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Protection of Intellectual Property for Small Business

by Greg Ross, Partner

19 June 2019

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Retail Leasing Reforms

by Atra Ardekani, Lawyer

31 January 2018

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Changes to the Retail Leases Act 1994 (NSW)

by Monica Carelli-Polito, Senior Associate

24 May 2017

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VOIDABLE TRANSACTIONS AND THE RACE AGAINST TIME
Australian Restructuring Insolvency & Turnaround Association (ARITA) Journal

March 2017

Co-authored by Christina Cavallaro, Senior Associate at Eakin McCaffery Cox Lawyers and Nicholas Simpson, Sydney barrister.

This article discusses the recent Court of Appeal decision of Sydney Recycling Park Pty Ltd v Cardinal Group Pty Ltd (in liquidation) [2016] NSWCA 329 and explores the issue of bringing additional voidable transaction claims after the limitation period under the Corporations Act has expired.
 

WHEN IS A CONTRACT CLAIM A BANKRUPT'S CLAIM?
Law Society Journal

October 2016

Co-authored by Christina Cavallaro, Senior Associate at Eakin McCaffery Cox Lawyers and Nicholas Simpson, Sydney barrister.

The article examines the recent decision of Berryman v Zurich Australia Ltd [2016] WASC 196 which considered whether a benefit payable pursuant to a bankrupt’s disability insurance policy was divisible amongst his or her creditors and, if so, whether the bankrupt could continue court action in his or her own name to recover that benefit.
 

Contract Penalty / Liquidated Damages Law - ? Resolution ?

by Gregory Ross, Partner

30 August 2016

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Changes to the Home Building Act 1989 (NSW)

by Michael Stafford, Partner

5 June 2015

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Mobility of the Legal Profession

by Gregory Ross, Partner

12-16 April 2015

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Cantarella Bros Pty Limited v Modena Trading Pty Limited [2014] HCA 48 (3 December 2014)

by Gregory Ross, Partner

10 December 2014

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Relief against forfeiture. Once is enough.

18 August 2014

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Coveting thy neighbour's land. Access options

10 July 2014

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Pre-DA Meetings, Yes, No, Maybe?

9 May 2014

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Managing Procurement in Government Agencies

by Gregory Ross, Partner

19 March 2014

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My development consent is about to expire! What can I do?

13 March 2014

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Engaging Recent Property, Environmental & Planning Law Cases

04 March 2014

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Development Consent Conditions, the good, the bad & the... rest.

04 March 2014

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I want to go to the Land & Environment Court

21 February 2014

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Council hasn't approved my DA - What should I do


21 February 2014

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Perfect or Perish Priority-Wise - PPSA Temporary Protection Period Expires Soon

by Peter Aked, Partner, and Kerry Sidaway, Partner

26 November 2013

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Post Contract Management

by Gregory Ross, Partner

26 September 2013

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Can an adviser to a company be a shadow director?

by Christina Cavallaro, Senior Associate and Mark Doble, Partner

27 August 2013

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Procurement? Keeping Procurement Under Control?

by Gregory Ross, Partner

14 June 2013

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Different forms of Administration in Corporate Insolvency

by Mark Doble, Partner

7 May 2013

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My development consent is about to expire!

 

What can I do?

 

 

 

"A development consent is a valuable asset. It is a statutory permission that authorises the carrying out of development on land, mostly for economic gain... It adds value to the land. Hence the prospect of a consent lapsing is apt to engender dismay in the holder of the consent."

CJ Preston in para 1 Kinder Investments Pty Ltd v Sydney City Council [2005]NSWLEC 737

Development consents don't last forever, but they can... sort of

So when does my development consent lapse?

Development consents will eventually lapse unless physical commencement of "building, engineering or construction work relating to the building, subdivision or work" the subject of the consent takes place on the site before the date the consent would otherwise lapse.

Q. 

 If there is no physical commencement then when does a development consent lapse?

A.

 

Check the development consent - the development consent will specify a lapsing date.
Depending on the Council/consent authority, the lapsing date will be anywhere from 2 to 5 years
after the date from which the consent operates.

  But... it's not that simple for development consents that:
 
  • operated before, and specified a lapsing date after, 22 April 2010; or
• were granted between 22 April 2010 and 1 July 2011;
 
  and where the operating period of those development consents was less than 5 years. Those consents automatically have 5 years from operation of the consent until lapsing. 

 [s.95 Environmental Planning & Assessment Act, 1979 (NSW) ("EP&A Act") for all of the above.]

Can I extend the operational period of my development consent?

Maybe - if the development consent was originally granted for a period of less than 5 years and you apply to the Council for an extension showing "good cause" why the extension should be granted. 

An extension of 1 year only can be granted through an application to the Council.

If the Council rejects the application then you can appeal to the Land & Environment Court ("L&E Court") to consider the application. 

Any 1 year extension will apply from the later of the date:

  • the consent would have lapsed (except for the extension); or,
  • the application for the grant was granted by the Council or approved by the L&E Court.

[s.95A EP&A Act]

What is physical commencement?

If there is physical commencement of building, engineering or construction work on the site that relates to the subject of the consent before the lapsing date of the consent then your development consent stays operational beyond the lapsing date indefinitely, or at least until a supervening event.

Usually the test is applied to cases where often only minimal physical work has been carried out on a site or sometimes work that does not result in any noticeable change to the appearance of the site.  Many of the cases involve questions as to whether survey work, demolition or testing on the site constitutes "physical commencement".

A leading case involving "physical commencement" is:

  • Richard & Ors v Shoalhaven City Council [2002] NSW LEC 11, which related to a consent for subdivision of land.  The question determined in this case was whether the survey work carried out was an essential part of the engineering work required for the approved subdivision.  The Judge found that "the taking of levels, placing pegs, the removal of vegetation and the establishment of marks, including the centre point of a road" were "part of the engineering work required for the establishment and construction of the subdivision".  As that survey work had taken place before the lapsing date, the consent had not lapsed.

but... the work has to be legal, including in compliance with the conditions of the development consent:

  • Biwazu Pty Limited v Cessnock City Council[2004] NSWLEC 411 involved a 29 lot subdivision in the Hunter region.  The conditions of the development consent required that:
    • certain detailed plans prepared by a Civil engineer be approved by the Council prior to commencement of "subdivisional works"; and
    • "Engineering design plans shall be submitted to Council's Works Department for approval prior to commencement of any works on the site."

In this case the Judge was not satisfied by the evidence that certain works had taken place after the consent had been issued.  However, even if that work had taken place, the Judge decided that he was not satisfied the work was essential.  Further, as the works had been carried out without obtaining approved engineering plans from the Council as required by the conditions, they were unauthorised and could not be relied upon as constituting "physical commencement".
 

  • In K & M Prodanovski Pty Ltd v Wollongong City Council [2013] the NSW Court of Appeal ruled that demolition and geotechnical works relied on by the applicant as evidencing "physical commencement" were not carried out in accordance with the conditions of the development consent.  As a result, the works were deemed illegal and could not be relied on as "physical commencement" to prevent the lapsing of the consent.

Consent to a section 96 (modification) application does not extend the time before lapsing

An approval to an application to modify a development consent does not re-start the clock.

Also, applying to modify a consent through a section 96 application solely to extend the lapsing date on a consent is unlikely to be a successful strategy - see below:

  • Kinder Investments Pty Ltd v Sydney City Council[2005] NSWLEC 737

In this case an applicant having previously been granted a 1-year extension to the consent sought a further extension by applying to modify the consent through a section 96 modification application to change the lapsing date.  Sydney City Council refused the application on the basis that it did not have the power to change the lapsing date through a section 96 application.

It was a novel approach that, given the subject of the development was an 8-storey extension to a 12-storey building in the city, was probably worth a shot.

Unfortunately for the applicant in this case, the L&E Court determined that section 96 did not permit modifications that altered the lapsing date of a consent. 
Sections 95 & 95A of the EP&A Act "were the only possible means and timings of lapsing of a development consent permitted by the statutory scheme" [para 40].

The lapsing date on any consent is the starting point.  The provisions of the EP&A Act need to be checked as well as what steps have been undertaken with respect to acting on the consent. 

The sooner that advice can be sought and any necessary action taken, the more likely the potential loss of a consent, and any legal proceedings to establish whether a consent has lapsed or not, may be avoided as can, hopefully, the engendering of dismay.

_________________________________________________________________________________

Eakin McCaffery Cox Lawyers can help by advising you through the DA process and available options as well as acting as your legal representatives in L&E Court proceedings on a cost effective basis.

Please contact Eakin McCaffery Cox Lawyers on (02) 9265 3000 for advice and action on planning, Council and the Land & Environment Court matters.

 

This paper is a summary providing general information and should not be construed as specific legal advice.  Each development application and consent is different and is made in different circumstances which require subjective assessment before legal advice may be provided

Managing Procurement in Government Agencies

 

Gregory Ross Government Law Seminar
Partner 19 March 2014
   

 

 

 

 

 

 

 




Managing Procurement in Government Agencies

Deciding when to outsource

When to outsource and what to outsource is, of course, an internal decision. It is partly a risk management decision. It is partly a resourcing decision.

There may well be policy reasons why some types of goods and/or services are not outsourced. For example, at both Commonwealth and New Wales Government levels, certain types of legal advice are, effectively, reserved to the Australian Government Solicitor and NSW Crown Solicitors Office.

To use the terminology of New South Wales, "core" legal issues are seen as ones which must be dealt with in a manner which not only involves appropriately experienced and knowledgeable lawyers but are recognised as ones requiring a degree of consistency of view, attitude and or policy.

The decision whether and when to outsource or not also involves a degree of provisioning skill.

The organization has to look inwards to itself to see what it is, what it needs, what it will need in the future and what, from time to time, it needs to be rid of.

Only then can management consider its procurement needs and how best to satisfy them.

By that I mean having appropriate systems, including needs analysis, in place to know the nature and extent of any given entity's goods and services needs and how well it can or cannot satisfy those needs. That includes, for instance, knowing annual or seasonal peaks and troughs of internal demand and, where relevant, the extent to which that is dependent upon external demand.

It goes without having to be elaborated upon in any detail, but most government agencies now operate on scant budgets. It is no longer seen as appropriate for entities, particularly government entities, to have large stored inventories of the goods likely to be used in the next year or two.

Availability at demand with a short supply timeline, is, it would seem, more in vogue.

Obvious examples of reasons to justify outsourcing the provision of some goods and/or services include: -

* that it is cheaper and more cost efficient to obtain the relevant service externally, common examples include cleaning and maintenance services;
* that the agency or entity lacks the relevant expertise in-house, common examples include probity advice services, some forms of audit and advice services, legal advice and services;
* that existing internal resources cant cope and there is a need to deal with "overflow";
* ensuring that goods and or services are being obtained / provided at a for value for money price;
* meeting some emergency need;
* that the relevant goods and / or services are not available under some existing Government panel contract or pre-approved contractor list.

I have heard arguments for and against some public health services such as "pathology services" being outsourced to one service provider. In context of major health centres, I would think a consistency of attitude and service of pathology service providers is to the advantage of the patient. Others may have a different view.

This paper does not deal, in any great detail, with the mechanisms appropriate for procurement of particular goods or services.

With most of today's audience being lawyers, I will touch upon issues particularly relevant to the outsourcing of legal services because ever increasingly internal legal teams will be expected to outsource varying amounts of legal work.

Agencies of the Commonwealth must note the obligation (cl 7.7 of the Commonwealth Procurement Rules) to consider their procurement needs for the future and to the requirement for annual procurement plans to be prepared and published on its website.

Time constraints prevent any detailed examination of issues relating to infrastructure projects and or Information Technology Systems and services being considered today. They could easily each involve seminars of a whole day or more, but the underlying contract, process and probity issues remain much the same as those for the general contractual procurement of goods and services.

In Australia, Government Contracting is and always has been a specialised field. It has its own issues. In my view is becoming increasingly complex and field in which staff of government agencies, if not experienced in the field, should be very wary. Too often have I seen people involved in contract management who have never worked in a contracting related area,. This sometimes results in issues arising through a lack of experience, and very limited knowledge of the actual contract and the original terms agreed to.

Now, more than ever, those issues include the scrutiny to which public sector staff-involved in procurement are subject.

Government procurement and Government contracting ranges, of course, from buying everything from stationery for Government offices to procuring armed weapons, from public transport to water supplies.

Procurement reform has been in progress for some years and many steps have been taken in the last couple of years.

One of the most significant developments having implications for Public Sector staff is the devolution of responsibility for procurement which puts agency staff involved in that procurement more in the line of scrutiny for probity type reasons.

Accordingly, we are confronting a new regime in which staff in agencies, in the absence at a NSW level of the State Contracts Control Board (SCCB), are no longer shielded from allegations of a probity type in context of basic Government procurement.

This of course requires the Government to ensure that staff are properly trained in both what they are doing and why they are doing it.

From my observations, that training is often, too often, inadequate and/or inappropriately directed.

Since I initially became involved in Government contracting in the late 1980s, having advised NSW ICAC and been a member of its internal review committee, I can't tell you how many of the allegations made in respect of misfeasance or malfeasance in Government procurement and contracting flow from staff not having been properly trained.

They might be trained in process, but, all too often, not in the reasons.

In short, my attitude to Government contracting is that the people involved in negotiating contracts, especially in the Public Sector, are more likely to move on than in the private sector.

Therefore, there is a real need to have a clear paper trail, before and after grant of contract, as well as being clear up front. The contract, however formal or informal, has to address clearly WHAT, WHO, WHEN, WHERE AND WHY of procurement and contracting.

In my observations this is a significant issue that Contractors face within Government Procurement.

In a number of projects I have seen involving Government the government party's authorised representative changed multiple times through people leaving the Government agency, and each new representative, never completely understanding of the contract, let alone what was actually agreed upon during the initial negotiation stages and acceptance stages.

In my observations, operations under the new Government Procurement regimes do not seem, to me, to place adequate emphasis on this.

Contracts and drafting, particularly in a Government procurement context, are a dynamic area of legal and commercial issues. It is also, in my experience, one in which contract templates and processes must be seen as an exercise in continuous improvement and, unfortunately for the lawyers, constant frustration.

Indeed, in my view, the templates promulgated by the NSW Procurement Board might best be described as "works in progress", for a number of reasons, some of which I mention later in this presentation. Not the least of those reasons is that in mid May 2013 a new version of the standard standing offer contract was published by the NSW government, which is consistent with the government policy which expressly states that documents will be reviewed from time to time.

 

Current legislation on Procurement Contracts

2014 is a relatively important year, so far as concerns legislation relevant to procurement arrangements due to both New South Wales and Commonwealth of Australia legislative changes to the background legislation relevant to procurement.

The coming into force in the middle of 2014 of the Public Governance, Performance and Accountability Act 2013 (PSPA Act) will effectively bring all Commonwealth entities under one umbrella piece of legislation.

In New South Wales the background legislation previously contained in the Public Sector Management and Employment Act 2010 has, with the abolition of that act consequent upon the passing of the Government Sector Employment Act caused the procurement provisions to be re-enacted as part of the Public Works and Procurement Act 2014 and the regulations under that act called the Public Works and Procurement Regulation 2014.

Interestingly, when I was refining this paper in late February 2014, I noticed that whilst the Public Works and Procurement Regulation 2014 was clearly available publicly the Public Works and Procurement Act 2014 was not yet available until some days later. Unusually, even the dates of publication suggested the Act was posted after the Regulation.

I proceeded upon the basis that the Public Works and Procurement Act 2014 must have been proclaimed before the Regulation but I did not choose to spend significant time and effort tracking down when it was proclaimed. That should appear on the relevant websites in due course.

At both New South Wales and Commonwealth levels the legislative provisions would appear to be part of the ongoing reform of procurement, which commenced some years ago, and continues and continues and continues and continues.

Whilst I do not doubt the desirability of ongoing reform I do have to wonder whether the manner in which it is being done is, particularly at the State level, is conducive to both public sector consumers and private sector suppliers being made adequately familiar with the changes and their implications on a regular basis.

Needless to say today's paper is not going to deal in detail with each and every piece of legislation that Commonwealth and or State of New South Wales level dealing with procurement but only the major pieces of legislation.

I do not in this paper deal with specific entity legislation which may confer particular procurement empowerment provisions because, in my view, the manner in which both Commonwealth and State of New South Wales procurement arrangements are now subject to promulgated policy documents would appear to me to have an old effect. That is that, other than as background legislation. I suggest specific to agency empowering legislation would appear to be rendered significantly less important.

I have to say from a technical perspective I find that unusual that but that is how the world is presently working.

At both Commonwealth and New South Wales level the general legislation, in my view, only facilitates and/or empowers, with the more important practical implications and directives being dealt with in policy documents and practice directions.

Whilst in this paper I mentioned the facilitating and directive legislation relevant to procurement proper, not to be forgotten at Commonwealth and State of New South Wales levels is the plethora of legislation which can and does impact on operations under a contract. That includes law such as Freedom of Information and or Government Information Public Access, workplace, health and safety, privacy and others.

Privacy legislation, equal opportunity, workplace health and Safety and child protection legislation are also relevant across the board and can have particular significance in many procurement situations.

For example, in researching this paper I decided to look to determine the amount spent on Goods and services by Government. This, surprisingly, is not as easy as it used to be.

However, what I did find what this useful (not) piece from a government site on the Costs of Children http://www.aifs.gov.au/institute/pubs/costspm.html:    -

"examines the difficulties of estimating the direct costs of children, arguing that the cost of a child is not an objective fact but varies according to tastes and preferences, and the amount of money parents have to spend on their children."

Well, what a finding that is!

 

Some Problems in Practice

Apart from the background facilitating legislation I need to draw attention to some particular legislation which can have impact on a contract both in its formation and management stages.

 

Peekaboos -- "PCBUs"

Recent legislation, particularly that to do with Work Health and Safety Act 2011 Cwth [see particularly sections 20 to 26], now places obligations much more on the person or persons in a position to "control" a workplace or particular aspects of it.

In the context of procurement contracts involving contractors coming on to a government site, contractors going onto a third party site and/or government staff going onto a contractor site, real issues of control and responsibility can and do arise.

The historical option of having a broad brush indemnity, such as that contained in some template contracts, is, in my view, no longer adequate.

Indeed, given the common Government template's provisions allowing the relevant government agency to inspect premises of the supplier [and/or the reverse], I can imagine that in some circumstances inspection of those premises before grant of contract and from time to time, during the term of the contract, will need to be carried out.

The nature of obligations imposed on the person in a position to "control" a workplace under current legislation involves quasi-criminal liability.

There must be some real doubt as to whether the contractual indemnity will be adequately enforceable in respect of such liability let alone whether it is even worth considering, as an option to deal with the issue, purporting to "delegate responsibility" to a contractor.

 

Commonwealth

At the date of preparation and delivery of this paper the main Commonwealth legislation dealing with procurement comprises the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997, the Financial Management and Accountability Regulations 1997 and the Commonwealth Authorities and Companies Regulations 1997.

Additionally, there are the Finance Minister's Orders for Financial Reporting and the Finance Ministers' (CAC Act Procurement) Directions 200 and Finance Circulars.

All of which operate, necessarily, against the background of the Commonwealth Constitution, the Public Service Act 1999, the Commonwealth Crimes Act 1914, the Auditor-General Act 1997, annual appropriation Acts, competition policy is, reporting policies and various international treaty obligations which are beyond the purview of today's paper

However, both of the main pieces of legislation are to be replaced with effect from the middle of 2014, by the Public Governance, Performance and Accountability Act 2013 (PSPA Act) which consolidates the two pieces of legislation into one and moves from a strict compliance approach to a principles-based framework.

The PGPA Act is intended to effect "a cultural change in Commonwealth resource management from a compliance approach to financial management, to a principles-based framework. Commonwealth entities are encouraged to think differently about how they manage resources." The legislation involves four key principles, that:

* "Government should operate as a coherent whole;
* A uniform set of duties should apply to all resources handled by Commonwealth entities;
* Performance of the public sector is more than financial; and
* Engaging with risk is a necessary step in improving performance." To support the implementation of the PGPA Act:
* Rules and better practice guidance will be established to assist Commonwealth entities to manage resources; and
* All relevant Commonwealth legislation  will  be reviewed to identify necessary consequential amendments />, which will form the basis of a consequential amendments Bill to go to the Parliament.

PGPA Rules are being prepared. The PGPA Rules will specify financial management requirements for Commonwealth entities. They will deal with the issues previously dealt with under the Financial Management and Accountability Regulations 1997 and the Commonwealth Authorities and Companies regulations 1997.

The new PGPA Rules, consistently with the new legislation, are to better reflect a resource management cycle. That includes: -

* to undertake corporate planning;
* performance management reporting standards and annual performance statements to better emphasise improved reporting and evaluation of the operations of Commonwealth entities;

over time, an introduction of the idea of relative autonomy "under which Commonwealth entities will meet core obligations and additional requirements will be based on the level of performance and risk of an entity."

Training and guidance material to assist Commonwealth staff in implementation of the new financial regime are being prepared and will be provided to Commonwealth entities and their staff. At the time of preparation of this paper (January 2014) the website of the Department of Finance did not contain links to any such material but flagged them as "coming soon early 2014".

The public sector management reform process aims to modernise the financial framework of the Australian Government so that it will support high quality resource management and performance now, and into the future. Whilst no one can criticise that aim, time will tell how successfully the aim is satisfied by its implementation.

I extract the following from relevant Commonwealth websites: -

"The reform the financial framework commenced with the Commonwealth Financial Accountability Review (CFAR) in December 2010. During 2011-12, the Department of Finance and Deregulation released a series of issues papers to Commonwealth agencies to elicit discussion on financial management and performance. A Discussion Paper </about/discussion-paper/> was publicly released on 27 March 2012, which was accompanied by an extensive program of consultation. Feedback from stakeholders, including within government, with state and territory officials, the private sector and academia, was obtained and firmer propositions were put forward again in a Position Paper </about/position-paper/> on 23 November 2012.

On  16  May  2013  the  Public  Governance,  Performance  and  Accountability  Bill  2013  (PGPA  Bill)
</legislation-pgpa-act/>,
a Bill to consolidate Commonwealth financial framework legislation within a single Act, was introduced into the Parliament of Australia. Subsequently the Joint Committee of Public Accounts and Audit (JCPAA) conducted an inquiry into the PGPA Bill and tabled their report
http://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=jcpaa/accountability_bill/report.htm on 4 June 2013. The Public Governance, Performance and Accountability Act 2013 (PGPA Act) http://www.comlaw.gov.au/Series/C2013A00123 was passed by the Parliament on 28 June 2013 and received the Royal Assent on 29 June 2013."

Unfortunately at the time of preparation of this paper, the draft rules available had nothing to do with relating to procurement

Beneath the various pieces of primary and secondary legislation sit a number of policy documents dealing with the substance of procurement operations frameworks.

They comprise: -


Commonwealth Procurement Rules (which made under the FMA Act but will need to be renewed under the new legislation though at the time of preparation of this paper I was unable to find any such provision having been made);
Finance Procurement Policy Website Finance Circulars
General Commonwealth Procurement guidance documents.

At the time of preparation of this paper I can only assume that the pre-existing exemption for indigenous Business enterprises from division two of the Commonwealth Procurement Rules is to continue under the new public sector management regime of the Commonwealth - details of the exemption existing as at the date of my preparation of this paper are available on the internet at https://www.finance.gov.au/sites/default/files/Indigenous%20exemption.pdf

When refining this paper in late February and early March I note that the Commonwealth provisions consequent upon passing the new Commonwealth legislation are still somewhat in a state of flux as to regulations guidelines and proposals so far as concerns status of the Commonwealth Procurement Rules.
As I understand the general intent, the existing Commonwealth Procurement Rules will continue to apply but not as regulations under the new legislation. There was a reference in one of the policy papers to concern that making the regulations would render some of the provisions of the Commonwealth Procurement Rules subject to disallowance by Parliament.

It was put that some of the content of the Commonwealth Procurement Rules flowed from international treaty obligations and that Government did not want them put at risk of disallowance.

So the short point is, it is all a work in progress.

 

New South Wales

* Public Works and Procurement Act 1912 which replaces the Public Sector Employment and Management Act 2010 (PSME Act)   - mainly chapter 7
* Public Works and Procurement Regulation 2014 which replaces Public Sector Employment and Management Regulation 2009 Part 4A and Schedule 1 Competitive Neutrality
* Public Finance and Audit Act /Public Authorities (Financial Arrangements) Act
* Treasurers Directions (effectively having force under section 9 of the Public Finance and Audit Act)

Pursuant to the provisions of the PWP Act, the NSW Procurement Board was established. It replaces the previous State Contracts Control Board. Its functions have changed from being the main procurement agency to being more a overarching policy directive entity which has issued various policy documents and template documents.

The provisions of the Public Works and Procurement Regulation 2014 substantively continue by virtue of transitional provisions the policies and procedures set up by the pre-existing NSW Procurement Board (some of which are themselves a continuation of policies and all contracts put in place by the previous state contracts control board).

The main such document, drawn from the NSW Procurement Board website, is -

 

GOODS AND SERVICES - PROCUREMENT - POLICY FRAMEWORK - FOR NSW GOVERNMENT
AGENCIES Version 2 July 2013

There are many template documents relating to and ranging from needs analysis to terms and conditions, but this is not the time or place for consideration of them. As at 27 February 2014, that site made no reference to the new NSW legislation.

To a great extent, the situation remains, if there is a pre-approved provider or a panel or 'piggyback" contract, it can be used.

However, I have to say I don't find that site, particularly so far as concerns finding pre-approved or prequalified suppliers user friendly.

Comments to me from intending suppliers to Government and clients in Government are to much the same effect.

To me, it is a little strange that notwithstanding the passing of new legislation in New South Wales, as at the first week in March 2014, the NSW procurement website makes no reference to the legislative changes.
 

Due diligence ensuring compliance

Increasing at both Commonwealth and State of New South Wales level, agencies are obliged to report on their outsourcing arrangements and issues.

In the dim, dark days of last century, when I first became significantly involved in Government procurement, the system involved:

1. the SCCB organising contracts for the "public service", from which agencies could buy from at will;

2. agency officers could do direct purchasing for goods and services under a relatively small threshold, some without quotes (for small value), some a number of quotes (some oral, some in writing) again dependent upon the value of the contract ;

3. where quotes were required for goods above another threshold, the use of EOI or RFT for procurements of significant values unless there was an existing "period contract" relevant to particular goods or services which would be used by agencies.

The threshold concept remains under the document reforms, with obvious changes to the monetary limits in question.

The terms and conditions used by SCCB for general goods and services, when I first started acting for it, involved about four pages of close print which came to about 27 clauses.

It was good for me because, after advising on them for a short while, I could practically recite them, which was great for giving advice over the telephone in response to queries which came in from time to time (by which I mean time and time and time again).

I well remember guidelines relating to value of goods or services thresholds which determined whether a full tender, a number of quotes or straight purchase could be adopted. The new procurement policies update those thresholds.

The system applicable in the early 1990s involved a handful of policies to be borne in mind. They included New South Wales regional policy development, a reference for Australian textiles and the like.

Back then, when there was a dispute with a supplier about some aspect of the goods or services provided, one could normally negotiate a settlement arrangement, if for no other reason that most suppliers were disinclined to cut off the hand that fed them by forcing Government to terminate their appointment to whatever panel contract was in issue.

In the 21st century, contractors are more litigiously minded as well as being more minded to go to the media by way of complaint. The NSW Procurement reforms are, in part, to deal with that reality.

Intending contractors are also probably more inclined to make complaint to oversight authorities, such as the NSW Ombudsman and the Independent Commission Against Corruption of NSW.

Challenges to various tender processes, led to the Courts finding the "process contract', and obligations concerning confidential information.

More and more government policies became relevant to the evaluation of tenders so complicating the process and warranting the recent reforms.
 

The Now

As I understand it from various NSW Government Annual reports, in the year 2010/2011 the NSW Government spent an estimated $12.7 billion on goods and services.

SCCB contracts for goods and services accounted for about $3.8 billion of that expenditure in that year.

Under the new procurement policies, we have the NSW Procurement Board, replacing SCCB, but with more an overview policy role than actual contract creation, though it does have a role in propounding templates for use by public sector agencies.

Where the NSW government has "whole of government" contracts in place, agencies should make use of them. The list of the contracts is available on the NSW Procure Point website.

This presentation will not  address the  issues relating to monetary limits for thresholds for various procurement methodologies, as they are freely available on the NSW Procurement Board website and will, of course, change over time.

The current web link to access  relevant detail of  current NSW process and templates is: http://www.procurepoint.nsw.gov.au/policy/goods-and-services/goods-and-services-policies/using-nsw-government-contracts.

As mentioned above, the most significant changes are that substantive procurement procedure is now delegated back to the agencies themselves and the practicalities of procurement in regional areas has been recognised for agencies in those areas.

With the aggregation of various agencies into "clusters", it is envisaged that there will be some "piggybacking" arrangements under which other agencies in the broader NSW Government diaspora will be able to access contracts in particular goods and services categories which had their origins in creation for and by some major agency which has a much greater needs of particular goods or services in issue.

The concept under the new arrangements is that procuring agencies will make use of the most up-to-date template for the various procurement needs. That will involve developing this skill of being able to move between and select from the various templates well aware of their own needs and the requirements and content of each of the various templates offered. They include: -

1. Easy Registration template situations and awareness of the operation of the Approved List and the Plain English Contract and Dictionary for the Approved List;

2. the non-IT Standing Offer Agreement Template;

3. the customer contract order arrangements - particularly services;

4. tendering conditions in Statement of Requirements;

5. Agency Specific Terms - non-IT;

6. Request for Quote whether under State contract or not.

The delegation back to agencies of procurement task of course brings with it the obligation to maintain openness and transparency of process.

Not infrequently and particularly for large procurements government has long adopted the prudent practice of making use of probity auditors and/or probity advisors.

A little to my surprise, I have noticed an increasing propensity for both State and Federal agencies to make use of internal resources for probity advice/audit.

The very nature of probity advice/audit implies something of an external review of the particular processor subject of the advice/audit.

Whilst I can appreciate the cost savings of using internal resources for probity advice/audit, it does raise the real risk that some probity advice/audit might not be considered as sufficiently objective to satisfy the requirements of the market place.

Whether that role can or should be carried out by a department or agency legal team, to bolster the objectivity aspect, will, of course, depend on the availability of staff to do so.

I would have thought that another reason in favour of the use of lawyers for probity advice/audit is that, at least to some extent, much of their advice may well be privileged from disclosure. However, that will really depend on the detail of the operations of any internal legal team and the extent to which it can properly assert a degree of objectivity sufficient to attract legal professional privilege.

Outsourcing Services

For agencies which are in any way involved in outsourcing the provision of services historically provided by Government, not insignificant issues arise in context of the selection of the outsourcing contractors.

That includes not only the usual things to do with capacity, reputation experience, cost, responsiveness, reporting and the like.

The risk issues involved in that type of outsourcing would appear, to me, necessarily to include agencies having to have a slightly broader vision of a "chain of supply" of the relevant goods and services.

That includes consideration, as an exercise in risk management and determining the capacity of the intending contracted supplier, of how the contracted supplier itself supplies the staffing and goods and/or services required to provide the outsourced services.

It will also include how that contracted supplier stores personal information in respect of the end user. It is not simply a matter of technical compliance with relevant privacy legislation (whether general or the more specific medical privacy legislation) but also consideration of how and where that information is stored and government needing to be satisfied that the storage of that personal information is relevantly safe.

Issues can, of course, also arise in an FOI/GIPA context in that outsourcing situation.

Keeping up to Date

Needless to say, agencies which have not previously been much involved in the procurement process will have to think carefully about their systems for tracking contracts.

I have often, over the years, have had to advise agencies which, for one reason or another, had forgotten to replace contracts before they expired.

For lawyers at both State and Federal levels, increasing governance of procurement by regularly changing policies directives and the like is bound to involve a degree of frustration.

Keeping Procurement Under Control?

It seems trite to say that the ability of anyone to keep procurement under control very much depends on the size of the organisation in question and, more importantly, the resources being put into doing so.

Indeed, the very fact that smaller agencies are allowed to "piggyback" on the contracts of larger agencies somewhat complicates the issue.

I well appreciate that long-term unavailability of resources has led to a situation in which the current government moved to implement its policy of reform of the Procurement system.

Almost universally within Government, the internal legal teams of departments and agencies are under significant stress resource-wise and may often be unable adequately and properly to support their internal procurement teams as well as the NSW Procurement Reforms seem to envisage.

Legal teams will have to take great care clearly to identify their role so far as concerns procurement exercises undertaken by their employer department/agency. Responsibility to agencies (especially those which are comprised within a different legal entity) which "piggyback" on a main contract is problematic, at best.

One of the NSW Procurement Board templates talks in terms of the Government Principal being able to "novate" the contract to other government departments and agencies.

One can only hope that the use of the word "novate" was not intended to convey the meaning understood by lawyers which is clearly inappropriate to arrangements between government departments which are all themselves the one legal entity - the State of New South Wales.

Legal teams will have to clearly identify their role in the terms of engagement relating to the role so far as concerns procurement exercises undertaken by their employer department/agency.

That will include, I suggest:-

1. clear specification of minimum notification and turnaround times. The last thing needed by an overstretched internal legal team is a request from the Procurement  section of the department/agency giving 24 hours or less time to consider and advise on what will often involve very large contract documents with a considerable amount of support -explanation papers;

2. finding time to settle agency templates well before they are needed;

3. recommending apt process to deal with the Workplace safety issues mentioned above;

4. clear specification of the need to give consideration to the liability cap provisions in the standard documents;

5. acceptance, almost as due diligence exercise, but in light of new workplace safety legislation, that there is a need to consider all aspects of the location of the performance of the services as relevant to who is in control for the purposes of that legislation and "PCBU" issues rather than, as may historically have been the norm, simply to rely on broad-brush indemnities which do not now adequately deal with the situation;

6. consideration whether proper "milestones" and/or "performance criteria" have been identified and adequately provided for in the contract documents;

7. finding time to settle agency arrangements to apply where the particular agency is to be the lead agency in respect of which other agencies can "piggyback", consistently with the new Procurement Policy, when the "lead agency" may not be particularly familiar with the requirements of "piggybacking" smaller agencies; and

8. development of agency specific risk management profiles and how they link to the relevant provisions of the approved templates.

Risk Management: What Can the Lawyers Do?

The new NSW regime envisages the NSW Procurement Board having an overarching role in respect of terms and conditions but I doubt it has the resources properly to carry out such a role.

Even if Government consistently sets template provisions, the old problem which will arise will be as to the extent to which agencies, exercising the procurement function themselves, will properly and adequately appreciate the commercial, risk, probity in process and legal reasoning behind some of the terms and conditions set by the responsible (State or Federal) agencies..

In my observations, often the procurement section of agency, for one reason or another, seeks to operate independently of the Legal Services section of agency. Far be it from me to suggest that some procurement staff see lawyers as generally obstructive, though I have heard it said.

That may make it very difficult for Legal Services sections to have meaningful input into and/or maintenance of approved templates, but Legal Services sections will have to work closely with relevant procurement staff on lines of responsibility.

Too often have I seen, both in public sector and private sector, the benefits of good templates being wasted by people working, not from the base template but from a contract recently used by somebody they work with who said was a good one for that type of deal.

An earlier document may well have been very appropriate for the earlier deal, but if and to the extent that it departed, for one reason or another, from the provisions of the standard template, alas, too often, the reasons for doing so in the reasons for particular provisions will not be apparent. I doubt Procurement Sections will have resources adequate to compare the terms of the "recent" agreement with the template to allow staff to determine what has been removed or added and what the reasons were for doing so.

Hence, staff should work from the base template but, alas I fear they too often will not be able to do so. Those base templates will themselves need, from time to time updating and review.

Where a Procurement Section wants advice from the Legal Services section or some approval from Legal Services section, it is an absolute imperative that a proper timeframe be set in place to enable lawyers to give meaningful and useful advice.

Similarly and where at all possible, I would recommend that Legal Services sections of agencies become involved in the training of procurement staff and the settling (and long-term review from time to time) of relevant agency specific refinements to template precedents.

When I refer to training, I mean not simply the basics of the contract process that the probity and processor rules relevant to procurement in the public sector.

As mentioned earlier in the paper, an internal legal team may well be able to offer assistance in the context of probity advice/audit and, in doing so, provide aspects of the probity advice/audit with legal professional privilege.

Thank you
 

 

Greg Ross | Partner 

Eakin McCaffery Cox

Level 28, 1 Market Street Sydney  NSW  2000
PO Box Q1196 QVB  NSW  1230; DX  1069  Sydney

t: (02) 9265 3070      f: (02) 9261 5918
m: 0413 544 106     w: www.eakin.com.au

 

The views and comments expressed in this paper are those of the writer and not Eakin McCaffery Cox and are of general comment only. The comments are not to be taken as advice on any particular scenario or situation..

The writer acknowledges the assistance and or contribution of the following in the preparation of this paper:

Alexander Ware - Paralegal Eakin McCaffery Cox

 

 

 

 

 

 

Relief against forfeiture  

Once is enough.


 

 

In a recent case in the Supreme Court of NSW Justice Young granted relief against forfeiture in favour of a tenant who operated a nightclub in Kings Cross(Elevation (NSW) Pty Ltd v Uniting Church in Australia Property Trust (NSW) - [2014] NSWSC 331).

It wasn't the first time there were difficulties between the landlord and the tenant with the landlord previously re-entering the premises for non-payment of rent in 2013.  However, after that re-entry, a new lease agreement between the landlord and the tenant meant that the tenant could occupy the premises again. 

Problems arose under that new lease with the tenant not making payments on time.  The landlord re-entered the premises again in early 2014 and terminated the lease. The tenant commenced Court proceedings seeking relief against forfeiture and was successful.

The case has received some attention because of the comments made by Justice Young at the end of his judgment, namely, that because the tenant had now had 2 chances (by being let back into the premises twice), the tenant couldn't count on a third chance being given in the future.

What is relief against forfeiture?

Relief against forfeiture (as it applies to leases) is where the Court makes orders that enable a tenant to return and occupy premises that had been re-entered by a landlord (usually after the tenant fails to pay rent).

Relief does not depend on any mistake, or failure, to properly act on the part of the landlord.  In fact the landlord may act completely in accordance with the lease and the landlord's contractual and legal rights in re-entering the premises.

The principle is really based on a matter of fairness, or equity, where a tenant should have its right to occupy premises restored by the Court if the tenant can prove it would be unfair not to allow the tenant to return to the premises.  As part of asking the Court for that relief, the tenant will have to agree to put the landlord back in the same position it would have been in, if the breaches had not occurred.

How does it work?

Assuming a landlord has re-entered premises on a valid legal basis then the tenant may either:

 
  • accept that it has lost the right to occupy the premises under its lease; or 
 
 
  • the tenant can consider commencing legal action seeking relief against forfeiture - the tenant potentially has this option even where the tenant is in serious breach of the lease.
 

If the tenant does commence proceedings then the tenant will be faced with the task of convincing a Judge that it would be equitable, or fair, to let the tenant back into the premises despite the tenant's previous breaches of the lease. 

As mentioned above, assuming the landlord has validly re-entered, then, amongst other things, the tenant will need to satisfy the Court that it will remedy the breaches (including paying all outstanding rent) and will not be in breach again. 

The nature of the relief sought usually requires that any Court action be taken by the tenant quickly, as the landlord may be seeking new tenants, and any delay or new lease agreement with a new tenant may prevent the possibility of relief being granted.

How many times can a tenant get relief against forfeiture?

In the concluding paragraphs of the Elevation case Justice Young indicated that as the case concerned the second time the tenant was permitted to re-occupy after the landlord re-entered the premises, the Court would be unlikely to give relief if the landlord re-entered a third time.

It would be reading into the case too far to say that tenants should expect that they should be entitled to return to the premises twice after re-entry but not a third time.

The message conveyed in those comments were directed to the tenant in that case - to make it clear that the Court would have difficulty accepting that the tenant should be entitled to relief if there was a third default and re-entry.

Ultimately the discretionary nature of the relief means that a Court would consider, before granting relief, the likelihood of a tenant defaulting in the future.  There is no limit under legislation or caselaw on the number of times relief can be granted, but, a Court is very unlikely to continue to give relief to the same tenant against the same landlord on multiple occasions.  It is not a given that a Court will grant relief even on the first occasion of default and re-entry - it will be depend on the circumstances of the case.

The cost of proceedings like this; the requirement that the landlord be put back in the same position if the breach had not occurred; and, the lost potential income while the premises are not occupied; would usually mean that for defaulting tenants - once is enough.


Eakin McCaffery Cox Lawyers can help by advising and acting for you in all your property matters including negotiations and dispute resolution procedures on a cost effective basis. Please contact Eakin McCaffery Cox Lawyers on (02) 9265 3000 for advice and action on property matters including negotiation and dispute resolution, planning, Council and the Land & Environment Court matters.



This paper is a summary providing general information and should not be construed as specific legal advice.

 

 

Cantarella Bros Pty Limited v Modena Trading Pty Limited [2014] HCA 48 (3 December 2014) 

The 3 December 2014, decision of the High Court of Australia in  CANTARELLA BROS PTY LIMITED v MODENA TRADING PTY LIMITED  [2014] HCA 48 may raise interesting implications for trademarks involving words borrowed from other languages, particularly where those words relate to issues of quality.

In the case, Cantarella, an importer of coffee to Australia from Italy, had trademarks registered in Australia in 2000 using “ORO” and ”CINQUE STELLE “ ( “gold “ and “five star” in English).

A competitor, Modena, started using the words.

Cantarella sued Modena for breach of trademark. Modena counterclaimed, in effect, seeking an order that the marks were not properly registered as not being relevantly distinguishing of the goods, but merely relating to quality. Cantarella won in the Federal Court, Modena appealed and won in the Full Court of the Federal Court.

Cantarella appealed to the High Court of Australia which, by majority, held that  in deciding whether a trademark comprising words, whether English or foreign, is "inherently adapted to distinguish", the Court has to consider the ordinary meaning of the word or words to Australian people concerned with the type of goods to which the mark is to attach.

A bit to my surprise in respect of “ORO”, the Court found that, at the time of the registration “ORO"  and ”CINQUE STELLE“, those words did not convey meaning sufficiently strongly to Australian people concerned with coffee as to be seen as words having simple reference to the character or quality of the goods.

The Court therefore held that the words inherently distinguished the goods from other goods in the marketplace to justify registration of the trade marks.

Full text of the case is available through at http://www.austlii.edu.au/au/cases/cth/HCA/2014/48.html

Given the frequency with which marketing organisations have for some time been freely borrowing words and symbols from other languages and that the relevant provisions of the legislation in Australia were refined by the Australian Intellectual Property Laws (Raising the Bar) Act 2012, I have to wonder whether the lawyers and trademark authorities in Australia are not going to have more difficulty with this type of issue.

This is particularly so, given that the Note to sections 41 (3) and (4) of the Australian Trade Marks Act 1995 provides that required distinguishing features are not satisfied by "trademarks that consist wholly of a sign that is ordinarily used to indicate:

(a) the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, all goods or services; or

(b) the time of production of goods or the rendering of services"

In a sense, do not the words ‘that consist wholly of a sign that is ordinarily used’ leave too much room to argue?

EAKIN McCAFFERY COX

                                                                                  

Gregory Ross
Partner
EAKIN McCAFFERY COX

 

 

 

Cantarella Bros Pty Limited v Modena Trading Pty Limited [2014] HCA 48 (3 December 2014) 

The 3 December 2014, decision of the High Court of Australia in  CANTARELLA BROS PTY LIMITED v MODENA TRADING PTY LIMITED  [2014] HCA 48 may raise interesting implications for trademarks involving words borrowed from other languages, particularly where those words relate to issues of quality.

In the case, Cantarella, an importer of coffee to Australia from Italy, had trademarks registered in Australia in 2000 using “ORO” and ”CINQUE STELLE “ ( “gold “ and “five star” in English).

A competitor, Modena, started using the words.

Cantarella sued Modena for breach of trademark. Modena counterclaimed, in effect, seeking an order that the marks were not properly registered as not being relevantly distinguishing of the goods, but merely relating to quality. Cantarella won in the Federal Court, Modena appealed and won in the Full Court of the Federal Court.

Cantarella appealed to the High Court of Australia which, by majority, held that  in deciding whether a trademark comprising words, whether English or foreign, is "inherently adapted to distinguish", the Court has to consider the ordinary meaning of the word or words to Australian people concerned with the type of goods to which the mark is to attach.

A bit to my surprise in respect of “ORO”, the Court found that, at the time of the registration “ORO"  and ”CINQUE STELLE“, those words did not convey meaning sufficiently strongly to Australian people concerned with coffee as to be seen as words having simple reference to the character or quality of the goods.

The Court therefore held that the words inherently distinguished the goods from other goods in the marketplace to justify registration of the trade marks.

Full text of the case is available through at http://www.austlii.edu.au/au/cases/cth/HCA/2014/48.html

Given the frequency with which marketing organisations have for some time been freely borrowing words and symbols from other languages and that the relevant provisions of the legislation in Australia were refined by the Australian Intellectual Property Laws (Raising the Bar) Act 2012, I have to wonder whether the lawyers and trademark authorities in Australia are not going to have more difficulty with this type of issue.

This is particularly so, given that the Note to sections 41 (3) and (4) of the Australian Trade Marks Act 1995 provides that required distinguishing features are not satisfied by "trademarks that consist wholly of a sign that is ordinarily used to indicate:

(a) the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, all goods or services; or

(b) the time of production of goods or the rendering of services"

In a sense, do not the words ‘that consist wholly of a sign that is ordinarily used’ leave too much room to argue?

EAKIN McCAFFERY COX

                                                                                  

Gregory Ross
Partner
EAKIN McCAFFERY COX

 

 

 

 
Mobility of the Legal Profession
Qualification and Practice in Multiple Jurisdictions
 
 
 
 
The Mobility of the legal profession?
 
The legal profession is, by definition, fairly conservative. So:-
 
What do we mean by "mobility of the legal profession"?
 
Whilst the main part of this topic is seen as relating to jurisdictional transfers of ability to practice and the ability to practice in more than one jurisdiction, there are a number of other types of "mobility" which I should not ignore but mention briefly, as relevant, possibly even more relevant to day to day practitioner operations.
 
They include: –
 
1.     transfer from the "private profession" to the "public sector";
2.     transfer from the "advocacy" to "solicitor" branch of the profession;
3.     transfer from "firm" practice to in-house corporate practice;
4.     transfer from "employee" to "principal" status; and
5.     transfer from practitioner to (and sometimes from) "judicial" status;
6.     transition from one level in the professional hierarchy to another.
 
Obviously these six examples do not attract as much attention as jurisdictional transfers or multiple jurisdiction practice but they raise not insignificant issues, some of which also resonate in consideration of issues relating to jurisdictional transfers and multiple jurisdiction practice.
 
In the ancient history of the last millennium, when I started practice in New South Wales, a graduate lawyer in New South Wales intending to become a Solicitor would do Articles of Clerkship or the practical training course at the College of Law (or equivalent). Thereafter, a graduate would commonly work with private firms or the public service. If you might have gone to the Bar, though usually only after a period of Solicitor practice in which they built up connections from which they hoped to be briefed.
 
At that time, working "in house" as a "corporate lawyer" was not that common for junior lawyers.
 
In those dim dark ages, an initially admitted NSW solicitor would have a "conditional" practising certificate which would need to be upgraded to a "full" practising certificate as if and when that person became a principal of law firm or the principal of corporate or government employer (in which case having a "full" Practising Certificate was, effectively, necessary to allow one to be the solicitor on record in any court proceedings, except to the extent that State all relevant Federal legislation relating to their employment exempted them from the requirement to hold a practising certificate).
 
There is, also mobility in the context of moving from a private profession to the public sector and vice versa though that is not the primary subject in my preparation of this paper. I, myself, have done that a couple of times. However it is an issue in New South Wales where there is an unfortunate perception amongst some that public sector lawyers are somehow inferior to private sector lawyers. Having been both a private sector lawyer and a public sector lawyer, I can only say that the perception is too stereotypical.
 
Unfortunately, it is one which the Australian National Profession Legal Reform proposals of 2010 in place at the time of writing the 2011 version of this paper might be seen as reinforcing, if the proposals are implemented in their then current form. However, those proposals were the subject of further review and whilst now the "national" profession only applies to 2 states (NSW and Victoria), the worst aspects of the definitions concerning public sector lawyers have been somewhat ameliorated.
 
 
Anecdotally and in my perception, that inadvertently led to some "class" distinction between Public Sector lawyers, in-house counsel and their private practice equivalents.
 
Historically, at least in the jurisdictions with which I have had most experience, the above six categories of legal practice mobility might be seen as vertical and to a lesser extent horizontal as well as geographically peripatetic
 
However, with greater ease of air travel and the development of current technology methods, some of which almost make the actual location of a practising lawyer all but irrelevant, it is inter-jurisdictional legal profession mobility and/or multiple jurisdiction practice that attracts most attention. Notwithstanding that I am a great user of electric and technological toys to assist in practice, I do not see technological advances and tools is really dealing with the issue inherent in the concept of mobility of the legal profession.
 
Plus ca change plus sa meme chose ??
 
Whilst we in the legal profession within the Commonwealth of Nations in 2015 celebrating the 800th anniversary of Magna Carta, by our sharing of a "common law tradition", might be said to have a slightly different and more flexible perspective on the point, most legal systems, in my opinion, have relevant local origins to which there is a very strong nexus which should not be too lightly ignored in facilitating multi-jurisdictional practice.
 
Even within particular Commonwealth countries it is common for the Legal Profession to be locally based. Obvious examples include the provinces of Canada and the States of India, Australia, and Nigeria, representatives of three of which are on the panel today.
 
There is, in my view, an unavoidable nexus between the practising lawyer and the place in which legal services provided are to be effective and effected.
 
Legal services are, in my understanding, more an art than a science. Legal Services do not operate in isolation but in context of the cultural milieu of the situation at hand.
 
This cultural nexus makes it difficult, if not impossible, for the very high degree of legal profession mobility propounded by some "Free Trade" advocates to be too freely permitted, especially if proper regard to the societal and cultural needs of the society to be served by the legal practitioner is to be a relevant criterion.
 
The United Kingdom, of course, has somewhat different legal systems for Scotland and England and has only in recent years even devolved Parliamentary responsibility, within certain bands, to Scotland and Wales. I am sure all present today from outside the United Kingdom watched with interest last year's referendum on the mooted secession of Scotland from the United Kingdom..
 
As a resident of a Federation, and I acknowledge that I have Scottish ancestors, I have to say I was intrigued by the debate leading to the Scottish secession referendum and I note the result of that appears to be leading to further devolution of powers to Scotland, the details of which will become known in time.
 
In discussing mobility of the legal profession, we should consider whether and to what extent the local/regional nature of legal practice, and particularly some types of legal practice has been a cause or an effect of the relative perception of lack of mobility of the Legal Profession.
 
 
In schedule B to this paper, I set out links to a number of articles which deal with a range of issues relevant to the mobility or immobility of lawyers, though they are not the issues I address in the paper.
 
No doubt increases and simplification of travel, international trade, communication and computer research over the last 30 years have contributed to the increased drive for mobility of the profession, but they are not the answer.
 
However, does that increased ability to deliver services to and from particular places almost instantaneously really support, of itself, increased or improved ability to serving the needs of society as well as it should?
 
In considering this topic, I bring to it my many years of considering applications for waiver of Academic and/or Practical Experience requirements and Practising Certificate applications in New South Wales. This experience necessarily influenced my thinking on this increasingly important topic. I also bring to this topic my experience of working with lawyers from a number of countries on Australian projects and or issues in their countries.
 
Many of my comments and queries reflect practical concerns and issues to do with mobility as well as whether the needs of legal services consumers are properly considered.
 
I have to wonder whether the idea of having a mobile Legal Profession itself involves some change in the nature of what practising the law is about, such that it would become something more akin to a trade than what has historically been considered a “profession”?
 
From time to time, I see references to "legal services" being propounded as something the mobility of which should be facilitated under Free Trade agreements and the like.
 
I hope I'm not being a legal dinosaur by expressing the view but I have real doubts whether too free a liberalisation of legal services is not only inconsistent with the nature of the practice of the law being a "profession" but also something of "dumbing down" of lawyers and what professional legal practice is, whether driven by commoditisation of "legal services" or otherwise and whether that will properly serve the legal services needs of legal services consumers across the many jurisdictions in which we practice..
 
If we adopt the view that the phrase or words "legal profession" is something more than "a job", does too free a "mobility of the legal profession" involve the possibility of great problems for the average legal services consumer? I believe that to be a real potential risk.
 
To believe otherwise seems in my view to smack of the idea that admission to practice is some inalienable right, rather than a privilege conferred by a society, through its admission authorities. It also, in my opinion, fails to recognise that the proper provision of legal services is very much dependent upon the particular practitioner being adequately familiar with the social melieu in which the relevant legal services are to be provided
 
I offer the following brief examination of the more recent changes to the concept of mobility of the profession in an Australian context as well as some comments, observations and suggestions of mine, which have been formed in the many years I have been involved in the administration of admission requirements in New South Wales.
 
Trite though it may sound, jurisdictions rightly and necessarily must have academic and practical experience requirements tailored to their own situation and needs.
 
No two jurisdictions are, in my view exactly alike.
 
 
Accordingly, I find it hard to see how the idea of a fully mobile [if not itinerant] legal professional can be supported so as best to serve the needs of the societies in which legal practitioners operate by the totally mobile legal professional envisaged by some.
 
Lawyers and Forms
 
One aspect of the sundry applications for admission that I see and find both amusing and concerning is that to do with the frequency with which applicants fail properly to complete an application or “copy” verbatim the application of another.
 
The New South Wales Legal Profession Admission Board application forms (links to the current versions of which appear in schedule A to this paper) request applicants to address the relevant criteria by providing evidence, in documentary form, clearly demonstrating compliance with the various admission requirements.
 
When I started practice, if you failed to complete forms correctly, particularly Court forms, they were summarily rejected at the Court registry (or worse, if the relevant form actually found its way before a judge).
 
I do not understand why applicants seeking to be admitted as lawyers should not be treated the same way.
 
Do not intending applicants, who are sloppy in completing the forms, not demonstrate an inadequate attitude with the privilege of “profession” aspect having reduced in importance?
 
We had one example, a husband and wife, whose applications were word for word the same, other than their names. When queried, the response was to the effect that the error was that of the ‘secretary’, not the two lawyers seeking admission in Australia. More recently I have observed applications from one or more people within the same large firm which are similarly "common", perhaps an example of "if the template works use it".
 
The Slow March to Mobility
 
Canada and Australia have shared what I see as a slow and cautious approach to the implementation of mobility across province and state borders.
 
Canada, of course, has Quebec province where the local law is French based civil law rather than common law based.
 
But now, by virtue of three agreements; --
 
the National Mobility Agreement;
 
the Territorial Mobility Agreement; and the Quebec Mobility Agreement
 
Canadian lawyers of one province can generally practice in another with relative ease.
 
That Quebec was a civil law jurisdiction warranted different thinking in respect of the implementation of mobility than was applicable in the "common law" provinces of Canada.
 
Whilst I obviously leave detailed exposition of the Canadian legal practitioner mobility issues to Canadian lawyers, such as Tom Conway, as I understand the Canadian arrangements, practitioners can have temporary or permanent mobility under the three agreements but they have to liaise with the relevant Law Society of the province or territory in question. In respect of temporary mobility, lawyers can practice in a jurisdiction which is a party to the National Mobility agreement where that jurisdiction has implemented the agreement, provided the lawyer has prescribed insurances and there are no relevant
 
 
criminal or disciplinary proceedings or the like in place in respect of the relevant lawyer. Under temporary arrangements they can practice up to a hundred days but if they establish what is referred to as an "economic nexus" within a jurisdiction the lawyer in question must apply to transfer to the jurisdiction on a permanent basis.
 
The permanent mobility arrangements allow lawyers to practice in participating jurisdictions that have implemented the National Mobility Agreement provided they are of good character they may transfer without transfer examinations but must certify they have reviewed and understood specified in prescribed reading materials for the jurisdiction to which they wish to transfer.
 
Whilst I obviously leave detailed exposition of the Canadian legal practitioner mobility issues to Canadian lawyers, such as Tom Conway, as I understand the Canadian arrangements,
 
Brief History of Australian Situation
 
The Commonwealth of Australia is a federation comprised of six states and two territories1. The six States all have their origin as colonies of the United Kingdom. Each State existed and had its own court system prior to the inauguration of the Commonwealth of Australia in 1901.
 
The Commonwealth of Australia Act left the States and State Court systems in place, provided for the setting up of the High Court of Australia, vested various matters including bankruptcy jurisdiction in the Commonwealth of Australia [which led to the Federal Bankruptcy Court which became part of the Federal Court of Australia when that Court was created in the late 20th century].
 
When the two internal territories, the Northern Territory and the Australian Capital Territory, were set up they were given the Court system which was part of the Australian Federal structure.
 
Conceptually, admission to a State Supreme Court did not automatically entitle a lawyer to appear or practice in another State Court or Federal Court without further application.
 
A lawyer admitted in a State Court really only needed to file applications to be entitled to appear in a High and/or Federal Court but interstate practice within the Federation of the Commonwealth of Australia raised more significant issues because they involved also having to be admitted to the State Courts of the country, as well as the States having different insurance and other requirements for legal practice.
 
There was a time when at least one State had provisions under which its legal practitioners were protected from competition by interstate practitioners by requiring residence within the State as a condition of admission. That position was eliminated in 19892 when the High Court of Australia found such provisions inconsistent with a provision of the Australian Constitution.
 
As such, those in an Australian context have historically had a state-based admission. An ability to practice elsewhere within Australia could be problematic.
 
 

1 There are also a couple of external territories, one example being Norfolk Island (NI) which has had an unusual history and  one in which its law is, in part, based on English common law dating from about 1828 as an adjunct of the British colonisation of Australia. The NI law is the English law of 1828, as amended by its own legislation and those Acts of the Australian Parliament which are specifically expressed to extend to Norfolk Island, and the common law.  Query whether it is the common law of England as at 1828 or the common law, as it has developed over the years.
 
2 Street v Queensland Bar Association [1989] HCA 53; (1989) 168 CLR 461.
 
 
Reflective of these arrangements, the development of National Law firms was slow but it did occur. National Law firms necessarily had to have their administrative arrangements in each State comply with the local law.
 
Reciprocity of admission arrangements was effectively introduced in Australian Commonwealth legislation, such as the Mutual Recognition Act 1992 (Cth) which was adopted by the States and Territories. This was supplemented by Australia/New Zealand mutual recognition effected by the Trans-Tasman Mutual Recognition Act 1997 (Cth).
 
In most States and Territories of Australia, New Zealand practitioners are not considered foreign lawyers [except when they talk about Rugby or Cricket], but they must register under the Trans-Tasman Mutual Recognition Scheme.
 
For a number of legal commercial and insurance-based reasons, members of the Australian legal profession have for 20 or more years been seeking to create an Australia wide legal profession.
 
In early 2010, the  Council of Australian  governments (COAG)  published, for  consideration  and  feedback,  proposals including draft legislation related to a national legal profession for Australia. They included provision for a type of conditional admission of “foreign“ lawyers in Australia practising “foreign” law.
 
Many, many submissions were received by Government by the time for closing of submissions in August 2010, just prior to a Federal election. Progress was very slow. There were many submissions as to revision. In the end, the Australian "National Profession" which is presently scheduled to start at the end of this year only includes Victoria and New South Wales.
 
At the time of writing this paper, the New South Wales requirements for legal profession and admission flow from the new National Profession legislation, Legal Profession Act of New South Wales, the Legal Profession Regulations of New South Wales and the Uniform Principles created by LACC 3 [the link to which appears in schedule A]. Other than the reference to the National profession legislation, roughly corresponding provisions apply in the other Australian jurisdictions.
 
The LACC principles were effectively, in my view, an exercise in the long and slow development of uniform admission requirements.
 
Their negotiation has been long and hard and at the time of writing this paper, it is not yet over.
 
They deal with both internal and external applications, as do the draft National Profession arrangements.
 
On a practical /procedural level, I find it surprising how often lawyers, whether with 0, 10, 15 or 20 and more years of experience, see it as ‘satisfactory’ to complete the application forms used in New South Wales for their applications for admission to the New South Wales Courts with words to the effect that "see my attached curriculum vitae".
 
They then attach often 50 or more pages of their professional life history. The information does not directly satisfy, let alone demonstrate, the matters sought by the NSW application forms. Applicants expect those administering the applications (often judges, academics and senior practitioners from both the Solicitor branch of the profession and the NSW Bar who provide their time on a voluntary basis) to wade through the many pages with a view to being expected to elicit information relevant to the admission requirements to be satisfied so as to permit admission to a Court.
 
Some seek admission in Australia intending to migrate and some tangentially to their practice in some other jurisdiction or jurisdictions in which they live and work
 
 

3 Law Admissions Consultative Committee
 
 
It would seem, to me, to be a most unusual and, in my view, unacceptable development to allow aspiring admittees to be able to make an application for admission to a Court, which would be accepted and then acted upon without the relevant admittees completing the form correctly.
 
What does that say of the applicant’s ability as a practitioner and attitude to the Law , the Courts and clients? What does it say of the applicants’ attitude to the society and culture of the intending place of admission and practice.
 
One can only wonder how an individual, who cannot complete the application form correctly, can be expected properly to serve the needs of a client by expressing the clients’ needs in documentation whether contractual, litigation related or otherwise.
 
That attitude seems disrespectful to the Courts and to have little or no regard to “clients”.
 
Ubiquitous Insurance issues
 
Needless to say, lawyers seeking to practice in more than one jurisdiction will have to pay attention to insurance cover, whether one policy can cover practice in more than one jurisdiction or whether a number of policies are needed.
 
NSW Admission Statistics for the Last Four Years:
 
The following table sets out the number of applications received by the NSW Legal Profession Admission Board in the last few years4.
 
2007
 
Form 10   1838
Form 11   146
Total         1985
2008
 
Form 10   1851
Form 11   154
Total         2005
2009
 
Form 10    1721
Form 11    117
Total          1838
2010
 
Form 10    1709
Form 11    121
Total          1830
2011
 
Form 10   1,710
Form 11   83
Total         1,793
 
2012
 
Form 10   1,949
Form 11   97
Form 12   1 (re-admission)
Total         2,047
2013 (to date)
 
Form 10  2,043
Form 11  88
Total        2,131
2014 (to date*)
 
Form 10   1,444
Form 11   68
Total         1,512

 


4 Form 10 – Local   Form 11 -- Previously admitted overseas  the new 2014/15 form will have to be checked and attached
 
 
From my observations over the years the number of applications vary almost cyclically, not surprisingly somewhat reflective of the ebb and flow of economic circumstances and sometimes political circumstances in various countries.
 
Long, long ago [some time last millennium], when I was a junior lawyer we were trained in the completion of relevant forms required by the Courts, particularly Bankruptcy courts, as it then was. If each and all the details required by the form was not correctly set out it could not be filed with the court, let alone considered by the Court.
 
Personally, I do not see the right to admission to practice in any jurisdiction as simply being an exercise in academic study with a bit of practical legal experience. It is a privilege carrying with it particular responsibilities to the Courts, the Law and clients.
 
It seems trite to say but, a good practitioner must have an understanding of the cultural norms of the jurisdiction or jurisdictions and clients in which he or she seeks to practice and be adequately fluent in the language(s) of the society and Courts in which she or he is to practise. Some Commonwealth countries deal with that issue better than others. Unfortunately I do not consider my own jurisdiction to be one that deals with that issue well. Too often have I had senior practitioners and even the occasional judge complain to me that some lawyer was appearing in Court who could not properly express themselves, let alone properly express the needs and wants of their client,
 
Multi-Jurisdictional Practice and Insurance
 
From my discussions with a representative of LawCover NSW [the organisation which looks after the compulsory level professional negligence insurance in respect of New South Wales practising Solicitors], that there is another aspect of practising in multiple jurisdictions (or even within one jurisdiction but with categories of client of the relevant society whose mother tongue is other than the language of the Courts of the relevant jurisdiction) which is of concern.
 
In New South Wales, it has been found that a significant number of negligence claims have been made against practitioners where, once examined, it has been found that the lack of facility with English by the Solicitor, whose main client base are persons of particular cultural/linguistic background, contributed to the circumstances leading to the claim.
 
My firm recently had the experience of acting in workplace relations matter for some Chinese clients. Their employer, the defendant in the proceedings, was also Chinese. The Court proceedings were before English-speaking judge and facilitated by the use of the translator appointed by the Court.
 
Thankfully the young lawyer from our office, of Chinese Vietnamese background, understood sufficient Cantonese to suspect that the translator was not simply translating but conversing with the employer witness as to how best to say certain things. She was able to doublecheck that with our client and make an appropriate submission to the Court in respect of the translators conduct
 
In Australia, whilst the society seeks to be "multicultural", the relevant cultural milieu against which and under which the Law operates is that of an English speaking Judaeo-Christian, but secular, society.
 
I do not seek to deal with the issue of how solicitors perceived by the statutory insurer as not having adequate facility with the English-language can have been admitted in New South Wales, other than to note that the new National Profession proposals for participating states of Australia envisage an English language proficiency being demonstrated prior to admission to practice.
 
 
Even within Australia one can often find that English is used slightly differently amongst the different States. Similarly, various local societal norms vary in a way which can impact on the law its operation and implementation. An ability of the profession will necessarily require a greater recognition of this phenomenon.
 
Unfortunately, the experience of our Lawcover insurer is that, in a number of instances, the lack of facility in use of English, which bases the vast bulk of legal issues in New South Wales and Australia, has been a real cause of or contributor to the alleged negligence of some relevant solicitors.
 
Similarly, the lack of English language skills by some Solicitors against whom certain negligence claims have been made has itself been such as to hinder the proper defence of those Solicitors by Lawcover.
 
That has potential to increase premiums for professional negligence cover and, consequentially, fees charged to clients.
 
Also relevant to the issue of a mobile practitioner is that, at least in my main jurisdiction (New South Wales), the required skill set of a Solicitor and the skills that of a Barrister, are different.
 
Some years ago, this difference of skills led to an interesting incident in respect of one English Barrister who sought admission in New South Wales.
 
The application was being considered by one of the relevant committees.
 
The application was being considered by reference to the set NSW criteria. A number of members of the committee found difficulty with whether the Barrister had satisfied some particular New South Wales Solicitor requirements by reference to the Barrister’s practice in Britain. The majority of members of the committee were concerned that one or two aspects of the New South Wales Solicitor requirements could not be seen as satisfied.
 
One member of the committee argued, simply, that because the Barrister had been admitted in Britain and been in practice for some years, the applicant would automatically receive all relevant skills and there was no need for the New South Wales requirements to be considered.
 
That was challenged by members of the committee.
 
That maybe a bit sad, but it does reflect the proper seriousness with which members of the relevant committee approach the task before them.
 
An aspect of Australia's move to a National Legal Profession includes a degree of standardisation of legal studies at universities and other institutions which provide relevant academic courses.
 
Similarly there are proposals for uniformity of key of competency standards in a practical legal training sense. That uniformity requirement is one which may not be facilitated by too free use of the idea of mobility of the profession.
 
This is not to suggest all law degrees in Australia will be the same but that minimum agreed topics will be required.
 
That resonates in the context of multi jurisdictional practice and I know a number of Universities are now offering courses structured to satisfy admission requirements in a number of jurisdictions, including some other Commonwealth countries. Law students will have to be increasingly careful to ensure that any law course they undertake is one which, academically, covers all the required fields of the admission authorities from time to time
 
In early 2010 the Australian Federal Government established Tertiary Education Quality and Standards Agency (TEQSA) which, is to evaluate performance of Universities against standard criteria.
 
 
These criteria include the ‘academic standards’ that govern relevant disciplines (professional bodies, employers, regulators, academics and students) nationally agree represent the core ‘Threshold Learning Outcomes’(TLOs) for graduates, whatever their institution of study.
 
In Law, the most attention is on Bachelor of Laws (LLB) courses and the Academic Standards Statement developed is to represent the minimum that an LLB graduate is expected to know, understand and be able to do as a result of their learning.
 
In 2010 A report was delivered by the Australian Learning and Teaching Council to the relevant Australian Government Department (being the Department of Education, Employment and Workplace Relations).  S LLB Standards developed after an extensive consultation process with the assistance of the judiciary, academics, regulators, professional bodies, practitioners and students.
 
The Expert Advisory and Discipline Reference Groups established to oversight the project include representatives from:
 
◇     the Judiciary;
 
◇     the Law Council of Australia;
 
◇     the Law Admissions Consultative Committee (LACC);
 
◇     the Council of Australian Law Deans (CALD);
 
◇     the COAG Standing Committee on Legal Practice and Relations with the Legal Profession;
 
◇     the Australian Young Lawyers Committee; and
 
◇     the Australasian Professional Legal Education Council (APLEC).
 
The Academic Standards Statement for the LLB contains six TLOs dealing with:
 
◇     knowledge;
 
◇     ethics and professionalism;
 
◇     thinking skills;
 
◇     research skills;
 
◇     communication and collaboration; and
 
◇     self management.
 
The TLOs are intended to be clear, achievable and have legitimacy. They make it possible for Law Schools to meet concurrent requirements of the Australian Government, the professional Admitting Authorities, CALD’s proposed Law Schools Standards Committee, and individual universities.
 
They have also drawn on relevant developments in parallel processes in the United Kingdom (Quality Assurance Agency Benchmark Statements), Europe (Tuning), Latin America (Tuning) and the standards developed by the American Bar Association.
 
 
The Horse and Cart
 
In a sense, I sometimes wonder whether or not, by increasing the concept of mobility of the profession, we are putting the horse before the cart or the horse before the cart.
 
In that sense, the question is really whether are we serving or ignoring the proper needs of the legal services consumer?
 
Whilst the concept of mobility of the legal profession no doubt had its origins long ago, partly in the context of migration and partly in the context of now outdated colonial concepts of lawyers from the "home country" or "mother country" having some automatic right of appearance before Courts in any jurisdiction, we have all moved past that.
 
Globalisation of trade and industry, developing technology and communication as well as ease of travel seem to drive the move to inter-jurisdictional transfers of ability to practice and the ability to practice e in more than one jurisdiction.
 
However, technology is only a tool.
 
It must be used to improve the Legal Profession’s ability to service the needs of legal services consumers.
 
In my view, except in particular circumstances to so warrant, technology should not be allowed to lower professional service standard, nor allow “admission” to practice independent of an intending lawyer’s reasonably acceptable academic qualifications and familiarity with the main language and culture of the jurisdiction(s) in which she or he intends to practice.
 
 
 
 
 
 
 

                          

Gregory Ross

Partner

EAKIN McCAFFERY COX
 

 

 

 

 

Changes to the Home Building Act 1989 (NSW)

 

The changes to the Home Building Act 1989 (NSW) (the Act), came into force on 15 January 2015, with further amendments coming into force on 1 March 2015. The amendments set out 5 key changes to the Act which is detailed below.

Defect Classification:

The classification of a defect dictates the time period in which the defect must be brought to the attention of the contractor. The amendments replace the definition “structural defect” with “major defect.”The warranty period for both a “major defect” and “structural defect” is 6 years.

“Major defect” is now defined as any flaw that makes the building uninhabitable or likely to collapse.

 In its effect, the new definition sets a higher standard to establish a major defect. Some defects classified under the old “structural defect” definition may not reach the requisite threshold of a “major defect” and therefore, they will be re-classified as a “minor defect” which only allows a two year warranty period instead of a 6 year warranty period.

This means that owner builders will have less time to bring a claim against a contractor/builder for many defects that have been reclassified under the amendments.

Duties of the Beneficiary of a statutory warranty:

New imposed duties now fall on the beneficiary of a warranty period to:

  •  Mitigate their loss in respect of a breach of warranty of defect;
  •  Make reasonable efforts to notify the builder and or developer of a defect within 6 months of the breach becoming apparent; and
  •  Allow the builder/ developer reasonable access to the property so they may rectify the breach.

Owner builders must take positive steps to mitigate their loss and allow reasonable access to rectify the defect. Failure to do so may provide a reason for the court to reject a claim for any defective work done to the development.

Diligent Pursuit:

An Owner Corporation (being the beneficiary of the warranty period) has the right to make a claim under home warranty insurance outside the warranty period if:

  • The relevant insurance contract was entered into on or after 1 July 2002;
  • The builder had not died, disappeared or become insolvent within the warranty period;
  • The Owners Corporation has properly notified the builder of the breach, within the warranty period;
  • The Owners Corporation diligently pursued enforcement of the statutory warranties; and
  • A claim in respect of the loss is made to the insurer within 10 years after the work insured was completed.

Therefore, provided that the owner builder has made a genuine attempt to notify the builder within the warranty period and they have satisfied the above qualifications, then a claim may still be bought against a builder even if the warranty period for the defect has expired.

Completion:

A new definition for date of completion has been introduced and specifies it as either being:

  • The date of issue of an occupation certificate that authorises the occupation and use of the whole of the building; or
  • The occurrence of some other event that is prescribed by the regulations as constituting completion of the work.

Defence to Statutory Warranty Claims:

Section 18F introduces a new defence for builders, which expands on their previous entitled defence.

reasonable reliance by the defendant on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done.”

In other words, the defendant builder may rely on a third party contractor’s instructions, provided that the third party is a professional, was hired by the owner builder for the development and the instruction to the defendant builder were made in writing before the defective work was carried out.

If you believe that these changes have affected your rights to either claim against a builder or defend against a claim, contact the Eakin McCaffery Cox Property or Litigation teams. We will be able to further explain the amendments and advise you on how these changes may apply to your case.

 

EAKIN MCCAFFERY COX LAWYERS

Level 28, 1 Market Street, Sydney, NSW, 2000

T 02 9265 3000

F 02 9261 5918

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Contract Penalty / Liquidated Damages Law - ? Resolution ?

 

 
The July 2016 decision by High Court of Australia’s (HCA) in Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 (27 July 2016)    
 
(http://www.austlii.edu.au/au/cases/cth/HCA/2016/28.html), will hopefully end the tortuous litigious path of issues relating to whether certain bank fees do or do not amount to unenforceable contractual penalties.
 
In a majority decision, HCA, after a very detailed analysis of the doctrine of penalties and its history, both in equity and at common law, dismissed two appeals by the bank customer to do with:-
 
1. whether late payment fees charged by the bank on consumer credit card accounts were unenforceable contractual penalties; and 
2. whether those fees were irrecoverable as in breach of statutory prohibitions against unconscionable conduct unjust transactions and unfair contract terms.
 
It is now clear from the decision that the Law does not require a demonstrable arithmetic link between the fee agreed to be paid upon certain events, such as late payment, and the “loss” to which it is intended to compensate the payee (the bank in this case).
 
Submissions by the customer that various amounts payable on happening of certain events, primarily late payment, were unenforceable as contractual penalties were rejected.
 
Arguments to do with inequality of bargaining power between banks and customers were not seen as relevant to the issue of whether the particular agreed payment was a penalty.
 
Justices of the HCA took the time to note but reject the suggestion made in a UK case that the law of contractual penalties in Australia and the United Kingdom was now going in different directions.
 
In the case HCA looked at and considered as relevant the sundry operating and administrative costs of the bank as background overhead costs to be borne and provided for, in part, by bank fees such as those in question. Those costs were significant but were not, of themselves, readily referable to a particular customer. 
 
HCA decided, consistently with lots of former case law, that where “damages” are very hard to calculate, an agreed amount will be enforceable unless extraordinary or unconscionable.
 
The case, of course, is relevant beyond the bank situation. The principles apply in any contractual arrangement identified and agreed events will, upon their occurrence trigger a liability to pay agreed “fees”, “payments” and/or “charges”.
 
Please feel free to contact me if you consider the above may be of relevance to your contractual operations.   
 
Gregory Ross     
 

 

EAKIN MCCAFFERY COX LAWYERS

Level 28, 1 Market Street, Sydney, NSW, 2000

T 02 9265 3000

F 02 9261 5918

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Changes to the Retail Leases Act 1994 (NSW)


On 1 March 2017 the Retail Leases Amendment (Review) Act 2017 No 2 (NSW) (“amending legislation”) received Royal Assent. These significant amendments to the Retail Leases Act 1994 (NSW) (“Act”) will commence on 1 July 2017.

The amending legislation will introduce key reforms which will impact both lessors and lessees of retail premises in New South Wales. According to the NSW Parliament, the purpose of the amending legislation is to increase transparency and certainty of leases, to introduce or improve fair protections for businesses, and to increase operational efficiency by simplifying certain processes. 
 

Key changes

Some key changes include the following:
 
Act to apply to Agreements to Lease - it has now been clarified that the Act applies to agreements for lease of retail premises. The lessor must provide the lessee with a disclosure statement 7 days before an agreement for lease is entered into. When a lease is entered into as a result of the agreement for lease, the lessor does not need to issue a separate disclosure statement. 
 
No minimum 5 year  term - the requirement that a retail lease must be for a minimum term of 5 years will be removed.
 
No undisclosed outgoings - the lessee’s liability to pay outgoings will be limited to the outgoings disclosed in the disclosure statement. If an estimate of outgoings is specified in the disclosure statement and the actual amount payable is greater, then the lessee is only liable to pay the estimated amount unless the lessor can prove that there was a reasonable basis for the estimate being disclosed.
 
Outgoings - management fees permitted - the replaced definition of outgoings specifically allows a lessor to include as outgoings, fees charged by the lessor in relation to the management, operation, maintenance or repair of the premises, building or land.  The Act will now expressly include ‘management fees’ in outgoings. 
 
Excluded usages - Schedule 1A of the Act now specifically excludes certain uses including but not limited to ATM’s, vending machines, internet booths, public telephones, children’s ride machines, signage displays, private post boxes, communication towers and storage licences.
 
Exclusions from turnover rent - revenue from online transactions will be excluded from turnover rent except where goods or services are delivered or provided from or at the retail shop or if the transaction takes place while the customer is at the retail shop.
 
Disclosure Statements
 
o Lessor’s Disclosure Statement - the lessee will have a right to recover compensation from the lessor (being costs the lessee reasonably incurred in entering the lease including fitout costs) if the lessee terminates the lease during the first 6 months of the term if the disclosure statement is materially false, misleading or incomplete. 
 
A lessor’s disclosure statement can now be amended before and after the lease is entered into by agreement in writing. The amendments take effect from the date of the agreement in writing. 
 
The Act also provides for a new prescribed form of disclosure statement.
 
o Lessee’s Disclosure Statement - the Act requires the lessee to provide the lessor with a lessee’s disclosure statement no later than 7 days after receiving the lessor’s disclosure statement.
 
Demolition clarified - the definition of ‘demolition’ will become comprehensive in that it will be amended to ‘Demolition includes repair, renovation and reconstruction’. The definition will not require the repair, renovation or reconstruction to be ‘substantial’.
 
The Act will now clarify that the demolition provisions will apply if part of a building is to be demolished. 
 
Termination by a lessor will only be permissible if the proposed demolition requires, and cannot be carried out without vacant possession of the retail shop. 
 
Market stalls - the Act will now clarify that market stalls are excluded from the Act unless the market stall is a permanent retail market.
 
Registration - leases for a term of more than 3 years (including the option term) must now be registered by the lessor within 3 months after the executed lease is returned to the lessor. 
 
Copy of lease - the lessor must provide the lessee with an executed copy of the lease within 3 months of it being returned to the lessor. This timeframe can be extended if there is a delay in obtaining mortgagee’s consent, provided the delay is not caused by the lessor failing to make reasonable efforts in obtaining the consent.
 
Mortgagee’s consent fees - the Act will now specifically provide that a lessor cannot recover mortgagee’s consent fees from the lessee.
 
Return of bank guarantees - lessors are now required to return any bank guarantee to the lessee within 2 months after the lessee completes its obligations under the lease unless the bank guarantee has expired or been cancelled. 
 
Consent to assignment - the lessor can refuse consent to an assignment of lease if where a lease has been awarded by public tender and the proposed assignee fails to meet any criteria of the tender. 
 
Impact on the franchising process
 
Franchising and leasing are intertwined - premises from which to operate are usually leased, and in such cases, the Act applies, and has significant implications for both franchisor and franchisee,
 
Where a franchisee occupies under a direct lease from a 3rd party lessor, the Act, and the amending legislation, will directly affect the franchisee.
 
In the case of the franchisor holding the direct lease, the Act provides a bundle of benefits and burdens for the franchisor. The franchisor, as lessee, will obtain all the benefits the Act confers on a lessee as well as other consequences such no 5 year minimum term. But at the same time, the sub-lease or licence which must necessarily permit the business to operate, casts the franchisor as lessor (to the franchisee) and imposes a raft of obligations, including:
 
o disclosure statements, and obligation to pay compensation where the franchisee (as lessee) terminates the sub-lease/licence due to non-issue or irregularities in the disclosure statement;
 
o limitations on the recovery of outgoings under the sub-lease/licence, unless explicitly disclosed in the disclosure statement;\
 
o obligations imposed under the head-lease which the Act may not permit to be passed on to the franchisee under the sub-lease/licence either at all, or In only party or in the same time frame. 
 
In addition, the franchisor is continuously faced with the tensions between concurrently applicable, but not always aligned, regulatory schemes as franchisor under the franchising code and as lessor under the retail legislation. 
 
Franchisors wearing both franchisor and lessor hats must continuously be en garde and should not delay seeking a protective legal risks audit or specific advice when issues arise.
 
Should you require any further information or have any questions about the reforms, please contact the author.
 
 
 
Monica Carelli-Polito
Senior Associate
(02) 9265 3000