The Family Law Courts have just announced the introduction of a court list dedicated to deal exclusively with urgent parenting-related disputes that have arisen due to the COVID-19 pandemic. The list will commence on 29 April 2020 and is currently expected to operate initially for three months.
The Courts have reported a increase in the filing of urgent applications by over 20% in each Court. The Chief Justice of the Family Court and Federal Circuit Court has made a statement indicating that matters involving risk and family violence will receive immediate attention and heard a swiftly as possible.
The Family Law Courts have identified the following types of matters or issues that may be suitable for filing in the COVID-19 List:
- Family Violence Matters;
- Matters involving Supervised Contact;
- Matters involving travel between States with border restrictions;
- Medical matters where the parties or the child have tested positive for COVID-19.
Interested in learning more on Family Law?
Click our recent articles below to find out more:
Setting Aside Property Settlement Orders
Major legislative reforms for companies and directors have been introduced with the passing of the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019. The amendment was passed by both houses of Parliament on 5 February 2020 in response to the problems arising from illegal phoenix activity (the transfer of assets from a failed or insolvent company to a new company to avoid paying debts).
Amendments have been made to the Corporations Act 2001, Taxation Administration Act 1953 and A New Tax System (Goods and Services Tax) Act 1999, with the changes to apply prospectively from 1 April 2020. The amendments aim to respond to the serious problem of non-payment of corporate GST liabilities and put in place stricter measures to protect against illegal phoenixing.
Phoenix companies have consistently attracted attention given the risk of these companies escaping liability for illegal and unethical behaviour. The long-awaited legislation introduces several insolvency law reforms, expanding the obligations and personal liabilities of company directors in order to reduce the evasion of debts and to ensure greater protection for the interests of creditors.
Director’s obligations
- Director penalty regime (DPN): Directors are personally liable if they fail to ensure the company complies with their tax liabilities. Tax liabilities extend to the company’s unpaid GST, luxury car tax (LCT) and wine equalisation tax (WET).
- GST obligations: Directors are to comply with their GST obligations for the timely lodgement of activity statements and GST returns, and the prompt payment of the amounts and GST instalments.
- Improper director resignation: A director may not resign if that means the company will be left without a director.
- Resignation backdating: Resignation applies from the date the notice was received by the ASIC, not the date of lodgement.
- Parallel liabilities: Director penalties have parallel liabilities for companies with multiple directors.
- New and former directors: Directors remain liable after their resignation as a director for director penalties which were due either on or before the date of resignation, if the relevant tax period ended before that date. Liability also extends to amounts due before a director’s appointment.
Major changes
- The Commissioner of Taxation can collect estimates of GST, LCT and WET. These estimates are distinct from the actual underlying liability of the taxpayer.
- New criminal offences and civil penalty provisions for preventing “Creditor-defeating dispositions” of company property have been introduced. This applies to company officers that fail to prevent or facilitate the company in making creditor-defeating dispositions.
- The Australian Securities and Investments Commission (ASIC) are enabled to make orders to recover company property disposed of or benefits received under a voidable creditor-defeating disposition, for the benefit of company creditors.
- The DPN now extends to net amounts and assessed net amounts, comprising GST, LCT and WET – for tax periods, and GST instalments.
- The Commissioner can retain tax refunds where a taxpayer has failed to lodge a return or provide other information that may affect the amount of a refund.
The amendments are a positive step to deter illegal phoenix activity and ensure directors uphold their corporate responsibilities through stricter regulations. It is important for directors and responsible staff members to stay well-informed of their obligations, liabilities and entitlements in order to adequately protect their company’s assets.
Interested in learning more about Insolvency & Reconstruction?
Click on our recent articles to find out more:
Statutory Demands and Insolvency
Chamberlains’ Response to Proposed Exposure Draft of Bankruptcy Regulations 2021
As we have all learnt to transition into a new area of telephone and audio video link conferencing, a hurdle has arisen with witnessing Affidavits. This has also proven particularly difficult with people who cannot leave their homes due to self-isolation or age for example to attend to find a JP to witness the documents.
The Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 which came into effect on 22 April 2020 has brought much reprieve.
Where a signature is required to be witnessed on a document such as a Will, Power of Attorney or an Enduring power of attorney, Deed or Agreement, an Enduring Guardianship Appointment, an affidavit, including an annexure or exhibit to the Affidavit or a Statutory Declaration then the signature may be witnessed by Audio Visual Link.
There are however qualifications to this and that is, a person witnessing the signing of a document by audio visual link must:
a) observe the person signing the document sign the document at that exact time;
b) attest or otherwise confirm the signature was witnessed by signing the document or a copy of the document, and Page 4 Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020 [NSW] Schedule 1 Amendment of Electronic Transactions Regulation 2017 Published LW 22 April 2020 (2020 No 169);
c) be reasonably satisfied the document the witness signs is the same document, or a copy of the document signed by the signatory; and
d) endorse the document, or the copy of the document, with a statement specifying the method used to witness the signature of the signatory, and that the document was witnessed in accordance with the Regulation.
The witness may either sign a counterpart of the document as soon as practicable after witnessing the signing of the document, or if the signatory scans and sends a copy of the signed document electronically—countersign the document as soon as practicable after witnessing the signing of the document.
Just remember this does not take away from verifying a persons identity, swearing or affirming the contents of an Affidavit or seeing the face of the deponent.
As always, if you have any questions or concerns, please contact Chamberlains Team on 02 6188 3600 or hello@chamberlains.com.au
The leasing Code of Conduct detailed in our previous article (https://chamberlains.com.au/update-on-leasing/) is now binding in NSW.
The Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) became law on 24 April 2020, which gives legal effect to the Code of Conduct in NSW. The Regulation will automatically repeal on 24 October 2020.
If you have any questions or need help in understanding what the code means for you, please reach out to our experienced Property Team at Chamberlains.
Interested in learning more on Property Law?
Click our recent articles below to find out more:
ACT Stamp Duty Concession Update
The Release of Deposit Conundrum
Part 1 – Examination:
Once a judgment has been obtained in the Local Court, there are several processes which can assist in recovering the debt. This four part series will take you through each enforcement process available to judgment creditors in recovering their debts.
The examination process is a cost effective method of understanding a debtor’s financial situation and can assist creditors and debtors in negotiating an instalment plan. The method is set out as follows:
Examination Notice:
An examination notice is posted to a debtor and includes a financial statement which they are required to complete and return to the creditor. The information to be provided to the creditor includes information such as the debtor’s employment status, any dependants they may have, any assets they have and so on. The debtor can also make an offer to pay the debt by instalments within the financial statement.
The debtor then has 28 days to complete the form and return it to the creditor. If the debtor does not complete and return the notice within 28 days, the creditor can make an application to the Court to issue an examination order.
Examination Order:
An examination order is a Court order which requires the debtor to attend Court to be examined in relation to their financial circumstances before a Registrar. This is called an examination hearing. The creditor is required to personally serve the debtor with the examination order at least 14 days before the examination hearing is listed. The creditor or creditor’s representative is also required to attend, and the Registrar will help facilitate a payment plan with the parties based on the information provided by the debtor.
Arrest Warrant:
In circumstances where the debtor fails to appear at the examination hearing, the creditor can seek leave from the Court to issue an arrest warrant for examination and seek their costs for appearing at the hearing. If service of the examination order is not affected by the date of the examination hearing, the arrest warrant cannot be issued.
Once 14 days has passed from the date of the examination hearing, and the debtor has not responded, the creditor can make an application for an arrest warrant to be issued. Following this, the Sheriff will attend the debtor’s property in an attempt to arrest them and bring them to Court to be examined in respect of their financial circumstances.
Pros:
- If the debtor cooperates, the information from the financial statement can assist the parties to come to an amicable agreement with respect to payment of the debt.
- The information provided in the financial statement assists the creditor in determining their duties as a creditor, and what steps they can take in terms of future enforcement depending on the debtor’s financial circumstances. For instance, if a debtor produces documents which show they have dependants and are earning an amount which would not allow them to pay more than $200 per week, the creditor would be required not to place the debtor under financial strain.
- The information provided in the financial statement can also assist the creditor in terms of carrying out future enforcement. For instance, if the financial statement is completed by the debtor, and then they become unresponsive, the creditor might be able to make an application for a garnishee order using the bank or employment details which were initially provided by the debtor within the financial statement.
Cons:
- Unfortunately, as the Sheriff only attends the property during 8am – 6pm from Monday to Friday, when most debtors are at work, it is difficult to actually execute the arrest.
- The Sheriff has limited power in terms of the force they can use to enter and arrest debtors as they cannot force entry.
- The longer the debtor avoids the Sheriff and attending the examination hearing, the more costs are incurred by the creditor.
- If the debtor is not served with the examination order, the creditor is limited in how many times they can adjourn the hearing until they effect service. Generally, after 2-3 adjournments, the examination order will be struck out by the Registrar, and the creditor will be required to issue a new examination notice and start the process again.
Intellectual Property: Design
A design registration is a unique asset that protects the way a product looks. A design registration protects the overall appearance of a product and gives the owner enforceable rights to their design.
1| What is a Registered Design?
A design registration is an intellectual property right that provides:
- Protection for the visual appearance of a product including the shape, configuration, pattern and/or ornamentation of a product; and
- Exclusive rights to commercially use, license or sell a design.
A design registration protects a design for five years from the filing date of the application. It can be renewed for a further five years (for a maximum term of ten years). If the design registration is not renewed at the five-year mark, the design will cease and be free for anyone to use.
2| How do I Protect my Design?
In order to protect your design in Australia, an application must be filed with the local government body, IP Australia. This application is typically prepared by a patent attorney using illustrations of your design.
3| Examination of Design Registrations
Once filed, a design undergoes a formalities examination soon after filing to ensure that the application is suitable for registration. Once the design passes formalities examination, it is registered and can be advertised as such.
A design registration can also undergo substantive examination which is an optional process that determines whether a design is new and distinctive. If successful, the design will be certified. Only once a design registration is certified is it enforceable against infringers.
4| What Should I Do if Someone Is Using My Design?
If you are concerned someone is using your registered design without your permission, you can take action. We recommend speaking to the team at Chamberlains who will guide you with enforcing your design registration.
Interested in learning more about Intellectual Property?
Click our articles below to find out more:
How to file a patent in Australia
Stop telling everyone you own my patents!
- Listen on YouTube:Listen Now
- Listen on Spotify:Listen Now
The High Court of Australia has provided practical guidance for trustees in cases of bankruptcy and the presumptions of the Court in regards to the lodging of caveats.
In the matter of Boensch v Pascoe [2019] HCA 49, the High Court of Australia considered the question of whether a property held by a bankrupt on trust was capable of vesting in the trustee in bankruptcy, pursuant to s 58 and the exclusion provided in s 116(2)(a) of the Bankruptcy Act 1966 (Cth).
Background
Mr Boensch claimed that he set up a trust of a house in Rydalmere (the property/Boensch Trust) which he held beneficially on trust for his children. In 2003 Mr Boensch (the bankrupt) was served with a bankruptcy notice and in 2005 was served with a sequestration order by the Court.
Mr Pascoe was assigned as his trustee in bankruptcy and immediately lodged a caveat over the property as was his usual practice to protect the title and interest of creditors. Mr Pascoe sought legal advice which declared he had a good and valid claim to the interest claimed therein.
The bankrupt brought proceedings to the Supreme Court of NSW alleging Mr Pascoe had lodged a caveat without reasonable cause, therefore entitling Mr Boensch to compensation pursuant to s 74P(1) of the Real Property Act.
Proceedings
The Supreme Court of NSW did not have jurisdiction to deal with the bankruptcy matters, thus the matter went to the Full Court of the Federal Court which dismissed the former bankrupt’s claim for damages, finding that the trustee in bankruptcy did act with reasonable cause in lodging and not withdrawing the caveat. The matter was then brought on appeal to the High Court which was dismissed with costs.
Issues
The High Court unanimously dismissed the appeal, focusing on the bankrupt’s interest in the trust property. A valid beneficial interest would provide him with entitlement in equity to be indemnified out of the Trust property, thus causing the property to vest in the trustee in bankruptcy.
- Valid beneficial interest
The issue to address was whether Mr Boensch had a valid beneficial interest in the Trust property. S 116(2)(a) of the Bankruptcy Act 1966 (Cth) excluded property held by the bankrupt in trust for another person from vesting in the trustee in bankruptcy. However the Court clarified that provided that the bankrupt has a valid beneficial interest in the Trust property, the property will be vested in the trustee in bankruptcy, pursuant to s 58(1) of the Act.
A valid beneficial interest means a ‘vested or contingent right or power to obtain some personal benefit from the trust property’ [15]. The beneficial interest must be ‘extant and valid’, recognising that the interest is capable of being immediately realised for the benefit of the bankrupt’s creditors [91].
It was found that Mr Boensch was mutually benefiting from the arrangement as he was able to use the room in the property. He had also incurred significant expenses in his capacity as a trustee of the Trust in the form of “bank payments, loan payments, the council rates, [and] every other cost … required” for the trust.
This gave rise to an equitable interest of a right to be indemnified out of the trust property and established that he had a beneficial interest in the property. Mr Boensch had an equitable interest in the trust property which took it out of the exclusion in s 116(2)(a), meaning the trust property would vest in the trustee in bankruptcy.
- Permissible grounds to lodge a caveat
The Court emphasised the conclusion in Beca Developments that in order for a caveat to be lodged without reasonable cause, it must be established that “the caveator neither had a caveatable interest nor an honest belief, based on reasonable grounds, that he had one”1.
At the time Mr Pascoe lodged the caveat, he had no reason not to honestly believe on reasonable grounds that he had a caveatable interest, even having sought legal advice that supported this belief.
Mr Pascoe’s caveatable interest arose due to the bankrupt’s right of indemnity, however even if a caveatable interest at the time of lodging the caveat did not exist, he would have had reasonable grounds due to his honest belief that it did exist.
Given that the bankrupt’s right of indemnity gave the trustee in bankruptcy a caveatable interest in the property and that the bankrupt had a valid beneficial interest in the property, sufficient grounds were established for Mr Pascoe to have lodged the caveat.
Takeaways
This case supports the proactive approach of trustees in bankruptcy in the prompt lodgement of caveats at early stages of administering bankrupt estates to protect the interests of creditors, even where trustees in bankruptcy may have limited information. In cases where a bankrupt trustee has a valid beneficial interest in the trust property, the property will vest in the trustee in bankruptcy.
There is a lot of ambiguity surrounding whether or not your insurance policy will respond to the current pandemic affecting so many businesses. We understand that the message to the market is that you are not covered for this unforeseen event and interruption to your business.
This might not be the case.
It has also come to our attention that some insurers may be offering a refund of premium on the policy you hold with them in circumstances where they are alleging that you are excluded from cover. We are concerned about the impact of this offer and what it may mean for you, particularly if it is our view that cover ought to be extended. Prior to accepting any such offer, we strongly recommend you take some advice.
Chamberlains’ Insurance Team can assist you in reviewing your insurance policy on a case-by-case basis and provide professional recommendations on your rights. For a fixed fee we will review your contract and give you initial recommendations on how to proceed.
Contact Lachlan McBride of our Insurance Team on lachlan.mcbride@chamberlains.com.au or call 02 6188 3600 for more information.
Justice Markovic of the Federal Court has recently granted voluntary administrators from Deloitte a short-term waiver from personal liability for rent in the administration of the Colette clothing group – see Strawbridge (Administrator), in the matter of CBCH Group Pty Ltd (Administrators Appointed) (No.2) [2020] FCA 472.
What Happened
Collette fashion and retail group were placed into voluntary administration on 31 January 2020. In February the convening periods in the administrations were extended to various times in June 2020 respectively to allow restructuring and potential sale of the group. In March 2020, all stores (which weren’t permanently closed at the beginning of the administration) were closed for health reasons due to COVID-19.
The administrators retained the obligations on 93 stores which they considered strategically valuable to the group however had the issue of ongoing lease liabilities, an unstable negotiating environment in the context of COVID-19 and changing Government responses and and personal liability for the rent in the meantime.
Following detailed financial analysis, the administrators sought waiver from personal liability for lease and related expenses pursuant to s 447A of the Corporations Act 2001 (Cth) (Act) and s 90-15 of the Insolvency Practice Schedule (Corporate) (IPSC) to amend the operations of ss 443A and 443B of the Act.
What Was Decided
Justice Markovic of the Federal Court was satisfied that the orders sought were appropriate, and that the evidence and financial analysis supported order for amongst other things that:
- The Administrators were excused from personal liability for lease payments for 93 premises for 2 weeks until 14 April 2020;
- The matter was relisted to 15 April 2020; and
- The orders were again extended for 3 weeks to 6 May 2020.
In her Decision, her Honour said:
“[i]t was apparent that, notwithstanding the uncertainty faced by the Administrators brought about by the current situation, the Landlords are likely to be in no worse position if the order sought by the Administrators in para 5 of AOP was made than they would be if the stores were vacated. While there is no certainty, if the order is made and the “mothballing” proceeds, there is at least a potential for the Landlords’ position ultimately to be improved.” (at [54])
Markovic J also stated:
“…that the Administrators currently consider, subject to their uncertainty as to the duration and extent of the impact of the COVID-19 pandemic, that “mothballing” is likely to realise most value for the Colette Group’s business. This is because post COVID-19 they will have the option of undertaking a managed wind down or re-engaging with interested parties to facilitate a sale or recapitalisation through a DOCA. It is therefore in the best interests of the creditors as a whole.” (at [25])…
I accept that the Administrators are unable to express any opinion with certainty in the current climate. The difficult and unpredictable environment in which the Administrators are operating is the result of the COVID-19 pandemic. It is not caused by any action or inaction on their part. Despite that, I can and do give considerable weight to their views, arrived at after their own evaluation based on the information available to them at the time.” (at [48])
What does it Mean?
The key takeaways for this decision include:
- Courts will now more than ever consider granting voluntary administrators flexibility in exploring restructuring options;
- Rent free periods are not off the table; and
- There is of course a need to balance stakeholder interests and the evidentiary burden is not insubstantial.
Read The Full Judgment – Right Here
Interested in learning more about Insolvency & Reconstruction?
Click on our recent articles to find out more:
Statutory Demands and Insolvency
Chamberlains’ Response to Proposed Exposure Draft of Bankruptcy Regulations 2021