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UPDATE LABOUR HIRE LICENSING STARTS IN QUEENSLAND

UPDATE LABOUR HIRE LICENSING STARTS IN QUEENSLAND

As you would be aware if you have read our article from 2017, labour hire licensing laws have passed in Queensland.

Labour Hire companies in Queensland are now getting ready for this to come into effect and to apply for licenses. The Labour Hire Licensing Act 2017 (Qld) (“the Act”) will commence 16 April 2018 and it requires labour hire providers operating in Queensland to apply for licenses to continue to trade.

The Queensland government has stated that the purpose behind the Act is to “protect labour hire workers from exploitation and restore confidence in the labour hire industry” through regulation.[1] The bill was introduced in direct response to an inquiry into the practice of the labour hire industry in Queensland.

  1. Who is included?

Labour hire providers are people or companies who provide labour hire services. Someone provides labour hire services if (in the course of conducting their business) they “suppl[y], to another person, a worker to do work in and as part of a business or commercial undertaking of the other person”.[2]

The Act also binds users of labour hire services. That is, a user of labour hire providers must only use licensed providers.

It appears (though is not expressly confirmed) from the Act and the explanatory material that this is not intended to include related entities supplying employees within their group.

  1. Where is included?

There is no express limitation contained within the Act with respect to labour hire providers who operate predominantly outside of Queensland. This suggests that any labour hire provider who provides any workers in the state of Queensland will be required to apply for and hold a licence under the Act moving forward.

  1. What are the requirements?

An applicant will need to:

a) Apply online and be able to identify themselves;
b) Identify at least one person as a nominated officer responsible for the day to day operations;
c) Show that the nominated officer(s) is a fit and proper person to provide labour hire services;

i. There are various matters which are taken into account in respect of whether someone is a fit and proper person including but not limited to convictions for offences relating to suitability to provide labour hire services, insolvency, and history of compliance with relevant laws;[3]

d) Demonstrate that the provider can comply with the relevant laws;
e) Demonstrate that the provider’s business is financially viable; and

i. Financially viable is defined as “means the person is able to pay the person’s debts as and when they become due and payable”.[4]

f) Pay an application fee;

g) Produce a 6 monthly report online.

  1. When does this need to be done?

Labour hire providers will need to apply for a licence online between 16 April 2018 and 15 June 2018. The licenses will last for a period of 1 year, at which time each licensee will be required to apply for a renewal.

  1. What are the penalties if you operate without a licence after June 2018?

The penalties for a labour hire provider continuing to operate without a licence after 15 June 2018 are fairly severe. It is important to note that there are also strict penalties for contracting with a provider who ought to be licensed (but is not) and for knowingly circumventing the Act

a. Failing to hold a licence as a provider

i. Should a company continue to provide labour hire services without a
licence, it can be fined up to $378,450.00;

ii. Should a person do so, that person may be fined up to $130,439.10 or
sentenced for up to 3 years imprisonment.

b. Advertising

i. Should a person/company advertise or hold out that they can
provide labour hire services but not hold a licence; the maximum
penalty is $25,230.00.

c. Contracting with a provider who does not have a licence

i. Should a person/company enter into an arrangement with a
provider who does not hold a licence (unless there is a reasonable
excuse):

  1.  A company may be fined up to $378,450.00;
  2. A person may be fined up to $130,439.10 or sentenced for up to 3 years imprisonment.

d. Knowingly circumventing the Act”

i. Should a person/company knowingly[5] enter into an arrangement
which is designed to circumvent the obligations of the Act:

  1. A company may be fined up to $378,450.00;

A person may be fined up to $130,439.10 or sentenced for up to 3 years imprisonment.

6. Moving forward

It is imperative that you apply for a licence under the Act before 15 June 2018 if you provide labour hire services in Queensland. If you contract with a company who provides labour hire services in Queensland, you must immediately implement a system to conduct a licence check beginning 15 June 2018 before contracting with them.

Remember, this is only in Queensland for now, but it’s possible the other states will follow suit soon.

If you would like further information about licensing requirements, assistance with your application or assistance with implementing a licence check system, please contact JHK Legal on 07 3859 4500.

Sarah Jones – Legal Practitioner Director

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[1] Explanatory notes to the Labour Hire Licensing Bill 2017.

[2] Section 7 of the Act.

[3] Section 27 of the Act.

[4] Schedule 1 of the Act.

[5] Or if they reasonably ought to have known.

Summary Judgment with Indemnity Costs – Seaman v Silvia (No 2) [2018] FCA 363

On 21 March 2018, the Federal Court of Australia delivered its judgment in Seaman v Silvia (No 2) [2018] FCA 363 (Seaman v Silvia (No2)). JHK Legal and Susan Anderson of Counsel represented the 2 respondents who were experienced insolvency practitioners. In this case, the Court examined the importance for legal practitioners to identify standing to commence proceedings, the importance of pleading causes of action, the making and timing of formal offers of compromise, and compliance with the Civil Dispute Resolution Act 2011 (Cth).

Please note that this article provides an overview only. Proceedings can be complex, and advice needs to be tailored to individual circumstances.  This article is not intended as a substitute for independent legal advice. If you have any questions or concerns we suggest that you contact JHK Legal for further information.

Background

On 14 June 2017,  Mr Seaman commenced proceedings in the Federal Court of Australia against Mr. Silvia and Mr. Granger (the Respondents) claiming negligence, breach of statutory duties, misleading and deceptive conduct under the Competition and Consumer Act 2010 (Cth), and damages pursuant to section 1324 of the Corporations Act 2001 (Cth).[1] In essence, the alleged cause of action arose out of the facts and matters in Granger v A.C.N 165 098 617 Pty Ltd [2016] FCA 474 (the 2016 Decision).[2]

The proceeding was subject to a number of interlocutory applications including an application by the Respondents to strike out Mr. Seaman’s amended statement of claim on the basis that it did not disclose a cause of action. Mr. Seaman opposed the application right up until the hearing, however, on the day of the hearing, and after much debate, Mr. Seaman conceded to the strike out application.[3] Importantly, Mr. Seaman had attempted to go behind the 2016 Decision, but ultimately, never applied to set it aside.[4]

On the same day, after having his amended statement of claim struck out, Mr. Seaman applied for leave to file a proposed further amended statement of claim. The Respondents opposed the application. That hearing was part heard on 20 December 2017 and was adjourned to 9 February 2018. Extensive submissions were made. On 16 February 2018 the Court delivered its judgment and refused Mr. Seaman leave to file his proposed further amended statement of claim as it lacked any merit.[5]

On 9 March 2018, the Respondents applied for orders seeking summary judgment and costs on an indemnity basis. In a twist, on the date of that hearing, Mr. Seaman had purportedly taken an assignment from the company A.C.N 165 098 617 Pty Ltd (formerly known as Private Health Clubs Pty Ltd (in liquidation)) (“the Company”), of any causes of action it may have had against the Respondents and sought an adjournment to file an application seeking leave to file a further amended statement of claim. That application was also opposed by the Respondents.[6]

On 14 March 2018, His Honour Justice Derrington delivered his final judgment in Seaman v Silvia (No 2).

Application for summary judgment

In delivering his judgment, His Honour noted that there had been multiple versions of Mr. Seaman’s statement of claim, and that he had identified previously the various attempts by Mr. Seaman to plead his causes of action against the Respondents.[7]

His Honour found that the various causes of action attempted to be pleaded by Mr. Seaman did not have any merit because (amongst other reasons) he lacked the requisite standing, nor did any cause of action exist, or if any did exist, they were not adequately pleaded in the multiple versions of his statement of claim.[8]

As noted above, on the day of the hearing, Mr. Seaman’s Counsel put forward that Mr. Seaman had purportedly taken an assignment of any causes of action available to the Company (being the respondent Company in the 2016 Decision).[9]

The difficulty with that position as His Honour pointed out, was that no statement of claim had been advanced, nor had any outline of argument been given to disclose what those causes of action were or what they could have been based on during the Respondents’ administration of the Company. In essence, there was a lack of specificity in what cause of action Mr. Seaman could rely on after he had purportedly taken that assignment. His Honour stated that given those actions were likely to be statutory causes of action, it was unclear how they would yield any positive outcome for Mr. Seaman.[10]

The alternative proposition put by Mr. Seaman was that he be given leave to commence a derivative proceeding in respect of claims by the Company. However, as His Honour observed:

“I made directions requiring the applicant to bring any application for leave to commence derivative proceedings by 28 July 2017. It appears from the evidence before the court that, ultimately, that was considered by the applicant, but a tactical decision was made not to pursue that course.”[11]

His Honour then went on to observe that a situation where no statement of claim exists was unusual in the context of a summary judgment application, but that the effect was that attempts had been made to agitate a cause of action, and that all (our emphasis) of those attempts had failed.[12]

His Honour stated that in those circumstances (that is, where the Respondents had been confronted with multiple versions of a statement of claim, none of which succeeded) he concluded that none of the claims advanced by whatever pleadings had been put forward or by any affidavit evidence, were viable.[13] His Honour then concluded that he was satisfied to a high degree of confidence that the veracity of Mr. Seaman’s proposed claims and or causes of action were lacking in merit.[14] His Honour granted Judgment to the Respondents pursuant to 31A of the Federal Court of Australia Act 1976 (Cth) (the Act).[15]

In addition to the above, His Honour went onto say that he was also of the view that the state of the proceeding enlivened the inherent power of the Court to dismiss the proceeding on the basis that it was (at the time of the hearing) in the technical sense, an abuse of process.[16] In support of that proposition, His Honour observed that Mr. Seaman did not, after many months, have any substantive statement of claim on which he could rely on.[17]

His Honour further highlighted the serious and unsubstantiated allegations levelled against the Respondents, and the substantial expense incurred by them in having to respond to Mr. Seaman’s allegations. In doing so, His Honour highlighted the obligations of legal practitioners under section 37M and 37N of the Act to ensure that litigation is conducted fairly, which in this case, included fairness to the Respondents to have the matter brought on and disposed of in an expeditious and cost-effective way.[18]

Indemnity costs pursuant to rule 25.14(2) of the Federal Court Rules 2011 (Cth)

As the Respondents successfully disposed of Mr. Seaman’s claims, the only issue remaining was that of costs. The Respondents, at a very early stage in the proceeding, had made an offer to Mr. Seaman pursuant to rule 25.01 of the Federal Court Rules 2011 (Cth) (the Rules) that he discontinue his proceedings, and pay to the Respondents their costs fixed on the standard basis in an amount of $1,950. That offer was not accepted by Mr. Seaman.[19]

As they were ultimately successfully, the Respondents sought their costs be paid on the indemnity basis pursuant to rule 25.14(2) of the Rules. His Honour noted that the essential question was whether or not the refusal to accept the offer was unreasonable which required postulating the situation of the parties as at the date on which the offer was made.[20]

His Honour stated in the circumstances of this case, that is, where all causes of action which were pursued by the applicant had been found to be without merit in law or otherwise unable to be adequately pleaded, it was clear that Mr. Seaman must have known there was a degree of speculation in commencing the proceedings.[21]

The Respondents had relied on the earlier decision of Viscariello v Macks [2014] SASC 189 in resisting Mr. Seaman’s misleading and deceptive conduct claim under the Competition and Consumer Act 2010 (Cth) since the commencement of the proceedings on 14 June 2017.[22] His Honour found that the earlier decision relied on by the Respondents of the Chief Justice in Viscariello v Macks [2014] SASC 189 was relevant to this proceeding, it was the considered view of the Chief Justice of South Australia (although not binding), it was subsequently upheld by the Full Court on 22 December 2017 in Macks v Viscariello [2017] SASCFC 172 and it is more than likely that Mr. Seaman was aware that there was authority against him when the offer was made.[23]

Bearing those points in mind, His Honour stated that these were factors to consider in whether or not it was unreasonable to refuse the offer. It was also relevant to the Court that, at the time the application as commenced, a serious question existed as to whether Mr. Seaman was entitled to bring the proceedings in the various capacities that he claimed he was entitled to.[24]

His Honour was ultimately of the view that a litigant (such as the Respondents) faced with a claim which they believe has no substance, is not acting unreasonably by inviting the claim against them to be wholly withdrawn. In those circumstances, His Honour took the view that it was not unreasonable for the Respondents to have sought from Mr. Seaman that the proceedings be discontinued against them without offering payment of any money, and they were right to do so.[25]

Taking the above into consideration, His Honour reached the conclusion that the applicant unreasonably failed to accept the Respondents offer, and that Mr. Seaman ought to pay the Respondents costs on the indemnity basis pursuant to rule 25.14 of the Rules.[26]

Indemnity costs pursuant to the Court’s general discretion

The Respondents also submitted in the alternative that their costs ought to be paid on the indemnity basis pursuant to the Court’s general discretion, and in particular, the factors espoused in Colgate-Palmolive[27] including:

  1. whether the proceedings were commenced for an ulterior purpose, in wilful disregard of known facts; and
  2. whether the allegations made ought not to have been made; and/or
  3. whether the proceedings had been unduly prolonged by groundless contentions.[28]

The Respondents also relied upon Mr. Seaman’s failure to comply with the Civil Dispute Resolution Act 2011 (Cth), which required the filing of a Genuine Steps Statement prior to a commencement of any action. This was not done by Mr. Seaman.[29]

His Honour, reinforced Reeves J’s comments in Superior IP International Pty Ltd v Ahearn Fox Patent and Trade Mark Attorney’s (No 2) [2012] FCA 997, that is, compliance with the Civil Dispute Resolution Act 2011 (Cth) is an important step; it imposes obligations on practitioners to comply with it and for good reason, and it also provides avenues against legal practitioners who do not comply with the requirements of the Act.[30]

In summing up this point, His Honour stated that if the only question was whether, in the general exercise of discretion to award costs, he should order indemnity costs by reason of a failure to file a genuine steps statement, then he would probably not exercise his discretion in that way. However, when taken with the other factors to which he referred in Colgate-Palmolive criteria, he ultimately came down in favour of granting an order for indemnity costs in respect of the proceedings.[31]

 JHK Legal observations

His Honour’s judgments in both Seaman v Silvia and Seaman v Silvia (No 2) give useful guidance for both insolvency, and legal practitioners facing claims and or allegations against them or their clients that are without merit.

In particular, it is a timely reminder for practitioners to have regard to the following points:

  1. That, before commencing proceedings, parties undertake the exercise of properly identifying and vetting:
  • the legal basis (or bases) of the causes of action and or claims that they intend to base their claims on;
  • their standing to prosecute a cause of action; and
  • the pre-litigation procedures, that is when in the Federal Court of Australia, that parties take genuine steps under the Civil Dispute Resolution Act 2011 (Cth) and consider the consequences that might flow from a failure to not take genuine steps.
  1. Once the decision to commence proceedings is made, that steps are taken to ensure that the identified causes of action are pleaded properly, and in accordance with the Rules.
  1. If defending a proceeding that is prima facie without merit, that:
  • a defendant considers protecting its position on costs by utilising formal offers of settlement to invite a claimant to withdraw the claim at a very early stage of the proceeding.
  • a defendant considers and utilises the interlocutory processes available under the Rules and Act to strike out pleadings and apply for summary judgment at a very early stage of a proceeding.

If proceedings have been commenced against you, and or you are considering enforcing your legal rights, whether as an insolvency practitioner or not, JHK Legal are happy to assist you throughout the process.

Daniel Johnston – Senior Associate

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[1] See Seaman v Silvia [2018] FCA 97 (Seaman v Silvia).

[2] Ibid at paragraphs [4] to [7].

[3] Ibid at paragraph [3].

[4] Ibid at paragraph [4] and paragraphs [54] to [58].

[5] See Seaman v Silvia at paragraphs [4] to [53].

[6] See Seaman v Silvia (No 2) at paragraph [1].

[7] Ibid; see also Seaman v Silvia at paragraphs [4] to [53]

[8] It must be noted that the Court identified that Mr. Seaman had 5 opportunities in which to plead his case; see Seaman v Silvia at paragraph [13] and [55].

[9] See Seaman v Silvia (No 2) at paragraph [2] to [3].

[10] Ibid at paragraph [4].

[11] See Seaman v Silvia (No 2) at paragraph [4].

[12] Ibid at paragraph [5].

[13] Ibid at paragraph [6].

[14] See Seaman v Silvia at paragraphs [14] to [47].

[15] See Seaman v Silvia (No 2) at paragraph [6].

[16] Ibid at paragraph [7].

[17] Ibid.

[18] Ibid; see also Seaman v Silvia at paragraph [55].

[19] See Seaman v Silvia (No 2) at paragraph [8].

[20] Ibid at paragraph [9].

[21] Ibid at paragraph [10].

[22] See Seaman v Silvia at paragraph [35]; Seaman v Silvia (No 2) at paragraphs [11] to [12].

[23] Seaman v Silvia (No 2) at paragraph [11].

[24] Ibid at paragraphs [12].

[25] See Seaman v Silvia (No 2) at paragraph [13].

[26] Seaman v Silvia (No 2) at paragraph [14].

[27] (1993) 46 FCR 225 (Colgate-Palmolive).

[28] See Seaman v Silvia (No 2) at paragraphs [15] to [18].

[29] Ibid at paragraph [19].

[30] Ibid.

[31] Ibid at paragraph [20].

 

 

 

EXACTLY WHAT ARE YOU RISKING BY GIVING A GUARANTEE AND INDEMNITY?

It is an unavoidable feature of modern commercial life that, as a business owner or a director, you are required to provide personal guarantees on behalf of your business and/or company, particularly to suppliers providing goods on credit and to financiers advancing funds.

A guarantee is the promise by one party (generally the owner or director) (the guarantor) to perform the obligations of another party (generally the obligation of a business or company to pay money) (the principal) to a third party (usually a supplier or a financier) (the third party) in the event that the principal is unable to perform its contractual obligations.

A guarantee itself forms a secondary obligation, with the guarantor’s liability dependent on the liability of the principal being established. If, for any reason the principal’s liability to perform the guaranteed contractual obligations is discharged, then the guarantor’s obligations are discharged.

For this reason, most modern guarantees have been expanded to include indemnities, creating the guarantee and indemnity most commonly utilised today. 

On signing a guarantee and indemnity the guarantor becomes principally (or primarily) liable for the debts of the principal, or, put another way, agrees to stand in the shoes of the principal and to personally perform the principal’s obligations to the third party.

For the purposes of this article, a “guarantee” should be read as a “guarantee and indemnity”.

It is essential to obtain legal advice prior to signing a guarantee, even if you regularly sign these documents, as the terms vary from guarantee to guarantee.

For example:

  1. a guarantee may be limited to one transaction or may be a continuing guarantee; that is, guaranteeing further obligations incurred by the principal and continuing in operation until formally discharged by the third party.
  2. your obligation may be sole, it may be joint with other guarantors (known as co-sureties) or joint and several with the co-sureties. Where your obligation is joint and several, the third party can select which of you to pursue for performance, it is not obliged to take collective action against the co-sureties.
  3. may indicate an obligation to pay a fixed amount or may extend to any amount owed by the Principal.

A solicitor can assist you by drawing any serious pitfalls to your attention and assist you with negotiating better terms for the guarantee, such as limiting the operation of the guarantee or making provision for its release on occurrence of certain events.

While it is common that personal guarantees are now secured by a mortgage over real property in favour of the third party, the absence of security does not prevent your assets from being made available to the third party.

By being a personal guarantor, any asset that you hold personally, or which you have an entitlement to receive (such as distributions from a trust) is at risk. In the event that you are unable to perform your guaranteed obligations, the third party may seek judgment from a Court for any amounts owing to it.

If successful, the third party will be entitled to utilise all methods of enforcement available to it by law to receive performance. Enforcement options vary according to circumstance, but include a warrant on title to sell any real property or, if there are insufficient assets, issuing of a of bankruptcy notice, and if not complied with, a creditor’s petition.

Providing a guarantee may also affect your personal capacity to borrow as it is a present liability even if it has yet to be called upon (and may never be).

These significant risks make it prudent to:

  1. Obtain legal advice as to nature and effect of the guarantee should you be asked to provide a guarantee.
  2. Obtain advice from your financial advisor as to your ability to meet your obligations should you be required to perform your obligations as guarantor and to ensure your assets are appropriately structured to minimise exposure. You should also consider how the guarantee may affect your future personal financial plans.
  3. Keep yourself appraised of the principal’s liabilities to the third party and, at the earliest possible time, seek a release from your obligations as guarantor.

JHK Legal is able to assist with advising on guarantees when faced with one to sign, work closely with your financial advisor to ensure your legal as well as financial needs are met and also to assist with the release process. All information in this article is written by way of general comment and any reader wishing to act on information contained in this article should first approach their legal professional advisors for properly considered professional advice which takes into account the reader’s specific situation.

If you would like to discuss any part of the above, please contact JHK Legal on 07 3859 4500 or [email protected]

Belinda Pinnow – Senior Associate

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