Sale of Businesses in Australia (2nd ed.)

The greater volume of businesses sold in Australia each year are small to medium enterprises. The administration of business contracts presents far different challenges than, for example, contracts for the sale of goods alone or contracts for the sale of land. The subject matter comprises both real and personal, and tangible and intangible property. Other considerations that do not affect those other commonplace contracts include dealing with employees who are both remaining and departing, taking account of restraints of trade, and the phenomena of the passing of property being different in respect of different forms of property being transferred in the same contract. In keeping with the format of the previous edition, the book is written with the busy practitioner in mind. It deals with the formation of business contracts, all aspects of disclosure both contractual and statutory, the role of agents, and detailed consideration of the different types of subject matter of small business contracts including, the lease of the premises, intellectual property, goodwill, licences, book debts and plant and equipment. It has up to date treatment of income tax implications of the sale and the impact of the latest Commonwealth legislation on dealing with employees of a business on sale. Consistent with the last edition, the book has chapters on time of the essence and completion, personal securities, restraint of trade clauses, special conditions and remedies for breach by both parties and misleading or deceptive conduct by the seller. In relation to personal securities, whilst the current State and Territory based law on Bills of Sale and other Chattel Securities has been the subject of commentary, the proposed national reform agenda has also been commented upon although that legislation is not due until May 2010 at the earliest

In focus : the Personal Property Securities Act 2009 (Cth)

Australia has new national legislation - the Personal Property Securities Act 2009 (Cth) and the Personal Property Securities Regulations 2010 – which commenced operation on 30 January 2012. Previous personal property securities legislation was very complex, with more than seventy pieces of legislation in the states and territories, and more than forty registers. This reform package is the culmination of a process that began many years ago and various drafts have been the subject of much investigation and consultation. This legislation rationalises previous laws and bring about substantial changes to this area of law. This paper seeks to explain the principal changes and their implications.

Outline of the Personal Property Securities Act 2009 (Cth)

Australia has new national legislation - the Personal Property Securities Act 2009 (Cth) and the Personal Property Securities Regulations 2010 – which commenced operation on 30 January 2012. The policy objectives of the new legislation are to increase certainty and consistency and to reduce complexity and cost. To achieve this, the legislation treats like transactions alike, by focusing on substance over form, and so removes distinctions between security interests which have been based on their structure. Differences based on the location or nature of the secured property and the debtor’s legal form, as an individual or company, have also disappeared. We now have one single national scheme and one national electronic registration system for all security interests throughout Australia. The Act applies to security interests in tangible and intangible personal property, including those based on some form of title retention which are not security interests under the general law. This legislation rationalises previous laws and bring about substantial changes to this area of law. This paper seeks to explain the principal changes and their implications.

Form prevailing over substance?

The decision of the Court of Appeal in Kellas-Sharpe v PSAL Ltd [2012] QCA 371 considered a not unusual provision in a loan agreement, being a provision whereby a lender agrees to accept a lower or concessional rate of interest in circumstances of prompt payment by the borrower. The loan agreement in question provided for the borrower to pay a standard rate of interest of 7.5% per month. However, if the borrower was not in default, the lender agreed to accept interest at a concessional rate of interest of 4% per month. The issue for determination by the Court of Appeal (McMurdo P, Gotterson JA and Fryberg J) was whether the clause was subject to the equitable jurisdiction to relieve against penalties, and, if so, if the interest rate provision should be treated as a penalty making the interest rate provision void. In mounting this argument, the borrower was seeking to overturn a long line of authority which has repeatedly upheld the semantic distinction between an increase in the rate of interest (which attracts the doctrine concerning penalties) and an incentive to the borrower by way of a reduction in the interest rate for prompt payment (which does not attract the doctrine)...

Improving the ability of guarantors to make a real choice : lenders' practices in taking third party guarantees

This article considers recent cases on guarantees of business loans to identify the lending practices that led the court to set aside the guarantee as against the creditor on the basis that the creditor had engaged in unconscionable conduct. It also explores the role of industry codes of practice in preventing unconscionable conduct, including whether there is a correlation between commitment to an industry code and higher standards of lending practices; whether compliance with an industry code would have produced different outcomes in the cases considered; and whether lenders need to do more than comply with an industry code to ensure their practices are fair and reasonable.

The state of the art defence : defining the Australian experience in the context of pharmaceuticals

One of the defences within Part 3-5 of the Australian Consumer Law is the state of the art, or development risk defence. This defence, although significant, has often been neglected in Australian jurisprudential analysis and has triggered at most generic academic analysis. However, with the rise of pharmaceutical and medical device litigation in Australia, it could become a vital weapon for Australian manufacturers against product liability claims. This paper will firstly review the two ways this defence could operate. It will also discuss the three types of defects which the defence could apply to. This paper aims to determine exactly when and how this defence should apply in Australia, in the context of pharmaceutical product liability claims.

An analysis of Australia's legal regime for imposing liability on manufacturers of pharmaceutical drugs

Following a trial in June 2009 where the Federal Court heard submissions regarding whether Merck Sharpe and Dohme Australia should be held liable for an increased risk of cardiovascular conditions noted in patients who had taken the anti-inflammatory drug Vioxx, a judgment was handed down against MSDA in March 2010. MSDA appealed to the Full Federal Court, where they were successful. Special leave to appeal to the High Court of Australia was rejected in May 2012. This article will examine the themes raised in the trial judgment and the appropriateness of Australia’s statutory consumer protection regime through the lens of pharmaceutical drug injuries and side effects.

Agents as intermediaries : when do they compete with their suppliers?

In cases involving allegations of price fixing under the former s 45A of the Trade Practices Act 1974 (Cth), it was necessary to prove that at least two parties to the arrangement or understanding at issue were “in competition with each other”. The same requirement is contained in the cartel provisions of the Competition and Consumer Act 2010 (Cth) (CCA) that replaced s 45A. The so-called “competition condition” is set out in s 44ZZRD (4) of the CCA. Where a supplier enters into vertical supply arrangements with agents or brokers, problems can arise if the supplier also has a downstream presence. At that functional level there may be a horizontal and therefore competitive dimension, and the competition condition may be satisfied. In such circumstances, great care will need to be taken in any discussions between the supplier and its downstream agents or distributors about the prices, discounts, allowances, rebates or credits that the agent or distributor may charge. Whether agents or brokers competed with their suppliers in vertical supply arrangements arose for consideration in two decisions handed down by the Federal Court in Brisbane...

Forrest v ASIC : a ‘perfect storm’

The policy objectives of the continuous disclosure regime augmented by the misleading or deceptive conduct provisions in the Corporations Act are to enhance the integrity and efficiency of Australian capital markets by ensuring equality of opportunity for all investors through public access to accurate and material company information to enable them to make well-informed investment decisions. This article argues that there were failures by the regulators in the performance of their roles to protect the interests of investors in Forrest v ASIC; FMG v ASIC (2012) 247 CLR 486: ASX failed to enforce timely compliance with the continuous disclosure regime and ensure that the market was properly informed by seeking immediate clarification from FMG as to the agreed fixed price and/or seeking production of a copy of the CREC agreement; and ASIC failed to succeed in the High Court because of the way it pleaded its case. The article also examines the reasoning of the High Court in Forrest v ASIC and whether it might have changed previous understandings of the Campomar test for determining whether representations directed to the public generally are misleading.

Statutory right of user - its impact in practice?

Scenario 1 A buys a two storey commercial building built along the only street frontage to the property. Vehicles cannot reach the rear of the property as the building extends across the entire width of the land. A bought the building with full knowledge that vehicular access to the rest of the property had been compromised by a desire to obtain maximum street frontage for the building which was occupied by a commercial tenant. On street parking is scarce in the surrounding area. A (to the knowledge of the adjoining owner B) constructs a carpark at the rear of the building. The employees of A’s tenant have been using the carpark obtaining access via a driveway on B’s land. To formalise this arrangement, A seeks a right of way for vehicles to travel down B’s driveway to access the carpark...

The cost of changing your mind!

A recent decision of the Queensland Civil and Administrative Tribunal dealt with the liability of a purchaser to pay a termination penalty where a contract for the purchase of a residential property was terminated during the ‘cooling-off’ period. The decision is Lucy Cole Prestige Properties Broadbeach Pty Ltd ATF Gaindri FT Trust t/as Lucy Cole Prestige Properties Broadbeach Pty Ltd v Kastrissios [2013] QCAT 653.

Plain English writing in Sri Lanka - an achievable goal

The use of plain English in document writing, whether in correspondence, agreements and deeds, court documents or judicial writing, is an important goal for the legal profession in Sri Lanka.

A review of Deeds of Company Arrangement

Deeds of company arrangement ('DOCAs') under Part 5.3A of the Corporations Act appear be something of a limited success. However, the use and outcomes of DOCAs raise legitimate questions as to whether the level of returns currently being achieved for creditors might be improved by legislative reform. The 2013 ARITA Terry Taylor Scholarship project entailed a review of a random sample of executed DOCAs effectuated between 1 August 2012 and 31 July 2013. This review was undertaken with the intention of producing a ‘snapshot’ of current trends and outcomes of the use of DOCAs in practice – ie, average (or typical) rates of dividends paid, what DOCAs customarily achieve, the profile of the companies executing DOCAs and the average duration of DOCAs. The purpose of this review was to empirically assess the use and effectiveness of DOCAs in order to inform the ongoing debate about the success or otherwise of Australia’s Part 5.3A voluntary administration regime (which recently marked its 20 year anniversary).

A sample review of Deeds of Company Arrangement under Part 5.3A of the Corporations Act

An empirical review of the operation of Part 5.3A of the Corporations Act 2001 (Cth) is timely given that Australia’s corporate rescue regime marked its 20 year anniversary in 2013. The research project culminating in this report was funded by the 2013 ARITA Terry Taylor Scholarship and entailed a review of a random sample of 72 executed DOCAs (and associated reports and returns) which were effectuated between 1 August 2012 and 31 July 2013. This sample review of DOCAs was undertaken with the intention of producing a ‘snapshot’ of current practices and trends pertaining to DOCAs – ie, average (or typical) rate of dividends paid, the outcomes or goals which DOCAs customarily achieve (eg, genuine company rescues, workouts, enhanced asset realisations or ‘quasi-liquidations’), the profile of the companies executing DOCAs and the average term/duration of DOCAs. The purpose and value of this sample review was to empirically assess the use and effectiveness of one important aspect of Part 5.3A and to further inform consideration and debate as to whether changes are warranted to Australia’s voluntary administration regime.