commercial

Unpaid interns

Typically, unpaid internships offer a taste of what is usually involved in a job or industry, as well as the chance to network and to add practical experience to their resume.

Many businesses however seek to avoid paying lawful entitlements to employees by labelling them an “intern” or calling it a “vocational placement” or similar. In law firms (yes, they do it too), it’s a “law clerk”.

The fact is that if they are performing productive work for your business, they are an employee and are therefore legally entitled to be paid.

Before engaging an unpaid intern, business owners need to genuinely consider if the placement is providing them with work experience, a career opportunity and take steps to avoid the arrangement being considered exploitation. That is, are they really an unpaid employee?

To determine whether the arrangement is ‘employment’ ask yourself these questions about the proposed intern:

  1. Will they have actual responsibilities (as opposed to just observing)?
  2. Will their workload be similar to a paid employee?
  3. Will the intern replace a paid employee?
  4. Will the intern have administration duties?
  5. Will the intern collect coffee orders?
  6. Does your business rely on interns for ongoing duties?

If you answered “yes” to any of the above, they are assisting your business, not learning, so it is likely that your unpaid interns will actually be employees and hence entitled to minimum Award rates.

Even if you will genuinely have unpaid interns at your workplace, they should have a contract (although not an employment contract) covering that fact and requiring them to maintain standards such as confidentiality, returning company property at the completion of the placement etc.

FURTHER INFORMATION

For further information in relation to any employment related issue or any business/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 / Dispute Resolution / Employment / General / Risk management / Superannuation  by 01 Sep 2020 0 comments

Uncollected goods: is possession 9/10 of the law?

If you are a business that cleans or repairs items that are never collected by a customer or if you are a lessor of a commercial property* and a tenant leaves items behind, you may wonder what your rights and obligations are in relation to those uncollected goods.

Is possession 9/10 of the law? Well, sort of. Often it can depend on the terms of trade agreed between the business and the customer (for example a retention of title clause, a lien** or other similar provisions), but assuming it hasn’t been agreed or if there are agreed terms but there is no unpaid account, what is the position?

If there is no contract to govern what happens then the Uncollected Goods Act 1995 (NSW) will likely apply. That Act allows the business holding the goods (bailee) to sell them if they are uncollected by the owner of the goods (bailor) or if the bailee can’t contact the bailor.

How the goods may be disposed of, and what notice needs to be given, depends on their type and value.  For example, if the goods are worth:

  • less than $100, the business owner needs to give the customer 28 days verbal or written notice of an intention to dispose of the goods. If the customer doesn’t respond or collect the goods in that time, the business owner can dispose of them they see fit;
  • more than $100 but less than $500, the business owner needs to give the customer and each other person that claims an interest in the goods 3 months written notice of an intention to dispose of them. If the customer doesn’t respond or collect them within 3 months, the business owner can dispose of them by private sale for ‘fair value’ or public auction;
  • more than $500 but less than $5,000 the business owner needs to give the customer and each other person that claims an interest in the goods 6 months written notice of an intention to dispose of the goods. If the customer doesn’t respond or collect them in the 6 month period, the business owner can dispose of them by public auction provided that the business owner publishes a copy of the notice in a daily newspaper circulating generally throughout NSW at least 28 days before the 6 months notice is to end;
  • more than $5,000, the business owner needs a Court order to dispose of the goods; and
  • Perishable goods are dealt with differently any only require a ‘reasonable’ amount of notice, the length of which depends on the nature and condition of the goods.

What should the notice state?

Broadly speaking, a notice regarding uncollected goods must include:

  • the business name;
  • a description of the goods;
  • an address where the goods can be collected;
  • a statement of any relevant charges (eg freight and storage costs) and if the business is planning to take money out of the sale to cover those charges;
  • a statement that on or after a specified date, the goods will be sold or kept unless they are first collected and the relevant charges are paid.

No profit

When the goods are sold, the bailee can only recover the cost of the original service being provided if unpaid, the costs of the sale and any maintenance, insurance and storage costs. The bailee is not allowed to make a profit on the sale of the uncollected goods.

Any surplus if the bailor can’t be found or won’t take it, must be paid, as unclaimed money, to Revenue NSW. What a pain!

* There is specific legislation relating to the disposal of goods held by a pawnbroker (Pawnbrokers and Second-Hand Dealers Act 1996 (NSW), Part 4, s.30), goods left by a tenant (Residential Tenancies Act 2010 (NSW), Part 6 Division 2) or resident of a retirement village (Retirement Villages Act 1999 (NSW), Part 9, Division 7). Some assets can require additional steps to dispose of such as motor vehicles (for example the Commissioner of Police has issued a certificate stating that the vehicle is not recorded as stolen) and may require a Personal Property Securities Register Search.

** A lien is a common law right to retain possession of an item until an account is paid (such as a mechanics lien to keep a car until the repair bill is paid for), but it can be confirmed in an agreement.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to uncollected goods, your rights or obligations under a contract or arrangement or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@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 / General / Insolvency & Bankruptcy / Property / Risk management  by 05 May 2020 0 comments

Coronavirus: Commercial Tenancies Code

Further to our COVID-19 blogs on the Federal Government led arrangements on employee standdowns, negotiating changes to commercial leases and the JobKeeper subsidy, the National Cabinet on 07 April 2020 agreed on a mandatory Commercial Tenancy Code previously foreshadowed as part of the “hibernation” strategy for Australia’s economy.

“preserve the lease, to preserve the relationship, keeps the tenant in their property and keeps the tenant on the lease, which is also good the the landlord… which underpins the value of those assets“

The Code applies to tenancies where either the Lessee/Tenant or the Lessor/Landlord is eligible for the JobKeeper program.

The Code is based on a set of leasing principals intended as the Prime Minister says to operate such that it “preserves the lease, preserves the relationship, keeps the tenant in their property and keeps the tenant on the lease, which is also good the the landlord… that underpins the value of those assets“.

The overarching obligations are for landlords and tenants to work together in an honest, open and transparent manner and to negotiate in good faith on a lease by lease basis so as to mitigate the impact of the Coronavirus on the lease arrangements.

The Leasing Principles themselves include:

  • Landlords must not terminate the lease due to non-payment of rent during the pandemic period*
  • Landlords must not draw on a Tenant’s security (bank guarantee, personal guarantee or cash bond etc) during the pandemic period
  • Tenants must honour the Lease
  • Landlords must reduce rent proportionate to the trading reduction in the Tenant’s business over the course of the pandemic period through a combination of:
    • waivers of rent (accounting for at least 50% of the rental reduction); and
    • deferrals of rent (spread over the remaining time on a Lease and for no less than 24 months)
  • No interest, fees or charged are to be imposed  on the rent waived or deferred
  • Rent increases (other than Retail Leases based on turnover) are frozen during the pandemic period
  • Any statutory or insurance charges passed on to the tenant are to reduced in the appropriate proportion
  • Tenants should have an opportunity to extend the Lease period  of the rent waiver/deferment period
  • A binding mediation process will regulate these co-operative arrangements.

*The pandemic period is from 03 April 2020 and for the period during which the for the period during which the Commonwealth Government’s JobKeeper program remains operational.

To view the Prime Minster’s statement following the National Cabinet meeting here.

The States and Territories will legislate these arrangements as soon as is possible.

Banks are urged to support landlords in a similar manner.

Residential tenancies remain a State and Territory issue, not being determined by the National Cabinet. To register your business’s interest in the JobKeeper system, visit the Australian Taxation Office’s dedicated page.

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus or if you need to discuss how to best deal with commercial tenancy issues, please contact us 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 legal concerns or objectives.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Insolvency & Bankruptcy / Property  by 07 Apr 2020 0 comments

Coronavirus – Negotiating changes to commercial leases

Any businesses that are experiencing a downturn as a result of the current economic crisis that has come as a result of the Coronavirus pandemic will know that one of the largest expenses, apart from that of staff, is its leasing of premises. We have another article on options for employers including standing down its workforce.

The Government has introduced a range of measures to assist businesses and employees with the ongoing payment of wages with the JobKeeper program and the National Cabinet has agreed to implement a moratorium on the eviction of commercial and residential tenants for 6 months. This will be implemented by the States and Territories.

The Government has suggested that commercial leasing arrangements are a matter that ought to be discussed and agreed between lessors and lessees as it is a very complicated area of law that affects businesses from sole traders to multinational corporations. There are many advantages of having these discussions, rather than seeking to strictly enforce the terms of the previously agreed leases, including:

  • The lessor can retain the lessee in the premises – this will be important for them after the pandemic ends
  • The lessee will need to continue trading from the premises – either during the pandemic and/or after the restrictions on movement are relaxed.
  • The lessor may have mortgage repayment obligations to its bank and will need some level of cashflow to assist it to do this

Any  discussions between lessors and lessees should, in the first instance, be informal and without prejudice to the written lease obligations.

There is a moratorium on evictions, but there’s not a moratorium on the requirement to pay rents. Landlords/Lessors and tenants/lessees not significantly affected by COVID-19 are expected to honour their lease and rental agreements.

Every business and each premises is different so there is no ‘one size fits all’ answer but points for negotiation could include:

  • changing the amount of rent to be paid for a period (say a reduction in rent of 25% for 6 months)
  • a rent free period or a reduced rent period (for example 3 months of no rent payable)
  • a delay in payment of the rent (same rent is payable but the obligation to pay is deferred to a later time).
  • extension of the term of the lease to accommodate any rental concessions

Any agreement that may be reached should be documented in writing and signed, and it may be that the lease if registered will also need to have any changed also registered on title.

There may be situations where no negotiated solution will work and parties may need to rely on dispute resolution procedures either now or at the end of the moratorium period, noting that the moratorium does not relieve a lessee from the obligations under the Lease, just that they cannot have the lease terminated during the moratorium period.

FURTHER INFORMATION

For further information in relation to legal issues arising from Coronavirus or if you need to discuss negotiating changes to commercial leases or licensing arrangements, please contact us 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 legal concerns or objectives.

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in Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Litigation / Property / Risk management  by 29 Mar 2020 0 comments

Lost luggage? What are your rights?

For damaged or lost luggage, where your travel is wholly within Australia with no international sectors, airlines are liable to compensate you under the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) (limited to a maximum of $3,000 for registered (checked) baggage and $300 for unchecked baggage).

For those travelling internationally, the rights of passengers for most airlines (carriers) are governed by the Montreal Convention, 1999 (Montreal Convention).

For the Montreal Convention to apply, both the country of departure and country of final destination must both be members. There are 136 countries that are parties.

The Warsaw Convention will generally apply where the Montreal Convention does not, but it is considered less favourable to passengers, especially when it comes to compensation and is based on a $/Kg calculation. This article assumes the Montreal Convention will apply.

Article 17 of the Montreal Convention provides:

“The carrier is liable for damage sustained in case of destruction or loss of, or of damage to, checked baggage upon condition only that the event which caused the destruction, loss or damage took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier…”

Article 22 of the Montreal Convention states:

“In the carriage of baggage, the liability of the carrier in the case of destruction, loss, damage or delay is limited to 1,000* Special Drawing Rights for each passenger unless the passenger has made, at the time when the checked baggage was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the sum is greater than the passenger’s actual interest in delivery at the destination.”

* adjusted to 1,131 SDR for inflation

So if you are travelling with something worth more than liability limit, you have the option to declare a higher value for your luggage and items when you check your bags at the airport. The carrier can provide you with a higher coverage amount for a fee (as per Article 22). The carrier will be liable to pay that higher amount unless it is proved that the declared amount is greater than the actual value of your baggage.

What is a Special Drawing Right?

A Special Drawing Right (SDR) is a fluctuating index based on a basket of international currencies as determined by the International Monetary Fund.

The SDR rate (as at the date of this article) is 1 SDR : AUD$2.01, so that entitles you to a maximum compensation of $2,273, but that is a maximum only – you will usually only get the replacement value.

If you keep every receipt you ever get, this is the time for you to shine as without receipts, it is difficult to get too much compensation!

What to do if your luggage is lost or damaged

If your luggage is damaged or does not arrive, ideally do not leave the airport. Rather, you should go to the baggage claim office at the destination airport and lodge a Property Irregularity Report (PIR) with the carrier that operated your final flight. Some carriers have time limits on reporting in their conditions of carriage (the terms you agree to when getting your ticket)

Most major airlines are relatively helpful when it comes to lost or damaged luggage, but even if they aren’t and you need to enforce your rights, note that Article 29 of the Montreal Convention provides:

“In … any action for damages … punitive, exemplary or any other non-compensatory damages shall not be recoverable.”

Travel insurance

If there is a shortfall between what the carrier pays you as compensation and what the item is worth, you can lodge a claim for the difference, subject of course to the terms of your travel cover, assuming you took it out.

For those that may not know, many credit card providers offer complimentary travel insurance if you pay an amount towards the costs of the trip on your card.

 

in Business / Commercial Law / Debt Recovery / Dispute Resolution / General / Risk management  by 03 Feb 2020 0 comments

What does “Without Prejudice” mean?

Have you ever received a letter or email with the words “without prejudice” or “without prejudice except as to costs” on it? Perhaps your lawyer has sent one on your behalf? Do you even know what it means?

It is advantageous for parties to try to resolve that dispute prior to incurring the significant costs and taking on the substantial risks that are involved with litigation. In having those settlement discussions or in making offers of settlement, parties may be disinclined to make admissions or concessions for fear that they may be used against them by the other party. This is where the concept of “without prejudice’ helps.

“Without prejudice” is a common law concept (now covered by statute since the Evidence Act 1995 (Cth) (the Act) was enacted) that communications marked as being “without prejudice” cannot be used by the other party as evidence in Court. This means that parties can speak openly about the matters in dispute without the risk of the other party using that offer against them later.

If you do want to be able to use the communications, you would not mark them as being “without prejudice” – you would want them to remain “open”.

So why the “except as to costs” or “save as to costs” part? Well, the privilege afforded by s131 of the Act that the communications cannot be placed into evidence does not apply to when the Court has to determine who is responsible for the costs of the litigation (ie, after the dispute has been resolved or determined by the court when entering a judgment).

In addition to these “without prejudice” communications, the various Courts have their own rules that provide for formal Offers of Compromise and the like and that govern the effect of not accepting an offer that you otherwise ought to have (the idea being to seek to have the parties really turn their mind to settling, and not wasting their own, the other party’s and the Court’s time and resources).

Ordinarily in litigation, the rule is that the losing party pays the winning party’s costs. The rules operate to change that where formal offers have been made and not accepted.

As an overly simple scenario by way of example, if an offer was made by Party A that Party B did not accept and at the hearing, Party A received a judgment for an amount equal to better than their offer, Party B can be penalized in the form of a costs order for the failure to accept that offer.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal.

For further information in relation to any legal dispute or litigation matter, contact Craig Pryor on (02) 9521 2455 or email craig@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 / Litigation / Risk management  by 01 Dec 2019 0 comments

What is client legal privilege?

Client legal privilege, also known as “legal professional privilege” is a fundamental common law concept now covered by the Evidence Act 1995 (Cth) (the Act) that protects the confidentiality of certain confidential communications made between a lawyer and the lawyer’s client.

The rationale for the privilege was to enhance the administration of justice and the proper conduct of litigation by promoting candid and honest disclosure between clients and their lawyers to enable lawyers to give proper advice and representation to their clients. We live in a complex society and our laws and legal system are at times very complicated so obtaining advice is to be encouraged.

Client legal privilege applies to confidential lawyer/client communications or even confidential communications between 2 or more lawyers acting for the client (whether oral or in writing and whether prepared by the lawyer or the client) where the dominant purpose of the communication is:

  • seeking or providing legal advice (“advice privilege” – s.118 of the Act); or
  • in relation to existing or anticipated legal proceedings (“litigation privilege” – s.119 of the Act)

The communication must have been made confidentially to attract privilege. Where a communication is made in front of a third party, privilege will likely not apply.

Privilege can attach to communications between an in-house lawyer and their employer, provided that the communication is made in confidence and the lawyer is acting in their professional capacity.

It is called “client legal privilege” because the privilege belongs to the client and not the client’s lawyer. A lawyer may only disclose privileged communications if clearly instructed to do so by a client.

How is the privilege waived or lost?

Client legal privilege may be waived by doing some act inconsistent with the confidentiality that the privilege is intended to protect, such as

  • knowingly and voluntarily disclosing the substance of the evidence to another person; or
  • the substance of the evidence has been disclosed with the express or implied consent of the client.

The litigation arm of the privilege can also attach to third parties such as experts however, where a party seeks to rely on an expert report in litigation, this will waive privilege over the instructions given and the documents referred to or relied upon within the expert’s report.

Privilege does not apply to communications made for the purpose of facilitating illegal or improper purposes. There are also some statutory exclusions to client legal privilege such as in relation to the investigative and regulatory powers of some Commonwealth agencies.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal.

For further information in relation to any legal dispute, litigation matter or any business or commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@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 / Litigation  by 01 Nov 2019 0 comments

Entering into electronic contracts

Increasingly, business is being done and people are entering into electronic contracts online, via smartphone platforms or email. Even conveyancing in relation to real property is now done online.

What are the requirements for a contract?

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

  1. The parties are legally competent
  2. There is an offer
  3. There is acceptance of that offer
  4. The consideration or price is agreed

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 since the Electronic Transactions Act 2000 (NSW) and corresponding legislation in Australia’s other States and Territories.

How can they be executed?

There are a number of ways an electronic contract can be “executed” provided that it is clear that the intention is to be legally bound:

  • by an exchange of emails or text messages
  • clicking an ‘accept’ button to accept terms (or even a hyperlink to terms) on a webpage
  • ticking a box to acknowledge and agree in an App
  • typing ‘yes’ or ‘I agree’ into an online form
  • ‘signing’ with your finger or a stylus/digital pen, such as when receiving goods
  • using an electronic signature facility to sign a document

The Act stipulates that that if a person consents to a method of electronic signature and intends that signature to be their consent to the contract, then it will be as binding as a written “wet ink” signature on paper. Act also requires that to be valid, the signatory must be reliably identified.

Some transactions are not able to be completed electronically for obvious reasons, such as:

NOTE – During the COVID-19 pandemic, this changed pursuant to the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 (NSW).

What about Deeds?

Deeds (which previously at common law had to be signed, sealed and delivered) or other documents that need to be ‘witnessed’ were unable to be signed electronically in NSW until 22 November 2018 when the insertion of section 38A into the Conveyancing Act 1919 (NSW), which specifically allowed it, was assented to. Witnessing requires physical presence at the time of signing, so it cannot be done by FaceTime, Skype, WhatsApp etc.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to any contractual, business-related or commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@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 / Online Issues / Risk management  by 01 Sep 2019 0 comments

Who owns the content you post on social media?

With the recent resurgence of the popularity of  FaceApp on social media feeds and considering the Facebook-Cambridge Analytica scandal, it is timely to consider some of the concerns being raised over data security and privacy in relation to the use of common smartphone applications.

Most social media apps, including Facebook, Instagram, SnapChat and Twitter, require users to agree to an extremely broad set of Terms and Conditions of Use that allow them access to your data.

This data, which can be used and sold to third parties, is in reality the price for your use of the otherwise “free” app. As it’s often said, “If you’re not paying for it, you’re not the customer; you’re actually the product being sold.”

That said, what is the legal effect of the Terms of Service that we have each agreed to when using social media Apps and who owns the content you post on social media?

  • FaceApp’s Terms can be found here
  • Snapchat’s Terms can be found here
  • Twitter’s Terms can be found here
  • Facebook’s Terms can be found here and includes:

“…when you share, post, or upload content that is covered by intellectual property rights (like photos or videos) on or in connection with our Products, you grant us a non-exclusive, transferable, sub-licensable, royalty-free, and worldwide license to host, use, distribute, modify, run, copy, publicly perform or display, translate, and create derivative works of your content (consistent with your privacy and application settings). This means, for example, that if you share a photo on Facebook, you give us permission to store, copy, and share it with others (again, consistent with your settings) such as service providers that support our service or other Facebook Products you use…”

  • Instagram’s Terms can be found here (Note – Instagram is one of Facebook’s Products).

They are all quite similar in effect as regards the ownership and use of your content – although generally you continue to own your content, they are able to use it as and when they see fit, forever, for free.

Did you know that you can request a copy of the data that Facebook has and it can be downloaded as a .zip file? To access the download your information tool, click here. You will probably be surprised at the depth of information that is held about you

Some people are shocked to find out that it has access to things like all the contacts on their phone to a record of messages sent or received, payment details and location information… it can be quite unnerving!

Reading the T&Cs is so boring… but an agreement is an agreement and you are agreeing to their Terms of Service when you use the App so you can’t complain. What you may not know is that each App will usually have its own privacy and data related settings which can be adjusted modify the type and amount of information obtained and stored (and seen by others) so you can modify them to help protect your own content.

You have to expect however that with any social type of App, there always be a level of information kept about you, sometimes for good reasons (eg, to feed you more content you may be interested in) but also sometimes for bad. It is up to you to decide how much data you want kept or shared and how that affects your user experience

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal.

For further information in relation to terms and conditions, consumer rights or any business or commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@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. Stay up to date – LinkedIn | Facebook | Twitter

in Commercial Law / General / Intellectual Property / Online Issues / Risk management  by 01 Aug 2019 0 comments

Can you just put a caveat on someone’s house?

If you are owed a substantial sum of money by someone, whether because you have loaned them funds or if you have a bill that hasn’t been paid, you would generally like to secure those funds. This way, if the borrower or debtor ends up being a bankrupt or insolvent, you may be in a better position as a secured creditor to those that are unsecured and hopefully you can get paid.

So how does security work? Security is effectively giving notice to the world that you have a claim on that person’s estate or assets so that subsequent people or businesses dealing with the same person are aware that you are to be paid in property, ie before them.

Security can be given in several ways, including:

  • handing over physical possession of certain assets;
  • the granting of  a Security Interest over assets registered on the Personal Property Securities Register (or “PPSR”); or
  • perhaps granting a Mortgage over real property owned by the person owing the money.

The registration of securities grants priority in order of registration, so it is important not to delay in registering any securities granted.

Ordinarily, you would have put in place a Loan Agreement or had Terms of Trade in place to govern your business relationship so that you have the express written consent to do such things to secure the debt, but if these documents are not in place before the financial obligation arises, people often take the step of lodging a caveat on title to property owned by the debtor.

A Caveat registered on title to a property has the effect (subject to the specific wording of the caveat of course) of preventing the owner or registered proprietor of that land from dealing with that land without the consent of the person who lodged the Caveat (the “caveator”). Dealings that can be prevented include lodging other Mortgages, lodging Transfers and the like.

Can you just put a caveat on someone’s house? If only things were that simple!

Many people have taken the step of lodging a Caveat on title to a debtor’s property only to have been unsuccessful in protecting their debt. Why? Well, in order to lodge a caveat (or even a Mortgage or PPSR Security Interest for that matter), you need to have the relevant asset “charged” in your favour with payment of the relevant debt. Creating a “charge” over an asset creates an interest in that asset that allows you to lodge a Caveat to notify and protect that interest.

A Caveat is not a document that gives you priority over previously registered interests, but it does give you some control over the asset such that you can prevent refinancing or a sale of an asset unless satisfactory arrangements for you to be paid have been made as part of that process  Properly drafted documents in relation to the lending of funds or business agreements where credit is extended should include things such as Mortgages, General Security Deeds or other things that create an interest in the asset sufficient to lodge a Mortgage, on title (to land), a Security Interest (on the PPSR in relation to assets etc) or at a minimum a Caveat over land.

Without such an interest being created, the caveator runs the risk that the owner can’t sell or refinance and suffers financially, then pursues the caveator for damages flowing from the caveator’s wrongful act, putting the caveator in an even worse position than they were before!

These things should not be done without proper advice, so take the time to review your current situation and documents now before a problem arises and have the documents updated to best protect you or your business.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to debt recovery, loan agreements, estate planning, any business-related matter or if you have a Caveat lodged on your property without your consent, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

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

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in Asset Protection / Business / Commercial Law / Debt Recovery / Dispute Resolution / Estate Planning / General / Insolvency & Bankruptcy / Property / Risk management  by 01 Jul 2019 0 comments
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