Sole Director of a company – what happens when you die?

There are three key things to think about what happens when a sole director and shareholder dies:

  1. Section 201F(2) Corporations Act to the rescue

    If the sole director and shareholder of a company dies, section 201F(2) of the Corporations Act 2001 allows a personal representative or trustee to appoint a person a director of the company. A personal representative is the person who is appointed executor under a will, or the person granted Letters of Administration if there is no will and the deceased died intestate.

  2. When will the Court appoint a director and in what circumstances?

    In considering an application for appointing a director after the sole director and shareholder dies, the Courts have generally allowed a person to be appointed director where there was some evidence the deceased intended a particular person be appointed his or her executor. The Court normally considers whether an appointment should be allowed under section 201F(2) and takes a practical approach in making orders that would preserve the estate’s assets or allow the business to continue running.

    Consider two examples :

    1. Estate Frumar [2016] NSWSC 1116
      The deceased was the sole director and shareholder of his company which ran his ophthalmic practice. The deceased left a note described as “last will and testimony” that appointed the plaintiff as executor. The plaintiff sought a limited grant of administration for the deceased’s practice to be sold as soon possible to preserve the value the practice. In allowing the application, the Court noted that the likely beneficiaries of estate agreed to the application.
    2. Estate Assim [2015] NSWSC 337
      The deceased was the sole director and shareholder and also the sole signatory on the trust account of his real estate businesses. Two issues arose from the deceased’s death that hampered running the business. First, as there was no signatory on the trust account, rental monies could not be paid out to its clients, which disrupted the business. Secondly, there was a potential purchaser interested in buying the real estate business. The Court noted the second purchaser issue was not as urgent as the first immediate problem of potential damage to the business’ goodwill if monies could not be paid out to clients.

      The daughters of the deceased applied to be administrators of their deceased father’s estate. The Court granted the application, but placed limitations on their administration, including obtaining an undertaking that the company not be wound up and not to deal with the assets except of in the normal court of business.

  3. Complications where there is no will

    However, things get particularly tricky if the person dies without a will. Normally, the personal representative of an estate is the executor of a will. Where the sole director/shareholder dies without a will, someone, usually a family member, has to apply for Letters of Administration. This process can take a long time, and may be further complicated where there are competing persons applying for the role of administrator or if no one wants to apply for the role of administrator. Subject to the circumstances, this might be possible to obtain on an urgent basis.

    Another complication arises is if the deceased died intestate and no family member wants to apply for Letters of Administration. If there is no one will or can administer the estate, a creditor of the deceased may apply for Letters of Administration. A creditor may seek the winding up of the company, and this would bring the company and business to an end.

    The complications above emphasise the need for small companies and family businesses especially to ensure their estate planning is in order to ensure a successful business is not halted just because of the death of the sole director and shareholder of the company.

The best solution is to ensure that if you have a company in your group assets, adequate appointment is made for the Executor and a resolution passed conditional on this event. Ask us how to create a Strategic estate Plan that preserves the assets and entities.

Family Trusts and chain of succession

Hands up who is in business or has investments and use a Family Trust! That is a great many of us and there is a huge amount of wealth tied up in trust structures in Australia.

Now hands up who can explain how a trust works! In a large number of cases when we are discussing succession issues with clients there is a limited knowledge of the mechanics of trusts. The main problem is the misunderstanding by clients that they do not “own” the assets held in their family trust. All they have is a right to be considered by the trustee for a distribution of capital or income, if they are within the “class” of named beneficiaries. They might also be the “appointor” or “controller” of the trust. This is sometimes called the “guardian”. If so named in the document the person has the “power to appoint” the trustee and the power to change the trust terms.

Very often families accumulate wealth in real estate together in a family trust. If one of them dies there is not a separate identifiable part of the trust property that can be handed to their children as part of their estate. This can create a lot of problems in families where they have all interested their time and hard earned money in a collective enterprise “owned” by the trustee of the trust. What can you do?

It is important to check the financial statements to see if there are “loans” by any one family member to the trust or if the payments were recorded as a gift. Loans are able to be demanded back and repaid, including to an estate. This might also be created by amounts recorded as “distributed income” for tax purposes but the cash was accumulated and retained by the trustee. This is called an “unpaid present entitlement”.

The controller of a trust or person having a loan due to them can “forgive” the amount of the loan in their Will and it will stay in the trust without tax consequences. Unfortunately you have to die first!

The problem is dealing with a number of people that have different interests and a desire to separate that part of trust assets between them. Very often this can only be done by selling the trust property and distributing the cash. The other solution might be to transfer trust property by way of distribution but most often this will incur stamp duty and possibly capital gains tax.

An alternative solution might be to ensure a corporate trustee with all relevant family members as Directors and shareholders. A corporate “appointor” might also be inserted into the Deed by variation. The Directors could be the key family members and different classes of shares could be issued to them. In this way, without a change to the trust or a transfer of any property, recognition of the key family members could be achieved.

This also allows each key person to leave the shares in their Will and the company constitution could be changed to ensure that those shareholders then have a right to be appointed as a Director. The family group can hold their investments and perhaps the legacy that has been created, which in turn can continue to provide a source of income for a wider family group. This is a very technical process and one which you should seek specific advice every time. Remember all trust deeds are different and must be read carefully in the facts of each case. cheers

Decision Time- What happens when you face the end of life choices?

Enormous stress and guilt can result from a family member having to make an end of life or withdrawal of medical support decision for you. We advocate that as part of our clients’ Strategic Estate Plan, they complete and sign an Advance Health Directive.

This is a document that prescribes in different circumstances what health decisions and specific medical treatment you have decided on.

Pursuant to the Powers of Attorney Act 1998 you have been able to make binding decisions on the terms of the health care such as CPR, blood products, intravenous fluids, naso-gastric feeding and pain relief (not the full list).

Note the difference with merely appointing a person as your Health and Personal Matters Attorney under the Act, is that they are able to be called on to make a health decision, but they are not bound to make any particular decision.

This uncertainty may be abhorrent and unacceptable to many people who prefer to mandate an outcome or treatment in certain circumstances. I guess in the end we are all human no matter how successful in life we are and the thought of having to be artificially sustained for a long period of time might not seem like the best exit.

It can be tricker for people who end up having a fluctuating level of capacity due to a mental health condition. Cue the Mental Health Act 2016 by which an SOC an Advance Health Directive are recognised. It is possible to dictate the future mental health treatment when a person has capacity and used to provide “future” consent instead of involuntary treatment.

There is a positive obligations on doctors and health professionals to check available records and to report reasons for not following them.

The Form requires a consultation with medical practitioner who must take you through every medical procedure listed and in each of the circumstances whether it is persistent vegetative state, terminal illness or unconscious. Not the most pleasant topic but all the same very critical to many people in terms of having the chance to determine the outcome should the circumstances arise.


There is a push for a national framework to ensure consistent approach in all states.


Everyone is presumed to have capacity until proven otherwise.


In our view it is critical that clients address this difficult issue by getting a valid and clearly stated document signed at the same time as their will and Enduring Power of Attorney. Ask us how!

Data Breaches and what to do about it

Data Breaches and what to do about it

Any company that stores data for their clients, patients, or customers must check the regulations regarding privacy and notifiable data breaches.(NDB)

A  mandatory notification of data breaches  commences in February 2018, and the Office of the Australian Information Commissioner (OAIC) has put out three draft resources for public comment before  14 July 2017.

The statements are useful guidelines for companies bound by the Privacy Act.

The  resources deal with:

  1. Identifying eligible data breaches;
  2. Notifying individuals about an eligible data breach; and
  3. The Australian Information Commissioner’s role in the NDB Scheme.

Identifying eligible data breaches

To check if an incident meets the threshold for  an eligible data breach, the guide gives  further clarity on the meaning of  “unauthorised access“, “unauthorised disclosure” and “loss” .

How an organisation  determines whether there is a “serious risk of harm” to an individual  as a consequence of the breach and what needs to be done to determine this, is based on what a “reasonable person” in the position of the entity would do, not  the particular individual. Close attention must be paid to the language of the Act and guide.

There are  some examples provided of remedial action  which may mitigate the “risk of serious harm”. The guides help an organisation assess these new obligationsin their circumstances.

Notifying individuals about an eligible data breach

The obligations to  notify all individuals of a breach, notify only those who are considered at “risk of serious harm” from it , and  where it is impractical to notify individuals, to publish notification, are covered by the guide.

The guide touches on the risks and benefits of different approaches and the relevant considerations for the three options.

The guide also provides one example of a data breach involving more than one organisation. This is an issue that is likely to be of concern for a business where there is more than one entity  in the service supply chain and contracts between them do not deal with how they will jointly deal with a data breach. An NDB can greatly affect both of their reputations.


Australian Information Commissioner’s role in the NDB Scheme

This brief guide gives background about the role of the Commissioner in terms of receiving notifications and enforcing compliance with the scheme. It also provides a  section describing  the powers that the Commissioner has including to make a declaration that notification need not be made or may be delayed.

Internal Controls, Testing and Audited Systems


It is very clear that data integrity and how we secure that data is going to be a far greater issue for all business and organisations that store data. Greater cost will be incurred to operate business as usual and to maintain normal procedures. It is critical to assess the strength of your organisation now and prepare the plan to respond to data breaches, especially those which may have consequences of a “serious risk of harm”. They say information is King and it has never been more true than in this new digital age. Ask us how to assess your compliance and prepare a risk audit.


Selling a business- what cost employee entitlements?

Sale of a Business – employee entitlements – How can it go wrong?

The  cost of  failing to account or adjust for  employee entitlements can be huge so make sure on sale of a business you check the details carefully.

What you need to know:

  • Generally, where there is a transfer of business in accordance with the Fair Work Act 2009 (Cth) (FW Act), an employee’s service with the old employer (the vendor) counts as service with the new employer (the purchaser). However there are exceptions to this general rule.
  • Separate statutory principles apply to each of annual leave, personal leave, redundancy pay and long service leave.
  • Long Service Leave is regulated at the State level, and different rules may apply in different States.
  • Clear agreement as to how the employee entitlements will be dealt with in a sale of business should be reached prior to completion and  set out in the sale of business contract.

Dealing with employee entitlements (such as annual leave, personal leave, long service leave and redundancy pay) in a sale of business can be tricky.


Is there a transfer of business?

Is there a transfer of business as described in section 311 of the FW Act?.

Section 311 of the FW Act provides that there is a transfer of business if:

  • the employee’s employment with the old employer (the vendor) has been dismissed;
  • within three months after the termination, the employee becomes employed by the new employer (the purchaser);
  • the work the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer; and
  • there is a connection between the old employer and the new employer (i.e. there is a transfer of assets from the old employer to the new employer; the old employer outsources work to the new employer; the new employer ceases to outsource work to the new employer; and/or the new employer is an associated entity of the old employer).

If there is not a transfer of business as described in section 311 of the FW Act, an employee’s service with the old employer (the vendor) will not count as service with the new employer (the purchaser). Therefore, the old employer would simply deal with accrued annual leave, personal leave and redundancy pay in the same way that it would if it was an ordinary redundancy situation and the new employer would not need to recognise the employee’s service with the old employer for the purposes of accrued annual leave, personal leave and redundancy pay.

If there is a transfer of business as described in section 311 of the FW Act, accrued annual leave, personal leave and redundancy pay should be dealt with is follows.

Annual Leave

In a transfer of business, accrued annual leave entitlements can be dealt with in one of two ways depending on whether the new employer elects to recognise the employee’s service with the old employer:

  1. If the new employer is not an associated entity of the old employer and the new employer elects not to recognise service for annual leave purposes, the old employer should pay out all accrued annual leave. As a result, the accrued annual leave entitlements will not transfer with the employee to the new employer; or
  1. If 1 above does not apply, accrued annual leave entitlements will transfer with the employee to the new employer and appropriate terms should be included in the sale contract for an adjustment to the purchase price to reflect the liability for which the new employer is now responsible

Personal Leave

In a transfer of business, accrued personal leave entitlements cannot be paid out by the old employer and must therefore transfer with the employee to the new employer. Appropriate terms should be included in the sale contract to adjust the purchase price to reflect the (potential) liability inherited by the new employer.

Redundancy Pay

Section 122(1) of the FW Act provides that in a transfer of business, redundancy pay entitlements can be dealt with in one of two ways. Like Annual Leave, the outcome depends on whether the new employer elects to recognise the employee’s service with the old employer:

  1. If the new employer elects to recognise service with the old employer for redundancy pay purposes, the employee is not entitled to be paid redundancy pay when his or her employment with the old employer terminates (generally at completion). As a result, the employee’s service with the old employer counts as service with the new employer for redundancy pay purposes; or
  1. The new employer, provided it is not an associated entity of the old employer, can choose to not recognise an employee’s service with the old employer for redundancy pay purposes and the old employer will be required to pay redundancy pay to the employee upon termination (generally at completion).

Long Service Leave

Long service leave is governed at the State level depending on to the location of the employee:

·              Industrial Relations Act 2016 (Qld)

·              the Long Service Leave Act 1955 (NSW)

·              the Long Service Leave Act 1992 (Vic)

·              the Long Service Leave Act 1987 (SA

·              the Long Service Leave Act 1958 (WA)

·              the Long Service Leave Act 1976 (Tas)

In Queensland, the Industrial Relations Act 2016 (Qld) provides that where a business is sold and an employee remains with the business, or has less than a three month break between being dismissed by the old employer and being employed by the new employer, the new employer becomes responsible for the employee’s accruing long service leave entitlement. Importantly, in many cases this entitlement cannot be cashed out by the old employer, even with the consent of the employee. Arrangements in which the old employer undertakes to payout an employee’s long service leave entitlement should be treated cautiously. Advice specific to the relevant jurisdiction should always be obtained.


It is important for employers to be mindful of the extent of, and how to deal with, employee entitlements in a sale of business. The outcomes depend on the nature of the employees employment, length of service, relevant jurisdiction, buyer election and the terms of the sale contract.

As such, all details regarding employee entitlements should be provided during the due diligence stage so that the parties can have meaningful discussions, and reach agreement, regarding how employee entitlements will be dealt with in the sale of business. Ask us how!



Business Succession Planning

What happens to your business when you die or become disabled?

Most business owners are flat out managing staff, payroll, creditors, customers and technical changes, which means there is little time left to plan for risks.

here are a few suggestions in getting things sorted:

1 Enduring Power of Attorney– Get this signed and make sure it covers trusts and companies as well as your personal capacity for financial and health matters;

2 General Power of Attorney– Where appropriate you should sign a General Power of attorney if you are sole Director of your company to make it easier to deal with banks and other companies with whom you contract;

3 Insurance- Get insurance to cover at least part of your business debt level, cash flow requirements for 6 months and immediate expenses. In terms of goodwill, if you have a shareholder or partner you must insure for the value of your business interest or equity.

4 Business Succession Agreement – You must have a written agreement with your shareholders or partners that provides for a conditional grant of an option to acquire the balance business from you or your family trust as owner of the share. If it is not written correctly stamp duty and capital gains tax will rise as at the date of the Deed leaving a worse revenue outcome for your family.

5 A Valid Will on the best terms – Everyone should take the opportunity to prepare a valid Will that covers all of their circumstances including business interests companies, shares, trusts and property, on terms that provide the best outcomes for their family. It is a small price to pay for a well drafted Will if it provides protection of beneficiaries for bankruptcy, disability and matrimonial disputes. By drafting key terms you can ensure that tax is minimized in the family group including children being taxed at adult rates and a wider class within which to distribute income such as trusts and companies. You can cover forgiveness of loans between family companies and trusts where there have been distributions for tax but no payments made.

6 Digital Assets – You should make sure adequate wording is included i your Enduring Power of Attorney and your Will to cover access to and ability to deal with digital assets. These include bank accounts, investment portfolios, family photographs and social media accounts. Make sure you cover ownership of domain names, email accounts and cloud based back up accounts so that your chosen attorney or executor can gain access to and control these assets according to your wishes.

7 Advance Health Directive Take the time to get this documents reviewed by your General Medical Practitioner and make your decisions regarding end of life treatment. Do not leave it open for family members to argue about pain relief, CPR, hydration surgery, antibiotics or other treatments when you may have lost the ability to communicate, are terminal  or end up in a permanent coma.

8 Binding Nominations for Superannuation- Many of our clients have not checked to ensure their Wills match the updated Binding Nominations that their accountant or financial advisor have put in place. Given the substantial changes in the legislation starting on 1 July 2017 we recommend all clients review this aspect as a matter of urgency. Do not wait until it is too late as your family will suffer the consequences of addition tax payable on your super nest egg built up over many years.

So these are just 8 simple points to tick off to ensure you are in the best possible position as a business owner. Take the time to get a review. It will only be 1 hour of discussion and is best done with your accountant/ financial and legal advisor together.

Corporate Governance

I recently attended the Australian Institute of Company Directors Course at Customs House and was inspired by an excellent program. It seemed to me that companies and how they manage their business are all bound by the same principles and affected by many of the same issues. Here are a few points worth considering:

1 Culture: Someone said “culture eats strategy for breakfast”. Maybe they are right and it takes strong and focused leadership to ensure culture develops in the right way. Make the rules about how you do business known and live by them as a Director;

2 Strategy: Without really knowing and understanding what you are about you cannot ever hope to reach your goals. Have a formal session each year and if you need it, get an external facilitator. make sure the team understand it so they can explain it in one sentence in a lift. Refresh this every year;

3 Financial Competency: The learning examples used included a family business secured by a family home with a basic balance sheet. As a Director if you cannot understand the numbers using 8 simple steps then you should resign.It is being able to read what is happening to a company that drives those numbers so you can make critical decisions;

4 Effective Decision making: As a key platform all business owners have to make decisions. By having a structured  process every time you are far more likely to make superior decisions for the long term sustainability of the enterprise.

5 Compliance & Risk: If you do not know the legal and accounting compliance and risk requirements then find someone who does. make sure you establish clear procedures to invest in these so the business is protected and maintained as much as possible. Establish a risk appetite based on your culture and purpose. Scenario planning is a great way to find out what you would do if the worst happened. Test your capacity to respond;

6 Board Composition and Effectiveness: If you cannot perform the role then find someone who can. There are plenty of people who can source the right Director to give the company the energy, the experience and the ability to make your business succeed. Get a Chair who can manage the group and make sure you balance the dynamics between board members, the CEO and the stakeholders.

If you would like assistance with any of these issues please take the first step and ask, cheers


Small Business Relief CGT

CGT and Small Business Concessions


 20 years after introduction of the small business CGT concessions, many business owners are unaware of their options. A carefully thought out plan with advice is smart.

The fact is most business owners fail to plan for the final succession plan for their hard earned company and assets.

We often identify business where opportunities for generous capital gains tax (CGT) concessions are missed on the sale of a business. Profit from the hard work and effort by taking advantage of the CGT concessions.

Inside the income Tax Assessment Act 1997 (Cth) Division 152, there are four key CGT small business concessions available. Get early advice on these concessions if you are considering selling your business, and structure the sale in a way that will allow you to take full advantage.


 You must be able to satisfy the basic eligibility conditions for relief before you can enjoy these benefits.

The CGT event must occur in relation to your “CGT asset”. This may be the sale of a business you own, however these terms are defined under tax law.

Assuming this is the case, you must then either:

  1. be a small business entity for the relevant income year;
  2. be a partner in a partnership (that is a small business entity) for the relevant income year, with the CGT asset being an interest in an asset of the partnership; or
  3. Satisfy the “maximum net asset value” test.

Small Business Entity and Partnership Interests

 If your aggregated turnover from either the previous or current year is less than $2 million, then you are considered a small business entity.  Similarly, if a partnership meets this small business entity definition, as a partner in the partnership you will have satisfied the eligibility condition.

Maximum net asset value test

 The maximum net value of all CGT assets that belong to you, any entities connected with you and any affiliates or entities connected with your affiliates must not exceed $6 million just before the relevant CGT event for which you are trying to access a CGT concession.

Be wary of timing! If the value of your business and assets is growing and you are approaching this threshold, act fast to take advantage of the CGT small business concessions.

As long as you have satisfied the above eligibility conditions, you are able to take advantage of the CGT relief under one of the following four conditions.


 Small business 15-year exemption (Subdivision 152-B)

If you have owned the CGT asset for an unbroken period of 15 years, and are over 55 when you sell the CGT asset, you may completely disregard any capital gain arising from the sale.

This is a highly valuable tool to use in retirement planning. If you’re not sure, you should seek professional advice to ensure you don’t miss out.

Small business 50% reduction (Subdivision 152-C)

 If you have not owned your business for 15 years, or are not ready to retire, then this concession allows you to reduce a capital gain by 50%, in addition to the 50% CGT general discount available to individuals under Division 115. This will give you a 75% reduction in your taxable CGT asset.

Small business retirement exemption (Subdivision 152-D)

 If you are under 55, and contribute the proceeds from the sale of a CGT asset to a super fund, you can elect to disregard all or part of a capital gain made from the sale. There is a life time limit of $500,000 for this exemption, so you can utilise it over the course of multiple asset sales until you reach the limit.

Small business roll-over (Subdivision 152-E)

 You can elect a roll-over, and reinvest the proceeds from the sale of your existing business into a new business (one that you either purchase or start) and defer the making of a capital gain from the sale until you ultimately dispose of that new business.

You have up to two years post-sale to purchase or start the new business before you trigger the obligation to pay CGT on the original sale. This roll-over could be used simply to defer your CGT obligations for two years with potentially significant savings.

If you are a small business owner start planning for your ultimate exit, because it is very difficult to change a structure and meet the criteria within the time frames.

Smart business owners seek early legal and tax advice and put themselves in the best possible position ready for the exit at the best value and with the best allowable revenue outcomes.




Cyber Breaches are you prepared!

Privacy Law Changes
We all create and manage data. The business world is swimming in it. The way we manage this data is crucial and how we deal with cyber attacks is now a greater responsibility.
On 19 October 2016, the Minister for Justice described in Parliament the reasons behind the new Privacy Amendment Bill as: receiving notification of the breach can allow that person to take action to protect themselves from harm.
The Privacy Amendment (Notifiable Data Breaches) Bill 2016 will only apply to the “personal information” of individuals, but will have significant practical implications for contractual relationships and corporate data security. Consider the following:
1. Notified data breaches may become immediate public news. Not only will the person affected vent their displeasure on social media and via company and media comments pages, but breaches will be reported in the mass media and recorded for perpetuity online;
2. Privacy and consumer rights organisations will keep comprehensive and permanent online records of reported privacy breaches. See for example in Australia the database maintained by the Privacy Rights Clearinghouse:
3. Contractual parties will know about the breach and may be concerned about whether their confidential information has been breached.
The consequences are potentially very serious for a business the subject of cyber breaches. Standard form confidentiality agreements require parties to: notify the other party of any possible or actual breach of confidentiality; take all reasonable steps required to prevent or stop the breach at the Recipient’s request; assist the other party in connection with any action or investigation regarding any possible or actual unauthorised disclosure. Some confidentiality or non-disclosure agreements may also require that the breaching party indemnify the loss caused by the unauthorised disclosure. That could be expensive!
You should conider obtaining cyber-insurance for this very reason. You may cause damage to anotherparty and be held liable for the breach.
Technology and telecommunications contracts now include specific cyber security provisions, requiring immediate notification on becoming aware of any breach or potential breach. Usually this is defined to include the detection of any malicious code or disruption to services. Frequently this is backed up by obligations for suppliers to provide security reports and allow security audits from time to time.
It may be difficult to comply with these obligations immediately after of a data breach, given the system has been compromised. Contractual compliance will require notice to a contractual party as the first response to a data breach.
Managing breaches in a sophisticated way costs time and money which many companies do not have and much of the focus relates to privacy obligations and personal information.
Data breaches will require a co-ordinated B2C and B2B response. The publicity and brand damage associated with the B2C response is a serious matter, but the failure to observe B2B contractual obligations could leave a company facing major litigation (including class actions if enough parties are affected), terminated contracts and a lack of commercial confidence.
Managing the contractual obligations in the public eye should be done with an organisation having a digital risk management plan. Successfully following that plan and being able to manage an effective response to a breach, is the best action to an online record tracking each reported breach.
Responding to contractual parties will require a different plan for response, especially if an insurer is involved. Early notification to that insurer will be critical in the extent of cover.
There is clearly the potential for cyber breaches to cause significant contractual liability. The potential effect of public disclosures and contractual notification should be quantified and a plan put in place.
You should consider getting specific advice about these issues relating to your company and the effect of the new laws.

Tie me kangaroo (Trademark) down sport !

Well I never thought I would see a large company like Qantas slip up on a matter of their core branding identity.


It seems that the lessons we all need to learn in business is that despite public perceptions unless we secure by registration, a valid Trademark in all applicable classes, a competitor might just take advantage of it. Take a look at the case study below and let us know if this triggers any concern in your company.

Qantas uses a variety of “kangaroo” trade marks as part of its business, including the “kangaroo tail fin” logo below which it registered in Australia in 1996 for advertising, marketing and merchandising services and financial, investment and banking services associated with the use and promotion of credit cards and charge cards (Registration No. 711454):

In a recent Federal Court case, Qantas has unsuccessfully opposed an application by Mr Luke Edwards to register the following “kangaroo t-shirt” logo as a trade mark:

Mr Edwards operates an online retail store selling a range of goods including clothing and apparel. In 2010, Mr Edwards applied to register his “kangaroo t-shirt” logo above as a trade mark, for use in relation to clothing; footwear; headwear; shirts; T-shirts. At the time, Mr Edwards’s online store offered t-shirts branded with his “kangaroo t-shirt” logo.

Qantas formally opposed the registration of the “kangaroo t-shirt” logo on a number of grounds but the Delegate of the Registrar of Trade Marks found in favour of Mr Edwards.

Qantas appealed the decision to the Federal Court, claiming that the “kangaroo t-shirt” trade mark was deceptively similar in appearance to Qantas’s existing Trade Mark Registration No. 711454 for the “kangaroo tail fin” logo.

Qantas also claimed that the goods/services covered by the two marks were closely related, (Meaning that Mr Edwards’s clothing; footwear; headwear; shirts; T-shirts were closely related to Qantas’s advertising, marketing and merchandising services.) Go figure!

Qantas also claimed that it had a strong reputation in Australia in relation to various registered and unregistered “kangaroo” trade marks it had used for many years and, because of this reputation, Mr Edwards’s use of his “kangaroo t-shirt” trade mark would be likely to deceive or confuse consumers. Qantas argued that consumers would simply see Mr Edwards’s “kangaroo t-shirt” logo on clothing as an extension of the Qantas brand.

The Federal Court dismissed both grounds of opposition and found in favour of Mr Edwards.

The Court held that Qantas and Mr Edwards’s trade marks were not deceptively similar in appearance, as each of the marks has a separate, distinctive element apart from a kangaroo. The Court also held that the goods/services covered by the two marks were not closely related. The Court noted that Qantas’s advertising, marketing and merchandising services were no more or less related to Mr Edward’s clothing; footwear; headwear; shirts; T-shirts than ‘any other goods or services that can be advertised, marketed or merchandised’ and that there was, therefore, no close relationship between the two.

In assessing Qantas’s reputation in its various “kangaroo” trade marks, the Court found that two of these “kangaroo” marks ‘would have been recognised by a substantial number of ordinary members of the public as marks denoting [Qantas’s] airline services’. However, the Court determined that there was no likelihood that consumers would be deceived or confused on seeing Mr Edwards’s “kangaroo t-shirt” trade mark used for clothing; footwear; headwear; shirts; T-shirts given the differences between the marks.

Qantas has now filed a new application for the “kangaroo” logo below covering a wide range of goods/services in 15 classes including various items of clothing (No. 1703712). Mr Edwards has opposed this application and it will be interesting to see the outcome of these proceedings.

This case highlights the importance of considering the different types of marks which are important to your business. In addition to registering brand names as trade marks, logos and other types of trade marks are also registrable and may be just as valuable.

I must say I am surprised that Mr Edwards did succeed but on a close review the logo is distinctly different. I wonder if it is a case of “the horse has bolted”. Make sure you d not find your business in the same predicament and remember that registration is a “priority right”. The first in time to register generally wins. cheers