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.