Atkinson Vinden Lawyers

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, or Solicitor, Leon Shohmelian, 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.

Priorities

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.

Our Recommendation

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, or Solicitor, Leon Shohmelian, 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.

Please contact Rod Berry, Director or Tom Howard, Lawyer on (02)  9411 4466 if you would like further assistance in this area.

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, or Solicitor, Leon Shohmelian, on (02) 9411 4466 if you would like assistance in this area.

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)