On 10 August 2019, renowned U.S. financier Jeffrey Epstein was found dead in his New York prison cell, where he had been awaiting trial on sex trafficking and conspiracy charges.
Just two days before his apparent suicide, Epstein signed a new will (available here), placing the majority of his estate (valued at over $US 577 million) into a trust.
If you’re thinking this sounds fishy, you’re not alone.
While Epstein’s estate law issues may not be his most salacious, they do overlap with some common issues in Australian succession law. Would Epstein’s last-minute will hold up in Australia?
1. Capacity
On 23 July 2019, Epstein was found semiconscious and severely injured on the floor of his prison cell. Authorities suspected either assault or attempted suicide as the cause of his injuries. Two weeks later, he signed his new will.
Under Australian law, these circumstances would give rise to questions of capacity.
If, at the time of signing, the testator lacked the required mental capacity, the will, or parts of the will, could be deemed invalid. A testator must have been of ‘sound mind’ – capable of understanding the nature and effect of a will, the extent of their property and the nature of others’ potential claims to their estate: Banks v Goodfellow (1870) 5 QB 549.
Although suicide does not itself give rise to a presumption of testamentary incapacity (Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 707–708), mental illnesses such as depression and anxiety can be contributing factors, indicating that the testator did not meet the requisite standard when they signed their will. For example, in Re Estate of Bulder [2012] NSWSC 1328 evidence of the deceased’s mental state which led to his eventual suicide supported the finding that he testamentary capacity.
2. Knowledge & Approval
Assault could be an indicator that Epstein’s free will may have been compromised at a material time prior to signing.
In Australia and the U.S. alike, the provisions of one’s will must have been known, understood and approved of by the testator, exercising their free will.
If a testator signed their will as a result of undue influence, fraud or duress, all of part of their will may be deemed invalid: Trustee for the Salvation Army (NSW) Property Trust v Becker [2007] NSWCA 136.
If any of these influences are proven to exist in Epstein’s or any other case, the testator’s will may be deemed invalid.
3. Contrary to Public Office
Although the will itself is publicly available, by creating a trust over the majority of his estate, Epstein was able to keep hidden the beneficiaries of his estate under the trust document (which was not published nor annexed to the will). This may have been an attempt to hide Epstein’s assets from future claims against his estate. Given the volume of emerging accusations against Epstein, this attempt appears to contradict public policy, potentially preventing claimants from receiving compensation.
Of course, without the trust document, it is hard to say what Epstein has actually done with the money. It is likely, however, that if it were an attempt to funnel the funds away from claimants, or even to evade tax, U.S. Courts would be able to step in on public policy grounds to prevent this effect.
Similarly, in Australia, all or part of a will may be invalidated if contrary to public policy.
For example, in Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) CLR 394, Ebbeck made a testamentary gift to his sons which was conditional upon them and their wives professing the Protestant faith. The condition was voided as it was revealed that Ebbeck, before signing his will, knew that two of his sons were married to women of Roman Catholic faith. If the condition were upheld, it would have encouraged the breaking up of two marriages, directly contrary to Australian public policy and therefore deemed void.
In terms of estate law issues arising from Epstein’s situation, these are merely the tip of the iceberg. The administration of deceased estates can be incredibly complex and the claims of third parties are not necessarily overruled by the terms of a will.
A recent decision handed down in the Supreme Court of New South Wales has shed light on the amount of evidence required to successfully terminate a winding-up application brought against a company in financial distress.
Section 482 of the Corporations Act 2001 (Cth) provides that at any time during the winding up of a company, the Court may, on application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.
In the matter of Rainbow Carlingford One Pty Limited (in liquidation) ACN 604 122 054 [2019] NSWSC 971, an application to terminate the winding-up of Rainbow Carlingford One Pty Limited (in liquidation) (Company) was brought by Rainbowforce Pty Limited, which owned all of the shares of the Company (Related Party). The Related Party stated that it had the intention of making payment of its debts to the Company and two external financiers of the Company issued further correspondence stating that they would consider extending the terms of their facilities and would not oppose the termination of the winding-up of the Company. The Related party also put forward some evidence showing that in the event the external financiers refused to extend the terms of their facilities, the Company was still in a position to obtain significant funding from its related entities to pay off the Company’s debts and show that it is solvent.
In the end, the application was refused by the Court on the basis that the proposed funding would not be sufficient to pay off its debts in a timely manner and the evidence put forward so far appeared inadequate, specifically with respect to the external financiers extending their loans and the fall back position of related funding. The Court particularly highlighted the importance for such a company to approach with caution, and not on a hopeful basis, when it has failed to repay its only trading creditor. The Court required further evidence to show that the Company is presently and is likely to remain solvent and provided the parties with a chance to put forward further and better evidence to support this application for terminating the winding-up of the Company.
This case therefore shows that it may be possible to terminate the winding-up of a company, however the Court will require the parties supporting such an application to provide substantial financial evidence to indicate the Company’s present and future solvency.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
Subway is under investigation by the Fair Work Ombudsman over employee underpayments and mistreatment of franchise owners. Subway’s franchise numbers have began to dwindle over the past 4 years, with 1 out of 10 franchises closing amid growing costs related to franchises.
Over two dozen current and former Subway employees have contacted a union affiliated group in Melbourne over the last 12 months revealing a range of issues. Employees complained of underpayment, the use of expired “Work Choice era” agreements, lack of penalty rates and physical and verbal bullying. This is after the Fair Work Ombudsman secured $65,438 in penalties in March 2019 against the former franchisee of two Subway outlets in Sydney for underpaying a worker by more than $16,000.
Contributing to the issue is the requirement franchisees to fund expensive overheads. These include renovations costing upwards of $200,000, costly equipment and fees for the latest technology. It is also alleged franchisees were required to foot a $10,000 fee for a loyalty app. Consequently, franchisees have attempted to cut overheads elsewhere within the business, notably employee wages.
Subway was heavily examined in parliament’s 2018 inquiry into the operation and effectiveness of the Franchising Code of Conduct. A former franchisee alleged he was required to pay $3000 for a new point of sale system and thermometers priced at $250 when there were much cheaper alternatives available.
Subway is not the only retailer grappling with underpayment issues. Wage theft has been uncovered at Michael Hill, Domino’s, Super Retail Group and Chatime over the past year, though most claimed it was a result of the complexity of modern awards.
A recent report by the Australian Payroll Association outlined that a third of payroll managers admitted to making employee payment or entitlement mistakes at least once a month, and claimed that the larger the business, the more likely mistakes are to occur.
In positive new for ACT employees, legislation was introduced in August 2019 to ensure workers are better able to access outstanding entitlements and wages by allowing fair work disputes to be heard more efficiently in the Magistrates Court.
Contact Chamberlains Law Firm for any questions and concerns regarding Workplace Law.
Buying off the plan involves securing a property using a Contract for Sale on an unconditional basis before the building has been constructed or completed. Although it may feel different buying a property without ‘walking through it’, almost all new apartment buildings are sold in this manner, so it is a very common way of buying property.
Buying off the plan can sometimes enable you to enter the property market at a lower price (albeit not always the case). This is possible as developers offer lower prices and financial incentives (such as rebates) in order to secure enough pre-sales to start the project. Thus, providing a great opportunity for both investors and home buyers. Whilst there may be good deals on offer, buyers should note that some properties sold this way are often based on estimated future prices and as such can be overpriced.
While it may be beneficial to purchase off the plan, there are a number of risks to be wary of. Therefore, it is important that you understand your legal rights and obligations before signing the contract. Written below are some things you should know before buying off the plan.
Deposit
Payment of the deposit is due on exchange of contracts. This is a significant outlay given the often-lengthy timeframe for completion. The deposit must be held in trust for the buyer by the seller’s lawyer or agent. Ideally, the contract should provide for interest on the deposit to be paid to the buyer or at least shared equally between the parties.
Finance
When buying off the plan it’s important to remember that most contracts will not be subject to finance. This is usually because it can take months or years for the settlement to take place and banks will not be able to approve a loan to fund a settlement that far into the future. It is crucial for you to speak to your banker or finance broker before signing a contract to determine if your current financial situation will allow you to purchase a property. Even then, banks cannot usually accurately assess your ‘serviceability’ until they receive all of your financial information (pay slips, expenses, existing assets and liabilities, etc).
Some banks are happy to pre-approve your loan once you sign the contract; however, pre-approvals are only valid for a finite period of time and will be subject to a bank valuation of the property and verification before funds can be advanced. It is wise to save up more money during the lead-up to the settlement as valuations can often be less than the purchase price. If a lower valuation is given, you will need contribute further funds to cover the difference at settlement. Thus, by continuing to save you can alleviate any financial strain you may experience in the event of a valuation coming through short of the purchase price.
Due to the period between purchase and settlement, your financial and personal circumstances may change. The change may affect your ability to obtain a loan. Changing circumstances include redundancy, having children, relocation overseas, etc. Staying in contract with your banker or finance broker during construction will help alleviate potential time issues.
Of course, once you have secured finance and signed all mortgage documents for your property, you are one step closer to settling your property!
Contracts
The contracts that are used in the off the plan sales are much more detailed then the traditional form of contract which are used in the everyday sale of established real estate. These contracts are always prepared by the developers solicitor and provided to your solicitor for review before signing. In most cases solicitors who have a thorough understanding of off the plan contracts will review a contact on your behalf in a matter of days and then provide their recommendations.
Defect or Maintenance Periods
When purchasing an off the plan home, you are not entering into a building contract. This means that you are not afforded with the same rights as a person who organises construction of their home by their chosen builder. Many (albeit not all) off the plan contracts will have a defects rectification clause giving buyers a right to request rectification of defects after settlement. The seller is often not required under the contract to repair any defects prior to settlement unless the property is uninhabitable or poses a safety risk to the occupier. Unfortunately defects clauses in most contracts limit the seller or builder’s liability by only requiring a repair of defined defects that do not included hairline cracks or items which are deemed not to be defects by the seller. It is therefore prudent that you have such clauses varied to ensure all defects that should be repaired, get repaired.
Sunset Clause and Delays
The sunset clause refers to a condition in the contract which specifies the maximum time frame the developer can take to complete the development before you have the right to pull out. This period is known as the ‘sunset period’. The ‘sunset’ period can be an indefinite period of time in some contracts. As such, you should consider whether you are willing to wait an extended period before purchasing.
To obtain further advice on purchasing property, please contact our property law specialists team.
I’m Taking You Down With Me
In June 2018, the liquidator of Takema Investments Pty Ltd was ultimately successful in bringing forward a proceeding against a former director of the company, Mr Kerry Tatnell. The liquidator sought payment of $286,356.03 from Mr Tatnell for contravening subsections 558G(2) and 588M(2) of the Corporations Act 2001 (Cth) plus costs.
For those who are unfamiliar with those sections, the liquidator was successful in arguing that Mr Tatnell breached his director’s duty to prevent the insolvent trading of Takema Investments, by failing to prevent the company from incurring a debt. As such, the liquidator was able to recover from Mr Tatnell an amount equal to the amount of the loss or damaged incurred.
Notwithstanding this, prior to the judgment given by Justice O’Callaghan on 29 July 2019, the parties were successful in reaching a settlement at mediation. Here, Mr Tatnell consented to a judgment against him for the sum of $175,000.00, inclusive of costs and pre-judgment interest.
In accordance with advice received by his lawyers, Mr Tatnell brought a cross-claim against his co-director wife seeking equitable contribution of 50% of any amount he would have been ordered to pay the liquidator. This was not disputed at trial despite the settlement that had occurred between the liquidator and Mr Tatnell.
Decision
Justice O’Callaghan confirmed that when ‘one director of a company is found liable for insolvent trading…s/he may recover from any other director who was not sued for that same loss or damage.’ This decision was made in accordance with the decision in Hall v Poolman (2007) NSWSC 1330, where Justice Palmer concluded that the doctrine of equitable contribution is applicable ‘where the person from whom contribution is sought has not been sued, although s/he could have been sued.’ Therefore, the person who seeks equitable contribution must show that had the co-obligor been sued, they would be liable for the same or proportionate part of the same loss.’
Here, Mr Tatnell was successful in establishing his claim for equitable contribution against his co-director wife, even though his own liability had been agreed to in the settlement. Specifically, the court highlighted that a ‘settling party may recover equitable contribution from a person who is liable for the underlying loss of the subject of the settlement.’ Justice O’Callaghan concluded the following:
(a) A settlement agreement making one party liable to another is sufficiently a common obligation to make a third-person who would be liable…liable for the same amount and to the same extent to attract the doctrine; and
(b) The settlement in this case was objectively reasonable.
The takeaway message from this case is that even if one director has reached a settlement in response to a liquidator’s insolvent trading claim, the doctrine of equitable contribution can still be used against a fellow director who had not originally been joined to the liquidator’s proceedings.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
When a retail company announces it is insolvent and entering into voluntary administration or liquidation, many loyal customers may be left unsure about their right to redeem gift cards, and rely on lay-bys and prepaid deposits at company stores. The effect that an insolvency event will have on items such as gift cards is largely dependant on the situation of the company.
When an Insolvency Practitioner (IP) (such as an Administrator or Liquidator) is appointed over a company, the objective is to review and manage the company’s assets and finances to generate the best result for both the company and its creditors. In cases of administration, the objective is to salvage the business to the extent possible, whilst in liquidation the objection is to wind up the company’s affairs and generate the best return for its creditors.
Can You Recover from the Administration?
As above, an IP’s role is to manage the affairs of the companies to achieve the best return possible for creditors. IPs must be pragmatic in their approach to dealing with the company’s assets and liabilities so as to create the largest asset pool possible for finalising the company’s affairs and distributing to creditors. For this reason, Administrators who continue to trade are often reluctant to honour gift cards, as this would serve only to reduce the company’s stock level or cash reserves, whilst providing little benefit to the company. For the same reasons, Liquidators often won’t provide refunds for gift cards, as there are either no funds to do so or it would diminish the asset pool available to creditors.
In situations of insolvency, gift card holders are generally classified as unsecured creditors. People often think of gift cards as having some monetary value, but when consumers purchase a gift card, they are in effect purchasing a set of terms and conditions that will allow them to acquire an amount of goods or services from a retailer. Rarely do these terms and conditions provide security for the money paid, and thus they effectively operate as an unsecured loan to the retailer.
Other Options for Recovery
While some gift cards may no longer be redeemable at any store, there are other options to recover some or all of the value of the card:
Chargeback
Where gift cards were purchased using a credit card, consumers may be able to recover the purchase price by applying to their bank for a credit card ‘chargeback’. This is a process whereby the gift card purchaser’s bank, on the gift card holder’s behalf, can apply to have the credit card transaction reversed. This can occur where goods or services have been paid for, but not supplied.
Gift card holders should contact their bank as soon as they are aware of the company entering insolvency to avoid any time limits on making a claim.
New Terms and Conditions
If the company continues to operate during external administration, the Administrators may announce that they will continue to honour transactions such as gift cards or lay-bys. This may also come with additional conditions on the use of the gift card. For example, they may require an additional dollar be spent for every dollar used on the gift card.
Lodging a Proof of Debt (POD)
When a liquidator has finalised the affairs of a company, any residual funds will be distributed to company creditors in the order prescribed by the Corporations Act 2001 (Cth). The priority of payments is as follows:
1. Liquidation and legal fees;
2. Secured Creditors;
3. Priority Unsecured Creditors (such as employees owed unpaid wages and super); and finally
4. Unsecured Creditors.
Lodging a proof of debt with the Liquidator will ensure that your interest is recorded, you are kept up to date with any developments and you may receive a distribution if there are available funds.
When a retail company enters into external administration, consumers need to be proactive in contacting their banks or the IP managing the company to avoid losing out on any value that may be recoverable from their unused gift cards.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
Many first home buyers in the ACT are not aware of the new Stamp Duty changes that came into effect on 1 July 2019.
Prior to 1 July 2019, first home buyers were only eligible for the Stamp Duty concessions if the property had never been lived in previously and if the purchase price was below the threshold of $607,000.00.
As of 1 July 2019, first home buyers are now eligible for this concession when purchasing any property, at any price, including established homes.
To be eligible for this concession the following requirements must be met:
• All applications must be at least 18 years of age
• All applicants must not have owned property in the last 2 years
• The purchased property must be occupied by at least 1 buyer within the first 12 months for at least 1 full year
• Applicants must not earn above the annual income threshold of $160,000 per household
To find out if you may be eligible for a Stamp Duty Concession, please visit the ACT Revenue Website here.
If you are not eligible for the a Stamp Duty Concession, the following Stamp Duty calculations apply for transactions after the 1st July 2019:
| Value of Non-Commercial Property | Duty Payable |
|---|---|
| up to $200,000 | $20 or $1.20 per $100 or part thereof, whichever is greater |
| $200,001 to $300,000 | $2,400 plus $2.20 per $100 or part thereof by which the value exceeds $200,000 |
| $300,001 to $500,000 | $4,600 plus $3.40 per $100 or part thereof by which the value exceeds $300,000 |
| $500,001 to $750,000 | $11,400 plus $4.32 per $100 or part thereof by which the value exceeds $500,000 |
| $750,001 to $1,000,000 | $22,200 plus $5.90 per $100 or part thereof by which the value exceeds $750,000 |
| $1,000,001 to $1,455,000 | $36,950 plus $6.40 per $100 or part thereof by which the value exceeds $1,000,000 |
| More than $1,455,000 | A flat rate of $4.54 per $100 applied to the total transaction value |
Whether you are buying or selling property, our conveyancing specialist team can assist you with a smooth exchange.
A recent decision handed down in the Supreme Court of New South Wales has shed some light on which creditors’ interests will be given greater weight when considering an adjournment of a winding up application.
Section 440A(2) of the Corporations Act 2001 (Cth) provides that the Court is to adjourn the hearing of an application for an order to wind up a company if the company is under administration and the Court is satisfied that it is in the best interests of the company’s creditors for the company to continue under administration rather than be wound up (Section 440A(2)).
The case of Mono Constructions Pty Limited ACN 107 404 679 v Cresco Opus Fund No 4 Pty Limited (Administrators Appointed) ACN 169 864 000 [2019] NSWSC 941 concerned a company (Cresco) which entered into a construction contract with a special purpose company (Mono) to develop properties that it had purchased for development. Cresco had also entered into subscription agreements with investors who contributed funds to the development. Mono however commenced action under the security of payment regime to recover debts owing to it by Cresco and commenced these proceedings to wind up Cresco.
A voluntary administrator was appointed for Cresco and a Deed of Company Arrangement (DOCA) was accordingly proposed, following which the voluntary administrator sought to adjourn the hearing of the winding up application until after the second meeting of the creditors in accordance with Section 440A(2).
While several creditors of Cresco (including the abovementioned investors and other creditors of Cresco that were related creditors) would vote in favour of the proposed DOCA, Mono opposed this request for adjournment and sought orders to wind up Cresco.
The Court was now required to consider whether “all creditors must be treated equally or whether all creditors are equal, but some are more equal than others.” Justice Rees stated that the onus was on the administrator to show that it is in the best interests of Cresco’s creditors that the administration continue, meaning that Cresco’s creditors would “get more by way of payment of their debts” through the administration than from liquidation.
In the end, the Court held that the “best interests of the creditors” in Section 440A(2) refers strictly to the interests in recovering what is owed to them as opposed to any other unrelated interests (such as “family, relationships or emotional attachment”). The Court accordingly gave less weight to the interests of the related party creditors, as it did not appear that they would receive any benefit under the proposed DOCA, and made an order in favour of Mono (the principal creditor) to wind up Cresco in insolvency.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
Caveats are one of the most recognisable forms of land dealings across the Australian States and Territories. However, they are also widely misunderstood.
Most commonly, caveats are used to help secure debts owed by the registered proprietor of a parcel of land to the ‘caveator’ (person lodging the caveat). However, before using a caveat for this or any other purpose, it is important that you fully understand your legal rights and obligations; and the risks associated with lodging them.
What is a caveat?
A caveat is a legal instrument that can be lodged on the title of a parcel of real estate property. It alerts the public to any interests someone may have in that property. The function of a caveat is to block certain other dealings from being registered. This can prevent other parties from registering conflicting interests over the property; or could block the owner from selling or otherwise profiting from the property until they have repaid a debt.
What gives a person the right to lodge a caveat?
Anyone who has a caveatable interest in a certain block of land is eligible to lodge a caveat. Caveatable interests come about when someone has a legal or equitable interest in the property in question, giving rise to an enforceable right. Examples of caveatable interests include:
a) a registered or equitable mortgage, including ‘unregistered’ loans which are agreed to be secured in whole or part over the property in question (without a mortgage being formally placed on title);
b) someone who contributes financially to a purchase of property, but chooses not to appear on title for tax or asset protection reasons (usually a spouse);
c) a purchaser under a contract for sale (i.e., before settlement has been effected);
d) in some instances, a tenant.
A caveat will stay in place and continue to block certain proceedings until the caveator withdraws it, it lapses, it is removed by a court order, or the caveator consents to a certain registration over the title by another party.
What risks are associated with lodging a caveat?
While caveats are an effective means by which to protect certain legal interests, caution should be exercised when seeking to lodge them. Each State and Territory in Australia has their own system for the lodgement of caveats. Depending on where the property in question is, the lodgement process may vary. This is important, as if there are any inaccuracies in the lodgement application, it may be rejected, leading to additional fees being payable in some instances.
Additionally, it is vital that a person seeking to lodge a caveat has a valid legal or equitable interest in the property that is ‘caveatable’. If a registered caveat delays or prevents someone else from taking certain actions in regard to a property, the other party may experience financial loss. If the person who lodged the caveat cannot then prove that they had the valid caveatable interest which was claimed, they will be liable to compensate such losses. This could include liability for expensive additional fees and charges for the associated court proceedings.
Summary
Caveats are effective legal tools for protecting your property interests. However, they should be used with caution, and only after seeking proper legal advice. Contact our team of property lawyers for any legal questions!
You would think Neil Armstrong would receive medical care that was out of this world. However, recent investigations have revealed that the first man on the moon’s death may have been the result of incompetent post-surgical medical care by a Cincinnati hospital.
Mr Armstrong had undergone bypass surgery in early August 2012. However, when nurses removed the wires for a temporary pacemaker, he began to bleed into the membrane surrounding the heart, leading to a cascade of medical issues that resulted in his death on 25 August 2012.
The hospital defended the care, but paid the Armstrong family $6,000,000 to settle the matter privately and avoid harsh public backlash. Accordingly, the hospital insisted on keeping the complaints and the settlement private and the facts of the matter remain clouded.
However, Mr Armstrong is not alone with such negligent medical care, in the Australian case of Tinnock v Murrumbidgee Local Health District (No 6) [2017] NSWSC 1003, the Plaintiff underwent surgery for the repair of a hernia. This surgery involved the placement of a surgical mesh over the impacted area. Unfortunately, a seroma (a pocket of fluid) developed during recovery, which resulted in the plaintiff requiring further surgery with the application of a vacuum sealed internal dressing (known as a VAC dressing). A third surgery was carried out to close the abdominal cavity which accommodated the VAC dressing.
When the plaintiff was finally admitted to Calvary Hospital, a severe infection stemming from the surgical mesh and VAC dressing over the hernia dissection had developed.
Claims were brought on behalf of the Plaintiff under negligence and battery. Judgment was entered for the Plaintiff in the sum of $1,005,509 plus costs.
Both of these cases address the importance of surgeons assessing the relevant factors to the patient, in determining the precautions that should be taken to enacted to reduce the risk of post-surgical infection. This has important implications for medical specialists in relation to their duty of care and the potential to breach this duty.
Let’s hope that you don’t have to travel as far as the moon for adequate medical care. However, if you have experienced an issue with the standard of care received, our Litigation team will provide you with comprehensive advice on personal injury or medical negligence. As injury compensation experts in these fields, we are uniquely placed to provide the strategic advice you need.