Strata Renewal Plans under the Strata Schemes Development Act 2015 (NSW)

The Strata Schemes Development Act 2015 (NSW) (SSD Act) allows for a collective sale or redevelopment of a strata scheme to proceed by an order of the Court if at least 75% of lot owners in the scheme support the strata renewal plan.

The Strata renewal process, in brief, involves submitting a Strata Renewal Proposal, that is considered by a Strata Renewal Committee. Then the SRC prepares a Strata Renewal Plan, which is circulated and considered by owners, and finally, once the level of support required is reached, the Owners Corporation meets and the plan is submitted for approval by the Land and Environment Court.

In Application by the Owners – Strata Plan No 61299 [2019] NSWLEC 111, the Land and Environment Court was asked to order that a strata renewal plan be given effect under the SSD Act. The scheme proposed in this case was a collective sale of all lots, as opposed to a redevelopment. The Applicant did not have unanimous support for the proposed collective sale as required by the SSD Act, but the absence of another party (the non-consenting owners) was not an impediment to making the orders because all owners had been served with the Class 3 Application and with the documents required in the lead-up to the commencement of the case. The thorough evidence and submissions of the Applicant demonstrated satisfaction with the prescriptive requirements of the SSD Act.

Tree root causes damage to another’s property

In the recent case of Pollachini v Estate of the late Peter Dimitropoulos [2020] NSWLEC 1463, the court considered whether the owners of the Estate of the late Peter Dimitropoulos were liable to pay for damages caused by a tree to the property of Ms Pollanchini.  Ms Pollanchi alerted the respondents to the damage numerous times before commencing proceedings in 2020. She claimed damages for the tree’s roots penetrating her sewer, requiring pipe clearance by a plumber, and for damage to the side gate, the driveway, the fence of her property, and walls of her house. She also claimed that the tree was a tripping hazard which impaired the ability to evacuate in case of emergency. The respondent resisted the claims on the ground that the tree had been poisoned and removed. Conclusively, the respondents were required to reimburse Ms Pollachini with $250 for the damage, and to pay her to have the tree ground away to a depth of 500mm below the soil surface and also to remove all stump grindings from the site. This case demonstrates the risk of not properly removing a tree that causes damage to another’s property.

Director liable for employee’s unconscionable conduct

The recent case of Jonval Builders Pty Ltd v Commissioner for Fair Trading [2020] NSWCA 233 considered remedies for unconscionable conduct in a construction context.

The Commissioner for Fair Trading sought compensation for consumers who had purchased villas at a holiday park, because they had been mislead to believe that the contractual terms and planning requirements that limited occupation to 180 days per year would not be enforced. The consumers had intended to live in the villas permanently. The primary judge held that the conduct was misleading and deceptive, and unconscionable. Jonval appealed against the latter finding. The appeal was dismissed as the Court held that Jonval’s director had personally engaged in unconscionable conduct as he was the ‘controlling mind of the company’ and had either personally executed the contracts or knew of and endorsed the conduct of his company’s employees.

The Court awarded compensation at 85% of the cost of improvements in circumstances where the occupiers had only made improvements because of the representations regarding permanent occupation. This case demonstrates the repercussions of misleading and deceptive, and unconscionable conduct.

Rent relief protections extended in NSW

The NSW Government has released the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (New Regulation), which extends the COVID-19 protections for lessees that were previously in the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (Repealed Regulation) to 31 December 2020. The new legislation implements a new definition of “Impacted Lease” to a lease to which an ‘Impacted Lessee’ is a party. An Impacted Lessee must qualify for Job Keeper payments under the amended rules.

The New Regulation clarifies that the prohibition on prescribed actions (such as terminating a lease) only apply in respect of a breach of an Impacted Lease that occurs within the prescribed period.

A party may make a second or subsequent relief request during the extended prescribed period if it does not relate to rent for a period for which relief was already granted. Thus, lessees who continue to be impacted can make additional requests for extended relief if they continue to be ‘Impacted Lessees.’ Lessors are required to commence negotiations within 14 days of receiving any request.

The dispute resolution provisions remain unchanged under the New Regulation. In the instance of a dispute, parties to a commercial lease must submit to mediation prior to commencing proceedings in a Court, and parties to retail leases must comply with Part 8 of the Retail Leases Act 1994.

Virtual AGMs and electronic execution of documents may continue

On 19 October, the Treasury released a draft legislation, Corporations Amendment (Virtual Meetings and Electronic Communications) Bill 2020, for consultation. It proposes to make permanent and expand upon the changes to the execution and meeting requirements made by Parliament earlier this year.  The draft Bill proposes to allow for:

  • electronic execution of company documents and documents relating to meetings,
  • meetings to be held as virtual or hybrid meetings,
  • notice of meetings and other documents relating to meetings to be communicated to prospective attendees electronically, and
  • minutes to be recorded, kept, and stored electronically.

The object of the Bill is to ensure that companies can use the most efficient mix of technologies to deliver on substantive corporate governance outcomes – to aid communications between companies and their shareholders. The impact of the temporary changes introduced due to COVID-19 were primarily positive, with regulatory savings for industry and increased productivity, which is why the government is seeking to make them permanent.

The Big Mac v The Big Jack

McDonald’s has recently filed a claim in the Federal Court of Australia against Hungry Jack’s, alleging that Hungry Jack’s has infringed their ‘Big Mac’ trademark with their new burger, the ‘Big Jack.’ McDonald’s filed their claim under the Trade Marks Act 1995, that the Big Jack is ‘substantially identical’ and ‘deceptively similar’ to their Big Mac, such that it is ‘likely to deceive or cause confusion’ to consumers.’

When Hungry Jack’s filed their Big Jack trademark, MacDonald’s did not oppose it during the relevant opposition period, being within two months of the mark being advertised 15 April 2020. Thus, McDonald’s only option was to take court action. McDonald’s argues that Hungry Jack’s action constitutes a ‘bad faith’ act because they were aware of McDonald’s existing trademark. McDonalds seeks to rely on its reputation under section 60 of the Trade Marks Act, to show that the Big Mac has indeed acquired a reputation and because of that reputation, the Big Jack would be likely to deceive or cause confusion.

Trademark Protection in Australia

Ownership of a trademark in Australia is primarily determined on a first-to-use basis, or if there is no use before filing, then on a first-to-file basis.

It is possible to protect an unregistered trademark under the tort of passing off, or under the Australian Consumer Law (in Schedule 2 of the Competition and Consumer Act 2010), that prohibits misleading or deceptive conduce in trade and false or misleading representations in relation to goods and services.

The rights in unregistered trademarks are contingent on the reputation of the relevant trademark, that can be evidenced though material such as promotional expenditure figures, examples of how the trademark has been used and promoted, third-party evidence of the reputation of a trademark and survey evidence of public awareness of the mark.

Notably, section 120(3) of the Trademarks Act 1995 (Cth) provides an action for the infringement of a well-known trademark where the infringer uses a substantially identical or deceptively similar trademark, and the infringing mark indicates a connection between the unrelated goods or services and the registered owner of the well-known trademark, and the interests of the registered owner are likely to be adversely affected.

Changes Affecting Discretionary Trust Owners of NSW Residential Land

The State Revenue Legislation Further Amendment Act 2020 (NSW) was implemented in June this year, and is relevant to trustees of discretionary trusts that own residential land in New South Wales.

The Act amends the NSW Duties Act 1997, the Land Tax Act 1956 and the Land Tax Management Act 1956, and mandates that the trustee of a discretionary trust will be deemed  a foreign person unless its trust deed expressly provides that:

  • no potential beneficiary of the trust is a foreign person; and
  • the terms of the trust cannot be altered to allow a foreign person to become a potential beneficiary in the future.

The amendments oblige ‘foreign persons’ who own or purchase NSW residential land to pay additional land tax and additional duty. ‘Foreign persons’ include individuals not ‘ordinarily resident in Australia,’ corporations and trustees in which an individual is ‘not ordinarily resident in Australia, foreign governments and other persons prescribed by the applicable regulations. However, Australian citizens will not be deemed foreign persons.

Force Majeure Clauses in COVID

Force majeure clauses in contracts exist to free the contracting parties from liabilities or obligations in circumstances where an event or situation, such as pandemic, prevents that party from fulfilling their obligations under the contract. The recent case of Meetfresh Franchising Pty Ltd v Ivanman Pty Ltd [2020] NSWCA 234 considered whether Meetfresh was liable for losses sustained by Ivanman for failing to honour the terms of their Franchise Agreement, or whether the force majeure clause applied to their Franchise Agreement. Meetfresh had the onus of establishing the applicability of the force majeure clause as they were seeking to rely upon it and it constituted an exception from Meetfresh’s broad contractual liability under the Agreement. The Court considered factors such as the place of the clause in the contract, and the evidence relating to the cause of the breach of the contract. The Justice ultimately held that Meetfresh failed to establish that the force majeure clause applied because there was a distinct lack of evidence about the cause of the event and the appellant’s inability to prevent its occurrence. Additionally, the force majeure clause was included amongst incidental clauses appearing at the end of the agreement, that made it an exception to, rather than a qualification of the appellant’s promises. This case demonstrates the difficulty of relying on force majeure clauses.

COVID Relief for Insolvency in the Construction Industry Extended to December

In March 2020, the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) was enacted, providing temporary relief for businesses in financial difficulty. Some of the changes introduced included:

  • a new insolvent trading ‘safe harbour’ comprising a six-month moratorium on insolvent trading liability for company directors in relation to debts incurred ‘in the ordinary course of the company’s business;’
  • an increase of the threshold at which creditors can issue a statutory demand to a company from $2,000 to $20,000, and an increase in the period for a response from 21 days from the date of service to 6 months; and,
  • an increase of the minimum debt to initiate bankruptcy proceedings against an individual from $5000 to $20 000 and an increase in the period for a response from 21 days from the date of service to 6 months.

Originally the measures were scheduled to end on 24 September, but they will now be extended to 31 December 2020 under the Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020 (Cth).