Getting Down to Businessbribery in commercial transactions is not treated with the same degree of...

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Getting Down to Business

WELCOME TO THE JUNE

EDITION OF GETTING DOWN TO

BUSINESS

In this edition, we look at anti bribery and aviation

legislation in both Australian and international

contexts and explore what happens when an SMSF

trustee is declared bankrupt.

We re-live recent social events and our Health and

Wellbeing officer reviews recent apps designed to

get more out of your day to day.

Finally we take an in depth look at a recent contract

law dispute involving family honour.

We hope you enjoy this edition.

Michael Mobberley – Editor

Do you have any articles or suggestions for our next edition?

Contact the editor at [email protected] with

‘GDTB’ in the subject line.

Defining airline accidents

Svetlana Collantes reviews a

recent aviation seminar.

Anti bribery in commercial

law

Wilyen Aguino compares anti

bribery laws in the UK and

Australia.

Bankruptcy in SMSFs

Patrick Huang discusses the

impact of an SMSF trustee

being declared bankrupt.

Social News

An update from our

Committee officer Olga

Kubyk.

Taking some time for

yourself

Our health and wellbeing

officer Sarah Jones explains

how to take a time out with

some handy apps.

Family honour and

contracts

Madeline Bow discusses the

recent case of Doueihi v

Construction Technologies

Australia Pty Ltd (2016)

NSWCA 105

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YOUNG LAWYERS BUSINESS LAW COMMITTEE JUNE 2016

On 2 June 2016, I attended a lunch seminar on the following topic: "It's not all black and white: 'Accidents' under domestic and international air law in a personal injury context' hosted by the Aviation Law Association of Australia and New Zealand ("ALAANZ"). The lecture was presented by Tom Janson, a Senior Solicitor at Shine Lawyers who has vast experience in this area. So what exactly is an accident? Whilst an ordinary person would generally perceive an 'accident' to be any unforeseen event that occurs on board an aircraft, this is generally not the case. With air travel in both domestic and international context becoming more commonplace, the definition of what constitutes an 'accident' has also had to be reconsidered. Pursuant to Article 17 of the Warsaw Convention 1929, “a carrier is liable for damage sustained in the event of the death wounding or any other bodily injury suffered by a passenger, if the accident which caused the injury or death took place either on board the aircraft or in the course of any of the operations of embarking or disembarking.” A similar provision is provided under the Civil Aviation (Carriers' Liability) Act 1959 (Cth).

So whilst the international and domestic regimes are for the most part uniform, therein lies one major difficulty to which this day the legislators have been unable to overcome: what constitutes an 'accident' and should the definition be broadened to include other types of accidents? Whilst the cases of Saks (1985) 105 S Ct 1338, Povey [2005] HCA 33 and Brannock v Jetstar Airways [2010] QCA 218, have been useful in providing guidance as to the indicia to determine if an accident has occurred, the application of same does not always 'fit' so neatly! Examples such as turbulence, passenger seats, sexual and indecent assault are just a few instances that have occurred on aircraft which may or may not have met all the indicia of what constitutes an accident; therefore failing to find liability on the part of the carrier and therefore damages not being awarded to the claimant. What about terrorist attacks, pilot suicide, maintenance issues and terrorist attacks occurring at the airport such as the recent occurrence at Zaventem Airport in March 2016? Do these constitute an 'accident’? Unfortunately, there is no definitive answer and each case must turn on its facts. Svetlana Collantes is the Chair of the Young

Lawyers Business Law Committee

The evolving meaning of the term "accident" under aviation law


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When a party provides a benefit to another person with the expectation of influencing their duties, it is frowned upon by society - especially in government. Interestingly enough though, bribery in commercial transactions is not treated with the same degree of contempt.

Our office came across an interesting commercial contract from the UK which had what is known as an Anti-Bribery Clause. The clause basically provides that the contracting parties must take reasonable steps to prevent bribery in their dealings. We did a little bit of snooping in UK law and found the Bribery Act 2010 (UK). That Act prohibits any kind of bribery in relation to: (a) any function of a public nature;

(b) any activity connected with a business; (c) any activity performed in the course of a

person's employment; or (d) any activity performed by or on behalf of a

body of persons (whether corporate or unincorporated).

This means that the UK law prohibits bribery in business to business transactions. In fact, the

Bribery Act (UK) puts an obligation on corporations to actively put in place adequate procedures designed to prevent bribery. In Australia the Criminal Code Act 1995 (Cth) is the only federal legislation that directly deals with bribery. Whilst the Bribery Act (UK) deals with bribery of a public nature or in the course of business, the Criminal Code (Cth) only deals with bribery of public officials. State and Territory criminal laws do govern commercial bribery to some extent in the private sector (for example Pt 4A of the Crimes Act 1900 (NSW)), and the Corporations Act 2001 (Cth) can apply to bribery in relation to directors’ and officers’ duties which prohibit the use of information or position to gain advantage for themselves or other persons. However, unlike the Bribery Act (UK) which establishes an onus on corporations to actively prevent bribery, there is generally no equivalent provision in Australian law to impose such an obligation. This begs the question – should Australian law do so? Wilyen Aguino is a lawyer at Lazarus Legal

Group

Anti-bribery law in commercial transactions


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Think your super is protected when you are bankrupt? Think again!

A bankrupt person's superannuation interests are one (of many) types of property that are not available to be divisible amongst his or her creditors. In that sense, superannuation can be said to be 'protected'. But if the superannuation interests are held in a self-managed superannuation fund (SMSF), then his or her bankruptcy can, without further action, lead to further legal and financial consequences. Under the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA), if you become bankrupt (i.e. you are an ‘insolvent under administration’), you are automatically disqualified from acting as a trustee of any SMSF or a director of the SMSF's corporate trustee.

Where the ATO issues a non-

compliance notice, the SMSF risks

income tax of 45% A number of consequences flow from this. For starters, it is a criminal offence for you (the disqualified person) to continue to act as a trustee or director of the corporate trustee. It also a criminal offence if you do not immediately advise the ATO that you had become a disqualified person (punishable by a fine). The immediate solution appears to be for the disqualified person to be removed or to resign from their trusteeship (or directorship). But this gives rise to a further issue. As the bankrupt person is no longer a trustee or director, the SMSF would fail to meet the definition of an

SMSF (as a complying SMSF requires all of its members to act as the SMSF's trustees or directors). In that sense, the SMSF runs the very real risk of not being a complying superannuation fund. Where the ATO issues a notice to the SMSF to this effect, the SMSF loses its tax concessional status, resulting in the income of the SMSF being taxed at 45%. Luckily, the ATO does allow up to 6 months for the SMSF to restructure itself so as to "re-meet" the definition of an SMSF. Commonly, the solution in most cases is to roll-over the bankrupt person's superannuation interests out of the SMSF to either a retail or industry superannuation fund (regulated by APRA) or a small-APRA fund. This may also entail winding-up the SMSF entirely.

Regular and prompt cooperation with

the ATO is critical However, it appears that the ATO does not allow for an extension of time beyond the 6-month "grace period" to cater for situations where the assets in the SMSF are:

(i) illiquid (such as real estate or interests in unrelated but unlisted companies or trusts); and/or

(ii) difficult to realise an asset's full market value of within 6 months.

It seems then that the only silver lining rests with the ATO. The Commissioner of Taxation has the ability under the SISA to suspend or remove disqualified persons as trustee of the SMSF and following such suspension or removal, appoint an acting trustee in his or her place. This appointment serves two purposes:

(iii) the acting trustee has and can exercise all the powers of the SMSF trustee to properly oversee and administer the SMSF, and

(iv) it assists the SMSF with not failing to meet the definition of an SMSF.

This is where regular and prompt communication and cooperation with the ATO is critical. Keeping the ATO informed and up-to-date on the restructuring process when one becomes an ‘insolvent in administration’ is key to keeping the ATO on good terms and can assist with deterring the ATO from imposing harsh penalties on the SMSF and its members. Patrick Huang is a lawyer at Argyle Lawyers

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Joint Business Law and CET Committees Speed Networking Night

The joint Speed Networking Night organised by the Business Law and CET Committees was recently held and was a great success! There were thirty-two people (sixteen pairs) participating. Svetlana Collantes, the Chair of the Business Law Committee, and Chris Chow, the Former-Chair of the CET Committee, were the MCs on the night. The night started with some tips about effective networking skills from the hosts before the pairs began networking. Participants were seated opposite each other and were given three minutes to speak: two minutes to tell their elevator pitches to each other and one minute to make a connection. Once the music started to play, the participants had to move around the room and find a person who they have never spoken to before. The last half an hour was allocated to informal networking. Although it was the inaugural speed networking night held by the Business Law and CET Committees, we received very positive feedback from participants on the night. The Speed Networking night has a great potential to become an ongoing event!

Golden Gavel Competition

(photos on next page)

The early start of the event (7.30am)

was definitely worth it! While having

breakfast at The Westin, we watched

various young lawyers battle it out by

way of public speaking for more than an

hour.

The ten competitors were given

humorous legal topics 24 hours before

the event and had to prepare a speech

to present in the morning. Topics

included office politics, Australia’s “Next

Top Model Litigant” and “Trump’s Top

Tips for bankrolling your own campaign”.

This year we also had the chance to

vote for the competition winner and the

people’s choice award through an online

App.

All the competitors had prepared

humorous speeches and taken very

different approaches to the competition

(including playing guitar and wearing

costumes) which left BusLaw members

at a crossroad on who to vote for!

The competition winner this year was

ultimately Gabrielle Morriss who spoke

on the topic of “Legal Profession

Uniform Laws: Who wore it best?” with

Ryan Murphy as runner up with the topic

of “The cab rank rule: ride sharing with

your barrister”. The winner of the

people’s choice award was Lachlan

Williams speaking (and singing!) on the

“Lock out laws and responsible service”.

You can view the winning speeches on

the Golden Gavel FB Page.

This years’ judges were Professor

Gilliam Triggs, 2016 NSWYL Patron,

and Mark Doepel, a partner at Sparke

Helmore Lawyers.

Business law committee social update Our social and events coordinator Olga Kubyk recaps recent Business Law events

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Business law committee members at the 2016 Golden Gavel competition


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Taking a few minutes for yourself…

Until this time last year, the idea of downloading “wellness” apps on my phone had never crossed my mind. Now, I don’t know what I’d do without them.

It’s objectively difficult for a person (and, I would argue, in particular a lawyer) to give themselves permission to actively take a few minutes a day just for themselves. Our lives as lawyers are taken up with caring about and stressing over the problems of others. I find that having something which sets out a daily activity means that I don’t have to give myself that permission: it has been scheduled for me. There are lots of fitness and healthy eating plans and ideas out there, but below I have just set out a few general wellbeing apps you can download.

1. Smiling Mind (free)

Smiling mind gives a set of meditation programs for those of us who don’t have a lot of experience in the art. The tasks get more complex and you make your way through. As an example of how easy it is to use, the first program is a simple exercise which asks you to sit or lie down for 5 minutes and follow instructions on a body scan meditation. 2. Sleep Cycle ($)

Sleep cycle uses a motion detector to chart your sleeping patterns. It also includes a wake up phase (30 minutes is recommended). This is a detection of when you’re at your most “awake” during the 30 minutes you need to wake up, with the alarm going off at that time. There are also other features including the ability to include sleep notes to track what effect things like coffee have on your sleep cycle. 3. Super Better (free)

Super Better is an app which has been created by game designers – its intention is to help “build personal resilience”. It’s customizable and asks you to complete basic/quick activities and tasks each day. 4. Happify (free)

Happify sells itself as “your personal happiness trainer”. It has customised tracks (which are groupings of games) based on a number of questions you answer when you sign up. The app works on the basis that the creators believe using the games 3-4 times a week will increase your happiness. 5. Stress Check (free)

Stress check asks you a number of questions each time you login. Based on your answers, it tracks your stress levels over the course of the week (or month, or year). It also includes meditations and office yoga programs you can purchase in-app. 6. Balanced (free)

Balanced works on a similar idea to Super Better. You can track your “victories” with a single swipe, and the victories themselves are simple: things like catching up with friends, reading a book or finding new music. It is a great way to keep the little things that matter a lot at the forefront of your mind.

Sarah Jones is the Business Law Health and Wellbeing officer and a legal practitioner director at JHK Legal


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The equity jurisdiction of the NSW Supreme Court has long sought to right the wrongs beyond the reach of the common law. The absence of a formal contract between parties does not naturally result in the absence of legal remedies available to victims of wrongdoing. Two common, but oft misunderstood principles that arise in the equity division are "estoppel" and "unconscionability". In the May 2016 case of Doueihi v Construction Technologies Australia Pty Ltd (2016) NSWCA 105 the NSW Supreme Court of Appeal was faced with an interesting set of facts dealing with equitable proprietary estoppel and unconscionability.

Mr Hogan was the director and primary shareholder of the defendant, Construction Technologies Australia Pty Ltd (CTA). The first to fourth appellants Mr Doueihi, Mrs Scott, Mrs Vatselias and Mrs Hogan, were family (together known as the Vatselias family). The fifth appellant, Marble Plus Pty Ltd, was a company owed by the Vatselias family. Since 1994 Mr Hogan had been working for the Vatselias family, and in 1998 he was promoted to managing director of the family's

business after he married a daughter of the Vatselias family, Mrs Hogan.

In 2008 Mr Hogan invested in a company (to be later known as CTA) which needed a large manufacturing space. He and Mr Doueihi together looked for premises large enough for both CTA and Marble Plus to operate. Upon finding a suitable property the parties agreed that the Vatselias family would purchase the property and there would be a lease arrangement from the family to CTA to allow CTA to operate out of the premises.

Although Mr Doueihi (on behalf of the family) and Mr Hogan negotiated a few key terms such as rent, term, option period, and payment of outgoings, the agreement was never formalised in writing. It had been the previous practice within the family to lease property between family members and their companies without a formal agreement, and the parties mutually relied on "family honour" between the parties. CTA incurred enormous expense fitting out the premises and the parties carried on a landlord/tenant relationship for over 12 months.

Keeping it in the family: finding legal obligation in a “honour” agreement


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In July 2011 Mr and Mrs Hogan separated. Shortly after the separation Mr Hogan sought to formalise the lease agreement to protect CTA's interests, however the Vatselias family only offered CTA a short term lease with an increased rent of 40%. Failing negotiations between the parties, CTA commenced proceedings against the family to enforce the terms of the lease agreement. Without a formal agreement the common law was useless – Mr Hogan turned to equity seeking a remedy for the Vatselias family's refusal to honour their agreement.

On behalf of CTA Mr Hogan argued that he had relied on the "family honour" that existed within the family as an assurance that the informal lease arrangement would be honoured by the parties. He had never intended for the lease to be formalised in writing, however CTA had gone to considerable expense in reliance of the representation made by the Vatselias family that the agreement would be honoured.

Mr Hogan asked the Court to recognise the arrangement as creating an equitable propriety estoppel that would form unconscionable conduct if the defendants were allowed to resile from their representations. The Vatselias family argued that an equitable proprietary estoppel was not made out because Mr Hogan had never assumed that a "particular legal relationship" existed between the parties, and it was unreasonable for Mr Hogan to make that assumption given the absence of a complete agreement.

The Court of Appeal upheld the decision of the trial judge, who found in favour of Mr Hogan/CTA. In his judgment Justice Gleeson reiterated the principle of equitable proprietary estoppel by quoting Walton's Stores (Interstate) Ltd v Maher (1988) HCA 7 (at 404) "a person whose conduct creates or lends force to an assumption by another that he will obtain an interest in the first person's land and on the basis of that expectation the other person alters his position or acts to his detriment, may bring into existence an equity in favour of that other person, the nature and extent of the equity depending on the circumstances."

In relation to unconscionability, Justice Gleeson made reference to Justice Brennan's comment in The Commonwealth v Verwayen (1990) 170 CLR 394 at 428-429, "equitable estoppel yields a remedy in order to prevent unconscionable conduct on the part of the party who, having made a promise to another who acts on it to his detriment, seeks to resile from the promise."

The question of whether an equitable proprietary estoppel had arisen was based on the circumstances of the case, namely the nature of the assumption made by Mr Hogan/CTA, and whether it was reasonable to rely upon it.

The Court reasoned that the nature of the assumption was that Mr Hogan assumed that CTA would have a proprietary interest in the land – not a contractual relationship with the appellants – and this was in keeping with the case law in equitable proprietary estoppel. Further the Court found that given the family's history of not formalising lease agreements and that Mr Hogan was a member of the family at the time of the arrangement, it was reasonable of him to rely on the assumption he made by representations of the Vatselias family, notwithstanding that the lease agreement was incomplete.

Finally, the Court found that it would be unconscionable for the Vatselias family to later refuse to honour the arrangements negotiated with Mr Hogan. Equitable proprietary estoppel was the appropriate remedy to prevent unconscionability by the Vatselias family.

The parties were ordered by the trial judge to enter in a formal lease agreement and on appeal the appellants were required to pay the defendant's costs.

The principles applied in this case may have an effect on any number of business and/or family relationships:

• certain property arrangements between family members or friends where the agreement has not been formalised in writing such as leasing


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arrangements, property development, sale and purchase of land;

• deceased estates where a family member was previously led to believe that they were to receive an interest in property; and

• certain property settlements between couples where representations were made to the ex-partner that they would receive an interest in the other partner's family property.

The two important lessons to remember are:

• It is always best practice to formalise property arrangements in writing with the assistance of legal advice

and drafting. The cost of preparing a formal document is novel compared to the cost of expensive litigation proceedings when a dispute arises.

• Individuals and/or companies may have a right in equity where a contract does not exist – if you think you have an equitable right to a property which has not been otherwise documented, we recommend that you seek legal advice.

Madeline Bow is a lawyer at Kells, Sydney.

Disclaimer

The opinions expressed in this publication are those of the authors and do not necessarily reflect the opinions or views

of their employer or NSW Young Lawyers.

The content of this publication is provided for information purposes only and does not constitute legal advice.

Recent Court Decisions

Victoria v Tatts Group Limited – Contract – construction of terms, where referred to statutory terms and

statutory term subsequently amended.

Playgro Pty Ltd v Playgo Art & Craft Manufactory Limited (No 2) – Trademarks – infringement – whether

deceptively similar.

Fischer v Nemeske Pty Ltd– Trustee powers – powers of advancement

RMeriton Apartments Pty Limited v The Owners of Strata Plan No. 72381 (No. 2) – Contract - damages

Tuck v White – need for intention to create legal relationship, inferred contract damages

Redmond Family Holdings v GC Access Pty Ltd & Ors – Trade practices, misleading and deceptive conduct

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