The transport industry is one of the most regulated and complex. But some of this burden and complexity can be drastically reduced by a little post-holiday detox and a legal health check.
Participants in the transport industry should take the opportunity to implement a few easy changes or reviews to ensure that they are in a position to start the new year strongly. Now is the perfect time to take a few simple steps to lay the foundations for a trouble-free year, which should allow you to focus on building your business, rather than dealing with problems.
We outline seven suggested new year's resolutions.
Contract terms and conditions
Do you have standard terms and conditions? When did you last review them? Are they still current and effective? Are they being effectively included or incorporated into your contracts? If not, they will not apply and are of no use.
Businesses should conduct a refresher review of the content and method of incorporation of their terms and conditions. You should ensure that your terms are current and deal with any changes in law or industry practice. You should also review your statements of incorporation and/or check that copies of standard terms are being sent out and signed or acknowledged.
Limitation of liability
Most businesses within the transport industry are entitled to limit their liability, sometimes substantially. Failure to do so in clear, legally enforceable terms means that you are carrying legal and financial risk when you do not have to. Further, including effective limitations of liability can often result in lower insurance premiums.
Businesses should review their terms and conditions to make sure that they are taking advantage of any available limitations or exclusions of liability, which in some cases can save millions of dollars. A limitation or exclusion clause which does not comply with legal requirements may be wholly void and ineffective, so careful and precise drafting is required.
Back-to-back (or better) contracting
Many businesses within the transport and project logistics industry are part of a contract chain or network. It is a vital contract risk management tool that your contracts with sub-contractors or suppliers of goods or services are on back-to-back (or better) terms with your contracts with your customer/client/head contractor wherever this is commercially achievable. If there is any mis-match, you may find yourself liable to your customer/client/head contractor and unable to recover any such liability in whole or part from those below you in the contract chain.
Uniform contractual liability provisions need to be the subject of negotiations from the outset and not left to the last minute. Alternatively, a proactive approach is for businesses to prepare their own standard form of service or supply agreement for sub-contractors or suppliers of goods or services, so that it is ready to roll out when any tender or request for proposal is sought.
Credit risk management
The transport industry bears the full force of economic cycles, with many participants failing in tough times, often leaving their partners with substantial unpaid invoices and claims. Have you conducted proper due diligence on your business critical primary customers, clients, head contractors, sub-contractors and suppliers?
To cover any substantial exposure, at a minimum you should review your credit agreements and payment terms and consider whether additional financial safeguards are necessary, such as effective personal or parent company guarantees. If ignored, bad debts only become bigger and worse, so businesses need to commence recovery action and exercise any security as soon as signs of trouble emerge.
Preservation of your rights in goods and property
Changes to personal property laws under the Personal Property Securities Act 2009 (Cth) mean that whenever your goods, stock, property or equipment are in the possession of a third party, they may be able to be taken by the liquidator of that third party unless you have registered and preserved your interest. Further, you may lose any entitlement to security over the goods, stock, property or equipment of others that you hold unless you ensure that your contractual provisions properly establish your security interest over them and/or you have registered and preserved your interest. Any defect or mis-description in your registration may mean that it is void and of no effect.
Consider reviewing your contracts to ensure that they are laying the foundation for these security rights and then ensure that you are effectively registering your interests on the Personal Property Securities Register.
Chain of Responsibility compliance
Does your business consign, pack, load, receive or transport goods carried by road? If so, you must have in place a Chain of Responsibility (CoR) compliance policy and audit program – even if you do not physically pack, load or transport the goods yourself. Failure to do so could result in substantial fines, with recent penalties exceeding $1 million and the companies concerned suffering substantial reputational damage. In addition, directors and managers can be held personally liable for any corporate breaches.
A CoR compliance policy and program is a non-negotiable requirement for every business in the road transport chain. Businesses should conduct a CoR risk assessment and prepare an appropriate compliance policy and audit program so that they are able to avoid the substantial penalties for CoR breaches.
Work health and safety
The transport industry has one of the highest workplace incident and injury rates, costing millions in lost productivity, penalties and personal injury claims. Injured people are far more expensive than damaged goods. The time taken to prepare and implement effective WHS policies and practices is not a cost, but is a financial investment in your business. In addition, it is a strict legal requirement, where a failure to have in place appropriate policies can result in personal liability and fines for directors and executives.
Businesses should conduct a WHS audit to ensure that appropriate practices and notices are in place and that their implementation and monitoring are being documented, in order to provide evidence to respond to any WHS investigation or defend any prosecution.
The above matters are each simple to consider and implement and can help ensure that the new year starts off on the right foot and positions you to have a less troublesome 2015.
We recommend that all businesses in the transport industry review the above seven steps and would be happy to help if you need any assistance.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.