, honest and transparent manner, and will each provide sufficient and accurate information within the context of negotiations to achieve outcomes consistent with this Code;
consider the duration and expiry of the lease; and
consider the structure of the leases.

Without wanting to sound sceptical, the Code does contain some cuddly language to support this position.
By using terms such as negotiate in good faith, achieving mutually satisfactory outcomes and applying the Code in spirit to all leasing arrangements, it does provide for a list of mandatory principles to guide that negotiation. However, experience tells us that when people become desperate, those goals only get you so far.
Key Leasing Principles Outlined in the Code
Accordingly, the Code provides for several leasing principles that should be applied as soon practicable, the most critical being that:

Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period);
Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. However, material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code;
Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals so that the cash flow relief is in the commensurate to the turnover reduction suffered by the tenant where, at a minimum, half of the assistance must be provided for by way of a rent waiver. For example, if the tenant experiences a 60% turnover reduction then at least 30% of the relief must be by way of rent waiver, and 30% must be by way of rent deferral;
Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the longer unless otherwise agreed by the parties;
A landlord should seek to share any benefit it receives due to deferral of loan payments, provided by a financial institution as part of the Australian Bankers Association’s COVID-19 response, or any other case-by-case deferral of loan repayments offered to other landlords, with the tenant in a proportionate manner;
If negotiated arrangements under this Code necessitate repayment, this should occur over an extended period in order to avoid placing an undue financial burden on the tenant;
Landlords must not draw on a tenant’s security for the non-payment of rent during the period of the COVID-19 pandemic and/or a reasonable subsequent recovery period; and
Generally, landlords must freeze rent increases for the duration of the COVID-19 pandemic and a reasonable subsequent recovery period.

What may be of concern to some is point 2 above where any material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code. This raises the question that if a business is suffering financial hardship and is unable meet its rent obligations and is then ultimately unable to pay for the costs of repair to the premises to the satisfaction of the landlord will any agreement negotiated pursuant to the Code by negated. As any tenant will know, financial obligations extend well beyond the payment of rent.
Deferred Rent Regime
What may concern landlords is the deferred rent regime. The end of the pandemic does not require the tenant to immediately repay any and all deferred rent payments, which may be paid through the recovery period. The Code states that tenants should be provided with an opportunity to extend the lease for a period equivalent to the rent wavier and deferral period. This is not mandatory. Accordingly, a lease may expire before all of the deferred rent has been paid to the landlord. Therefore, landlords should be wary that deferred payments of rent may be at risk, particularly when leases expire not long after the crisis has concluded or the business only recovers at a slow rate.
If the landlord and the tenant are unable to agree on terms applying the principles set out above, then the parties are to refer the matter to the relevant State or retail leasing dispute resolution process. Unfortunately, for most leasing matters, the relevant referee in determining disputes is the Queensland Courts and the Queensland Civil and Administrative Tribunal.
Increased Commercial Leasing Disputes
Only time will tell as to how well Queensland will cope with a potential influx of leasing disputes seeking to be determined through any dispute resolution process and what will happen to those parties whilst waiting for any dispute resolution to occur. Given the obvious effect on businesses in Queensland as a result of the pandemic, every minute will count.
Will it work? Only time will tell with many factors at play, including the overall length of downtime due to government restrictions and the resilience of business against growing economic uncertainty.
The implementation of the Code (which must be legislated for by the State Government) is nothing short of a positive step forward in preventing the economic ruin of small business.
If any landlord and tenant require assistance in negotiating commercial leasing relief, then please contact Bill Purcell, Jacob Duane or Daniel Ronan in our Property and Real Estate team.
 
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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The National Cabinet which has been formed between the political leaders of the Australian states and territories has adopted a Code of Conduct which will have the force of legislation in each state and territory for the duration of the coronavirus pandemic and beyond.
This article summarises the essential features of the Code. Another article we have written provides commentary and analysis on the Code of Conduct and it can be accessed by clicking here.
Overview of the Code of Conduct
The Code imposes a set of leasing principles which must apply to retail, office, industrial and other commercial tenancies in which a tenant conducts a business which is eligible for the JobKeeper programme.
The Code will apply until, according to the Australian Government, the pandemic ends and until the end of a subsequent reasonable recovery period (“relevant periods”).
The Code applies to commercial tenancies which have an annual turnover in excess of $50 million and which suffer financial stress or hardship as a result of the pandemic.
The Code intends to make landlords and tenants share the financial risk and cash flow impact, proportionately, during the relevant periods. Landlords are to agree a “tailored, bespoke and appropriate temporary arrangements” with tenants on a case-by-case basis.
The Code requires landlords and tenants to negotiate in good faith to ensure business continuity and to facilitate the resumption of normal trading activities during a reasonable recovery period when the pandemic ends.
Negotiations must be conducted openly, honestly and transparently and sufficient, accurate trading and financial information must be exchanged in a timely manner.
Leasing principles
Other overarching principles will apply in guiding negotiations – each of which is intended to mitigate the impact of the pandemic upon the tenant.
There are 14 leasing principles which the Code of Conduct applies to temporary arrangements negotiated between landlords and tenants –

Landlords must not terminate leases for non-payment of rent up to the end of the relevant period
Subject to lease variations negotiated under the Code, tenants which fail to comply with certain obligations under their leases will forfeit the protection of the Code. For example, they may be evicted.
Landlords must offer tenants rent reductions. They may be in the form of deferrals, discounts, waivers or other concessions. They must be proportionate and may be up to 100% of rent and outgoings ordinarily payable. The concessions must be proportionate and based upon the tenant’s reduction in turnover.
Waivers must be at least 50% (and sometimes more depending upon a landlord’s financial position) of the aggregate of negotiated waivers and deferrals. In other words, if the negotiated amount is $100,000, at least $50,000 must be waived. Notably, however, tenants may agree to waive the 50% minimum waiver.
Deferrals must be amortised over not less than 24 months or longer if the term of the lease has more than 24 months to run.
Outgoing concessions which landlords receive (e.g.reduction in rates or insurance premiums) must be passed on to tenants.
Landlords should seek to share any benefit which they receive from the lenders during the pandemic, in a proportionate manner, with tenants. But, the application of this principle will be problematic.
Landlords should consider waving recovering of other expenses payable by tenants which are unable to trade during the pandemic but will be permitted to reduce services to which the expenses would normally apply. Examples would include cleaning and gardening costs.
Negotiated deferrals, other than for rent, should be payable over an extended period to avoid undue financial burden on the tenant. Repayment should not commence during the relevant period
Landlords may not apply interest or other charges on rent which is waived or deferred.
Landlords may not enforce personal guarantees for non-payment of rent or draw against cash bonds or claim against bank guarantees for non-payment of rent during the relevant period.
Landlords should allow tenants to extend their leases by the amount of time involved in any rent waiver and deferral period to provide extra time to trade on existing lease terms during the recovery period.
Landlords must agree to freeze rent increases other than rent based on turnover for the relevant period.
Landlords must permit tenants to reduce opening hours or to cease trading, without penalty, because of the pandemic

Mediation
If landlords and tenants are unable to negotiate and agree on leasing arrangements as required by the Code or otherwise, the matter in question should be referred for mediation.  Mediation will be binding.
The Code of Conduct states that landlords and tenants must not use the mediation process to prolong or frustrate the “facilitation of amicable resolution outcomes”.
Conclusion
The Code will be implemented by State and Territory legislation which, hopefully, will be uniform. Adherence to it will be mandatory. But, that does not mean, for example, that the law will require landlords and tenants to reach an agreement. Rather it will require them to attempt to do so in good faith. If an agreement cannot be reached, the parties must go to mediation.
The Code makes no mention of penalties for non-compliance. But it would be reasonable to expect State and Territory legislation to contain penalties for breaches the Code.  Will it be a punishable offence for a landlord to refuse to negotiate? Will it be a punishable offence for a tenant to knowingly produce inaccurate financial information during negotiations or mediation? Predictably, “YES”.
If any landlord and tenant require assistance in negotiating commercial leasing relief, then please contact Bill Purcell, Jacob Duane or Daniel Ronan in our Property and Real Estate team.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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We are seeing unprecedented activity in the commercial leasing industry due to the COVID-19 pandemic. Currently, we are assisting our clients to negotiate rent reductions in exchange for monthly calls on bank guarantees and extension to lease terms.
How long this will last is anyone’s guess as the Prime Minister’s media statement on 3 April 2020 stated that a mandatory code was to be legislated by the states and it would include a prohibition “on landlords from making a claim to a bank guarantee or security deposit for non-payment of rent”. There are other proposed prohibitions contained in the media statement.
Generally speaking, communication between landlords and tenants has been admirable. There are some tenants that are refusing to communicate with landlords. Those tenants are being issued with notices to remedy breach of lease.
Although they cannot be acted on, it will serve as a record of the breach and the tenants’ refusal to work in a fair and reasonable manner.
The Property Council of Australia yesterday issued a COVID-19 Brief. In that brief, the PCA hinted at the possibility of the National Cabinet adopting a principle “allowing tenants to walk away from their leases en masse”. That would be devastating for the commercial leasing industry.
Landlords and tenants need to communicate now to ensure that all parties are able to continue to trade and meet their obligations during these difficult times.
“The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.” Winston Churchill.
Jacob Duane, Bill Purcell and Dan Ronan would be happy to discuss how you can work with your landlord or tenant on achieving a result that works for all parties involved in your commercial leasing arrangement.

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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Given the severe belt-tightening that we are all experiencing due to the coronavirus/COVID-19 pandemic, there will be no doubt be a flow-down effect to bodies corporate that manage the operation of strata-titled complexes.
Those bodies corporate engage specialist body corporate managers to conduct the business of the body corporate and to manage the by-laws that regulate those complexes. The body corporate manager is paid from the levies that are paid by owners of the individual lots.
It is reported that a Gold Coast luxury hotel has closed as a result of financial stress on its owners that operate the hotel.  As a result, the owners of the lots in the hotel have called an extraordinary general meeting to vote on whether the body corporate company be placed into liquidation.
If this is happening in a complex with multimillion-dollar lots it will surely happen to complexes owned by mums and dads and self-funded retirees.
Owners of lots in a body corporate need to take action now and engage with their body corporate managers. An understanding needs to be reached to determine how much longer the body corporate fees can pay the body corporate manager for its services.
“I never worry about action, but only inaction”. Winston Churchill
Jacob Duane, Bill Purcell and Dan Ronan would be happy to discuss this article if you have any queries.

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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Case Study
Galaxy Developments Pty Ltd The Civil Contractors (Aus) Pty Ltd trading as CCA Winslow – Decision if the Queensland Supreme Court 30 March 
Two facets of this decision are worth review:  

It was alleged by the applicant that any decision made by the adjudicator was void as it was made outside the time requirement under the Building Industry Fairness (Security of Payment) Act (BIF). The consequences if the decision was void was there is no enforceable adjudication decision following a $1.3 million decision in favour of the respondent (CCA);
It was further alleged that certain bus shelter works and seating additional to roadworks were completed by the contractor while not having a license as was required. As such under section 42 of the QBCC Act contractors undertaking unlicensed works could not recover any amount for remuneration other than under the terms of that Act and more particularly could not pursue an adjudication application under BIF

Facts and Issues – Late Decision 
The fact that the adjudicator delivered a decision outside the time limits required by the Act was uncontested. The question here was whether the Act should have been interpreted in such a way as to water down what might otherwise be seen as quite mandatory provisions. The respondents here argued that the clear objectives of the Act should effectively trump an interpretation that was strict in nature.
The applicant argued that the clear meaning and unqualified time limits mean as they suggest that decisions need to be made within the specified time and if they are not it is a matter that goes to the jurisdiction of the adjudicator and a court should declare any such decision void. Given The use of the word “must” in section 85 (1), the applicant argued there could be no clearer circumstance, and there was no required uncertainty to look beyond the clear meaning of the text.
Decisions and Takeaways – Late Decision 
Not surprisingly, the Court determined that the clear textual meaning should prevail regardless of the underlying objects of the Act “must” really does mean “must”. This decision was for a significant sum and no doubt the adjudicator issued a considerable account for his services in determining what was a void decision as he didn’t comply with the basic requirements of delivering the decision on time. The adjudicator was denied any fees for services and an order was made accordingly as the adjudicator was determined not to have acted in good faith as required.
The remedy for an applicant faced with these circumstances is that he could either within five business days of the period ending when the adjudicator should have given his decision, request the registrar to refer the application to another adjudicator or make a new application. These are remedies under section 94, and while timings are tight, as are all time limits under the Act, this was crucial to the decision being made in favour of the applicants. The point made by the Court is that the applicant for adjudication was not left without a remedy.
Facts & Issues – Unlicensed Contracting 
While it was strictly unnecessary for the Court to determine the issues of licensing (as it had already determined the matter in the lack of timely decision issue), her Honour was no doubt compelled, if no other reason but to again underline the possible injustice to contractors for the small error that occurred in this instance.
The respondent had a landscape licence only, and it was contended that a minor part of the works undertaken were outside the bounds of that licence, and consequently, under the authority of a multitude of cases, the respondent was unable to make an adjudication application, and any application decided would have been beyond jurisdiction and as such void.
The works undertaken included the construction of roadworks, clearing and earthworks at Foxwell Road Coomera. Importantly part of the works included fixing of a simple garden seat to new concrete paving as well as erecting a prefabricated metal shelter with a bench seat on the concrete footpath. There was an associated structure, a bike rack, at the side of the bus shelter. The value of these works compared to the total contract was minuscule.
Much discussion took place as to whether these minor works for within the various exemptions that apply under the QBCC Act and whether indeed the landscaping licence covered any of these structures. 
Considerable time was spent on some exemptions rather than others because of their complexity concerning the age of the particular Road and whether or not that Road fell within certain exceptions under the Act. 
Most of these discussions are very technical in terms of legal interpretation of the exceptions. They are not useful to cover in such an article other than to say that more often than not these exceptions are determined by very fine lines and that there can be reasonable differences of opinion concerning the applicability or otherwise of the exceptions when compared to the work carried out.
Result in Takeaway is Unlicensed Building Work 
In the end result, the Court determined on purely statutory interpretation grounds that while Foxwell Road may have been a dedicated Road, the structures upon the footpath did not form part of that dedicated Road such that it fell within the exception. While the bus shelter wasn’t determined to be building work, because of how the definitions work, the garden seat separate to the shelter and bike rack were not covered by the exceptions in the definition of building work. 
As a consequence, the work was undertaken by an unlicensed contractor with the result that the contractor was unable to make an adjudication application and was restricted to its rights on a quantum meruit style claim under section 42 of the QBCC Act.
As is clear from above and from previous articles I have written on the subject the definitions are fine and sometimes complex as to what is and what is not building work and what is covered by particular licence and what is not. Her Honour emphasized, 
 ‘… my conclusion is a result of stochastic and illogical provisions in the schedules of the QBCC regulations and produces a result which, although it may be correct in law, is absurd in reality: the first respondent was licensed to demolish move and reassemble a prefabricated bus shelter but was not licensed to carry out the same actions in relation to the much simpler structures of a freestanding bus seat and bike rack. Again, focusing only on the licensing issues, the result is not that the first respondent cannot be paid for those very small items of work, but that the first respondent cannot be paid for work under a contract worth $1.3 million. I invite the renewed attention of the Legislature the need for establishing a rational and fair law in relation to recovery of payments under contracts to perform building works.’ 
Contractors proceed at their peril by not having some regard to the works in the scope of work and whether they are licensed for each part of it.
 
 

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While construction is deemed an essential industry at present, depending on levels of compliance with social distancing, the incidence of COVID-19 in the industry and WH&S concerns, the time may come when delays will be forced upon a project by reasons of lack of productivity, reduction in staff, or product and labor shortages because of government intervention.
There is a real risk that your current contracts do not properly protect you from delay or cost claims in these circumstances.
Start Reviewing Reviwieing Contracts Now Before the COVID-19 Pandemic Worsens
Clients should logically start a review of their contracts currently underway now so that those which may expose your business to such claims should the COVID-19 pandemic (or the business disruption from the virus) worsen, are identified. Once identified contractors might choose to “get on the front foot” and propose changes to the contract by way of a deed of variation which might for instance deal with issues such as:

Suspension of obligations affected by COVID-19;
An obligation to mitigate any loss to the project in terms of timing;
Extensions of time;
How increases in costs should be dealt with; and
How delay damages are dealt with.

We can draw up an appropriate deed that might commence the discussion as to how these matters are proposed to be dealt with.   We can also assist in any negotiations and finalise the deed once an agreement is reached.
We expect that these matters will be more easily dealt with now when the parties can discuss and work out what should happen in a sensible negotiation and enter into a clear agreement if things get worse.  The alternative is that you wait until significant delay and costs disputes are being made, you discover your contract does not protect you very well and you then have to spend significant sums on adjudication, arbitration or litigation during or even worse at the end of the project.
Given some lead time, you should be able to negotiate a better result compared to leaving these matters to a time when business pressure means relationships are under greater strain.  This approach will also be far more cost-effective than dealing with each contractual dispute that arises should the COVID-19 restrictions mean you are unable to comply with your obligations through no fault of your own.  It will also give you peace of mind in carrying out your current works under contract.
Tony Mylne and Andrew Lambros would be happy to how to put in place such a system and give you a fixed budget for any proposed initial draft of any deed of variation.
 

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The post How to Protect Yourself from Coronavirus/COVID-19 Costs as a Contractor appeared first on Bennett and Philp Lawyers.

The latest case of an unusual “Will” involves that unheralded defender against breakages; the humble beer carton.
Lindsay Olive had made a Will in which he divided his $1 million estate between children, step-children and step-grandchildren.
However, in 2019 Mr Olive told friends that he wanted to change his Will so that it provides for his friends and leave his children and step-children out.
Unfortunately, Mr Olive passed away suddenly in November 2019 aged 69, before making that new Will.
The executor discovered various writings that Mr Olive had made on a beer carton, as well as on a beer coaster and a letter. The handwritten scrawl comprised of names, numbers and other notations. There were ticks next to some names, comments such as “Has enough” and “Doesn’t deserve it” besides others.
According to Mr Olive’s close friend, it was the norm for him to write notes on any old bits of paper while drinking beer and listening to 4KQ in that area under his house which he called his “office”.
The executor took the step of asking the Supreme Court to decide whether the beer carton, coaster or letter should be recognised as Mr Olive’s final Will, instead of the 2019 Will.
Mr Olive’s only daughter opposed any of those documents being recognised as his final Will.
Ultimately, the Court rejected the beer carton, coaster and letter as being the last Will. The 2019 Will applied.
On considering this case, I cannot help thinking these two questions:

What was Mr Olive’s preferred beer?
Did the executor really need to seek the Court’s decision on the validity of the beer carton, etc?

The answer to the first question is anyone’s guess so let’s look at the second question.
It is not uncommon for executors to locate notes, or even an unsigned Will, containing statements as to how the deceased may have wanted his or her estate to be administered.
However, for such documents (‘informal’ Wills) to have any prospect of being upheld by a court, there needs to be strong evidence demonstrating that the deceased intended that particular document to be operative.
If that evidence does not exist, then a determination from a Judge is not usually required.
Here, there may have been evidence suggesting that the beer carton was intended to be operative. We do not know.
In any event, it’s a situation which could have been easily avoided a couple of ways: by him having ‘amended’ the beer carton (or coaster or letter) so as to make it operative, or by having a formal Will prepared. While a beer carton Will would have been admirable in this author’s eyes, the latter is usually the safer option.
 
 
 
 

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In our latest webinar, Construction Litigation Director, Tony Mylne, discusses gearing up for the commencement of statutory trusts, as well as the amendments to the Building Industry Fairness (Security of Payment) Act (BIF). It is expected that these amendments will be passed during the period of April – May 2020.

The seminar discusses the essential and detailed consideration of:

Overview and History
Phases of Introduction
Who do Trusts Apply To?
Which contracts exempt?
When is amount liable to be paid to subcontractor?
Statutory Trusts – Administration, Deposits, Payments, Dissolution, Shortfall, Notices
Retention Trust Account, Admin, Charges
Training
Powers obligations and restrictions on Trustees
QBCC Powers
Security under PPSA
Personnel liability of executives
Amendments S75 – Supporting statements
Withholding payment
Charges over property
Amendments to Security of Payment Provisions and QBCC Act, s42E, Excluded no site supervisors licence

It is important to be aware of these changes and how they may affect your business practices or construction team.
Find below a schedule prepared to accompany our webinar and which sets out all penalties under the project trust account provisions. This should assist in identifying risk areas of administration, and possible liabilities for executives, corporations and business owners dealing with the anticipated legislation.
If you would like further updates, please contact us.
 

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The post Amendment to Building Industry Fairness (Security of Payment) Act – Project Trust Accounts appeared first on Bennett and Philp Lawyers.

With the current pandemic playing out, everyone realises that they need to take urgent action, but the question is what to start with and how to do it?  We have set out the issues and some of the legal points you need to consider to make sure your business is placed in the best position possible to get through this crisis and onto the other side successfully.
Costs reduction
Obviously, you need to work out what costs you can reduce quickly and how quickly you can do it.
Landlords and creditors
Communication and negotiation is key here.  This is the common advice and it’s correct.
What gets forgotten is the need to document any final agreement in a form that is legally enforceable.
Most businesses don’t realise that legally an agreement to accept less than what you’re owed is not binding. The creditor can sue you later for the shortfall.
You need to either ensure that there is some form of legal consideration between the parties to amend the contract or it needs to be documented in a Deed which is properly executed to make it legally enforceable.
Debtors
Securing cash flow is going to be vital, the reality is a lot of your clients or customers may not be able to pay you right now.
Our article on ways to try and deal with those issues can be found in the article linked below.

How to Protect Your Cash Flow During the Coronavirus/COVID-19 Pandemic

Employees
We have written previously about standing down employees and how, if done strategically, it can benefit your business from a cash flow perspective and allow your employees to ‘stay on the books’ while accessing Government funded entitlements like the new JobKeeper package.  Those articles can be found below:

COVID-19 – What Happens if your Business is Ordered to Shutdown
COVID-19 – Is Your Business Ready?

Consider your contractual obligations
If you have commitments to your clients or customers such as building contracts, supply contracts or other services you need to work out if you will be able to meet those obligations.
A lot of contracts contain financial cost provisions if they are not completed on time.  Even without specific financial costs, as a matter of law you can still be liable for not completing your obligations under a contract.
These contracts should be reviewed and if you think there could be a problem, you should be looking to negotiate and amend these contracts now, in the event you can’t complete your contract.
Remember you may be affected by one of your suppliers or contractors being unable to complete their contract to you and this should be factored into any such negotiation.
For a more detailed article on this issue please click below:

Coronavirus Crisis & Force Majeure: How Can I Get out of My Contract?

Government assistance
Obviously, everyone will be looking at these packages, you need to factor in how long payment will be for some of these programs and how long any approval for government loans might take and how quickly you need to apply.
For a more detailed article on this issue please click below:

‘I Need Money Now’ – Available Income Measures and Options for Australians Affected by COVID-19

Be realistic about your business
If your business was already struggling or you expect that it will take a long time to recover, then you need to consider your options of closing down your business.
Many from the ATO, creditors and the landlords are talking about deferring these debts, not forgiving them.
Should this current situation continue for the next 6 months then the amount of debt that your business accrues may become impossible to repay long after this crisis is over.
Trying to struggle through for several more years without being able to repay these debts means you might still end up closing the business down but will have lost the opportunity to spend those years building a new business or receiving paid employment.
If you are in this category please contact us, there is a lot that can be done to avoid this or reduce the impact of closing a business but only if you act quickly and don’t wait until the last minute.
Legal assistance
If you need any advice or assistance in carrying out these steps please get in contact with us.
Please click here to access our Coronavirus (COVID-19) Resource Centre to access all of our latest articles and updates and meet our expert response team who can assist you with any challenges your business may face.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).

 
 
The post Urgent Business Actions to Take During the Coronavirus (COVID-19) Pandemic appeared first on Bennett and Philp Lawyers.

The legal and practical challenges to enforcing payment through the court system (which is slowing down  due to social distancing requirements and other problems brought on by coronavirus and may slow down further) while also dealing with the government changes at the moment means that businesses need to be thinking of different ways to collect payment, or to protect themselves as a matter of urgency.
Given bankruptcy notices and statutory demands are likely to be ineffective right now given the six-month period to comply other options need to be considered.
Adding to this difficulty is that the courts are slowing down on the processing of standard debt recovery matters meaning it takes longer to obtain a judgement than usual.  The courts are also indicating that a number of the other enforcement mechanisms will not be actioned either.
For example, warrants for seizure and sale of property will not be actioned for a period of time in some courts already.  Even if such a warrant could be obtained selling the property of a debtor by way of public auction will be very difficult given the restrictions on COVID-19 enforced social distancing now in effect which impact on house inspections and auctions.
It also makes good business sense to assist your customers as much as possible during the current crisis.
We have set out a few options that are still open for companies to encourage payment that can be put into place.
Caveats
Your terms and conditions in the credit agreements may allow you to caveat over the property of the debtor or the guarantor.  We can review those terms to advise you if you have that ability and if you did not have these terms then they can also be amended.
Currently, you are still able to lodge caveats and take the necessary court action to protect that caveat to ensure your interest in the property is secured.  Taking further action to sell the property will be difficult under the circumstances but this at least helps to improve the longer-term recoverability of this debt.
Asking for security
Depending on the terms and conditions of your credit agreement and guarantee you may be entitled to ask for a mortgage to secure any current and future debts the debtor may have with your business.
If you are able to obtain a registered mortgage, then the recoverability of the debt over the longer term will be greatly improved.
PPSR
Your credit agreement or terms and conditions of sale may allow you to register a security interest over the goods you have supplied or other security interests on the Personal Property Security Register.
You still need to register that interest properly.  If the interest hasn’t been registered, then you will need to get advice to deal with any time limits you may have missed.
Discount for early payments
While not ideal, offering a discount to encourage early payment may ensure that your account gets paid by debtors who are trying to control their cash flow as much as possible.
The key to such a proposal is that it be clearly expressed and nonnegotiable.  If it is a 5% discount for payment within the next seven days, ensure that you adhere to such a timeframe and act accordingly.  If the payment is not made, then the full amount will remain due and payable.
As a legal matter that sort of agreement usually needs to be expressed in a Deed.  To give reassurance to the customer we can assist you in preparing that Deed if necessary.
Renegotiation
If you don’t have current terms and conditions with your clients, or those terms do not allow you to take the actions mentioned in this article you can still change this.  For customers who do need help part of any agreement should be that they either sign terms and conditions that include these clauses or amend the current terms to allow you to take those actions.
Explanation to customers
A lot of these steps above are about trying to improve your longer-term recoverability of the debt.  This can be explained to customers and it can even be included in the agreement that you will not take any further action after obtaining that security for a certain time period (similar to standing down your employees which we have advised on previously).
Chase debts early
Some customers will be able to pay you and that money should be collected as soon as possible.  Early reminders to clients and customers will help to improve payment and encourage those with problems paying to let you know sooner.
That information can then be used to decide if further credit will be provided, if further work will require upfront payment or one of the alternatives set out above is appropriate.
Assistance
If you would like any further advice on these options, please do not hesitate to contact us. We will be able to review your terms and conditions, advise you what rights you have and help you with the next steps to recover and secure your debts in these current conditions.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
The post How to Protect Your Cash Flow During the Coronavirus/Covid-19 Pandemic appeared first on Bennett and Philp Lawyers.

Given that a Level Three lockdown could be mandated sooner rather than later, it is essential to consider your risks under your property contracts.
In Queensland, the standard REIQ contract provides that time is of the essence. That means if you do not observe your obligations by the due date, you will be in breach of your contract.
There are four exceptions under the standard REIQ contract for Delay Events:
(a) a tsunami, flood, cyclone, earthquake, bushfire or other act of nature;
(b) riot, civil commotion, war, invasion or a terrorist act;
(c) an imminent threat of an event in paragraphs (a) or (b); or
(d) compliance with any lawful direction or order by a Government Agency.
If we are forced into lockdown, it is possible that your contract may be impacted by a lawful direction or order made by a Government Agency.
If that is the case, and you are a party that is unable to perform your settlement obligations as a result of a Delay Event, the time for the performance of those obligations is suspended, ceases to be the essence, and the parties are deemed to not be in breach of their settlement obligations.
When the suspension period ends, either party to the contract may issue a notice of settlement. That notice must state that:
(a) that the suspension period has ended;
(b) a date, being not less than 5 nor more than 10 business days after the date the notice to settle is given, which shall become the settlement date; and
(c) that time is of the essence.
You need to speak with your solicitor to see how this impacts on you.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
The post COVID-19 and Property Transactions appeared first on Bennett and Philp Lawyers.

As a legal practitioner with a special interest in medical negligence claims, I anticipate many calls later this year from the relatives of elderly family members who have passed away as a result of contracting the COVID-19 virus, particularly if our health systems become overwhelmed.
There will be calls from people whose 75-year-old or 85-year old mother, father or spouse has passed away after contracting the virus and they believe that their parent was not provided with the best medical care available. They will not only be saddened by their loss but they will be angry that their beloved parent or spouse did not receive the treatment they believe they were entitled to.
In almost all cases, my legal advice to them will not be what they want to hear.
Putting liability aside for the moment, the first difficulty is going to be that their elderly parent or spouse was not likely to have been an income earner and it is unlikely that the caller was financially dependent upon the income of the deceased or dependent on their care. As might be imagined, such situations are exceedingly rare.
The sad truth is that Queensland legislation actively discriminates against elderly people with medical negligence claims. It does so by precluding claimants from recovering their standard legal costs from the defendant unless their damages claim exceeds about $78,040. Without a claim for economic loss, virtually all claims involving negligent treatment of an elderly person do not reach that level of monetary damages in order to make the claim economically viable. Much the same applies when negligent treatment of a child causes their death.
Unless there is a dependency claim the only other claim available to those who have lost an elderly loved one is a claim for a psychiatric injury caused to the survivor by the circumstances surrounding the death of their loved one. Such claims do arise but sometimes what the claimant is suffering from is prolonged grief, not a diagnosable psychiatric injury as such.
Returning to the threshold question of “liability”, this is likely to be a difficult hurdle for potential claimants in the COVID 19 scenario.
The standard expected of medical practitioners and medical health workers is not one of “perfection”.
The standard of reasonable care and skill required is that of the ordinary skilled person exercising and professing to have special skill. So, in a medical context, it is whether the doctor, nurse or hospital at large met the standard of an ordinary skilled doctor, nurse or hospital.
If things go very badly for our health system and it is overwhelmed by patients suffering from COVID 19, it simply may not be possible to provide the care the medical practitioners would like to or ordinarily be able to provide. In that situation, I expect that courts are going to have some sympathy for those medical practitioners working under very difficult circumstances with limited resources, particularly if those resources are limited by factors beyond the practitioners’ or the hospitals’ control.
Let us hope that the “flattening of the curve” of new COVID-19 patients is successful and our health system does not become overwhelmed.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
The post Coronavirus and Medical Negligence: The Unfortunate Truth appeared first on Bennett and Philp Lawyers.

As business closures become more widespread to implement social distancing measures, many now find themselves making tough decisions around the continuation of employment of workers and the concomitant risks of corporate insolvency.
In addition to the stimulus measures aimed at keeping workers in jobs, on Sunday the Federal Government announced an additional measure to attempt to shield companies from creditors and stave off corporate insolvencies.
Statutory demand process
The statutory demand process is an important tool used by creditors to recover debts owned by companies. 
Where a company fails to either take court action to have the demand set aside or pay the debt before the expiry of the statutory demand period they are deemed to be insolvent. Once deemed insolvent, the creditor can take steps to have the company wound up.
Under the interim measures:

The minimum debt amount that may form the basis for a statutory demand under the Corporations Act 2001 has been increased from $2,000 to $20,000; and
Companies will now have 6 months to respond to a statutory demand (formerly 21 days).

 The changes will provide a significant shield (effectively rendering the statutory demand regime toothless) while they are in place.
Insolvent trading
The insolvent trading regime imposes personal liability for any new debts incurred by companies on directors who permit those companies to keep on trading following their insolvency (ie, typically considered to be the point at which they are unable to pay their debts as and when they fall due).
This can often impose significant barriers to companies whose directors may genuinely believe that they can resurrect a company’s fortunes but need to protect themselves from personal liability.
The operation of these provisions has been deferred by 6 months, providing some breathing space for directors as they seek to re-organise the company’s affairs and seek any government of financial assistance that may be available.
Note that directors whose conduct is considered “egregious” may still be liable under the amended regime.
Comments
While the measures will have obvious benefits to keep companies in existence, they will obviously have downstream impacts on the creditors of those companies.
While these measures will assist, it is still important to:

seek to maintain important long-term relationships with landlords, financiers, suppliers and other key creditors (where possible) by communicating the extent of the company’s distress and seeking where possible to reduce debt or defer obligations;
 investigate all measures that have been put in place to support business activity.

We can’t emphasise this enough – keep communicating and don’t stick your head in the sand.
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
The post Temporary “Regulatory Shield” to Be Employed to Protect Businesses and Directors From Insolvency Regime appeared first on Bennett and Philp Lawyers.

We are living through uncertain times that very few of us have experienced. The vast majority of businesses are in the same boat, no matter what industry they operate in, where serious consideration is being given to whether your business will be required (whether by government edict or economic necessity) to shut down for an unknown period of time.
As can reasonably be expected, many businesses are facing the tough task of deciding whether their business will be been forced to shut down due to the current economic crisis. This decision will likely be taken out of the hands of most businesses and determined by the State and Federal Governments. It is clear that the most serious concern for employers (and, indeed, employees), is how do they continue to pay their employees – whether that be by way of normal pay or annual leave (or long service leave) – in circumstances where the business is not generating any income (or any sufficient) to meet those liabilities.
The Fair Work Act 2009 (Cth) (the “Act”) allows an employer to “stand down an employee during a period in which the employee cannot usefully be employed because of … a stoppage of work for any cause for which the employer cannot reasonably be held responsible” (section 524(1)(c) of the Act).
One must consider that at the time of drafting section 524 the Act, the legislature had not anticipated that section 524 of the Act would be applied to what is effectively a national shut down affecting all businesses. What has become clear is that there is no definitive legal commentary on the application of section 524 of the Act in circumstances where most businesses in our nation are facing the same economic concerns and probable shut downs.
Over recent days the Fair Work Ombudsman has appeared to change its stance on whether the Coronavirus (COVID-19) would definitively be an event that would allow businesses to stand down their workforce as a result of forced government shut downs and/or economic necessity. The message from the FWO is now clear in that it considers a pandemic, such as the Coronavirus, would be the kind of event that would allow a business to stand down its employees under section 524 of the Act.
However, it must be remembered that section 524 of the Act is intended to relieve an employer of the obligation to pay wages to employees who cannot be usefully employed in certain limited circumstances. The consequences of a stand down can have a severe impact on an employee and their family, as the employee may be deprived of wages for a lengthy period. Whether a particular employee can be usefully employed is a question of fact to be determined having regard to the circumstances that face the employer.
What happens if you stand down an employee in accordance with the Act?
If an employer stands down an employee during a period in accordance with section 524 of the Act, then the employer is not required to make payments to the employee for that period. In a previous publication, we opined that it appeared to be a reasonable proposition that employers should not unreasonably refuse an employee’s request to take paid annual leave/long service leave. In the absence of clear guidance from the Federal Government, it could be seen to be unreasonable for an employer to refuse an employee’s request to take annual leave/long service leave if the employee is faced with the prospect of being stood down as a result of the Coronavirus. What is “reasonable” will depend on the circumstances of each employee, and the employer’s business needs.
There has been little guidance on this issue as to whether it would be unreasonable for an employer to refuse to allow an employee to take annual leave (or long service leave) entitlements (or part thereof) during this time. However, the pressing concerns that employers have conveyed to us over the last week is that the vast majority of businesses will not have the cash flow reserves to sustain annual leave (or long service leave) payments for all employees during this prolonged period. That raises the proposition, contrary to the previous general contentions reflected in our previous publication, would it be reasonable for the employer to refuse an annual leave (or long service leave) request during this time and therefore, not required to make any payments to employees during the stand down.
We consider that the Federal Parliament by way of the recent rescue packages are providing some guidance on this point. The Federal Government has announced that:
“the Government has temporarily expanded eligibility for the JobSeeker and Youth Allowance payments, meaning you may be eligible if you’re:
(a) A permanent employee who has been stood down or lost their job;
(b) A sole trader, self-employed, a casual or contract worker whose income has reduced;
(c) Caring for someone who’s affected by coronavirus.
Income testing will still apply but if you’re earning less than $1,075 a fortnight, Centrelink should approve your claim, meaning you would get the supplement”.
Accordingly, and in light of that proposed relief, we consider that on the strict reading of section 524 of the Act and the proposed relief being offered to permanent employees stood down from their employment, there are strong arguments that an employer will have acted reasonably in refusing an employee’s request to take annual leave (or long service leave) in circumstances where the business is unable to meet the payment of those entitlements as a direct result of a lack of cash flow due to forced shut downs (subject to an enterprise agreement, or a contract of employment which applies to the employment relationship).
We will continue to monitor reports and commentary for any further guidance provided by the State or Federal Governments and share that information to you as soon as possible.
Importantly, the employees’ annual leave and long service leave entitlements will continue to accrue during any stand down.
General requirements to stand down all or part of your workforce:
To invoke section 524 of the Act, employers will need to ask themselves the following questions to ensure they satisfy all its elements:

Does your employees’ contract of employment or enterprise agreement provide for stand down situations?If yes, those provisions must be complied with (including any specific requirements e.g. consultation) instead of simply utilising the stand down provisions contained in section 524 of the Act.
Can the business establish that the reason for the stand down of employees because the employees cannot be usefully employed as a result of the Coronavirus and the business’ lack of viability if it had to continue to bear the burden of the employees’ wages?It is not sufficient that there be merely a downturn or a building is inaccessible. If there is work an employee can undertake in other areas of the business or the employee can work from another location, it will not be a stoppage and the Stand Down Provisions will not be available.Section 524 of the Act requires all prospects of useful employment elsewhere in the business to be exhausted before it is enlivened. Employers will, therefore, need to exhaust all other options such as working from home, working in some other way (such as directing them to an alternative role if available) and/or redeployment opportunities before they turn to the stand down provisions.
We would suggest that any stand downs should be implemented as fairly as possible. For example, giving employees as much notice as possible so that they do not incur costs or inconvenience related to attending for work only to be stood down.

As said above, the FWO has put out advice that is consistent with the above. You can access the FWO advice by clicking here. You will note that the FWO has specifically highlighted that standing down employees without pay is not generally available simply due to a deterioration of business conditions or because an employee has coronavirus. Employers should ensure that they understand when a stand down under the Act may be triggered so that they may respond to any employee questions and/or misconceptions.
We consider that forced Government shut downs will likely trigger the operation of section 524 of the Act.
Some examples provided by the FWO of when employers may be able to stand down employees include:

4. If there was an enforceable government direction requiring the business to close (which means there is no work at all for the employees to do, even from another location);
5. If a large proportion of the workforce was required to self-quarantine with the result that the remaining employees/workforce cannot usefully be employed
6. If there was a stoppage of work due to lack of supply for which the employer could not be held responsible.

It is important to remember that if employers cannot satisfy the elements above, they may be exposed to a dispute application under s 526 of the Act which would be dealt with by the Fair Work Commission most commonly by arbitration (but mediation, conciliation or provision of a recommendation where appropriate are also within the Commission’s powers).
If an employer unlawfully stands down employees without pay, the employees will likely be able to recover unpaid wages.
Further, section 525 of the Act provides that an employee is not taken to be stood down during a period when the employee:

Is taking paid or unpaid leave that is authorised by the employer, or
Is otherwise authorised to be absent from his or her employment.

(Note: An employee may take paid or unpaid leave (for example, annual leave) during all or part of a period during which the employee would otherwise be stood down).
Standing Down Your Workforce – The Considerations
Standing down part or all of a business’ workforce is a drastic step as it would usually deprive workers of an income for an indeterminate period. It is not a termination of employment. It is very important to remember that should a business make their workforce redundant, they will be liable for the notice period and redundancy payments provided for under the National Employment Standards. However, in the present Coronavirus crisis, it appears that the Federal Government is providing a safety net by expanding the JobSeeker and Youth Allowance payments to stood down employees.
As we have previously advised, if your business is considering either ‘shutting down’, enforcing a ‘stand down’, or directing employees to work from home, we strongly recommend that you consult with your employees about the potential major changes to their ongoing employment. This will be a mandatory requirement under a modern award or an enterprise agreement.
That consultation ought to include discussions with the business’ workforce is to whether the employees would agree to reduced hours and/or taking paid or unpaid leave during this time. It is important for all employers and employees to understand that we must all work together to ensure the long-term viability of businesses to navigate this crisis and to also ensure that those employees have a position to return to once we get to the other side of this crisis.
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).

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Ever more Australians are under financial stress as new measures to combat the COVID-19 outbreak force businesses to close or restrict hours and services. As a nation with some of the highest debt per capita ratio, many Australians are finding themselves without sufficient savings to sustain themselves and their families for what could be 6 months or more, with no or limited income.
In this article, we list a number of avenues that may be available to Australians to ease their financial burdens during this difficult time, including under the Government’s economic response package to date.
Government incentives for businesses
If you are operating a business, the Federal Government has introduced a number of measures to be rolled out as part of its economic response package to boost businesses cashflow. 
As this article is designed for personal income, to find out more about economic measures available to businesses we invite you to visit the Government’s economic response webpage, Support for Businesses.
Centrelink and social security options
On 20 March 2020 (as a consequence of the 2018-2019 budget) a number of social security working-age payments including Newstart Allowance, Wife Pension, Bereavement Allowance, Sickness Allowance, Widow B Pension, Widow Allowance and Partner Allowance were rolled into a new payment scheme known as the JobSeeker Payment.  
The JobSeeker Payment is available to Australians who:

are between 22 years of age and the Age Pension age; and
meet the residence rules; and
meet the income and assets test limits; and
are unemployed and looking for work, or sick or injured and can’t do their usual work or study.

Other social security payments are also available to working-age persons including:

Youth Allowance Jobseeker;
Parenting Payment (partnered and Single);
Farm Household Allowance; and
Special Benefits.

The Federal Government has announced that from 27 April 2020 for a period of 6 months:

Individuals on any of the above working age payments will be entitled to receive an additional $550 per fortnight Coronavirus supplement; and
The eligibility criteria for the JobSeeker Payment and Youth Allowance Jobseeker payment will be relaxed as follows:

it will also be available to permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers and contract workers. That is, you do not need to be strictly unemployed and looking for work;
the asset testing will be waived but the income testing remains applicable; and
waiting periods will be waived or reduced in certain cases.

Individuals who are permanently unemployed should consider now if they qualify for the JobSeeker Payment, and those stood down or on low hours, sole traders and self-employed should investigate the income test requirements and stand ready to apply should it become necessary for them.
More information on the JobSeeker Payment and other working-age social security can be found at the Services Australia website.
There are other economic responses by the Federal Government including additional payments to persons on certain existing social security arrangements, including pensioners. More information on the Government’s economic response to the Coronavirus for individuals and households including factsheets containing all the details can be found at the Government’s designated webpage, Support for Individuals and Households.
Early access to Superannuation
You may have heard of the Federal Government’s measure to allow individuals to withdraw up to $20,000 of their superannuation tax-free. This will reportedly apply if:

you are unemployed; or
you are eligible to receive a JobSeeker Payment, Youth Allowance for JobSeekers, Parenting Payment (which includes single and partnered payments), special benefit or farm household allowance; or
on or after 1 January 2020:

you were made redundant; or
your working hours were reduced by 20% or more; or
if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.

We expect many individuals will qualify for this option. If you qualify will be able to withdraw up to $10,000 from their superannuation before 1 July 2020, and then up to a further $10,000 from 1 July 2020 for approximately 3 months (exact timing to depend on final legislation terms). Applications will be able to be made from mid-April 2020 through the MyGov website. 
Until this time, withdrawing from superannuation remains available if you meet the requirements of early access, which include compassionate grounds and severe financial hardship.  
Compassionate grounds include:

Medical treatment and medical transport for you or your dependant;
Making a payment on a home loan or council rates so that you don’t lose your home;
Meeting expenses to cater for disability of you or your dependent;
Palliative care for you or your dependant; and
Death, funeral or burial expenses of your dependant.

Severe financial hardship may be claimed if:

You have received eligible government income support payments continuously for 26 weeks; and
You are not able to meet reasonable and immediate family living expenses.

More information about early withdraw of your super is available on the ATO website or through your Superannuation Fund.
Home loan and credit facility moratoriums
Part of the Federal Government’s economic response to date includes incentives towards banks and other lenders to promote and facilitate the continuation of existing credit arrangements and new credit facilities.
For the everyday Australian, most banks have already responded with varying degrees of measures pertaining to existing facilities of customers affected by Coronavirus, including 3-6 months moratoriums on home loan and small business loan repayments. 
 Each bank has issued a statement on its own measures dedicated to customers affected by Coronavirus. Look for your bank via the ABA’s website and follow the links to your bank’s financial hardship page to understand what your bank can do and how to apply.
It is important to understand that the banks’ measures in connection with Coronavirus, which are largely suspension measures, are in addition or ancillary to existing financial hardship and other rights that exist under the Credit Code, the legislation that applies to all consumer credit facilities including home loans and credit cards. Section 72 of the Credit Code provides that a person can request a variation in their loan repayments if they are suffering financial hardship. The Code does not specify what will qualify as financial hardship or impose on the lender a requirement to accept any variation proposed by the debtor, but there is a requirement to consider the application and respond formally within set time frames. If the bank refuses a request to vary a credit facility on the grounds of financial hardship, a court may make that order on the application of the debtor. It is recommended that you obtain legal advice before making a hardship application to your bank and/or in the case that your application is rejected.
If you are in difficulty repaying your loan in circumstances where you believe that you would never have been able to repay the loan or the loan should not have been made, this could indicate that you have other rights, for example, if the lender did not follow responsible lending procedures. In this case, you should seek legal advice and a complaint may be filed with the Australian Financial Complaints Authority which replaces the old financial ombudsman and governs all complaints with regards to the financial services and superannuation industry.
Relief from bills and other contracts
It is important to note that not only loans and credit cards qualify as credit facilities to which the Credit Code applies. There are a number of consumer contracts with delay payment and interest options that may qualify as Credit Code contracts to which the hardship provisions of the Code apply. In addition, there are industries in which suppliers are the subject of statutory requirements or have introduced their own financial hardship options in connection with Coronavirus. This might include equipment rental facilities, electricity and gas accounts, telecommunication accounts.
Most providers have indicated an intent to help their customers, so if you expect that you will have difficulty meeting your bills, you should consider researching your provider’s policy on Coronavirus (most now have a dedicated webpage and policy statement) and/or seek legal advice as to your rights under the contract.  
Contractual review of a contract should consider:

the contract’s own terms for delay or termination rights, including force majeure;
any statutory rights applicable to the industry pertaining to the subject contract; and
any common law rights of delay or termination including frustration.

What more can we expect to come?
This is a fast-developing situation and we can expect the Federal Government to introduce more measures as we proceed, including, possibly, legislated moratoriums. However, it is hard to know what may be the next action that the Federal Government takes.
We will seek to update this publication as more economic measures are declared and their associated legislation is formalised.
It is important that Australians seek legal and financial advice if faced with serious decisions including potential default on credit facilities, rental agreements and contracts. 
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
The post ‘I Need Money Now’ – Available Income Measures and Options for Australians Affected by COVID-19 appeared first on Bennett and Philp Lawyers.

We are seeing an increasing number of enquiries from parties wishing to know whether they may be able to get out of their commercial contracts due to the various ramifications of the Coronavirus pandemic.  Some may be able to rely on a force majeure clause in the contract. 
Force majeure
‘Force majeure’ is a French term that literally means “greater force.”  In law, it refers to a specific type of contractual clause that essentially frees the parties from their obligations when extraordinary event or circumstance beyond their control prevents one or both parties from fulfilling their obligations under the contract.
Force majeure is entirely a contractual creation and will not be implied into the contract by the courts.  The scope of application of such clauses will vary widely – there is no one size fits all standard wording for such clauses. The specific drafting of the clause will determine its usefulness in either suspending or terminating your obligations under the contract.
What events are covered?
These may vary widely, but the clause will often provide a general reference to, for example, an event ‘outside the reasonable control of a party’ and list specific events such as war, strike, riot, plague or act of God.
In relation to the current Coronovirus (COVID-19) pandemic, relevant references would include ‘plague’, ‘pandemic’, ‘disease’ or ‘epidemic’ or less certainly ‘act of God or ‘natural catastrophe’.  We may also see the term ‘lockdown’ come into play as the government response adapts. It is important to note that the jury is out on whether the COVID-19 outbreak is an ‘act of God’ per se and different views exist on this point.
Extent to which obligations cannot be satisfied
A force majeure clause will use language that determines to extent to which the impact on a parties’ ability to satisfy their obligations before the clause may be relied on.  The burden of proof to show this is on the party who wishes to rely on the clause.  The language of the clause needs to be checked carefully, for example to determine if it requires the force majeure event to ‘prevent’ or simply ‘hinder’ the performance of the contract:

‘prevent’ = this is generally considered to be where it is impossible for the party to perform its obligations under the Contract. This would apply where, for example, an importer was prevented from delivering its goods by a shutdown of all points of entry into the delivery country, but not if the problem was caused by a shutdown of a particular country and the importer could source the product elsewhere, even if at additional cost.
‘hinder’, ‘delay’ or ‘render impractical’ = this is a lesser standard than impossibility, but refers to circumstances that would render the fulfilment of the obligations substantially more onerous. In this case, having to import from an alternative source at considerable added cost may be sufficient.

Foreseeability
In some case, the clause will exclude events that should have been foreseeable by the parties.  In practice, this will be another barrier to the party seeking to rely on such clauses.  There are likely to be arguments in future court matters relating to whether the Coronavirus pandemic was foreseeable given previous pandemic events and in light of warnings given by various not-for-profit and government agencies.
Exclusion of payment obligations
The obligation to pay money will often be specifically excluded under force majeure clauses, meaning that you will not be released from an obligation to pay money as a result of a force majeure event.
Manner of exercise
In some cases, the contract will specify a process that a contracting party must follow before the benefit of the force majeure clause can be obtained.  For example, some clauses provide that a party must issue a notice specifying the nature of the force majeure event.  Giving notice that you cannot comply with a contract in the absence of having followed the procedures of a force majeure clause, could amount to a repudiation of the contract.  Although communication is the key in achieving amicable outcomes in commercial contracts, you should be careful how you proceed in order to preserve and not jeopardise any rights you have.
Suspension or Termination
Does the clause permit the termination of the Contract for an event of force majeure?  In practice, most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend or delay it for the duration of the force majeure.  Termination is usually reserved merely for one off supply or purchase arrangements.
My contract doesn’t contain a force majeure clause – now what?
There are other legal rights that may apply in some cases.  Consider whether the doctrine of frustration may apply to your contractual obligations. Frustration of contract occurs as a result of an event which was not foreseeable by the parties and which makes complying with the terms of the contract impossible to or changes the parties’ obligations so substantially that would be unjust to require them to continue.
A contract is usually not frustrated merely because it becomes more expensive or more onerous for one party to comply with its obligations.  It is usually difficult to meet the high threshold that the courts require before they will consider a contract frustrated (but then, these are unusual times).
What can you do?
As the consequences of improperly terminating a contract or failing to perform your obligations thereunder can be dire and potentially result in claims for damages against you, we strongly recommend that you obtain legal advice as soon as possible if you are in the position in which you think that you may be unable to fulfil your obligations under a contract.
In particular, take the following steps as soon as possible:

Check your contract to see whether it contains a force majeure clause. Because each such clause is different, you should seek legal advice in line with your particular circumstances to see whether it may permit you to suspend or terminate your contractual obligations.
In the absence of a force majeure clause, seek legal advice as to whether the doctrine of frustration or other legal remedies may apply to your circumstances.
Consider whether you have alternative ways of complying with your contractual obligations, even if those entail higher costs. For example, are you truly prevented from delivering on your contractual commitments by the unavailability of goods or materials from countries affected by coronavirus? Put in place a ‘plan B’ if at all possible.
If you are in the process of negotiating terms, ensure that you put in place a properly drafted force majeure clause that clearly sets out the circumstances in which obligations will be suspended. In this environment a standard force majeure clause will be insufficient – it must be specific.
We also recommend that you take advice to determine ways in which losses may be mitigated or deferred, including engaging with your counterparty, if practical. Consider, for example:

if you have business interruption insurance or other insurances available; and
if you can make use of any Government incentives (as these continue to be rolled out).

If your business is in financial difficulty, you should also consider your personal situation, including whether you can access Centerlink benefits, your superannuation, make a hardship application or take alternative measures to boost your income and defer your expenses.

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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Dan Ronan, Special Counsel
Prominent Brisbane-based law firm Bennett & Philp is expanding their property and real estate development team with renowned property lawyer Dan Ronan joining as Special Counsel. 
Bennett & Philp Managing Director Lance Pollard says the firm is excited to welcome Dan who brings nearly 20 years of property and town planning experience to Bennett & Philp. “Dan will strengthen what is already a skilled and experienced property and real estate team. In addition to partnering closely with his clients to deliver excellent outcomes, Dan is committed to service excellence,” said Mr Pollard. 
Dan has extensive experience in property law managing a broad range of matters including commercial leasing, residential conveyancing, commercial conveyancing, rural transactions, property development and property-related disputes. Dan’s main focus as a property lawyer has been assisting property developers in community titles scheme and flat land subdivisions from site acquisition (and due diligence), titling, sale contracts and planning and environment litigation. 
Dan will work closely with Property & Real Estate Director, Bill Purcell whom he has had a strong working relationship with of over five years during his time at Purcell Fox.
“Dan is an excellent property & real estate lawyer possessing exceptional technical legal skills and a calm measured approach when delivering solutions for his clients. The addition of Dan to Bennett & Philp’s Property & Real Estate team allows us to enhance our firm’s skillset further and augment our presence within the sector” continued Mr Pollard. 
“Bennett & Philp is a growing firm that has a strong property and real estate presence within the Brisbane market. I’m looking forward to working with Bill and the rest of the team on growing this practice and achieving the best possible results for our clients,” Mr Ronan said.  
Dan joins Bennett & Philp during a period of strong growth, with staff numbers now pushing past 80. 
Dan graduated with a Bachelor of Laws from the Queensland University of Technology. 
 
 

Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).
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