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December 12, 2013

Leases from insolvent landlords at risk

In Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) [2013] HCA 51 the High Court decided that the liquidators of a lessor company had the power to disclaim the leases to investors under section 568(1)(f) of the Corporations Act 2001.

A majority of the High Court decided that the liabilities of the lessor (including its obligations to provide quiet enjoyment and not derogate from the grant of exclusive possession) would be terminated from the day on which the disclaimer takes effect, as would the correlative rights of the tenant. Each tenant's estate or interest in the land would be terminated.

The decision has implications for tenants who make substantial improvements to property over which they have a long-term lease or who borrow on the security of their lease: the solvency of their landlord is now a risk factor.

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Posted 12th December 2013 by David Jacobson in Corporations Act, Financial Services, Property, Risk Management

November 27, 2013

Anti-bullying law commences on 1 January 2014

Anti-bullying legislation will come into effect on 1 January 2014 and will enable victims of workplace bullying to apply to the Fair Work Commission (FWC) for an order that the bullying stop. (Background)

The FWC has released two draft documents in preparation for its new jurisdiction:

  • draft Anti-bullying case management model - Fair Work Commission (Model), and
  • draft Anti-bullying bench book - Fair Work Commission (Benchbook).

The Anti-bullying Benchbook and Case Management Model are designed to inform potential parties of the FWC’s procedures and relevant legislative provisions.

The new anti-bullying jurisdiction is not an avenue to provide compensation to those who have been subjected to bullying or to penalise employers. It is directed at preventing workers from being bullied at work.

The case management model has various steps, which culminate in the Panel Head determining if the matter should be sent for voluntary mediation with a Commission staff member, or direct to a Commission Member for mediation, conciliation or arbitration.

The Model makes it clear that the new anti-bulling legislation does not promote or recommend monetary settlements as a remedy for workplace bullying.

The Benchbook outlines the flexibility the FWC has to gather information it considers appropriate in relation to an anti-bullying application, including contacting the employer or other parties to the application, conducting a conference or holding a formal hearing.

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Posted 27th November 2013 by David Jacobson in Risk Management, Workplace

November 18, 2013

How hard is it to wear two hats?

There are many corporate positions that may be double hatted (depending on the company size): company secretary/general counsel, general counsel/chief compliance officer, CFO/risk officer, internal auditor/compliance officer.

But how practical is it for an employee to wear two hats at once?

The issue is whether the person can effectively carry out both functions.

For example, for ADIs, insurers and superannuation funds, APRA requires that a Chief Risk Officer be independent from business lines, the finance function and other revenue-generating capabilities.

Other positions may require direct access to the board (not just to report to the board) without a conflict of interest.

The issue is whether the double-hatted role will result in serious problems being overlooked or whether the dual roles interact well together.

For lawyers there are issues relating to liability and legal professional privilege:

In Shafron v Australian Securities and Investments Commission [2012] HCA 18 the High Court decided that Mr Shafron's responsibilities with James Hardie as company secretary and general counsel were indivisible and must be viewed as a composite whole.

In Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No. 2) [2007] FCA 1445, the Federal Court decided that it must not be assumed that all advice given by a lawyer employed in both legal and management positions in a company has the benefit of legal professional privilege if it cannot be proved they were acting in a legal (rather than a management) capacity when they gave the advice.

It should not be assumed that 2 positions which may appear to "fit" will work together in practice.

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Posted 18th November 2013 by David Jacobson in Compliance, Corporations Act, Financial Services, Insurance, Risk Management, Superannuation

November 13, 2013

Reform of securitisation

APRA's Charles Littrell has given a speech discussing the issues behind proposed securitisation reforms and changes to APS 120 which will be published soon.

The securitisation market collapsed in 2008-2009 but has since improved.

Key points from APRA's review:

"by and large conventional Australian RMBS arrangements were sound, in both a liquidity and credit sense.

Moving from origination to investments, we discovered that securitisation, as one of the family of complex structured credit arrangements, could facilitate losses from investments thought to be secure, but which were in fact highly risky.

We also learned that securitisation could have more systemic implications than regulators thought was the case prior to 2008. If securitisation makes aggressive lending too easy in good times, but isn’t available to fund sound lending in adverse capital markets, then pretty clearly securitisation is pro-cyclical. This is unhelpful in a systemic sense. APRA is hopeful that its proposed reforms will reduce the pro-cyclical element in securitisation.

Then there was the surprise that all the complexity in the market, touted in various forums as innovation and completing markets, turned out to be, by and large, simply a way to conceal bad credit risks from end-investors. These investors, having learned that some complex and opaque instruments could not be trusted, panicked en masse and fled from all complex credit including unsecured lending to otherwise sound banks."

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Posted 13th November 2013 by David Jacobson in Financial Services, Risk Management

Planning for firearm attacks

The Australian-New Zealand Counter-Terrorism Committee (supported by the National Security Resilience Policy Division (NSRPD) of the Attorney-General’s Department) has published The Active Shooter Guidelines for Places of Mass Gathering which provide guidelines for planning and responding to a situation where a person uses a gun to threaten others at sites such as sporting venues, shopping/business precincts, public transport hubs and tourism/entertainment venues.

The guidelines aim to increase awareness of this particular type of threat, while also providing guidance on the issues and options that may be considered during risk mitigation and contingency planning activities.

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Posted 13th November 2013 by David Jacobson in Business Planning, Risk Management, Workplace

September 6, 2013

APRA releases final guidance on managing data risk

The Australian Prudential Regulation Authority (APRA) has released Prudential Practice Guide CPG 235 Managing Data Risk (CPG 235) for ADIs, insurers and superannuation funds.

Subject to meeting APRA’s prudential requirements, a regulated entity has the flexibility to manage data risk in a manner that is best suited to achieving its business objectives.

The PPG targets areas where APRA continues to identify weaknesses as part of its ongoing supervisory activities.

Examples of data risk include:
(a) fraud due to theft of data;
(b) business disruption due to data corruption or unavailability;
(c) execution delivery failure due to inaccurate data; and
(d) breach of legal or compliance obligations resulting from disclosure of confidential data.

APRA envisages that data risk management principles could include:
(a) access to data is only granted where required to conduct business processes;
(b) data validation, correction and cleansing occur as close to the point of capture as possible;
(c) automation (where viable) is used as an alternative to manual processes;
(d) timely detection and reporting of data issues to minimise the time in which an issue can impact on the entity;
(e) assessment of data quality to ensure it is acceptable for the intended purpose; and
(f) design of the control environment is based on the assumption that staff do not know what the data risk management policies and procedures are.

In addition, a number of specific security management principles are also relevant.

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Posted 6th September 2013 by David Jacobson in Compliance, Financial Services, Privacy, Risk Management

New risks for directors

Yesterday David Jacobson gave the opening keynote at the Mutuals Audit & Governance Professional Institute (MAGPI) conference in Brisbane on recent changes to director liability. Below are some of his slides.

Disclaimer: the slides were designed to accompany the presentation, not to be viewed as stand-alone slides or legal advice, but may still be of some interest to those who did not attend the presentation.

The presentation emphasised new risks for directors and how directors can manage those risks.

If you can't see the slides above you can see them here

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Posted 6th September 2013 by David Jacobson in Corporate Governance, Corporations Act, Financial Services, Risk Management

August 9, 2013

Queensland Health Payroll System Commission of Inquiry Report: contract management lessons

The Queensland Health Payroll System Commission of Inquiry Report by Richard Chesterman QC is a rare analysis of government decision making and insight into project management and lessons learned.

The Commission was established to consider the adequacy and integrity of the procurement, contract management, project management, governance and implementation process for the Queensland Health Payroll System.

The 264 page report concludes that:

"This Project serves as an example of serious failure, both because of the sharp increase in the price paid and the waste of public sector resources dedicated to achieving the system Go Live, some two and a half years later than contracted for. That cost continued afterwards, and continues in the need for its stabilisation and maintenance.

Added to this was the distress and inconvenience caused to QH staff, many of whom could not afford the financial consequences of a dysfunctional payroll system.

I have identified two principal causes of the inadequacies which led to the increase in contract price, the serious shortcomings in contract and project management, and in the State’s decision to settle with IBM.

Those causes were: unwarranted urgency and a lack of diligence on the part of State officials. That lack of diligence manifested itself in the poor decisions which those officials made in scoping the Interim Solution; in their governance of the Project; and in failing to hold IBM to account to deliver a functional payroll system."

The report contains interesting insights into contract negotiation, probity assessments and dispute resolution.

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Posted 9th August 2013 by David Jacobson in Risk Management, Web/Tech

July 1, 2013

Anti-bullying law passed

The Fair Work Amendment Bill 2013 has been passed by Parliament and given Royal Assent. The anti-bullying provisions will commence on 1 January 2014.

Amongst other things, the Act enables a worker who reasonably believes that they have been bullied at work to apply to the Fair Work Commission for an order to prevent the worker being bullied at work.

A worker is an individual who performs work in any capacity, including as an employee, a contractor, a subcontractor, an outworker, an apprentice, a trainee, a student gaining work experience or a volunteer.

A worker is bullied at work if:
(a) while the worker is at work in a constitutionally-covered business:
(i) an individual; or
(ii) a group of individuals;
repeatedly behaves unreasonably towards the worker, or a group of workers of which the worker is a member; and
(b) that behaviour creates a risk to health and safety.

It therefore applies to workplaces run by companies but not unincorporated businesses and partnerships.

Bullying include behaviour that is victimising, intimidating, humiliating or threatening. A worker will not be bullied at work if the action is reasonable management action carried out in a reasonable manner.

The FWC is required to start dealing with a matter within 14 days after the application is made.

If the FWC is satisfied that the worker has been bullied, and there is a risk that the worker will continue to be bullied, it may make an order to prevent the worker being bullied at work. The power of the FWC to make an order does not extend to ordering reinstatement of a person or the payment of compensation or a pecuniary amount.

But a pecuniary penalty can be given for a breach of that order.

The FWC may refer a matter to a work health and safety (WHS) regulator where it considers this necessary and appropriate.

Employers should have a policy and procedures in place to respond to bullying claims.

Draft workplace bullying policy

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Posted 1st July 2013 by David Jacobson in Risk Management, Workplace

Sex discrimination scope extended

The Sex Discrimination Amendment (Sexual Orientation, Gender Identity and Intersex Status) Bill 2013 has been passed by both Houses and is awaiting Royal Assent.

UPDATE: Commencement on 1 August 2013

The Bill amends the Sex Discrimination Act 1984 to extend the protection from discrimination to the new grounds of sexual orientation, gender identity, and intersex status.

It also extends the existing ground of ‘marital status’ to ‘marital or relationship status’ to provide protection from discrimination for same-sex de facto couples in addition to opposite-sex de facto couples.

Discrimination on these new grounds is unlawful in the same circumstances as for other grounds already covered by the Sex Discrimination Act.

The Bill makes it clear that introducing protections against discrimination on these grounds does not affect current Government policy on same-sex marriage.

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Posted 1st July 2013 by David Jacobson in Risk Management, Workplace
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