Category: Business Law

Businesses small and large encouraged to “go green”

The recent Anvil Hill case addressed the question of assessing greenhouse gas (hereafter GHG) emissions when mining applications are considered in Australia.

20 September 2007, the Federal Court of Australian, by Justice Margaret Stone, dismissed an application by environmental group Anvil Hill Project Watch Association. Concern was raised with respect to the mine’s possible contribution to climate change (Anvil Hill Project Watch Inc v Minister for the Environment and Water Resources [2007] FCA 1480).

Environmental Group Claimed Mine Was Not a “Controlled Action”

The proceedings arose from an application by Centennial Hunter Pty. Limited to construct an open-cut coal mine in NSW’s upper Hunter Valley. The proposed project became known as the “Anvil Hill Project”.

A delegate of Federal Minister for Environment and Water Resources Malcolm Turnbull decided, in February 2007, that the project was not a “controlled action” within the meaning of section 67 of the Environment Protection and Biodiversity Act 1999 (Cth) (EPBA). This decision meant that the project could proceed without any further approval being required.

The environmental watch group challenged the way the delegate dealt with issues regarding the adverse impact of greenhouse gas emissions arising from the mine in an application filed in May 2007 under section 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) for an order to review the decision.  In particular, they argued that the delegate erred in looking for a “measurable or identifiable increase in the global atmospheric temperature or other greenhouse gas impacts” emanating from mine emissions.

Federal Court Dismisses application

Justice Stone, in dismissing the application, said the delegate did not err in his determination that the mine was a “controlled action”

“Without going into detail it is sufficient to say that these assessments involve closer scrutiny of the proposal than is required to that point,” Justice Stone said. “The Minister must also balance the negative effect of the proposed action against any positive benefits the proposal may have.”

He added that the Environment Protection and Biodiversity Act not prescribe clear criteria by which the Minister can evaluate the substantiality or significance of an impact, such as greenhouse gasses, on matters protected by the EPBA.

Environmental Group Calls for Review of Legislation

In a statement on 21 September 2007, AHPWA president, Christine Phelps expressed the groups disappointment. “It is outrageous in today’s world and scientific knowledge that a coalmine does not automatically trigger the EPBC Act. It is an environmental protection Act and already recognises anthropogenic climate change as a key threatening process and a major cause of habitat loss.”

Ms Phelps went on to say that the decision demonstrated the inadequacy of current legislation and said the case highlighted an “urgent” need for changes.  She said that the AHPWA is yet to decide on appealing the decision.

“At a time of looming federal elections it will be interesting to see how the major parties respond to this decision,” she said.

High Court boost for contracting parties

The High Court has found that the “conduct of an innocent party is a relevant factor in considering whether a contract has been repudiated”. The decision is good news for small businesses in their relying on other parties to fulfil contractual obligations.

A joint venture was entered into between “Koompahtoo Local Aboriginal Land Council” and “Sanpine Pty Ltd” to develop a parcel of land which came to be in the Council’s possession as a result of claims made under the Aboriginal Land Rights Act 1983 (NSW). Each party held a 50 per cent interest in the joint venture with Koompahtoo contributing its land and Sanpine contributing its services as development manager.

The project was blocked by environmental issues, was controversial within the Koompahtoo community, and had difficulty securing financing. Despite $2 million in accruing costs, the project did not proceed to the rezoning stage.

An administrator was appointed to the Council in 2002 who found that Sanpine, by its conduct, had repudiated the joint venture agreement and as a result the administrator terminated the agreement.

In the Supreme Court of NSW, Sanpine argued that the joint venture agreement was valid and continuing. Campbell J identified nine distinct breaches of the joint venture agreement, including obligations for:

* banking and spending of money;
* document production and maintenance;
* obtaining rezoning approval, and
* maintaining proper books.

Proper accounts and financial records were never kept, and documentation failed to explain or justify significant amounts it claimed to be expenses chargeable to the joint venture; included therein was a payment of more than $183,000 to the wife of a Sanpine controller. The Judge found that the breaches amounted to repudiatory conduct entitling Koompahtoo to terminate the agreement.

Sanpine appealed. The majority of the NSW Court of Appeal held that some breaches were excused by waiver or estoppel and that even if the breaches were proved they were not sufficient to repudiate the agreement.

Despite failing to strictly comply with the agreement in some aspects, the Court held that the parties’ method of communication and informal provision of information meant that lack of formal adherence to the agreement was not repudiatory. In particular, the Court found that Sanpine was working to achieve the central objective of the joint venture and that Koompahtoo had already consented to several departures from the contract.

Koompahtoo appealed. The High Court considered the benefit which the injured party is entitled and the consequences of their failure to comply with the contract. Because the land was provided by Koompahtoo, it was therefore entitled to evaluate the affairs of the joint venture. However the administrator was unable to examine the affairs of the joint venture due to sub-standard accounting and neither could Sanpine explain its expenses.


Reference Article:

Will new laws turn small business into spies

The Anti-Money Laundering/Counter-Terrorism Financing Act (AML/CTF), which came into effect on 12 December 2007 will soon have implications for small businesses.

As the first part of the AML/CTF Act has come into full effect, banks and other financial institutions are to comply with the new laws.

The second provision of the legislation is expected to come into effect by mid-2008 and which will impose an obligation on small businesses, professionals and retailers to report suspicious transactions to the Australian Transaction Reports and Analsysis Centre (AUSTRAC).

Those affected include:

* Jewellers;
* Real estate agents;
* Lawyers;
* Accountants;
* Financial advisors;
* Property dealers;
* Brokers; and
* Car dealers.

The AML/CTF legislation has created widespread controversy, including calls from advocates and interest groups, to scrap the legislation. The Australian Privacy Foundation, for instance, believes the legislation places an obligation on small businesses to monitor their customers in a similar way to “spying”.

Privacy advocates have called for a halt to turning small businesses into spies.

In a letter dated 13 December 2007, sent to the Federal Minister for Finance and Deregulation, consumer representative for CHOICE Jan Whitaker and the Australian Privacy Foundation representative Nigel Waters, called for a halt to the second part of the legislation. “This is really the Financial Privacy Invasion Act in its current form,” the letter stated.

They are concerned that the legislation risks small businesses to reporting activity based on such “amateur” profiling as ethnicity. Another concern was that suspicious transactions reporting would lead to an abundance of citizen reporting, with no recourse to the Privacy Act to destroy incorrect data held by AUSTRAC.

“It’s there forever with no ability for a citizen to ‘prove their innocence’,” the letter stated. “This data is available for additional profiling not only by the traditional law enforcement agencies charged with protecting the financial interests of the country, but also Child Support Agency, Centrelink, ASIC and many more.”

In this context, Ms Whitaker and Mr Waters warned the Act would lead to “crime on speculation” instead of “probable cause”.

In calls to delay the legislation, Ms Whitaker and Mr Waters called for the new Rudd Government to:

* Review the “onerous” nature of the existing legislation, which they claim exceeds the requirements of the FATF 40 recommendations.
* Delay indefinitely the presentation of the second tranche, which they believe “extends” the onerous compliance obligations to thousands of small businesses, should the legislation pass.
* “Reduce the regulation of our financial institutions, cut the current red tape, and certainly stop from adding any more that would impose on small businesses as a result of the second tranche,” the letter stated.

Government consults small business on new workplace laws

Small businesses will now participate in the drafting of new workplace laws with the creation of a new Business Advisory Group and Small Business Working Group, announced on 20 February 2008.

Federal Employment and Workplace Relations Minister Julia Gillard and Small Business Minister Craig Emerson said when making the announcement“the groups would work with the Government on drafting new workplace relations laws to be introduced this year”.

Key players of the Business Advisory Group

The new chair of Business Advisory Group will be, John Denton, CEO of Corrs Chambers Westgarth, who also has a strong involvement with the Business Council of Australia.

Ms Gillard and Mr Emerson said a key member of the Group will be Chief Executive of the Australian Industry Group Heather Ridout, whose role will be to link the Business Advisory Group to the statutory body the National Workplace Relations Consultative Council.

Welcoming the announcement, Ms Ridout said linking the groups would provide consistency that will contribute to:

* Ultimately better legislation;
* Greater understanding, and
* Better policy development.

Ms Ridout said that the Advisory Group will be able to contribute to developing a system that will work for all of Australia in the long term, and that gives stability to business planning and investment.

“I am very pleased to serve on the Business Advisory Group,” Ms Ridout said in a statement dated 20 February 2008. “The Advisory Group is an important body and there’s a long way to go with the government’s workplace relations agenda.”

“Ai Group represents a huge spectrum of industries from ICT, through to construction, transport, manufacturing, food, infrastructure and labour hire,” Ms Ridout said. “We are therefore well placed to make a significant contribution to the work of the Group on behalf of Australian business and industry.”

The Business Advisory Group will also include representatives of the hospitality, banking, transport, construction, mining, retail, labour hire and the media industry.

Key players of the Small Business Working Group

A key function of the Small Business Working Group will be to comment on Labor’s new unfair dismissal system, the Fair Dismissal Code, and other matters concerning small business.

The Group will be chaired by the Small Business Minister and includes representatives from peak small business bodies such as:

Tony Steven, Council of Small Business of Australia
Gary Black, National Retailers’ Association
Pearce Makin, Victorian Automobile Chamber of Commerce
John Hart, Restaurant and Catering Australia
Bryan Stevens, Real Estate Institute of Australia
Simon Ramsay, Victorian Farmers Federation
Greg Holmes, Hotel, Motel and Accommodation Association
Kieran Schneemann, Pharmacy Guild
Peter Bush, McDonalds
Andrew Arkell, Institute of Chartered Accountants

According to Ms Gillard and Mr Emerson, in addition to these formal consultants the Federal Government will:

* Consult the Australian Council of Social Services, particularly on the question of  low wage workers;
* Consult the Australian Council of Trade Unions;
* Continue to meet with the National Workplace Relations Consultative Council, a statutory body comprising representatives of ACCI, the AI Group, the ACTU, AMMA, the BCA, the MBA and NFF; and
* Obtain the technical advice of the subset group of the Committee on Industrial Legislation (COIL), which play a consulting role in the creation of the Transition Bill.

It is expected the new laws will come into operation from January 1, 2010 and will have a significant impact upon employer and industry groups.

Reference Article:

Federal Court finds Pizza oven provider misled small business owners – ACCC

The Australian Competition and Consumer Commission (ACCC) has announced it obtained orders from the Federal Court finding that “Original Mama’s Pizza and Ribs Pty Ltd” a pizza oven provider, misled its business customers about the contracts by which they purchased the ovens. The ACCC said the terms under which their finance contracts provided for the ovens could be cancelled. Misleading representations caused business customers to detrimentally enter into long-term financing agreements

In a media release dated 19 March 2008, Original Mama’s managing director George Terence Hilder and sales representative Richard Soo, made misleading representations to small business owners including convenience store, service stations, and cafes owners. The misrepresentations, it was claimed, induced them to enter into long-term financing agreements with third party finance companies, in order to purchase the pizza oven systems.

The ACCC said these misrepresentations provided no recourse if the oven system purchased was defective. As a result they ordered:
* the small business owner would be able to cancel their financing agreements;
* Original Mama’s Pizzas & Ribs would be obliged to remove the oven, with no costs  incurred by the small business owner; and
* that the small business consumer would be released from all financial obligations with respect to the ovens.

The oven provider also made false statements to the effect that the oven system would be risk free because of a six or 12-month free trial period, the ACCC said.

On review, the Federal Court found that “once the small business owners had entered into the financing agreements, Mr. Hilder would sell the ovens to the finance companies at an inflated price of between $15,000 and $19,500 (plus GST). When the small business owners tried to terminate their obligations under the financing agreements, they were told the agreement could not be cancelled”. The Court declared that the Pizza over provider breached Trade Practices Act.

On 18 March 2008 in the Federal Court the ACCC obtained orders against Original Mama’s Pizza and Ribs Pty Ltd, Mr Hilder and Mr Soo, for breaches of the Trade Practices Act 1974 and the Australian Securities and Investments Commission Act 2001.

The orders included:
* “Original Mama’s breached sections 52 and 53(g) of the Trade Practices Act (or equivalent ASIC Act provisions);
* Mr Hilder and Mr Soo were knowingly involved in those contraventions; and
* Mr Hilder and Mr Soo, on behalf of Original Mama’s, made the misleading representations to small business owners.

The court made a range of orders against Mr Hilder and Mr Soo, including injunctions, costs and corrective orders.

One corrective order by the ACCC included requiring Mr Hilder and Mr Soo to publish an advertisement including the following:
* accurately summarising the Court’s judgement in daily newspapers in every region where an oven system was supplied; and
* advising persons who may have suffered losses as a result of their conduct deemed unlawful, of their entitlement to seek damages under the TPA and/or the ASIC Act.

The ACCC announced it did not institute proceedings against any of the financial companies that provided finance for the oven systems.

Justice Madgwick did however mention the need to examine to what extent financiers are allowed to profit from such transactions.

“It may bear examination that financiers should be able to profit from transactions induced by unlawful conduct such as the respondents engaged in here when in fact, whatever the legal position may be, the perpetrators of the unlawful conduct constitute the means and bridge, in non-technical language: the agency, by which the financiers acquire their borrowers,” Justice Madgwick stated.

ACCC Chairman Graeme Samuel said the outcome still serves as a warning against finance companies. “This is an important outcome for the small business owners who were misled by the actions of the company, Mr Hilder and Mr Soo,” Mr Samuel said. “Significantly, it also sends a strong message to finance companies to do their best to ensure that borrowers are not unlawfully induced by others to enter into such agreements.”