Artboard 1Icon/UI/CalendarIcons/Ionic/Social/social-pinterest

COVID-19 Resource Centre

We understand how stressful these uncertainties are. We are prepared, available and ready to assist you in navigating any legal issues before and as they arise.

Holding Redlich is a full service commercial law firm and has the breadth and depth of expertise to advise you on issues that may be affecting your business due to COVID-19. We remain committed to continuing to provide the highest quality legal services to you and your business.

We understand how stressful these uncertainties are. We are prepared, available and ready to assist you in navigating any legal issues before and as they arise. Our offices remain open and we can talk to you in person or via Skype/Webex if that is your preference.

COVID-19: Success in the recovery phase – legal issues to consider

Recent Government announcements on easing of restrictions and restarting the economy mean there is now light at the end of the tunnel.

The ‘road back’ will be challenging with many issues to consider, balance and resolve. Effective management of these issues will position organisations well for the recovery phase.

We’ve prepared a series of questions that you may need to consider in the days, weeks and months ahead.

Employment

  • How do we meet our duties under work health & safety legislation to manage the risk of an employee contracting the virus at work, particularly for vulnerable workers (e.g. over 70 or over 60 with a chronic medical condition)?
  • How do we modify workplace risk management systems relating to privacy, migration law, confidentiality, intellectual property, quality management and delegated authority, in response to adjusted working arrangements, including work from different locations?
  • How do we manage the transition from temporary work arrangements (e.g. lesser hours, different duties or stand down) to pre-pandemic working conditions?
  • How do we minimise legal exposure when implementing any necessary redundancies, redeployments and retrenchments?
  • What are the lessons of COVID-19 for workplace productivity in such areas as employee consultation, risk management and flexible working arrangements?
  • Can we require employees to use the COVIDSafe app?
  • Is there anything we can do to assist an employee who has a visa into Australia and is stuck overseas? What happens if they breach their re-entry date into the country?

Finance and debt management

  • What is the best way to handle debt recovery and repayments? Should we obtain extra security? Is now an appropriate time to issue winding up or bankruptcy proceedings against our debtors?
  • Are we able to negotiate with creditors who are putting pressure on us for payment?
  • Do we need to raise capital for our business? If so, do we need to engage in refinancing, capital raising, fund raising or alternative funding arrangements?
  • We are seeking ways to increase cashflow within our business. Are there recommended strategies to manage the distressed sale of our assets that will mitigate risk and maximise sale prices?
  • Is it possible to monetise our intellectual property as we assess the value of our business?

Contracts

  • What can we do if we are unable to meet our obligations under our existing contracts and agreements? What can we do if our suppliers and service providers are unable to meet their obligations? Is our force majeure clause enforceable, and in what circumstances will a contract be ‘frustrated’?
  • Should we consider updating our terms of supply to include additional security requirements from customers?
  • How can we update our existing supply and distribution contracts to ensure we minimise liability and risk in relation to future pandemics and other such unforeseeable events?

Tax

  • What support are we eligible to receive through the ATO?
  • Are we entitled to any land tax or payroll tax relief?
  • Are we able to have our tax debt deferred?

Property – tenants

  • Are we able to negotiate rental abatement with our landlord?
  • Are we entitled to obtain the benefit of any land tax relief or similar cost savings provided to landlords?
  • What documents can the landlord ask us to provide as evidence of hardship?
  • We are still trading. How do we ensure the only outgoings passed on are reasonably and properly incurred?
  • Can we protect against future pandemics or similar unforeseeable events?

Property - landlords

  • How does the National Code of Conduct apply to our business?
  • What are the commercial implications of granting extensions to tenants such as bank guarantees, expiring insurances, extensions triggering subdivision, capturing of internet sales, sub-leases and FIRB approvals? 
  • What documents can I ask tenants to provide as evidence of hardship?
  • Can we assist our tenants to access any business disruption insurance they may have or mitigate their risk through rental guarantee provisions?
  • Can we use the surveillance data we collect at our shopping centres and buildings to drive re‑engagement of visitors?
  • Is now a good time to review our contracts with security companies and managers to ensure alignment of our privacy processes given the public concern around surveillance and the COVIDSafe app?
  • What resources and training can we provide to our front line staff to assist them with managing privacy complaints and questions?

Property – developers and investors

  • Are we entitled to any land tax relief?
  • Are high property valuations a risk for developers facing deteriorating conditions in commercial property markets?
  • What will the impact of COVID-19 have on prices in the office and retail markets, in the short and long term?
  • What is the best approach to refinancing or extending our existing finance facilities, including where we have securities and guarantees in place?
  • How do the new foreign investment rules affect sales to foreign investors?

Governance

  • From a governance perspective, what has changed and what are our requirements? Do we need additional reporting lines or cross matrices?
  • While our staff are working from home, in some cases, our ordinary processes are not being followed which is increasing risk to our business. How could a delegated authority policy help us in this regard?
  • The new whistle-blower provisions have started, what have we heard from the front line that we need to respond to? If nothing, do we need to train and encourage early reporting?

Procurement

  • Have there been any regulatory amendments regarding procurement compliance arising from the COVID-19 pandemic to address issues it creates?
  • As it is a current issue, do we need a specific COVID-19 clause in contracts we are entering into now, or can we still rely on concepts of force majeure/frustration?
  • Are there ways we can accelerate the procurement aspects of projects that have been put on hold for COVID-19, within the bounds and clauses of our current contract?
  • What is required to change our procurement strategy to engage more local, Australian manufacturers and businesses and better manage our preferred supplier arrangements?
  • How do we ensure our standard contracts include force majeure and exit clauses relating to pandemics and such unforeseeable events in future?
  • Is there now greater scope to undertake collaborative procurement with adjacent businesses?

Intellectual property

  • We have changed our product or services offering. Do our existing trade marks cover us so that our competitors cannot use them?
  • How do we know if we are breaching the trade marks of another business?
  • Are any new names for our product or services available to use?
  • Have we sought to protect our trade marks overseas?
  • Now that our staff are working from home, have we secured our business information properly?
  • Does our business information remain confidential or do our supply agreements need reviewing to incorporate more robust confidentiality terms?
  • How are we protecting our online reputation and who owns our domain name?
  • Are staff finding new ways to innovate that could be patentable?
  • Are there competitors of ours using an identical or similar trade mark for similar services?
  • Who actually owns the IP we sell to others?
  • Could we license our IP to others for additional revenue?
  • Could we joint venture with others (even competitors) to leverage the value of redundant IP we have created?

Unfair contract terms and unconscionable conduct

  • Changes to our operations have resulted in us being accused of unfair and unconscionable conduct. What should we do?
  • How do we respond to a small supplier or customer who has assessed that our contract terms are unfair?

Supply chain

  • How can we improve our supply chain to better secure provision of goods?
  • We are making some changes to our supply chain to better support Australian manufacturers and businesses. Can we brand our products as ‘Made in Australia’?

Privacy and data

  • Should we conduct a health check (or privacy review) on our business to help us understand stakeholder expectations and how to better manage them?
  • Can we use personal information collected previously when we have pivoted to a new product or offering?

Advertising

  • As we move towards recovery, our advertising campaigns need to be more aggressive but we want to remain compliant. What are our limitations?

Technology

  • How can we fast-track the re-commencement of our IT project that was paused during COVID‑19?
  • As we move into recovery, is it possible to scale down our software licensing arrangements that we scaled up to better manage the impact of COVID-19?
  • When we stopped passing on reduced licence fees, our supplier threatened us with termination for repudiation. Where do we stand now?

Construction & infrastructure projects

  • Consideration of the extent of force majeure and exit clauses relating to pandemics and other such unforeseeable events in future contracts?
  • How do we ensure an ability to address sudden and unforeseen changes in obligations between parties to our projects, such as issues relating to COVID-19, joining additional funders, allocation of risk, accelerating projects and restrictions relating to travel and social distancing?
  • When is an appropriate time to utilise the security of payment legislation to recover outstanding monies in this challenging time?
  • How do we manage disputes amongst our supply chain? How do we ensure such disputes do not adversely affect us?  What can we do in our contracts to ensure we can manage such issues? Do we need to consider certain rights of intervention in such disputes?
  • A claim relating to project delivery delays and disruption (COVID-19 related or otherwise) has been issued against us. How should we respond to that in both the short and longer term and best manage it? Are there steps we should take now to pre-empt such a claim and best position ourselves should such a claim be made in the future? Is it possible to resolve this and meet both our objectives and those of the principal?
  • Is there Government assistance or other strategies we can leverage to fast-track projects and avoid bottleneck in supply chain delivery?
  • How do we best manage changed arrangements for meetings, changes in executing documents and potentially increased risk of fraud resulting from changes we have implemented to progress our projects during COVID-19 restrictions?
  • As the COVID-19 restrictions ease, there is an urgency to deliver our projects, which is causing us to deviate from our normal tender rules. What should we be concerned about from a probity perspective?
  • COVID-19 may increase the likelihood of domestic modern slaves in the national supply chain due to hidden supplies, desperation of businesses suffering loss, and stranded legal and illegal immigrants. How do we ensure compliance with modern slavery legislation?

Media sector

  • How do we ensure compliance with the accelerated and significant regulatory changes that are predicted to impact the media sector?
  • Demand for content is becoming increasingly competitive. How should we structure our deals to achieve the best outcome?
  • As we return to production, how do we set up our processes, and what contractual and insurance risk management can we undertake?

Overseas businesses

  • How do the new foreign investment rules affect our investments and acquisitions in Australia?

Queensland

  • How can we obtain extended hours for construction and/or operation?
  • What happens if our development approvals lapse? Can we seek extensions to currency periods?
  • Will Council offer a discounted application fee for the lodgement of Development Agreements?
  • How can we enter into an Infrastructure Agreement with Council to defer infrastructure charges until after plans are sealed?
  • What can we do if the Council is not making decisions in accordance with statutory timeframes?
  • We have a significant project that is of ‘State Interest’. Is there any way we can leverage this to progress its development?

Victoria

  • We have not yet submitted a planning application for a proposed development, or our planning application has been delayed by Council. How can we expedite our planning application?
  • Are there any initiatives we could rely on to help obtain support for and approval of our land development project?
  • Our development application is under review at VCAT – I have heard VCAT is not holding physical hearings. Will this delay the hearing of my development application?

New South Wales

  • How can I preserve my development consent and prevent it from lapsing?
  • Can the assessment of my project be fast tracked?
  • What strategies can I use to get my application approved as soon as possible?
  • When do I need to lodge an appeal by to protect my appeal rights for undetermined applications?
  • Can I rely on exempt or complying development provisions to undertake my development?


COVID-19: Legal FAQs

The evolving COVID-19 pandemic continues to present new and significant challenges to all facets of society. As shortages and disruptions to business operations continue, uncertainty surrounds the emerging legal implications of these challenges. This guide is intended to assist our clients in navigating this uncertainty.

The advice below is necessarily high level. It is based on the most common questions we have been asked since the COVID-19 pandemic developed. However, we understand that every contract is different and requires individual consideration. As such, we encourage you to contact us to discuss any concerns you may have. We are working and available to assist you.

Contractual issues

Can I stop performing the contract because of COVID-19?
This will depend on the terms of your contract. The terms of any contract allocate the various risks between the parties. Where the contract does not provide relief to a party for a pandemic or epidemic, then it is unlikely the right to stop work will be available.
However, your contract may provide for relief through mechanisms such as force majeure or change in law regimes and in certain circumstances, it may even be possible to justifiably discontinue of performance (see “Is the contract frustrated?” below).
Our comments about these types of contractual regimes are set out below.

Is COVID-19 a force majeure event?
You may have heard discussions about force majeure in recent times. A force majeure regime operates to relieve a party from performing its contractual obligations due to an event outside the reasonable control of the affected party. It is also important to note at the outset that if a contract does not include a force majeure clause, one will not be implied into the contract. It must be express.
If the contract does contain a force majeure clause and a party is prevented from performing the contract due to COVID-19, then whether relief will be available will depend on the drafting of the force majeure provisions.
The COVID-19 outbreak would almost certainly be captured under a force majeure regime where ‘pandemic’, ‘epidemic’ or similar concepts are expressly included. In the absence of this, the relevant provision may include something similar to an ‘Act of God’ as a force majeure event. Again, each circumstance will depend on how ‘Act of God’ is defined, but as a general rule, ‘Act of God’ covers natural events absent of human action (eg. natural disasters such as floods and earthquakes) and as a result, COVID-19 is unlikely to be covered given it is transmitted through human to human contact.  
If a contract contains a force majeure regime which responds to the COVID-19 outbreak, then this typically relieves both parties from the performance of their relevant obligations, to the extent those obligations cannot be performed as a result of the outbreak.
Please note that force majeure regimes do not typically provide for additional relief such as relief for extra costs incurred.

What is change in law relief?
“Change in law” regimes are also common in contracts. Typically, they contemplate situations where an unforeseen change in a legal requirement affects the ability of a party to perform its obligation. In this respect the change in law regime will provide relief for such a change, including such things as suspension rights, extensions of time or recovery of additional costs.
If the Government issues laws/legislative requirements and regulations etc. to manage the effects of COVID-19, and those legislative requirements impacted a party’s ability to perform its obligations then that party may be entitled to claim relief.
As opposed to legislation, the State Governments have been issuing orders and directions (such as Victoria’s Stay at Home Directions) to manage the effects of COVID-19. Whether these directions and orders are covered by the relevant change in law regime will depend on the precise drafting of the relevant provisions of the contract. It should not be assumed that the directions immediately give rise to compensation for a change of legislative requirement.

Is the contract frustrated?
Unlike force majeure (or change in law clauses), the doctrine of frustration will apply regardless of whether or not the contract expressly provides for its application.
Restrictions imposed by COVID-19 may result in the contract being frustrated regardless of whether or not there is a frustration clause under the contract.
Frustration occurs where, through no fault of either party, the obligations under the contract become “radically different” from those originally contemplated by the parties to the contract, such that a party’s obligations can no longer be performed. This is a very high threshold to satisfy. The test is whether the consequences of the COVID-19 outbreak has resulted in a party being incapable of performing its obligations.
If performance is merely more difficult, but still possible, the contract will not be frustrated. In these circumstances, failure to perform will amount to breach of contract. Reasonably foreseeable or inherent risks such as delays, shortage of materials or shortage of workforce will typically not qualify as frustrating events.
Further, a contract will not normally be found to be frustrated due to:

  • an event that was contemplated by the parties, even if the parties fail to anticipate the severity;[1] or
  • hardship, inconvenience or a bad bargain.[2]

What if my counterparty is no longer willing to performing the contract?
This depends on why they are no longer performing?
Is it because:

  1. they can no longer perform (see “Is the contract frustrated?” above); or
  2. are they refuse to perform because they believe they are entitled to relief.

While the other party may believe they are entitled to relief, this does not mean they can refuse to perform. They have the onus of proving their entitlement to cease performance, which carries with it the usual risks of failure. If they cannot (or do not) successfully establish their claim, their refusal to perform the contract will possibly amount to a wrongful repudiation of the contract which would trigger a right for you to terminate.
In the meantime consider whether you can protect yourself by taking mitigating steps. Where the other party is not performing the contract, for example, due to supply chain blockages or restrictions on movement, new arrangements may be able to be agreed with your counterparty, or in limited cases, entered into with alternative suppliers. But, there is always danger in moving too quickly to source alternative suppliers/contractors etc while the contract remains on foot, so please seek advice before proceeding down that route. 
Furthermore, where the contract is not terminated, keep in mind that your liability to perform your obligations will continue when performance by the other party becomes possible again.

Is COVID-19 covered by insurance?
This depends on your insurance policy.  
Each insurance policy will differ according to the nature of the businesses and contractual arrangements in question. Accordingly, each policy will require its own review. Generally, however, common policies are unlikely to protect policyholders because the interruptions to business activities caused by COVID-19 do not fit comfortably into the common requirements for claimable losses incurred.
For example, a Business Interruption Insurance policy normally requires for the damage to occur at the policyholder’s premises, while Contingent Business Interruption Insurance policies, which may provide cover for claims resulting from a disruption in the supply chain or other business interruption, in most cases exclude pandemics. By way of comparison, most Public Liability or Event policies will contain specific exclusions that prevent claims being made in the event of a loss arising out of a pandemic.
Corporate & Commercial Law, Construction & Infrastructure

[1] Claude Neon v Hardie (1970) Qd R 93.
[2] Tsakiroglou & Co Ltd v Noblee Thorl Gmbh (1962) AC 93.

Corporate governance and considerations for ASX listed entities

What is the impact of COVID-19 on a listed company’s continuous disclosure obligations, and how should this impact be managed?
In light of COVID-19, companies are having to contend with fast-evolving challenges across a range of areas. The fluidity of these challenges, and the need for companies to respond quickly from a business continuity perspective, create a dynamic and uncertain environment which increases the likelihood of price sensitive information arising under circumstances where ASX-listed entities may not be sufficiently prepared to make timely disclosure under ASX Listing Rule 3.1.
Listed entities must therefore conduct a proper and ongoing assessment of matters that may give rise to disclosable information, with the following in mind:

  • 'information' for the purposes of ASX Listing Rule 3.1 extends beyond matters of fact; it includes matters of opinion and intention, and is not limited to financial information or information that is quantifiable in financial terms. The information may also be generated or sourced from outside of the entity. Accordingly, information about the impact of COVID-19 on a listed entity’s employees, customers, suppliers, consumers and other third parties may constitute information concerning that listed entity for continuous disclosure purposes.
  • examples of matters impacted by COVID-19 in relation to a listed entity that could give rise to disclosable information include:
    • earnings guidance or other market forecasts;
    • material contracts and financing arrangements; and
    • operational decisions, such as suspending operations and standing down employees.
  • information concerning matters of supposition or that is insufficiently definite to warrant disclosure can qualify for a disclosure exception.
  • listed entities should not attempt to predict the unpredictable in the context of COVID-19, and should not make forward-looking statements to the market unless they have a clear and reasonable basis for doing so.

What steps should boards of ASX-listed entities consider taking?
In addition to conducting a diligent and ongoing assessment of their continuous disclosure obligations, boards may also need to increase their levels of engagement with senior management at this time, to ensure that:

  • the board is providing the necessary support to management at this challenging time;
  • the board is receiving the necessary information to make informed decisions in a timely manner;
  • any decisions on matters generally reserved for the board (including key business continuity measures) can be swiftly made and executed; and
  • any significant continuous disclosure announcements can be promptly considered and approved by the board prior to release.

Increased board engagement should be implemented in a considered manner, with appropriate boundaries clarified, to avoid inadvertent impediment of senior management's ability to swiftly effect crisis management and business continuity decisions.

Does COVID-19 increase the risk of insider trading, and if so, what should listed entities do to mitigate this risk?
Companies are currently responding to a number of unpredictable challenges due to the COVID-19 outbreak. This inevitably leads to a heightened risk of insider trading, as new information is arising more frequently than it does under normal market conditions.
Listed entities should act prudently to mitigate the risk of insider trading, firstly by controlling information flow within the organisation, and ensuring that all price sensitive information is disclosed to the market in accordance with its continuous disclosure obligations. Additional steps that listed entities could consider implementing include:

  • reminding all relevant persons of their obligations under the listed entity’s securities trading policy, and if appropriate, amending the securities trading policy to increase trading restrictions and/or extend its coverage so that it applies to a larger group of employees; and
  • consider modifying existing trading windows or blackout periods under the securities trading policy, or declaring a special trading blackout period, to restrict trading during this uncertain time.

What should a listed entity consider when giving investor briefings in the current market?
Many listed entities are conducting analyst and investor briefings to address updated/withdrawn earnings guidance and other issues arising out of COVID-19. Analyst and investor briefings can provide a useful supplement to formal market announcements, and can improve the market’s understanding of information concerning listed entities.
However, listed entities should be mindful that analyst and investor briefings can pose a significant risk area for selective disclosure of market-sensitive information. This is particularly the case with smaller, less formal briefings, which tend to be less structured and scripted.
Whilst it may not always be practicable to restrict briefings at a time a heightened market sensitivity, in the current environment it is particularly important for listed entities to exercise heightened caution in discussing or responding to questions concerning COVID-19 at investor or analyst briefings, to ensure compliance with their continuous disclosure obligations. Some practical recommendations to achieve this include:

  • Formal policies:
    • adopting written policies (or reinforcing existing ones) to ensure that no market sensitive information is disclosed during analyst and investor briefings. These policies should outline a process to be implemented where market-sensitive information is inadvertently disclosed during these briefings
    • ensuring that the written policies are well understood and followed at the organisational level
    • reviewing the list of matters which are reserved for the board under the listed entity’s delegations of authority policy, and ensuring that all relevant personnel are aware that those board-reserved matters cannot be commented on except where such comment has been authorised by the board and/or released publicly through the ASX.
  • Controlling information flow at briefings:
    • being particularly vigilant about what information is disclosed at analyst and investor briefings – and where practicable, restrict disclosed information to certain subject matters
    • confining comments on individual market analysts’ financial projections to errors in factual information and underlying assumptions
    • refraining from trying to manage or correct market expectations through briefings
  • Broaden access to information disclosed at briefings:
    • ensuring as broad as possible access to analyst and investor briefings
    • making immediately available full transcripts or recordings of briefings or roadshows on the entity’s website or through an ASX announcement.

Has ASX provided any relief with regard to capital raisings in the context of COVID-19?
Due to the financial impact of COVID-19, there has been an increased demand for capital amongst listed entities. In response to this, ASX has announced that it will grant a temporary extra placement capacity of 10% to all companies, in addition to the existing 15% that they are afforded under ASX Listing Rule 7.1. This means that listed entities can now raise funds by placing up to 25% of their current issued capital (less any capacity already used in the preceding 12 months).

This temporary capacity is subject to a number of restrictions, including:

  • entities can only undertake one placement using the extra placement capacity;
  • entities using the extra placement capacity must undertake either a follow-on pro rata entitlement offer, or a follow-on offer to retail investors under a share purchase plan; and
  • entities that already have access to an extra 10% placement capacity under Listing Rule 7.1A will be able to elect to use their existing Listing Rule 7.1A capacity or the extra 10% placement capacity, but not both.

The temporary extra placement capacity is available to companies until 31 July 2020 unless extended by ASX.

Will ASX grant any relief with respect to reporting deadlines?
ASX will consider on a case-by-case basis any reporting relief sought by companies with 30 September, 31 December or 31 March balance dates. ASX may grant a short extension where:

  • ASIC has agreed to grant the entity an extension;
  • the entity’s auditor has confirmed in writing that they will not be able to complete their audit by the relevant deadline;
  • the entity has released an Appendix 4E with unaudited financial results; and
  • for half yearly statements, the entity has released unaudited and unreviewed financial results.

There is currently no relief provided to companies with 31 May and 30 June balance dates – however ASX continues to monitor the situation.
ASX has also confirmed that it is unlikely to grant extensions for the filing of quarterly cash flow or quarterly activity reports.

Corporate & Commercial Law

Data and privacy issues

How can personal information be protected whilst working remotely?
This is largely a technical question, as the Privacy Act does not prevent employees from working remotely as a response to COVID-19. The Australian Privacy Principles (APPs) do continue to apply, and regulators have suggested that there is an increased vulnerability to cyber-attacks such as phishing campaigns or scams, due to employers potentially having less visibility for example. Other suggestions for protection of personal information include:

  • keeping up to date with the latest advice from the Australian Cyber Security Centre;
  • securing all devices such as mobile phones, laptops, data storage devices and remote desktop clients and ensure all devices, networks and systems have the most recent updates and security patches applied to them;
  • use work email accounts, not personal accounts, for all work-related emails that contain personal information (and generally avoid transferring personal information over email, when more secure, encrypted methods can be used); and
  • checking your data breach response plan is up to date and would be effective when the response team is working remotely.

Can I disclose personal information of employees in order to prevent or manage COVID-19 in the workplace?
Most likely, yes. Provided such disclosure is limited to those who ‘need to know’ and is necessary to lessen or prevent a serious threat to the life, health or safety of any individual, or to public health or safety, there are exemptions in the Privacy Act that will allow disclosure. Whether such disclosure is necessary should be informed by reliable advice, for example, from the Department of Health.
It is likely that organisations, both public and private, will need to collect, use and disclose personal information (including sensitive information) to prevent or manage COVID-19 in the workplace. Information about the health of an individual would be considered sensitive information and generally consent of the individual is required before collecting, using or disclosing such data. However, if information is required for the reasons described above (to prevent threats to health or safety), then such collection, use or disclose is permitted. You would still also need to establish that it was unreasonable in the circumstances to obtain the permission of the individual.
Additionally, if the personal information relating to the individual is considered an ‘employee record’ such records are exempted from privacy laws where directly related to a current or former employment relationship. This will apply for organisations governed by the APPs, however state government departments and organisations may not be able to rely on such an exemption. For example, in Victoria, state government departments and entities would need to rely on exceptions in the state legislation similar to the ‘serious threat’ exemptions described above because there is no equivalent employee records exemption.
Data & Privacy Law

Employment issues

What are my safety obligations as an employer?
Work health & safety legislation requires employers to take practical steps to minimise risks posed to workers’ safety while working. The risk of infection by COVID:19 activates this obligation.
Employers need do consult and discuss with employees ways to control the risk of exposure to the virus. They also need to keep employees informed and provide regular updates about the pandemic.
They also need to consult with persons who control workplaces in which you send your employees as well as those employers of persons entering your workplace.
It might be a good idea to appoint a COVID-19 pandemic manager who would manage implementation of risk control measures, be a direct liaison between the employer and other duty holders, and provide regular communications and updates to workers.
There is ample material submitted by government health agencies about ways to minimise the risk of infection, including social distancing, good personal hygiene and using personal protective equipment.  Employees need to be educated and trained about these measures.
Employers should develop and implement guidelines for restricting entry to the workplace and develop systems to manage workers who become unwell at work.
Employer should also remind employees that they also have a duty to take reasonable care for their own health and safety and comply and cooperate with employer’s safety instructions.

What are my options in the face of a reduced requirement for work?
Employers seeking to deal with a reduced requirement for labour in the face of the pandemic are considering:

  • reduced working hours;
  • reduced pay;
  • agreed or forced taking of paid leave;
  • stand down or unpaid leave; and
  • redundancies.

Each of these measures require careful consideration and appropriate legal advice to ensure compliance with legal requirements.

If I am receiving JobKeeper wage subsidies as an employer, what capacity do I have to reduce labour costs?
The Federal Government has amended the Fair Work Act 2009 (Cth) to provide greater flexibility for employers who are recipients of the JobKeeper wages subsidy. This is canvassed in the Corporate Toolkit section of this document.
Workplace Relations & Safety

Foreign investment issues

What has changed?
From Sunday, 29 March 2020 at 10.30 pm (AEDT) the monetary threshold for screening foreign investments under the Foreign Acquisitions and Takeovers Act 1975 (Act) was lowered to zero dollars. Time-frames for approving proposed foreign investment were also extended.

How do the threshold changes impact me?
The changes substantially expand the scope of transactions requiring Foreign Investment Review Board (FIRB) approval and significantly lengthen FIRB review periods for applications.
All proposed foreign investments into Australia which are subject to the Act will now require FIRB approval.  Certain acquisitions were already subject to the zero dollar threshold, such as residential land and vacant commercial land.
The zero dollar threshold applies regardless of the value of the investment, or the nationality or the nature of the foreign investor (i.e. whether the investor is a private or government entity).

How long will FIRB take to assess my application?
FIRB will now have up to six months to review new and existing applications under the Act. This is a significant increase from the previous 30 day time-frame.
Priority will be given to processing urgent applications for investments that protect and support Australian businesses and jobs. If your application is urgent, you should advise FIRB of the commercial or economic impacts of potential delays.

Is foreign investment still allowed?
Yes, foreign investment is still permitted. Upon announcing the new regime, the Treasurer stated: “This is not an investment freeze.  Australia is open for business and recognises investment at this time can be beneficial if in the national interest.
The Treasurer also explained that the measures were “necessary to safeguard the national interest as the coronavirus outbreak puts intense pressure on the Australian economy and Australian businesses.

How long will the new rules be in place?
The government hasn’t specified how long the new rules will apply but has indicated the changes are temporary and will be in place for the duration of the COVID-19 crisis.

What will FIRB consider when assessing applications?
Foreign investment proposals will be reviewed against the national interest, including for potential impact on the community and employment. Conditions on investment may be applied to address any risks identified.

What if I signed an agreement before the changes were announced but the transaction hasn’t completed yet?
The new thresholds won’t apply to agreements entered into before 10:30pm AEDT on 29 March 2020, including in circumstances where the agreement has been entered but the investment hasn’t been acquired.

Does this apply to parties entering into leases?
FIRB approval is now required for all leases that exceed a term of five years where the tenant is a foreign entity. Regardless of the value of the lease or the nature of the land it relates to, approval must be obtained by the tenant prior to acquiring an interest in the lease, where the term under the lease (including any options terms) is reasonably likely to exceed five years.

What happens if I don’t apply for FIRB approval?
Foreign persons who fail to meet their legal obligations may be ordered to dispose of their investment, receive a civil penalty, and be subject to criminal prosecution.

What does this mean for my pre-existing FIRB application?
In some cases, FIRB will request an extension on processing deadlines for existing applications by up to six months. Applicants will be contacted to discuss the expected time frames and any commercial deadlines will be considered.

Are there other changes under the Act, like the definitions of foreign person, significant action or notifiable action?
No, only the monetary thresholds under the Act have changed.
The non-monetary thresholds under the Act remains unchanged. For instance, a private foreign investor can generally still acquire less than 20% of an Australian company irrespective of value without needing FIRB approval. The various exemptions under the Act (including certain money lending agreements and investments in financial sector companies) will remain in place.

Have the fees changed?
No, the new rules don’t change the application fees. Submissions have been made to FIRB stating that investors that are only required to apply due to the threshold reduction should be charged lower fees.  This still unresolved.

How do the changes impact my exemption certificate?
Exemption Certificates granted before the changes were announced are still valid and apply. Any conditions still need to be met.
Certain interests are permitted or excluded from exemption certificates’ scope by referring to sections in the Act and regulations. FIRB has stated the amending regulations will clarify that the impact of those sections will not be expanded to include other types of land or business. New interests in low-threshold land or sensitive business under the old monetary thresholds will be excluded from the certificate.

Can I withdraw my application?
Yes. FIRB will also consider refunding your application fee if you are withdrawing the application due to delaying or deferring the investment due to the economic conditions related to the COVID-19 crisis.

How can I access further information about the changes?
The information in this factsheet is accurate as at 8 April 2020. If you are concerned about the impact of the FIRB changes on a proposed investment in Australia, please contact us.
Corporate & Commercial Law

Insolvency issues

What protection does the COVID-Safe Harbour provisions provide to me?
Directors will not be personally liable for insolvent trading in respect of a debt incurred:

  • In the ordinary course of the company’s business; and
  • In the period from 23 March 2020 to 23 September 2020.

The protection will cover both the types of expenses ordinarily incurred by the business prior to the outbreak of COVID-19, as well as expenses incurred in facilitating the continuation of the business during COVID-19 (such as costs relating to transitioning to remote access or consultant costs engaged to assist with rent negotiations).
The 6 month protection may be extended by Parliament, depending on the impact the COVID-19 situation continues to have on the Australian economy.

How is this different from the usual position?
Outside of the COVID-Safe Harbour provisions, directors may be personally liable for insolvent trading. Historically, Australia has had some of the strictest insolvent trading liabilities for directors in the world. In 2017, a new insolvent trading defence was introduced (the original Safe Harbour provisions) which relieves directors who, after suspecting insolvency, develop a course of action that is reasonably likely to lead to a better outcome for the company than an immediate appointment of an insolvency practitioner. In those circumstances, the director will not be personally liable for the debts incurred in implementing that plan. 
The key differences between the original Safe Harbour provisions and the COVID-19 Safe Harbour provisions are:

Am I still at risk of personal liability during the COVID-19 period?
There are still some risks that you need to keep in mind. In particular:

  • the protection does not extend to any debts incurred prior to 23 March 2020
  • egregious conduct, involving dishonesty, fraud or illegal phoenix activity, is not covered and directors may still be criminally liable for such conduct
  • directors may still be personally liable for certain tax debts and may be issued with a Director Penalty Notice (DPN) by the ATO.  This has recently extended to GST debts, as well as superannuation contributions for employees
  • directors who have signed personal guarantees will continue to be liable in accordance with the terms of those arrangements (however see our FAQs in relation to the National Leasing Code in relation to guarantees on leased premises)
  • directors of listed companies need to continue to ensure compliance with the companies’ continuous disclosure obligations.  Insolvent trading claims against directors often run hand-in-hand with shareholder class actions around non-disclosure/misleading and deceptive conduct. Directors should consider whether earnings guidance or forward-looking statements should be revised in light of the impact of COVID-19 on business operations. Failure to disclose price-sensitive information to the market may result in directors being liable for losses flowing from a failure to disclose that information 
  • directors continue to owe duties of care to exercise reasonable care, skill and diligence and to act in the best interests of shareholders. Directors should be actively taking steps to protect the business, including by considering eligibility for government subsidies, engaging with lenders and landlords to relax banking covenants and seek rent relief, and cutting down all non-essential spend.

Dispute Resolution & Litigation

Leasing issues

SME Leasing Principles during COVID-19:- National Code of Conduct
With pressure mounting on landlords, tenants and the Federal and State Governments, the Prime Minister has announced a compulsory code of conduct for landlords and tenants dealings with rentals during the COVID-19 crisis. (The Code is set out in full here)
The following highlights the key elements of the Code by asking some basic questions relevant to all landlords and tenants.

What’s the purpose of the Code?
The purpose is to create a good faith negotiating environment within specific parameters for landlords and tenants to reach agreement about rents during the COVID-19 crisis. “The objective of the Code is to share, in a proportionate, measured manner, the financial risk and cashflow impact.”

Who is captured by the Code?
The Code is intended to apply to all tenants to whom the Commonwealth Government’s JobKeeper programme would also apply, with an annual turnover of up to $50mil, including franchises at the franchisee level. The Code also states the expectation that even if tenants do not meet this criteria, the Code should apply “in spirit” to all leasing arrangements for affected businesses.

When will the code apply?
The commencement date will be determined by each State and Territory. It’s not clear if the Code will apply retrospectively to affect deals which may have already been done. The Code appears to be intended to be operational during the operation of the JobKeeper programme and parties are expected to take into account “a reasonable recovery period”.

Are landlords only required to offer one deal for all tenants?
No
Landlords are expected to agree “tailored, bespoke and appropriate” deals on a case-by-case basis.  Deals are expected to include proportionate reductions in rent. Deferrals and waivers are expected to be offered of up to 100 per cent of the rent payable.

What information needs to be provided/considered?
Parties are expected to work together in an “open and honest manner” and to provide relevant and accurate information about revenue, expenses and profitability to assist the process. This includes, from a landlord perspective, accounting for benefits afforded by its bankers on loan payments.

What about outgoings?
Reductions in land tax and rates are expected to be passed on proportionately to tenants. Landlords should also seek to waive outgoings during periods where a tenant can’t trade. Importantly they are entitled to reduce services as required as well.

Are there guides on the level of rent assistance?
Yes
Any rental reduction should be constituted by a minimum 50 per cent waiver component over the COVID-19 period. This isn’t intended to indicate that rents should be reduced by 50 per cent, but rather that whatever the reduction, 50 per cent of it should be waived as distinct from deferred. It is also intended that reduction in turnover should be met by cashflow relief – see example below.

Do tenants have to repay deferred rent?
Yes
Repayments must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties. So if the lease ends during that period, the tenant still gets time to repay. No repayment should commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government) or the existing lease expiring, and taking into account a reasonable subsequent recovery period.
No interest should be charged on deferred rent or outgoings.

Do ordinary rent increases apply?
No
There is a freeze on rent increases.  However, turnover rent can be collected from successfully trading tenants.

Do tenants have to trade?
No
Tenants may cease to trade or reduce operating hours without penalty

Can I call on a guarantee?
No
Landlords are prevented from drawing on a bank guarantee, security deposit or personal guarantee while COVID-19 pandemic continues and for a reasonable recovery period thereafter.

What happens if a tenant defaults?
Tenants are required to comply with their leases as modified by the arrangements agreed under the Code.  If they do not, they will lose the protections afforded by the Code

Does the code provide an example of how it’s intended to work?
Yes, the following is extracted from Appendix 1 to the Code:

  • qualifying tenants would be provided with cash flow relief in proportion to the loss of turnover they have experienced from the COVID-19 crisis:
    • ie. a 60 per cent loss in turnover would result in a guaranteed 60 per cent cash flow relief
    • at a minimum, half is provided as rent free or rent waiver for the proportion of which the qualifying tenant’s revenue has fallen
    • up to half could be through a deferral of rent, with this to be recouped over at least 24 months in a manner that is negotiated by the parties
      • so if the tenant’s revenue has fallen by 100 per cent, then at least 50 per cent of total cash flow relief is rent free or rent waiver and the remainder is a rent deferral. If the qualifying tenant’s revenue has fallen by 30 per cent, then at least 15 per cent of total cash flow relief is rent free or rent waiver and the remainder is rent deferral
      • care should be taken to ensure that any repayment of the deferred rent does not compromise the ability of the affected SME tenant to recover from the crisis
  • the parties would be free to make an alternative commercial arrangement to this formula if that is their wish.

Commercial and Retail Landlords and tenants
Can a tenant stop rent payments and what does this mean for a landlord?
Ordinarily, a landlord would have contractual rights where a tenant stops paying rent, including the rights to re-enter the premises and to terminate the lease if the non-payment of rent continues for 14 days after giving notice. However, there is currently a moratorium on termination of commercial tenancies for non-payment of rent. Many Australian States and Territories have published regulations with respect to commercial leases to give effect to the National Cabinet’s mandatory Code of Conduct. We have reported on these regulations on our website. Pursuant to the regulations, landlords have been entering into discussions with tenants and working together to find tailored and appropriate temporary arrangements.  

Can tenants cease trading?
Ultimately, whether a tenant can cease trading depends on the local regulations and restrictions currently in place. In some areas and industries, the State Government has ordered that certain activities must cease (e.g. eating in at restaurants). In absence of such restrictions, a business may continue to trade. However, despite there being no specific prohibition, there may be practical barriers, which mean trade is impossible. These should be discussed with your landlord. Subject to any Government orders or any agreements between the parties, tenants and landlords must continue to comply with their lease obligations.

Is the lease void because the tenant can’t trade?
This is a complex question which needs to be answered on a case-by-case basis applying the doctrine of contractual frustration to the situation. The Australian law, as it presently stands, suggests that a lease contract will only be frustrated in very rare circumstances. A contract coming to an end because of frustration is unlikely.

What should a commercial tenant be doing now?
Tenants should keep up to date with the latest developments and announcements by the Federal and State Governments as well as all other relevant authorities. As a starting point, we suggest tenants review the mandatory Code of Conduct for commercial leases and the relevant State or Territory regulations. We reported on the Code and what it means for tenants and landlords here. Generally, rent relief will be available for tenants eligible for the JobKeeper programme. Tenants should be engaging with their accounting and legal advisers to prepare all relevant information to take advantage of the JobKeeper programme and the Leasing Code. In addition, tenants should be keeping the dialogue open with landlords and seeking to reach temporary agreements.

Do landlords have to keep up full services?
Landlords should be reviewing all service contracts, for example, with security providers, cleaners, air-conditioning contractors to determine whether services can or should be reduced and, if so, on what terms. The Leasing Code contemplates landlords reducing services which are not currently required, without penalty to tenants, in order to manage outgoings and reduce costs.
Landlords may also wish to consider whether they can recover additional cleaning costs. Although deep or more frequent cleaning costs are likely to be higher than those of ordinary cleaning, they may still be recoverable. In particular, an obligation on the landlord to manage the building in a professional manner may allow a landlord to recover these costs.

Is COVID-19 covered by insurance?
Both landlords and tenants should be carefully reviewing their insurance policies and consider whether any losses relating to COVID-19 are covered by their policies. In particular, landlords should consult their insurance providers to determine whether they are covered for loss of income or rent.
Property & Real Estate

Project development issues

What does the COVID-19 mean for milestones?
We would expect that a pandemic is covered by either a moratorium or force majeure provision in a standard development agreement. This will enable the developer to seek an extension of time, if necessary. In relation to sunset dates under residential off the plan contracts, the provisions of the Sale of Land Act still apply. See here

Can an agreement for lease be terminated if there is a force majeure clause?
Agreements for lease often include force majeure clauses. We discussed force majeure clauses here.
In the context of agreements for lease, force majeure events may apply to practical completion dates. Depending on the drafting of the relevant agreement, a force majeure clause may:

  1. extend timeframes under the agreement for lease;
  2. give a tenant a right to claim damages; or even
  3. terminate the agreement for lease.

Parties should carefully review their transaction documents and consider their approach to deal with any issues that arise due to COVID-19.

Can project documents be signed and exchanged electronically?
In the current climate, parties may wish to consider if project documentation can be signed and exchanged electronically, especially given logistics with many signatories still working remotely. As discussed here, whether electronic signing is possible will depend on the nature of the relevant document and the proposed method of signing. You may need to check the relevant laws and regulations to ensure electronic signatures will be binding. In addition, the document may need to expressly provide for electronically signing. Your organisation may also need internal policies in place in this regard. For these reasons, we recommend consulting your lawyer. 

What do the recent FIRB changes mean for foreign investors?
We summarised the key FIRB temporary changes here. Following the changes, we recommend that foreign investors should endeavour to submit their FIRB applications as soon as possible. In addition, foreign investors should allow for significant delays in processing their applications. As such, commercial timeframes should (to the extent possible) take into account the need to obtain FIRB approval and the likelihood for delay.
Ultimately, there is now more scrutiny on foreign investment in Australia given the concerns that the negative impact of COVID-19 on Australian businesses may mean an increase in distressed asset sales to foreign investors. The Treasurer has separately proposed reforms to the foreign investment review framework. We discussed the comprehensive changes here and we will continue to monitor these developments.

What happens if the Government stops all construction work?
The Commonwealth Government has the power to stop all construction work under the Biosecurity Act 2015 (Cth). If this happens then a contractor may be entitled to an extension of time and/or costs for any delay. This will depend on the terms of the building contract. Contract FAQ section for discussion on the various types of relief that may be available.
If works have not commenced and a permit is due to expire during this period, applicants should apply for extensions of time to commence the development or use permitted by the permit.

Will COVID-19 impact my planning approval?
COVID-19 should not impact on the determinations of permit or development applications (DA) by Councils. There may, however, be some adjustments to timelines and processes to accommodate changes in circumstances.
There may also be changes to the way planning documentation is submitted to Council, with some Councils temporarily closing customer service centres and only accepting electronic lodgement. In Melbourne, Council physical offices are presently closed and accordingly documentation must be submitted electronically.

What if my planning approval is close to expiry?
One of the most obvious consequences of COVID for planning approvals is that some developers may decide to put developments on hold, or some developments underway may take longer to complete than was anticipated.
Planning approvals often have conditions requiring that developments be commenced and completed, and also conditions for the commencement of use, within certain timeframes.
Development delays due to COVID therefore raise the prospect of planning approvals expiring.
Planning legislation makes provision for the extension of lapsing provisions in certain circumstances and you should check whether an application could be made to extend the planning approval.
Extension of time due to COVID related delays should present a good argument to justify extension.

Will I need to amend my planning approval?
COVID is likely to have impacts upon the residential, industrial and commercial real estate markets. Planning approval holders may therefore look to permissions they currently hold as to whether they need amendment so as to change the use authorised in response to changing market conditions.

What about my planning appeal?
In the case of planning appeals, courts and tribunals have recently adjourned a number of scheduled hearings as a result of the impacts of COVID-19.
The Victorian Civil and Administrative Tribunal is now holding practice day hearings, compulsory conferences and hearings, via telephone or zoom, depending upon the nature of the issue at hand. Planning panels may now conduct hearings electronically. Local Council meetings may also be conducted electronically and streamed live on the Council’s website.

Who bears the risk of planning delays?
The developer/owner/occupier is responsible for compliance with the conditions of planning approvals and bears the full risk of non-compliance with any planning approval conditions.
Other risks from planning delays with third parties will depend upon the terms of any contract with those third parties. For example, if COVID-19 delays the registration of a subdivision so that lots sold under a contract of sale cannot be settled by the required settlements date, where that risk lies will depend upon the terms of the contract. Please refer to our Contract FAQ section for further discussion.

What is the Victorian development and planning taskforce?
The Victorian Government established a dedicated taskforce on 24 April to aid in the continual running of the building and development industry during the coronavirus pandemic. With the aid of Ministerial powers, the Taskforce initially focused on overseeing the fast-tracking of planning approvals that have been delayed by the coronavirus. The Taskforce will also provide recommendations on long-term projects that are currently in the pipeline, including initiatives to expand social housing options.

State specific planning advice
There will be some differences depending on what state you are operating in and different approaches depending on what Council you are dealing with. Holding Redlich has offices with experienced planning and environment law teams in Victoria, NSW and QLD to help with particular planning related queries.

What happens to my current construction project?
Whether or not the contractor is entitled to an extension of time and/or costs for any delay will depend on the terms of the building contract. Please refer to our Contract FAQ section for discussion on the various types of relief that may be available.
As noted earlier, construction delays due to COVID raise the prospect of permits expiring. The Planning and Environment Act 1987 (Vic) makes provision for the extension of planning permits. COVID factors would found the basis for a very persuasive argument in favour of permit extension.
Construction & Infrastructure
Planning, Environment & Sustainability


Resource library (below)

Loading...

To receive invitations to upcoming seminars and articles that may be of interest to you please subscribe to the Holding Redlich Weekly Brief.

Subscribe