ByLawyers News and Updates

Personal Property Securities Act and conveyancing

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Conveyancing is concerned with the transfer of land and improvements from one owner to another. The doctrine of fixtures means that the improvements on the land are considered by the law to be part of the land and therefore a contract for the sale of real estate simpliciter does not involve the sale of personal property and the Personal Property Securities Act (PPSA) has no application to such a contract.

Vacant land

Subject to what is said below in relation to corporate vendors, a vendor’s response to an inquiry from a purchaser about the PPSA in the sale of vacant land is to simply confirm that the contract does not relate to personal property and the PPSA is not relevant.

Residential sales

However, it is traditional for land contracts to include a provision for the sale, in addition to the land, of chattels – or now, goods – that pass with the land. In the residential context this includes such things as carpets, blinds, light fittings and the like which add no real value to the land but which vendors generally leave upon departure and purchasers, often vehemently, expect will remain with the property. It is estate agents who traditionally complete this part of the contract and, in a rush to make a commission, little care is likely to be taken to distinguish between chattels and fixtures. It is therefore not unusual to find “stove, hot water service and swimming pool pump” listed as goods, whereas they are truly fixtures and not subject to the PPSA.

Items that are in fact goods will almost invariably fall within the exemption in s 47 PPSA that excludes personal or domestic items valued at less than $5000. Therefore, the vendor’s response to a request for release in such circumstances should again be that there is no personal property sold pursuant to the transaction that is subject to the PPSA.

The PPSA may be applicable in contracts for the sale of land that also include the sale of a substantial item of personal property. Generally, this will be in the context of a substantial commercial or industrial property and the parties will be alive to the possible application of the PPSA. In that case the quite complex provisions of general condition 7 of the contract of sale guide the release procedure.

Company charges

Prior to the introduction of the PPSA a charge against an asset of a company could be registered at ASIC (Australian Securities and Investments Commission). These charges were ‘migrated’ to the PPSA. Registration was not limited to personal property owned by the company and could in fact extend to a fixed and floating charge over all of the assets of the company, including real estate. The significance of registration of such interests and the need for their release was recognised in Naval and Military Club v Southraw Pty Ltd & Anor [2008] VSC 593, and it is best to conclude that the safest course of action is to search the PPSA register and insist upon release of such charges.

The purpose of release is to prevent a claim after settlement by a third party claiming an interest under the charge. However once the purchaser is registered as proprietor of the land the principle of indefeasibility will mean that the purchaser takes the property free of any such interest. Therefore, the only concern relates to the period between settlement and registration, during which time the dispute would be between two unregistered interests, the first of which (the charge) would have priority in time. However, the purchaser would be entitled to argue that the chargee was entitled, indeed obliged, to register the charge on the title by way of caveat and failure to do so constitutes postponing conduct.

The chargee might argue that a caveat would only have achieved notice and that the purchaser had notice (or constructive notice) from registration on the PPSA. However, s 300 PPSA specifically provides that registration on the PPSA register is not to be deemed constructive notice so a purchaser who does not search may be in a better position than one who does.

Release

The predecessor to general condition 7 acknowledged the possibility of a letter of comfort in relation to such charges but general condition 7 now only envisages a formal release of PPSA charges. The purpose of release in this context is to overcome ‘notice’ and it would appear reasonable that, should the purchaser search the PPSA register and thereby gain notice of a charge, then obtaining a letter of comfort (as distinct from a formal release) should mean that the secured party would be unable to argue that the purchaser should be subject to the secured party’s interest when comfort has been given by that secured party in respect of that interest.

This article has interest and relevance for practitioners in all states.

A Personal Property Securities publication is available on By Lawyers.

Workers Compensation QLD

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Workers Compensation

OCTOBER
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
AUGUST
  • Commentary updated to comply with the National Injury Insurance Scheme (Queensland) Act 2016. The purpose of the Act is to ensure that anyone who sustains serious personal injuries in a motor vehicle accident in Queensland, may be eligible to receive necessary and reasonable lifetime treatment care and support under the National Injury Insurance Scheme.
  • Reference to National Injury Insurance Scheme added to the following precedents: Initial letter to applicant client all claims with costs disclosures, Retainer instructions, Initial letter to applicant client lump sum claims with costs disclosures, and Letter to plaintiff with enclosures.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
FEBRUARY 
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.
  • Recent changes to common law threshold – Summary of the recent legislative changes brought in by the Workers’ Compensation and Rehabilitation and Other Legislation Amendment Act 2015 included in the Workers Compensation QLD publication commentary.

Conveyancing TAS

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Conveyancing

OCTOBER
  • Added commentary discussing valid clearance certificates for foreign residents.
  • Costs Agreements
    • Clause added on payment of fees when purchaser not proceeding
    • Added client and firm fields company execution clause trust account details solicitor’s lien.
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
AUGUST
  • Sale of Real Property – commentary updated to include discussion on bringing co -ownership arrangements to an end via partitioning.
  • Sale and Purchase of Real Property commentaries – further content on Foreign Resident Capital Gains Withholding Payments added.
MAY
  • Foreign resident capital gains withholding payments amendments made to Commentaries and Retainer instructions.
  • Include foreign resident capital gains withholding payments when over $2 million to all necessary precedents and to do lists.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • New section included in the commentary on powers of attorney for land transactions to accompany power of attorney precedents.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Conveyancing SA

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Conveyancing

OCTOBER
  • Sale and Purchase of Real Property – added in commentary discussing foreign resident clearance certificates.
  • Purchase of Real Property Commentary – clause added on payment of fees when purchaser not proceeding.
  • New Precedents
    • To do list – Sale of real property
    • To do list – Purchase of real property
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
    • Clause on recovery of fees added when purchaser not proceeding.
AUGUST
  • Sale of Real Property – commentary updated to include discussion on bringing co-ownership arrangements to an end via partitioning.
  • Sale and Purchase of Real Property commentaries – added further content on Foreign Resident Capital Gains Withholding Payments.
MAY
  • Foreign resident capital gains withholding payments amendments made to Commentaries and Retainer instructions.
  • Include foreign resident capital gains withholding payments when over $2 million to all necessary precedents and to do lists.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH 
  • New section included in the commentary on powers of attorney for land transactions to accompany power of attorney precedents.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Conveyancing QLD

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Conveyancing

OCTOBER
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
    • Clause on recovery of fees added when purchaser not proceeding.
AUGUST
  • Purchase and Sale of Real Property commentaries – further content on Foreign Resident Capital Gains Withholding Payments added.
  • Sale of Real Property – commentary updated to include discussion of how co-ownership may be brought to an end via partitioning.
JUNE
  • Update First Home Owners’ Grants for 1 July 2016 changes.
MAY
  • Foreign resident capital gains withholding payments amendments made to Commentaries and Retainer instructions.
  • Include foreign resident capital gains withholding payments when over $2 million to all necessary precedents and to do lists.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • New section included in the commentary on powers of attorney for land transactions to accompany power of attorney precedents.
FEBRUARY 
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Magistrates’ Court Civil SA

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Magistrates’ Court Civil 

OCTOBER
  • Costs Agreements – Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
AUGUST
  • From 1 August 2016 Small Claims reduce from $25,000 to $12,000 or less. Edit scale of costs – Third schedule.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Motor Vehicle Accident QLD

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Motor Vehicle Accident

OCTOBER
  • Costs Agreements – Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
AUGUST
  • Added commentary on the National Injury Insurance Scheme Queensland
  • Initial letter to client and Retainer Instructions – information added concerning eligibility for the NIIS scheme after award of damages.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Personal Injury QLD

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Personal Injury 

August 
  • Additional commentary added on NIIS – updated to ensure compliance with the National Injury Insurance Scheme (Queensland) Act 2016. The act applies to individuals who may eligible to receive necessary and reasonable lifetime treatment care and support for a serious personal injury resulting from a motor vehicle accident.
  • LINKS TO – National Injury Insurance Scheme (QLD) – Notification form
    LINKS TO – National Injury Insurance Scheme (QLD) – Application form – Interim participation
    LINKS TO – National Injury Insurance Scheme (QLD) – Application form – Insurer
April 
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
February 
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Mortgage Stress

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Whilst there is considerable consistency between the property laws of Victoria and New South Wales, there are also significant differences.

Some differences in practice are:

  • nomination in New South Wales is virtually unheard of as it creates a second duty, but is common in Victoria as it does not; and
  • deposit release is prohibited in New South Wales but common in Victoria.

Some differences in the law are:

  • acquiring an easement by prescription is banned in New South Wales but still available in Victoria; and
  • there is no equivalent in New South Wales to Victoria’s statutory right to clawback fraudulent transactions s 172 Property Law Act 1958.

Perhaps the best known example of the difference was the view previously held in New South Wales that the existence of an illegal structure on land constituted a defect in title and allowed a purchaser to avoid the contract. This was in contrast with the Victorian view that such a defect was merely a quality defect and that the vendor was protected by the principle of caveat emptor. The New South Wales view was ‘corrected’ (that is; brought in line with Victoria) by the Court of Appeal in Carpenter v McGrath 40 NSWLR 39 and consistency has reigned since.

In recent years a significant difference has again occurred with New South Wales taking a ‘radical’ view of the impact of fraud in certain mortgage transactions. In both jurisdictions it is accepted that whilst fraud is an exception to indefeasibility, nevertheless registration of a fraudulent instrument by a party who was not party to the fraud will be indefeasible. Mortgagees have therefore been able to rely on mortgages that have been fraudulently signed provided that the mortgage was registered and the mortgagee was not itself a party to the fraud. However in New South Wales an argument was accepted that it was possible to look ‘behind’ the mortgage at the document that constituted the agreement to repay as it was that document that created the obligation that justified the mortgagee’s security interest and the extent of the mortgagor’s covenant to repay was to be determined by a consideration of the contractual agreement between the parties.

If that contract (loan agreement) created an obligation to repay a specific amount then the covenant to pay protected by the indefeasible mortgage was enforceable. However if the loan agreement referred to an ‘all monies’ mortgage relating to past and future advances then it was said that the mortgagor’s covenant to pay arose contractually from the ancillary documents that related to the actual advances and that if those documents were fraudulent then the covenant to repay arose outside of the protection of the indefeasible mortgage. Essentially, it was said, no money was advanced pursuant to an ‘all monies’ mortgage as the money was advanced pursuant to forged documents.

Victorian mortgagees quaked in trepidation as an army of decisions mounted on the north bank of the Murray River set to wreck havoc on Victorian all money mortgages but Pagone J. in Solak v Bank of Western Australia [2009] VSC 82 manned the ramparts and beat off the hordes by upholding an all monies mortgage and the lenders breathed a sigh of relief. However a Trojan Horse has appeared in the form of Perpetual Trustees Victoria Limited v Xiao [2015] VSC 21. Hargrave J. has adopted the New South Wales analysis of an all monies mortgage and has described the decision in Solak as ‘plainly wrong’.

The scene is now set for a definitive decision by the Victorian Court of Appeal on what is an important point of law. According to Xiao a mortgagee of a forged all monies mortgage is not able to enforce the mortgage or undertake a mortgagee’s sale. Whether confirmation of Xiao will have retrospective repercussions is a matter for the future.

The mortgagor’s victory in Xiao was somewhat pyrrhic as Hargrave J. went on to find that Xiao in fact held the property on trust for the forger (her husband) and that the lender was entitled to judgment against the husband, who had also been joined as a defendant. Hargrave J. was obliged to overcome the presumption of advancement applying to a transfer from husband to wife but did so by finding adequate evidence that it had been the intention of the husband at the time of transfer to retain the beneficial interest in the land.

The mortgagee would therefore be faced with the need to enforce this judgment by way of a Warrant of Execution rather than a mortgagee’s sale. The mortgagee’s possession of the certificate of title would aid that exercise.

The Impact of Bamford on Trust Deeds and Trust Resolutions

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Subscribers to our Companies, Trusts, Partnerships and Superannuation product, and LEAP Office users, will be acquainted with the content written by Greg Vale, a By Lawyers author.

Following the Bamford decision Greg circulated a letter to his clients, which is reproduced below for your information.

Our trusts take into account this decision.

Getting it right – the impact of bamford on trust deeds and trust resolutions

On 30 March 2010 the High Court handed down its much awaited decision in Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation [2010] HCA 10.

In response to Bamford on 2 June 2010 the ATO released a Decision Impact Statement (‘DIS’) and Practice Statement Law Administration PS LA 2010/1, which outlines how the ATO will treat the determination of trust income.

The High Court decision and ATO response are significant and affect every trust in Australia. In particular they affect how trust deeds and income distribution resolutions must be drafted to obtain the optimum tax outcome.

The significance of the High Court’s reasoning in Bamford is that it confirms that it is possible to define and modify ‘trust income’ through the drafting of one’s trust deed. The advantage of being able to define and modify trust income is that it can create circumstances which remove adverse tax consequences or even allow more beneficial tax outcomes to be achieved.

Articles Whilst written for Federal practitioners this article has interest and relevance for practitioners in all states.

Although the ATO accepts that Bamford means that trust deed clauses can be used to define trust income and can thus influence how the net income of a trust will be taxed, it provides a series of caveats, including the potential application of the general anti-avoidance rule or trust stripping rules in circumstances involving a deliberate mismatch between income entitlements and tax outcomes.

Great care is required in the drafting of the yearly income distribution resolutions. Following Bamford, there is a clear benefit in ensuring that one’s trust deed confers sufficient powers to allow a trustee to determine trust income in each income year. Accordingly, in relation to the 2009/2010 income year and onwards, we consider that all trustees should undertake the following steps in light of Bamford.

Step 1 – Trust deed review

Trustees should review the trust deed in conjunction with their tax and legal advisors to determine whether: 1. The trust deed defines trust income and if so, how the definition operates to determine its capacity to minimise adverse tax consequences going forward; 2. The trust deed provides the trustee with adequate powers to modify trust income, including the power to reclassify items as income or capital and vice versa and allocate expenses and losses as appropriate; 3. There are appropriate streaming provisions and whether they are adequate going forward.

Step 2 – Consider amending the trust deed

Where the trust deed does not contain an adequate definition of trust income or powers to enable the trustee to stream or modify what constitutes trust income, then trustees should consider whether it is beneficial to amend the trust deed to resolve these deficiencies. Tax and legal advice should be sought prior to amending the trust deed so as to avoid any adverse tax consequences. For example, the ATO have already flagged the issue of trust resettlements in this context.

Step 3 – Review the drafting of the trustee resolutions

Trustees should review how they draft their distribution resolutions to ensure that an appropriate tax outcome will be achieved. Binetter Vale Lawyers can carry out the necessary review of your client’s trust deeds and provide advice as to the appropriate amendments in the wake of the decision in Bamford and considerations to take into account when drafting income distribution resolutions for a total of $250 (unless advised otherwise in advance). Separately, for an additional charge to be advised as part of the trust deed review, we are able draft the relevant deeds of amendment and provide tax and legal advice on the issue of resettlement as appropriate.

Further, any deeds of amendment will be accompanied with advice as to the types of resolutions appropriate for that deed.

*This article has interest and relevance for practitioners in all states.

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