On 4 September 2020, the court of appeal handed down its decision in Ko v Hall and Ors [2020] VSCA 224. The main issue in this case was whether a determination by the medical panel made outside of the time frame prescribed by s 28LZG(3) of the Wrongs Act 1958 (Vic) (“the Act”) would be invalid. Under this section, a medical panel must give its determination as to whether a claimant has suffered significant injuries:

within 30 days of the claimant or a registered health practitioner complying with a request by a medical panel; or
within a longer period as agreed by the claimant and the respondent.

While the court decided that the medical panel’s determination was valid in this instance, the minority judge provided useful commentary against part of the majority’s judgement.
Background
The claimant sought damages for personal injuries from the respondent surgeon. As with almost all non-employment and motor vehicle claimants she had to show that she had a significant injury as a result of the respondent’s alleged negligence. As a result of the respondent’s refusal to accept that the claimant had a significant injury, the issue was referred for determination by a medical panel. On 8 March 2019, the claimant was examined by the panel and, by agreement of the parties, the due date for the panel’s determination was extended from 7 April 2019 to 22 April 2019. The panel did not meet this deadline.
On 16 May 2019, almost a month after the determination was due, the panel once again requested for, and the parties agreed to, a further extension of time until 30 May 2019. A determination was issued in favour of the respondent on 20 May 2019, which was within the new extended time frame.
The claimant subsequently applied for judicial review claiming that the panel’s failure to meet the deadline on 22 April 2019 meant that its determination was effectively invalid. Though the parties had consented to an extension on 16 May 2019, this was after the longer time frame had expired. The claimant submitted that since the consent was provided after a deadline had already expired, any decision made by the panel after 22 April 2019 could no longer be valid. In other words, it was argued that once a determination had been rendered invalid due to the effluxion of time, that defect could not be cured by a subsequent consent to an extension of time.
Judgement
The court had to ascertain whether s 28LZG(3) only allowed the parties to agree to an extension before time had expired or whether they could agree to one, even after time had expired. The court found no reason to limit what it saw as the plain words of paragraph (b) which enabled parties to agree to a longer period for determination.
It noted that if the parties could not be empowered to agree to an extension merely because time had expired, no matter how willing both parties were to have an extension, they would be required to commence the significant injury process afresh. The court believed that this consequence would be inconvenient and counterproductive to the legislative intent that the significant injury process be completed expeditiously. In the circumstances the court held that the medical panel made its determination within the time required in s 28LZG(3) and its determination was valid.
Though this conclusion was sufficient to dispose of the case in the respondent’s favour, for the sake of completeness, the court proceeded to address a further issue of whether a decision by the medical panel given outside the time limit in 28LZG(3) would become invalid.
Unlike the provisions in the Act which imposed time limits on respondents, there are no consequences which apply to a medical panel for issuing a determination after the period in s 28LZG(3) has expired. This, the court held, seemed to be a consistent and apparently deliberate difference made by the legislature. If it had been the legislature’s intention to invalidate decisions by the medical panel for non-compliance with a time limit, the court held that it would have explicitly said so in the Act. Additionally, the fact that the parties can extend time by agreement under paragraph (b) of the section was consistent with the idea that the panel’s jurisdiction was not intended to last only up to the end of the 30 day period.
The court held that the time limit under s 28LZG(3) was not a condition of the panel’s authority and the judicial review proceeding was dismissed.
Minority Judgement
Though Justice McLeish agreed with the majority’s decision to dismiss proceedings, he disagreed with the judges’ finding that a panel’s decision would still have jurisdiction if it was made outside the time limit.
Justice McLeish noted that paragraph (a) of the s 28LZG(3) clearly identifies a 30 day deadline for the due date. If more time was needed, paragraph (b) then offers an “express cure” for that problem. Thus where paragraph (b) does not apply, that is if the parties do not agree to a time extension, the panel is disempowered from giving its determination if not done within the 30 day period and the same would apply if the panel failed to make its determination within a longer agreed period.
In applying this principle, Justice McLeish was of the view that a medical panel which fails to give its determination within the required period, absent any agreement by the parties to extend that time, would be without jurisdiction to do so after time expired.
Importantly, his honour emphasised that to construe s 28LZG(3) as making compliance a condition of jurisdiction is not to undermine the efficiency of the scheme or to inconvenience claimants. Rather, it is to provide a motivation for a medical panel to do its work within the specified period, and to leave it in the hands of the parties to decide whether the panel can still proceed if it fails to meet the deadline.
Comments
The judgement from this case is a reminder that parties are empowered to exercise the flexibilities afforded to them by the law. The court’s decision confirms that the determination of a medical panel will still be valid even if it is given outside of the time limit prescribed by s28LZG(3)(a). Furthermore, under s28LZG(3)(b), parties can agree to extend the deadline even after the due date for the panel’s decision has lapsed.
It is important to note, however, that in this case the claimant’s agreement to the extension was a key factor in upholding that the medical panel had jurisdiction. Justice McLeish has suggested that without such agreement, the time limit will strictly apply to invalidate decisions by the panel issued outside that time limit. The fact that the majority weren’t overly concerned by a Panel’s failure to comply with the statutory time limits coupled with the practical reality that in most cases its hardly worth reviewing a Panel determination means that this issue is unlikely to be revisited, even if Justice McLeish made some important points in his judgment.
If you would like any advice in this area, please contact Hunt & Hunt.

with Michelle Nguyen, Graduate at Law
Case Note: Ko v Hall and Ors [2020] VSCA 224 | Hunt & Hunt Lawyers

This year Hunt & Hunt was appointed to the National Sports Tribunal Assistance Panel.
We had a chat with Lawyer and athlete George Mourani about the assistance panel, his sporting background, and why Hunt & Hunt chose to get involved.
What is the National Sports Tribunal Legal Assistance Panel?
“The National Sports Tribunal Legal Assistance Panel (NSTLAP) is an established panel of legal practitioners who are willing to provide free or substantially discounted legal assistance for athletes and sporting bodies who come before the National Sports Tribunal (NST). The NST hears and resolves national-level sporting disputes in Australia.”
Why is it important to have a National Sports Tribunal?
“I read in the Government response to the Wood Review that each year 14 million Australians participate in some form of sporting activity and sport generates $35-47 billion of economic activity.
Australians have no tolerance for corruption in sport and expect integrity to be safeguarded at all times. The NST is an independent and nationally coordinated effort to identify and resolve disputes in our sports codes. It will protect the public confidence in sports and reassure athletes that they are competing on an even playing field.”
Why are we involved?
“Sports Law continues to be an integral part of our justice system and there is every reason to be optimistic about the future of Sports Law in Australia
Hunt & Hunt has a strong reputation of appearing as advocates in courts, tribunals, arbitration, mediation and dispute resolution, making us well-placed to assist parties before the NST in an efficient manner.
The firm has a strong commitment to the National Pro-Bono Target, and I expect matters before the NST to fall within this category.
We are also the sole Australian member of Interlaw which is an elite global network of pre-eminent law firms across the globe and are a part of the Sports, Media and Entertainment special business team.”
Tell us about your sporting background
“I’d say my sporting career started when I was 5 years old. I fell in love with football and you could almost always find me either kicking a ball against the wall or sleeping with it tucked in my arms.
Before I knew it, I turned 12 which was the beginning of professional football. I survived the trials and signed for Bankstown City Lions FC in the Football NSW National Premier League competition – the highest in my age group.
I remained in that competition for 7 years and moved around between clubs like Sydney Olympic FC and APIA Leichardt Tigers. Somewhere along the way I was also chosen to represent my Metropolitan District at the NSW State Titles Competition for a few years. At 19 years old, I faced a cross-road between a legal career or a sports career… And here I am now.
Sports will always be close to my heart. I currently play community football for Belmore Eagles FC and hold memberships with Sydney FC and Souths Sydney Rabbitohs.”
Who can contact you and how can you help?

“If you are an individual or a sporting organisation with disputes regarding codes of infringement, conduct infringement, anti-doping rule violations, disciplinary matters, selection and eligibility issues, bullying, harassment or have any other sports related concerns, please contact me by email on [email protected] or 02 9391 3186.”
Lawyer and athlete George Mourani optimistic about the future of Sports Law in Australia | Hunt & Hunt Lawyers

It’s always a question of priority when setting up a private business – every dollar is precious. If a dollar is to be re-invested, it needs to be well invested.
We often hear business owners wondering why they should invest in a Shareholders’ Agreement

“we get along really well”
“we’ve known each other a long time”
“I trust him or her”
“if we have a problem, we’ll just work it out commercially”.

And that might well be right. But like any relationship breakdown, the circumstances and timing are often unpredictable and so is the response. Plus, money is involved (often a lot of money), so the stakes are high.
The importance of investing in a Shareholders’ Agreement
A good Shareholders’ Agreement for your business will never be exactly the same as one for any other business and what should or should not be included will always reflect the business’ specific circumstances. While all Shareholders’ Agreements have some level of similarity, the particular options for each of the relevant issues are nearly endless. Your Shareholders’ Agreement needs to be carefully prepared to accommodate the needs of the particular business and the particular business owners. There is no such thing as one-size-fits-all! The “pre-packaged” agreements you can buy off the shelf can be poorly drafted, generic and certainly will not have taken into account the particular, unique circumstances of your business.
Things to consider when drafting a Shareholder’s Agreement include:

the dynamic and relationship between the shareholders, such as the percentage of shares held and what is being brought to the table by each business owner;
whether the business is a start-up or mature;
shareholder expectations in terms of future capital/debt funding;
the long term objectives of the company (e.g. remain private, look to sell or float in the medium term);
the nature of the business’ assets- e.g. a going concern dependant for its value on continuing to trade, or a collection of more “passive” assets;
if you have an employee shareholder and he / she leaves the company, do they still retain their shareholding? A breakdown in relationship can create a range of problems; and
how do you best protect the business from an outgoing shareholder establishing a competing business.

What could go wrong?
If there is no Shareholders’ Agreement in place, and a dispute (or even a decent difference of opinion) arises, it is more likely that a value destroying dispute and perhaps litigation will follow, as there is no agreed “set of rules”. Where there is no guidance on how disputes should be managed, a “free for all” situation can result.
In the absence of a Shareholders’ Agreement, a dispute may well end with a court ordering that the company be wound up. This would result in high litigation costs, both financial and emotional, the appointment of a liquidator, destruction of serious value built up over many years of hard work as well as loss of any control over the outcome.
Indeed, even if none of the parties want to litigate, the stalemate and inability to move forward with the business will see value diminish or disappear – sometimes very quickly.
These problems can largely be avoided through the use of a Shareholders’ Agreement which sets the rules and adequately predetermines the management of disputes.
Conclusion
A good Shareholders’ Agreement will set out a map for running the business and resolving issues, acting as a framework for dealing with unexpected events. When drafting a Shareholders’ Agreement, the skill is not just reading what’s in the agreement, it’s the experience of knowing what is not in the agreement. Sometimes leaving something out is to your advantage. Sometimes it’s not. It’s also knowing what the other options might be. Ultimately, any outlay in expense incurred from investing in a Shareholder’s Agreement will be cheaper than dealing with a dispute or court proceeding down the track when things do not go to plan.

with Elissa Raines, Lawyer
Shareholders’ Agreements – Why do you need one? | Hunt & Hunt Lawyers

The Australian Government has extended the temporary insolvency relief for the remainder of the year in a bid to give viable businesses the opportunity to recover from the economic crisis of 2020.
The move will see the temporary relief extended until 31 December 2020.
The decision to extend the temporary relief, which was due to expire on 30 September 2020, comes in an attempt to prevent further job losses and avoid another massive hit to the economy.
“The extension of these measures will lessen the threat of actions that could unnecessarily push businesses into insolvency and external administration at a time when they continue to be impacted by health restrictions. These changes will help to prevent a further wave of failures before businesses have had the opportunity to recover,” said Josh Frydenberg.
“As the economy starts to recover, it will be critical that distressed businesses have the necessary flexibility to restructure or to wind down their operations in an orderly manner. The Government will continue to help businesses successfully adapt and restructure so that they can bounce back on the other side of this crisis.”†
The temporary relief measures include:
Statutory Demands

The minimum threshold for creditors to issue a statutory demand on a company has been increased from $2,000.00 to $20,000.00.
The time-frame for a company to respond to a statutory demand has been increased from 21 days to six (6) months.

Bankruptcy Proceedings

The minimum amount of debt required for a creditor to seek the issue of a bankruptcy notice against a debtor has been extended from $5,000.00 to $20,000.00.
The time-frame for a debtor to respond to a bankruptcy notice has been increased from 21 days to six (6) months.
The period of protection a debtor receives after making a declaration of intention to present a debtor’s petition has been increased from 21 days to six (6) months.

Insolvent Trading

Directors will be relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business during the period in which the interim relief measures are in effect.

Hunt & Hunt Lawyers national insolvency team will continue to monitor the changes to insolvency laws and provide further updates as new information becomes available.
Please contact Hunt & Hunt Lawyers if you require further information, or to discuss your specific circumstances
Related article
Temporary changes to insolvency laws amid the COVID-19 pandemic
Authors
Jessica Egger, Lawyer
Matt Gauci, Partner
 
†  7 Sep 2020, The Hon Josh Frydenberg MP & The Hon Christian Porter MP joint media release, ‘Extension of Temporary Relief for Financially Distressed Businesses’
 
Insolvency relief to be extended to 2021 | Hunt & Hunt Lawyers

Following on from the recently announced dumping duty investigation into Australian wine, the Chinese Government hit the industry with a countervailing duty investigation on 31 August.  Below we briefly set out the claims that will be investigated by the Chinese government, the difference between a dumping and countervailing investigation and what further actions needs to be taken by Australian wine exporters.
What is a countervailing investigation?
Countervailing investigations are aimed at removing the effect of subsidies provided by the target country that hurt producers in a foreign country.  Under WTO rules, a Government can impose countervailing duties against imports from another country to offset the effect of government subsidies provided to producers in that country.  Subsidies take many forms such as grants, tax relief, Government supplying inputs to production a low price and expense rebates.
Not all benefits give rise to countervailing duties.  The subsidies must be tied specifically to exports or provided to specific businesses or businesses in a specific industry or region.
How does a countervailing investigation differ from a dumping investigation?
The main difference between dumping and countervailing investigations is activity that duties are aimed to address. In dumping investigations, the activity is the selling of goods to an export market at a price less than its “normal” value.  In a countervailing investigation, the activity is the Government providing benefits to producers in the target country.
However, there are similarities.  In each there will be an investigation into whether the domestic industry has suffered loss and whether imports from the target country caused that loss.  There is also an overlap in that the same activity that gives rise to a claim of subsidisation may also lead to a finding of a particular market situation in the target country.  Such a finding impacts on how the dumping margin is calculated – normally resulting in high dumping margins.
Importantly, the same activity cannot be used to impose dumping and countervailing duties.  This does not mean that both duties will not be imposed, just that one will be decreased to avoid double counting.
What has been alleged against Australian wine exporters?
The Chinese Government will investigate a claim that the Australian federal and state Governments have provided 40 different types of subsidies to the Australian wine industry.  A key example of a benefit is the wine equalisation tax system (WET) and WET producer rebate.  The amount of this rebate is currently $350,000 per manufacturer.  Since its inception, the WET producer rebate has always placed Australian at risk of a countervailing investigation.
Another example is the Export and Regional Wine Support Package.  Parts of this package include wine export grants which have the specific aim of increasing wine exports to China.
A third example is the export markets development grant.  Under this grant, 50% of the costs of export related marketing expenses can be offset by Government payments.  Being export specific, these payments are likely to be closely reviewed by the Chinese government.
Any program available only to certain sectors, such as wine producers, or certain regions, will also be closely reviewed.
It is alleged that the subsidised goods are causing harm to Chinese manufactures of wine.  These claims are very similar to those made in the dumping investigation.  Again, we urge Australian exporters to make submissions as to the non-price reasons why Australian wine is succeeding in China and the factors other than Australian wine that are causing Chinese wine manufacturers to suffer loss.
A specific countervailing rate has not been alleged.  Much will depend on which companies are investigated.  The benefits offered by the Australian government may be significant for a small business.  However, for Australia’s largest exporters the benefits may be immaterial.
What should Australian wine exporters do?
As with the dumping investigation, the initial key step is to register with the Chinese government.   Failure to do so will result in the exporter being treated as an uncooperative exporter and may be subject to the highest possible duty rate.  If you have already registered for the dumping investigation you will need to register again for the countervailing investigation.
Following registration, the Chinese government will select certain exporters to review in detail.  Those exporters will need to complete a detailed questionnaire regarding their costs of manufacturer and the value of any benefits received from State and Federal Governments.
We are here to help
Hunt & Hunt, with the assistance of Chinese lawyers that specialise in dumping and countervailing investigations, can assist with exporter registration, completion of exporter questionnaire and submissions on issues such as what has caused any loss.
First dumping, now Australian wine exporters face a countervailing duty investigation by the Chinese Government | Hunt & Hunt Lawyers

The Sydney CBD office will have a new address from Monday 14 September 2020.
Our new office address will be 1 Bligh Street, Sydney NSW 2000
Our mailing address will remain the same: GPO Box 4132, Sydney NSW 2001
Please update your records.
Stay connected
The main switch board and desktop phone numbers will remain the same. Your team will remain contactable through all the usual channels including telephone, mobile and email.
We’re on the move | Hunt & Hunt Lawyers

On 5 August 2020, the Victorian Court of Appeal handed down its judgment in Cant v Mad Brothers Earthmoving Pty Ltd [2020] VSCA 198, providing clarity on the circumstances in which a third party payment may amount to an unfair preference.
Ultimately, the Court of Appeal held that, where a third party pays the debt of a company which later goes into liquidation, the payment must diminish the available assets of the insolvent company to fall within s.588FA(1)(b) of the Corporations Act 2001 (Cth) (“Act“).  This will be the case where the third party is indebted to the insolvent company, and payment by the third party to the insolvent company’s creditor reduces that liability.
Background
Eliana Construction and Developing Group Pty Ltd (in liq) (“Eliana“) was indebted to Mad Brothers Earthmoving Pty Ltd (“Mad Brothers“) in respect of excavation works carried out at a site in Taylors Hill, Victoria.
Eliana and Mad Brothers agreed to settle the debt on payment by Eliana of $220,000. Rock Development & Investments Pty Ltd (“Rock“), a company related to Eliana, borrowed money from a lender (“Nationwide“) to pay the debt.  Nationwide transferred $220,000 to Mad Brothers to discharge Eliana’s debt under the settlement agreement.
In the subsequent liquidation of Eliana, Eliana’s liquidator brought an unfair preference proceeding against Mad Brothers in respect of the $220,000 payment. The main issues which arose during the proceeding were:

whether Eliana was a party to the transaction within the meaning of s.588FA(1)(a) of the Act; and
whether the $220,000 payment was received “from” Eliana within the meaning of s.588FA(1)(b) of the Act.

The liquidator’s unfair preference claim was successful at trial.  However, the judgment was overturned on appeal in the Supreme Court.  The liquidator subsequently appealed to the Court of Appeal.
The Court of Appeal’s judgment
The liquidator argued that Eliana authorised Rock to make the payment, and that was sufficient to establish that Eliana was a party to the transaction, and that the payment was received “from” Eliana.
While accepting Eliana was, in fact, a party to the transaction, the Court of Appeal found that the $220,000 payment was not an unfair preference.  This is because the payment was not received “from” Eliana, as required by s.588FA(1)(b) of the Act.  The Court’s conclusions were stated at [120] as follows:-

A company may be a party to a transaction within the meaning of s.588FA(1)(a) of the Act where it directs a third party to make a payment to a creditor, or it authorises or ratifies such a payment. However, the payment will not necessarily be received “from the company” within the meaning of s.588FA(1)(b) of the Act.
The words “from the company” in s.588FA(1)(b) of the Act have the effect that a payment will only amount to a preference if it is received from the company’s own money, meaning money or assets which the company is entitled to.
In order for a preference to be “from the company”, its receipt by the creditor must diminish the assets of the company available to creditors.
A payment by a third party, which does not diminish the assets of the company available to creditors, is not a payment received “from the company,” and therefore cannot be an unfair preference.

The Court considered the existence, or otherwise, of a debtor / creditor relationship between Rock and Eliana to be a matter of significance.  If Rock was indebted to Eliana, the impugned payment would have reduced that debt, and given Mad Brothers the benefit of money Eliana was entitled to.  In those circumstances, the payment would have reduced the value of Eliana’s asset (i.e. the debt), and would have been received “from” Eliana, within the meaning of s.588FA(1)(b) of the Act.
However, the Court could not be satisfied, on the available evidence, that Rock was indebted to Eliana.  Accordingly, the Court concluded that there had been no diminution in Eliana’s assets as a result of the transaction.  The payment was not, therefore, an unfair preference.
Implications
While the Court of Appeal’s judgement has clarified the law in respect of third party payments, one unintended consequence of the judgement may be to inform insolvent companies, and their creditors, about how to structure payments to avoid the unfair preference provisions under the Act.  We expect this issue will arise more frequently with the rise of insolvencies predicted as a result of the global COVID-19 pandemic.

with Mark Pennini, Lawyer & Michelle Nguyen, Graduate at Law
Victorian Court of Appeal rules on third party unfair preference payments | Hunt & Hunt Lawyers

Since 9 April 2020, the temporary JobKeeper legislation has allowed employers to vary the working hours of employees in response to the COVID-19 pandemic. This JobKeeper enabling direction, among others, aims to assist businesses to retain its workforce despite reductions in revenue and available work and the Government health measures which have been put in place to control it. Employers should note however, that this flexibility is not absolute and recent decisions by the Fair Work Commission (FWC) illustrate that the exercise of these directions must still be reasonable.
Directions must be proportionate to available work
The case of Allan Jones v Live Events Australia Pty Ltd [2020] FWC 3469 (3 July 2020) is a timely reminder for employers not to overplay their hand when issuing stand down directions. Mr Jones was employed as a broadcast engineer at Live Events and most of his rostered work was at horse racing events in Western Australia. Although the pandemic had disrupted the sports industry generally, horse racing continued relatively uninterrupted in Western Australia.
By March 2020, Live Events had formed the view that the impact of the pandemic on its business more broadly would be significant enough to require operations to be cut back. Live Events asked its staff to voluntarily agree to a 40% reduction in salary and working hours. Mr Jones refused the pay reduction and from March to June 2020 he continued to work at least 80 hours per fortnight with occasional overtime.
In June 2020, Live Events notified Mr Jones of its intention to issue a JobKeeper enabling direction to reduce his minimum working hours from 80 hours to 48 hours per fortnight (a 40% reduction). Mr Jones disputed the reasonableness of this direction as productive work was still available and was being performed.
The FWC held that the direction issued by Live Events was authorised, but that the direction was so overwhelmingly precautionary, it was unreasonable. The level of reduction was not proportionate to his rostered hours, prospective work hours or to the arrangements of other technical crews in Western Australia. Furthermore, at the time that Live Events imposed the reduction of Mr Jones’ hours by 40%, it had lifted the 40% reduction imposed on other staff to 20%.
The FWC varied the direction to a minimum of 64 working hours per fortnight (i.e. it imposed a 20% reduction for Mr Jones), concluding that this was more reasonable in the circumstances.
The FWC cautioned that its variation order was not a green light for the employer to reduce hours without an objective or fair basis for doing so. Even if objective circumstances exist to allow the full flexibility of the varied direction to be utilised, the FWC said that Live Events should first explore reasonable alternatives to a reduction in hours or income. Finally, the FWC stated that it would be inappropriate for Live Events to leave the varied direction in place if, during the period of its operation, the employer lifted the 20% reduction for other employees and returned its workforce to 100% of hours and salary.
Decision considers fairness between different employees
In Transport Workers’ Union of Australia v Prosegur Australia Pty Limited [2020] FWCFB 3865 (23 July 2020) the relevant JobKeeper enabling direction to reduce hours was found to be reasonable.
In this case, Prosegur initially proposed a blanket reduction in working hours to a minimum of 25 hours per week for full-time, part-time and casual employees. Concerned that this direction would disproportionately affect the entitlement of full-time employees, the Fair Work Commission Full Bench directed Prosegur and the Transport Workers’ Union (TWU) to seek to reach agreement on a direction that would be workable and reasonable. Prosegur and the TWU both agreed that it was necessary and appropriate to reduce the ordinary hours of the full-time employees to a minimum of 60 hours per fortnight.
The parties further agreed that this direction should be conditioned by a distribution method. The proposed method was that work would be allocated first to full-time employees, then to part-time employees and finally to casual employees to ensure they could all achieve their minimum work hours. Any extra available work would then be prioritised in the same order.
Though it was legally unnecessary to issue a JobKeeper enabling direction to casual employees, Prosegur proposed to provide casual workers with a minimum of 25 working hours per week, while the TWU proposed a minimum of 20 hours. The Commission had regard to a spreadsheet provided by Prosegur of hours worked in the period from April to July 2020 and was satisfied that there were sufficient hours available to be distributed in the manner Prosegur proposed. Accordingly, the FWC accepted the alternative JobKeeper enabling directions proposed by Prosegur on the basis it was fair to all employees – it would allow full-time employees to maintain approximately full-time pay, while retaining the minimum hours for part-time and casual employees.
Key takeaways
The unpredictable nature of today’s business conditions (particularly in Victoria) mean it is sensible that JobKeeper enabling directions continue to be available beyond 28 September 2020 to allow employers to trade through this crisis. However, it is important to remember that these directions cannot be given carte blanche. Employers must properly consider practical solutions to the challenges presented by the coronavirus pandemic, and utilise JobKeeper enabling directions to the extent that they are reasonable, necessary and appropriate in the circumstances.
Whether a direction is reasonable should include consideration of how similar employees are being treated. The differing contractual entitlements of full-time, part-time and casual employees should also be taken into account, so that these three classes of employees are not treated in identical fashion.
If you or your business have been affected by JobKeeper enabling directions and you would like advice on this matter, please contact the Employment Team at Hunt & Hunt.
 
with Michelle Nguyen
Graduate at Law
Flexibility within reason – Recent cases demonstrate limitations on the exercise of JobKeeper enabling directions | Hunt & Hunt Lawyers

We sometimes use the terms “business” and “company” interchangeably without realising that they are not synonymous. When we refer to the sale of a company, we generally mean the process under which a seller sells their shares in a company. Under a share sale, the company itself is unchanged – meaning the assets and the liabilities of the company are transferred to the buyer. A business sale, on the other hand, generally refers to selling the assets of a company, also known as an asset sale. To avoid confusion, we will only use the term “asset sale” in this article.
An asset sale, as the name suggests, involves the sale of the company’s assets. The buyer gains ownership of those assets but the seller retains ownership of the company and, generally speaking, the liabilities of the company don’t transfer.
Neither sale structure is risk-free so it is important to understand the distinction between selling assets and selling shares and what consequences follow. The decision as to which structure of sale best suits a seller will depend on some key considerations.
Tax considerations may suggest a preference for proceeding one way or the other. The tax consequences are complex and depend, amongst other things, on who owns the shares in the selling entity and whether the share owner is a trust. It will be critical for any seller to obtain appropriate tax advice on the different tax consequences of each approach.
Contracts
In an asset sale, for the buyer to receive the benefit of key commercial contracts, the seller will need to assign all existing contracts to the buyer. Often, a counterparty’s consent to assignment will be required. This could present problems as the counterparty (whether a customer or a supplier) may seek to renegotiate the contractual terms. The assignment process can become time consuming where there are many contracts involved, all with different assignment provisions, and this may impact on the ultimate price that the buyer is willing to pay for the assets.
Only the “benefit” of a contract is able to be assigned by the seller, unless the relevant counterparty cooperates and signs a novation agreement. As a seller, if you are party to any long-term, more onerous contracts, you may wish to novate those as part of the sale, as only in that way will you be fully “off the hook” under those contracts.
Conversely, in a sale of shares, contracts to which a company is a party do not have to be assigned to the buyer. Though the buyer takes control of the company in a share sale, the contracting party, the company itself, does not change.
This does not necessarily mean that it will be a smoother or safer process if the seller chooses to sell shares rather than assets. Share sellers should always be alert to any “change of control” provisions in the contract which may be triggered by the sale. Such a provision may require the seller to obtain the consent of the other party to the contract prior to completion of the share sale.
Employees
When selling assets, the employees of the company do not automatically become employees of the buyer. The buyer can essentially cherry pick which of the seller’s employees it would like to employ. Employment will continue only if the buyer makes a new offer of employment and the employee accepts.
If employees are re-employed by the buyer, the buyer may receive an allowance (that is, a reduction on the purchase price) on completion to reflect that it will assume responsibility for paying the employee’s accrued long service and annual leave entitlements. Personal leave is usually not included. The treatment of employees will have important consequences for the seller in an asset sale context, too – where employees are terminated without (generally) an offer from the buyer on “no less favourable” terms, the seller must pay out the employee’s redundancy entitlement. That may happen, for example, if the buyer doesn’t agree to offer employment to all the seller’s employees, or, for those who are offered employment, doesn’t recognise their prior service with the seller.
This is a very different position to a share sale, where existing employee arrangements are typically not affected, as the employer entity does not change. However, the buyer may still negotiate some adjustment in the purchase price to cover the buyer effectively assuming liability for leave entitlements.
Warranties
A warranty is a representation about what is being sold, for example, that a seller has good title, is not in breach of any contract and that there is no litigation pertaining to the company the shares of which are being sold.
Sellers can usually expect to give fewer warranties in an asset sale, compared to a share sale. This, of course, will vary depending on the particular company and the risks involved in the sale but generally speaking, this is the case for the following reasons.
Asset buyers are liable only in relation to liabilities they have assumed and assuming a liability requires three parties to agree – buyer, seller and also the continuing party to the relevant contract, so often, many fewer liabilities pass to a buyer on an asset sale.
On the other hand, whilst a seller may need to give less warranties in an asset sale, it will probably be left with more liabilities than in the case of a share sale where, at least in theory, all of the liabilities of the company pass with the company to the buyer.
Comparatively, all past, present and future liabilities of a company pass to the buyer on a sale of shares. These might include harder to identify liabilities (potentially, yet to emerge) such as a tax return being challenged by the ATO, an environmental contamination liability for premises owned or occupied years ago or a claim from employees for being underpaid some time back. The possibility of finding skeletons in the company’s closet or having to assume liabilities after completion, of any magnitude, means that a share purchase is considered more risky than an asset purchase. For this reason, sellers are typically expected to give broader warranties for the buyer’s protection.
Stamp duty
In Victoria, a buyer will generally not have to pay stamp duty in a sale of assets except to the extent that land or motor vehicles are being transferred. The laws of other states should be considered where assets are located elsewhere.
Generally, share sales do not attract stamp duty. However, duty will be charged in a sale of shares in Victoria where:

the company whose shares are being sold is “land rich”, meaning it owns land in Victoria with a threshold value of $1m or more and its land holdings in all places comprise at least 60% of the unencumbered value of all its property; and
the transfer of shares represents the acquisition of a significant interest in the company (being 50% or more in the case of a private company and 90% or more for a listed company).

Stamp duty on such a share transfer will be assessed based on the value of the transaction, ranging from 1.4% up to 5.5% where the value exceeds $960,000.
GST
A sale of shares is GST-free. For an asset sale, if a the seller provides to the buyer all assets necessary for the continued operation of the enterprise, this will be classified as the supply of a going concern and be GST-free. Otherwise, if a seller doesn’t provide to the buyer all assets necessary for its continued operation, GST will be payable.
Conclusion
It is important to understand the fundamental differences between an asset sale and a share sale, as each represents a different risk proposition for a buyer. That being the case, the impact on a seller will differ as between the two alternatives. The differences may emerge in the price received, risk retained or the mechanics for transferring certain assets. Tax is also likely to be a key consideration.
If you would like advice on selling your business, please contact our Corporate & Commercial Team at Hunt & Hunt.

with Michelle Nguyen
Graduate at Law
Selling your business? What are you really selling? | Hunt & Hunt Lawyers

As the name suggests, a Shareholders’ Agreement is an agreement between the shareholders of a company, which sets out the rules and processes that will apply to shareholders investing in and participating in the decision making of the company.
While a company’s constitution may outline the general rules that govern the relationship between, and activities of, the company and its shareholders, the constitution is more of an “off-the-shelf” document, that is not usually customised to address the wide range of issues that arise between shareholders.
While a constitution largely remains static, a Shareholders’ Agreement provides flexibility to accommodate shareholders coming in and out of the business. A constitution will not usually cover topics such as the relationship between the members in their capacity as shareholders, the valuation of shares on their sale or the process to be followed if or when a shareholder acts improperly.
Ultimately, a Shareholders’ Agreement aims to avoid and as needs resolve disputes arising between shareholders and to reduce disruption to the business where a shareholder wishes to sell its shares.
Features of a good Shareholders’ Agreement
Some of the more important clauses covered in Shareholders’ Agreements include:
Restraints
A Shareholders’ Agreement may provide for restraints which prevent a shareholder from competing with the company or taking the company’s clients, both whilst they are a Shareholder and for a specified period afterwards.
Deadlock
These provide a mechanism that is to apply where decision making in the company on a critical matter is deadlocked. This allows for a resolution to be reached, preserving the value in the company and enabling it to move forward.
Pre-emptive rights
These allow existing shareholders to acquire shares prior to the shares being offered to third parties. A more tailored pre-emptive rights regime, with appropriate features to reflect the mix of shareholders in the company, can be incorporated.
Identifying exit strategies
Exit strategies could include a buy out or sale of the business, as well as identifying how, and at what value, shareholders may exit the company.
Future funding obligations
A Shareholders’ Agreement will govern whether or not shareholders are obliged to contribute new debt or equity funding, and also whether existing shareholders have preferential rights if new shares are to be issued.
General decision making, including board composition and reporting
These are important matters that will vary from company to company, depending upon the number and different size of shareholdings, as well as the extent to which shareholders wish to be actively involved in company decision making.
As each Shareholders’ Agreement will be different, we have examined two clauses in further detail to demonstrate how different circumstances can impact on what is included.
Drag Along and Tag Along
Where shares are held equally between shareholders, such as if shares are held 50/50, there is usually no ‘drag’ right, and conventional pre-emptive rights will apply. Where one shareholder holds more than a 50% shareholding, however, a drag along provision would allow a majority shareholder who wishes to sell to compel minority shareholders to also sell their shares. This is particularly useful where a buyer wishes to purchase the entire company.
Tag along provisions, on the other hand, aim to protect the minority shareholder from being ‘stranded’ when the majority shareholder sells. A tag along stipulates that the majority shareholder must ensure that any sale of their shares also extends to the minority’s shareholding – i.e. the minority ‘tags along’ with the majority. The minority shareholder will therefore be able to sell their shares for the same price and on the same terms and conditions as the majority.
Special majority or veto rights
Where the shareholding is held in equal shares, there is usually no requirement for a “special majority” when a vote is called for. Effectively, each shareholder has a right to veto any decision. On the other hand, if there are multiple shareholders, with one shareholder holding more than 50%, the dynamic between shareholders should be customised to fit the particular situation.
When choosing what issues may require a special majority or allow for majority shareholder or group of shareholders a right of veto, you should ensure that only critical items are covered. Matters such as loans and guarantees, key employment contracts, the payment of dividends, the purchasing of assets and entering into contracts over a threshold value or duration are important items to consider.
Ultimately, what items will be covered will depend on your business plan, growth stage and existing administrative or executive structure. It will also depend on the risk appetite of the particular group of shareholders.
Conclusion
A well drafted Shareholders’ Agreement will govern the relationship between shareholders, outlining a set of rules aimed at resolving potential disputes between business owners. Furthermore, a Shareholders’ Agreement should facilitate investment and allow for a streamlined exit by the current owners.
By setting out these expectations from the outset, business owners will have a clear understanding of their rights and responsibilities as shareholders and reduce the likelihood of a costly and value-destructive dispute.
 
with Elissa Raines, Lawyer
Shareholders’ Agreements – What are they and what are they for? | Hunt & Hunt Lawyers

On 13 August 2020, the High Court of Australia handed down its highly-anticipated decision in the Mondelez case.[1] Employers welcomed the decision since the High Court accepted the arguments put forward by the employer, Mondelez, as supported by the Federal Government and provided a common-sense approach to calculating personal/carer’s leave entitlements. The decision reversed an earlier judgement of the Full Court of the Federal Court on 21 August 2019.
Under the Fair Work Act 2009 (Cth) (Fair Work Act), employees are entitled to 10 days of paid personal/carer’s leave per year. The employees in this case were shift workers at the Cadbury chocolate factory in Tasmania who worked three 12-hour shifts per week, and they argued,  supported by the AMWU, that they were entitled to 10 days of sick leave based on the length of their shifts, i.e. 120 hours per year.
By comparison, a typical full-time employee who works a standard 7.6 hours per day, across five days in a week, would normally accrue 76 hours of leave each year. In Mondelez, there was an enterprise agreement in place which set a full-time working week at 36 hours per week and provided shift workers with 96 hours of personal leave per year.  This meant that when a shift worker takes paid personal/carer’s leave for one 12-hour shift, Mondelez deducted 12 hours from their accrued leave balance.  Over the course of one year of service, employees accrue paid personal/carer’s leave sufficient to cover eight 12-hour shifts.
The arguments put forward by the AMWU had been accepted by the Federal Court before Mondelez launched an appeal to the High Court. Mondelez and the business community generally were understandably concerned that the Federal Court decision would have an inequitable outcome between employees, as well as representing a significant increase in employment costs and potential back claims.
A majority of the High Court rejected the “working day” approach to the calculation of leave that had been put forward for the AMWU.  Instead, the Court held that what is meant by a “day” must be calculated by reference to an employee’s ordinary hours of work and that “10 days” represents two standard five-day working weeks.
In other words, the Fair Work Act should be understood to mean that one “day” refers to a “notional day” consisting of one-tenth of the equivalent of an employee’s ordinary hours of work in a two-week period. Since patterns of work do not always follow two-week cycles, the entitlement to “10 days” of paid personal/carer’s leave is best thought of as representing 1/26 of an employee’s ordinary hours of work in a year.
The “notional day” construction was accepted by the High Court as being a fairer interpretation which was consistent with the objectives of the Fair Work Act to provide fairness, flexibility, certainty and stability for employers and employees.
The majority judgement highlighted the following inequities which would occur if the interpretation adopted by the Full Court of the Federal Court, in accepting the AMWU’s submissions, were allowed to stand:

An employee whose hours are spread over fewer days with longer shifts would be entitled to more paid personal/carer’s leave than an employee working the same number of hours per week spread over more days;
a part-time employee working one day per week for 7.6 hours would be entitled to ten days of paid personal/carer’s leave per annum ( the same as a full-time employee). This meant that they would accrue the leave at 5 times the rate of a full-time employee; and
a person who was employed one day per week by a number of employers would be entitled to 10 days of paid personal/carer’s leave from each employer (ie a staggering 50 days in each year).

The majority judgement commented that the 3 outcomes above would be directly contrary to the stated objects of the Act, being laws that are fair to working Australians, are flexible for businesses and promote productivity and growth. It added that the alternative interpretation would discourage an employer from employing anyone other than full-time employees.
What are the effects of this decision on employers?
The High Court decision means that employers will not have to recalculate and increase the personal/carer’s leave entitlements of part-time employees or employees who work shift based rosters involving longer hours per day but less days worked.
Although the issue was not addressed, the same reasoning will apply to interpreting the annual leave provisions in the Fair Work Act, meaning that employers will not be required to recalculate and increase annual leave entitlements for the same types of employees.
Accordingly, the decision provides greater clarity for employers about how to calculate both personal/carer’s leave and annual leave entitlements and is generally consistent with the common sense approach that most employers had adopted before the Federal Court threw doubt on the issue.  Now is a good time to revisit your payroll practices and systems as well as your leave policies to ensure that they are consistent with the High Court decision.
If you would like assistance in this area, please contact our Employment Team at Hunt & Hunt.
 
with Michelle Nguyen
Graduate at Law

[1] Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union; Minister for Jobs and Industrial Relations v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29
High Court clarifies sick leave entitlements – the Mondelez decision | Hunt & Hunt Lawyers

What is dumping and what do wine exporters need to do now?
The announcement that China has commence an anti-dumping investigation into Australia wine has come as a surprise many.  Dumping is associated with unfair tactics and selling goods at a loss.  This isn’t what is associated with the Australian wine industry.  However, the industry is in for a nasty shock – you can be found to be dumping even when acting ethically and selling at a profit.
It is easy to argue that the investigation is politically motivated.  However, it is important to keep in mind that this week Canada commenced a dumping investigation against Australian gluten.  Further, since the start of this year, Australian has commenced five anti-dumping investigations against Chinese products.  Australian wine exporters need to focus on how to get the best outcome from the investigation, rather than question the motives of the Chinese government.
What is dumping?
Under WTO rules, dumping occurs when an exporter sells goods to a foreign market at prices that are less than what it sells the same goods in its domestic market.  Adjustments are made for issue such as transport, level of trade, credit terms and packaging.  However, the general premise is, if you sell wine for $20 a litre in Australia and export the same wine to China at $15 a litre, the wine is dumped.
It will not matter that the wine is still profitable at $15 a litre or that the Chinese market is very different to the Australian market.
The calculation becomes more difficult if it is claimed that Australian prices are unreliable.  The application in wine investigation claims that via initiatives such as the wine equalisation tax, Australia has interfered in the Australia market and that Australian sale prices should not be used.  Disregarding actual Australian sale prices has resulted in an alleged dumping margin of 202%.
What happens if dumping is found?
Dumping is not illegal or even unethical.  Different markets will often warrant different prices.  However, if dumping is found, it may allow the importing country to impose dumping duties.
Dumping duties can only be imposed where the dumping is found to have caused material injury to an industry producing similar goods.  In this case, the key question will be, does the price of Australian wine cause damage to the Chinese wine industry?
What should exporters do?
China will now conduct a detailed investigation into the export of Australian wine and its impact on the Chinese industry.  This investigation will require Australian exporters to give detailed financial information about their Australian sales and their exports to China.  The investigation will also look at whether Australian exports caused harm to Chinese winemakers.
It is crucial that Australian exporters are fully involved in the investigation.  Failure to cooperate can result in a finding that the exporter is uncooperative and result in high levels of dumping duty.
It may also be the case the Australian exporters, and their Chinese customers, can make submissions as to whether Chinese consumers are selecting Australian wine over local Chinese wine based mainly on price.
The first step is for Australian exporters to register with the Trade Remedy and Investigation Bureau of the Chinese Ministry of Commerce to participate in the investigation.  This must occur by 6 September 2020.
There are strict timeframes around registration, the return of exporter questionnaires and the lodgement of submissions.  If exporters want to be involved, they do need to act quickly.
Following registration, a sample of exporters will be selected to complete much more detailed exporter questionnaires.
How Hunt & Hunt can help
Hunt & Hunt has a dedicated Customs and Global Trade team that has advised exporters and importers on a number of anti-dumping investigations.  Hunt & Hunt will work with specialist Chinese based dumping lawyers to get Australian exporters the best possible outcome.
Please contact Russell Wiese on 61 3 8602 9231 or [email protected] if you would like to discuss how Hunt & Hunt can help.
Want to know more? Free webinar
In conjunction with Freight and Trade Alliance, Hunt & Hunt will be delivering a webinar on dumping and this investigation at 1:00 pm (AEST) on Wednesday 26 August.  Click here for registration and more information.
China commences anti-dumping investigation against Australian wine | Hunt & Hunt Lawyers

Introduction
With the full impact of Stage 4 Restrictions on Victorian businesses yet to be felt, the Federal Court of Australia decision in Ford (Administrator), in the matter of The PAS Group Limited (Administrators Appointed) v Scentre Management Limited [2020] FCA 1023 (“Ford“), handed down on 21 July 2020, represents a significant win for landlords of insolvent companies.
The case settled an important question as to the priority of rent incurred during the period of an administrators’ statutory moratorium on liability (i.e. the “standstill period”), in circumstances where a company continues to use and occupy leased premises to carry on its business.
Ultimately, the Court decided that rent incurred in those circumstances would be properly incurred in carrying on the business of the company under s. 556(1)(a) of the Corporations Act 2001 (Cth), and prioritised over other unsecured debts in any subsequent liquidation, in accordance with the “Lundy Granite” principle.
Background
On 29 May 2020, PAS Group Ltd (“PAS Group”), an Australian-based fashion group, went into administration, primarily as a consequence of the COVID-19 pandemic and the collapse of Harris Scarfe.
Prior to administration, PAS Group leased 166 premises.  Following the administrators’ appointment, PAS Group continued to trade from all but 8 of the retail premises.
The administrators of PAS Group obtained an order to extend the “no personal liability period” for rent from 5 business days from 29 May 2020 to 22 June 2020 (“the “standstill period”).
The total unpaid rent incurred during the standstill period was approximately $1.385M. The PAS Group generated approximately $7.32M in revenue from trading from the leased premises during that period.
The administrators sought a declaration that rent incurred during the standstill period amounted to an unsecured debt, which was not entitled to priority over other debts in any subsequent winding up.
The declaration was opposed by Scentre Management Ltd (“Scentre”), the largest lessor of premises to the PAS Group.  Scentre argued that rent incurred during the standstill period should be treated as an expense properly incurred in carrying on the business of the PAS Group, within the meaning of s.556(1)(a) of the Act, and thus afforded priority in accordance with the “Lundy Granite” principle.
Lundy Granite principle
It has long been the case that expenses incurred to preserve, realise and get in property of a company, or to carry on a company’s business, are payable in priority in any subsequent liquidation.
The relevant principle, often referred to as the “Lundy Granite”[1] principle, operates in circumstances where an administrator (or liquidator) elects to cause a company to continue to have “beneficial occupation” of leased premises (i.e. the company continues to trade from those premises).  In those circumstances, the rent incurred during the period of beneficial occupation  is payable as an expense of the external administration, within the meaning of s.556(1) of the Act, and prioritised over other unsecured debts.
The rationale behind the principle is that an external administrator obtains a benefit for the company (and, by extension, its creditors) by remaining in occupation, and trading-on, from the premises.
The Court’s decision in Ford
In Ford, the administrators argued that:-

A landlord’s claim for rent under a pre-administration lease was an ordinary unsecured claim against the company.
The standstill period rent was not a debt “incurred” within the meaning of s.556(1) of the Act, because the administrators’ were not personally liable for rent in that period.
The Lundy Granite principle had been supplanted by s.443B of the Act (which sets out the circumstances in which administrators are personally liable for rent) and should not be applied to expand what debts may be payable in priority under s. 556(1) of the Act.
The voluntary administration regime is intended to balance creditors’ interests, and applying the Lundy Granite principle in the present circumstances would create a “super priority” for landlords.

The Court did not accept the administrators’ arguments, and their lack of personal liability for the standstill rent was considered to be irrelevant. Rather, the Court considered the only relevant question to be whether the rent was an expense incurred in carrying on the business of the PAS Group.
The Court considered the fact the administrators had operated the PAS Group on a “business as usual” basis, during the standstill period, to be clear evidence of their election to continue the company’s occupation of the premises. Consequently, the standstill rent was properly incurred in carrying on the business of PAS Group under s. 556(1)(a) of the Act.
Ultimately, the Court refused to make the declaration sought by PAS Group’s administrators, and accepted the unpaid rent owing to Scentre (and other landlords of PAS Group) would have priority over other unsecured debts in any subsequent winding up.
Consequences
The Ford case settled an important question as to the priority of expenses incurred during the period of administrators’ statutory moratorium on liability. However, there remain some areas of uncertainty for administrators, noting that the Lundy Granite is grounded in the idea of “beneficial occupation.”
We expect that the priority to be afforded to landlords’ unpaid rent will increasingly feature in upcoming external administrations. This is particularly so as the pandemic takes a toll on many businesses, and as the end of the moratorium introduced by the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) on statutory demands and bankruptcy notices on 15 October 2020 nears (although, some media outlets are reporting that the Commonwealth may extend the moratorium).
Mark Pennini
Lawyer
Emily Clapp
Graduate at Law

[1] Re Lundy Granite Co, ex parte Heavan (1871) L.R. 6 Ch. App. 462
Landlords’ “Super Priority” for unpaid rent of insolvent tenants | Hunt & Hunt Lawyers

On 31 July 2020, the Treasurer, Josh Frydenberg, announced that the Morrison Government would extend certain features of the temporary Coronavirus response legislation for a further 6 months.
Until 21 March 2021, company directors can continue to use certain interim amendments to the Corporations Act to satisfy their legal obligations, such as the ability to hold AGMs online and execute documents electronically.
The Treasurer’s announcement however did not specify whether the provisions:

extending the period a company has to respond to a statutory demand from 21 days to six months;
increasing the minimum debt threshold for issuing a statutory demand on a company from $2,000 to $20,000; and
granting directors temporary relief from personal liability for insolvent trading for debts incurred in the ordinary course of the company’s business,
would also be extended for a further 6 months.

We will provide updates on this matter as more details are released.
If you would like further information or advice on how these changes could assist your company, please contact our Corporate & Commercial Team at Hunt & Hunt.
Full details of the announcement are available here.
Extension of temporary COVID-19 Corporations Act amendments | Hunt & Hunt Lawyers

As the COVID-19 situation escalates in the metropolitan Melbourne region and across Victoria, we wish to provide all our clients with an update on Hunt & Hunt’s plan to provide continuity of care and service.
Office Closure
Following the announcement of Stage 4 restrictions on Melbourne, the Hunt & Hunt Melbourne office at 114 William Street will be closed from 5:30pm on Wednesday 5 August 2020.
Continuity of Service
Our people will continue to be available to meet the needs of our clients by working remotely, with our team continuing to work at full capacity.
Since the outbreak of this pandemic, we have focussed on updating our systems and increasing our efficiencies to ensure all our services could continue to be provided remotely in the event a full lockdown occurred. All our Melbourne staff are fully equipped to work remotely and a majority have been doing so for months now.
Our main phone line will continue to be available between 8:30am – 5:00pm.  Alternatively, the direct contact details of all Principals and senior staff members are available on their website profile.
Documents forwarded via Australia Post or Courier will continue to be collected and distributed via our document management system to the relevant staff member. However, in the interests of speed and efficiency, we ask that you use email wherever possible.
Caring for our Clients & Staff
We understand that these restrictions will have a heavy impact on many businesses across Victoria, and we will continue to support our clients fully during these challenging times, working closely together to continue to achieve and protect their business goals.
We believe that the strong relationships we have built between our internal team and our clients will ensure we can proactively work together to develop a plan to protect each client’s particular needs.
The Stage 4 restrictions are a challenging time for all Melbournians and impact Victorians generally. Through our Health and Wellbeing program, we aim to ensure the physical and mental health needs of our staff and their families are respected and supported throughout this period.
What Next?
The one thing we have learnt throughout the last 6 months, is that the situation is constantly changing.
It is expected these arrangements will be in place for an initial period of 6 weeks in line with Government announcements. But we will remain flexible and ready to adapt to the circumstances and our clients’ needs. We will continue to provide updates as the situation changes.
In the meantime, please stay safe and stay in touch.
From all of us here at Hunt & Hunt Victoria
Update: Continuity of Care During Stage 4 Restrictions in Melbourne | Hunt & Hunt Lawyers

After much speculation, the Federal government announced the extension of the JobKeeper payment scheme, JobKeeper 2.0, on 21 July 2020, to assist businesses to recover following the impacts of the COVID-19 pandemic.
The scheme will commence on 28 September 2020 when the existing scheme ends, and continue until 28 March 2021.
New JobKeeper payment arrangements
JobKeeper 2.0 continues to assist businesses in their financial recovery, but their eligibility will need to be reassessed and the payments will be scaled back and organised into two tiers for full time and part time employees.
Businesses and not-for-profits will need to demonstrate that they have met the relevant continuing decline in turnover test in the June and September quarters to access payments after 28 September 2020. Eligibility will be reviewed again in early January 2021 for the period to 28 March 2021.
The JobKeeper Payment rate will be gradually reduced and paid in two tiers, depending on an employee’s hours worked:

Date
More than 20 hours / week
Less than 20 hours  week

 
28 September 2020 to
3 January 2021
 
 
$1,200 per fortnight for eligible employees who worked for 20 hours or more a week in the four weeks before 1 March 2020
 
$750 per fortnight for eligible employees who worked for 20 hours or more a week in the four weeks before 1 March 2020
 

 
4 January 2021 to
28 March 2021
 
 
$1,000 per fortnight for eligible employees who worked for 20 hours or more a week in the four weeks before 1 March 2020
 
$600 per fortnight for eligible employees who worked for 20 hours or more a week in the four weeks before 1 March 2020
 

What about JobKeeper enabling directions?
Equally important to the JobKeeper scheme is the enabling directions which give employers a level of workplace flexibility designed to keep employees attached to their businesses.
Since April 2020, employers have been lawfully permitted to make changes to the working conditions of their employees which would not otherwise have been allowed, including reducing working hours, assigning alternative duties, allowing work to be performed from home, and reaching agreement about taking annual leave. Information about the current JobKeeper enabling directions can be found here.
As the law stands, these flexible directions are scheduled to cease on 28 September 2020, in line with the first phase of JobKeeper.
Whilst the Federal Government’s latest announcement concentrated on the amended JobKeeper payments, it is inevitable that this workplace flexibility will also be extended until March 2021 with similar changes to the enabling laws and the Prime Minister has said as much in recent press interviews. There may yet be some changes introduced or negotiated in Parliament, which we will report on as events unfold.
JobKeeper 2.0: New payments structure confirmed with continued flexibility expected to follow | Hunt & Hunt Lawyers

On 24 June 2020, amendments to the Duties Act 1997, the Land Tax Act 1956, and the Land Tax Management Act 1956 were enacted.
As a result, it is essential that trustees of all discretionary trusts review their trust deeds, in order to avoid surcharge land tax and/or surcharge purchaser duty.
Background
Generally, every discretionary trust which holds real estate in New South Wales is subject to:

stamp duty (at the time of acquisition of the property); and
land tax (annually)

In addition, “foreign trustees” may be liable for surcharge land tax and surcharge purchaser duty in respect of residential land holdings.
The rates of these surcharges are as follows:

surcharge purchaser duty: 8% of the market value of the property;
surcharge land tax: 2% of the unimproved value of the land.

Prior to these recent developments, the trustee of a discretionary trust would only be considered a foreign trustee if a beneficiary of the trust was a foreign person.
What are the changes?
The trustee of a discretionary trust is now taken to be a foreign trustee unless the trust prevents a foreign person from being a beneficiary of the trust.
Revenue NSW has issued a Practice Note detailing how this test will be applied.
In short, the effect is that a trust which does not expressly benefit a foreign person may still be liable to surcharge purchaser duty and/or surcharge land tax.
Who is affected?
In all likelihood, a great many discretionary trusts, including ordinary family trusts and testamentary trusts.
For example, most standard family trust deeds will not include an express provision that excludes a foreign person from being a beneficiary.
Rather, it is commonplace for the trust deed to define potential beneficiaries broadly, by reference to their relationship to the trustee (e.g. “the spouse of the trustee”).  In such cases, the trustee will fall afoul of the new provisions and be deemed a foreign trustee, unless an exclusion clause is added.
When do the changes come into effect?
The Commissioner has given trustees until 31 December 2020 to amend their trust deeds so that they comply with these legislative changes.
The changes will not apply to existing testamentary trusts.  However, testamentary trusts created under a will dated after 31 December 2020 will be subject to the new rules.
Enforcement
Revenue NSW possesses a wide range of powers to monitor compliance and recover unpaid surcharges.
In many cases, liability for surcharge land tax is discovered by Revenue NSW when the land holder eventually sells the property.
Similarly, for surcharge stamp duty, liability for surcharge purchaser duty may only be discovered after the landholder has purchased the property.
Each of these circumstances can lead to nasty, unforeseen cash flow consequences for the trustee of a discretionary trust.
We anticipate that Revenue NSW will require further disclosure by trustees and/or their practitioner representatives when properties are bought and sold, with a view to collecting unpaid surcharge purchaser duty and surcharge land tax.
Action required
We strongly recommend that all trustees of family trusts have their trust deeds reviewed by their legal advisor as soon as possible.
If you have any questions, contact Tim Story to discuss.
Does your family trust hold residential real estate in NSW? If so, you must read this. | Hunt & Hunt Lawyers

Introduction
In March 2020, the Federal Government introduced measures to reduce financial pressure on businesses and individuals caused by COVID-19, including Job Keeper and extensions of time to comply with statutory demands and bankruptcy notices. As these measures are set to expire in September 2020, an increase in individuals and businesses defaulting is expected and consequently, an increase in the enforcement of security interests against defaulting debtors.
Accordingly, it is important that secured parties take action now to ensure that their interests are protected under the Personal Property Securities Act 2009 (Cth) (PPSA) and enjoy the highest available level of priority. One form of priority available under the PPSA is ‘PMSI super priority’.
What is PMSI super-priority?
For a secured party to protect its security interest in personal property (property other than land), it must first ‘perfect’ the interest. This is usually achieved by registration on the Personal Property Securities Register (PPS Register) digital register.
Commonly, two or more secured parties will have a security interest in the same secured property. The PPSA introduced a priority system to determine competing claims to the same property. Generally, a secured party which registers its interest first will take priority over later-registered interests. An exception to this general rule applies to Purchase Money Security Interests (PMSI).
A PMSI will arise:

when a seller sells goods on retention of title terms;
when a lender loans money to a third party to purchase goods and the lender takes a security interest in the purchased goods; and
under a PPS Lease, being a lease or bailment of goods for 2 or more years.

Example:
Bank lends money to Construction Company, secured by all of Construction Company’s present and future assets. Bank prefects its interest by registration on the PPS Register.
Later, Seller sells a truck to Construction Company, but retains title to the truck until Construction Company has paid in full. Seller perfects its interest by registration.
Later still, Construction Company defaults and Bank and Seller both try to take possession of the truck.
Ordinarily, because Bank perfected its security interest before Seller, Bank’s interest will take priority and Bank can claim the truck. However, if Seller has satisfied certain requirements, it may claim a PMSI super-priority and will be entitled to take possession of the truck.
How to qualify for PMSI super-priority
To qualify for PMSI super-priority, the secured party (in the above example, the Seller) must register its security interest on the PPS Register:

for goods that are inventory (e.g. stock), prior to the goods being supplied; and
for goods that are not inventory, within 15 business days of supply.

The registration must also specify that the security interest is a PMSI. If any of the requirements is not satisfied, there will be no entitlement to PMSI super-priority.
Is it too late to register?
Registration of a security interest may occur at any time. There are advantages to perfecting a security interest promptly, and serious consequences for failing to do so. Consequences include losing PMSI super-priority status and losing the security interest altogether. Even so, it is advantageous to register at a late stage versus not registering at all.
Applications to extend PMSI super-priority status
In the above example, as the truck is not inventory, Seller was required to register its interest within 15 days of supplying the truck to Construction Company. If Seller registered its interest after this time, Seller’s interest would not have PMSI super-priority status and Bank could claim the truck. However, Seller may apply to the court to retrieve its PMSI super-priority status.
The court may grant an extension of the registration period, thus affording PMSI super-priority status, if it is just and equitable to do so. The court will consider:

whether the extension is required as a result of accident, inadvertence or some other sufficient reason;
prejudice to any other secured parties or creditors; and
whether a third party has acted, or not acted, in reliance on the secured party not having PMSI super-priority.

Conclusion
Security interests should be perfected as soon as possible, ideally in advance of the supply of goods.
Even if a lengthy period has elapsed since the security interest arose, it is advantageous to perfect the interest by registration.
PMSI super-priority status can be obtained by court order if there are compelling reasons to do so.
Contact our team for advice about perfecting your security interest to obtain the highest level of priority.
 

Marcus Fogarty
Lawyer
Melbourne
Using your super powers: Why you should register your interests under PMSI super priority | Hunt & Hunt Lawyers

On 12 June 2020, the Federal Parliament passed the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019, which establishes a lifetime registration system for company directors with the aim of combating illegal phoenix activities.

Any person seeking to become a director of a registered company will be required to first apply for a Director Identification Number, or “DIN” for short, and have their identity confirmed.
The director will keep the same DIN for life even after they cease to be a director of one company and are appointed as a director of another. Presently, directors could have multiple entries in ASIC’s registers if there are variations in their personal details.
The new identity system is expected to begin in the first half of 2021, following development of the technology.

The DIN regime is aimed at preventing repeated unlawful behaviour, called ‘phoenixing’, as well as making directors more accountable for past activities.

What is ‘phoenixing’?
Phoenixing is where directors shut down a company and transfer assets to a new company to avoid paying debts and liabilities.
In July 2018, PricewaterhouseCoopers Consulting (Australia), after having been engaged by the Australia Taxation Office, Fair Work Ombudsman and Australian Securities and Investment Commission to examine phoenix activity, released ‘The Economic Impacts of Potential Illegal Phoenix Activity’ report which estimated that the annual cost to the Australian economy as a result of phoenix activity is between $2.85 – $5.13 billion dollars.

Individuals must apply for a DIN prior to their appointment as a director, although for current directors there is a transitional period of 18 months during which they will be required to apply for a DIN.
It is important for companies and directors to be aware of these new obligations and to have processes in place to ensure compliance when the new legislation takes effect.
There are criminal and civil penalties for a director if they:

fail to apply for a DIN;
provides false identity information; or
knowingly apply for a second DIN when one has already been assigned.

For example, the criminal penalties for a director applying for multiple DINs or misrepresenting a DIN could be a maximum of 100 penalty units, or 12 months imprisonment, or both.
The Administrative Appeals Tribunal will have jurisdiction to conduct merit reviews of decisions made by the registrar administering the DIN regime.
Privacy concerns have been raised in respect of the DIN regime by the Australian Institute of Company Directors, although it is anticipated that these concerns will be addressed prior to the introduction of the new identity system.

Need more information?
If you have any questions or concerns regarding how the new DIN regime might affect you or your company, please do not hesitate to get in touch.
Authors
Matt Gauci & Jessica Egger
Brace yourselves… ‘Director Identification Numbers’ are coming! | Hunt & Hunt Lawyers

Are you planning to visit us at our Gateway premises in the Sydney CBD? Be aware, our reception has temporarily relocated to level 11.
In preparation for our upcoming move to 1 Bligh Street in September, we have moved our reception to level 11 in the Gateway Building.
“1 Bligh street is a brilliant location – it’s an iconic, highly sustainable and multi-award-winning building,” said NSW Managing Partner, Jim Harrowell AM. “Returning to Bligh Street is significant – Bligh Street was the location of our main office shortly after Hunt & Hunt was established 90 years ago.”
The building is an ecologically sustainable development and has achieved a six-star green status by the Green Building Council of Australia.
Until the Sydney CBD Hunt & Hunt office relocates in September, clients and visitors are reminded to enter via the 11th floor of the Gateway Building in Circular Quay.
Hunt & Hunt is on the move | Hunt & Hunt Lawyers