Let’s face it -both you and I, or someone close to us, have recently complained about what seems to be the unstoppable increase to our home and business energy bills.
These increasing prices affect us all – we all use electricity.
So who’s job is it to keep energy prices stable?
By Chris Dennis, Consultant- Law Quarter.
The Role of the ACCC
The ACCC plays a role in the regulation of energy markets. Specifically, the ACCC’s role in energy markets is in the context of the Competition and Consumer Ac 2010. For example, the ACCC enforces the competition and consumer protection provisions in energy markets and assesses energy mergers and authorisations.
So what is the ACCC doing about increasing energy bills?
Just this month the ACCC released their final Retail Electricity Pricing Inquiry report, or a ‘blueprint to reduce electricity prices’. The ACCC states that this blueprint is designed to ‘significantly improve electricity affordability for Australian consumers and businesses’.
The blueprint or report is the result of an inquiry, which commenced in March 2017. This inquiry began by identifying the root causes of high electricity prices across the entire electricity supply chain.
The report describes the National Energy Market as ‘largely broken and needs to be reset’. That’s a big statement from a Government regulatory agency.
As part of the process, the ACCC has admitted that ‘poor decisions have been made over the past decade creating the current electricity affordability problem’, and ‘it now falls to current Commonwealth and state governments to make the difficult decisions to fix it’.
So why have electricity prices increased?
According to the ACCC, electricity has become unaffordable because:
– Wholesale and retail markets are too concentrated;
– Regulation and poorly designed policy have added significant costs to electricity bills; and
– Retailers’ marketing of discounts is inconsistent and confusing to consumers and has left many consumers on excessively high ‘standing’ offers.
It is their view that most households are paying far too much for electricity and many are having difficulty paying their bills.
As a result, the report of the ACCC has made 56 recommendations detailing ways to fix the National Electricity Market
The ACCC’s recommendations include:
Abolishing the current retail ‘standing’ offers (which are not the same between retailers), and replacing them with a new ‘default’ offer consistent across all retailers, set at a price determined by the Australian Energy Regulator (AER).
Requiring retailers to reference any discounts to the new ‘default’ offer pricing determined by the AER, making it easier for consumers to genuinely compare offers. Conditional discounts, such as pay-on-time discounts, must not be included in any headline discount claim.
A mandatory code for comparator websitesbeintroduced so that offers are recommended based on customer benefit, not commissions paid.
Voluntary write downs of network overinvestment, including by the NSW, Queensland and Tasmanian governments (or equivalent rebates).
Premium solar feed-in-tariff schemes should be funded by state governments and the small scale renewable energy scheme should be phased out, saving non-solar consumers $20-$90 per year.
Government support to make bankable new investment by new players in generation capacity to help commercial and industrial customers and drive competition.
Restructuring of Queensland generators into three separately owned portfolios to improve competition.
Limiting companies with 20 per cent or more market share from acquiring more generation capacity.
Improving the transparency of over-the-counter contract trading by requiring reporting of these trades to a central registry.
Improving the AER’s powers to investigate and address problems in the market and increasing penalties for serious wrongdoing.
The ACCC estimates its recommendations, if adopted, will save the average household between 20 and 25 per cent on their electricity bill, or around $290-$415 per annum.
Conclusion
While the efforts of the ACCC are welcomed, a sanguine approach must be adopted. There will be no quick fix to ongoing increases in energy bills and sector reform to reduce power bills will take time.
Our Energy Experience
We have significant experience in energy law. Our experience includes working for energy retailers, energy storage, and renewable energy companies. Working on ‘both sides of the meter’ gives us a unique and unmatched perspective.
Our lawyers have written extensively for industry publications including WattClarity and RenewEconomy. Our clients include small solar installers alongside large network distribution businesses.
Our firm is a finalist in this year’s Innovator of the Year award in the 2018 Australian Law Awards. Our sister business, Compliance Quarter has applied for over 80 percent of the recent energy retail authorisations with a 100 percent success rate. Compliance Quarter was a 2018 Westpac 200 Business of Tomorrow winner.
Power Purchase Agreements (PPAs) have reached maturity in the Australian market- now in the market for more than seven years. We are reaching the point where, for those early PPAs, we can expect to see legal issues arise and PPAs examined in the courts.
In today’s article, we look at four key legal considerations when it comes to drafting a ‘behind the meter’ PPA. Correct drafting today will save you unnecessary legal costs tomorrow. This is our second post looking at PPAs in Australia.
I. Certainty
PPAs are complex due to the nature of the ‘product’ being sold i.e. energy. Some PPAs require the purchase of 100 per cent of the generated quantity whereas others require the purchase of the quantity of electricity consumed. Each variation comes with its own risks and benefits. Care must be taken to ensure that the structure of a PPA is clear and compliant with regulatory obligations.
Different considerations apply when selling a PPA to a commercial as opposed to a residential consumer. There are a range of statutory obligations you will have under Australian Consumer Law including the non-excludable guarantees. These obligations need to be considered at the drafting stage. Furthermore, your marketing collateral needs to be consistent with the terms of your PPA, and not have the potential to mislead consumers.
II. Ownership
Ownership of solar panels under a PPA may be clear in your mind but, under the law, the reality is less certain. Where ownership of panels is to transfer to the consumer at the end of the PPA term (often 7 years), with no intention of retention by your business, it may be that the panels are in fact fixtures meaning that you have limited rights in relation to taking them back.
III. Licences, Permits and Approvals
By selling energy under a PPA you are operating an energy business. Your business will either need to be exempt from the requirements to hold an authorisation or licence or hold an authorisation or licence. The Australia Energy Regulator has jurisdiction in NSW, SA, TAS, ACT and QLD. If your business is proposing to offer a PPA in those states it may be able to rely on an R8 exemption. The R8 exemption will not be appropriate in all instances and where it is appropriate comes with conditions.
In addition to energy licence obligations, your business will also need to consider consent authority obligations including any requirement to obtain a complying development certificate or a development approval. Further, your business will also need to comply with electrical safety laws in each state and with any electrical contractor licensing obligations.
IV. Metering
Energy is sold to a consumer on the basis of meter reads. A PPA should consider a range of scenarios including a customer denying access to a meter, any need for an estimated reading, and responsibility for metering including ongoing maintenance.
When metering PPAs it is important to remember the requirements of the National Measurements Act 1960 (Cth). Pattern approval (in other countries this is sometimes called ‘type approval’) is mandatory for measuring instruments used for trade in Australia. The National Measurement Institute (NMI) evaluates measuring instruments to check they meet specific Australian standards.
Our Energy Experience
We have significant experience in energy law, including in drafting Power Purchase Agreements. Our experience includes working for energy retailers, energy storage, and renewable energy companies. Working on ‘both sides of the meter’ gives us a unique and unmatched perspective.
Our lawyers have written extensively for industry publications including WattClarity and RenewEconomy. Our clients include small solar installers alongside large network distribution businesses.
Our firm is a finalist in this year’s Innovator of the Year award in the 2018 Australian Law Awards. Our sister business, Compliance Quarter has applied for over 80 percent of the recent energy retail authorisations with a 100 percent success rate. Compliance Quarter was a 2018 Westpac 200 Business of Tomorrow winner.
In our next post, we will look at changes to the accounting standards that come into effect from 1 Jan 2019 and are relevant to businesses looking to explore Power Purchase Agreements.
If you have any questions on Power Purchase Agreements please email connor@lawquarter.com.au. Alternatively, contact us here.
Many people will have heard of the term ‘section 10’. It is often referred to in the context of relatively minor offences such as traffic infringements, drug offences and common assault. However, in actuality, the Court has a discretion to award a ‘section 10’ for any criminal or driving offence.
By Alex Silcock, Law Quarter.
What does ‘section 10’ mean?
A ‘section 10’ generally refers to that provision of the Crimes (Sentencing Procedure) Act 1999. This section applies when there has been a finding of guilty. It gives the Court a discretion to discharge the offender with no conviction, meaning that there will be no criminal record, or other penalty like loss of licence.
There are different types of ‘section 10’ orders that may be granted. The best-case scenario for a guilty party would be an unconditional dismissal under s 10(1)(a). In this situation, no criminal conviction is recorded whatsoever. Other section 10 orders may be conditional on a good behaviour bond, or the completion of an offenders program. It is important to remember that a ‘section 10’ with a good behaviour bond attached, will still result in a finding of guilty being present on a person’s record until the bond is extinguished.
When will a court grant a ‘section 10’?
Section 10 grants the Court a discretionary power, allowing it to exercise its own authority or judgment in determining whether to grant such an order. However, there are certain factors which the Court must consider when making a decision.
These include: age of the offender, prior record, mental health issues, the seriousness of the offence, extenuating circumstances and anything else that might be considered relevant.
It is a common misconception that anyone who is convicted of their first offence will be successful in a section 10 application. However, courts do not grant section 10’s lightly and will need to be convinced that the factors mentioned above warrant such an order being made.
If you would like affordable and honest advice on your prospects of receiving a ‘section 10’, please contact us at Law Quarter.
PPAs are growing in popularity in Australia as a viable alternative to ‘grid sourced’ energy. They are now offered to both residential and commercial customers. They have the alternative to provide consumers with cheaper and greener electricity.
In today’s article, we ask three questions: What is a PPA, why enter into one, and what is their legal and regulatory environment?
What is a PPA?
Put simply a PPA is an agreement between an independent power generator (or vendor) and a purchaser (often called the ‘off-taker’) for the sale and supply of energy.[1] They can be used for the supply of any type of energy, but in more recent times have often been used for the supply of renewable energy such as through solar panels or wind generators.
A PPA can take on two general forms. In a physical PPA, energy is physically supplied and sold directly to the purchaser. The power generator is usually not connected to the wholesale National Energy Market (NEM). A virtual or synthetic PPA involves two distinct agreements which operate in parallel. Unlike a physical PPA, the energy is not physically supplied and sold directly from the generator to the purchaser. Instead, the generator must connect to the NEM, where the purchaser is supplied energy through a contract with an authorised market retailer. At the same time a separate agreement, often taking the form of a ‘contract-for-differences’ is agreed between the generator and the purchaser to guard against fluctuations in the spot price for electricity which will be reflected in the retail contract. This means that, in effect, the energy and relevant renewable energy certificates are provided to the purchaser at a ‘fixed price’.
A behind the meter PPA is a physical PPA with the solar generation units installed behind a customer’s meter. Behind the meter PPAs are advantageous as they allow for the sale of electricity without the need for the use of the grid. Law Quarter is able to assist you in drafting a behind the meter PPA ensuring that the contractual documentation is complete and manages all of the key risks including the management of environmental certificates, ownership of the system, access for operation and maintenance, and early termination.
Why enter into a PPA?
PPAs may be advantageous to any organisation, such as UNSW, which seeks to reduce its carbon footprint. Whether in its physical or synthetic forms, through a PPA with renewable energy, a purchaser can ensure that a certain amount of renewable energy is produced.
Of course, there are economic considerations that an organisation will need to take into account before entering into a PPA as well, including:
Wholesale price uncertainty. A PPA allows the organisation to lock in a price for electricity over an extended period. The purchaser can benefit from not being subject to the price fluctuations of the wholesale energy market. On the other hand, this may lock the organisation into a price higher than it would otherwise pay;
Generator failure. The purchaser needs to take into account the risk that the generator will fail and be unable to supply energy as agreed and how they might insure against such failure.
What is the regulatory and legal environment for PPAs?
All energy suppliers in NECF participating jurisdictions, including independent generators that supply energy through PPAs, are subject the supervision of the Australian Energy Regulator (AER). AER requires that such suppliers hold either an exemption or a retail authorisation and must provide certain consumer protections.[2] Whether or not they are subject to the consumer protections under the National Energy Retail Law, all such vendors are subject to the Australian Consumer Law.
If the PPA involves a ‘derivative’ financial instrument (as synthetic PPAs generally do), the supplier may be required hold an Australian Financial Services (AFS) licence, and be subject to the authority of the Australian Securities & Investments Commission (ASIC). To read more go to https://compliancequarter.com.au/otc-electricity-derivatives/.
Another matter that anyone entering into a PPA may need to consider is whether a security interest should be registered on the Personal Property Securities Register (PPSR). For example, if a vendor is physically supplying a solar panel to the purchaser’s premises this can protect their legal interest in the solar panel (for general information on the PPSR see https://compliancequarter.com.au/ppsr-changes/).
If you think we could be of any further guidance in this area, please don’t hesitate to get in contact.
When faced with a legal problem, it is important you feel that your concerns are being heard and you are receiving the best possible representation. If you are unhappy with your current solicitor, you may consider seeking advice or representation from an alternative law firm.
Reasons for changing
There are a number of reasons why you might wish to consider changing solicitors:
You believe that your solicitor has been dishonest or misleading;
You feel that you have been overcharged;
Your solicitor has ignored or acted contrary to your instructions;
You believe that your solicitor may have acted unethically or breached the Solicitors Rules.
You feel that your solicitor has been unresponsive, or has not given you quality advice.
While any of the above are valid reasons for wanting to change solicitors, a decision to switch is extremely important and should not be undertaken lightly.
The transfer process
Although it is a big decision to change your legal representative, the process is simple.
You should do your own research on a law firm before you approach a new solicitor. It is important that you ensure that they will provide better service in the areas that you believe your current solicitor is lacking.
Approach your new solicitor and tell them that you currently have legal representation, but are unhappy and considering a change. This is a good opportunity to determine whether your potential new solicitor is personable and to explain why you are unhappy with your current solicitor. It is possible that your desired new solicitor may advise that you would best served remaining with your current solicitor.
After speaking with your new solicitor, if you still wish to change, you need to notify your current solicitor that you want them to cease acting for you. Your new solicitor can draft a letter informing your current solicitor on your behalf.
Your new solicitor will ask you to sign a costs agreement and send a letter and an ‘uplift authority’, signed by you, to your old solicitor requesting that they release your file.
If you still have outstanding legal fees owing to your old solicitor, they have a right to retain possession of your file. If you are not in the position to pay those costs, your new solicitor can draft an agreement which secures your old solicitor’s payment at the conclusion of the proceedings in exchange for the release of your file.
Changing solicitors is relatively easy, but it is still a big decision. Being unhappy with what your solicitor has told you, is not itself a good reason for changing lawyers. Remember that a good solicitor will always give forthright and honest advice, even if it is not what a client wants to hear. If you are interested in changing solicitors and believe that we can help, please enquiry here and we would be happy to arrange a meeting or teleconference.
Free assessment
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There are a range of activities that a business might engage in in relation to digital or crypto currencies (digital currencies), such as bitcoin, in Australia. A business could be using a digital currency as a form of financing (such as through an Initial Coin Offering or ‘ICO’), providing a marketplace for exchange of the currency, or providing ancillary services (such as payment systems).
This document sets out the regulatory framework for digital currency in Australia which involves a patchwork of different laws. It also sets out remedy and enforcement options that may be available to consumers who have suffered a loss through the purchase of digital currency.
1. The Regulatory Framework
1.1. Payments system regulation
The Reserve Bank of Australia (RBA) regulates the payments system in Australia through the Payment Systems (Regulation) Act 1998 (PSR Act). A payments system is a ‘funds transfer system that facilitates the circulation of money, and includes any instruments and procedures that relate to the system’ (section 7, PSR Act). The RBA’s approach is to regulate only where necessary with respect to competition, efficiency or risk to the financial system. Thus far, the RBA does not consider this threshold for intervention to be met, and thus does not regulate digital currency.[1]
1.2. ASIC and ACCC regulation (including consumer protection)
The Australian Securities and Investments Commission (ASIC) does not consider digital currencies to fall within the legal definition of ‘financial product’ under the Corporations Act 2001 (Corporations Act) or the Australian Securities and Investments Commission Act 2001 (ASIC Act).[2]Broadly, this is because a financial product is defined through those Acts as a facility through which a person makes a financial investment, manages financial risk or makes a non-cash payment. Digital currency is not one of these things, nor is it a specifically regulated financial product such as a foreign exchange contract. This means that a person or business does not provide financial services, or a financial market, when they operate a trading platform, provide advice or arrange for the purchase and sale of digital currencies. Consequently, trading platforms are not required to hold an Australian Market Licence (AML) or an Australian Financial Services (AFS) licence, nor comply with associated obligations such as providing Product Disclosure Statements.
However, a business which deals in digital currencies, may be regulated by ASIC if it engages in related activities that do involve financial products. For example, a digital currency is not classified as a non-cash payment facility as it does not automatically confer a right of use as a payment method, nor as exchange for cash. However, if a business did provide such a payment service, it may be regulated by ASIC. Or, if the business facilitates contracts for the purchase and sale of digital currency that do not settle immediately, this may be classified as a derivative (a regulated financial product), and also be regulated by ASIC.[3]
While protections that apply to general financial products do not apply to digital currencies, the general consumer protection provisions of the Competition and Consumer Act 2010, including the Australian Consumer Law (ACL), do apply. This means, for example, that any digital currency business must provide services with due care and skill (clause 60), that are fit for purpose (clause 61), that do not involve unfair contractual terms (clause 23), and do not involve unconscionable or misleading conduct (clauses 20 and 18).
There are a range of enforcement actions that may apply and remedies that may be available in the case of breach of the consumer law including court action by regulators, penalties, injunctions and compensatory damages (see chapter 5, ACL).
1.3. Initial Coin Offerings
A business that engages in an initial coin offering (ICO), may also, depending on the circumstances, have obligations under the Corporations Act and be regulated by ASIC. An ICO is a form of fundraising, which operates by allowing investors to use digital currency to purchase coins via the internet for a set period of time. The ICOs are often global offerings which can be created anonymously and/or accepted anonymously.
Depending on the way in which the ICO is structured, it could be a managed investment scheme (MIS), an offer of shares, an offer of derivatives or a non-cash payment facility. In all such cases, obligations under the Corporations Act apply which may include disclosure, registration and licensing.
For more information see http://asic.gov.au/regulatory-resources/digital-transformation/initial-coin-offerings/.
1.4. Anti-money Laundering and Counter-Terrorism Financing Regime
The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017, which recently passed through the houses of parliament (and will shortly become law), means that, digital currency exchange providers will now be required to:
enrol and register on the Digital Currency Exchange Register maintained by the Australian Transaction Reports and Analysis Centre (AUSTRAC) and provide prescribed registration details;
adopt and maintain an Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) program to identify, mitigate and manage the risks they may face;
identify and verify the identities of their customers;
report suspicious matters and transactions involving physical currency that exceed $10,000 or more (or foreign equivalent) to AUSTRAC, and
keep certain records related to transactions, customer identification and their AML/CTF program for seven years.
1.5. Taxation
The view of the Australian Tax Office (ATO) is that transaction with bitcoin (and presumably other digital currencies) is similar to a barter arrangement, with similar tax consequences. ATO considers that bitcoin is neither money nor a foreign currency, and the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes. See https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia—specifically-bitcoin/, for further information.
1.6. Privacy Act
The Privacy Act 1988 concerns the use and protection of personal information. This will apply to many digital currency businesses in Australia (in general, those with a turnover of more than three million). Through the Australian Privacy Principles (APPs), this can place a range of obligations on a digital currency business. For example, AAP 11.1 provides that an entity that holds personal information must take reasonable steps to protect the information from misuse, interference and loss, as well as unauthorised access, modification or disclosure.
1.7. Common Law
Various areas of the common law will also apply for those engaged in activities related to digital currencies, including:
Misrepresentation: This might apply, for example, if a consumer considers that misrepresentations have been made which induced them to enter into a foreign currency transaction;
Unconscionable conduct. This might occur, for example, where the consumer considers that the business has taken advantage of some weakness in the consumer in order to facilitate the transaction;
Tort: This might occur, for example, if an individual thinks that they have lost digital currency due to a digital currency business breaching its duty of care.
In many cases, common law protections are similar (though not identical) to protections available under the ACL.
1.8. Industry self- regulation
Digital currency businesses can seek certification by the Australian Digital Commerce Association (ACDA). Such certification means they are subject to a code of conduct, compliance with which must be independently audited. Obligations under that code of conduct include being subject to best practice standards around reputation and general conduct, extensive consumer protections and AML/CTF programs (see http://adca.asn.au/home-2/code-of-conduct/). Failure to meet these obligations may mean that certification is revoked.
2. Remedies
If a consumer considers that they have suffered a loss through the purchase of digital currency, there are several options for recourse that may be available to them, depending on the circumstances. Regardless of the complaint, the initial step for most consumers is to complain directly to the business to try and seek a solution.
The consumer should also consider whether the business is certified by the Australian Digital Currency Association. If so, the Industry Code of Conduct applies which includes an extensive list of consumer protections (see http://adca.asn.au/home-2/code-of-conduct/). This certification also means that the consumer must have access to an external dispute resolution scheme.
If a consumer is dissatisfied with the response of the digital currency business, whether or not that business is certified by ACDA, they should check on the relevant website whether that business is subject to an external dispute resolution scheme (such as the Financial Ombudsman Serviceor the Credit and Investments Ombudsman), and if so, make a complaint to that body.
In the case of a breach of the ACL, such as where a consumer considers that a person or business has been deceptive about the benefits of purchasing a digital currency, the consumer could consider:
Lodging a complaint with the relevant state or territory consumer protection agency such as NSW Fair Trading in the case of a contract governed by New South Wales law. NSW Fair Trading may assist in resolving the issue and/or may take an enforcement action against the business in question. Note, however, that even where a consumer protection agency wishes to take action, this may not result in compensating the consumer;
If the consumer considers that the business may be offering a financial product they could consider making a complaint to the ASIC.
If the consumer wishes to do so they could also take a civil claim to court. This could be for a breach of the ACL, but also for other causes of action such as negligence or misrepresentation. A consumer may wish to do so, for example, where they are seeking an amount greater than that available in a tribunal, or a remedy only available in a court (such as the equitable remedy of ‘specific performance’). Note, court action might be considerably more expensive than making an application to a civil tribunal.
If the consumer considers that a business has breached its obligations under the Privacy Act 1988, the consumer could consider complaining to the Office of the Australian Information Commissioner (OAIC). OIAC can determine that compensation must be paid, or take civil action against a business for breach of the Privacy Act 1988.
[1] RBA, Submission to the Inquiry into Digital Currency, p10.
[2] Senate Economic References Committee, Digital currency—game changer or bit player, p8.
[3] See ASIC, Senate inquiry into digital currency:Submission by the Australian Securities and Investments Commission, p12.
In our last piece (part one) on joint ventures we described some of the common characteristics of a joint venture and some of the legal forms that such a venture might take. Today, we take a look at how parties to a joint venture might acquire legal obligations to one another. Note, as usual, this is general commentary only and does not constitute legal advice.
The importance of the joint venture agreement
The legal obligations of the participants in a joint venture depend on the legal form of the joint venture. For example, incorporated joint ventures have obligations which arise from the Corporations Act 2001. Joint ventures which take the form of a trust will incur the obligations of trustees. In unincorporated joint ventures, the obligations of the participants will arise largely from the agreement between the parties.
Just last year, the NSW Supreme Court considered in Coyte and Anor v Norman and Anor; Centre Capital (Newcastle) Pty Ltd and Anor [2016] NSWSC 1242 a series of claims and counterclaims relating to a ‘Unit Trust’ joint venture. In that case, several claims relied on the breach of contractual obligations relating to an oral “further agreement”. The court did not find that that agreement existed. This emphasises the importance of a clear written agreement setting out the specific obligations of participants to each other in a joint venture.
The importance of distinguishing between a partnership and other joint ventures
In part one, we mentioned that a distinction can be made between a legal partnership and unincorporated joint ventures. The definition of a ‘partnership’ is provided in various state laws as “persons carrying on a business in common with a view of profit”.
The requirement to be “carrying on a business” is suggestive of one potential difference between a partnership and other joint ventures; the former tends to be (though there are exceptions) a repetitive endeavour rather than a one-off. Furthermore, it is common for the relationship in a joint venture to involve a common undertaking to produce a product to be shared amongst themselves, rather than profit.
So, what is the relevance of the joint venture/partnership distinction? The relevance is that the existence of a partnership imposes stringent fiduciary obligations on the partners, such as a duty against undisclosed conflicts of interest and a duty not to profit to the detriment of the other partners.
Note, however, that some fiduciary obligations may also arise whether or not the joint venture constitutes a partnership. In many cases this will be as a result of what the participants agreed to and the circumstances of the agreement. Fiduciary duties that may arise include:
• A joint venture participant may be restricted from dealing in assets committed to that joint venture without the informed consent of the other parties
• A joint venture participant may be restricted from obtaining any “collateral advantage” in relation to the joint venture, without the knowledge and informed consent of other participants.
[1] See, for example, (NSW) Partnership Act 1892, s1(1)
[1] Smith v Anderson (1880) 15 Ch D 247 at 277-8; [1874-80] All ER Rep 1121
[1] United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1
[1] United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 13
Today is part one of a two-part introduction to joint ventures. In today’s piece, we look at some of the common characteristics of joint ventures as defined by the courts and the forms that a joint venture might take. In part two we will look at the obligations that hold between participants in a joint venture
The concept of a joint venture
There is no all-encompassing legal definition of “joint venture” in Australian legislation. While the term does appear in various statutes, those definitions are for specific legal purposes, rather than offering a general definition.[1] Nor has a general legal definition been provided by the courts.
One oft-quoted case remarks:
“As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.’”[2]
So, from this we might say that the ordinary concept of a joint venture captures a general idea of people or entities working together for mutual gain. And while this ‘association’ might take various legal forms, the focus is on those associations that are not legal partnerships.
‘Recognisable and common characteristics’ of joint ventures
A more recent case held that, while the existence or otherwise of a joint venture will be a question of fact depending on the particular case, the following are “recognisable and common characteristics” of a joint venture:[3]
Participants have property, or property interests in the assets of the association
Participants exercise joint control
Participants both contribute, though not necessarily in equal measure
Participants have rights and obligations in relation to the association and these are often relative to the ownership of shares and/or contributions made
Participants have a joint interest in achieving the purpose of the association
Participants enter into the association for mutual gain, often for mutual profits.
Types of joint venture
Two key types of joint venture (though by no means the only ones) are contractual joint ventures (or ‘unincorporated joint ventures’) and corporate joint ventures.
A contractual joint venture binds two individuals or entities via a contract. This kind of arrangement provides considerable flexibility for both participants and can be particularly useful for short-term or single purpose ventures.
A corporate joint venture is registered as a limited liability company. In this arrangement parties to the venture become shareholders of the joint venture company. This arrangement means that the joint venture is subject to the requirements for companies in the Corporations Act 2001 and other corporate legislation such as the Australian Securities and Investments Commissions Act 2001 and Competition and Consumer Act 2010.
In our next piece, we will look at the obligations that participants in a joint venture owe each other.
Please note, that the information here is intended as a general introduction and for advice specific to your business, please seek professional legal advice.
Not happy about your employee’s conduct and considering dismissal? First, take some time to reflect on your obligations and your employee’s history of employment.
As widely reported, on 7 September 2017 the FWC ordered Tassal Group Limited T/A Tassal Operations Pty Ltd to pay compensation to Ms Chapman in the sum of $8229.00.
That Voice Mail Message
Ms Chapman was employed by Tassal as a level 1 processing employee. Her duties included scaling, slicing, weighing and packing fish.
On 25 April 2017, Ms Chapman called a supervisor at Tassal and left the following voice mail message:
“Hi Michelle, its Avril one of your most loved pains in the arse. Um its ANZAC day, my birthday, and I admit I have over indulged so I’m taking into account one of the golden rules be fit for work and I’m not going to be fit for work so I won’t be there. But um love ya, catch ya on the flip side”
Tassal’s Response
Tassal alleged that the conduct amounted to a breach of its Code of Conduct and to an unacceptable risk to Tassal and its employees.
A letter was given to Ms Chapman when she arrived for work on 27 April. The letter contained the allegation of misconduct and advised that she was to be stood down with pay and was required to respond to the allegations by noon on 28 April 2017.
“You had deliberately made a decision to consume alcohol to the extent that you would not be fit for work on 26 April 2017 when you were required to attend and be in a fit state to carry out your duties safely.”
Ms Chapman’s Reply
Ms Chapman responded by email on 27 April at 7:06 am:
“This is my response to the allegation against me.
Firstly, I did not deliberately make the decision to consume alcohol to the point were (sic) I would be unfit to attend work the following day.
It was by BIRTHDAY, and friends dropped by unannounced. I had my official birthday party on the Monday night and wasn’t expecting visitors on Tuesday, however, visitors I got. As the afternoon went on I realised it was going to be a long night and I believe I acted responsibly and respectfully by contacting management to let them know I wouldn’t be fit for work.
Would it have been wiser for mw to call at 6 am on the 26th and plead illness? I think if I had done that then I wouldn’t be writing this letter now, but it wouldn’t have been the honest thing to do in my opinion.
It was not my intention to deliberately take the day off, the events were not planned and not expected, and again, I feel that contacting management on the 25th was the right and responsible thing to do.”
On 27 April 2017 at 3.47 pm. Ms Chapman sent a further email:
“Dear Duane, I have waited all day for a return phone call from Seonna in regards to whether I am required to attend a meeting tomorrow to discuss the allegations directed towards me. The letter stated that I must respond in writing by 12.00 noon Friday 28 April 2017, and I have done that via email to you, however the letter did not state if I was required to be in attendance on the Friday. I rang Seonna and she assured me she would call me back with the relevant information I needed. She hasn’t done that.
I would also like to add that I feel managments (sic) constant quest in turning ‘MOLEHILLS INTO MOUNTAINS’ is detrimental to our company’s integrity and our code of conduct. The “GO IN FOR THE KILL” mentality is rather disturbing and completely against Tassal’s moral code in my opinion. Management is also responsible for their staff’s wellbeing, although it seems staff are ignored in favour of impressing higher management. I did nothing untoward to deserve that letter, and the fact that I drove all the way from Waterloo, only to be handed a letter and told to leave was totally unprofessional and unforgivable on managements (sic) part.
I would be more than pleased to discuss this matter further with Mark Ryan if given the opportunity. I respect you, and I await your personal response.”
Following further correspondence, Tassal made the decision to terminate the employment of Ms Chapman.
Finding
FWC Deputy President David Barclay found that there was a valid reason for the termination and that Ms Chapman had chosen to over indulge in alcohol on the day before she was due to work to such an extent as to be unable to fulfil her obligations to attend work the next day.
However, the FWC Deputy President David Barclay also found that the termination was harsh.
Tassal relied on a previous incident- a further alleged breach of the Code of Conduct as satisfying the requirement for a warning about the unsatisfactory performance. FWC Deputy President David Barclay disagreed, the previous warning was not for the same conduct and therefore Ms Chapman should have been given a warning:
In this case we have a misguided approach to the employer to the effect that the Applicant has overindulged (in alcohol) to such an extent as to result in her being incapacitated for work in circumstances (unlike the previous instance) where there was no extenuating circumstance which might constitute a justification for that conduct. That constitutes the valid reason. However because this is the first time the Applicant has conducted herself in that manner in 5 years of working for the Respondent to terminate her employment was harsh. I agree with the Applicant that another sanction such as performance management or a further, perhaps even final, warning was appropriate.
Lesson for Employers
Employers proposing to terminate employment for unsatisfactory conduct need to carefully consider the history of an employee’s conduct and the appropriateness of a warning vs dismissal.
If you have any questions on the above, please contact us.
We are offering an obligation free initial consultation for a period of 45 minutes for anyone who would like to discuss summary dismissal. Simply provide your details below.
A worker may be dismissed with immediate effect if they are in serious breach of their obligations, subject to compliance with the employment agreement and other applicable law. This is known as summary dismissal. You can read a case study of such a dismissal here.
Employers proposing to dismiss an employee need to carefully examine their obligations and the circumstances leading to the proposed dismissal.
Termination of employment is not a pleasant experience for anyone. In some instances, an employer may find themselves with no choice, and where those circumstances are sufficiently serious, a summary dismissal may be in order.
It is important for employers to understand their obligations with respect to summary dismissal. This is a risky area of law. Employees have rights that must be respected and a wrong move could end up costing a business much more than anticipated.
The key question for an employer is if appropriate grounds exist for summary dismissal. This article will examine this question. Advice should be obtained and this article will not give you enough information to make a decision in this area.
Laws that apply to a termination of employment
Termination of employment may occur for many different reasons. An employee may resign, be dismissed, or their position may be made redundant. Both State and Commonwealth legislation may apply to employment, as well as any applicable awards, industrial agreements, and the employment agreement itself. Each applicable obligation will determine the steps to be taken by an employer in relation to a specific dismissal.
Termination of employment is based on the law of contract. At common law, a contract may be terminated in response to a breach of an essential term, a fundamental breach, or repudiation. Repudiation occurs where a party indicates that it is unwilling or unable to perform its obligations in a significant respect. This may be shown where there are a series of minor breaches which taken together show a disregard for the obligations imposed by a contract.
What is a Serious Breach?
For an employer to exercise the power of summary dismissal under common law, there must be a serious breach of a term of employment, and that term may be express or implied.
The following may amount to grounds for summary dismissal under common law:
Serious misconduct ( positive, intentional, or wilful wrongdoing);
Wilful refusal to obey a lawful and reasonable instruction; and
incompetence and neglect.
If an employer proposes to dismiss an employee for a serious breach, it must make an assessment of the conduct said to justify dismissal. Case law provides guidance on which circumstances are sufficiently serious. In Rankin v Marine Power [2001] VSC 150. a manager’s negligent supervision of an overseas operation was held to be a breach of duty but not sufficiently serious to justify summary dismissal. In that case, the employer was ordered to pay the employee the amount of $169,612.35 representing damages for failure to provide proper notice and accrued long service leave entitlements.
Where a breach by an employee has occurred, it is important for an employer to make an assessment and to take appropriate action. A failure by an employer to act on breaches by an employee may be taken to be a waiver of the employer’s right to terminate the employee for those breaches.
Statutory References
There are also statutory definitions and obligations to consider. There are a number of references to serious misconduct in the Fair Work Act 2009 (Cth) and Fair Work Regulations 2009 (Cth). These statutory definitions and obligations are important as they determine the subsequent rights of a dismissed employee.
Relevant statutory obligations were discussed in the case of Sharp v BCS Infrastructure Support Pty Limited [2015] FWCFB 1033:
The relevance of the definition of “serious misconduct” in reg.1.07 to the matter is also, with respect, obscure. Section 12 of the Act contains a definition of “serious misconduct” for the purposes of the Act which simply cross-refers to reg.1.07. Apart from s.12 itself, the expression “serious misconduct” is used in only three places in the Act. In s.123(1)(b), a dismissal for serious misconduct is a circumstance in which the notice and redundancy entitlement provisions of Pt 2-2 Div 11 are not applicable; in s.534(1)(b) a dismissal for serious misconduct is one to which the requirements for notification and consultation in Pt 3-6 Div 2 do not apply; and in s.789(1)(b) a dismissal for serious misconduct is one in relation to which the requirements established by Pt 6-4 Div 3 for notification and consultation do not apply. The expression “serious misconduct” is not used anywhere in Pt 3-2, Unfair Dismissal, of the Act. Section 392(3) requires the Commission, in relation to the award of compensation for an unfair dismissal, to reduce the amount that it would otherwise order by an appropriate amount where it is “satisfied that the misconduct of a person contributed to the employer’s decision to dismiss the person”. However, it is clear that conduct may constitute “misconduct” for the purpose of s.392(3) without necessarily being “serious misconduct”. The expression is used in the Small Business Fair Dismissal Code, but that had no application in this case (and it is at least highly doubtful in any event whether the reg.1.07 definition applies to the Small Business Fair Dismissal Code). Reg.1.07 therefore had no work to do in the application of the provisions of Pt 3-2 to the circumstances of this case.
Good Resources
If you are an employer considering a summary dismissal, you should review the following resources:
The Small Business Fair Dismissal Code provides protection against unfair dismissal claims, where an employer follows the Code. The Commission will deem a dismissal to be fair if the employer follows the Code and can provide evidence of this. A small business is defined as any business with fewer than 15 employees;
Summary dismissal is a complex area of law. There will be circumstances that justify a summary dismissal but an employer should carefully examine those circumstances against the applicable law before taking action. A failure by an employer to act on breaches by an employee may be taken to be a waiver of the employer’s right to terminate the employee for those breaches.
When examining obligations of an employer, applicable statutory obligations should be examined followed by the employment contract and any applicable award or industrial agreement. Only then can an employer understand their obligations with respect to termination.
Please contact us if you have any questions on the above.
