Electronic Execution of Documents

The Federal Government has released draft legislation to introduce permanent reform allowing Australian companies to electronically execute company documents.

In August the Federal Government passed legislation to execute documents electronically under s 127 of the Corporations Act, for a temporary amendment until 31 March 2022. 

From 6 May 2020 until 21 March 2021 the Corporations (Coronavirus Economic Response) Determination (No1) 2020 and Corporations (Coronavirus Economic Response) Determination (No3) 2020 were in place, but there was a gap between 21 March 2021 and 14 August 2021 of uncertainty around the electronic execution of document. 

To avoid this uncertainty, the Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments), introduces permanent reform allowing Australian companies to electronically execute company documents (including deeds) under section 127 of the Corporations Act. 

In order to sign an document electronically, (a) a method must be used to identify the person and indicate their intention to sign the document, (b) the copy or counterpart must include the entire contents of the document, and (c) the method used must be reliable and appropriate for the purposes. Platforms such as DocuSign and AdobeSign can be used for authenticating intention, or they can be sent with a covering email acknowledging an intention to be bound. 

In the lead up to national reform, companies and individuals should be careful to ensure that any documents they sign electronically will be legally affective. 

Fearless Girl Replica – Not An Infringement of Intellectual Property

The original ‘Fearless Girl’ statute was commissioned by State Street, a US finance company, to be a symbol of State Street’s initiatives about gender diversity in corporate governance and the financial services sector. In 2019, Maurice Blackburn (MB), an Australian law firm, commissioned the same artist to create a replica for an Australian workplace gender equality campaign. The case of State Street Global Advisors Trust Company v Maurice Blackburn Pty Ltd (No 2) [2021] FCA 137 in the Federal Court of Australia considered whether State Street could prevent MB from using and promoting a replica of the “Fearless Girl” statute in Australia. State Street claimed trade mark infringement, copyright infringement, misleading or deceptive conduct and passing off and inducing breach of contract. They failed in all causes of action. 

State Street owned a trade mark registration for the work mark ‘Fearless Girl’ in ‘publicity services’ and ‘financial services.’ Justice Beach dismissed the allegation of trade mark infringement because in Australia, “Fearless Girl” was used to describe the replica statue and was not used in relation to the offering of the services associated with State Street’s trademark. 

The artist granted State Street an ‘exclusive licence’ to promote gender diversity issues in corporate governance and in the financial service sector, so MB did not infringe copyright in the work because their acts were not within the scope of State Street’s exclusive rights as MB’s campaign was broadly focussed on gender equality and not limited to the financial services sector. The claims of misleading or deceptive conduct and passing off were not made out either, because the replica was not made in association with State Street.

This case is an illustrative example of the requirement to precisely define the scope of exclusive licence rights in copyright and trade mark protection. 

Failed Termination of a Contract for the Sale of Land

The case of Sandpiper Kooragang Pty Ltd v Fortis Products Pty Ltd [2020] NSWSC 1256

considered whether a purported termination of a sale of land was valid. The purchaser in this case sought specific performance of a contract for sale of land owned by the vendor. 

The vendor served a notice of termination upon the purchaser based upon failure of the purchaser to comply with the notice to complete. The purchaser claimed that the vendor was in default of the agreement for breach of warranty and also that the vendor was not ready, willing and able to proceed to completion because they were not in a position to issue a clear land tax certificate. 

The issue in the case was whether the respondent’s purported termination of the contact was valid.

The court held that the notice to complete was valid and effective to make time of the essence for the completion of the contract. However, it was not open to the vendor to rely upon the purchaser’s failure to complete as a breach of contract that entitled the respondent to terminate the contact as the breach of the warranty had no relevant bearing on the obligation to complete. Additionally, the vendor was not ready willing, and able to perform his obligations because he had not paid the outstanding land tax and it would not be possible for him to provide a clear land tax certificate at the time fixed for completion. 

Therefore, the termination of contract was invalid and the contract remained on foot. 

This case demonstrates the importance of contract drafting to ensure that what the parties view as ‘essential’ is reflected in the contract, as only a breach of an ‘essential term’ of a contract will enable a party to terminate a contract. It also shows that parties wishing to terminate a contract must be ready, willing and able to perform the contract themselves. 

Compulsory Acquisition of Property by Transport NSW

In the recent case of Elmasri v Transport for NSW, the Plaintiffs were owners of land of which Transport for NSW sought to acquire a portion of the land for the construction of a motorway. 

Transport for NSW issued a proposed acquisition notice under the NSW Land Acquisition (Just Terms Compensation) Act 1991 s 11. However, the plaintiffs challenged the validity of the proposed acquisition notice and contended that the Transport authority had not made a ‘genuine attempt’ to acquire land by agreement at least six months before giving notice as required by s 10A(2) of the Act.

Transport for NSW made an oral application for a non-publication order. 

The court held that Transport for NSW had engaged detailed external expert advice and made offers of compensation to the plaintiff to secure the agreement to acquire all or part of the plaintiff’s land. Whilst the processes, timeliness and communications by Transport for NSW were not ‘perfect,’ the court considered that individually or collectively, they did not amount to a lack of bona fides. The court did not accept the plaintiffs case that s 10A(2) was not satisfied prior to the issuance of the proposed acquisition notice. 

Thus, court orders were made to affect the orders sought by Transport for NSW. This case demonstrates that even where there are flaws in government acquisition processes caused by delay and poor communication, s 10A(2) is still likely to be met unless there is a lack of bona fides. 

New Grace Period for Design Registrations

New amendments to the Design Act 2003 (Cth) have been implemented based on recommendations from the Advisory Council on Intellectual Property. 

The new regulations, effective from 10 Sept 2021 introduce a ‘grace period for designs’ which is a 12-month period for designers who make their designs publicly available before they file an application for registration. 

Importantly, the grace period will only date back to 10 September 2021, so any design application filed before then will have technically already been disclosed to the public and will not have the protection of the grace period. 

The registration of a design can only be revoked on lack of entitlement grounds if the court is satisfied that it is just and equitable to do so. However, a court is able to order the rectification of the Design Register to correctly note the true owner of the design. This development allows the court to transfer ownership of a registered design to the true owner, maintaining validity of the design and giving the true owner the ability to enforce its design rights rather than cancelling the design registration. 

Another update to the Act is that whether a design in considered distinctive, or is infringed 

by another design/product is now assessed by the standard of a ‘familiar person’ who is merely familiar with the product. This marks a change from the previous standard of ‘informed user.’ 

Moreover, under these new amendments exclusive licensees can bring proceedings to enforce infringement of certified designs. 

Reminder: Cessation of Paper Certificates of Trust

Earlier this year we announced that the Registrar General of NSW had formally announced changes to the land title system in NSW. These changes came into effect from 11 Oct 2021.

These changes have implications for mortgagees, their security interests and their ability to prevent other parties from legitimately or illegitimately dealing with the property whilst the mortgagee’s mortgagee remains registered on title. 

The Amendment to the Real Property Act 1900 (NSW) permitted the Registrar General to declare that all existing Certificates of Title for NSW properties will be cancelled, no new Certificates of Title will be issued and Certificates of Title will cease to exist. From now, all dealings with NSW real property must be in electronic form and lodged through an ‘eConveyancing’ system. Following registration of a dealing, an Information Notice will be issued confirming the registration. 

New Mandatory Director ID

A new legislative instrument introduced in the last few weeks by the Minister for Superannuation, Financial Services and the Digital Economy required company directors to apply for a ‘director identification number’ by 30 November 2022. However, new directors appointed between 1 November and 4 April 2022 will need to apply for their identification within 28 days of appointment. The aim of the regime is to prevent illegal phoenixing by ensuring directors can be traced across companies, while also preventing the use of false or fictitious identities. 

Applications for the director ID will open via the new ‘Australian Business Registry Services (ABRS)’ which is a single platform administered by the Commissioner of Taxation that brings together ASIC’s 31 business registers and the Australian Business Register. 

To apply, Directors will be required to produce their myGovID, two identity documents, their bank account details, super account details, ATO notice of assessment, dividend statement, Centrelink payment summary and PAYD payment summary. 

The penalty for failing to apply for a director ID within the stipulated time is 5000 penalty units (currently $1.11 million), and penalties also apply for conduct that undermines the new requirements, including providing false identity information to the registrar or intentionally applying for multiple director IDs. 

Fanciful Risks – A Reassurance for Property Owners

A recent case of Foti v Biordi [2021] NSWDC 496 in the NSW District court considered whether an owner and occupier of property was negligent in failing to prevent a man from stepping into a hole adjacent to his rented premises. 

The court held that the description of the events by the plaintiff was ‘wholly implausible’ and that any injury to the plaintiff was his own fault and not a negligent act or omission by the property owner. This was primarily because the plaintiff’s version of events of the night had changed on at least four occasions and the inconsistencies undermined his credibility. The court was satisfied that the plaintiff’s injury was actually caused by rolling his ankle upon getting out of his car after parking at the premise – which is what he told hospital staff. Nevertheless, the court said that even if that were not true and the plaintiff’s version of events was correct, the risk to the plaintiff of falling was so low as to be ‘fanciful.’ A reasonable person in the position of the plaintiff would use lighting available to him from his car’s headlights or another readily available source of light in order to enter a premises safely. 

This case serves as a reassurance to property owners that whilst they should take reasonable care to prevent a foreseeable risk of harm on their property, they will not be responsible for preventing risks of such low probability as would be unreasonable in the circumstances. 

Claim to Have an Easement Extinguished Fails for Potential Future Use

The recent case of Sheppard v Smith [2021] NSWSC 1207considered whether an easement could be extinguished. The parties to the dispute were two couples owning adjoining terrace houses in Sydney. The easement, created in 1885, covered a one-metre wide strip extending around two sides of the plaintiff’s house and originally provided a passageway leading from the street to the rear of the defendants house. 

It is pictured in the image below: 

The Plaintiff’s claimed under s 89(1) of the Real Property Act 1900 (NSW) that, (a) the right of way was obsolete (b) that the easement was abandoned and (c) that extinguishment of the easement would not substantially injure the defendants. 

The evidence showed that the easement was originally granted for the removal of ‘nightsoil’ in 1885 before the suburb of Birchgrove was sewered. As the decades went on the laneway fell into disuse and new fences, hedges, raised garden beds and backyard extensions covered parts of the former laneway. 

In determining whether the easement was obsolete, the Court had regard to the terms of the right, rather than the way that it had been exercised in the past. The fact that the easement required expenditure to make it readily trafficable did not mean that it was useless. The defendants had expressed a wish to use the right of way and it was capable of being restored to its former condition as a rear access laneway. It was thereby not obsolete. Additionally, extinguishment would ‘substantially injure’ the defendants because they expressed a desire to use it, and the plaintiffs did not lead sufficient evidence to challenge this. 

Ultimately, the plaintiff’s claim to have the easement extinguished failed.

Another change to the COVID-19 Retail and Commercial Leases Regulation

The Retail and Other Commercial Leases (COVID-19) Regulation was amended for the third time this year on 24 September 2021, with a slight change to eligibility requirements. Previously tenants needed to qualify for specific NSW Government grants to be an ‘impacted lessee’ and tenants who received a ‘Commonwealth COVID-19 Disaster Payment’ would be excluded from being an impacted lessee. However, with the new amendments, tenants can be impacted if they receive the Commonwealth grant.

s 4, which contains the ‘Meaning of an impacted lease’ states that the lessee will be an impacted lessee if they qualify for one or more of 2021 COVID-19: (i) Micro-business Grant, (ii) Business Grant or (iii) JobSaver Payment, or ‘would qualify but for a COVID-19 Disaster Payment made to the lessee by the Cth.’ More details of the Regulation can be accessed here, as well as the amending legislation.  

As the lockdowns ease, a tenant may no longer qualify as an impacted lessee. Landlords can monitor this by issuing fortnightly requests for information that the tenant is an impacted lessee. The amendments allow further renegotiation. Some specific matters relevant for renegotiations include a tenant’s turnover, and landlords are not required to reduce rent for a period when a tenant ceases to be an impacted lessee. It may be a reason to renegotiate if the landlord has previously agreed on ongoing waivers and reductions, but the tenant’s position has improved. In renegotiated positions, landlords can include terms that reduced rent will not apply while a tenant is not an impacted lessee. 

The amendments pre-empt better retail trade, in anticipation for the end of COVID restrictions.