What is a Deed of Novation?

Consider this – you have entered into a contract to purchase a property, but for various reasons, the property no longer suits you.  But it will suit your parents perfectly.  So can you transfer the contract over to your parents, so that your parents are the purchasers?

Also consider this – your business has a really valuable commercial contract, supplying services to a large organisation.  However you are moving interstate and closing up the business, but rather than letting the valuable commercial contract lapse, you would like to instead transfer the benefits (and obligations) under it to a friend’s business which is operating within the same industry.

So how are these transfers dealt with legally?  With a Deed of Novation.

A Deed of Novation is used when a party wishes to transfer or assign its rights and obligations under an existing contractual arrangement to another party – that is, the outgoing party is substituted for the incoming party without changing the original rights and obligations under the original agreement.

The effect of such a Deed is that the outgoing party is released from its obligations under the contract, and the various rights and obligations under the contract are transferred to the incoming party.

From the point of view of the other party to the contract, nothing changes – although they would need to consider and consent to the transfer (see below)Question

What is the difference between novation and assignment?

  • Novation transfers both rights and obligations under the contract to the incoming party, whereas assignment transfers rights only.
  • Novation requires tri-partite consent (that is, the consent of all parties – the outgoing party, the incoming party and the remaining party), whereas assignment may not require the remaining party’s consent (subject to the actual wording of the contract)
  • Novation results in a new agreement on the same terms as the original agreement, whereas assignment doesn’t necessarily discharge the original agreement, meaning that the outgoing party will remain bound by any obligations

Points to consider

It is important to consider the following points when considering a deed of novation:

  • does the original contract allow one party to novate its rights and obligations to another party?
  • does the novation require pre-approval from the remaining contractual party?
  • is there a requirement for pre-approval not to be unreasonably withheld?
  • would it make more commercial sense to terminate the existing contract, and replace it with a new contract?
  • who will be liable for past performance or default prior to the novation?  Will the incoming party take on the rights and obligations pre-dating the novation?
  • what will be the effective date of the novation?  The date of the agreement, or some other pre-determined date?

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Contact the team at Shire Legal on 9526 3444 or info@shirelegal.com.au if you have any questions about Deeds of Novation, or commercial agreements generally.

The recent government webinar – getting your business ready for the 2016/2017 financial year

Just in case you missed the recent webinar held by representatives from the ATO, ACCC, ASIC and Fair Work Ombudsman, here is the list of important links shown as part of the above webinar:

Question

Fair Work Ombudsman:

Australian Competition & Consumer Commission: B2B UCT (Business To Business Unfair Contract Terms)

Excessive card surcharging

Scams

Australian Securities & Investments Commission:

Australian Taxation Office:

New country of origin food labelling from 1 July

Businesses that sell food in retail stores in Australia need to know about the new country of origin food labelling laws which will apply from 1 July 2016.

The new requirements regarding country of origin food labelling will vary depending on:

  • the type of food product and
  • whether it was grown, produced, made or packed in Australia or another country.

Even though the new laws come into effect from 1 July, there is a period of 2 years within which businesses will have the time to implement the changes – so products that are packaged up until 1 July 2018 will still be able to contain labelling that complies with the previous legal requirements under the Food Standards Code (administered by Food Standards Australia New Zealand).

What businesses (and consumers!) need to knowMade in Australia

  • All food that currently needs to be labelled with a country of origin will continue to do so.
  • Most food that is made, produced or grown in Australia will need to carry a label that also includes a kangaroo symbol, as well as text and a bar chart indicating the percentage of Australian ingredients.
  • Labels for most products packed in Australia that contain imported foods which have undergone no or only minor processing in Australia will carry a ‘packed’ statement, as well as text and a bar chart indicating the percentage of Australian ingredients. They will not carry the kangaroo symbol.
  • Imported food will continue to show where it was grown, produced, made. If the food was not grown, produced or made in a single country it will need to indicate where it was packed and that it is of multiple origins or comprises imported ingredients.

What other businesses need to know this information?

As well as the actual manufacturers, importers, distributors and retailers of the food products, this information is crucial for anyone involved in the package design and marketing of the products (such as graphic designers and marketing).

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Contact the team at Shire Legal on 95263444 or info@shirelegal.com.au if you have any questions about the new requirements, or any other aspect of consumer laws.

Smaller businesses are not immune from the ACCC

So, as a smaller business, do you think you are immune from the wrath of the ACCC?  Think again.

In recent months, the ACCC has been successful with the following enforcement action:

  • Omniblend Pty Ltd – an online retailer of kitchen applicances – found guilty of resale price maintenance in the Federal Court (penalty of $17,500)
  • Conroys Pty Ltd – a bacon supplier – given an infringement notice for making a false and misleading representation regarding the country of origin of its bacon products (labelled as a product of Australia, when it was in fact made from imported pig meat) ($10,200)
  • Kailis Bros Pty Ltd – manufacturer of frozen prawn meat – were issued with an infringement notice alleging false and misleading conduct by suggesting that the prawns were caught, processed and packaged in Australia, when they were in fact packed and processed in Thailand ($10,800)
  • A Whistle & Co (1979) Pty Ltd – an Electrodry franchisor – engaged in false and misleading conduct by publishing false testimonials on its website (total penalties of $215,000)
  • Clews Holdings Pty Ltd and D Burnz Investments Pty Ltd – retailers of adjustable beds and mobility products – were both issued infringement notices alleging false and misleading representations, by suggesting that the products were approved by the Therapeutic Goods Administration (when they were not) and that they complied with the relevant Australian Standard (when no such standard exists) (penalty of $20,400 each)
  • Clinica Internationale Pty Ltd and Mr Radovan Montague – offered programs for migrants seeking permanent residency – found guilty of false and misleading representations and unconscionable conduct (penalties totalling $1,025,000)
  • Derodi Pty Ltd and Holland Farms Pty Ltd (trading as Free Range Egg Farms) – found guilty of false and misleading representations regarding its claims of its eggs being “free range” (penalty of $300,000)

So if you are concerned that your packaging and/or marketing material may convey a false or misleading representation about your product/service, or if you are concerned about the sales tactics used to sell your product/service, contact Melissa Lammers at Shire Legal to discuss your concerns.

Waltzing Matilda – a trademark?

The media last year picked up on the fact that a Victorian company had applied to IP Australia for a trademark over the phrase “Waltzing Matilda” for goods and services relating to online material, videos, CDs etc.  It was reported that as a result, the town of Winton, which claims it was the birthplace of the song Waltzing Matilda, would be prevented from using the phrase on its promotional and merchandise materials – suggesting instead that it would need to pay for the privilege.

The Mayor is reported as saying:

“We would like not to see it happen, because Winton is the home of Waltzing Matilda and also, Winton is the town that has promoted the song and Banjo Paterson since the 50s, and we’d be sad to see someone is doing this.”

“We’d like to be able to do what we wish with Waltzing Matilda. It is an important part of Queensland and Australia’s history.”

The term “Waltzing Matilda” was actually first trademarked in 1968, by the same Victorian company (WM Productions Pty Ltd) in relation to beverage products and the general film industry.  So over the years, the Victorian company has had to renew the trade mark registration every 10 years, to prevent anyone else applying for its registration.  Nevertheless, over the past 47 years since initial registration, there have been a number of oppositions lodged by other companies interested in securing the rights over the iconic term, usually by claiming that the original trademark holder has not “used” the trademark, therefore the registration should lapse.

Opponents of the renewed trademark have included, amongst others, the Winton Shire Council, the Waltzing Matilda Centre Limited, and Jolly Swagmen Pty Ltd.

Gavel

What is non-use?

As the owner of a trademark, you are required to use the trademark in the course of trade.  Otherwise, the trademark registration may be removed because of “non-use”.  Anyone can lodge an application with IP Australia for a trademark to be removed because of non-use – being either:

(a) the fact that the registered owner lodged the original registration with no intention of using the trademark (section 92(4)(a)); or

(b) the fact that the registered trademark has not been used for the 3 years prior to the application being lodged (see section 92 of the Trade Marks Act 1995).

Anyone who opposes the application can lodge evidence as to use of the trademark, warranting its continued registration.

One application leads to another, and another …

Interestingly, on the same day as the above media report appeared, an individual (with a contact address in Winton, Queensland) also applied for registration of the trademark “Waltzing Matilda” in so far as it relates to “paper postcards, picture postcards and postcards” (all within class 16).

And 5 days after the above media report appeared, another individual applied for registration of the trademark “Waltzin’ Matilda” for the same classes of goods and services as WM Productions Pty Ltd has applied for (being classes 16 and 41).

“Show cause”

As it turns out, the Victorian company’s application for the registration of “Waltzing Matilda” in the broader range of products was rejected, and the applicant now has until December 2016 to argue their case.

Watch this space …

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If you have a specific term or phrase that you would like to prevent your competitors from using, you should consider registering a trademark – contact Melissa Lammers on 95263444 or mlammers@shirelegal.com.au to discuss how Shire Legal can help you with the trademark registration process.

What does it mean to be proactive, rather than reactive?

We have all heard of the saying – “be proactive, rather than reactive” – but what does that actually mean, particularly when you are talking in the context of a legal firm? It means taking steps sooner rather than later to avoid issues arising, rather than only taking steps once the issue has arisen – which usually takes more time, money and worry. In the legal context, this can best be demonstrated by looking at some of the issues we have dealt with in recent years, issues which could have been avoided if the client had their legal affairs in order at the start:

Situation 1OTP An employer was in dispute with an employee as to what the employee’s entitlements were.  The employee claimed that ….  How could this have been avoided?  By having a customised employment agreement drawn up and signed off by both parties at the time that the employee commenced. Commercial

Situation 2 After operating her business successfully for a period of years, a client allowed her sister to start working in the business as well, and after a short time, transferred ownership of the business name to her sister, and also allowed her to operate the bank account.  The client had a falling out with her sister, following which her sister proceeded to operate her own business under the same trading name, took some of the business’ core equipment, and continued to draw monies out of the bank account.  Neither the client nor the sister knew how to resolve the dispute between them.  How could this have been avoided?  By having a partnership agreement drawn up between them, they could set out the circumstances within which the partnership would come to an end, and what steps would need to be taken to those circumstances.

Situation 3ACCC A client was challenged by the ACCC about the labelling on its product.  How could this have been avoided?  By having a specialist lawyer review and approve the proposed labelling before it went into production.  The review would ensure compliance with labelling requirements regarding:

CommercialSituation 4 At the end of the fixed term of the franchise agreement, the franchisee was unsure as to whether or not they should renew the franchise agreement for a further term.  In the meantime, the franchisee continued to operate the franchised business, giving the franchisor the impression that the franchise had been renewed (although documents had not been signed).  When the franchisee decided to exit the franchise, the franchisor attempted to bind the franchisee to the terms of the franchise agreement, and sought damages.  How could this have been avoided? By approaching a specialist franchise lawyer at the end of the fixed period, the franchisee could have been guided as to what to do and not to do, to preserve their rights regarding the agreement, and to avoid creating the impression that the franchise agreement was continuing.

Situation 5 A client entered into negotiations with a prospective purchaser of its business, and subsequently signed off on a 1 page document by which the client agreed to sell the business to the purchaser for a fixed price.  This created a number of issues – the real asset to be sold was not the business as such, but the client’s shares in a Pty Ltd company which owned the business.  The lease was in the company’s name, and any change in control of the company lessee required the landlord’s approval.  Some of the business assets were under lease, and not owned by the company as such.  Although the client and the purchaser had negotiated to settle the deal within a matter of days, the matter eventually settled after a number of months because of the numerous issues to be dealt with.  How could this have been avoided?  By contacting lawyers at first instance, the 1 page document could have been drafted with the correct details and with the correct procedures, ensuring that the deal was negotiated and settled within a reasonable time frame and with correct documentation in place.

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Statements like “I don’t need a lawyer” or “I haven’t got the time/energy/money to get a lawyer involved in this” could end up costing you more time/energy/money in the long run.

Please contact the team at Shire Legal to discuss your situation and see how we can help you to minimise the time/energy/money spent in resolving any issues you may have.

Have you lay-byed a Christmas hamper from Chrisco?

GavelThe Australian Competition & Consumer Commission (ACCC) commenced proceedings against Chrisco Hampers Australia Ltd (Chrisco) in the Federal Court almost 12 months ago, alleging that the lay-by agreement for its Christmas hampers was unfair.

The Federal Court has just handed down its decision – and agreed that the lay-by agreement used in 2014 contained an unfair contract term relating to the “HeadStart Plan”, which allowed Chrisco to continue to take payments by direct debit after the customer had fully paid for their order.  The direct debits would only stop if the customer took the required steps to “opt out” of the payment plan.

The Court noted that the term caused a significant imbalance in the rights and obligations between Chrisco and its customers.

The Court also held that Chrisco made a false or misleading representation by stating to customers that they could not cancel their lay-by agreement after making the final payment – when in fact the law provides that a lay-by agreement can be cancelled at any time prior to delivery of the goods.

The ACCC also alleged that Chrisco breached the lay-by laws that require any termination charges imposed on the customer must be reasonable, and certainly no more than the reasonable costs incurred by the supplier.  The Court held that the ACCC did not prove this point.

Further information about your rights with lay-by agreements is available on the ACCC’s website.