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To accept or not accept instructions in urgent will matters

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By Rosslyn F. Curnow Nolch, Principal

Rosslyn Nolch Solicitors

Publisher’s Note: The outcome in Howe v Fischer [2013] NSWSC 462, discussed in this article, was overturned on appeal in Howe v Fischer [2014] NSWCA 286. Following the decision on the appeal, unless the instructions for the will are concluded and unless there is reason to think the testator is at imminent risk of death, then it appears a solicitor is unlikely to be held negligent for failing to advise about, or to procure, an interim will. However each case will turn on its facts and solicitors should take utmost care.

Every case of course turns on its own facts, but two recent cases, and an ageing population, highlight the need for consideration of a number of issues when agreeing to take on a new wills matter.

  1. Fischer v Howe [2013] NSWSC 462

The lawyer was asked to act for a new client in relation to her will. The willmaker (W) had made a number of formal wills between 1982 and 2009 and wished to change certain dispositions in her then latest will made in 2009. In particular, W wished to leave the plaintiff in this matter a 50% share of her estate in lieu of the 25% left to him in the 2009 will.

W had lost faith in her previous lawyer and asked her doctor if she could recommend a lawyer. The doctor knew the defendant lawyer and contacted him, and in the course of the conversation noted that she believed W had testamentary capacity as she was of sound mind, although physically frail. Subsequently the lawyer spoke directly with W and then attended her home, where she resided with the assistance of a carer, two days later (25 March 2010).

At the time of the attendance, the lawyer took instructions during a lengthy conference. He was not provided with details of the 2009 will.

It is pertinent to note that during that conference, as well as stating her wishes in respect to the change in disposition to the plaintiff, W:

  1. did not reveal her age (94), other than by reference to the ages of her children;
  2. wanted her previous lawyer and accountant removed as executors and, when asked who she wanted as executor, ‘suggested that the defendant could be appointed. He (the defendant) advised her to think about whom she wanted and to let him know when he presented her with a draft of the will.’;
  3. did not appear to be suffering from ill-health or appear to be exhausted from the lengthy conference.

This conference was shortly prior to the 2010 Easter holiday. At the conclusion of the conference the lawyer told W that he would be away on leave over the Easter break and would not return to work until after Easter. It was proposed that the lawyer would prepare a draft will and attend W during the week after Easter, with which W agreed, also stating that she would like the plaintiff to be present at that meeting. The lawyer left with instructions, and was to contact W upon his return from leave.

Later that day W spoke to the plaintiff over the telephone and told him that she had seen a lawyer and wanted to ‘schedule’ him to attend after Easter when the plaintiff could be present.

Subsequently, over a very short period of time during which W refused to be admitted to hospital, W became ill. On 31 March 2010 the lawyer commenced leave (Good Friday was 2 April 2010). W died on 6 April 2010, without executing a new will, and her doctor was ‘shocked’ that she had passed away at that time.

Following objections on the basis of a lack of testamentary capacity by a family member left out of the 2009 will, that will was finally admitted to probate with some modifications (which did not affect the plaintiff’s entitlement of 25% under that will). Subsequently the plaintiff brought an action against the lawyer for his ‘lost’ 25%, being the difference between what he received under the 2009 will (25%) and what he would have received under the ‘new’ will had it been made (50%).

What appears to have told against the lawyer was that he was very experienced, had a short time previously attended a seminar on informal wills, and that ‘The defendant accepted that there was no practical impediment to his making an informal will at the conclusion of the conference since it would not have taken long and there was no indication that the deceased’s attention or energy was flagging. He admitted that he did not give any consideration to an informal will which the deceased could have signed that day or shortly thereafter’.

The court stated (at 97):

I consider that the defendant was negligent in failing to procure an informal will at the conference on 25 March 2010. He could have done so. His failure to do so was a breach of his duty to exercise reasonable care. Although the deceased may not have been at risk of imminent death as [the doctor] understood the term, being at risk of dying within hours or within a day, she was, by reason of her age, lack of mobility, need for care and infirmity, susceptible to a not insignificant risk of losing her testamentary capacity in the period of about a fortnight between the initial conference and the proposed conference. There was no reason for her, or her intended beneficiaries, to be subjected to that risk in light of her settled testamentary intentions, both as to dispositions and as to her desire to change her executors, and the circumstance that it was the solicitor who was responsible for the delay.

And (at 102):

The only thing that would have relieved the defendant of the obligation to procure an informal will would have been the deceased’s express instructions that she did not wish to take that course. No such instructions were forthcoming nor could they have been because the defendant did not raise the option with her. I do not accept that the preparation of an informal will was in any way inconsistent with the later execution of the formal will at the conference in April. To the contrary, the purpose of the making of an informal will was to safeguard the implementation of her testamentary intentions against the possibility that the deceased would lose her testamentary capacity either through death or stroke or other event to which her advancing age and frailty made her increasingly susceptible.

The plaintiff was awarded the difference between 25% and 50% of the estate against the lawyer.

  1. Maestrale v Aspite [2012] NSWSC 1420

On 8 July 2002 the lawyer met with the deceased, who was on a day release from hospital, and took instructions for a will – this had been arranged by the plaintiff. Subsequently, on 15 July 2002, the lawyer attended the hospital with the original will for the purposes of having it executed, but unfortunately the deceased died 10 minutes before he arrived.

The plaintiff’s contentions, many of which the court accepted, included that:

  • he had asked the lawyer on several occasions in the three weeks leading up to 8 July 2002 to attend his father for the purposes of making a new will (under which the plaintiff was to receive a greater share than provided in an earlier will);
  • the lawyer negligently failed to have the deceased sign his instructions at the meeting 8 July 2002 (as an informal will);
  • he had contacted the lawyer on 12 July 2002 and 13 July 2002 to say that his father’s health was deteriorating.

In response, the lawyer said that:

  • it was not until the morning of 8 July 2002 that any arrangement was made for him to meet with the deceased;
  • while he understood that the deceased had been diagnosed with cancer, the plaintiff had told him the doctors believed he had six months to live, and that the deceased gave him the same information on 8 July 2002, at which time the deceased appeared to be in a reasonably stable condition;
  • had the plaintiff informed him of the urgency, he would have attended the deceased without delay, but denied having been so informed;
  • he was aware of the applicable informal will provisions (section 18A Probate and Administration Act 1898 (NSW)) 2, but did not advise the deceased of the option of making an informal will because of his assessment of the deceased’s general state of health on 8 July 2002 together with the information the deceased gave him at that time that his doctors had given him some months to live.

The court considered the evidence of various experts and inter alia quoted from Hill v Van Erp [1997] HCA 9 where the solicitor was held liable to the intended beneficiary, the disposition being ineffective because the husband of the intended beneficiary was asked to attest the will:

Thus, when a solicitor accepts responsibility for carrying out a client’s testamentary intentions, he or she cannot, in my view, be regarded as being devoid of any responsibility to an intended beneficiary. The responsibility is not contractual but arises from the solicitor’s undertaking the duty of ensuring that the testator’s intention of conferring a benefit upon a beneficiary is realised. In a factual, if not a legal sense, that may be seen as assuming a responsibility not only to the testatrix but also to the intended beneficiary.

The court also quoted from Queensland Art Gallery Board of Trustees v Henderson Trout (a firm) [2000] QCA 93 where a ‘disappointed beneficiary’ was unsuccessful:

It may be accepted that whenever a solicitor takes instructions to make a will, there is a potential for a duty to arise in favour of third parties who may be damaged if the solicitor fails to discharge the retainer with due care. Whether a duty actually arises in favour of a particular third party depends upon a variety of circumstances, and these have not by any means been clearly identified by the cases. … Hill v Van Erp, suggests a variety of potential matters including foreseeability of loss to the third party, control of the situation by the solicitor, proximity between the solicitor and the third party, general public reliance on satisfactory performance by solicitors, assumption of responsibility to discharge the retainer properly, the powerlessness of the third party to do anything to protect himself or herself, whether or not there is any conflict between the duty owed to the client and the alleged duty to the third party and perhaps other matters also.

There is as yet no consensus as to which matters are dominant or any formula which will guide a trial judge in formulating tests that will determine whether or not such a duty is owed. However … (i)t is up to the client to indicate when he or she is ready to make a particular will. Attempts by a solicitor to hurry up an undecided client or to seek to benefit particular beneficiaries are fraught with danger. Recognising this, Courts should be slow to inflict busybody functions or duties of this kind upon solicitors or other professional advisers.

In the circumstances of the present case, particularly in the absence of indication from the testatrix that she wanted to finalise the matter at least to the extent of executing a will that would secure a particular benefit to the art gallery, I do not consider that the stage was reached at which any duty of care arose on the solicitor’s part in favour of the art gallery.

The court then noted (at 106) that the situation in this case was distinguishable from the latter case, and that the deceased ‘had given clear and unambiguous instructions to (the lawyer) to prepare a will under which he intended that the plaintiff would benefit, to a material degree, differently from his other children. There is nothing to indicate that (the deceased) was uncertain as to his testamentary intentions at the conclusion of the (8/7/2002) meeting and everything to support the inference that he was thereafter awaiting the attendance of (the lawyer) to render those intentions final and enforceable.’

And (at 107):

By accepting those instructions, and in pursuance of carrying them out, … (the lawyer) had a coexistent duty to the plaintiff to ensure that in the event of any change in his father’s health or capacity he would make prompt arrangements to attend with a formal will or, if time did not permit, to attend with the file notes so that they might be signed and an informal will created. The breach of duty did not reside in an unduly dilatory approach to preparation of the will by allowing the passage of seven days before the will was prepared but in his failure to respond to the plaintiff’s urgent calls for advice and attention in the interim.

The court awarded damages against the lawyer based on the difference between what the plaintiff received under the ‘old’ will, and what he would have received under the ‘new’ will (with some adjustment for other factors pertaining to the deceased’s expressed wishes).

Other relevant points

Our professional rules, in respect to which the Australian Solicitors’ Conduct Rules (yet to be implemented) are very similar, highlight some areas where an ‘urgent’ will situation can put the lawyer in peril, for example (in addition to rule 10):

  • Agreeing to Act for a Client (Rule 2): consider what might be deemed diligently attending to the work required with ‘reasonable promptness’ in the circumstances;
  • Maintaining confidentiality (Rule 3): consider how to best effect ‘deathbed’ instructions when co-ordination with family members is required (particularly where they are existing clients, as is often the case);
  • Avoiding conflicts of interest between clients and between the client’s and the practitioner’s own interest (Rules 8 and 9) 3: consider how one ceases to act if a material conflict arises when the willmaker’s health is failing.

We also should consider one of the suggestions contained in the 2012 Victorian Law Reform Commission’s Review of Succession Laws that willmakers be obliged to obtain a medical certificate before giving instructions for making a will 4, and also the suggestion that a person authorised to take affidavits or a medical practitioner act as a witness5.

So the questions we might need to consider before accepting instructions for wills include:

  • Is it urgent, not only in time but in terms of the willmaker’s health?
  • Is it urgent from the willmaker’s point of view, or are there really issues of capacity with the urgency being from the point of view of the intended beneficiary?
  • Can one attend to the matter promptly (as in immediately, foregoing holidays, other emergencies etc.)?
  • Is one able to assess competency immediately, as opposed to a slightly longer but more considered approach; and/or is there a legislative requirement for a medical certificate before instructions can be taken, in which case whose responsibility is it to pursue this?
  • Is one prepared to write up an informal will ‘on the spot’ if the need arises, including adequate consideration of potentially difficult areas such as excluding immediate family members who would ordinarily expect to benefit?
  • Is an informal will recognised in the lawyer’s particular jurisdiction, at present 6, or in the future if additional legislative requirements are imposed?
  • What are the risks in errors being made in a hasty informal will, as opposed to one prepared in the serenity of one’s office with precedents and all necessary information to hand?

We also need to consider potential risks, some being obvious and some perhaps not, including:

  • The willmaker may not really want a (new) will, but in the perceived immediacy of the matter the lawyer is given little time in which to give this considered attention, particularly if s/he is being pressured by such statements as ‘If mum dies before this will is signed …’ (we all know how this goes).
  • If the (new) will is made, disappointed beneficiaries may allege all sorts of improprieties against the lawyer.
  • If the (new) will is not made, disappointed beneficiaries may allege their ‘disappointment loss’ is in direct proportion to the alleged negligence of the lawyer.
  • Indicators of diminished competency may be missed in the immediacy of the matter, particularly if the lawyer has not acted for that willmaker previously.
  • An informal will prepared in haste may not meet applicable jurisdictional requirements (see point 3).
  • Drafting errors may be made in the haste to prepare a will.
  • If the willmaker indicates they want the lawyer to act as executor the lawyer may be caught between refusing or asking the willmaker to consider further, leaving him/herself open to accusations of delay; or agreeing, and being accused later of coercing the willmaker to make the appointment and failure to comply with the professional rules.
  • There may be a higher risk of conflict between the interests of the willmaker, the interests of family members if they are existing clients, and also the interests of the lawyer in ensuring that all ethical duties are met as well as a personal interest in not being taken to task afterwards.

So whilst every person should be able to access legal assistance when and where required, there are evolving difficulties in regard to this area of law, and it may well be that in the future only specialist firms are willing to accept this type of work.

Note: Contributed by Rosslyn Nolch, Solicitors, for educational purposes only, and originally prepared for Wills, Powers of Attorney & Enduring Power of Guardianship (VIC) – Step-by-Step Legal Practice Guide and Precedents By Lawyers For Lawyers.

The interpretation is that of the author, and the reader should research all of the materials referred to for him or herself. Primary source of case information unless otherwise noted:

https://www.austlii.edu.au/.

This article does not constitute legal advice.

NOTE:

  1. See also In Check Issue No. 59 www.lplc.com.au.
  2. Section 18A Probate and Administration Act 1898 (NSW).
  3. See also the 2012 Victorian Law Reform Commission’s Review of Succession Laws, referred to below, Point 2.43 and Question W5.
  4. Point 2.43 and Question W4.
  5. Point 2.17 and Question W1.
  6. See for example: Fast v Rockman [2013] VSC 18 where an unexecuted Will was admitted to Probate as a document the deceased intended to be his Will, notwithstanding that he had not actually seen it (but had seen an earlier unexecuted Will to which he wanted minor changes); Re Will and Estate of Brian Bateman [2011] VSC 277 where an informal (draft) Will was admitted to Probate, and Estate of Peter Geoffrey Brock; Chambers v Dowker & Anor; Dowker & Anor v Chambers & Ors [2007] VSC 415; and Estate of Baier [2013] NZHC 504 where a Will approved by telephone by the deceased was admitted pursuant to section 14 Wills Act 2007 (details courtesy Envoy June 2013, NZILE); contrasted with the result in Prucha v Standing [2011] VSC 90 where the Court found the deceased had not intended the document to be his last Will.

Tip Box

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

The risks of asking an employee to a little chat

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

The background

At the time of her dismissal, the employee (Ms Ward) had worked as an Advertising Sales Coordinator in her employer’s Agency Division. Each sales coordinator had a client list to sell advertising to and service.

The employer had an account management system on its computer network which provided a complete billing history of the advertising relationship with clients. Sales coordinators entered ‘notes’ about client-related matters into the account management system.

The employer decided to restructure. Clients previously serviced by the agency sales team (including by the employee) were internally allocated to other teams.

The employee didn’t take kindly to the restructure. ‘In a fit of pique’ she deleted notes that she had made about clients on the account management system to make it difficult for anyone who took over the employee’s client accounts.

Whilst voicing her unhappiness about the reallocation decision with her manager, the employee informed him of the deletion of her client notes from the account management system.

The investigation

The employer initiated a workplace investigation following the employee’s disclosure. An examination of the employer’s computer system confirmed that notes had been deleted by the employee.

Some three days after the employee’s disclosure, an 8 am meeting was held by management. The employer’s Sales Director, who had initiated the investigation, directed a human resources officer to arrange a meeting with the employee. At the time, the matter was considered ‘serious’ and the Sales Director was considering the employee’s dismissal.

Within two hours, the employee was summoned to a meeting with the human resources officer and management representatives.

Following the misconduct meeting, the employer decided to summarily dismiss the employee with four weeks pay in lieu of notice (due to her near 20 years of service) the next day.

The employee subsequently filed an unfair dismissal claim Sandra Ward v West Australian Newspaper Limited [2010] FWA 1785 (8 March 2010).

Unfair dismissal hearing – the important points

Fair Work Australia was critical of the employer’s workplace investigation.

FWA rejected the employer’s attempted characterisation of what was in reality a serious meeting about alleged misconduct as a merely a ‘conversation’ or ‘discussion’.

FWA observed that:

  • the employee’s ongoing employment was in jeopardy prior to her attending the meeting;
  • the employee was called to the meeting without any notice or knowledge of its purpose;
  • the employee had no idea of the meeting’s seriousness;
  • the meeting, whether deliberate or not, was set in the employer’s boardroom, which one of the manager’s present described as making him uncomfortable;
  • Ms Ward was interviewed by two senior members of management and the HR Officer;
  • the interview was not conducted with clarity, mainly due to the HR Officer leading the interview with less than 48 hours knowledge of the account management system; and
  • this lack of clarity and lack of notice led to the employee being confused, hesitant in her answers and the employer (incorrectly) forming the view that the employee lacked openness and she was untruthful.

FWA held that:

  • the employee was not treated fairly nor was there was a valid reason for her dismissal;
  • at the misconduct meeting, the particulars of the allegations and surrounding circumstances were not put to the employee in a fair and straightforward way enabling her to respond appropriately;
  • the meeting was arranged in such a way – in terms of location, timing and lack of knowledge of its purpose – that the employee could not access a support person;
  • the employee was not untruthful in her answers; and
  • the dismissal was unfair.

FWA overturned the dismissal and reinstated the employee to her original position.

Lessons for employers

When conducting a workplace investigation into workplace misconduct, employers need to be able to demonstrate a fair procedure was adopted. In particular:

  • avoid any actions which could be perceived as trickery;
  • be clear with an alleged wrongdoer about the purpose of a meeting – including the nature and seriousness of the allegations being investigated.
  • avoid using vague statements or descriptions which play down the seriousness of the meeting (e.g. ‘having a chat about something’);
  • provide sufficient notice of the meeting to enable the alleged wrongdoer to seek advice and/or arrange a support person; and
  • not have made any predetermination about the outcome of the investigation.

Contract – Guarantee

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Prior to the introduction of the 2008 copyright Contract of Sale of Real Estate it was common for a vendor to include a standard form guarantee in a proposed contract and to require directors of a corporate purchaser to personally guarantee the performance of the contract by signing that guarantee at the time that the contract was executed by the company.

However the copyright 2008 contract introduced a standard general condition (GC) that was designed to overcome the need for a guarantee to be included in the contract. GC 20 provides ‘The vendor may require one or more directors of the purchaser to guarantee the purchaser’s performance of this contract if the purchaser is a proprietary company’. thereby creating a right in favour of the vendor, at any time during the continuance of the contract, to require the director to sign a guarantee.

But what if, when subsequently required to enter into such a guarantee, the director refuses or fails to do so? The vendor’s rights pursuant to the contract are limited to the parties to that contract, essentially the purchaser. If the vendor is to enforce the right created by the contract, the vendor must establish a right against the directors of the company that exists outside of the contract, as the directors are not parties to the contract.

It is submitted that the vendor can successfully establish such a right based on the general principles of unconscionability, both at common law and in their statutory form. There can be no doubt that a corporate purchaser is engaging in trade and commerce when entering into a contract of sale of land and the directors, as the human force behind the company, are equally so engaged. Trade practices law has undergone considerable development in recent years with the states adopting the Australian Consumer Law, including a general duty to act in good faith.

It is submitted that a director of a company who causes the company to enter into a contract containing GC 20 will be found to be making a representation to the vendor that the director knows that the vendor is relying on the director signing a guarantee if called upon to do so and a refusal or failure to sign the guarantee will constitute unconscionable conduct and entitle the vendor to remedies directly against the director. This argument is strengthened by the High Court decision in Toll (FGCT) P/L v Alphapharm P/L [2004] HCA 52 to the effect that parties engaged in trade and commerce are taken to have read and understood the meaning and effect of contractual documents, specifically GC 20.

Corporations have no ‘life’ of their own. They are creatures of statute and are only capable of acting on the basis of the decisions made by their officers. Those decisions are to be made, in the case of multi-director companies, by the directors in formal or informal meetings of the directors. A vendor is therefore entitled to assume that a contract that, on the face of the document, is signed on behalf of a corporation has been read by the relevant officers of the corporation and that those officers are thereby aware of the terms of the contract. The directors will thereby be taken to be aware of the vendor’s entitlement to call for directors’ guarantees, and to thereafter refuse or fail to sign the guarantee when called upon to do so is unconscionable.

A disappointed vendor might also consider relying on the High Court case of Houghton v Arms [2006] HCA 59 where employees of an insolvent defendant were held liable for misrepresentations made by the corporation. It might be argued that by signing a contract including GC 20 the corporation is representing to the vendor that the directors will sign a guarantee when called upon to do so in the future and that the directors have accessorial liability for that representation such as to make the directors directly liable to the vendor. If the purchaser company fails to fulfil the contract the vendor may seek damages against the directors, not on the basis of a signed guarantee, but rather on the basis that the failure of the directors to sign the guarantee is a breach of the company’s representation to the vendor that the directors would sign and that the directors are personally responsible for that misrepresentation.

Alternatively, a disappointed vendor might appoint a liquidator to the insolvent company and pursue the directors who refused to sign the guarantee on the basis of the directors’ duties to the company. By authorising the company to enter into the contract the directors exposed the company to the possibility of loss. By not signing the guarantee when called upon to do so, and ultimately honouring the guarantee, the directors, in breach of their duty to the company, are responsible for the company’s loss, being the debt to the vendor arising out of the contract.

Tip Box

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

Contract – Australian Consumer Law – Impact on residential conveyancing

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

Australian property law in general, and conveyancing in particular, were dominated for two centuries by the common law principle of caveat emptor (let the buyer beware) which gave very little protection to a purchaser against misrepresentations by the vendor. The age of the consumer, which began with protection against encyclopedia salesmen jamming their foot in the door in the 1960s and became serious with the Commonwealth Trade Practices Act of 1974 (TPA), has been chipping away at caveat emptor for nearly 50 years and, somewhat reluctantly, the states jumped on the consumer protection bandwagon with their respective fair trading Acts.

The Australian Consumer Law (ACL) is, to some extent, the culmination of that process and seeks to provide an Australia –wide template and has been adopted by all jurisdictions to govern most of the issues that arise in a consumer protection environment. Whilst there is a nominal jurisdictional limitation of $40,000, the Australian Consumer Law applies if the transaction relates to personal, domestic or household use and there are specific provisions in the Australian Consumer Law concerned with real estate contracts.

Understanding the application of the Australian Consumer Law is not made any easier by the method used to adopt the former Trade Practices Act principles as universal legislation. The Australian Consumer Law is a Schedule of the Competition and Consumer Act 2010, an Act primarily designed to establish the Australian Competition and Consumer Commission and it is not until s 130 of that Act (Part XI) that reference is made to the Australian Consumer Law as being Schedule 2 of the Act. The Australian Consumer Law was adopted by Victoria as the Australian Consumer Law (Vic) by s 9 Fair Trading Act.

Whilst the Commonwealth’s jurisdiction was limited to corporations acting in trade or commerce, the Australian Consumer Law (Vic) applies to corporations and individuals ‘carrying on business within Victoria’ or ‘persons ordinarily resident’ in Victoria (s 13 Fair Trading Act).

Off the plan contracts

Such contracts have traditionally been subject to the Trade Practices Act as they invariably involve corporations engaged in ‘trade or commerce’ and the Fair Trading Act as, irrespective of the corporate character, the vendor is ‘carrying on a business’. The ACL has prohibitions relating to ‘misleading and deceptive conduct’ (Part 2-1 s 18), ‘unconscionable conduct’ (Part 2-2 s 20) and ‘false and misleading representations’ in relation to the sale of land (Part 3-1 s 30) and each of these apply if the vendor is engaged in trade or commerce, as would be the case in an off the plan contract.

The adoption of the Australian Consumer Law was not meant to be a law reform process, more in the nature of consolidation, but the opportunity was taken to expand the application of the concept of ‘unconscionable conduct’ in two respects (second reading speech). No longer is it necessary to prove a ‘special disadvantage’ and statutory unconscionability, whilst based on the ‘unwritten law’, is not limited to the existing state of the law and may be expanded by the courts.

Shortly prior to the adoption of the Australian Consumer Law, prohibitions were introduced against unfair contract terms and these were adopted by the Australian Consumer Law (Part 2-3 s 23). Whilst it is intended that these provisions will regulate the relationship between business and consumers and therefore undoubtedly apply to off the plan contracts, the section, unlike the other prohibitions, makes no mention of ‘trade or commerce’ as a precondition.

Domestic contracts

The requirement for ‘trade or commerce’ meant that the sale of a domestic residence did not create any Trade Practices Act obligations on a domestic vendor. However the unfair contract terms prohibitions in the Australian Consumer Law appear to operate whether the transaction is in trade or commerce or not, and so it may be that those prohibitions apply to contracts of sale of domestic properties.

As such sales invariably utilise a standard form contract, usually based on the 2008 prescribed contract, the general conditions of which may be saved from scrutiny by s 26(1)(c) as provisions permitted by law (the regulations), any special conditions may be subject to attack.

Conclusion

Special conditions may offend the unfair contract terms prohibitions such as giving the vendor the right not to proceed with a contract, to change the layout of the property sold or to accelerate the purchaser’s liability to pay land tax all of which may appear in various contracts, including off the plan contracts.

Additionally special conditions that specify high rates of penalty interest or potential loss in the case of default that are common in domestic contracts may offend the unfair contract terms prohibitions.

Tip Box

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

Caveats – Insufficient proceeds from settlement

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

The Torrens system (s 89 Transfer of Land Act 1958) allows third parties interested in land to record that interest on the title to the land by lodging a caveat. Unlike normal dealings that are registered on title, a caveat is ‘recorded’ on title. Consequently, the recording of a caveat in no way improves the status of the interest which is recorded, unlike the registration of a dealing which grants the registered interest indefeasibility.

A caveat entitles the caveator to be notified of any proposed dealing with the title and provides the caveator with the ability to establish the priority of the caveator’s interest over any competing interest by issuing proceedings within 30 days of receiving notice. But the real impact of a caveat in the world of conveyancing is the negative effect that the recording of the caveat on a title has on any transaction involving that title. Any prospective purchaser of the land, and particularly any prospective financier of a purchaser, will not proceed with the transaction if a caveat remains recorded over the title.

Thus a vendor who wants a proposed sale to proceed will be obliged by the purchaser to ‘free’ the land of the burden of the caveat by production of a withdrawal of caveat at settlement. In the normal course of events this is within the ability of a vendor, who arranges for a payment to the caveator from the settlement proceeds and a withdrawal is produced by the caveator in return. But what is the situation when the settlement proceeds are not sufficient to satisfy the caveator’s claim?

This situation often arises where the vendor is suffering mortgage stress and negotiates a sale in anticipation of receiving sufficient funds at settlement to discharge the mortgage and any other claims over the land, but finds that the effluxion of time between contract and settlement and increasing interest, costs, fees and charges result in a shortfall.

The registered mortgagee demands repayment in full, or at least the whole proceeds of sale if there is a shortfall, and there are no excess funds available to satisfy a caveator. Is the caveator obliged to nevertheless provide a withdrawal of caveat so that the settlement can proceed?

A caveator who refuses to withdraw in such a situation is entitled to argue that the caveator is merely insisting on its legal rights and should not be obliged to surrender those rights for no compensation. On the other hand, it could be argued that such a caveator is adopting a ‘dog in a manger’ attitude – if I am not going to get paid then no-one is. A party interested in having the matter proceed to settlement could issue proceedings pursuant to s 90(3) Transfer of Land Act 1958 for a declaration that a withdrawal be provided on the basis that there are no excess funds available for the caveator and the ‘balance of convenience’ favours the settlement proceeding.

There is some authority for this proposition in the New Zealand case of Pacific Homes Ltd (In Receivership) v Consolidated Joinery Ltd [1996] 2 NZLR 652 where a caveat was ordered to be removed because ‘there is no practical advantage in maintaining it’. However that was in the context of a mortgagee sale and s 91(2A) Transfer of Land Act 1958 now applies in a mortgagee sale environment to defeat caveats claiming money that were lodged subsequent to the mortgage. The analogy may however still apply in respect of caveats claiming something other than money, for example, a terms contract.

There may also be some support for the proposition that the caveator should withdraw provided by the case of Capital Finance Australia Limited v O’Bryan Group P/L [2003] VSC 355. That case concerned a warrant of sale and seizure that had been lodged by a creditor and was holding up settlement of a sale that was being supervised by the mortgagee. It was clear that the proceeds of the sale would not repay registered mortgages, let alone satisfy the claim of the judgment creditor who had lodged the writ. The mortgagee successfully sought the removal of the warrant to allow the sale to proceed on the basis that there was no realistic prospect of the warrant achieving anything for the creditor and that other parties were suffering detriment from the delay.

Legal proceedings involve expenditure of substantial amounts of money in an environment that is, by definition, money-poor. An alternative is to negotiate a compromise whereby the pain is shared. The party likely to receive the biggest benefit, usually the mortgagee, might recognise that the delay and cost associated with reverting to a mortgagee sale justifies agreeing to a part payment to the caveator and the caveator might recognise that a compromise is advisable as forcing a mortgagee sale will result in automatic removal of the caveat.

Tip Box

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

Caveats – Forcible removal 1

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

The Torrens system (s 89 Transfer of Land Act 1958) allows third parties interested in land to record that interest on the title to the land by lodging a caveat. Unlike normal dealings that are registered on title, a caveat is ‘recorded’ on title. Consequently, the recording of a caveat in no way improves the status of the interest which is recorded, unlike the registration of a dealing which grants the registered interest indefeasibility.

A caveat entitles the caveator to be notified of any proposed dealing with the title and provides the caveator with the ability to establish the priority of the caveator’s interest over any competing interest by issuing proceedings within 30 days of receiving notice. But the real impact of a caveat in the world of conveyancing is the negative effect that the recording of the caveat on a title has on any transaction involving that title. Any prospective purchaser of the land, and particularly any prospective financier of a purchaser, will not proceed with the transaction if a caveat remains recorded over the title.

Thus a vendor who wants a proposed sale to proceed will be obliged by the purchaser to ‘free’ the land of the burden of the caveat by production of a withdrawal of caveat at settlement. In the normal course of events this is within the ability of a vendor, who arranges for a payment to the caveator from the settlement proceeds and a withdrawal is produced by the caveator in return. But what is the situation when the settlement proceeds are not sufficient to satisfy the caveator’s claim?

This situation often arises where the vendor is suffering mortgage stress and negotiates a sale in anticipation of receiving sufficient funds at settlement to discharge the mortgage and any other claims over the land, but finds that the effluxion of time between contract and settlement and increasing interest, costs, fees and charges result in a shortfall. The registered mortgagee demands repayment in full, or at least the whole proceeds of sale if there is a shortfall, and there are no excess funds available to satisfy a caveator.

Is the caveator obliged to nevertheless provide a withdrawal of caveat so that the settlement can proceed?

A caveator who refuses to withdraw in such a situation is entitled to argue that the caveator is merely insisting on its legal rights and should not be obliged to surrender those rights for no compensation. On the other hand, it could be argued that such a caveator is adopting a ‘dog in a manger’ attitude – if I am not going to get paid then no-one is. A party interested in having the matter proceed to settlement could issue proceedings pursuant to s 90(3) Transfer of Land Act 1958 for a declaration that a withdrawal be provided on the basis that there are no excess funds available for the caveator and the ‘balance of convenience’ favours the settlement proceeding.

There is some authority for this proposition in the New Zealand case of Pacific Homes Ltd (In Receivership) v Consolidated Joinery Ltd [1996] 2 NZLR 652 where a caveat was ordered to be removed because ‘there is no practical advantage in maintaining it’. However that was in the context of a mortgagee sale and s 91(2A) Transfer of Land Act 1958 now applies in a mortgagee sale environment to defeat caveats claiming money that were lodged subsequent to the mortgage. The analogy may however still apply in respect of caveats claiming something other than money – for example, a terms contract.

There may also be some support for the proposition that the caveator should withdraw provided by the case of Capital Finance Australia Limited v O ’Bryan Group P/L [2003] VSC 355 . That case concerned a warrant of sale and seizure that had been lodged by a creditor and was holding up settlement of a sale that was being supervised by the mortgagee. It was clear that the proceeds of the sale would not repay registered mortgages, let alone satisfy the claim of the judgment creditor who had lodged the writ. The mortgagee successfully sought the removal of the warrant to allow the sale to proceed on the basis that there was no realistic prospect of the warrant achieving anything for the creditor and that other parties were suffering detriment from the delay.

Legal proceedings involve expenditure of substantial amounts of money in an environment that is, by definition, money-poor. An alternative is to negotiate a compromise whereby the pain is shared. The party likely to receive the biggest benefit, usually the mortgagee, might recognise that the delay and cost associated with reverting to a mortgagee sale justifies agreeing to a part payment to the caveator and the caveator might recognise that a compromise is advisable as forcing a mortgagee’s sale will result in automatic removal of the caveat.

Tip Box

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

Disastrous work Christmas parties – Hopefully these don’t ring a bell…

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

The work Christmas party season is in full swing by now. If your organisation has already had its Christmas party, hopefully everything went well and from a workplace law standpoint there were no issues that arose.

If your organisation is yet to have its annual gathering, hopefully all the risk management HR ‘boxes have been ticked’.

  • All reasonable steps have been taken to prevent unacceptable behaviours from occurring at the work Christmas party;
  • Managers are aware of their responsibility to monitor and supervise at the function;
  • Employees have been reminded of applicable policies and behavioural standards (for example; sexual harassment, bullying and OHS);
  • Light alcohol and no alcohol options are available;
  • In keeping with the lighthearted spirit of the festive season let’s visit three work Christmas party disasters.

Top 3 Work Christmas Party Disasters

Number 1

Coming in at number one would have to be the 2007 “party to end all parties” involving employees of a Sydney Telstra retail store. What started out as a work dinner function later that evening went awry at a nearby motel with a store employee having sexual intercourse with another employee within the view and/or earshot of the three other employees. The employee responsible was ultimately dismissed but in order for Telstra to successfully defend its actions, the ensuing litigation went as far as the Full Bench of the then Australian Industrial Relations Commission: Telstra v Streeter [2008] AIRCFB 15 (24 February 2008)

Number 2

In the “what were they thinking” category is a 2002 work Christmas party at which a waitress served food and drinks to clients and other employees at a party held on work premises – while topless and in lingerie. A female employee was not invited to the party and was told, “It’s a party for the boys…you don’t need to worry about it.” Upon finding out about the presence of the topless waitress, the employee resigned from her employment and ultimately sought counselling in relation to the distress she felt at the time. Although the woman gave evidence that she would not have wanted to attend the party if she had known a topless waitress was going to be there, her complaint of sex discrimination against her former employer was successful on the basis of her not being made to feel welcome to attend the Christmas party because of her gender: Carter v Linuki Pty Ltd trading as Aussie Hire & Fitzgerald (EOD) [2005] NSWADTAP 40 (22 August 2005).

Number 3

Perhaps in the “why bother” category is the 1999 case in which a male employee was dismissed after he exposed himself twice before approximately 50 company employees plus partners at a Christmas function, when performing what he considered to be a ‘party trick’ called the “Pelican”. Not surprisingly the Australian Industrial Relations Commission did not see any humour in the employee’s actions and dismissed his legal claim: S. Mason v Boyne Smelters Limited – 880/99 B Print R7701 [1999] AIRC 934 (20 August 1999).

Warning, warning – Taking account of past workplace sins when disciplining employees – Part 2

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

In brief

In Part 2 of our discussion about the recent Patrick Stevedores case (Tony Carrick v Patrick Stevedores Holdings Pty Limited [2012] FWA 4480), we consider whether the actions of an employer over a prior disciplinary warning can be called into question in a later dismissal case by Fair Work Australia (FWA).

Your latest ‘HR headache’

Picture this situation…You’re a senior HR (human resources) practitioner within a large company. One of your subordinates, ‘Melanie’, dutifully reports the outcome of a recent HR investigation into alleged employee misconduct. You note that the severity of the misconduct would have justified dismissal if the allegation were substantiated. Melanie reports that she ‘believed’ the employee had committed misconduct but due to some unfortunate circumstances there was not sufficient evidence. Melanie took the ‘safe route’ and, rather than dismissing the employee, she issued the employee with a formal warning.

You feel relieved that Melanie did not dismiss the employee because of the evidentiary issues but are nevertheless troubled by the outcome. You remember ‘someone’ telling you once that an incorrectly issued warning is never capable of external review. You are wondering whether that view is correct.

Warning misconceptions

Misconceptions about when a disciplinary warning may be issued are not uncommon. Some employers consider that if there is not sufficient evidence to substantiate misconduct (which would have justified dismissal) as an alternative, they may issue a formal warning. Some also believe that a flawed disciplinary warning can somehow be ‘swept under the carpet’ and is never capable of review. The Patrick Stevedores case shows both beliefs to be incorrect.

Patrick Stevedores case

In this case, the employee was dismissed for a serious safety breach which caused a collision between forklifts at the Fishermans Island Brisbane terminal. Some months prior to that incident, the employee had received a final warning for another safety breach. The employee had other instances of unsatisfactory performance or conduct on his disciplinary record.

The employee argued that the final warning was not justified, and should not have been taken into account for the ultimate dismissal. Importantly, this caused Fair Work Australia to look into the circumstances of the issue of the formal warning.

Ultimately, FWA found that the final warning was justified, as was its use in the subsequent dismissal of the employee.

The point to note here is that the employer was put into a situation where it was forced to substantiate:

  1. its issue of the prior warning; and
  2. its use of the warning (with other disciplinary sanctions) as justification for the ultimate dismissal.

Lessons for employers

  1. The circumstances behind a prior disciplinary warning can be questioned at a later dismissal hearing.
  2. There are a number of disciplinary options open to employers, but whatever action is taken, the same standards of proof apply.
  3. A formal warning should be approached in the same way that a dismissal would be approached – that is, where sufficient evidence does not exist for a dismissal, a formal warning is not an alternative.
  4. If a disciplinary warning is wrongly issued, it should be withdrawn.

Honestly! Let’s talk about employee dishonesty

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By Brad Petley

ACUMEN LAWYERS WORKPLACE RELATIONS AND SAFETY LAW SPECIALISTS

In brief

An employee owes a duty to their employer to be honest in their dealings with it. This is no more apparent than when the employee is the subject of an investigation into alleged misconduct.

A recent dismissal case before Fair Work Australia (FWA), Gunning v Cetnaj Queensland Pty Ltd [2012] FWA 6627 (3 August 2012), provides useful guidance for employers about the effect of an employee’s dishonesty during an HR (human resources) investigation.

The Gunning case

The dismissed employee, Gunning, had worked as a sales representative at the Burleigh Heads branch of the employer’s lighting products business. A customer’s attempt to return a product for a refund uncovered an apparently fraudulent scheme by Mr Gunning’s flatmate, who had formerly worked as a sales representative for the employer, involving a diversion of refund money to a joint bank account of Mr Gunning and his flatmate.

The employer conducted an investigation and subsequently dismissed Mr Gunning for ‘theft and misconduct’ over his alleged involvement in the fraud.

At the unfair dismissal hearing, FWA found that the evidence did not support a finding that Mr Gunning was involved in the fraud originally investigated. However, FWA went on to find that Mr Gunning was not honest with his employer when he was interviewed about his knowledge of the fraud concerns and that of itself formed a valid reason for his dismissal. Accordingly, the employee was found to have been validly dismissed.

FWA made the following important points about an employee’s duty during an HR investigation:
  1. An employee owes a duty to his employer to be honest in his dealings with it.
  2. To do otherwise is to compromise the necessary trust and confidence that is an integral part of the employment relationship.
  3. This does not mean that an employee must answer any and all questions posed to him or her by his employer in an investigation or interview.
  4. But it does mean that an employee must respond honestly to any genuine enquiry made of the employee that is relevant to the conduct or other issues in question or under investigation.

Points to take away

  1. The existence of the relationship of trust and confidence is vital to an employment relationship.
  2. During an investigation into employee misconduct, employers may uncover or be faced with misconduct outside of that which is being investigated.
  3. A dishonest response to a genuine and relevant enquiry is destructive of the relationship of trust and confidence.
  4. A failure to respond to questions honestly can form a stand-alone (valid) reason for an employee’s dismissal.
  5. If in doubt, employers should seek advice.

Warning, warning – Taking account of past workplace sins when disciplining employees – Part 1

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By Brad Petley

Acumen Lawyers Workplace relations and safety law specialists

In brief

A recent dismissal case before Fair Work Australia (FWA) serves as a useful illustration of the issues facing employers when weighing up an employee’s poor disciplinary record and whether a dismissal would be justified.

Warning confusion

Picture this situation. You have an employee who has committed a breach of discipline in the workplace. For present purposes, we will refer to the employee as ‘Jim’. Let’s say that Jim is one hour late for work. You have interviewed him. He was unable to offer a reasonable excuse. You are wondering what to do with him. Jim is not the easiest of employees. He has received a number of warnings previously over conduct and/or performance issues. You are a tad fed up and are considering whether you can terminate Jim’s employment. You remember ‘someone’ telling you once that employers can only take account of ‘like for like’ past disciplinary issues when deciding if a justification exists for a termination of employment. None of Jim’s previous warnings have related to lateness for work. Jim is sitting outside your office. You are wondering what to do.

What does the Fair Work Act say?

Confusion over the prior warnings that may be taken into account is not uncommon amongst some employers.

In determining whether a dismissal was harsh, unjust or unreasonable, Fair Work Australia is required to take into account a number of factors. If the dismissal related to the unsatisfactory performance of an employee, FWA is required to take into account whether the person had been warned about that unsatisfactory performance before the dismissal.

In a previous edition of Workplace Acumen, we pointed out that the unfair dismissal laws in the Fair Work Act do not set out a minimum threshold (e.g. three warnings) before an employer is entitled to dismiss a misbehaving and/or underperforming employee. Depending on the circumstances of a matter there may be no necessity for a warning to have been issued before an employer is entitled to dismiss the employee. Much will depend on the facts and circumstances of the case.

Recent case

The recent Patrick Stevedores case (Tony Carrick v Patrick Stevedores Holdings Pty Limited [2012] FWA 4480) is a useful example of a dismissal involving an employee who had been issued with a number of prior warnings before he was ultimately dismissed.

In this case, the employee was dismissed in November 2011 for a serious safety breach causing a collision between forklifts at the Fishermans Island Brisbane terminal. Prior to that incident, the employee had received a final warning (in April 2011) for another safety breach. Both acts were serious breaches of Patrick’s Safety Cardinal Rules workplace safety policy.

The employee’s prior disciplinary record also included warnings for:

  • sleeping during a shift sometime during late August 2010;
  • failing to attend work on 23 December 2009;
  • using his Maritime Security Identification Card to admit another employee to the Patrick site on 14 April 2009.

FWA took into account that the employee’s overall disciplinary record was poor and that he was the subject of a final warning at the time of the most recent breach. Not surprisingly, FWA ruled the employee’s dismissal was justified.

The point to note here is the combination of diverse disciplinary infractions that the employer took account of before deciding to dismiss.

Lessons for employers

Employers should:
  1. Employers are not required to only take into account prior warnings for the same type of performance or conduct issue (i.e. ‘like-for-like’ issues).
  2. The Patrick Stevedores case is an example of a situation where an employer justifiably took account of a series of prior warnings for a variety of workplace issues (i.e. breaches of workplace procedures, unsatisfactory performance and misconduct).
  3. If an employer is in doubt about whether it is able to dismiss an employee based on the employee’s prior disciplinary record, always seek advice.

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