News Articles

January 22, 2021 By GKN Law Firm

Accessing digital assets – estate planning essentials

The untimely death (or purported death) of Gerald Cotton, former Chief Executive Officer of Canadian cryptocurrency exchange company, Quadriga CX, emphasises the importance of planning your electronic after-life.

Mr Cotton’s death in India at the age of 30, not only raised suspicion as to its authenticity (and allegations of an exit scam) but reiterated the chaos that can be created if digital assets have not been considered in an estate plan.

Mr Cotton was the sole custodian of encrypted passwords ‘protecting’ over $200 million worth of digital assets. His untimely death has left numerous Quadriga customers unable to access their assets with trading on the Quadriga platform suspended while authorities try to work out where to next.

Mr Cotton’s widow states that she played no role in the running of Quadriga and, despite efforts, has been unable to unlock the laptop used by Mr Cotton nor access any of his accounts.

The digital assets referred to in the Quadriga saga comprise cryptocurrency (virtual currency created and stored electronically such as Bitcoin, Litecoins and Ethereum). The cryptocurrency system is decentralised and not subject to a governing authority, raising unique challenges in identifying and ‘locating’ the assets.

Regardless of how the Quadriga saga unfolds, it is a timely reminder of how important it is to consider what happens (or should happen) to our digital assets when we die.

What are digital assets?

A person’s ‘digital life’ may encompass a range of online transactions, activities and accounts such as:

cryptocurrency;
financial assets including online bank accounts and shares;
intellectual property attached to domain names or online literary works;
online sporting and gaming accounts;
loyalty programs such as Flybuys, Rewards and Frequent Flyers;
online shopping accounts such as eBay and Amazon;
personal / business social media accounts such as email, Facebook, Linked-In.

All should be considered, and included, in an effective estate plan.

Issues unique to certain digital assets

Traditional cash-based assets such as money deposited in a bank, shares or other paper-based investments are held by title to the owner and can be transferred to the beneficiary of a deceased person with the relevant documentation. Ownership of digital assets like Bitcoin, however, is anonymous with owners accessing their cryptocurrency with private keys which are used to unlock and deal with the assets. This information may be held on a computer device (via a digital wallet), on a USB, or printed separately. These assets can easily be overlooked or ‘keys’ misplaced, representing unique challenges when it comes to administering an estate.

Many digital assets are also held globally and may therefore raise jurisdictional issues from an estate planning perspective. In most instances, there is no uniform legislation governing access to a deceased person’s online accounts, so it is imperative that these matters are dealt with specifically in an estate plan.

Following are some steps you can take to ensure your online life is appropriately dealt with when you are gone.

Identify your digital assets

You should start by making a list of your digital assets (including online accounts) and determining what you would like to happen to them when you die.

Keep records of your online accounts and subscriptions including user names and passwords and store this information in a secure place.

Remember your online accounts and login details are likely to change frequently and your list should be maintained accordingly.

Understand your online accounts

Understanding how various accounts are dealt with by service providers will help to determine the type of action you would like taken when you die.

For example, Facebook account holders can advise in advance whether their account is to be deleted or memorialised. A memorialised account can provide a place for family and friends to share memories after a person dies on the deceased’s profile, and any content shared by the deceased person remains visible to those with whom it was shared. Nobody can log into a memorialised account.

Some loyalty programs such as Frequent Flyers may not be transferrable or redeemable after a person dies, so it may be wise to keep tabs on these types of accounts to utilise benefits regularly.

Include digital assets in your Will and appoint a technology custodian

Your Will should define and identify important digital assets and provide executors and trustees with appropriate directions and powers to deal with them.

Assign your executor or other trusted person, who is familiar with technology, the role of managing your online life after you die and ensure this direction is included in your Will.

Record your after-life technology instructions with respect to each account separately and ensure these instructions are secure, but accessible to your technology custodian. Never disclose passwords in your Will.

Online maintenance

Online accounts contain personal information which should be protected. Technology presents a real risk of identity fraud and unmonitored accounts can be particularly vulnerable. Regular monitoring and unsubscribing or deleting unused accounts can help minimise risk and keep your technology life tidy.

Regularly downloading photos and videos from your mobile to a storage device can ensure that memories are accessible to your family when you die.

Consider incapacity

It is also important to consider what happens to your online life in the event that you are incapacitated. Appointing a trusted person to manage your online affairs and including specific instructions in an enduring power of attorney is a logical step to ensure the appropriate management of your digital wealth if you are incapacitated.

The instrument making the appointment should be specific to the jurisdiction in which the assets are held, and in this respect, more than one document may be required.

Consider trusts

It may also be beneficial to hold substantial digital assets through a trust structure, if possible, for greater protection and better taxation outcomes. In doing so, the trust must be considered and dealt with under the Will, which should nominate beneficiaries of the trust or shares in the trustee company and include provisions to ensure the trust can achieve the desired objectives.

Conclusion

It has become increasingly difficult for executors, lawyers and family members to ascertain and access online assets after a person dies, with many financial and other institutions operating in a ‘paperless’ environment. Certain digital assets such as cryptocurrency can present additional problems for a deceased’s family.

Inaccessible online accounts make it difficult to identify assets, and leaving online accounts open indefinitely raises concerns of potential identity theft.

Good online management and ensuring your digital assets are included in your estate plan will help your executors and family manage your online life after you are gone.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

January 22, 2021 By GKN Law Firm

Retail Leasing Disclosure Obligations

When leasing commercial property, it is important for tenants and landlords to understand the relationship they are entering and the rights and obligations they have.

In New South Wales, retail leases are regulated by the Retail Leases Act 1994 (NSW) (the ‘Act’). A commercial lease is classified as a ‘retail lease’ if it falls within the Act’s definition. This is usually determined by the nature and location of the premises but generally includes shops and outlets situated in a retail centre and / or utilised for selling, hiring, or providing goods and services to the public.

With the increase of retail shopping complexes over the years, the Act was introduced to enhance consumer protection for tenants, improve communication and provide access to low-cost dispute resolution for the retail leasing industry. Consequently, retail leases are governed by specific rules designed to promote fairness and transparency before and during lease negotiations, and throughout the term of the tenancy.

A landlord leasing or offering to lease retail premises has specific disclosure obligations. This article outlines the information a landlord must provide during a leasing transaction and the consequences if the disclosure requirements under the Act are not met. This is a general overview only and landlords and tenants should obtain professional advice tailored to their specific circumstances.

Disclosure obligations at a glance

A landlord is required to provide the prescribed information relevant to a prospective tenant’s decision about whether to enter or renew a retail lease. The following documents must be available before the landlord or agent offers a new retail lease:

a draft copy of the proposed lease;
a lessor’s disclosure statement;
the NSW Retail Tenant’s Guide, which outlines the rights and obligations of retail tenants and landlords and explains some commercial matters.

These requirements are widely referred to as a landlord’s disclosure obligations.

What is a disclosure statement?

The disclosure statement outlines important information about the lease, such as:

the premises to be leased, amenities, shared facilities and services such as air conditioning, cleaning, maintenance;
the term of the lease and renewal options;
the rent payable including turnover rent;
rent reviews and the method for calculating rent increases;
the tenant’s estimated liability for outgoings;
tenant’s fitout requirements;
relocation or demolition clauses and information regarding planned future works;
specific information for shopping centre leases such as trading hours, annual sales for the centre, turnover for speciality shops per square metre, traffic count, and lease termination dates for anchor tenants.

Schedule 2 of the Act sets out the form and content of the disclosure statement.

When must the disclosure statement be provided?

The landlord’s disclosure statement must be provided to the tenant at least 7 days before a new retail lease is entered. Upon renewing a lease, the landlord must either reproduce the original disclosure statement with a written update or provide a fresh disclosure statement.

Consequences of not conforming with disclosure obligations

False, misleading or non-issue of disclosure statement

Information in a disclosure statement must be complete and accurate to allow a tenant to make an informed decision regarding the proposed transaction.

Generally, a tenant may terminate the lease by giving written notice within the first 6 months if the landlord fails to issue a disclosure statement within 7 days prior to the lease being entered or provides a materially false, misleading or incomplete disclosure statement.

A tenant who validly terminates a lease in these circumstances may also have rights to claim compensation for expenses reasonably outlaid in entering the lease including recovery of fitout costs.

The tenant may not terminate on grounds that the disclosure statement is false or misleading if the landlord acted honestly and reasonably, and the tenant is in substantially as good a position as if the error had not occurred.

New South Wales Civil and Administrative Tribunal (NCAT) may resolve claims concerning retail leasing disputes to the prescribed jurisdictional limit. NCAT may also order the rectification of a disclosure statement or deem that a disclosure statement has been provided in certain circumstances.

Disclosure statements may be amended by agreement between the parties before or after the lease has commenced and the amendment will have effect from the date determined in the agreement.

Excluding outgoings or incorrect estimates

Landlords must itemise all outgoings in the disclosure statement and provide accurate estimates of the tenant’s liability for these items. Generally, a landlord cannot require a tenant to pay for an outgoing that has not been included in a disclosure statement. If the amount of an outgoing listed in the disclosure statement exceeds the estimate, a landlord may not claim the excess if there are no reasonable grounds for the estimate provided.

Lessees disclosure statement

A lessee’s disclosure statement forms part of the disclosure documentation and is an acknowledgement by the tenant that the relevant disclosure documents have been received and that the obligations under the lease are able to be fulfilled. There is also opportunity for the tenant to include any representations made by the landlord or agent concerning the lease. Such matters might include levels of passing traffic or the mix of tenants within a shopping complex.

The tenant is required to complete the lessee’s disclosure statement and return this to the landlord within 7 days of receiving the lessor’s disclosure statement.

Conclusion

Parties to a retail leasing arrangement should be conversant with their rights and obligations under the Act.

Landlords should ensure that leasing and disclosure documents are carefully prepared with consideration to the content and service requirements. Failing to follow the correct processes or providing incomplete or inaccurate documents can have costly results

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

January 22, 2021 By GKN Law Firm

Understanding Unfair Dismissal Claims

Unfair dismissal matters can be complex and frustrating for both employers and employees alike. Since the commencement of the Fair Work Act in 2009, employers have had expanded responsibilities to ensure they correctly terminate employees and more employees are able to successfully make unfair dismissal claims.

At the same time employers have narrower exceptions when they’re defending claims.

Terminating a person’s employment is usually stressful and upsetting for everyone concerned, so it’s always important to understand when and how it can be done in a fair and appropriate manner.

The issues can be complex

Unfair dismissal can also incorporate far reaching issues including employment type, award and enterprise agreement coverage, time limits for claims and the provisions of the legislation.

In addition the definition of ‘dismissal’ can include a situation where a person resigns but was forced to do so because of conduct, or a course of conduct, engaged in by their employer. This is commonly referred to as ‘constructive dismissal’.

What remains after the legislative changes is that a dismissal must be harsh, unjust or unreasonable for it to be an unfair dismissal under the Act. The primary remedy is said in the Act to be reinstatement, but in practice this does remain the exception rather than the rule. More often than not, compensation is ordered – the Fair Work Commission can order compensation of up six months of the employee’s salary.

Who is covered by the unfair dismissal provisions of the Fair Work Act?

In a small business (with fewer than 15 employees), an employee is covered if they have worked for at least 12 months;
For larger businesses, employees are covered after six months.
There is an additional hurdle for employees of small business. Even if an employee has worked in it for 12 months, a dismissal will not be unfair where the small business has complied with the Small Business Unfair Dismissal Code.
Under the Fair Work Act, a dismissal will not be unfair if an employer can show that it was a “genuine redundancy”.

What is a “genuine redundancy”?

There are three elements to a genuine redundancy.

the employer no longer requires the employee’s job to be done by anyone because of changes in the employer’s operational requirements;
the employer has complied with any consultation obligations that it might have in an enterprise agreement or award;
it would not have been reasonable for the employer to redeploy the employee within the employer’s business or the enterprise of an associated entity of the employer.

Small businesses – don’t be caught out

Research by Benoit Freyens, assistant economics professor at the University of Canberra, and Paul Oslington, economics professor at the Australian Catholic University, found that in the change from the Workplace Relations Act 1996 to the Fair Work Act:

Where unfair dismissal cases were arbitrated between 2000 to late 2010, claimant success rates have lifted from 33% under Work Choices to 51% under the current Fair Work Act.
Claims under Fair Work against businesses with more than 100 employees have a 41% success rate, versus the 33% rate under the Workplace Relations Act.
Claims lodged under Fair Work have jumped to 17,000 per year, from 6000 under Work Choices – in line with the increase in the number of employees able to make unfair dismissal claims (and the removal of many employees from the State industrial relations system to the Federal industrial relations system). Payouts were steady, averaging about 12 weeks’ pay.

Conclusion

Employers need to be vigilant in conforming to process while dismissing somebody. Even when the employer believes they have sufficient reasons to justify dismissal, such as theft. They need to follow the correct process – such as providing warnings and collecting documentary evidence. In the absence of this process it’s very easy to formulate an unfair dismissal claim on the basis of a lack of fair process.

For employers the best way to avoid claims of unfair dismissal is to make sure that your organisation and your employees really understand their obligations under the Fair Work Act when terminating someone’s employment. It also means there should be an internal review of the firm’s policies.

That said, only about 1% of unfair dismissal applicants to the Fair Work Commission successfully achieve reinstatement through arbitration. The most common outcome is a conciliated settlement. Understanding unfair dismissal claims helps parties optimise their outcome in what can be a confusing system.

We represent both employers and employees so if you or your organisation needs assistance or advice on how to proceed please call on (02) 9602 2535 or email [email protected]

December 6, 2020 By GKN Law Firm

Interview questions you can’t ask

An employer’s potential liability for workplace discrimination arises before the first interview and exists whether or not a decision is made to hire a person.

A job interview is integral to the recruitment process and provides an opportunity for the employer to ask questions, check credentials and determine a prospective employee’s suitability for a position. It also provides reciprocal opportunities for candidates to find out more about the role and the organisation and to assess their interest in the position.

Naturally, both parties want to find the ‘right fit’ however the employer is largely in control of the interview process and may go about finding the right person in the wrong manner.

By asking a candidate certain ‘illegal’ questions during the interview process, employers may risk breaching Commonwealth and / or State laws aimed to protect individuals against discrimination in the workplace.

So, what are illegal questions?

When interviewing a candidate for a position, the primary focus of the questions asked should be to assess the applicant’s inherent ability to perform the key functions of the role.

Employers should avoid asking questions about certain unlawful factors for which a candidate’s answer could be construed as determinative to the success, or otherwise, of his or her application. These include questions about age, gender, sexual preference, ethnicity, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion or social origin. Essentially, these matters are considered irrelevant in determining a person’s capacity to perform the role.

Even the most ‘innocent’ questions (such as those that might be asked during the course of social conversation) could be considered unlawful during a formal interview. The following are some examples:

How do you manage work with three children?
How old are you?
Does your disability prevent you from carrying out your job?

These questions have something in common – they are questions that might be asked of a particular category of applicants (those with children, over 50 years of age or with a disability) that would not necessarily be asked of other applicants.

Other questions that may result in a discrimination complaint include:

What is your religion?
Where were you born?
Are you working at the moment?
Have you had a workers’ compensation claim?

These questions are unnecessary when determining an applicant’s ability to carry out the duties required of the role and should be avoided. Deciding that an applicant is unsuited for the position based on an answer to one or more of these questions may result in discrimination action.

Asking the right questions

Potential claims for discrimination can be minimised by re-thinking your approach to how questions are asked and having a detailed job description to refer to during the interview process. This helps keep the interview on track and ensures only the essential requirements of the position are addressed.

Organisations are encouraged to implement a set of standard interview questions that focus on the key skills and requirements of the position. This may include asking applicants to demonstrate how their skills and personal qualities make them an ideal choice for the role. An effective way to achieve this is to ask for examples of how the applicant has achieved certain outcomes or reacted to particular situations in previous roles. For example, you might ask, ‘please explain how you managed an irate customer during your time as service representative with XYZ’.

Following are some examples of discriminatory questions, together with an alternative approach that can be used to obtain the necessary information from a candidate.

Injuries / physical disabilities – it may be necessary to discuss an applicant’s injuries or physical condition to determine objectively whether he or she would be able to safely perform, without personal risk or risk to others, the duties required.

Rather than asking directly about his or her condition, the interviewer should go through each element of the job and, where relevant, discuss what adjustments to the workplace might be required to assist the applicant perform these duties. Appropriate questions may include:

‘Are there any reasons why you may not safely be able to lift 5 kg?’

‘Are there any specific adjustments we would need to make so you could carry out the duties required?’

This demonstrates that the employer has genuinely considered the applicant who may be an ideal fit, with a few minor modifications to the workplace.

Age – asking an applicant his or her age is unlawful particularly if the employer is assuming that the person, due to age, lacks the energy, drive or technical ability to carry out the role. Basing questions on the applicant’s skills, experience and inherent ability to perform these tasks, rather than querying their age will help minimise a discrimination complaint. An appropriate question would be:

‘Tell me about your computer experience…what types of programs have you used?’

Family commitments – it is unlawful to discriminate against a candidate based on his or her family circumstances. Rather than asking applicants if they have children or family commitments, simply ask whether they are able to commit to the hours / days required of the position. For example:

‘The job will occasionally require you to work evenings and weekends – would this conflict with other commitments?’

Religion / race – it is unlawful to rule out an applicant whom you assume will be unable to work weekends due to religion, race or culture. If the job requires weekend work, simply point out the required days and ask the applicant whether he or she would have any issues working these days.
Currently working – asking an applicant if he or she is currently working could be perceived as discrimination on the grounds of employment, unemployment or receiving a pension. Instead, ask when the applicant would be available to start work.

Conclusion

Avoiding workplace discrimination starts before the recruitment process and continues throughout the employment relationship (including opportunities for career progression), during workplace investigations and termination processes.

Framing questions appropriately to minimise potential action for unfair discrimination and to give candidates an opportunity to demonstrate whether they can perform the job requires sound procedures and ensuring those involved in the recruitment process are aware of their obligations.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

December 6, 2020 By GKN Law Firm

Understanding easements in your property contract

Identifying and understanding easements in a property transaction is an important part of the conveyancing process.

Vendors are required to disclose all easements affecting the land they propose to sell in a property contract, and buyers should ensure they are aware of the impact an easement will have on the land they are about the purchase.

Your property lawyer will identify any easements affecting your proposed purchase and explain their effect on the use of the land.

What is an easement?

An easement is an interest attached to a parcel of land that gives another landowner or a statutory authority a right to use a part of that land for a specified purpose.

The easement is registered on the title of the property and affects a defined area of the land. The easement is generally shown on the plan of the land with a brief description noted or more fully described in a further document (instrument).

Examples of easements include:

a right of carriageway (right of way) allowing the owner of landlocked property to access their land by travelling over a portion of neighbouring land – example; a shared driveway used for a battle-axe block;
a cross-easement which provides neighbouring properties reciprocal rights to use each other’s property in the same manner – example; for mutual support of a structure such as a party wall between terrace houses;
an easement for services such as electricity, water or sewerage – the easement may be over or under the property, and may run parallel at the rear or side of a property – example; sewer pipes laid underneath the land by the local water authority or an overhead electricity transmission line.

Easements are recorded on the title deed to a property, noted on the registered plan and incidental instruments, and / or shown on sewerage diagrams.

Legal terminology

When discussing easements, you may hear the terms ‘private and public – dominant and servient – positive and negative’. These terms generally refer to how the easement is created and who benefits from the easement.

A private easement is an easement created between landowners. When such an easement is created one parcel of land will benefit from the easement (the dominant tenement) and the other parcel of land will be burdened by the easement (the servient tenement).

A positive easement provides a landowner with a benefit, such as the right of way described above that allows the landowner to cross over another’s property to access his or her own. That same easement is considered a negative easement by the neighbouring landowner, as allowing the access impacts upon that landowner’s unrestricted use of the land.

A public easement is one created by a statutory authority over one or more parcels of land such as the easement for water services described above. This is also an example of a negative easement as the easement will restrict building over that part of the land (see below).

The effect of an easement

An easement provides certain rights and restrictions and owners of land with registered easements should understand their legal implications.

A party who is lawfully authorised to benefit from an easement, such as the neighbour with a right to use your driveway to access his or her property, and who uses the easement in the prescribed manner, will not be liable for trespass. As the owner of the servient tenement you must not interfere with or restrict these rights.

If an authority has an easement registered over your land, such as an easement for electricity or sewerage services, then the authority will have the right to access your property and to carry out repairs and maintenance on the easement.

An easement will also impact on your building and development plans. Owners are generally prohibited from building over or too close to an easement or must obtain approval from the authority who owns the easement to do so. If a structure is built over an easement without permission or where permission is denied, then the owner will be legally required to remove the structure.

Extinguishing or terminating an easement

In some circumstances, an easement may become redundant or may no longer be required. In such cases, it may be practical and advantageous for an owner to have a registered easement removed from the property’s title. Removal of a negative easement may increase the value and / or appeal of your property.

There are several ways that an easement may be extinguished or terminated.

Express release – the parties affected by the easement may agree to terminate the easement and register their agreement with the relevant land titling authority.
The owner of the servient tenement may apply to have the easement extinguished on the grounds of ‘abandonment’. This is established by the non-use of the easement and an intention on the part of the owner of the dominant tenement to abandon the easement.
In some circumstances, where the dominant and servient tenements are consolidated into a single parcel of land.
In circumstances where there is an alteration of use of the dominant land to the effect that use of the easement by the servient land comes to an end or is rendered obsolete.

Conclusion

Understanding easements and their effect on property is a fundamental part of the conveyancing process and buyers, in particular, should ensure they are aware of the impact an easement will have on the land they are about the purchase.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

December 6, 2020 By GKN Law Firm

Considering the wishes of the children in parenting cases

Separating couples are generally required to make reasonable attempts to resolve disputes about the future living arrangements, care and responsibility of their children. Unless there are extenuating circumstances, dispute resolution is compulsory if agreement cannot be reached.

If dispute resolution fails, then the matter may need to be resolved through Family Court proceedings under the Family Law Act 1975 (Cth) (the ‘Act’).

The Family Court has considerable discretion when determining children’s matters. The child’s best interests will be the overriding consideration in the Court’s decision. This requires that the Court address a number of factors – one of these is the views of the child.

Determining the child’s best interests

The following matters are some of the factors the Family Court will consider in determining a child’s best interests:

children should know and have the benefit of a meaningful relationship with both parents;
children should be protected from physical and psychological harm and harm resulting from them being subject to family violence;
children should receive parenting that allows them to reach their full potential;
parents should cooperate in determining what is best for the children;
unless a child is at risk, parental responsibility should be equally shared and children should have the right to spend time on a regular basis with both parents and other people significant in their lives.

When determining orders regarding arrangements for children there is a presumption of shared parental responsibility. This means that each parent should be jointly and equally responsible for significant long-term decisions concerning their children such as their health, welfare, religious and cultural upbringing, and education.

The Court must also give consideration to orders for a child to spend equal time with each parent or if equal-time living arrangements are not appropriate, the child spending substantial and significant time with each parent.

What about the views of a child?

In determining what is in a child’s best interests the Court must, amongst other factors, consider ‘any views expressed by the child and any factors (such as the child’s maturity or level of understanding) that the court thinks are relevant to the weight it should give to the child’s views’.

As a consequence, some people believe that the views of an older or teenage child will be the turning point in proceedings regarding living arrangements. This is not the case, as confirmed in the case of Bondelmonte & Bondelmonte & Anor [2017] HCA 8. The case reiterates the very discretionary approach the Family Court may take in deciding children’s matters.

The facts

The Bondelmonte case concerned parenting arrangements whereby two teenage boys (aged almost 15 and 17 years) lived primarily with their father, having little or no contact with their mother, whilst the daughter (almost 12 years) lived with the mother and had minimal contact with the father.

The arrangement was generally acceptable to the parties until the father took the boys to New York for a holiday and subsequently decided to make this their indefinite home.

The mother objected seeking urgent interim orders and the father was ordered to return the boys to Australia until the matter was ultimately determined.

The matter proceeded to the High Court with the father arguing that the boys had expressed a preference to remain in New York with him and that, in light of their respective ages, the boys’ views should be determinate of the outcome of the proceedings.

The Court acknowledged that the boys did express a desire to reside with the father however determined, in the circumstances, that it was in their best interests not to make the orders sought by the father.

The Court confirmed that, whilst the Act requires that the views of a child should be genuinely considered, the Court must exercise discretion in the context of several other matters. In particular, the children’s views being influenced by a parent and the need to assess their ‘choice’ in light of their respective ages and maturity. In other words, the Court was required to assess the boys’ understanding (or absence thereof) of the potential impact their decision would have on the relationship between them and their mother, and their sister.

The High Court declined to grant the orders sought by the father.

Key points

In children’s proceedings, it is important to discern between requesting a child to give evidence and providing an opportunity for a child to express his or her feelings on a particular matter.

Children should not be involved in proceedings merely to attest to a disputed fact and proceedings must be balanced to ensure that the child can voice an opinion that truly is his or her own. The Court will attempt to unveil the possibility of coercion or manipulation leading to the views expressed by a child.

Flexibility and discretion in Family Court proceedings is critical to ensure the level of participation is appropriate to the age, maturity and any other relevant needs of the child. This may be facilitated by utilising expert witnesses, counsellor’s reports or through a child’s representative.

Conclusion

The Family Court has significant discretion and will take a comprehensive approach to determine what is in a child’s best interests when deciding living and care arrangements.

Whilst the views of children are important factors and must be given genuine consideration, they are only one or many matters that a Court is required to consider in determining the best interests of the child.

This article is for general information only. You should obtain professional advice tailored to your specific circumstances before undertaking any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

November 3, 2020 By GKN Law Firm

Review your discretionary trust to avoid foreign surcharges on land acquisitions and holdings

A feature of a discretionary trust is its flexibility to distribute income and capital to a range (or class) of beneficiaries. To achieve these goals, trust deeds have traditionally been drafted to include a wide range of beneficiaries and potential beneficiaries. In many cases however this could cause the trust to be deemed a ‘foreign person’, unintentionally attracting premium rates of stamp duty and land tax. Changes to legislation in New South Wales make the situation even more likely, prompting an urgent review of discretionary trusts to avoid unnecessary foreign surcharges when acquiring or holding residential land.

Background – surcharges applicable to foreign persons

Since 2016 a surcharge of 8% on stamp duty and 2% on land tax applies when ‘foreign persons’ acquire and/or own residential land in New South Wales. The surcharge is payable in addition to the usual stamp duty calculated on the transfer of land and/or land tax charged.

A ‘foreign person’ may be an individual, corporate foreign investor or trust structure. Trustees of discretionary trusts may be deemed ‘foreign persons’ and therefore liable for foreign surcharges if a potential beneficiary is a foreign person.

Given the purposely broad range of beneficiaries often included in a trust deed, a present or future foreign relative of a principal beneficiary (even though there may be no intention to benefit such a person) will fall within this scope, such that the trust will attract the foreign surcharge. An example, taken from Revenue NSW’s Practice Note CPN 004 v2 – foreign surcharges and discretionary trusts, illustrates.

Mr and Mrs Jones (both Australian citizens) are primary beneficiaries of the Jones Family Trust. Other primary beneficiaries include their two children Mark and Peter who are under the age of 10. The trust has potential beneficiaries who include future spouses and children of Mark and Peter and no other potential beneficiaries.

The trust has no existing foreign beneficiaries, but future spouses and children of Mark and Peter could be foreign persons. The trustee is taken to be a foreign person.

New laws require trust deeds to expressly exclude foreign beneficiaries to avoid foreign surcharges

The State Revenue Legislation Further Amendment Act 2020 amends the Duties Act 1997 and Land Tax Act 1956 to the effect that discretionary trusts in New South Wales will be deemed a foreign trust unless:

the trust deed expressly excludes potential foreign beneficiaries in its provisions (the ‘no foreign beneficiary requirement’); and
the trust deed includes an irrevocable term that prevents it being amended to allow a foreign person to be a beneficiary in the future (the ‘no amendment requirement‘).

The provisions affect trustees of discretionary trusts that hold or propose to acquire residential property.

What should trustees do?

The new laws make it clear that, to avoid the foreign surcharge, the provisions of a discretionary trust must explicitly and irrevocably prohibit foreign persons from being beneficiaries. If it is intended not to include a foreign beneficiary under the terms of the trust, the deed governing it should be reviewed and amended to satisfy the ‘no foreign beneficiary’ requirement and the ‘no amendment requirement’.

Revenue NSW’s Practice Note CPN 004 v2 provides practical guidance on how surcharge purchaser duty and surcharge land tax is to be applied where land is held by a discretionary trust and outlines the transitional provisions applicable with respect to liability of the surcharges.

Essentially, discretionary trust deeds must be amended by 31 December 2020 in accordance with the new legislation to exclude foreign beneficiaries, for the surcharges not to apply. In some circumstances, trustees that have inadvertently incurred and paid surcharge land tax may also be eligible for a refund if the trust deed is amended in accordance with these requirements and by 31 December 2020.

Discretionary trusts that do not contain these provisions will be liable for the surcharges from 1 January 2021.

The transitional provisions for discretionary testamentary trusts operate differently and, for advice tailored to your specific circumstances, we recommend contacting your professional advisor urgently.

Conclusion

Trusts are complex and, to be effective, require ongoing management and professional advice. Care must be exercised when amending a trust deed, not only to ensure that the provisions adequately meet requirements to avoid foreign surcharges but to ensure it is amended in accordance with the terms of the trust, and does not trigger other financial implications.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

November 3, 2020 By GKN Law Firm

Family law and the family home – your options after separating

If you have separated from your spouse or de facto partner, deciding what to do about the family home can raise a whirlwind of emotions. Many memories are attached to the family home – good and bad – and while some may want to hold onto the home and all the sentiment that goes with it, others may want nothing more than to move on.

In many cases, the decision is primarily influenced by financial circumstances with the only possible outcome being that neither party retains an interest in the home. If the matter becomes particularly contentious, then the ultimate decision may rest with a Court.

For many reasons, the family home may be held in one name only, in a trust or corporate entity, or with a third party. Despite the legal interests however, it is important to understand from the outset that when dividing property, all interests in all assets held by the parties must be taken into consideration.

This article outlines some possible outcomes that may be reached when dividing interests in the family home, after discussing some preliminary financial and banking matters to consider post-separation.

Talking to your financial institution

One of the first property-related considerations after separation should be your banking and finance. The sooner you communicate with your bank or building society, the sooner you can explore the options available.

Financial institutions are equipped to deal with financial hardship and relationship breakdowns and have processes to assist parties navigate the issues that arise after separation, particularly when there is a mortgage over the family home. Policies may allow for short-term variations to repayment requirements to assist with cashflow. This might include an interim ‘holiday’ if you are ahead on payments or switching from principal and interest to interest-only payments while negotiations are on foot.

While discussing your mortgage matters with your bank, you should also consider:

closing joint accounts or ensuring any joint accounts that remain open require both parties to authorise transactions;
cancelling joint credit cards;
opening an individual account.

Working through the numbers means having a clear understanding of the balance owing on your loan, the way any offset accounts are set up, and the relevant fees (including early break fees) that will apply if the property is sold and the mortgage paid out.

Getting early legal and financial advice

Even if separating on good terms, it is important to obtain independent financial and legal advice when negotiating the division of your assets and before finalising a property settlement. Stamp duty concessions are generally available when transferring real estate subject to a family law property settlement, however these concessions cannot be accessed unless a formal legal settlement has been properly documented.

Other considerations such as capital gains tax may also be relevant which can make a significant impact on the overall property adjustment. Working with your lawyer and financial advisor will ensure these matters are considered to provide the optimum settlement for your particular circumstances.

What are the options with the family home?

Following are some of the agreements that may be negotiated with respect to the family home after separation. The outcome will of course depend on the joint and individual circumstances of the parties and how the negotiations proceed.

The property is sold, and surplus funds are distributed between the parties. In this case, the parties will need to agree on the method of sale, the agent to be engaged (if any), the value of the property and the listing price. After the house is sold, the home loan, agent’s commission and any other fees are paid from the proceeds of settlement and the balance is distributed between the parties in the proportions agreed.
One party buys the other party out. In this case the parties must again agree on a value for the home, or if an agreement cannot be reached the value may be determined by an expert. The party wishing to retain the family home will need sufficient funds to buy out the other party which will often require refinancing an existing mortgage or granting a new mortgage over the property to obtain the necessary funds to pay out the other party. The feasibility of doing this will depend on the proposed transferee’s financial circumstances and whether he or she has sufficient assets / income to support the loan.
The parties exchange assets to facilitate a buy-out. If other significant assets form part of the property pool, such as an investment property, substantial share portfolio, etc., the parties may negotiate a ‘swap’ of assets with or without a monetary adjustment to reflect the respective asset values and the agreed property settlement.
Sale or transfer of the family home is postponed. While a ‘clean break’ is generally preferable, it may sometimes be beneficial to postpone the sale or transfer of the home. For example, it may be in the best interests of the children to enable them to continue living in the home with a parent for a specified time, or it may not be immediately financially viable to sell or transfer the property.

In such cases, an agreement documenting these negotiations is still essential which must take into consideration responsibilities for mortgage repayments, insurances, rates, repairs and maintenance.

Of course, there may be variations of these outcomes with each matter considered in light of the parties’ respective circumstances and the financial implications involved. In all cases, it is essential to ensure that the property remains insured and secure and that relevant time limits within which to commence legal proceedings for a property settlement are understood.

What if we were renting?

Not all couples purchase a house together and a long-term rental could arguably be considered a ‘family home’. So, what happens with an existing lease when a couple separate? The rental agreement will need to be updated, with consent of the landlord, if one of the parties has moved out and an agreement reached regarding any bond held. This may require a monetary adjustment between the parties. These negotiations should be documented in writing with the assistance of a legal advisor.

Conclusion

There are always financial implications when dividing property after separation and the family home is no exception. Obtaining professional advice to flag potential issues and consider the effect of duty and taxation on the proposed settlement can help you make an informed decision that delivers the best possible outcome for your circumstances.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9602 2535 or email [email protected]

November 3, 2020 By GKN Law Firm

Enduring Powers of Attorney explained

A lot of people have heard of a Power of Attorney however most do not fully appreciate the extent of its power, the benefits it delivers or the types of Powers of Attorney that exist.

A Power of Attorney is a useful legal document used to allow someone to handle your affairs in a variety of circumstances. It is often used if you are planning to go overseas, taking an extended holiday, suffer from poor health, have an accident or reach a stage in your life when you need greater assistance managing your affairs.

In this article we examine why appointing a Power of Attorney is so strongly recommended by lawyers and explain the difference between a General Power of Attorney and an Enduring Power of Attorney.

Selecting a person to act in your place

The appointment of your Attorney enables that person (or people) to act in your place, and do the things you would normally do yourself. Such as signing documents, paying the bills and doing the banking. The person you choose, your Attorney, has the right to stand in your shoes when you wish them to look after your affairs. In reality they can enter into agreements in your name and on your behalf.

Therefore as a result of the power of the appointment it is critical that you select the right person to act in that capacity. The person does not have to be a lawyer. In fact it is important for the person to know you well and for you to trust them. It is often a trusted family member but whoever it is must be over 18.

The difference between a General and an Enduring Power of Attorney

Not all Powers of Attorney are the same.

A General Power of Attorney is a legal document that gives the Attorney the authority to make decisions about financial and legal matters on behalf of the person who appoints them. This power lasts only for as long as the person who appoints them has mental capacity. The general power ceases to operate if the person that has made the Power of Attorney loses capacity to make decisions. A General Power of Attorney is often used as a tool of convenience. For example, a person might appoint a General Power of Attorney to look after their financial and legal affairs in Australia while they travel overseas.

An Enduring Power of Attorney is similar to a General Power of Attorney except that the powers continue, or endure, in the event the donor loses mental capacity.

In New South Wales, a document appointing an Enduring Guardian can be used alongside an Enduring Power of Attorney to authorise medical and health decisions.

An Enduring Power of Attorney, unlike the General Power of Attorney, must be explained to you by a prescribed witness, that is, a lawyer.

It is important to be aware that an Enduring Power of Attorney becomes void when you die.

What happens if you lose capacity without having a Power of Attorney?

The probability that someone can lose capacity is often not properly considered by people. However, if you do not have an Enduring Power of Attorney and develop a mental incapacity you are therefore unable to manage your financial affairs. It is too late then to have a lawyer prepare such a document as you do not have capacity to sign it.

The difficulty is that no person automatically has the right to manage your assets. Not even if they are your husband or wife.

This therefore has a colossal effect on all the financial decision making thereafter with your bank accounts, your jointly owned home, shares or other jointly owned assets or liabilities.

To have decisions made in these circumstances would then involve an application to the NSW Civil and Administrative Tribunal (formerly the Guardianship Tribunal).

The applicant, usually a family member, would apply to become your financial manager. However this is subject to that person being deemed fit (as in ‘fit and proper’) by the Tribunal. Failing this finding of being ‘fit’, the Tribunal may appoint the NSW Trustee and Guardian to manage your affairs.

If the NSW Trustee and Guardian is appointed, your spouse may need to consult with a government department to deal with your ongoing financial decision making until your death.

When does the Attorney’s power begin?

You may nominate when your Attorney’s power is to begin. If you do not name a date or an occasion, it begins immediately. On the other hand, if you lose the capacity to make such decisions before the date or occasion you name, the power begins at that point.

It is important to note that even if you give your Attorney power immediately, you may also continue to make decisions yourself while you are able to do so. By providing a Power of Attorney you do not restrict or give up the right to make financial decisions as you do today.

Summary

Today Powers of Attorney are used as a precautionary step by sensible adults rather than as a stop gap measure for an overseas trip. Professional groups such as accountants and financial planners, along with lawyers all strongly recommend that their clients of all ages and walks of life, make a Power of Attorney so their assets are not locked up if a person loses legal capacity to sign documents and their loved ones are put through avoidable stress.

If you or someone you know wants to know more don’t leave it to late, please contact us on (02) 9602 2535 or email [email protected]

September 30, 2020 By GKN Law Firm

New laws for off-the-plan purchases in New South Wales

New South Wales has introduced laws for off-the-plan residential property contracts to foster improved transparency and protection for purchasers.

The reforms amend the Conveyancing Act 1919 (NSW) and Conveyancing (Sale of Land) Regulation 2017 and commenced on 1 December 2019.

Purchasers, vendors and developers should take note of the key changes, explained below.

Additional disclosure requirements for vendors

Off-the-plan contracts usually contain numerous conditions, with many elements of the ‘finished product’ subject to change during the construction phase. Additional disclosure requirements are anticipated to give greater certainty to purchasers who must rely on the written information provided by a vendor when making decisions.

A disclosure statement, in the approved form, together with prescribed documents must now be attached to an off-the-plan contract before it is signed.

The disclosure statement highlights key information such as the sunset date, whether the development has been approved and other conditional events, and identifies the relevant clauses in the contract for further explanation.

The disclosure statement must include a draft plan prepared by a registered surveyor setting out details such as the proposed lot number, the area and its location, the site of any proposed easements affecting the lot and details of any restrictions on the use of the land or covenants affecting all of part of the lot.

A draft floor plan and location plan must be included for strata schemes and a draft location diagram, detail plan and community, precinct or neighbourhood property plan, as relevant, for these types of developments.