The Law Society of NSW Specialist Accredititation 

BLOGS

Any information contained in a blog on this website is general in nature only. The content of any blog posted below reflects information which is known to us as at the date of the posting of the blog. Please be aware that the law regularly changes. Please do not rely on the general information contained in the below blogs, instead we recommend that you contact us to obtain legal advice tailored to your own specific situation.

 

Jun23

Review of Discretionary Trust Deeds

Amanda Quin - Tuesday, June 23, 2020

If you hold or intend to hold real estate in NSW via a Discretionary Trust and wish to avoid foreign persons surcharges then you need to review your Trust Deed and if necessary amend your Trust Deed before 31 December 2020.

Foreign person surcharge land tax is an annual tax and it applies to real estate in NSW which is held by foreign persons. Likewise, foreign person surcharge duty is an additional stamp duty which foreign persons pay, when they purchase property in NSW.

Even though you may be an Australian citizen or permanent resident, if you hold property via a discretionary trust, then you need to be aware that all discretionary trusts are deemed to be a foreign person unless the trust deed has specifically and irrevocably excluded foreign persons from being eligible beneficiaries of the trust.

The NSW Legislative Council passed the State Revenue Legislation Further Amendment Bill 2020 on 18 June 2020.

This legislation specifies that 31 December 2020 is the deadline for you to review your trust deed and potentially amend it to exclude foreign persons, in order to avoid the need to pay foreign person surcharge land tax and foreign person surcharge stamp duty.

Accordingly,  assuming you are prepared to exclude foreign persons from being a beneficiary of your trust, then  you should review and where necessary have your Trust Deed amended before the deadline of 31 December 2020.

Please contact Andrew Graham (email amg@peacockes.com ) or Jeremy Tooth (email jrt@peacockes.com ) or phone our office on 02 6882 3133 if you would like our assistance to review your Trust Deed.

May13

Execution of Electronic Transactions

Amanda Quin - Wednesday, May 13, 2020

Blog authored by Andrew Cannon - Email: aac@peacockes.com
Electronic transactions, signing and the Electronic Transactions Act NSW and CTH

In these current uncertain times and restrictions with COVID-19, professionals are increasingly changing the way they think about communicating and transacting internally in the office and amongst wider colleagues electronically.

Electronic and digital documents and signing are, subject to legislative requirements, providing a real and flexible alternative to completing legal transactions electronically, particularly in the areas of conveyancing and real property. The convenience of near uniform legislation since 1999 known as the Electronic Transactions Act (theETA) ensures that a transaction under a state or Commonwealth law will not rendered invalid simply because a document was signed via electronic means. Courts are also increasingly aware of how electronic transactions and signatures are already a part of modern commercial life[1], as well as their significance to the future of “modern business practice”[2].

However, the ETA sets out three mandatory conditions in order for electronic signatures to be deemed effective. These conditions are:

1. Identity

- the person (signatory) must use a method to identify themselves and their intention;

2. Reliability

- the method used was as reliable as appropriate for the purpose of the electronic communication ( or proven in fact with further evidence); and

3. Consent

- the signatory (and any counter-signatories) must consent to the use of the electronic communication to fulfil the requirement and method of identification.

“Electronic” Signature and “Digital Signature” – What is the difference?

Whilst it is often the case that the terms “electronic signature” and “digital signature” are thought of and used interchangeably, it is important to note the distinction between them.

An electronic signature is essentially a signature on any electronic communication or document which DOES NOT have any physical verification or authentication on the document which it relates to. Such examples include inserting an electronic signature in a pdf letter or clicking an ‘I accept’ button online on a terms and conditions disclosure.

However, a “digital signature” is a type of electronic signature in which a verification element or authentication is provided on the document using specialised software integrated with a Public Key Infrastructure (PKI) system, to help ensure the security of the signatory’s identity, confidentiality and avoid issues surrounding document integrity and fraud.

An example of such a verification or authentication element is an DocuSign envelope ID or an AdobeSign transaction number, which are two well- known digital signing platforms. Most often, digital signing platforms provide a certificate of completion or similar certification or authentication after the completion of electronic signing. This certificate or authentication details and tracks the electronic ‘footprint’ of who, when and how a electronic document was created, sent, opened and signed, providing reassurance for clients and other signatories that the use of their electronic signature is confidential and secured.

Deeds and companies signing under s 127(1) of the Corporations Act – Issues?

Whilst NSW is currently the only state which permits deeds to be signed and witnessed electronically, regard should be had to the Law Society of NSW’s ‘FAQ on Electronic Witnessing of Signatures’. Witnessing electronic or digital signatures for deeds is legally and technologically complex, particularly also if one of the signatories is a company signing under s127(1) of the Corporations Act 2001 (Cth).

However, if electronic execution is required to occur pursuant to s 127(1) of the Corporations Act it may be prudent to consider some further practical measures such as:

  • Including an electronic execution clause and warranties as to the authority of the persons similar to the assumptions set out in s129(5) of the Corporations Act;
  • Requiring evidence of personal authentication of the officer signatories, and that a single electronic document was signed and witnessed; and
  • Requiring evidence of the identity and actual authority of the signatory or signatories to the relevant documents (eg board minutes or company resolutions).

In this respect, legal advice should be sought if you require either a document to be signed under section 127 (1) or a deed .

References

 

[1] C&P Syndicate Pty Ltd v Reddy [2013] NSWSC 643 [111].

 

[2] Stuart v Hishon [2013] NSWSC 766 [34].

Mar17

Coronavirus (COVID-19) update from REI NSW

Amanda Quin - Tuesday, March 17, 2020

 

Posted below is an update from REI NSW from 12 March 2020 in respect of Coronavirus (COVID-19) which sets out some information that may be of assistance in this time.

The information below has been reproduced with permission from REI NSW.

REI NSW may be contacted via phone on (02) 8267 0578 and their website is www.reinsw.com.au

Dear Colleague,

 

REINSW is monitoring the evolving situation in relation to the impact of Coronavirus Disease 2019 (COVID-19), previously known as Novel Coronavirus. Cases are currently increasing in Australia, although resulting deaths are thankfully extremely low. It is possible that the disease will continue to be spread through community transmission.

Real estate is a people business where agents deal closely with a wide range of people in many environments – workplaces, homes, shopping centres and so on. In doing so there are a few sensible precautions to take to aid the protection of yourself and others.

The situation is continually evolving, and individuals as well as those responsible for others need to stay informed and make decisions based on information from reliable sources, such as the Department of Health (Commonwealth) and NSW Ministry of Health. Please refer to these websites frequently for news on Coronavirus Disease 2019 (COVID-19) as they are updated regularly.

We are putting precautions in place here at REINSW so that the normal course of business may continue as usual. We are implementing sensible systems in case we need to work remotely and we are working to make sure we have increased hygiene procedures at all of our events and training courses for the foreseeable future.

It is important to make sure your business runs as smoothly as possible in these uncertain times.

If you’re wondering what you can do to prepare your business and staff, perhaps you might consider the following:

  • Follow up to date health and hygiene guidelines
    • Make sure hand sanitiser and tissues are available to all staff, clients and visitors
    • Properly wash your hands frequently and thoroughly. Click here for tips on the 20 second-hand wash.
    • Cover your nose and mouth when coughing or sneezing
    • Stay at home if you are sick
    • Isolate any staff members who show signs of possible symptoms and advise them to contact their doctor
    • Refrain from shaking hands or greeting others with a kiss
  • Prepare contingency plans in response to the virus
    • Review and adapt your agency practices and procedures as required
    • Have plans in place for staff to work remotely if needed
    • Make sure laptops are available to staff with access to office servers and drives
    • Make sure office phones can be diverted to staff mobile phones or to an answering service

NSW Health has provided this fact sheet: Frequently Asked Questions about COVID-19.

We cannot give specific advice to individual businesses but, as your peak industry body, we encourage you to consider:

  • Reviewing internal policies and procedures and adapting them if necessary
  • Cancelling unnecessary staff travel plans
  • Deferring open, periodic or other inspections if there is any concern
  • Not attending auctions or entering a property if you’re aware there is someone in there or has been in there self-isolating because of the virus (for instance, a tenant or vendor)
  • Encouraging auctions to take place in the agents’ office as opposed to on-site

It is business as usual here at REINSW. However, should REINSW events or training courses need to be cancelled, we will notify you at our earliest opportunity with information on cancellations and postponements.

We are carefully watching news alerts on Coronavirus Disease 2019 (COVID-19) and should government advice change we will notify you with updates.

In the meantime, here are some useful links providing information on the disease and how you can protect yourselves:

Rest assured that we are here to support you with the smooth running of your agency and we will alert you to any updates on the virus as and when required.

REINSW


Oct02

COSTS IN THE LOCAL COURT

Amanda Quin - Wednesday, October 02, 2019

Blog authored by Tim Cullenward  (Email: tac@peacockes.com )

Usually if you are involved in a dispute that cannot be resolved amicably, it will end up in the Local or District Court. If you find yourself in the position where you need to commence legal proceedings against someone (or if you are being sued yourself), then you should consider the consequences before it goes too far.

Legal Costs

Generally, a Magistrate or Judge will order the losing party to pay the victor's legal costs. There are many variables to this and not every Court practises such measures, but it is generally accepted practice in the NSW Local and District Courts that "costs follow the event".

One major issue to consider before embarking on any litigation is whether the proposed defendant has any funds or assets in which to meet any costs orders against them, as well as the judgment. If they don't have any assets or funds, then there will be nothing to pay your costs if you are successful. This means that whilst you may have "won", you have lost more money than what you started with, depending on what legal costs you incurred along the way.

Local Court Division and Costs

Ordinary, if you want to commence any litigation you should speak to a solicitor. Many solicitors have an initial conference fee or similar and will disclose their fees once they have a full grasp of what your matter is about. These fees can be substantial, depending on the matter and the issues at hand, and also upon the amount of evidence and complexity of the case.

If, however, you commence civil proceedings yourself without the assistance of a lawyer, then you should consider what division you should file your Statement of Claim in. This will determine what costs you can obtain from your opponent if you are successful (and also tell you what costs orders you might be exposed to if you lose the litigation).

For instance, if you commenced legal proceedings as the Plaintiff in the General Division of the Local Court, then you may be subject to a maximum costs order limiting the amount of legal costs awarded in your favour (where the defendant would have to pay your legal costs). The Local Court hears civil cases for matters up to $100,000, with matters less than $20,000 in the Small Claims Division.

General Division Costs Orders

If you have commenced legal proceedings in the General Division of the Local Court, and you were successful, then the Court would usually direct that "costs follow the event." This means that the Defendant would have to pay your legal fees. However, the Court will usually award costs on an "ordinary basis". This means that the most you could expect to receive would be around (roughly) 70% of your legal costs upon costs assessment. These are commonly referred to as "party/party" costs. A costs assessment takes place in matters for more than $20,000 where a costs assessor carries out a review of the legal costs sought by a party to determine the amount to be paid.

If you wanted to seek your full costs i.e. 100%, then you would need to make an application for indemnity costs. These are commonly referred to as "solicitor/client costs". To obtain such a costs order you would need to provide evidence to the court as to why you should obtain such an order. For claims above $20,000, this can be done if an offer of settlement was made during the proceedings and the judgment in your favour was for more than what you offered. Such offers are usually called "Offers of Compromise" or "Calderbank Offers". A further blog on these matters will be published later.

Small Claims Costs Orders

In proceedings in the Small Claims Division of the Local Court (claims less than $20,000), the maximum legal costs awarded would depend on the amount of the claim. There are limits and the amount of costs can vary depending on whether a lawyer helped you (and to what degree), and how the proceedings were finalised. For instance, if you received assistance from a lawyer and the proceedings ended with the court giving a judgment after a hearing, the maximum amount of legal costs that can be awarded are between $252.00 and $1,259.29.

If either party makes a genuine offer to resolve the matter, and the offer was rejected or ignored, and the refusal was not reasonable, the court can increase the maximum amount of legal costs for giving a judgment after a hearing by 25%.

If the Claim is for between $10,000 and $20,000, the maximum costs that you could be awarded would be 25% of the amount awarded by the Local Court in respect of the claim, plus any amount that might be allowed in relation to costs incurred up to the filing of the first defence in the proceedings. For example, if you commenced proceedings for a claim of $15,000 in the Local Court, and the court awarded you the full amount of $15,000, the most you could be awarded in legal costs would be $3,750 (25%). This is despite any additional costs you may have incurred up to this point.

If you wanted to vary the maximum costs order, you would need to provide evidence to the court explaining why the maximum costs order should be varied considering the complexity and subject matter of the proceedings.

Remember, if you are unsuccessful in the proceedings, the Local Court may award costs in the defendant’s favour, i.e. you might be required to pay the defendant’s legal costs and the same considerations above would apply.

Conclusion

Before commencing proceedings in the Local Court, it is always necessary to consider the legal costs consequences, particularly in circumstances where legal costs can exceed the amount of the claim. Even if you are successful, you will not recover the whole amount of your legal costs. For more information, please contact our office on 02 6882 3133 for an appointment.


 

Sep30

If you operate a business or hold assets then you may be exposed to loss arising from a variety of sources which could include:

  • bankruptcy or liquidation; 
  • a liability/damages claim;
  • a family provision claim on your death; or
  • a divorce (either your own divorce or in the case of family succession planning, the divorce of your children).

 

However there are a variety of strategies that may be able be used to potentially protect your assets or reduce the risk of your assets being accessible to a claimant.

Of course, there are varying degrees of protection that are able to be achieved and it is particularly difficult to protect your assets from loss through your own divorce, although a binding financial agreement (which can be entered into before cohabitation commences or before marriage or during cohabitation/marriage) may be able to assist. However it would require the co-operation of your spouse.

 

In other cases, such as family succession/divorce of children and protection from potential bankruptcy/liquidation there are a number of other strategies that can be implemented to protect your assets  - providing that you plan and implement your strategy at the appropriate time, in general, the earlier the strategy is implemented, the more beneficial it is likely to be.

One strategy which could be considered is a gift via a promissory note and loan-back. This involves the owner of the asset gifting the value of the equity in the asset (but not legal title in the asset itself) to a discretionary trust and simultaneously the same amount is loaned back from the trust to the property owner, secured by a mortgage in favour of the trust.

As a result, the asset is still legally owned by the same person, but its equity has been transferred to a trust and therefore may be better protected from a liquidator, providing that the transfer of  the equity and  the mortgage/loan-back is undertaken well prior to any relation-back (claw-back) period.

There are pros and cons of undertaking such a strategy, including issues that may arise with any current financiers,  and depending on your situation there may be more effective or simpler strategies available to you.

Accordingly, the strategy in this example should not be implemented without first seeking legal and accounting advice specific to your situation. If you would like to discuss this or any other potential asset protection strategy then please do not hesitate to contact Andrew Graham or Jeremy Tooth on 02 6882 3133.

 

Feb08

Personal Property Security Interests

Amanda Quin - Friday, February 08, 2019

Expiry of Personal Property Security Interests:

The Personal Property Securities register reached its 7 year anniversary on 30 January 2019.

The default registration period for a security interest starts at 7 years (although a security interest may of course be registered for a different period).

In any case, anyone who manages security interests should regularly check whether their registered interests are due to expire and consider whether the registration of their security interests may need to be renewed/extended.

If you have registrations that need to be extended, they must be extended before they expire to maintain priority.

If you require our assistance to renew/extend any registrations or have any other queries in relation to securities interests then please contact our office on 02 6882 3133.

 

 

May02

Security Interests

Amanda Quin - Tuesday, May 02, 2017

SELLING AGRICULTURAL GOODS AND REGISTERING A PERSONAL PROPERTY SECURITY INTEREST

It is not unusual for a farmer/grazier to sell grain or wool or other products on terms that payment shall occur at a later date.

A risk which arises in this scenario is the possibility of the buyer becoming bankrupt or entering into liquidation prior to paying the farmer for the grain or wool.

In such cases, the farmer could potentially not be paid at all for the farmer’s produce.

Where a person or entity becomes bankrupt or is liquidated, then secured persons, such as a bank with a registered mortgage will always be entitled to receive payment from a liquidator prior to unsecured creditors.

It is possible however for a farmer who has sold agricultural products on terms for payment in the future, to become a secured creditor and this can be done by utilising the Personal Property Security Interests Act 2009 (“the PPSA”).

WHAT DO YOU NEED TO EFFECTIVELY REGISTER A SECURITY INTEREST

Firstly, for a security interest to be registered and to be effective, then you need to ensure that:

(a) You have the right to register a security interest; and

(b) You need to know sufficient information about the buyer of your produce to be able to register a security interest; and

(c) The security interests needs to be “attached” to the collateral; and

(d)The security interest needs to be perfected.

The simplest way to ensure that you have the right to register a security interest is to have a written agreement with the buyer of your produce that grants you the right to retain title in your produce until you receive payment for it AND a right to register a security interest on the Personal Property Securities Register. If required we can assist with preparing such an Agreement.

The information that you need to know about the buyer includes:

  • The full and correct legal name of the buyer of your produce (ie whether they are a company, trust, partnership or an individual);
  • The buyer’s ABN (where they have one); and
  • The date of birth of the buyer (but only where the buyer is an individual or a partnership of individuals).

The security interest attaches to the grain or wool or other produce (“the collateral”) in a number of different ways, but the simplest way to meet the requirement for “attachment” is to ensure that the written security agreement is completed and signed prior to delivering your goods to the buyer.

The easiest way to “perfect” an interest in the collateral and to therefore become a secured party, is to register your interest electronically on the Personal Property Securities Register at https://www.ppsr.gov.au/ and we can also assist you with that process, if required.

Dec02

Mandatory Energy Efficiency ratings for Commercial Office Space

Amanda Quin - Friday, December 02, 2016

As at 1 July 2017, the threshold for reporting energy efficiency ratings pursuant to the Building Energy Efficiency Disclosure Act 2010  will be reduced from 2,000 square metres to 1,000 square metres.

Where the said legislation applies, then a Building Energy Efficiency Certificate (BEEC) needs to be obtained and registered. A BEEC incorporates both a National Australian Built Environment Rating System (NABERS) Energy star rating and a Tenancy Lighting Assessment (TLA) of the relevant area of the building.

Where the BEEC requirements apply, then the BEEC must be registered prior to approaching the market regarding a proposed sale or lease and the Energy star rating must be included in any advertising for the sale or lease or sublease. Therefore if you do need a BEEC for a building, then you need to obtain the BEEC and register it before you advertise the office space for sale or for lease.

This legislation does not apply if:

  • The proposed lease is for less than 12 months;
  • The building is a strata titled building;
  • The occupancy certificate for the building is less than 2 years old; or
  • The building is a mixed use building and the office space is less than 75% of the building’s net lettable area.

 

In addition the disclosure requirements only apply where either:

(a) the office space is owned by a corporation/company; or

(b) where the tenant is a corporation/company (and in this case, only where the tenant or purchaser asks for a BEEC).

That is, this law does not apply to office space that is owned by natural persons and leased or sold to natural persons.

You can also apply for an additional exemption, if you are approached by someone who is seeking to buy or lease the building (as opposed to you as the owner advertising it for sale or for lease).


 

 


 


 



Jul25

NEW WITHHOLDING TAX ON TRANSFERS OF PROPERTY

Amanda Quin - Monday, July 25, 2016

From 1 July 2016 every person or entity who acquires land in Australia which has a value of $2 million or more must withhold money on account of the transferor’s potential Capital Gains Tax liability. The person acquiring the property is then required to remit any such amount to the ATO.

In addition, entering into an option to purchase (regardless of the value of the underlying property) and acquiring interests in certain landholding companies and trusts will also be caught by this new tax requirement.

If the transferee (ie purchaser) fails to withhold the correct amount of tax, then the purchaser will be penalised. Significant penalties will apply.

Generally, the amount to be withheld will be 10% of the purchase price or the value of the property, but this may be varied if the vendor obtains a variation notice from the ATO and serves a copy of the notice on the purchaser prior to completion of the sale.

The transferee is also not required to withhold or remit any money if an exception applies.

Accordingly, unless an exception or variation notice applies, all persons selling land or interests in land for $2 million or more must be aware that the purchaser will withhold 10% of the purchase price from completion.

Any withheld amount will be credited to the Vendors when the Vendors next lodge their tax return with the ATO.

Exceptions to the new withholding regime

There is no requirement for a purchaser to withhold any money on account of the vendor’s potential CGT liability if:

1. The market value of the property is less than $2 million; or

2. A clearance certificate has been obtained from the ATO by the vendor (or all of the vendors when there is more than one vendor) and provided to the purchaser before settlement; or

3. In relation to an option or an interest in a landholding company, the vendor gives the purchaser a declaration that the vendor is or will be an Australian resident for a period which covers the transaction (and the purchaser is not on notice of the declaration being false), or

4. The vendor is under external administration or in bankruptcy.

Who is eligible for a Clearance certificate

Australian residents are eligible for clearance certificates.

Foreign residents are not eligible for clearance certificates, but they may be able to obtain a variation notice to reduce or eliminate the need formoney to be withheld from the sale, if they can show that a CGT exemption or other exemption will apply.


Apr01

Abolition of Duties in NSW - Pitfalls

Amanda Quin - Friday, April 01, 2016

The NSW State Government has flagged that on 1 July 2016 it will be abolishing stamp duty on the following transactions:

  • Transfer of business assets
  • Transfer of marketable securities (eg shares in private companies and units in unit trusts)
  • Transfer of statutory licences and gaming machine entitlements
  • Mortgage Duty (to the extent it has not already been abolished)

You may recall that the NSW State Government has on a number of occasions flagged that these duties were being abolished and then delayed the abolition date. Hopefully, this time the abolition will proceed as planned.

LANDHOLDER DUTY – LAND RICH COMPANIES AND UNIT TRUSTS

However, there is a potential pitfall for companies and unit trusts which are landholders.

Despite the proposed abolition of stamp duty on the transfer of shares in a private company or units in a unit trust from 1 July 2016, it appears that landholder duty will still remain.

Landholder duty is payable on the acquisition of a significant interest in a private company or unit trust that owns land and meets certain other requirements.

As such, stamp duty may still be payable on the transfer of shares in a private company or units in a unit trust, where the transfer involves a significant interest and where the company or unit trust (or its linked entities) has land holdings in NSW with a value of $2 million or more.

There are some exemptions for companies which hold rural land. This can be a complex area of law and we recommend legal advice be obtained prior to any transfer occurring.

TRANSFER OF A LEASE IN CONJUNCTION WITH A SALE OF BUSINESS

Where a lease is transferred with the business (which often happens with business premises that are rented), then although the goodwill of the Business will be exempt from stamp duty, nevertheless the plant and equipment and any consideration for the transfer of lease is liable for duty.

If the transaction were instead structured with a new lease being granted to the new owner of the business, then the plant and equipment would not be liable for stamp duty.

Accordingly when buying a business that operates from leased premises, you should consider whether the costs of the stamp duty that would be payable in relation to the plant and equipment and the transfer of the lease is likely to outweigh the costs of negotiating and entering into a new lease instead.

TRANSFER OF LAND IN CONJUNCTION WITH A SALE OF BUSINESS

Where a sale of land and a sale of business takes place, then whilst the goodwill of the Business will not be liable to duty, nevertheless the land and the plant and equipment of the business will be liable to duty.