Government Response to December 2023 Franchising Independent Review

Government Response to December 2023 Franchising Independent Review

The Government has released its response to the Franchising Independent Review agreeing to the majority of the recommendations. This article identifies some key changes to be made, the timing for these and explores what this may mean for franchises.

ACCC Enforcement and Compliance Priorities for 2024-25: What this means for franchises

ACCC Enforcement and Compliance Priorities for 2024-25: What this means for franchises

The ACCC has announced its enforcement and compliance priorities for 2024-2025. This article explores what this may mean for franchises.

ACCC Report on Unfair Contract Terms, Case Update and Franchising Review Report Summary Findings and Recommendation

ACCC Report on Unfair Contract Terms, Case Update and Franchising Review Report Summary Findings and Recommendation

This update replicates a legal update provided to the Franchise Council of Australia’s February breakfast at Kooyong Lawn Tennis Club.

An easier and clearer Personal Property Securities Act? The Government outlines proposed changes

An easier and clearer Personal Property Securities Act? The Government outlines proposed changes

On 22 September 2023 the Commonwealth government released the Personal Property Securities Amendment Bill 2023 and amending regulations for public consultation until 17 November 2023. The aim is intended to simplify the use of the law, in particular the registration process, and clarify its application, especially around enforcement priorities.

Disputed Debts with the ATO – teamwork makes the dream work?

Disputed Debts with the ATO – teamwork makes the dream work?

The ATO has a new collaborative and tailored approach to managing the collection and recovery of disputed debts.

AWE v Clough: The continuing clarification of what constitutes a personal property security interest and the requirements for rectification of out of time registrations

AWE v Clough: The continuing clarification of what constitutes a personal property security interest and the requirements for rectification of out of time registrations

This case concerned an uncontested application to extend the time for registration of a security interest on the Personal Properties Securities Register (PPSR), requiring consideration of what constituted a ‘security interest’ capable of registration on the PPSR.

Court finds director personally liable for combustible cladding costs

On 24 August 2023, the County Court handed down its decision in Owners Corporation I Plan No PS 707553K and Ors v Shangri-La Construction Pty Ltd (ACN 130 534 244) and Anor [2023] VCC 1473.

This is the first successful compensation claim by the State of Victoria directly against a director of a building company for the rectification costs incurred in removing combustible cladding under the amendments to the Building Act 1993 (Cth).

Building Act 1993 (Vic) amendments

 In 2019,  the Victorian Government established Cladding Safey Victoria (CSV) as a commitment  to oversee the  removal of combustible cladding from apartment buildings and publicly owned buildings in Victoria.

Subsequently, a number of amendments were made to the Building Act 1993 (Vic) (Act) and reflected in section 137F of the Act such that:

  • where CSV pays for cladding rectification work from 19 November 2020, the Crown is subrogated all the rights and remedies the owner has against any person in relation to the installation or use of any non-compliant or non-conforming cladding; and

  • the Crown can enforce these rights against an officer of an entity who, at the time the cladding was installed, had either knowledge of the cladding used, or provided consent for its use.

Background

In 2015, Shangri-La Construction Pty Ltd (Shangri-La), completed the construction of an apartment complex in Hawthorn.

All consultants involved in the project, including the appointed fire engineer, agreed that it would be sufficient and compliant to install the expanded polystyrene (EPS) product, known as RMAX Orange Board (RMAX) on the building. The building surveyor subsequently issued a building permit in December 2014.

Post construction and following the Lacrosse and Grenfell fires, it was largely accepted by the industry that EPS was non-compliant and combustible.

In 2019, the owners corporation commenced proceedings in VCAT against Shangri-La for various defects and non-compliant cladding. However, Shangri-La went into liquidation and the claims against it were stayed.

The active parties in this proceeding were the State of Victoria and the director of Shangri-La, Mr Naqebullah.

Court’s findings

The State of Victoria sought orders that Mr Naqebullah, as an officer of Shangri-La, be made personally responsible for the rectification costs incurred by CSV.

Under section 137F of the Act, a defence to an enforcement action can be established if it is proven that an act or omission by an entity occurred without the knowledge or consent of an officer of the entity.

At the hearing:

  1. Mr Naqebullah argued that he lacked knowledge that the RMAX product used was non-compliant and that the issues were beyond his knowledge and expertise, and he should therefore not be liable.  

  2. The court accepted Mr Naqebullah’s evidence that he was unaware that EPS was inappropriate to be used as external cladding, and only became aware of its problematic nature in 2016 or 2017.

  3. In interpreting section 137F of the Act, the Court adopted a strict approach and considered the absence of further proof that Mr Naqebullah knew that EPS was problematic and non-compliant is not sufficient to negate that he had knowledge of EPS being used as external cladding on the building.   

  4. Mr Naqebullah’s “knowledge”, namely that EPS was used, is sufficient to exclude him from the benefit of the defence.

Mr Neqebullah was ordered to personally pay $1.2 million to the State in compensation.

Implications

Subject to any appeal, the outcome of this case may result in the State further pursuing directors and officers of building companies for compensation for expenses incurred by CSV in rectifying combustible cladding.

Key takeaways

If an officer of a building company possesses knowledge or consents to the cladding product used in a project (regardless of whether they knew the product is non-compliant)they may be found to be personally liable if the State enforces its rights against them.

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Ben Wyatt
Principal Lawyer
T: +61 3 9611 0115 | M: +61 409 173 928
E: bwyatt@sladen.com.au

Kelvin Tay
Senior Associate
T: +61 3 9611 0148 | M: +61 413 557 157
E: ktay@sladen.com.au

Is a VSBC certificate valid if there has been no retail lease mediation?

Is a VSBC certificate valid if there has been no retail lease mediation?

A recent Supreme Court decision has made it clear that there is nothing in the Retail Leases Act that restricts the issue of a certificate by the VSBC until after a mediation has been conducted and the absence of a mediation does not invalidate a certificate. The VSBC can form a view that a mediation is unlikely to resolve a dispute based on the refusal of one party to participate in a proposed mediation and issue a valid certificate so that an aggrieved party can commence proceedings in VCAT.

Security for costs does not create a PPSA security interest: Laurus Group v Mitsui

Security for costs does not create a PPSA security interest:  Laurus Group v Mitsui

The Victorian Supreme Court has confirmed that payment of funds into Court as security for costs will not give rise to a security interest required to be registered on the PPSR, even if the payment was made pursuant to consent orders. This means that section 267 of the PPSA will not assist external administrators to recover funds paid into Court as security for costs under a Court order.

Sladen Snippet - The Krongold appeal – VCAT’s jurisdiction to hear matters involving federal legislation remains restricted

Sladen Snippet -  The Krongold appeal – VCAT’s jurisdiction to hear matters involving federal legislation remains restricted

On 17 August 2023, the Court of Appeal in the Victoria Supreme Court handed down its decision in Krongold v Thurin [2023] VSCA 191. This decision is a further instalment in a long running domestic building dispute between homeowners, David and Lisa Thurin (Thurin) and their builder, Krongold Constructions (Aust) Pty Ltd (Krongold).

If you don’t ask, you’ll never know: Pedley and allocation of payments made to the ATO

If you don’t ask, you’ll never know: Pedley and allocation of payments made to the ATO

In Deputy Commissioner of Taxation v Pedley (No 2) (2018) FCA 2015 (Pedley), the Federal Court confirmed the wide discretion available to the Australian Taxation Office’s (ATO) to allocate payments made to it for tax debts especially where the taxpayer has not provided explicit direction as to what payments should be applied to which debts.

‘What is mine is yours: Tomaras and the substitution of tax debtors’

‘What is mine is yours: Tomaras and the substitution of tax debtors’

The High Court in Commissioner of Taxation v Tomaras & Ors (2018) HCA 62 (Tomaras) has confirmed the Federal Circuit Court had jurisdiction to make orders altering the property interests of parties to a marriage substituting one party for the other party as sole debtor to the Commissioner of Taxation (Commissioner) in respect of income tax liabilities owed by the first party.

Sladen Snippet - ATO to disclose overdue tax debts to credit agencies

Sladen Snippet - ATO to disclose overdue tax debts to credit agencies

In the 2016-2017 Economic and Fiscal Outlook (http://www.budget.gov.au/2016-17/content/myefo/download/09-Appendix-A-Revenue.pdf), the Government announced that the Australian Taxation Office (ATO) would be allowed to report to credit reporting agencies the tax debt information of entities that don’t effectively engage with the ATO to manage those tax debts.