Farm Debt Mediation Reforms.

Farm Debt Mediation Reforms: Has the farm house been spared?

 

FDMA Review 23 years on…

To ensure the Act reflects its original intent, the Farm Debt Mediation Act 1994 (NSW) (FDMA) is currently under review as part of the NSW Rural Assistance Authority’s (RAA’s) Strategic Plan 2015-2019.

The review is part of the RRA’s initiative in partnership with the Australian Government to nationalise farm debt mediation, whilst driving economic growth within the industry and community.

The FDMA allows debtors in default of a farm mortgage to engage in facilitated mediation with creditors before the creditor takes enforcement action to recover the debt, allowing for the ‘efficient and equitable resolution of farm disputes.’(Section 3 FDMA)

What is Under Review?

The proposed changes impose strict obligations upon farmers to comply with the FDMA’s prescribed operation, yet eliminates some burdensome procedural requirements.

The proposed main changes are to:

  • expand the definition of “farmers” to include guarantors with an interest in an affected farm mortgage to be notified of and possibly attend mediation proceedings;
  • change the definition of “farm” so that it may be expanded to protect a broader range of farmers under the Australian New Zealand Standard Industrial Classification 2006 (ANZSIC), which excludes fishing, hunting and trapping from the FMDA. The Review also proposes new guidelines requiring farmers to demonstrate they are principally involved in primary production.
  • exclude machinery such as motorbikes, quadbikes cars and trucks may no longer form the subject of debt mediation, as the law doesn’t currently exclude machinery that serves multiple purposes.

Other important changes include the proposed elimination of the requirement to establish a mediation claim in multiple jurisdictions, as well as the introduction of “show cause” notices and periods when answering to allegations made by creditors and lodging exemption periods. The law may also be amended so as to not apply to farm mortgages that are secured by a guarantor that is subject to a bankruptcy petition. It has also been suggested that the FDMA be clarified to ensure that subsequent mediations are not needed for a farmer’s default under agreements giving effect to the mediation, such as a contract or mortgage document.

The FDMA may also specify the methods in which a mediator is to be chosen to be prescribed by regulation, and may require the provisions of mortgage documents and correspondence to either the mediator or creditors during proceedings.

What does this mean for farmers? 

  • The ability of guarantors to be notified and participate in mediation may relieve the burden upon farmers to claim protection of the FDMA by establishing the Act applies.
  • Farmers may be limited to which farm debts can be mediated, with certain machinery excluded.
  • The farmer may have new thresholds and requirements to establish they are a primary producer or involved in Agriculture, Aquiculture or Forestry and Logging as part of the ANZSIC Code.
  • Under the proposed changes, If the subject of the farm debt covers land in multiple states, farmers may no longer be required to submit claims in multiple jurisdictions.
  • Farm mortgages that are solely secured by a guarantor who is subject to a bankruptcy petition is unable to gain protection under the FDMA.
  • Farmers may no longer have the responsibility of nominating a mediator to which the creditor must agree.

 

What does this mean for practitioners?

  • Lawyers need to encourage their clients to respond promptly in proceedings as the right of famers to respond to allegations made by the creditor under s 11 within 28 days may become a legal requirement.
  • Lawyers may need to assist their client in effectively showing cause in order to submit an exemption period, which stays proceedings for 6 months.
  • Lawyers also need to be aware if their client defaults on agreements that give effect to the mediation under the proposed changes, that a subsequent mediation may not be required.
  • Accurate records of all correspondence and relevant mortgage documents should be kept as they be required by the mediator and/or creditor during proceedings.

 

Despite the changes which may appear to limit the ability of farmers to mediate their debt, mediation is overall a relatively inexpensive and efficient process. Between 12 February 1995 and 30 December 2016, the RAA reported that out of the 1659 ‘satisfactory mediations’ that have been undertaken under the FDMA, 1487 mediations resulted in parties reaching an agreement. This is an agreement rate of 90%.

Ultimately it is worth being aware of proposed changes to ensure that farmers are aware of their rights and obligations in mediating their debts, resulting in efficient and quick resolutions.

Contact: Kenneth Stanton (Principal), Lachlan Roots (Principal) or Jessica Haddad (Law Clerk) +61 2 8920 1344 or info@barraketstanton.com

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New Victorian Children Legislation (Reportable Conduct)

NEW REPORTING OBLIGAS MAY HIT UNSUSPECTING RTOs IN VICTORIA

New Victorian Children Legislation (Reportable Conduct) Act will apply to many RTO’s working with children

This article is another in our series about the Vocational Education Training (VET) Sector. While our previous articles have focused on the changes under the VET Student Loans Act 2016 this article outlines the anticipated changes for Victorian RTO’s under the Children Legislation (Reportable Conduct) Act 2017 (the Act) which commences on 1 July 2017.

Compulsory reportable conduct scheme

The Act establishes a compulsory reportable conduct scheme for organisations and businesses in Victoria who provide services to children.  The scheme requires these organisation and businesses to report any allegations of abuse so that even individuals who don’t have a criminal record can be excluded from working with children.

The new scheme will be overseen by the Commission for Children and Young People (the Commission) which has the authority to:

  • Decide whether to conduct an investigation into misconduct;
  • Report trends to Parliament;
  • Make an application to the Magistrates’ Court;
  • Monitor inquiries into abuse; and
  • Monitor the safety systems of organisations engaged in children-related work.

Under the scheme organisations and businesses will need to implement processes for reporting allegations of misconduct against children. When reportable conduct is alleged, information must be provided to the Commission and a subsequent internal investigation must take place. The Commission is also required to report its findings to the Government and distribute relevant information to the Working with Children Check Unit, with the main aim of ensuring that children are safe from risk of harm.

What is reportable conduct?

Reportable conduct in under the Act means:

  • Sexual offences again, with or in the presence of a child;
  • Sexual misconduct against, with or in the presence of a child;
  • Physical violence against, with or in the presence of a child;
  • Any behaviour that causes significant emotional or psychological harm to a child; or
  • Significant neglect of a child.

What are the obligations on heads of organisations?

The scheme will require heads of organisations (that is the chief executive officer or principal or public officer) to:

  • respond to a reportable allegation made against a worker or volunteer from their organisation, by ensuring that allegations are appropriately investigated
  • report allegations which may involve criminal conduct to the police
  • notify the Commission of allegations within 3 business days after becoming aware of the allegation
  • give the Commission certain detailed information about the allegation within 30 days after becoming aware of the allegation
  • after the investigation has concluded, give the Commission certain information including a copy of the findings of the investigation
  • ensure that their organisation has systems in place to:
    • prevent reportable conduct from being committed by a worker or volunteer within the course of their employment
    • enable any person to notify the head of a reportable allegation
    • enable any person to notify us of a reportable allegation involving the head
    • investigate and respond to a reportable allegation against a worker of volunteer from that organisation.Which RTO’s will this cover? The first phase commences when the Act does, from 1 July 2017, and encompasses:
    • The scheme covers a wide array of education and child services providers in three distinct phases. There may be aspects of your training programs that interact with children’s in ways you hadn’t previously thought was pertinent, but will raise reporting obligations.
    • As noted above, heads of organisations must, within 3 business days of becoming aware of a reportable allegation, notify the Commission that a reportable allegation has been made against one of their workers or volunteers.  Within 30 calendar days, heads of organisations must provide certain detailed information about the allegations and their proposed response.  It is a criminal offence for a head of an organisation to fail to comply with the 3 business-day and 30-day notification obligations without a reasonable excuse.
  1. An entity registered under the Education and Training Reform Act 2006 in respect of an accredited senior secondary course or registered senior secondary qualification;
  2. An entity registered under the Education and Training Reform Act 2006 to provide a specified course t students from overseas;
  3. A disability service provider providing residential services for children with a disability;
  4. A mental health service provider that provides in-patient beds.

The second phase commences 6 months after the first phase (from 1 January 2018) and applies to:

  1. An entity that provides overnight camps for children as part of its primary activity and is not a youth organisation;
  2. A disability service provider;

The final phase commences 18 months after the first phase (from 1 January 2019) and applies to:

  1. Approved providers under the Education and Care Services National Law which includes;
  • Preschools;
  • Long day care;
  • Out of school hours care;
  1. A children’s service within the meaning of the Children’s Services Act 1996, being a service providing care or education for 4 or more children under the age of 13 years in the absence of their parents or guardians.

The legislation can be confusing and it can be tricky to establish whether your organisation falls under any of the above categories, particularly if your business has a dual purpose.

 

Are you a provider in the VET Sector? Contact Kenneth Stanton or Lachlan Roots on +61 2 8920 1344 and by email on

kenneth.stanton@barraketstanton.com or lachlan.roots@barraketstanton.com 

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From Grape to Glass

 

From Grape to Glass

Buying a vineyard where you can sit back and enjoy the fruits of your labour sounds like paradise, but it may not be quite as idyllic as you imagine. Kenneth Stanton, one of Australia’s leading wine lawyers, examines the maze of regulations that winemakers need to navigate in order to get their product off the vine and into the consumer’s glass.

I’ve always viewed winemaking as a poetic – even a magical – process, and it seems that quite a few celebrities have also been bewitched. The film director Francis Ford Coppola, and musician and singer Cliff Richard, both own vineyards. Gérard Depardieu is such an enthusiast, he owns vineyards in several countries. Allegedly, his passport lists his profession as vigneron rather than actor.

However, the reality is that viticulture is a tough, and even fickle, business. Ideally, you need to be a shrewd businessperson because you’re at the mercy not just of local economic developments but of the global economy.

In addition, winemaking is an extremely competitive industry.

The many challenges wine producers face is something I see every day working with clients operating in the industry.

Interestingly, it isn’t just the economics of viticulture that tests. Most aspiring vintners don’t realise that the way in which the industry is regulated will also pose challenges. They aren’t simply facing regulation at a local and national level; there is a web of international institutions and agreements that will affect everything they do.

In my view, being aware of what is involved, including the potential pitfalls, is (to use another agricultural metaphor) what separates the sheep from the goats in the wine industry.

Have you ever been tempted to escape your corporate job and buy a vineyard? Would it be as idyllic as you imagine?

Growing grapes is a very labour-intensive process, involving activities such as pruning, leaf plucking and shoot thinning. You may need to spend time and money netting hectares of vines to protect your crop from birds. In addition, grapes are very dependent on the weather. Your vineyard could be hit by a storm and all your grapes split by hail. A year’s work could be lost in minutes.

The reality is that you’re not just facing a lot of hard work and the unpredictable forces of nature. Your activities are strictly controlled, because the regulatory bodies operating in this area are tasked with protecting the reputation of Australian wines while boosting sales in overseas markets.

Growers must comply with the Australian Label Integrity Program (LIP), which requires everyone in the wine supply chain to keep an auditable trail of documents indicating the vintage, grape variety and geographical indication of the grape products they grow, manufacture, supply or receive.

The penalties for failing to keep a record, keeping a false or misleading record, making a label claim not supported by your records or failing to provide a copy of the record when supplying wine goods can be severe and, in extreme cases, may lead to imprisonment.

It is likely that you’ll have to use chemicals to protect your crop from a variety of pests. The Australian Pesticides and Veterinary Medicines Authority (APVMA) sets the maximum residue limits permitted. However, the regulator of residues of chemicals in food (and wine) is Food Safety Australia and New Zealand (FSANZ), which adopts the maximum residue limits set by the APVMA. You’re required by law to keep a record not only of what chemicals you use, but how much of them you use.

However, the regulations don’t stop there when it comes to grape growing.

If you’re keen to export your wine overseas, you need to be aware that the maximum residue limits are much lower in the European Union than in Australia.

In addition, there are a large number of bilateral trade agreements that affect the international wine trade. Australia, along with Canada, Chile, South Africa and the United States, has made concessions regarding geographic indications in return for improved access to the European Union market. So, don’t even think about calling your beautiful sparkling wine ‘champagne’ or your red wine ‘Burgundy’ (even if your vines were imported from that French region back in the 19th century). In addition, you can’t state that your wine is from McLaren Vale unless it was actually sourced from that region.

What about making the wine? How much red tape is involved?

This is where the regulations become even more heavy-handed.

Decisions made by intergovernmental and international non-government organisations such as the International Office of Vine and Wine (OIV), the World Trade Organization, Codex Alimentarius, the World Wine Trade Group and the Fédération International des Vins et Spiriteux determine what you can call your wine, the additives you can use and the labels you can affix to the bottle, as well as where you can export your wine.

It is at this point that you might wonder whether you should have kept things simple and stuck to growing grapes, letting someone else handle the winemaking.

As a winemaker, you must keep records documenting any changes to the wine goods. The blending rules for wine are far from straightforward and affect vintage, variety and geographical indication. For example, if the wine is blended from different vintages or geographical indications, your records must show what proportions of the blend are represented by each blended wine, and the vintage, variety and geographical indication of each such wine.

You will soon discover that, when it comes to labelling your wine, you can only refer to grape varieties recognised by the OIV, the International Union for the Protection of New Varieties of Plants (UPOV) and the International Plant Genetic Resources Institute. In addition, as mentioned above, you must only use the geographical indications that have been agreed upon for Australia.

But the regulations don’t stop with blending.

Wine production in Australia is governed by Standard 4.5.1 of the Australian New Zealand Food Standards Code. The Code contains definitions for wine, sparkling wine, fortified wine, grape spirit and brandy.

The Code also regulates food additives and specifies those approved for the production of wine, sparkling wine and fortified wine (such as ascorbic acid, citric acid, dimethyl dicarbonate, erythorbic acid, lactic acid, etc.). It also lists the approved processing aids for the production of wine, sparkling wine and fortified wine (such as activated carbon, agar, alginates, calcium and potassium salts, ammonium phosphates, argon, etc.).

If you are planning to export your wine, you need to retain at least two samples of each product selected for export for at least six months after bottling, or for three months after the stock is exhausted, whichever is earliest.

By this point, you may be close to tearing your hair out. However, you’re only two-thirds of the way through the Australian wine regulation maze.

What about packaging the wine? Surely, that’s fairly straightforward?

Not exactly.

Wine labelling in Australia is governed by a range of federal and state laws. As touched on above, the brand name must not mislead as to the origin, age or identity of the wine.

In addition, the legislation specifies how the vintage, region, variety, volume, designation, country of origin, alcohol content, allergens, name and address, lot number and number of standard drinks are specified.

You also need to comply with the regulations relating to labelling item position, language, brand name, bar codes, ‘best before’ date and carton labelling.

You need to be aware that:

 vintage claims are optional but must be 85%

 region (GI) claims are optional but must be 85%

 variety claims are optional but must be 85%.

What about if you’re keen to export your wine and tap into some of those lucrative overseas markets?

Under the Australian Grape and Wine Authority Regulations, all wine shipments over 100 litres require export approval. The idea behind this is to protect the reputation of Australian wine by assisting wine producers to comply with international regulatory requirements, monitor compliance with Australian law, and investigate breaches when detected.

You will need to go through the following approval process:

  1. Obtain a licence to export.
  2. Register the product.
  3. Issue an export permit for each consignment of wine leaving Australia that is in excess of 100 litres.

If you want to export your wine to the European Union, you will need to obtain a VI1 Certificate of Analysis after you’ve obtained an Export Permit. This can be obtained from any National Authority of Testing Authorities-accredited laboratory.

In addition, if you’re dealing with a bulk wine shipment, you need to ensure that you’re complying with loading and transportation specifications. Failure to do so may result in your licence for future bulk wine shipments being suspended.

It’s also worth noting that wine exports are subject to a levy (the Wine Export Charge), which is calculated as a percentage of the sales value.

Finally, you need to be aware that the requirements for wine labels differ for each country, and that some country authorities or importers require additional certification.

The good news is that once you’ve checked out those requirements, you are on your way to international success and can pour yourself a stiff drink to celebrate.

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Vocational Education Training Student Loans and Trustees Don’t Mix

 

Is your RTO trustee of a trust? A quick restructure may be in order if you want to be an Approved Course Provider of VET Student Loans

This article is the second in a series about Vocational Education Training sector changes in connection with the VET Student Loans Act 2016 (the Act).

Our previous article (which you can read here) outlined the application process for becoming an Approved Course Provider (ACP) for VET Student Loans.  This article continues with the theme of ACP eligibility requirements.  A requirement that ACP applicants may not have picked up or understood fully is their inability to be trustees of a trust.  Imminent organisational restructuring is on the cards for those ACPs who fall into this category.

Prohibition on trustees

The Act prohibits persons who are ACPs from being a trustee by stipulating that in order to meet the “course provider requirements” an RTO must “be a body corporate that is not a trustee”.  This is a blanket prohibition.  No “if’s” or “but’s”.

Clearly if you are an RTO which is not a trustee then you can breathe a sigh of relief and continue worrying about the other changes you need to comply with under the Act.

However, if you are an RTO which is a trustee then you may have a major problem on your hands.  It may be that your RTO already has provisional approval as an ACP or has applied to become an ACP.  If you have failed to properly disclose that you are a trustee, section 36 of the Act could come home to roost as it allows the Department to suspend, cancel or revoke your status as an ACP or application for approval as an ACP where you do not comply with the Act.

How can you comply with the requirements of the Act if you are a trustee?

This will ultimately depend on the nature of your corporate, tax and other structuring arrangements as an RTO and how you have been operating your existing RTO business.  For some it may be all too hard to restructure.  For others, there may be a range of changes which can be considered to your existing structure to manage this issue, including the following:

  • Retirement of your RTO as trustee of any trusts of which it is trustee and appointing a replacement trustee
  • Establishing a new RTO entity (not a trustee) and moving all of your RTO arrangements from the existing trustee to the new RTO (noting that this would require approval from the relevant regulatory authorities, including ASQA, VRQA and TAC)

In considering either of the above options or any other structural options available to you, careful consideration will need to be given to the following non-exhaustive list of matters:

  • The terms of the RTO’s funding and other material contracts
  • Course material licensing and other IT and IP arrangements
  • Banking and other financing facilities which may contain restrictions or other consent covenants
  • Taxation implications for the RTO and any trust of which it is trustee

It is never fun to make a hasty organisational restructure, but better to comply with the requirements now before you have your provisional ACP status suspended or revoked or your application to be an ACP rejected.

Stay tuned for the rest of our VET Sector series in the months to come!

Are you a Provider in the VET Sector? Do you need the assistance of lawyers who can help you comply with the new VET Laws? Contact Kenneth Stanton or Lachlan Roots on +61 2 8920 1344 and by email on
kenneth.stanton@barraketstanton.com or  lachlan.roots@barrkaketstanton.com 

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Out with the old and in with the new: How to stay on top of the Vocational Education Training Student Loan revamp

 

Being prepared for the changes under the new VET Student Loans scheme may be the difference between sink or swim.

With the Christmas and New Year festivities well and truly over, the luxury of slowly easing back into your regular work routine cannot afford to be taken by any Vocational Education Training Provider (Provider). So shake off that holiday hangover and read up because the VET Sector is getting an overhaul.

The VET Student Loans Act 2016 (the Act) commenced on the first of January this year, and has wide-ranging reforms for all aspects of the VET Sector. The Act was unsurprisingly a response to the previous VET FEE-HELP Scheme which was described by the National Audit Office as having ‘poor design and a lack of monitoring’.

This article is the first of a series that will help Providers understand and adapt to the different design and increased monitoring under the new scheme. Along with increased requirements upon Providers, competition will become more pronounced as new loan caps and restrictions on course availability kick in.

Becoming an Approved Course Provider is the most urgent aspect of the new changes and will be addressed in this article. The application date is drawing near and the process is rigorous, so be across the new requirements and send your application in by the deadline or wave goodbye to government funding.

How to become an Approved Course Provider

Regardless of whether you are a provisional Provider or not, come 1 July 2017 only Approved Course Providers will be eligible to receive VET Student Loans. Applications to become an Approved Course Provider close at 11:59pm on 19 February 2017. Missing this deadline will lock Providers out until an annual application process has been developed and approved by the Department of Education of Education and Training.

And remember, just completing the form may not cut it as only ‘high quality providers offering courses with positive outcomes for students gain approval’ (The Department of Education and Training).

Along with the usual information you would expect to be included in the application (such as key personnel, Provider and course details) the most important section is the Provider Suitability Requirement (PSR) criteria. The PSR criteria require evidence of five key Provider characteristics:

  1. Financial Performance: This means you need professionally prepared financial documents showing you that your ‘organisation has sound financial management structures in place’.
  2. Strong Management and Governance: You need to demonstrate a ’strong commitment to good governance, accountability and data integrity’.
  3. Experience in Providing Quality Vocational Education: The Department is looking for Provider’s to demonstrate that they have a strong history of quality education services.
  4. Student Outcomes: You need to sell to the Department that your Provider has a commitment to ‘genuine student engagement’ and substantiate it through course completion rates and student employment outcomes.
  5. Workplace Relevance: The Department is limiting funding to course with a ‘high national priority’. Linking your courses to state subsidy/skill lists or science, technology, engineering and mathematics is vital for funding. After this you also need to demonstrate involvement with the industry that your courses relate to.

The application process may be daunting for prospective Providers seeking entry to the VET Sector, but will be equally challenging for existing Providers (even if they have a dedicated compliance team). If the above requirements haven’t snapped you out of holiday mode then you are either already prepared or looking for work in a different industry.

Stay tuned for the rest of our VET Sector series in the months to come!

Are you a Provider in the VET Sector? Do you need the assistance of lawyers who can help you comply with the new VET Laws? Contact Kenneth Stanton or Lachlan Roots on +61 2 8920 1344 and by email on
kenneth.stanton@barraketstanton.com or  lachlan.roots@barrkaketstanton.com 

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Overriding purpose: why ‘less is more’ has never been more apt

 

Retaining that silk may be tempting, but be prepared to bear the brunt of a costs order if the court deems it unnecessary.

A key aspect of litigation that is often overlooked by both lawyers and clients is the overriding purpose principle, which is clearly set out in both the New South Wales and Victorian Civil Procedure Acts (The CPAs). Section 56 of the NSW CPA stipulates the ‘the just, quick and cheap resolution of the real issues in the proceedings’ as an overarching principle. Both parties and their solicitors are placed under a duty to assist the court achieve this principle under the CPAs.

Ignoring the overriding purpose principle is done at your own peril. Frustrated by the disregard shown by parties and their solicitors, the courts have increasingly showed a willingness to correct this apathy with stinging costs orders.

Now that you are aware that you not only owe this duty to the court but are likely to get more than a rap over the knuckles if you ignore it, you should follow these simple guidelines to avoid being saddled with an adverse costs order.

For Lawyers:

  • Try to resolve as many peripheral issues between parties outside the court. This means resolving interlocutory issues by a telephone call between parties and filing motions as a last resort.[1] The High Court in Expense Reduction and Analysts Group Pty Limited expressed a clear disapproval for ‘unduly technical and costly disputes about non-essential issues’.[2]

  • ‘Civility, trust and mutual respect’ are expected of solicitors and barristers, and must ‘never be abandoned at the behest of clients’.[3] If you negotiate with other parties in a reasonable manner and reach a compromise on an outcome, the court will be unlikely to award adverse costs.[4]
  • Don’t leave things till the last moment! In Aon Risk Services the Australian National University sought to amend their case in the third day of the trial.[5] The High Court didn’t take kindly to this, dismissing the proposed amendment and ordering costs against Australian National University.
  • Avoid providing unnecessary and excessive volumes of documents to the court. Justice Kunc in Tugral was particularly frustrated with the ‘practice of exhibiting … an evidentiary cornucopia from which only a few morsels are ultimately selected to be referred to in argument.’[6]

Still not convinced? You should have a chat to the applicant’s solicitors in Yara Australia Pty Limited v Oswal who had to pay 50 percent of the respondent’s appeal book costs because the court decided they filed ‘excessive materials’.[7]

For Clients:

  • While you might not always understand the specifics of what your lawyer is doing in your proceedings, ask them to justify the particular course of action taken and remind them of the overriding purpose principle.
  • Don’t be frustrated if your solicitor explains that they can’t act on your instructions because of their overriding duty. Yara Australia Pty Ltd & Ors v Oswal made it clear that a solicitor’s obligation to the court takes precedence over a client’s instructions when they are in conflict.[8]
  • Beware of engaging in ‘overrepresentation’. You have a right to representation to the level and extent that is necessary for the proceeding and nothing more. That shiny silk might seem like the answer but you will be on the hook for their shiny fees if the court decides they amount to overrepresentation.[9]

The reality is that the overriding purpose principle isn’t going away anytime soon so we suggest you play by the rules and assist the courts by acting reasonably and making sure you do everything you can to keep proceedings as ‘quick and cheap’ as possible.

Are you involved in litigation? Do you need the assistance of lawyers who will ensure you adopt a cost-effective and strategic approach to running your case? Call Kenneth Stanton, Lachlan Roots or Charlie George on +61 2 8920 1344. Alternatively, you can email us at kenneth.stanton@barraketstanton.com, lachlan.roots@barrkaketstanton.com and charlie.george@barraketstanton.com 

[1] Tugrul v Tarrants Financial Consultants Pty Limited [No 5] [2014] NSWSC 437.

[2] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46.

[3] Tugrul v Tarrants Financial Consultants Pty Limited [No 5] [2014] NSWSC 437.

[4] Hamilton v New South Wales [2016] NSWSC 1213.

[5] Aon Risk Services v Australian National University [2009] HCA 27.

[6] Tugrul v Tarrants Financial Consultants Pty Limited [No 5] [2014] NSWSC 437.

[7] Yara Australia Pty Ltd & Ors v Oswal [2013] VSCA 337.

[8] Yara Australia Pty Ltd & Ors v Oswal [2013] VSCA 337.

[9] Ibid.

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A legal oxymoron: when an agent’s irrevocable appointment is revocable

 

The law of agency: when are you likely to want the appointment of an agent to be irrevocable?

Anyone running or managing a business is aware that agency relationships play an important role in commercial life.  After all, there are numerous situations in the commercial world of one party (the principal) authorising another party (the agent) to create legal relations with a third party.

In most cases, the appointment of an agent will be revocable.  However, there are certain circumstances where it may make commercial sense for the appointment to be irrevocable. In fact, an irrevocable appointment could arise in many such relationships.  These include (but are not limited to):

  • Estate agents
  • Auctioneers
  • Attorneys (appointed under power of attorney)
  • Distribution agents
  • Finance brokers
  • Insurance brokers
  • Insurance agents
  • Solicitors
  • Receivers
  • Liquidators
  • Travel agents.

When might an irrevocable appointment be revocable?

The recent decision of the Supreme Court of the United Kingdom in Bailey and Another (Respondents) v Angove’s Pty Ltd (Appellants) [2016] UKSC 47 (Angove’s Case) considered the rather oxymoronic legal world of the revocability of irrevocable appointments of agents.  This article reviews this decision and the salutary lessons which it teaches.

According to Lord Sumption (with whom Lords Neuberger, Clarke, Carnwath and Hodge agreed):

The general rule is that the authority of an agent may be revoked by the principal, even if it is agreed by their contract to be irrevocable.[1]

But any good lawyer knows that every good general rule typically has at least one exception.

For instance, there are circumstances in which the irrevocable appointment of an agent cannot be revoked by the principal, such as when the agent has a relevant interest of his or her own in the exercise of his or her authority as agent.[2]  That is, the power is irrevocably granted on the basis that it secures to the attorney an entitlement to recover against the principal some benefit granted by the principal to the agent.  As Lord Sumption noted, two conditions must be satisfied in order for irrevocability of the appointment to apply:

  1. There must be an agreement that the agent’s authority is to be irrevocable.[3]
  2. The authority must be given to secure an interest of the agent, being either a proprietary interest or a liability owed to the agent personally.[4]

It follows from these conditions, however, that upon the proprietary interest or liability owed to the agent being satisfied, the principal can revoke the agent’s appointment.

When is an irrevocable appointment NOT revocable?

Under the general law, the following principles must apply if you want to prevent a principal from revoking an irrevocable appointment of an agent:

  • The agreement between the principal and agent appointing the agent must expressly stipulate that the agent’s authority is to be irrevocable.[5]
  • The irrevocable appointment must be coupled with an interest.[6]
  • The appointment must secure an interest of the agent, being either a proprietary interest of the agent or a liability owed to the agent personally.[7]
  • The interest must be for the benefit of the agent so as to ‘protect some title or right in the subject of the [agency] or secure some performance to [the agent]’[8]. As Lord Atkinson stated in Frith v Frith [1906] AC 254:

…where an agreement is entered into for sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the donee of the authority: Story on Agency, sect 476.[9]

  • The irrevocability of the agent’s authority may be inferred from the relevant agreement, but not from the mere co-existence of the agency and the interest. It is necessary that the one should be intended to support the other.[10]
  • The irrevocability of the agent’s authority can be found in the following situations:
  • where the authority exists solely in order to secure the agent’s financial interest;[11]
  • where the relationship of principal and agent is broader than the mere collection of money to satisfy the agent’s debt, so that the agent may be said to act both for [itself] and [its] principal.[12]

The murky issue of irrevocability: attorneys (appointed under a power of attorney) and distribution agents

The remainder of this article will focus on two of the following types of agency – attorneys (appointed under a power of attorney) and distribution agents.  Why? Because attorneys (appointed under a power of attorney) are very commonly used in a diverse range of situations from family and other arrangements to specific transactions, and therefore this type of agency relationship regularly arises in daily private and commercial life; and distribution agents, because it was this type of agency relationship which was the context for this article and the subject of the decision in Angove’s Case.

Attorneys appointed under a power of attorney

In New South Wales,[13] the position at common law has been replaced with specialist legislation – the Powers of Attorney Act 2003 (NSW).  Sections 15 and 16 of the Act deal with irrevocable powers of attorney and provide as follows:

15             Irrevocable powers of attorney

An instrument that creates a power of attorney creates an “irrevocable power of attorney” for the purposes of this Act if:

(a)           the instrument is expressed to be irrevocable, and

(b)           the instrument is given for valuable consideration or is expressed to be given for valuable consideration.

16           Effect of irrevocable powers of attorney

(1)           The power conferred by an irrevocable power of attorney is not revoked or otherwise terminated by, and remains effective despite, the occurrence of any of the following:

(a)           anything done by the principal without the concurrence of the attorney,

(b)           the bankruptcy of the principal,

(c)           the mental incapacity of the principal,

(d)           the principal becoming a mentally incapacitated person,

(d1)        the principal becoming a person who is a managed missing person within the meaning of the NSW trustee and Guardian Act 2009,

(e)           the death of the principal,

(f)            if the principal is a corporation, the dissolution of the corporation.

(2)           Subsection (1) has effect except to the extent that the instrument creating the irrevocable power of attorney provides otherwise.

The Act defines an ‘instrument’ to include a deed and ‘valuable consideration’ to include marriage but does not include a nominal consideration, even if it has some value.

The important point to note here is that in New South Wales there is a statutory regime regulating irrevocable powers of attorney that must be followed in order for them to be properly created and effective, which will not be undone if any of the circumstances set out in section 16(1) of the Act arise.  Significantly, however, the regime includes an ‘opt out’ mechanism in section 16(2) of the Act.  As Ward J noted in Quest Rose Hill Pty Ltd v White [2010] NSWSC 939, if the power of attorney meets the statutory requirements, then, for the purposes of the statute it is irrevocable, whether or not it meets the common law requirement of being coupled with an interest.[14]

The distribution agency in Angove’s Case

The essential facts in the case were as follows:

  • Angove’s Pty Ltd (an Australian winemaker) engaged D&D Wines International Ltd (a UK company) (D&D) as its agent and distributor in the United Kingdom under an Agency and Distribution Agreement dated December 2011 (ADA).
  • D&D went into administration on 21 April 2012 at which time there were outstanding invoices totalling $874,928.81 representing the price of wine sold by D&D to UK retailers.
  • On 23 April 2012 Angove’s gave D&D written notice terminating the ADA and D&D’s authority to collect on the outstanding invoices totalling $874,928.81. The written notice stipulated that Angove’s would collect on the outstanding invoices and account separately to D&D for its commission arising on these sales referable to these invoices.
  • On 10 July 2012 D&D moved into voluntary liquidation. The liquidators (Bailey) claimed that Angove’s was not entitled to do what it had done and contended that D&D was entitled to collect on the outstanding invoices, deduct its commission arising on these sales referable to these invoices, and leave Angove’s to prove in the winding up of D&D for the balance of the price of the invoices.
  • As part of its claim D&D argued that the arrangements under the ADA created an irrevocable agency because the ADA created rights allowing D&D as agent to collect its commission out of the proceeds of wine sold by it to customers of Angove’s.

Their Lordships found against Bailey and D&D for the following reasons:

  1. While D&D had express authority to collect from customers, the authority wasn’t expressed to be irrevocable. Nor was it is expressed as surviving the termination of the ADA.  It would have been easy to have expressed these conditions in the ADA but they weren’t.
  2. While D&D assumed responsibility for collecting payment from customers, there was nothing in the ADA to stop Angove’s assuming responsibility for that task or the customer paying Angove’s directly.
  3. The fact that the ADA allowed D&D to recover its commission by deducting it from the proceeds of invoices upon payment by the customer didn’t infer that the agency was irrevocable.
  4. It was inherently improbable that either D&D or Angove’s intended the arrangement to be irrevocable as the parties had envisaged the possibility of insolvency and had provided for a mutual right of termination in that event.

What can be learned from Angove’s Case

The lessons are twofold:

  1. If you WANT your agency relationship to be irrevocable it requires express language to record this, and it must found a proprietary or other right in the agent that is personal to the agent.
  2. If you DO NOT WANT your agency relationship to be irrevocable, it is critical that there is express language which records this, and that the terms and conditions of the relationship must have the substantive effect of making it revocable.

Do you need to create an agency relationship that is irrevocable? Or, are you determined to ensure any agency relationship you create is revocable? At Barraket Stanton Lawyers, we can help you achieve either outcome. Call Lachlan Roots or Kenneth Stanton on +61 2 8920 1344. Alternatively, you can email us at lachlan.roots@barrkaketstanton.com or kenneth.stanton@barraketstanton.com.


[1] Bailey and Another (Respondents) v Angove’s Pty Ltd (Appellants) [2016] UKSC 47 at Paragraph [6].

[2] Ibid at Paragraph [7].

[3] Ibid.  See also Esteban de Comas v Prost and Kohler (1865) Moo PC NS 158; Frith v Frith [1906] AC 254; Griffin v Clark (1940) 40 SR (NSW) 409; Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd (2005) 55 ACSR 185.

[4] Ibid at Paragraph [7].  See also the cases referred to in footnote 3.

[5] Ibid at Paragraph [7].

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Frith v Frith [1906] AC 254 at 259-260. See also Clerk v Laurie (1857) 157 ER 83 at 83 per Williams J; Smart v Sanders (1848) 2 CB 895 at 917-918 per Wilde CJ.

[10] Bailey and Another (Respondents) v Angove’s Pty Ltd (Appellants) [2016] UKSC 47 at Paragraph [8].

[11] Ibid at Paragraph [9]. See also Walsh v Whitcomb (1797) 2 Esp 565 and Gaussen v Morton (1830) 10 B&C 731.

[12] Bailey and Another (Respondents) v Angove’s Pty Ltd (Appellants) [2016] UKSC 47 at Paragraph [9].

[13] There is similar legislation in all States and Territories, however the South Australian and Australian Capital Territory legislation does not contain provisions addressing irrevocable powers of attorney.

[14] See D.E. Dal Pont, Powers of Attorney, 2nd Edition, LexisNexis Butterworths, 2015 at p 21.

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Effects of the 2016 Budget on the Wine Industry

In Tuesday’s Budget, the Government announced several changes to the Wine Equalisation Tax (WET) rebate, to be implemented over the next 4r years. These reforms were introduced in an effort to place ”the wine industry in a stronger, long term position by making a record investment in international and domestic wine promotion, while strengthening the integrity of the WET by tightening eligibility rules and reducing the WET rebate.”

The WET rebate was originally intended to benefit small wine producers in rural and regional Australia. However, since its introduction in 2004, the wine industry has found that the WET rebate has moved beyond the original intent and has had a negative impact on the industry by encouraging business structuring to maximise rebate claims and by contributing to excessive wine grape production and low value wine. It is hoped that these reform will address these concerns.

WET Rebate and Excise Refund Reforms

The reforms include:

• tightening the eligibility criteria for the WET rebate. From 1 July 2019, a wine producer must own a winery or have a long term lease over a winery and sell packaged, branded wine domestically. This will ensure only those that have a stake in the wine industry will benefit from the rebate by eliminating “virtual winemakers” and curtailing the issues associated with bulk and unbranded wine.

The changes will equally apply to producers of cider, perry, sake and mead, and to New Zealand wine producers that claim the rebate under trade agreements.

Final details on the tightened eligibility criteria (including the definition of “winery”) will be resolved after further consultation; and

• reducing the WET rebate cap. The WET rebate cap will be reduced from $500,000 to $350,000 on the 1 July 2017 and then further reduced to $290,000 on 1 July 2018.

In addition to reforming the WET rebate, the Government has also indicated that it will extend the excise refund scheme to domestic spirits producers from 1 July 2017. The current scheme provides those eligible with a refund of 60% of excise paid up to $30,000 per financial year. Eligibility will now include producers of whisky, vodka, gin, liquor and producers of low strength fermented beverages such as non-traditional cider.

However, those that are eligible for the WET rebate and most producers of alcopop beverages (i.e. those that purchase spirits and add soda and other flavours) will not be eligible for the excise refund scheme.

Support for export and regional wine growers

The Government claims that it will save over $300 million from the WET reform. From this amount, $50 million will be given over 4 years to the Australian Grape and Wine Authority from 1 July 2016. The funding is to be used to promote Australian wine overseas, and wine tourism within Australia to benefit regional wine producing communities. This will open new opportunities through free trade agreements and increase wine exports, which currently constitutes approximately 60% of the wine produced in Australia.

For more information please contact:

Kenneth Stanton

Partner

P: (+61 2) 8920 1344

E: kenneth.stanton@barraketstanton.com

Debbie Chun

Senior Associate

P: (+61 2) 8920 1344

E: debbie.chun@barraketstanton.com

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A boutique law firm has advised Casella Family Brands on its acquisition of Brand’s Laira from McWilliam’s Wines Group

Firms: Barraket Stanton Lawyers (Casella Family Brands); Holding Redlich (McWilliam’s Wines Group Ltd)

Deal: Casella Family Brands acquired of Brand’s Laira from McWilliam’s Wines Group Ltd.

Value: Undisclosed

Area: M&A

Key players: The Barraket Stanton Lawyers team was led by partner Kenneth Stanton (pictured).

Deal significance: Casella Wines Pty Ltd of Casella Family Brands acquired Brand’s Laira from McWilliam’s Wines Group Ltd, for an undisclosed amount.

The move furthers the expansion of Casella Family Brands, following the off-market takeover of Peter Lehmann Wines in 2014.

Casella Family Brands prides itself on its commitment to the domestic wine industry and is excited about the opportunity to develop this industry, both domestically and internationally.

Barraket Stanton Lawyers lead partner Kenneth Stanton said: “Since our firm’s inception in 2011, we have worked for clients in all areas of the wine industry.”

He continued: “Casella Family Brands is a close client who represents integrity and family values. We are proud to be a part of their expansion.”

This article was published on the Lawyers Weekly website on 5th January 2016. View the article on the Lawyers Weekly website http://www.lawyersweekly.com.au/deals/17754-boutique-advises-on-wine-company-acquisition

 

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Three firms act on drinks deal : Lawyers Weekly

Firms: Ashurst (Coca Cola Amatil Limited), Barraket Stanton Lawyers (Casella Wines),

Corrs Chambers Westgarth (NAB)

Deal: Establishment of a Beer Joint Venture between Coca Cola Amatil Limited and Casella Wines Pty Ltd

Area: Corporate

Value: Initial investment, by issue of convertible notes, by Australian Beer Company Pty Ltd to Coca Cola Amatil Limited of $24 million, with further funding obligation of up to $23 million

Key players: Murray Wheater (pictured) was the lead Ashurst partner. He was assisted by Barbara Phair, Vivian Chang, Tim Sackar, Graeme Tucker, Cameron Thomson and Andrew Deane. Continue reading

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