by legal | May 12, 2020 | Uncategorized
You might be trying to sell something, whether it be a second-hand surfboard, car or a financial product like a share in a company. If that product is a lemon, what are the rules around selling it? The product might be a lemon because: the surfboard has previously been snapped in half and repaired; the car has a major mechanical fault; or for the share, the underlying company has constrained cash-flow and is subject to a threatened legal proceeding, which, if commenced, the legal costs of defending it would render the company insolvent. As a starting point, the law’s ancient abiding position is buyer beware (or in Latin: caveat emptor). An experienced surfer can typically tell when a surfboard has been snapped and repaired. An inexperienced surfer should buy new or take a more experienced person with them when they inspect (or take the risk). Any buyer of a car can have a mechanic do an inspection and report on any likely mechanical problems and the likely costs of repair (which can be factored into the price offered). A buyer of shares can undertake due diligence, or for listed companies rely on the fact that the market has factored all relevant information into the prevailing price (the efficient capital market hypothesis, which has its limitations). Does the law ever move away from buyer beware? Yes, it does, but never just to protect a gullible buyer. Australian law provides that a person must not engage in misleading and deceptive conduct in trade or commerce. Let’s take the seller of a car (ignoring the need to a roadworthy certificate in some...
by legal | Mar 19, 2020 | Uncategorized
COVID-19 is wreaking carnage in our society, making those infected either somewhat or significantly ill and sometimes even dying. The government is endeavouring to limit the contagion in a bid to limit the number of people infected, as a desirable objective in itself, and so that our health facilities are not overwhelmed. The Australian government has banned non-essential outdoor meetings of greater than 500 people and non-essential meetings indoors of greater than 100 people. It has also issued travel advisories for Australians not to travel overseas and for Australians overseas to return home. Music festivals and concerts are being cancelled. International visitors need to self-isolate for 14 days and will be banned from this Friday. Sporting events are being cancelled or being played in empty stadiums. People are stockpiling perceived essentials like canned food and toilet paper, leaving supermarket shelves empty. We have never had to deal with a pandemic in our lifetime and this uncertainty breeds anxiety and fear. We are fearful for our health and the health of our family and friends, particularly the elderly. We are also fearful of the potential economic consequences. Concerts, sporting events, airlines and hotels are all being significantly and negatively impacted. There are lay-offs and suspensions (Qantas standing down 2/3rds of its 30,000 workforce). There are knock on effects for others, such as food producers, linen suppliers and taxi and Uber drivers as international tourism dwindles. People are seeking to minimise their public interactions, so they are eating at home more and not frequenting cinemas. So, what if you are party to a contractual commitment and this new environment makes that...
by legal | Feb 4, 2020 | Uncategorized
Designs in 3D products generally do not enjoy copyright protection In the intellectual property world, generally, if you industrially design a 3-dimensional product then unless you apply for a design registration for that product then you lose any copyright protection for that product once you industrially apply it (create more than 50 copies of it). You must also apply for registration before you go public with it (i.e. make the application while it is still under wraps, and make sure it stays under wraps until you do so). Copyright and design registration both provide monopoly rights to the underlying work. However, copyright lasts significantly longer than a design registration: life of the author + 50 years for copyright; a straight 10 years for design registration. Copyright arises automatically upon creation without the need for applying to the government for registration (in Australia, each design application costs $250 in government fees) The policy of the government is clear. Designs tend to be products that do things that have functional utility and a shorter period of monopoly rights is intended to allow the underlying product to be freely used by all sooner (hopefully to the benefit of society as a whole). Exception: Works of Artistic Craftsmanship One exception to the above is for works of artistic craftsmanship (WAC). A WAC is typically a three-dimensional product, but it enjoys the benefit of longer copyright protection and no registration is required. WACs are specifically referenced in the Copyright Act as a special category of works that enjoy copyright protection (paragraph (c) of the definition of “artistic work” in section 10 of the...
by legal | Dec 12, 2019 | Uncategorized
Life is uncertain and involves risk. Some people like taking risks and some are more risk-averse. Some people are risk-averse in some areas of their life (e.g. financially conservative) yet take risks in others (politically active and participates in protests and risks arrest). Some people love taking physical and sporting risks. Most noticeably, extreme sports, like rock climbing, downhill skiing and big wave surfing. After years of practice, people develop their skills and back those skills and their judgement in participating. How fast can I go into that hairpin corner on my motorbike? Can I solo climb that rock wall without ropes? Can I ride that 30’ wave? Despite the skill and talent, accidents inevitably occur. Sometimes claiming lives, sometimes with horrific and irreversible damage, such as quadriplegia or paraplegia. Nothing can change that. But these people’s lives change dramatically, and they need lots of medical support/intervention and ongoing care. That all costs money. If a person suffers this type of injury as a result of a car accident, then the compulsory personal injury insurance that comes with the vehicle registration will provide cover, up to predesignated limits. If the tragedy occurs out in the surf or out on a mountain, then there isn’t such an obvious defendant or insurer to seek compensation from. Plaintiff lawyers have often sought to sue someone to try to help provide for injured people. Judges often receive bad raps in public discourse, such as the nuanced job of sentencing criminals is an easy target for media and public outrage over too lenient sentencing (and sometimes they are too lenient, but mostly they probably...
by legal | Nov 6, 2019 | Uncategorized
I was asked in mid-October to act for the owners of a registered training organisation (RTO) to assist with its sale. A basic term sheet had been signed with the buyer and they both wanted to complete before the end of the month. Due diligence was underway, but unfortunately there was not a confidentiality deed in place. That was the first item to address. Next was preparing the share sale agreement (SSA). The broker had a version of a SSA that was tailored to the peculiar RTO regulatory environment. That needed just a bit of a shift to be a little more in the seller’s favour, a tad (!) of tightening, including adding some warranties from the buyer and addition of a buyer’s guarantor. It also required a mechanism to calculate and adjust for the net position vis-à-vis receivables and payables, provision for a tax estimate for trading up to completion and otherwise allowing the seller to dividend to itself the net cash/profit out of the company. The buyer didn’t appoint a solicitor until 3 days before scheduled completion (not so helpful). Those solicitors then sought a range of changes (many of which were agreed), but also a $50,000 holdback to address a variety of issues and also sought a range of liquidated damages based on perceived technical compliance issues in the RTO regulatory framework. This broad hold back was resisted, although a 10k holdback was agreed for 30 days just to cover if there were additional debtors than were adjusted for. We also resisted the request for liquidated damages, principally because the seller was very on the ball...
by legal | Oct 25, 2019 | Uncategorized
Many businesses, at some stage in their life, need funds from external sources. That is, their cash flow is insufficient to allow them to grow at the desired rate or to take a quantum leap into an entirely new level of operations or to expand globally. For any business, poor or negative cash-flow creates strain and is not sustainable, and for some a failure to obtain additional funding may mean the end of their business. This may be particularly acute when a business has a relatively mature position in Australia but is seeking to expand overseas. If your global expansion is occurring by way of appointing a distributor for your products then it may be possible to obtain healthy deposits from them when they place an order, which can in turn pay or contribute to paying the required deposit likely required by the business’ suppliers/manufacturers. There may still be a cash flow gap. Clearly, this is not available if the business is seeking to grow organically and set up its own operations overseas. The principal sources of funding available to businesses are bank loan, factoring, an angel investor, private equity/venture capital, crowd funding (either in exchange for product or for shares in the entity) and/or going public (that is, a full blown initial public offering of the entity’s shares on the Australian or other stock exchange). Besides the traditional avenues listed above, support may be available from the Australian government via Export Finance Australia. For example, EFA may be able to provide either a direct government loan or a government guarantee of your existing or proposed finance...
