Alternative Dispute Resolution: Mediation and Settlement Conferences

Alternative Dispute Resolution: Mediation and Settlement Conferences

Lawyers are often stereotyped as being interested in prolonging an expensive court action, however more often the opposite is true, due to the availability of alternate dispute resolution avenues such as mediation.

Lawyers know that court cases are expensive and that clients are fearful that legal costs could escalate to an intolerable level. Lawyers interested in preserving long standing relationships with their clients will often recommend alternative dispute resolution options. Mediation is one of those options.

There are various types of mediation

  1. Pre-litigation informed settlement, or a round table conference
  2. Informed settlement conference after the court proceedings have commenced without a mediator
  3. Courted ordered mediation with a mediator

What exactly is mediation?

Mediation allows parties to remain in control of their own disputes and outcome while facilitating parties to tell their side of the story to the other party and the mediator. It is conducted on a ‘without prejudice basis’ which means that whatever is said during the mediation is confidential and cannot be used in court against you. It rules out the uncertainty and risk of court litigation and allows the parties to make certain compromises to achieve a commercial outcome.   

Mediation is one form of alternative dispute resolution. Others include Early Neutral Evaluation, Expert Determination and Arbitration.

In essence, mediation is an informal conflict resolution process brought before an independent, neutral third party. Mediation gives the parties the opportunity to discuss their issues, clear up misunderstandings, and find areas of agreement in a way that would never be possible in a court case.

Mediation is often voluntary. Typically the mediator has no authority to make a binding decision unless both parties agree to give the mediator that power.  This is dealt with in advance of the mediation commencing. Mediators are accredited under the National Mediator Accreditation System.

When parties should consider mediation

In practical terms mediation is likely to be quicker and more cost-effective than the more formal processes of arbitration or litigation (in court). Mediation should be considered as early as possible after a dispute has arisen. It is particularly appropriate where a dispute involves complex issues and/or multiple parties.

In addition, mediation can be implemented prior to, or in conjunction with, other forms of dispute resolution such as arbitration or court proceedings.

In circumstances where privacy and confidentiality are important, mediation enables parties to preserve these rights without public disclosure. This often leads to more satisfactory outcomes for both parties.

Advantages of mediation

There are many advantages. In summary these can be described as:

You get to decide

The responsibility and authority for coming to an agreement remain with the people who have the conflict. The dispute is viewed as a problem to be solved. The mediator does not make the decisions, and you do not need to “take your chances” in the courtroom.

In doing this however, you need to understand your legal rights so that you can make decisions that are in your own best interests. It is very important to seek legal advice from a competent litigation lawyer so that you do not agree to an offer that is much less than you are entitled to.

The focus is on needs and interests

Mediation examines the underlying causes of the problem and looks at what solutions best suit your unique needs and satisfy your interests.

For a continuing relationship

Colleagues, business partners, and family members have to continue to deal with each other co-operatively. Going to court can divide people and increase hostility. Mediation looks to the future. It helps end the problem, not the relationship.

Mediation deals with feelings

Each person is encouraged to tell their own story in their own way. Discussing both legal and personal issues can help you develop a new understanding of yourself and the other person. You are encouraged to see things from the other person’s perspective.

Higher satisfaction

Participants in mediation report higher satisfaction rates than people who go to court. Because of their active involvement, they have a higher commitment to upholding the settlement than people who have a judge decide for them. Mediation ends in agreement about 80% of the time and has high rates of compliance.

Informality

Apart from court ordered mediation in a large court, for complex litigation in which parties would follow a set structure such as submitting position paper and a mediation bundle to the mediator ahead of the mediation, informal settlement conferences are less intimidating process than going to court. Since there are no strict rules of procedure, this flexibility allows the people involved to find the best path to agreement.  Although it is normal for any dispute resolution to be taxing emotionally, mediation is a process that is much less confronting and is conducted in a much more comfortable environment than litigation

Faster than going to court

Years may pass before a case comes to trial, while a mediated agreement may be obtained in a couple of hours or in sessions over a few weeks.

Lower cost

The court process is expensive and costs can exceed the benefits. It may be more important to apply that money to solving the problem, repairing damages, or paying someone back. Mediation services are available at low cost for some types of cases. If you can’t agree, other legal options are still possible. Even a partial settlement can lessen later litigation fees.

Privacy

Unlike most court cases, which are matters of public record, most mediations are confidential.

Where mediation is not the solution

With mediation, a resolution is not guaranteed. There is the potential that parties may invest time and money in trying to resolve a dispute out of court and still end up having to go to court. Ultimately, it is a call that should be made in consultation with an experienced lawyer.

Mediation should not be a solution in circumstances where it is not appropriate. For example, where a court remedy is necessary such as an injunction or seeking specific urgent court orders.

It must also be remembered that the mediator has no power to impose a binding decision on the parties. Therefore, even after the mediation the matter may be unresolved and you may still need to go to court.

Fundamentally, mediation rarely produces a satisfactory resolution unless all parties to a dispute are committed to a resolution.

Navigating the court system can be a financially and emotionally costly and time-consuming process. Mediation is an alternative. It is suitable for people who are willing to communicate with the other party and attempt to better understand and settle their dispute with the help of a trained third party.

To find out more call us on (02) 9963 9800 or contact us here.

Business Structures: Companies

Business Structures: Companies

This article looks at companies – how to set one up and the pros and cons of a company structure. When commencing a business venture, it is necessary to consider the most appropriate type of business structure to put in place. Different business structures have different benefits and disadvantages.

Key Features of Companies

A company is a separate legal entity capable of holding assets in its own name and liable for its own obligations. A company is owned by shareholders. The liability of shareholders is usually limited to the amount of their shareholding guarantee. This means that shareholders can limit their personal liability and are not generally liable for the debts of the company.

Directors manage the day to day business affairs of the company. There are a number of duties and obligations for company directors including an obligation that a director must act in the best interests of the company.

In Australia, the most common forms of companies are:

  • Private company (or a proprietary limited company): this is a company which does not sell its shares to the public and cannot raise money from the general public through share issue.
  • Public company: is a company whose shares are owned by the public at large, with the company’s shares usually listed for trade on a stock exchange.

Companies are regulated by the Australian Securities Investment Commission (ASIC) and governed by Corporations Law.

How to set up a company

An Australian company must be registered with ASIC. When ASIC registers a company, the company will be given an Australian Company Number (ACN). An applicant must nominate a principal place of business and registered office for the company.

Prior to lodging an application for registration, consideration should be given to:

  • the proposed company name. A check should be undertaken to confirm the availability of the proposed name. If no name is specified in the application, the company will be referred to by its ACN.
  • what rules will apply to govern the company. This can generally be the replaceable rules from the Corporations Act (which means that the company does not require its own written constitution), a constitution or a combination of the two.
  • who will be the shareholders and directors of the company.

A company needs its own Tax File Number, which can be obtained online from the Australian Taxation Office (ATO) and an annual tax return must be filed.

A company must be registered for GST if its annual turnover is $75,000 or more. An Australian Business Number (ABN) is required to register for GST and can be obtained online through the Australian Business Register.

Pros and Cons

The advantages of forming a company include:

  • liability for shareholders is limited
  • easier to raise finance for expansion
  • ownership can be easily transferred
  • taxation rates can be favourable

The disadvantages include:

  • expensive to form, maintain and wind up
  • reporting requirements can be complex
  • must publicly disclose key information
  • owners cannot offset losses against other income

Conclusion

A company might be a suitable business structure for unrelated parties who want to commence a business venture together, where there is a degree of risk and limited liability is wanted or where there is a desire to list the company on the stock exchange.

Establishment of a company and ongoing administrative and compliance costs associated with Corporations Law can be high. An accountant or lawyer can help you understand the cost and risks of a company and explain whether a company structure would be suitable for your business going forward.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or email law@etheringtons.com.au.

Understanding Unfair Dismissal Claims

Unfair dismissal matters can be complex and frustrating for both employers and employees alike.  Since the commencement of the Fair Work Act in 2009, employers have had expanded responsibilities to ensure they correctly terminate employees and more employees are able to successfully make unfair dismissal claims.

At the same time employers have narrower exceptions when they’re defending claims.

Terminating a person’s employment is usually stressful and upsetting for everyone concerned, so it’s always important to understand when and how it can be done in a fair and appropriate manner.

The issues can be complex

Unfair dismissal can also incorporate far-reaching issues including employment type, award and enterprise agreement coverage, time limits for claims and the provisions of the legislation.

In addition, the definition of ‘dismissal’ can include a situation where a person resigns but was forced to do so because of conduct, or a course of conduct, engaged in by their employer. This is commonly referred to as ‘constructive dismissal’.

What remains after the legislative changes is that a dismissal must be harsh, unjust or unreasonable for it to be an unfair dismissal under the Act. The primary remedy is said in the Act to be reinstatement, but in practice this does remain the exception rather than the rule. More often than not, compensation is ordered – the Fair Work Commission can order compensation of up six months of the employee’s salary.

Who is covered by the unfair dismissal provisions of the Fair Work Act?

  • In a small business (with fewer than15 fewer employees), an employee is covered if they have worked for at least 12 months;
  • For larger businesses, employees are covered after six months.
  • There is an additional hurdle for employees of small business. Even if an employee has worked in it for 12 months, a dismissal will not be unfair where the small business has complied with the Small Business Unfair Dismissal Code.
  • Under the Fair Work Act, a dismissal will not be unfair if an employer can show that it was a “genuine redundancy”.

What is a “genuine redundancy”?

There are three elements to a genuine redundancy

  1. the employer no longer requires the employee’s job to be done by anyone because of changes in the employer’s operational requirements;
  2. the employer has complied with any consultation obligations that it might have in an enterprise agreement or award;
  3. it would not have been reasonable for the employer to redeploy the employee within the employer’s business or the enterprise of an associated entity of the employer.

Small businesses – don’t be caught out

Research by Benoit Freyens, assistant economics professor at the University of Canberra, and Paul Oslington, economics professor at the Australian Catholic University, found that in the change from the Workplace Relations Act 1996 to the Fair Work Act:

  • Where unfair dismissal cases were arbitrated between 2000 to late 2010, claimant success rates have lifted from 33% under Work Choices to 51% under the current Fair Work Act.
  • Claims under Fair Work against businesses with more than 100 employees have a 41% success rate, versus the 33% rate under the Workplace Relations Act.
  • Claims lodged under Fair Work have jumped to 17,000 per year, from 6000 under Work Choices – in line with the increase in the number of employees able to make unfair dismissal claims (and the removal of many employees from the State industrial relations system to the Federal industrial relations system). Payouts were steady, averaging about 12 weeks’ pay.

Conclusion

Employers need to be vigilant in conforming to process when dismissing somebody, even when the employer believes they have sufficient reasons to justify dismissal, such as theft. They need to follow the correct process – such as providing warnings and collecting documentary evidence. In the absence of this process it’s very easy to formulate an unfair dismissal claim on the basis of a lack of fair process.

For employers the best way to avoid claims of unfair dismissal is to make sure that your organisation and your employees really understand their obligations under the Fair Work Act when terminating someone’s employment. It also means there should be an internal review of the firm’s policies.

That said, only about 1% of unfair dismissal applicants to the Fair Work Commission successfully achieve reinstatement through arbitration. The most common outcome is a conciliated settlement. Understanding unfair dismissal claims helps parties optimise their outcome in what can be a confusing system.

We represent both employers and employees so if you or your organisation needs assistance or advice on how to proceed please call on (02) 9963 9800 or email law@etheringtons.com.au.

Accessing digital assets – Estate planning essentials

The recent death (or purported death) of Gerald Cotton, former Chief Executive Officer of Canadian cryptocurrency exchange company, Quadriga CX, emphasises the importance of planning your electronic after-life.

Mr Cotton’s death in India at the age of 30, has not only raised suspicion as to its authenticity (and allegations of an exit scam), but reiterated the chaos that can be created if digital assets have not been considered in an estate plan.

Mr Cotton was the sole custodian of encrypted passwords ‘protecting’ over $200 million worth of digital assets. His untimely death has left numerous Quadriga customers unable to access their assets with trading on the Quadriga platform suspended while authorities try to work out what to do next.

Mr Cotton’s widow states that she played no role in the running of Quadriga and, despite efforts, has been unable to unlock the laptop used by Mr Cotton nor access any of his accounts.

The digital assets referred to in the Quadriga saga are held in cryptocurrency (virtual currency created and stored electronically such as Bitcoin, Litecoins and Ethereum). The cryptocurrency system is decentralised and not subject to a governing authority, raising unique challenges in identifying and ‘locating’ the assets.

Regardless of how the Quadriga saga unfolds, it is a timely reminder of how important it is to consider what happens (or should happen) to our digital assets when we die.

What are digital assets?

A person’s ‘digital life’ may encompass a range of online transactions, activities and accounts such as:

  • cryptocurrency;
  • financial assets including online bank accounts and shares;
  • intellectual property attached to domain names or online literary works;
  • online sporting and gaming accounts;
  • loyalty programs such as Flybuys, Rewards and Frequent Flyers;
  • online shopping accounts such as eBay and Amazon;
  • personal / business social media accounts such as email, Facebook, Linked-In.

All should be considered, and included, in an effective estate plan.

Issues unique to certain digital assets

Traditional cash-based assets such as money deposited in a bank, shares or other paper-based investments are held by title to the owner and can be transferred to the beneficiary of a deceased person with the relevant documentation. Ownership of digital assets like Bitcoin, however, is anonymous with owners accessing their cryptocurrency with private keys which are used to unlock and deal with the assets. This information may be held on a computer device (via a digital wallet), on a USB, or printed separately. These assets can easily be overlooked or ‘keys’ misplaced, representing unique challenges when it comes to administering an estate.

Many digital assets are also held globally and may therefore raise jurisdictional issues from an estate planning perspective. In most instances, there is no uniform legislation governing access to a deceased person’s online accounts, so it is imperative that these matters are dealt with specifically in an estate plan.

Following are some steps you can take to ensure your online life is appropriately dealt with when you are gone.

Identify your digital assets

You should start by making a list of your digital assets (including online accounts) and determining what you would like to happen to them when you die.

Keep records of your online accounts and subscriptions including user names and passwords and store this information in a secure place.

Remember your online accounts and login details are likely to change frequently and your list should be maintained accordingly.

Understand your online accounts

Understanding how various accounts are dealt with by service providers will help to determine the type of action you would like taken when you die.

For example, Facebook account holders can advise in advance whether their account is to be deleted or memorialised. A memorialised account can provide a place for family and friends to share memories after a person dies on the deceased’s profile, and any content shared by the deceased person remains visible to those with whom it was shared. Nobody can log into a memorialised account.

Some loyalty programs such as Frequent Flyers may not be transferrable or redeemable after a person dies, so it may be wise to keep tabs on these types of accounts to utilise benefits regularly.

Include digital assets in your Will and appoint a technology custodian

Your Will should define and identify important digital assets and provide executors and trustees with appropriate directions and powers to deal with them.

Assign your executor, or other trusted person who is familiar with technology, the role of managing your online life after you die and ensure this direction is included in your Will.

Record your after-life technology instructions with respect to each account separately and ensure these instructions are secure, but accessible to your technology custodian. Never disclose passwords in your Will.

Online maintenance

Online accounts contain personal information which should be protected. Technology presents a real risk of identity fraud and unmonitored accounts can be particularly vulnerable. Regular monitoring and unsubscribing or deleting unused accounts can help minimise risk and keep your technology life tidy.

Regularly downloading photos and videos from your mobile to a storage device can ensure that memories are accessible to your family when you die.

Consider incapacity

It is also important to consider what happens to your online life in the event that you are incapacitated. Appointing a trusted person to manage your online affairs and including specific instructions in an enduring power of attorney is a logical step to ensure the appropriate management of your digital wealth if you are incapacitated.

The instrument making the appointment should be specific to the jurisdiction in which the assets are held, and in this respect, more than one document may be required.

Consider trusts

It may also be beneficial to hold substantial digital assets through a trust structure, if possible, for greater protection and better taxation outcomes. In doing so, the trust must be considered and dealt with under the Will, which should nominate beneficiaries of the trust or shares in the trustee company and include provisions to ensure the trust can achieve the desired objectives.

Conclusion

It has become increasingly difficult for executors, lawyers and family members to ascertain and access online assets after a person dies, with many financial and other institutions operating in a ‘paperless’ environment. Certain digital assets such as cryptocurrency can present additional problems for a deceased’s family.

Inaccessible online accounts make it difficult to identify assets, and leaving online accounts open indefinitely raises concerns of potential identity theft.

Good online management and ensuring your digital assets are included in your estate plan will help your executors and family manage your online life after you are gone.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or email law@etheringtons.com.au.

E-conveyancing; the way of the future

For the past 150 years when completing a property settlement it has been necessary for lawyers and banks to meet up to check and swap documents and bank cheques.

The party that ended up with the documents then had to lodge them at the Land Registry and notify government authorities about the transaction.

Many of our readers would have been involved in a settlement where they were selling one property and buying another and the settlements had to occur simultaneously or where multiple simultaneous settlements had to be finalised before you were able to get the keys to your new home.

There are a lot of things that can go wrong with a manual process involving the physical signing and handling of documents.

The commencement of a new e-conveyancing system changes this and brings the whole conveyancing process into the 21st century filling it with much needed speed, efficiency and accuracy.

What is e-conveyancing?

e-Conveyancing provides an electronic online business environment for completing property transactions including electronic lodgement with Land Registries and the electronic settlement of payment of funds.

This process is facilitated via a secure online environment to:

  • Lodge the Land Title documents needed to register changes in property ownership and interests;
  • Allow the various parties involved in the transaction to view and complete the documents online to conclude the property exchange or transaction; and
  • Allow for the electronic settlement of all financial transactions at a nominated date including settlement monies, duties, taxes and any other disbursements.

The Benefits:

  • Tangible time and cost efficiencies;
  • No requirement for physical documentation at settlement;
  • No requirement to physically attend settlements;
  • Use of technology to reduce human error and settlement failure;
  • Aims to replace legacy paper-based approach.

This is a huge shift in the industry, similar to how share trading in the late 90s went from paper share certificates to online, revolutionising the stock broking industry and share trading generally.

Who provides the secure online environment?

An online property exchange known as PEXA has been established nationally to provide a standardised platform for the completion of online property transactions.

The PEXA platform has been rolled out gradually since December 2013 under an initiative lead by the Government backed National Electronic Conveyancing Development Limited.

The platform – developed by Accenture and hosted by Telstra – uses elements of electronic conveyancing systems developed in individual States.

PEXA removes the need to physically attend settlement. Basically, land registries, financial institutions and lawyers can access the platform and transact together online, performing lodgement right through to settlement from the comfort of their desk. 

Through PEXA, the following transactions can be completed (subject to conditions):

  • Mortgage
  • Discharge of Mortgage
  • Caveat
  • Withdrawal of Caveat
  • Transfer Title
  • Nomination
  • Withdrawal of Nomination
  • Consent
  • Notice of Acquisition
  • Notice of Sale

How does it work?

Lawyers open an online workspace where the Land Registry documents and settlement schedule are created and information is shared with all parties to the transaction.

Once preparation is complete and the settlement date and time is reached, PEXA will automatically:

  • Lodge documents with the Land Registry;
  • Exchange loan funds and pay stamp duty and other third party beneficiaries;
  • Remove the need for bank cheques and the wait that goes with them; and
  • Remove the need to physically attend settlement.

How does this improve the current system?

It dramatically improves the current situation where lawyers representing the buyer and seller as well as the incoming and outgoing Bank are required to meet up and exchange printed documents and bank cheques before a property is able to settle.

Simple errors like a misspelt or missing name, names that don’t match across documents or wrong cheque details could cause the settlement to fail.

Using PEXA the information is pre-populated in the system and verified against the land registry system, so it reduces error and gives certainty that the purchase will settle.

Full transfer functionality including online lodgement and financial settlement is now available to NSW property lawyers and conveyancers.

If you would like to know more about e-conveyancing or would like help with your property matter contact us on (02) 9963 9800 or email law@etheringtons.com.au.

Avoiding redundancy traps

Employers can easily fall into dispute with their employees by failing to properly handle redundancies. There is often uncertainty surrounding redundancy, in terms of handling it within the law, as well as cost.

Redundancy commonly occurs when a business is sold and a new owner offers jobs to the vendor’s existing workforce. Some employees decline the offer of employment by the new owner. In this context, an issue can arise as to whether or not redundancy payments need to be made to an employee who rejects an offer of employment by the new owner.

Notice and Severance distinguished

Notice and severance payments should not be confused. The period of notice provides the employee with a chance to seek other employment while a severance payment is intended as compensation for the loss of future entitlements to long service leave and accrued sick leave.

Redundancy

Let’s examine what redundancy means. The best way to define redundancy is that the employer no longer wishes the duties the employee has been performing to be undertaken by anyone. Termination of the employee on this ground has therefore nothing to do with poor performance or misconduct. Essentially the work or role is no longer required to be performed by any employee. Redundancy can also happen when an employer becomes insolvent or bankrupt, or following a re-structure, in order to increase the competitiveness or profitability of a business.

The employer must meet any requirements under a relevant award or enterprise agreement regarding redundancy. This includes discussions with the employee about the prospect of redundancy in view of operational changes or restructuring.

Employers need to be aware that a redundancy which does not meet the above criteria may expose them to an unfair dismissal claim. It should also be appreciated that a redundancy does not remove the need for notice or payment in lieu of notice.

Some employers fall into the trap of going through a ‘redundancy’ and then immediately afterwards advertising the same position. From an employer’s perspective it is prudent to assume the former employee will check your advertised positions.

It is not uncommon for an employer to seek to portray what may in fact be, a wrongful termination of an employee, as a “redundancy”.

The employer needs to ensure that, on examination of the facts, whilst the employee may have no legal claim to a severance payment, there is no basis for a common law claim.

What is a ‘genuine redundancy’?

If an employee has been made redundant and that redundancy is a “genuine redundancy” as defined by the Act, then the employer will be able to defend a claim for unfair dismissal.

Under the Act, it is a “genuine redundancy” if:

  • the person’s employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise; and
  • the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment regarding the redundancy; and
  • it is not reasonable for the employer to redeploy the person in the employer’s enterprise or an associated entity of the employer’s enterprise.

It is important that the employer who is making an employee redundant not only complies with the consultation provisions of any applicable award or enterprise agreement, but also makes enquiries to make sure that there is not a suitable alternative position available within the employer’s business or any other “associated entity” of the employer.

When should a redundancy payment be made?

When an employee is made redundant then usually a redundancy payment will be required by the employer and this is often called severance pay.

However, the employee is not entitled to redundancy pay under the Fair Work Act if the employee:

  • resigns;
  • is terminated other than due to redundancy, e.g. misconduct or performance issues;
  • has been employed for less than 12 months;
  • is employed in a small business with less than 15 employees;
  • was employed for a fixed term and that term has ended;
  • is a casual employee.

The amount of any redundancy payment is calculated by reference to the employee’s years of service. For example if the employee has worked for a period greater than one year but less than two the redundancy period payable would be 4 weeks. If the term was between 9 to 10 years the period would be 16 weeks.

However, an employer may not be required to pay the redundancy for the full length of service if the employee did not have any redundancy entitlements with the employer in question, prior to 1 January 2010. In those circumstances the period from which redundancy payments are calculated is 1 January 2010 rather than the full length of service.

In conclusion – take care

It is easy to fall into one of these employment law traps and employers should be satisfied as to the circumstances that constitute a redundancy, carefully review payments to be made and comply with the Act’s requirements in relation to a “genuine redundancy”.

Regardless if you are an employer or employee, if you feel you need assistance call us on (02) 9963 9800 or email law@etheringtons.com.au.