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The federal government is in a consultation process to consider reform to law relating to restraints.  In April 2024, the treasury produced an issues paper “Non-competes and other restraints: understanding the impact on jobs, business and productivity” which is available at treasury.gov.au.  The issues paper identifies the typical types of restraint clauses on employees, including: The discussion paper deals (at pages 12 and 13) with cascading restraints.  Cascading restraints (also called stepped restraints or ladder restraints) are a form of restraint which identifies: The clauses operate so that each separate obligation can be combined with each other so that – for example – at its widest the restraint might apply against working in the industry within Australia for 3 years, but then separately, it would apply to working for specific clients within Australia for 6 months and so on.  While the first in most cases is likely to be void, the second is potentially valid, and there are any number of other combinations which would also be valid.  A restraint with (say) 4 restrained activities, 4 geographical areas, and 4 restraint periods has over 60 combinations.  Further, a restraint with a wider area might be valid for a short time and a restraint with a smaller area might be valid for a longer time.  This then gives rise to enormous uncertainty on the part of the employee who could be sued by the employer and would have to go through the litigation process at significant expense, and with the prospect of it being responsible for damages and costs, and in circumstances where the court is unlikely to determine the outcome until well into or after the expiry of the greatest restraint period.  The issues paper cites the study “Employment restraints of trade: an empirical study of Australian court judgments” as reporting that out of 145 court judgments where employers attempted to enforce a restraint at an interim level (ie as an injunction pending trial), the employers were mostly (53.8%) unsuccessful.  This however does not take into account the fact that: The issues paper does not suggest potential methods to resolve these matters.   One remedy might be to have an unfair contract terms regime in respect of employment contracts as is the case for consumer contracts, including business to business contracts.  It seems odd that an employer could include a clause in an employment contract and bind their employee to it, when the same clause in a contract between the employer and a contractor might attract penalties under the unfair contracts legislation.   This could discourage employers from including clauses that are unfair. At this stage, the public consultation period has ended, with the competition review to advise the government on outcomes in the second half of 2024. For advice relating to restraints in employment and other agreements, please contact Peter Muller at peterm@qbmlaw.com.au

In the recent decision of Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149, His Honour Justice Applegarth considered the implied obligation of contractual parties to cooperate in the context of a number of “off the plan” sales.  Relevantly: The Applicant buyers bought the application before the Supreme Court for relief based upon the implied (ie not written in the contract) duty of the parties to cooperate.  This duty was discussed in His Honour’s judgment, including: While the contract was not subject to finance, the court considered that the necessity to obtain finance was in order to enable each buyer to perform a fundamental obligation under the contract (ie to pay the price) and that it was implicit that the contract promised that the buyer would have the opportunity to obtain that finance, in particular during the 14 day period following the notice to settle.  In the court’s view, in practical terms, this was a duty to cooperate by allowing access to the buyer for a valuation to obtain that finance. At paragraph 71, the court indicated that it was inclined to declare that the developer’s duty to cooperate to allow the buyer the benefit of the contract required it to permit access to the property by a valuer appointed by the buyer in sufficient time to provide a valuation advice in advance of completion. The court found that the developer had breached that duty by unreasonably delaying in responding to the requests for access and hindered the buyers obtaining finance.  While the developer argued that it was the buyers’ fault in not taking steps to organise third party finance ahead of the need to settle, the court noted that while a finance approval can be organised that is conditional on inspection and valuation, no such inspection or valuation was made possible until 8 July 2024 – well into the 14 day period.  As a consequence, the court determined that the developer was not entitled to call for completion of the contract on 16 July 2024.  This had the consequence that the buyers would not be in breach if they did not settle on that date.  The argument and decision raise a number of interesting questions.  It is not uncommon for developers to call for settlement when the titles office has created titles for the new lot but before work has completely finished in relation to those new lots.  Sometimes, those issues can have impacts on the final value of the property.  Does this mean that a contract is unfair if the developer can insist on settlement without allowing for valuation inspections a reasonable period before the settlement date? For advice in relation to contractual obligations and commercial and property matters, please contact our commercial lawyers, Peter Muller at peterm@qbmlaw.com.au, Megan Sarroff at Megans@qbmlaw.com.au and Sally Chipman at sallyc@qbmlaw.com.au

Many people use discretionary or family trusts in their asset holding, for perceived asset protection and income distribution advantages. Often, these trust deeds are bought “off the shelf” by providing basic information to the supplier which then issues the trust deeds in a standard form. For the purposes of estate planning, there are a number of issues which are critical where assets are held by a party as trustee for a discretionary trust.  One aspect is that – if it is intended to pass over the trust benefits to a particular person – the will maker might want to ensure that the beneficiary is given the “power of appointment” which is the power under the trust deed to appoint a new trustee (this role is most often called “appointor” or “principal”).  Otherwise the trust could be operated for the benefit of other beneficiaries. When reviewing trust deeds for the purposes of estate planning, we often find – in widely used trust deeds – difficulties with the provisions relating to the power of appointment.  Some do not allow the named appointor to appoint a person as their replacement in their will.  In one that we reviewed recently, the clause provided that on the death of the appointor, the power could be exercised by their  “legal representative” (i.e. their lawyer) which is likely to be an error because it was probably intended to have the power exercised by the appointor’s “personal representative” (meaning the executor of their will or administrator of their estate), which expression many trust deeds mangle by calling it “legal personal representative” which is actually an expression used in superannuation law where it is defined by sec 10 of the Superannuation Industry (Supervision) Act 1993, and which really should not be used in non-superannuation trust deeds unless it is properly defined, which it rarely if ever is. In the same trust deed, the appointor would be automatically removed if they lost capacity or were bankrupted, which then led to the trustee being required to call a meeting of all beneficiaries, notwithstanding that there are potentially hundreds of possible beneficiaries given the wide nature of the scope of beneficiaries in discretionary trust deed, with then provisions for beneficiaries of certain classes having to “unanimously” agree on the new principal.  As a result, this particular trust deed – in a standard form and in wide use – contains areas of potential uncertainty and inconvenience. Reviewing trust deeds is critical for effective estate planning, so that deficiencies or inconsistencies can be corrected.  Those issues could be avoided to some extend if the trust deeds were drawn at the outset having regard to the need for an easy transition in the event of the death of the appointor. For advice relating to estate planning and trust deeds, contact Peter Muller at peterm@qbmlaw.com.au

The QBCC was recently given guidance by a member of QCAT who considered that this guidance would be useful to “assist the Commission” when dealing with claims under the Statutory Insurance Scheme. Member McVeigh, in King & McDonald v Queensland Building and Construction Commission [2024] QCAT 138 observed that the Statutory Insurance Scheme was to provide assistance to consumers, by Schedule 6 of the Queensland Building and Construction Commission Regulation 2018. To obtain assistance, Member McVeigh noted that the consumer must make the claim: For a structural defect, within three months after the day they first become aware (or ought to have reasonably become aware) of the defect; orFor a non-structural defect, within seven months after the day they first became aware (or ought reasonably to have become aware) of the defect. Member McVeigh also noted that (relevantly for this matter) a structural defect is defined to include a defect in the work which allows water penetration of the residence. In the dispute, the consumers had noticed that certain skylights had not been installed in accordance with recommendations on 5 May 2020, and noticed water marks in cornice on 10 August 2020 before lodging a complaint with the QBCC on 13 August 2020. While the QBCC issued a direction to rectify in December 2020, and decided in April 2021 that the rectification work was not of a satisfactory standard, in May 2021, the Commission decided that the consumers were not entitled to assistance under the Statutory Insurance Scheme on the basis that they knew of the defect on 5 May 2020 – 3 months and 8 days before the claim was made, about 8 days after the time limit of 3 months (for structural defects) had expired. So the issue was whether or not the 3 month time limit applied from the May date. In the Member’s reasons which noted that the Commission’s interpretation of a certain section of the QBCC regulation “was, and always had been, untenable”, the Member observed that until the morning of the hearing, the QBCC maintained that a reasonable person would have known that – as the skylights had not been installed in accordance with the manufacturer’s recommendations – they were structurally defective, despite the fact that there was not at the time any evidence that there was or might be water penetration. The Member found that it was the noticing of the water marks that constituted the consumers becoming aware of the structural defect, and they made their claim to the QBCC three days afterwards. The Member’s decision was critical of the approach of the QBCC to the claim, and the QBCC’s continued reliance upon a decision which the Member considered had limited application, dealing with a policy in different terms to the current policy, and also omitting a qualifying sentence in the decision. The effect of the Member’s decision was that – in the Member’s view – it took more than the knowledge that there was a defect (which later provide to be a structural defect) to trigger the shorter time period for making a claim in respect of a structural defect. What was needed was for the consumers to be objectively aware that there was a structural defect. This however does not mean that the consumers have to know that there is a defect, and that it is a structural defect under Schedule 6 to the QBCC Regulation 2018. It is sufficient that they know that the defect has one of the characteristics of a structural defect as are set out in the Regulation, which are (as at April 2024): (a) if the work is for a residence or related roofed building—(i) a defect in the work that causes or contributes to deflection or movement of the footing or slab of the residence or building so the residence or building no longer complies with the building assessment provisions under the Building Act 1975 ; or(ii) the work does not comply with a performance requirement under the Building Code of Australia, part B1 or part 2.1 for the residence or building; or(iii) a defect in the work that causes the residence or building to be uninhabitable or not reasonably accessible; or(b) if the work is for a swimming pool—a defect in the work that allows water to escape through the shell of the swimming pool; or(c) if the work is on or for a residence, related roofed building or swimming pool—a defect in the work that adversely affects the health or safety of persons who occupy or use the residence, building or swimming pool; or(d) if the work is on or for a residence or related roofed building—a defect in the work that allows water penetration of the residence or building. For enquiries in relation to building matters, including claims on the Statutory Insurance Scheme, please contact Justin Mathews at justinm@qbmlaw.com.au