Vicarious liability – ‘Am I liable for damage caused by my employees?’

The relevant question to ask is whether the worker is an employee or an independent contractor. This involves consideration of a range of factors.

Not every factor will be relevant in every case, nor will all be given the same weight.  Control (that the employer has over the worker) remains the central element. 

Other relevant factors include:

1. Mode of remuneration;

2. Provision and maintenance of equipment;

3. Obligation to work;

4. Hours of work;

5. Provision of holidays;

6. Deduction of income tax;

7. Delegation of work by the employee;

8. Whether uniform provided;

9. Provision of training.

An employer is liable for the conduct of an employee committed in the course of employment.

If the person who committed the liability was an independent contractor and not an employee, then the employer will not be vicariously liable for that conduct unless a non-delegable duty exists.

Independent contractors

The person who employs an independent contractor will only be liable for that contractor’s conduct if the employer owed a personal duty of care to the victim and that duty was a non-delegable duty of care. A non-delegable duty is a duty of care which the court regards as being unable to be discharged or ‘outsourced’.

Example: An employer company hires an independent contractor to operate a forklift, taking pallets from a warehouse to an awaiting truck. The forklift driver, desperate to get home decides to speed things up. Manoeuvring at twice the usual speed, the contractor hits an employee of the company. The employee may bring an action against;

• The independent contractor for negligent forklift operation,
• The employer company for negligently failing to provide a safe working environment, notwithstanding that the employer is seemingly faultless.

Where there is no non-delegable duty, an employer is not liable for the conduct of an independent contractor, even if that party was undertaking duties for the employer.

The words used to describe the relationship are not definitive of the legal nature of the relationship (just because they name themselves principal and contractor does not mean the law sees it as such), it is a matter for the courts to decide objectively.

Where an employee is lent by one employer to another employer, the company who retains control will be vicariously liable. It is not sufficient that the new employer is in control of payment, if all other forms of control remain with the original employer.

Was the conduct committed during the course of employment?

If it is established that the person who committed the act was an employee then the next question to be addressed is whether the act was committed in the course of his/her employment.

An act or omission is still considered to be in the course of employment if it is either a wrongful mode of committing an authorised act or a wrongful act actually authorised by the employer

If an employee takes an opportunity during employment to use time or resources for personal purposes the employer is not liable. This is referred to as the “frolic” doctrine   If it is argued that the employee was on a frolic, both the purpose and extent of the deviation must be considered (for example, where a driver deviated slightly off route to get refreshment from a hotel, the employer was still held liable). If the employee is engaged on employer business and on personal business at the same time, the employer may still be liable.

An express prohibition by the employer of a wrongful act will not necessarily be a defence to the employer if the employee’s act was still a mode of doing what the employee was employed to do.

An employer may be vicariously liable for both intentional and unintentional acts committed by an employee.

For a more thorough consideration of this complex area of law, or if you would like to know whether you are an employee or an independent contractor, make an appointment to speak with one of our experts about your position and rights.

New Federal Asbestos Legislation

If your workplace or commercial holdings were constructed prior to 31 December 2003, then the new federal asbestos laws will apply to you.

You will need a current Asbestos Register and current Management Plan to comply with legislation commencing 1 January 2012. You will also need to ensure your reviews are up to date.

If you do not have a current Asbestos Register or current Management Plan and have not had a review, Quality Building Management (QBM) can take steps to ensure you comply with legislation.

Bennett Carroll Solicitors have offices located in Brisbane and the Sunshine Coast

Freecall: 1300 334 566
Fax: (07) 3343 8664

Email: info@bcglaw.com.au

Website: www.bcglaw.com.au 

Transfer Documents

There's a small suite of documents and a clutch of processes that go with them, designed to transfer to the buyer the tangible and registrable assets that make up the business. In most cases it is the buyer's responsibility to create the documents that create these transfers, and you simply need to sign and return them.

You need to be aware however of the process.

Lease
In  some jurisdictions the Lease Transfer is made up of two documents; the Assignment of Lease itself, and a Deed of Covenant.

The Lease Assignment document (it may be called the Transfer or a Deed of Assignment depending upon the type of lease you hold), will be prepared by the buyer and sent to you to sign and return. That document effectively transfers any rights that you have in the Lease. You should not return it unless you receive a written undertaking from the solicitor to the buyer, that the document is not to be used pending settlement. If you do not receive this Undertaking, do not return the document. Do not accept this Undertaking from the buyer itself.An Undertaking from the solicitor is an enforceable undertaking able to be pursued both through the Courts and through the Solicitor's disciplinary body. An Undertaking from the buyer itself is worthless.

The Deed of Covenant is a document designed to create a direct link between the buyer and your landlord. It enables the landlord to sue and creates what is called "Privity of Contract". This document is prepared by the landlord's solicitor at your expense and is often done very slowly, and in fact may not be ready by settlement.

You should check as soon as possible on the cost of this document, as prices vary wildly. You do not have an opportunity to shop for prices, as the landlord will choose its own solicitor for it.

Your responsibility after the Contract is signed, (obligations vary slightly from Contract to Contract so check yours), is usually simply to take all reasonable steps to obtain the consent of the landlord to the Assignment. Chasing the documentation is the buyers responsibility.

Business Name, Website, Telephone and other services
Again it is up to the buyer to produce documentation for you to sign, but if you want to avoid ongoing responsibility for electricity, telephone, Internet and other services, it is important to take a direct hand in seeing that these services are cut off from the day after the settlement. This will take them out of your name. Remember, many of these services have security deposits, which should be adjusted off your final bill or returned to you.

Local Authority and State Government Licences
Most authorities maintain that these licenses cannot be "transferred" or "assigned", and have to be applied for freshly by the buyer.

Regardless of the wording used, the buyer will be responsible for obtaining licenses in its name for the continuation of the business.

One potential catch for a seller is where the Contract makes the purchase of the business subject to obtaining all of these licenses, and gives the buyer the opportunity to back out if those licenses are not obtained. It is implicit in that situation that the buyer will have to take all reasonable steps to secure that outcome.

Regardless, it will be important for you to be on top of the status regarding each of those licences, and in direct contact with the licencing authority to ensure that this is happening.

Requisitions on Licenses
Some of these licences have a requisitions regime.

Particularly in a food preparation business, the Local Authority License process often creates a situation where the local authority will indicate that the license can be assigned but only once several requisitions have been completed.

The Contract will usually specify but this is your responsibility, but sometimes will place monetary cap on the value of requisitions which with you have to comply after which it is the buyer's responsibility to pay. If you believe that requisitions are possibly or likely you should attempt to limit the monetary value of your contribution.

Bennett Carroll Solicitors have offices located in Brisbane and the Sunshine Coast

Freecall: 1300 334 566
Fax: (07) 3343 8664

Email: info@bcglaw.com.au

Website: www.bcglaw.com.au  

Agents, their duties and secret commissions

When we hear the word agent our first thoughts are of real estate agents. However, an agent in a legal sense actually covers an expansive range of relationships between a person or company (an agent) and another (referred to as a principal) who has undertaken to serve their best interests.

Whether or not a relationship of agency exists is a question which the courts approach objectively[1]. There are many examples of established agency relationships. Here are a few;

·         Real estate agent and client

·         Solicitor and client

·         Employee and employer

·         Joint venturers (to each other)

·         The director of a company (to the company)

Scope of an agent’s duties

While the scope of the duties owed by an agent to their principal will vary depending on the type of agency, a fundamental duty of an agent is not to use their position to make a gain for themselves without the knowledge and assent of the principal[2].

An agent should consider if there is any personal interest in the matter which might conflict with the duty owed to the intended principal and, if so, he or she should decline to act as agent without the fully informed consent of the principal[3].

Profit from position and secret commissions

If an agent is aware of any circumstances which might influence their client’s decision to enter into a negotiation, and fails to disclose that information to their client, the commission may be forfeited[4].

If the agent does receive profit as a result of that non-disclosure, these profits are recoverable by the principal on learning the true facts[5].

Should an agent receive a secret commission or profit the principal may recover it as well as dismiss the agent[6].

Application to Real Estate

Let’s apply this to a real estate transaction, where agencies most commonly arise.

Perhaps you have heard of agents who desired to act for both a buyer and seller and to obtain commission from both. It is the duty of the agent to make full disclosure to both the buyer and seller of an intention to act for, and receive payment from, the other party. Both parties must be made fully aware of this intention and agree to the agent doing so[7]. In the event the agent does not tell both parties, or does not gain their consent, the commission will be lost.  These obligations apply in addition to any PAMDA or POA obligations.

---

[1] Garnac Grain Company Inc v HMF Faure & Fairclough Ltd

[2] Parker v McKenna

[3] Lintrose Nominees Pty Ltd v King

[4] Dargusch v Sherley Investments Pty Ltd

[5] Walden Properties Ltd v Beaver Properties Pty Ltd

[6] Fullwood v Hurley

[7] Fullwood v Hurley

Have you had an employee take your business secrets elsewhere? Or perhaps you’re a frustrated employee who’s considering it? Consider this:

An action for breach of confidence has quite a wide scope. It may arise where an employee takes secrets from their boss to their competitor, or even where a partner in a married couple divulges secrets of their relationship. The basis for the action can come from a variety of legal realms, however the most common is through a provision in a contract of employment.

Elements

In order to maintain an action for breach of confidence, the person who brings the action must establish three elements;

1.     That the information has the necessary quality of confidence or secrecy;

2.     The information was imparted in circumstances importing an obligation of confidence;

3.     There was (or may be) an unauthorised use of the information.

Unless you are an expert, it can be quite a complex process to determine whether these elements are met. Most people will approach a lawyer after satisfying element three, however it is numbers one and two which create the most difficulty.

 Defences

If you are concerned because you may have disclosed confidential information, do not fret. There is a range of defences which may aid you. Defences to an action for breach of confidence include:

·         Consent of the confider

·         Disclosure for the purpose of complying with the law

·         Disclosure of a crime, wrong or misdeed

·         If disclosure is in the confidant’s interests

·         Disclosure in the public interest (for national security, public health, and things of this gravity)

Remedies

Remedies awarded in breach of confidence cases include:

·         Injunction to prevent either;

a)      the information being revealed in the first place, or

b)      further misuse of the information.

·         Monetary Remedies (either an account of profits or damages)

·         Formation of a constructive trust (where a defendant acquires some property by use of the confidential information, it may be held on trust for the plaintiff)

·         Orders for delivery-up and for destruction

If you are concerned that your confidential information is at risk, or if you are unsure what you should or shouldn’t tell your next employer about your current work, make an appointment to speak with us about your rights.

BUYING A SMALL BUSINESS- CIRCULAR NO.5

1.            STARTING A BUSINESS FROM SCRATCH

An alternative and seemingly cheaper option to buying an existing business, is to start your own. 

Benefits of starting your own business:-

(a)              Can be cheaper;

(b)              Can be set up using your own systems and procedures in your own manner;

(c)              Can be grown at your own pace;

(d)              Requires less immediate capital input. 

Disadvantages:-

(a)              More likely to fail;

(b)              May not be any cheaper in the long run;

(c)              No track history of income which will affect both financing and prospects of success;

(d)              No client base, no goodwill, no market presence.

2.            GOING INTO COMPETITION WITH YOUR CURRENT EMPLOYER (COMPETITION CLAUSES AND RESTRAINT CLAUSES)

You may be considering setting up in competition to your present employer, and even, perhaps, taking some of your employer’s clients with you. 

Contrary to common belief, this is not automatically taboo.

Unless you have signed a restraint clause, there is nothing to prevent you from setting up in competition with your employer, and taking some clients with you. 

There are some rules however:-

1.                You cannot, in preparation for your departure, use your employer’s equipment, systems, procedures or records to lure clients away.

2.                Generally speaking, you cannot take client records with you, which have been copied before your departure.  Photocopying and removing client lists, ledgers, data bases, or precedents is not permitted. 

3.                You cannot use your employer’s telephone and other systems to “set clients up to leave”, prior to your departure. 

In the absence of a Restraint Agreement however, there is nothing to stop you from speaking with customers once you have left, and soliciting them to come with you. 

If you are subject to a Restraint Agreement, you should take that Agreement to your Solicitor and have it looked at to see if it is binding and reasonable, prior to deciding upon your course of action.

You are not permitted to run a “parallel business”.  That is, you are not permitted to stay employed with your present employer, and run a separate business in competition with your employer, unless you have your employer’s specific permission. If this is granted you should ensure the permissions is in writing. 

STILL TO COME

 

1.                        THE PURCHASING PROCESS

2.                        CONTRACT CONDITIONS

3.                        DUE DILIGENCE AND FINANCE CLAUSES

4.                        JOINT VENTURES AND EXPANSIONS

5.                        SYSTEMS, GROWTH AND FRANCHISES

6.                        HIRING AND FIRING

7.                        WHAT IS DISCRIMINATION?

8.                        WHAT IS SEXUAL HARASSMENT?

9.                        WHAT TO DO IF YOU ARE DISCRIMINATED AGAINST OR SEXUALLY HARASSED?

10.                     INDEX - ANTI-DISCRIMINATION ACT 1991

11.                     31.          APPENDIX - ITEM 2 – HARASSMENT COMPLAINT PROCEDURE

12.                     31.          WRONGFUL DISMISSAL – INDEX

13.                     32.          WRONGFUL DISMISSAL

14.                     33.          APPENDIX - CHECK LIST FOR DISMISSAL PROCESS

15.                     34.          Sample interview process - First or Second Interview

16.                     35.          FEEDBACK record book

17.                     36.          FIRST WARNING LETTER TO POOR PERFORMER

18.                     SECOND WARNING LETTER TO POOR PERFORMER

19.                     DEBT COLLECTION, CLIENT INDUCTION, CREDIT ASSESSMENT, COSTING YOUR PRODUCTS AND MARGINS

20.                     PRIVACY

21.                     BANKRUPTCY, PART X AND EXTERNAL ADMINISTRATION

22.                     LICENSING

23.                     HOW TO BUY OR START A NEW BUSINESS

24.                     STOCK

25.                     BUYING STOCK

26.                     GST

27.                     PERSONAL SPENDING

28.                     EQUIPMENT FINANCE – STRUCTURES

29.                     FACTORING

30.                     RETAIL PRESENTATION ISSUE

31.                     NAMES, SIGNAGE, LOGOS

32.                     ADVERTISING, MARKETING, YOUR POSITION IN THE MARKET

33.                     POSITIONING IN THE MARKET

34.                     SYSTEMS GROWTH AND FRANCHISES

35.                     ASSESS YOUR STRENGTHS AND WEAKNESSES

36.                     MATCH THE SKILLS WITH YOUR GOALS

37.                     LOOK FOR AN EXISTING OR A NEW BUSINESS WHICH MATCHES YOUR SKILL SET AND YOUR GOALS

38.                     WHAT TO LOOK FOR IN A NEW OR EXISTING BUSINESS

39.                     WHAT IF YOU DON’T HAVE THE SKILL SET TO INSTALL SYSTEMS AND PROCEDURES?

40.                     SYSTEMS

41.                     GROWTH

42.                     FRANCHISES

43.                     INSURANCE

44.                     RETIREMENT AND ESTATE PLANNING

45.                     TAXATION

46.                     THE CONTRACT PROCESS

47.                     DUE DILIGENCE

48.                     PART X, BANKRUPTCY AND EXTERNAL ADMINISTRATION

49.                     PART IX AND PART X ARRANGEMENTS

50.                     ADMINISTRATION FOR COMPANIES

51.                     RECEIVERSHIP

52.                     LIQUIDATION

BUYING A SMALL BUSINESS- CIRCULAR NO.4

1.            WHAT BUSINESS TO BUY

Having decided on a target industry (or perhaps a group of two (2) or three (3)), where do you look?

Business classifieds, and business brokers, have always been the best source of potential leads for businesses.  You can speak with the local trade association for the industry in question, and many (news agencies, medical practices, child care centers for example), have their own listing processes.

The benefit of dealing with a broker is that you should receive more organized and presentable information.  You also have someone who can chase and find information for you regarding the business.

It is important that you have a rudimentary understanding of how to value businesses in your target industry. 

2.            VALUING THE BUSINESS

The value of business is broken up into several parts:-

(a)              Goodwill;

(b)              Fixtures and fittings;

(c)              Debtors;

(d)              Work in progress;

(e)              Plant and machinery. 

3.            GOODWILL

This is the most difficult component of the business to value.  It is the component the Vendor asks for which compensates him for the fact that you will receive on-going income from the machine that he has built. 

It is usually calculated as a multiplier of the average net income of the business over the last three (3) years.

Every type of business has a different multiplier.  It is important that you speak with your Accountant and the industry association (if there is one), to find out what the goodwill multiplier is. 

This figure is usually the most hotly contested and intensively negotiated part of a business purchase. 

Different industries have different multipliers (for example accountancy practices a multiplier of 1 between .8 and 1, legal practices a multiplier of .3 etc.)

Multipliers are often expressed as percentages based on the return you receive for the purchase price (eg caravan parks, 16%, that is you should receive 16% return on the purchase price, or put another way, the net income should be 16% of what you paid for the goodwill). 

Percentages are multipliers that may be moved backwards and forwards depending upon the quality of the business, its years of trading, the volatility of the market, the desperate nature of the Vendor, or patchy trading history of the business. 

4.            FIXTURES, FITTINGS, PLANT AND EQUIPMENT

Most often these items are bought that their “written down value”, that is, the value to which the Vendor has written them down in the depreciation schedule for those items of equipment.  Sometimes however, there is contention between the Vendor and Purchaser over this value. 

The Vendor may wish to keep the fixtures, fittings, plant and equipment figure low and the goodwill figure high in order to minimize Capital Gains Tax.  The gains tax paid on the goodwill component of the business by a Vendor, is considerably lower than other items of the business. 

Conversely, the Purchaser, if he can legitimately raise the value of the fixtures, fittings, plant and equipment, will gain additional depreciation benefits, and will lower the “indexed cost base” of the business, the starting figure for your Capital Gains Tax bill which you will eventually pay when you sell the business. 

Any figures used in the purchase between the parties, must be able to be justified to the Australian Taxation Office.  It is important that you consult both your Solicitor and Accountant in relation to ensuring that whatever action you take with the breakdown of the purchase price, is sustainable and can be justified to the Australian Taxation Office.

Many parties simply decide not to complete a breakdown of the purchase price, and “go their separate ways”, in relation to recording the breakdown of the components of the business. 

5.            WORK IN PROGRESS AND DEBTORS

It is not normal to buy the debtors of a business (that is the outstanding debts which have already been invoiced by the Vendor but have not yet been paid).  If you were to buy the shares in the Company which runs the business, rather than the business itself (see below), then all of the assets of the Company remain in tact.  Otherwise, the debtors belong to the Vendor, and the Vendor may collect them (with or without your assistance). 

Ordinarily, some assistance is provided by you, as you will be dealing with the customers and cheques will be coming in to the business premises.  You are not responsible for any invoices which were issued before the settlement date, which are not collected.

With regard to work in progress (orders which have not yet been completed, delivered and invoiced) you may:-

1.                Buy these at invoice price;

2.                Not buy these but be faced with having to complete the work (not recommenced);

3.                Split the proceeds;

4.                Pick a particular part of the process (for example orders completed and ready for delivery), and use that point to divide jobs between Vendor and Purchaser. 

6.            BUYING THE BUSINESS OR BUYING THE COMPANY

Occasionally, it is suggested (and there may be some benefit), in buying the shares in a Company which runs the business, rather than buying the business assets from the Company.

If the Vendor uses a corporate structure for example XYZ Pty Ltd trading as ABC Fencing, there are two (2) separate entities, the business ABC Fencing, and the Company which owns that business XYZ Pty Ltd. 

You may buy the business from the Company which is not a legal entity.  You set up your own structure and commence trading as a brand new entity, from day one.

Alternatively, you may buy the shares in XYZ Pty Ltd and have that Company continue to trade as ABC Fencing.

If you do so, the Company will be owner of the business both before and after settlement, and you will simply own the shares in that Company and have the ability to direct it.

Most of the benefits flow to the Vendor by using this structure, and you will inherit any sins and skeletons in the closet committed by that Company prior to the date for completion.  There may be Capital Gains and Stamp Duty benefits to be gained by you however, and certain non-transferable licenses (depending upon the industry), might be able to be preserved by using this structure.  It is not normally recommended however.   

STILL TO COME

 

1.                        STARTING A BUSINESS FROM SCRATCH

2.                        GOING INTO COMPETITION WITH YOUR CURRENT EMPLOYER (COMPETITION CLAUSES AND RESTRAINT CLAUSES)

3.                        THE PURCHASING PROCESS

4.                        CONTRACT CONDITIONS

5.                        DUE DILIGENCE AND FINANCE CLAUSES

6.                        JOINT VENTURES AND EXPANSIONS

7.                        SYSTEMS, GROWTH AND FRANCHISES

8.                        HIRING AND FIRING

9.                        WHAT IS DISCRIMINATION?

10.                     WHAT IS SEXUAL HARASSMENT?

11.                     WHAT TO DO IF YOU ARE DISCRIMINATED AGAINST OR SEXUALLY HARASSED?

12.                     INDEX - ANTI-DISCRIMINATION ACT 1991

13.                     31.          APPENDIX - ITEM 2 – HARASSMENT COMPLAINT PROCEDURE

14.                     31.          WRONGFUL DISMISSAL – INDEX

15.                     32.          WRONGFUL DISMISSAL

16.                     33.          APPENDIX - CHECK LIST FOR DISMISSAL PROCESS

17.                     34.          Sample interview process - First or Second Interview

18.                     35.          FEEDBACK record book

19.                     36.          FIRST WARNING LETTER TO POOR PERFORMER

20.                     SECOND WARNING LETTER TO POOR PERFORMER

21.                     DEBT COLLECTION, CLIENT INDUCTION, CREDIT ASSESSMENT, COSTING YOUR PRODUCTS AND MARGINS

22.                     PRIVACY

23.                     BANKRUPTCY, PART X AND EXTERNAL ADMINISTRATION

24.                     LICENSING

25.                     HOW TO BUY OR START A NEW BUSINESS

26.                     STOCK

27.                     BUYING STOCK

28.                     GST

29.                     PERSONAL SPENDING

30.                     EQUIPMENT FINANCE – STRUCTURES

31.                     FACTORING

32.                     RETAIL PRESENTATION ISSUE

33.                     NAMES, SIGNAGE, LOGOS

34.                     ADVERTISING, MARKETING, YOUR POSITION IN THE MARKET

35.                     POSITIONING IN THE MARKET

36.                     SYSTEMS GROWTH AND FRANCHISES

37.                     ASSESS YOUR STRENGTHS AND WEAKNESSES

38.                     MATCH THE SKILLS WITH YOUR GOALS

39.                     LOOK FOR AN EXISTING OR A NEW BUSINESS WHICH MATCHES YOUR SKILL SET AND YOUR GOALS

40.                     WHAT TO LOOK FOR IN A NEW OR EXISTING BUSINESS

41.                     WHAT IF YOU DON’T HAVE THE SKILL SET TO INSTALL SYSTEMS AND PROCEDURES?

42.                     SYSTEMS

43.                     GROWTH

44.                     FRANCHISES

45.                     INSURANCE

46.                     RETIREMENT AND ESTATE PLANNING

47.                     TAXATION

48.                     THE CONTRACT PROCESS

49.                     DUE DILIGENCE

50.                     PART X, BANKRUPTCY AND EXTERNAL ADMINISTRATION

51.                     PART IX AND PART X ARRANGEMENTS

52.                     ADMINISTRATION FOR COMPANIES

53.                     RECEIVERSHIP

54.                     LIQUIDATION