Advertising - beware the making of big promises!

Consumer protection laws provide for what can become quite substantial financial penalties against individuals or businesses found to be in breach of those laws. It is easy for an unhappy customer or client to file a complaint with Consumer Affairs and if more than one complaint is received, start a possible chain of investigation of all your business practices.


The legislation sets out a lot of the rules that businesses have to comply with in the negative, as in “a person must not, in trade or commerce, in connection with…” Since I prefer to state the positive of what you can and should be doing, that’s the way we’ll look at it now.


First things first - you want to advertise your services in a way that entices hordes of eager customers to your door. Direct response advertising is all about triggering the emotions of your buys by identifying their wants and giving them all the reasons, both positive and negative, they need to overcome any hesitancy to buy. In doing so you must be careful how you describe your goods and services. Here are some of the things you need to be aware of when describing your services. Make sure:

• Your services are of the particular standard, quality, value, history etc that you claim them to be.


• Your services have actually been used or bought by the people that you claim have used or bought them. (ie, don’t claim that you gave Ricky Ponting some coaching around the last cricket test if you didn’t!)


• If you claim to have sponsorship, approval or benefits to your services, the claims are true.


• You state the price clearly and in a way that cannot confuse people.


• You can provide what you say you can, when you say you can.


• If you claim your knowledge, experience or qualifications came from someone or somewhere that they actually did.


• You realistically state the need for a particular good or service.


• If you offer a condition, warranty, guarantee, right or remedy, you actually meet that commitment.


• You make claims that you can realistically substantiate.
  

Consider that this long list of requirements has been developed over the years and often in response to the activities of people whose business practices were considered to be unacceptable. I’ve left out a few dealing more with manufactured products and concentrated mainly on those dealing with services.

What consumer protection law does is identify all the tricky things that business people have done in the past, and attempts to identify some of the tricky things they might do in the future, to pry people away from their hard earned money. You might imagine that consumer protection law is written with the premise that people only purchase what they need, and wouldn’t otherwise spend their money, and it certainly does give that impression.

Next post we’ll have a look at Bait Advertising and how not to get caught.

What do you know about the legal regulations affecting your business?

Hello, its nice to be back. I’ve been busy the last couple of months giving some presentations about legal issues affecting small business, particularly coaching businesses, and preparing a few legal products and publications to assist people in small business, (particularly those running a business on their own) which should be available for purchase in the New Year. You can guess what I’ll be doing these holidays!

Somewhat discouragingly, (or should that be encouragingly?) I received a message today from a gentleman in his 60s who has been running his business for many years, has a full time staff equivalent of 6 people and turns over on average $4m per year. He said that as a small business person you gain experience about what to worry about in contracts, do a lot of business on shaken hands and trust and learn from experience when to be wary. He said that he doesn’t use legal advice at all!

It is great to hear that people are able to continue to do business on trust. As a lawyer, we rarely get to see that side of business because people come to us generally after they need assistance, rather than for prevention.

If we look at prevention for a moment, what are the areas of your business that could do with a quick review?

Anyone dealing with the public in the sale of goods or services for personal, domestic or household use (eg, not for business or trade purposes) is obliged to comply with the requirements of the Fair Trading Act relevant to their state or territory. The Fair Trading Acts are pretty similar across the country and any complaints or issues regarding Fair Trading matters are usually managed by Consumer Affairs in that state or territory. I’ve listed all of the Consumer Affairs websites in an earlier post, so that you can find them without too much trouble.

I’m going to write a series of blogs over the next month or so covering some of the key areas of consumer protection law that you, as a business person supplying goods or services, should be aware of. If you know about it, you can do something about it. If you don’t know about it, you might be surprised when someone from Consumer Affairs gives you a call and asks you about your legal compliance issues. In the first one, I’ll talk about describing your goods or services and making sure that you are only making promises that you know you can keep.

Until then, I wish you all the best for your holidays and hope that you get to spend them with the people you cherish.

Grey Areas

I've been learning a lot about marketing this year. The key is to give the customer what they want. Sounds like common sense, doesn't it? What I've been learning and what is finally sinking in is that customers will value more and hence pay more for what they WANT than what they NEED. Even more to the point is that you actually don't have a potential customer if you are selling what you think the customer needs without even knowing if the customer thinks they need it!

The thing with most professional services, doctors, lawyers etc is that we provide a service that our client invariably NEED rather than necessarily WANT. So, as a lawyer we are already behind the eight ball when it comes to providing cost effective services. Customers are more likely to resent having to use legal services in their time of need than chosing the services they want at a time that suits them.

So the struggle I have is working out what preventative legal services you as a business owner will actually want, and appreciate, rather than trying to give you what I think you need.

What makes working out what you as a client might want, is further complicated by the fact that there are not a lot of clear answers in law. The example I used at a recent presentation was this:

Imagine a big red cross one side of the room and a big green tick the other side of the room and a whole lot of hazy grey area in between. There is very little definative right and wrong in law and a whole lot of grey area which is subject to interpretation.

Subject to Interpretation...

What difference would it make to you if your lawyer clearly explained that the advice they are giving you is their best guess as to how it would be interpreted by a court and not the definative right answer in your situation?

The First Legaleasy Presentation

Hi there readers,

I just gave my first live Legaleasy presentation today to a group of about 35 coaches all training for coaching certification with Beyond Success.

I provided an overview of business legal structures, briefly covering sole traders, partnerships, trusts and companies, and a discussion around business names. We then went on to get an overview of intellectual property - trademarks, copyright, patents and designs.

Then finished with obligations to clients include fair trading/consumer affairs implied warranties, duty of care, privacy, confidentiality and record keeping.

It seemed to be well received and 25 people have given me written feedback about the top three legal concerns they have in running or setting up their coaching businesses, and I'm excited to be finding out what it is people really want to know.

Thank you to Paul and Mary Blackburn for giving me the opportunity to speak today, Jules for your support, and all the people who chose to attend the session that I presented. I appreciate the opportunity to add value!

Jeanette

Is it really necessary to register a Trademark?

This is the third part response to a question posed by Jen after reading earlier Legaleasy posts, with a delay of about a week. Sometimes life gets in the way!


Trademark registration, is it really necessary?


Great question! When you are first starting a business you probably have other items of expenditure that are going to actually help generate your business income which should have higher priority than trademark registration. In a start up business, unless you have loads of money to spend on it, earning income is the most important aspect of the business, so focus there first.


If you are concerned that your really cool logo, catchphrase or name is going to be immediately snaffled by a competitor, then you can note a little TM after it and start making enquiries about trademark registration. TM is a warning to consumers and businesses that you are declaring the name, logo etc to be a trademark of your business and something you intend to take action to protect. Have a look at Google... they only use a TM and haven't go so far as to register their name as a trademark. Don't for a minute think that they wouldn't take action to do something about you using the name for your own business!


On the other hand, look at Apple®. Apple® register all of their trademarks and take prompt action to protect them. So what is the difference?


Suing for trademark infringement is much easier and cheaper if you have a registered trademark. If you haven't registered a trademark you have to put a lot more information before the court to demonstrate that it is in fact a trademark and should belong to you to the exclusion of others before you can challenge someone else's usage of it. Some companies are pedantic about their trademarks being used, others are relaxed and consider it additional free promotion.


What you need to consider is how your business will be impacted if you do or don't register a trademark and what action you are prepared to take to protect it whether or not it is registered.


Effective trademark registration is likely to require assistance from someone who has done it before, particularly if you are wanting to argue that a combination of otherwise generic words should be trademarked. For example, it is not going to be easy to get trademark registration for something like "The Timber Shop" because it is not sufficiently distinctive or unique.


Logos and names will generally not get registration if they are considered deceptively similar to already registered logos or names. The process can be longwinded as well as it can take months to assess you trademark for registration, and if there are any issues or questions that need answering prior to registration, more time.

Registration bodies are generally government or semi-government bodies. Only pay for registration through a government endorsed site, the others are scams. If you get an email inviting you to register with an organisation, check them through government sites before handing over any money, it will save you thousands! I've had a look at a few official sites lately - in Australia the official register is IP Australia (www.ipaustralia.gov.au) - and they list some of the current scams going around and the kind of money those organisations are making, without giving you any protection at all.

I'm currently involved in assisting the process of renewing and registering about a dozen trademarks with a company I work with and the cost that they've been quoted works out at about $2,000 per trademark.

So, unless you think you have an absolute winner of a name that will need protection the instant you make it public, don't spend the money and wait months to start your business. Start your business and guage the benefit of registration before you apply.



Thanks for waiting Jen, Let me know if this helps!

Jumping through domain name hoops

The law around the purchase, sale and ownership of domain names is developing all the time. There are a number of individuals and companies who have diligently gone around 'acquiring' names that can be associated with existing celebrities or businesses and put premium prices on those domain names and there has been a fair amount of discussion around whether or not that behaviour should be regulated. Some companies and individuals have sued those enterprising entreprenuers, calling them 'cyber squatters', seeking to obtain the domain names without the large price tags. (paying the lawyers instead)

Firstly, what is a domain name? Well, I had a look in Wikipedia for a useful definition and found something equivalent to legalese, so my alternative (and possibly not wholly technically accurate) explanation is that the domain name provides people surfing the web with a virtual address to find you. Thats it. It doesn't necessarily give you a website and it doesn't automatically appear as a webpage just because you purchase the address. It does give you the exclusive right to attach webpages or a website to the address for people to find for as long as you remain the registered owner.

Like registering a business name, there aren't a lot of hoops to go through. You find a domain name seller (from my experience www.godaddy.com is pretty good), search the site for the domain name you want, and purchase it if it is available.

Again, hints are:

• don't try and register something that you know is someone elses brand name, it'll only end in tears
• know who or what entity is going to own the domain name and whether that is the same person or entity that is going to operate the website (it doesn't have to be, but you should put a written agreement in place between the entities to clarify the legal relationships if it isn't)
• know why you want a particular domain name and how much you are prepared to pay for it if someone else has already registered it

You can buy a domain name from an existing registered owner rather than through a domain name company, but if you want to go down that path be careful about handing any money over before you have access to the domain name. Chasing up money you have paid overseas is expensive, labourious and often unsuccessful. Obviously a domain name which comes up without website content attached to it has the chance of being easier and cheaper to acquire than a domain name with a website attached.

.. tomorrow, a note on trademarks...

Jumping through hoops

This question comes from Jen after reading some of the earlier posts on the Legaleasy blog.

What are all the hoops we need to jump to register a business name, domain name and trademark it if that is neccessary?

Thanks for the question Jen. You actually have three questions roled into one, so I'll deal with them one at a time.

Registering a business name
Registering a business name in Australia is really easy. You simply go online to any of the Offices of Fair Trading or Consumer Affairs around the country, or turn up at one of their shopfronts (addresses are online) and complete a fairly simple form, pay a fee of around $80 and voila! I've listed the links for all of those offices below so that you don't have to search for them.

ACT - Office of Regulatory Services
NSW - NSW Office of Fair Trading
NT - Department of Business, Industry and Resource Development
QLD - Office of Fair Trading
SA - Office of Consumer and Business Affairs SA
TAS - Tasmania Office of Consumer Affairs and Fair Trading
VIC - Consumer Affairs Victoria
WA - Department of Consumer and Employment Protection

The things you need to do before you fill in an application for registration of a business name are:

1. Know who the owner will be, whether that is you, a partnership, trust or a company.
2. Do a business name search on www.asic.gov.au so that you know the name you want to register isn't already registered to someone else. You used to have to secure the name first, now you don't, but you do need to list three preferences.

Note, registering a business name is not the same as starting a company and it doesn't create a separate legal entity. The owner of the business name is the legal entity. You can apply for an ABN for the business name that you register and you can use it on bank accounts.

Registration is renewable every three years.

Tips for registering a business name - be careful if you want to try and play on the name of another business. Crazy John's (mobile phone company) successfully sued Crazy Ron's (mobile phone company) for breach of trademark even though there was no problem with registering the name in the first place.

... more tomorrow ..

What are the components of a disclaimer that covers me legally?

I hope you all enjoyed the series of exchanges with John about bad service and demands for payment. It was certainly fun for me! If you have a series of questions that you'd like to have answered, please do let me know. Now we're moving on to different topics...

Disclaimers

The purpose of a disclaimer is to let your client or customer know in very clear terms what their responsibility is and what is not your responsibility. It is not possible to disclaimer all legal liability because there are certain obligations implied into contracts. In Commonwealth countries those obligations were originally common law (law of common practice recognized by the courts) and are now included in legislation.

A disclaimer needs to be written clearly and acknowledged by the customer or client. Disclaimers written in small font and hidden in documents are generally not effective. You need to be able to demonstrate that the disclaimer was brought to the attention of the customer or client and that they have acknowledged having read it and agreed to the terms. We know that not everyone reads them, so you need a process which makes it the clients obligation to explain why they didn’t if they didn’t. You might be familiar with the tick boxes for online forms (booking flights online is a good example) where you cannot proceed without ticking the box, and next to the tick box it says “I have read and accept the airline’s Terms and Conditions”.

What's the strangest disclaimer that you have ever read?

Bad service and demands for payment - Part 4

Here's John's last query and my response. After this piece of advice John managed to resolve the dispute and move on with his business. Without court proceedings!

I have one more question to ask, and I am absolutely more than willing to pay for your time – I am not asking for a freebie. So, please send me an invoice. (I didn't)

With respect to this contract:

They have done some work and that is what they are claiming costs for, however…

After they had done the work, and they had invoiced me for this work, I rang the guy up and complained and after a bit of argument, I said “I don’t want to pay and I want you to cancel the invoice” to which he eventually said “Well, you are the most difficult customer I have ever had and I don’t want to have anything more to do with you, so we will just walk away and leave it then.” And I said “good thanks”

Now, isn’t that an offer to cancel everything and walk away? I accepted it.

The next day he changed his mind and said in an email… “where you have AGAIN agreed to withdraw the invoice” that’s just confusing & misleading. "That offer was made on the basis that you had advised us that you had cancelled the job, I have reviewed all correspondence from you & the offer is withdrawn as at no point have you communicated in writing as is in our terms”

He never said that the offer to withdraw the invoice was based on cancelling the job in writing during the telephone call, but it is going to be his word against mine !!!!!

So that was the question. Here's the response -

John

Why would you pay for my time just to be right?

Stop. Look at the situation. You have a relationship breakdown with the person doing the work.

Is the work already done of any use to you? Is it fair that the person who did the work gets paid for the time? Do you want to continue to work with this person in the future?

My suggestion, rather than legal advice is this:

It is a very small amount of money in the grand scheme of things, so don’t make it about the money. If that brings up a reaction for you, be interested in your reaction and what you can learn from it. It’s still not about the money.

You may chose to very respectfully and politely refer him to your telephone conversation (by time and date) and advise that you are confirming in writing the discussion on the phone that you do not require his services any further, and thank him for having agreed to cancel the invoice at that time.

Consider how you are feeling when you write that email and do it from a position of complete acceptance of the person you are writing to rather than a position of being right or being in dispute.

My legal advice is to pay the money and get on with life. Continuing this dispute is only going to hold you up from moving forward and cost you more time, money and energy than the invoice is worth.

There is no predictable result in court on the basis of the information that you have given me. Because they have done some work and issued an invoice they have a greater chance of success than you do if they took the matter to debt recovery or court. Your word against theirs is not a good position to be in when heading to court.

So tell me, what do you think of this last piece of advice?

Bad service and demands for payment - Part 3

Now after the more general questions that John sent me and before I had provided him with some answers, he sent me a more specific question...

I have a contract that a supplier is trying to enforce payment on. We signed a contract but never paid the required 50% deposit. The contract letter p2 states:

“trading – 50% deposit, balance on delivery”

And below signature line it states.. “By signing this & paying deposit you are accepting of the above terms & conditions which can only be varied by a notice in writing & signed by both parties”

We thought this meant that we needed to sign AND pay the deposit, and then we would be bound by the terms and conditions of this contract. Since we never paid the deposit, we are not bound by the terms and conditions of this contract. Is that correct?

The short and simple response was this -

Contracts are essentially made when there is:

offer, acceptance, consideration

They offered to do work, you accepted in part by signing the quote, even if you didn’t pay the deposit, if they acted in reliance upon your signed acceptance, even if you didn’t pay the deposit, and did work, then you probably do owe them money.

The real question is, have they done any work for you? If they have, you owe them money, maybe not all they have asked for, but a reasonable sum for the work that they have done. I suggest you have a frank and honest conversation with them as to why you did not pay the deposit, and why you don’t want to pay the balance now, and negotiate a result you can both live with.

If they haven’t yet done any work for you, they can’t seek payment.

What kind of difference would this kind of advice make for you in your business?

Bad service and demands for payment - Part 2

Following on from my last post, John's second question was focussed more on how to negotiate a different result than what to do with an invoice for work he wasn't happy with...

How do I negotiate with a supplier or contractor when they are unwilling to correct the service, but still demanding payment?

If the supply was made to you as an individual consumer (rather than a business consumer) either do, or threaten to, make a complaint to Consumer Affairs. In most Australian states you can make a complaint to consumer affairs that costs you nothing by simply filling in an online form and waiting. And waiting. They are pretty busy so it can take a couple of months to get to your complaint.

You can also lodge a Fair Trading complaint in the appropriate administrative tribunal complaining that they haven’t done the work properly. Under Fair Trading laws contractors and suppliers and other businesses are required to provide services in a proper workmanlike manner. There are also a number of other avenues for complaint, for example if what is supplied does not fit the purpose that you wanted to put it to. So if you order, say, a custom built trailer from someone for the purpose of carting a market stall around, which is of a particular shape and size that you have told the builder about, and it doesn’t fit on the trailer or the trailer can’t take the weight, then its not fit for the purpose they knew you wanted it for and you aren’t obliged to either accept delivery of it or pay for it.

If it is a business to business transaction and they won’t negotiate, then pay what you think is a fair price for the work done, keep an amount relevant to the cost of repairing the work done and then put it all in writing. Eg:

Invoice amount: $4960
Alternate materials used so value reduced by $789
Anticipated cost of repair: $1200 (get a quote if you can)

Prepared to pay $4960 - $789 - $1200 = $2,971

Explain in writing why you are prepared to pay what you are paying and why you are not prepared to pay any more. Give them a reasonable amount of time to arrange (7 days) or complete (14 days) repairs and tell them if you don’t hear otherwise you’ll get the repairs done by someone else and pay them the quoted price for repair. Do get a short statement of the work done from anyone you get to do repairs! Better if they are properly qualified to do that work too. Not good if its your handyman mate, neighbour or uncle!

Once you have paid what you believe to be fair and provided an opportunity for them to correct their work, it puts them in a very difficult position in regard to demanding payment of the balance of their invoice. The important thing for you is to keep copies of all your communications with them (notes of telephone calls), take photos of the problem before it is fixed and after it is fixed, be clear about what the expected result was etc.

If you can collate that information into a timeline of events with supporting documentation, then you are prepared to argue the point in a tribunal or a court. You will also be confident in your position and know what you are doing. If you can’t be that organized (or bothered), pay them and move on! It really isn’t worth being stuck in a dispute, it simply sucks your time and energy and holds you up from moving forward.

Complete it and move on.

Have you every been stuck in a dispute that cost more of your time and energy than it was worth?

Bad service and demands for payment - Part 1

There are actually three or four parts to this topic all revolving around great questions from John, thanks John! I'll post the questions as he put them to me and the responses that I made to each question over the next couple of weeks so that you can get a feel of the different kind of responses that are available depending upon the way you ask the question. Asking better questions will always give you better answers! Although I have answered this question in an Australia centric fashion, similar priniciples apply wherever you are in the World.

How do I deal with contractors or suppliers who have given me terrible service then demand payment via their invoice?

Firstly, do you have anything in writing? Often you will receive the terms and conditions of supply on the back of a quote from a supplier. Sometimes they don’t have any at all. Contractors frequently don’t have terms of service. If you have received something in writing, have a look at that first and work out when you received as compared to when the work was done. If you received it after the work was done, it doesn’t necessarily apply. If before, it probably does.

Secondly, if you are an individual you are protected by consumer legislation relevant to your legal jurisdiction. There is an office of Fair Trading or Consumer Affairs in each state and territory of Australia and they all have websites, some are more useful than others. There is Fair Trading legislation that applies to the supply of goods and services to individual consumers. You can find a copy of the Australian legislation through http://www.austlii.edu.au/* by going to the tabs on the left hand side of that page, picking your state, then looking for “consolidated acts” for that jurisdiction, “F” and find “Fair Trading Act” in the list. Fair Trading Acts are full of fascinating rights and entitlements for consumers!

Did you know that a contractor or supplier is required by law to complete their work in a “proper, workmanlike manner”? If you have contractors who are demanding payment and have failed to provide an adequate service you can let them know that you are prepared to make a complaint to Consumer Affairs if they don’t have a chat with you to work out something more reasonable.

In Victoria, New South Wales, Queensland and ACT the governments have created Civil and Administrative Tribunals which deal with these kinds of complaints. Again, they all have websites, some better than others. There similar tribunals in other states, just look for them through the Consumer Affairs websites. These tribunals are less formal than courts and, whether they admit it or not, biased to the consumer. Complaints are usually pretty cheap (less than $100 for a complaint with a value of up to $10,000) to lodge with the tribunal; can be paid by credit card and forms are usually available to download from the website and can be submitted online, post or fax.

You do need to be prepared if you are going to lodge a formal complaint with a tribunal. Collect everything you have in writing and any notes you have of telephone conversations. The law is not about right or wrong, its about who can put forward the most believable “proof”. You also can’t leave anything out. When you put forward the “facts” you need to put forward all of the facts, not just the ones you like or that make you look good. Also, don’t make things up! Tribunal Members, Magistrates, Judges are not fools and they are used to having people present cases to them. When they prepare a decision they will tell you whether or not they found your story credible!

If you are planning to make a complaint, be organised. Collate the information about what was requested, what was expected, the exchange of quotes and information, telephone calls etc into a timeline of events with supporting documentation, then you are prepared to argue the point in a tribunal or a court. You will also be confident in your position and know what you are doing. If being that organized sounds like too much trouble, then pay the disputed invoice and move on! It’s not worth letting a dispute suck your time and energy. Take it as a lesson well learnt and money you don’t need to spend again to learn the same lessons.

What have you learnt about consumer law lately?

*www.austlii.edu.au has links to international Legal Information Institutes around the World at the bottom of their homepage.

Scared to sack someone? Need to sack someone?

When you have a small business, in fact any size business, you can't afford to keep people on the pay roll just because you employed them in the first place.

Let's face it, we all make mistakes. Sometimes someone sounds ideal for the role when interviewing them and once they are actually doing the day to day work, we realise that either they are simply not up to it, or it isn't the right fit.

The key is to bite the bullet and take action as soon as you realise that they are not suitable for the role. This is easier said than done for most people. I have worked in an organisation who kept on a completely incompetent employee for more than three years when they never should have been employeed for more than a month. The excuses the boss made for not sacking the individual were many and varied including:

- they're still getting used to the role
- I've cautioned them and they seem to be behaving better this week
- they weren't feeling well today
- I was going to do it today but they were away sick
- they've just had a death in the family
- I haven't had time

As Donald Trump says, its not personal, its business. Consider that an incompetent employee makes more work for other staff, disrupts morale within the workplace, has the potential to make mistakes which cause significant financial loss to the company and is not receiving any favours from you if they think they are fulfilling a role competently when in actual fact they are not.

There are ways and means to dismiss staff.

Firstly, be clear when employing staff as to the expectations of their role. You can't dismiss someone for failing to do their job when no one is clear on what their job actually is!

Secondly, if you have someone on a three or six month trial period, meet with them regularly and review both their experience and your expectations. Don't leave it until the end of the trial period to conduct a review.

Thirdly, if they are not working out and you don't intend to keep them past the end of the trial period, let them know. You might think that it is better to keep them in the business for the whole of that period so as to avoid having to find someone new until later, but neither your business nor the employee are likely to benefit from prolonging an unworkable situation.

If you just never got around to telling someone that you did not intend to keep them on during their trial period, then look at providing training and mentoring as an avenue to assist them in becoming capable of fulfilling the role. Review regularly and reasonably. Keep a record of progress. Highlight fundamental requirements of the role that are not being met and provide the employee with an opportunity to meet those requirements.

The main point is that if you don't tell an employee where they are not meeting expectations and provide them with a reasonable opportunity to shape up, you can't turn around and ask them to ship out and expect no repercussions!

Have you got a story to share?

Losing your job and calling in the lawyers

I was recently asked to provide some advice to a friend of a friend who had just lost their job.

The thing was that they didn’t just lose their job. They spent 11 years working 60 to 80hrs per week to grow a business from $150,000 per year to $2,000,000 per year on the promise (not in writing) of a business partnership. A company was set up in 2008 to take over the business and provide the partners with shares with the transfer coming into effect in July 2009. Coincidently, after 11 years of service under a business management and marketing contract, my friend of a friend had their services terminated in April 2009. Unlikely to be a coincidence. This is the query my friend sent through to me:

Do you know of any quality Industrial Workplace type lawyers who I can talk to simply to get some honest answers... I have spoken to a number of them and they are happy to take on the case but in reality they would all love to take on the case... Ideally if I could find an honest lawyer, pardon the pun then I would be a lot happier... I would be happy to give a lawyer 10% of any money they recover for me as a payment, rather than simply throwing good money after bad on a wing and a prayer.

And here is the response I provided:

You will find that most lawyers are honest; they simply don’t have an adequate concept of explaining the way the system works to their clients.

Unfortunately I don’t know anyone over there to recommend. You would be best to get a local lawyer. In terms of finding a lawyer to help you, it sounds like you want someone in litigation with an understanding of contracts and constructive trust arguments more than a workplace lawyer.

Your offer of 10% of recovery is actually not a proposal that lawyers are permitted to accept under champerty rules (its an ethical compliance thing), although I know there are some provisions which allow firms to enter into ‘no win, no fee’ type arrangements.

Some suggestions:

1. Do not let your legal proceedings become the focus of your life. If you do, you will be disappointed.


2. Focus on the outcome you want considering what might fall in between your worst case scenario (you lose, pay your legal costs and their legal costs) and your best case scenario (you win, they pay ½ your costs). Expecting to get only your best case scenario is not realistic.


3. Concentrate on rebuilding your future more than your legal case.


4. When finding a lawyer, ask them to give you examples of similar work they have done and ask for a testimonial from the people they have done that work for in the past.


5. You should approach Legal Aid. They fund commercial cases in very limited circumstances and may also know of other organizations which may assist you with legal fees. They might also be able to recommend a lawyer for you.


6. Be clear on what your fees are likely to be. Keep asking questions until you are clear. Then double the figure that they have given you as an estimate and keep in mind that even if you win, you can only recover about ½ of your legal costs from the loser. You have to win to recover any costs at all.


7. If your first legal opinion is that you have no case, ask them why and what you would need to be able to demonstrate in order to have a case. Do not shop around until you find someone who says you do have a case if more than one lawyer says you don’t.


8. Be prepared and clear each time you deal with your lawyers. Its saves them time and you money.


9. For the 10 page history that you have prepared, collect as much supporting evidence as you can, especially letters, emails and anything that was in writing at the time that your original agreement was made. Relying on oral testimony alone is a risky way of running a case.

A recent movie which highlights the risks of becoming obsessed with court proceedings is Flash of Genius in which Bob Kearns takes on Detroit automakers who he claims stole his idea for the windshield wiper. His obsession consumes years of his life and destroys his family life. Let me know if you can relate to this or know of someone with a similar experience.

Argh, I'm being sued again!

The question I actually received from an Australian lady was this -

How do you stop a person on centrelink benefits who can lodge as many appeals against you as they like without financial cost to them) from calling you back to court?

It is horribly frustrating to be dragged in to court repeatedly when you have nothing to do with the actual action and its already been resolved. It's not just frustrating for you either, its also frustrating for the courts because it delays worthy cases and consumes resources. I wrote some commentary on the Queensland (Australia) court rules on this a couple of years ago and have actually made applications like this against a couple of people on behalf of clients.

Most court and tribunal systems have what is called “vexatious litigant” rules. You can apply to the court to have a person declared a vexatious litigant in circumstances where they have made numerous claims around the same circumstances. One person I had to obtain an order against had started proceedings in two courts and two different tribunals with claims ranging from breach of contract to discrimination, unfair dismissal from employment and breach of human rights.

To make an application to have someone declared a vexatious litigant you need to provide the Court with details of past actions and anything else they have done in other courts against you, and the cost to you both in terms of time and money.

Vexatious litigants are frustrating! For you and the courts.

If your application is successful, the person you get the order against will need to apply to the Court to get the Court’s permission before they can commence any further actions against you.

The only limitation is that such an order applies only in the Court that you obtain it, so if your vexatious litigant keeps changing courts you will need to make more than one application. Once you do have a successful application, you can use that as part of your evidence to support applications in other courts.

In my experience, obtaining one of these orders in one court has been sufficient to stop the litigant from continuing their claims in all courts. What is your experience?

Is a company as trustee of the trust the most “protected” structure?

Great question, and thank you to the lady who asked it. It generally depends upon the nature of the protection that you are seeking to obtain. Different structures have different benefits.

When you set up a private company you create a legal entity between you and the rest of the world. You will most likely be a shareholder and director in that company and provided that you comply with your obligations as a director, will not be liable as an individual for the activities of the company. If the company is simply going to act as trustee of a trust, then it should not be used as a trading entity and will then have minimal reporting requirements each year. Essentially a statement to say that there has been no money through the company, its not trading and therefore is solvent and able to continue to exist.

As trustee, the company becomes the public face of the trust and the fact of the existence of the trust does not need to be publicly known. A trust is one of the most private structures that you can set up. Banks and finance companies will require disclosure of the full legal structure you are using and will know the relationships, but the public won’t. A great example is a corporate trustee purchasing a property on behalf of a trust. The registered title for the property will show that the company is the owner. Anyone suing the company won’t get very far because there is no money or property in the company, it’s in the trust.

Different structures have different benefits

When property is held in a trust it is hard to get at. Trusts can be set up to provide the beneficiaries (the people ultimately entitled to the benefit of the trust property) with income from or distribution of the trust assets either at the discretion of the trustee or upon fixed events. Anyone wanting to get something from a beneficiary cannot access the trust property as long as it remains in the trust.

Please note that the Courts may have powers in separations and family breakups which may enable the Court to make orders accessing trust property regardless of whether or not it has been distributed. There are also circumstances where the Courts can declare that a trust exists or that in the circumstances an expectation of distribution from the trust has occurred, enabling access to the trust property.

If you are prepared to spend the money there are apparently ways to make it next to impossible for others to get at your assets. It does depend on the expertise of your advisors and how accessible you want things to be. Also consider what would happen to it all if you died tomorrow and how you would be able to pass it on to a charity or loved one.

Is there more you'd like to know, or a personal experience you'd like to share?

Are you being pursued for legal costs?

Unfortunately, despite everything the legal profession has tried to put in place to ensure that clients are not unduly surprised by their legal bills, it does still happen. I had one client admit to me that after their experience with the legal profession, any quote for services they received; their expectation was that the bill would end up at double the quoted amount.

Law firms, like any other business, still have to recover their fees and are in a better place than most businesses to start court proceedings to get them.

A friend received a bill from lawyers for about five times the amount they had expected, and after they had attempted to make very clear to their lawyer that they did not have funds to get involved in court proceedings. Despite what my friend thought had been clear, the lawyer sent a letter which pushed the other party to start court proceedings. When she failed to pay, they sued for their fees in the Magistrates Court. In responding to the claim she was self represented due to lack of funds.

Without seeing the claim and based upon the circumstances my friend explained to me, I made these suggestions:

Your defence may not answer the claim. You need to deny that any monies are owed, and that if any monies are owed (which is not admitted), then the costs charged are excessive and unreasonable.

Essentially I would expect that they have claimed that you retained them, you instructed them and they performed work for you, for which they now say you should pay.

You should admit that you attended their offices the day you did but deny that you retained them, stating that you expected that interview to be an initial interview prior to provision of services, then state that, in accordance with your expectation that that interview was an initial interview for which there would be no charge, you were not provided with a retainer agreement at that time or until a time when they knew or ought to have known that you would not have the opportunity to review it (being overseas).

As an alternative, it was unreasonable to have two persons present for that interview charging at a senior lawyer rate and that the costs for that interview were excessive and unreasonable in the circumstances.

You cannot deny that they performed work for you, which in fact you have admitted anyway. You can however state that the services provided were not the services that you requested and that you deny any liability for the cost of services not requested by you. This is relevant to your specific instructions that they not involve you in court proceedings and, contrary to those specific instructions they took action which they knew or ought to have known would do exactly that.

What you are counterclaiming is that there was no contract in the first place – a contract requires a meeting of minds, which there was not. And, in the alternative, if there was a contract for services (which is denied) then they were negligent in the performance of those services, causing you loss and damage as you have set out.

After providing the law firm with an amended defence my friend reached an agreement to pay one quarter of the costs sued for over a period of 12 months.

Is insurance enough to protect me in the personal development business?

Protection from what? Just as there is no justice in the legal system there is no sure fire way of protection yourself from every possible outcome in a business. It’s a risk assessment exercise, starting with identifying the risks.

In a personal development business you are asking people to pay you money without any guarantee of results. The reason that you can’t guarantee results is because personal development is just that, personal! You can work with someone with all the best intentions in the world, and still they will resist and look for excuses and avoid doing what you might be advising is best for them. So, lets consider some of the risks:

1. Not happy, they want their money back.

Insurance is not going to protect you in this situation. What you need to do is be very very clear and the start of the relationship what it is that you are providing. As an example, if you use a set monthly fee, paid in advance, and that fee entitles the client to a certain amount of time with you, be clear what is going to be included in that time and what happens if they fail to show up. Be clear that the fee is for your time, not their results and that results will vary based upon the actions they take. Have something in writing that your client needs to sign before they pay, so that they understand what they are paying for and what you will do in exchange for that payment. Never promise what you can't deliver. Be mindful of who you chose to work with and be prepared to repay monies. Ultimately it will be a learning experience for you and of greater value to your business to investigate and learn from the complaint and move on.

"Never promise what you can't deliver"

Where services are provided to support a business, then you can include a limitation of liability in your terms of service to the cost of providing the service again. This does not apply to services provided for personal use and is a limitation that is available under Fair Trading legislation. It is worth considering this type of limitation if you are dealing with people in business so that they cannot make a claim against you for consequential loses in their business.

2. Your client does something stupid and you get the blame.

I may have stated that a little flippantly, but you really have no control over the actions of another person and it is possible that could end up on the receiving end of a complaint resulting from your work with the client. I am aware of a number of investigations into personal development companies where people have actually committed suicide after attending a course. It does not mean that the company did anything wrong, it could mean that the person was unstable and the environment was not suitable for them and they never should have been there in the first place. Unfortunately you can only work with what you know, so asking if someone has mental health problems or has ever or is receiving treatment for mental health concerns is a good question to ask before you start working with someone.

Some form of professional indemnity insurance may assist you in these circumstances. Be clear on the terms of your insurance policy and what it covers and what kind of evidence they will require from you in the event of a claim. You should keep notes of your sessions with each client including what you covered, any particular exercises you recommended, your impression of their responses and any improvements to your practice that you feel you could have made. Records like this can assist you in demonstrating what you have done without having to rely on memory alone.


3. Injury in your premises

If you are going to run a business from home or any premises, you might consider getting public liability cover so that a claim from anyone tripping over a bump in the carpet and losing a tooth on the door frame will be covered.

For more details about the type of insurances suitable for your business, seek the services of a professional insurance broker in your industry. Professional industry bodies (for coaches, consultants etc) are the best places to start as they generally have established relationships with insurance providers who already have an understanding of the nature of your business.

Joint Venture - what do you need to think about first?

Some people might think that the term 'Joint Venture' is pretty self explanatory, but for those who don't agree, here's a quick run down on the key features:

• you can joint venture with as many parties as you want
• a joint venture has a specific limited purpose
• usually has a limited time frame, either the end of the project or a specific date
• doesn't make you automatically liable for the whole deal (which is different from a partnership)
• defines each parties contributions and liabilities
• can be amended and repeated

So, why do you need to think about before getting into a joint venture? The first and most important thing to decide is the purpose of the joint venture. If one person has a product and the other person has a marketing system and distribution list, the joint venture might be for the purpose of distributing as many items of product to the list as possible over a given period.

You can also joint venture for creation and production, which is what commonly happens in property development. One party might provide the property, another the plans and council approval, the builder might contribute the labour and materials and a division of profits is agreed based upon contributions made.

So, after deciding what the purpose is, then decide who is involved and what they agree to contribute to the venture. It is especially important to determine who is responsible for driving the project forward and chasing up deadlines for contributions. Its great collaborating, but there needs to be accountability somewhere or things just won't get done.

Work out what the financial set up is going to be. The joint venture should have its own financial records, bank accounts etc and definately not be co-mingled with the business or personal details of any of the parties. What is required will depend on where you decide to base the joint venture.

Find out whether or not the joint venture needs a registered business number or any tax registration before you get started. Also be clear as to how the tax implications are to be dealt with in regard to each of the parties. Generally joint ventures are established so that each party to the venture is responsible for their own tax obligations based upon their expenses and earnings from the venture. Having this clear before you start is a lot easier than trying to work it out afterwards!

If you're going to produce something that has ownership rights, like a property development, a book, a website or even a software program, then before you start know who is going to own it at the end and what rights the other parties have to it. For example, the copyright in a book might be owned by one party, but one of the other parties might have permission to publish copies of the book as well.

Also think about confidentiality. What if you all come up with a great business process. Can you all continue to use that at the end of the venture? What about selling the process commercially if it is so great? What about any client lists that might be produced? Who gets to keep them and what are they allowed to do with them, or do they have to be destroyed?

Work out what happens when the venture comes to an end. Who takes what? Who is responsible for tidying up and closing off any legal or accounting reporting requirements? Who keeps any books or records produced?

So, you're quick checklist when thinking about putting together a joint venture could be as follows:

1. WHY - purpose for getting together in the first place
2. WHAT - everything you can think of that needs to be done for the venture to be successful and the party responsible for getting it done
3. WHO - parties, who is driving the venture forward? who can sign agreements?
4. WHEN - start, finish
5. WHERE - is there a choice of office, country, base, bank
6. HOW - responsibilities, liabilities, set up and tidy up

There aren't may contracts that are legally required to be in writing, but if you want to save time, money and angst in the long run, you are best to get your joint venture agreement in writing before you start. If you want more of an idea of how a JV agreement is put together, do some online searching and have a look at what other people have done. Be aware though, that copying someone else's agreement won't necessarily be the best way of achieving what you want to achieve. If you want to say money then by all means put something together yourself, but get it checked through by a lawyer to make sure it achieves what you want it to. Its not worth saving a couple of grand up front to lose a hundred grand at the end!

What does 'Not for Profit' mean?

Good question.

Lets start with what it doesn’t mean.

• A ‘not for profit’ or ‘non-profit’ organization can make a profit, and in fact any prudent person will realize that if it doesn’t make a profit it’s not going to last for very long.
• ‘Not for profit’ is not a legal term defined in legislation to identify a particular type of organisation. It is a part of common language.
• Just because an organization is ‘not for profit’ does not mean that it is a recognised or registered charity, nor that it has to be.

Ok, so we know its not a legal term, not necessarily a charity and it can make a profit. So why is it called a ‘not for profit’ (NFP)? The term is used to describe organisations which are not operated with the primary aim of making a profit for shareholders, but rather have a focus of providing programs and services of public benefit.

More consideration of the influence of the language we use has generated an increasing number of alternative descriptions including: ‘for social profit’, ‘civil society organization’, ‘citizen sector organization’ and ‘public sector organisation’. To avoid any public confusion in the near future, it is advisable for such organisations to explain their NFP position until people (including governments and courts) are more familiar with the new terminology.

Changes in terminology do not affect the fact that there are numerous ways of structuring a NFP organization to meet the needs for which it is established. Many professional membership organisations are structured as incorporated entities with Boards of directors and members. The members may have similar voting entitlements to shareholders, but will never be entitled to any distribution of the profits of the organization, whether by dividend or upon the dissolution of the company. The usual structure requires that, upon the dissolution of an NFP for any reason, any surplus monies left with the liabilities are paid must be distributed to another organization with a similar purpose.

Other NFPs are structured without membership at all and simply have a Board who appoint their own replacements. No model, corporate or otherwise, need ever be permanent. Some aspects may be changed with the involvement of members, and other parts may be changed at the board level to facilitate operations.

In Australia, NFPs are generally either incorporated associations governed by stated based laws under the administration of the Departments of Consumer Affairs or Fair Trading for each state, or incorporated nationally pursuant to the Corporations Act which is administered by the Australian Securities and Investment Commission (ASIC). The compliance and reporting requirements differ between incorporated associations and companies.

NFPs that are correctly founded and able to demonstrate the requirement that funds will not be distributed to members may apply for tax exemptions. Application for recognition as a charity and a tax status which allows for people to claim tax deductions on their donations is a different and more involved process. There are only limited circumstances under which an NFP can gain what is called deductible gift recipient status.

So there you have it. A NFP can be structured in a variety of ways, has a purpose for public benefit, can make a profit, may seek tax exemptions and must reapply its profits in support of the purpose of the organization or else give them to another organization with a similar purpose.

The bad man – the difference between law and ethics

Being hidebound in legal education I was recently surprised by the expectation of an advisor to the health profession that ethical obligations should not and could not be negotiated. Confounded by the concept that ethical obligations could possibly surpass legal obligations, I sought support from other sources to help me to explain that the law is obligatory and ethics are an optional extra. After a little searching, I found this wonderfully simply explanation going back to the 1880’s at the beginning of an otherwise jargon filled law journal article by Neil Andrews. *

Paradise Lost?

Oliver Wendell Holmes, like Satan in Paradise Lost, remains the most memorable character in the story of Anglo-American law. One hundred years ago, on the 8th of last month, as an Associate justice of the Supreme Judicial Court of the State of Massachussets, Holmes introduced another serpent into the garden of American law. It was released amongst the lawyers of Massachusetts, law students and their parents at the inauguration of a new hall at Boston University Law School. In his speech, 'The Path of the Law,' he invited his listeners, interested to know where the limits of the law are, to consider the law from the point of view of a 'bad man'. This will clarify for them the difference between law and morality and ethics.

You can see very plainly that a bad man has as much reason as a good one for wishing to avoid an encounter with the public force, and therefore you can see the practical importance of the distinction between morality and law. A man who cares nothing for an ethical rule which is believed and practised by his neighbors is likely nevertheless to care a good deal to avoid being made to pay money, and will want to keep out of jail if he can....

If you want to know the law and nothing else, you must look at it as a bad man, who cares only for the material consequences which such knowledge enables him to predict, not as a good one, who finds his reasons for conduct, whether inside the law or out-side of it, in the vaguer sanctions of conscience. ...

What constitutes the law? You will find some text writers telling you that it is something different from what is decided by the courts of Massachusetts or England, that it is a system of reason, that it is a deduction from principles of ethics or admitted axioms or
what not which may or may not coincide with the decisions. But if we take the view of our friend the bad man we shall find that he does not care two straws for the axioms or deductions, but that he does want to know what the Massachusetts or English courts are likely to do in fact. I am much of his mind. The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law.

Onara O'Neill has recently provided a catalogue of virtues in her argument that there is a link across what is generally seen as the dichotomy between abstract principles of justice and the 'particularities of virtuous lives' making both just institutions and virtuous lives interelated. These virtues can be found in institutions, such as companies. They are the best form of citizen and act differently from Holme's bad man.

the virtues of justice include justice itself, as well as varied forms of fairness, of toleration and respect for others, of fidelity and probity, and of truthfulness and honesty.

Holmes went on to speculate that that it might be desirable if 'every word of moral significance could be banished from the law altogether.' This would be 'a law with no duties, rights, or wrongs; no conception of good or bad faith, of reasonable or unreasonable conduct; and no notion of justice or injustice.

Unlike the Critical Legal Scholars of almost a century later Holmes was not advised to leave the academy for inducing cynicism and despondency amongst law students. He was not attacked by a number of judges for introducing students to concepts which would make them unfit for legal practice. Four years later he was appointed as an associate justice of the Supreme Court of the United States where he sat for the next three decades. On his ninety-second birthday President Franklin Roosevelt called at his house. The same President stood in the rain by his graveside when he was buried at Arlington National Cemetery. Hollywood held him up to American youth as an exemplar in the film, the 'Magnificent Yankee'.

In 1880 Holmes had introduced his first snake into the Eden of formalist law in the lectures he gave on the common law at the most-Bostonian Lowell Institute. This was most appropriate. The Lowells, like Adam and Eve, talked only to God. From these addresses developed his book The Common Law. It opened with the words:

The life of the law has not been logic: it has been experience. The felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have had a good deal more to do than the syllogism in determining the rules by which men should
be governed. The law embodies the story of a nation's development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics. In order to know what it is, we must know what it has been, and what it tends to become. We must alternately consult history and existing theories of legislation. But the most difficult labor will be to understand the combination of the two into new products at every stage. The substance of the law at any given time pretty nearly corresponds, so far as it goes, with what is then understood to be convenient; but its form and machinery, and the degree to which it is able to work out desired results, depend very much upon its past.

*For the academically minded, footnotes have not been included but you can find a full copy of the article here: Neil Andrews – “Wormes in the entrayles: the corporate citizen in law?”, Murdoch University Electronic Journal of Law, Vol 5, No 2 (June 1998)

http://www.austlii.edu.au/cgi-bin/sinodisp/au/journals/MurUEJL/1998/16.html?query=law%20and%20ethics%20and%20conflict

Starting a business

People start new businesses all the time and you don't need to go through any mysterious legal process to do so; you just get started! The only real legal obligation that you have went starting a business is to account for the income you make, and that (in Australia at least) can be done with your personal tax if you don't have a separate structure in place.

You certainly will need to work out a few things, but before you go and spend a great deal of money, why not try something out and see if it works first? Baby steps. The first thing you really need to look at is your worst case scenario.

What is the worst that can happen if I pursue this business? How much can I lose financially if I jump in right here, right now? If you hear a presentation about a franchise business and the non-refundable fees that you must invest just to get the details are more than you can afford to lose right now, then don't do it. You don't want to feel obliged to continue because of the money already spent.

By all means set everything up legally if that fits your risk profile and you feel more comfortable doing it that way. Just don't let "getting it right" be an excuse to stop you from pursuing your dream. Richard Branson ran into trouble with the tax office with his first business. He accepted that he made a mistake, learnt a lot, paid all his obligations and never made the same mistake again. Learning experiences are the foundation of successful businesses.

Once you have a concept working and making a little income, there are a lot of reasons for setting up a legal business structure:

• professional image
• privacy
• asset protection
• risk reduction
• growth
• succession planning
• ability to bring in other people
• ability to on-sell the business
• reduced tax
• ability to claim business expenses and other deductions against income

We're going to look briefly why you might start looking at separating your business from yourself.

Firstly, lets say you are operating a successful home business, say as a tradesman. You might have started out small, doing $2,000 a month in business. Well done!

You might have your business in your own name as Fred Blogs, electrician and you pay personal income tax on your profits. So what's your position?

- the business is you, so you don't necessarily have anything to sell

- the business is you, so you are personally liable if anything goes wrong

Lets explain.

People find it much easier to associate value with tangible things. If you have a business set up in an entity that is separate from yourself, say 'Sparky Pty Ltd', then people automatically imagine that there is a separate business in place. Its easier to identify that the contacts recorded by the business are customers of that business and not just a bunch of numbers in your phone. It might also be easier to identify what tools of trade belong to the business and which ones belong to you personally.

In terms of risk, a typical company has $2 worth of shares and not a lot in the way of assets. If a customer's house burnt down due to faulty wiring and their invoice is in the company name, they sue the company. If your business, your house and your car are all in your personal name, anyone suing you successfully could in effect take the house and car away to pay the debt.

What you do with your business essentially comes down to two things, which cover all businesses, no matter what size or stage of development are value and risk.

If the risks inherent in your business are small and you have no immediate desire to be able to sell it, get started! If the risks inherent in your business are likely to be high or you are putting your business together for the specific purpose of being able to on-sell it in the near future, then set up a separate entity.