Law Society Newsletter - 2nd of 2013
IN THIS ISSUE :
·
BYO
devices: The risks and trends
·
Privacy: Businesses need to be prepared for new laws
·
Raising
the bar: Patents and intellectual property
·
Emails:
Does your company own your CEO’s emails?
·
Family
law: Changes to family violence definition
·
Are executors of wills
entitled to be paid? Not as often as you’d think
·
Employment law: Restraining ex-employees from
poaching clients
·
Mis-selling
a lesson to banks and investors: Bank’s “cynical” awareness of risks
“extraordinarily disturbing”
·
Sellers of land face GST bill:
Sub-divided farm land not exempt
·
Changes to directors’ liability:
Increased burden of proof in less serious environmental offences
The risks and trends
As more employees use their own devices to do work,
businesses need to be aware of privacy, security and intellectual property
rights issues.
The current shift in working practices –
from the traditional nine-to-five work day based in an office to working
remotely and being connected 24/7 – has led to the rise in cloud computing
and bring-your-own-device (BYOD). There are, however, certain legal,
technological and commercial risks associated with this more mobile
workforce and businesses need policies in place to reap the benefits.
First is the issue of privacy,
especially when an employee uses their own device for work. Businesses need
to put in place policies to manage personal information on BYOD effectively,
as well as prevent privacy breaches.
Second is the risk of data breach.
Businesses need to update corporate policies to include how and what types
of work data can be stored on BYOD and how third-party consumer applications
like Evermore and Dropbox can be used. Many are choosing a ‘virtualised’
approach, where no physical data is held on the device and if it is lost or
stolen, it can be switched off or killed remotely. Employees must be trained
to ensure they take all reasonable steps to secure their devices, including
regularly updating passwords and installing virus patches.
Businesses should also be aware of
intellectual property issues that can arise and review existing employment
contracts to ensure that any and all intellectual property created on a
BYOD, whether at work or outside, is owned by the organisation.
Other issues to look out for include:
·
retention of records for litigation
purposes;
·
software licensing arrangements for
devices, which may not extend to BYOD;
·
insurance policies, which may not cover
user-owned devices; and
·
human resource issues such as
availability of the policy, what happens when the employee ceases employment
with the organisation, content and acceptable use obligations, device
payment obligations and interaction with other corporate policies.
Businesses need to be prepared for new laws
Organisations risk being caught out if they don’t
start acting now to update policies.
New privacy laws come into force on 13
March 2014. With less than a year to review their privacy policies and
information systems to ensure ongoing compliance, businesses need to
consider changes to any policies relating to the receipt of unsolicited
information, direct marketing and the retention of personal information.
Companies need to have processes to deal
with unsolicited information, for example, how to destroy or de-identify it
if it could not have been lawfully collected.
Under the new laws, individuals can
request that an organisation not disclose their personal information to
facilitate direct marketing. So businesses need to review policies and
practices to ensure compliance.
Finally, contractual arrangements with
third parties involving the disclosure of personal information should also
be reviewed, particularly in relation to direct marketing and cross-border
transactions.
Patents and intellectual property
New laws that came into force from 15 April make it
tougher to successfully patent an invention.
The laws are designed to more closely
align the Australian system with international standards and, in the
process, raise the bar for the successful patenting of inventions in
Australia.
In particular, there is a shift towards
examining the practical applications of the invention by specialists in the
field. From 15 April, budding inventors will need to work harder to provide
enough information in their specifications for an expert in the appropriate
area to understand, as well as perform the actions to which the invention
could potentially be put.
Common general knowledge outside of
Australia is also included as part of the test for inventiveness for the
first time and inventors now need to show that the claims they make are
adequately supported by the documentation they include with their
application.
The new laws significantly bolster the
principle of free access to patented inventions for regulatory approvals and
research. This means actions that would otherwise be infringements on patent
are exempt when performed for the purpose of obtaining approval required by
Australian law. For example, if a generic drug company wishes to make
preparations for sale of its generic equivalent to a patented drug by
seeking regulatory approval before the patented drug comes off patent, it
may do so. It may also produce quantities of its product and run a trial or
submit its product for testing in order to gain regulatory approval.
For those seeking to block approval of a
rival’s patent there are new time limits to be considered.
Commonly used reasons for extensions of
time such as a witness or attorney being unavailable will no longer be
permitted.
Does your company own your CEO’s emails?
A UK court has found that a company does not own its
CEO’s emails if they are not held on its servers.
A former CEO of a UK company had his
company emails automatically forwarded to his personal email address. A
dispute arose around the construction of a 50,000 dead weight tonnage
vessel, relating to failures to meet two contract milestones, and liability
to pay sums totalling US$30 million. There was evidence that the CEO had
agreed to a separate arrangement and the company wanted access to his
emails. The emails were not on the company’s servers, because once a message
was forwarded, it was deleted from its servers.
The UK court was asked to decide on the
narrow question of whether the company had any claim to ownership of the
content of the CEO’s emails. It found the company had no right to the
content, denying it access to the CEO’s emails. Australian courts would
probably have arrived at a similar conclusion, so businesses should try and
ensure that emails are located on their servers rather than on those of a
third party. Possession is nine-tenths of the law, even in the digital era.
Changes to family violence definition
The definition of ‘family violence’ has been
broadened to include economic and other forms of non-physical abuse.
Recent changes to family law aim to more
accurately reflect the experience of family violence, taking better account
of the complexity of the issues involved and the varying patterns of
behaviour the violence may take.
The new laws broaden the definition of
violence in a family context to include economic abuse as well as other
forms of harmful, non-physical behaviour. For example, denying a family
member financial autonomy would now fall under the definition.
Another example of non-physical violence
would be the prevention of a family member making or keeping connections
with their family, friends or culture.
Importantly, the changes do not
necessarily require the family member in question to feel fear as a
consequence of the behaviour, rather the focus is on the actions of the
perpetrator and their state of mind. The central question being: is the
perpetrator aware of the effect or consequences of their behaviour on the
victim?
Protecting children and their interests
remains paramount. In fact, some provisions in this regard have been
strengthened – the courts are to give greater weight to the need to shield
children from the harm of being exposed to family violence over the benefit
of children having a meaningful relationship with both parents.
If you need advice on a family law
matter, contact your solicitor.
Are executors of wills
entitled to be paid?
Not as often as you’d think
If you’re chosen to be executor of a will, it helps
to know when you’re entitled to payment. And if you prepare a will, and wish
the executor to receive payment, you should make some provision for this
through what is commonly called a “charging clause”.
Professionals with business, legal,
accounting or financial skills are often asked to fill positions of trust
for friends and clients, such as trustee or executor of a will. In general,
an executor who is a professional is not entitled to charge for their
services.
As executor, you are entitled to
reimbursement for expenses but only to pay for your actions if allowed by
the court, by a charging clause in a will, or if approved by the
beneficiaries. The beneficiaries need to have decision-making capacity, be
informed, and not have a conflict of interest.
Recent cases where fees were wrongly
charged suggest a common lack of understanding of the options.
In one case, a will executor and
accountant, who had been the deceased’s financial adviser for about 20
years, paid himself over $200,000 for his duties as executor of the estate,
which had a gross value of approximately $2 million, claiming to do so under
a charging clause in the deceased’s will. The sum was described by the judge
as “an enormous amount of money for an executor to charge”.
In another case, a financial manager –
the son-in-law of the deceased’s niece – was appointed by the Guardianship
Tribunal to handle the estate and advised he would only charge out-of-pocket
expenses. However, over a four-and-a-half-year period, his firm charged and
received fees of over $200,000. The judge pointed out the principle “that a
trustee must not profit from the trust”.
Your solicitor can provide you with
further advice on drafting and executing wills.
Restraining ex-employees from poaching clients
Contracts to stop an ex-employee from poaching a
company’s clients need to be carefully worded.
A post-employment solicitation restraint
is a clause in an employment contract that seeks to ensure employees leaving
a company do not take the company’s existing clients with them.
This generally means an employee is
forbidden from advertising or soliciting custom from former clients, but
what is the legal situation when it’s not clear if there was direct
solicitation involved?
A personal trainer worked at a sports
centre as an independent contractor. When she left their employment she
began working for a rival gym franchise. The franchise offered discounted
membership rates to people the trainer had coached previously, including
those whom she had trained while at the sports centre.
The personal trainer also posted various
messages on her Facebook page advising her Facebook friends of the various
agreements and deals with her new employer.
As her original contract with the sports
centre prevented her from soliciting work from the centre’s customers for
three months after her work with the company ended, the sports centre took
her to court seeking redress.
At trial the judge found the wording of
the personal trainer’s contract meant that there was no restriction on who
she could train, so long as those who sought her services were unaffected by
her solicitation or canvassing efforts. The difficulty for the sports centre
came in proving that the customers the personal trainer took with her had
knowledge of, or were influenced by, her canvassing efforts online.
The personal trainer was ordered to take
down any postings on Facebook that could entice customers away from the
centre and into her new workplace, but ultimately kept the clients that had
followed her from the sports centre already.
Post-employment solicitation restraints
drafted as part of employment contracts can be complex.
For advice on appropriate wording of
employment contracts consult your solicitor.
Mis-selling a lesson
to banks and investors
Bank’s “cynical” awareness of risks “extraordinarily disturbing”
In a recent class action by three councils, Lehman
Brothers was found liable for the big losses they suffered when the global
financial crisis hit. In assuming the role of trusted adviser, the bank owed
a duty of care in providing advice that aligned with the investors’ risk
profile.
The councils took action against the
bank for recommending and selling them complex, high-risk financial products
as investments. The courts found the councils had been misled into buying
financial products that in no way matched their need for capital security
and liquidity. The products were so complex the judge noted that even he was
not sure he understood fully how they worked by the end of the trial. Had
the councils been told of the risks they would not have invested.
In finding the bank liable on all counts
for breach of contract, negligence, misleading and deceptive conduct and
breach of fiduciary duty, the court focused on its process of mis-selling.
This occurred in a plethora of ways. The investments were described as
having features such as a high level of capital security and liquidity when
the opposite was true. Their offering memoranda – withheld from the councils
– clearly highlighted that the investments were illiquid, buy-to-hold
investments, and only suitable for investors who could withstand a total
loss of capital. The misrepresentations were conveyed to the councils by
presentations, pitch materials, term sheets, emails and oral communications.
Awareness of the true risks in the bank’s internal emails was described by
the judge as “extraordinarily disturbing” and “cynical”.
The case shows that advisers may be
liable for misleading and deceptive conduct if they do not take care in
explanations or information given about high-risk products they offer.
Disclaimers may be ineffective if they are irrelevant or not given
prominence.
Sub-divided farm land not exempt
If you’ve owned farm land since before the
introduction of capital gains tax, you might expect that the significant
capital gain you stand to make in selling part of your property will not
face a GST bill. But that may well not be the case.
A couple owned land jointly and operated
a farm business in partnership. As business turnover was greater than
$75,000, they were registered for GST.
The plan was to subdivide three 25-acre
blocks, selling them for $250,000 each. Although not GST experts, they knew
from the front page of the standard contract for sale of land that GST is
not payable on the sale of subdivided farm land.
But subdivided farm land is only
GST-free if subdivided from land on which a farming business has been
carried on for at least five years, and the supply is to an associate of the
supplier without benefit, or for less than market value.
As none of the purchasers were
associates and the sales were at market value, the sales were not GST-free.
The sellers faced GST of $75,000.
To make matters worse, as none of the
purchasers was going to use the land for farming, it was not possible to
rely on the usual farm-land exemption or try to rely on any warranty by the
purchasers in order to recover GST from them. The purchasers had no
contractual obligation to pay the GST.
Contact your solicitor about GST
responsibilities.
Changes to directors’ liability
Increased burden of proof in less serious environmental offences
Changes in the law reduce the circumstances in which
directors and managers should face liability for environmental offences by
their corporations. The new laws categorise actions into more and less
serious offences.
The burden of proof now rests with the
prosecution for less serious offences. Importantly, the prosecution is
required to prove a corporate officer’s involvement, whether by act or
omission, in the commission of the offence. This shift is expected to reduce
the number of prosecutions of corporate officers.
However, the presumption of
responsibility continues to apply in cases of most serious environmental
offences.
These include such offences as failing
to comply with conditions of an environment protection licence, polluting
waters and failing to notify authorities of a pollution incident.
This publication is provided by Higgins Lawyers to its clients for their information on a complementary basis. It represents a brief summary of the law applicable as at January 2012 and should not be relied on as a definitive or complete statement of the relevant laws. Readers should not act or rely on this information without first seeking our professional advice concerning their particular circumstances.
