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Contracts Involving Public Authorities

Summary

Case summary re: 123 259 932 Pty Ltd (123) v Cessnock City Council (Council) (No 2) [2021] NSWSC 1329 (Cessnock case).

The decision of the Cessnock case demonstrates that public authorities, such as Councils should take reasonable action to ensure compliance with lease agreements and other related contracts. The case also highlights the importance of having knowledge of the assets held by another party, as expectation damages will not be awarded if there are no assets.

The Facts

In Cessnock Case, 123 sought damages against the Council for the breach of contract and unconscionable conduct.

Council was the landowner and developer. Council proposed to subdivide Cessnock Airport to include aviation and non-aviation uses. On 26 July 2007 an Agreement for Lease (AFL) was executed by the parties for one of the subdivided lots. To successfully lodge a development application on itself, the Council split its role as developer and its role as the regulator. As the developer Council lodged the DA, and using its planning authority it could then consider and approve the development. 123 proposed to occupy the suite to run adventure flights, a venue for hire and an aviation museum. The AFL provided that if the plan of subdivision was registered by 30 September 2011 Council would grant a 30 year lease to 123. 123 commenced occupation of the land and subsequently erected a 3.5 million dollar hangar on the site.
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NSW Supreme Court – When are executed lease documents binding

The recent NSW Supreme Court case of Thorn Australia Pty Ltd v Centuria Property Funds Ltd [2021] NSWSC 1271 highlights the necessity for caution and diligence when executing and exchanging deeds, especially in property matters.

The Court was asked to determine whether a prospective lessee who had signed and delivered deeds to a lessor was bound by the deeds. The Court found that although the lessee executed the deeds, provided a bank guarantee, made arrangements regarding access and making further payments, it was held that the lessee did not objectively manifest an intention to be immediately bound by the deeds.

The parties had entered into a Heads of Agreement which included a statement to the effect it did not constitute a binding lease between the parties and both parties had the right to withdraw from negotiations at any time before the execution of the formal lease documentation. The lessee provided a cover letter enclosing the signed deeds that set out the procedure for execution and the return requirements from the lessor. The procedure required that the lessor send a scanned copy of the deeds to the lessee for perusal and approval prior to exchange of the deeds. As such, the lessee did not authorise the exchange of the deeds until written authorisation was given by the lessee to do so.
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GREATER SYDNEY’S 2021 LOCKDOWN: WILL BUSINESSES SINK OR SWIM?

By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group

Greater Sydney is currently in a lockdown and has remained in the dark with respect to whether, and when businesses would receive some relief.

Last year, the Federal Government introduced the JobKeeper scheme to assist with keeping businesses afloat (including employees within those businesses) through of the payment of wage subsidies subject to certain criteria.

The Morrison and Berejiklian Governments have announced that NSW businesses will finally receive some relief as we enter the fourth week of lockdown in NSW. It is evident that regardless of whether lockdown is in fact extended past 30 July 2021, businesses have already experienced a substantial hit. Should lockdown continue to be extended, we may see plenty of businesses struggling to make it through this lockdown.

On 13 July 2021, The Premier, Treasurer released some information regarding the new NSW COVID-19 support package, including the following:
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Breaches of the Council Model Code of Conduct – A Lesson for Councillors

The NSW Civil and Administrative Tribunal has recently heard a matter in which the Office of Local Government was seeking a determination as to whether the mayor of Inner West Council, Mr Darcy Byrne, had engaged in misconduct as defined in s 440F(1) of the Local Government Act 1993, for failing to comply with an applicable requirement of the Inner West Model Code of Conduct.

By way of background, following approval by Inner West Council to amendments being made a development control plan, a councillor at Inner West Council posted on her Facebook page which referred to her unhappiness in the amendments being approved and commenting that the mayor had been the one pushing for the amendments. In response, another councillor commented on the Facebook post, as well as other individuals.

Mr Byrne subsequently sent letters (described as concerns notices pursuant to the Defamation Act 2005 (NSW)  to both councillors, alleging that he had been defamed by the Facebook post and requesting that the comments be deleted and a public apology be issued via Facebook.
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Don’t Go Chasing Waterfalls – COVID-19 Safe Harbour is (still) not Safe

The temporary safe harbour protection from director liability for insolvent trading expires on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading .

The temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). There has been some recent debate about whether the words “before any appointment during that period” of an external administrator, mean what they appear to say, namely that any appointment must take place “during that period” of the temporary safe harbour expires.

Our Stephen Mullette has recently responded to the alternative view – that an appointment can be delayed until the new year. Unfortunately, the conclusion is that the better view is still that to take advantage of  the safe harbour defence, the directors must have appointed an external administrator before 1 January 2021. You can read the further consideration here, and make up your own mind.
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Danger – COVID-19 Safe Harbour STILL Requires Early External Administrator Appointment

The Government has recently extended COVID-19 business protection measures introduced in March, including the temporary safe harbour protection from director liability for insolvent trading. These protections will now expire on 31 December 2020. However the Government has not corrected a critical timing issue which exists in the COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 31 December 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading.

In March Parliament passed a raft of legislative reforms in an attempt to provide protections for businesses an ameliorate the economic effects of the coronavirus in Australia. One of these amendments was temporary legislation to protect directors from liability for insolvent trading during the global COVID-19 pandemic. This temporary protection is found in section 588GAAA of the Corporations Act 2001 (Cth). This safe harbour protection from insolvent trading will mean that directors will not be personally liable for debts incurred in the ‘ordinary course of business’, provided those debts were incurred during the operation of the temporary legislation, presently which will now expire at the end of 31 December 2020.
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Danger – COVID-19 Safe Harbour Flaw Requires URGENT External Administrator Appointment

A fatal flaw exists in the government’s COVD-19 safe harbour legislation. This means directors must appoint an external administrator to their company on or before 24 September 2020, if they wish to take advantage of the COVID-19 safe harbour protection from insolvent trading.

At the beginning of the global pandemic the Australian Federal Government introduced temporary legislation to protect directors from liability for insolvent trading during the global COVID-19 pandemic. This safe harbour protection from insolvent trading will excuse directors for liabilty in respect of debts incurred in the ‘ordinary course of business’ during the operation of the temporary legislation, presently due to expire at the end of 24 September 2020.

However, for reasons which are not clear, but possible linked to the urgency with which the legislation was passed, the drafters included an additional fundamental and crucial requirement to gain the benefit of this COVID-19 safe harbour protection from insolvnt trading. That requirement is that in order to gain this COVID-19 safe harbour protection, an external administrator (either a voluntary administrator or a liquidator), must have been appointed before the legislation expires at the end of 24 September 2020.
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Simone Brew appointed Managing Director of Matthews Folbigg Lawyers

1 September 2020

Matthews Folbigg Lawyers is delighted to announce the appointment of our new Managing Director, Simone Brew. Simone is the head of the firm’s Litigation, Planning and Local Government groups.

Matthews Folbigg Lawyers is the premier medium sized firm in Western Sydney, based in Parramatta, with 8 practice groups and over 60 lawyers and legal service professionals. This is the first time in the firm’s 60 year history that the firm has had a female Managing Director. Even more notably the firm is owned 50% by our experienced female lawyers.

Chairman of Matthews Folbigg Lawyers, Jeff Brown said “Matthews Folbigg is delighted to announce Simone’s appointment as Managing Director. She has been an integral part of the firm’s Executive group for many years and in particular has been instrumental in leading the firm’s response to the COVID-19 pandemic. This is just one example of the strengths that make her qualified to lead our firm into the future”.
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