Concerns regarding proper execution of documents by electronic signatures

In the recent case of Bendigo and Adelaide Bank Limited & Ors v Kenneth Ross Pickard & Anor [2019] SASC 123 the Court considered whether a Loan Deed that was entered into by a corporate borrower, individual guarantor and corporate lender, was effectively executed. Pursuant to s127 of the Corporations Act 2001, a company is able to execute a document without the use of a common seal, if it is signed by two directors, or, a director and company secretary. The term ‘signed’ is not distinctly defined in the Corporations Act, however it excludes s10 of the Electronic Transaction Act 1999 which involves execution via digital signature. In the above case, evidence brought forward by the plaintiff demonstrated that an unknown person on behalf of the plaintiff affixed a digital signature of the directors to a digital copy of the document. Despite the fact that there existed a resolution of directors to accept such types of loan agreements, it failed to go into detail in relation to the authorised mode of execution. Furthermore, there was no other document (for example company minutes, or a different resolution) that authorised the electronic application of the directors’ signatures. As a result the Court concluded that the document had not been validly executed as the electronic signature was not a sufficient means of execution under s127. Furthermore, the Court reasoned that it was not sufficient for two signatures to appear on different counterparts or copies of the Deed as no one copy would have been sufficiently executed by the company under s127(1). This case raises a number of questions as to whether two directors will have validly executed a document under s127 if they have signed different copies of the same document, and particularly where a document is signed electronically without express authorisation to do so.

New regulations to govern online short-term rental platforms

The NSW government has recently released new regulations to govern online short-term rental accommodation platforms including AirBnb and HomeAway. The new regulations seek to simplify and refine the previously vague laws. Under the proposal, short-term rentals will be permitted  for 365 days of the year insofar as the host is present. If the host does not live at the property, short-term rentals will only be permitted for 180 days in the Greater Sydney region.   The limit in relation  properties where the host is not present, does not apply to properties elsewhere in NSW, however, councils outside of the Greater Sydney Region will have the power to decrease the 365 day limit, to 180 days. Furthermore, additional changes have been proposed to the NSW Strata Schemes Management Act 2015 that will allow owners’ corporations to ban short-term rentals within their apartment block, if there is a majority of 75%. Under these new laws, it is also proposed that a mandatory code of conduct will be developed for the online platforms and agents to address concerns such as noise and disruptive guests. You can read more about the proposed regulations here.

Are you a landlord selling gas or electricity to tenants? Ensure NERL exemptions apply

The National Energy Retail Law (NERL) regulates and controls the sale of electricity and gas. Under this law, landlords that sell electricity and gas to tenants are required to hold an authorisation or exemption under the NERL. In a variety of circumstances, this authorisation/exemption is not automatic with it being necessary that the landlord apply for it. In particular, in dealings involving commercial properties, the exemption only automatically applies if there are less than 10 tenants purchasing electricity from the landlord. The recent case of Pipe Networks Pty Ltd v 148 Brunswick Street Pty Ltd [2019] FCA 598 the Federal Court held, that a standard lease clause that permitted the landlord to charge the tenant for the supply of electricity, was not enforceable due to the landlord failing to hold an exemption require by the NERL. Despite the Court finding that the clause was illegal due to the absence of the exemption, the landlord ultimately applied for and received the exemption, and was permitted to charge electricity from the date of the exemption. This case is a reminder to landlords who sell electricity or gas to their tenants, to check that they are registered for an exemption, or fall within the exemption category under the NERL.

 

Judicial review in relation to compulsory acquisition of land

The recent case of Joyce v Health Administration Corporation [2018] NSWSC 1679 demonstrates the Court’s approach to the practices involved in the compulsory acquisition of land. The case  involved landowners challenging the attempt of the Health Administration Corporation to compulsorily acquire their land, pursuant to s10A of the Land Acquisition (Just Terms Compensation) Act 1991 (‘the Act’). S10A provides that an acquiring authority must make a “genuine attempt to acquire the land by agreement” prior to giving a proposed acquisition notice (PAN). The landowner argued that the acquiring authority had failed to make genuine attempt to reach an agreement in relation to the land over the required period and sought to injunct the authority from proceeding with the PAN. The Court ultimately found against the landowner, concluding that there was an 8-month period of negotiations, which involved an earlier EOI process and negotiations of land that were ultimately different to the land that was compulsorily acquired. The decision in this case is particularly important as there are various impending compulsory acquisitions for the M12 and Sydney Metro, and acts as a reminder for stakeholders to be across issues that may arise.

Court finds that bank guarantees are not always unconditional

Bank guarantees are a common part of commercial and retail leases, where a bank promises to pay a sum specified when certain events occur, such as where a tenant breaches a lease, but the Supreme Court of NSW has ruled that a landlord can, in some situations, be restrained from relying on such a guarantee.

In the case of Universal Publishers Pty Ltd v Australian Executor Trustees Ltd [2013] NSWSC 2021 the court was asked to determine whether the landlord could call on the bank guarantee where the landlord claimed in good faith that the tenant was in breach of the lease, rather than an actual breach in fact. This was the key issue, as the landlord wanted to call upon the bank guarantee before proceedings relating to the breach had been finalised in court. Ultimately the court constructed the contract as meaning that that the bank guarantee could only be relied upon where there was an actual breach of the lease, which cannot be found if there is a genuine dispute as to whether the tenant had breached the lease contract.

When does noise ‘substantially interfere’ with property owner’s rights

In the case of Ammon v Colonial Leisure Group Pty Ltd [2019] WASCA 158 the Supreme Court of Western Australia considered whether a property owner had a claim of nuisance against a neighbouring hotel. The case involved Colonial Leisure Group (Colonial) who owned Raffles Hotel. Guests at the hotel would often use the beer garden and other outside areas. In May 2009, Mr Ammon purchased and moved into a luxury three-bedroom apartment on the fifth floor of an apartment complex (owned by Raffles), which overlooked the Hotel’s beer garden. Mr Ammon and a number of other owners found that after Raffles Hotel had undergone refurbishment in 2014, the noise level dramatically increased.

Mr Ammon commenced proceedings in the Supreme Court of Western Australia claiming that the noise emanating from Raffles Hotel was a private nuisance interfering with the enjoyment of his apartment. It was also claimed that the noise generated by the hotel exceeded the assigned level of noise allowed by the Regulations. Mr Ammon sought an injunction to limit the music at the hotel. On Appeal, the Court found that the primary judge did not err in finding that the hotel’s noise did not constitute substantial interference with Mr Ammon’s property. Despite the fact that the noise levels of the premises (65 decibels) significantly exceeded the assigned noise levels (48 decibels), evidence showed that the noise predominately came from the road that ran past both the hotel and apartment complex. Furthermore, the Court held that Mr Ammon had knowingly chosen to buy an apartment next to the hotel, which meant the noise could not be deemed unreasonable. Accordingly the appeal was dismissed.

Court’s unwillingness to interfere in shareholder disputes

The recent case of Pacific Dairies Limited v Orican Pty Ltd [2019] VSC 647 highlights the unwillingness of Courts to interfere in shareholder disputes. The case involved Mr Clark, the CEO and minority shareholder of Pacific Dairies Limited (the Company), who sought to bring an application under s232 of the Corporations Act 2001 to remove the current directors of the Company and to set aside issues concerning shares and options to the directors. Mr Clark argued that the Court should make an order under s233 pursuant to ss 232(d) and s232(e) due to the fact that since 2015 the Company had not achieved any of its goals announced to the public in relation to business expansion, and despite its deteriorating financial position had paid its directors’ extremely high fees and had made selective shares issue to the directors without offering the same issue to all of the shareholders. In its decision, the Court held that the Company’s conduct did not constitute oppression under s232(e) of the Act. The Court reasoned that although the Company’s conduct could be considered inadequate and that its financial situation was of concern, it could not be established that the conduct amounted to oppression, discriminated against members or was contrary to the interest of members. The Court also cited that it was reluctant to interfere with shareholder democracy, in instances where there is an absence of a winding up application against the company.

The danger of elapsed deferred commencement consents

 The decision in Dennes v Port Macquarie-Hastings Council [2018] NSWLEC 95 highlights the importance of satisfying deferred commencement conditions before the specified period elapses, or else development consent may lapse. In this case, development consent for a flood-prone property in Beechwood was subject to a deferred commencement condition that required Mr Dennes to submit a Flood Emergency Response Plan (FERP) within 12 months. Mr Dennes submitted such a plan within that time frame, but it was rejected by the Council as it was ‘not capable of being supported in its current form.’ Mr Dennes then failed to take any action until four months after the time period of the deferred commencement condition had elapsed, at which time he appealed to the Land and Environment Court.

The court ultimately held that the presentation of the FERP to the Council was not enough to satisfy the deferred commencement condition, as it expressly required the council to find the FERP to be satisfactory. As this did not happened within the specified period, the court held that the development consent had elapsed with the deferred commencement condition. This decision is an important reminder that any appeals must be brought before the specified time period for the satisfaction of a condition elapses.

Can a landlord force a tenant to pay rent without a written lease?

The recent case of Wilson v Dobson [2019] NSWSC 697 illustrates instances in which a landlord can force a tenant to pay rent, despite the fact that no written or executed lease exists. The case involved Mr and Mrs Wilson (landlord) who purchased the Gearin Hotel Katoomba in August 2011. In early 2015, the landlords entered into an oral agreement with Mr Dobson and Ms Linton (tenants) in which they paid rent and looked after the rates and maintenance. By May 2016 the tenants had fallen behind with their payments, with the landlord agreeing to temporarily pay the rates and insurance until business improved. The landlord commenced proceedings seeking to obtain possession of the property and payment of the outstanding rent and interest from May 2016 to April 2019.

The tenants argued that due to the fact that there was no written lease, there was no indication of a landlord-tenant relationship, and therefore no requirement to pay outstanding rent. The Court held that there was sufficient evidence to indicate that there was a tenancy arrangement between the tenants and landlord as the landlord’s bank records indicated receipt of regular amounts of $2,500 described as ‘rent and GST’. Furthermore, the bank records indicated that there were several periods lacking payment of rent. The tenants argued in response that there had been various agreements between them and Mr Wilson that rent was to be forgone due to their purchase of chattels and equipment for the hotel. The Court held that there was no evidence to prove the agreement or expenditure and handed down judgement for Mr and Mrs Wilson. The tenants were ordered to pay $109,107.87 for unpaid rent and interest. They were also ordered to pay costs.

Foreign investment exemption certificates – what foreign investors need to know

Foreign clients looking to purchase real estate in Australia may need to consider whether a Foreign Investment Exemption Certificate is relevant to their circumstances. An exemption certificate allows a foreign person to purchase one property under the Foreign Acquisitions Takeovers Act 1975. It also permits foreign investors to make offers on multiple properties within a state or territory, conditional upon the fact that they only purchase one property. As a result, a foreign investor is afforded increased flexibility, in that they are not required to seek approval for each property they attempt to purchase.

The exemption certifies are valid for 12 months from the date of approval. Temporary Australian Residents are able to use the exemption certificate to purchase: an established dwelling to live in, a new dwelling or a single block of vacant land for development. Foreign non-residents are only able to use an exemption certification to purchase: a new dwelling or a single block of vacant land for development. More information about exemption certificates can be found here.