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Summer 2015
Pharmacy insights
Dispensing sound legal insights
Insights Editor:
Georgina Odell, Senior Associate
E [email protected]
Pharmacy insights is a legal
newsletter for pharmacists and
pharmacy related businesses.
This edition includes a ‘must read’
for anyone considering buying a
business. Also in this edition, why
you really should make a will, and
the dangers of dismissing employees
without proper procedure.
Buying a pharmacy: an overview 1
News, events & presentations
4
Dismissal may be warranted but still
unfair without proper procedure
5
Why you should make a will 6
Pharmacy law update
7
Franchising update: Federal Court
decision on franchisor’s
unconscionable conduct
8
COMMERCIAL AND BUSINESS LAW
Buying a pharmacy: an overview
So you have found a pharmacy to buy, agreed the price in
principle and have the funding to proceed, but don’t know
what happens next? Here is a brief overview of the legal
process involved in buying a pharmacy.
Due diligence
As a first step, you should ask your accountant to undertake financial due
diligence and assist you in relation to the price being negotiated.
You will need to instruct a solicitor to act for you in the purchase, and it is helpful
if your accountant and solicitor liaise regarding the terms of the purchase and
any perceived risks. Usually the seller, through its business broker, will ask the
buyer to make an offer using a short form ‘heads of agreement.’ Make sure
you ask your solicitor to check this — it should be non-binding and subject to
completion of due diligence to your satisfaction.
Your solicitor will engage with the seller’s solicitor and ask for further information
where information has not already been provided as an attachment to the draft
contract. This process is sometimes referred to as the legal due diligence
process during which your solicitor checks that you are buying what you thought
you were buying, that the seller actually owns all of the assets of the business
being transferred (including items such as the lease, the intellectual property
[trade marks etc], the stock and the plant and equipment).
Your solicitor will undertake searches including property searches and searches
of the Personal Properties and Securities Register to ascertain what security
By Mark Fitzgerald, Principal
T 03 9810 6767
E [email protected]
Summer 2015
Pharmacy insights
interests are registered over the business and assets. These must be discharged on completion
so that clear title is transferred to you. This process is similar to the process of discharging the
current owner’s mortgage over a house when a new buyer completes the purchase.
Agreement with your partner
If you are buying with a partner, you should consider the benefits of negotiating a partnership
agreement governing your relationship, with effect from settlement of the purchase. A
partnership agreement would cover issues such as how the business is to be run, how much
time each of you are to devote to the business, profit shares, voting rights, and what is to
happen to the business if one of you resigns, retires or dies.
Exchange of contracts
Generally, contracts for the sale of a pharmacy are prepared by the seller’s solicitor because the
seller has the relevant information and documentation about the business which is needed to put
the contract together. A seller will often be referred to as the vendor in the documentation.
The contract will often be in a standard format, for example, in New South Wales, the Law
Society Sale of Business Contract 2004 is commonly used as the basic agreement, with special
conditions tailored to the particular business being purchased. In Victoria, the standard format
is the Sale of Business Contract endorsed by the Real Estate Institute of Victoria and the Law
Institute of Victoria.
The contract sets out procedures for dealing with the transfer of any lease of the premises and
the obtaining of any consents which are required, such as consents to assignment of the lease
from the landlord, and consents to any mortgage over the lease which is to be required by the
financial institution funding your purchase.
Contracts for the sale of a pharmacy will contain conditions precedent which are requirements
which must be satisfied before you will be legally obliged to complete the purchase. The
obtaining of all necessary consents in relation to the lease are important conditions precedent,
as are the requirement for Pharmacy Council and Medicare approvals to be given. You should
make sure you are satisfied your finance has been formally approved and that you can satisfy all
financial conditions, or make the contract ‘subject to finance.’
It is important for you and your solicitor to carefully review the contract prepared by the seller’s
solicitor. In particular, the contract should include a range of seller warranties, and the seller (and
its principals) should provide robust and enforceable restraint covenants. Once your solicitor is
satisfied that all is in order, he or she will exchange contracts. From this point, the parties are
under a legal obligation to buy and sell subject to the conditions precedent being satisfied.
Lease
Pharmacy leases are governed by the retail leasing legislation that applies to each of the states
and Territories. There are requirements for lessor and assignor disclosure when the lease is
transferred. The purpose of the disclosures is to ensure that the buyer is made aware of relevant
information relating to the lease before accepting liability under it.
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Summer 2015
Pharmacy insights
Training period
If you requested it in the contract, the seller will attend at the pharmacy after settlement in order
to train you and/or your staff and provide you with important practical information. This is not
automatic, and you must stipulate this in the contract if you require this.
Employees
Usually, the buyer will decide which members of the current staff are to be offered employment
upon the handover of the business. The buyer should consider whether he or she wishes to
interview staff prior to settlement, and if so, have this written as a term of the contract. It
is important that the position regarding employees is considered carefully. Have the terms
of their new employment written into a formal offer letter and contracts prior to them
commencing employment.
Stock
Generally, a stock take will take place at the pharmacy on the last business day before completion
in order to determine the exact amount to be paid for stock on completion. The buyer will
generally pay an agreed amount to the seller on completion, and there will be an adjustment
of that figure once the results of the stock take are known. If you do not wish to buy certain
items of stock (e.g. stock within 3 months of its expiry date), then this should be set out in
the contract.
Completion
Once the conditions precedent are satisfied, and your finance documentation has been signed,
the solicitors will make arrangements to complete the transaction. Completion is sometimes also
referred to as settlement.
The buyer’s solicitor will liaise with the funder regarding draw down on loans, and with the
seller’s solicitor regarding the directions for payment of the purchase monies.
All parties will agree a time and date for the settlement meeting. Generally, the seller and the buyer
are not required to attend the settlement meeting but will be represented by their solicitors. Your
bank funding the purchase will also attend.
At settlement, the solicitors will collect any discharges of outgoing securities, deal with the
transfer of the lease, hand over cheques for purchase monies, collect documentation facilitating
the transfer of the business name to the buyer and the assignment of any trades marks, and the
legal transfer of the pharmacy will take place.
After completion
There are a few steps which need to be undertaken by your solicitor after completion, such
as registering the transfer of a lease, checking that outgoing securities have been removed
from the PPSR, and ensuring that any adjustment sums payable to you or the seller under the
contract are properly dealt with (e.g. adjustments to the amount payable for stock).
IN THE NEXT EDITION OF PHARMACY INSIGHTS WE WILL EXAMINE KEY STAGES IN
THE PURCHASE PROCESS IN MORE DETAIL. PLEASE CONTACT MARK FITZGERALD ON
T: 03 9810 6767 (MELBOURNE) OR GEORGINA ODELL ON 02 9018 9975 (SYDNEY) IF
YOU WOULD LIKE TO DISCUSS BUYING OR SELLING A PHARMACY.
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Summer 2015
Pharmacy insights
NEWS, EVENTS & PRESENTATIONS
Meet Paul Baker
Paul is the Managing Principal of Meridian Lawyers and has more than
25 years’ experience advising in pharmacy law and pharmacy related
matters. As well as acting for the Pharmacy Guild of Australia, Guild
Insurance, individual pharmacists, and national pharmacy buying groups
and franchisors, Paul is also the Honorary Solicitor to the Pharmacists’
Support Service. The Pharmacists’ Support Service is a charity that
provides a confidential telephone support service to pharmacists,
pharmacy interns and students, every day of the year between 8.00am
and 11.00pm, as well as taking calls from family, friends and colleagues
who are concerned about a pharmacist. The volunteers who take the
calls are all pharmacists trained in telephone counselling.
Paul Baker, Managing Principal
T 02 9018 9911
E [email protected]
Paul and Senior Associate Georgina Odell have recently advised the Pharmacists’ Support Service
pro bono concerning their new fundraising plans for 2015, which involves the creation of an online
portal for the collection of voluntary donations from the pharmacy profession. This year marks the
20th anniversary of the Pharmacists’ Support Service.
Pharmacists suffering from work-related stress, trauma following a pharmacy robbery, or
professional or personal concerns can call the support line on 1300 244 910 or visit the
website at www.supportforpharmacists.org.au
Events
AUSTRALIAN PHARMACY PROFESSIONAL CONFERENCE
12–15 MARCH 2015
Principal Mark Fitzgerald and Senior Associate Georgina Odell will be presenting a
Business Workshop at APP 2015, providing insights into the practical and legal issues
of buying or selling a business and entering into partnerships, including an overview of
common business structures, why due diligence is important, the stages in the sale process,
and some finance and security basics.
APP is The Pharmacy Guild’s annual national conference and the largest pharmacy
conference and trade show in Australia. Contact Mark on T: 03 9810 6767 or Georgina
on T: 02 9018 9975 or visit www.appconference.com.au for further details.
page 4 | Pharmacy insights
Summer 2015
Pharmacy insights
EMPLOYMENT LAW
Dismissal may be warranted but still
unfair without proper procedure
The Fair Work Commission found the dismissal of a delivery
driver who urinated outside the entrance of a client’s warehouse
was unfair. This case is a reminder that the usual procedural
steps apply even when it appears obvious that there is a valid
reason for termination.
The driver, employed by Sargeant Transport, was due to make a regular delivery
to a Woolworths Regional Distribution Centre. When he arrived at the gate he
pressed the intercom button, then moved to the far side of the truck, placed
some paper in his mouth and then urinated. He then returned to the intercom
and pressed the button again, had a discussion over the intercom and returned
to his truck. It was captured on CCTV. The driver was aware that there were
toilets inside the gate he could use. Woolworths informed Sargeant Transport of
the incident and banned the driver from attending its sites for three months.
By Sharlene Wellard, Principal
T 02 9018 9939
E [email protected]
CASE: Cowan v Sargeant
Transport Pty Ltd [2014] FWC
5330 (18 August 2014)
The Commission found that the driver’s conduct was “unprofessional” and
“unacceptable” and his failure to adequately explain his actions constituted a
valid reason for dismissal. However, the Commission considered that Sargeant
Transport had not applied a “systematic approach” to investigating the driver’s
actions. It did not provide him a proper opportunity to respond to the allegations
or have a support person. The employer was criticised for not meeting with the
driver face-to-face, preferring to deal with him by telephone.
In awarding compensation, the Commission applied a 30% discount due to the
driver’s misconduct and ordered the employer pay the driver $16,128 and
unpaid superannuation.
TIP: Even where it appears that an employee has engaged in serious misconduct, sufficient to warrant
immediate dismissal, employers should still apply “procedural fairness” which typically includes:
• informing the employee of the allegation of misconduct and, if serious, stand the employee down
(on pay)
• gathering information about the allegations
• meeting with the employee and allow the employee an opportunity to bring a support person
• putting the allegations to the employee and give the employee a reasonable opportunity to respond
• taking the employee’s response into account before determining disciplinary action.
For advice on employee counselling and disciplinary processes or any employment law matter please
contact Sharlene Wellard, Principal on T: 02 9018 9939 or E: [email protected]
page 5 | Pharmacy insights
Summer 2015
Pharmacy insights
WILLS AND ESTATES, PROPERTY LAW
Why you should make a will
Few people enjoy thinking about their own death. Perhaps
this is the reason why so many of us either do nothing about
making a will, or put it off as long as we can.
Most people know that they should make a will, but do not understand the
consequences of not doing so. If you die without making a will, you will
be intestate.
This means that you have lost your right to control the distribution of your assets
after your death. In the event of an intestacy, the law automatically dictates a
set formula for the distribution of your estate to certain categories of relatives
in certain proportions, and takes no account whatsoever of what you may
have wanted.
If you are in a de facto relationship, and you die intestate then your partner will
not automatically be treated as a spouse. This inevitably leads to unnecessary
complexity, distress, and cost at an already emotional and difficult time.
By making a will, you will be able to control who receives which of your assets
when you die and who is to administer your estate. Your beneficiaries will
generally be able to access funds and other property more quickly and easily if a
valid will has been left.
Your will is also a good place to make your wishes known regarding guardianship
of children.
Most people agree that once they have made their will, they rest easier knowing
that they have made provision for loved ones and put their affairs in order should
the unthinkable happen.
Remember to update your will if major life events happen such as the death of a
spouse, separation, divorce, together with happier events such as marriage, and
the birth of children and grandchildren.
IF YOU WOULD LIKE TO DISCUSS MAKING A WILL OR ESTATE PLANNING,
PLEASE CONTACT IAN GODDARD ON T: 02 9018 9943.
page 6 | Pharmacy insights
By Ian Goddard, Principal
T 02 9018 9943
E [email protected]
Summer 2015
Pharmacy insights
COMMERCIAL AND BUSINESS LAW
Pharmacy law update
Changes to conditions of approval of a pharmacist to supply
pharmaceutical benefits
Pharmacists and pharmacy businesses should be aware of changes to the
conditions of approval of a pharmacist to supply pharmaceutical benefits, which
came into force on 1 December 2014.
From that date, the National Health (Pharmaceutical Benefits) (Conditions
of approval for approved pharmacists) Amendment (Supply from Premises)
Determination 2014 (Amending Determination) amends the earlier National
Health (Pharmaceutical Benefits) (Conditions of approval of approved
pharmacists) Determination 2007 (Original Determination) to include the
following new conditions:
By Georgina Odell, Senior Associate
T 02 9018 9975
E [email protected]
An approved pharmacist must not make a claim for payment from the
Commonwealth in relation to the supply of a pharmaceutical benefit:
• unless it was supplied at or from approved premises for the pharmacist;
• if that pharmaceutical benefit was never at approved premises of
the pharmacist;
• unless the pharmacist, or an agent of the pharmacist, was present at
approved premises for the pharmacist at the time the pharmaceutical benefit
was dispensed;
• on the basis of a prescription (other than a medication chart prescription)
unless the pharmacist, or an agent of the pharmacist, has seen the
prescription at approved premises for the pharmacist; and
• on the basis of a medication chart prescription unless the pharmacist, or
an agent of the pharmacist has seen a copy of the chart containing the
prescription at approved premises for the pharmacist.
The Amending Determination also updates the Original Determination by
clarifying the current versions of the professional practice and ethical standards
with which pharmacists are to comply for the purposes of pharmaceutical
benefits scheme approval.
PLEASE CONTACT GEORGINA ODELL ON T: 02 9018 9975 IF YOU ARE UNSURE
WHETHER THESE CHANGES AFFECT YOUR BUSINESS PRACTICES IN TERMS
OF DISPENSING PROCEDURES, SUPPLY ARRANGEMENTS OR INTERACTIONS
WITH UNAPPROVED PREMISES, OR IF YOU HAVE A QUESTION IN RELATION TO
PHARMACY REGULATION.
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Summer 2015
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COMMERCIAL AND BUSINESS LAW
Franchising update: Federal
Court decision on franchisor’s
unconscionable conduct
On 29 January 2015, the Federal Court of Australia made a
declaration that a Victorian cleaning franchisor had engaged
in unconscionable conduct in contravention of the Australian
Consumer Law and failed to comply with the Franchising Code
of Conduct.
The case centred around the franchisor’s dealings with two first-time franchisees,
one of whom was stated to be of a young age, with no business experience and
limited ability to understand legal documents.
The Federal Court declared that the franchisor had:
• engaged in conduct which was misleading or likely to mislead; and
• made representations that were false or misleading and concerned the
profitability, risk or other material aspect of a business activity that the
franchisor invited other people to engage or participate in, and which
required the performance of work or investment of money by other people.
The franchisor’s conduct which lead the Court to this conclusion included
representing to a prospective franchisee that:
• if he purchased a franchise for a particular cost ($28,150) then it would
provide him with work sufficient to generate a particular revenue ($4,000)
each month, when in fact, the franchisor did not have reasonable grounds for
making this representation; and
• regardless of the work provided by the franchisor, it was obliged to, and would
pay him $4,000 each month when in fact the franchisor was not obliged to do
so under its franchise agreement and it did not have reasonable grounds for
making this representation.
The Court also found that the franchisor had:
• failed to disclose the matters required to be disclosed by the Franchising
Code of Conduct;
• entered into a franchise agreement with a person without first obtaining a
signed statement, as required by the Franchising Code of Conduct, that he
had either been given advice about the agreement by an independent legal
adviser, business adviser or accountant, or had been told that such advice
should be sought but had decided not to seek it;
page 8 | Pharmacy insights
By Douglas Raftesath, Principal
T 02 9018 9978
E [email protected]
CASE: ACCC v South East
Melbourne Cleaning Pty Ltd
(in liq.) (formerly known as
Coverall Cleaning Concepts
South East Melbourne Pty Ltd)
[2015] FCA 25
Summer 2014
2015
Pharmacy insights
• failed to pay monies owed to a franchisee; and
• told a franchisee that it would demand payment of the ‘loan’ of the balance of
the franchise fee if he terminated his franchise when the franchisor was not
entitled to that payment.
The Court declared that each of the franchise agreements were void, and significant
penalties were imposed on an individual who was found to have aided and abetted
the franchisor’s breaches including disqualification from managing corporations
for a period of 2 years, a requirement to pay compensation to the two franchisees
concerned, and a substantial pecuniary penalty payable to the Commonwealth
of Australia.
Lessons learned:
• Franchisors should make themselves aware of the new requirements of the Franchising
Code (as amended from 1 January 2015) and ensure their practices and procedures
are compliant.
• Prospective franchisees should seek legal advice in relation to franchise agreements
before signing or paying any money.
• Care must be taken to ensure that disclosures and representations to prospective
franchisees are accurate and based on reasonable grounds.
• Court proceedings for breaches of the Franchising Code may be accompanied by
proceedings for breaches of the ACL (unconscionable conduct).
• Individuals who aid or abet breaches of the ACL by a company may find themselves
with personal liability for pecuniary penalties, orders for compensation and
disqualification from managing corporations or being involved in franchise businesses.
FOR ADVICE ON BREACHES OF THE FRANCHISING CODE AND ACL OR ANY
COMMERCIAL LITIGATION OR DISPUTE RESOLUTION ISSUE, PLEASE CONTACT
DOUGLAS RAFTESATH (COMMERCIAL LITIGATION PRINCIPAL) ON T: 02 9018 9978.
FOR ADVICE ON THE FRANCHISING CODE, DISCLOSURE AND PREPARATION OF
FRANCHISE OR LICENCE AGREEMENTS, AND COMPLIANCE PLEASE CONTACT
MARK FITZGERALD (COMMERCIAL PRINCIPAL, MELBOURNE) ON T: 03 9810 6767
OR GEORGINA ODELL (SENIOR ASSOCIATE, SYDNEY) ON T: 02 9018 9975.
Find out more about Meridian Lawyers at meridianlawyers.com.au – our commercial, commercial
litigation and employment team’s contact details are provided on the following page.
Disclaimer: This information is current as of February 2015. These articles do not constitute legal advice and do not give rise to any
solicitor/client relationship between Meridian Lawyers and the reader. Professional legal advice should be sought before acting or
relying upon the content of these articles.
Meridian Lawyers | Melbourne | Sydney | Newcastle | Brisbane
www.meridianlawyers.com.au
page 9 | Pharmacy insights
Meet our team
Commercial, commercial litigation and employment team
LITIGATION & DISPUTE RESOLUTION
COMMERCIAL & BUSINESS LAW
EMPLOYMENT & INDUSTRIAL RELATIONS
PROPERTY, WILLS & ESTATES
COMMERCIAL & BUSINESS LAW
Ian Goddard, Special Counsel
T +61 2 9018 9943
E [email protected]
Julian Gregory, Consultant
T +61 2 9018 9923
E [email protected]
PROPERTY, COMMERCIAL & BUSINESS LAW
COMMERCIAL & BUSINESS LAW
EMPLOYMENT
EMPLOYMENT
Douglas Raftesath, Principal
T +61 2 9018 9978
E [email protected]
Georgina Odell, Senior Associate
T +61 2 9018 9975
E [email protected]
INTELLECTUAL PROPERTY,
COMMERCIAL & BUSINESS LAW
Janette Li, Solicitor
T +61 3 9810 9770
E [email protected]
Mark Fitzgerald, Principal
T +61 3 9810 6767
E [email protected]
Katrina Mark, Senior Associate
T +61 2 9018 9964
E [email protected]
Sharlene Wellard, Principal
T +61 2 9018 9939
E [email protected]
Laura Dhana, Senior Associate
T +61 3 9810 6771
E [email protected]
Leanne Dearlove, Solicitor
T +61 2 9018 9988
E [email protected]
COMMERCIAL & COMMERCIAL LITIGATION
Gabrielle Parra, Solicitor
T +61 2 9018 9925
E [email protected]
meridianlawyers.com.au