Law Society Newsletter
In touch with the law
No 2 of 2014
The law is constantly changing and this newsletter describes developments which may be relevant to you. If you are in any doubt about these or any other aspects of the law, please make an appointment to see your solicitor. In this issue
Brand integrity: Protecting trademarks in China
Industrial relations: “Workplace” clarified by sexual harassment case
Greening the workplace: Dollars and sense
Litigation: High price paid for warranty breach
Intellectual property: Patent trolls
Liquor licensing: High risk: new liquor licensing laws
Real property: Swimming pool compliance
Insolvency: Disclaimed leases
Bail: Davids and Goliath
Security of payment: Under Construction
BRAND INTEGRITY - Protecting trademarks in China
The year of the horse could usher in better opportunities to protect brand integrity when new trademark law is introduced in China in May. As Australia’s largest trading partner, the importance of the People’s Republic of China to the Australian economy is beyond dispute. Yet despite long-standing Sino-Australian relations and a renewed eagerness on the part of Australian business to engage with the Chinese market, many Australian businesses fail to take the essential steps required to protect their trademark rights in China.
On 1 May 2014, China’s new trademark law (NTL) came into force. There are several anticipated changes with which businesses should familiarise themselves, as well as some key branding considerations when protecting trademarks in China.
For businesses based outside China, conventional wisdom suggests that seeking trademark protection and then attempting to enforce any resulting rights can be a protracted and often frustrating experience. Significant delays in examination, opposition, appeal, and a trademarks regime that has often been out of step with evolving global trademark law and practice has meant many international businesses have simply deferred seeking trademark protection in China.
That said, the 30 August 2013 announcement that the NTL of the People’s Republic of China would come into force on 1 May 2014 marked an important step for China. The advent of the long-awaited NTL seeks to redress many of the perennial concerns of international brand owners, including improving the efficiency of the application and opposition practice and procedure, significantly increasing fines against infringers, and introducing the concept of an application being made in good faith.
INDUSTRIAL RELATIONS- “Workplace” clarified by sexual harassment case
In a recent decision, the Federal Court held that the term “a workplace” is broad and may include a range of venues nd locations, depending upon the surrounding circumstances and the conduct of workplace participants.
A recent decision of the Federal Court of Australia is a reminder to employees and employers of the need to keep professional and personal relationships separate. In Ewin v Vergara (No. 3)  FCA 1311, an employee was awarded $476,163 for sexual harassment by a fellow worker, making it one of the largest court-ordered sexual harassment awards.The case also provides clarification on the meaning of “workplace” in the Sex Discrimination Act 1984 (Cth) (SD Act), giving the term a potentially broad definition.
GREENING THE WORKPLACE - Dollars and sense
Sustainability may conjure images of alternative lifestyles, but it “doesn’t have to be about tree-hugging, it’s actually a sound business decision”, says Australian Legal Sector Alliance (AusLSA) general manager Emily Wilson.“There are some people who get involved in sustainability because it’s the ‘right thing’ to do but the bottom line is that if you’re using less electricity, if you’re using less paper, you’re saving money. Sustainability is about efficiency, and efficiency is always good business practice because it’s profitable,” says Emily Wilson, AusLSA general manager.
The property at 85 Castlereagh Street is one of the latest high-profile green buildings to go up in Sydney. Achieving a coveted 6-star GreenStar rating from the Green Building Council of Australia, the office tower forms part of the larger Westfield development and uses a system of sensor lights (attuned to the availability of natural light), automated blinds (that respond to seasonal variations in sunlight) and active chilled beams (pipes of cooled water run through a beam integrated into the ceiling to lower the temperature of the surrounding air) to deliver a 50 per cent gain in energy efficiency.
Use of advanced water-recycling technology results in a further 93 per cent saving in water for the tower compared to an ordinary office build according to our building guide for the day, Stuart Murray, the Sydney CBD commercial properties manager for Westfield.
While the strategic decision about whether or not to pursue sustainability is made at the senior partner level, particularly in terms of big-picture moves to GreenStar rated buildings or expensive fit-outs, the practical decision-makers tend to be administrators, or facilities and office managers. It’s these people who can integrate ongoing (less glamorous but essential) processes into company culture, such as recycling programs or increasing awareness of things like the need to turn off computers or minimise paper use.
LITIGATION - High price paid for warranty breach
The High Court has affirmed the principles applied in assessment of damages for breach of contract.A majority decision of the High Court in Clark v Macourt  HCA 56 has confirmed the manner in which damages are to be calculated for breach of contract in relation to donor sperm used in assisted reproductive technologies (ART).
The decision illustrates the importance of understanding the way in which the ruling principle can be applied in assessing damages, particularly in unique and factually complex cases.It also suggests it is appropriate to advise clients to be proactive and mitigate loss if damaged goods are received in breach of contract – purchasing similar assets from alternative sources will not be viewed negatively by the courts. The maxim pacta sunt servanda illustrates the importance our legal system places on preserving the agreements struck by commercial parties. For a practitioner’s client, this means that the law of damages will endeavour to place them in as good a position as if the promise had actually been performed.
INTELLECTUAL PROPERTY - Patent trolls
A recent Federal Court ruling demonstrates why Australia is not a fertile a hunting ground for patent trolls.
Unpaid Systems Ltd, a UK patent portfolio company which some regard as a ‘patent troll,’ has stumbled at the first hurdle in its case against Telstra. In Upaid Systems Ltd v Telstra Corporation Limited  FCA 1441, Upaid alleged two of its patents had been infringed by Telstra’s mobile commerce system. The Federal Court found Upaid failed to identify, with sufficient particularity, at least one instance of each type of infringement alleged to have been committed.Patent trolls are companies that don’t produce new products or ideas but rely on purchasing and collecting patent royalties to turn a profit. A troll will typically buy up patents and then send out letters threatening legal action against a company it perceives as potentially infringing the purchased patent unless that company pays a licensing fee. In the US, a significant proportion of patent law suits are now undertaken by patent trolls. The Goodlatte Innovation Act (currently before the US Senate) is an attempt to address the problem. Although Unpaid is not a ‘classic’ troll, because it co-developed the systems in dispute in the late 90s and early 2000s but didn’t effectively monetise them, the court’s finding that it failed to plead its case adequately highlights some of the challenges that a true patent troll would face in Australia.
LIQUOR LICENSING - High risk: new liquor licensing laws
New legislation passed in December 2013 to regulate Kings Cross venues has been used as a basis for more far-reaching reforms passed on 30 January 2014 as the Liquor Amendment Act 2014.Recent changes to the liquor licensing legislation significantly impact on the development potential of land in affected areas. Moreover, new regulations impose greater burdens on licensees in the newly defined Sydney entertainment district, where new 1.30am lock-out and 3am cease service rules apply. In those areas, a range of offences have been added to the category of “strike” offences, which can give rise to severe commercial consequences.The Liquor Amendment (Kings Cross Plan of Management) Act 2013 (the Act) commenced on 6 December 2013. It adds further regulatory requirements to those first imposed under the Liquor Amendment (Kings Cross Plan of Management) Act 2012. Both pieces of legislation were said to be designed to “tackle alcohol-related violence” in the Kings Cross precinct.
REAL PROPERTY - Swimming pool compliance
New swimming pool certification requirements apply to strata and community titles, and will impact on the lease or sale of land contracts for premises with pools.
Changes to the Swimming Pools Act 1992 (the Act) has produced some uncertainty with regards to the application of the new sale and leasing requirements within a strata context. More specifically, it is uncertain whether an owner seeking to sell or lease their lot within a strata or community scheme is required to provide a certificate of compliance for a swimming pool located on the common property or association property within the scheme.
Strata and community scheme managers and real estate agents in NSW are encouraged to familiarise themselves with the new provisions and in particular the requirement for an owner to register their swimming pool and obtain a valid compliance certificate in preparation for the new prescribed documents for sale and leasing which commenced on 29 April 2014.
The Division of Local Government recently released fact sheets titled “Leasing a property with a Swimming Pool or Spa Pool” and “Selling a Property with a Swimming Pool or Spa”, which confirm its position that the new sale and leasing requirements are intended to apply to lot owners in the context of strata and community schemes.
INSOLVENCY - Disclaimed leases
The High Court has delivered a win for liquidators in a long-running battle over forestry leases.A High Court decision has highlighted the potential fragility of a lease, especially a long-term lease, when a corporate landlord is placed into liquidation and its liquidator determines that there is no appreciable benefit to the company for those tenancies remaining in place. The decision, in Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation)  HCA 51 (Willmott), upholds the decision of the Victorian Court of Appeal, effectively meaning liquidators are able to extinguish the leasehold estate or interest of tenants when a landlord is wound up.
For insolvency practitioners, the judgment clarifies an area of the law where there was some residual doubt and will come as a welcome addition to the armoury of powers with which liquidators are statutorily invested.Practitioners will also need to be sensitive to the prospect of a tenant or a secured creditor suffering loss arising from a disclaimer. Quite apart from loss of future profits from businesses destroyed by the loss of the lease, tenants may also lose money invested in expensive fitouts. However, under s.568B(3) of Corporations Act 2001 (Cth)(the Act) a person aggrieved by a disclaimer can apply to the court to set it aside if it would cause “persons who have, or claim to have, interests in the property, prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause to the company’s creditors”.
BAIL - Davids and Goliath
When Musa Konneh launched a class action against his mistaken arrest by police for breach of bail, he opened the door for other disadvantaged young people to do the same, but only if they can be found. Many young people mistakenly arrested by police will be eligible for compensation for false imprisonment, arrest and battery as a result of a NSW Supreme Court decision that newly construes the power of arrest in the Bail Act 1978 (NSW). Others, including adults who are not part of the Konneh v State of New South Wales (No. 3)  NSWSC 1424 (Konneh) class action (but who were arrested for breach of bail when not in fact on bail), may also be able to rely on the judgment in claiming damages for false imprisonment. Lawyers must inform their clients of the possibility of pursuing damages for wrongful arrest.
In an example of the internationalisation of the law and the opportunities available to tenacious litigants, a dispute between foreign-owned companies has resulted in two proceedings in NSW courts, which finally reached the High Court where an application for special leave to appeal was refused. Severstal, a Swiss incorporated subsidiary of a Russian steel manufacturer, and Bhushan, an Indian company, were in dispute about shipments of steel by Severstal from Russia to Bhushan’s Indian plant. Proceedings in relation to this dispute have been determined in Switzerland and are also ongoing in Delhi. At the time the Swiss proceedings were determined, Severstal had no assets in Australia. Bhushan, however, is the shareholder of Bhushan Australia, which holds a majority interest in mining tenements in Queensland. The proceedings show the ways in which the jurisdiction of foreign courts might be called in to aid disputes with no obvious connection to that jurisdiction.Security of payment Under Construction Primarily directed at promoting timely payment of subcontractors, recent amendments will have broader implications for industry players.
Solicitors acting for principals and head contractors should be aware that changes to the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) have the potential to make preparation of payment schedules considerably more onerous for their clients. Ensuring adequate administrative processes are in place to prepare the supporting statements required by the new legislation, and more importantly to verify their accuracy, will be a priority once the amendments commence.
The Building and Construction Industry Security of Payment Amendment Act 2013 (NSW)(Amendment Act) is expected to commence in April 2014 and will apply to construction contracts executed after its commencement.
The key changes to the SOP Act are:
removal of the requirement to endorse a payment claim as being made under the SOP Act;
introduction of a requirement that a payment claim be accompanied by a supporting statement to the effect that all subcontractors have already been paid amounts due to them;
introduction of mandatory deadlines for making progress payments; and
provision for the making of regulations requiring retention money to be held in a trust account.
In touch with the law
No 1 of 2014
The law is constantly changing and this newsletter describes developments which may be relevant to you. If you are in any doubt about these or any other aspects of the law, please make an appointment to see your solicitor.
In this issue
Strata law: Win for owners corporation against builder
New super tribunal: Bringing tribunals under one umbrella
Multinationals’ obligation to redeploy: Overseas posting not a right
Paying it forward: Former employers up for workers compensation
Hard sell not tolerated: ACCC unconscionable conduct appeal
Technology: 3D printing
What is waste? Environmental law
New laws on sex discrimination: Categories extended to include same-sex couples
Freezing orders: Applying for freezing orders
Workplace relations: Unfair dismissal for mental illness
Temporary residency: What income is taxed?
STRATA LAW - Win for owners corporation against builder
A Court of Appeal decision will assist residential strata schemes to sue builders for negligent building work. The Mantra Chatswood Hotel, a serviced apartment business managing units in a strata plan, brought a claim for negligence against the apartment’s builder, Brookfield Australia Investments. It was seeking compensation for loss arising from the cost required to repair building defects.
The court found the owners corporation was vulnerable and was owed a duty of care by the builder because there was no way it could have protected itself from the builder’s negligence. As a result of this case, it is likely that the expense of rectifying defects which could cause property damage, including to lot property, could be claimed from the builder.
This could mean the builder could be responsible for the leaking window or balcony that gives rise to water damage within the property. Although the case is not binding in other states and territories, it is certainly persuasive. It should also assist commercial strata schemes in Victoria, the ACT and Queensland as well as many residential strata schemes in Queensland and the ACT. The builder is appealing to the High Court which will likely be heard in the next few months. For updates on how these development could affect you consult your solicitor.
NEW SUPER TRIBUNAL - Bringing tribunals under one umbrella
New tribunal, the NSW Civil and Administrative Tribunal (NCAT), began operations on 1 January this year. NCAT is an umbrella organisation integrating most of the tribunals of NSW into one structure. People can approach any of the tribunals through this “one-stop shop” via one phone number and website.
The NCAT portal covers 23 tribunals, from relatively small bodies such as the Chinese Medicine Tribunal to the much larger Consumer, Trader & Tenancy Tribunal and the Guardianship Tribunal. The intention is to provide more streamlined access to justice – the system before was described as “complex and bewildering”.
The NSW model differs from the super tribunals of other states in preserving different tribunal specialities so you can still directly approach the tribunal you need. NCAT can be reached on 1300 006 228.
MULTINATIONALS’ OBLIGATION TO REDEPLOY - Overseas posting not a right
A Fair Work Commission decision sheds light on the obligation of multinational companies to consider overseas employment for employees affected by redundancy. The commission found the failure of a multinational company to redeploy an employee who was made redundant into an overseas position was not unfair.
The company, part of a multinational employer group, was found to have complied with its obligation to consider reasonable redeployment options, even though it declined to place an employee in an available position overseas when it made employees in its Brisbane office redundant.
The commission found that only after considering basic questions about a company’s structure, such as whether it has a formal overseas relocations policy and central management control over the relevant overseas office, need the task of assessing an employee’s skills, experience and qualifications against available positions be undertaken. At any given time there may be a number of vacancies in a firm’s overseas offices.
This decision establishes that it will only be necessary to consider international options for redeployment in certain circumstances. A number of other factors which the commission said need to be considered include the costs of relocating an employee from one country to another and training to fit relevant job requirements or gain necessary language skills. Do you have international operations? Contact your solicitor if you have questions about employment issues.
PAYING IT FORWARD - Former employers up for workers compensation
If a worker becomes ill with a disease of gradual onset as a result of working for more than one company, who foots the compensation bill? In a recent case, a worker sought workers compensation from Weathertex, his most recent employer. He was diagnosed with nasal cancer on 15 February 2004 as a result of exposure to wood dust while sawmilling hardwood logs and chipping planks at a masonite factory in Newcastle.
He worked at the factory from 15 March 1965 to 31 October 1998, while CSR Timber Products owned it, and from 1 November 1998 to 16 February 2004, while Weathertex owned it. The Workers Compensation Commission held that Weathertex was the employer that last employed the worker and was liable to pay compensation. Weathertex disputed this claim on the basis CSR was liable because the injury was caused by CSR’s earlier employment of the worker.
The High Court found that Weathertex had the right to pursue CSR in order to gain indemnity for the workers compensation payments. The High Court’s decision could expose former employers of workers that contract a disease of gradual onset during the period of their employment with that employer to the risk of having to indemnify a subsequent employer that has been ordered to pay compensation by the Workers Compensation Commission.To find out what this could mean for you, talk to your solicitor.
HARD SELL NOT TOLERATED - ACCC unconscionable conduct appeal
The ACCC is likely to be emboldened by a new court decision against Lux Distributors.
In a significant decision with implications for both businesses and consumers, the court has found in favour of the Australian Competition and Consumer Commission (ACCC) in its case against Lux Distributors Pty Ltd. The ACCC alleged that Lux, a seller of vacuum cleaners, had engaged in unconscionable conduct in relation to three elderly women by using “free maintenance checks” of the women’s existing vacuum cleaners as a deceptive ruse to gain access their homes. Salespeople then exercised a range of pressure-selling techniques to get the women to purchase Lux products. In a unanimous decision, the court agreed with the ACCC, finding the actions breached consumer laws.
Businesses should revisit their contracting arrangements and ongoing business practices to ensure any previous risk assessments are in line with the full court’s thinking, which explicitly considers social norms and questions of fairness. Consumers should also be aware of their rights when subject to visits by salespeople within their homes. For more information consult your solicitor.
TECHNOLOGY - 3D printing
Design revolution or intellectual property nightmare? For a designer or manufacturer, 3D printing is set to transform the industry, as it is an on-demand manufacturing model. It allows the manufacture of most objects from prototype to end product in a matter of hours, resulting in lower shipping and packaging costs. However, it could lead to a loss of sales of genuine products if widespread, unauthorised 3D printing occurs.
At the moment, the price of a 3D printer is prohibitive – approximately $20,000 – but they will inevitably become cheaper and enter the mainstream. Designers and manufacturers need to start now to find the best protection against unauthorised 3D printing by registering their designs. Registration of designs should happen before the product is on the market or promoted anywhere in the world and is valid for 10 years. To be registered, the design is tested against what is already available and then certified if it is novel. The law contains robust infringement provisions against designs which are substantially similar as well as direct imitations. So creating a 3D model from an original 3D object, attempting to match its design and form exactly, will constitute an infringement of a registered design.
However, the test is strict and would not prevent 3D copies that differ sufficiently from the registered design – including relatively slight alterations. This is particularly relevant in the consumer goods market where there are many products with small variations between them. There might be other means of protecting your design, including patents or trademarks which a solicitor might be able to help you with.
WHAT IS WASTE? - Environmental law
A new court decision has limited the scope for resource reuse and recovery, especially for material such as demolition waste. A company that carried out demolition and excavation work and then transported the by-products of those activities to build roads was charged with unlawful transportation of waste.
The company argued that the material was not actually waste, as it was wanted for re-use in the construction of roads. Initially, the court agreed, but its decision was later overturned on appeal where it was found that the only appropriate test for whether material is waste or not is whether the owner (or generator) of the material at the time of transportation has a continuing use for the material.
Given the decision, those involved in reuse and resource recovery will need to be very careful. Unless a clear intention to re-use/recover the material is established by the owner of the material prior to transportation, that material is treated as waste in the eyes of the law – even if intended for ultimate reuse or recovery by other parties.
NEW LAWS ON SEX DISCRIMINATION - Categories extended to include same-sex couples
Changes in the law expand the areas of possible sex discrimination. Now discrimination on the basis of sexual preference, gender identity or intersex status is outlawed. Previously, federal law only examined discrimination on the basis of “sexual preference” in the area of employment or occupation.
The definition of gender identity has been expanded to include the way a person expresses or presents their gender and recognises that a person may not identify as either male or female. The new ground of “intersex status” recognises being intersex as being about biological variations not gender identity. “Different sex” rather than “opposite sex” is used throughout the legislation, consistent with the new definitions of gender identity and intersex status in recognition that a person may not identify as either male or female. The laws also now cover same-sex couples – “marital or relationship status” replaces “marital status” and “de facto partner” replaces “de facto spouse” to cover both opposite- and same-sex couples. Consistent with these new protections, sexual harassment provisions state that a person’s sexual orientation, gender identity, intersex status and marital or relationship status are all now circumstances which can be taken into account when considering whether or not a reasonable person “would have anticipated the possibility that the person harassed would be offended, humiliated or intimidated”.
Further information on the changes is available at www.humanrights.gov.au/new-protection.
FREEZING ORDERS - Applying for freezing orders
Where there is a real danger that the other party in a dispute may dispose of assets to defeat a claim, you can apply to the court for freezing orders.
In a recent case, X and Y lived and worked in the same area of the Hunter Valley. Y, who had judgment ordered against him in court had, a year before court proceedings, listed his residential property for sale. A few days after the court decision, X drove past the home and saw a ‘for sale’ sign in the front yard. Worried that the house would be sold, he went to a higher court seeking that any proceeds from the sale of the residential property be frozen, up to the amount of the judgment debt and any costs.
The court said that the order should have been sought from the court where the judgment would be enforced. It said X must show that there was sufficient prospect that the judgment would be enforced, and that there was a danger that assets would be lost. In this case, the court considered that there was no threat of assets dissipating such that judgment in favour of X would remain unsatisfied. There was little risk of the assets being hidden or shifted to another person, and allegations of fraud were unfounded. Therefore, the court ordered X to pay costs because he should have known that there was no real prospect of success. It was exacerbated by his allegations of fraud against Y.
WORKPLACE RELATIONS - Unfair dismissal for mental illness
Employers face significant challenges and risks when seeking to dismiss employees suffering from mental illness. The Fair Work Commission has found that an employee had been unfairly dismissed from his position on the basis of his mental illness. The employee had undergone psychiatric assessment at the request of the employer, where it was found that he had paranoid schizophrenia and was not getting help or taking medication for the condition.
The expert said the employee did not have a current capacity for work and might be disruptive in the workplace. The expert also said the employee would need treatment and a certificate saying he was fit to return to work before he returned. The employee’s employment was terminated based on the psychiatric report. However, the commission found that the reason for dismissal did not accord with the expert’s opinion. In fact, the commission said the evidence described the employee as not having “a current capacity to return to work”.
While the commission agreed that the employee had been unfairly dismissed and should be reinstated, it did not automatically mean he should immediately return to the workplace. The employee was required to first produce clearance from both a treating psychologist and a treating psychiatrist that he was fit to return to work. Management of employees with mental illness is often a vexed issue for employers; a bespoke approach is needed, fashioned to the circumstances of the individual case.
TEMPORARY RESIDENCY - What income is taxed?
Normally, Australian residents will pay Australian tax on their worldwide income but non-residents will only pay Australian tax on income with an Australian source. An exception to the general rule is temporary residents, including most of those on 457 visas (a 457 visa allows non-residents to work in Australia for up to four years).
Executives who are temporarily resident are not subject to Australian tax on most foreign-sourced income and capital gains. However, they are taxed on non-Australian sourced income which relates to employment undertaken or services provided while a temporary resident of Australia.
If, for example, a temporary resident receives interest from an overseas investment, that interest will be exempt from Australian tax. But if they receive income from working overseas while a temporary resident it will be subject to Australian tax. A problem which particularly concerns executives who are temporarily resident is how employee share schemes will be taxed. Contact your solicitor for further information.