Business Matters Newsletter – December 2013
Published on December 19, 2013 by Selwyn Black
MORE TROUBLE FOR HEAD CONTRACTORS
An Act has been passed in NSW which changes payment requirements in the Building and Construction Industry.
The Building and Construction Industry Security of Payment Amendment Act 2013 amends the Building and Construction Industry Security of Payment Act 1999 where it relates to payments to be made under construction contracts.
Changes to be introduced include that subcontractors need to be paid within 30 days. In construction contracts “payment claims” will no longer need to state that they are payment claims made under the Act, but must now be accompanied by a supporting statement that all subcontractors have been paid all amounts owed to them. Contractors can be prosecuted for lying about paying subcontractors, with fines up to $22,000 or possible jail time. Another change is that a head contractor must pay retention money into a trust account that operates according to the regulations.
The requirement to pay subcontractors within 30 days has been criticised by The Master Builders Association as being overly harsh on builders/head contractors because the legislation does not ensure prompt payment between clients and builders. This means that head builders could be short on funds, and some head contractors/builders could go to the wall, reducing competition and increasing construction costs.
The amendments will not apply to construction contracts entered into before the Act commences.
For further information contact Selwyn Black (sblack@codea.com.au) Ph: (02) 8226 7359.
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On 12 December 2013 the High Court handed down judgment in Australian Competition and Consumer Commission v TPG Internet Pty Ltd. The High Court considered whether TPG’s advertisements breached Australian Consumer Law and the Trade Practices Act, and if so, what should be taken into account in determining the penalty.
From September 2010 to November 2011, multi-media advertisements for TPG prominently displayed that its ADSL2+ broadband internet service could be obtained for $29.99 per month. In actual fact in order to acquire this, customers also needed to obtain a $30 per month TPG home phone service for at least 6 months. There was also an additional $129.95 setup fee and $20 deposit for phone charges. In the advertisements, terms that qualified the offer were displayed much less prominently. The ACCC believed that the advertisements were misleading and deceptive, and brought proceedings against TPG.
The High Court held that the advertisements’ “dominant message” was of crucial importance. Where the dominant message of an advertisement doesn’t fairly represent the offer, it will be deemed misleading. The Court found that even where consumers do not enter into a contract under the influence of a misleading advertisement, a breach of the law may occur at the point where members of the target audience are lured into the “marketing web” because of their incorrect belief that was formed because of the advertisement. This was held to be the case, even where the customer came to understand the true nature of the offer when the contract was entered into.
The High Court said that TPG advertisements tended to be misleading. The majority did not accept that this could be remedied or excused by the possibility that members of the target audience know that ADSL2+ services may be offered as a bundle.
In considering the size of the penalty, the High Court outlined three points that justified the seemingly hefty $2 million fine:
• the number of contraventions – 9 in total, taking into account the different forms of media
• TPG’s undertaking – in 2009 TPG made an undertaking under section 87B of the Trade Practices Act to the ACCC to not engage in misleading or deceptive conduct in general
• general and specific deterrence – the majority quoted a Federal Court judgment to highlight the role of deterrence considerations in assessing the appropriate penalty: “penalties must be fixed with a view to ensuring that the penalty is not such as to be regarded… as an acceptable cost of doing business”.
TPG is not the only telecommunications company to be fined for misleading or deceptive advertising – Optus was fined $178,200 in 2011 and $3.61 million in 2012.
In previous decisions the existence of an internal compliance and training scheme and other systems to reduce the risk of misleading consumers, have reduced penalties. The worst outcome of cases like this is often damage to corporate reputation.
For further information contact Troy Rollo (trollo@codea.com.au) Ph: (02) 8226 7358.
PATENT DECISION ON PHARMACEUTICAL METHODS
On 4 December 2013 the High Court issued its decision in is Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd & Ors.
Sanofi-Adventis Australia patented the use of the pharmaceutical drug, Leflunomide, as a method to treat or prevent psoriasis. The Australian patent on the preparation and composition of Leflunomide had expired. Apotex intended to supply Leflunomide products in Australia under the name Apo-Leflunomide for the treatment of active psoriatic arthritis and rheumatoid arthritis. The product information of Apo-Leflunomide stated that it was “not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease”.
Sanofi-Adventis Australia sued Apotex for infringement of the patent. Apotex counter-sued for revocation of the patent on multiple grounds.
The High Court held that medical treatment methods that make use of a previously unidentified therapeutic use of a pharmaceutical product are patentable in Australia, unlike in New Zealand and the UK. The Court came to this view because it found that a method of medical treatment can be seen to be a “manner of manufacture”, a requirement in order for an invention to be patentable.
Accordingly, Apotex’s application for the revocation of Sanofi-Adventis’ patent was refused. However, it was found that Apotex had not infringed the patent because the product information stated that Apo-Leflunomide was not to be used for the purpose that was the subject of that patent.
Conclusion
It is now clear that it is possible to patent methods of medical treatment using a pharmaceutical product to treat a particular disease.
It is still unclear whether surgical methods are patentable. In their joint judgment Justices Crennan and Kiefel said that the patentability of methods used by medical staff and doctors when physically treating patients is a different issue that did not need to be further considered in this case.
For further information contact Selwyn Black (sblack@codea.com.au) Ph: (02) 8226 7359.
REVIEW OF NSW RETAIL LEASES ACT
The NSW Government is looking at the law covering retail leases, the Retail Leases Act 1994 (NSW). Similar reviews of equivalent Acts have taken place in states such as Victoria, Queensland and Western Australia.
The Office of the NSW Small Business Commissioner and Registrar of Retail Tenancy Disputes suggests that the retail sector is changing.
They say retailers face new challenges such as rapidly growing online sales and overseas retailers entering the market.
The following issues are listed amongst those being considered:
• Information asymmetry – this relates to the claimed lack of information currently available to retailers when entering into a lease. For example, side deals (incentives negotiated between the parties) are not registered, making it hard for retailers to determine the whole of the true financial deal for other tenancies from looking at the register. The review asks whether information about side deals should be in a publicly available site/location.
• Outgoings – outgoings are the expenses incurred by a landlord in the operation, maintenance or repair of the property. This includes taxes. What outgoings should landlords be allowed to recover from tenants? Is there a way to provide more certainty as to what outgoings a tenant will have to pay the landlord? Will management fees be excluded?
• Fair dealings – should there be a requirement under the Act to act in good faith?
• Coverage of the Act – does the Act cover all that it should? For example, should the Act cover retail shops that are part of office towers?
• Technical issues – what is the appropriate way for provisions of the Act to be enforced? Should penalties/remedies under the Act be changed? Should the Act also deal with revenue from online sales?
You can view the Review Paper in full on the NSW Small Business Commissioner’s website.
The Government has invited recommendations or comments by interested stakeholders. If you would like to contribute, a survey is available at <http://www.smallbusiness.nsw.gov.au/RLA-review-2013> or send an email toretail.review@smallbusiness.nsw.gov.au.
For further information contact Selwyn Black (sblack@codea.com.au) Ph: (02) 8226 7359.
