Our commentary on the effects of marriage and divorce on wills has been added to. While a will is revoked by the marriage of the testator a number of exceptions apply, as per s 13 of the Wills Act. The commentary on the impact of divorce on a will is also enriched.
FAMILY LAW – LETTERS OF ADVICE FOR BINDING CHILD SUPPORT AGREEMENTS
Detailed Letters of Advice for Binding Child Support Agreements have been added to the Children publication in Family Law with one for the “payee” and one for the “payer”. The letters explain Child Support Assessments and the meaning and effect of Binding Child Support Agreements on the client’s rights. Each letter also lists the particular advantages and disadvantages of Binding Child Support Agreements for the “payee” and the “payer”. The “payee” letter explains the advantage of registering the agreement where there are non-periodic payments.
Locate these letters on the Children matter plan in Settling it Early in the Child Support folder.
NSW – Supreme Court – Equity Division and Common Law Division – Appeals – Practice Note SC CA 1
Information has been added to the Act for Plaintiff and Act for Defendant commentaries in both the Supreme Court Common Law and Equity Guides to incorporate the requirements of Practice Note No. SC CA 1 which was issued on 13 December 2017 and which commenced on 1 January 2018.
All parties to proceedings in the Court of Appeal are required to comply with the requirements contained in Part 51 UCPR (appeals) and Part 59 UCPR ( judicial review). The Practice Note makes additional provision for the preparation and conduct of proceedings in the Court of Appeal.
Local Court NSW – Author review of precedents
The author, Bob Gowenlock, has reviewed the precedents for Acting for the Plaintiff and Acting for the Defendant within the Local Court NSW Guide. The precedents have now been updated to incorporate these amendments by the author.
FAMILY LAW – BINDING CHILD SUPPORT AGREEMENTS
The Binding Child Support Agreements commentary has been updated with relevant case law.
Balzano & Balzano [2010] FamCAFC 11 at [40]-[41] and Gallup & Gallup [2009] FMCAfam 839 at [52]-[53] both demonstrate the extreme difficulty in having a binding child support agreement set aside.
Vendor’s duty to co-operate
By Russell Cocks, Solicitor
First published in the Law Institute Journal
Contracts often impose specific obligations on purchasers but these may be accompanied by implied obligations on vendors to co-operate with the purchaser to allow the purchaser to fulfil those obligations.
Contracts of sale of land often include conditions that require a purchaser to undertake some action that will put the purchaser in a position to complete the contract. Such conditions are known as ‘contingent conditions’ in that the purchaser does not promise that the condition will be satisfied but acknowledges that if the condition is satisfied, the contract will no longer be conditional on that condition being satisfied.
A common example is a finance condition whereby the contract is conditional (contingent) upon the purchaser obtaining finance to assist the purchaser to complete the contract, or at least to make application for such finance and notify the vendor of the outcome. The purchaser does not promise that finance will be obtained, but obtaining finance will mean that the contract will proceed. The failure of a contingent condition will generally give a right to terminate a contract.
Contingent conditions may be in contrasted to promissory conditions whereby one, or both, of the contracting parties promise to do something; such as to adjust outgoings, or provide documents, or settle the transaction in a particular way. Generally, the failure of a promissory condition will not give a right of termination unless the condition is essential, or goes to the root of the contract.
Conditions may be both contingent and promissory, as indeed is the finance condition in GC14 of the standard contract. The contract is contingent upon the purchaser obtaining finance, but the purchaser also promises to apply for finance and advise of the outcome of that application. If the purchaser fails to comply with the requirements of the condition, the contingency is deemed to have been satisfied and the contract proceeds unconditionally in respect of finance.
Such conditions specifically impose obligations on the purchaser but also impliedly impose obligations on the vendor. Grubb v Toomey [2003] TASSC 131 and Grieve v Enge [2006] QCA 213 are authority for the proposition that a vendor who agrees to a finance condition in a contract impliedly agrees to make the property available to the purchaser for the purpose of a valuation required by a prospective lender and that a vendor who fails to comply with this obligation will be in breach of contract.
Simcevski v Dixon [2017] VSC 197 concerned the sale of a commercial property that had previously been used as a petrol station and that the purchaser wished to redevelop. The purchaser required finance for the purchase and the financier required a valuation to include an assessment of the likely contamination of the site. However, the contract was not conditional upon finance so it was not open to the purchaser to argue that the implied obligation to make the land available for valuation extended to an obligation to allow investigations.
The purchaser sought to rely on a Special Condition in the contract that stated that the vendor gave no warranty in respect of contamination, that the purchaser had inspected the property and that the purchaser released the vendor from any liability in relation to contamination. The condition also referred to the purchaser conducting investigations in relation to contamination and the purchaser sought to argue that this created an express or implied obligation on the purchaser to conduct those investigations and a consequent implied obligation on the vendor to make the property available for the purpose of conducting those investigations.
In the context of the contract this seemed an ambitious argument, as the purpose of the Special Condition appeared to be to protect the vendor and the court concluded as much. Thus, the court held that the Special Condition did not create an express or implied obligation on the purchaser to conduct investigations. Whilst the court did recognise that a vendor does have an implied general duty to co-operate with the purchaser to allow the purchaser to gain the benefits anticipated to flow from the contract, that duty did not extend to making the property available for the proposed investigations in this case as the purchaser had no obligation to conduct those investigations.
A final argument of the purchaser was that the refusal by the vendor to allow the investigations to be conducted prevented the purchaser from completing the contract and that a vendor in such circumstances should not be entitled to terminate the contract, as to do so would allow the vendor to benefit from its wrongdoing. The court, whilst acknowledging the Prevention Principle, held that, on the facts of this case, the Principle did not apply.
Tip Box
Whilst written for Victoria this article has interest and relevance for practitioners in all states.
Estate planning – An exciting opportunity for small law firms
The usual wills versus a will with estate planning
For most clients a will is a straightforward document that appoints an executor, an alternate executor, perhaps makes some specific bequests of personal items to certain family members, then leaves the balance of the estate to their spouse then their children with a default clause if none of these beneficiaries survive.
The fees charged by most firms are modest and reflect the reality that most clients do not wish to pay a great deal for something that they only reluctantly accept that they need and know they will never personally use and can prepare themselves using a form bought from the post office.
Wills have traditionally been seen as valuable because they eventually bring the firm estate work, rather than valued for the fees associated with the wills themselves. There is an old adage that the goodwill of a practice are the good wills in safe custody.
However, estate planning is a different thing and many firms are now taking a far more comprehensive approach, with a far more profitable result.
Estate planning is an area where small firms can grow their offering to existing clients and attract new, high net worth clients who require and appreciate professional expertise and assistance in this important area of practice.
It is far easier to offer this expertise than many small firms realise. The By Lawyers suite of testamentary trusts and wills clauses, together with the extensive commentary on wills and estate planning, means that firms can confidently advise clients who may have substantial assets including business interests held in company, partnership, trust structures or self-managed superannuation funds.
Whereas a firm might charge few hundred dollars for ‘husband and wife’ wills, the comprehensive succession planning required by a family with substantial assets and interests, including a review of existing structures and documents, preparation of wills which incorporate testamentary trusts, plus other appropriate documents such as powers of attorney and appointments of enduring guardian, is likely to involve fees of many thousand dollars, as well as extending the relationship between the firm and the family to other areas and members. Clients who have such assets and need such advice are mostly very happy to pay for it because they realise the value of the exercise and are as dedicated to retaining their assets for their family as they were to building up those assets in the first place.
Why testamentary trusts?
For clients with substantial assets, complicated families or family members who have medical or personal problems, the use of testamentary trusts has multiple benefits over usual wills, summarised below.
Creditor protection
To protect a bequest from being accessed by creditors of a beneficiary, including guarantees for a business venture.
Divorce of a child
To avoid family assets being redistributed by the Family Court. Assets held in trust are not assets of any individual and the Family Court cannot make an order requiring the distribution of those funds.
Education
Bequests via testamentary trust for payment of school and tuition fees for grandchildren is more tax efficient than simply leaving money to the child’s parents.
High risk beneficiaries
Where one of the beneficiaries is in a high-risk business or has personal issues with drugs or gambling which warrant strict controls being placed on access to any estate funds.
Remarriage of spouse
To limit access to existing family assets by a new family or spouse.
Tax benefits
To minimise tax payable, facilitate income splitting and distribute tax free to children under 18 on marginal rates with the no tax threshold.
Will challenges
Keeping estate assets in trust means they are not in the beneficiaries’ estates and therefore not subject to challenge when they die.
Disabled children
To ensure that any disabled or intellectually impaired children are provided for in the most effective way. A Special Disability Trust can provide a substantial bequest to a disabled child without impacting on any Centrelink benefits.
Identifying the right clients for complex estate planning
Although most clients potentially would benefit from a testamentary trust, their present circumstances do not suggest that one is necessary. In contrast estate planning is essential for clients with high net worth, multiple assets and asset types, business interests, complex business structures, existing family trusts, self-managed superannuation funds, complicated family arrangements and relationships and potential beneficiaries with special needs or personal problems.
Many clients have not considered the need for estate planning which with the aid of By Lawyers commentary and precedents can be offered by practitioners.
The benefits of testamentary trusts
- The fundamental advantage of a testamentary discretionary trust is that the assets are held by the trustee for the beneficiaries, not by the beneficiaries themselves. This allows the protection of assets from claims against beneficiaries and from misuse.
- Separate fixed trusts can be established for separate people or purposes, with conditions. For example, if one child has a drug addiction, a bequest could be left in trust for that child to receive appropriate maintenance and treatment, without them having access to the capital.
- If a beneficiary faces bankruptcy, an inheritance for that beneficiary through a testamentary discretionary trust will not form part of the beneficiary’s bankrupt estate.
- Assets held within a testamentary discretionary trust are not part of the matrimonial pool to be divided up in any family law property settlement in the event of divorce.
- Testamentary trusts also provide an opportunity for testators to control assets after their death, by way of conditional access to trust assets. While not desirable for the beneficiaries, this can certainly be seen by many testators as an advantage.
- Testamentary trusts can be very tax effective – income, capital gains and franked dividends can be distributed among all beneficiaries each year in the most tax-efficient way.
By Lawyers precedents and commentary
Using By Lawyers publications gives your firm the tools and confidence to assist clients with their estate planning, bringing profitable new work and quality new clients into your firm.
GST withholding
By Russell Cocks, Solicitor
First published in the Law Institute Journal
Six months after the ATO introduced new GST Withholding obligations on purchasers of real estate, those changes are starting to have an effect.
In an attempt to reduce avoidance of GST obligations by vendors arising from the practice of illegal phoenix activity, the ATO introduced a GST Withholding obligation on 1 July 2018. The intent of these changes is to require purchasers of certain types of real estate to withhold a portion of the purchase price from the vendor and pay that money to the ATO, to be applied as a credit towards the vendor’s GST liability. This is not a new tax, just a new method of collecting an existing tax. However, as is usually the case when the ATO seeks to transfer responsibility for tax collection, unintended consequences may result in the ‘innocent’ tax collector facing unexpected consequences.
Notice
Unfortunately, the introduction of the Withholding obligation has been complicated by the introduction of a parallel NOTICE obligation on vendors. It is logical in a transaction that generates a purchaser Withholding obligation to require the vendor to notify the purchaser that the obligation exists, but the vendor NOTICE obligation does not mirror the Withholding obligation and applies to a wider set of transactions than the Withholding obligation applies to. By way of example, one of the categories where the purchaser must Withhold is the sale of NEW residential premises but ALL vendors of ALL residential premises are obliged to give a NOTICE. In the case of not-new residential premises, the NOTICE states that the purchaser is NOT obliged to Withhold and given that the vast majority of residential sales are of existing (as opposed to new) properties the effect of the legislation is to require a vast number of vendors to advise the purchaser that no Withholding is required. This obligation appears to be counter-intuitive and has resulted in considerable misunderstanding in relation to the application of the Withholding obligation. It is difficult to glean the motivation behind this wider NOTICE obligation and perhaps this anomaly might be rectified in any review of the legislation.
The most efficient way to deal with the NOTICE obligation when no Withholding is required is to include the NOTICE in the contract with the statement that no Withholding is required. If Withholding is required, the NOTICE must provide the vendor’s name, vendor’s ABN, specify the Withholding amount and when it is payable (at settlement) and may be provided in the contract, or subsequently.
Obligation
In summary, the purchaser must Withhold if the contract relates to:
- new residential premises.
This category can be seen to apply to apartment and townhouse sales where there was a perception of illegal phoenix activity.
- potential residential land.
This category applies to greenfield subdivision sales, again a potential phoenix scenario.
However, this category is wider than lots on a proposed plan. It applies to potential residential land that is included in a (registered) plan of subdivision. It therefore applies to sales of residential lots off-the-plan (because the plan is registered prior to settlement) but also applies to the sale of ANY residential land that is a lot on a plan of subdivision – effectively ALL vacant residential land.
However, Withholding is only required where the vendor makes a taxable supply. Off-the-plan sales by land developers will be in the course of an enterprise and therefore taxable supplies attracting Withholding, but most sales of one-off vacant residential lots will NOT be in the course of an enterprise and therefore will not be a taxable supply and will not attract Withholding. Notwithstanding that no Withholding is required, the vendor must still give the purchaser NOTICE that Withholding does not apply.
Again, this seems counter-intuitive and restricting the obligation to off-the-plan sales might be a future improvement.
Payment
If the vendor gives NOTICE that Withholding applies the purchaser must lodge a form of Withholding notification with the ATO and will then receive a lodgement reference number (LRN) acknowledging the notification and a payment reference number (PRN) to be used when lodging a settlement date confirmation form at the time of payment to the ATO.
Tip Box
•GST Withholding applies to new residential premises and vacant residential land.
•Withholding NOTICE must be given with ALL residential sales.
Family Law – Grandparents order and commentary
New commentary on parenting orders in relation to grandparents has been added to the Children publication … Grandparents are entitled to apply for parenting orders pursuant to s 65C, which provides: A parenting order in relation to a child may be applied for by … (ba) a grandparent of the child; or … Whilst grandparents specifically have standing to make an application under the Family Law Act, it does not automatically mean orders will be granted. As with any parenting order, the court will always consider an application by the grandparents through the prism of what is in the best interests of the child: s 60CC.
Also, a new draft order has been added to the library of Children Orders: “Spending time with grandparents”.
Family Law – Updated Costs Agreements
The Costs Agreements for the Family Law publications – Property Settlement, Children, Financial Agreements and Divorce – have all been updated for each State and Territory to include the amended Itemised Scale of Costs that takes effect on 1 January 2018.
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