F45 Failure to Make Patent Claim

Recently, the F45 fitness franchise commenced proceedings against Body Fit Training Company Pty Ltd, one of their competitors, and four of their directors, alleging patent infringement. Body Fit Training denied the infringement and by cross-claim, sought orders revoking F45’s existing Patents for invalidity.

F45 owned Patients which claimed a method and system for remote configuration and operation of fitness studios from a central server. The studio computers present directions on display in the studio, and users perform exercises at each station based on the displays.

The judge considered whether F45’s invention claimed a computer-implementation, and if so, whether the invention claimed could be broadly described as providing a solution to a technological problem, such that it represented an advance in computer technology, or that it involved an unusual technical effect due to the way in which the computer technology was utilised.

The judge answered the first question in the affirmative but in regard to the second question, found that the patents did not provide any solution to a technical problem, nor represent any advance in computer technology. The Judge preferred Body Fit’s contention that the invention was aimed at improving the management and operation of fitness studios and managing the interest and motivation of users by the use of generic computer technology.

The judge also commented that even if the patents were valid, Body Fit did not infringe them because the retrieval and communication of information process was different between the two systems. F45 has appealed this decision, which is pending determination in the Full Federal Court.

The full decision of F45 Training Pty Ltd v Body Fit Training Company Pty Ltd (No 2) [2022] FCA 96is provided in this link.

Another Reminder about Director ID

As we have previously advised, company directors are now required to apply for a Director Identification Number from the Australian Business Registry Services. These unique numbers apply in respect of all companies that a given person is a director of.

If you were a director of an existing company prior to 1 November 2021 and become a director of another company after 31 October 2021, then the deadline to apply for director ID is 30 Nov 2022.

To apply, you are required to prove your identity, which is made easiest if you already have a MyGovID account. Additionally, you need to provide your Tax File Number, your residential address as held by the ATO, and information form 2 further documents to verify your identity.

A summary of the deadlines for application are in the table below, and more information can be found on the ABRS website.

Date you become a directorDate you must apply
On or before 31 October 2021By 30 November 2022
Between 1 November 2021 and 4 April 2022Within 28 days of appointment
From 5 April 2022Before appointment

Claim for Unpaid Rent Succeeds but Outgoings Precluded by Estoppel

The recent Supreme Court case of Shimden Pty Ltd v Park Pty Ltd [2022] NSWSC 267 concerned a dispute between a landlord and a tenant in respect of a six-year lease of a service station and convenience store. The lease in question had expired the landlord had sold the premises. However, the landlord was seeking to recover amounts of rent and outgoings payable pursuant to the terms of the lease.

The issue was whether an estoppel would preclude the landlord from claiming the rent owed under the lease, considering they had sent erroneous invoices, which failed to include the annual CPI adjustments. The tenant argued that this claim was precluded by an estoppel against the landlord as the tenant was at all time acting on the assumption that the landlord would not increase the rent in accordance with CPI adjustments.

The Court found that the landlord had not made any representation suggesting that rent would not be increased by CPI. Hence, the applicant was entitled to claim the GST component and CPI increase in rent, but the way outgoings were dealt with by the parties gave rise to an estoppel by convention that precluded the landlord from recovering outgoings. The Court held that to allow the landlord to claim outgoings in an entirely different fashion ‘would be to engage in impermissible re-writing of the terms of the lease’ and ‘would involve imposition of liability in a manner not contemplated by the terms of the lease.’

The applicant failed in the claim for outgoings but was able to recover the unpaid GST and rent increase amounts.

Contract of Sale Terminated for Breach

A recent case in the NSW Supreme Court, Lee v Lee [2022] NSWSC 181, considered whether a contract of sale for a unit was valid and enforceable. The contract of sale was entered into on 9 February 2021, with a 10% deposit being duly paid by the Plaintiff and completion stipulated for ‘90 days after the contract date.’

The contract contained a Special Condition that ‘The purchaser must not register any caveat against any of the Certificate of Title relating to the Land or Property notifying its interest under the Contract’ and this was stated as being an essential term.

The Applicant requested that the settlement occur on a later date than the contract specified, but settlement did not occur on this date. On 19 May 2021, the Respondent’s solicitor sent an email to the Applicant stating that the contract had not been properly exchanged so that it could not be binding on either party. Importantly, the Applicant lodged a caveat against the title to the property which was the subject of the contract for sale. The Respondent’s solicitors then sent an email to the Applicant’s solicitors saying that they retracted the statement that the contract was not binding and sought to terminate it for breach of contract.

The court agreed that the contract had been validly exchanged, however the Applicant had breached a special condition not to lodge a caveat on the Title of the contract, which was an essential term. Hence, the respondent validly terminated the contract.

Corporations Law Changes to Meetings and Electronic Execution of Documents

The Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) has commenced. This Act makes permanent amendments to the Corporations Act in order to facilitate the electronic execution of documents, allow for company meetings to be held at either a physical venue or via virtual meeting or a combination of the two, and it allows for the electronic distribution of meeting-related documents and other documents.

Changes to electronic execution

  • The changes to s 127 do not differ substantially from the temporary measures introduced during COVID 19. However, the changes to s 126 are new in that now, an agent does not need to be appointed by deed and witnessing and delivery are not necessary for the deed to be validly executed. This makes the signing process for company agents easier. Additionally, a lawyer or another agent for a company can sign a deed electronically, irrespective of the State or Territory law which governs the deed.

Meetings

  • Importantly, wholly virtual meetings are only allowed where this is expressly permitted by the company’s Constitution. The technology must also be ‘reasonable’ and allow members to exercise their right to ask questions and make comments both orally and in writing.

These changes apply to all documents sent and meetings held after 1 April 2022.

What To Do If Your Neighbour’s Trees are Blocking Your Sunlight or View

The Trees (Disputes Between Neighbours) Act 2006 (NSW) (the Trees Act) enables a neighbour to obtain court orders to force the hedge owner to prune or remove a high hedge. 

The Act defines a hedge of trees as a group of 2 or more trees that are planted so as to form a hedge and rise to a height of at least 2.5 metres (above existing ground level). 

The Court may make an order requiring the hedge owner to trim or remove the hedge if satisfied that the trees are severely obstructing sunlight to a window of a dwelling situated on the applicant’s land, or are severely obstructing a view from a dwelling situated on the applicant’s land. Additionally, the severity and nature of the obstruction must be such that the applicant’s interest in having the obstruction removed, remedied, or restrained outweighs any other matters that suggest the undesirability of disturbing or interfering with the trees by making an order.

Usually an order is made to mandate regular pruning of the hedges as opposed to removal. 

Recent Case on Positive Covenants and Easements

In the resent case of Aust-One Investment Pty Ltd v New World Investments Pty Ltd [2022] NSWSC 137 considered the enforceability of positive covenants.

The Applicant and Respondent were owners of adjoining retail buildings in the front main street of a shopping centre and both buildings ran through to a lane at the back which was adjacent to a multi-storey car park constructed by the local council. An easement had been granted by a transfer by the prior owners of the properties on the terms that included a covenant that the owners of No 181 would pay one quarter of the gross rentals received by them each calendar month to the owners of No 183-185 in order to have a right of way. 

The main issue was whether a payment covenant was enforceable by the Respondent against the Applicant, who was an assignee of the dominant tenement and not a party to the transfer. The second issue, which would only arise if the court found the payment covenant to be enforceable, concerned the meaning of the term ‘gross rentals’ in the payment covenant. Aust-One wanted to refuse to comply with the payment covenant but simultaneously enjoy the benefit of the easements created by the Transfer.

The court found that all easements could operate effectively to the fullest of intended effect whether or not the payment covenant was honoured by the owner of the dominant tenement for the time being. The court did not accept that the conditional benefit principle could only make the covenant to pay money enforceable against the successor in title to the original covenantor if the covenant was to pay a single sum of money. 

Lastly, the court held that the correct effect of the word ‘gross’ was that Aust-One was not entitled to deduct from actual rentals received, and their own business costs were not recoverable from the lessees. 

Compensation Increased for Compulsory Acquisition

A recent matter in the NSW Land and Environment court considered how much compensation a party was entitled to under the Land Acquisition (Just Terms Compensation) Act 1999. 

James N Kirby Holdings Pty Limited (the Applicant) was the registered proprietor land which was compulsorily acquired by Transport for NSW. They brought proceedings objecting to the amount of compensation offered to them. 

The issue was whether compensation should have been increased to allow for an ‘adjoining owner premium,’ given that the Applicant had owned 2 blocks adjacent to each other and whether there had been an increase or decrease in the value of the adjoining land by reason of the carrying out of the proposal.

The Court found that the likely disruption to the access the estate by heavy vehicles during the construction of public works would impact on the value of a hypothetical purchaser would pay at the date of acquisition. The amount that was to be incurred in a relatively short term would be assessed by a hypothetical purchaser. In addition, the total amount for injurious affection relating to the real risks of impacts on access to the relevant estate during the four-year construction was 2.5% of the before value being $1,650,000. 

The Court awarded total compensation of $5,144,480 which comprised the market value of $3,303,690, injurious affection at $1,655,000, and disturbance at $185,790.

Extensive Fence on Easement Constitutes Actionable Nuisance

The recent case of Dudley v Ainsworth [2021] NSWSC 1478considered whether the fence and works erected on an easement amounted to a substantial interference with the plaintiff’s reasonable use of the easement.  

The plaintiff had a 49m long easement over the defendant’s land which was noted on the titles of the two properties and used as a driveway to access a public road.

The cause of the dispute was that the defendants installed a fence along the easement with only a 7.4 m gap to permit the plaintiff to access his land. This was problematic for the plaintiff as they owned numerous vehicles including an 11m long bus. 

The Plaintiff sought injunctive relief against the Defendants on the basis that the works interfered with their reasonable user rights, by denying sufficient points of access through the gates. 

The Court held that the respondents were allowed to fence the property along the boundary in easement area but not to deny points of access at southern end of the easement. The planting of shrubs and trees at these points amounted to a real substantial interference with the enjoyment of the easement and constituted an actionable nuisance. The applicants were thus entitled to an injunction to remedy the continuation of the interference. 

This case is a reminder that any construction upon an easement will have to comply with the terms of the easement. 

Case Applying the Covid Leasing Regulations

Over the last 18 months we have provided many updates in relation to the Covid Leasing Regulations. The recent case of Todarello Property Investments Pty Ltd v GJA Kalra Pty Ltd involved the application of that legislation.The Applicant was the registered proprietor of land where a lease of a service station and motel premises had been registered for 10 years, with options for renewed terms of 5 years each. The original lessees under the lease transferred the lease to GJA Kalra Pty Ltd and the dispute was about whether GJA had validly exercised the option to renew.

The Applicant terminated the lease on the basis of $117,702.94 of unpaid rent and operating expenses constituting a breach of contract and GJA disputed the validity of termination. 

The Court found that the breaches did not preclude the respondent’s entitlement to the option because regardless of whether breaches are continuing, only breaches that occur up to the date of the expiry of the lease can preclude a lessee from exercising an option to renew. Hence the respondent had validly exercised the option to renew the lease for a further term of five years. 

Additionally, the Applicant was not entitled to take or continue ‘prescribed action’ against respondent on grounds of breach of lease during the ‘prescribed period’ under the Regulation because they failed to negotiate in good faith, which was mandated under the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (NSW). Therefore, the termination of lease by the landlord was invalid. 

This case demonstrates the importance of complying with the Covid Leasing Regulations. We note that Compulsory Mediation provisions in the Regulations have been extended beyond 13 March 2022 for specific lessors, as described in another article this month.