- November 2013 - Forgiving Debts in the Family
- November 2013 - There is nothing standard about a standard Building Contract
- November 2013 - New Window Safety Laws
- November 2013 - Swimming Pool Compliance
- November 2013 - Time is Almost Up! Register your Security Interest before it's too late
- November 2013 - Protection of Domain Names
- October 2013 - Parenting Arrangements over the Holiday Season
- October 2013 - Power of Attorney: New Requirements
- September 2013 - Workplace Flexibility Stretched
- September 2013 - Alchemy and Credit Control: Turning Longstanding Debts into Gold
- September 2013 - Landlords vs Tenants
- August 2013 - Super Reforms Lapse due to Election
- August 2013 - Claims Against your Estate from your Former Spouse
- August 2013 - Family Provision Claims and the Family Court
- August 2013 - Family Disputes can Continue long after Death
- July 2013 - NSW Strata Laws are now more "pet friendly"
- July 2013 - Reminder to Register Your Swimming Pool!
- July 2013 - The Personal Property Securities Act in Practice
- July 2013 - Important Amendments to the Property, Stock and Business Agents Act - 2013
- June 2013 - Abolition of Stamp Duty - DELAYED!!!
- June 2013 - Shareholder's Agreements
- June 2013 - A few tips if you are planning on going into business
- May 2013 - The Dangers of a Verbal Contract
- May 2013 - Tips for Avoiding Contract Disputes
- May 2013 - Superannuation Benefits After a Member's Death
- April 2013 - Protection is free, but who owns it?
- April 2013 - Copyright in Pictures on the Internet
- April 2013 - Intellectual Property and the Workplace
- March 2013 - How Family Provision claims can drain the value of small estates - legal costs in claims against the estate
- March 2013 - Trust Deeds - how can they be varied, and will there be an adverse tax consequence?
- March 2013 - Self Managed Superannuation Fund (SMSF) update
- November 2012 - Do you Cloud?
- November 2012 - Electronic Contracts
- November 2012 - Litigation and Breach of IP Rights
- October 2012 - GST Revisited
- October 2012 - Transferring a Business Name
- October 2012 - Hidden Traps Associated with Social Media
- October 2012 - Cloud Computing Agreements
- September 2012 - Casual Employees: Are they really casual?
- September 2012 - Why employers should not be afraid to confront fruitless Unfair Dismissal claims - Two Case Notes
- September 2012 - Are your Workers correctly described as independent contractors or employees?
- September 2012 - Real Estate Agency Law
- August 2012 - Binding Financial Agreements May Not Be Binding
- August 2012 - The ABC of Divorce
- August 2012 - Directors Beware!
- July 2012 - Changes to First Home Owner Grant Scheme
- July 2012 - First Home - New Home Scheme
- July 2012 - NSW Home Builders Bonus
- July 2012 - A Notice to all of our Australian Non-Resident Clients
- July 2012 - Do Landlords need to consider the Personal Property Security Register?
- July 2012 - Are you considering entering into a Retail Lease? Understand your rights before you sign the Lease
- June 2012 - Trustee's Fiduciary Responsibility in the Management and Administration of a Self Managed Super Fund
- June 2012 - Wills and More
- June 2012 - NSW Budget Deferral of Stamp Duty Abolition Schedule
- May 2012 - Costs in Litigation
- May 2012 - Mortgage Law Update - Possession Proceedings
- May 2012 - Sometimes we get it wrong
- May 2012 - Excess Contributions to Superannuation......Postscript to April alert
- May 2012 - Business Names Registration
- April 2012 - Excess Contributions to Superannuation
- April 2012 - A Standard Form Contract for Retirement Villages in NSW
- April 2012 - Third party creditor's intervention in family law property proceedings
- March 2012 - PPSR
- March 2012 - Capital Gains Tax Roll-Over Relief in Family Law Matters
- March 2012 - HR Policies: Are Employers creating rods for their own backs?
- February 2012 - Practical Implications of the PPSR
- February 2012 - Trust Deeds - Are you at risk of Resettlement?
- February 2012 - Changes to the Home Building Act
- February 2012 - OH&S becomes WH&S
- January 2012 - Commencement of New Regulations and Act
- January 2012 - Credit Card Debts and Family Law
- November 2011 - Green Buildings
- November 2011 - Parenting, Separation and the added pressure of Christmas
- October 2011 - Personal Property Securities Information Series (Part 5)
- October 2011 - Avoiding Adverse Outcomes in the Workplace
- September 2011 - Personal Property Securities Information Series (Part 4)
- August 2011 - Personal Property Securities Information Series (Part 3)
- August 2011 - Personal Property Securities Information Series (Part 2)
- August 2011 - Personal Property Securities Information Series (Part 1)
November 2013 - Forgiving Debts in the Family
Parents will often loan their adult children funds to assist in building a new business or purchasing their first property. Unfortunately, family relationships occasionally break down and the parties need to know where they stand and what their rights are to recover the funds.
Forgiving the Debt
The child (the borrower) will often say that the lending parent forgave the debt.
If there are no documents, a Court will determine whether the funds were forgiven or not depending upon the memory of each party and their creditability in the witness box. This is a classic "he said, she said" dispute.
If there are no formal documents signed or registered, an informal forgiveness of debt in writing will generally be an effective defence.
In contrast, if the parent registered a security interest against an asset, the lender is required to formally discharge the loan in the correct format and the forgiveness of debt may be challenged.
If you are considering assisting your children with a loan, consider:
- Discuss the loan with the borrower to reach an agreement on the key terms and conditions of the loan including whether any interest is payable, repayment dates and the term of the loan. Discuss whether the loan will be secured by any asset such as a property or an asset of the business. This must be done at the time the funds are provided;
- Document the agreement;
- Seek legal advice. A solicitor can assist you to secure the loan by registering a mortgage or a security interest over an asset. Although this requires some initial costs upfront, it will greatly impact the parent's ability to recover the funds later; and
- Discuss the loan with other interested parties. Often parents with more than one child make loans to one child. In our experience this encourages future family disputes, depending on what has been promised to different family members.
If you are concerned that you have previously loaned moneys to family members without the appropriate documentation or are considering making a new loan to family members, please contact our Commercial Team to discuss how we can assist you to protect your rights and position.
November 2013 - There is nothing standard about a standard Building Contract
Of late we have had multiple clients approach us seeking advice on a home building contract that has been provided by their builder. One common comment we hear at such times goes along the lines of:
"It's their standard contract, it should be pretty straight forward."
Unfortunately, these contracts are anything but straight forward. The contracts used by most builders are based on standard templates provided by various industry bodies, which usually do not sufficiently protect the interests of the home owner.
Regrettably we don't have the space or time to go into all the possible pitfalls, so will outline a few of the major concerns:
(a) Amendments to the Contract: Just because the contract is based on a standard template does not mean it can't be amended. Builder's often include amendments which allow them greater leeway on price and time and so too should home owners require amendments to protect their interests.
(b) Variations to the Price: One common area of disputes between builders and home owners relates to variations, specifically those resulting in an increased price. While there may be a single price listed at the front of the contract, almost every building contract has provisions for this amount to increase (and rarely for it to decrease). For example there will almost always be a provision allowing for an increased price if there are any "unforeseen" site conditions. Given that the builder is the expert then it is in the best position, and should have the experience, to foresee any potential difficulties. The builder should be responsible for identifying these and allowing for them in the quoted price. We recommend a simple amendment requiring that the builder has inspected the site prior to commencement of work and cannot request a variation of price for any site condition which should have been apparent on such an inspection.
(c) Payment: Most contracts will require "progress payments", being payments to be made at intervals during the works. This may sound fair, however the amounts allocated are often arbitrary, and may not reflect the actual value of work done, resulting in major issues if the work is never completed. Additionally you may be paying for defective work which will not become apparent until the house is complete. We recommend requiring a warranty by the builder that the progress payments accurately reflect the work done to that point, and that the home owner be allowed to retain a percentage of any payments (ideally 5-10%) against any possible defects.
(d) Building Defects: Once the building is complete there is usually a "defects liability period" during which the home owner may notify the builder of any defects and which the builder must then repair. Our experience is that these clauses usually do not go far enough to protect the home owner. They are usually too short (13 weeks, where 26 weeks would be preferable) and may limit the number of times you can provide a list of defects to the builder to 1. The latter limitation may result in you having to make the difficult choice between waiting until the end of the liability period to provide your list, and therefor living in a potentially dangerous home, or providing the list early and forgoing your right to have any later defects rectified.
The matters discussed above are far from exhaustive. If you are considering accepting a builder's quotation it is of vital importance that you have their contract reviewed to ensure that you, and your future home, are properly protected. If you are thinking of entering a building contract, or have any questions, please contact our Property team.
November 2013 - New Window Safety Laws
The Minister for Fair Trading recently announced new safety measures to prevent children falling from windows.
All windows above the ground floor in existing residential strata schemes are to be retrospectively fitted with a lock or safety device which prevents the window opening more than 12.5cm.
The NSW Government will amend the Strata Schemes Management Act 1996 and the Residential Tenancies Act 2010 to require Owners Corporations to install safety devices on all windows that pose a safety risk to young children, all owners to install safety devices regardless of the by-laws of the strata scheme and to include window safety devices in the prescribed condition report for rental premises.
The implementation of new legislation and new safety measures could save a child's life.
November 2013 - Swimming Pool Compliance
We advise that the time to register your swimming pool in accordance with the Swimming Pools Amendment Act 2012 was extended to 19 November 2013.
When selling or leasing your property from 29 April 2014 a valid Certificate of Compliance issued under the Swimming Pools Act 1992 or an Occupation Certificate issued in respect of the swimming pool which is less than 3 years old will become a prescribed document and MUST be annexed to the Contract for Sale of Land or provided to the tenant.
A Certificate of Compliance may only be issued by Council or an accredited certifier once the inspector has inspected the swimming pool and is satisfied that the requirements for the issue of the Certificate of Compliance have been met. A swimming pool must be registered and must comply with all safety requirements in accordance with the Swimming Pools Act 1992 before the Certificate of Compliance can issue. The inspector can charge a maximum fee of $150.00 for the first inspection of the swimming pool and a maximum fee of $100.00 for each additional inspection of the swimming pool and may refuse to issue the Certificate of Compliance until the fee has been paid.
Council or an accredited certifier can issue a notice requiring works to be undertaken to the swimming pool if it is non-compliant.
You should take this opportunity to ensure that your swimming pool complies with the safety provisions under the Swimming Pools Act 1992. Please contact your local Council to arrange for an inspection of your swimming to ensure compliance.
November 2013 - Time is Almost Up! Register your Security Interest before it's too late
Continuing on from our series of alerts on the Personal Property Securities Act 2009 (Cth) (PPSA), we advise that the transitional period under the PPSA is due to expire on 31 January 2014.
The purpose of the transitional period was to provide temporary protection for security interests that were created prior to the register coming into force, being 30 January 2012. Whilst most security interests would have migrated from other existing registers, such as charges from ASIC, not all security arrangements had a register prior to the PPSA and therefore the transitional period allowed for those pre-existing security interests to be formally recognised by allowing secured parties to register those interests on the Personal Property Securities Register.
The types of arrangements that the transitional period was designed to protect were retention of title arrangements, consignment arrangements and equipment and chattel mortgages; as there was no formal body to register these arrangements with prior to the PPSA. Failure to adequately protect these interests that existed prior to 30 January 2012, may result in the possibility of another party securing priority over your security interest or if the grantor becomes insolvent, being treated as an unsecured creditor. The old methods of enforceability under the those arrangements that existed prior to the PPSA may no longer be enforceable due to other secured parties having registered security interests over the same assets.
To ensure that you are not holding an unperfected security interest that existed prior to 30 January 2012, you will need to review all your current contractual arrangements to ensure that your security interest is registered and protected prior to the expiry of the transitional period.
At Atkinson Vinden we understand the importance of ensuring that your security interests are properly protected on the Personal Property Securities Register. If you are unsure as to whether you have adequate protection for your interests or require any clarification, please contact Jessica Lobow to discuss further.
November 2013 - Protection of Domain Names
The Internet can best be described as an international network of networks, providing the communications architecture that forms the basis of other services, such as the World Wide Web. Every computer directly connected to the internet holds its own personalized identifying number, known as an IP (Internet Protocol) Address, an address consisting of a code of numbers, simplified into a ‘people friendly’, alphanumeric reference term, also known as a domain name.
Domain names, unlike trade-marks, are not recognized by local statutes as intellectual property, and therefore are not protected against use by another party in the same way as a trademark. This becomes problematic in the information age as the high volume of client or customer research completed online provides an intelligent competitor an opportunity to target the client or customer that mis-strokes the keyboard. The issue of competitors registering similar domain names is one that is becoming increasingly prevalent and one that the courts have recently overviewed.
The tort of passing off prevents people from representing their goods or services as being the goods and services of another, protecting the goodwill of a trader from a misrepresentation that causes damage to their goodwill. Recently the issue of the registration of comparable domain names breaching passing off regulations came to a head in REA Group Ltd v Real Estate 1 Ltd  FCA 559, where competing real estate agencies registered the domain names “realestate.com.au” and “realestate1.com.au” respectively. Whilst REA Group’s domain name www.realestate.com.au was already well established in the marketplace upon Real Estate 1’s registration of their domain name, Justice Bromberg stated that the decisive factor was not the history or public notoriety of the domain name, but rather whether the conduct of the competing firm would mislead or deceive the public. In this case the court found that an ordinary person would understand that an organic search result is likely to be more relevant to the information searched for than a sponsored link. Justice Bromberg also found that REA had not established that a substantial number of ordinary or reasonable persons were likely to be misled or deceived by the closeness of the domain names.
This approach differs significantly from the approach taken by the panelists under the UDRP, who in previous case law recognized the concept of “initial interest confusion” or the idea that “by the time a user reaches the website identified by a domain name any registrant objective of attracting visitors for financial advantage to a website through a confusingly similar domain name will generally be achieved”. Therefore it is seems that the ability for an entity to combat an intelligent competitor is becoming more difficult.
The REA case established a test for trademark infringement by claiming the differences between trademark infringement and misleading and deceptive conduct by indicating that a mark will be deceptively similar to another mark if there is a “real tangible danger” of confusion occurring and that allowance must be made for the imperfect recollection of a trademark. The test for trademark infringement is different to that required to establish misleading and deceptive conduct, with the courts in trademark infringement matters considering the use of the respondents mark alone, whereas the test for misleading and deceptive conduct focuses more on the ability to create confusion within the mind of a consumer. Therefore it is arguable that in its current state, as a domain name is not seen as a mark of a corporation that an entity will find it hard to protect.
An entity does currently have a claim against the registration of a similar domain name under the UDRP if the case involves “clear cybersquatting” (bad faith registration of a domain name in which another entity has rights), at which time an entity can make an application to have the name cancelled or transferred to it if the applicant can convince an independent panelist that:
· The domain name is identical or confusingly similar to a trademark or service mark in which the applicant has rights;
· The registrant has no rights or legitimate interests in respect of the domain name;
· The domain name has been registered and is being used in bad faith
UDRP proceedings usually take two to three months to conclude. Whilst the REA case has narrowed the issues in a claim against a similar domain name, Australian courts will still consider claims when:
· Domain name holder is registered in Australia or the domain name is registered with an Australian registrar;
· The rights holder is seeking a remedy other than mere transfer of the domain name (for example, if the domain name holder is engaging in conduct in addition to the registration and use of the disputed domain name;
· The domain name holder has some rights to the domain name; or
· The domain name is not used for similar goods and services but there is a clear risk of confusion and damage to the applicant.
The UDRP is useful for cases where the client is looking for a simple, quick and cheap way of recovering the domain name, although all options should be considered before embarking down this path as these matters are far from a home run.
October 2013 - Parenting Arrangements over the Holiday Season
As the December/January school holiday period is fast approaching, separated parents often consider their parenting arrangements over the holiday season. If you do not have Parenting Orders from the Court specifically providing for Christmas/holiday time with the children, conflict may occur during the holiday season due to disagreements over the time the children are to spend with each parent. Rather than celebrating the holiday season and the children enjoying their time with each parent, these disputes create stress for everyone.
Factors to consider regarding Christmas/holiday parenting arrangements include:
- That the December/January school holidays are 6 weeks in length. How is the time to be divided between each parent? Some parents alternate each week of the school holidays and others divide it equally so that the children spend three consecutive weeks with each parent. Each family's situation is different and consideration should be given as to what arrangement works best for the children taking into account their needs, ages and maturity.
- How are the public holidays shared? For example, is religion important? Does one parent wish for the children to observe religious traditions?
- Does one parent spend Christmas Eve and early Christmas morning with the children and the other parent will spend from midday on Christmas Day until Boxing Day with the children? When is it convenient for changeover to take place on Christmas Day? Bear in mind that the day is often very busy and delays occur and Christmas lunch may actually take place mid afternoon.
- Whether a parent wishes to travel overseas with children during the holiday season, e.g. to visit extended family? Is the other parent unlikely to consent to overseas travel?
- If you have Parenting Orders in place and the other breaches the order, do you need to make an urgent application to the Court regarding the breach of the order?
- If you do not have Parenting Orders from the Court and the other parent is refusing time with the children over the holiday season, do you need to make an urgent application to the Court seeking Parenting Orders?
The last day for filing an application seeking Parenting Orders for the Christmas holiday period with the Family Court of Australia is 4.00pm on Friday, 8 November 2013. It is important that you lodge your application prior to this date. In relation to filing an application seeking urgent Parenting Orders from the Federal Circuit Court, there is no cut off date for filing applications however the listing of a matter by the Federal Circuit Court will depend on the wording of the orders sought, the urgency of the matter and the availability of hearing dates prior to the Christmas holiday period.
If you require assistance and legal advice regarding obtaining Parenting Orders or your current parenting arrangements, please contact our experienced Family Lawyers, Annabel Murray (Family Law Accredited Specialist) or Alexandra Michaels on 9411 4466.
October 2013 - Power of Attorney: New Requirements
As a result of amendments to the legislation covering powers of attorney, LPI (Land and Property Information) now requires that two new forms be used for creating powers of attorney and there is a difference between: a General Power of Attorney and an Enduring Power of Attorney.
Use of the new forms will become mandatory from 1 March 2014 onwards. However LPI will continue to accept and register General Powers of Attorney made in accordance with the previous legislation.
Enduring Powers of Attorney made in accordance with the previous legislation which were entered into, i.e. fully executed by all parties, before 28 February 2014 will still be accepted for registration by LPI after this date, but LPI will only accept the new form of Enduring Powers of Attorney for any powers created from 1 March 2014 onwards.
If you have entered into a Power of Attorney under previous legislation and which has not been accepted by all of your attorneys then you should make sure that their acceptance is effected before 28 February 2014.
A Power of Attorney must be registered (at LPI and for a standard fee) if your attorney is empowered to sell, mortgage, lease or otherwise deal with your real estate. If you don't intend for your attorney to deal with your real property assets, registration is not necessary and any powers granted will still be effective for use by your attorney for any other purposes.
Please contact any member of our estate planning team if you have any queries in regard to your current or proposed powers of attorney.
September 2013 - Workplace Flexibility Stretched
Those striving for a better work-life balance will be pleased to learn that the range of people now entitled to request flexible working arrangements has been stretched. Business may not be so pleased because of the potential organizational contortions this may require.
Since 2010, working Australians have been entitled to request flexible working arrangements whilst their children are younger than school age, subject to an employer's right to refuse if there are reasonable business grounds for doing so. Examples have included changes in hours, patterns, and location of work.
In July 2013, the range of those who may request flexible working arrangements has been expanded to include those who have the care of children of school age or younger, who are carers, who have a disability, who are 55 or older, or who are dealing with issues of domestic violence in their home.
These new categories likely capture more than half of all workers, meaning that this reform probably represents one of the most significant changes to labour arrangements in Australia since WorkChoices.
A small way in which employers have been helped under the changes is a much clearer set of rules around when such requests may be refused. It is reasonable for an employer to refuse if the new working arrangements would be too costly, if there is no capacity to change the working arrangements of other employees to accommodate the request, if it would be impracticable to change the working arrangements of other employees, if the new arrangements would be likely to result in a significant loss in efficiency or productivity, or if the new arrangements would be likely to have a significant negative impact on customer service.
If an employer elects to refuse the request, they should properly document which of the above reasons are relied upon, and communicate those reasons to the worker. Time limits apply to giving a reply, so these requests must be dealt with quickly.
Working women will continue to struggle with the dilemma of when, and on what terms, they return to work after having a baby. It is one thing to have legislated rights to return to work on flexible terms; it is quite another for women to expect to be given the same opportunities for advancement in their career if they choose to call upon flexible terms. Similar factors will apply to the new categories of workers also entitled to greater workplace flexibility; while the choice is there, will ambitious employees dare exercise that choice if it means they may be treated less favourably when opportunities for advancement come along?
We would love to hear your stories about how flexibility has been achieved in your workplace, and what some of the practical issues of implementation have been.
September 2013 - Alchemy and Credit Control: Turning Longstanding Debts into Gold
"Cash is king", or so the saying goes, but how do you make progress with clients who just won't pay? If a significant amount of money is owed, legal proceedings are usually justified on a commercial basis, and will usually get the other party's immediate attention.
But what if the amount owed is relatively modest, making court proceedings prohibitively expensive for that debt? These are our six golden tips to recovering your bad debts.
1. Personally visit the debtor and discuss the situation with them. Personal contact can be very powerful, especially if you can explain to the debtor, face-to-face, the negative impact their behaviour is having on your business. You can eyeball them and say that if they do not pay, you intend following legal procedures, including, if necessary, court action, because you will not accept non-payment.
2. Negotiate terms. Sometimes this may involve receiving payment in several tranches. Often the reason that a debtor won't pay is because they do not currently have the full amount available to pay you. Invite them to pay off in 3 or 4 steps over several weeks or months. Avoid arrangements that are too complicated, or involve too long a time period, because the other party will almost inevitably reneg on the deal. Another negotiation strategy to consider is offering a reduction if the amount is paid in a very short period, such as 10% reduction if paid by the end of the week. Advise the debtor what the amount will be if they pay in that short period, and how much they will be saving.
3. If the person who owes the money is a professional person, you may be entitled to report their behaviour to the professional body that registers that person. Most professionals are required to meet standards of behaviour that is exemplary, and financial misconduct such as failing to pay debts may be relevant to that person's ongoing registration. Even cautioning the debtor that you are considering this course of action may be sufficient to get their full attention.
4. Send correspondence about the debt to the household where the debtor lives, without identifying the name of the recipient of the letter. In many domestic situations one of the adults controls the finances, and the other will be completely unaware of the debt. With a bit of luck, your letter might be opened by the partner or spouse of the debtor, who may be shocked that monies are owed, and who may become your advocate in placing pressure on the debtor to pay.
5. Have a lawyer or debt collection agent issue a letter of demand on your behalf. Having a third party write the demand for you can often change the dynamic - the recipient will open the letter for a start, as initially they will not recognise who it is from, and they will usually perceive a greater urgency to paying the debt because of the fear of the legal processes which may follow. Solicitors can expressly threaten court action. Debt collection agents can also make assertions about negative credit ratings if the amount is not paid.
6. Issue a Creditor's Statutory Demand. This form of demand requires payment within 21 days, on the threat that if it is not paid in that timeframe, the company will be presumed insolvent, entitling you to wind up the debtor company. To most companies this represents a very serious threat, and will almost always result in payment, or a clear statement from the other party of what the issues are (whether solvency or a dispute over the amount owed). Some caution is required with this strategy: if there is a genuine dispute as to the amount of debt, the Creditor's Statutory Demand can be set aside and cost consequences may follow. As a result, before you issue your own Creditor's Statutory Demand, it is important to seek legal advice to ensure it complies with the proper form and to ensure it does not breach any legislative or common law requirements. A solicitor will need to help you prepare the Affidavit that must accompany the Demand, setting out the necessary particulars of the debt.
If you have any questions in relation to debt recovery members of our litigation team are always available to assist you.
September 2013 - Landlords vs Tenants
Knowledge is power. Recently we have had a few clients who have not been fully aware of the rights and obligations that operate under the Retail Leases Act (1994) NSW (the Act). These are some key issues both landlords and tenants should be aware of, from the perspective of a typical tenant:
1. "My landlord says the Act doesn't apply to me as I only have a licence to occupy the premises":
It doesn't matter what the agreement between the landlord and tenant is called, it is still capable of being a Retail Lease and falling within the scope of the Act. All the tenant needs is a right to occupy the premises, whether exclusively or not.
2. "My landlord is only willing to offer me a 3 year term, with no option to renew":
A tenant with a retail lease is entitled to a minimum 5 year term (including any option period). The only way to waive this right is to obtain independent legal advice and provide a certificate evidencing the advice to the landlord.
3. "It is getting to the end of my lease and the landlord will not tell me whether I am going to be offered a new lease":
Under the Act the landlord is required to give between 6 and 12 months notice of its intentions at the end of the lease (reduced to 3 to 6 months notice for a lease of less than 12 months). If the landlord fails to do so then the tenant can require a 6 month extension of their lease, from the date on which the landlord indicates its intentions, SO LONG AS the tenant asks for this extension before the lease would otherwise have expired.
4. "I am applying for a new lease and the landlord wants a Lease Application Fee":
A landlord, or its agent, is prohibited from asking for, or accepting, any money as a precondition of the grant of a lease (advance payment of rent and security deposit excepted). Penalties apply.
5. "I have just had a market review and the rent valuation came in at less than my current rent. My landlord is pointing to a term of the lease stating that the rent cannot reduce":
Any provision of a retail lease that attempts to stop rent from reducing after a market review is of no effect. If a market review has just been undertaken then the rent valuation is the new rent, regardless of whether it is higher or lower than the previous rent.
These are just some of the protections afforded to retail tenants under the Act. Please note that in order for the Act to apply you have to be in a retail premises (as defined by the Act) and not subject to a number of exceptions (mostly relating to very short term leases, or large premises). If you have any doubt about whether the Act applies, or would like to discuss your rights, please feel free to contact our commercial team on (02) 9411 4466.
August 2013 - Super Reforms Lapse due to Election
As many will know a number of significant changes to superannuation legislation were heralded earlier this year.
Some are now "law"...including;
1. increasing the superannuation guarantee from 9% to 12%; this increase is being introduced on a staggered basis - currently it is at 9.25%;
2. an increase in the concessional caps by $10,000 [to $35000] for people aged over 60 (and for people over 50 from 1 July next year); and
3. the abolition of the 15% tax on superannuation for people earning under $37,000 per annum.
The calling of the federal election means that no legislation can be passed in respect to the remaining announced issues.
The most controversial proposal of a $100,000 cap on tax free earnings in the pension phase has not been passed into legislation. This means that account based pension accounts with earnings above $100,000 won't be taxed....and the Liberal party have already announced the remaining proposals will not be "revisited "if they win the election. These include:
1. increased reporting requirements,
2. an increase in the inactive account threshold,
3. changes around deferred lifetime annuities,
4. an extension of the deeming rules relating to account based income streams, and
5. bringing all financial assets to be assessed under the same rules.
August 2013 - Claims Against your Estate from your Former Spouse
Separating couples usually give careful thought to finalising their property settlement so that each is clear as to the assets and liabilities as well as superannuation that they are to retain on the breakdown of the relationship. Often after parties have finalised their property settlement, they then also give careful consideration to their own estate planning and have new Wills prepared.
Whilst this is an important task to attend to, it is important to be aware that a spouse including a former spouse is defined as an "eligible person" under the Succession Act 2006 (NSW), meaning that they are a category of person who can, on the death of a spouse/de facto spouse or former spouse, bring a claim seeking a share of that deceased party's estate.
For couples who both are receiving significant assets out of the property settlement, who are able to be financially independent of the other in the future and particularly those with children or who re-partner, they are often concerned about the potential for their former spouse to bring such a claim against their Estate. They may elect to enter into a mutual deed of release under the Succession Act. This is a written agreement between the parties in which each party promises to the other not to bring such a claim and in which both agree to join the other in an application to the Supreme Court for the mutual promises in the Deed of Release to be approved of and upheld by the Court.
It is only when the Supreme Court approves the mutual promises in the Deed of Release that the agreement is binding, meaning it bars any claim for provision from the other's estate after their death. Some couples apply to the Supreme Court during their lifetimes in accordance with best practice guidelines. Other couples elect to wait in the event that such a claim is made. It is important to note that the mutual Deed of Release is not binding on the Supreme Court until it has been approved of by it.
Each case is of course different. For other couples, it may not be prudent to enter into a mutual Deed of Release. Examples can include couples with very modest net asset pool for division and the party in the weaker position may be relying on ongoing spousal support from the other.
Entering into a mutual Deed of Release is not to be done lightly. Careful consideration needs to be had to the advantages and disadvantages of doing so and giving consideration to your own individual and financial circumstances to determine whether or not it is prudent to do so. For further information or enquiries, please contact Annabel Murray.
August 2013 - Family Provision Claims and the Family Court
Can children in certain circumstances utilise the Family Court to circumvent family provision orders? The High Court case of Stanford v Stanford  HCA 52 dealt with such a scenario.
In the Stanford matter the wife was 89 years and the husband was 87 years. It was the parties' second marriage and both had adult children from their first marriages and had been married 37 years.
The husband and wife lived in the home received by the husband from his first marriage. In 1974 the wife sold her home to her daughter.
In March 1995 the husband made a will leaving his estate to be divided equally between his sons and the wife intended to leave her estate to her daughters. The husband's will provided for the wife to have a life tenancy in their matrimonial home.
In September 2005 the wife made an Enduring Power of Attorney in favour of her daughters. In December 2008 the wife suffered a stroke and the onset of dementia. The wife required full-time care and was unable to return to live with the husband. The husband placed $40,000 into a bank account to provide for his wife's medical treatment and care and visited his wife three times a week.
In August 2009 the wife's daughter brought proceedings as her case guardian under section 79 of the Family Law Act 1975 in the Family Court for an order that the matrimonial home be sold and the net proceeds of sale together with the husband's superannuation entitlements and joint savings be divided equally between the parties. By now the wife had lost testamentary capacity to change her will.
The daughter succeeded and the Magistrate ordered that the property be divided 57.5% to the husband and 42.5% to the wife. The husband was ordered to pay the wife $612,931 within 60 days on the basis that this was a just and equitable outcome.
The husband appealed to the Full Court of the Family Court. Before judgment was pronounced the wife died. In November 2011 the wife's daughters jointly applied to the Family Court to be substituted as legal personal representatives of the wife on the basis that they were joint executors and beneficiaries of the wife's last will and testament. The husband submitted that due to the death of his wife it was inappropriate for any order for property settlement to be made.
In January 2012 the Full Court delivered its judgment that on the husband's death the amount of $612,931 be paid to the wife's legal personal representatives.
The husband sought special leave to appeal to the High Court. The High Court found that the Family Court had the power to make orders with respect to the property as the claim by the wife's personal legal representative remained a claim arising out of the marital relationship of the parties. However the High Court stressed that the first enquiry to be made by the Court is that under section 79(2) of the Family Law Act 1975 whether it is "just and equitable" to make an order including in circumstances where a party has died.
The High Court set aside the property orders made by the Full Court on the basis that the wife's needs were already being met by the husband and that a maintenance order should have been made.
The Stanford matter highlights the difficulties which may arise for parties in second marriages with children from previous relationships. The Family Court may provide an avenue for circumventing family provision orders, even in circumstances where a marriage is intact, if it is found by the Family Court on its first enquiry to be just and equitable in the circumstances to make property orders. For further information or enquiries, please contact Alexandra Michaels.
August 2013 - Family Disputes can Continue long after Death
Families should be aware that their disputes do not die with an elderly family member, and can in fact escalate into litigation against the estate. We frequently handle matters in which an unresolved dispute between family members carries on and becomes worse after the death of one of the people involved. These claims usually involve a breakdown in family relationships, lack of communication about what will happen after older family members die and unclear or unrealistic expectations regarding the person's estate.
Disgruntled or upset family members can legitimately make a claim against an estate of a family member in circumstances where the relationship has completely broken down and the claimant was not provided for in the family member's Will. The resulting litigation can be stressful, time consuming and deeply upsetting for all parties who are required to provide personal details to the Supreme Court of New South Wales regarding the family's relationships and financial circumstances. The Claimants may not have spoken to the deceased for a number of years, however if they are the spouse of the deceased, the child of the deceased, a de facto partner living with the deceased at the date of death, a former spouse, a person who was wholly or partly dependent on the deceased, a member of the deceased's household or a person the deceased was living in a close personal relationship with at the date of death, they may be eligible to lodge a claim.
The Court will consider the relative financial positions of the different claimants and the entirety of the relationship between the parties. If the claimant requires financial assistance, the Court may find in their favour despite a poor relationship with the deceased in the years before the family member died.
Our advice to those wishing to put their affairs in order or consider the potential impacts of a family dispute after their death is:
- communicate your intentions clearly with all family members who may feel entitled to make a claim on your estate;
- formalise your intentions in a Will drawn by a solicitor;
- consider binding superannuation nominations and a succession plan for any positions you hold in a family company;
- inform family members of any gifts you intend to make which they may find surprising, unusual or unfair; and
- seek specific advice from your solicitor if your affairs are complex or if there is a family dispute on foot which you suspect may create issues between your loved ones after you are gone.
For further advice please contact Caitilin Watson.
July 2013 - NSW Strata Laws are now more "pet friendly"
Finally there is some good news for pet owners currently living in or considering moving into a strata controlled building.
The New South Wales Government is in the process of amending the model By-Laws contained in the Strata Schemes Management Act 1996 (NSW) which currently prohibits pet owners from keeping pets in their property unless they obtain the formal consent of their Owners Corporation.
The changes mean that owners will now be able to have pets in their property subject to reasonable consent and conditions set by the Executive Committee of the Owners Corporation for their property.
Whilst the changes are only minor, in that you still need to obtain some consent from the Executive Committee it does allow more freedom for pet owners who were having to find alternate accommodation for their pets, when moving into a strata controlled building.
At Atkinson Vinden, we understand what is important to you in respect to changes in the law. If you require any further assistance, please contact Jessica Lobow, Associate at email@example.com or 9411 4466.
July 2013 - Reminder to Register Your Swimming Pool!
The Swimming Pool Amendment Act 2012 came into force on Monday 29 October 2012 to establish the safety standards for backyard swimming pools.
We remind you that you must register your backyard swimming pool by Tuesday 29 October 2013 in compliance with the Act.
The Government has now set up an online swimming pool register at www.swimmingpoolregister.nsw.gov.au. If you register your swimming pool online there is no fee payable, however your local council may charge you up to $10.00 if you ask them to register your swimming pool on your behalf.
As part of the registration process you will be required to undertake a self assessment process. The pool inspection self assessment checklists are available online at www.swimmingpoolregister.nsw.gov.au.
If you fail to register your swimming pool by Tuesday 29 October 2013 you may be fined between $220.00 and $2,200.00.
We attach a summary prepared earlier this year in relation to the change of legislation which we trust will be beneficial to you:
- The Government is to set up an online swimming pool register and each pool owner must register details including address, type of pool and date of construction etc within 12 months from date of assent ie by 29 October 2013.
- As part of the registration process, each owner undertakes a "self-certification" process by completing a safety checklist. Owners can request the local council to complete the registration at a cost of $10.
- Failure to register: $220 - $2,220 penalty.
Swimming pool barrier inspections
- Councils are to develop appropriate and affordable inspection program.
- Mandatory inspections for tourist and visitor accommodation or multi-occupancy developments, but no more than once every 3 years.
- Owners can request local council or private certifier (under Building Professionals Act 2005) to certify compliance for a prescribed maximum fee.
- Owners must have a valid compliance certificate issued under the Swimming Pools Regulation 2008 before a property is leased or sold - valid for 3 years.
o Exemption: if there is an occupation certificate less than 3 years old that authorises use of the pool
o Conveyancing (Sale of Land) Regulation 2010 Schedule 1 amended - the certificate is now a prescribed document
o Residential Tenancies Regulation 2010 Schedule 1 amended - Standard Form Agreement now includes a clause saying the landlord has provided a copy of the compliance certificate/occupation certificate to the tenant
o Phase-in period: 18 months from 29 October 2012
- Council or private certifier can issue a notice if the pool is non-compliant.
- Inspection fees: maximum of $150 for first inspection and maximum of $100 for additional inspection.
- Include a provision to clarify that, where an existing swimming pool that is exempt from the Act's fencing requirements is fenced voluntarily, such fencing must meet the Act's requirements for a compliant, four-sided barrier. This would effectively remove the exemption.
- Clarify and make consistent with the Local Government Act 1993 council powers of entry under the Swimming Pools Act to inspect private swimming pool barriers.
- Amend the definition of "swimming pool" in section 3 of the Act by replacing the words "300mm or more" with "greater than 300mm" to increase national uniformity.
- Replace the term "hotel or a motel" with "tourist and visitor accommodation" wherever occurring in the Act to increase consistency with other legislation.
- Online register will be operational from 29 April 2013.
- All swimming pools must be registered no later than 29 October 2013.
- Must have compliance certificate when selling/leasing a property from 29 April 2014.
July 2013 - The Personal Property Securities Act in Practice
A recent New South Wales Supreme Court decision has confirmed that perfected interests under the Personal Property Securities Act ("PPSA") may take precedence over an owner's interest in an asset.
The proceedings involved competing claims to civil construction vehicles leased by Queensland Excavation Services Pty Ltd ("QS") to Maiden Civil (P&E) Pty Ltd ("MC"). The vehicles had been in MC's possession for quite sometime and QS was invoicing MC for their use, notwithstanding that no written leases had been entered into between the parties, and nor had any lease been perfected by way of registration under the PPSA.
MC had also granted a security interest over all of its assets to Fast Financial Solutions Pty Ltd ("Fast") by a general security agreement ("Agreement"), which was perfected by registration under the PPSA. Fast then appointed receivers to MC under the perfected Agreement as a result of MC's financial difficulty. The receivers claimed that Fast held a security interest in the assets within the meaning of the PPSA, and that they had priority over any interest of QS, the owner of the assets. MC sought to have QS deliver the assets to them as it had taken back possession.
It was held that QS had a security interest as a lessor under a PPS lease which was not registered. While the interest was a transitional security interest, it was registrable but not registered prior to the registration commencement time. The protection available to transitional security interests did not apply. QS's security interest was unperfected. Accordingly, Fast's perfected security interest in the assets had priority over QS' unperfected security interest in them. Events of default under the Agreement had occurred and the receivers and Fast had enforceable rights of possession of the assets against QS who took back possession. A perfected interest takes priority over an unperfected interest regardless of ownership.
This result is not unexpected, but is a good example of the need to consider whether an interest in an asset may require registration under the PPSA.
Please call any member of our Commercial Team to discuss any aspects of the PPSA.
July 2013 - Important Amendments to the Property, Stock and Business Agents Act - 2013
The amending legislation has recently been gazetted by the New South Wales Government.
We have previously alluded to some of the mooted changes in respect to auctioning procedures and in particular the insurance and trust account requirements of licensed real estate agents / agencies. The changes in respect to the engagement of auctioneers and more stringent trust accounting and auditing procedures are set out in the schedules to the amending Act.
Possibly of more significance is a change to section 55 of the Act. Many agents will be aware, to their financial detriment, of the "strict liability" test applied to an agent's claim for the payment of commission or expenses in circumstances where there is either no written agency agreement or a defective agreement has been issued or, in respect to the execution of that agreement, there has been some breach of the legislation.
The amending Act (see section 55A) provides relief to a real estate agent from his / her previous disentitlement to commission and / or expenses in those circumstances, principally where the agent / licensee fails to serve a copy of the relevant agency agreement within 48 hours after it has been signed or where the relevant agency agreement fails to comply with the requirements of the Act and regulations.
However, it is not all "beer and skittles". Courts / Tribunals are restricted from ordering the payment of commission / expenses unless the failure to serve copies of agreements was occasioned by inadvertence or other cause beyond the control of the licensee (hopefully this provision will be liberally interpreted) or where the failure is of a minor nature (a good example would be where the agent's licence number has been omitted or juxtaposed).
Thankfully the Court / Tribunal may now make an order in the agent's favour for payment of commission / expenses "in all circumstances which are fair and reasonable" and where "failure to make such an order would be unjust". The Court / Tribunal must be sure that "no loss has been suffered" as a result of the agent's failure. A good example would be where the agent has been the effective cause of the sale of a property or the leasing of premises where for that service the client / property owner would be expected to meet a commission claim.
June 2013 - Abolition of Stamp Duty - DELAYED!!!
To all those who were waiting on 1 July 2013 for the abolition of stamp duty on marketable securities (shares and units), non-land business assets and mortgages. Once again this has been temporarily delayed by the state government, though we have yet to be informed of the new, proposed abolition date. In the mean time, watch this space.......
June 2013 - Shareholder's Agreements
If you're starting a business and thinking of incorporating you should be aware that, while there are many benefits, incorporation comes with its own potential pitfalls.
For example, when a corporation is formed it will be issued with a constitution governing how the company can be run. This will usually be a stock standard document with little if any consideration given to the particular nature of your business. If you are the sole shareholder and director, this may suit you just fine. If, however, there are multiple parties involved then there is a real possibility that this could create problems, which may not become apparent until years down the track.
This is where entering into a shareholders agreement can be useful. It allows you to vary the terms of your constitution and have greater control over how your company is to be run.
Some areas where a shareholders agreement can be useful are:
Appointment of Directors:
While it may sound fair and equitable that a simple majority of shares should be able to appoint the directors of your company, what if you are in business with two other people, each owning one third of the shares and the two others decide that you don't get a representative on the board? Under most constitutions this simply would be tough luck; however a shareholders agreement can allow that each shareholder has the right to appoint their own director who may only be removed by them. Obviously this gives you greater power to protect your interests and stay involved in the day to day running of your business.
Drag Along Provisions:
Imagine that you are the majority shareholder in a company and a third party wants to buy you out, but only if they can also buy the shares of the minority shareholders. Under a standard constitution you may be stuck relying on the willingness of the minority, however a shareholder agreement can contain provisions requiring a minority shareholder to sell their shares in these circumstances. And if you are that minority shareholder and don't want to give up your company? Well, that same shareholding agreement can give you pre-emptive rights to buy the majority shareholding as a precondition to any sale.
Decisions of the Board:
Some business decisions are too important to be decided by a simple majority. Some decisions need to be made unanimously or not at all. The only person who will know what those decisions are is you. By entering into a shareholders agreement you get to determine which matters must be decided by all the directors, rather than some draftsman who does not even know what your business does.
These are some of the benefits of entering into a shareholders agreement. To discuss these, or any others, please feel free to call one of our commercial team on 9411 4466.
June 2013 - A few tips if you are planning on going into business
Following are a few short tips which may be beneficial when first starting out in business:
The way in which you structure your business is the foundation for its prosperity. It is important to determine what vehicle you will utilise to run your business considering your position now and where you want your business to be in the future. Sole trader, partnership, joint venture, a company or a trust? What is right for you and your business?
It is important that your agreements be in writing as a security for yourself and any other parties involved in the business. The right agreement will stipulate roles, responsibilities and protections of all parties involved in the business and depending on the vehicle that you utilise, you can structure your business to minimise tax and create sufficient asset protection for your future business transactions.
Having good employees is crucial in developing a fruitful business. It is just as important to ensure that these employees are retained correctly with appropriate job descriptions and employment agreements so everyone knows what their roles, duties and responsibilities are.
Where Will You Operate From
It is essential that the premises which you choose to lease is appropriate and can accommodate for your business and its future needs. It is important that you are aware of all the terms and conditions both monetary and non-monetary and ensure that there is no nasty hidden bite backs.
Cash flow is the cause of most small business failures today. Having the appropriate terms and conditions which apply to the sale of items or services. Your terms and conditions will give you the appropriate method to facilitate any debt recovery, privacy issues, warranties to any goods and services and return and refund policies.
Protecting your intellectual property is extremely important. This includes your business name, logo, ideas and your systems that you have in place which usually is the goodwill of your company. Without having the appropriate protections, agreements and ownership of intellectual property any other business or person could be representing itself as your business and you may have no action against it without the proper documentation in place.
What kind of funds will you need to start the business and to continue to operate it until you earn any revenue? Will you use utilise director's loans, borrow money from the bank or from a third party and what assets will you use to secure your finance?
Lawyers and Financial Advisers
Having good professional advisers is extremely important in the initial start up of your business. It enables you to have the confidence that you are structuring your business in an effective and efficient manner to meet both your short term and long term goals. With Atkinson Vinden we will assist you through the whole business cycle to ensure that your business is always protected.
Please contact Janelle Boutros or our Commercial Law Team for any further queries.
May 2013 - The Dangers of a Verbal Contract
The Dangers of a Verbal Contract
"A verbal contract isn't worth the paper it is written on"
While this phrase has often been used to disparage the ability to prove the existence of a verbal contract, it also highlights one of the difficulties that can arise when a contract is entered into without being put in writing, even if all the parties agree that a contract exists.
Specifically a verbal contract is extremely unlikely to include a variety of terms and conditions that will be found in almost every professionally drafted contract. I will specifically discuss warranties, indemnities and dispute resolution clauses, though there are numerous others which might be relevant.
While in some cases legislation implies warranties into a contract for the supply of goods and services, these generally only apply if the price is less than a set amount, or the goods are not provided for re-supply. As such if you are buying a large piece of machinery, or equipment to be on-sold you will likely have limited recourse against the supplier unless a properly drafted warranty is in place.
A well drafted indemnity clause takes into account the ability of each party to control the risk of any loss or damage and apportions the liability for that risk accordingly. If this has not been considered and put into writing you may find yourself open to liability over which you have limited or no control.
While we all hope that our contractual relations go smoothly, with a satisfactory outcome for everyone, the simple fact is that this does not always happen, just ask our litigation team. In such a case it is advantageous to have in place an agreed process for discussing and resolving any disputes, including requiring mediation. Without such your only option may be costly litigation where you could wind up having little or no say in the outcome.
These are, of course, only a small sample of matters which might not be covered in a verbal contract. Should you wish to discuss your contractual relations in further detail please feel free to contact one of our commercial solicitors on 9411 4466.
May 2013 - Tips for Avoiding Contract Disputes
In litigation, we routinely see contracts, entered into by both people and companies that have been messed up, with varying consequences for those who enter into them.
1. Understand what constitutes the contract:
A contract need not be in writing. Often, for more casual business relations, we see a very general written contract supplemented or amended with a later 'handshake' agreement, or even a contract based entirely on a handshake.
A handshake can be as enforceable as a written contract. The problem is it is more open to subjective perception and interpretation. The benefit of a written contract is that you know, to a high degree of certainty, what the terms are, and more importantly you can prove those terms by pointing to the written contract alone. If you are seeking to enforce an oral agreement, either you will need the person you are enforcing it against to agree with you regarding its terms (unlikely!), or you will need to satisfy a court as to what the terms are. This can be a difficult process, and contains a large subjective element (witness credibility: an "I said, he said" dispute).
Given the potential for subjectivity, when you enter into a contract you need to be careful to ensure you know what the contract is. The only way to have a degree of certainty in this regard is to reduce the terms of the contract to writing, and include in the contract a clause indicating that the written contract alone represents the agreement between the parties, and can only be amended in writing. Such a clause is commonly overlooked.
2. Know your rights, know your obligations:
It sounds trite, but often we see disputes arise in circumstances where one party failed to fully comprehend the meaning of a contractual term.
When entering into a contract, consider carefully what you are hoping to achieve from it. You will have in mind some specific targets, perhaps regarding time of delivery, or quality of product or work. Be specific about these terms, and satisfy yourself that they are clearly and properly expressed in the contract.
The other party to the contract will also have specific targets in mind when contracting with you. These are the terms you need to be most careful of, as they will inevitably favour the other party, potentially to your detriment. As tedious as it might be, you must discipline yourself to consider these terms carefully and satisfy yourself that you understand the impact and effect of these terms to the same level of clarity and detail that you would insist upon for the terms that favour you.
The only airtight answer to this issue is to seek legal advice on the terms.
When presented with a contract, discipline yourself to sit down and read each clause one by one.
3. Ambiguity is your enemy:
The worst disputes tend to occur in circumstances where a contract has been drafted with such ambiguity that it can be interpreted in two different ways.
Where the interpretation results in a significant difference to the rights and liabilities of the parties, one way or another, disputes are likely to arise. Inevitably each party will adopt the interpretation that most favours them.
The problem with such a dispute is that where genuine ambiguity exists, until the court makes a ruling on the point, there can be no absolute certainty as to which interpretation is the correct one. The potential for this to lead to wasted legal costs is almost limitless.
We usually see ambiguity arise in contracts drafted by people without legal training (although lawyers have been known to mess this up as well!). We have a range of contracts drafted for all types of commercial transactions which have been 'battle tested' (upheld in court), and can provide them for a reasonable cost.
4. Be aware of the consequences of getting it wrong:
In determining how closely you need to scrutinize a contact before signing it, you need to have an appreciation for the potential consequences of stuffing the contract up. A Mars Bar contract is unlikely to have significant commercial repercussions for anyone. However, most serious commercial contracts will cause significant loss to one party if the other does not properly abide by its obligations. For example, if you supply goods to someone who runs a business of selling them to consumers, you can expect any dispute over the contract to include a 'loss of business' component, which in the right circumstances can be shockingly high.
Before entering into a contract, consider the worst-case scenario mess-up. If the worst-case scenario is something that your business cannot afford to occur, it is probably worth speaking with lawyers to confirm the terms of the contract, and to ensure that your interests are protected.
May 2013 - Superannuation Benefits After a Member's Death
Once again it has been necessary for the ATO to clarify an important issue regarding the payment of a member's benefits after death. In 2011, in a draft ruling, the ATO took the position that a super income stream (e.g. pension payment) must cease as soon as the recipient has died unless a dependent beneficiary of the deceased member is "automatically entitled to receive that income stream". Carrying on from this, the ATO took the view that tax would generally be payable on the fund member's investment earnings, including realised capital gains, after death.
This ATO view has been subjected to so much criticism that late last year the Government was obliged to release draft regulations to give certainty to this issue. The Government's position (once the draft regulations are gazetted) will allow the tax exemption for earnings (e.g. pension payments) on assets supporting superannuation income streams to continue following a fund members death where the member was in a "pension phase" until his/her benefits have been paid out of the fund.
It is intended that these changes will be made retrospective from the 1st July 2012.
April 2013 - Protection is free, but who owns it?
As small to medium business owners many of you may be unaware of a potential infringement suit lurking around the corner especially in respect to copyright.
Copyright is a form of protection afforded to literary and artistic works such as music, art, newspapers and computer programs and is governed by the Copyright Act 1968 (Cth). As copyright is a form of intellectual property that is free and not required to be registered it often confuses people as to who actually owns the copyright in the work. It will be surprising to most people that copyright is often subject to a licence which confirms ownership.
Recently we had a case where our client was accused of infringing another's copyright by replicating information from one magazine to another. Our client was not aware that this information was a breach of copyright given that the alleged infringing information was obtained from another third party due to a distribution relationship.
Unfortunately there was no distribution agreement in place to confirm that the owner of the information was not infringing a third party's intellectual property and that the owner would indemnify our client if this occurred. Therefore despite the owner giving the information to our client, our client may be liable for damages. These potential costs to our client could have been avoided if there was a proper distribution agreement in place with the appropriate warranties and indemnities.
It is important than when obtaining information, images, music or the like from other sources that you undertake adequate due diligence to determine who is the owner of the copyright in the works and ensure there are adequate agreements in place to document any licence arrangement.
At Atkinson Vinden we understand the importance of protecting your intellectual property. Please contact Solicitor, Jessica Lobow, on (02) 9411 4466 if you would like assistance in this area.
April 2013 - Copyright in Pictures on the Internet
Some of you may have read recently in the news about a photographer who discovered that a picture they had taken had been copied from the internet and used on t-shirts widely available for sale in Australia.
This situation highlights a variety of issues both for the owners of a copyright and for entities that wish to use pictures which may be subject to the copyright of others.
The first point to note is that there is no system of registration of copyright in Australia. Copyright exists in certain original items when they are created and there is no requirement that the copyright owner note on the material that copyright exists. As such, you cannot simply assume that a picture available on the internet which does not identify the author is free to use. Doing so may leave you open to legal action including having to hand over any profits you have made from the use of the material.
Of course this does not necessarily mean that a copyright owner's rights are automatically protected if their works are published on the internet. Many websites, including for example Instagram and Facebook, have terms which grant them a licence regarding the use of any materials published on their site for certain purposes. As such it is important to know what you are agreeing to when you upload a photo or other material as you may be effectively giving up the right to have your material attributed to you and the website owner may be able to commercialise and profit from your works.
These are just some of the issues to be aware of when dealing with copyright and the internet. If you have any concerns about how people have been using your copyright material, or whether you are entitled to use material you have discovered please feel free to contact one of our Intellectual Property team on 9411 4466.
April 2013 - Intellectual Property and the Workplace
In today's knowledge economy, creations of the mind can often be more valuable to a business than physical things. If you run a business which depends on creativity (whether on your creativity or the creativity of your employees), then it is important that you take steps to protect any products of this creativity which provide your competitive edge.
Perhaps you have know-how, or work processes which are not commonly known in your industry, or even inventions or designs. It only takes the departure of a single disgruntled employee to take your advantage across to a competitor. Indeed, competitors may head-hunt your employees for this precise purpose. It pays to be prepared for this contingency.
1. Common Law protections:
First of all, if you have not taken any steps to protect your IP, do not panic. Your IP rights may still have the benefit of a limited level of protection. The relationship of employment carries with it certain common law protections that will be implied into any contract of employment, however drafted or expressed.
Most importantly, amongst these is the implied contractual duty of good faith that an employee owes their employer. This will generally include an obligation on an employee to make any intellectual property made in the course of their employment available to their employer.
There are two major factors that will be considered by the courts in determining whether the intellectual property arose in the course of employment:
a. The first question is whether the development occurred during the employee's hours of work and with your resources, or whether it occurred independently, outside of the workplace.
b. The second question whether the employee is engaged for the purpose of producing such work. For example, if the employee is engaged as a salesperson but creates an invention unrelated to their role whilst employed, it may be difficult to allege that this invention belongs to the company, notwithstanding the fact that it was created on the company's time.
Assuming these questions are answered in the Employer's favour, then a court would consider the extent to which the employer should maintain control over the IP following the employee's departure from the business.
2. Contractual protections:
The Common Law protections described above rely to a significant degree on the factual circumstances of each individual matter, over which you as the Employer may have little or no control. An employee might say that he did the work on his own time. He might say that the invention was his before he started his employment. He might say a thousand things which are contrary to your interests. Unless you have evidence to contradict what he says, you are unlikely to be successful in court. It is far better to avoid this whole messy argument, and rely instead on Contractual protection.
A properly drafted contract governing IP will provide clear and concise terms which express unambiguous protections for intellectual property produced or created by employees while employed by you. Such a contract removes all of the uncertainty involved in relying on the Common Law protection, and places you as the employer in the position of power.
If you are concerned that your employment contracts may not properly protect your IP, we would be pleased to discuss the options that are available to you. If your business relies upon its IP, then it is worth a single consultation with us to ensure that you have the highest level of protection. Please contact any member of our employment team on 9411 4466.
March 2013 - How Family Provision claims can drain the value of small estates - legal costs in claims against the estate
The death of a loved one invariably creates an emotional upheaval and administrative burden for his/her family and close friends. In this context, a claim against the Estate by a disgruntled family member or friend is always upsetting. The prospect of a delay of 12 months for a Court case, briefing solicitors and discussing the private affairs of the recently departed is not appealing to anyone.
One of the most common initial questions is who bears the cost of the claim against the Estate?
The Usual Position in Litigation
In all litigation the starting position is "costs follow the event". This means if the matter proceeds to hearing before the Court, the loser will usually pay a contribution to the winner's legal costs. The Court has broad powers to award costs, or not. The contribution is determined by whether any reasonable offers of settlement have been made by either party. If no offers of settlement have been made, the loser will usually pay 50-75% of the winner's legal costs known as "party/party" costs. These costs are distinct from the total costs paid to the solicitor known as "solicitor/client" costs. Offers of settlement can alter the legal costs paid. This was introduced to encourage all parties to any litigation to attempt to resolve disputes outside the Court, and punish litigants who act unreasonably.
Legal costs are often significant and can determine whether you feel your outcome was worthwhile, irrespective of whether you "won" in Court. In our experience, whilst clients often feel greatly aggrieved and determined to proceed to hearing initially, a commercial, practical outcome will influence their level of satisfaction at the end of the litigation.
The Usual Position in Family Provision claims
Legal costs in Family Provision claims against the Estate are generally paid out of the Estate's assets if the claim is successful. This is particularly important for smaller estates with a value of between $400,000 and $750,000, because if the Estate is unsuccessful in defending the claim, it will likely be ordered to pay the claim, a contribution to the claimant's legal costs and its own legal costs. In some cases this may be a significant proportion of the Estate.
Risks for the Estate
The risk for the Estate can be contrasted against the risk to the claimant. Frequently, the solicitor for the claimant will act on a "no win, no fee" basis. In addition, the claimant may not have any assets to lose, if the Estate is successful in Court. Accordingly, the Estate will be required to pay its own legal costs in full because the claimant has no funds or assets to contribute. In these circumstances, the playing field is uneven and the result may be unfair. These are risk management issues for the Estate.
Our approach is to consider the end goals from the initial notification of a potential claim against the Estate. Each case is different. We can resolve many matters early by negotiating outside of Court. If one party is unreasonable, the matter will inevitably proceed to hearing and the Estate's legal costs should be focused on preparing for the hearing.
March 2013 - Trust Deeds - how can they be varied, and will there be an adverse tax consequence?
There can be pitfalls in amending trust deeds - both in terms of trustee liability to beneficiaries where a relevant power to act is missing from a deed and in terms of amendments triggering exposure to capital gains tax. This is a technical area of the law.
While some simple amendments may be made to a trust deed using a commonly included variation power, there are often issues or actions sought about which the trust deed is silent, and which, although seemingly advantageous to the beneficiaries, cannot be carried out by the trustee. S.81 Trustee Act 1925 (NSW) permits an application to the Supreme Court for the court to approve exercise of a power if that would be advantageous for the beneficiaries, and a recent case has highlighted the benefits of such an application.
In Barry v Borlas Pty Limited & Ors the relevant trust was created by a deed in June 1977 by Mr Barry for the benefit of his wife, children and grandchildren as primary beneficiaries. The vesting day was specified as 31 December 2026 (30 years earlier than the maximum period permitted), and at that date the trust fund was to vest in such of the primary beneficiaries and in such shares as the trustee might determine. There were many valuable assets in the trust fund including farming properties. Vesting would require sale of those assets triggering significant tax consequences, as well as not being considered in the best interests of the family. There was no power of variation in the trust deed. Dealing with an application pursuant to s.81 Justice White was satisfied that an amendment of the trust to extend the vesting date would be advantageous to the beneficiaries as it was consistent with and would advance the objectives of the trust including providing for Mr Barry's children and grandchildren well into the future. It was also relevant that the beneficiaries supported the proposal and thus the court exercised the discretion allowed by s.81 to extend the vesting date.
However, before applying to the Court for an order to extend the vesting date, it is also important to consider whether or not that extension may give rise to a resettlement (in effect, to a new trust) which could then have capital gains tax and stamp duty implications. Those implications should be clarified before taking any action to vary the trust, as the tax or duty, if payable, would be payable from the date of the variation (even if liability was not ascertained or assessed until disposal of the asset many years after the variation). Unfortunately, although in 2001 the Australian Taxation Office (ATO) issued a Statement of Principles which dealt with its views on what constitutes a resettlement, that has now been withdrawn and until recently there has been no public document as to the ATO's viewpoint on resettlement.
The Statement of Principles is still useful as a general guide and consideration should also be given to the content of private rulings. Private rulings, by their nature, deal specifically with particular trust deeds and therefore cannot be utilised as precedents, but they are a useful indication of the ATO view. Those views have seemed to go either way; sometimes where an extension of a vesting date expands the identity of eligible beneficiaries the ATO has viewed that as changing the beneficial rights of the existing beneficiaries and thus being a resettlement, but it has also in other matters looked at the intention of the original settlor at the time the Trust was established. If the intention was apparently to benefit defined beneficiaries in a particular family, then the ATO has ruled that the trust was for the general benefit of a family group and provided it was not being used as a vehicle for a particular project or to hold a particular asset then the extension of the date (and the possible enlarging and variation of the class of beneficiaries, but within the same family) was ruled to be maintaining the beneficial interest of the beneficiaries as a class. Those extensions were not seen to be a resettlement.
The effect of these varied rulings has been to create significant differences between "trust law" and the ATO. However, the consequences of some common amendments are now somewhat clearer with the publication of draft Tax Determination TD 2012/D4. In essence this states that the ATO will consider that certain amendments to a trust deed pursuant to a valid exercise of a power contained within the trust constituent document will not trigger CGT event E1 or E2. Examples given by the ATO as being outside the scope of E1 or E2 include:
- Addition of new entities to a class of objects;
- Expansion of a power to invest; and
- Addition of a definition of income and power to stream.
However, even where a trustee has powers to declare that particular assets of a trust are to be held exclusively for one of the trust objects to the exclusion of other objects, an amendment made in pursuance of such power, such as that a trustee will commence to hold one of several assets exclusively for one of the objects of the trust whilst not terminating the trust, will be regarded as a variation of the trust obligation so as to trigger event E1.
It would seem arguable (but this has not been stated by the ATO) that an amendment to a trust deed pursuant to an order under s.81 Trustee Act will also be similarly regarded, even though not being under a power of the constituent deed, since the effect of the Court's discretion is to enlarge or enable exercise of a power by the trustee (which takes its powers from the constituent deed) and that will then be an exercise of power under the constituent deed.
Whilst resettlement issues must be considered whenever any proposal is under consideration in regard to an amendment of a trust, certain amendments are now able to be made with a better degree of certainty as to the tax consequences.
March 2013 - Self Managed Superannuation Fund (SMSF) update
The complexities continue in this area of the law. For example, in recent weeks;
- The Australian Taxation office (ATO) has warned Trustees of any SMSF to take care when considering investing in the property market through their fund, in particular in respect to products being promoted by lending institutions often called 'limited recourse' or 'non-recourse loans'. ATO is concerned about arrangements that do not comply with Superannuation laws and we have seen several recent examples of this. Obviously if a purchase has been completed and the loan arrangements do not comply with the law, the arrangement cannot be simply rectified. Apart from the prospect of losing otherwise favourable tax treatment and adverse tax or stamp duty consequences, the only way out could be a forced sale of the asset and subsequent losses.
- Issues surrounding/exceeding the limited Salary Sacrifice/Superannuation contributions or the timing of such contributions have been the subject of recent Administrative Appeal Tribunal decisions. The cases are instructive and highlight the need for individual fund SMSF members to check on the timing and the amounts of their super fund contributions/salary sacrifices to avoid adverse consequences.
As a result of substantial lobbying to government, it has been proposed that a "fairer administrative penalty regime"' for trustees of some contraventions of Superannuation law be introduced. Policy dictates that it is appropriate to give ATO other methods of encouraging recalcitrant trustees to remedy breaches quickly, rather than relying on the existing heavier handed enforcement procedures. ATO suggests a power to issue "'rectification or education directions"' for various breaches, the latter requiring trustees to undertake a specified approved course of education to ensure compliance with Superannuation law.
As always, these matters clearly show that establishing and operating a successful SMSF is no easy matter and careful consideration and advice needs to be taken at all times. For any further assistance in this area, contact Chris McClure or any of our Commercial Law team members.
November 2012 - Do you Cloud?
Many individuals and organisations are resorting to cloud computing for data storage and management. Here are a few aspects to be mindful of when considering moving to the cloud:
Confidentiality and security: Unless you have the technical know-how to set up your own private cloud, chances are you will be buying the service from a third-party cloud provider and store data on a virtual platform. The risk of losing privacy and confidentiality becomes inherent. It is important to put in place appropriate levels of password protection and encryption protocols before you enter into cloud storage agreements.
Robust risk management and continuous security assessment also need to be put in place not only to protect sensitive information but also to prevent data contamination from viruses or data leakage in a situation where you share the same infrastructure platform with other users.
Privacy: You will need to consider compliance with Australian privacy laws, which require that personal information (any information that identifies a person or could be used to identify a person) remain within Australian borders unless you have consent from the individual. This will apply especially when your business collects information from customers or users.
Accessibility and reliability: Accessibility of the cloud and its compatibility with your business requirements and existing software should also be assessed. Find out if there are any limitations on using the cloud, and bear in mind that sometimes the cost of transferring large amounts of data in and out of the cloud and the time it takes are also significant.
Reliability of the service provider should be closely analysed before entering into a service agreement. Does it provide any performance guarantee? What happens if there is a delay or problem in retrieving data? Do the facilities offer any backup and other strategies to combat network failure or security attacks?
Jurisdiction: Cloud computing also raises regulatory implications as many service providers are outside Australia. Care needs to be taken in finding out what the governing laws are in relation to disclosure, privacy, investigations and breach in the event of a dispute.
Please contact us if you require any further assistance on (02) 9411 4466.
November 2012 - Electronic Contracts
As more and more business is conducted online or by email it is important to be aware of potential issues surrounding the formation of a valid contract.
Both State and Commonwealth legislation allow that contracts may be formed by electronic means. Of course when you are not dealing face to face there are a number of potential issues to be aware of. We will briefly discuss three of these:
Both State and Federal legislation hold generally that, barring agreement to the contrary, a person is only bound by an electronic communication if they actually sent it, or authorized it to be sent. Obviously this means that some form of identity confirmation is advisable, especially in important or large contracts. This could include requiring registration for online orders, or confirming an agreement by phone.
If you have an online order form which sends an automated response it should be noted that this response is capable of forming an enforceable contract, even if there has been no human interaction. If you have any concern about being able to fulfill your obligations, you should examine the wording of such a response. It may be preferable for the automated message to simply state that the order request has been received, and will be confirmed at a later date.
Invitation to Treat:
Following from the above point, it should be noted that simply placing an order online is generally not enough to form a binding contract. Until such time as the vendor accepts the order this is merely an offer to purchase or to deal, which can then be accepted by the vendor. In conjunction with the point above this makes the content of any automated response made by the vendor particularly important.
Of course, these are only some of the issues to be aware of when engaging in e-commerce. Others include the time of formation and the location of a contract.
Please do not hesitate to contact us should you require further information.
November 2012 - Litigation and Breach of IP Rights
Recently there have been a number of high profile international cases regarding patent infringement and intellectual property. Most notable amongst these have been the very public battles between computing giants Apple and Samsung.
However, it would be wrong to assume that mega-corporations such as these would limit the scope of their litigation to the 'big fish'. This firm has first-hand experience of some of the biggest companies in the world attempting to crush or otherwise take advantage of small businesses by abusing, or making allegations with respect to, their intellectual property.
If your company faces an allegation that it has infringed another company's IP rights, there are a number of issues of which you should be aware:-
Are the allegations accurate?
In many instances, parties will be entirely unaware of their alleged patent infringement. As such, a letter of demand from a patent holder often comes as a huge surprise to small businesses. However your lack of intent will not assist you as patent infringement is assessed objectively.
If an allegation is made, the devil will be in the detail. It is important that you seek specialist advice immediately. We will conduct a detailed analysis of the patent which is alleged to have been infringed, and the item which is alleged to have infringed it. It is often the case that the allegation is exaggerated and unsupportable, and only a close legal and expert analysis of the allegations will empower you with the knowledge of whether a defence is worthwhile or futile.
Given the high costs of IP litigation, whether you are enforcing or defending, this knowledge is absolutely crucial.
If the allegations are accurate, can they be easily addressed, even in part?
In many cases, it is a preferable alternative to litigation for a company to change its product slightly to avoid the potential for IP litigation, which can be extremely expensive and time consuming.
Allegations of patent infringement often come hand-in-hand with allegations of misleading and deceptive conduct (a more nebulous concept). In many instances where we have acted in such matters, our clients have been able to avoid litigation where such allegations have been made by implementing small but important changes into their products which, while perhaps not addressing the allegations in their entirety, address them sufficiently to make litigation a risky and unappealing option.
Often, this is enough to make the allegations go away.
If litigation is commenced, what sort of claim will you face?
If you are unable to avoid, address or frustrate the allegations, your only option will be to fight them. The orders which will be sought against you will be for injunctions and damages, which may have a crippling effect on your business. If you do resolve to fight them, you should only do so in circumstances where you can be confident of victory (and recovering your legal expenses, which may be substantial). We can provide you with professional advice on your prospects of success.
For more information on these issues, please do not hesitate to contact us on (02) 9411 4466.
October 2012 - GST Revisited
The case law continues to mount in relation to GST issues and disputes. Many of these involve the sale or acquisition of business assets and real estate.
The most recent example involved a property developer, purchasing a suburban "commercial office" which the developer wanted to demolish, redeveloping the land for a residential unit development.
The sale/purchase proceeded as a taxable supply with the vendors refusing to consider the use of the margin scheme.
The developer purchaser accordingly paid the GST but was subsequently unable to recover the input tax credit. The ATO rejected the developer's application on the basis that the sale was the supply of "residential premises" other than "new residential premises" and therefore input taxed. The ATO ruled that the "commercial office" the subject of the sale began its life as a house and was initially used as a residence. Regardless of its most recent commercial use the ATO insisted that its initial residential use and the fact that there were no restrictions upon it, once again, being used for residential purposes, meant that the intermediate commercial use was irrelevant.
Unfortunately in Australia, at least, the GST treatment of such transactions can be complex and confusing. The current ATO draft ruling (GSTR2012/D1), whilst providing many examples to work through, is still not final and still not clear cut. It began its life as GSTR2000/20, was reviewed in GSTR2011/D2 and still seems to be causing (potentially expensive) problems for accountants, lawyers and their clients. In all such transactions, beware!
Please contact a member of our commercial team if you would like more information.
October 2012 - Transferring a Business Name
If you are thinking of selling your business then there's a good chance that you'll need to transfer your Business Name along with it.
While this used to be a relatively simple process when the Business Name registry was controlled by the NSW Department of Fair Trading the migration to ASIC has presented a number of difficulties of which you should be aware.
You should first note that if you had previously registered your name under the state system your registration remains in effect. You will however need to obtain an "ASIC Key" to be able to deal with it. Your previous registration number will not be sufficient. You can request the "ASIC Key" through ASIC's website. This will be posted to the registered address for the business. Experience suggests this can take 5-10 business days.
Should you need to register the name under ASIC there are a few points to be aware of:
- The system is wholly online. You are not able to fill out a paper form for registration.
- The current online system automatically checks for a similar business or company name and blocks registration if one is found. However, it cannot recognise if a duplicate company name is also the name seeking registration. The effect is that if you seek to register a business name the same as your company name your application will be blocked and you will need to apply for permission to proceed. This takes up to 28 days.
- Once you have lodged the registration application be careful to review all communications from ASIC, taking special care to open all attachments and links, as the form emails sent do not always contain the information required.
- Once your name has been registered and you are issued with the "ASIC Key" be sure to keep it in a safe place. You don't want to have to apply for it again.
Once you are in possession of your "ASIC Key" you then need to apply for a transfer. This is no longer done by means of a form that you sign and hand over to the proposed transferee. You must cancel your existing registration, noting that the reason is a transfer of the business name. ASIC will then take up to 28 days to process your request. This request is irrevocable and as such should never be lodged prior to completion of your contract for sale of business.
Once the application is processed you will be provided a "Consent to Transfer Number". You hand this to the transferee who has to wait a mandatory 28 day period before being able to register the name. They have up to 4 months to do so or the name may be registered by another party.
This all obviously presents a difficulty for contracts for sale of business. These generally provide that a business name will be transferred on completion; however, under the new system this is impossible. You should ensure when you enter into such a contract that there is a special condition allowing for the above delays, otherwise you are likely to find yourself in breach and liable for the consequences.
We can assist you with these issues. We highly recommend taking as many of the above steps as possible and as early as possible to alleviate the risk of delay or difficulty in finalising your sale. Please contact our commercial team if you would like more advice.
October 2012 - Hidden Traps Associated with Social Media
As business owners many of you would be using social media as a tool to market your business. Social media allows for users, friends or fans of your social media advertising page such as Facebook or Twitter to post comments on your page.
As a result of two recent decisions the Federal Court and Advertising Standards Bureau (ASB) have held that business owners are now responsible for posts or comments by third party users on their social media advertising page. In the event a third party user posts an obscene, discriminatory or offensive message then as the business owner you may be liable for breach of the Australian Consumer Law and the Advertiser Code of Ethics.
These decisions have determined that Facebook and Twitter accounts managed by a business are forms of advertising and the business owner has an element of control over these pages to review and delete posts, which is the reasoning for why the business owner is liable for the actions of a third party.
In the case of Fosters Australia*, it had a VB Facebook Page, and a complaint was made where a third party had posted a comment which was sexist, discriminatory, offensive and obscene. Fosters tried to argue that the comments needed to be read in context of the brand; however the ASB determined that such conduct was in breach of the Advertiser Code of Ethics. Fosters have now implemented rigorous methods to ensure such conduct does not occur in the future.
As business owners you will need to take steps to reduce the risk of being held liable for third party comments on your social media advertising page. We strongly recommend that you review your terms and conditions and actively monitor your pages to review the posts by third party users and if required delete any posts which may be misleading and deceptive or offensive.
At Atkinson Vinden we understand the importance of reducing your liability as a business owner. Please contact Senior Partner, Sheena Joshi, or Solicitor, Jessica Lobow, on (02) 9411 4466 if you would like assistance in this area.
*Advertising Standards Bureau Case Report, Case Number 0271/12, Advertiser: Fosters Australia, Asia & Pacific (11 July 2012).
October 2012 - Cloud Computing Agreements
There are a number of concerns with cloud computing agreements, one of which is where your data will be stored or processed. Potentially, when utilising storage in the cloud, your data may be located anywhere in the world. This means that your data may be stored in multiple data centres, in multiple copies worldwide. This process, known as "trans-border data flow" could breach various data protection and privacy laws in the various countries your data may be stored in.
A partial solution lies in the Privacy Amendment (Enhancing Privacy Protection Bill 2012) introduced in May 2012 which includes the new Australian Privacy Principles (APP). In particular, APP 8 states that before a company in Australia can export a client's personal information overseas, it must take reasonable steps to ensure that any overseas recipient will not breach the APPs. Essentially, the APPs introduce vicarious liability for companies in Australia that send data off shore. This provides some peace of mind for Australians utilising the cloud.
September 2012 - Casual Employees: Are they really casual?
Casual employment may seem like a good way to field a workforce without the pesky concerns of termination notice, annual leave, sick leave, and redundancy pay.
Many employers engage people on this basis. The problem is that the term is routinely misapplied, and as a matter of law, the employees you think are casual may in fact be permanent.
The term 'casual employee' is not expressly defined in the Fair Work Act or in any modern award, other than as 'an employee engaged and paid as such'. This lack of clear definition means that there is a great deal of room for interpretation when considering if an employee is casual or not.
Generally speaking, an employee who works regular hours and has a reasonable expectation of ongoing work is not, at law, a casual employee. If you have employed the same individual for 3 years, 5 days per week as a 'casual', in the absence of some strict terms in an employment contract, the court would probably not consider them to be casual at all. Somewhere along the line, their employment has become permanent, and they may press a claim for leave, notice and redundancy entitlements should you ever elect to terminate them. It can come as a rude shock when a 'casual' employee of 10 years service presses a claim that mounts up to tens of thousands of dollars.
To be confident that employees are truly casual and will be considered as such by a court, you need to ensure the following:
1. That they are expressly described as casual in their employment contract or letter of appointment. The most common problems arise when employees are not subject to a written agreement;
2. That, in providing for the casual's hourly rate, the contract separates the base component from the casual loading (the amount paid to compensate casuals for their lack of leave entitlements);
3. That, if a 'casual' is working regular hours and reasonably expects to continue to do so, you as the employer offer them full time employment from time to time. If they elect to remain as a casual (as they often will, to ensure they continue to receive the more generous pay associated with casual employment) then you have protected yourself from possible future risk.
If you have any casual employees who work regularly and you anticipate that they will continue to do so, it would be worthwhile consulting with us about the arrangements you have in place to ensure that you are not exposed to unnecessary risk.
Please contact a member of our employment team if you would like more information on this topic or on any other employment issue.
September 2012 - Why employers should not be afraid to confront fruitless Unfair Dismissal claims - Two Case Notes
Why employers should not be afraid to confront fruitless Unfair Dismissal claims - Two Case Notes
Two recent decisions in August 2012 at Fair Work Australia (FWA) highlight why businesses do not need to pay out large sums or duck for cover at the first sign of an Unfair Dismissal claim from former employees. The key to Unfair Dismissal claims against employers is a shrewd assessment of the claimant's chances of success. If it is available, a jurisdictional argument can be a silver bullet for an employer facing an Unfair Dismissal claim. One of the following decisions demonstrates a straightforward method to have the proceedings thrown out, whilst the other case could have achieved a better result by settlement.
What are jurisdiction issues?
The basic requirements for former employees to be eligible to make an Unfair Dismissal claim are:
1. The Claim must be lodged with FWA within 14 days of receiving notice of the termination of employment;
2. The employee cannot earn over $123,300 (excluding superannuation) in accordance with 333(1) of the Fair Work Act 2009 (the Act); and
3. The employee must have been employed by the business for longer than 6 months, or 12 months if the business is a "small business employer". Small business employers employ less than 15 full time workers.
The above jurisdictional restrictions can be used to defeat an Unfair Dismissal claim, even in circumstances where the employee would otherwise have a strong claim.
In Smith v Dock Enterprises  FWA 6766 the claimant began working as a casual driver for the business, Dock Enterprises Pty Ltd (Dock Enterprises), in March 2011. The claimant worked regularly for the business until March 2012 when his employment was terminated without the required written notice. The business was a small business employer. Accordingly, the business defended the claim on the basis that the worker was not eligible to make an Unfair Dismissal application, because he had not completed 12 months service.
There was some confusion as to the date the worker commenced work and was terminated. As is often the case in employment matters, the evidence became a question of individual's memories of events. The Court found the employer's evidence more reliable, and the employee's application was dismissed because his employment fell short of the minimum service by 2 weeks.
In other cases the issues are not straightforward and the business can use the mandatory conciliation as an opportunity to settle the claim for a reasonable sum. In the below case, the employer was ultimately unsuccessful at hearing.
In the case of Hillie v World Square Pub  FWA 6806 the claimant has been a casual worker at a pub since July 2009. The pub had been originally managed by Wanslea Grove Pty Ltd (Wanslea Grove), who abandoned the business on 26 August 2011. A Mr Lucas began managing the pub for the owners on 29 August 2011 when the pub partially reopened. The claimant reported for work on 29 August 2011 and apparently did not notice and was not informed of the change of employer. Four months later, on 16 December 2011 the claimant's employment was terminated.
The business argued that the claimant was not eligible to make a claim because she had been employed for less than 12 months. Mr Lucas did not complete a formal transfer of the business, however FWA found the employer was bound to recognise the employee's service to the previous employer, under section 311 of the Act and the authority of Peter Zabradac v Transclean Facilities Pty Ltd  FWA 4492. The Claimant commenced employment with the Mr Lucas within three months of the termination by Wanslea Grove and the work the claimant performed for the Mr Lucas was substantially the same as that performed for Wanslea Grove. The Act permitted the Court to find that Mr Lucas's business was connected with Wanslea Grove because Mr Lucas had an "arrangement" with Wanslea Grove for the beneficial use of some of its assets.
An Unfair Dismissal application will not protect a casual employee unless his/her work is characterised as "on a regular and systematic basis" under section 384 of the Act. This exclusion did not apply to this claimant. Accordingly, the claimant was considered a person protected from Unfair Dismissal and the application was relisted to hear the substantial issues.
The Court acknowledged that Mr Lucas had the opportunity to initially employ the claimant on probation. If Mr Lucas had issued the claimant with a short letter informing her of the change in business and explaining that service for Wanslea Grove would not be recognised as service for his company, the claimant would have been ineligible to apply for Unfair Dismissal. In addition, Mr Lucas could have altered the claimant's terms of employment to recognise she was more suited to a permanent part time employee, rather than a casual employee. The business did not receive the benefit of retaining the claimant as a casual staff member, yet it was exposed to a potential claim for unpaid annual leave in an Unfair Dismissal application. This is an example where a legal assessment of the working relationship could have saved the business a litigation headache.
Take Away Points for Business
1. If an Unfair Dismissal claim is commenced, consider if the claimant is eligible to make the claim under the jurisdictional limits outlined above; and
2. If you take over another business, issue a letter to employees of the business clarifying whether service for the former owner will be considered service for your company, and if the employees will be on trial for a period.
Our experienced Employment Team is happy to assist Companies with each of the following steps:
1. Enter employment contracts which accurately reflect your employment arrangements;
2. When an employee becomes troublesome, take preventative action;
3. If an Unfair Dismissal claim is commenced, do not panic;
4. Seek advice to understand your legal position; and
5. Explore settlement options before or at the conciliation.
September 2012 - Are your Workers correctly described as independent contractors or employees?
We frequently receive questions about whether a worker is properly described as an "independent contractor", or if they should be considered an employee. Incorrectly describing the arrangement can create a minefield of potential problems.
What is the Difference?
An employee is engaged by a business individually for their labour, and is under the direct control and supervision of the employer. By contrast, an independent contractor is engaged on the basis of providing clearly identified services. That is, the service itself, rather than the person is engaged. This subtle difference has flow on effects for the responsibilities and liabilities of both the business and the worker.
When Issues Arise
The following problems can arise if the engagement has been done incorrectly:
- claims for non-payment of employee entitlements such as annual leave, sick leave, long service leave and superannuation;
- claims relating to under-payment of Award rates of pay;
- unexpected workers compensation, public liability and professional indemnity obligations;
- unexpected ATO obligations and liabilities.
There is a regime under the Fair Work Act 2009 (Cth) to discourage and prevent sham arrangements. These provisions are to deter companies from representing that a worker is an independent contractor when in truth the worker is actually an employee. Civil penalties attach to breaches of these provisions.
The best approach for both workers and business is to focus on the prevention rather than the cure. The employment team at Atkinson Vinden is available to discuss whether the decision between an employment contract or an independent contracting arrangement is an issue in your circumstances. We are happy to advise clients on new employment contracts or reviewing current working relationships. In our experience, disputes regarding these issues can often be avoided by reviewing the circumstances of the case and engaging in an open discussion with the worker or business concerned.
Please contact a member of our employment team if you would like any further information.
September 2012 - Real Estate Agency Law
As with many areas of legal practice (and life generally) real estate agency law has become significantly more complex and hence specialised in recent years. Atkinson Vinden provides a wide range of services in this field to help our clients, particularly the principals of real estate agency businesses, better manage the opportunities and risks in this area.
Our services are geared to all of the needs a business might have for principals contemplating the sale or purchase of an agency (or any of its components, particularly a rent roll, a strata roll or similar) and assisting agents to better manage contentious issues in the day to day conduct of their businesses.
Atkinson Vinden has assisted agents throughout New South Wales in the sale and purchase of franchised and independent real estate agency businesses and in respect to the preparation and negotiation of various agency related contracts. We have also assisted real estate agents and business brokers in respect to commission claims, general disputes and franchising issues.
Our documentation is second to none and often regarded as "industry standard".
Our services include:
- Rent Roll sale and purchase;
- Real estate agency sale and purchase;
- Share Sale Agreements in respect to a Rent Roll or agency;
- General real estate and property law;
- Mediation and/or litigation of agency disputes including commission claims, retention claims, lost management claims and restraints of trade;
- Agency / business succession planning, estate planning and documentation;
- Shareholder / Unitholder Agreements (some linked to Keyman insurance);
- Agency employment and consultancy law;
- Agency contracting and services law.
To launch this specialist area of our practice the team will hold a free breakfast seminar on Tuesday 30 October 2012 commencing at 7.30am in our offices. If you would like further information or would like to register please contact Janice Martin on 9411 4466 or email firstname.lastname@example.org.
Click here to "Meet the Team"
August 2012 - Binding Financial Agreements May Not Be Binding
Binding Financial Agreements ("BFAs") were intended to provide some certainty and control to married and de facto spouses who want the option of determining, by agreement, how to deal with their property, financial and other issues in the event of a future separation (commonly known as "pre-nuptial agreements"), or directly after separation. However, it is becoming increasingly apparent from some of the court cases that the law surrounding BFAs continues to be complex and ever-changing. The effectiveness of BFAs is uncertain as the case law shows that they can be challenged and/or set aside by the Family Court, sometimes on fairly technical grounds (such as drafting errors within the document) and, at other times, because they are impracticable due to circumstances that have arisen since the BFA was made.
Whilst recently, there were certain changes made to the law aimed at making it more difficult to set aside BFAs on merely technical grounds, there continue to be cases which challenge how effective and final BFAs really are.
BFAs, particularly those dealing with future events ("pre-nuptial agreements") can be problematic from a practical point of view. It is often difficult for a couple at the beginning of their relationship, to reach a suitable, fair and practical agreement as to the division and distribution of assets and liabilities at some undefined point in the future, as the circumstances of that particular couple may change, fairly dramatically over time, thereby necessarily affecting the practicality and fairness of the BFA, for example, due to the birth of children. A couple wishing to rely on a BFA would need to review the BFA and seek fresh legal advice as to its practicality and effectiveness where there is a significant change of circumstances, otherwise they risk that the BFA is not practicable or is set aside by the Court.
There are several other factors which could lead to a BFA being set aside, including a non disclosure of a material fact. It is of the utmost importance when preparing a BFA to ensure that there is a full and frank disclosure of all the parties' assets, liabilities and financial resources. Parties often underestimate the importance of providing complete and accurate financial details. However a failure to provide a full and frank disclosure could be a factor in later having that BFA set aside by the Court on the application of one party.
Therefore before deciding whether to enter into a BFA, ensure that you obtain the appropriate legal advice and that you completely disclose all the relevant information to your solicitor to enable the provision of that advice, and to determine if a BFA is right for you. Please contact Annabel Murray or Nathan Avery-Williams of our office who would be more than happy to answer any questions you may have.
August 2012 - The ABC of Divorce
The Family Law Act 1975 (Cth) provides only one ground for divorce in Australia. This is that the marriage has broken down irretrievably. This is only evidenced if the parties are separated and have lived separately and apart for not less than twelve months. An application for a divorce order can only be applied for and a divorce order made after a minimum of twelve months separation.
In determining whether the relationship has irretrievably broken down and the parties have separated there needs to be:
1. An intention of one or both of the parties to sever and discontinue the marital relationship.
2. Where one party alone considers the marriage has ended, that party communicates this to the other; and
3. The party(ies) act on that intention, and act as though the marriage has ended.
Commonly couples, often for economic reasons, may live whilst separated under the one roof. Parties who live under one roof during all or part of the period of separation will be required to file Affidavit evidence from a third party, which establishes precisely what the arrangements were, such as separate bedrooms, informing others that the marriage is over and the like. This is to satisfy the Court that the separation is genuine and that the marriage has irretrievably broken down.
Finally, an Application for Divorce may either be applied for by one party or by them together as joint applicants. Where an application has been made by a single party and there are children of the marriage under the age of 18, one party or their solicitor is required to attend Court to advise about care and child support issues concerning those children. In situations where the application is joint, divorce orders are usually made in the absence of the parties.
If you have any questions in relation to divorce, it is important to seek legal advice, as there are many factors that may influence whether or not the orders shall be made by the Court.
August 2012 - Directors Beware!
The responsibilities and liabilities of directors have increased generally in recent times and now even more so with the provisions of the Pay As You Go Withholding Non-Compliance Tax Act 2012. This Act will impact on all directors and their associates. Essentially the changes under the new law are that:
1. Penalties against directors are extended to unpaid superannuation guarantees, as well as for unpaid PAYG amounts.
2. Directors are no longer able to discharge or extinguish a director penalty by placing a company into administration or liquidation when a PAYG or superannuation guarantee remains unpaid and unreported 3 months after the due date.
3. In some cases directors and their associates will be liable to a PAYG withholding non-compliance tax (which will reduce their credit entitlements) where the company has failed to remit amounts withheld. In effect, the directors and associates will not be able to access PAYG credits in their own tax returns where a company has not paid the ATO.
4. Associates (and this includes spouses) can be held personally liable for unpaid PAYG and superannuation on their own personal tax accounts if they do not:-
(i) Influence the director to report and pay outstanding tax to the ATO, appoint a liquidator or administrator, or
(ii) Inform or report the director for the non-payment of tax to the ATO, ASIC, the Police or the Minister.
5. Directors will be personally liable for their company's unpaid superannuation guarantee charge including for superannuation relating to the quarter ended 30 June 2012 which has a superannuation guarantee statement lodgment date of 28 August 2012.
6. And most importantly, the amendments are retrospective to the extent that any unpaid and unreported (for more than 3 months) PAYG liability which is outstanding as at 29 June 2012 will result in a director penalty that cannot be remitted by placing the company into administration or liquidation. In effect, this will be a personal debt for the director.
It is therefore essential that all directors take an active role in ensuring that superannuation and PAYG obligations of the companies of which they are directors are up to date and correct. This obviously impacts greatly on the roles of directors and the responsibility may be sufficient for directors who have very little involvement with companies to cease acting as directors. This may be possible since many companies no longer require two directors to operate effectively, or may be able to amend their constitution so that only one director is required. If you require any assistance in regard to director's roles and the possible amendment of a Constitution, please contact a member of the Atkinson Vinden commercial team.
July 2012 - Changes to First Home Owner Grant Scheme
The $7,000.00 first home owner grant for established properties (i.e. not brand new properties) will end on 30 September 2012 and will not be available for first home buyers where a contract for the purchase of established properties is entered into on or after 1 October, 2012.
The First Home Owner Grant (New Homes) Scheme will commence from 1 October, 2012 and the amount of the Grant will be $15,000.00. This will affect first home purchasers who enter into a contract to purchase a brand new home on or after 1 October, 2012. The $15,000.00 grant will be reduced to $10,000.00 on 1 January 2014 and will affect contracts entered into on or after 1 January 2014.
July 2012 - First Home - New Home Scheme
This Scheme replaces the First Home Plus scheme from 1 January 2012. This applies to the purchase of new homes or vacant land on which the purchaser intends to build a new home. From 1 July, 2012, to be eligible for the full exemption from duty, the dutiable value of the property must be less than:
- $550,000.00 if the property is a private dwelling; or
- $350,000 if the property is a vacant block of residential land.
Concessions will apply where the dutiable value of the private dwelling is more than $550,000 but less than $650,000 and for vacant land where the dutiable value of the residential land is more than $350,000 but less than $450,000.00.
A "New Home" is defined to mean a home that has not been previously occupied or sold as a place of residence.
July 2012 - NSW Home Builders Bonus
The Home Builders Bonus ceased on 1 July 2012 so that contracts entered into on or after that date will not longer be eligible for the stamp duty concessions which applied prior to that date in relation to the purchase of new homes, homes off the plan and vacant land on which a new home was to be built. The concession will still apply to contracts which have been entered into after 1 July 2010 and before 1 July 2012.
July 2012 - A Notice to all of our Australian Non-Resident Clients
The Federal Government announced in the recent Budget that it will remove the 50% Capital Gains Tax discount for non-residents for all Capital Gains accrued from 7:30am, 8 May 2012. The discount (where applicable) may still be obtained on any gains accrued prior to that time, so long as the non-resident obtains a market valuation of the capital assets as at that date.
There are quite specific rules on such valuations, and we recommend that you use a reputable valuer to prepare the valuations in the required form. Given the difficulties in valuations prepared "after the fact", those valuations should be obtained sooner than later, and held for use on the ultimate disposal of the asset, even if that is quite some time in the future.
July 2012 - Do Landlords need to consider the Personal Property Security Register?
Generally the Personal Property Security Act, as you would be aware from our previous newsflashes, does not deal with real property. However there are some occasions when parties to a real property transaction need to consider whether or not a security interest may have been created and thus need some form of protection via the Personal Property Security Register.
This is relevant in lease matters either when chattels are left in premises for a tenant or a landlord makes a contribution to a tenant towards the cost of fit out.
Use of Chattels
Chattels (tenant's fixtures and fittings and perhaps furnishings) which are left in the premises by a previous tenant are often left in the premises when the landlord re-lets the property. If the landlord is asserting ownership of those chattels then it should ensure that interest is protected by registering it on the Personal Property Security Register. If it fails to do so then those chattels may be claimed by third parties (perhaps creditors of the previous tenant) who may themselves have a better security interest.
Contribution to Fit out
When the contribution to a tenant's fit out is used (wholly or partly) for chattels and tenants fittings, such as gaming machines, televisions, general fit out, crockery and cutlery in a restaurant, security equipment and the like, those are items of personal property. They are not covered by the landlord's entitlement to the land and fixtures and if it is intended that the landlord is to own those items of personal property then the lease will require an appropriate clause entitling the landlord to be provided with relevant details (including serial numbers for items which have such) and to register its security interest. If the goods are intended to be the tenant's property but financed by the landlord (for example where an incentive clause has a claw back arrangement should the tenant breach the lease when such incentive is required to be repaid) then the landlord could be entitled to a PMSI (a purchase money security interest) and therefore the lease needs to document that arrangement and allow the landlord to register its interest.
This is an evolving area at present and it is therefore important that landlords consider when negotiating for incentives just what is intended in terms of ownership of fit out and the items comprising the fit out.
Please contact Anne Goodrick or any other member of our property team for further advice.
July 2012 - Are you considering entering into a Retail Lease? Understand your rights before you sign the Lease
A retail lease is very different to a residential and commercial lease, as it is highly regulated and governed by the Retail Leases Act 1994 (NSW) ("Act").
A retail lease exists where a shop is selling and supplying goods or services where the shop is less than 1,000 square metres and is used for a retail business.
It is important that prospective tenants are aware of the requirements of a retail lease and clearly understand their rights and obligations, as disputes often arise where tenants do not understand the document they are signing, and by that time it is often too late to resolve.
At the outset a tenant should be given by the landlord a Disclosure Statement, at least seven (7) days prior to the commencement of the lease. The Disclosure Statement is just as important as the lease itself. A Disclosure Statement details the outgoings payable by the tenant, the details of any fitout works, the rights to exclusivity of use, any planned development and other obligations of both parties.
If you are entering into retail lease in a shopping centre the Disclosure Statement also should include the annual sales of the centre, whether turnover rent is payable, and details of any major fitout. It is important that this document is accurate in that it reflects the agreement between the parties. If anything is different from what you have been advised, it should be discussed prior to signing the lease. Retail lease disputes often arise out of inaccuracies of a Disclosure Statement, and can end up being very costly to resolve.
Once a Disclosure Statement is signed, the tenant can then sign the lease. It is important that a tenant signs the Lease prior to taking possession or commencing payment of rent.
Considerations for the lease itself include maintenance and repair of equipment, rent, methods of rent review, details of the permitted use, the requirement for a bond and trading hours.
In a shopping centre other considerations include the requirement to contribute to an advertising and promotion fund and the calculation of turnover rent.
In respect to legal costs, the Act states that the landlord is responsible for preparation of the lease. The tenant is only responsible for expenses such as registration fees and any costs incurred by the landlord to amend the lease once the Disclosure Statement has been signed. Mortgagee consent fees can also be a disputed expense and should be dealt with when negotiating the lease.
The bond can be paid by cash or bank guarantee. If it is paid by cash a tenant must ensure that the landlord lodges the bond with the Retail Tenancy Unit within 20 business days of receipt. The benefit of paying by a cash bond is that there is more protection afforded to the bond in that there are specific procedures for paying out bond money at the end of the lease, especially where there is a dispute and the landlord attempts to call upon the bond.
At Atkinson Vinden we understand the importance of entering into a Lease that is right for you. Please contact a member of our Property team (02) 9411 4466 if you would like assistance in this area.
June 2012 - Trustee's Fiduciary Responsibility in the Management and Administration of a Self Managed Super Fund
The recent case of Shail Superannuation Fund v Commissioner of Taxation highlights numerous important aspects regarding the management and administration of a self managed superannuation fund (SMSF) particularly a trustee's fiduciary responsibility.
It has always been our view that a corporate trustee is the best option. Utilising individual trustees is possible and certainly popular - in such instances it is critical that each individual trustee is fully informed and involved in the running of the SMSF. A good starting point in that respect is the Australian Taxation Offices SMSF Trustee Declaration and its recent booklet of advice posted to each SMSF Trustee entitled "How Your Self Managed Super Fund is Regulated" and "Running a Self Managed Super Fund" and the dire consequences that can apply when each trustee is not so involved.
Shail's case involved a SMSF with $3.5 million of investments with the husband and wife as trustees. While the couple was happily married there were no problems; when the relationship broke down the husband illegally withdrew the majority of the funds from the SMSF and left Australia. ATO deemed the fund to be non-complying due to this illegal withdrawal resulting in the funds tax liability calculated at 46.5% of its asset value at the commencement of the financial year of the illegal withdrawal. With the husband out of the picture Mrs Shail was held liable for the ATO assessment penalties and interest; while the Appeal's Court was sympathetic it held that she had "allowed the illegal withdrawal to occur" and "as trustee of the fund she was liable". She had breached her "fiduciary duty" to ensure that Super Laws were upheld by the fund.
Utilising a corporate trustee (in particular for new funds to be established) can substantially reduce this sort of risk and, coupled with more conservative standing banking and funding investment deposit and withdrawal procedures, should go someway to avoiding a Shail type situation. As the end of the financial year approaches it would also be timely for individual trustees to look carefully at their involvement in their respective funds and to reconsider, with appropriate financial and legal advice, whether "best practice" is being observed in respect to the administration and management of that fund.
A more fulsome article on the necessity of corporate trustees will appear in the next Atkinson Vinden Newsletter. In respect to any immediate questions or concerns please contact Chris McClure on 9411 4466.
June 2012 - Wills and More
To avoid an unexpected or unwanted result following death, every adult should make a will - and keep it up to date as circumstances change. Although anyone can make his or her own will, this often leads to dispute and litigation that is costly and upsetting to those involved.
In considering the estate planning needs of a client we will not only prepare a will, but also advise that an enduring power of attorney, and sometimes that an appointment of enduring guardians be made as well.
What is required and appropriate will depend on the circumstances of each individual. Matters to consider include the following.
- Assets including jointly held assets, interests in a partnership, trust, business, superannuation (whether in a retail fund or a self managed fund) and life insurance
- The identity of those who might expect to benefit from the estate on death - is there anyone who could expect to benefit, a child or some other dependent, but whom it is wished to exclude?
- Is your family a "blended family" arising out of a second or later marriage or relationship, children from a former relationship of you or your partner?
- Is any intended beneficiary in financial difficulty, a compulsive gambler or drug addict, in a shaky marriage, or in need of special medical support?
- Are you intending to marry a particular person? Unless a will is correctly worded, marrying after the will is made will revoke the will except for gifts in favour of the married partner.
- Divorce will revoke any gift under the will in favour of the former spouse.
To ensure that a will has the intended result, it is important that it be reviewed periodically, and as circumstances change - on marriage, divorce, the birth of children, as children become adults, and marry, on the birth of grandchildren, on a potential beneficiary facing bankruptcy, on divorce or death of a child.
To ensure that your assets and personal wellbeing are properly managed during your life, especially if you become unable to manage them yourself, an enduring power of attorney should be made and in some cases also an appointment of enduring guardians. The choice of attorneys and of guardians must be made with great care and we can assist in the consideration of this.
We will assist in creating an estate plan that takes into account these issues and draft documents that are appropriate to the circumstances, including a will that might be a relatively simple document, or it might provide for more sophisticated testamentary trusts, a power of attorney and where appropriate an appointment of enduring guardians.
Please contact a member of our Estate Planning team if you need further advice on (02) 9411 4466.
June 2012 - NSW Budget Deferral of Stamp Duty Abolition Schedule
We take this opportunity to inform clients that, as part of the State Government's 2012 Budget, the planned abolition of stamp duty in NSW levied on mortgages, the transfer of business assets and certain marketable securities in private companies, has been deferred for 12 months and is now scheduled to commence on 1 July 2013.
This deferral means that mortgages, the transfer of business assets and marketable securities in private companies will continue to attract stamp duty in NSW until 1 July 2013.
If you are considering purchasing a business or shares in the near future, or are receiving an advance from a potential mortgagor, we advise contacting a member of our Commercial Team before you enter into any formal transaction documents. Please contact Anne Goodrick on (02) 9411 4466.
May 2012 - Costs in Litigation
Imagine spending 1 million dollars in a legal battle over a sum of $50,000. It might sound outrageous, but this is precisely what happened in a matter which this firm recently inherited from another solicitor. Naturally, the original reason for the dispute was all but forgotten in the battle to recover legal costs.
This is obviously an extreme example. However, the truth is that, even in the absence of the sort of negligence or dishonesty which might make a good segment for 'A Current Affair', costs in litigation can rise far beyond the initial expectations of the litigants and their solicitors.
This can happen for a multitude of reasons. There may be unexpected preliminary hearings on procedural issues; there may prove to be a huge weight of documents produced by the other side to sift through; evidence may prove more difficult to prepare than originally anticipated; the other side may be hopelessly inefficient. The bottom line is that there are a wide range of factors which are partially or completely out of a solicitor's control which can contribute to a longer, more expensive litigation process. Rarely does litigation proceed without any surprises.
We conduct our practice specifically with a view to avoiding this potential trap. Often we encourage our clients not to press litigation in circumstances where the amount in dispute is small enough to create a real risk that legal fees will outweigh the value of the dispute. There are alternatives which we seek to explore, including mediation, which often yield reasonable results without the burden of risk associated with litigation.
In circumstances where litigation has been commenced, we often advise our clients to make their best, most reasonable offer quite early in the dispute. Not only does this maximize prospects of settling the matter before legal costs become oppressive, but it also protects our clients' capacity to recover maximum costs at the end of the dispute if it fails to settle.
We often encourage our clients to consider litigation as they would consider an investment. Spending 1 million dollars to fight over $50,000 is obviously a poor investment. However the question becomes more difficult when the numbers are less extreme (for example, spending $30,000 in fees to chase $100,000).
If you are considering commencing litigation, you should bear in mind the risks and alternatives outlined above. Although the decision is ultimately yours, we will give you frank advice on whether litigation is commercially justifiable, having regard to the costs and risks which you will inevitably face.
Please contact a member of our Litigation and Dispute Resolution team if you would like more information.
May 2012 - Mortgage Law Update - Possession Proceedings
Since the Global Financial Crisis, the Litigation Team at Atkinson Vinden have assisted high net worth individuals negotiate with lenders regarding existing loans during the turbulent economic climate for business.
Individuals experiencing temporary difficulties in servicing existing loans, either for private purposes or for their businesses, should consider a number of options open to them as follows:
- Negotiate with the lender. Most lenders offer a range of flexible payments in the event that your business is suffering from a temporary blip, which you anticipate recovering from in the near future.
- Internal dispute resolution. Lenders are required to offer internal dispute resolution in the event that individuals are experiencing difficulties in meeting repayments.
- External dispute resolution. Lenders are required to be a member of an External Dispute Resolution scheme. The two current options for lenders are the Financial Ombudsman Service (FOS) and the Credit Ombudsman Service Ltd (COSL). These services provide a forum for individuals experiencing difficulties in meeting their repayments to negotiate with lenders.
- Refinancing with an alternative lender.
- If the loan is secured by real property, an individual should consider the option of selling the property in the event that they are likely to experience ongoing difficulties in servicing the loan.
We are available to assist individuals and businesses consider the best approach for them if they are experiencing difficulties meeting their loan repayments. Early negotiations with the lender can avoid or resolve possession proceedings commenced by the lender in the Supreme Court of New South Wales.
When an individual or business is served with a Statement of Claim for the possession of a property securing a loan in default, the borrower has numerous options if they seek advice promptly, presumably within 28 days of being served with the lender's claim. Our team are available to answer questions regarding private mortgages, business loans and loans under the National Credit Code.
We are closely following amendments to legislation on the provision of credit. The Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 (Cth) (the Bill) was introduced to Parliament on 21 September 2010. The Bill is being considered by the Parliamentary Joint Committee on Corporations and Financial Services and the Senate Economics Legislation Committee who have been consulting with lenders, external dispute resolution services, lawyers and community legal services who provide feedback on behalf of low income borrowers. Submissions on the Bill closed on 7 May 2012.
The Bill proposes changes to:
- Strengthen legal requirements for reverse mortgages;
- Hardship Applications under the National Credit Code;
- Caps on the maximum costs payable regarding small loans;
- Restrict the use of some terms, such as "pre-approved", "independent", "impartial" and "unbiased";
- Enhance the Court's ability to address unfair or dishonest conduct by brokers;
- New provisions to allow borrowers to claim a refund for excessive establishment fees levied by lenders for third parties, such as finance brokers, which are not ascertainable at the time of payment; and
- Changes to disclosure requirements regarding employer payment authorisations.
New Equity List Practice
A further recent change which affects unregistered mortgages disputed in the Supreme Court of New South Wales Equity List is the new Practice Note issued by Her Honour Chief Justice Bergin relating to the service of evidence and the process of discovery. This impacts both lenders and borrowers in disputes regarding mortgages because the Court has adopted a streamlined approach for the parties to prepare the case for hearing.
For more information or assistance with any of the above issues, please contact the Litigation and Dispute Resolution Team at Atkinson Vinden.
May 2012 - Sometimes we get it wrong
On occasion, a person acting in a professional capacity on behalf of another may make an error of judgment which results in loss to the client. This may include accountants, lawyers, financial advisors and doctors.
In one example, we recently settled a case where we were acting for a client against his former solicitor. The case involved the purchase of a dental practice and a significant error the former solicitor made in the contract for sale. This error resulted in a lengthy and expensive litigation matter brought against our client. Ultimately, we were able to achieve an excellent result through negotiations with the former solicitor's insurer, recovering the entirety of our client's loss.In most professional settings, the practitioner owes a duty of care to their client. This arises by virtue of the fact that the client seeks guidance from the professional in reliance upon the professional's special skills and experience. That same duty means that the professional should be careful to respect relationship boundaries.
Sometimes professionals will seek our help with other situations that have arisen in professional life, for example; allegations of sexual impropriety. Because of the possible criminal repercussions, these situations need to be handled delicately.
If you would like to talk confidentially about a professional situation, please do not hesitate to contact Nathan Avery-Williams.
May 2012 - Excess Contributions to Superannuation......Postscript to April alert
In last months message we countenanced this issue; since then the Federal Budget has been announced with significant changes proposed in respect to both concessional contributions [and their limits] and the manner in which they are taxed, none of which are likely to create any enthusiasm for those planning their retirement but rather a disincentive for doing so.
It would be timely for a thorough review of an individuals superannuation planning ,including an immediate review of salary sacrificing arrangements for such individuals. This may well impact on an individuals Estate Planning considerations as well.
May 2012 - Business Names Registration
Finally, a worthwhile government initiative with respect to reducing red tape for small business. For many years registering a business name has been handled through state agencies (in NSW, currently the Office of Fair Trading).
From 28 May 2012 the process will be streamlined and managed nationally through ASIC, which will establish and oversee a national business name database, as well as handling all Australian business names applications and renewals.
For the business name owner this means that once registered, an Australian-wide (rather than state-wide) registration will result; if nothing else it will substantially reduce the registration/renewal fees applicable.
Of course, as always, business name registrations provide a limited and less fulsome "protection" for the registered name owner - certainly less than for a company name or a trademark, for example.
Existing business name registrations will be migrated by the state agencies to the ASIC Register.
Contact a member of the Atkinson Vinden commercial team if you have any questions or concerns about business or company names, trademarks or intellectual property issues.
April 2012 - Excess Contributions to Superannuation
As it is getting towards the end of the financial year it is timely for superannuation fund members to review their contributions for the 2012 financial year.
Incredibly, in 2011 over 45,000 taxpayers put too much money into their superannuation resulting in most of these being taxed at penalty rates for putting too much aside in concessional or pre-taxed contributions.
Most people understand the concept of "salary sacrificing" but, as with many good ideas, government has made the salary sacrificing concept more complicated and certainly more confusing with age factors, budget cutting and similar considerations.
Things will only get even more so in the 2013 tax year!
When reviewing your concessional contributions and any salary sacrificing do not forget that these will include both an employer's compulsory superannuation contributions as well as any pre-tax extra contributions you may make. It is easy to lose track of the total contributions! As well, excess contributions are calculated according to when the money is deposited into the super fund, rather than when the fund member becomes entitled to it.
At its simplest, the result is a Tax Assessment at 46.5% on the excess contributions which is often more than the member's marginal tax rate - it gets much worse if a taxpayer is wishing to further boost their super by making after-tax contributions as well. Penalty rates of up to 93% can apply!
Whilst the government is looking at the excess benefits problem it is unlikely that this will be sorted out any time soon...so beware!
Please contact Chris McClure at Atkinson Vinden if you have any questions or concerns on this important issue.
April 2012 - A Standard Form Contract for Retirement Villages in NSW
NSW Fair Trading has released a draft standard form contract for use in retirement village transactions in NSW. It is anticipated that the standard form contract will become available in mid-2012 and that its use will be compulsory for all retirement village transactions between residents and operators.
As with standard form contracts for the sale of land and the sale of businesses however, special conditions may be added to the standard form on the condition that such special conditions do not conflict with the standard form or the Retirement Villages Act 1999 (NSW).
The standard form contract will apply to all forms of retirement village transactions, including strata title, loan/lease, loan/licence and rental transactions. The existing disclosure statement will continue to be used and remains a prescribed document in all transactions.
The draft standard form contract is available here. Comments may be provided to Fair Trading until 18 May 2012.
Please contact our Retirement Village specialist Guy Vinden should you have any queries.
April 2012 - Third party creditor's intervention in family law property proceedings
The Family Law Act enables third party creditors to intervene in property proceedings. By intervening, that third party creditor is joined as a party and can apply to have enforceable orders made for repayment of a debt. The spouse parties can similarly apply to have either the debt apportioned to only one spouse party, or set aside.
It is relatively common, particularly given high real estate prices in Sydney, that parents (particularly, elderly parents) lend an adult spouse party money towards purchasing a home. At the time the money is lent by the parent, it is generally the intention that the money is being lent to their adult child and that child's spouse, to help them get on financially, but when questioned about whether or not they would forgive the debt, most parents would say "no". It is generally their intention that if the adult child's marriage broke down that they would expect to be repaid in full the money that they lent or if their circumstances changed that they would call on the loan to be repaid.
Things do not, however, always go to plan.
In family law cases, the Court can look behind family loans and decide whether or not the monies are loans and would in fact be ordinarily repayable and in dong so, considers steps taken by the lender to secure monies advanced, the history of repayments, details of conversations held in relation to the loan and the purpose of the loan. It is not uncommon where one spouse party, who previously having had the benefit of funds advanced (for example towards the purchase of the former matrimonial home) later denies that the monies were in fact a loan and repayable to the former spouse's parents. Where the former spouse's parents are seeking to enforce the loan agreement, it is difficult in the absence of security and/or documentation.
Parents considering lending money to adult children should first obtain accounting and financial planning advice in relation to any implications that the loan may have on their Centrelink entitlements in the future. Where money is to be advanced towards, for example, purchasing a home, parents should consider lodging a caveat over of the property, or entering into a formal mortgage and any Deed of Priority with the first mortgagee as well as always having a properly drafted Loan Agreement between themselves, their adult child and their adult child's spouse, in which terms are clearly set out. If, as can happen in family law cases, the Court forms the view that the monies may not have always been repayable, then the Court may hold only one party responsible for that loan (usually the adult spouse party whose parents lent the money) or if the terms are uncertain, may apportion the interest payable again to only one party with the principle lent to be shared.
If the evidence does not support that the moneys advanced were a loan, then the Court can treat the monies advanced as a gift, in which case the adult spouse party whose parents advanced the funds, gets the benefit of that contribution as if they themselves had put the cash into the marriage.
Please contact Annabel Murray at Atkinson Vinden if you have any questions or concerns on this important issue.
March 2012 - PPSR
From our previous email alerts, you would be aware that the Personal Property Securities Act 2009 (Cth) (PPSA) commenced on 30 January 2012.
Whilst topics relating to the PPSA and retention of title arrangements have been discussed in our previous email alerts, we now take this opportunity to advise you of the greater scope of the PPSA and its application to lease and real estate transactions.
1. A security interest will arise in respect of a landlord's fitout, to the extent that fitout is not a fixture excluded from the PPSA, in premises leased for one year or more or for an indefinite period.
2. Landlords will need to register these security interests within strict timeframes if they wish to avoid the risk of ownership of the relevant fitout passing to any controller of the tenant's assets in circumstances where the tenant enters into an insolvency arrangement.
Financing of fitout by tenants will, under the PPSA, usually be more transparent, and financiers are likely to request more sophisticated 'Right of Entry' or 'Landlord Waiver' documentation with landlords.
Tenant security deposits
A security interest could arguably arise in favour of both a landlord and tenant in respect of a tenant security deposit, where the landlord holds the deposit on trust and the lease is of premises and personal property.
In addition, any security interest that does arise in relation to a tenant deposit, even if perfected by registration within the prescribed timeframes, will rank behind any prior registered security interest (such as 'all assets' security in favour of a financier of either party).
Having regard to these factors, until it is clear that a security interest does not arise in relation to tenant security deposits held on trust by landlords, parties may choose to avoid lease security deposits held by landlords, and instead use other common forms of tenant security to which the PPSA does not apply, such as bank guarantees and insurance bonds, or lease security deposits paid to third-party stakeholders (provided that lease documentation is drafted appropriately).
Assignments and Subleases
Any security interest arising under a lease in favour of a landlord (such as in relation to landlord fitout or, potentially, a tenant security deposit) that is registered will need to be re-registered following an assignment or sublease. Landlords may, accordingly, wish to avoid allowing a tenant to assign or sublease without consent (even for assignments or subleases between related entities) unless prior written notice is provided by the tenant to the landlord, enabling re-registration to occur within the prescribed timeframes.
Landlords may, in some cases, have greater certainty in disposing of chattels abandoned by a tenant, by conducting a search of the PPS Register to identify the holders of any security interests in relation to those chattels, so that those interests can be accommodated before the assets are disposed of.
Contracts for Sale
Purchaser deposits and call option fees
As with security deposits held for leases, a security interest could arguably arise in favour of both a vendor and purchaser where the vendor holds the deposit (on trust) under a contract for sale.
Where the PPSA does apply, it will again be the case (as with lease security deposits) that priority of any security interest arising in relation to a purchaser deposit held on trust by a vendor cannot be obtained against prior registered security interests, despite registration within the prescribed timeframes.
Common practice under contracts of sale is for deposits to be paid to third-party stakeholders, and no security interest arises in respect of the deposit in these circumstances where contracts are drafted appropriately. So the PPSA will not apply in relation to most deposits paid under contracts of sale.
Call options are normally paid to the grantor of the option (the ultimate vendor). In most cases there is no security interest that arises in relation to the call option fee. However, if it is agreed that the option fee will be applied towards a deposit if the option is exercised, and the vendor holds the option fee in a separate account, then the same considerations as apply to a deposit held by the vendor may also apply to the option fee.
Transfer of security interests to purchaser under contract
A contract for sale will need to provide for any security interests in favour of the vendor that relate to the property being sold (such as in relation to landlord fitout or, potentially, tenant security deposits) to be transferred to the purchaser at settlement.
Purchaser due diligence
When purchasing a property, a purchaser should undertake the necessary enquiries to identify security interests that should be registered in favour of the vendor but have not been. Prior to entering into any formal contract a purchaser will need to consider the following:
1. the risk of any security interest not being registered and how to manage such risk;
2. whether any security interests will need to be transferred on settlement for the benefit of the purchaser; and
3. that any security interests registered against the Vendor must be discharged on settlement insofar as they are related to the property being sold.
The pre-PPSA process of a vendor providing an ASIC Form 312 at settlement will no longer be possible, and is likely to be replaced by the provision of a copy of a discharge of relevant security interests, and an undertaking by the secured party to lodge a discharge on the PPS Register, should that be necessary to reflect the discharge (which might not always be the case, depending on the terms of the original registration).
March 2012 - Capital Gains Tax Roll-Over Relief in Family Law Matters
Under the Income Tax Assessment Act 1997, Capital Gains Tax (CGT) roll over relief is available where an asset is transferred under a Court order under Part VIII of the Family Law Act or under a Financial Agreement that is binding under Part VIIIA of the Family Law Act. This enables the parties to a relationship to have the benefit of CGT roll over relief where the asset is transferred between them, or from a trustee or a company to a "spouse", which since 9 December 2008 now includes same sex spouses.
Roll-over relief means that the CGT liability is deferred until the transferee eventually disposes of the asset and the transferee is taken to have acquired the asset when the transferor did. Consequently, when the transferee eventually sells the asset:
1. If the asset was initially acquired pre 20 September 1985 then it will be CGT free, or
2. If it was acquired by the transferor after 20 September 1985 then it will attract CGT and the calculation of the CGT liability takes into account the transferor's initial cost base and any reduced cost base when the transferee acquired it.
Clients in Family Law matters need accounting and financial planning advice regarding any potential CGT liability and concessions and cost bases. We want our clients to be aware of CGT implications and obtain advice whether the CGT liability may be minimised or incurred when we are drafting their property settlement and before any Financial Agreement is entered into or Court orders made. It is important that the transfer of an asset is because of a Court order or Financial Agreement and not simply later acknowledged by an order of the Court or subsequent Financial Agreement as this may jeopardise CGT roll over relief.
CGT may be taken into account by the Court but not necessarily in all cases. So when is CGT considered? In the case of Rosati decided in 1998, the following principles were laid down in relation to the treatment of CGT.
First, whether CGT should be taken into account varies in accordance with each case. Factors that would influence whether or not it would be taken into account include the likelihood of the relevant asset being sold in the foreseeable future, how the asset was acquired during the relationship and what each party's evidence is in relation to that asset.
Consequently, if the parties during the course of the relationship invested in an asset acquired after 20 September 1985 and their evidence was that the asset would need to be sold because neither could afford to buy out the other's share of that asset, just as the parties would share in any profit in that asset, the Court would order that they also share any liability which could include the Capital Gains Tax liability.
Other circumstances include whether sale of the asset is inevitable. Where for example an asset was bought purely as an investment, it may be apparent that it was intended to be sold in the foreseeable future. In such a case, the Court may make an allowance for any CGT payable upon its sale when determining the value of the asset in the proceedings before it.
CGT may also be considered not so much in determining the value of the asset but in terms of any adjustment on each party's entitlement where the Court forms the view that it is inevitable that the asset might be sold in the short to mid term, such that the potential CGT liability is a foreseeable risk for one of the parties. This might be the case where, for example, the mother wishes to retain the property so that she and the children can remain in the home but it is foreseeable that she may be unable to maintain mortgage repayments over a longer period of time and that the property would ultimately be sold once spousal support and child support ends in the near future.
In addition, in a case in which there is no likelihood of the asset being sold in the foreseeable future there may nevertheless be circumstances that make it appropriate for the Court to take into account the potential CGT liabilities.
When the matter is before the Court, evidence is required from accounting and financial planners about each party's tax position, how CGT would be calculated as well as evidence about any discounting of tax, particularly if the asset may not be sold for some time. If parties are negotiating we also need accounting and financial planning advice as to what the likely CGT liability shall be so that we can deal with this liability in reaching agreement regarding the value of the asset pool and in apportioning assets and liabilities between the parties.
Please contact a member of our Family Law team if you would like further information.
March 2012 - HR Policies: Are Employers creating rods for their own backs?
Most employers of any significant size will have workplace policies with which employees are expected to comply. They often seek to regulate employee standards of conduct, disciplinary procedures, bullying and harassment procedures and other similar issues. Often, these are compiled in handbooks which are given to the employee at the commencement of their employment, along with a contract to sign.
The beauty of workplace policies is that, unlike contracts, they can be changed without the need to reach agreement with the employee. This means that they are perfect for governing issues which the company wishes to maintain some flexibility over. It also provides an opportunity to adapt to changes in technology and the law.
However, employers may not be aware that, in circumstances where policies have not been handled correctly, courts have held that they have binding contractual effect on employers, and have ordered damages against employer companies when such companies have not complied with their own procedure. This principle has been upheld, perhaps most prominently, in the decision of Goldman Sachs JB Were Services Pty Ltd v Nikolich.
To cite an example, if a company maintained a bullying and harassment procedure, whereby complaints could be made and action taken to prevent such conduct, an employee could potentially allege breach of contract in circumstances where the company failed to apply its own policy. This was the issue which arose in the Nikolich decision.
Similarly, many companies have disciplinary procedures, often encapsulating the concept of 'three strikes', in which an employee is given a set number of warnings before they are dismissed. There is no legal obligation to give three warnings; all that is required is that a fair and reasonable process be followed. What is fair and reasonable will vary, depending on the particular situation involved. If an employer breached their own policy which required three warnings, and dismissed a badly underperforming employee after 2 strikes, the employee would have a very clear case for unfair dismissal. The company would be considered bound by its own policy and obliged to comply with it, even though that policy goes far beyond what is required by legislation.
Employers need to be aware that they will be held to comply with their own policies. In short, it is crucial that policies contain guidelines which the employer is willing and able to comply with. It is equally important that all employees, and in particular management, are trained in the application of the policies so that everyone understands what is expected of them.
Please contact a member of our Employment Law Team if we can be of further assistance.
February 2012 - Practical Implications of the PPSR
Migration of existing interests to the PPSR
As the Personal Property Securities Register ("PPSR") finally came into effect on 30 January 2012, it is now essential for businesses to consider some of the practical issues associated with the new register. One of these issues is the compulsory and automatic migration of security interests from existing registers and onto the PPSR.
Interests on most existing registers have been automatically migrated across to the PPSR. However, there is the possibility that the information for each individual security interest may not have been migrated accurately.
It is important, therefore, that all interested parties participate in the PPSR's "Find and Claim" process whereby they may search the migrated information online. Parties may search the "secured party groups" and the associated information which have been created as a result of the migration process and then check this information and correct it if necessary.
They will then need to transfer the registrations from those migrated "secured party groups" to a new secured party group they have created to manage their registrations on the PPSR.
If, for example, you previously had charges registered over companies to protect your interests we recommend that you create an account with the PPSR to access the "Find and Claim" process.
How the PPSR works
The PPSR differs from previous registers in the simplicity of documentation which is required to be lodged. Secured parties need only to register a Financing Statement online and pay a lodgement fee in order to register their interests.
The Financing Statement will require the following information:
1. Details of the secured party.
2. Details of the grantor (owner).
3. Details of the giving of notices.
4. Description of collateral and proceeds.
5. The end time for registration.
6. Details of subordination (not mandatory).
7. Whether the security interest is to be a Purchase Money Security Interest.
Secured parties must have reasonable grounds to register a security interest and the application must not be frivolous, vexatious, offensive or contrary to public interest.
We recommend that secured parties register a Financing Statement prior to completing a transaction with the grantor and handing over possession of any collateral (goods).
Registration of a security interest with the PPSR is critical with respect to determining priorities between secured parties and the significance of a security interest on insolvency.
Atkinson Vinden Lawyers understands the importance of your business becoming PPSA compliant. Please contact Senior Associate, Anne Goodrick on (02) 9411 4466 if you would like assistance in this area.
February 2012 - Trust Deeds - Are you at risk of Resettlement?
The recent Bamford decision has prompted many to review their existing trust deeds and to seek to amend them to ensure that the trust deed complies with the High Court's decision in Bamford v The Commissioner of Taxation.
In a recent example, a trust deed required a definition of income to be inserted and further specific provisions to ensure that the trustee would be able to stream franked dividends and capital gains. The trustee was advised by an external party that streaming would allow the trustee to distribute all the capital gains to one beneficiary, all the franked dividends to another and all other income (interest, rent and so on) to a third.
In addition, the trust, which was established in 1989, owns a block of residential units in Sydney and a large share portfolio.
To distribute all capital gain to a beneficiary, in most cases a trust deed needs to contain a clause giving the trustee the power to make capital distributions to beneficiaries.
This trust deed contained no definition of income, no income streaming clause and no capital distribution clause, but the trust deed did include a clause which gave the trustee the power to amend the deed in any way it chooses. Further, the trust was to vest when the settlor's youngest grandchild turned 30 and at that time the capital was to be distributed to the settlor's grandchildren equally.
The trust deed was amended so that the following was now included in the trust deed:-
1. A definition of income;
2. An income streaming clause; and
3. A clause giving the trustee the power to distribute capital to any beneficiary.
Despite the intention of the trustee, the ATO's view in its Statement of Principles, was that the trust had been resettled due to the addition of the capital distribution power.
Generally, the addition of a definition of income would not result in a trust being resettled. In its Statement of Principles, the ATO states, "Although inserting or varying an income definition may materially change the rights of beneficiaries, it may not in itself alter the essential nature and character of the trust relationship so as to result in a new trust estate."
The ATO will accept that no new trust estate arises where, in the absence of other factors:
1. It can be reasonably concluded that the purpose and effect of the new definition is to clarify rather than significantly redefine entitlements to income and capital;
2. Where there is a significant change in respect of entitlements, it is between the rights of a single beneficiary or class or beneficiary, rather than between different beneficiaries or classes of beneficiaries.
Similarly, the addition of a power to stream income is unlikely to result in a trust being resettled as it is a procedural change which will not substantially alter the rights of beneficiaries in respect of trust property.
However, the addition of a power to distribute capital before the vesting date is likely to amount to a resettlement.
The terms of this trust suggested that the settlor, by not including a power to distribute capital, intended that the trust capital would be preserved until the vesting date and then passed to his grandchildren.
Inserting a power to distribute capital, in the ATO's view, changed the essential nature and character of the original trust relationship and therefore created a new trust.
As the trust is deemed to have disposed all of its assets at market value the unrealised capital gains will become taxable.
This example highlights the need to carefully consider all options before proceeding to amend your trust deed. Amendments to trust deeds must be drafted with extreme care and with reference to both the ATO's and the OSR's views on resettlement of trusts.
Please contact Sheena Joshi, Director if you require further assistance.
February 2012 - Changes to the Home Building Act
Developers and builders should be aware of changes to the Home Building Act by way of the Home Building Amendment Act 2011 which makes wide-ranging changes to the Home Warranty Insurance, Statutory Warranties and Contract requirements. The changes mean that a land owner who develops land through a joint venture arrangement will now be considered to be a developer and therefore liable under the statutory warranty provisions in the Home Building Act 1989. This change is effective as of 23 October 2011 and applies to both current and future Contracts. Developers and builders have also been prohibited from relying on Part 4 of the Civil Liability Act 2002 to apportion their liability to other parties; and this change commenced on 23 October last year as well. It also applies to both current and future Contracts.
The maximum duration of developers' and builders' liability for breaches of statutory warranties has been reduced from 7 years to 6 years post practical completion but this change will apply only to new Contracts entered from 1 February 2012. All policies issued after 1 February 2012 will have a minimum cover of $340,000.00 regardless of the value of the work.
Therefore developers and builders should take care that their insurance cover is appropriate and of course purchasers can, to some extent, be confident that there will be a party to pursue should there be building issues after the purchase is completed.
If you have any queries, please contact any member of our Property Team.
February 2012 - OH&S becomes WH&S
Just when you thought you had fully come to terms with the Occupational Health & Safety Act 2000, work safety laws in NSW have been overhauled again. From 1 January 2012, all workplaces need to follow the terms of the new Work Health & Safety Act 2011.
The good news is that underlying the new Act is a principle of doing what is "reasonably practicable" to ensure safety at work, bringing NSW law in line with that of many other states to a level which may be more achievable. The bad news is that potential fines for breaches have been increased, and there is, more than ever, a very strong onus on those persons who carry on the business to assume full responsibility in this area.
From our review of the workplace safety arrangements of various employers, a key failing of many companies is that they have tried to delegate the obligation of ensuring workplace safety to the OH&S committee which was formed under the old Act. The purpose of a Safety Committee under the new Act is to provide a mechanism for the company to consult with employees, so that employee concerns are listened to and addressed. The driver of workplace safety must be the senior management and board of a company, not the Safety Committee. Company directors and managers who fail to drive the workplace safety agenda are exposed to substantial fines.
The new Act creates a new type of employee representative - a Health & Safety Representative ("HSR"). HSRs are able to issue stop work notices in workplaces where they have reason to believe employee safety may be at risk, and they are entitled to demand company records relating to safety issues. Unions also have increased rights of entry under the new Act, which is very much in line with Union rights under the Fair Work Act 2009.
Companies would be well advised to review the new Act, and make the changes necessary to comply with it. We can assist with a gap analysis, to determine what you need to do to comply. Call our Rod Berry to discuss the services we provide in this area.
January 2012 - Commencement of New Regulations and Act
Competition and Consumer Regulations 2010 (Cth)
Since 1 January 2012 there have been significant penalties for companies and individuals trading using non-compliant terms, conditions and warranties. If you have not already done so, please contact a member of our Commercial Team in order to have your standard terms and conditions of trade reviewed and amended, in addition to any warranties that you provide to your customers.
Personal Property Securities Act 2009 (Cth)
We also remind you of the imminent commencement of the Personal Property Securities Act 2009 (Cth) and the associated Personal Property Securities Register. A commencement date of 30 January 2012 has now been confirmed by the Government. Many of our clients have updated their terms and conditions to comply with the new Act and Register. If you have not already done so, please contact a member of our Commercial Team to have your documents reviewed.
January 2012 - Credit Card Debts and Family Law
The Christmas season is often credit card liability season as well. Credit card liabilities are a frequent source of conflict in separated couples. Clients regularly seek advice about whether or not they are liable for their former partner's credit card debts, even if the credit card is held in the other party's name.
All liabilities are taken into account when determining how assets of a relationship are to be divided. Consequently credit card liabilities are considered. It is important that the party who incurred the credit card liability provide all statements showing the expenditure on those credit cards.
Not all credit card liabilities are necessarily shared liabilities. For example expenditure by one party on alcohol, cigarettes and gambling, plastic surgery or vacations would not be treated as matrimonial debts. By contrast, expenditure at Woolworths by a separated couple purchasing household groceries for their children, paying the electricity account for the home, purchasing school shoes, health insurance and gap medical expenses are clearly expenses towards the welfare of children. Often one party may be unaware of what the other party has on their credit card debt but that on its own will not preclude the debt from being a matrimonial one. The issue is how, in effect, the money was spent. If you would like further advice regarding any family law issue please contact Annabel Murray, Accredited Family Law Specialist.
November 2011 - Green Buildings
Atkinson Vinden clients were alerted to the gazettal of the Commercial Buildings Energy Efficiency Code and its potential and significant effect upon commercial building owners in our February/March 2011 AV "Law Talk" article.
From 1 November 2011 "Green Building" issues became serious with the regulations enacting the Commercial Building Disclosure (CBD) program coming into effect. Substantial penalties can result for building owners (and even tenants) if their office/commercial spaces do not meet environmental standards when leased or sold. The transitional disclosure period began on 1 November last year but with a lower level of disclosure.
Building Energy Efficiency Certificates (BEECs) are required to be issued if more than 2,000 square metres of office space is sold, leased or subleased - so the CBD requirements apply to both building owners and tenants who sublet space.
BEECs are only valid for 12 months and must be publicly available - they need to include:
- A National Australian Built Environment Rating System energy star rating for the building.
- An assessment of tenancy lighting within the area being sold or leased.
- General energy efficiency guidance.
It is likely that compliance will require substantial works on many buildings by their owner landlords and it is unlikely that the (largely capital) work costs could be passed on to tenants (even though a tenant is likely to reap benefits in lower energy costs and similar). Tenancy disruption could result while compliance works are carried out; preferably the work would be carried out when the property is untenanted, but for many multi-tenanted buildings, this will not be possible.
A tenant's fit-out and general working practices may have a big impact on the building's "green credentials", and needs careful monitoring.
Management of the CBD programme is shared between the Federal Department of Climate Change and Energy Efficiency and the NSW Office of Environment and Heritage. This may complicate both compliance and enquiry aspects.
It is estimated that energy use in commercial buildings accounts for approximately 10% of total greenhouse gas emissions so it is perhaps understandable that Government seeks to improve the energy efficiency of commercial buildings...... and, of course, the "carbon tax" legislation has also just passed through both houses of Federal Parliament.
Contact the Commercial Team at Atkinson Vinden on 9411 4466 for further advice on these important issues.
November 2011 - Parenting, Separation and the added pressure of Christmas
Traditionally, the Christmas school holiday period is a busy time for both family law practitioners and the Family Courts. The reasons for this may include the fact that any cracks in the relationship are often more obvious around Christmas time and for families who have separated there may be conflict regarding children's care arrangements over the Christmas and school holiday time. Another factor may, according to a recent report in the Sydney Morning Herald, be that the youngest child has now completed their Higher School Certificate and for many women this is the opportune time to separate.
Any separation, irrespective of the ages of children, is stressful for parents, extended family members and of course the children themselves. Research shows that whilst parental separation is stressful for children, children will be able to manage the change in their living arrangements. Where children have difficulty managing is if there is ongoing conflict between parents. Parental conflict commonly takes two forms, that is, where parents verbally abuse each other, put down the other parent directly to the children or in the children's presence, make the other parent's time with the children difficult in that the children are not "allowed" to see the other parent or speak with them, and involving the children in other related aspects of the relationship breakdown such as child support and the property settlement. Alternatively, parents fail to speak with each other at all and the cold war begins. Where these practices continue, children are at risk of doing poorly at school, psychologically and emotionally.
To avoid or work towards breaking this pattern of behaviour, both parents should obtain legal advice about how family law works and in particular their rights and responsibilities under the Family Law Act as parents. There are organisations available at modest to no cost for families, including Relationships Australia, Centrecare, Unifam, the Government-run Family Relationship Centres, and private counsellors who have experienced mediators to help parents discuss their children's care needs and work towards reaching agreement so that as parents they can continue to meet those needs. These strategies will work for the majority of families where there are no significant risk factors and safety concerns such as where a parent engages in regular substance or alcohol abuse.
If you would like further advice regarding any family law issue please contact Annabel Murray, Accredited Family Law Specialist.
October 2011 - Personal Property Securities Information Series (Part 5)
If you attended our recent seminar on the Personal Property Securities Act 2009 (Cth) ("PPSA") you will be aware that there are a number of issues to come to grips with before the PPSA is law.
As mentioned at the seminar, we have prepared a checklist to assist in determining how the PPSA will affect you and your business. Please click here for the checklist.
Here are some examples of the likely effect of the PPSA on businesses.
John Smith grants a security interest in a motor vehicle to Westbank, and later grants a security interest in the same motor vehicle to Eastbank.
Eastbank registers its security interest. Westbank does not. Consequently, the security interest held by Eastbank is ranked with a higher priority than the security interest granted by Westbank.
This means that if John Smith defaults on the arrangements with both Eastbank and Westbank, Eastbank will be able to take possession of the motor vehicle, whereas Westbank will have difficulty in enforcing an unregistered interest as it will rank lower than Eastbank's security interest.
Retention of Title
Jones Pty Ltd is a supplier of womens footwear. Prior to the PPSA, Jones Pty Ltd would secure payment for the footwear by using a retention of title clause in its sale terms.
Jones Pty Ltd registers the supply of womens footwear to a buyer as a security interest. It registers the security interest before the buyer takes possession of the footwear in order to ensure that the security interest is perfected.
The buyer grants a security interest over the womens footwear to a third party such as a bank and the bank proceeds to register that security interest. As Jones Pty Ltd already has a registered security interest, it has the highest priority and it will be entitled to recover the footwear or to be paid before the bank in the event that the buyer defaults.
If Jones Pty Ltd had not registered its security interest its interests would have ranked second in priority to the bank's interests, jeopardising its right to recover the footwear or to be paid if the buyer defaulted.
Migration of existing personal property interests to the Register
Eastbank has a security interest in a car owned by Smith Pty Ltd. This security interest is registered on the NSW Register of Encumbered Vehicles ("REVS") and is migrated across to the PPS Register as a migrated security interest. Eastbank's security interest is taken to be perfected from immediately before the registration commencement time until the time the registration would have ended in accordance with the law under which REVS was maintained.
Using the same facts as above, after the security interest is migrated to the Register, Eastbank amended the registration to extend the end time. On 15 February 2012, which is before the end date of both the REVS registration and the amended PPS registration, Smith Pty Ltd gives Eastbank an amendment demand stating that the car does not secure the loan to Smith Pty Ltd. Eastbank fails to respond. On 21 February 2012, the Registrar removes Eastbank's registration from the Register.
On 1 March 2012, a liquidator is appointed to Smith Pty Ltd's company. Eastbank's security interest stopped being continuously perfected on 21 February 2012 - its unregistered security interest would be void against the liquidator and the car would become part of the assets that would be distributed to pay the debts of Smith Pty Ltd. Given that Eastbank no longer has a registered security interest it will lose its rights to claim against the car and therefore will suffer a loss.
We recommend that businesses carry out a "PPS health check" and we can assist by reviewing your agreements, advising on the PPSA generally and ensuring compliance and protection of interests.
Atkinson Vinden Lawyers understands the importance of your business becoming PPSA compliant. Please contact Senior Associate, Anne Goodrick on (02) 9411 4466 if you would like assistance in this area.
October 2011 - Avoiding Adverse Outcomes in the Workplace
Employers should be vigilant about how they manage the discipline and termination of staff. Not only is there the risk of unfair dismissal proceedings, but now under the Fair Work Act, there is also a risk of facing an adverse action claim.
The recent case of Bayford provides a good example of how this area of the law works. Bayford had been terminated because of poor performance and consistent lateness for work. The employee brought adverse action proceedings, arguing that his lateness for work had been caused by him having to attend to family responsibilities, especially in relation to his small child, who was teething. He argued his family responsibilities, which were known to the employer, were the real reason for his termination, and this constituted an adverse action.
The protections under the adverse action jurisdiction render it unlawful for an employer to subject an employee to "adverse action" because the employee possesses or has exercised a "workplace right". A "workplace right" can include any entitlement arising from an industrial instrument, to something so general as the right to make a "complaint or inquiry with respect to (the employee's) employment". "Adverse action" can include anything from termination to demotion to simply altering the employee's position in a manner which they consider to be detrimental.
In Bayford, the employer provided detailed evidence about the counselling and warnings undertaken with the employee. The court held that it was necessary to find the real reason for the employer's conduct, by looking at all of the surrounding circumstances as well as the employer's subjective reasons for making the relevant decisions. On this basis, the court found that the real reason for the termination of the employee's employment was his poor performance and lateness for work, and that the suggestion that it was really about penalizing someone for trying to exercise their care responsibilities for a child was misguided.
Employers need to be conscious of the fact that once an allegation is made, the onus rests with them to prove that the alleged action taken was not due to the exercise of a workplace right. For an employee to succeed, the exercise of a workplace right does not need to be the sole or dominant reason for the adverse action. It only needs to be one of the reasons.
The case demonstrates to employers the importance of following a transparent and comprehensive disciplinary process, particularly if there is a suggestion that the employee might rely on grounds for an adverse action claim. The fact that the employer is required to show that the prohibited reasons set out in the Fair Work Act were not the reason for termination places even more importance on these practices.
Employers can take solace in recent decisions which have demonstrated that employers can successfully defend these claims in circumstances where the action taken is based on a legitimate workplace change (ie restructuring, redundancy etc). However, employers should note that, in light of the reverse onus, they will need to justify each decision they make with respect to which employees are selected for redundancy. This is made easier by keeping written records of the reasons for decisions.
These protections now form a crucial part of the workplace relations landscape. If you are an employer, then there are policies which you could implement to limit your business's exposure under these relatively new laws.
September 2011 - Personal Property Securities Information Series (Part 4)
STOP PRESS!!! We have been informed that the Attorney General's Department is now formally preparing for a new commencement date of 31 January 2012. We will provide further information on the revised commencement schedule as it is made public.
The official commencement date for the PPSR remains 31 October, 2011 but this is likely to be, yet again, delayed. Regardless of the confirmed commencement date, you must ensure that your business is prepared for and compliant with the PPSA.
Retention of Title
As a result of the PPSA reforms, Retention of Title (ROT) arrangements now constitute a security interest and should be registered to allow the secured party (supplier or lender) to enforce the interest against the grantor (purchaser) and any third parties.
Suppliers who currently provide goods subject to ROT will no longer be able to rely on their title to protect their interest in the goods. ROT arrangements will be registrable provided the security agreement is in writing, contains an adequate description of the goods and is signed by the grantor (or if not signed, adopted or accepted by the grantor).
The main impact of the PPSA on ROT clauses is the enforcement procedures. Firstly, suppliers or lenders cannot just "repossess the goods" but must follow the guidelines in Chapter 4 of the PPSA. Secondly, if a supplier or lender does not register its interests, its claim may be ranked lower in priority than other creditors in the event of a default, and will not be enforceable against third parties.
It is important that all Terms & Conditions containing ROT arrangements are reviewed and amended in order to comply with the PPSA. We can review your documents and advise what changes are required to ensure your interests are protected.
The PPS Register
The PPS Register is essentially a database that will list all registered Security Interests. It will allow secured parties, potential buyers and other interested parties to search the Register to find out if a security interest is registered over property. The actual security agreement (such as Terms & Conditions) which gives rise to a security interest does not have to be registered. Rather, a Financing Statement must be registered which contains the following information:
- Secured party details (supplier or lender)
- Grantor details (purchaser)
- Particulars of collateral
- Serial number, if required
- Description of proceeds
- Registration details (the end time for registration)
- An indication whether the security interest is or will be subordinated.
A registration fee is payable at the time the security interest is to be registered. Provided that there is no defect in the registration, it will take effect immediately and a Verification Statement will be issued to confirm registration.
The Register will also allow users to search by serial number for certain types of collateral such as VIN, Chassis or Manufacturer numbers for motor vehicles.
A search of the Register is only permitted for a genuine purpose (for example due diligence). Anyone who requires a search on an individual will be required to make a declaration that they are undertaking the search for an authorised purpose. If a search is undertaken for an improper purpose, penalties will apply.
The PPSA cannot be ignored. You must ensure that you implement procedures in your business to enable registration of security of interests in an efficient manner. Failure to do so may result in the loss of priority and control of the property concerned.
At Atkinson Vinden we understand the importance of your business becoming PPSA compliant. Please contact Senior Associate, Anne Goodrick on (02) 9411 4466 if you would like assistance in this area.
August 2011 - Personal Property Securities Information Series (Part 3)
It was revealed last week that IT issues may result in a further delay in the start date of the PPSR. This news comes despite that fact that the start date has already been pushed back on a number of occasions. We will continue to monitor this point and provide you with more information as it comes to hand.
We are commonly asked questions relating to the enforcement of security interests, particularly where various parties have competing interests in the same asset. Similar to interests in land, secured parties will have to meet certain requirements to ensure that they maintain the highest priority.
Priority rules are relevant when the same personal property is subject to two or more security interests. If the debtor defaults, certain rules determine the order of priority in which the various secured parties can enforce their security interests under the PPSA.The priority time for a security interest in collateral is the earliest of the following times to occur in relation to the security interest:
- The registration time of the security interest;
- The time the secured party first perfects the security interest by taking possession or control of the asset;
- The time the security interest is temporarily perfected, or otherwise perfected by force of the Act.
An example of determining priority is as follows:
John Smith grants a security interest in a motor vehicle to West Bank, and later grants a security interest in the same motor vehicle to East Bank. East Bank registers the security interest, while West Bank does not. Consequently, the security interest held by East Bank would have a higher priority than the security interest granted by West Bank, despite John Smith having granted the first security interest to West Bank.
The transitional provisions in the PPSA provide for the migration of data from existing registers to the PPS Register and priority rules for security interests existing prior to the PPSA coming into force. The transitional provisions will be discussed later on in our series.
In Part 4 of our series we will discuss Purchase Money Security Interests, which are commonly referred to as PMSI.
At Atkinson Vinden we understand the importance of your business becoming PPSA compliant. Please contact Senior Associate, Anne Goodrick, on (02) 9411 4466 if you would like assistance in this area.
August 2011 - Personal Property Securities Information Series (Part 2)
As outlined in Part 1 of our information series, the PPSA will impact many arrangements with respect to personal property and failure to address these changes could result in your interest being inadequately secured. The PPSA affects all established forms of secured finance including fixed and floating charges, chattel mortgages, margin loans, finance leases and debt finance.
An understanding of key terms and concepts is essential, so we have prepared a short glossary:
Attachment is the process by which a security interest fastens on an asset so as to be enforceable such as when the value is for the security interest or the grantor does an act by which the security interest arises.
Collateral means personal property to which a security interest has attached.
Grantor is a person or organisation who owns or has an interest in the personal property (collateral) to which the security interest is attached (whether or not the person owes payment or performance of an obligation secured by the security interest).
Perfection means ensuring that the security interest is attached to the collateral and is enforceable against a third party. A perfected security interest has priority over an unperfected security interest.
Priority rules means determining the ranking of the security interest in relation to rival claims.
Purchase Money Security Interest (PMSI) is created where a secured party provides collateral, a person provides funds to acquire collateral, a lessor or bailor leases or provides goods or goods are consigned under a commercial consignment. It applies only to the extent of the value given to the grantor, including interest and credit charges.
Personal property means any form of property other than land or buildings and includes tangible property such as motor vehicles, art, machinery and crops, as well as intangible property such as intellectual property and contract rights.
Security interest in personal property arises from a transaction that in substance secures the payment of a performance or obligation.
In Part 3 of our series we will look at the importance of priorities and perfecting your security interest.
At Atkinson Vinden we understand the importance of your business becoming PPSA compliant. Please contact Senior Associate, Anne Goodrick on (02) 9411 4466 if you would like assistance in this area.
August 2011 - Personal Property Securities Information Series (Part 1)
There has been much talk recently about the Personal Property Securities Act 2009 (Cth) ("PPSA") and how this will affect the way that businesses protect their security interests in personal property.
Over the coming months we will provide you with a regular information series which is intended to highlight the key matters relating to the PPSA and the National Personal Property and Securities Register ("Register").
The PPSA and the Register are intended to be effective from 1 October 2011* and will replace over seventy different pieces of legislation and current security registers.
Their purpose is to provide rules for the creation, extinguishment and enforcement of security interests in personal property and to determine priority between competing security interests.
If you deal with any of the following in your business then you will need to be aware of the way in which the PPSA affects you:
- Joint Venture Agreements
- Equipment Hire Agreements
- Retention of Title Arrangements
- Farm Ins and Farm Outs
- Co-mingling of Products
- Charges, Mortgages and Pledges
- Conditional Sale Agreements
- Hire Purchase Agreements
- Flawed Asset Arrangements
- Transfers of Accounts
- Consignor's Interests
In our next update we will look at the key terms and concepts of the PPSA and provide you with an understanding of some of the PPSA related terminology that you may have heard about.
At Atkinson Vinden we understand the importance of your business becoming PPSA compliant. Please contact Senior Associate, Anne Goodrick on (02) 9411 4466 if you would like assistance in this area.
* The Commonwealth Attorney General has recently flagged the possibility that this start date may be pushed back until 31 October 2011 but this has not yet been confirmed.