Issue 53 - June 2008

• Minimising business risks (part 2 of 2)
• Workplace policies create contractual obligations for employers
• Don't start fencing work until you have served your notice
• The Verdict

Appointment of Jayne Humphreys as Senior Associate

Work Integrated Learning Scholarship

Further useful tips Minimising business risks (part 2 of 2)

Continued from our May 2008 newsletter…

Avoiding personal guarantees
A guarantee is a contract whereby the “guarantor” promises to answer the default of another person’s obligations to a third party. The most common example involves a bank loan where the guarantor usually promises to fulfil the loan between the bank and a borrower if the borrower defaults.

Becoming a guarantor can be extremely risky, particularly when guaranteeing large debts. A common example is where parents provide a guarantee to assist children to obtain a mortgage. Under most guarantees, the guarantor becomes immediately liable to repay the defaulted debt (that is, the guarantor is primarily liable and the lender does not have to wait for attempts to recover from the borrower before calling on the guarantee).

As a practical matter, many businesses cannot obtain finance unless a personal guarantee is provided. If this is the case, whenever the loan is repaid, the guarantee should be discharged so that the guarantor cannot continue to rely on it at a later date concerning subsequent transactions.

Superannuation contributions
In many circumstances, superannuation entitlements can be protected from bankruptcy trustees. This is too complex an area to deal with in this article and an area which is the subject of recent legislative amendment however, it can be a useful protective tool so you ought to consider discussing this with your lawyer or accountant.

Business succession planning
What happens to a business upon the death of its principal or upon the principal losing mental capacity? A business can prepare for these events by having a will, power of attorney or, if appropriate, a shareholders or unitholders agreement.

Wills contain provisions dealing with what is to happen with your house, car and personal items however, it can also deal with the succession of your business. The type of entity which you choose to run the business (for example company, sole trader or trust) will determine the clauses needed to effect transmission of the business in your will. It is important to seek legal advice in drafting a will to meet the object of transmitting the business.  A “standard” form of will is normally insufficient.

For businesses operating as companies or unit trusts with multiple parties, business succession issues can largely be dealt with by an appropriately and properly drafted Shareholders Agreement or Unitholders Agreement. Such documents may contain provisions regarding who runs the business on your death or incapacity, how you are bought out and the mechanism for determining and paying the price and even raising such funds such as by having key person or life insurance.

A power of attorney has the effect of giving the legal powers of an individual (for example, the power to enter into a contract to sell land or obtain money from a bank) to other persons. In this way, if the principal loses mental capacity, the business can still be operated provided the document is appropriately drafted.

In addition to the above, an important personal matter than people often overlook is the appointment of an enduring guardian to make medical and lifestyle choices for you should you lose capacity. A power of attorney will not assist in this regard.

If you have an enquiry in relation to risk management or business succession, please contact Craig Pryor or email craig@wmdlaw.com.au.

New direction for employment law Workplace policies create contractual obligations for employers

Workplace policies and culture statements can create binding contractual obligations on employers.  According to the Federal Court’s decision in Nikolich v Goldman Sachs, workplace policies may be incorporated into the express and/or implied terms of an employment contract. 

In that case, Mr Nikolich lodged a complaint that he had been ‘bullied and harassed’ during the course of his employment with Goldman Sachs.  Goldman Sachs had in place a number of written workplace policies, including those dealing with harassment. Mr Nikolich claimed he suffered severe anxiety and distress following conflict with a manager.  As a result, he suffered depression and psychological injury, which caused him to be absent from the workplace for extended periods and ultimately lead to his dismissal.  It was found that Goldman Sachs did not handle Mr Nikolich’s complaints in accordance with the written grievance procedures and this was a clear breach of its own policies and contractual obligations.  Interestingly, this is the first time that an Australian court has awarded general damages for pain and suffering experienced by a person during employment.

What does this mean for your workplace?

Businesses should regularly review workplace policies, especially those relating to harassment and grievance procedures. You should ensure policies are relevant to present operations and that adequate resources have been allocated to comply with and enforce the policies which are in place. Employment contracts should be drafted to distinguish those policies that are legally enforceable from any which operate as guidelines only.

If you would like further information regarding workplace policies or new developments in employment law, please contact Kevin Dwyer or email kevin@wmdlaw.com.au.

Dividing fences Don't start fencing work until you have served your notice

The Dividing Fences Act 1991 sets out rules regarding how the cost of a dividing fence is to be shared between land owners and the types and specifications of a dividing fence. The Act also sets out a procedure for resolving disputes arising from fencing issues between land owners. A dividing fence is a fence that separates the land owned by adjoining owners and includes, a structure of any material, an embankment or hedge, but does not include a retaining wall or a wall forming part of a building.

If a land owner wants an adjoining owner to share in the cost of a dividing fence, that owner must serve a 'fencing notice' on the adjoining owner, either personally or by post, before any fencing work can be undertaken. The notice must include details of the boundary line on which the fence is to be erected, the type of fencing proposed and the estimated costs of the fencing work. If it is proposed that the cost of the fence is to be shared otherwise than in equal proportions, the notice must state the intended proportions.

An adjoining owner is not liable to contribute to the costs of the dividing fence if:

any work is carried out before a notice is served on them, or
any work is carried out after service of a notice but before an agreement is reached between the parties or an order is made by a Local Court.
Notice is not required to be served in the case of urgent fencing work, if a fence has been destroyed or damaged. Fencing work may be urgent if there are safety or security reasons or the fence is required to prevent stock loss. In those circumstances, adjoining owners must equally share the costs of the urgent work. If a dividing fence is damaged by a land owner or someone on the land owner's land, that owner is liable for up to the full costs of repairing or replacing the fence.

Under the Act, the costs which must be shared between adjoining land owners for fencing work includes all related work, such as preparation of the land, design, construction, replacement, repair and maintenance of the fence. The costs to be shared are for fences that are deemed to be 'sufficient dividing fences'. Generally a sufficient dividing fence includes a paling fence in residential areas and a wire fence with star posts in rural areas.

In the event one owner wants a fence of a higher standard than a sufficient dividing fence, then the owner wanting the higher standard fence is liable for the difference in the costs between the sufficient fence and the higher standard fence. If a dispute about the standard of fencing arises, and Court action is taken, the Court will consider the following factors the standard of any existing fence, the use of the land on either side of the fence, privacy concerns of either owner, the usual fence in the surrounding area and any Council requirements.

If you would like any further information on fencing issues or any property related matter please contact Rebecca Flynn or Melissa Grant or email rebecca@wmdlaw.com.au or melissa@wmdlaw.com.au.

Your questions answered The Verdict

In this section, we answer your general questions in relation to any area of law. Obviously, we are not able to provide specific legal advice or advice in relation to a current legal matter. If you have a question you would like us to answer, please submit it by email to rebecca@wmdlaw.com.au.

I've been served with a statement of claim - what do I do?

If you have been served with a Statement of Claim, you must not ignore it. Once a Statement of Claim has been served, you only have 28 days to respond. A Statement of Claim is generally filed with a Court, often the Local Court, by someone, whether a person or a company, to commence proceedings for money alleged to be owed by you.

After the 28 day period has elapsed, if you ignored the Statement of Claim, the creditor can have judgment entered against you. Once judgment is entered against you it is a debt which the creditor can enforce against you, for the amount claimed, plus interest up to the date on which the debt is paid in full. The judgment remains valid for a period of 12 years and the creditor can pursue you for payment of the debt anytime during the 12 years after the judgment is obtained unless you have repaid the debt in full.

Any contact you make with the creditor should be in writing, to document any agreement which may be negotiated between you and the creditor. If you make any payments, either in part or full payment of the debt, you should ensure that you get a receipt and retain it for your records.

If you intend to respond to the Statement of Claim, there are a couple of options available to you. You can file a defence. If you acknowledge that you owe the and are unable to pay in full, you make an application to pay by installments. You may also be able to make a cross claim against the creditor. There can be significant costs implications if you defend a claim and the Court determines that you owe the debt.

It is prudent to seek legal advice as soon as possible if you are served with a Statement of Claim. Contact Craig Pryor or Kara Yacoubian on 9525 8688 if you require assistance in relation to any claim against you or any claim you are intend to commence.

Congratulations Jayne Appointment of Jayne Humphreys as a Senior Associate

We are pleased to announce the appointment of one of our Senior Lawyers, Jayne Humphreys as a Senior Associate of the firm. Jayne has had a long association with the firm and has recently been very active in developing our practice in the areas Estate Planning, Wills, Guardianship and Powers of Attorney.

We congratulate Jayne on her appointment which is a fitting recognition of her long association with and support for the firm.

If you would like to contact Jayne in relation to any estate planning issue, please telephone her on 9525 8688 or email jayne@wmdlaw.com.au.

WMD and the University of Wollongong's assistance to law students Work Integrated Learning Scholarship

Warren McKeon Dickson, in conjunction with the University of Wollongong, runs a scholarship program for law students in their final year of study.

The scholarship is offered to a final year student to provide practical experience in a legal environment and is aimed at complementing the theoretical knowledge of the law obtained at UOW.

Anika Fleet, pictured with Barrie Price (WMD's office manager), is the current scholarship holder for 2008 and will be staying with the firm when she graduates from UOW and is admitted as a lawyer in December 2008. WMD has recruited 3 past recipients of the scholarship, Melissa Grant, Kieran Haydon and Kara Yacoubian.

If you would like more information regarding the scholarship contact the Faculty of Law at UOW or Melissa Grant on or email melissa@wmdlaw.com.au.
 

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