McKillop Legal Blog

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Properly executing documents

When it comes to properly executing documents, depending on the type of document and the parties executing it, there are different requirements for it to be valid.

The manner of execution depends on matters such as:

  • Party – whether a party is an individual, a partnership, the Government, an association or a corporation (and whether those signatories are parties in their own right or as a trustee of a trust or a superannuation fund;
  • Document – whether it is a Deed or just a contract or an Agreement; and
  • Physical/Electronic – whether it to be signed online or in person, or a combination of both.

PARTY TYPE

Individuals

An individual may execute a document by simply signing it with their signature witnessed by a person who is not party to it.

Partnerships

For a partnership to be bound by a document or a deed, either all partners to the partnership or an individual authorised by all the partners (whether or not the individual is a partner) should execute the document or deed.

Often, documents will be executed by a partner on behalf of a partnership. This authority may be set out in the partnership deed or a power of attorney. If you cannot obtain a copy of the relevant authority, you should consider obtaining a warranty from the individual in the relevant execution clause that they have authority of the partnership to so execute the document.

Companies

Section 127 of the Corporations Act (Corporations Act) sets out the ways in which a document may be executed by a company. If a company executes a document in this way, anyone will be able to rely on the protection in other sections of the Corporations Act for dealings in relation to that company. A company may execute documents under seal or choose not to have a company seal and even if the company has a seal, it need not apply it.

A company may execute a document with or without a seal if the document is signed by:

  • 2 directors; or
  • a director and a company secretary o; or
  • a sole director (there is no requirement for a private company to have a secretary).

Companies can also sign via an agent under s.126 of the Corporations Act.

Associations

Usually an incorporated association signs documents by having 2 committee members sign it but often the Rules of Association need to be examined to confirm this.

An unincorporated association is not a legal entity and so cannot contract in its own right so be careful entering into any contract of value with them.

Trusts

A trust is not a legal entity and as such, it cannot contract in its own right so all acts relating to a trust must be undertaken by its trustee or trustees.

The type execution clause that should be used will depend on what type of entity the trustee is (eg a company  or one or more individuals) execution clause should be used if the trustee is a company).

Although a trust is not a legal entity, it may be a tax entity so may have its own ABN. You should therefore confirm that the ABN being used is the ABN of the trust and not the ABN of the trustee. An ABN is a great identifier.

If you are unable to confirm that the trustee has the power to enter into the arrangement (which can usually be ascertained by examining the trust deed), you should consider obtaining a representation and warranty from the trustee that it has the power to execute the document or deed on behalf of the trust.

DOCUMENT TYPE

There are various reasons for choosing between the different types of document. such as greater (often double the length) limitation periods for enforcing obligations in deeds compared to just agreements. Sometimes legislation requires transactions by deed, but oftentimes deeds are used as they are the most solemn act a person can perform in relation to an item of property or any other right.

Agreement / Contract

Generally, a contract is in place and is valid if the following conditions are met:

  1. Intention to create legal relations
  2. An offer
  3. Consideration (price) being agreed
  4. Acceptance

A written signature is not necessarily required for a valid contract to exist. The terms of the agreement also can be agreed verbally.

Contracts can be signed electronically (even with the click of a mouse) since the Electronic Transactions Act 2000 (NSW) (ET Act) and corresponding legislation in Australia’s other States and Territories.

Deed

Traditionally, to be a valid, as a deed the document had to be “signed, sealed and delivered” and thus it had to be:

  • written (on paper or parchment);
  • signed and the parties’ seal/s applied); and
  • delivered (physically to the other party),

however now, there is no requirement for a seal (where it is described as a deed or expresses that is is ‘sealed’ and it is witnessed appropriately), the parties are presumed to have ‘delivered‘ it on execution and the parchment requirement has also been dispensed with given the ET Act, amendments to the Conveyancing Act 1919 (NSW) and, in relation to companies, the passing of the  Corporations Amendment (Meetings and Documents) Act 2022, which from 01 April 2022 (after the temporary COVID-19 pandemic measures ended on 30 March 2022), amended the Corporations Act to permanently allow things such as:

  • director or member meetings virtually, such as through Zoom or Teams meetings etc (regardless of the requirements under their constitutions); and
  • documents, including deeds, to be executed electronically.

As Deeds do not require consideration like a contract, often it can be sensible to include a nominal item (such as $10) as consideration just in case the document isn’t valid as a deed – as it can still be relied on as a contract, possibly even if not signed by the other party but part performed.

WET INK OR ELECTRONIC?

Documents now can either be signed:

  • in physical form with ‘wet ink‘ signatures;
  • electronically; or
  • a combination of both.

Either way, the method of signing must clearly and reliably identify the part and indicates the party’s intention in respect of the information recorded in the document.

Obviously, special care needs to be taken with parties that are not Australian residents and to consider the governing law and jurisdiction of the arrangement.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Termination of employment

There are 4 main reasons for an termination of employment:

  1. Misconduct (breaching the terms of the employment such as not following a reasonable and lawful direction or policy)
  2. Performance  (lack of skill, care, diligence etc)
  3. Capacity (not fulfilling the inherent requirements of their role)
  4. Redundancy (the employee genuinely no longer needs the employee’s role to be done by anyone, or the employer becomes insolvent/bankrupt)

The first thing to look at in any employment-related issue is the Employment Contract itself (as well as any relevant Award or industrial agreement) and depending on the issue, any relevant Workplace Policies or directions/notes on the employee’s file.

If the employee:

  • is a casual;
  • has not been employed for more the prescribed period (6-12 months);
  • was employed for an agreed fixed term or to perform a specific task; or
  • is on probation,

then termination of the employee is usually simple however, where these don’t apply, then the employee may potentially bring or threaten an:

  • unlawful dismissal claim; or
  • unfair dismissal claim.

Casuals

Given the nature of an ad hoc arrangement, casual employees usually don’t have to give any (or much) notice, and the same goes for the employer.

Generally, there is nothing a casual employee can do if they are terminated unless they have been employed for at least 6 months (or 12 months for a small business – see below), except if it was for an unlawful reason. Then the “general protections” in the Fair Work Act can come into play.

Fixed term agreement

If the employment was for a defined or fixed term and that time has ended, then they will not have been “dismissed”.

Probation

Often, the Employment Contract will have a probationary period in which the employee or the employer can terminate without providing any reason on short notice.

Probationary periods are usually 3-6 months, but can be extended.

GENERAL PROTECTIONS DISMISSAL (UNLAWFUL TERMINATTION) 

The Fair Work Act sets out several “general protections” to prevent employees being dismissed for things (each known as an “adverse action“) such as:

  • discriminatory reasons such as race, colour, sex, sexual orientation, age, religious beliefs, mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin etc (unless an inherent requirement of the job)
  • being absent from work because of illness, injury or parental leave
  • performing emergency volunteer work
  • union membership
  • making a complaint or commencing legal action against the employer or exercising a workplace right

Fines can apply for such dismissals in addition to reinstatement and payment of lost wages or salary.

Unlawful dismissal/adverse action claims must be brought within 21 days of the dismissal.

UNFAIR DISMISSAL

Where:

  • an employee has in excess of 6 months of service (or 12 months where the employer is a small business);
  • the employee’s income is below the high income threshold (compensation cap); and
  • the employee’s employment is covered by a modern Award or enterprise agreement, then

unfair dismissal can come into play if the employee’s dismissal was “harsh, unjust or unreasonable” (in the circumstances, considering the reason/s and the process followed) or if the employee felt they had no choice but to resign following such conduct (called “constructive dismissal“).

A termination is not unfair (and it is a complete defence to an unfair dismissal claim) where:

  • a small business follows the Small Business Fair Dismissal Code; or
  • in the case of a genuine redundancy.

Unfair dismissal claims must be brought within 21 days of the dismissal.

Small business exception

Where a business is classified as a “small business” (ie, it has 15 of fewer full time equivalent (including several part time staff but excluding contractors) employees, liability for unfair dismissal is removed where the small business employer has complied with the Small Business Fair Dismissal Code.

The Small Business Fair Dismissal Code Checklist sets out a simple and fair process to follow at termination.

Redundancy

A redundancy is “genuine” where the employer:

  • no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s business;
  • has complied with any obligation in a modern Award or enterprise agreement that requires consultation about the redundancy; an
  • has considered if it would have been reasonable in all the circumstance for the employee to be redeployed within the employer’s business or any associated enterprise.

Additional payment called redundancy pay is payable in addition to notice and unpaid entitlements, such as annual leave etc.

NOTICE

When terminating employment (including for redundancy), the correct period of notice must be given, or payment in lieu if allowed as per the National Employment Standards and the Employment Contract.

An exception to this is “summary dismissal” (on the spot termination, without notice) when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal – usually for serious misconduct (theft, fraud, assault, sexual harassment, serious breaches of workplace health and safety rules and procedures or refusing to carry out a lawful and reasonable instruction that is part of the role.

MANAGING TERMINATION RISKS

Where termination is being considered, the employer must have a good reason for the termination and follow procedural fairness in the process.

Where poor performance is the issue, the employee ought to:

  • be informed of the issue, told what is expected and advised of the likely consequence of not improving -eg, termination) and be given a reasonable time to improve; and
  • have a reasonable opportunity to consider and respond to such allegations (and improve).

Where misconduct is involved (other than serious misconduct):

  • the employer ought to be able to point to specific terms of the employment or clear policies as to the conduct required (except where such poor conduct goes without saying); and
  • a proper investigation ought to take place, with the employee having a proper opportunity for the employee to respond to such matters.

Capacity being in issue is often self-evident, such as not being able to do a job – for example a professional licence or vocational qualification lapsing.

Consider how other employees had been dealt in the past with for similar conduct and the position, past conduct and length of service of the employee also.

Keep detailed records of warnings, meetings and counselling (3 warnings are not always required)

The employee should have opportunity to have a support person at interviews and the employer may want a second person (a witness) present.

Maintain a level of professionalism and give notice of termination in writing.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Buying a property with others: Co-Ownership Agreements

Given the increasing cost of buying real estate, many potential purchasers are having to pool their resources to buy property together.

This can be good for many reasons as the costs can be shared and you may be able to own or live in better premises than you may otherwise be able to afford on your own, but there are risks.

Co-ownership often is a joyful experience at the beginning but often, disputes can arise such as each co-owner has differing views on the approach to be taken on various matters, from the important to the quite petty.

If you have bought, or are thinking of buying, a property with others, then you should really have a Co-Ownership Agreement in place.

Co-Ownership Agreements often cover the following maters (and others):

  • Ownership proportions
  • Amounts contributed for acquisition costs
  • How improvements to the property are made
  • Agreed valuation mechanism for exit purposes
  • Rights of first refusal / pre-emption
  • Parts of the property / premises either co-owner may have exclusive use of (and those for common use)
  • Contributions to expenses (insurance, rates, utilities etc)
  • Responsibilities for tasks like mowing, maintenance, upkeep etc
  • Dispute resolution procedures
  • Estate planning considerations (for example a couple’s interest may be held as joint tenants, rather than tenants in common).

Other articles of interest regarding this topic include:

FURTHER INFORMATION

For further information on co-ownership of property and the benefits of Co-Ownership Agreements, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Liquidation

Liquidation is the process of winding up a company’s financial affairs and ultimately results in the existence of the company ending and being deregistered at ASIC.

An insolvent company can be wound up by the Court either by voluntary resolutions of the company’s directors and the company’s shareholders or by application by a creditor.

A solvent company can also be wound up through a members voluntary winding up if the company is no longer needed.

A Court will make an order for the winding up of a company if it can be shown that the company is:

(a)    actually insolvent – it cannot pay its debts as and when they fall due (even if the company has surplus assets but cannot convert them to cash them quickly); or

(b)    is deemed to be insolvent (such as through a Creditor’s Statutory Demand having been served but not complied with).

The Court can order winding up for other reasons also.

Unlike during a company’s administration, personal guarantees are unaffected by liquidation – they are personal arrangements.

Secured creditors are also unaffected by the process of liquidation.

In a liquidation, after sale of the company assets etc, the liquidator will distribute as dividends any surplus in accordance with the order of priority set out in s.556 of the Corporations Act 2001 (Cth).

A liquidation lasts for as long as it takes but ends on the company being struck off ASIC’s register or by Court order – either dissolving the company or staying or setting aside the winding up.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Deed of Company Arrangement

A Deed of Company Arrangement (DOCA) is a proposal put forward by stakeholders, usually the directors, whilst the company is in administration so as to give a return to creditors better than they may receive in a winding up.

Importantly, a DOCA avoids the need to place the company into liquidation and allows the company to continue to trade with control of the company ultimately going back to the directors.

DOCA arrangements are flexible in that they can provide for may forms of payment from a lump sum or a payment by instalments of a fixed amount of based on net profit.

A Deed of Company Arrangement and must be signed within 15 business days of the 2nd creditors meeting (unless this time is extended by the Court), otherwise the company must be placed into liquidation, with the administrator becoming the liquidator.

Prior to execution, a DOCA must be approved by at least 50% of creditors by number and in value of amounts owed. Once signed, DOCAs are binding agreements between the company and its creditors and the administrator is in control of the company.

If entered into, a DOCA subsists for as long as its terms provide, until the obligations in the DOCA have all been met or until Court order.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Voluntary Administration

Voluntary Administration (VA) is a process that enables insolvent companies to satisfy their debts. Once an administrator is appointed, the administrator can assist the company to trade its way into a healthier financial position with a view to either the company:

(a)    being placed back into the director’ control,

(b)    entering into a Deed of Company Arrangement (DOCA) or

(c)     being placed into liquidation.

Administration begins generally when the company directors (not the shareholders) resolve that the company is or is expected to become insolvent (but it can commence when a liquidator believes that that a proposed DOCA may give creditors a better return that liquidator or if a secured creditor has a right under their finance arrangements to appoint an administrator).

During a Voluntary Administration, the directors lose all control of the company and the administrator assumes sole responsibility the assets and affairs of the company.

There are 2 creditors meetings in a Voluntary Administration, the first within 8 business days of the administrator being appointed and the second, within 30 business days of that date. At this second meeting, the creditors determine the company’s fate – choosing either to enter into a DOCA if one is proposed or liquidation.

Secured creditors can exercise their security in a VA but must do so within 13 business days of the administration commencing. Unsecured creditors are unable to enforce their claims during the moratorium period that exists during the administration.

During the administration period, any guarantee of company debts cannot be enforced against a director etc.

VA ends on the entry into of a DOCA, if the creditors so resolve, if the company is placed into liquidation or if the Court orders it to end.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Forged cheques

Cheque use in Australia has dropped by 83% over the last 10 years and is dropping by around 20% per annum. Although the use of cheques in Australia is declining rapidly with the alternative (and quicker and easier) payment methods such as EFT, debit and credit cards, PayWave, ApplePay, Stripe etc, Australians still use around 60 million cheques per year, so it is important to know what duties you may owe to your bank in relation to forged cheques.

There are 2 principal duties owed by a customer to a paying bank in relation to cheques:

  1. a duty to take reasonable care when drawing cheques so as not to mislead the bank or facilitate a forgery; and
  2. a duty to notify the bank promptly after becoming aware of a forged cheque.

If a customer becomes aware of a forgery but takes no steps to inform the bank and the bank acts to its detriment in paying the cheque, then the customer cannot later deny that the cheque was genuine.

There is no obligation on a customer to examine bank statements to detect forgeries and notify the bank of discrepancies. The customer’s obligations are limited to the above duties. Subject to those duties, the bank bears liability for payment of a cheque drawn without the customer’s authority.

The relationship between a bank and its customers in relation to cheques is a contractual one and the above duties are terms implied into that contract but banks can insert provisions into their terms of service to place the burden of losses from forged cheques on their customers if they so choose, so check the T&Cs of your bank or building society.

Steps to help prevent or detect forged cheques

Not all cheque forgeries can be prevented however, to attempt to prevent forgeries:

  • check for watermarks, ‘void’ pantographs, microprinting or other security measures
  • check the cheque looks ‘authentic’ – high quality printing, paper, correct spelling, even spacing, no smudges
  • don’t pre-sign “blank” cheques or leave cheques partially completed
  • cross cheques or mark them as “not negotiable” or “account payee only” so they are unable to be cashed or negotiated and have to be paid to an account
  • insert the dollar amount in numbers as close as possible to the ‘$’ sign and cross out any blank space to attempt to prevent other numbers from being inserted
  • state the full amount in words without leaving any spaces between or after the words – cross out any blank space
  • promptly alert your bank or the police to any suspicious, unexpected or unauthorised account transactions (cheques cant be ‘stopped’ once presented).

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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What is the difference between Deeds and Agreements?

You may have noticed that some documents you have signed have been expressed to be a Deed and others as an Agreement (or a Contract). You may wonder – is there a difference?

At law, the essential ingredients to have a binding agreement are:

  • Offer – what is being sold and purchased
  • Consideration – the ‘price’ paid
  • Intention to be legally bound by the arrangement
  • Acceptance of the Offer

The main difference between a deed and an agreement is that there is no requirement for consideration for the deed to be binding. The fact that something is executed as a “deed” means that it is a most solemn promise that you mean and intend to do what you promise to do.

Obviously, contracts can be written or verbal, but a deed must be in writing.

Often the choice of executing as a deed is due to there possibly being no actual consideration passing or a difficulty in quantifying it (such as the mutual exchange of promises do do or refrain from doing something, rather than a payment of money).

Common examples of deeds include:

  • Deed of Guarantee
  • Deeds of Release & Indemnity
  • Deeds of Settlement
  • Trust Deeds or Superannuation Deeds
  • Confidentiality Deeds

Some documents must be in the form of or to take effect as a Deed to be valid, such as for the transfer of real property in NSW.

Signed, Sealed & Delivered

Traditionally, to be a valid deed, the arrangement had to be “signed, sealed and delivered” and therefore:

  • on paper or parchment,
  • signed by the parties and their seal applied; and
  • it had to be physically delivered to the other party,

however now, there is no requirement for a seal and the parties are presumed to have ‘delivered‘ it on execution.

It must also still be witnessed for individuals signing however in modern times, the law in NSW (since 22 November 2018) allows for electronic execution. Further, the Regulations made during the COVID-19 Pandemic were updated to allow remote witnessing by audio-visual link* (although we always prefer “wet ink” signatures as the lowest risk option for execution of deeds).

Subject to the terms of the document (which may allow or prohibit it, and whether or not execution in counterparts is provided for), a deed may be binding on a party, irrespective of whether the other party or parties to the deed have also signed it.

As with all documents, the correct attestation clauseshould be used depending on whether the party is an individual, company, trustee or a partnership.

As Deeds do not require consideration, often it can be sensible to include a nominal item as consideration just in case the document isn’t valid as a deed – as it can then be relied on as a contract.

Also, limitation periods for enforcing obligations in deeds are longer than for agreements.

*Note – changes to company signing arrangements took effect on 01 April 2022 with the Corporations Amendment (Meetings and Documents) Act 2022.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Merry Christmas from McKillop Legal

Our office will be closed from 4pm on 23 December 2021 and will re-open on Monday, 17 January 2022.

We wish our clients, referrers, friends and family a very merry Christmas and a happy and prosperous New Year ahead in 2022.

Limitation periods

There are limitation periods that apply to various legal cause of action.

The effect of a limitation period in relation to a legal cause of action is that claims become time-barred, and therefore unable to proceed, where the relevant period of time has elapsed without a claim being brought through the relevant Court or Tribunal.

There is no “Statute of Limitations” in New South Wales as such but there is the Limitations Act 1969 (NSW) which has a default limitation period regime where there is no specific timeframe set out in the relevant Act (such as the Succession Act 2006 (NSW), Home Building Act 1989 (NSW), Defamation Act 2005 (NSW), Fair Trading Act 1987 (NSW), Fair Work Act 2009 (Cth), Criminal Procedure Act 1986 (NSW) etc).

The Limitation Act (or the relevant specific Act) describe the types of legal actions and the limitation periods that apply to them such as the following civil claims:

Cause of action Limitation period
Contractual claims 6 years from the date on which the cause of action accrued
Negligence 6 years from the date on which the cause of action accrued
Family provision 12 months from date of death
Cause of action founded on a deed 12 years from the date on which the cause of action first accrues
Enforcing a judgment 12 years from the date on which the judgment first becomes enforceable
Defamation 1 year from date of publication
Unfair dismissal 21 days from the date of dismissal of employee

NOTE – this is a general guide only – you should get specific advice as to the limitation periods that apply to your specific circumstances

Different limitation periods apply to causes of action in different jurisdictions, such as the Commonwealth or those of each State and Territory. Limitation periods can also apply to some criminal matters but serious crimes generally do not have such limitation periods.

In some very limited circumstances, the relevant limitation period may be able to be extended.

FURTHER INFORMATION

For further information on litigation and dispute resolution, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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