COVID-19 | ‘Business days’ when business has changed
Lionel Hogg, Partner, Gadens, Brisbane and Liam Hennessy, Director, Gadens, Brisbane
The ‘business day’ in a new light
Way back on 29 March 2020, the Morrison Government announced sweeping shutdowns in response to the COVID-19 pandemic. Pubs and gyms were among those deemed ‘non-essential’ businesses and required to shut down. Businesses which did not fall under this qualification, including banks, remained open though.
Since that time, the restrictions have see-sawed in Australia and around the world. Most Australian states have progressively relaxed their restrictions e.g. Qld and NSW, while Victoria has relaxed and then drastically tightened its restrictions – it is now at Stage 4 restrictions – in response to a ‘second wave’ of COVID-19 outbreaks. A Melbourne curfew is in place between the hours of 8pm until 5am. The only reasons to leave home between 8pm and 5am are permitted work, medical care and caregiving.
One legal consideration – among many – which arises pertains to what a ‘business day’ means, given:
- it is a boilerplate definition incorporated into most contracts and many statutes imposing time-sensitive obligations, for example breach reporting for financial services licensees;
- statutory definitions of the term are often drafted by reference to ‘bank holidays’;
- many contracts feature bespoke definitions of ‘business day’, particularly those with an international dimension; and
- oft-times those bespoke definitions are with reference to work in the usual course i.e. 8.30am – 5.30pm at an office. They do not contemplate working-from-home scenarios, or indeed curfews!
Valuation dates, settlement dates, payment dates and many other key actions under contracts, from OTC transactions to large real estate transactions, are calculated by reference to the ‘business day’. If the sequencing of these days is likely to change given the Federal and state government’s measures now or into the future, it will inevitably give rise to postponements of contractual events and ancillary financial ramifications. It is therefore timely to revisit this bedrock definition.
The ‘business day’ and hours long and short
A secondary question arises as to the working-from-home arrangements to which many Australians and global citizens are now becoming accustomed. Is it a ‘business day’ when many businesses’ physical premises are closed, and employees are working remotely? The answer to that will depend on how the relevant legislation or contract defines a business day (see the first example of a ‘business day’ clause above for illustration.)
In addition, the hours of a business day can no longer be safely assumed. One definition of ‘business day’ we have seen is predicated on the ‘working hours period of the business each day’. Another is referrable to the ‘ordinary hours’ of work each day. Are those working hours still 8.30am to 5.30pm when employees are working from home? Can it be argued that a party has missed a notification deadline if they submit a required notice by 8.45pm instead of 5.30pm in the age of working from home? How will the curfews in Victoria affect these considerations? Is that a ‘force majeure’ event? Again, it will depend on a close examination of the definition.
The ‘business day’ and impacts minor and major
Most contracts predicate the timing of certain actions based on the concept of a ‘business day’, whether defined by legislation or otherwise. Time is often of the essence in many transactions. Depending on the transaction, if a party’s interpretation of ‘business day’ is such that the action takes place a few actual days after the anticipated event, and time is of the essence, the financial implications could be huge. Examples include interest accrual on large debts, market fluctuations for OTC transactions, missed option expiration dates, missed notification dates for insurance incidents, extended notice periods, and failures to settle for real estate transactions. The possibilities are endless.
To ground these scenarios practically, the Attorney General of Texas earlier this year issued an announcement entitled ‘Update: Calculation of Business Days and COVID-19′ which commenced with these words ‘As part of the unprecedented response to coronavirus in Texas, and in light of the Governor’s recent disaster declaration, our office has received inquiries regarding the calculation of business days’[1] The issue is a live one for many commercial Texans, just as it will be for many commercial Queenslanders (both states, incidentally, being ‘Sister States’) and other Australians.
This issue is also not without Australian historical precedent. In IOC Australia Pty Ltd v Mobil Oil Australia Ltd[2], the High Court decided that a payment which was to be made on the ‘last business day of the month’ was due on 28 December, instead of 31 December. The latter date was only deemed a public holiday after the contract was formed, to the unhappy fortune of the contracting party, who then needed to pay early.
Practical next steps
Businesses who have large value or particularly time sensitive contracts should consider conducting an audit of the definition of ‘business day’ in those contracts to see if they are now likely to be open to arguable interpretation, or may become so in the near future. It is even more incumbent on those businesses who have entered into international contracts – particularly those drafted by overseas-based lawyers – given the likelihood of bespoke definitions.
[1] Ken Paxton, Attorney General of Texas ‘Update: Calculation of Business Days and COVID-19’, available at https://www.texasattorneygeneral.gov/open-government/governmental-bodies/catastrophe-notice/update-calculation-business-days-and-covid-19
[2] (1975) 11 ALR 417