Commercial Law

Order for Security for Costs

An Order for security for costs is to help ensure that unsuccessful proceedings commenced by a Plaintiff do not disadvantage the Defendant. Such applications are more usually made in relation to an appeal rather than an original matter.

A security for costs order generally requires a Plaintiff to pay a certain amount of money into Court (or a solicitor’s trust account) before their proceedings can continue – that is the proceedings are in effect stayed pending the security being provided.

The Court has several sources of power to make an order for security for costs, including:

  • the Court’s inherent power to stay proceedings to ensure the proper and effective administration of justice
  • the relevant Court rules (eg, Rule 42.21 of the Uniform Civil Procedure Rules 2005);
  • s.1335 of the Corporations Act 2001 (Cth).

Due to the weight an order for security for costs may carry, Courts must weigh the rights and interests of all parties to the proceedings. The Court has a broad discretion as to whether to grant such an order and will usually look to factors including (in no specific order):

  • the inherent legal right of a Plaintiff to bring legal proceedings;
  • the strengths and bona fides of the Plaintiff’s case
  • where the Plaintiff ordinarily is resident;
  • the financial standing and asset position of the Plaintiff in the jurisdiction in which the claim has been commenced (including where the Plaintiff may have divested itself of assets);
  • whether there is reason to believe that the Plaintiff can satisfy an order for costs not only from its own resources, but from other resources including those who will benefit from the litigation; the public importance of the case;
  • delay of bringing the application for the order;
  • if the Plaintiff hasn’t disclosed an address or has moved and not updated it, particularly if there is reason to believe that it was done to to avoid the consequences of the proceedings;
  • whether such an order will frustrate the litigation;
  • the justice of the case.

It is uncommon for such an order to be made against an individual Plaintiff (as opposed to a company, partnership or trustee) but not impossible, depending in the circumstances of the particular case and Plaintiff.

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.

in Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Insolvency & Bankruptcy / Litigation / Risk management  by 01 Apr 2025 0 comments

Why you should have a Shareholders Agreement

CONSIDER THESE COMMON ISSUES

What would happen to your company if you or your business partner became so ill that one of you could no longer work – or worse still, died?

Would you still be paying dividends or making distributions of profit to that person even through he or she is not around, or to their spouse or family?

If they died and left their spouse everything in their Will (including their shares in your company), would you want to be in business with his or her spouse?

What if your business partner sold his or her shares in your company to a complete stranger or a competitor following an argument?

How are your shares to be valued and over what period will the purchase payments be made to your family? Or is there an insurance policy to fund the payment in a lump sum?

HOW CAN A SHAREHOLDERS AGREEMENT HELP?

A Shareholders Agreement can cover these not uncommon scenarios and tailor the rights and obligations of the shareholders of a company to fit your personal circumstances and your particular business to help avoid some of these potential problems for everyone’s ultimate benefit.

You may have a Will, but you may not have certainty in relation to what will happen to your family or your business in the event of your death or serious illness unless these matters are clearly dealt with in a Shareholders Agreement.

FURTHER INFORMATION

For further information in relation to business succession, estate planning, litigation and dispute resolution or any commercial law matter, 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 commercial law needs.

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in Business / Commercial Law / Dispute Resolution / General / Risk management  by 10 Feb 2025 0 comments

General Security Deeds

A General Security Deed (GSD) or a General Security Agreement is effectively a legal document used to secure the repayment of a loan or some other legal obligation.

GSDs are often used by lenders such as banks where there is no real property security available to place a Mortgage or Caveat over, so in addition to signing a Loan Agreement or Letter of Offer, a borrower will likely also be asked to sign a GSD.

Prior to the creation of the Personal Property Securities Register (PPSR), a GSD used to be known as a ‘fixed and floating charge‘ which was registered over companies at ASIC. A GSD however, can be registered on the PPSR against any legal entity including a trustee of a trust, a partnership or sole trader and can cover any form of personal property.

Personal property is basically anything other than land and can include motor vehicles, intellectual property, shares in companies, units in unit trusts, stock and business equipment.

Under the GSD, the borrower is known as the ‘Grantor’ and the lender is called the ‘Secured Party‘ and the terms of the GSD can be complicated but basically provide that the Secured Party can take, hold and sell the secured personal property to repay the debt or until the obligation the GSD is securing has been met – this is known as a ‘Security Interest’.

GSDs have priority in the order in which they are registered so there is often a real benefit to registering them on the PPSR (known as ‘perfection’) as soon as possible.

General Security Deeds are complicated and important documents, so before you sign one, you ought to take appropriate advice as to their meaning and effect.

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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in Business / Commercial Law / General / Insolvency & Bankruptcy / Property  by 01 Dec 2024 0 comments

Partnership Agreements

A partnership is defined in the Partnership Act 1892 (NSW) as “the relation which exists between persons carrying on a business in common with a view of profit”.

Advantages of having a partnership, in addition to having additional business owner/s to bounce ideas off and share the workload, can include the fact that there is virtually no cost to establish it, little external regulation and very little paperwork involved.

Disadvantages include unlimited joint and several liability, a maximum of 20 business owners, liability for the acts and omissions of partners and risk of disagreement between partners.

Although the Act does govern some aspects of the partnership relationship, a Partnership Agreement can be invaluable when there is a difference of opinion or the relationship between partners breaks down as often happens.

A Partnership Agreement can cover:

  • the business name the partners will trade under
  • the agreed business activities of the partnership
  • how the partnership will be managed (regular meetings, duties and responsibilities)
  • contributions to the partnership  and the agreed partnership percentage/split (and hence how profits and losses are shared)
  • how the respective interests in the partnership are valued
  • retirement, death and expulsion of partners (and if and how new partners can be introduced)
  • whether any post-partnership restraints apply
  • agreed dispute resolution mechanisms

Partnership Agreements can be simply drafted to cover common situations or be specifically tailored to your specific your business.

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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in Business / Commercial Law / Dispute Resolution / General / Risk management  by 01 Oct 2024 0 comments

Casual employment changes

On 26 August 2024, there are more casual employment changes for employers to consider:

  1. a new definition of “casual employee” comes into effect;
  2. casual employees will have the right to request to convert their casual employment to a permanent one after 6 months (instead of 12 months); and
  3. Casual employee information statements have to be provided more often

New definition of casual employment

From 26 August 2024, a new definition of casual employment in the Fair Work Act 2009 (Cth) (Act) applies as follows:

“An employee is only a casual where:

(a)  there is no firm advance commitment to continuing and indefinite work, considering a number of factors, including the real substance, practical reality, and true nature of the employment relationship, and

(b)  they are entitled to receive casual loading or a specific casual pay rate.”

This is a substantial move away from the prior position in s.15A of the Act following the High Court of Australia’s judgment in Workpac Ltd v Rossato & Ors [2021] HCA 23 that determinative weight is to given to what was stated in the employment contract. Now there is no single determinative factor of casual employment but rather the substance of the arrangement is to be considered.

Employee choice – casual conversion

Generally, from 26 August 2024, where an employee of a business (other than small businesses) believes they no longer meet the new casual employee definition, they will have the right to request conversion of their casual employment to a permanent one after 6 months instead of 12 months.

Prior to this date, once a casual had been employed for 12 months and was working a regular pattern of hours on an ongoing basis without significant change in the last 6 months of their employment, the employer had to make a written offer of casual conversion within 21 days of the anniversary of their commencement date and the employee had 21 days to accept or reject it.  Similarly, a casual could request it and the employer could only reject it within 21 days on reasonable grounds or if the employee didn’t meet the regular pattern requirement.

For small business employers, from 26 February 2025, casual employees will have the right to request to convert their casual employment to a permanent one after 12 months. Prior to this, small business employers did not have to deal with casual conversion requests or offer them at all.

Under the new regime, employers may still refuse but only on grounds that the definition isn’t met or that fair and reasonable operational grounds apply such as that it would have a significant impact on the business, that substantial change to the business is required etc.

Casual Employment Information Statements

From 26 August 2024, the Casual Employment Information Statements will need to be provided to

  • new casual employees before, or as soon as possible after, they start their casual employment
  • all casual employees employed by non-small businesses as soon as possible after
    • 6 months of employment
    • 12 months of employment; and
    • every subsequent 12 months of employment
  • all casual employees of small businesses as soon as possible after 12 months of employment.

Note that there is no change to the requirement for Fair Work Information Statements on commencement of employment.

Steps for employers to take

Employers should urgently:

  1. check the commencement date for all staff and diarise to review obligations each 6 months
  2. send CEIS as required
  3. consider whether employees are in fact casual
  4. consider if conversion offers need to be made
  5. if necessary, issue updated Contracts of Employment

FURTHER INFORMATION

For further information, 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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in Commercial Law / Dispute Resolution / Employment  by 01 Aug 2024 0 comments

Serving documents on companies

Section 109X of the Corporations Act 2001 (Cth) provides that a document may be served on a company by means including:

(a)  leaving it at, or posting it to, the company’s registered office; or

(b)  delivering a copy of the document personally to a director of the company.

Documents that may need to be served may be a Summons, Statement of Claim or even a Creditor’s Statutory Demand.

Companies are obliged to register a change of registered address within 28 days of at changing. Directors are also required to ensure their address details on the register are maintained.

Where service of a document not properly effected or there is a dispute about its, there is a risk that the Court may determine that service wasn’t effected, set it aside altogether and there could be consequences such as costs orders.

Service by post

Service by post is cheap and easy.

If posted to a company’s registered address, a document is presumed under s.160 of the Evidence Act 1995 (Cth) to have been received at that address on the 7th working day after being posted.

A problem with service by post however, is that the recipient could argue that it was never received or a dispute could arise as to timing of service.

Personal service

Arguably, personal service by a process server of a document on a director of a corporation is the best way to effect service.

These professionals are in the business of doing this and provide an Affidavit of service which can be used in evidence to prove service to a Court and as they are a third party service provider, there is often no dispute raised as to service and when so there is no “he said”/”she said” type argument as there may be if the parties themselves effected service.

Leaving it

An alternative to posting it or serving it on an officer of a company is leaving it at the company’s registered office.

Again, this is best done by a licensed process server who can swear or affirm what they did and when.

Informal service

The Courts are increasingly allowing alternative methods of service where parties are evading service or any of the above methods do not result in effective service such as through third parties, email, text messages, social media accounts etc.

FURTHER INFORMATION

For further information in relation to Corporations Act issue, legal proceedings, serving documents on companies or any business or commercial law matter, 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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in Business / Commercial Law / Debt Recovery / Dispute Resolution / Litigation  by 03 Jun 2024 0 comments

Why use an IP License Deed?

Any forms of intellectual property (IP), whether they be trade marks, copyright or others, can be licensed for use by third parties. It is effectively renting them out, like an asset hire arrangement for physical assets. So why use an IP License Deed?

A licensing arrangement is advantageous to the holder of the IP as royalties, licensing fees or other forms of payment can generate revenue for the benefit of the holder of the IP, in addition to confirming that the IP remains held by the holder even though it may be used by the licensee.

Another common reason for the use of an IP License Deed is to aid in asset protection, such as where one entity may hold assets (such as IP) and another entity may trade (and hence incur liabilities and hold risk). The licensing arrangement means that the “at risk” entity that is using the IP can do so without putting the IP itself at risk. If the trading entity finds itself in financial difficulty or ends up in external administration or liquidation, then the license can be terminated and the IP returns to the control of the asset holding entity.

Licenses do not have to be written, but it is strongly recommended as it can prevent arguments and uncertainty.

License Agreements can cover things including:

  • term and territory
  • whether the use is exclusive or not
  • obligations when using the IP (eg, not to adversely affect the IP)
  • matters that result in termination
  • obligations on termination (such as return of all forms of IP and stop all further use)

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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in Business / Commercial Law / Dispute Resolution / Intellectual Property / Risk management  by 01 May 2024 0 comments

Companies signing contracts

In prior blogposts, we explained the differences between Deeds and Agreements and what Deed Polls are and we also explained how to properly execute a legal document depending on the type of entity entering into it.

This article relates to execution by or on behalf of an Australian corporation – a Pty Ltd (but not a public company) – that is, what are the requirements for companies signing contracts?

Part 2B of the Corporations Act 2001 (Cth) (Corporations Act) sets out how companies can execute legal document and the assumptions those dealing with companies may make about the execution of documents by or on behalf of a company.

Section 127 describes the ways in which a document may be executed by a company, namely by:

  • 2 directors; or
  • a director and a company secretary; or
  • for a company that has a sole director – that director, if:
    • the director is also the sole company secretary; or
    •  the company does not have a company secretary.

This applies regardless of any other requirements in the company’s constitution.

Companies can also sign via an employee, officer or an agent under s.126 acting with the company’s express or implied authority.

If a company executes a document in accordance with the those sections, then any person dealing with that company is entitled to assume under ss.128 & 129 that:

  • those persons shown as directors/company secretaries on ASIC’s register; and
  • anyone held out by the company as being an officer or agent of the company
  • are:
    • validly appointed;
    • have the authority to exercise the powers of the company; and
    • are properly performing their duties

This assumption applies even if an officer or agent of the company acts fraudulently or forges a document but not if that person knew or suspected that the assumption was incorrect.

Business should be wary of the authority of persons signing and query the person’s authority if they aren’t listed at ASIC formally as a director or company secretary.

Many businesses give higher level employees titles like “Director”, “Sales Director” and the like so, often so as to minimize pay rises or for other reasons, but they run the risk that those persons can bind the company due to the statutory assumptions identified above as they are potentially being held out by their titles as having authority to bind the company.

Separately, those employees also run the risk that they are considered ‘shadow directors‘ if the company runs into financial trouble, particularly where any director duties haven’t been followed.

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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in Business / Commercial Law / Dispute Resolution / General  by 01 Mar 2024 0 comments

What is copyright?

There are various types of intellectual property (the general name given to the laws covering trade marks, patents, designs, circuit layouts, plant breeder’s rights and copyright), but the simplest (at least in terms of how and when it is created at least) is copyright.

What is copyright?

Copyright exists in a ‘work’ as soon as that work is created.

People spend time, money and talent in creating ‘original’ works and their efforts are protected by copyright.

Works include:

  • literary works – texts, books, poems, screenplays, song lyrics, letters, computer programs etc
  • artistic works – drawings, paintings, maps, plans, sculptures, photographs etc
  • dramatic works – plays, screenplays and choreography etc
  • musical works – musical scores (but not the recording of the music itself)

Protection is also given to ‘subject matter other than works‘, being sound recordings/broadcasts, films/movies, published editions of works etc.

Unlike a patent for example, copyright does not protect ideas or information as such but only the original expression of ideas or information. If it is not original, there is no copyright.

Two people could independently come up with a similar work at the same time. Both would hold copyright on their own works.

Copyright is free and automatic in Australia – there is no need (and indeed no place in which) to register it.

What rights does copyright give?

The Copyright Act 1968 (Cth) and the Regulations made under that Act set out the law in Australia regarding copyright.

Copyright protects the original expression of ideas or information – the work itself. The owner of the copyright owns copyright in the text in a book even though the owner of (an authorised) physical copy of a book owns the physical book itself.

Copyright entitles the holder the exclusive right to publish, reproduce (copy) and otherwise use that work (and to make money from doing so). Using a substantial part of a work without the copyright holder’s permission is an infringement upon that right and the holder can commence a legal action for an injunction to restrain such use, damages or accounting for any profits made from such use etc.

There are exceptions to copyright including ‘personal use’ and use (known as fair dealing) including:

  • research or study
  • reporting of news
  • giving of professional advice
  • satire/parody

as well as certain ‘special purposes‘ such as making accessible format copies for persons with disabilities, for educational instruction etc

Overseas copyright is enforced in Australia and reciprocal arrangements exist overseas to protect Australian copyright abroad due to various international conventions. There are treaties in place in some countries only however.

How long does copyright last?

Copyright generally lasts for as long as the person that owns it is alive, plus 70 years (but some shorter timeframes apply to certain works).

Once copyright ends, the work is said to be in the ‘public domain’ – and can be used by anyone.

How to help enforce copyright in a work

If your work is written or able to be viewed such as online or on a screen, you can use the copyright symbol © or (c) on the work, with the author’s name and the date it was created. This symbol serves as notice to the world that you assert copyright in that work and from when.

Using the © symbol is not a requirement to establish or assert copyright however, just a good practice.

Songwriters can register their works through licensing agencies, so fees can be collected and paid for using their songs.

Contractual arrangements regarding copyright and its use can also impose rights and obligations on the parties to it. Copyright can be assigned, licensed or even borrowed against.

Titles, business names and slogans are not protected by copyright (as they are usually too small/unoriginal to be protected by copyright), but they can in some cased be protected by trade mark.

What are moral rights?

Moral rights are the right of integrity of authorship, the right of attribution of authorship and the right against false attribution of authorship. They are non-economic rights that are personal to the creator of a work, so if a work is commissioned by a business, the business would require the person creating the work (and getting paid for it, whether as an employee or a contractor) to assign their moral rights or permanently consent to alterations to it that may otherwise infringe them.

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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in Asset Protection / Business / Commercial Law / Dispute Resolution / Intellectual Property / Litigation  by 01 Feb 2024 0 comments

What is a trade mark?

Trade marks are a form of intellectual property right. A  trade mark can be used to protect a business name, tag line/phrase or word  (a word mark) and/or logo (a figurative mark), but less commonly, it can also be used to protect a letter, colour, sound, scent, picture, movement, aspect of packaging or any combination of these.

Protecting a brand can add to its value as an asset so it is a very important business consideration, particularly if you ever intend to sell your business in the future.

Why have a trade mark?

A registered trade mark provides the holder the exclusive right to use that trade mark in Australia in respect of specified goods and/or services. This means that the holder of such an intellectual property can legally prevent others from using the trade mark for similar goods and services.

The holder of a trade mark can sell the mark to a third party or allow others to use that mark, for example for a fee, such as through a licensing arrangement. Often a franchise agreement also includes a license to use the trade mark of the franchised business.

Many business owners mistakenly believe that registering a business name or domain name gives them some sort of ownership of that name – this is not the case.

What requirements are there to register a trade mark?

The Trade Marks Act 1995 (Cth) and the Regulations under that Act govern trade marks in Australia.

In order to be registered, a trade mark must be able to distinguish the goods and services of the holder from other traders. It can’t be an everyday word or phrase, a geographical name or be descriptive of the goods or services (as other traders may need to use those words to describe their wares). Further, some signs and names are prohibited from registration.

When seeking registration, certain categories of goods and/or services must be chosen. The protection of the trademark is only in that category (or categories) chosen and only for the types of goods/services described in the application.

A trademark lasts for 10 years but can be renewed for successive periods.

How to help protect your trade mark

Having a registered trade mark gives the owner the right to place the ® symbol next to the trade mark so as to let others know it is registered and to help deter them from using it (without permission).

When a trade mark is not yet registered but an application is pending, the TM symbol can be applied to the mark. There is no requirement to use the ® or TM symbols however. use of the ® symbol in connection with a mark that is unregistered in Australia is an offence under the Act.

Trade marks must be used as registered. Failing to use a trade mark can render it liable to being removed from the register for non-use.

Registration of a logo that includes a trading name does not necessarily protect the trading name, just the logo. This is why the name often needs to be separately registered. Care needs to be taken to consider what is to be registered and how it will be used. Separate registrations are often advised for a name and for a logo.

If you have a trade mark and become aware of someone infringing it (such as by using a very similar name or logo without your consent or indicating they have some association with your business or products when they do not), you should get advice from a lawyer on sending an appropriately worded cease and desist letter asking them to stop using it.

What if your trade mark isn’t registered?

Registration of a trade mark is not essential. Unregistered trade marks can possibly be protected under the common law, such as through the tort of ‘passing off‘ and claiming misrepresentation such as under the Australian Consumer Law however, registration if recommended.

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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in Asset Protection / Business / Commercial Law / Dispute Resolution / Intellectual Property / Litigation  by 01 Jan 2024 0 comments
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