August 2004
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In this edition:
Note: All hyperlinks below were correct at the time of publication. Generally, it is too onerous a task for us to check and update these and so if a hyperlink is no longer valid, please accept our apologies.
Legislation to implement the Australia-US Free Trade Agreement has been enacted. For a copy of the US Free Trade Agreement Implementation Act 2004, US Free Trade Agreement Implementation (Customs Tariff) Act 2004 and their explanatory memoranda, go to:
http://scaleplus.law.gov.au/html/comact/12/6876/top.htm
http://scaleplus.law.gov.au/html/comact/12/6877/top.htm
http://scaleplus.law.gov.au/html/ems/0/2004/0/2004062410.htm
http://scaleplus.law.gov.au/html/ems/0/2004/0/2004062411.htm
Another example of an allegedly "free" product or service attracting the ire of ACCC. ACCC has extracted court enforceable undertakings from American Express regarding a companion airline ticket program, under which Platinum card members who purchased a specially negotiated ticket for first or business class air travel on a participating airline received a "free" or "complimentary" ticket entitling a second person to accompany them on the flight. ACCC received complaints that members were in fact able to purchase comparable air travel tickets in the open market at a price that indicated that the companion ticket offer was not truly free. ACCC Chairman Mr Graeme Samuel has warned that: "Businesses need to be careful when they use absolute terms in their advertising. An offer of free, complimentary or bonus goods or services means exactly that, and businesses need to exercise caution when making absolute claims of this nature." See Media Release 144/04:
http://www.accc.gov.au/content/index.phtml/itemId/528431/fromItemId/2332
ACCC has issued guidelines on country of origin claims made by the toy industry. For a copy of the guidelines, go to:
APRA has released a discussion paper that proposes an improved capital framework for lenders mortgage insurers and is also proposing a tightening of the prudential rules governing the 50% capital concession available to authorised deposit-taking institutions on mortgage-insured loans. For a copy of the discussion paper, go to:
http://www.apra.gov.au/RePEc/RePEcDocs/Archive/discussion_papers/dp0014.pdf
ASIC has released a new Policy Statement 181 Licensing: Managing conflicts of interest. For a copy of the new Policy Statement, go to:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps181.pdf/$file/ps181.pdf
ASIC has released a policy proposal paper on the new dollar disclosure obligations and invited public comment. See Information Release IR 04-39 and the accompanying policy proposal paper:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/52287C8EC5FFCF78CA256EEC00052BC9?opendocument
ASIC has released a Class Order 04/0967, which provides short term relief from the requirement for financial reports of registered schemes that are disclosing entities to reveal remuneration paid directly or indirectly to directors and executives of their responsible entities. See Information Release IR 04-38:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/3CF0D877D2D1867BCA256EEB0006C5EF?opendocument
ASIC has issued proposals to grant limited ongoing class order licensing relief for certain entities in the securitisation business. The proposed relief will exempt certain special purpose vehicle issuers of debentures or interests in a managed investment scheme from the requirement to obtain an Australian Financial Services (AFS) licence. See Information Release IR 04-41:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/6A9B6EE012FF4476CA256EF30010CA2A?opendocument
ASIC has issued a reminder that under the Corporations Act 2001, only shareholders can remove a director of a public company and that attempts by directors to remove another director from office are void. An agreement which provides that a director can be removed from office if the other directors decide is therefore ineffective. ASIC has said that companies that have these arrangements in place and present them as if they are binding may be guilty of misleading conduct. See Information Release IR 04-40:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/2A9BD648F0E8BB4BCA256EF300095D61?opendocument
ASIC has launched its first civil penalty proceedings for insider trading. The proceedings relate to the purchase of exchange-traded call options by a client relationship manager at a bank and his tippee. See Media Release 04-274:
http://www.asic.gov.au/asic/ASIC_PUB.NSF/byid/1D9A505CDB15E968CA256EFA0004B3B0?opendocument
SFE has released a summary of the process it undertakes and formal guidelines regarding its ongoing regulation of the roll and expiry process for quarterly bond futures contracts. See SFE Bulletin 47/04:
http://www.sfe.com.au/content/bulletins/sfe/2004/sfe2004_047.pdf
SFE has issued the individual contract specifications and various determinations for its recently introduced NZFOX NZSX 15 index futures (the 'ZIF') and NZFOX equity options. See SFE Bulletin 46/04:
http://www.sfe.com.au/content/bulletins/sfe/2004/sfe2004_046.pdf
Pre-negotiated Operating Rules are now applicable for the 3 and 10 year interest rate swap futures contracts and any inter-commodity spread strategies involving the swap futures contracts. See SFE Bulletin 45/04:
http://www.sfe.com.au/content/bulletins/sfe/2004/sfe2004_045.pdf
For an outline of the Basel II revised framework for capital adequacy of banks recently released by the Basel Committee on Banking Supervision, see Mallesons, Financial Services Law Alert – 2 August 2004:
For a summary of the changes relating to electronic transactions under the Consumer Credit Code proposed in the Consumer Credit (Qld) Amendment Bill and the draft Consumer Credit Amendment Regulation (No.1) 2004 (Qld), see Allens Arthur Robinson, Focus: Consumer, Compliance & eCommerce - August 2004:
http://www.aar.com.au/pubs/pdf/baf/foccecaug04.pdf
A recent UK Court of Appeal decision regarding security taken over book debts has created continuing uncertainty for lenders in this area. See Clayton Utz, Insights: Banking & Financial Services - 26 August 2004:
http://www.claytonutz.com/areas_of_law/controller.asp?aolstring=&na=614
For a general discussion of recent developments in employee relations law, see Allens Arthur Robinson, Focus: Workplace Relations – August 2004:
http://www.aar.com.au/pubs/pdf/wr/fowraug04.pdf
For a summary of the effect of the US Free Trade Agreement implementation legislation, see Allens Arthur Robinson, Focus: Free Trade Agreement Implementation - August 2004:
http://www.aar.com.au/pubs/pdf/intl/foftaug04.pdf
And for an overview of the ramifications of the legislation for pharmaceutical patent owners and generics, see Mallesons, Patents Law Alert - 16 August 2004:
http://www.mallesons.com/publications/alerts/Patents_Alerts/Patents_alert_16_August_2004.pdf
The Supreme Court of New South Wales
has held that when assessing whether a report commissioned by inhouse counsel was privileged,
the relevant dominant purpose to be tested was that of the company, not the
inhouse counsel. In that case, the court rejected a claim for privilege for a
report commissioned by an inhouse counsel of an airport operator into an aerobridge accident because
it found the operator had four purposes for commissioning the report: (1) for use
in anticipated litigation; (2) to understand the cause of the incident; (3) to
reduce concerns the Airlines Operation Committee may have with the safety of the particular aerobridge
and other aerobridges; and (4) to ensure similar incidents did not occur again.
Accordingly, it did not meet the "dominant purpose" test in order to attract
legal professional privilege. See Deacons, Legal Update: The "Dominant" Purpose Test – a Challenge for
Corporate Counsel and Government Lawyers – 13 August 2004:
http://www.deacons.com.au/news/article.asp?nID=603
A recent Federal Court decision (McDermott Industries (Aust) Pty Ltd v Commissioner of Taxation) dealing with the taxation position of foreign lessors of equipment, has rejected an expansive approach in determining whether they have a taxable presence in Australia under a tax treaty. For a discussion of the case, see Mallesons, Asset Finance Alert – 31 August 2004:
http://www.mallesons.com/publications/alerts/Asset_finance_alert_31_August_2004.pdf
Recent amendments to the Trade Practices Act 1974 by CLERP 9 legislation mean that it is now possible for a defendant to claim contributory negligence or contribution from a joint wrongdoer in misleading and deceptive conduct actions. See Minter Ellison, Proportionate Liability Under CLERP 9 – 4 August 2004:
New compliance obligations for telemarketing activities in Victoria and NSW came into force on 30 August 2004. For details, see Allens Arthur Robinson, Client Update: Telemarketing - August 2004:
http://www.aar.com.au/pubs/cmt/cutelmktaug04.htm
Nicom Interiors Pty Ltd v Circuit Finance Pty Ltd [2004] NSWSC 728 is a good illustration of the potential pitfalls involved in the execution of deeds of guarantee. In that case, the court held that the addition of an extra guarantor after the original guarantee was executed was a material alteration that arguably rendered the original deed vitiated under the rule in Pigot's case, which the court found still applied in Victoria, the proper law of the contract of guarantee. The court also held there was some doubt, given the way the guarantee form had been constructed, whether the company had properly executed it as a guarantor at all and, even if it did, whether it had executed it as a deed. Accordingly, it was arguable that the deed was a mere nudum pactum because the company did not appear to have received any consideration for giving the guarantee. These doubts as to the validity of the guarantee were held sufficient to set aside a statutory demand relating to it. The full text of the judgment is available at:
http://cclsr.law.unimelb.edu.au/judgments/states/nsw/2004/august/2004nswsc728.htm
Edwards v Attorney General [2004] NSWCA 272 is an important precedent for directors of companies in financial difficulties who are concerned about personal exposure for insolvent trading. In that case, the directors of companies with extensive asbestos-related liabilities were concerned that they might not have adequate funds to meet all of those liabilities in the future and might therefore be liable for insolvent trading if they continued to pay those claims in full as they materialised. They sought an order under section 1318 of the Corporations Act 2001 relieving them from present and future liability for any negligence, default, breach of trust or breach of duty in their capacity as directors in continuing to pay asbestos claims in full. The NSW Court of Appeal held that section 1318 should be given a wide interpretation and permits the Court to protect directors from claims made by third parties, as well as claims made against them by or on behalf of the corporation. However, section 1318 has no prospective operation. Accordingly, the Court could only grant the protection asked for past acts. To address that issue, the court granted liberty to the plaintiffs to apply on or before 6 December 2004 for similar protective orders in respect of any payments made between the date of the judgment and 6 December 2004 and like liberty to apply to a judge to vary the latter date. The full text of the judgment is available at:
http://cclsr.law.unimelb.edu.au/judgments/states/nsw/2004/august/2004nswca272.htm
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