Legislators simplify will-making process in the wake of COVID-19
Last week the Queensland Government passed legislation in an effort to allow wills and enduring power of attorney’s to be witnessed via video conference.
Pursuant to regulation 9 of the COVID-19 Emergency Response Bill 2020 (Qld), the Government is entitled to make regulations where an Act permits or requires the signing or witnessing of a document. This regulation making power affords the making of “modified requirements or arrangements”. In effect, the legislation allows the Court to dispense of the formal witnessing requirements and determine whether an informally made will is valid.
The move follows a Practice Direction issued by the Queensland Supreme Court on the same day which allows applications for informal wills to be heard by a Registrar rather than a judge.
Specifically, the Direction grants a Registrar power to constitute the Supreme Court and hear and decide application under section 18(2) of the Succession Act 1981 (Qld). In doing so it dispenses the requirement for a party be in the physical presence of the testator, provided the Registrar is satisfied that:
- A solicitor drafted, witnessed or supervised the will’s execution;
- The deceased intended for the document to take immediate effect;
- The testator executed the will in the presence of one or two witnesses via video conference;
- The witnesses were able to identify the documents executed; and
- The reason the testator was unable to execute the will in person arose from complications relating to the COVID-19 pandemic.
The direction was issued in accordance with Rule 452(2) of the Uniform Civil Procedure Rules 1999 (Qld) and applies only to documents executed between 1 March 2020 and 30 September 2020.
Queensland is not alone in embracing technology, with a number of other jurisdictions also introducing modifications to the will-making process. In New South Wales, temporary regulations made under section 17 of the Electronic Transactions Act 2000 (NSW) facilitate witnessing via video conferencing, while across the ditch the Epidemic Preparedness (Wills Act 2007 – Signing and Witnessing of Wills) Immediate Modification Order 2020 alters section 11 of the Wills Act 2007 to permit the use of audio-visual links.
COVID-19: FWC approves reduction in redundancy pay
The Fair Work Commission (FWC) has approved the first application for a reduction in redundancy pay during the COVID-19 pandemic.
Employers may apply to the FWC to vary redundancy pay under section 120 of the Fair Work Act 2009. The section allows an application to be made where the employer either (a) obtains other employment for the redundant employer, or (b) cannot pay the redundancy pay the employee is entitled to. The FWC has discretion to reduce the amount of redundancy pay (including to a nil amount) if it is considered necessary.
In Mason Architectural Joinery Pty Ltd [2020] FWC 1897, the small business Mason Architectural Joinery Pty Ltd (Mason Joinery) had taken many steps to reduce its overheads in the wake of a downturn of business. These steps included reduction of spending, sale of the company car and redundancy of two employees.
The employee was entitled to 3 weeks’ notice of termination and 7 weeks’ redundancy pay under the Joinery and Building Trades Award 2010. Mason Joinery was able to pay the employee his accrued annual leave and accrued roster days off entitlements as well as the notice amount. Mason Joiner was however unable to pay the full redundancy pay. Mason Joinery sought an order decreasing the redundancy amount.
Commissioner McKinnon was satisfied that Mason Joinery was under significant financial strain. The Commissioner noted that the business had not received income for two months and had lost some pre-booked jobs resulting in the viability of the business being highly dependant on the how long the pandemic situation would last.
The Commissioner noted that the employee was able to secure a new job only 8 days after his termination. The new job also paid $2 an hour more than the previous position with Mason Joinery. The notice of termination that the employee received was equivalent to 15 days’ pay and covered that 8 days of non-employment.
The employee had also taken a holiday that was pre-booked during his employment with Mason Joinery from 15 March 2020 to 21 March 2020 (a month after he started his new job). Upon his return the employee was required to self-isolate for 14 days. The Commissioner held that as the employee had been paid out his accrued annual leave the employee suffered no loss in this regard as the amount was sufficient to cover both the holiday and period of self-isolation.
Accordingly, the Commissioner held that it was appropriate to reduce the amount of redundancy pay for the employee to 1 week’s pay.
Fair Work decision signals warning for COVID-19 redundancies
In a previous update we noted that while Covid-19 has created a unique situation, standard employment law procedures still apply and must be followed. A recent case in the Fair Work Commission (FWC) demonstrates the risks resulting from a failure to follow the appropriate procedures.
In Australian Municipal, Administrative, Clerical and Services Union v Auscript Australasia Pty Ltd [2020] FWC 1821, the FWC assessed an application bought by the Union alleging that Auscript failed to consult in respect of employee redundancy and closure of sites.
In January 2020, Auscript decided to close offices in Hobart and Adelaide as well as downsizing one of its Sydney offices. This was done without consultation with the Australian Municipal, Administrative, Clerical and Services Union (ASU). The ASU and Auscript agreed to develop a joint Consultation and Communication Protocol (the Protocol) to avoid further potential failure in Auscript complying with their obligations under the Auscript Australasia Enterprise Agreement 2010.
Auscript sought to make further redundancies in response to the impact of Covid-19 on its transcription work. Auscript alleged that restrictions in Courts and Tribunals as well as its own forecasts necessitated the sudden decision to maintain the viability of its business. Auscript claimed that it fulfilled its obligations under the Protocol. The ASU disagreed and sought the urgent assistance of the FWC.
At a conference the FWC issued a statement which among other things noted that the parties agreed to “abstain from any compulsory redundancy until at least the parties finalise a strategy … to preserve as many jobs as possible and communicate the identified options clearly to staff so they can make informed decisions”. No agreement was able to be reached after the conference and Auscript would not commit to engage in further consultation. Auscript sought to press ahead with closing the Melbourne office and implement redundancies in Queensland. The matter was then progressed to a hearing.
Upon perusing the evidence, Commissioner Yilmaz determined that Auscript had not given genuine consideration to options other than redundancy. The Commissioner was not satisfied the participation in the conference by Auscript was not genuine, describing its actions as a “mere formality”. The Commissioner criticised Auscript’s communication to employees, labelling it an “empty offer” and not “genuine consultation.” Further, Commissioner Yilmaz concluded it was clear the company had already made a decision unable to be influenced by employees or their representatives.
While it was accepted by all parties that it was a necessity that major decisions had to be made, the Commissioner noted that “an obligation to treat staff with dignity” remained. Accordingly, the Commissioner made an order in favour of the ASU.
High Court clarifies definition of ‘officer’ under Corporations Act
In Australian Securities and Investments Commission v King [2020] HCA 4, the High Court of Australia recently examined the scope of the definition of the term “officer of a corporation” in section 9 of the Corporations Act 2001 (Cth). The Court unanimously held that there is no requirement that a person be a named officer of the corporation to be captured by the definition. The test to establish whether a specific individual is an officer is whether they have the capacity to “significantly affect the financial standing of the company”.
Case Facts
Mr King, was the CEO and executive director of MFS Ltd, the parent company of the MFS Group of companies. The MFS Group was involved in funds management and financial services.
The Premium Income Fund (PIF) was a managed investment scheme operated by the MFS Group with an entity known as MFS Investment Management Pty Ltd (MFSIM) acting as the responsible entity. In June 2007, MFSIM entered into a $200 million loan facility with the Royal Bank of Scotland to be applied solely to the PIF. On 27 November 2007, MFSIM and senior personnel in the MFS Group arranged for $150 million to be drawn down from the loan facility. $147.5 million was disbursed by MFSIM to pay the debts of other companies in the MFS Group.
While two disbursements were made, only one was ultimately relevant to the High Court. A disbursement of $130 million was made on 30 November 2007 to an entity known as MFS Administration that acted as the treasury company of the MFS Group. On the same day the funds were received, MFS Administration paid $103 million to Fortress Credit Corporation (Australia) II Pty Ltd (Fortress). This money was paid in satisfaction of a short-term loan made to another MFS Group entity that was due to be repaid on that same date.
This series of events culminated in ASIC bringing enforcement proceedings against MFSIM and several of its officers for breaches of the Corporations Act. MFSIM was held to have contravened subsections 601FC(1) and (5) in relation to its duties as the responsible entity of PIF, and had breached section 208(1) by providing a financial benefit to a related party. Ay trial and on appeal to the Queensland Court of Appeal, Mr King was found to been knowingly involved in MFSIM’s contraventions and by consequence of section 79(c), was also held to have contravened sections 601FC(5) and 209(2).
Legal Issues
ASIC further contended Mr King was liable under s 601FC as an officer of MFSIM despite the fact he had ceased being a director on 27 February 2007 some nine months prior to the events. The Queensland Court of Appeal had held that Mr King was not an officer in the sense of having capacity to “affect significantly the corporation’s financial standing”. The Court deemed it was necessary for AISC to show Mr King had acted in an office of MFSIM in order to fall within the definition of s 9(b)(ii). ASIC appealed this finding contending that the Court had misconstrued the definition of “officer” by requiring ASIC
High Court Findings
The High Court unanimously found that the Court of Appeal erred in ruling that ASIC was required to prove Mr King had acted in an office of MFSIM in the sense of being in a ‘recognised position with rights and duties attached to it’. The Court adopted a literal interpretation of s 9, stating that subsection (b)(ii) required an inquiry into the role the person in question plays in the corporation. Such an inquiry is made on a case by case basis, considering the entire facts and circumstances of the individual and corporation including: the role of a person; what they did or not do to fulfil that role; and the relationship between their actions or inaction and the financial standing of the corporation.
Mr King was involved in the management of MSFIM and had not only the capacity to affect the financial standing of the entity, but actively intervened in its management. Accordingly, Mr King was held to be an officer of MSFIM despite not holding a formal executive role at the time of transaction.
JCL Comment
Importantly this decision makes it clear that individuals who hold a named office in a corporation will be captured by paragraph (a) of the s 9 definition, individuals who do not hold a named office may be captured by paragraph (b). This reasoning is consistent with the ‘shadow director’ regime which similarly provides that individuals that do not hold the office of director may still be considered a director where they have the capacity and custom of being able to affect the company.
This case is also important as it was made in the context of a group of companies. The Court expressly noted that corporate structure would not assist in avoiding liability for breaches of statutory prohibitions.
Does an employee owe a fiduciary duty for credit limit increases?
Employees owe certain fiduciary duties to their employers. Generally, this means an employee cannot do either of the following things:
- Make or pursue a personal gain in circumstances in which there is a real and substantial possibility of a conflict of interest arising between the personal interests of the employee and the interests of the employer (the no conflict duty); and
- Make or pursue a personal gain based by using his or her position as an employee or by using information or opportunities received in the course of his or her employment (the duty of trust).
As these duties are quite broad in scope a variety of circumstances could constitute a breach of either duty. A recent case in the Queensland Court of Appeal examined whether an employee owed a fiduciary duty to his employer in regard to providing a credit limit increase to a customer.
In Metal Manufactures Limited v Johnston & Anor [2020] QCA 42, a company was permitted to purchase goods on credit up to an amount of $20,000 which was later extended to $50,000. However, the company was unable to keep within this agreed credit limit and, with the assistance of an employee of its supplier, was ultimately able to purchase goods up to an amount of $325,797.50.
The supplier sought to recover this owing account; however, the company was wound up in insolvency prior to trial leaving no possibility of recovery. A case was instead bought against the company’s director and the employee of the supplier.
The supplier alleged a breach of fiduciary duty on the part of their employee for allowing the company to purchase goods beyond their credit limit in contravention of section 182(2) of the Corporations Act 2001 (Cth). The case against the director was that he had knowingly, or ought to have know, assisted the employee in breaching his duty. The case was accordingly dependant on successfully proving a breach of duty by the employee.
There is a long line of authority establishing that employees owe a fiduciary duty to their employers. This is also expressly indicated in section 182(2) of the Corporations Act. Not all employees will owe a fiduciary duty however and accordingly it must be established that a particular employee owes by looking at all circumstances of the case.
In this case the Court did not find that a fiduciary duty was established. Whilst the employee was a store manager, he was not a senior employee in the overall context of the business, did not have discretionary power to allow a customer credit beyond what was already agreed. On this basis the employee was not deemed to be in a position of special trust or confidence.
Even if a fiduciary duty had been established, the claim still may not have succeeded. While the Court was willing to accept that the employee had deliberately allowed unauthorised supply beyond the credit limit which was “consciously wrongful” and took deliberate steps to conceal the conduct, the Court was not willing to label the conduct dishonest in the sense of impropriety.
The basis for this finding was an absence of evidence demonstrating the employee received some personal benefit, either from his employer in terms of commission, salary increase or promotion; or from the company or director in the form of a bribe.[iv]
Whilst a fiduciary duty could not be established on these particular facts, it may still be possible for an employee of a similar position or standing to be considered a fiduciary of their employer. Additionally, further causes of action may be pleaded against an employee; simply not being in a fiduciary relationship will not be sufficient to avoid liability.
COVID impact on civil trials
COVID-19 has had an impact on a number of businesses and institutions. Courts and Tribunals are still operating with some modifications to their general procedures. A recent case in the Australian Capital Territory (ACT) saw judicial consideration given to the effects of the virus in deciding an application to adjourn proceedings.
In Talent v Official Trustee in Bankruptcy (No 5) [2020] ACTSC 64, the applicant sought an adjournment of the proceedings on the basis of medical advice, specifically that they suffered from leukaemia which placed them at a greater risk if exposed to the virus. The application was supported by a letter from the applicant’s doctors stating they “strongly support [the applicant] self-isolating until further notice”. The application related to a proceeding regarding a claim relating to a property in which the applicant resided. The property formed part of a deceased estate.
A number of additional circumstances were considered including the age of the applicant’s solicitors, being 59 and 56; the medical conditions of the legal representatives including suffering from asthma, obesity; the respondent senior counsel being unable to travel by air and residing in Queensland resulting in the junior counsel having to conduct the matter.
Whilst the Respondent was appreciative of the health concerns of the applicant and their legal representatives, the adjournment was opposed on the basis that the proceedings could still be conducted via video link. The Respondent argued that it was pertinent to have the proceedings determined as soon as possible to give effect to the will of the deceased.
Elkaim J agreed that it was important to give effect to the will and that a good deal of the case could be conducted from a remote location. However, it was noted at [14] that it is important to give the litigants an opportunity to appear at court:
On the other hand, litigants have a right to appear in court to not only give evidence but also to observe the running of their case. This will involve providing instructions, sometimes very promptly. There is no doubt that many procedures within a litigated case can be effectively conducted through remote forms of communication. However, I think there can be an important distinction with a final hearing.
Elkaim J then moved to considering the practical consequences of the adjournment. The primary consideration was the impact the current climate had on property values. It was noted that property value was likely to be substantially reduced which would result in the true value of the property not being obtained if it were sold. A secondary consideration was the necessity of the applicant having to leave the residence if it were to be sold. Elkaim J noted that this would expose the applicant to a higher level of risk that may have a tragic result.
No specific prejudice aside from general delay could be identified as being suffered by the Respondent if the adjournment was granted. On that basis, Elkaim J was satisfied that the potential consequences balanced in favour of granting the adjournment. Elkaim J concluded noting that “We are living in an unprecedented and unpredictable atmosphere.”
From this case it is apparent that while the typical procedural principles will apply to an adjournment application, the ultimate decision will be coloured by the practical consequences of making any such order.
