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).

When are Developers Liable for Defects in Residential Building Works?

In the case of The Owners – Strata Plan No 66375 v King [2018] NSWCA 170 the NSW Court of Appeal ruled that immediate subsequent home owners are able to enforce statutory warranties against developers under s18C of the Home Building Act 1989. In this case, the Kings contracted with Beach Constructions to build a residential and commercial strata development on their land, but after residents moved into the buildings various defects were found, including missing seals on elevator doors and other fire and safety defects. These were not a result of the builders work, but rather design flaws that the builder had followed. The Owner’s Corporation brought a claim against the Kings and Meridian Estates, a company of which the Kings were the sole directors. On first instance, the primary judge held the Kings were not developers because only Meridian Estates was party to the contract, however the Court of Appeal overturned this decision and ordered a judgement of over $5 million against the Kings. The court held that the Kings fell within the definition of developers and that the warranties guaranteed under s18C were designed for situations like these, where immediate subsequent purchasers could seek compensation from the person responsible for the defective work where there is no direct legal relationship.

Sales Commissions Payable the sale of property

In the recent case of Outerbridge trading as Century 21 Plateau Lifestyle Real Estate v Hall [2020] NSWCA 205the Court of Appeal considered who was entitled to commission where two agents were involved in a sale. In 2012, Hall (the Seller) engaged various real estate agents, including Unique, to sell their property. In 2015, Hall then entered into a written Agency Agreement with Century 21, another real estate company. The Agreement provided that commission was payable to the Agent if they were the effective cause of the sale, and the buyer had been introduced to the property through the Agent. In 2017, the ultimate purchaser contacted Century 21 and was shown the property. However, in late December 2017 the purchaser attempted to contact the Agent (Century 21), but the Agent was overseas and could not be contacted.

The purchasers then contacted Unique, who negotiated a contract for the sale of the property, following completion of which, Unique received a commission. On appeal, Century 21 claimed $108,086 for sales commission, arguing that they had originally introduced the purchaser to the property, before the purchaser contacted the second agent. The Court of Appeal held that Century 21 were not a cause of the sale due to the fact that  “mere introduction” of a purchaser to the property is insufficient to be an effective cause, and Century 21’s introduction had been exhausted when their Agent became uncontactable. The Court rejected Century 21’s claim for commission and dismissed the appeal with costs.

Declaring construction contracts void on the grounds of economic duress

In the recent case of Classic Deco Pty Ltd v Fine Touch Pty Ltd [2020] ACTSC 209 the ACT Supreme Court considered whether deeds between two subcontractors were voidable due to economic duress. The matter involved four contracts for various projects. In each contract, the defendant engaged the plaintiff as a subcontractor, and for each case, the plaintiff argued that a deed poll signed as a condition of receiving final payment from the defendant was entered into under economic duress and was consequently voidable. The defendant’s conduct included withholding progress payments, denying the plaintiff the ability to check calculations within the deeds, denying the plaintiff the ability to receive necessary source documents, and asserting that if the deeds remained unsigned the plaintiff would not receive any payment. The plaintiff thus sought to have the deeds declared void, and to claim the money that was outstanding under the contracts. The Court held in that case that the plaintiff’s evidence was manifestly inadequate to establish that the deeds were entered into under economic duress. The case demonstrates that the legal test for economic duress is difficult to establish.

Development Applications under the EPA Act

In the recent case of Damerau v Central Coast [2020] NSWLEC 1417, the Court considered whether a previously refused development application seeking the subdivision a residential lot, the demolition of a shed, and connection to an existing sewer system, was correctly decided.

The Central Coast Council originally refused the DA for reasons including an increased flood risk, the potential of a non-functioning sewer system during a flooding event, incompatibility with the constraints of the site and because the proposed development was not in the public interest. The appellant appealed against the refusal pursuant to s 8.7(1) of the Environmental Planning and Assessment Act 1979 (EPA Act).

The Court ultimately held that based on the evidence including the DA’s (amended) supporting plans, documents, expert reports, and expert submission in relation to the EPA Act, the development did not satisfy the provisions under s 4.15(1)(a)(i) to grant consent to the proposal. This case illustrates that in deciding such DA matters, the Court may have regard to the site unsuitability, the adequacy of information for assessment and whether the proposed development was in the public interest.