Commercial Law Firm

Mediation before litigation

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Abraham Lincoln once said “discourage litigation. Persuade your neighbours to compromise wherever you can”. In addition to being a president he was also a lawyer so he understood that mediation can sometimes be a good alternative to litigation.

Mediation can be as formal as an independent mediator being appointed to work with the warring parties to get them to come to an agreement on a particular date. Each party prepare for a mediation, much like it is an actual hearing. However, people feel a bit free to speak their mind as they are not being cross examined. Things said in mediation are privileged - which means it cannot be used against you in a hearing. For these reasons, a mediation is often less stressful than a day in Court. So consider trying mediation before litigation.

Bear in mind that once you commence proceeding, many judges will order parties to attend a mediation. For some types of claim, such as a Family Provisions Act claim, it is compulsory before a hearing. Various types of mediation are also compulsory in Family Law. But note - you cannot be ordered to agree to any offers the other party might make, you are only ordered to attend. It's important to make sure any agreement to settle is written down, signed and capable of being enforced. For example, if company A owed company B money, you cannot reach a binding agreement that Company C will pay that debt (unless of course company C agrees to it). Your solicitor will include a number of terms that will make your agreement enforceable. If you are already involved in litigation, any agreement can be placed into Orders that the Court will then stamp, acting as though you had a judgment in the matter.

An agreement can also come about in an informal way - such as both lawyers chatting over the phone about a resolution with each call getting closer to agreement. Whichever method is tried, both parties need to be prepared to engage in the mediation process and at least try to resolve their dispute.

One key benefit of mediation is that the parties have agreed on the resolution themselves, so it is often more practical for their own particular circumstances. It is often easier to re-establish a commercial relationship after a mediation, rather than dragging someone through a hearing.

Sometimes people simply cannot agree on anything and mediation will not achieve a resolution. Other times, a dispute is of a highly technical nature requiring expert evidence and novel legal arguments. Again, these matters may not be suitable for mediation. Even though litigation is often expensive and stressful for many businesses it goes hand in hand with doing business, hopefully only on an occasional basis.

Whether or not your dispute is resolved at mediation or you end up running a full blown hearing - you must have legal representation skilled in preparing your evidence and presenting it to the Court to ensure an enforceable outcome.

Drones, you and the law

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Drones are becoming more common. Although used for some time for agribusiness, map making and by surveillance organisations and insurance companies, smaller drones are now readily available - in fact they seem to be one of the top Christmas gifts for 2016.

Be careful what type of drone you buy - drones that are 2 kgs or more, need to be registered with the Civil Aviation Safety Authority (CASA). Anyone piloting these drones also needs to obtain an Operator’s Certificate before they can start flying the drone in public airspace. Where public airspace begins is not straight forward, unfortunately there is no clear boundary. Serious drone operators should consider purchasing maps from CASA.

From 26 September 2016 onwards, if you are operating a drone that is less than 2 kgs, you will be permitted to pilot that drone during the day as long as it remains within your line of sight, rises no more than 400 feet from the ground and is more than 30 metres away from members of the public. By remaining within 400 feet from the ground, you should stay out of public air space, but bear in mind CASA can declare public airspace for particular events or for emergencies. However, there are quite a few circumstances that will effectively cancel out this ability, including:

  • If the flight is for commercial gain.
  • In a prohibited area.
  • In a populous area - which can include both residential areas, such as a city, but, also a crowed beach, a sporting event or any other once off events that cause an area to swell with people.
  • Within 5 kilometres of the movement area of an airport.
  • Anywhere where there is an emergency, police or fire operation being conducted.

Be aware that if anyone operating a drone commits any of the above breaches they can be fined up to $8,500.00 per offence.

Local Councils have the power to ban drones in public places such as parks. However, the Council will not generally be able to regulate the airspace in their area.

This is certainly an area of the law that is lagging behind technology, however after 26 September 2016 new laws will provide some comfort to members of the public who are concerned about the increased use of drones and the perceived invasion of privacy. Currently in Australia the “right” to privacy currently only extends to personal information.

The 2016 Census, your small business and privacy

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The 2016 Census was meant to be to a seminal moment in our history. For the first time a snapshot of our society was to occur online.

However, instead of the excitement of something new, and kudos to the government for implementing a new system said to save tax payers around $100 million, all of the publicity related to our concerns about Privacy. We wanted to know how the information we had willing provided in years past was going to be used, accessed and stored. If anything, the 2016 Census showed how much people value their privacy and how any transaction online sets of alarm bells.

Privacy may not be a particularly interesting topic of conversation, but you can bet your bottom line that your customers are concerned about their personal information and what you are doing with it. If there is even a perception that you will not respect their privacy, they will vote with their feet.

Personal information is any detail about a person that allows that person to be identified - their name, address, date of birth, bank account details, medical records, photographs and even information about their shopping habits and where they work may be included. Much of this information is routinely collected by businesses. If your business collects personal information there are strict requirements about how you use it and store it. If you misuse this material, you are likely to lose customers and business partners. You may also risk a fine.

When you are collecting information, you should state what the information is used for and refer customers to your privacy policy. Consider if you actually need the information - “because it might be useful later on” is not a good enough reason to request it. A clear privacy policy will provide reassurance to your customers that you respect their privacy. If you collect any type of financial information from customers they will expect it to remain private, in fact they are entitled to have it protected from disclosure.

Next, consider how you store personal information. Have sophisticated passwords for your server, a firewall and don’t leave physical copies of information physically lying around where others can see it. You need a process in place to manage the information. If you have staff members, you will need to let them know about the process.  The process is an important tool to protect your business from fines, complaints and a loss of customers so it is worth getting the process right from the start.

If you will share the information with a third party, you must state this in your privacy policy.

A business with an annual turnover of more than $3,000,000.00 must comply with the Privacy Act. If your business has less turnover, it is still a good idea to demonstrate to your customers that you value their personal information, it's great PR. If your business provides health services you must comply with the Privacy Act and the Heath Records Information Act, irrespective of your annual turnover. If you have any contracts or funding from government, you are likely to have to comply with any privacy polices of that agency as part of your agreement.

What is a Power of Attorney?

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A Power of Attorney is a document that allows another person to legally manage your financial and legal affairs. A Power of Attorney can be General or Enduring.

More commonly used is the Enduring Power of Attorney that many people set up at a time in their lives when they are managing their own affairs quite well. However, understanding that sometimes health can fail, they chose to set up a Power of Attorney on their own terms and nominate that it will commence operating at a later date (usually when their treating doctor determines they are no longer capable of managing their own affairs).

What can a Power of Attorney do?

An attorney can undertake any actions that you can- they can pay your bills, liaise with government departments and withdraw money from your accounts, in addition to open and close bank accounts, enter into lease and hire purchase agreements and even sell your house. So it is vital that you trust the person you appoint as your attorney. It can be helpful to have more than one to promote accountability. An attorney must avoid placing themselves in a position where their interests are in conflict with yours. A common example is where there is an adult child still living at home with shared expenses who then manages your money.

An attorney must act in accordance with your directions. If you have set up a Power of Attorney and you now wish to change or stop it, you must formally revoke this Power, provided you have the capacity to make that decision.

If your attorney wants to deal with your land, the Power of Attorney must be registered with the LPI (formerly known as the Land Titles Office). If a registered Power of Attorney is revoked, that revocation should also be lodged with the LPI.

What is a General Power of Attorney?

A General Power of Attorney is convenient to set up for a specific purpose. For example, if you have an overseas trip planned and while away you will have legal documents that require attention, perhaps you have bought a house and settlement is while you are away, or you have purchased an unregistered block of land that might register during your trip. Allowing a trusted family member or friend to sign documents on your behalf means the transaction will continue in your absence. A General Power of Attorney will automatically cease if you lose your mental capacity.

Why appoint a Power of Attorney?

A Power of Attorney is a vital document to help a person maintain independence in their later years, should they actually need it. It allows them to retain control of their affairs by stating who and on what terms their financial and legal affairs may be managed. A Power of Attorney should be appointed in advance of a situation where you may find yourself lacking the mental capacity to make their own decisions.

We often receive enquiries from people who have a parent that has developed dementia, alzheimer’s diseases or are otherwise not able to manage their own affairs. The children state that they have been able to help their parents in the past but now an organisation, often a bank, is requiring a formal Power of Attorney. The difficulty with this situation is, when a person lacks the mental capacity to manage these transactions, they almost always lack the mental capacity to instruct a solicitor to prepare a Power of Attorney and our hands are tied.

When a person has lost their capacity and either needs a Power of Attorney made, or, needs to revoke a Power of Attorney, they or concerned people need to approach the Guardianship Tribunal for a decision to be made on that person’s behalf.

Conflict between Franchisors and Franchisees.

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Australia is the land of franchising - there are more franchised systems here than anywhere else in the world!

Recently two high profile franchising disputes have filled the daily news- the franchisor’s decision to make its pizza hut franchisee’s sell $5.00 pizzas that decimated many Pizza Hut shops and the 7-11 scandal that saw employees being grossly unpaid. Like many business arrangements, franchising works well until it doesn’t…then it tends to spectacularly fail.

Last year headlines shocked the nation with claims that 7-11 stores underpaying staff with wages as low as $12.00 per hour (with the award being a minimum of $17.29). The ABC’s Four Corners claimed that up to 60% of franchisees were involved in underpaying their workers. The Franchisor went into damage control promising to oversee the payroll functions of the franchisees workers. Franchisees who have correctly paid workers are nervous and have reported a drop in sales as customers assume they too did the wrong thing. Rumours of a class action are circulating.

Who has control?

A franchisor often has the ultimate authority over the franchisees’ business. How much authority depends on the wording of the agreement. Some franchising systems will not allow any change in their system and must approve all advertising and premises. Many food franchised businesses will actually hold the lease in their name and sub-lease it to the franchisee, in addition to choosing all third party suppliers. Others are far more flexible, providing general guidelines about the use of the system and suggestions for advertising. Rigid requirements can cause conflict when a franchisee sees the rigidity as stifling innovation and profit. Franchisors worry that in failing to “follow the system” the franchisee will undermine the business model diluting its worth.

How could it go wrong?

Tensions can emerge when the interest of the franchisee differs to that of the franchisor. In the example of the Pizza Hut case the head franchisor, Yum, wanted to take on Domino’s who had gained a large portion of the market share with their successful cheap pizza range. When Yum required their franchisee’s to start selling cut price pizza’s too, the franchisees responded that they could not turn a profit on a $5.00.

Some franchisee’s banded together and commenced a class action that was fiercely defended by Yum. They argued that the franchisor has an obligation to make decisions that would allow the franchisee to make and increase profits. Ultimately, the Court pointing to a clause in their franchise agreements that stated Yum could unilaterally change pricing and did not guarantee that any pricing decisions would be profitable. You can read more about that decision in our previous article linked above.

Expansion or Dilution?

Often a franchisor wants to increase its market share by expansion whereas a franchisee can see the same expansion as a threat to its own profitability. When considering whether to buy into a franchise, do so with open eyes. Read every single clause in the agreement and try to chat to existing franchisees about their experience. Seek legal and accounting advice. Be territorial- if your agreement does not give you an exclusive territory, ask why not? The Franchising Council of Australia has great online resources for potential and current franchisees to read. Despite these tensions, franchising remains a popular choice and many people do find them profitable businesses to own and operate.

Changes to The State Revenue Legislation Amendment Act 2016

As a Licensed Conveyancer  at a Law Firm, I deal with many clients, from first home buyers to investors and businesses. The State Revenue Legislation Act  effects a large portion of my clients and determines what they can do, the grant amounts they will receive and the tax they need to pay. So when The NSW Office of State Revenue or OSR,  announced changes to the act with The State Revenue Amendment Act 2016, I realised many of my clients would be unaware or confused by the changes. So for those people or businesses undertaking a transaction with the OSR,  and to help you understand the changes, I have summarised the changes to the act below. The changes include:

  • To be classified as a "Substantially renovated home" for the purpose of the First Home Owner Grant and First Home New Home Exemption or Concession from Duty, the home must now be created by renovations that remove or replace all, or substantially all of the building.
  • To be classified as a "home built to replace demolished premises" for the purpose of the First Home Owner Grant, the home must be built on the same land that the demolished premises stood.
  • Unoccupied land which is eligible for the principal place of residence land tax exemption that is occupied by a person other than the owner can now be exempt for a period of up to 4 years from when that person stops using the land for residential purposes.
  • Wages that are paid to a person by a body corporate wholly owned by at least 2 local councils, for activities carried out for those councils, are now exempt from payroll tax.
  • After a successful objection or review, the chief Commissioner must now pay interest on a refund made to a taxpayer.
  • Enterprises may now voluntarily report amounts which are not classified as unclaimed because the total is $100 or less. The amount must be paid to the Chief Commissioner and can be claimed by the owner of the money.
  • The Chief Commissioner may now allow an owner of unclaimed money whose right to the money has expired to still claim the money.
  • References to anything done or held by a trustee of a unit trust scheme as trustee in respect of corporate reconstruction transactions and corporate consolidation transactions that are exempt from duty now extend to include anything done by or held by a custodian of the trustee of a managed investment scheme.

For more information on the The State Revenue Legislation Amendment Act 2016 click HERE.

If you need legal advice in relation to a property or business transaction. Coutts can give you the advice you need. 

Mallik Rees joins Coutts at the Hunter Valley Vineyards

On Tuesday the 5th April the team at Coutts Solicitors & Conveyancers travelled to the Hunter Valley to celebrate Coutts joining with Mallik Rees Lawyers located in Cessnock. Mallik Rees Lawyers is an accredited specialist firm providing a variety of legal services to the Cessnock community, with a focus on local government and planning law. The announcement was made to distinguished guests at the Goldfish Bar and lounge in Polkolbin. The evening debuted the new branding for the Cessnock location and revealed the firm will now be known as "Coutts Mallik Rees Solicitors & Conveyancers". The evening was celebrated with perfect weather, food and beverages in the picturesque Hunter Valley setting. Guests included the Mayor of Cessnock Bob Pynsent and representatives from Dungong Council, Liverpool Plains Council, Gunnedah Council, Tamworth Council and Maitland Council as well as long term supporting business partners of Mallik Rees Lawyers. With the joining of the two firms Coutts Solicitors & Conveyancers and Mallik Rees Lawyers are able to leveridge the legal services at both locations and provide their clients with additional expertise for a richer more elite experience from some of the best solicitors in the state.  

Small business protection from unfair contracts

The Australian Consumer Laws are designed to protect an individual against unfair practices. Under the proposed Unfair Contracts, some of these protections will be extended to protect small businesses as well (who don’t fall within the definition of consumer). The unfair Contracts Act is designed to make it harder for a business to enforce certain standardized contracts, or at least certain clauses in those contracts, against a small business. The kinds of terms that will be in the firing line include:

  • Clauses that allow one party to increase the price without allowing the other party to then terminate the contract.
  • Clauses that allow a party to vary the terms of the contract without informing the other party and allowing them to then terminate the contract.
  • Clauses that allow one party but not the other to terminate

Will these protections apply to franchising? Yes, if the upfront price of the contract is either less than $100,000.00 or if the contract duration is 12 months or more, the upfront price is no more than $300,000.00. Given the vast majority of franchise agreements are presented or a ‘take it or leave it’ basis and often do not allow the individual or small to terminate the agreement before the term, there could be a flurry of activity as franchisors update their agreements. Other typically clauses in franchise agreements that allow the franchisor to buy back the franchised business at an unfair amount or to reduce the obligations they offer to provide are likely to be now enforceable.

This Act was passed in October 2015 by Parliament and is expected to come into effect by the end of 2017. If you use a standardised contract, such as terms and conditions, now is the time to review your contracts. If you find clauses that give you all the power and your customer- be they an individual or a small business- none, you might need to re-phase the clause or perhaps get rid of it completely. Ask yourself if that clause is necessary to do business with you and protect your legitimate interests. If you have been using a standard contract “borrowed” off another business or maybe downloaded from www.whoknowswheres.com, it’s a great time to chat to us about getting a contract, or, terms and conditions that complies with these new amendments and is tailor made to your industry and your business.

The amendments to the Unfair Contracts bill mean, if you are a small business you will soon have another string on your bow if you were to end up in a dispute over a contract.

For advice on your business contracts click here to contact Coutts.

Different Business Structures

If you are buying a business or starting a business, you will need to make a decision on the type of Business Structure you need.  Firstly you need to know what the different Business Structures are and what suits your business.

Sole trader

A sole trader is the simplest business structure you can have. It is easy to set up and easy to wind up. Many favour this structure as there is less formal paperwork required than other structures and you generally have complete control over your business. One major risk is that you are personally liable for any debts or liabilities of your person and this is a limitless liability. This means there is no distinction between your business property and your personal property. It can also be harder to sell a business as a sole trader as potential purchaser’s may find it hard to see value in the business once you have gone (a reasonable conclusion!). If you start as a sole trader it is easy to change structures, which many do as their business expands.

Partnership

Once the hallmark of an accountants practice or a firm of lawyers, partnerships are less common than they used to be. However, partnerships still have their place in the modern business world. It still suits 2 or more people who want operate a business together and want a more flexible structure. As with sole trader, liability and responsibility for debts of the business (even if the business has a separate name) is shared equally by the partners…if one partner disappears the other can be left with all of the debts. Partners can split profits as income and offer partnerships to high performing employees. Whilst not compulsory, any partnership should have a written agreement clearly setting out how the partners want the business to operate and what they will do if a dispute arises.

Company

Commonly a company is a Pty Ltd (a proprietary limited) company. A company is responsible for its own obligations and debts. Shareholders are not responsible for company debts. Directors of a company are only liable for company in a limited circumstances. A company has higher set up costs then partnerships and sole traders and has ongoing obligations and reporting requirements with ASIC. Some information regarding the company, such as its directors, shareholders and registered office is publically available.

Trust

Trusts can often offer the highest level of asset protection for an individual in business. Trusts can also be flexible in how they distribute income to beneficiaries so there can be some tax advantages. Details of trusts are not generally publically available and so offer more privacy then a company. However, they can be expensive to set up and have ongoing reporting requirements (so your accountant will love it!). The complex structures of trusts can make it harder to use loans and financing arrangements

Which structure suits me?

As shown above each structure has positive aspects and negative aspects. Different models suit different types of businesses. An accountant is the best person to advise on which structure best suits your business and we can prepare the necessary documents to put those structures in the place.

For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.

How to buy a business

If your New Years Resolution is to buy a business you might be surprised to know that buying a business can be quite a complicated process, depending on what you are buying and how you are buying it. That's not to say you shouldn't do it, if you have had a dream to buy a business, it is definitely worth doing, however getting the right advice will help you to make the best decision on what to buy and the process to buy a business. Coutts has expertise in advising clients on buying and selling businesses, including franchises, Pty Ltd companies and Sole traders. We can also advise you on the best structure to use to buy a business- you don’t need to keep the structure you are buying.

If you are buying an established business you need to first determine what exactly you are buying- stock? Equipment? A registered business name? In some cases, you might also be buying debt, employees with long service leave entitlements and a bunch of creditors you have no chance of pursuing.

A properly prepared Contract for Sale of Business will note down everything included in the sale and will also set out the conditions that you are buying the business on. Making sure the Contract is correct can involve what seems like a lot of “to and fro” between the solicitors, however, it’s the contract that protects all parties so it is vital it is correct. Even if both the seller and the buyer have agreed on the big picture items, such as the price and the date for handover, there are lots of smaller details that your solicitor will confirm, such as:

  • Are you buying stock? At what value?

  • Is the equipment included in the sale or is it lease?

  • Are any of the employees staying on after the sale? Do they have long service leave entitlements about to crystallise?

  • Do you need a licence to run the business?

  • Is the soon-to-be former owner prevented from opening up a competing business nearby?

Do you know you cannot buy a lease? If a business operates in a leased premises, that lease must be either assigned (transferred) to you, or, a new lease will be offered. Bear in mind it is up to the landlord to decide to you give you a lease, it is not up to the seller. What will you do if you buy a business, but cannot get a lease on your terms? It is standard for the incoming tenant to pay the landlord’s legal fees (in addition to their own) associated with transferring the lease or obtaining a new lease.

Do you know you need to pay stamp duty on purchases of businesses? You may also need to pay Capital Gains Tax and GST.

Buying a business can be an exciting time when you finally become your own boss. But there is also a lot that can go wrong. You need a trusted, legal adviser to make sure that you are getting everything you think you are getting and leaving out the things you don’t want. You need enforceable contracts to protect you if things go pear shaped. You need to understand your lease. You need to be fully aware of the financial circumstances of the business and know that all of its debts are paid. Buying a business with unpaid tax debts, pending lawsuits and old stock would be a costly purchase indeed. Good advice is often worth far more than it costs and when you use a solicitor you are paying for their expertise and your peace of mind.

For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.

What is a Will?

What is a Will? A Will is a written record about how you would like your possessions and property to be distributed when you die, and, who you wish to be in control of that process. It’s something we all agree is an important task for our future, but we often don’t make the time to write those plans before we die. It’s important to plan ahead when thinking about your Will, you need to decide who will be your beneficiaries, the person or people that will inherit your property and the executor (the person who does the actual giving away). A few alternative executors in case the person you chose is no longer around when you pass away is a good idea too.

It is important that everyone has a valid will when they pass away. Without a Will, your next of kin will have to apply to the Courts for a document called Letters of Administration, which then allows that person to distribute your estate in accordance with a set formula that may not be what you actually wanted.

Like many things in life, it pays to think ahead. If you put off making your Will it might be too late. While we can and do prepare Wills for people in hospital, it generally quite rushed and not ideal.

During the appointment, there are two other estate planning documents we can discuss with you. They are an Enduring Power of Attorney and an Appointment of Enduring Guardian.

There are certain legal requirements for a valid will and while attempting to prepare a “DIY” Will, many people don’t end up with a valid Will and this can result in a costly legal battle. It is also possible to have the NSW Public Trustee prepare your Will. If you are considering this option please be fully aware of the fees that the trustee will charge as your executor. However, using a Solicitor to draft your Will provides you with many more options and the cost is fixed, not charged as a percentage of your estate.

For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.

What situations can cause franchise disputes?

What do pizza and petrol have in common?At the moment there are two big businesses making headlines for franchise disputes- Pizza Hut and United Petroleum. Around 80 owners of Pizza Hut Franchisees are currently in the Federal Court claiming the $4.95 pizza range the franchisor has required them to sell is too cheap- they cannot make any profit and remain in business. Part of their argument is that the franchisor is not acting in their best interests and it is unconscionable to require the franchisees to sell pizzas at such a low rate. Initially unsuccessful in obtaining an order to stop the requirement to sell the cheap pizzas, the matter is now chugging along towards a final decision. It is expected that the judgment, whomever the Judge agrees with, will provide much needed clarity on exactly what kind of care the franchisor owes to the franchisee.  

A more recent conflict to emerge involves a franchisee of United Petroleum. While in some respects it is hard to imagine not turning a profit from petrol, the franchisee is claiming that he was required to sell gas bottles and confectionery at a high price and was forced to change electricity suppliers that charged a much higher price. United was able to terminate the franchise agreement due to Mr Nijhawin’s failure to pay electricity bills. In speaking to the ABC’s news service, the franchisee said “We're devastated, totally. Financially, emotionally, physically…we're finished,"[1].

A lawyer representing two other (now former) united Petroleum franchisees, claims that it is in the interests of United Petroleum for a franchisee to commit a breach, so they can then take back the business and re-sell it to a new franchisee, netting around $145,000.00 each time the business changes hands[2]. Another disgruntled franchisee commented that his business struggled because United dictated what products its franchisees sold and at what price, including United Petroleum home branded products[3]. He shut up shop in March 2015.

If you are considering a franchise you must, must, must fully understand the franchise document. You need to be aware of clauses that allow the franchisor to dictate your resale price. If you get caught in the cross fire of a pricing war, as is currently raging between Pizza Hut and Dominos, your business could be the first casualty. If the franchiser dictates your supplier and you can get a better deal elsewhere- what are your rights to go elsewhere? Read between the lines- is this document passing on all the risk of running the business solely to you, without giving you the power to make decisions that impact on its profitability? While the franchising model of business can be a profitable way of running a business, often enjoying instant brand recognition, training, support and extensive marketing, as with most of life’s decisions, your decision to buy a franchise must be an informed decision. Coutts have experience in reviewing a variety of franchising documents as well as acting for parties in franchising disputes.

If you are thinking of starting a franchise business. Coutts Solicitors is hosting a FREE Webinar on Monday 7th September 2pm with the ABC's of starting a business. Our Commercial Law expert Adriana Care can help you decide the best way to set your business up, to be a success from the start!

To register for the ABC Business Start up Webinar click on the link:

https://attendee.gotowebinar.com/register/4031324567032270850

or if you would like to talk to one of our business lawyers call

1300 268 887

for a free initial consultation.

When is an Independent Contractor Really an Employee?

Independent contractors can be a cost effective way to structure or even supplement your workforce, for when times get busy. A business that has famously used independent contractors is Uber. They are currently the talk of the town. They use a concept that matches people who need a lift somewhere.... with a regular Joe who has a spare seat. Its critics will say it is just like a taxi service, but without any regulation or safety for passengers. Whatever you think of Uber (or don’t think of it, as the case may be) the startup has again made the headlines, this time some of its drivers have commenced an action in California claiming that they are employees of Uber, not independent contractors and should be paid reimbursements, such as fuel. The question of whether a person undertaking work for another is an employee or an independent contractor is one of the most frequently ask questions in employment law. From an employers point of view, using independent contractors over a traditional employee/employer relationship can be quite attractive- although often paid more on an hourly or piecemeal rate, there is no PAYG, compulsory superannuation contribution or insurances obligations. They can be utilised when the work is there. From an independent contractor’s point of view, it can be more flexible as a contractor can name their rate, hours and can knock back work if they chose to.

So what is the catch? Why don’t more work places use contractors? Not all industries have fluctuations in work load and need a steady work force. Contractors can cost more. And if an employer gets things wrong, by hiring contractors, that are essentially working as employees, things can get very expensive very quickly. The ATO will come knocking for PAYG, interest and possibly fines. APRA will also seek employee superannuation from you and when that is late, the fines can be steep. Because of uncertainty about when a contractor will actually be deemed an employee, many workplaces are hesitant to use contractors, however, don’t throw the baby out with the bathwater!

When using independent contractors, there are a few things that employers can do to make sure those contractors really are contractors:

  • Get legal advice tailored to your industry and specific work place. Maybe independent contractors are not going to work for you.
  • Use a detailed agreement that clearly sets out the employment relationship. This must be done by a lawyer who is up to date with employment issues and decisions.
  • Once you have your agreement in place- stick to it! It can be easy to fall into a employer/employee relationship.
  • Make sure your contractors have their own public liability and professional indemnity insurances and workers compensation insurance.
  • Don’t try to out-fox the tax-man- if the ATO thinks that there is a sham going on, they have wide reaching powers to decide that you are using employees and the range of penalties on offer can be great.

Do you need advice on a current independent contractor or hiring a new contractor? Talk to Coutts Solicitors & Conveyancers. Coutts have the experience and expertise to help your business get the most benefit out of hiring contractors.

Call Now on 1300 268 887 your first appointment is FREE (excluding contract reviews).

5 Tips on reclaiming your debts

If you are in business you are sure to have had at least one client who owes you money- probably more than one. This can quickly turn your cash flow into more of a cash dribble and can ruin your business. So what can you do once it becomes obvious that despite promises, extensions and payment plans you still haven’t got paid? Here are 5 tips on reclaiming your debts: 1. You need to decide if you want to pursue the debt or write it off. Pursuing a debt half-heartedly is likely to produce a half-hearted response. We find that a firm but clear letter of demand that attaches a draft Statement of Claim can make your debtor sit up and pay attention to their debt.

2. If the debtor still does not pay then you can immediately file the claim, claiming the amount they owe you, and, some interest and legal fees for good measure. If the debtor doesn’t file a defence within 28 days from when they are served with the Statement of Claim you can have a judgment entered against them. If your debtor wants to pay you at any stage its worth engaging in some discussion about your fees- but realistically, if you have had these discussions in the past and you didn’t receive any money from them, it likely that the debtor’s attitude hadn’t changed much. Once you have a judgment you will find yourself in a better position to negotiate for payment of your fees or the debtor will risk having that judgement enforced against them or their business.

3. It is important your business has a great accountant who can work with you proactively to reduce your debtors. But don’t leave everything up to the accountant- know who your debtors are and how much they owe.

4. You need to stop supplying the debtor allowing them to increase the amount they owe you. Although easier to assume that if you keep the relationship going you have more of a chance of getting paid, ask yourself “do I want to work with someone who doesn’t pay their bills?”.

5. As with many things in life, prevention is better than a cure. It is surprising how many businesses do not have any written terms and conditions that deal with deposits, payment terms and ways to protect a business against debtors, especially ones that become bankrupt or liquidated.

We can help you chase up debts, making those awkward calls you keep putting off and act fairly, but firmly, with your debtors. We can also work with you to put in place strategies to keep your amount of debtors down to a manageable amount, including preparing terms and conditions.

Talk to Coutts about how we can work with you to make sure debtors don’t dry up the cash flow you worked hard to create.

Call 1300 268 887 your first consultation is free.