10 June 2019

Inheritance: How is it dealt with in Property Settlements?


Written by Jessica Swain

What happens if you have separated and you receive an inheritance before you have finalised your property settlement? Timing (as most things in life) is key.

Whilst there are two (2) approaches that the Court may adopt when dealing with significant post separation windfalls, the discretion of the Court is extremely broad.

The process for determining a property settlement usually involves valuing all the property (assets and liabilities) of the parties to a relationship and placing them into one “pool” (the asset pool).

As the assessment of the asset pool is taken to be the assets and liabilities of the parties as at the date of the hearing or settlement and not at the time of separation, any asset or liability acquired post-separation technically falls within the pool of assets available for distribution between the parties.

The Court is to assess each party’s contributions, both financial and non-financial, to the assets of the relationship, as well as each of the parties’ future needs.

Two Approaches

The Court can adopt a “global approach” and divide the asset pool as an overall pool. The Court in most cases adopts the global approach.

The other approach that may be adopted by the Court is an “asset by asset” (or “two pool”) approach. That is, for example, that inheritance should be regarded as a financial resource. It is excluded from the asset pool and considered separately from the other assets. This is not commonly applied. However, as this article will show, the Court has considered the “asset by asset” approach in some cases, including those in which an inheritance has been received either very late in the relationship or, more commonly, after separation. For this approach, the assessment of contributions to the particular asset (the inheritance) is considered separately.

The approach taken by the Court is a matter for its discretion.

Inheritance Received During the Relationship

In general, and remembering each matter is individual on its facts, if an inheritance is received whilst the relationship is still on foot, this is treated as a financial contribution by the party who received the inheritance to the joint asset pool (“the recipient”).

As foreshadowed, the timing is important. If the inheritance is received early in the relationship this may be categorised as an initial financial contribution by the recipient. However, over time, for example a 25-year marriage, the weight given to that initial contribution will lessen and may have little or no effect on the division of the property pool, dependent upon the time that has passed and the quantum of the asset. In a shorter relationship, the existence of an initial contribution of an inheritance is likely to increase the recipient’s percentage entitlement to the overall assets of the relationship.

Inheritance received post-separation

If one party receives an inheritance post separation, those monies may be considered as a financial resource rather than an asset. That is, the monies received should not be included in the asset pool to be divided but should be taken into account as a “future needs” factor (under Section 75(2)). This means that the recipient has a resource that they may draw upon to meet their future needs as opposed to the non-beneficiary party. Dependent upon the facts, it is arguable that the non-beneficiary party may then receive a greater percentage of the divisible asset pool.

Relevant Cases

Calvin & McTier (2017) FamCAFC 125

The Full Court decision of Calvin & McTier was an appeal from the Magistrates Court of Western Australia in relation to property proceedings. The parties were married for eight (8) years, separated in 2010 and divorced in 2011. There was one child of the marriage who was cared for by both parents equally from separation. At commencement of cohabitation, the Wife had no assets of significant value. The Husband owned two properties, a car, shares and superannuation entitlements. During the marriage, the Husband was the primary income earner and the Wife was the primary homemaker. Proceedings were commenced in January 2015 by the Wife (after leave was granted to pursue property proceedings out of time). In January 2014, four (4) years after the parties had separated, the Husband received an inheritance from his father’s estate. The Husband’s inheritance accounted for approximately 32% of the net asset pool available for division between the parties.

The Trial Magistrate adopted a global approach to the asset pool, including the Husband’s inheritance and ultimately awarded 65% of the total asset pool to the Husband and 35% to the Wife.

The Husband appealed the Trial Magistrate’s decision to the Full Court of the Family Court of Australia.

The appeal was primarily focused on whether the Judge erred by including the Husband’s post-separation inheritance within the asset pool. The Husband argued that the inheritance should be excluded from the asset pool as there was no clear “connection” between the inheritance and the parties’ marriage. The Full Court rejected that argument and concluded that the Court has the discretion as to how to approach the treatment of property acquired after separation. The Husband’s appeal was dismissed with costs.

This decision clarifies that the Court retains a very wide discretion as to how property matters may be dealt with and particularly, how the Court deals with property acquired after separation separately (asset by asset approach) or altogether (global approach).

Holland & Holland (2017) FamCAFC 166

Conversely to Calvin & McTier, in this matter, the Court in the first instance held that the inheritance was not included in the asset pool. This changed on appeal.

In this case, the parties were married for 17 years, separated in 2007 and divorced in January 2012. At the time of the Hearing, there were two dependant children aged 14 and 17. The asset pool included an encumbered property with equity of approximately $140,000. Prior to separation, the Husband was running his own business in which he and the Wife were joint partners. After separation, the Husband became the sole business owner and the Wife and children had occupation of the matrimonial property. The Husband continued to pay the mortgage for the property from 2007 to 2009, after which, the Wife moved out into rental accommodation and the house was rented out to a third party. The Wife paid for renovations for the property so that the property could be tenanted and from that time, paid the mortgage and other expenses.

In February 2011, the Husband received an inheritance from his late brother’s estate, being a property valued at approximately $715,000 (with mortgage of approximately $83,000). The Husband’s parents subsequently paid out the mortgage, effectively leaving the Husband with an unencumbered property to the value of $715,000.

The net asset pool of the parties, including the Husband’s inheritance, totalled around $1.1 million.

The Trial Judge held that the inheritance was a financial resource of the Husband and whilst she indicated an intention to deal with the asset pool on an “asset by asset” basis, which would in effect mean a “two pool” approach, Her Honour adopted a global approach to all other assets but excluded the inherited property altogether from consideration of assessment of contributions by the parties. Her Honour, after excluding the inherited property, found that the parties’ contributions were equal and ultimately made Orders providing for the Wife to receive 62% of the total asset pool (excluding the inherited property) and 38% of the pool (plus the inherited property) to the Husband.

On appeal, the Wife argued that the inheritance should be included as an asset of the parties as it was property of the parties of the marriage and the Trial Judge had failed to treat it as property by excluding it from the pool of assets and by treating it as a financial resource of the Husband only. The Full Court found that the Trial Judge had erred in excluding the inherited property from an assessment of contributions and noted that the Trial Judge should have assessed the contributions of the whole approximate 17 year cohabitation and the 8.5 years post separation. The Full Court reiterated the view that it is incorrect to exclude property from consideration as part of the asset pool. The Wife was successful on appeal.

Summary

Calvin & McTier reiterates the Court’s wide discretion when addressing contributions made by parties during a relationship or after separation. The Court may adopt a global or asset by asset approach. The source and timing of the inheritance is important; that is, whether it was received early in the relationship, late in the relationship, immediately after separation, or a significant period after separation when the parties were living independent financial lives. Importantly, post-separation inheritances cannot be excluded entirely.

Post-separation assets and how they are treated or assessed will vary with the circumstances of each case. The law pertaining to the division of assets under the Family Law Act 1975, is complex given the varying interpretations of the Court of the relevant statutory provisions.

To discuss your property settlement matter given those complexities, please contact our offices for advice from our experienced family law team.

5 June 2019

Obligation for Employers’ to have Workers Compensation Policy


Written by Montana Messina

An employer has an obligation to hold a valid policy of insurance when employing workers, except in certain circumstances.

If a worker suffers a workplace injury or illness, the worker is entitled to make a claim for compensation.

If the Workers Compensation Nominal Insurer determines that the employer did not hold a valid policy, is not considered an exempt employer and there is no dispute that the worker was an employee and was injured at work, the Nominal Insurer may issue a notice under section 145 of the Workers Compensation Act 1987 (“the Act”). The 145 Notice requires an employer to reimburse the Nominal Insurer for any payment made to a worker in respect of a claim.

Once served with a 145 Notice, if the employer seeks to appeal their liability to reimburse the Nominal Insurer, the employer must file an application to appeal the 145 Notice with the Workers Compensation Commission (“the Commission”) within the prescribed time limit.

If an employer disputes liability to reimburse the Nominal Insurer on the basis that they are were an employer exempt from having to obtain a policy of insurance, the onus is on the employer to prove exemption status, at the relevant time

Pursuant to section 155AA of the Act, an employer is considered an exempt employer and not required to obtain a policy of insurance, if during the financial year, the employer has reasonable grounds for believing that the total amount of wages that will be payable by the employer during the financial year to the workers employed by the employer will not be more than the exemption limit for that financial year.

The exemption limit for a financial year is specified as $7,5000 under the Act. An amount of wages actually payable will not be determinative when making an assessment of what will be payable. There is no requirement under the Act for retrospective consideration of evidence of wages paid.

Determining whether an employer had ‘reasonable grounds,’ as noted by this section of the Act, requires an objective test to be applied, as set out in the case of Kula.

This was affirmed by the High Court in Rockett which unanimously held that “there must be ‘reasonable grounds’ for a state of mind…it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person”.

The relevant question for determination for the Commission is whether the employer can establish, on the balance of probabilities, that at the time of injury, the employer had reasonably objective grounds for believing that the total amount of wages payable to a worker during a financial year would not exceed $7,500.

The employer can provide evidence as to various factors to demonstrate their exemption status, such as:

  1. Employment contract;
  2. Classification of worker;
  3. Commencement of employment;
  4. Expected duration of employment;
  5. Remuneration;
  6. Termination of employment;

However, it is ultimately for the Commission to determine whether an employer is considered to be an exempt employer at the date of the injury and liable to reimburse the Nominal Insurer.

Settling the matter with the Nominal Insurer prior to determination by the Commission in relation to a current 145 Notice, does not preclude the Nominal Insurer from issuing a further 145 Notice to an employer to reimburse the Nominal Insurer in the future. Further queries and payments made to or on behalf of the work for the same injury.

If the Commission determines that an employer is not an exempt employer pursuant to section 155AA of the Act, the employer is precluded from asserting that it is an exempt employer in relation to future 145 Notices issued by the Nominal Insurer that relate to the same worker and injury.

We strongly recommend that you take out workers compensation insurance even if you do not think you will pay more than $7,500 in wages.

29 May 2019

Spousal Maintenance


Written by Danielle Rosano

Obligations to Pay Spousal Maintenance under the Family Law Act 1975 

Pursuant to the Family Law Act 1975 (“the Act”), a party may be required to provide financial support to their former spouse or partner in certain circumstances if the other party is unable to adequately support themselves.

The issue of spousal maintenance is distinct from, and separate to, a property settlement and payment of child support.

Although there is no automatic right to spousal maintenance, it is important to bear in mind that the Act does impose an obligation on parties to financially support their former spouse or partner in certain circumstances, even after divorce or separation. The obligation to pay financial support to another party applies whether or not you and your former partner were married or in a de facto relationship.

The extent of any financial support that may be required to be paid by way of spousal maintenance depends on the capacity of the paying party and the reasonable needs of the other party.

In considering whether one party is liable to pay the other party spousal maintenance, the Court will consider various factors that may apply to both parties, including as follows:

  1. The income and of both parties;
  2. The age and health of each party;
  3. The ability of each party to engage in gainful employment;
  4. What a suitable standard of living is;
  5. Whether the relationship or marriage has impacted upon one party’s ability to earn an income and engage in gainful employment; and
  6. Which party any child and/or children of the marriage or relationship reside with.

If a party claiming spousal maintenance re-marries the Court will generally terminate  the obligation of the other party  to pay spousal the maintenance, however, in some rare circumstances, the Court may determine that the obligation should still continue even if the party in receipt of spousal maintenance has remarried.

Similarly, if the party in receipt of spousal maintenance enters into a new de facto relationship, this will not necessarily mean that the obligation for spousal maintenance is automatically terminated, although again the obligation is unlikely to be continued other than in rare circumstances.

In broad terms, to determine whether the obligation for spousal maintenance should cease if the party in receipt of spousal maintenance enters into a new de facto relationship, the Court  will generally examine the financial relationship between that party and their  new de facto partner in assessing whether that party can adequately support themselves.

Spousal maintenance can be paid as a periodic weekly, monthly or annual amount. Alternatively, spousal maintenance can also be paid by way of a one-off lump sum payment to the party in need.

If you are not able to reach an agreement with respect to spousal maintenance on a negotiated basis with your former spouse or partner, then you can apply to the Family Courts to seek a Court Order for the payment of spousal maintenance.

If you intend to make an Application for spousal maintenance in the Family Courts, it important that you are aware that under the Act, there are strict timeframes for the filing of such Applications.

In the event of a marriage, any Application for spousal maintenance must be filed with the Family Courts within 12 months of a divorce order becoming final.

In the event of a de facto relationship, an Application for spousal maintenance must be filed with the Family Courts within 2 years of the date that you and you and your partner separated on a final basis.

If you do not file an Application for spousal maintenance with the Family Courts within the timeframes specified above, then you need to seek the Court’s permission to file your Application ‘out of time’ before the issue of spousal maintenance can even be determined by the Court.

Although the Court will grant such permission in certain circumstances, this is often a difficult threshold test to meet. Accordingly, it is always prudent to ensure that you file any Application for spousal maintenance within the relevant timeframes provided for in the Act.

If an order for spousal maintenance has been made by a Court and you fail to comply with that order, then on the application of the party to whom the maintenance is owed the Court can take steps to enforce your obligation to pay spousal maintenance and may also impose other consequences or penalties upon you.

In the event you believe that you may be eligible to receive spousal maintenance or that you may be held by a Court to have an obligation to pay spousal maintenance, then it is important that you obtain independent legal advice in relation to your, or your spouse’s, potential claim for spousal maintenance.

20 May 2019

Homemade Will with deficiencies an expensive mistake


Written by Janine Foo.

Often people find estate planning confronting, daunting and potentially costly when consulting advice from a wills and estates lawyer.

Having a proper estate plan prepared on the advice of professionals can ensure your assets that you worked your entire life building are properly safeguarded and distributed in accordance with your intentions in a timely manner, upon your death.

A well thought out estate plan minimises the risk of your loved ones going through emotionally taxing legal proceedings, delays in receiving their provisions under your will and your estate paying significant legal costs that would diminish the value of your estate.

 

The Homemade Will and the consequence

In the case of Re Hely; Application by Arbuthnot & Donoghue [2018] VSC 614, Daryl Hely (“the deceased”) left an estate worth $25,043,551.57 and a Will dated 2 December 2016 with deficiencies that were prepared by and with the assistance of his daughter, who was not a lawyer and did not have any expertise in drafting Wills.

Sometime in late 2014, the deceased engaged a lawyer to prepare his Will. This Will comprised of seven testamentary trusts for his seven children, specific cash gifts to his grandchildren, capital gains tax and the distribution of the residuary estate.

 

The deficiencies in the Homemade Will

On 2 December 2016, without the assistant of a lawyer, the deceased crossed out clauses in his 2014 Will and told his daughter to simplify his will and type up a new one. Much to the detriment of all the beneficiaries in the deceased estate, the executor was unable to administer the estate until an application was made to the Victorian Supreme Court to rectify the Will. The following are the deficiencies in the deceased 2 December 2016 Will which the executors sought to be rectified with the Victorian Supreme Court:

  1. Seven testamentary trusts with no named beneficiaries;
  2. Cash gifts “up to a maximum of” a specified amount was ambiguous and the executors had no understanding of how much the cash gifts should be made out for;
  3. Capital gains tax liability was unequally distributed amongst the beneficiaries;
  4. Cash gifts made out to the grandchildren had vesting ages that were inconsistent between two clauses in the Will; and
  5. There was uncertainty on what formed part of the residuary estate.

 

The Take Away

The legal proceedings brought by the executors to rectify the 2 December 2016 Will was costly on the estate, caused extensive delay in the distribution of the estate to the beneficiaries, and unnecessary added stress to all parties involved. This could have all been avoided if proper legal advice was sought in putting together an estate plan.

At the end of the day, have a professional draft your will with your intentions can provide you with the peace of mind of knowing that your estate will be properly administered upon your death.

16 April 2019

Transition To E-Conveyancing


Written by by Leah Hynes

Electronic Conveyancing (or e-Conveyancing as it is commonly referred too) has been implemented by the NSW Government over the course of the last 5 years. Secure online processes have been introduced and will replace the traditional manual and paper processes involved in current property transactions within NSW.

Currently there is only one electronic platform capable of undertaking the preparation and lodgement of electronic documents, together with processing and finalising Financial Settlements. The system is called ‘Property Exchange Australia Limited’ or PEXA in short.

 

THE E-CONVEYANCING TIMELINE

On 8 October 2013, e-Conveyancing commenced in NSW by inviting a small number of Banks to start transacting on PEXA by allowing the preparation and lodgement of Mortgages and Discharge of Mortgages to take place electronically. From September 2014, practitioners were also invited to join the PEXA platform to begin to lodge documents electronically.

From the end of 2014 until early 2016, PEXA used that time to review, obtain feedback and transform the platform into a more streamlined and user-friendly platform. NSW Land Registry Services, who were formerly known as Land & Property Information Services NSW, started informing practitioners of the upcoming mandate dates for electronic lodgement to take place in NSW.

From 28 February 2017, the NSW Government released the “100% digital timeline” and confirmed its plan for the introduction of paperless conveyancing, committing to a final date of 1 July 2019. It was advised that all paper transactions in NSW would be conducted electronically and all paper Certificates of Title would be phased out by this date.

In March 2018, all Refinances, standalone Mortgages and standalone Discharge of Mortgages were required to be lodged online. This was quickly followed by the requirement for all Caveats, Withdrawal of Caveats and standalone Transfers to be lodged online from 1 July 2018. One of the most important changes in this process was the elimination of the clients to sign the documents which are being lodged. Clients are now required to sign a Client Authorisation Form and have their Identity verified to allow a Practitioner to sign and lodge the documents electronically on behalf of the client.

We are advised that all Transfers, Mortgages, Discharge of Mortgages or any combinations of these which affect the same title, must be lodged electronically when signed on or after 1 July 2019, except when lodged with another dealing which cannot be lodged electronically. e.g. Transfer including Easement. All sales, purchases & refinances which include a financial settlement will be required to be processed online from 1 July 2019.

 

WHAT I NEED TO KNOW AS A CLIENT

Certificates of Title

A fundamental change in e-Conveyancing is the conversion of a paper Certificate of Title to an electronic Certificate of Title, also known as an e-CT. As mandated by the NSW Government, all Certificates of Title held by Mortgagees have now been converted to electronic Certificates of Title.

If you are holding an original Certificate of Title in safe keeping, it is important you provide this to your Solicitor or Conveyancer so that they can verify whether your Title has been converted to an e-CT. Once the conversion has taken place, a paper Certificate of Title holds no further value or use.

 

Client Authorisation

In e-Conveyancing, you will not be able to access the PEXA Platform to sign an instrument or document. Your practitioner will require you to sign a Client Authorisation Form which provides your Solicitor or Conveyancer with the necessary authority to sign the documents on your behalf. In addition to the Client Authorisation Form, you will be required to undertake a Verification of Identity.

 

Verification of Identity

In PEXA, it is the responsibility of the Practitioner to verify the identity of the clients they represent. This is an integral part of each e-Conveyancing transaction and is designed to ensure that all parties transacting in the Workspace can be confident that the person with whom they are dealing with is indeed the person entitled to deal with the subject property.

As e-CTs are now being issued by the NSW Land Registry Service, it is more important than ever to ensure the identity of the transacting parties. The paper Certificate of Title was traditionally known as the “Proof of Ownership”. Without a paper Certificate of Title to provide, it is necessary to further prove your entitlement to deal with the property in question.

Our office is equipped to undertake the Verification of Identity in house or even remotely if you are unable to attend the office. Our office is also registered with Australia Post, who are also able to undertake the Verification of Identity process with you and submit it directly to our office.

 

Security

As a PEXA member, our Firm is required to meet and maintain a certain standard of Security when using the PEXA platform. PEXA uses an advanced encryption mechanism to protect all information and ensure the integrity and confidentiality of the data on the PEXA Platform.

Encryption is also used by all financial service providers to protect and maintain all customer data. Digital Certificates are used to electronically sign documents in PEXA on behalf of our clients and eliminate the need for a physical signature. Within Uther Webster & Evans, these Digital Certificates are only held by 3 Firm Directors and our 2 Licensed Conveyancers.

 

Benefits of e-Conveyancing

In 2017 the NSW Government commissioned an independent KPMG Report on the e-Conveyancing System in NSW to analyse the benefits of the platform. The Report found the main benefits to be noted as follows:-

  • Time – Lodgement by way of PEXA saved practitioners an estimated 65%-70% of time spent following exchange of Contracts.
  • Costs – Whilst there is a fee to use the PEXA platform, the use of the system avoids a number of costs which would otherwise be incurred such as final searches, settlement attendance (and reattendance) fees, bank cheque fees etc.
  • Certainty – The platform has been found to provide enhanced productivity, reduced risk of failed or cancelled settlements, greater transparency between the parties and greater flexibility ensuring a smoother transaction and a higher Settlement completion rate.
  • Access to Funds – Following Settlement, the funds are electronically transferred and received immediately by the Vendor, the Council, Sydney Water and any other accounts required to be paid.
  • Risk – Immediate electronic lodgement of the Transfer of Land on Title following Settlement eliminates the risks associated with legal ownership and the risks involved in the current paper registration process.

 

Outcome

The adoption and integration of e-Conveyancing has been a long process and we are still a year away from truly experiencing the full impact of this system. However, from our experience so far, the benefits are undeniable. The electronic process saves time, reduces the risk of fraud and forgery and allows our Property Team more time to focus on better quality client relationships through improved delivery of services.

 

15 April 2019

Changes To Sentencing New South Wales


Written by Paul Crean, Senior Associate

The sentencing laws for courts dealing with offenders in New South Wales were overhauled in September 2018. The overall objective in the reforms was to ensure community safety by properly holding offenders to account and to assist in the problem of re-offending.

 

Summary Of The Changes To Sentencing

  • Suspended Sentences have been abolished
  • The Intensive Correction Order (ICO) provisions have significantly changed. The courts now have greater flexibility to add additional conditions such as home detention and electric monitoring
  • Courts are to be equipped with better information about offenders at the time of sentencing
  • There is now a presumption that Domestic Violence Offenders are to receive a supervised community based sentenced or are to be imprisoned (unless the court has clear reasons why another sentence is more appropriate)

 

The New Sentencing Scheme In Practice

Conditional Release Order (CRO)

CRO’s have been introduced and replaced good behaviour bonds which were previously dealt with under a Section 9 or Section 10 (1)(b) the Crimes (Sentencing Procedure Act) 1990. A CRO must include two (2) standard conditions and a court may add additional and further conditions. The CRO cannot exceed two (2) years.

The two (2) standard conditions are:

  • The offender must not commit any offence during the period of the order; and
  • The offender must appear before the court if called to do so at any time during the order.

In regard to Domestic Violence Offenders, CRO’s can only be used if the order includes a supervision condition and the court has considered the safety of any victim of the offence(s).

 

Community Corrections Order (CCO)

For more serious offences, the courts can sentence by way of Community Correction Orders (CCOs). These are seen as a more flexible order and an alternative to custody with the idea that offenders can receive supervision to tackle their offending behaviour.

Similar to CRO’s, CCO’s must include two (2) standard conditions and may be subject to additional and/or further conditions. The two (2) standard conditions are:

  • The offender must not commit any offence during the period of the order; and
  • The offender must appear before the court if called to do so at any time during the order.

They cannot exceed three (3) years. Again, in relation to Domestic Violence Offenders, can only be made if the order includes a supervision condition and the court has considered the safety of any victim of the offences.

 

Intensive Correction Order (ICO)

If court sentences an offender to imprisonment the court may order that the sentence be served in the community by way of Intensive Correction Order (ICO).

The amendments to the ICO provisions provide the court with further discretion to tailor particular conditions of the ICO to the individual offender. The ICO is subject to two (2) standard conditions and the court must impose at least one (1) additional condition (which may include home detention).

Importantly, ICO’s are not available for offenders that have been convicted of (including but not limited to the following):

  • Murder or Manslaughter
  • Prescribed Sexual Offence
  • Discharge of a firearm
  • Terrorism offences
  • Breaches of serious crime prevention or breaches of public safety order.

In relation to domestic violence offences, the court must not impose an ICO unless it is satisfied that the victim of the domestic violence offence and any other person whom the offender is likely to reside will be adequately protected.

Further, if court finds a person guilty of a Domestic Violence Offence, the court must not impose home detention condition if the court believes the offender will reside with the victim.

Should you have any comments on the changes to the Sentencing Regime, please do not hesitate to contact the team at UWE.

15 April 2019

Family Provision Orders And The Interests Of Beneficiaries


Written by Patricia Jane Muscat, Associate

Chapter 3 of the Succession Act 2006 (NSW) (“the Act”) enables certain persons, who fall into defined classes of eligible persons, to institute proceedings seeking an order that provision, or further provision, be made for them out of an estate of a deceased person. This type of order is called a Family Provision Order.

In the years 2016, 2017 and 2018 a total of 2,972 applications were filed in the Supreme Court of New South Wales seeking a Family Provision Order. In the same period, 3,040 Family Provision matters were disposed of. The vast majority of disposals were by way of settlement (as opposed to the Court giving judgment after a fully-contested hearing).

Whenever a Family Provision Order is made in favour of an applicant, either by way of settlement or contested hearing, there will inevitably be someone who bears the burden of that provision being made.

Section 65(1)(c) of the Act identifies that a Family Provision Order must specify the part or parts of the deceased’s estate out of which it is to be provided.

Section 61(1) of the Act identifies that the Court cannot disregard the interests of the other beneficiaries of the estate when making a Family Provision Order.

Section 66(2) of the Act enables the Court to adjust the interests of any person affected by a Family Provision Order as considered necessary, and enables the Court to “be just and equitable to all persons affected by the order”.

In Hoobin v Hoobin [2004] NSWSC 705, White J indicated that, when assessing how the burden of a Family Provision Order ought to be borne, the Court has a wide discretion, which should be exercised having regard to rules of reason and justice with due regard to the whole of the surrounding circumstances.

In State of Victoria v Sutton [1998] HCA 56, at [77], McHugh J said:

“The rules of natural justice require that, before a Court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order.”

Two recent cases of the Supreme Court have dealt with the issue of how the interests of affected beneficiaries are accounted for when making a Family Provision Order.

In Webster v Strang; Steiner v Strang (No. 2) [2018] NSWSC 1411, Kunc J was called upon to consider how the burden of Family Provision Orders made in favour of an adult daughter and an adult son out of the estate of their late mother ought to be borne.

Each of the son and daughter, who received a legacy of $2,000,000.00 under the Will of the deceased (in an estate in excess of $14,000,000.00) received further provision.

 

The Court found that the daughter should receive $1.2 million in addition to the legacy made to her under the Will. In the primary judgment, the Court found that the additional sum ought to be borne in first instance between her children and grandchildren. The Judge considered relevant:

  1. What would be least disruptive to the overall scheme of the Will; and
  1. Duly recognising the deceased’s allocations between different family groups in the Will.

In argument as to why the children and grandchildren of the daughter ought not bear the burden of the provision, Senior Counsel made a submission to the following effect:

“The starting point of any analysis for the burden of Robyn’s increased provision should be the identification of which beneficiaries will be least affected by having their benefits under the Will reduced. Combined with this is the over-arching consideration stemming from the parens patriae jurisdiction that the Court should be jealous to protect the interests of minor children at the expense of claims by their parents and relatives.”

The Court found:

  1. In making a Family Provision Order, the Court is not exercising its parens patriae It is exercising a statutory jurisdiction pursuant to the terms of the Act.
  1. The proposed approach (using, as a starting point, which beneficiaries will be least affected by having their benefits disturbed) risks creating a presumption which ignores the complex, fact based, evaluative exercise which the Court must undertake, and must be rejected.

In Sackelariou, Edward v O’Donnell; Sackelariou, George v O’Donnell [2018] NSWSC 1651, Hallen J was called upon to deal with an application by beneficiaries of an estate proposed to be affected by Family Provision Orders agreed at a mediation as between the executor of the estate and the two applicants.

The resolution reached between the executor and the applicants involved the relevant beneficiaries (four step-grandchildren of the deceased) contributing $62,500.00 to the settlement of the applicants’ claims.

The beneficiaries indicated that they did not consent to the settlement or to the way in which it affected them.

In all of the circumstances of the case, and taking into account the evidence before him, his Honour concluded that he could not be satisfied that the step-grandchildren should bear that portion of the provision agreed to be made in favour of the plaintiffs.

His Honour referred to a number of matters, which should be of assistance to practitioners. These include:

  1. Enquiries ought to be made of all the beneficiaries of an estate whose interests may be affected by a proposed Family Provision Order.
  1. They should be given an opportunity to be heard, including advancing any competing claim (financial or otherwise).
  1. Consideration ought to be given to alternatives available in relation to how the burden of the provision ought to be borne. Parties should weigh up these alternatives, preferably on notice to all affected beneficiaries, to ensure that the settlement reached is consented to globally.

By taking these matters into account, those involved in Family Provision matters can avoid settlements being stymied at a later date by non-consenting affected beneficiaries.

23 October 2018

Proposed Amendments to the Family Law Act/Domestic Violence


Written by Montana Messina.

Family Court and Family Violence:

A recent parliamentary inquiry into the Family Law system has examined the effectiveness of current practice and procedures in the Family and Federal Circuit Courts, and the family law system more broadly, involving families appearing before the Courts where one or more party is self-represented and where there are allegations or findings of family violence.

Family violence became a focus for policy and law reform after a number of reports highlighted the extent to which family violence applied to adults and children post-separation.

Studies have concluded that elements of power and control are at the centre of family violence. Family violence is recognised as a means of asserting dominance and control in a relationship, with a variety of physical and non-physical mechanisms being used by the perpetrator. The definition of family violence in the Family Law Act, 1975 (“the Act”), was accordingly amended and expanded in order to recognise additional circumstances or behaviours that constitute family violence, including non-physical abuse and behaviour that is designed to control, coerce or create fear.

 

Intersection of Family Violence and Self Represented Litigants:

The expanded definition of family violence in the Act created greater awareness of the issue amongst practitioners and other professionals engaged in the court system, however it did not alleviate practical difficulties. There is an increasing trend for self-representation in state and federal courts and it is not uncommon for at least one party to be unrepresented in family law proceedings. Self-representation poses many challenges for Judges, court staff and family law practitioners, and these challenges are made more difficult when there are allegations or findings of family violence in cases where one or both of the parties is self-represented. The difficulties are magnified in the family law context because of the personal nature of the issues considered or litigated in each case and the relationship between the parties to the litigation.

With an increased number of self-represented litigants and increasing disclosure of family violence by parties in family law matters, the difficulties in relation to cross-examination have been highlighted. It is a fundamental right of a party in the justice system to cross-examine a witness in their case.  However, cross-examination of a former partner or spouse can further perpetuate abuse and control, regardless of intention.

If the perpetrator is self-represented, they have the right to cross-examine their ex-partner, a process that can be incredibly traumatic for the victim. This court process can be utilised by the perpetrator of family violence to continue their harassment, control and abuse.

If the victim is self-represented, this also poses a problem as they are expected to cross-examine the perpetrator. In this instance, their capacity to appropriately and fully question their former partner may be diminished or negated by their fear of the perpetrator.

The Court must balance procedural fairness and access to justice, a balancing act that is very difficult in cases where there is family violence and where one or both of the parties are self-represented.

 

Current Practice and Proposed Amendments:

Currently, allegations or findings of family violence do not prevent cross-examination of their former spouse or partner by self-represented litigants. Whilst the court can stop a witness from answering a question that is regarded as offensive, abusive or humiliating, a question must be answered if it is believed to be in the interests of justice. The court is bound by its obligation to provide procedural fairness to both parties in a trial and, in practice, the court can be reluctant on that basis to deny a party the right to cross-examine. Cross-examination plays an important role in testing evidence.

Direct cross-examination potentially exposes victims to re-traumatisation and can affect their ability to give clear evidence. As they stand, the current arrangements in court where one or more party is self-represented and there are findings or allegations of family violence are ineffective in protecting victims from further family violence, whether or not this is intended.  Victims are not protected due to the weight given to procedural fairness by the Court.

Currently, the Family Law Amendment (Family Violence and the Cross Examination of Parties) Bill 2018 is before the Senate. This Bill aims to ensure there are appropriate protections in place for victims of family violence during cross-examination in all proceedings by prohibiting direct cross-examination between parties where allegations of family violence are raised.

Specifically, and if passed by the Senate, the Bill will:

  • Prohibit personal cross‑examination where there is an allegation of family violence between parties and if any of the following applies:
    • either party has been convicted of, or is charged with, an offence involving violence, or a threat of violence, to the other party,
    • a family violence order (other than an interim order) applies to both parties,
    • an injunction under section 68B or 114 of the Act for the personal protection of either party is directed against the other party,
    • the court makes an order that personal cross-examination is prohibited.
  • Provide that, if personal cross‑examination is prohibited, cross‑examination is conducted by a legal representative.
  • Provide that, if there is an allegation of family violence but personal cross‑examination is not prohibited, the court applies other appropriate protections.

In proceedings where there are allegations or findings of family violence, cross-examination is to be conducted by a lawyer and, if necessary, a lawyer to be provided by Legal Aid.

This Bill aims to bring the Family Court procedure in line with other jurisdictions, such as the criminal law practice in New South Wales. It aims to balance the right to a fair hearing, with the critical consideration being the ability to test evidence, and the rights of the victim, in particular focusing on the need to reduce the potential distress and humiliation caused by direct cross-examination.

1 September 2018

What you need to know about the changes to the Retail Leases Act


Written by Joanne Keo.

On 1 July 2017, a number of changes to the Retail Leases Act 1994 (NSW) came into effect. This included the NSW Civil and Administrative Tribunal now having power to hear retail lease disputes for claims up to $750,000 and making decisions concerning rectification of leases and lessor disclosure statements. There are also a number of changes that concern both Landlords and Tenants.

What Landlords need to know:

Agreement to Lease

The Act now specifically applies to an agreement to lease of retail premises (Section 3B). The Landlord must provide the Tenant with a disclosure statement 7 days before an agreement to lease is entered into failing which the Tenant has a right to terminate the Lease within the first 6 months.

No undisclosed outgoings

A Landlord is required to provide full disclosure of any obligation of the Tenant to pay outgoings failing which the Landlord cannot recover from a Tenant any outgoings that are not disclosed (Section 12A). If an estimate of outgoings is specified in the disclosure statement and the actual amount payable is higher than the estimate, then the Tenant is only liable to pay the estimated amount unless the Landlord can prove that there was a reasonable basis for the estimate given.

Cannot charge Tenant Mortgagee’s consent fees

Section 14 and the definition of “lease preparation expenses” now clarify that a Landlord is not entitled to recover any expenses in connection with obtaining the consent of the Landlord’s mortgagee.

Copy of signed Lease

Section 15 now requires the Landlord to provide the Tenant with a signed copy of the Lease within 3 months after the lease signed by the Tenant is returned to the Landlord (or the Landlord’s lawyer).

Compulsory registration of the Lease

Leases for a term of more than 3 years (including any option term) must be registered by the Landlord within 3 months after the signed Lease is returned to the Landlord. Failure to do so will attract a maximum penalty of $5,500, (Section 16). This creates practical problems for Landlords with mortgages as mortgagees consent sometimes take months.

Bank Guarantee to be returned within 2 months

A Landlord must return a bank guarantee to the Tenant within 2 months after the Tenant has satisfied its obligations (as opposed to moving out) under the Lease that secured the bank guarantee (Section 16BA).

 

What Tenants need to know

Minimum 5-year term abolished

There is no longer an automatic right of Tenants to a minimum 5-year Lease term.

Expanded definition of outgoings

Section 3A revises the definition of outgoings to include fees charges by a Landlord for services provided by the Landlord for management, operation, maintenance or repair of the shop, building or land.

Excluded Retail Shops

Section 5(d) and Schedule 1A exclude certain uses from the Act including but not limited to ATMs, children’s rides, display of signage, internet booth, public telephones, private post boxes, storage licences and vending machines.

Compensation for Tenant who validly terminates in the first 6 months

A Tenant is entitled to recover compensation from the Landlord, including expenditure by the Tenant in connection with the fit-out of the premises, where the Tenant terminates the Lease during the first six months as a result of an incomplete, false or misleading lessor’s disclosure statement, or a failure to give the Tenant any disclosure statement at all (Section 11(2A)).

Exclusion from Turnover rent

Section 20 has been amended so that revenue from online transactions will be excluded from turnover rent except where goods or services are delivered or provided from or at the retail shop or if the transaction takes place while the customer is at the retail shop.

Demolition clarified

Section 35 now clarifies that the demolition provisions will apply if part of a building is to be demolished. The definition of ‘demolition’ has been widened as it no longer requires the repair, renovation or reconstruction to be ‘substantial’.

Assignment

Section 39(1)(e) now allows a Landlord to withhold consent to an assignment of lease that has been awarded by public tender if the proposed assignee fails to meet any criteria of the tender.

15 August 2018

How can I avoid a criminal conviction?


Written by David Quayle, Associate.

How can I avoid a criminal conviction if I have been charged with an offence, and if a conviction is recorded will this be on my record for life?

Having a criminal record can affect a person’s employment, overseas travel, obtaining certain licences such as firearms licences and insurance. As a result, it is inevitable that people charged with a criminal offence are concerned about the future impact that this may have on their life and career, beyond the sentence they receive from a Magistrate or Judge of the Court.

Sentencing options which involve no conviction being recorded

A ‘Section 10’ is one of a number of sentencing options which are available to a Court in New South Wales sentencing a defendant for an offence. This is a sentencing option which does not involve a conviction being recorded.

The legislation under section 10(1) Crimes (Sentencing Procedure) Act 1999 provides that without proceeding to conviction, a court that finds a person guilty of an offence may make any one of the following orders:

(a) an order directing that the relevant charge be dismissed,
(b) an order discharging the person on condition that the person enter into a good behaviour bond for a term not exceeding 2 years,
(c) an order discharging the person on condition that the person enter into an agreement to participate in an intervention program and to comply with any intervention plan arising out of the program.

In deciding whether to make an order under this provision the Court is to have regard to the following factors:

– The person’s character, antecedents, age, health and mental condition
– The trivial nature of the offence
– The extenuating circumstances in which the offence was committed
– Any other matter that the court thinks proper to consider

For Commonwealth offences, people should be aware that the equivalent legislation is Section 19B Crimes Act 1914 (Cth).

Importantly, whilst the above is a sentencing option that involves no conviction being recorded, you must be aware that it will still appear on a person’s criminal record history.

[Please note: Reforms to NSW sentencing laws are due to commence in September/October 2018 and the equivalent sentencing option under the new legislation will be a Conditional Release Order]

Criminal Records

A criminal record is an extract from a database which details a history of the offences a person has been charged, the date of those offences, the Court the matter was listed before and the sentence recorded.

Commonly, people question the period of time that offences will be on a person’s record.

Spent Convictions and the Disclosure of Convictions

The Criminal Records Act 1991 (NSW) is the relevant legislation for spent convictions and when a person is required to disclose any convictions that have been recorded against their name.

When a conviction is spent it means that a person is not required to disclose to any other person for any purpose information concerning the spent conviction. In this regard, any question concerning a person’s criminal history is taken to refer only to convictions (Section 12 Criminal Records Act 1991). This means, when a person is asked if they have any criminal convictions, they would only be answering yes if they have any convictions which are not spent. Accordingly, if the conviction is spent then the answer to that question would be no.

How long until a conviction is spent?

A conviction is spent on completion of the relevant crime-free period. The crime-free period is 10 years after the date of a person’s conviction (Section 9 Criminal Records Act 1991). Note: the crime-free period is 3 years for people sentenced in the Children’s Court.

All convictions are capable of spent, except:

(a) convictions for which a prison sentence of more than 6 months has been imposed,
(b) convictions for sexual offences (the specific offences are listed under Section 7),
(c) convictions imposed against bodies corporate,
(d) convictions prescribed by the regulations.

Employment in certain occupations/Applying for a working with children check clearance

If a person is applying for an appointment or employment as a judge, magistrate, justice of the peace, police officer, member of staff to Corrective Services NSW, teacher or teacher’s aide then they must disclose any conviction even if it is spent.

Similarly, if a person is applying for a working with children check clearance under the Child Protection (Working with Children) Act 2012 any conviction must be disclosed (s 15 Criminal Records Act 1991).

Please note if you have received a ‘Section 10’ for an offence and you are applying for one of the above positions or a working with children check, this will need to be disclosed despite no conviction being recorded. This is explained further below.

Non-recorded convictions (Section 10) and your requirement to disclose the offence

For the purposes of the Criminal Records Act 1991 the finding by a Court that an offence has been proved, or that a person is guilty of an offence, without proceeding to a conviction (i.e. if you are sentenced to a ‘Section 10’) then this sentence is treated as a conviction under this Act (s 5 Criminal Records Act 1991).

A sentence under s10(1) Crimes (Sentencing Procedure) Act 1999 will not mean you have a conviction recorded but for the purposes of the Criminal Records Act 1991 you will have to disclose this when applying for a working with children check or if you are seeking employment in certain professions.

Whilst a ‘Section 10’ is classified as a conviction in these circumstances, it will be spent either immediately following the decision of the sentencing Court or upon satisfactory completion of a bond if one is imposed (s 8 Criminal Records Act 1991).

Is a conviction wiped from a person’s criminal record history once it has been spent?

No. If a conviction is spent it means that it does not need to be disclosed (subject to the above exceptions). It will remain on your criminal record history despite the period of time that has passed.

What if I am charged with an offence and the charges are dismissed, will this be on my criminal record history?

Yes. Even if a charge is withdrawn by the police it will remain on your criminal record history. An option is to write to the NSW Police Commissioner on the basis that the charges have been withdrawn however its removal will be up to the Commissioner’s discretion.

15 August 2018

Should I Give a Director’s Guarantee?


Written by Gilbert Olzomer, Associate.

If you are a director of a company, your personal liability for transactions undertaken by the company is generally protected by what is known as the corporate veil. This means that should the company incur a liability, the rights of a creditor or plaintiff to take action are limited to pursuing the company only.

For this reason, many parties in commercial transactions and mostly those who are extending credit to corporations, seek personal guarantees from directors to secure that liability.

This arises because of the likely poor outcome a creditor will receive if a company is to enter liquidation, administration, receivership or otherwise be unable to pay its debts.

When will a Director’s Guarantee be sought?

A director’s guarantee will most likely be sought at the time an agreement for credit is entered into. Although the guarantee may appear as part of the documentation in a credit application, a guarantee, properly construed, exists as a separate agreement to a credit application/ credit agreement, comprising of different terms and between different parties, including the personal guarantors signing the document.

Most commonly, guarantees are sought to secure;
I. monies advanced under a loan;
II. credit provided for an ongoing trading relationship such as for the delivery of consumer goods like alcohol or milk; and
III. in tenancy agreements a guarantor will be required to guarantee payment and obligations of the company under the tenancy agreement.

If I provide the Guarantee, what does it mean?

A guarantee is a free-standing agreement and a guarantor will be bound (unless the guarantee can be set aside) by the terms and conditions contained in the guarantee to perform the outstanding obligations left by the company.

Where a guarantee is executed by two or more guarantors, a term commonly included is joint and several liability. This is where each guarantor is liable separately and also with the other guarantors for the principle debts owed by the company to the creditor. A creditor can pursue a single guarantor for the whole debt even in the presence of other guarantors having validly executed the guarantee.

“All monies” clauses are commonly included in guarantees in that a guarantor can be liable to a creditor, for a debt other than one to which the credit application relating to that guarantee specifically allows.

It is also important to note that guarantors may be liable for pre-legal recovery, collection and other legal costs incurred by the creditor in pursing the company/guarantor, as well as interest on outstanding amounts. This is often included in the form of an “indemnity” and in the case of small debts; the amount of interest, pre-legal recovery, collection and/or legal fees, could amount to more than the principle debt itself.

A guarantee may contain a charging clause which entitles the creditor to secure the guarantee over real property owned by the guarantor. This allows a creditor to register a caveat or mortgage over real property owned by the guarantor to secure the debt and without necessarily having first commenced proceedings. This will often act to stop the guarantor from selling or otherwise dealing with the property while the debt remains unpaid.

External Administration

Under section 440J of the Corporations Act a guarantee cannot be enforced during a period where the company is in administration, unless leave of the court has been granted.

Setting aside a Personal Guarantee

Because a guarantee is an agreement, it can be set aside and rendered void in the same way as other agreements.

These vitiating factors include:
– misrepresentation;
– misleading and deceptive conduct;
– mistake;
– duress;
– undue influence; or
– unconscionable conduct.

Further to this, section 7 of the Contracts Review Act 1980 enables a Court to set aside a guarantee if in the circumstances it would be unfair and unjust to enforce the guarantee. The most relevant application of the above vitiating factors is the rule in Yerkey -v- Jones (1939) HCA 3 (1939) 63 CLR 649 which was affirmed by the High Court in Garcia -v- National Australia Bank Ltd [1988] HCA 48.

The rule in Yerkey -v- Jones, is that equity will grant relief to a person who has signed a guarantee in support of their spouse’s business, if the following criteria are met:

I. the guarantor must be held to be a volunteer;
II. the company was wholly controlled and operated by the other spouse;
III. the guarantor did not stand to be benefit from the business transactions;
IV. the guarantee was sought by the spouse and without any direct dealings between the creditor and the guarantor; and
V. the guarantor did not understand the essential respects or nature of the guarantee and received no advice or explanation as to the type and extent of the agreement which was being executed.

Conclusion

In the current business climate creditors often find themselves the losers in insolvency and are unable to claw back funds from behind the corporate veil. With creditors becoming more risk averse, it only follows that where sophisticated creditors extend credit, guarantees will be sought.

It is often the case that if a guarantee is not provided, credit will not be extended, and your company’s chances of doing business with that creditor, will be impacted, if not prevented entirely.

If a guarantee is to be provided:

1. Ensure that a guarantee is capped to the smallest amount possible, which will minimise the amount sought down the track should the company fail to meet its obligations to the creditor.

2. Do not allow a charging clause.

3. Always ensure that once a business is sold or directors are changed, guarantees are withdrawn. The ways that a director’s guarantee can be withdrawn will depend on the terms and construction of the guarantee itself, however, always be sure to complete the withdrawal in writing and to get written confirmation or receipt from the creditor that the guarantee has been effectively withdrawn. It is often the case that until a guarantee is withdrawn, a person may still find themselves liable for debts of the company, even though their directorship and company involvement has ended.

4. Always seek prudent legal advice before signing any agreement including a guarantee.

If you have any questions regarding guarantees or if you are unsure whether you should provide a personal guarantee, please contact Uther Webster & Evans.

16 July 2016

Is Equal Shared Parental Responsibility the same as “Equal Time”


Written by Rachael Vincent, Solicitor

The short answer is “No!” Although often confused, equal shared parental responsibility and equal time are separate and distinct.

What is Parental Responsibility?

Parental Responsibility means “all the duties, powers, responsibilities and authority which, by law, parents have in relation to children”.  Parental Responsibility can be exercised solely or jointly. In the absence of any court order, parental responsibility is deemed to be joint (or “equal shared”), meaning that parents have to consult the other and make joint decisions in relation to major long term issues affecting their children.  Such major long term decisions can include:

  • Where a child goes to school;
  • What religion a child practices;
  • What surname a child has;
  • In the event that a child has major health issues, what treatment that child should receive and where they should receive it; and
  • Changes to the child’s living arrangements, for example, a proposed relocation to a new location making it difficult for the child to spend time with one parent.

What is Equal time? 

Equal time refers to a parenting arrangement for separated parents whereby children spend the same (or close to the same) amount of time with each parent. This is often on a “week about” basis, meaning during school term time, the children spend one week with one parent and then the following week with the other parent. There can also be other ways to divide the time evenly, depending on the parents’ and the children’s circumstances.

How do you get Equal Shared Parental Responsibility?

If there are no court orders or parenting plans in place, parents automatically have equal parental responsibility.

If, after having consulted the other parent, parents continue to have difficulty in making decisions relating to parental responsibility, there are avenues that parents can take without having to approach the Court. Local agencies can assist and offer mediation services to separated parents to discuss parenting arrangements and parental responsibility. Such agencies can include:

  • Relationships Australia;
  • Local Family Relationship Centres;
  • Catholic Care; and
  • Private Mediators.

It is a requirement that parents attend mediation prior to commencing Court proceedings, other than in cases where there is urgency or family violence. If no agreement can be reached at the mediation process it is open to either parent to file an Application with the Court.

In Australia there are two Courts that have the jurisdiction to make a parenting order, the Family Court, and the Federal Circuit Court. When making any parenting order in relation to children both courts operate on the presumption that it is in the best interests of the children for their parents to have equal shared parental responsibility for them.  In the case of Goode (No 2) [2007] FamCA 31, the presiding Judge stated:

“From the children’s perspective, I can only see good will come from their parents jointly exercising parental responsibility.”

Once a Court makes an order for equal shared parental responsibility the Family Law Act 1975 (“the Act”) then requires the Court to look at whether an equal time arrangement is “reasonably practicable” and “in the best interests of the children.”

Again, equal shared parental responsibility is not the same as equal time, rather it comes before an order for equal time is considered.

Parents who have equal shared parental responsibility for their children only have to consult the other in relation to major long term issues affecting the children, not simple day-to-day issues. Day-to-day issues include what the children have for meal time or whether they attend school excursions.

When might a Court not make an order for Equal Shared Parental Responsibility?

There are some circumstances where the Court may decline to make an order for equal shared parental responsibility, for example:

  1. Where there has been alleged violence that has continued since separation;
  2. Evidence of family violence or child abuse by the other parent where a parent or child reasonably fears for or is apprehensive about their personal wellbeing or safety.

Sometimes the Courts can decline to make an order for equal shared parental responsibility on the basis that communication between the parents is so bad that there can be no hope that they could effectively communicate to discuss major long term issues surrounding their children. The Full Court of the Family Court has said in relation to this:

“It appears to us that a parenting order, including an order for equal shared parental responsibility, must be in the best interests of a child, a court may in the exercise of its discretion find it inappropriate to make an order in certain circumstances. This could occur where, although there is no family violence or child abuse, the conflict or lack of effective communication between the parents is such that to properly exercise their equal shared parental responsibility they would be unable to comply with section 65DAC by consulting and making a genuine effort to reach agreement about major long term issues affecting their child or children. In other words, in these circumstances an order for equal shared parental responsibility would inevitably lead to further conflict and perhaps contravention applications, which conflict and/or ongoing litigation could be adverse to the child’s best interests.”

In the overwhelming majority of cases, however, the Court does make an Order for Equal Shared Parental Responsibility.

16 July 2016

Bank’s attempt at possession of an elderly couple’s home fails for ‘Unjust’ and ‘Unconscionable Conduct’


Written by Justine Taylor, Senior Associate

RHG Mortgage Corporation v Ianni [2014] NSWSC 849

His Honour, Davies J of the Supreme Court set aside a Loan Agreement and ordered that the Bank, RAMS, discharge the mortgage over the home of the elderly Defendants, on the basis of an Unjust Contract and Unconscionable Conduct.

UWE acted for the Defendants Mr. & Mrs Ianni, who were successful in defeating the bank.

History of Proceedings

The case has had a long history before the Court, in proceedings which were commenced by the Bank against the elderly couple back in 2008.  Sadly, Mrs Ianni passed away since the commencement of the proceedings.

The matter was first heard before His Honour Grove AJ who upheld the loan agreement. However the Court of Appeal, before Bathurst CJ, Basten JA and Tobias AJA (dissenting), set aside the Judgment of Grove AJ and remitted the matter for retrial.  The Court of Appeal held that His Honour’s finding as to the Mortgage Broker, Mr Famularo, being a reliable witness, was “glaringly improbable” and that the Court at first instance had overlooked incontrovertible facts.

The Facts

Mr. and Mrs Ianni, emigrated from Italy in 1954.  Mrs. Ianni had left school at the age of 8, worked for a year in a convent and married Mr. Ianni in 1960.  She could not read or write, although she could print her name and understand a few words in English.  Mr. Ianni worked as a painter and docker until retiring and also had poor reading and writing skills in English.

Mr. & Mrs Ianni gave a personal guarantee in 2000, over a loan from St George Bank to their son and daughter in law, who operated a business in Darling Harbor.  Mr. Ianni told the court that he had given guarantee limited to $100,000.

In 2005, the children refinanced in order to buy a property in Dural. On 14 September 2005, a Loan Application was submitted to RAMS in a 20 page fax by then Mortgage Broker, Mr. Famularo as Principal of Australian Mortgage & Business Finance Solutions.  The loan was for a term of 30 years, (by which time Mr. Ianni would have been 100 years of age). The purpose of the loan was stated in the application to be:

  1. the purchase of a property for $500,000,
  2. the refinancing of loans for $490,000 and
  3. costs for the financing of $10,000,

so that the total loan facility sought was $1,000,000.

The application contained a number of false statements:

  1. Firstly it annexed a contract of sale (referred to in the proceedings as the ‘Sham Contract’) so that it  appeared Mr. and Mrs Ianni Snr were the purchasers of the Dural Property for $500,000, when in fact their children were purchasing the Dural Property for $2.2 million.
  1. Secondly, the Loan Application attached a “Snapshot” of a St George Loan Statement that suggested Mr & Mrs Ianni Snr had received a loan from St George in their own names rather than as guarantors.
  1. Thirdly, the application stated that Mr. Ianni and Mrs Ianni were self-employed, earning an income of $85,000- $90,000, with assets exceeding 2.5 million which included a share in the restaurant business.
  1. The application was also submitted with false identification and passport numbers.

In fact, Mr. & Mrs Ianni were pensioners with no capacity to service any such loan, and Mrs Ianni did not hold an Australian passport.

The Judgment

His Honour noted that the Mortgage Broker, Mr. Famularo, had a copy of the real contract for the purchase of the Dural Property, because he had submitted a separate financing application with NAB on behalf of the children.

The Court found:

  1. The Bank had notice as to the age of the Applicants and the fact that this was a 30 year loan.
  1. Despite the Bank’s internal file notes, (indicating concern that Mr. & Mrs Ianni were not listed as self-employed “directors” and requesting that the statement of assets and liabilities be amended), the Bank proceeded on the loan.  The Bank never requested clarification as to the Applicants’ employment, and the Bank called no witness to give explanation.
  1. The Bank also proceeded on the loan on the basis that 100 identification points were held on file, yet the points held on file for Mrs Ianni added up to 60;
  1. The Bank proceeded on the loan despite the apparent deficiency between the amount required in the stated loan purpose as against the amount to be loaned.
  1. RAMS knew from the ‘Sham Contract’ that the property being purchased was said not to be part of the security for the loan being sought.  That was unusual because it strongly suggested that the property was not being purchased as an investment property.  The tax benefits that would have flowed from using that property as security for a loan made that clear, yet the Bank’s internal notes, in contrast, suggested that the property was being purchased as an investment.  Again no witness from the Bank was called by way of explanation.
  1. An inference was drawn by His Honour that in fact the Bank had notice, based on a water rates statement, that Mr. Ianni was a pensioner.
  1. It was apparent that the Bank overrode its own guidelines.

His Honour found the Mortgage Broker, Mr. Famularo, “to be a most unsatisfactory witness” and found it difficult to accept much of the evidence he gave.”  His Honour determined that some evidence from Mr. Famularo was “quite frankly unbelievable.”

In this most recent paradigm of David vs Goliath, the Court found that the contracts were unjust and had the bank done things that might, in the circumstances have been expected of a bank, they would have ascertained the improvident nature of the contract

The court also found that the Defendants were under special disability by reason of their age, language, education and economic background.

The Bank has filed a Notice of Appeal, to be determined next year. And so the proceedings continue to yet another round.

16 July 2016

Sham Trusts


Written by Justine Taylor, Senior Associate

SHAM TRUSTS

Trusts originated in late medieval England where a wealthy land owner (“The Feoffor”) would convey land to another trusted party (“The Feoffees to uses”) to hold the land as directed for the benefit of persons nominated. The object behind the predecessor to today’s modern trust was to allow land holders to make ‘wills’ for their land, which would automatically have otherwise passed to their heir, and normally the oldest son.

The modern trust is commonly utilised and has many advantages including taxation benefits, strategic estate planning which keeps assets outside a will, and of course, protecting assets from creditors.

However the trust structure is not safe from attack (just ask Gina Rinehart), and the Court will in some circumstances go behind a trust.

CONDON V LEWIS

The question of when the Court will consider a trust to be a “sham” was considered in the recent case of Condon v Lewis [2013] NSW CA 204. In that case the debtor, Colleen established a discretionary trust as the vehicle for the purchase of real property. Colleen was the Appointor (which is the person with ultimate control who decides who the trustee is) and the beneficiaries included herself, her daughters and her grandchildren. Colleen had established the trust and at the time the property was purchased told her accountant “I’m in a complicated court case. I’ve found property which I want to buy, but I want to keep it in my own name in the short term because of the court case”.

In 2005, Colleen amended the trust so that one of her daughters was the Appointor and she removed the corporate trustee and appointed herself personally as trustee. In 2006, proceedings between Colleen and her former husband were settled and a declaration was made that Colleen would hold the property as trustee of the discretionary trust and that it be transferred to her within 30 days.

Despite the 2005 deed of amendment and the settlement in 2006, it was not until 3 years later that Colleen transferred the property into her name as set out in the 2006 Order.

In 2009 and 2010, Colleen entered into a series of loans, secured over the property with no mention of her holding the property as trustee. Subsequently, Colleen’s daughter appointed a new trustee of the company, however the property was not transferred into the new trustee company’s name before Colleen was made bankrupt in 2012.

It is also noted that all funds purchased of the property were contributed to by Colleen personally.

The Trustee in bankruptcy asserted that the trust was a sham and was entered into so as to conceal fact that the property was actually owned by Colleen.

The Court of Appeal, held that the trust was not a sham and that whilst the trust had been established with the intention of protecting Colleen’s assets, it had been established with the intention that it should not have its apparent effect nor any legal consequence. “To say that a document or transaction is a sham, means that while professing to be one thing, it is in fact something different.”

The Court must essentially look to the circumstances in which the trust was created so as to ascertain the clear intention of the party in establishing trust.

The Court will only look behind a document or transaction if there is a “good reason to do so” so that there is effectively a presumption against the findings that a trust is a sham.

The Court also noted the distinction between sham trust and a trust which had been entered into specifically for the purpose of defrauding or defeating creditors.

FAMILY COURT

The Family Court is no stranger to looking towards the true nature and controller of a trust, and indeed the Family Court requires disclosure as to the Appointor and interest in any trusts so as to determine the true extent of matrimonial assets.

It is for this reason that, when establishing a trust, persons will often elect to put in place an alternative friendly Appointor to put distance between the person and the trust. Of course this ultimately has to be weighed against relinquishing true control of the trust.

In the Family Court, even an entitlement as a beneficiary under a trust can be a relevant consideration to the Court, as in the case of Read v Chang [2010] FAMCA 876, where a wife was the discretionary beneficiary of a trust which had assets of $630 million. In that case the Court held that “although the wife may only have a contingent entitlement and is no more than a member of a class of beneficiaries, the memorandum of wishes enlightens the Court as to future the wife’s economic circumstances”.

16 July 2016

RPS V R [2000] 199 CLR 620


Written by Christian McMahon, Solicitor

RPS v R [2000] 199 CLR 620

This is a High Court case where Uther Webster & Evans’ very own Vivian Evans represented the Appellant to successfully appeal the former decision of the NSW Supreme Court of Criminal Appeal.

The case primarily concerned itself with the giving of evidence and the Silence of the Accused (commonly referred to as an accused’s “right to silence”) and directions from the Judge given to the Jury concerning such a right. It clarified circumstances when a jury may take account of an accused’s failure to give evidence.

There were five particular disputed comments given by the Trial Judge to the Jury which became the determinative issue of these proceedings.

  1. Firstly, the judge told the jury that the appellant’s decision not to contradict evidence given by the complainant was said to be a partial admission and that it could be taken into account by the jury in “judging the value of or the weight of” the prosecution’s evidence.
  2. Secondly, the judge told the jury that in absence of denial or contradiction of the evidence given they could “more readily” accept that evidence.
  3. Thirdly, the judge instructed the jury that it may be reasonable in the circumstance for the jury to conclude that the absence of any evidence of the accused to contradict or deny the evidence given by the complainant could lead them more readily to accept the prosecution’s evidence.
  4. Fourthly, the Judge said the appellant’s decision not to give evidence could allow the jury to feel more confident in relying on the evidence given by the prosecution.
  5. Finally, the judge said that the absence of evidence from the accused meant that the version of events put in cross-examination of the witnesses for the prosecution was not supported by evidence.

Consideration of the trial Judge’s above directions about the absence of evidence from the accused was analysed with respect to s20 of the Evidence Act 1995 (NSW). That section provides:

“The Judge or any party (other than the prosecutor) may comment on a failure of the defendant to give evidence. However, unless the comment is made by another defendant in the proceeding, the comment must not suggest that the defendant failed to give evidence because the defendant was, or believed that he or she was, guilty of the offence.”

The respondent crown argued that the trial judges directions were no more than a “comment” with no such suggestion of the accused’s guilt.

It was held that the comments given by the trial judge contravened s 20(2) of the Evidence Act 1995 because they suggested that the appellant failed to give evidence because he believed that he was guilty of at least some of the offences concerned. It was wrong to say that the accused’s decision could allow the jury to feel more confident in relying on the prosecution evidence.

Furthermore, the High Court held that the disputed comments should not have formed part of the judicial commentary given in this case due to the accused’s “right to silence”.

This case helped clarify the scope of the power conferred on the Judge to give directions and ‘comments’ to a jury, by reason of S20 of the Evidence Act 1995 (NSW).

This case also led to the recent changes in the Law of the Right to Silence as a result of the Evidence Amendment (Evidence of Silence) Act 2013.

13 July 2016

Claw Back Provisions in the Bankruptcy Act


Written by Zachary Gazzard, Solicitor

What happens if a debtor attempts to divest their assets before they become bankrupt by selling or transferring the assets to a family member or friend? 

When a person is made bankrupt, a Trustee is appointed to administer the bankrupt’s estate and sell the bankrupt’s assets for the benefit of creditors. If a bankrupt dissipates assets that would have come under the Trustees control to distribute to the bankrupt’s creditors, the Bankruptcy Act 1966 (Cth) can enable the Trustee to apply for orders that the transaction is void, and thereby “claw back” the assets.

From how long ago can transfers by the debtor be “Clawed back”? 

Undervalued transactions – These are transactions within five years before the deemed commencement of the bankruptcy where a debtor sells or transfers an asset for less than its market value, of the asset or purchases something for consideration greater than it is worth.

There are different time periods for determining whether a person will have a defence to an undervalued transaction claim. Transfers that occur two years before the deemed commencement of bankruptcy are void against the Trustee if it can be shown that the bankrupt person was insolvent at the time. This period extends to four years if the transferee is a related entity of the bankrupt. The relevant period extends to five years unless the transferee can prove that the transferor was solvent at the time of the transfer.

If the transaction is void, the Trustee will need to repay any consideration given by the transferee for the transfer.

Certain transfers are excluded from the avoidance provisions and the transfer is also protected where the transferee acquired the property in good faith and provided market value for the transfer.

Transfers done with the intention to defeat creditors – These are transfers where the debtor transfers property primarily for the main purpose of preventing property from being divisible among their creditors, or to hinder or delay the property being made available for division among their creditors.

There is no time limit within which the disposition must have occurred.

A transfer of property from a person who later becomes bankrupt is void against their Trustee in bankruptcy if it can be shown that:

  1. The transferred property would probably have become part of the transferor’s estate or would probably have been available to creditors; and
  2. The transferor’s main purpose in making the transfer was to prevent, or delay the transferred property from becoming available to creditors.

If void, the Trustee in bankruptcy must repay any consideration given by the transferee for the transfer.

Preferential payments – These are transfers or payments made to unsecured creditors that result in a creditor receiving a preference over the remaining unsecured creditors at a time when the debtor was insolvent. The transaction must have occurred within 6 months prior to the deemed commencement of the bankuptcy.

It is a defence to a preferential payment claim if it can be shown that the person:

  1. was a purchaser, payee or encumbrance in good faith who gave consideration at least as valuable as market value and entered into the transaction in the ordinary course of business and did not know, or have reason to suspect, that the debtor was insolvent and that the transfer would give him preference, priority or advantage;
  2. has taken title in good faith and for market value through a creditor of the debtor;
  3. executed a conveyance, transfer, charge, payment or obligation pursuant to or under a maintenance agreement or order; or
  4. transferred the property under a debt agreement.

Some recent cases which illustrate how the claw back provisions in the Bankruptcy Act take effect are:

Nelson v Mathai (2011) 253 FLR 139; [2011] FMCA 686

A number of transfers were challenged under s 121 of the Bankruptcy Act 1966 (Cth). Where money of the transferor was used to purchase real property in the name of another person, it was held that such real property was, in substance, purchased by the transferor and transferred to the transferee and the applicant was entitled to recover the property. Alternatively, the applicant was entitled to recover the property as it was purchased entirely from the funds of the transferor and the funds could be traced to that property.

Sutherland v Byrne – Smith [2011] FMCA 632

A De facto couple had a financial agreement in place and bought property as joint owners. The couple separated after two years and sought to rely on the financial agreement to transfer the share of the male partner to Ms Byrne-Smith. The male partner filed for bankruptcy a few months later.

The financial agreement was held not to be protected as it was not an order of the Family Court. Transfer according to Financial Agreement was an undervalued transaction so could be set aside. It was not a transfer to defeat creditors as there was a relationship breakdown. The Court looked to the actual contributions to the acquisition and found the transfer to the extent of the male partners contribution to the property was void against the Trustee.

Official Trustee v Brown [2011] FMCA 88

Mr Daeveys made contributions to Ms Brown’s property prior to his three year bankruptcy. After he was discharged from bankruptcy, Daeveys applies for property settlement. The Trustee discovered his application for the property settlement.

The Trustee got Mr Daevey’s share in the property as Mr Daeveys had this interest at time of bankruptcy but failed to disclose it.

10 June 2019

Inheritance: How is it dealt with in Property Settlements?




Written by Jessica Swain

What happens if you have separated and you receive an inheritance before you have finalised your property settlement? Timing (as most things in life) is key.

Whilst there are two (2) approaches that the Court may adopt when dealing with significant post separation windfalls, the discretion of the Court is extremely broad.

The process for determining a property settlement usually involves valuing all the property (assets and liabilities) of the parties to a relationship and placing them into one “pool” (the asset pool).

As the assessment of the asset pool is taken to be the assets and liabilities of the parties as at the date of the hearing or settlement and not at the time of separation, any asset or liability acquired post-separation technically falls within the pool of assets available for distribution between the parties.

The Court is to assess each party’s contributions, both financial and non-financial, to the assets of the relationship, as well as each of the parties’ future needs.

Two Approaches

The Court can adopt a “global approach” and divide the asset pool as an overall pool. The Court in most cases adopts the global approach.

The other approach that may be adopted by the Court is an “asset by asset” (or “two pool”) approach. That is, for example, that inheritance should be regarded as a financial resource. It is excluded from the asset pool and considered separately from the other assets. This is not commonly applied. However, as this article will show, the Court has considered the “asset by asset” approach in some cases, including those in which an inheritance has been received either very late in the relationship or, more commonly, after separation. For this approach, the assessment of contributions to the particular asset (the inheritance) is considered separately.

The approach taken by the Court is a matter for its discretion.

Inheritance Received During the Relationship

In general, and remembering each matter is individual on its facts, if an inheritance is received whilst the relationship is still on foot, this is treated as a financial contribution by the party who received the inheritance to the joint asset pool (“the recipient”).

As foreshadowed, the timing is important. If the inheritance is received early in the relationship this may be categorised as an initial financial contribution by the recipient. However, over time, for example a 25-year marriage, the weight given to that initial contribution will lessen and may have little or no effect on the division of the property pool, dependent upon the time that has passed and the quantum of the asset. In a shorter relationship, the existence of an initial contribution of an inheritance is likely to increase the recipient’s percentage entitlement to the overall assets of the relationship.

Inheritance received post-separation

If one party receives an inheritance post separation, those monies may be considered as a financial resource rather than an asset. That is, the monies received should not be included in the asset pool to be divided but should be taken into account as a “future needs” factor (under Section 75(2)). This means that the recipient has a resource that they may draw upon to meet their future needs as opposed to the non-beneficiary party. Dependent upon the facts, it is arguable that the non-beneficiary party may then receive a greater percentage of the divisible asset pool.

Relevant Cases

Calvin & McTier (2017) FamCAFC 125

The Full Court decision of Calvin & McTier was an appeal from the Magistrates Court of Western Australia in relation to property proceedings. The parties were married for eight (8) years, separated in 2010 and divorced in 2011. There was one child of the marriage who was cared for by both parents equally from separation. At commencement of cohabitation, the Wife had no assets of significant value. The Husband owned two properties, a car, shares and superannuation entitlements. During the marriage, the Husband was the primary income earner and the Wife was the primary homemaker. Proceedings were commenced in January 2015 by the Wife (after leave was granted to pursue property proceedings out of time). In January 2014, four (4) years after the parties had separated, the Husband received an inheritance from his father’s estate. The Husband’s inheritance accounted for approximately 32% of the net asset pool available for division between the parties.

The Trial Magistrate adopted a global approach to the asset pool, including the Husband’s inheritance and ultimately awarded 65% of the total asset pool to the Husband and 35% to the Wife.

The Husband appealed the Trial Magistrate’s decision to the Full Court of the Family Court of Australia.

The appeal was primarily focused on whether the Judge erred by including the Husband’s post-separation inheritance within the asset pool. The Husband argued that the inheritance should be excluded from the asset pool as there was no clear “connection” between the inheritance and the parties’ marriage. The Full Court rejected that argument and concluded that the Court has the discretion as to how to approach the treatment of property acquired after separation. The Husband’s appeal was dismissed with costs.

This decision clarifies that the Court retains a very wide discretion as to how property matters may be dealt with and particularly, how the Court deals with property acquired after separation separately (asset by asset approach) or altogether (global approach).

Holland & Holland (2017) FamCAFC 166

Conversely to Calvin & McTier, in this matter, the Court in the first instance held that the inheritance was not included in the asset pool. This changed on appeal.

In this case, the parties were married for 17 years, separated in 2007 and divorced in January 2012. At the time of the Hearing, there were two dependant children aged 14 and 17. The asset pool included an encumbered property with equity of approximately $140,000. Prior to separation, the Husband was running his own business in which he and the Wife were joint partners. After separation, the Husband became the sole business owner and the Wife and children had occupation of the matrimonial property. The Husband continued to pay the mortgage for the property from 2007 to 2009, after which, the Wife moved out into rental accommodation and the house was rented out to a third party. The Wife paid for renovations for the property so that the property could be tenanted and from that time, paid the mortgage and other expenses.

In February 2011, the Husband received an inheritance from his late brother’s estate, being a property valued at approximately $715,000 (with mortgage of approximately $83,000). The Husband’s parents subsequently paid out the mortgage, effectively leaving the Husband with an unencumbered property to the value of $715,000.

The net asset pool of the parties, including the Husband’s inheritance, totalled around $1.1 million.

The Trial Judge held that the inheritance was a financial resource of the Husband and whilst she indicated an intention to deal with the asset pool on an “asset by asset” basis, which would in effect mean a “two pool” approach, Her Honour adopted a global approach to all other assets but excluded the inherited property altogether from consideration of assessment of contributions by the parties. Her Honour, after excluding the inherited property, found that the parties’ contributions were equal and ultimately made Orders providing for the Wife to receive 62% of the total asset pool (excluding the inherited property) and 38% of the pool (plus the inherited property) to the Husband.

On appeal, the Wife argued that the inheritance should be included as an asset of the parties as it was property of the parties of the marriage and the Trial Judge had failed to treat it as property by excluding it from the pool of assets and by treating it as a financial resource of the Husband only. The Full Court found that the Trial Judge had erred in excluding the inherited property from an assessment of contributions and noted that the Trial Judge should have assessed the contributions of the whole approximate 17 year cohabitation and the 8.5 years post separation. The Full Court reiterated the view that it is incorrect to exclude property from consideration as part of the asset pool. The Wife was successful on appeal.

Summary

Calvin & McTier reiterates the Court’s wide discretion when addressing contributions made by parties during a relationship or after separation. The Court may adopt a global or asset by asset approach. The source and timing of the inheritance is important; that is, whether it was received early in the relationship, late in the relationship, immediately after separation, or a significant period after separation when the parties were living independent financial lives. Importantly, post-separation inheritances cannot be excluded entirely.

Post-separation assets and how they are treated or assessed will vary with the circumstances of each case. The law pertaining to the division of assets under the Family Law Act 1975, is complex given the varying interpretations of the Court of the relevant statutory provisions.

To discuss your property settlement matter given those complexities, please contact our offices for advice from our experienced family law team.

5 June 2019

Obligation for Employers’ to have Workers Compensation Policy




Written by Montana Messina

An employer has an obligation to hold a valid policy of insurance when employing workers, except in certain circumstances.

If a worker suffers a workplace injury or illness, the worker is entitled to make a claim for compensation.

If the Workers Compensation Nominal Insurer determines that the employer did not hold a valid policy, is not considered an exempt employer and there is no dispute that the worker was an employee and was injured at work, the Nominal Insurer may issue a notice under section 145 of the Workers Compensation Act 1987 (“the Act”). The 145 Notice requires an employer to reimburse the Nominal Insurer for any payment made to a worker in respect of a claim.

Once served with a 145 Notice, if the employer seeks to appeal their liability to reimburse the Nominal Insurer, the employer must file an application to appeal the 145 Notice with the Workers Compensation Commission (“the Commission”) within the prescribed time limit.

If an employer disputes liability to reimburse the Nominal Insurer on the basis that they are were an employer exempt from having to obtain a policy of insurance, the onus is on the employer to prove exemption status, at the relevant time

Pursuant to section 155AA of the Act, an employer is considered an exempt employer and not required to obtain a policy of insurance, if during the financial year, the employer has reasonable grounds for believing that the total amount of wages that will be payable by the employer during the financial year to the workers employed by the employer will not be more than the exemption limit for that financial year.

The exemption limit for a financial year is specified as $7,5000 under the Act. An amount of wages actually payable will not be determinative when making an assessment of what will be payable. There is no requirement under the Act for retrospective consideration of evidence of wages paid.

Determining whether an employer had ‘reasonable grounds,’ as noted by this section of the Act, requires an objective test to be applied, as set out in the case of Kula.

This was affirmed by the High Court in Rockett which unanimously held that “there must be ‘reasonable grounds’ for a state of mind…it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person”.

The relevant question for determination for the Commission is whether the employer can establish, on the balance of probabilities, that at the time of injury, the employer had reasonably objective grounds for believing that the total amount of wages payable to a worker during a financial year would not exceed $7,500.

The employer can provide evidence as to various factors to demonstrate their exemption status, such as:

  1. Employment contract;
  2. Classification of worker;
  3. Commencement of employment;
  4. Expected duration of employment;
  5. Remuneration;
  6. Termination of employment;

However, it is ultimately for the Commission to determine whether an employer is considered to be an exempt employer at the date of the injury and liable to reimburse the Nominal Insurer.

Settling the matter with the Nominal Insurer prior to determination by the Commission in relation to a current 145 Notice, does not preclude the Nominal Insurer from issuing a further 145 Notice to an employer to reimburse the Nominal Insurer in the future. Further queries and payments made to or on behalf of the work for the same injury.

If the Commission determines that an employer is not an exempt employer pursuant to section 155AA of the Act, the employer is precluded from asserting that it is an exempt employer in relation to future 145 Notices issued by the Nominal Insurer that relate to the same worker and injury.

We strongly recommend that you take out workers compensation insurance even if you do not think you will pay more than $7,500 in wages.

29 May 2019

Spousal Maintenance




Written by Danielle Rosano

Obligations to Pay Spousal Maintenance under the Family Law Act 1975 

Pursuant to the Family Law Act 1975 (“the Act”), a party may be required to provide financial support to their former spouse or partner in certain circumstances if the other party is unable to adequately support themselves.

The issue of spousal maintenance is distinct from, and separate to, a property settlement and payment of child support.

Although there is no automatic right to spousal maintenance, it is important to bear in mind that the Act does impose an obligation on parties to financially support their former spouse or partner in certain circumstances, even after divorce or separation. The obligation to pay financial support to another party applies whether or not you and your former partner were married or in a de facto relationship.

The extent of any financial support that may be required to be paid by way of spousal maintenance depends on the capacity of the paying party and the reasonable needs of the other party.

In considering whether one party is liable to pay the other party spousal maintenance, the Court will consider various factors that may apply to both parties, including as follows:

  1. The income and of both parties;
  2. The age and health of each party;
  3. The ability of each party to engage in gainful employment;
  4. What a suitable standard of living is;
  5. Whether the relationship or marriage has impacted upon one party’s ability to earn an income and engage in gainful employment; and
  6. Which party any child and/or children of the marriage or relationship reside with.

If a party claiming spousal maintenance re-marries the Court will generally terminate  the obligation of the other party  to pay spousal the maintenance, however, in some rare circumstances, the Court may determine that the obligation should still continue even if the party in receipt of spousal maintenance has remarried.

Similarly, if the party in receipt of spousal maintenance enters into a new de facto relationship, this will not necessarily mean that the obligation for spousal maintenance is automatically terminated, although again the obligation is unlikely to be continued other than in rare circumstances.

In broad terms, to determine whether the obligation for spousal maintenance should cease if the party in receipt of spousal maintenance enters into a new de facto relationship, the Court  will generally examine the financial relationship between that party and their  new de facto partner in assessing whether that party can adequately support themselves.

Spousal maintenance can be paid as a periodic weekly, monthly or annual amount. Alternatively, spousal maintenance can also be paid by way of a one-off lump sum payment to the party in need.

If you are not able to reach an agreement with respect to spousal maintenance on a negotiated basis with your former spouse or partner, then you can apply to the Family Courts to seek a Court Order for the payment of spousal maintenance.

If you intend to make an Application for spousal maintenance in the Family Courts, it important that you are aware that under the Act, there are strict timeframes for the filing of such Applications.

In the event of a marriage, any Application for spousal maintenance must be filed with the Family Courts within 12 months of a divorce order becoming final.

In the event of a de facto relationship, an Application for spousal maintenance must be filed with the Family Courts within 2 years of the date that you and you and your partner separated on a final basis.

If you do not file an Application for spousal maintenance with the Family Courts within the timeframes specified above, then you need to seek the Court’s permission to file your Application ‘out of time’ before the issue of spousal maintenance can even be determined by the Court.

Although the Court will grant such permission in certain circumstances, this is often a difficult threshold test to meet. Accordingly, it is always prudent to ensure that you file any Application for spousal maintenance within the relevant timeframes provided for in the Act.

If an order for spousal maintenance has been made by a Court and you fail to comply with that order, then on the application of the party to whom the maintenance is owed the Court can take steps to enforce your obligation to pay spousal maintenance and may also impose other consequences or penalties upon you.

In the event you believe that you may be eligible to receive spousal maintenance or that you may be held by a Court to have an obligation to pay spousal maintenance, then it is important that you obtain independent legal advice in relation to your, or your spouse’s, potential claim for spousal maintenance.

20 May 2019

Homemade Will with deficiencies an expensive mistake




Written by Janine Foo.

Often people find estate planning confronting, daunting and potentially costly when consulting advice from a wills and estates lawyer.

Having a proper estate plan prepared on the advice of professionals can ensure your assets that you worked your entire life building are properly safeguarded and distributed in accordance with your intentions in a timely manner, upon your death.

A well thought out estate plan minimises the risk of your loved ones going through emotionally taxing legal proceedings, delays in receiving their provisions under your will and your estate paying significant legal costs that would diminish the value of your estate.

 

The Homemade Will and the consequence

In the case of Re Hely; Application by Arbuthnot & Donoghue [2018] VSC 614, Daryl Hely (“the deceased”) left an estate worth $25,043,551.57 and a Will dated 2 December 2016 with deficiencies that were prepared by and with the assistance of his daughter, who was not a lawyer and did not have any expertise in drafting Wills.

Sometime in late 2014, the deceased engaged a lawyer to prepare his Will. This Will comprised of seven testamentary trusts for his seven children, specific cash gifts to his grandchildren, capital gains tax and the distribution of the residuary estate.

 

The deficiencies in the Homemade Will

On 2 December 2016, without the assistant of a lawyer, the deceased crossed out clauses in his 2014 Will and told his daughter to simplify his will and type up a new one. Much to the detriment of all the beneficiaries in the deceased estate, the executor was unable to administer the estate until an application was made to the Victorian Supreme Court to rectify the Will. The following are the deficiencies in the deceased 2 December 2016 Will which the executors sought to be rectified with the Victorian Supreme Court:

  1. Seven testamentary trusts with no named beneficiaries;
  2. Cash gifts “up to a maximum of” a specified amount was ambiguous and the executors had no understanding of how much the cash gifts should be made out for;
  3. Capital gains tax liability was unequally distributed amongst the beneficiaries;
  4. Cash gifts made out to the grandchildren had vesting ages that were inconsistent between two clauses in the Will; and
  5. There was uncertainty on what formed part of the residuary estate.

 

The Take Away

The legal proceedings brought by the executors to rectify the 2 December 2016 Will was costly on the estate, caused extensive delay in the distribution of the estate to the beneficiaries, and unnecessary added stress to all parties involved. This could have all been avoided if proper legal advice was sought in putting together an estate plan.

At the end of the day, have a professional draft your will with your intentions can provide you with the peace of mind of knowing that your estate will be properly administered upon your death.

16 April 2019

Transition To E-Conveyancing




Written by by Leah Hynes

Electronic Conveyancing (or e-Conveyancing as it is commonly referred too) has been implemented by the NSW Government over the course of the last 5 years. Secure online processes have been introduced and will replace the traditional manual and paper processes involved in current property transactions within NSW.

Currently there is only one electronic platform capable of undertaking the preparation and lodgement of electronic documents, together with processing and finalising Financial Settlements. The system is called ‘Property Exchange Australia Limited’ or PEXA in short.

 

THE E-CONVEYANCING TIMELINE

On 8 October 2013, e-Conveyancing commenced in NSW by inviting a small number of Banks to start transacting on PEXA by allowing the preparation and lodgement of Mortgages and Discharge of Mortgages to take place electronically. From September 2014, practitioners were also invited to join the PEXA platform to begin to lodge documents electronically.

From the end of 2014 until early 2016, PEXA used that time to review, obtain feedback and transform the platform into a more streamlined and user-friendly platform. NSW Land Registry Services, who were formerly known as Land & Property Information Services NSW, started informing practitioners of the upcoming mandate dates for electronic lodgement to take place in NSW.

From 28 February 2017, the NSW Government released the “100% digital timeline” and confirmed its plan for the introduction of paperless conveyancing, committing to a final date of 1 July 2019. It was advised that all paper transactions in NSW would be conducted electronically and all paper Certificates of Title would be phased out by this date.

In March 2018, all Refinances, standalone Mortgages and standalone Discharge of Mortgages were required to be lodged online. This was quickly followed by the requirement for all Caveats, Withdrawal of Caveats and standalone Transfers to be lodged online from 1 July 2018. One of the most important changes in this process was the elimination of the clients to sign the documents which are being lodged. Clients are now required to sign a Client Authorisation Form and have their Identity verified to allow a Practitioner to sign and lodge the documents electronically on behalf of the client.

We are advised that all Transfers, Mortgages, Discharge of Mortgages or any combinations of these which affect the same title, must be lodged electronically when signed on or after 1 July 2019, except when lodged with another dealing which cannot be lodged electronically. e.g. Transfer including Easement. All sales, purchases & refinances which include a financial settlement will be required to be processed online from 1 July 2019.

 

WHAT I NEED TO KNOW AS A CLIENT

Certificates of Title

A fundamental change in e-Conveyancing is the conversion of a paper Certificate of Title to an electronic Certificate of Title, also known as an e-CT. As mandated by the NSW Government, all Certificates of Title held by Mortgagees have now been converted to electronic Certificates of Title.

If you are holding an original Certificate of Title in safe keeping, it is important you provide this to your Solicitor or Conveyancer so that they can verify whether your Title has been converted to an e-CT. Once the conversion has taken place, a paper Certificate of Title holds no further value or use.

 

Client Authorisation

In e-Conveyancing, you will not be able to access the PEXA Platform to sign an instrument or document. Your practitioner will require you to sign a Client Authorisation Form which provides your Solicitor or Conveyancer with the necessary authority to sign the documents on your behalf. In addition to the Client Authorisation Form, you will be required to undertake a Verification of Identity.

 

Verification of Identity

In PEXA, it is the responsibility of the Practitioner to verify the identity of the clients they represent. This is an integral part of each e-Conveyancing transaction and is designed to ensure that all parties transacting in the Workspace can be confident that the person with whom they are dealing with is indeed the person entitled to deal with the subject property.

As e-CTs are now being issued by the NSW Land Registry Service, it is more important than ever to ensure the identity of the transacting parties. The paper Certificate of Title was traditionally known as the “Proof of Ownership”. Without a paper Certificate of Title to provide, it is necessary to further prove your entitlement to deal with the property in question.

Our office is equipped to undertake the Verification of Identity in house or even remotely if you are unable to attend the office. Our office is also registered with Australia Post, who are also able to undertake the Verification of Identity process with you and submit it directly to our office.

 

Security

As a PEXA member, our Firm is required to meet and maintain a certain standard of Security when using the PEXA platform. PEXA uses an advanced encryption mechanism to protect all information and ensure the integrity and confidentiality of the data on the PEXA Platform.

Encryption is also used by all financial service providers to protect and maintain all customer data. Digital Certificates are used to electronically sign documents in PEXA on behalf of our clients and eliminate the need for a physical signature. Within Uther Webster & Evans, these Digital Certificates are only held by 3 Firm Directors and our 2 Licensed Conveyancers.

 

Benefits of e-Conveyancing

In 2017 the NSW Government commissioned an independent KPMG Report on the e-Conveyancing System in NSW to analyse the benefits of the platform. The Report found the main benefits to be noted as follows:-

  • Time – Lodgement by way of PEXA saved practitioners an estimated 65%-70% of time spent following exchange of Contracts.
  • Costs – Whilst there is a fee to use the PEXA platform, the use of the system avoids a number of costs which would otherwise be incurred such as final searches, settlement attendance (and reattendance) fees, bank cheque fees etc.
  • Certainty – The platform has been found to provide enhanced productivity, reduced risk of failed or cancelled settlements, greater transparency between the parties and greater flexibility ensuring a smoother transaction and a higher Settlement completion rate.
  • Access to Funds – Following Settlement, the funds are electronically transferred and received immediately by the Vendor, the Council, Sydney Water and any other accounts required to be paid.
  • Risk – Immediate electronic lodgement of the Transfer of Land on Title following Settlement eliminates the risks associated with legal ownership and the risks involved in the current paper registration process.

 

Outcome

The adoption and integration of e-Conveyancing has been a long process and we are still a year away from truly experiencing the full impact of this system. However, from our experience so far, the benefits are undeniable. The electronic process saves time, reduces the risk of fraud and forgery and allows our Property Team more time to focus on better quality client relationships through improved delivery of services.

 

15 April 2019

Changes To Sentencing New South Wales




Written by Paul Crean, Senior Associate

The sentencing laws for courts dealing with offenders in New South Wales were overhauled in September 2018. The overall objective in the reforms was to ensure community safety by properly holding offenders to account and to assist in the problem of re-offending.

 

Summary Of The Changes To Sentencing

  • Suspended Sentences have been abolished
  • The Intensive Correction Order (ICO) provisions have significantly changed. The courts now have greater flexibility to add additional conditions such as home detention and electric monitoring
  • Courts are to be equipped with better information about offenders at the time of sentencing
  • There is now a presumption that Domestic Violence Offenders are to receive a supervised community based sentenced or are to be imprisoned (unless the court has clear reasons why another sentence is more appropriate)

 

The New Sentencing Scheme In Practice

Conditional Release Order (CRO)

CRO’s have been introduced and replaced good behaviour bonds which were previously dealt with under a Section 9 or Section 10 (1)(b) the Crimes (Sentencing Procedure Act) 1990. A CRO must include two (2) standard conditions and a court may add additional and further conditions. The CRO cannot exceed two (2) years.

The two (2) standard conditions are:

  • The offender must not commit any offence during the period of the order; and
  • The offender must appear before the court if called to do so at any time during the order.

In regard to Domestic Violence Offenders, CRO’s can only be used if the order includes a supervision condition and the court has considered the safety of any victim of the offence(s).

 

Community Corrections Order (CCO)

For more serious offences, the courts can sentence by way of Community Correction Orders (CCOs). These are seen as a more flexible order and an alternative to custody with the idea that offenders can receive supervision to tackle their offending behaviour.

Similar to CRO’s, CCO’s must include two (2) standard conditions and may be subject to additional and/or further conditions. The two (2) standard conditions are:

  • The offender must not commit any offence during the period of the order; and
  • The offender must appear before the court if called to do so at any time during the order.

They cannot exceed three (3) years. Again, in relation to Domestic Violence Offenders, can only be made if the order includes a supervision condition and the court has considered the safety of any victim of the offences.

 

Intensive Correction Order (ICO)

If court sentences an offender to imprisonment the court may order that the sentence be served in the community by way of Intensive Correction Order (ICO).

The amendments to the ICO provisions provide the court with further discretion to tailor particular conditions of the ICO to the individual offender. The ICO is subject to two (2) standard conditions and the court must impose at least one (1) additional condition (which may include home detention).

Importantly, ICO’s are not available for offenders that have been convicted of (including but not limited to the following):

  • Murder or Manslaughter
  • Prescribed Sexual Offence
  • Discharge of a firearm
  • Terrorism offences
  • Breaches of serious crime prevention or breaches of public safety order.

In relation to domestic violence offences, the court must not impose an ICO unless it is satisfied that the victim of the domestic violence offence and any other person whom the offender is likely to reside will be adequately protected.

Further, if court finds a person guilty of a Domestic Violence Offence, the court must not impose home detention condition if the court believes the offender will reside with the victim.

Should you have any comments on the changes to the Sentencing Regime, please do not hesitate to contact the team at UWE.

15 April 2019

Family Provision Orders And The Interests Of Beneficiaries




Written by Patricia Jane Muscat, Associate

Chapter 3 of the Succession Act 2006 (NSW) (“the Act”) enables certain persons, who fall into defined classes of eligible persons, to institute proceedings seeking an order that provision, or further provision, be made for them out of an estate of a deceased person. This type of order is called a Family Provision Order.

In the years 2016, 2017 and 2018 a total of 2,972 applications were filed in the Supreme Court of New South Wales seeking a Family Provision Order. In the same period, 3,040 Family Provision matters were disposed of. The vast majority of disposals were by way of settlement (as opposed to the Court giving judgment after a fully-contested hearing).

Whenever a Family Provision Order is made in favour of an applicant, either by way of settlement or contested hearing, there will inevitably be someone who bears the burden of that provision being made.

Section 65(1)(c) of the Act identifies that a Family Provision Order must specify the part or parts of the deceased’s estate out of which it is to be provided.

Section 61(1) of the Act identifies that the Court cannot disregard the interests of the other beneficiaries of the estate when making a Family Provision Order.

Section 66(2) of the Act enables the Court to adjust the interests of any person affected by a Family Provision Order as considered necessary, and enables the Court to “be just and equitable to all persons affected by the order”.

In Hoobin v Hoobin [2004] NSWSC 705, White J indicated that, when assessing how the burden of a Family Provision Order ought to be borne, the Court has a wide discretion, which should be exercised having regard to rules of reason and justice with due regard to the whole of the surrounding circumstances.

In State of Victoria v Sutton [1998] HCA 56, at [77], McHugh J said:

“The rules of natural justice require that, before a Court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order.”

Two recent cases of the Supreme Court have dealt with the issue of how the interests of affected beneficiaries are accounted for when making a Family Provision Order.

In Webster v Strang; Steiner v Strang (No. 2) [2018] NSWSC 1411, Kunc J was called upon to consider how the burden of Family Provision Orders made in favour of an adult daughter and an adult son out of the estate of their late mother ought to be borne.

Each of the son and daughter, who received a legacy of $2,000,000.00 under the Will of the deceased (in an estate in excess of $14,000,000.00) received further provision.

 

The Court found that the daughter should receive $1.2 million in addition to the legacy made to her under the Will. In the primary judgment, the Court found that the additional sum ought to be borne in first instance between her children and grandchildren. The Judge considered relevant:

  1. What would be least disruptive to the overall scheme of the Will; and
  1. Duly recognising the deceased’s allocations between different family groups in the Will.

In argument as to why the children and grandchildren of the daughter ought not bear the burden of the provision, Senior Counsel made a submission to the following effect:

“The starting point of any analysis for the burden of Robyn’s increased provision should be the identification of which beneficiaries will be least affected by having their benefits under the Will reduced. Combined with this is the over-arching consideration stemming from the parens patriae jurisdiction that the Court should be jealous to protect the interests of minor children at the expense of claims by their parents and relatives.”

The Court found:

  1. In making a Family Provision Order, the Court is not exercising its parens patriae It is exercising a statutory jurisdiction pursuant to the terms of the Act.
  1. The proposed approach (using, as a starting point, which beneficiaries will be least affected by having their benefits disturbed) risks creating a presumption which ignores the complex, fact based, evaluative exercise which the Court must undertake, and must be rejected.

In Sackelariou, Edward v O’Donnell; Sackelariou, George v O’Donnell [2018] NSWSC 1651, Hallen J was called upon to deal with an application by beneficiaries of an estate proposed to be affected by Family Provision Orders agreed at a mediation as between the executor of the estate and the two applicants.

The resolution reached between the executor and the applicants involved the relevant beneficiaries (four step-grandchildren of the deceased) contributing $62,500.00 to the settlement of the applicants’ claims.

The beneficiaries indicated that they did not consent to the settlement or to the way in which it affected them.

In all of the circumstances of the case, and taking into account the evidence before him, his Honour concluded that he could not be satisfied that the step-grandchildren should bear that portion of the provision agreed to be made in favour of the plaintiffs.

His Honour referred to a number of matters, which should be of assistance to practitioners. These include:

  1. Enquiries ought to be made of all the beneficiaries of an estate whose interests may be affected by a proposed Family Provision Order.
  1. They should be given an opportunity to be heard, including advancing any competing claim (financial or otherwise).
  1. Consideration ought to be given to alternatives available in relation to how the burden of the provision ought to be borne. Parties should weigh up these alternatives, preferably on notice to all affected beneficiaries, to ensure that the settlement reached is consented to globally.

By taking these matters into account, those involved in Family Provision matters can avoid settlements being stymied at a later date by non-consenting affected beneficiaries.

23 October 2018

Proposed Amendments to the Family Law Act/Domestic Violence




Written by Montana Messina.

Family Court and Family Violence:

A recent parliamentary inquiry into the Family Law system has examined the effectiveness of current practice and procedures in the Family and Federal Circuit Courts, and the family law system more broadly, involving families appearing before the Courts where one or more party is self-represented and where there are allegations or findings of family violence.

Family violence became a focus for policy and law reform after a number of reports highlighted the extent to which family violence applied to adults and children post-separation.

Studies have concluded that elements of power and control are at the centre of family violence. Family violence is recognised as a means of asserting dominance and control in a relationship, with a variety of physical and non-physical mechanisms being used by the perpetrator. The definition of family violence in the Family Law Act, 1975 (“the Act”), was accordingly amended and expanded in order to recognise additional circumstances or behaviours that constitute family violence, including non-physical abuse and behaviour that is designed to control, coerce or create fear.

 

Intersection of Family Violence and Self Represented Litigants:

The expanded definition of family violence in the Act created greater awareness of the issue amongst practitioners and other professionals engaged in the court system, however it did not alleviate practical difficulties. There is an increasing trend for self-representation in state and federal courts and it is not uncommon for at least one party to be unrepresented in family law proceedings. Self-representation poses many challenges for Judges, court staff and family law practitioners, and these challenges are made more difficult when there are allegations or findings of family violence in cases where one or both of the parties is self-represented. The difficulties are magnified in the family law context because of the personal nature of the issues considered or litigated in each case and the relationship between the parties to the litigation.

With an increased number of self-represented litigants and increasing disclosure of family violence by parties in family law matters, the difficulties in relation to cross-examination have been highlighted. It is a fundamental right of a party in the justice system to cross-examine a witness in their case.  However, cross-examination of a former partner or spouse can further perpetuate abuse and control, regardless of intention.

If the perpetrator is self-represented, they have the right to cross-examine their ex-partner, a process that can be incredibly traumatic for the victim. This court process can be utilised by the perpetrator of family violence to continue their harassment, control and abuse.

If the victim is self-represented, this also poses a problem as they are expected to cross-examine the perpetrator. In this instance, their capacity to appropriately and fully question their former partner may be diminished or negated by their fear of the perpetrator.

The Court must balance procedural fairness and access to justice, a balancing act that is very difficult in cases where there is family violence and where one or both of the parties are self-represented.

 

Current Practice and Proposed Amendments:

Currently, allegations or findings of family violence do not prevent cross-examination of their former spouse or partner by self-represented litigants. Whilst the court can stop a witness from answering a question that is regarded as offensive, abusive or humiliating, a question must be answered if it is believed to be in the interests of justice. The court is bound by its obligation to provide procedural fairness to both parties in a trial and, in practice, the court can be reluctant on that basis to deny a party the right to cross-examine. Cross-examination plays an important role in testing evidence.

Direct cross-examination potentially exposes victims to re-traumatisation and can affect their ability to give clear evidence. As they stand, the current arrangements in court where one or more party is self-represented and there are findings or allegations of family violence are ineffective in protecting victims from further family violence, whether or not this is intended.  Victims are not protected due to the weight given to procedural fairness by the Court.

Currently, the Family Law Amendment (Family Violence and the Cross Examination of Parties) Bill 2018 is before the Senate. This Bill aims to ensure there are appropriate protections in place for victims of family violence during cross-examination in all proceedings by prohibiting direct cross-examination between parties where allegations of family violence are raised.

Specifically, and if passed by the Senate, the Bill will:

  • Prohibit personal cross‑examination where there is an allegation of family violence between parties and if any of the following applies:
    • either party has been convicted of, or is charged with, an offence involving violence, or a threat of violence, to the other party,
    • a family violence order (other than an interim order) applies to both parties,
    • an injunction under section 68B or 114 of the Act for the personal protection of either party is directed against the other party,
    • the court makes an order that personal cross-examination is prohibited.
  • Provide that, if personal cross‑examination is prohibited, cross‑examination is conducted by a legal representative.
  • Provide that, if there is an allegation of family violence but personal cross‑examination is not prohibited, the court applies other appropriate protections.

In proceedings where there are allegations or findings of family violence, cross-examination is to be conducted by a lawyer and, if necessary, a lawyer to be provided by Legal Aid.

This Bill aims to bring the Family Court procedure in line with other jurisdictions, such as the criminal law practice in New South Wales. It aims to balance the right to a fair hearing, with the critical consideration being the ability to test evidence, and the rights of the victim, in particular focusing on the need to reduce the potential distress and humiliation caused by direct cross-examination.

1 September 2018

What you need to know about the changes to the Retail Leases Act




Written by Joanne Keo.

On 1 July 2017, a number of changes to the Retail Leases Act 1994 (NSW) came into effect. This included the NSW Civil and Administrative Tribunal now having power to hear retail lease disputes for claims up to $750,000 and making decisions concerning rectification of leases and lessor disclosure statements. There are also a number of changes that concern both Landlords and Tenants.

What Landlords need to know:

Agreement to Lease

The Act now specifically applies to an agreement to lease of retail premises (Section 3B). The Landlord must provide the Tenant with a disclosure statement 7 days before an agreement to lease is entered into failing which the Tenant has a right to terminate the Lease within the first 6 months.

No undisclosed outgoings

A Landlord is required to provide full disclosure of any obligation of the Tenant to pay outgoings failing which the Landlord cannot recover from a Tenant any outgoings that are not disclosed (Section 12A). If an estimate of outgoings is specified in the disclosure statement and the actual amount payable is higher than the estimate, then the Tenant is only liable to pay the estimated amount unless the Landlord can prove that there was a reasonable basis for the estimate given.

Cannot charge Tenant Mortgagee’s consent fees

Section 14 and the definition of “lease preparation expenses” now clarify that a Landlord is not entitled to recover any expenses in connection with obtaining the consent of the Landlord’s mortgagee.

Copy of signed Lease

Section 15 now requires the Landlord to provide the Tenant with a signed copy of the Lease within 3 months after the lease signed by the Tenant is returned to the Landlord (or the Landlord’s lawyer).

Compulsory registration of the Lease

Leases for a term of more than 3 years (including any option term) must be registered by the Landlord within 3 months after the signed Lease is returned to the Landlord. Failure to do so will attract a maximum penalty of $5,500, (Section 16). This creates practical problems for Landlords with mortgages as mortgagees consent sometimes take months.

Bank Guarantee to be returned within 2 months

A Landlord must return a bank guarantee to the Tenant within 2 months after the Tenant has satisfied its obligations (as opposed to moving out) under the Lease that secured the bank guarantee (Section 16BA).

 

What Tenants need to know

Minimum 5-year term abolished

There is no longer an automatic right of Tenants to a minimum 5-year Lease term.

Expanded definition of outgoings

Section 3A revises the definition of outgoings to include fees charges by a Landlord for services provided by the Landlord for management, operation, maintenance or repair of the shop, building or land.

Excluded Retail Shops

Section 5(d) and Schedule 1A exclude certain uses from the Act including but not limited to ATMs, children’s rides, display of signage, internet booth, public telephones, private post boxes, storage licences and vending machines.

Compensation for Tenant who validly terminates in the first 6 months

A Tenant is entitled to recover compensation from the Landlord, including expenditure by the Tenant in connection with the fit-out of the premises, where the Tenant terminates the Lease during the first six months as a result of an incomplete, false or misleading lessor’s disclosure statement, or a failure to give the Tenant any disclosure statement at all (Section 11(2A)).

Exclusion from Turnover rent

Section 20 has been amended so that revenue from online transactions will be excluded from turnover rent except where goods or services are delivered or provided from or at the retail shop or if the transaction takes place while the customer is at the retail shop.

Demolition clarified

Section 35 now clarifies that the demolition provisions will apply if part of a building is to be demolished. The definition of ‘demolition’ has been widened as it no longer requires the repair, renovation or reconstruction to be ‘substantial’.

Assignment

Section 39(1)(e) now allows a Landlord to withhold consent to an assignment of lease that has been awarded by public tender if the proposed assignee fails to meet any criteria of the tender.

15 August 2018

How can I avoid a criminal conviction?




Written by David Quayle, Associate.

How can I avoid a criminal conviction if I have been charged with an offence, and if a conviction is recorded will this be on my record for life?

Having a criminal record can affect a person’s employment, overseas travel, obtaining certain licences such as firearms licences and insurance. As a result, it is inevitable that people charged with a criminal offence are concerned about the future impact that this may have on their life and career, beyond the sentence they receive from a Magistrate or Judge of the Court.

Sentencing options which involve no conviction being recorded

A ‘Section 10’ is one of a number of sentencing options which are available to a Court in New South Wales sentencing a defendant for an offence. This is a sentencing option which does not involve a conviction being recorded.

The legislation under section 10(1) Crimes (Sentencing Procedure) Act 1999 provides that without proceeding to conviction, a court that finds a person guilty of an offence may make any one of the following orders:

(a) an order directing that the relevant charge be dismissed,
(b) an order discharging the person on condition that the person enter into a good behaviour bond for a term not exceeding 2 years,
(c) an order discharging the person on condition that the person enter into an agreement to participate in an intervention program and to comply with any intervention plan arising out of the program.

In deciding whether to make an order under this provision the Court is to have regard to the following factors:

– The person’s character, antecedents, age, health and mental condition
– The trivial nature of the offence
– The extenuating circumstances in which the offence was committed
– Any other matter that the court thinks proper to consider

For Commonwealth offences, people should be aware that the equivalent legislation is Section 19B Crimes Act 1914 (Cth).

Importantly, whilst the above is a sentencing option that involves no conviction being recorded, you must be aware that it will still appear on a person’s criminal record history.

[Please note: Reforms to NSW sentencing laws are due to commence in September/October 2018 and the equivalent sentencing option under the new legislation will be a Conditional Release Order]

Criminal Records

A criminal record is an extract from a database which details a history of the offences a person has been charged, the date of those offences, the Court the matter was listed before and the sentence recorded.

Commonly, people question the period of time that offences will be on a person’s record.

Spent Convictions and the Disclosure of Convictions

The Criminal Records Act 1991 (NSW) is the relevant legislation for spent convictions and when a person is required to disclose any convictions that have been recorded against their name.

When a conviction is spent it means that a person is not required to disclose to any other person for any purpose information concerning the spent conviction. In this regard, any question concerning a person’s criminal history is taken to refer only to convictions (Section 12 Criminal Records Act 1991). This means, when a person is asked if they have any criminal convictions, they would only be answering yes if they have any convictions which are not spent. Accordingly, if the conviction is spent then the answer to that question would be no.

How long until a conviction is spent?

A conviction is spent on completion of the relevant crime-free period. The crime-free period is 10 years after the date of a person’s conviction (Section 9 Criminal Records Act 1991). Note: the crime-free period is 3 years for people sentenced in the Children’s Court.

All convictions are capable of spent, except:

(a) convictions for which a prison sentence of more than 6 months has been imposed,
(b) convictions for sexual offences (the specific offences are listed under Section 7),
(c) convictions imposed against bodies corporate,
(d) convictions prescribed by the regulations.

Employment in certain occupations/Applying for a working with children check clearance

If a person is applying for an appointment or employment as a judge, magistrate, justice of the peace, police officer, member of staff to Corrective Services NSW, teacher or teacher’s aide then they must disclose any conviction even if it is spent.

Similarly, if a person is applying for a working with children check clearance under the Child Protection (Working with Children) Act 2012 any conviction must be disclosed (s 15 Criminal Records Act 1991).

Please note if you have received a ‘Section 10’ for an offence and you are applying for one of the above positions or a working with children check, this will need to be disclosed despite no conviction being recorded. This is explained further below.

Non-recorded convictions (Section 10) and your requirement to disclose the offence

For the purposes of the Criminal Records Act 1991 the finding by a Court that an offence has been proved, or that a person is guilty of an offence, without proceeding to a conviction (i.e. if you are sentenced to a ‘Section 10’) then this sentence is treated as a conviction under this Act (s 5 Criminal Records Act 1991).

A sentence under s10(1) Crimes (Sentencing Procedure) Act 1999 will not mean you have a conviction recorded but for the purposes of the Criminal Records Act 1991 you will have to disclose this when applying for a working with children check or if you are seeking employment in certain professions.

Whilst a ‘Section 10’ is classified as a conviction in these circumstances, it will be spent either immediately following the decision of the sentencing Court or upon satisfactory completion of a bond if one is imposed (s 8 Criminal Records Act 1991).

Is a conviction wiped from a person’s criminal record history once it has been spent?

No. If a conviction is spent it means that it does not need to be disclosed (subject to the above exceptions). It will remain on your criminal record history despite the period of time that has passed.

What if I am charged with an offence and the charges are dismissed, will this be on my criminal record history?

Yes. Even if a charge is withdrawn by the police it will remain on your criminal record history. An option is to write to the NSW Police Commissioner on the basis that the charges have been withdrawn however its removal will be up to the Commissioner’s discretion.

15 August 2018

Should I Give a Director’s Guarantee?




Written by Gilbert Olzomer, Associate.

If you are a director of a company, your personal liability for transactions undertaken by the company is generally protected by what is known as the corporate veil. This means that should the company incur a liability, the rights of a creditor or plaintiff to take action are limited to pursuing the company only.

For this reason, many parties in commercial transactions and mostly those who are extending credit to corporations, seek personal guarantees from directors to secure that liability.

This arises because of the likely poor outcome a creditor will receive if a company is to enter liquidation, administration, receivership or otherwise be unable to pay its debts.

When will a Director’s Guarantee be sought?

A director’s guarantee will most likely be sought at the time an agreement for credit is entered into. Although the guarantee may appear as part of the documentation in a credit application, a guarantee, properly construed, exists as a separate agreement to a credit application/ credit agreement, comprising of different terms and between different parties, including the personal guarantors signing the document.

Most commonly, guarantees are sought to secure;
I. monies advanced under a loan;
II. credit provided for an ongoing trading relationship such as for the delivery of consumer goods like alcohol or milk; and
III. in tenancy agreements a guarantor will be required to guarantee payment and obligations of the company under the tenancy agreement.

If I provide the Guarantee, what does it mean?

A guarantee is a free-standing agreement and a guarantor will be bound (unless the guarantee can be set aside) by the terms and conditions contained in the guarantee to perform the outstanding obligations left by the company.

Where a guarantee is executed by two or more guarantors, a term commonly included is joint and several liability. This is where each guarantor is liable separately and also with the other guarantors for the principle debts owed by the company to the creditor. A creditor can pursue a single guarantor for the whole debt even in the presence of other guarantors having validly executed the guarantee.

“All monies” clauses are commonly included in guarantees in that a guarantor can be liable to a creditor, for a debt other than one to which the credit application relating to that guarantee specifically allows.

It is also important to note that guarantors may be liable for pre-legal recovery, collection and other legal costs incurred by the creditor in pursing the company/guarantor, as well as interest on outstanding amounts. This is often included in the form of an “indemnity” and in the case of small debts; the amount of interest, pre-legal recovery, collection and/or legal fees, could amount to more than the principle debt itself.

A guarantee may contain a charging clause which entitles the creditor to secure the guarantee over real property owned by the guarantor. This allows a creditor to register a caveat or mortgage over real property owned by the guarantor to secure the debt and without necessarily having first commenced proceedings. This will often act to stop the guarantor from selling or otherwise dealing with the property while the debt remains unpaid.

External Administration

Under section 440J of the Corporations Act a guarantee cannot be enforced during a period where the company is in administration, unless leave of the court has been granted.

Setting aside a Personal Guarantee

Because a guarantee is an agreement, it can be set aside and rendered void in the same way as other agreements.

These vitiating factors include:
– misrepresentation;
– misleading and deceptive conduct;
– mistake;
– duress;
– undue influence; or
– unconscionable conduct.

Further to this, section 7 of the Contracts Review Act 1980 enables a Court to set aside a guarantee if in the circumstances it would be unfair and unjust to enforce the guarantee. The most relevant application of the above vitiating factors is the rule in Yerkey -v- Jones (1939) HCA 3 (1939) 63 CLR 649 which was affirmed by the High Court in Garcia -v- National Australia Bank Ltd [1988] HCA 48.

The rule in Yerkey -v- Jones, is that equity will grant relief to a person who has signed a guarantee in support of their spouse’s business, if the following criteria are met:

I. the guarantor must be held to be a volunteer;
II. the company was wholly controlled and operated by the other spouse;
III. the guarantor did not stand to be benefit from the business transactions;
IV. the guarantee was sought by the spouse and without any direct dealings between the creditor and the guarantor; and
V. the guarantor did not understand the essential respects or nature of the guarantee and received no advice or explanation as to the type and extent of the agreement which was being executed.

Conclusion

In the current business climate creditors often find themselves the losers in insolvency and are unable to claw back funds from behind the corporate veil. With creditors becoming more risk averse, it only follows that where sophisticated creditors extend credit, guarantees will be sought.

It is often the case that if a guarantee is not provided, credit will not be extended, and your company’s chances of doing business with that creditor, will be impacted, if not prevented entirely.

If a guarantee is to be provided:

1. Ensure that a guarantee is capped to the smallest amount possible, which will minimise the amount sought down the track should the company fail to meet its obligations to the creditor.

2. Do not allow a charging clause.

3. Always ensure that once a business is sold or directors are changed, guarantees are withdrawn. The ways that a director’s guarantee can be withdrawn will depend on the terms and construction of the guarantee itself, however, always be sure to complete the withdrawal in writing and to get written confirmation or receipt from the creditor that the guarantee has been effectively withdrawn. It is often the case that until a guarantee is withdrawn, a person may still find themselves liable for debts of the company, even though their directorship and company involvement has ended.

4. Always seek prudent legal advice before signing any agreement including a guarantee.

If you have any questions regarding guarantees or if you are unsure whether you should provide a personal guarantee, please contact Uther Webster & Evans.

16 July 2016

Is Equal Shared Parental Responsibility the same as “Equal Time”




Written by Rachael Vincent, Solicitor

The short answer is “No!” Although often confused, equal shared parental responsibility and equal time are separate and distinct.

What is Parental Responsibility?

Parental Responsibility means “all the duties, powers, responsibilities and authority which, by law, parents have in relation to children”.  Parental Responsibility can be exercised solely or jointly. In the absence of any court order, parental responsibility is deemed to be joint (or “equal shared”), meaning that parents have to consult the other and make joint decisions in relation to major long term issues affecting their children.  Such major long term decisions can include:

  • Where a child goes to school;
  • What religion a child practices;
  • What surname a child has;
  • In the event that a child has major health issues, what treatment that child should receive and where they should receive it; and
  • Changes to the child’s living arrangements, for example, a proposed relocation to a new location making it difficult for the child to spend time with one parent.

What is Equal time? 

Equal time refers to a parenting arrangement for separated parents whereby children spend the same (or close to the same) amount of time with each parent. This is often on a “week about” basis, meaning during school term time, the children spend one week with one parent and then the following week with the other parent. There can also be other ways to divide the time evenly, depending on the parents’ and the children’s circumstances.

How do you get Equal Shared Parental Responsibility?

If there are no court orders or parenting plans in place, parents automatically have equal parental responsibility.

If, after having consulted the other parent, parents continue to have difficulty in making decisions relating to parental responsibility, there are avenues that parents can take without having to approach the Court. Local agencies can assist and offer mediation services to separated parents to discuss parenting arrangements and parental responsibility. Such agencies can include:

  • Relationships Australia;
  • Local Family Relationship Centres;
  • Catholic Care; and
  • Private Mediators.

It is a requirement that parents attend mediation prior to commencing Court proceedings, other than in cases where there is urgency or family violence. If no agreement can be reached at the mediation process it is open to either parent to file an Application with the Court.

In Australia there are two Courts that have the jurisdiction to make a parenting order, the Family Court, and the Federal Circuit Court. When making any parenting order in relation to children both courts operate on the presumption that it is in the best interests of the children for their parents to have equal shared parental responsibility for them.  In the case of Goode (No 2) [2007] FamCA 31, the presiding Judge stated:

“From the children’s perspective, I can only see good will come from their parents jointly exercising parental responsibility.”

Once a Court makes an order for equal shared parental responsibility the Family Law Act 1975 (“the Act”) then requires the Court to look at whether an equal time arrangement is “reasonably practicable” and “in the best interests of the children.”

Again, equal shared parental responsibility is not the same as equal time, rather it comes before an order for equal time is considered.

Parents who have equal shared parental responsibility for their children only have to consult the other in relation to major long term issues affecting the children, not simple day-to-day issues. Day-to-day issues include what the children have for meal time or whether they attend school excursions.

When might a Court not make an order for Equal Shared Parental Responsibility?

There are some circumstances where the Court may decline to make an order for equal shared parental responsibility, for example:

  1. Where there has been alleged violence that has continued since separation;
  2. Evidence of family violence or child abuse by the other parent where a parent or child reasonably fears for or is apprehensive about their personal wellbeing or safety.

Sometimes the Courts can decline to make an order for equal shared parental responsibility on the basis that communication between the parents is so bad that there can be no hope that they could effectively communicate to discuss major long term issues surrounding their children. The Full Court of the Family Court has said in relation to this:

“It appears to us that a parenting order, including an order for equal shared parental responsibility, must be in the best interests of a child, a court may in the exercise of its discretion find it inappropriate to make an order in certain circumstances. This could occur where, although there is no family violence or child abuse, the conflict or lack of effective communication between the parents is such that to properly exercise their equal shared parental responsibility they would be unable to comply with section 65DAC by consulting and making a genuine effort to reach agreement about major long term issues affecting their child or children. In other words, in these circumstances an order for equal shared parental responsibility would inevitably lead to further conflict and perhaps contravention applications, which conflict and/or ongoing litigation could be adverse to the child’s best interests.”

In the overwhelming majority of cases, however, the Court does make an Order for Equal Shared Parental Responsibility.

16 July 2016

Bank’s attempt at possession of an elderly couple’s home fails for ‘Unjust’ and ‘Unconscionable Conduct’




Written by Justine Taylor, Senior Associate

RHG Mortgage Corporation v Ianni [2014] NSWSC 849

His Honour, Davies J of the Supreme Court set aside a Loan Agreement and ordered that the Bank, RAMS, discharge the mortgage over the home of the elderly Defendants, on the basis of an Unjust Contract and Unconscionable Conduct.

UWE acted for the Defendants Mr. & Mrs Ianni, who were successful in defeating the bank.

History of Proceedings

The case has had a long history before the Court, in proceedings which were commenced by the Bank against the elderly couple back in 2008.  Sadly, Mrs Ianni passed away since the commencement of the proceedings.

The matter was first heard before His Honour Grove AJ who upheld the loan agreement. However the Court of Appeal, before Bathurst CJ, Basten JA and Tobias AJA (dissenting), set aside the Judgment of Grove AJ and remitted the matter for retrial.  The Court of Appeal held that His Honour’s finding as to the Mortgage Broker, Mr Famularo, being a reliable witness, was “glaringly improbable” and that the Court at first instance had overlooked incontrovertible facts.

The Facts

Mr. and Mrs Ianni, emigrated from Italy in 1954.  Mrs. Ianni had left school at the age of 8, worked for a year in a convent and married Mr. Ianni in 1960.  She could not read or write, although she could print her name and understand a few words in English.  Mr. Ianni worked as a painter and docker until retiring and also had poor reading and writing skills in English.

Mr. & Mrs Ianni gave a personal guarantee in 2000, over a loan from St George Bank to their son and daughter in law, who operated a business in Darling Harbor.  Mr. Ianni told the court that he had given guarantee limited to $100,000.

In 2005, the children refinanced in order to buy a property in Dural. On 14 September 2005, a Loan Application was submitted to RAMS in a 20 page fax by then Mortgage Broker, Mr. Famularo as Principal of Australian Mortgage & Business Finance Solutions.  The loan was for a term of 30 years, (by which time Mr. Ianni would have been 100 years of age). The purpose of the loan was stated in the application to be:

  1. the purchase of a property for $500,000,
  2. the refinancing of loans for $490,000 and
  3. costs for the financing of $10,000,

so that the total loan facility sought was $1,000,000.

The application contained a number of false statements:

  1. Firstly it annexed a contract of sale (referred to in the proceedings as the ‘Sham Contract’) so that it  appeared Mr. and Mrs Ianni Snr were the purchasers of the Dural Property for $500,000, when in fact their children were purchasing the Dural Property for $2.2 million.
  1. Secondly, the Loan Application attached a “Snapshot” of a St George Loan Statement that suggested Mr & Mrs Ianni Snr had received a loan from St George in their own names rather than as guarantors.
  1. Thirdly, the application stated that Mr. Ianni and Mrs Ianni were self-employed, earning an income of $85,000- $90,000, with assets exceeding 2.5 million which included a share in the restaurant business.
  1. The application was also submitted with false identification and passport numbers.

In fact, Mr. & Mrs Ianni were pensioners with no capacity to service any such loan, and Mrs Ianni did not hold an Australian passport.

The Judgment

His Honour noted that the Mortgage Broker, Mr. Famularo, had a copy of the real contract for the purchase of the Dural Property, because he had submitted a separate financing application with NAB on behalf of the children.

The Court found:

  1. The Bank had notice as to the age of the Applicants and the fact that this was a 30 year loan.
  1. Despite the Bank’s internal file notes, (indicating concern that Mr. & Mrs Ianni were not listed as self-employed “directors” and requesting that the statement of assets and liabilities be amended), the Bank proceeded on the loan.  The Bank never requested clarification as to the Applicants’ employment, and the Bank called no witness to give explanation.
  1. The Bank also proceeded on the loan on the basis that 100 identification points were held on file, yet the points held on file for Mrs Ianni added up to 60;
  1. The Bank proceeded on the loan despite the apparent deficiency between the amount required in the stated loan purpose as against the amount to be loaned.
  1. RAMS knew from the ‘Sham Contract’ that the property being purchased was said not to be part of the security for the loan being sought.  That was unusual because it strongly suggested that the property was not being purchased as an investment property.  The tax benefits that would have flowed from using that property as security for a loan made that clear, yet the Bank’s internal notes, in contrast, suggested that the property was being purchased as an investment.  Again no witness from the Bank was called by way of explanation.
  1. An inference was drawn by His Honour that in fact the Bank had notice, based on a water rates statement, that Mr. Ianni was a pensioner.
  1. It was apparent that the Bank overrode its own guidelines.

His Honour found the Mortgage Broker, Mr. Famularo, “to be a most unsatisfactory witness” and found it difficult to accept much of the evidence he gave.”  His Honour determined that some evidence from Mr. Famularo was “quite frankly unbelievable.”

In this most recent paradigm of David vs Goliath, the Court found that the contracts were unjust and had the bank done things that might, in the circumstances have been expected of a bank, they would have ascertained the improvident nature of the contract

The court also found that the Defendants were under special disability by reason of their age, language, education and economic background.

The Bank has filed a Notice of Appeal, to be determined next year. And so the proceedings continue to yet another round.

16 July 2016

Sham Trusts




Written by Justine Taylor, Senior Associate

SHAM TRUSTS

Trusts originated in late medieval England where a wealthy land owner (“The Feoffor”) would convey land to another trusted party (“The Feoffees to uses”) to hold the land as directed for the benefit of persons nominated. The object behind the predecessor to today’s modern trust was to allow land holders to make ‘wills’ for their land, which would automatically have otherwise passed to their heir, and normally the oldest son.

The modern trust is commonly utilised and has many advantages including taxation benefits, strategic estate planning which keeps assets outside a will, and of course, protecting assets from creditors.

However the trust structure is not safe from attack (just ask Gina Rinehart), and the Court will in some circumstances go behind a trust.

CONDON V LEWIS

The question of when the Court will consider a trust to be a “sham” was considered in the recent case of Condon v Lewis [2013] NSW CA 204. In that case the debtor, Colleen established a discretionary trust as the vehicle for the purchase of real property. Colleen was the Appointor (which is the person with ultimate control who decides who the trustee is) and the beneficiaries included herself, her daughters and her grandchildren. Colleen had established the trust and at the time the property was purchased told her accountant “I’m in a complicated court case. I’ve found property which I want to buy, but I want to keep it in my own name in the short term because of the court case”.

In 2005, Colleen amended the trust so that one of her daughters was the Appointor and she removed the corporate trustee and appointed herself personally as trustee. In 2006, proceedings between Colleen and her former husband were settled and a declaration was made that Colleen would hold the property as trustee of the discretionary trust and that it be transferred to her within 30 days.

Despite the 2005 deed of amendment and the settlement in 2006, it was not until 3 years later that Colleen transferred the property into her name as set out in the 2006 Order.

In 2009 and 2010, Colleen entered into a series of loans, secured over the property with no mention of her holding the property as trustee. Subsequently, Colleen’s daughter appointed a new trustee of the company, however the property was not transferred into the new trustee company’s name before Colleen was made bankrupt in 2012.

It is also noted that all funds purchased of the property were contributed to by Colleen personally.

The Trustee in bankruptcy asserted that the trust was a sham and was entered into so as to conceal fact that the property was actually owned by Colleen.

The Court of Appeal, held that the trust was not a sham and that whilst the trust had been established with the intention of protecting Colleen’s assets, it had been established with the intention that it should not have its apparent effect nor any legal consequence. “To say that a document or transaction is a sham, means that while professing to be one thing, it is in fact something different.”

The Court must essentially look to the circumstances in which the trust was created so as to ascertain the clear intention of the party in establishing trust.

The Court will only look behind a document or transaction if there is a “good reason to do so” so that there is effectively a presumption against the findings that a trust is a sham.

The Court also noted the distinction between sham trust and a trust which had been entered into specifically for the purpose of defrauding or defeating creditors.

FAMILY COURT

The Family Court is no stranger to looking towards the true nature and controller of a trust, and indeed the Family Court requires disclosure as to the Appointor and interest in any trusts so as to determine the true extent of matrimonial assets.

It is for this reason that, when establishing a trust, persons will often elect to put in place an alternative friendly Appointor to put distance between the person and the trust. Of course this ultimately has to be weighed against relinquishing true control of the trust.

In the Family Court, even an entitlement as a beneficiary under a trust can be a relevant consideration to the Court, as in the case of Read v Chang [2010] FAMCA 876, where a wife was the discretionary beneficiary of a trust which had assets of $630 million. In that case the Court held that “although the wife may only have a contingent entitlement and is no more than a member of a class of beneficiaries, the memorandum of wishes enlightens the Court as to future the wife’s economic circumstances”.

16 July 2016

RPS V R [2000] 199 CLR 620




Written by Christian McMahon, Solicitor

RPS v R [2000] 199 CLR 620

This is a High Court case where Uther Webster & Evans’ very own Vivian Evans represented the Appellant to successfully appeal the former decision of the NSW Supreme Court of Criminal Appeal.

The case primarily concerned itself with the giving of evidence and the Silence of the Accused (commonly referred to as an accused’s “right to silence”) and directions from the Judge given to the Jury concerning such a right. It clarified circumstances when a jury may take account of an accused’s failure to give evidence.

There were five particular disputed comments given by the Trial Judge to the Jury which became the determinative issue of these proceedings.

  1. Firstly, the judge told the jury that the appellant’s decision not to contradict evidence given by the complainant was said to be a partial admission and that it could be taken into account by the jury in “judging the value of or the weight of” the prosecution’s evidence.
  2. Secondly, the judge told the jury that in absence of denial or contradiction of the evidence given they could “more readily” accept that evidence.
  3. Thirdly, the judge instructed the jury that it may be reasonable in the circumstance for the jury to conclude that the absence of any evidence of the accused to contradict or deny the evidence given by the complainant could lead them more readily to accept the prosecution’s evidence.
  4. Fourthly, the Judge said the appellant’s decision not to give evidence could allow the jury to feel more confident in relying on the evidence given by the prosecution.
  5. Finally, the judge said that the absence of evidence from the accused meant that the version of events put in cross-examination of the witnesses for the prosecution was not supported by evidence.

Consideration of the trial Judge’s above directions about the absence of evidence from the accused was analysed with respect to s20 of the Evidence Act 1995 (NSW). That section provides:

“The Judge or any party (other than the prosecutor) may comment on a failure of the defendant to give evidence. However, unless the comment is made by another defendant in the proceeding, the comment must not suggest that the defendant failed to give evidence because the defendant was, or believed that he or she was, guilty of the offence.”

The respondent crown argued that the trial judges directions were no more than a “comment” with no such suggestion of the accused’s guilt.

It was held that the comments given by the trial judge contravened s 20(2) of the Evidence Act 1995 because they suggested that the appellant failed to give evidence because he believed that he was guilty of at least some of the offences concerned. It was wrong to say that the accused’s decision could allow the jury to feel more confident in relying on the prosecution evidence.

Furthermore, the High Court held that the disputed comments should not have formed part of the judicial commentary given in this case due to the accused’s “right to silence”.

This case helped clarify the scope of the power conferred on the Judge to give directions and ‘comments’ to a jury, by reason of S20 of the Evidence Act 1995 (NSW).

This case also led to the recent changes in the Law of the Right to Silence as a result of the Evidence Amendment (Evidence of Silence) Act 2013.

13 July 2016

Claw Back Provisions in the Bankruptcy Act




Written by Zachary Gazzard, Solicitor

What happens if a debtor attempts to divest their assets before they become bankrupt by selling or transferring the assets to a family member or friend? 

When a person is made bankrupt, a Trustee is appointed to administer the bankrupt’s estate and sell the bankrupt’s assets for the benefit of creditors. If a bankrupt dissipates assets that would have come under the Trustees control to distribute to the bankrupt’s creditors, the Bankruptcy Act 1966 (Cth) can enable the Trustee to apply for orders that the transaction is void, and thereby “claw back” the assets.

From how long ago can transfers by the debtor be “Clawed back”? 

Undervalued transactions – These are transactions within five years before the deemed commencement of the bankruptcy where a debtor sells or transfers an asset for less than its market value, of the asset or purchases something for consideration greater than it is worth.

There are different time periods for determining whether a person will have a defence to an undervalued transaction claim. Transfers that occur two years before the deemed commencement of bankruptcy are void against the Trustee if it can be shown that the bankrupt person was insolvent at the time. This period extends to four years if the transferee is a related entity of the bankrupt. The relevant period extends to five years unless the transferee can prove that the transferor was solvent at the time of the transfer.

If the transaction is void, the Trustee will need to repay any consideration given by the transferee for the transfer.

Certain transfers are excluded from the avoidance provisions and the transfer is also protected where the transferee acquired the property in good faith and provided market value for the transfer.

Transfers done with the intention to defeat creditors – These are transfers where the debtor transfers property primarily for the main purpose of preventing property from being divisible among their creditors, or to hinder or delay the property being made available for division among their creditors.

There is no time limit within which the disposition must have occurred.

A transfer of property from a person who later becomes bankrupt is void against their Trustee in bankruptcy if it can be shown that:

  1. The transferred property would probably have become part of the transferor’s estate or would probably have been available to creditors; and
  2. The transferor’s main purpose in making the transfer was to prevent, or delay the transferred property from becoming available to creditors.

If void, the Trustee in bankruptcy must repay any consideration given by the transferee for the transfer.

Preferential payments – These are transfers or payments made to unsecured creditors that result in a creditor receiving a preference over the remaining unsecured creditors at a time when the debtor was insolvent. The transaction must have occurred within 6 months prior to the deemed commencement of the bankuptcy.

It is a defence to a preferential payment claim if it can be shown that the person:

  1. was a purchaser, payee or encumbrance in good faith who gave consideration at least as valuable as market value and entered into the transaction in the ordinary course of business and did not know, or have reason to suspect, that the debtor was insolvent and that the transfer would give him preference, priority or advantage;
  2. has taken title in good faith and for market value through a creditor of the debtor;
  3. executed a conveyance, transfer, charge, payment or obligation pursuant to or under a maintenance agreement or order; or
  4. transferred the property under a debt agreement.

Some recent cases which illustrate how the claw back provisions in the Bankruptcy Act take effect are:

Nelson v Mathai (2011) 253 FLR 139; [2011] FMCA 686

A number of transfers were challenged under s 121 of the Bankruptcy Act 1966 (Cth). Where money of the transferor was used to purchase real property in the name of another person, it was held that such real property was, in substance, purchased by the transferor and transferred to the transferee and the applicant was entitled to recover the property. Alternatively, the applicant was entitled to recover the property as it was purchased entirely from the funds of the transferor and the funds could be traced to that property.

Sutherland v Byrne – Smith [2011] FMCA 632

A De facto couple had a financial agreement in place and bought property as joint owners. The couple separated after two years and sought to rely on the financial agreement to transfer the share of the male partner to Ms Byrne-Smith. The male partner filed for bankruptcy a few months later.

The financial agreement was held not to be protected as it was not an order of the Family Court. Transfer according to Financial Agreement was an undervalued transaction so could be set aside. It was not a transfer to defeat creditors as there was a relationship breakdown. The Court looked to the actual contributions to the acquisition and found the transfer to the extent of the male partners contribution to the property was void against the Trustee.

Official Trustee v Brown [2011] FMCA 88

Mr Daeveys made contributions to Ms Brown’s property prior to his three year bankruptcy. After he was discharged from bankruptcy, Daeveys applies for property settlement. The Trustee discovered his application for the property settlement.

The Trustee got Mr Daevey’s share in the property as Mr Daeveys had this interest at time of bankruptcy but failed to disclose it.