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.

 

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.

Oct09

REGISTERING PERSONAL PROPERTY SECURITY INTERESTS

If you sell personal property (such as goods or equipment or livestock or vehicles etc) on account OR if you lease or hire out personal property to third parties (hereafter referred to as "your customer"), then you need to be aware of the Personal Property Security Act ("the PPS Act").

The PPS Act enables you to record your ownership and other rights in goods or equipment or other personal property that your customer has not yet paid for. This type of security interest can be registered even if the anticipated account payment period is quite short.

The PPS Act also permits you to record your ownership of goods, equipment, livestock (including racehorses) or other personal property that has been leased to your customer, if the lease is a long term lease.

From 1 October 2015, the PPS Act deems leases to be on a long term basis if:-

  • The lease has no defined term or is for an indefinite period; or
  • The lease is for a motor vehicle, boat or aircraft (or equipment with a serial number) and is for a term of 12 months or more (including options) (this was previously only 90 days); or
  • Where the lease itself does not contain provision for a long term, if you consent to your customer keeping the goods or equipment for more than one year.

If you register your interest within the relevant time frames AND if your customer goes into liquidation, then you can protect your assets from being sold by your customer's liquidator.

However if you fail to register your interest by the relevant deadline AND if your customer enters into liquidation, then their liquidator is entitled to sell your goods and equipment, without needing your consent and you will merely be an unsecured creditor among many seeking their money back.

There are different deadlines to register your ownership interest depending on the type of transaction that has taken place. These deadlines are as follows:-

SECURITY INTERESTS WHERE PERSONAL PROPERTY IS SOLD ON ACCOUNT OR BY WAY OF VENDOR FINANCE -

Type of Goods Deadline for PPS Registration
Where your goods are part of your customer's inventory:
The PPS security interest must be registered by you before your customer obtains possession of the goods from you.


Where your goods are not inventory:


The PPS security interest must be registered by you within 15 business days of your customer obtaining possession of the collateral.

If you do not register a PPS interest within the relevant timeframes, then the PPS interest may still be validly created as a general security interest (ie an interest which effectively puts other parties on notice of your interest in the goods, eg this may be useful if your customer sells his or her business), however it will not benefit from thesuper-priority over liquidators.

In addition where your security interest relates to a company, the Corporations Act also provides for a 20 business day registration time limit for general security interests, if you wish to minimise the risk of your property being sold as part of your customer's liquidation.

Given the competing time limits, we recommend that, if in doubt, you register a PPS registration as early as possible in any transaction where a PPS interest may arise.