ISSUE No. #27 - August 2008
IN THIS ISSUE
• Confidential Information – Important Confidential information –
Lessons for Employers ............................ 1
• GST compliance for property dealings –
a moving target........................................ 2
important lessons for
• Business Succession Basics....................... 2
• Pre-Nuptial Agreements and other
Relationship Agreements......................... 3 The need for employers to protect their confidential
• Use of trade marks on imported goods ....... 4 information has been highlighted by a recent decision of the
• Scam alert! ................................................. 4 NSW Supreme Court. On 4 June 2008, the Court made
• What’s New at Moores................................ 5 orders restraining a former employee from using certain
documents, but did not restrain him from using information
“which he may have retained in his mind”.
Editorial Leanne Tully
Case Note – Digital Products Group v Opferkuch
th Workplace Relations
Welcome to the 27 issue of Discovery. In In this case, Mr Opferkuch accidentally copied his former
this edition the important issue of employers employer into an email quoting detailed sales and pricing
protecting their confidential information is figures relating to the former employer, Digital Products Group (‘DPG’).
discussed. This gave DPG the evidence it needed to show that Mr Opferkuch was
using its price and sales figures in his new job. The implication was that he
We look at GST compliance for property had taken actual documents from DPG, because the data was “not of the
dealings – just when you thought GST was a
kind likely to be carried in someone’s head”.
known quantity along comes a Court case to
challenge the way you might be reporting
GST. Again we look at the issue of business The Court ordered that Mr Opferkuch should not use, copy or show any
succession and the importance of getting the documents containing certain information relating to DPG. However, the
basics right. Court refused to order that he should not use unwritten information relating
to DPG. The Judge stated that he would be entitled to make use of his
We explain how your assets can be protected general knowledge of DPG’s sales and pricing in his new employment.
by pre-nuptial agreements and other
relationship agreements. This is an important DPG attempted to rely on a Confidential Information clause in its written
issue for the professional advisor who must offer of employment to Mr Opferkuch. However, the Judge indicated that
ensure that existing agreements for their the clause restrained the disclosure of certain unwritten information and not
clients are valid or open to challenge under
the use of that information, and said that the clause may not have been
the Family Law Act.
binding because Mr Opferkuch never signed the document.
In our “What’s New at Moores” section we
introduce some new recruits and explain the Important Lessons:
renovations being undertaken within in our
office. 1. Ensure that all employees with access to sensitive information agree in
writing to keep that information confidential.
We trust you will find the articles and
2. Ensure that the confidentiality agreement or clause is worded
comments of interest and assistance to you in
managing your business and personal appropriately, so that it is wide enough to be useful, but not so wide as
investments. to be unreasonable.
3. Include in the confidentiality agreement or clause the following points:
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discovery : issue No. #27 August 2008
(a) a definition of confidential information should not apply since there had been no "supply" of
specifying the documents and information the land.
the employer wishes to protect – including
any exceptions such as information forming After contrary decisions by the Administrative
part of the employee’s general skill and Appeals Tribunal and the Federal Court, the case
has now been decided by the High Court of
(b) details as to the things an employee must Australia. Unfortunately, the decision is not in favour
not do – such as use, copy or disclose the of the taxpayer. The Court decided that a forfeited
confidential information; deposit will attract GST where the deposit was in
relation to a "taxable supply".
(c) any limits on the confidentiality obligation –
such as time-frames beyond which certain Keep the following things in mind:
information ceases to be sensitive;
(d) clear obligations regarding the return of • The case does not only apply to property
documents and information upon transactions. The ATO considers that this
termination of employment; decision is equally applicable to contracts for
other goods and services.
(e) agreement that it may be necessary for the
• If you're the seller, seek advice before asking for
employer to obtain an injunction as well as
a higher deposit - to do so may result in you
having to report the deposit as a "part payment"
and may result in a premature GST liability.
4. Ensure that restraint clauses are used where
necessary. DPG was in a relatively unusual • In order to claim an input tax credit for your
position in having the evidence of its former forfeited deposit (if you're the person who
employee’s activities sent to it by email. For couldn't complete the deal), you MUST have a
many employers, it is difficult to gather evidence tax invoice.
of breaches of confidentiality obligations until it
is too late. A restraint clause can be used to • Do your sums and consider the GST
prevent a former employee from competing with consequences before telling your lawyer to bring
a former employer. As with confidentiality the contract to an end.
clauses, restraint clauses must be carefully
worded to ensure they are enforceable.
For assistance in preparing employment agreements
which protect your confidential information and the Basics
goodwill of your business, contact our Workplace In Discovery 24, we talked about the
Relations Group. importance of arranging for business
succession in your business and how
it might be achieved, whether you
GST Compliance for wish to pass your interest in the
business to your business partner,
property dealings – a the next generation or upcoming
moving target Cecelia Irvine-So
Senior Lawyer -
Commercial We touched on the importance of
Just when you thought GST was a
Group considering what will happen to
your interests in your business if
known quantity, along comes a Court
you were to unexpectedly die or become
case to challenge the way you might
permanently disabled. It was noted that it is
be reporting GST. important to consider:
The Reliance Carpet case
• whether you would effectively place your spouse
into your shoes, running the business with your
Reliance sold a piece of land for current business partner;
Principal, almost $3m plus GST. The purchaser
Property Grouppaid a 10% deposit, but failed to pay • whether your spouse could or would be able to
the balance on the settlement date. discharge your functions;
Reliance issued a rescission notice and terminated • whether, where your spouse could not discharge
the contract when the purchaser failed to pay the those functions, your business partner would be
monies due. The 10% deposit was forfeited to prepared to pay them your share of the profits;
Reliance under the terms of the contract. and
• whether your business partner could afford to
The ATO decided to assess GST on the forfeited buy out your interest in the business.
deposit retained by Reliance, effectively taking
1/11th of the deposit as GST revenue. We discussed how many businesses implement
Understandably, Reliance objected - it said GST Buy-Sell Agreements funded by life insurance, to
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discovery : issue No. #27 August 2008
ensure that on the unexpected death or disability of Lastly, the temptation to own insurance via the
one of the partners, the outgoing person is paid their business and claim a deduction can lead to the
insurance proceeds and the other person takes over proceeds not being CGT free, as they may be
their interest in the business. considered to have a revenue purpose for lost
profits, rather than a capital purpose.
Some of the key issues in relation to voluntary exit
agreements were raised – that is, dealing with what The lesson with business succession matters and
happens if there is a “falling out” or somebody wants buy-sells, is to make haste slowly and to consider all
to leave the business, and how the interest in a of the available options, as relative costs and
business is valued and paid where there is no life benefits need to be considered from the perspective
insurance. of each party.
A current trend in business succession is to own life
insurance in one’s superannuation. Pre-nuptial agreements
The abolition of RBLs has made the ownership of life and other relationship
insurance in superannuation more attractive.
Previously, any proceeds received above the RBL agreements
would be taxed as excess benefits at the top
marginal rate plus Medicare levy. Family lawyers can draft legally
binding agreements to protect clients
However, owning life insurance in superannuation in the following diverse
does have some restrictions and it is important to
note these before plunging in:
a) a pre-nuptial agreement in
contemplation of marriage –
• Whilst the tax deduction can be claimed for the
Stephen Winspear section 90B Family Law Act
premiums, the deduction is claimed within the Principal, (“B” stands for before
fund and is only available for life and TPD (Total Family Law Group
and Permanent Disability Insurance). marriage);
• Trauma insurance, such as insurance in the b) an agreement entered into during the marriage
event of a heart attack, is generally not obtained governing division of property and maintenance
via superannuation and there is no permitted after separation but prior to divorce – section
deduction. There is also debate about whether 90C (“C” stands for current marriage);
the ownership of trauma insurance can render a
super fund non-complying, because a trauma is c) an agreement governing division of assets and
not necessarily consistent with the sole purpose spouse maintenance after divorce – section 90D
of superannuation which is to provide for (“D” stands for divorce); and
• Tax might still be payable on the proceeds as d) cohabitation agreements under state or territory
they are paid out of the super fund in the laws for de facto couples (usually applicable to
absence of a superannuation death benefit both heterosexual and same sex couples) –
dependent (at 30% plus Medicare levy). these can be entered into prior to cohabitation,
• Practically, there still may be access issues in during cohabitation or after separation. They
relation to the proceeds coming out of the fund. are binding under most state and territory laws
Where the purpose of the superannuation fund but specific advice should be obtained.
and/or the conditions of release do not accord
with the policy purpose, proceeds can still Estate planners and accountants need to beware as
become trapped. to whether existing agreements for their clients are
valid or open to challenge.
• Ultimately, there is usually some tax to pay on
TPD proceeds, when paid out of the fund to the
A recent decision of the Full Court of the Family
Court, Black v Black (2006) 205 FLR 137, has cast
The lesson is that care still needs to be taken, and doubt on the validity of many pre-nuptial agreements
consideration given to ownership of life insurance in (and post-nuptial agreements) previously prepared
super just as in any other manner. Sometimes, under the Family Law Act.
banks and financial institutions also set up situations
where insurance for all relevant parties is owned by The basic question in that case was whether the
one trustee, and then the trustee holds the proceeds Family Law Act provisions specifying how to enter
on trust for the beneficiaries. This can lead to tax into binding financial agreements are to be
issues, and also has fees involved which ought to be interpreted very strictly or liberally. The answer was
considered up front. that they should be interpreted strictly so the
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discovery : issue No. #27 August 2008
agreement in that case was invalid. lemonade, first concocted in 1922, to allow cyclists
“who wanted a more refreshing drink so they could
Therefore it is now clear law that agreements must continue on their journey without falling off their
include in the body of the agreement a statement bicycles!”
that each party acknowledges that before signing the
agreement they have received independent legal US wine company E&J Gallo Winery had already
registered the trade mark "Barefoot" in Australia in
relation to wine, and sued Lion Nathan for
(i) the effect of the agreement on the rights of infringement of its trade mark. Lion Nathan in turn
that party; and brought action against Gallo to have its "Barefoot"
(ii) the advantages and disadvantages, at the trade mark removed for non-use.
time that the advice was provided, to the
party of making the agreement. In its June 2008 judgement, the Federal Court of
Australia made some important findings:
This applies to all agreements drafted to date under
sections 90B, C or D of the Family Law Act. As a • beer and wine are sufficiently different goods
result, many completed agreements may now be that Gallo's registration of the "Barefoot" trade
invalid! mark in relation to wine did not prevent Lion
Nathan from using the trade mark "Barefoot
I recommend that estate planners and accountants Radler" in relation to beer; and
check every pre-nuptial agreement on their files to
see that they comply with the above or else their • Gallo's trade mark should be removed for non-
clients will be at serious risk. There are also other use, because Gallo had failed to use its trade
technicalities which may render pre-nuptial mark in Australia.
agreements (and post-nuptial agreements) invalid. If Two simple lessons can be learned from this case:
professional advisers fail to refer their clients for
advice about these matters, and the client is • registration of a trade mark in relation to certain
inadequately protected at the end of their domestic goods or services does not prevent another
relationship, I believe that in some circumstances person from using a similar trade mark in
there may be an argument that that adviser was relation to different goods or services; and
negligent. If you have any doubts, recommend to
your clients that they obtain family law advice as • failure to use a registered trade mark leaves it
insurance against any future difficulties. vulnerable to be removed for non-use.
Note that the Commonwealth Parliament may pass This judgement also has a number of technical
legislation later this year to bring de facto implications that are potentially quite important,
relationships under the Family Law Act for all though beyond the scope of this article. These will
purposes. That is, separating de facto partners undoubtedly be raised by Gallo in its appeal, which it
would be treated like married couples when they has already lodged.
separate. In anticipation of this happening, all
cohabitation agreements being entered into at this
time should mirror the provisions of the Family Law Scam alert!
Act and include the provisions referred to above. We have recently received a number of letters
This will maximise their chances of being encouraging Australian businesses to register to be
enforceable in future.
listed in the Industry and Commerce 2008 business
This is a very technical area of family law, but real directory. The letters originate from Spain and
and binding benefits are available here if these appear quite legitimate and professional. The letters
matters are handled carefully. We would be happy give the false impression that there is an existing
to assist if you have any queries or if you would like listing in the directory, and that the contact details
to refer clients to us for advice about their proposed merely need to be confirmed or updated.
On signing up, businesses commit themselves to
appearing in the next 3 editions of an essentially
Use of trade marks on worthless business directory, and are charged
$A1,300 per edition. The fine-print also states that
imported goods the listings will continue beyond the initial 3 editions
In January 2008, Australian brewer
Lion Nathan launched "Barefoot At least two Australian Government agencies,
Radler" a beer with a lemon and lime Austrade and the ACCC, warn about this scam.
twist. The name "Barefoot" was Similar scams also exist in relation to trade fair and
intended to convey a relaxed, exhibition directories, and underscore the importance
Nils Versemann summery feel. The term "Radler" of reading documents carefully before signing them,
Senior Lawyer means "cyclist" in German, and particularly where you are not familiar with the
also describes a type of beer with person you are dealing with.
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discovery : issue No. #27 August 2008
What’s New at Moores…
Welcome to Nawal Ismail and Joelle Blackburn
Joelle Blackburn has recently joined Moores Legal as its Human Resources Manager. Joelle
has worked in Human Resources for over twenty years and consulted in that area for
numerous industries including manufacturing, telecommunications, insurance and professional
Nawal Ismail is a new addition to our Commercial Group and comes to us from a Melbourne
CBD law firm. Nawal studied in Singapore, USA, Sydney and Melbourne and has travelled
extensively throughout Asia, Europe and the Middle East. Nawal is also fluent in oral and
written Malay. Nawal is a commercial lawyer and has worked with small to large corporate
entities on commercial, property and litigation matters.
We welcome both Joelle and Nawal and look forward to working with them.
If you have been a recent visitor to Moores Legal you will have noticed the renovation works
on the ground floor of our building. With the steady increase in numbers in our different
practice areas we have enlarged our office space. Our private client areas of family law and
personal injury together with our administration group now taking up a major portion of the
ground floor. Our reception and meeting rooms remain on level 1.
MURRAY BAIRD – Business and Corporate Law ANDREW SIMPSON – Estate Structuring & Probate and Elder Law
• TIM ADAM – Personal Injury and Employment Law • ALLAN SWAN – Estate Structuring & Probate
• ANDREW SCOTT– Business and Sports Law • JENNIFER DIXON – Estate Structuring & Probate
• STEPHEN WINSPEAR– Family Law • PETER SZABO – Family Law
• PETER LOFTUS– Property and Finance • ANDREW BOER – Commercial and Property Law
• PHILIP CURTIS– Estate Planning & Structuring
• ANDREW SUDHOLZ– Commercial and Property Law Consultants
TIM CONNOR – Personal Injury Law
• DAVID WELLS – Commercial Dispute Resolution
PETER ANDREW – Employment Law
STEVEN SAPOUNTSIS – Commercial Dispute Resolution
TERRY FRASER – Aged Care
9 Prospect St. Box Hill Vic 3128
Lv 10, 350 Queen St. Melbourne Vic 3000
12/1140 Nepean Hwy, Mornington Vic 3931
Telephone:  9898 0000 Facsimile:  9898 0333
email@example.com www.mooreslegal.com.au www.MooresTraining.com.au