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  • 16 Apr 2020 3:13 PM | Michele Davis (Administrator)

    Special Member Article by Scott Eustace, Director | Dispute Resolution + Insolvency,  Stokes Lawyers, Accredited Specialist - Commercial Litigation (Qld).

    Mandatory Code for Commercial Leases During COVID-19

    On 7 April 2020, the Government released the much-anticipated Mandatory Code of Conduct (the Code) to apply to certain commercial and retail leases during the COVID-19 crisis.  The Code imposes a set of good faith leasing principles for landlords and tenants.  The overarching principles are to share, in a proportionate, measured manner, the financial risk and cashflow impact of COVID-19.

    It is intended that landlords and tenants will agree upon temporary arrangements taking into account the particular circumstances on a case-by-case basis.

    The Code is to be given effect through state and territory legislation.

    Below is a summary of the provisions of the Code.  The summary is not intended to be exhaustive.

    Who does the Code apply to?

    The Code applies to a tenant who:

    • has an annual turnover of up to $50 million; and
    • suffers “financial hardship” as a result of the COVID-19 pandemic.  A tenant is deemed to suffer financial hardship if it suffers a 30% reduction in turnover compared to the same period last year.

    The Code will apply for the period during which the Commonwealth JobKeeper program is operational.

    What must the Landlord do?
    • Landlords must reduce rent in proportion to the tenant’s reduction in turnover.  For example, if the tenant has a 50% reduction in turnover, rent must be reduced by 50%.
    • The reduction in rent must be in the form of:
    o   a waiver of rent representing at least 50% of the reduction.  This component is not recoverable by the landlord.
    o   The balance of the reduction may be a deferral of rent.  This is recoverable on the earlier of the end of the COVID-19 pandemic or the expiry of the lease and is to be amortised over the greater of the balance of the lease term or 24 months.
    • Rent increases are frozen.
    • The landlord must pass on any reduction in statutory charges (e.g. land tax or council rates) or insurance it received in the appropriate proportion.
    • The landlord must share any benefit it receives for the deferral of loan payments from its bank in a proportionate manner with the tenant.
    • Tenants should be given the opportunity to extend its lease for an equivalent period of the rent waiver or deferral period.
    • Any agreement under the Code must be reduced to writing.
    What must the Landlord not do?
    • The landlord must not terminate the lease for non-payment of rent.
    • The landlord must not make a claim on a bank guarantee or a security deposit for non-payment of rent.
    • The landlord must not penalise the tenant for ceasing trade or reducing trading hours.  
    What must the Tenant do?

    The tenant must comply with the terms of the Lease, subject to any amendments agreed in accordance with the Code. A material failure by the tenant will forfeit any protections provided to the tenant under the Code.

    Binding Mediation

    Where the landlord and tenant cannot reach agreement under the Code, the matter may be referred to the applicable state or territory “retail/commercial leasing dispute resolution processes” for binding mediation.

    Conclusion 

    The Code must be the subject of legislation to be introduced in each state or territory.

    Although the Code seeks to strike a balance between landlords and tenants, there is little doubt, the bulk of the burden of the Code is imposed upon landlords.

    The COVID-19 legislative landscape seems to change by the day. Perhaps there will be further legislative changes in the coming days that will provide assistance to commercial landlords?

    For further advice or information in relation to the Code and its impact upon commercial landlords and tenants contact our Director of Dispute Resolution, Scott Eustace, at seustace@stokeslawyers.com.au.



  • 16 Apr 2020 3:10 PM | Michele Davis (Administrator)

    Special Member Article by Scott Eustace, Director | Dispute Resolution + Insolvency,  Stokes Lawyers, Accredited Specialist - Commercial Litigation (Qld).

    What options does an employer have to manage its wages bill during the COVID-19 crisis?

    Since the outbreak of COVID-19 and the resulting government intervention including restrictions on gatherings and movement, many businesses are confronted with the question of how they decrease their business expenses to combat their falling turnover. 

    Although COVID-19 is primarily a social and health issue, the reality is it has become an issue of economic life and death for many businesses.

    The Federal Government has already offered various assistance packages to businesses generally such as the Job Keeper payment and in specific industries such as the newly announced Early Childhood Education and Care Relief Package.  There will shortly be announced a package in relation to relief in respect of rent for commercial premises (at the time of writing this package has not been detailed).

    Notwithstanding these packages, over the past couple of weeks probably the question we have been asked most often is “What can I do to reduce my wages bill while COVID-19 is reducing my turnover?” The next question often is “Can I stand down my employees?”

    Broadly speaking, the options for an employer may include:

    1.      Terminating an employee’s employment on the grounds of redundancy;
    2.      Asking an employee to take leave without pay;
    3.      Standing down an employee without pay;
    4.      Directing an employee to take paid leave (long service leave, annual leave);
    5.      Asking an employee to take paid leave; and
    6.      Negotiating with an employee to reduce their wages during the downturn.

    Which of these options are available in individual workplaces will depend upon the circumstances of the employer and the employee. 

    There is no doubt in our opinion that an arrangement which involves the employer and employee agreeing on an outcome ought to be the first option considered.

    During this process, the first question to ask is what the contractual basis of the employment relationship is.  Is there an applicable Modern Award, is there an EBA or is the relationship governed by a common law contract?

    Once it is determined what instrument governs the relationship, then the employer will need to determine what that instrument says about the rights of the employer in the present circumstances.  

    If the employment relationship is governed by a common law contract, the parties are essentially free to agree to amend their contract and therefore agree to whatever arrangements they want.  Therefore, the employer and employee could agree to reduce wages, or a stand down or for the employee to take paid leave.

    If however a Modern Award or EBA applies, the options available to reach agreement may be more limited.

    If the employer and employee cannot reach an agreement, then the employer may have to look at the available options to impose an outcome on the employee.

    Dealing with the right to stand down employees, there is a general stand down right given to employers in the Fair Work Act 2009.  That right is limited to standing down an employee where the employee cannot usefully be employed because of a limited number of specified circumstances.  One such circumstance is a stoppage of work by any cause for which the employer cannot reasonably be held responsible.

    The question is whether COVID-19 directly or indirectly results in a stoppage of work for which an employer cannot reasonably be held responsible. This depends upon the particular circumstances of the employer and its business to be assessed on a case by case basis.

    The employer will need to consider the issue of whether the employee can still usefully be employed.  Can the employee do work that will contribute to the conduct of the business or from which the business can benefit, even if it is not work within the employee’s ordinary duties? An employer ought to explore flexible working arrangements, including working remotely and different locations.

    Aside from the limited stand down rights in the Fair Work Act 2009, whether an employer has the right to impose another outcome on an employee is a question of interpreting the instrument governing the employment relationship in the circumstances presented.

    As a last resort, if no other solution can be found, the employer may have to resort to redundancies.  There is under the Fair Work Act (and Modern Awards) specific requirements in relation to redundancies.  We suggest an employer ought to seek legal advice before embarking upon a process of redundancies.

    For advice or information on the options available to employers in the present circumstances, contact Director of Dispute Resolution, Scott Eustace, at seustace@stokeslawyers.com.au.


  • 16 Apr 2020 2:45 PM | Michele Davis (Administrator)

    Special Member Article by Scott Eustace, Director | Dispute Resolution + Insolvency,  Stokes Lawyers, Accredited Specialist - Commercial Litigation (Qld).

    Changes to Corporations and Bankruptcy Laws in Response to COVID-19

    With COVID-19 affecting the economic viability of businesses across Australia, recent changes have been announced by the Federal Government to help affected businesses.  The Government has stressed the importance of implementing a temporary safety net for otherwise profitable and viable businesses that now face temporarily financial distress.

    Some of the key changes are outlined below.

    Changes to Thresholds for Statutory Demands and Bankruptcy Notices 

    Creditors have the ability to issue a statutory demand (a method of demanding payment of a debt) to a debtor Company.  The failure to comply with a statutory demand may result in the debtor Company being wound up.

    The Federal Government has temporarily increased the minimum debt that must be owing before a creditor can issue a statutory demand.  The threshold will, for a period of six months, be increased from $2,000 AUD to $20,000 AUD.  The compliance period for responding to a statutory demand has been extended temporarily from twenty-one days to six months.

    Similar changes have been made to the bankruptcy regime with the minimum threshold for issuing a bankruptcy notice increasing from $5,000 AUD to $20,000 AUD.  The compliance period for responding to a bankruptcy notice will also be temporarily increased from twenty-one days to six months; giving debtors more options to consider repayment arrangements. 

    These arrangements also will apply for a period of six months in relation to statutory demands and bankruptcy notices issued after 24 March 2020.

    These measures do not impact upon other enforcement rights a creditor may have such as commencing debt recovery proceedings, enforcing a judgment (other than by statutory demand or bankruptcy notice) or enforcing security rights. Although we note the State courts have separately imposed certain restrictions on enforcement of judgments.

    Changes to Insolvent Trading

    The Federal Government has announced that insolvent trading laws will be suspended for a period of six months.  This will temporarily relieve directors of personal liability for any debts incurred while trading when their Company is insolvent.  However, this relief will only apply to debts incurred in the ordinary course of a Company’s business; and does not apply to any cases of egregious activity such as instances of dishonesty and fraud.  Such activity will still be subject to potential criminal penalties. 

    Any relevant debts incurred by the Company will still be payable by the Company.

    ASIC and AGMs

    Guidelines have been released by ASIC regarding upcoming annual general meetings (AGMs) for Australian public Companies.  ASIC has indicated it has a “no action” policy for Companies that are required to hold their AGM by the 31 May 2020.  The effect of this policy is that providing such Companies hold their AGM by 31 July 2020, ASIC will take no action.

    ASIC Guidelines also deal with the use of technology to facilitate holding of an AGM.  However, such use of technology may be impacted by the provisions of the Constitution of a Company.  We recommend legal advice be sought before conducting AGM’s using technology.

    Comment

    The intention of this legislation is to provide a temporary safety net for otherwise profitable and viable businesses that face temporarily financial distress.  While this is certainly a worthwhile goal, the concern we have with the changes to the statutory demand regime in particular is that these changes may be seen cynically as an opportunity by some Companies to simply delay paying their creditors.  This may have greater knock-on effects to other businesses and therefore the economy as a whole if the money stops flowing to creditors. 

    Conclusion

    This is a fluid situation and there may well be further changes to the Corporations Act and Bankruptcy Act.

    We at Stokes Lawyers are monitoring this situation and will provide further updates in due course.

    For advice or information on the COVID-19 Government response and how it may affect you or your business, contact Director of Dispute Resolution, Scott Eustace, at seustace@stokeslawyers.com.au.

    Please note there are further governmental responses to address COVID-19 (such as the various financial stimulus packages) which may affect individuals, households and businesses (including small businesses).  These other responses are outside the scope of this article.  If you do have questions outside the scope of this article, please contact us at info@stokeslawyers.com.au.

    16 April 2020


  • 28 Feb 2020 11:31 AM | Michele Davis (Administrator)

    We wanted to highlight an event coming up with FLPA that has reached our ears that we thought our members would love to hear about.

    Let's be honest, it's been a tough time lately for many of our practitioners and community; particularly, with what we've heard in the media of late. Maybe there's something hitting you right now, maybe these recent events have triggered old challenges you've made it through; either way, it's been really tough.

    It is for this reason that we encourage people to take some time out and enjoy the world around us with other folks looking for the same thing.

    So, we want to encourage you to go along and have a great time.

    FLPA is holding a Barefoot Bowls at New Farm Bowls Club on 20 March 2020 from 5pm to 7pm. FLPA members and non-members can go along. 

    You can find all the details here: https://www.flpa.org.au/events/

    (For clarity - we're not involved or affiliated with the event, we just wanted to bring it to your attention. )

    Have a great time, 

    From the LSRLA 

  • 6 Nov 2019 3:25 PM | Michele Davis (Administrator)

    Did you know that with our new, you-beaut, whiz-bang website also comes a new Members App where you can access your profile, RSVP to events and connect with your colleagues? All from the palm of your iPhone or Android device. It doesn't get simpler than that!

    If you're a fan of using technology to your advantage, head on over to the App Store or Play Store and look for "Wild Apricot for Members" and download it today.  All you need is your username and password, and you're set to access everything you need!

    From the LSRLA Committee


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