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In this issue

Welcome to the June edition of our Corporate and Commercial Briefly.

>   Corporate and Commercial – South Australian reforms for directors’ personal liability for corporate fault
>   Construction – The South Australian Supreme Court hands down its first decision on the Building and Construction Industry (Security of Payment) Act 2009 (SA)
>   Employment – Increased superannuation contributions: Are you ready?
>   The Not-for-Profit Sector – New statutory definition of charity

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Corporate and Commercial – South Australian reforms for directors’ personal liability for corporate fault

South Australia has become the latest state to implement legislation refining directors’ personal liability for offences committed by corporations. The Statutes Amendment (Directors’ Liability) Act 2013 (Act) will remove directors’ personal liability for offences committed by corporations from 19 current State Acts while also repealing and replacing existing directors’ liability provisions from another 24 Acts. The Act comes into operation on 17 June 2013 and adopts the Council of Australian Governments’ (COAG) reform program for directors’ liability which seeks to provide a more uniformed approach to personal liability for corporate offences.

New directors' liability provisions

These new provisions will impose individual criminal liability on directors or officers (as defined in the relevant State Act) for offences committed by the corporation. The Act reflects COAG’s recommended approach when dealing with these offences, summarised below:

  • the corporation at first instance should be held liable before any liability is attributed to directors;
  • directors should not automatically be liable for offences committed by the corporation, but rather a number of factors must first be considered to determine the ability of directors to influence the offending conduct of the corporation;
  • directors should be liable where they have encouraged or assisted the commission of the offence or otherwise where they have been reckless or negligent in relation to the offence; and
  • in some instances, directors will bear the burden of proving that reasonable steps were taken to prevent the corporation committing the offence, rather than the prosecution proving the offence beyond reasonable doubt (ie directors are deemed liable until they prove otherwise).

Types of offences

The COAG guidelines provided for three different types of offences for directors’ liability under the new legislative regime. South Australia has only implemented two types of offences summarised below:

  • “Type 1 Offences” – offences where a director is innocent of any offence committed by the corporation unless the prosecution can prove beyond reasonable doubt that the director knew or ought to reasonably have known that there was a significant risk that the offence would be committed and the director was in a position to influence the conduct of the corporation and failed to exercise due diligence (take reasonable steps) to prevent the offence; and
  • “Type 3 Offences” – offences where a director is guilty unless the director can prove, on the balance of probabilities, that he or she could not have prevented the corporation from committing the offence (ie. the onus of proof is reversed).

Actions for directors

The Act lists a broad range of South Australian Acts that have been amended with regard to directors’ personal liability. Directors should be aware of these changes and take particular note of Acts which may affect them. Directors should also be aware that the new provisions are specific only to the legislation listed in the new Act. Provisions in other legislation concerning personal liability not covered by this Act will continue to apply unchanged.

Directors should also note that these new provisions relate specifically to personal liability of directors for offences committed by a corporation and not to provisions dealing with offences personally committed by directors.


For more specific information on any of the material contained in this article please contact Johanna Churchill on 8210 1236 or jchurchill@normans.com.au or Sam McNeil on 8217 1307 or smcneil@normans.com.au.


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Construction – The South Australian Supreme Court hands down its first decision on the Building and Construction Industry (Security of Payment) Act 2009 (SA)

On 3 June 2013, Justice Blue of the Supreme Court of South Australia handed down the Court’s first judgement on the Building and Construction Industry (Security of Payment) Act 2009 (SA) (SOP Act) in the case of Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors [2013] SASC 84.

The security of payment legislation in other jurisdictions in Australia has been highly litigated since its introduction in those jurisdictions. The SOP Act is almost identical to the New South Wales security of payment legislation.  In its judgement the Court considered a number of decisions of the New South Wales courts, confirming our view that decisions from New South Wales would be used as guidance in South Australia.

The case related to works completed for the construction of the new Woolworths Walkerville Shopping Centre (the Project).  Built Environs was the head contractor for the Project. Tali was appointed by Built Environs as the structural steel subcontractor for the Project.  The subcontract between Built Environs and Tali separated the work to be completed by Tali into three separable portions and set completion dates for each portion.  The subcontract provided for Built Environs to claim liquidated damages for late completion of each of the portions and for any liquidated damages to which Built Environs was entitled to be set off against progress claims by Tali.

Tali submitted nine progress claims to Built Environs under the subcontract.  In its ninth progress claim, Tali claimed that the total value of work it had completed to date was $1,238,836.30. Tali deducted amounts previously certified of $656,850 and claimed a net amount of $581,986.30.  Built Environs sent Tali a payment schedule in response to its ninth progress claim in which Built Environs rejected certain variations claimed by Tali and sought to set off liquidated damages of approximately one-million dollars against the amounts claimed by Tali.

Tali made an adjudication application to Nominator, an authorised nominating authority under the SOP Act, in respect of its ninth progress claim.  Nominator nominated Matthew Allan as the adjudicator.  Mr Allan determined that the value of the progress payment to which Tali was entitled was $579,420.90.

Built Environs commenced judicial review proceedings against Tali, Nominator and Mr Allan seeking a declaration that Mr Allan’s determination is a nullity and an order setting it aside.

Built Environs relied on six grounds for judicial review.  These were:

  1. That Tali’s payment claim did not comply with section 13(2) of the SOP Act and this deprived Mr Allan of jurisdiction to undertake an adjudication.  Built Environs’ contentions were based on the fact that there were arithmetical errors in the payment claim that it did not specifically identify the construction work performed since the previous payment claim.
  2. That Mr Allan exceeded his jurisdiction by entertaining a claim for unliquidated damages, assuming the jurisdiction of the subcontract superintendent to grant an extension of time to Tali to achieve substantial completion and entertaining claims not made in Tali’s payment claim.
  3. That there was a denial of natural justice because Mr Allan did not invite further submissions or evidence from the parties.
  4. That there was a denial of natural justice due to a reasonable apprehension of bias of Nominator and/or Mr Allan.
  5. That Mr Allan made errors of law invalidating his determination.
  6. That Mr Allan did not act in good faith because he did not attempt in good faith to consider the submissions put by the parties or call for further submissions and identify, understand and determine the issues in accordance with the SOP Act and the contract.

Justice Blue rejected Built Environs’ first ground of review on the basis that the payment claim allowed a reasonable principal to ascertain with sufficient certainty the basis of the claim, so as to be able to provide a meaningful payment schedule, notwithstanding the minor arithmetical errors and the fact that the claim had been prepared on a cumulative basis.

Justice Blue also rejected Built Environs’ second ground of review.

The third ground of review was upheld by Justice Blue.  There were a number of points, both factual and legal, decided by Mr Allan in his adjudication application which the Court found Mr Allan did not have any or sufficient evidence before him to make a decision on or where Built Environs had not been given adequate notice that Tali was relying upon, or that Mr Allan might determine the adjudication application upon.  In relation to these points, the Court found that Mr Allan should have sought further submissions from the parties or called a conference before deciding these matters.  Justice Blue found that there was a denial of natural justice by Mr Allan and that this rendered the adjudication determination void.

Built Environs’ fourth ground of review, that there was a reasonable apprehension of bias by Nominator or Mr Allan, was based on fact that:

  • The manager of Nominator, Mr Sain, was also the chief executive officer of Edward Sain & Associates (ESA) that had been engaged by Tali to advise and assist it concerning contractual issues with Built Environs on the Project.
  • ESA conducts adjudication training courses on behalf of Nominator and ESA trained, on behalf of Nominator, Mr Allan.
  • Mr Allan was a former employee of Built Environs prior to the Project.

The Court found that there was a reasonable apprehension of bias on the part of Nominator in the selection of the adjudicator to adjudicate the dispute between Tali and Built Environs and that this rendered the adjudication decision void.  However, the Court found that there was insufficient evidence to establish a reasonable apprehension of bias on the part of Mr Allan.

Given that the Court upheld the third and fourth grounds of review, the Court did not decide grounds five and six of review.   The Court declared that Mr Allan’s adjudication determination was void and set the determination aside.

This decision shows that recipients of payment claims must be reasonable in their responses, and that minor errors in the payment claims will not invalidate the claims. However, if you are the subject of an adjudication where the adjudicator appears to go beyond the scope of the evidence before them, you may be able to challenge that adjudication on the basis of this decision.

We suggest that before embarking on any of the processes set out in the SOP Act you obtain appropriate advice. Your situation will be unique and you may not be able to rely on the information in this article alone.

If you require further information regarding any of the issues raised in this article, please contact Mark Henderson on 8210 1220 or mhenderson@normans.com.au, Stephen Williams on 8210 1237 or swillliams@normans.com.au or Lisa Hubbard on 8217 1369 or lhubbard@normans.com.au.


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Employment – Increased superannuation contributions: Are you ready?

As previously highlighted to our Briefly readership, compulsory employer superannuation guarantee contributions will soon increase from 9% to 9.25%.

This increase will take effect on 1 July 2013. It is the first increase of seven to the superannuation guarantee contribution, which will ultimately require employers to make contributions of 12% of an employee’s ordinary time earnings.

All employers must ensure that the new rate of 9.25% is adhered to throughout the 2013/14 financial year.

For more specific information on any of the material contained in this article please contact Sathish Dasan on 08 8210 1253 or sdasan@normans.com.au.


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The Not-for-Profit Sector – New statutory definition of charity

On 29 May 2013, the Federal Government introduced legislation into Parliament which creates a statutory definition of charity. The definition will come into effect on 1 July 2014, and will assist the Australian Taxation Office, the Australian Charities and Not for Profit Commission and other Commonwealth agencies (and potentially in the future, some State Government agencies) determine whether an entity is as a charity and can receive charitable concessions.

Up until now, the terms “charity” and ‘charitable purposes’ have not been comprehensively defined for the purposes of Australian law and their meaning has been determined under the common law which has developed over 400 years.  This case law was largely based on the preamble to the English Statute of Charitable Uses of 1601 (also known as the Statute of Elizabeth).  Although it is not intended that these new definitions depart from the common law, it is intended that they provide greater clarity about what is meant by those terms.

Key features of the legislation are as follows:

  • to be a charity, an entity must be not-for-profit and its only purposes must be charitable purposes for the public benefit, or purposes that are incidental or ancillary to, and in furtherance of such charitable purposes.
  • charitable purposes include:
    • advancing health, education, social or public welfare, religion, culture, and the natural environment;
    • promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;
    • promoting and protecting human rights;
    • protecting the safety of the general public;
    • preventing or relieving the suffering of animals;
    • any other purpose that may reasonably be regarded as analogous to or within the spirit of the above charitable purposes.
  • an entity with a purpose to promote or prevent change to government laws or policy may be a charity provided the change relates to the above charitable purposes and the purpose is pursued for the public benefit.
  • in the absence of any evidence to the contrary, certain charitable purposes are presumed to be for the benefit of the public, namely:
    • relieving illness;
    • relieving the needs of the aged;
    • advancing education;
    • relieving poverty;
    • advancing religion.
  • a charity cannot be an individual, a political party or a government entity.

For more specific information on any of the material contained in this article, please contact Johanna Churchill on (08) 8210 1236 or jchurchill@normans.com.au.


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