Cor­po­rate update

In Brief

The cor­po­rate team dis­cuss recent devel­op­ments con­cern­ing side deals and indem­ni­ties in com­mer­cial con­tracts as well as direc­tors’ lia­bil­i­ty changes in NSW, changes in Work Health and Safe­ty Laws and changes to cor­po­rate penalties.

Side Deals

Adi­cho v Dankei­th Homes Pty Ltd [2012] NSW­CA 316
Any side deals and col­lat­er­al con­tracts should be evi­denced in writ­ing and draft­ed as deeds or sup­port­ed by some con­sid­er­a­tion (pay­ment) to ensure the terms are enforce­able, espe­cial­ly if the terms are incon­sis­tent with the main agreement.

Indem­ni­ties in com­mer­cial contracts 

McLeary v Swift [2012] NSWSC 1403
Indem­ni­ties need to clear­ly cov­er the rel­e­vant lia­bil­i­ty. And if it is like­ly that a third par­ty will need the ben­e­fit of the indem­ni­ty then either: a) name that par­ty in the indem­ni­ty, b) ensure the indem­ni­ty is held on trust for the third par­ty, or c) exe­cute the doc­u­ment as a deed poll.

Direc­tors’ lia­bil­i­ty changes in NSW

On 20 Novem­ber 2012, the New South Wales Leg­isla­tive Coun­cil passed the Mis­cel­la­neous Acts Amend­ment (Direc­tors’ Lia­bil­i­ty) Bill 2012. Key changes include:

1. Direc­tors and offi­cers will no longer be auto­mat­i­cal­ly liable for offences com­mit­ted by a cor­po­ra­tion unless they act­ed as an accessory.
2. The reverse onus of proof (“guilty until proven inno­cent”, found cur­rent­ly in many cor­po­rate offences) will be removed except for some envi­ron­men­tal and safe­ty offences.
3. The num­ber of offences to which spe­cial direc­tors’ lia­bil­i­ty pro­vi­sions apply will be reduced from over 1,000 to about 50.

Changes in Work Health and Safe­ty Laws (WHS) effec­tive ear­ly 2013

These new laws will cre­ate a pos­i­tive oblig­a­tion on direc­tors and offi­cers to ensure their com­pa­ny com­plies with WHS laws. An offi­cer fail­ing to exer­cise due dili­gence could be guilty of an offence where his or her com­pa­ny has not even breached any WHS laws.

Com­mon­wealth Penal­ty Units to Rise by end 2012

The mon­e­tary amount of penal­ties for offences under Com­mon­wealth leg­is­la­tion are set to increase sig­nif­i­cant­ly by the end of 2012 under leg­is­la­tion recent­ly passed by Parliament.

The leg­is­la­tion imple­ment­ing the increase is con­tained in the Crimes Leg­is­la­tion Amend­ment (Seri­ous Drugs, Iden­ti­ty Crime and Oth­er Mea­sures) Bill 2012, which was assent­ed to on 28 Novem­ber 2012. The effect of the leg­is­la­tion is that the val­ue of penal­ty units imposed for offences under Com­mon­wealth leg­is­la­tion will increase from $110.00 to $170.00. The amend­ments are said to reflect changes in the Con­sumer Price Index (CPI) and they also pro­vide for three-year­ly reviews of penal­ty unit val­ues going forward.

The increase will apply to penal­ties for offences under all Com­mon­wealth leg­is­la­tion to which the penal­ty unit def­i­n­i­tion set out sub-sec­tion 4AA(1) of the Crimes Act 1914 (Cth) applies. This includes for exam­ple, offences under the Cor­po­ra­tions Act 2001 (Cth), Fair Work Act 2009 (Cth), Com­pe­ti­tion and Con­sumer Act 2010 (Cth) and Copy­right Act 1968 (Cth).

The increas­es are due to take effect by 28 Decem­ber 2012, and will only apply to offences com­mit­ted after the com­mence­ment of the new penal­ty unit value.