From 4 June 2020, the ACT Government is waiving stamp duty for buyers of new land and off the plan units. The waiver will apply to contracts exchanged between 4 June 2020 and 30 June 2021.
Vacant Land
Eligible buyers will not have to pay any stamp duty on single residential dwelling blocks which are vacant.
Off the plan units
In relation to off the plan units, eligible buyers will not have to pay duty for purchases up to $500,000. For purchases between $500,000 and $750,000, a $11,400 stamp duty reduction will apply.
Eligibility requirements
To be eligible, at least one buyer must live in the home continuously for at least one year, starting within 12 months of settlement or completion of construction.
It remains to be seen how this will be legislated. We suspect this will be done by way of a disallowable instrument. We will provide an update on this website when more information becomes available.
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ACT Stamp Duty Concession Update
The Release of Deposit Conundrum
In these unprecedented and economically stressful times we face as a nation, many organisations will struggle to survive in the short, and ultimately, long term. Thousands of Australians may have or will lose their jobs, whilst thousands of businesses may end up in a position where they are unable to meet their debts and enter into a state of insolvency.
As a result, many questions and uncertainties will arise regarding the creditors of a company and how recoveries may be made for the benefit of all those creditors. Being experts in the fields of litigation, insolvency & restructuring, Chamberlains often receives queries about unfair preference claims. As part of an ongoing series of articles discussing insolvency in difficult times, this blog will highlight the elements of unfair preference claims and time periods relating to the claim.
What is an unfair preference claim?
A claim for an unfair preference arises where a company enters into a transaction with an unsecured creditor, in which the creditor is paid more in relation to the debt the Company owes than the creditor would have received if all the ordinary unsecured creditors were paid out in a liquidation scenario. The payment is considered an unfair preference because it has given the creditor an advantage over other creditors of the company, deeming it unfair.
Unfair preference claims are governed by the Corporations Act 2001 (Cth). Section 588FA provides the elements that have to be met for a transaction to be an unfair preference. Section 588FE provides the time period in which the transaction must happen in order for an unfair preference claim to be made.
How does an unfair preference claim arise?
An unfair preference claim is usually brought forward by a liquidator on behalf of the company in liquidation. However, in order for this to occur, liquidators must prove the following:
When does an unfair preference claim arise?
A claim for an unfair preference will arise if the transaction had occurred within a statutory period, which is calculated using a date referred to as the ‘relation back day’. Usually the relation-back day will be the day the creditor who wound up the company made its application to court, but this will vary depending on how the company was ultimately wound up, whether it was in voluntary administration beforehand, etc. As mentioned, the period is usually 6 months prior to the relation-back day, unless a related entity of the company is a party to it, in which case it will be 4 years.
Series part 2
Part 2 of our series will discuss the implications of an unfair preference claim on both parties, as well as defences to such claims.
Property settlement (also known as “completion date”) is the date when a property transfers from one owner to another.
These legal requirements can be complex, which is why most buyers and sellers will engage the services of a conveyancing law firm to ensure the process is handled correctly.
The settlement date is usually negotiated and agreed between the buyer and seller prior to entering into the Contract for Sale. In the ACT, the standard settlement period is 30 days from the date of entering into the Contract (“exchange date”), however this can be varied by agreement. Once you exchange contracts on your new property, the contract has become formally binding and you will know your agreed settlement date.
Immediately prior to the settlement date you will be required to arrange a pre-settlement inspection to ensure that there are no major issues with the property.
In the ACT, settlements occur at a physical meeting between the parties where documents and cheques are handed over. There are no electronic bank transfers or electronic documents accepted at settlement in the ACT.
Prior to the settlement date, your Conveyancer and lender (if finance is being obtained) will work together to schedule a meeting with the seller’s conveyancer at the ACT Settlements Room on the agreed settlement date. You are not required to attend the settlement.
At settlement, the seller’s solicitor will hand over the Certificate of Title and Transfer forms, and in exchange the buyer’s solicitor will hand over cheques for payment of the balance of the purchase price. Once all requirements of the parties have been satisfied at settlement, the settlement will be complete.
Your conveyancer will be in touch with you immediately after settlement to advise that keys are now able to be collected from the selling party or their agent. At this time you are officially able to take possession of the property.
All title documents are physically lodged for registration with the ACT Land Titles Office after settlement, which will register you as the new owner. This process time-frame is dependent on the ACT Land Titles Office capacity and can sometimes take a few weeks.
From April 2020 the ACT Land Titles Office have begun issuing electronic Certificates of Title. Unless you have obtained finance you will receive a copy of the electronic Certificate of Title from your conveyancer after the registration process is complete. In the event that you have obtained finance, your bank will receive and hold the electronic Certificate of Title, until your mortgage has been discharged.
Part 4: Bankruptcy and Winding Up
To conclude our 4 part series on debt recovery in the Local Court of New South Wales, we will consider the avenues of winding up and bankruptcy proceedings which are also available to creditors. Whilst these options are not traditionally intended for enforcement purposes, they can be an excellent tool for creditors in recovering debt from an individual debtor or debtor company.
I. Written Demand:
a. As per section 459E, a written demand for payment must first be sent to the company.
b. This can be done whilst the debt is not yet the subject of a judgment entered by the Court.
c. If this is the case and the debt is not a judgment entered by the Court, the Act requires that an Affidavit by an officer of the creditor be sworn or affirmed and served along with the demand.
d. If no response or payment is received within 21 days of service of the written demand, the debtor company is presumed to be insolvent.
II. Application:
a. An application can be made to a Supreme Court or the Federal Court of Australia.
b. The debt amount must exceed $2,000.
c. The application relies on the presumption of insolvency arising within 3 months prior to the Application being made to the Court.
d. Once an application is issued by the Court, various affidavits in support are served upon the company’s registered office, further documents are required in preparation of the hearing. This includes material which supports that the debt is outstanding and that an administrator or liquidator have not yet been appointed and that there is no application to oppose the application.
III. The Hearing:
a. If the Court is satisfied that there is sufficient evidence in respect of the abovementioned requirements, the Court will wind up the Company and Order the appointment of a liquidator to collect the assets of the company to distribute to the creditors.
I. Bankruptcy Notice:
a. Recovery via bankruptcy commences with the lodging of a bankruptcy notice with the Australian Financial Security Authority (“AFSA“) on a debt that is greater than $5,000.
b. The debtor has 21 days from the date of service to comply with the notice by paying the full amount of the debt or by entering into a payment arrangement.
II. Act of Bankruptcy:
a. The creditor bears the burden of proving the debtor has committed what is known as “an act of bankruptcy” as per section 40 of the Bankruptcy Act 1966 (Cth).
b. An act of bankruptcy results from the debtor’s failure to comply with the requirements of a bankruptcy notice.
c. Once this occurs, the creditor can commence bankruptcy in the Federal Court of Australia by obtaining the issue of a Creditor’s Petition by the Court.
III. Bankruptcy Proceedings:
a. The Creditor’s Petition should be filed within 6 months of the act of bankruptcy.
b. The Court will then list the matter for a sequestration hearing.
c. At the hearing, if the Court is not satisfied that the debtor can repay the debt, the Court can make a sequestration order declaring the debtor bankrupt and appointing a Trustee to take over control of the debtor’s assets and liabilities and repay creditors who lodge a proof of debt with the Trustee, prioritising secured creditors.
d. The costs of obtaining the sequestration order are usually paid out of the bankrupt debtor’s estate as a priority.
e. Once a person is declared bankrupt, they remain as such for a period of 3 years when they may be discharged.
3. Changes to Insolvency Law as a result of COVID-19:
On 24 March 2020, as part of the economic response to Coronavirus, the Australian Government temporarily changed the time for compliance with Bankruptcy Notices and Statutory Demands to 6 months from 21 days.
Furthermore, the Government increased the debt threshold for both bankruptcy and winding up processes to $20,000. This change was put in place to allow debtors, whether they be personal or corporate, some breathing space and time to settle their existing debts. The changes came into effect on 25 March 2020 and are expected to be in place until at least August 2020.
It is very important that you establish exactly who the owners of the property are going to be before you sign the Contract. Most people buying their principal place of residence will usually buy the property in their joint names. You may need to reconsider this if one of you has a high risk occupation (e.g. lawyer, doctor, accountant or other professional) or one of you is the sole director of a company which operates a business. Sometimes it is better for asset protection purposes that the spouse or partner who is not engaged in any trade or profession that could put them at risk of being sued is the preferred owner of the property.
A recent decision handed down by the Federal Court of Australia has revised the entitlements that ‘casual’ workers are eligible to.
In the matter of WorkPac Pty Ltd v Rossato [2020] FCAFC 84, the Federal Court considered the characterisation of an employee as a ‘casual’ worker, and whether this prevented them from accessing certain employee entitlements as set out in the National Employment Standards (NES).
Background
Mr Rossato was an employee of WorkPac, a labour hire company, for three and a half years. Throughout this time, six consecutive employment contracts had been made between Mr Rossato and WorkPac. Under each contract, Mr Rossato was treated as a ‘casual’ employee.
Issue
In April 2019, Mr Rossato brought proceedings against WorkPac claiming that he had not received any paid annual leave, paid personal/carer’s leave, paid compassionate leave and public holiday pay that he was entitled to under the Fair Work Act 2009 (Cth) (Fair Work Act) and the WorkPac Pty Ltd Mining (Coal) Industry Enterprise Agreement 2012 (EA).
Decision
The Court focused on the characterisation of the employee as a ‘casual worker’ and noted that, the status of Mr Rossato’s employment was not wholly dependent upon express written terms (such as using the term ‘casual) in the contract, as asserted by WorkPac. The facts of the employment such as the nature of work and period of employment are just as important to consider in the characterisation of a worker’s employment.
The defining characteristic of a casual worker was the absence of a ‘firm advance commitment’. These include factors such as regular work patterns, uncertainty, discontinuity, intermittency of work and unpredictability.
For the purposes of WorkPac’s EA and given the nature of his employment, the Court found that Mr Rossato was a permanent employee, even if named a ‘casual’ in his contracts. His employment was stable, regular and predictable, reflective of a firm advance commitment in each of his six contracts.
Thus, Mr Rossato was entitled to the employee entitlements that he claimed under the Fair Work Act and the EA with respect to paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.
Takeaways
Given that casuals make up 20% of the Australian workforce, this decision has the potential to entitle thousands of casual workers to employee entitlements. Even with the higher pay rates received as a casual, employees may be entitled to ‘double dip’ to receive paid leave entitlements. The decision also has the potential to have significant implications on employers and their payment obligations to their employees.
A recent decision handed down by the NSW Court of Appeal has shed light on several civil procedures of the Court.
In the matter of French v Bremner [2020] NSWCA 77, the NSW Court of Appeal considered the Plaintiff’s application to remove a matter to the High Court and to vacate a hearing date taking into consideration the current court restrictions due to COVID-19.
Background
Mr French was an inventor who engaged in various business activities in partnership with Dr Bremner. The partnership broke down in 2011. At first instance the Court found in favour of Dr Bremner. Mr French subsequently filed an application for removal of the proceedings to the High Court of Australia. He then filed a notice of intention to appeal the decision to the NSW Court of Appeal.
It later became apparent that Mr French sought not only removal of the proceedings to the High Court and to stay any further steps being taken in the proceedings of the NSW Court of Appeal, but sought relief to have default judgment entered into against Dr Bremner.
Decision
1. Removal of proceedings to High Court
The High Court may order proceedings to be removed into the High Court when there is a matter pending in a State Court involving the exercise of federal jurisdiction (s 40(2) of the Judiciary Act). Mr French’s application was rejected on the basis that there was no cause pending in the NSW Court at the time the removal application was filed. An appeal is not commenced merely by notice of an intention to appeal.
2. Request to vacate hearing date
Mr French requested to vacate the hearing date of his appeal on the basis that he lived in the country and was not able to come to Sydney to prepare all the necessary documents and seek legal advice. He wanted to present his case in person which was not possible under the Court’s restrictions due to the COVID-19 pandemic.
It was not clear whether Mr French had the necessary equipment to conduct appeals through audio-visual link. The Court stated accordingly that it would be unsatisfactory if the Plaintiff was to appear by telephone and the Defendant’s lawyers by audio-visual link. Considerations for unrepresented litigants to appear physically in Court are usually granted, however given the current pandemic it would not be possible. Therefore, the request to vacate the hearing date, unopposed by the Defendant, was granted.
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A recent case in the Federal Court of Australia (Federal Court) has shed light on the admissibility of a proof of debt by a liquidator regarding related companies.
In the case of Barnden (Liquidator), in the matter of Masonry Works Pty Limited (in liquidation) [2020] FCA 575, the Federal Court considered the performance of a liquidator’s duties in a quasi-judicial capacity to determine the true liabilities of a company.
Background
Andrew Barnden was the sole liquidator of both Masonry Works Pty Ltd (in liq) (Company) and Masonry Profiles Pty Ltd (in liq) (Profiles). The liquidator made an application to lodge a proof of debt of Profiles which concerned a discrepancy of the recorded amounts of a loan paid by Profiles to the Company. The contention was whether or not Mr Barnden as liquidator of both companies, could admit to proof in the liquidation of a claim by one company against the other company.
Decision
The application was granted pursuant to the power in s 90-15 of the Insolvency Practice Schedule which justifies a liquidator in accepting a proof of debt (In the matter of Daily Planet Pty Ltd (In Liquidation) [2019] VSC 265). The Court stated that Mr Barnden was obliged to assess Profile’s proof of debt in his capacity as a liquidator of the company, in a quasi-judicial capacity.
The liquidator was entitled to protection of the Court, recognizing that the liquidator had faithfully performed his duties, conducting thorough investigations of the incomplete and conflicting evidence to examine the discrepancy of the loan amount.
The Court, therefore, allowed the proof of debt in the liquidation of the company to be admitted.
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As part of the economic response to the COVID-19 pandemic, the Government has allowed temporary early access to superannuation. Individuals who have been significantly financially affected by the Coronavirus and satisfy the eligibility requirements will be allowed to access up to $10,000 of their superannuation in 2019-2020 and a further $10,000 in 2020-2021.
For bankrupts receiving any such superannuation payments on or after the date of bankruptcy, these payments are protected pursuant to section 116(2)(d)(iv) of the Bankruptcy Act 1966 (the Act).
This includes superannuation from:
Protection of these superannuation payments extends to any property which was wholly or substantially purchased or acquired through such payments (ss 116(3) and 116(2)(n) of the Act).
Part 3: Garnishee Orders
There are two main types of Garnishee Orders which are issued in the Local Court. These include the Garnishee Order for Debts and Garnishee Order for Wages or Salary.