Tute 2 (Tara)

Question 1

What does it mean when your employer indemnifies you as their employee in your employee contract?

Answer 1

Indemnity Definition: security or protection against a loss or other financial burden.
Protection from being sued essentially.

Question 2

What is the only situation that you can be sued after you have died?

Answer 2

If you are famous and have an estate in perpetuity.

Perpetuity means ‘the state or quality of lasting forever.’

Question 3

Why does Torts Law not apply to project managers?

Answer 3

Tort is the law of duty of care and duty of care is about reasonable competence to those with licenses or to a ‘benchmark’. Therefore as project managers don’t have licenses, they do not have a duty of care. This seems to be slowing changing however, starting in QLD.

Question 4

What is the level of measurement held accountable in Tort

Answer 4

The level of Reasonable Competence

Question 5

Two big ways to void your insurance…

Answer 5

1. Not notifying your insurer immediately once you are made aware of an issue.
2. Trying to solve it yourself can admit guilt.

Question 6

the building legislation has a clause now that state the lawsuit from construction must be brought forward within a certain time period. How long is this time period and when does it start?

Answer 6

It starts at occupancy certificate and goes for 10 years - Legislatively barred from suing you. However, this is different for each state and Nicole advises not to use this information in the exam. The legislation can, however, be changed therefore you can end up being liable forever if the legislation changes down the track. E.g. the legislation for child abuse changed so that the victims can sue at any time now.

Question 7

Insurance contracts usually include exclusions now. What are common insurance exclusions?

Answer 7

Cladding insurance.

Question 8

In what way should you involve your insurance provider in signing contracts?

Answer 8

Get them to look over it to check for any unnecessary liability or ‘catches’.

Question 9

What is the type of insurance you would have during retirement?

Answer 9

‘Run-off’ cover. Your insurer assumes your risk of liability is lower.

Question 10

When don’t architects need insurance?

Answer 10

When you are an employee and have never built any independent projects. As soon as you have acted as an architect under your own registration, you are liable for the life of that project (your life probably) and need insurance. If you have done your own projects and then become an employee, you need runoff cover whilst being an employee.

Question 11

What is the insurance situation when you are the only design professional/architect working for a construction company?

Answer 11

It is very difficult for construction companies to get professional indemnity insurance because they are not providing a ‘professional’ service but are classified as a commercial service. Therefore the liability all falls to the sole architect. Make sure the company you work for has some sort of PI insurance for the design services to indemnify you - often this will be in the form of a separate entity alongside the construction company that’s a ‘professional service’.

Question 12

What are the other parties that could also be sued alongside with you referred to as? I.e. the engineer, building surveyor etc

Answer 12

Concurrent Wrongdoers.

Question 13

What is the Tort of Negligence?

Answer 13

Fallen below the standard of reasonably competent.

Question 14

What is the expiry timeframe from an event that someone can sue under Tort?

Answer 14

6 years from the date of the event/incident.

Question 15

Ways to separate your company liability from your personal liability and personal assets…

Answer 15

The company signs the contracts, has its own ABN, has an assets register (separate to personal register), has its own bank account, has an ACN and has a separate TFN.

Question 16

What classifies as a sole practitioner?

Answer 16

only one individual. he or she is the sole business partner.

Question 17

What are Proprietary Companies?

Answer 17

is a legal entity in itself and in law considered to be a ‘person’ and can enter into contracts, own property etc, just like an individual.
The enterprise has a continuous existence and cannot be dissolved by the death, ill health or withdrawal of an owner.

Question 18

Who manages a proprietary Company?

Answer 18

The management of the company (and therefore the practice) can be centralised in a board of directors, thereby permitting selection of experts as managers of the business, whether or not they are shareholders.

A director may be an employee of the company, as well as a shareholder.

A director may be entitled to a director’s fee, and/or a salary as an employee,
and if a shareholder, a share of the profits in proportion to the shareholding.

Question 19

Who funds a proprietary Company?

Answer 19

Shareholders (who might not be directors or employees) can invest in the company which owns and operates the practice and be entitled to a share of the profits in proportion to their shareholding.

Capital can usually be raised more readily, than for a sole proprietor or a partnership, by the issuing or selling of shares.

Question 20

Who owns a proprietary Company?

Answer 20

The shareolders own the company.
Companies have owners (shareholders) and officeholders (directors and
secretaries) who are not necessarily shareholders.

A director may be an employee of the company, as well as a shareholder.

Question 21

What are a few of the overhead liable costs of a proprietary company?

Answer 21

liable for payment of superannuation guarantee, payroll tax, workers compensation etc.

Question 22

What are the benifits to a proprietary company as opposed to a sole trader or partnership?

Answer 22

The company structure can provide protection to directors or shareholders against many of the ‘ordinary’ liabilities to which partnerships and sole proprietors are exposed. Directors are generally not personally (jointly) liable for the debts of the company unless they themselves breach their duties as a director – but this is separate to and of no assistance in the common scenario of personal liability of architect directors if jointly sued with the company over a particular project – independent legal and insurance advice is essential on such liability.
Shareholders (who are only shareholders) are only liable to the extent of the paid-up value of the shares they own.

Question 23

What are the negatives to a Proprietary Company?

Answer 23

Companies require a more complex management regime with greater responsibilities and accountability to government regulators and shareholders, and disclosure of financial and other affairs. These legal requirements impose higher accountancy and compliance costs on the practice, and heavy legal and corporate responsibilities on directors.

Question 24

What is a Proprietary Limited Company?

Answer 24

A Pty Ltd company is relatively easy to set up and not difficult to maintain. A Pty Ltd company is still a private company therefore cannot raise capital by offering shares to the general public. Their director(s) are commonly well protected from any liability to the company’s debts. For these reasons, Pty Ltd companies are the most common type in Australia and generally suited for small to medium sized companies.

Question 25

What does the ‘Limited’ in Pty Ltd mean specifically?

Answer 25

The ‘limited’ in ‘proprietary limited’ refers to limited liability – the fact that a shareholder’s legal responsibility for a company’s debts or liabilities is limited to the number of shares owned. Plainly, if a company becomes insolvent, the shareholders will only be liable to lose the money they used to purchase their shares. In some cases where a shareholder has partly paid for shares, they are required to pay the remaining money they owe for those shares.

An alternative to a company limited by shares is a company limited by guarantee. In these companies, members agree to a certain amount of legal responsibility upon becoming members. In other words, they agree to guarantee a certain amount of liability to the company.

Question 26

What is a Partnership?

Answer 26

A partnership is formed when two or more people go into business together with a view to making profit. A partnership is not an entity in the way that a proprietary company is a legal person.

Question 27

What is the max. number of people in a partnership?

Answer 27

A partnership is limited to between two and 20 partners (the actual limit may vary among the states and territories and occupational groups but is a substantial number).

Question 28

What are the legal obligations to Partnerships?

Answer 28

A partnership must have its own Tax File Number (TFN), and usually an Australian Business Number (ABN) and lodges its own, separate tax return. There is also no legal requirement for a written agreement, although it is highly recommended that a document is prepared with legal assistance that sets out the full extent of the relationship between the partners.

Question 29

What are the advantages to being a sole practitioner?

Answer 29

Advantages:
• simplicity and ease of formation
• low start-up costs
• the least amount of regulation
• the most amount of privacy and autonomy
• the architect is only required to pay workers compensation, make superannuation
payments or pay payroll tax if they take on employees.

Question 30

What are the disadvantages to being a sole practitioner?

Answer 30

Disadvantages:
• NARROW MANAGEMENT base
• lack of continuity/EXPANSION of the business
• CAPITAL limited to personal assets or own ability to raise it or borrow it
• personal CAPACITY for work and client perceptions determines success
• PERSONAL LIABILITY for all business debts, and for all civil claims made by a third party against the practice (eg for professional negligence)
• there is NO ISOLATION of the sole practitioner’s personal assets from the practice’s assets where, for example, a creditor is attempting to satisfy a debt owed by the sole practitioner, or where a court makes an award for damages against the practitioner.

Question 31

What are the legal obligations of a sole practitioner?

Answer 31

Must register for ABN. Must register for GST and organise it with the ATO.

Question 32

When compared to a sole practitioner, what are the disadvantages to a Partnership?

Answer 32

as the business develops personalities may clash and there may be disputes over administration and profit sharing (hence the value of a partnership agreement)

partners can be individually and collectively liable for the defaults of other partner(s) including professional negligence

if a partner wishes to leave the business, it may require the other partner(s) to raise capital to buy that partner out. If they are unwilling or cannot do so, or do not accept that partner’s suggested replacement, it can reduce that partner’s options, again pointing to the value of a partnership agreement which sets out what is to be done.

Question 33

When compared to a sole practitioner, what are the advantages to a Partnership?

Answer 33

partnerships are not expensive to set up and you provide access to shared capital

knowledge, experience, skills and ability to take time off is pooled

there are certain tax benefits where the partners are in the same family, such as
husband and wife

Question 34

What are a limited Partnerships?

Answer 34

Limited partnerships differ from conventional partnerships in that they are made up of general partners, who manage the business, and limited partners, who are passive investors in the business and do not contribute to its management. Limited partners are liable for financial debts in proportion to their investment.

Question 35

What is the benifit to limited Partnerships?

Answer 35

The benefit of a limited partnership is that the business can attract capital investment.

Question 36

What are the legal obligations of Limited Partnerships?

Answer 36

Limited partnerships must be registered with the consumer regulatory body in the respective state (but are not permitted in some states). Limited partnerships and incorporated limited partnerships must be registered separately from the business name. General partnerships, also referred to as ‘partnerships’, do not need separate registration.

Limited partnerships must also be registered with the Office of Regulatory Services, ACT.

Limited partnerships must also be registered in South Australia.

Question 37

Partnership Agreement needs to include:

Answer 37

• the nature of the business
• the role and authority of each partner and who has financial control of the partnership
• proportion of ownership of each partner and sharing of profits and losses
• each partner’s liability to contribute funds
• the management of the partnership
• the manner of dissolution of the partnership
• the distribution of assets on dissolution
• the resolution of disputes between partners
• the death, bankruptcy, retirement of a partner

Question 38

What do partners do with their own tax lodgement when in a partnership?

Answer 38

A partnership has its own Tax File Number (TFN), and usually an Australian Business Number (ABN) and lodges its own, separate tax return. Generally, each partner then adds their share of the profit (or loss) to their personal income tax for assessment by the ATO and will pay tax at the personal income tax rate. The Australian Tax Office (ATO) website provides a guide to income earned from a partnership .

Question 39

What questions should a business ask itself when doing marketing?

Answer 39

Who are your nearest direct competitors? In comparison, is your business growing, steady or declining? What can you learn from your competitors’ operations? How does your business differentiate itself in the market place? Does your business offer a number of services, or offer select services? Answering these and other questions can provide a useful audit of the relevance of the firm’s marketing plan and direction.

Question 40

What will you do after the exam?

Answer 40

Celebrate! 🍹

Question 41

What terminology is used when encourage your climbing buddy to finish a climb they’ve tried a couple of times already?

Answer 41

C’mon, Send it! You got this!