Depositing the certificate of title with the lender’s solicitor can create an equitable mortgage…

In some instances, the Supreme Court can order the sale of a property to repay the debt. This was examined in the case of Hatala v Graglee Pastoral Company Pty Ltd [2017] NSWSC 155.
In May 2013 Mr Hatala and Mr Daniel lent Grag Group Pty Ltd the sum of $300,000 and a property at Sutton Forest was used as security for the loan.

At that time, the husband (Mr Coady) was the sole director, secretary and shareholder of the borrower company (Grag Group Pty Ltd) while his wife (Mrs Coady) was the sole director, secretary and shareholder of Graglee Pastoral Company Pty Ltd who was the registered proprietor of the Sutton Forest property.

Shortly before the loan was advanced, the husband delivered the loan agreement signed on behalf of the borrower company together with the certificate of title of the Sutton Forest property to his solicitor, Mr Silk. Mrs Coady did not sign the loan agreement. A day later, the lenders visited Mr Silk’s office and the latter showed each of them the certificate of title of the Sutton Forest Property. The lenders then signed the loan agreement and they each transferred $150,000 into the bank account of Grag Group Pty Ltd.

Grag Group Pty Ltd defaulted on the loan and the lenders commenced recovery proceedings. The lenders claimed that by depositing the certificate of title an equitable mortgage was created and they were entitled to ask the court to appoint a receiver to sell the property and recover the money owing to them.
The evidence was that Mr Silk, the solicitor, told the husband, Mr Coady that the certificate of title for the Suttons Forest property would be held as security for the loan. Furthermore, the loan agreement prepared by Mr Silk said that the certificate of title was to be held as security.

In his judgment, Justice R Darke referred to earlier cases and said that an equitable mortgage can be created by lodging the certificate of title even if there is no writing. The one difficulty that the lenders had was that the wife, never signed the loan document. However, based on the evidence before him, His Honour was satisfied that Mr Coady was acting with the knowledge and consent of his wife.
His Honour made a declaration that the lenders had an equitable mortgage over the Sutton Forest property and ordered that a receiver be appointed to sell the property in order to repay the debt.

The COVID-19 pandemic and business interference insurance …

Many business operators had taken out business interference insurance and claimed on those policies after they suffered loss because of lockdowns imposed by state governments during the COVID-19 pandemic. The insurance companies are denying liability and it is now for the courts to determine the issue of responsibility.

The most recent decision followed proceedings brought by the owner and operator of the Vanilla Lounge cafe. In this action, the Federal Court was asked to answer a specific question: can liability be excluded (under the particular insurance policy) if the claim arises directly or indirectly or contributed by a human disease specified in a declaration of a human bio security emergency made under the Biosecurity Act 2015 (Cth.). The insurance company argued that the reason for the lockdown (and therefore the loss) was the state governments declaration under the state law not the declaration made by the Commonwealth government. The Judges answer was “no”, that liability cannot be excluded.

It is understood that leave will be sought to appeal the decision to the High Court.

There have been other decisions that similarly are opening the door for business owners to claim on their policies.

For more information about your rights, contact Peter Jackson at pjackson@jacksonassoc.com.au or Costin Stan at cstan@jackasonassoc.com.au

Peter Jackson, Costin Stan and Jason Tran from Jackson & Associates, Solicitors wish our friends, clients and readers of our newsletter the best wishes for the holiday season and the coming year.

Our offices will be closed between 23 December 2020 and 4 January 2021.

For urgent matters during the holiday period please contact Peter Jackson at pjackson@jacksonassoc.com.au or Costin Stan at cstan@jacksonassoc.com.au

Unfair contract terms declared void…

JJ Richards & Sons Pty Ltd (JJ Richards) is a large waste disposal company. The Federal Court declared, by consent, that eight of the standard contract terms of the company with small businesses were void because they breached the Australian Consumer Law provisions designed to protect small business operators. This was the first case following the introduction of the provisions in 2016.

The contract terms that were declared void allowed JJ Richards to increase its prices, remove any liability from itself, charge for services not rendered and a number of other one sided provisions. Like standard contract terms in small business contracts these were non-negotiable standardized terms .

A term in a standardized form contract will generally be unfair if it is one-sided and excessive and is not reasonably necessary to protect the interests of the company.

It should be noted that contract terms may not be unfair if they are clearly drawn to the other parties attention before entering into the contract.

COVID-19 pandemic and the protection of small business …

The federal government has proposed a new insolvency regime to support small business, help them survive and maintain their present workforce.

From 1 January 2021, a company with liabilities of less than $1 million, that has no employee debts overdue and tax returns filed can create a Small Business Restructuring Plan.

These companies will remain under the management and control of the existing team. Having decided to create a plan under the scheme the company must appoint a Small Business Restructuring Practitioner (SBRP) to advise on the restructuring plan and its implementation.

Once the process has commenced there is a moratorium on claims being made against the company and the directors. The company must prepare the restructure plan within 20 business days and it must be signed off by the SBRP.

The SBRP will notify the creditors of his appointment and when prepared, send them the restructure plan. The SBRP must certify the plan and that, in his opinion, the business will be able to make the payments under the plan.

The creditors have 15 business days to vote on the plan. For the plan to be approved, 50% of the creditors by value must vote in favor of its implementation. Related parties are not permitted to vote on the approval of the plan.

Once approved the plan is implemented under the supervision of the SBRP who has the power to terminate the plan in certain circumstances.

For further information on a Small Business Restructuring Plan contact Peter Jackson (pjackson@jacksonassoc.com.au) or Costin Stan (cstan@jacksonassoc.com.au) at Jackson & Associates, Solicitors.

The construction industry and a new duty of care …

It is well understood that the Home Building Act 1989 NSW (Home Building Act) provides that the building work “be done with due care and in accordance with the plans and specifications in the contract”. Under the Home Building Act, claims for major defects must be made within six years of the completion of the work and two years in other cases. If the builder wishes to join others in any claim it is his obligation to do so.

In June 2020, the Design and Building Practitioners Act 2020 NSW (Design and Building Act) commenced. This act imposes a range of additional statutory obligations on builders, architects, engineers and others working in the building industry. Furthermore, this act was introduced because although the Home Building Act imposed statutory warranties, there was doubt that a duty of care existed and this act changes that position. Section 37(1) of the Design and Building Act stipulates that:

A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects —

(a) in or related to a building for which the work is done, and

(b) arising from the construction work.

The new law provides that claims can be made for six years from when the loss becomes apparent or for up to ten years after the work was completed and with no distinction between major and minor defects. Moreover, the new duty of care is retrospective and extends back as far back as ten years. If the claimant considers others should share the responsibility for the loss they must be joined in the claim by the claimant. This is a different approach to that taken in claims commenced under the Home Building Act.

This is important legislation that will benefit those who wish to claim loss for defective building work because they were unable to establish a duty of care or who missed the limitation period in the Home Building Act.

Should any of newsletter readers find themselves in such a scenario they should contact Peter Jackson at pjackson@jacksonassoc.com.au or Costin Stan at cstan@jacksonsasoc.com.au.