Commercial Litigation News

Retail Shop Leases in Queensland

 – pitfalls for tenants exercising options to extend or renew


Those that that rent their business premises typically invest substantial capital and resources in establishing themselves in that particular location. This includes the costs of the store fit out, in addition to as branding and other marketing activities. In order to ensure this investment is not lost upon the initial lease term expiring, tenants will often negotiate one or more options to extend the lease beyond the initial term.

 

Exercise of option

 

Where a Queensland Retail Shop Lease contains an option to renew or extend the lease, section 46 of the Retail Shop Leases Act 1994 (Qld) (RSLA) requires the landlord to give the tenant written notice of that option date. This notice must be given at least two months before the option date, but not more than six months prior to the option date.

Whilst this obligation is clearly stated in the RSLA, a landlord’s failure to comply with the obligation, whilst potentially exposing the landlord to a fine of up to 40 penalty units ($5,046 as at 1 July 2017), this will not excuse the tenant’s failure to comply with the option exercise procedure contained in the lease. If the option date is missed, regardless of whether the landlord failed to give the required notice, the tenant will lose their ability to exercise any right to renew or extend the lease.

This can potentially result in very significant consequences for the tenant, as the tenant can be being forced to vacate the leased premises on short notice, regardless of the resources invested to establish their business at the leased premises.

 

Where the lease does not contain an option

 

Where a Queensland Retail Shop Leases does not contain an option to renew, section 46AA of the RSLA requires the landlord to give the tenant written notice offering to either renew or extend the lease, or alternatively advise the tenant that a renewal or extension is not to be offered. This notice must be given to the tenant at least three months but not more than six months before the lease expires, or for leases of over one year, at least six months but not more than one year before the lease expires.

If the landlord fails to give this notice, the tenant may, by submitting an extension request to the landlord in writing prior to the expiry of the lease, automatically extend the lease until six months after the landlord gives the required notice. However, this will only apply if the tenant submits the extension request prior to the lease expiring, failing which the opportunity to do so will be lost.

 

What should tenants do?

 

Tenants should ensure that they are familiar with their rights and obligations under any lease and must not rely on the landlord to remind them of any important dates, as ignorance of those rights is not a valid excuse.

In order to ensure any options to extend are not lost, it is imperative that tenants put adequate procedures in place to diarise important dates so that they are not missed. If there is any uncertainty, legal advice should be sought at the earliest opportunity.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 06 July 17

IP Australia – changes to trade mark fees

New fees will be payable to IP Australia for any new trade mark applications filed from 10 October 2016.

Trade mark applications

Most notably, IP Australia has removed the need to pay a registration fee for Australian trade mark applications (previously $300 per class). Whilst increased application fees are payable, the overall effect of these changes is a reduction of fees for the trade mark application process.
 

Description – application fees Old fee  New fee
Headstart (pre-application service) new request - per class   $120 $200
Headstart (pre-application service) new representation - per class   $120 $150
Headstart (pre-application service) additional class fee - per class  $120  $200
Headstart (pre-application service) Part 2 fee - per class   $80 $130
Trade mark application - with picklist per class   $120 $250
Trade mark application - without picklist per class  $200  $330
Series trade mark application -with picklist per class                                         $270 $400
Series trade mark application - without picklist per class   $350 $480
Trade mark application (not using online services) - per class   $220 $350
Series trade mark application (not using online services) - per class   $370 $500
Madrid import application – per class   $420 $350
Description – registration fees Old fee New fee
 Trade mark registration   $300 No fee

 Trade mark renewals

The renewal costs payable each time a trade mark owner wishes to extend their trade mark for a further 10 years has increased by $100 to partially offset the reduced costs in the application process.

 

Description – renewal fees Old fee New fee
Trade mark renewal (online services fee) - per class  $300 $400
Trade mark renewal (fee by other means) - per class $350 $450 $350 $450
Madrid import renewal – per class $300 $400

 

Note: Any fees payable to IP Australia are GST free.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 13 October 16

Trade Mark Infringement

 When is a registered trade mark infringed?

In accordance with section 120 of the Trade Marks Act 1995 (Cth), a person infringes a registered trade mark if they use as a trade mark, a sign that is substantially identical with, or deceptively similar to, the trade mark:

  1. in relation to goods or services in respect of which the trade mark is registered;
  2. in relation to goods of the same description as those in respect of which the trade mark is registered, or services that are closely related to those goods; or
  3. in relation to services of the same description as those in respect of which the trade mark is registered, or goods that are closely related to those services.

This article does not deal with infringement of an unregistered trade mark.

Use as a trade mark

A trade mark is a sign that is used or is intended to be used, to distinguish a particular trader’s goods or services from the goods or services of another person. The purpose of a trade mark is for it to be used as a ‘badge of origin’, or more specifically a sign that indicates the commercial origin of the goods or services.

The registration of a trade mark provides the owner with the exclusive right to use the trade mark in Australia in relation to the particular goods or services for which the mark is registered. For another trader to infringe that exclusive right, they must have used the registered mark as a trade mark.

Where the registered trade mark has not been used in a way that constitutes use as a trade mark, for example it has been used descriptively rather than in an attempt to indicate the commercial origin of the goods, there will be no infringement of the registered trade mark.

Substantially identical

To determine whether an allegedly infringing trade mark is substantially identical to a registered trade mark will involve a side-by-side comparison of the two trade marks.

This is a high threshold to meet and will require an extremely high degree of similarity between the two trade marks. It therefore usually has limited application except in cases of blatant infringement, with most cases instead dealing with the issue of deceptive similarity.

Deceptively similar

A trade mark will be deceptively similar to a registered trade mark if it so nearly resembles the other trade mark that it is likely to deceive or cause confusion.

The test that has been applied by Courts when assessing deceptive similarity involves consideration of the imperfect recollection of the two trade marks. This is a much less precise test than determining whether two marks are substantially identical, as it does not involve a side-by-side comparison.

Defences to trade mark infringement

A person will not infringe a trade mark in certain circumstances, for example:

1. they use their name, the name of their place of business, the name of their business’s predecessor or the name of the predecessor’s place of business, where that use is in good faith;

2. they use the sign in good faith to indicate:

a. the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, of goods or services
b. the time of production of goods or of the rendering of services;
c. the intended purpose of goods or services;

3. for the purposes of comparative advertising;

4. where the Court considers that the alleged infringer would be entitled to obtain its own registration for the allegedly infringing trade mark if they were to apply for it (eg. where the alleged infringer can establish prior concurrent use, that is use prior to the priority date of the registered trade mark they are alleged to have infringed).

Remedies for infringement

Where infringement has been established and no defences have been successfully raised, the Court may:

  1. grant an injunction to prevent continued infringement;
  2. award damages or an account of profits.

Depending on the circumstances such as the flagrancy of the infringement and the conduct of the infringer, the Court may also add an additional amount to the assessment of damages.

Tips for trade mark owners:

  • Applying for and obtaining a registered trade mark will provide much stronger protection than attempting to rely on an unregistered trade mark. The Australian trade mark system operates on a first to file basis, so seeking protection as soon as possible is advisable.
  • A trade mark owner should always exercise caution when accusing third parties of infringing their trade mark as the recipient of such a demand may be entitled to apply to the Court for a declaration that the demand constitutes a groundless threat.
  • The owner of a trade mark may have other causes of action against an alleged infringer even if they do not have a trade mark registered under the Trade Marks Act 1995, for example passing off or misleading and deceptive conduct. These actions will be discussed in a separate article.
  • Trade mark owners must ensure they protect their registered trade mark or it may become vulnerable to removal.
  • Whilst there is no obligation to do so, owners of registered trade marks may display the ® symbol next to the trade mark to signify that the trade mark has been registered. It is an offence for a person to represent that a trade mark is registered in Australia when they know or have reasonable grounds to believe that it is not.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 27 June 16

Trade Marks - Non-Use

 Application for removal of a trade mark for non-use - opposition process

An application for removal of a trade mark for non-use (“non-use application”) provides a mechanism for registered Australian trade marks to be removed from the Register of Trade Marks if they are not being used or the owner never had any intention in good faith to use, authorize use or assign the trade mark. A non-use application can be made in relation to the entire trade mark, or alternatively, a partial non-use application can be made just in relation to particular goods or services.

The usual reason that a non-use application is filed is because the person making the application (“applicant”) has already filed a trade mark application in Australia but another person’s earlier trade mark is considered too similar and is therefore blocking the registration. Typically the applicant will contact the owner of the earlier trade mark approximately one month prior to filing the non-use application to determine if the earlier mark’s owner will consent to the applicant’s trade mark application proceeding. If this consent is not forthcoming, a non-use application is the natural next step.

The burden is placed on the person opposing the non-use application (typically the trade mark owner, although third parties are entitled to oppose the application) (“opponent”) to establish that the application should be unsuccessful. In order to successfully oppose a non-use application, the opponent must show that the trade mark has, in fact, been used in good faith in Australia during the three year period ending one month before the non-use application was filed. If the application is ignored, the non-use application will automatically be successful and IP Australia will process the non-use application.

To oppose a non-use application, the opponent must file a notice of intention to oppose within two months of the advertisement of the non-use application. A filing fee of $150.00 is payable for each trade mark opposition. The objector must file a statement of grounds and particulars outlining the reasons they say the trade mark should not be removed within one month of filing the notice of intention to oppose. At that stage, the applicant is able to decide whether to proceed by filing a notice of intention to defend within one month.

If the opposition is defended, the opponent must then file evidence of use. The applicant will then be entitled to file any evidence in response, with the opponent also provided the opportunity to file any further evidence in reply. The application will then be determined by the Registrar, with the unsuccessful party typically ordered to pay the other party’s legal costs. If desired, a party may appeal the Registrar’s decision in the Federal Court.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 03 June 16

Trade Mark Application Process

The purpose of a trade mark is for it to be used as a ‘badge of origin’, a sign that links the goods or services to the trader who supplies them.

Prior to filing any trade mark application, you should first give consideration to what trade marks should be registered, as well as which goods and/or services will be relevant. Prior to investing time and money in developing, applying for and marketing a trade mark, it is also advisable to carry out investigations to determine whether any other traders are already using a similar mark that may pose difficulties for your intended use.

Trade mark application

Once a proposed trade mark has been selected, the trade mark application process is commenced by filing an Application to Register a Trade Mark. The application can be submitted in hard copy or by using the IP Australia eServices facility. The official fee payable to IP Australia on filing ranges between $120.00 and $200.00 per class, depending on how the application is lodged and what goods and services are selected.

Once filed, the trade mark application will be indexed, allocated an application number and be published in the Australian Official Journal of Trade Marks (“Official Journal”)1. The application details will also be publically assessable on the Australian Trade Mark On-line Search System (ATMOSS) website.

The trade mark application will then be examined by the Registrar of Trade Marks (“Registrar”).

Examination

Once the trade mark application has been examined, the Registrar will issue an examination report. We typically see trade mark examination reports issued within three to five months of the application filing date. If there are circumstances justifying early examination, it is possible to request an expedited examination which, if accepted, will usually see the examination report issued within one month.

The examination report can either be a clear report (where the Registrar considers the application in order to proceed to acceptance) or be subject to citations (where the Registrar has identified issues it considers presently prevent acceptance).

Common citations include where the trade mark that has been applied for is not distinctive, or where it is substantially identical with or deceptively similar to a trade mark with an earlier priority date (ie. a trade mark that was filed before the subject application).

Other grounds for rejection may include situations where:

  1. the trade mark contains certain protected symbols (for example the Olympic rings);
  2. the trade mark is unable to be represented graphically;
  3. where the trade mark would be scandalous or contrary to law.

If citations are raised, an applicant may be able to amend the application or take certain steps for consideration for the Registrar, which may allow for the trade mark to proceed to acceptance. The applicant has fifteen (15) months from the date of the first examination report for the application to be accepted. If the trade mark is not accepted within that period, or an extension obtained, the trade mark application will lapse.

Once a clear examination report has been issued, the application will sit in abeyance for five to six months from the application date, as required by international convention obligations. Once this time has passed, the Registrar will advertise acceptance of the trade mark application in the Official Journal.

Opposition period

The Registrar’s publication of the notice of acceptance starts a two (2) month period for any interested third parties to lodge an opposition to the trade mark application. Potential grounds for opposition and the opposition process are not dealt with in this article.

If no oppositions are lodged and the opposition period expires, the trade mark can then proceed to registration.

Registration

On payment of the applicable registration fee (presently $300.00 per class), the Registrar will register the trade mark on the Australian Trade Marks Register. Importantly, whilst a trade mark will provide no protection until it is registered, once registered, protection will be granted from the filing date (or an earlier convention priority date, if applicable).

Note: Any fees payable to IP Australia are GST free.

 1.  http://pericles.ipaustralia.gov.au/ols/epublish/content/olsTrademarkPDFs.jsp

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 27 May 16

BCIPA Payment Process

Payment claims for construction and related work under the Building and Construction Industry Payment Act 2004 (BCIPA)


BCIPA explained

With cash flow posing a regular issue for those in the building industry, the purpose of the Building and Construction Industry Payments Act 2004 (Qld) (“BCIPA”) is to ensure that persons carrying out construction work under a construction contract, or supplying related goods or services, are able to recover progress payments under those contracts.

The BCIPA offers a process for recovery of progress claims that is typically simpler and more efficient than litigation.

The procedure for resolving disputes under the BCIPA can broadly be separated into the following four categories:

1. Issue of Payment Claim;
2. Receipt of Payment Schedule;
3. Adjudication of the dispute; and
4. Recovery proceedings.

 

What type of work is covered by the BCIPA?

For a claimant to issue a payment claim, they must first have carried out construction work or supplied related goods or services under a construction contract in Queensland.

Construction work is broadly defined and not only includes the building, repair and demolition of buildings or structures, but also work carried out in relation to those buildings, for example the installation of heating, electricity and air conditioning services.

Related goods and services will also be subject to the BCIPA, including the supply of plant and equipment or materials for use in carrying out the construction work, as well as related services such as architectural, engineering and soil testing services.

Payment claim

A payment claim can only be submitted in respect of a reference date. A reference date is the date on which a payment claim can be made by the person who is purportedly owed money under a construction contract (“claimant”).

The relevant construction contract may specify how a reference date is to be calculated. If the construction contract is silent on the issue, the BCIPA deems the reference date to be the last day of the month in which the relevant work was first carried out or goods or services provided, and on the last day of each subsequent month.

For a payment claim to meet the requirements of the BCIPA, it must:

1. identify the construction work or related goods or services to which the claim relates;

2. state the amount of the payment claim; and

3. state that it is made under the BCIPA.

Previously, where the construction contract did not specify a date, a payment claim could be served up to twelve (12) months after the work was carried out or goods or services were supplied. However, recent amendments to the BCIPA have reduced that period to six (6) months. Where the payment claim is a final payment claim, the time to submit that claim will be the later of:

1. the period worked out under the relevant construction contract, if any;

2. 28 days after the end of the last defects liability period; or

3. six months after the work was completed or the goods or services were supplied.

Only one payment claim may be submitted in relation to any one reference date. Likewise, a single payment claim should not be submitted in respect of multiple construction contracts.

Payment schedule

On receipt of a payment claim, if the recipient of the payment claim (“respondent”) wishes to dispute some or all of the amounts claimed in the payment claim, they must serve a payment schedule on the claimant.

The time frame for service of a payment schedule is the earlier of either the time specified under the construction contract or:

1. for a payment claim of $750,000 or less, ten (10) business days after the payment claim was served; or

2. for a complex payment claim (a claim in excess of $750,000), either fifteen (15) or thirty (30) days after the payment claim was served, depending on how long the claim was served after the relevant reference date.

Previously the consequences were extremely severe for a respondent who failed to submit a payment schedule within the relevant period. A respondent who did not do so would not be entitled to raise any defence or counterclaim to recovery proceedings commenced by the claimant in respect of the progress claim. However, recent amendments to the BCIPA provide the respondent with a second opportunity to submit a payment schedule. Before a claimant may apply for adjudication or commence recovery proceedings, they must first give the respondent written notice of their intention to do so and provide the respondent with a further five (5) business days to submit a payment schedule. This effectively provides the respondent with a second chance (albeit with a very short response time) to submit a payment schedule. This notice by the claimant must be made within twenty (20) business days after the payment due date.

Adjudication

A claimant may apply for adjudication by filing an adjudication application:

1. where the respondent submits a payment schedule disputing payment, within 10 business days from receipt of the payment schedule;

2. where the respondent submits a payment schedule, but fails to pay the whole or part of the scheduled amount by the due date for payment, within 20 business days from the due date for payment;

3. where the respondent fails to submit a payment schedule (after being given the abovementioned second chance to do so), within 10 business days commencing at the end of the five (5) business day notice period.

On receipt of the adjudication application and any response submitted by the respondent, the adjudicator will determine the application and issue their decision stating the amount, if any, that the respondent is to pay to the claimant. If the respondent fails to pay the adjudicated amount, the claimant may request that an adjudication certificate be issued.

Recovery proceedings

On obtaining an adjudication certificate, the claimant may file the certificate in the relevant Court where it will take effect as a judgment.

Where a respondent fails to submit a payment schedule on receipt of a payment claim, and fails to do so again after receiving notice of the claimant’s intention to take recovery action, the claimant may commence proceedings against the respondent for the full amount claimed. In these circumstances, the respondent is not permitted to raise any defence or counterclaim against the claimant, and any defence would be limited to challenging the validity of the payment claim. A defence on other grounds would be susceptible to an application for summary judgment.

Once judgment has been obtained, the claimant may exercise the usual enforcement options available under the Court rules.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 23 May 16

So You Have Received a Statutory Demand

 So you have received a statutory demand... What now?

When a company receives a document with the title 'CREDITOR'S STATUTORY DEMAND FOR PAYMENT OF DEBT' (“statutory demand”), it is critical that the company immediately gives the statutory demand the respect it deserves. Failing to take prompt and appropriate action can result in the appointment of a liquidator and the effective loss of the company.

A statutory demand is a notice issued under the Corporations Act 2001 (Cth) in respect of a debt of $2,000 or more that is due and payable. A statutory demand will allow the recipient company with a 21 day period to:

  1. pay the debt;
  2. compound the debt (enter into an acceptable payment arrangement or compromise); or
  3. file and serve a application filed in the relevant Court to have the statutory demand set aside.

Consequences of failing to comply with statutory demand

The consequences of failing to comply with a statutory demand are severe. If the recipient company allows the 21 day period to expire without taking appropriate action, it will be presumed to be insolvent. Once this occurs, creditors are entitled to apply to the Supreme or Federal Court seeking orders that the company be wound up in insolvency.

By failing to respond to the statutory demand, the recipient company will also typically lose the right to raise any dispute regarding the statutory demand or the underlying debt. The recipient company will then only be able to resist a winding up application if it is able to satisfy the Court that it is in fact solvent, something which is usually much more difficult than it may initially appear.

Should a creditor’s winding up application be successful, the Court will order that a liquidator be appointed to the company who will assume control of the company from the company’s directors. Once appointed, a liquidator will take steps to investigate the company’s financial position, sell any assets, pay creditors, distribute any remaining surplus to shareholders, and then ultimately deregister the company.

What are the company’s options?

In addition to paying the demand in full or entering into a payment arrangement with the creditor, the company may challenge the statutory demand on certain grounds.

An application to set aside a statutory demand will be successful if the recipient company can establish one or more of the following:

  1. that there is a genuine dispute about the existence of the debt;
  2. the company has an offsetting claim (that is, a genuine counterclaim, setoff or cross-demand);
  3. there is a defect in the demand which would otherwise cause substantial injustice to the company;
  4. there is some other reason that the demand should be set aside.

Should the company wish to challenge a statutory demand, it must file an application in a competent Court to have the statutory demand set aside. It is critical that the application is both filed and served within the 21 day period. Companies should not leave any intended application until the last minute.

If the creditor makes an application and is successful, the Court will order that the statutory demand be set aside.

Some tips and traps:

  1. Whilst it is not the only way to effect service on a company, creditors usually serve a statutory demand by posting the demand to the registered office of a company. The registered office is the address listed on the Australian Securities and Investments Commission (ASIC) company register. The creditor serving the demand does not need to prove that the company actually received the statutory demand at the registered office, only that it was sent to this address. It is therefore imperative that this address is kept current.
  2. Procedures should be put in place with staff regarding what is to occur if a statutory demand is received (such as immediately bringing it to a director’s attention), or where the registered office is at another location (such as an accountant’s office).
  3. Urgent action must be taken or a company will lose the right to challenge on certain grounds. The application should not be left until the last minute, and legal advice should be immediately sought.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Key words: Commercial litigation, Corporations Act, Statutory Demands
 

Posted in: Commercial Litigation News at 16 May 16

Defamation in Queensland

 The law of defamation provides protection to a person who has had their reputation wrongfully harmed by another. Whilst actions in defamation are typically pursued by natural persons, in certain circumstances corporations may also have an action in defamation. For more information on when a corporation can pursue an action in defamation, see our article here.

To be successful in establishing a cause of action in defamation, the aggrieved needs to establish three elements, specifically that the allegedly defamatory statement:

  1. identifies them;
  2. has been published; and
  3. is defamatory, that is, it carries a defamatory meaning.

Identification

In order for a person to be defamed they must be sufficiently identified. Sometimes this will be a simple matter, for example, where the aggrieved person has been directly referred to by name. In other situations identification may prove more tricky, such as where the person has not been directly referred to or the defamatory statement relates to a particular group with a number of members, for example a committee or association.

Publication

Defamation only protects a person's reputation from harm in the minds of other persons. It is therefore essential to show that the defamatory matter complained of has been published (whether verbally, visually or in writing) to at least one person other than the aggrieved.

Some examples of how a defamatory statement can be published include:

  1. over the telephone or during a face to face conversation;
  2. a television or radio broadcast;
  3. a letter or written report;
  4. a post on Twitter or Facebook;
  5. a post or comment on a forum or website article.

Defamatory meaning

A statement will be found to carry a defamatory meaning where:

  1. it exposes the person to hatred, contempt or ridicule;
  2. it causes people to shun and avoid them; or
  3. it lowers that person’s estimation by right minded members of the public.

There are three ways that a defamatory meaning can arise, that is:

  1. on the natural and ordinary meaning of the word (where the words themselves, without more, convey a defamatory meaning);
  2. by way of false innuendo (where the defamatory meaning arises from reading between the lines of the words);
  3. by way of true innuendo (where a natural reading of the words give rise to a defamatory meaning to persons who are aware of other matters not in the publication).

Defences

Once an action in defamation has been established, the defendant may attempt to raise defences to the claim. The possible defences available will be discussed in a separate article.

Damages

The maximum amount of general damages in Queensland for a single cause of action for non-economic loss is $355,000 (current as of 1 July 2014, indexed annually).

Limitation period

Unlike most causes of action which typically have a three or six year limitation period, defamation has an extremely short one (1) year limitation period. The limitation period commences on the date of publication of the defamatory statement.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 12 May 16

When Can a Corporation Sue for Defamation in Queensland?

The recent Queensland Supreme Court decision of Jones v Aussie Networks Pty Ltd [2014] QSC 126 provides guidance on whether a corporation can be defamed when its share capital is owned by another corporation in a fiduciary capacity, namely as trustee for a trust.

It is a common misconception that corporations are unable to sue for defamation. Whilst it is true that large corporations are generally prohibited from bringing an action for defamation in Queensland, a corporation will be entitled to bring an action in defamation if they are an ‘excluded corporation’.

Section 9 of the Defamation Act 2005 (Qld) provides that a corporation will be an excluded corporation if:

  • the objects of the corporation do not include obtaining a financial gain for its members; or
  • it employs fewer than 10 persons and is not related to another corporation.

The decision in Jones concerned an application by the plaintiff (“Jones”) to join a corporation (Australian Shareholder Centre Pty Ltd (“ASC”)) as a co-plaintiff on the basis that it too had been defamed by the defendants. All of ASC’s 100 ordinary shares were held by another company, Torque Securities Pty Ltd (“Torque”). Importantly those shares were held by Torque in its capacity as trustee for the Jinx Trust.

Jones’s application was opposed by the defendants on the basis that ASC was not an excluded corporation because, whilst ASC appeared to have less than 10 employees (although this had not been conclusively proved), ASC was related to its sole shareholder, Torque.

To determine whether or not a corporation is related to another corporation, the Defamation Act 2005 adopts the definition of related bodies corporate contained in the Corporations Act 2001. On this basis, a corporation will be related to another where the corporation is:

  1. a holding company of another corporation;
  2. a subsidiary of another corporation;
  3. a subsidiary of a holding company of another corporation.

There was no suggestion that ASC was a holding company of another corporation. In order to determine whether ASC was a subsidiary of Torque, it is necessary to consider various provisions of the Corporations Act 2001.

Section 46 of the Corporations Act 2001 provides that the first body (ASC) will be a subsidiary of another body (Torque) if:

  • the other body:
    • controls the composition of the first body’s board; or
    • is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or
    • holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or
  • the first body is a subsidiary of a subsidiary of the other body.

Whilst (b) would have had no application (a subsidiary of a subsidiary), a casual reading of the Defamation Act 2005 and the Corporations Act 2001 would suggest that the defendants were correct, that ASC was indeed a subsidiary of Torque, as ASC triggered each of the sub-paragraphs to (a) because Torque, as the sole shareholder of ASC:

  1. controlled the composition of ASC’s board;
  2. was in a position to cast and control more than 50% of the votes at any general meeting of ASC; and
  3. held more than 50% of the issued capital in ASC.

However, as was submitted by the applicant Jones (and as was ultimately accepted by the Court), section 48(2) of the Corporations Act 2001 contained an important qualification that any shares held, or power exercisable, by the other body [Torque] in a fiduciary capacity are treated as not held or exercisable by it. Further, it was specifically acknowledged that section 48 applied when determining whether a body corporate is a subsidiary of another.

In applying section 48 of the Corporations Act 2001, the Court acknowledged that Torque held the ASC shares as trustee and therefore in a fiduciary capacity. The resulting determination was that Torque’s shareholding of ASC must be disregarded when determining whether ASC was its subsidiary. Accordingly, ASC was not a subsidiary of, or related to, another corporation, and therefore satisfied the definition of ‘excluded corporation’.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 10 May 16

QLD Building Amendments

 Alert: Recent amendments to building licensing and regulation in Queensland 

Subcontractor liability for defective building work

With the recent release of the ‘Accountability for Subcontractor Defects Policy’ by the Queensland Building and Construction Commission (“QBCC”), the consequences of defective building work have become much more serious for subcontractors.

Previously, whilst the QBCC did have the power under the Queensland Building and Construction Commission Act 1991 (“QBCC Act”) to direct subcontractors to rectify defective work, the QBCC would typically only issue such directions and take enforcement action against principal contractors. The new policy provides that where the defective work is found to be caused by a subcontractor, the QBCC will pursue them before looking to the principal subcontractor.

The new policy takes effect from 1 June 2015.

Permitted individual applications

Under the QBCC Act, the holder of a QBCC licence will become automatically categorised as an ‘excluded individual’ if they:

  1. become bankrupt or take advantage of bankruptcy laws; or
  2. were a director, secretary or influential person of a company at the time of, or within a year after, a provisional liquidator, liquidator, administrator or controller was appointed to the company, or the company is otherwise wound up.

This would result in the licensee being disqualified from holding a QBCC licence for a period of five (5) years. A second disqualification results in a lifetime ban.

Despite what would appear to be a distinct lack of consultation with the industry considering the significant impact they will have, further amendments to the QBCC Act have now come into force that will have the effect of removing a licensee’s entitlement to apply to become a permitted individual.

Previously under the QBCC Act, the holder of a QBCC licence who became categorised as an ‘excluded individual’ could apply to the QBCC to be categorised as a ‘permitted individual’. On triggering one of the relevant events, licensees would automatically be classed as an ‘excluded individual’.

These amendments have removed a licensee’s ability to make a permitted individual application. This will have a significant impact on persons who may have previously, in their particular circumstances, been successful in applying for classification as a permitted individual and therefore been able to maintain their licence and livelihood.

Other relevant amendments include:

  1. the initial disqualification period for individual licensees has been reduced from five (5) years to three (3) years; and
  2. whilst previously any company being placed into liquidation or administration would be sufficient to trigger a ‘relevant event’, it will now be necessary for the company in question to have directly or indirectly carried out building work or building work services. This will mean that a licence holder will not be disqualified from holding a QBCC licence where a company of which they are an officeholder or influential person is placed into liquidation, administration or is otherwise wound up, and that company is not involved in the building industry.

These amendments took effect on 1 July 2015.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Key words: Commercial Litigation, Building & Construction, QBCC, Queensland Building and Construction Commission, Defective work, Excluded individuals
 

Posted in: Commercial Litigation News at 02 March 16