Chamberlains Law Firm is delighted to announce the incorporation of Backhouse Legal into its growing practice.
As of 30 April 2018, Principal of Backhouse Legal and 2017 Canberra Business Woman of the Year, Angela Backhouse, has joined Chamberlains Law Firm as Director – Business & Finance.
Angela has over 10 years’ experience in commercial business and transactional legal matters, focusing especially on servicing regional clients through her expertise in agriculture and agribusiness, banking and security, manufacturing, and business structuring.
Angela will continue to service clients in her hometown of Braidwood and surrounding regions, maintaining her strong ties with the regional community.
Managing Director of Chamberlains Law Firm, Vik Sundar, is looking forward to strengthening Chamberlains’ value offering.
“Both Backhouse Legal and Chamberlains share a number of core areas of expertise, however they also have strength in differing areas, which has inspired the incorporation”, says Vik, “our complementary approaches to client service and deep expertise in core industries will create a compelling offering throughout Canberra, Sydney, and the surrounding regions.”
Angela Backhouse is particularly enthused about the future potential the incorporation holds.
“Backhouse Legal has always placed strong emphasis on culture and pushing the boundaries of legal innovation”, says Angela, “incorporating our practice into a firm such as Chamberlains who share these values will open up new pathways for driving change from the way in which legal services have traditionally been offered to more dynamic and value-focused business offerings.”
With her Angela brings a team of lawyers, conveyancers, and support staff. The fully integrated firm will consist of 35 legal and support staff, led by a team of 6 highly skilled and specialised directors.
The office of Backhouse Legal closed on Friday 27 April 2018, with a full integration into Chamberlains Law Firm’s Canberra office being complete as of Monday 30 April 2018.
The decision of Justice Markovic in the recent matter of Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd (in liq) (No 2) [2018] (“Stone v Melrose”) is another great example of the law ever slowly eroding the tools available to liquidators to recover voidable transactions for the betterment of creditors.
It is by all means a great outcome for respondent’s to unfair preference claims but otherwise another hurdle for insolvency practitioners who are facing pressure and criticism from all angles regarding everything from the costs they incur, to their administrative processes and the returns they are obtaining for creditors.
At paragraph 279 – 287 of the Decision, Her Honour follows the decisions in Re Parker and Smith v Bone in acknowledging the applicability of set off as per section 553 of the Corporations Act 2001 (Cth) to voidable transactions. He Honour went on to say at paragraph 287 that the set-off was not applicable in the particular case because:
As was the case in Jetaway, here there were multiple promises of payment that were not met despite persistent follow up. Further, while CPS (unlike the company in Jetaway) did not admit that it did not have, and had no prospect of having, any funds to pay the accrued debt, its imposition on Melrose Cranes of a payment plan by which it incrementally paid back amounts that were not referable to any tax invoices implied the same. Mr Melrose admitted that this was what he believed and as summarised at [275] above,the circumstances indicate that Melrose Cranes was well aware that CPS was unable to pay its debts as and when they fell due. On that basis, it is not entitled to a set-off under s 553C of the Act.
Regardless of the outcome, Stone v Melrose serves as a guide to insolvency practitioners and respondents when analysing their positions and preparing to engage in litigation.
From 1 July 2018, purchasers of new residential premises and new residential subdivisions must withhold the goods and services tax (GST) amount on the contract price at settlement and pay it directly to the Australian Tax Office (ATO).
Why were the GST laws amended?
Phoenixing
It has been discovered that some developers were selling properties for a contract price that reflected their GST obligations but dissolved the entity before their next BAS lodgement to avoid remitting the GST to the ATO. Typically, a developer will obtain a cash flow benefit in holding the settlement proceeds for up to three months before their BAS and GST payment is due.
Phoenixing to avoid paying GST has grown significantly over the last decade. As of November 2017, the ATO has identified 3,731 individuals that have actively engaged in this activity over the last 5 years. These individuals controlled over 12,000 insolvent entities responsible for $1.8bn in debt that has been written off. The insolvent entities also claimed $1.2bn in input tax credits between 2013 and 2017.
It is important to note however that the ATO’s definition of phoenixing overlooks whether particular instances of phoenixing are legal or illegal. The legality of phoenixing depends upon the motivations and methods of phoenixing, as well as their interaction with the non-payment of tax liabilities.
What are the new requirements?
For Purchasers
The amended GST laws requires purchasers of:
to withhold GST and pay it directly to the ATO on or before settlement. This will mean the purchaser must withhold and pay to the ATO:
(a) generally, 1/11th of the contract price;
(b) if the margin scheme applies, 7% of the contract price; or
(c) some other amount if directed by the ATO.
Under the new requirements, Developers are required to provide notice to purchasers of their obligations to withhold and pay GST to the ATO. However, if a Developer breaches this obligation, the purchaser’s withholding and payment requirements are not affected. As a purchaser of new residential property and subdivisions, it pays to understand your withholding obligations.
For Developers
The GST laws now require developers to:
1. issue a written notice to the purchasers to withhold the GST amount of the contract price and pay that to the ATO.
The notice must be sent to the purchasers prior to settlement, and must include the developer’s name, ABN, the GST amount and the settlement date (i.e. date the balance contract price is payable). Failing to provide sufficient notice to the purchaser constitutes a strict liability offence but does not affect the purchaser’s obligation to pay the GST to the ATO.
2. report the GST amount in their Business Activity Statement (BAS)
Developers are entitled to a credit for the amount paid by the purchaser at settlement, or a refund, if the amount paid exceeds the actual GST liability.
The new GST laws apply to contracts that have been:
The amended GST laws however provide a transitional arrangement whereby parties who have entered into contracts before 1 July 2018 will be excluded from fulfilling the new GST withholding requirements, provided that the property transaction settles before 1 July 2020.
How much GST to withhold and paid to the ATO?
The amount of the payment required to be made to the ATO will be equal to:
What about related party transfers of new residential property?
There is no love for developers looking to sidestep their GST obligations by transferring new residential properties to related entities, family members or staff for no consideration.
The amount payable for a supply between the developer and its associates (which is defined in the Income Tax Assessment Act 1936 to include any entities related to the developer) for no consideration or less than the GST-inclusive market value is taken to be 10% of the GST exclusive market value of the property.
“Associate” transferees still have the reporting and remission obligation as any purchaser does.
What should you do?
Developers and sellers of residential property generally need to be mindful of their legal obligations regarding notification to purchasers and reporting to the ATO.
The ACT Legislative Assembly’s Standing Committee on Economic Development and Tourism has held an inquiry into building quality in the ACT. The inquiry has come in response to assessing the quality of new buildings as well as discovering potential or actual causes of poor building quality within the ACT.
As a result, the ACT Government has responded with a stricter testing regime for builders, beginning in 2019, for those seeking to renew their licences. The test will involve two attempts, with the result, that those who fail both will not have their licences renewed. Note however, this is not new for Class C builders who since 2016, already need to sit a written test to receive their licence.
Further to those seeking to renew their building licences, prospective builders applying for Class A, B and C licences in the ACT will need to sit a skills and technical assessment. This test assessment will be released later this year. Current builders, however, are not exempt, if the Construction Occupations Registrar finds that a ground of discipline exists, he or she can require a current builder to sit the test.
To successfully complete both the testing and skills assessment, as well as preventing being targeted to complete assessment, it is important for current and potential builders to ensure that they are aware of:
Access Canberra will oversee the notification of builders as to when complaints are made against them and will then inform them when a test needs to be sat.
The committee welcomes submissions from both the public and stakeholders to the inquiry, these submissions should be lodged by Friday, 6 July 2018.
for all those interested in making a submission there is a discussion paper located here.
The Governing Board of the ACT Long Service Leave Authority (LSLA) has recently agreed to a reduction in the employer levy payable under the Building and Construction Scheme of the Long Service Leave (Portable Schemes) Act 2009 (ACT) (Act).
Leave Schemes under the Act
The Building and Construction Scheme allows workers in the construction industry to accrue leave entitlements across multiple employers. It also applies to self-employed workers in these industries.
Other schemes included in the Act that operate in the same manner include:
Levy Rate
Employers pay a levy on all wages for the administration of the Scheme. This levy is reviewed at least every three years. The Governing Board has reduced the rate from 2.5% to 2.1%, effective on 30 April 2018.
The reduction was due to the following factors:
The levy rate decrease does not have an effect on employee leave entitlements, so they also benefit from the employer having fewer tax obligations to the LSLA.
Conclusion
Formal notification of the levy reduction will occur in early May to avoid confusion for the quarterly remittance in the January to March quarter.
In the interim, the notice of the reduction will be great news for employers and employees in the building and construction industry and signals that the regime is working effectively.
If someone asked you what was meant by the term ‘money’, what would you say? Would you define it as simply the cash you currently have in your wallet, in the bank, your shares? What about debts owed to you?
Will drafting may be considered by some to be a somewhat simplistic area of the law. However there is great danger if a will is drafted badly and as most succession lawyers can attest, one’s testamentary wishes may not be honoured because of drafting issues.
In Perrin v Morgan [1943] AC 399, the UK House of Lords heard on appeal a decision originally handed down by the UK Court of Appeal in 1942. Defining the term ‘money’ was precisely the question to be considered.
The Testator died, leaving a home-made will. This will directed that ‘all moneys of which I die possessed shall be shared by nephews and nieces now living’. The main issue in contention was whether the Testator meant for the term ‘all moneys’ to encapsulate her whole personal estate. The Testator’s personal estate was mainly comprised of investments (stocks, shares, debentures etc.) and it was questioned whether this phrase ‘all moneys’ was to include these investments.
The traditional view of the courts was to define the term ‘money’ quite narrowly. ‘Money’ was defined to include actual cash, cash held at the bank, dividends due and similar choses in action. The Court of Appeal originally upheld this narrow definition on the basis that ‘they could find no context in the will enlarging the meaning to be given to the word [money]’.
The House of Lords reversed the Court of Appeal’s decision on the basis that it was necessary to consider the context in which the will was drafted and to look beyond the words of the will. The House of Lords was concerned with avoiding a construction of the will which would give the term ‘money’ a specific legal meaning that was markedly different from the ordinary use of the term ‘money’ in the English language.
The House of Lords construed the phrase ‘all moneys’ to include the Testator’s investments based mainly on the fact that it was a home-made will (and it was commonplace for a lay person to define the term ‘money’ as to include their personal estate) and that to construe the term ‘all moneys’ narrowly would cause an unnecessary partial intestacy which arguably the Testator wanted to avoid by drafting a will in the first place.
The effect of Perrin v Morgan has been to accept the need to look beyond the wording of a will and rather to look at the intentions of the will-maker and the circumstances surrounding the drafting of the will.
So for those of you who are considering drafting your own wills, always consider the implications of every word you add (or omit) in your documents. Although the rule in Perrin v Morgan allows for the context surrounding a will to be considered (in certain circumstances), it is prudent to consider carefully your choice of words.
The Queensland Court of Appeal has recently upheld the operation of an exclusion of liability clause in an engineering contract.
The decision in The Thistle Company of Australia Pty Ltd v Bretz & Anor [2018] QCA 6 (Thistle v Bretz) reinforces the position taken by courts in previous cases involving exclusion clauses in design professional contracts.
Background
The original proceedings in the Bundaberg District Court regarded a tripping case. An elderly man sued the Thistle Company (Thistle) in negligence for tripping over a raised section surrounding a petrol pump at a service station that Thistle owned. Clear yellow markings on the plinth had been painted over in black and the previously sloped edge was transformed into a right angle.
The Court at first instance found that Thistle had breached its duty of care to the injured man.
Thistle claimed that the engineering firm engaged to renovate the station had designed the platform negligently and in breach of contract. They claimed that the engineering firm had breached its duty to the injured man and should be liable as tortfeasor. The trial judge denied this application.
Thistle sought leave to appeal on the grounds that, amongst other things, the trial judge had erred in finding that an exclusion clause in the contract between Thistle and the engineering firm was effective and thereby dismissing the third-party proceedings.
The Decision
The contract between Thistle and the engineering firm contained an exclusion clause, which stated that:
“After the expiration of one (1) year from the date of invoice in respect of the final amount claimed by [the engineering firm]…, [the engineering firm] shall be discharged from all liability in respect of the services whether under the law of contract, tort or otherwise.”
Leave to appeal was unanimously denied by the Court. Philippides J stated that the exclusion clause applied because, despite the contentions of Thistle:
Comment
Thistle v Bretz follows a long line of cases since Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, where exclusion clauses have been read with their ordinary meaning in the context of the contract rather than made subject to special rules. These cases demonstrate that such clauses can be dealt with simply and without presumptions.
Businesses should be aware that the terms of a contract can greatly limit their liability in tort or contract if it causes injury to a third party. Tortious liability can completely fall on one party if an exclusion clause exists in a contract. Thistle v Bretz provides a good example of this occurring in a building and design context.
We are proud to announce that Stipe Vuleta is a finalist at the 2018 Lawyers Weekly 30 Under 30 Awards in the Dispute Resolution category.
Congratulations Stipe on your well deserved nomination and best of luck for the awards on May 18th from the whole Chamberlains family.
This is Part 2 of a two-part series on legal privilege. Part 1 on legal professional privilege is also available here.
Without Prejudice Privilege (WPP)
WPP protects communications between parties regarding settlement negotiations. Information from without prejudice communications cannot be used in associated legal proceedings. It may only be adduced in civil matters, not criminal ones.
WPP encourages the parties to make genuine attempts to resolve their dispute. It removes the fear that an offer made will compromise a party’s legal position in court. The rationale is that this helps reduce time in court and legal costs, so WPP plays an important public interest function.
Pursuant to section 131(1) of the Uniform Evidence Acts, the privilege applies to:
Once a document has been determined to be privileged, it cannot be produced without multilateral consent by both parties.
Not all communications marked ‘without prejudice’ will attract WPP. Exceptions include:
Self-Incrimination Privilege (SIP)
SIP is the Australian parallel to the Fifth Amendment right enshrined in the United States Constitution. In the ACT, it is protected by section 22(i) of the Human Rights Act 2004 (ACT), as well as section 128(1) of the Uniform Evidence Acts.
A natural person claiming this privilege may refuse to answer a question or produce any document that may incriminate them.
The privilege exists to encourage witnesses to come forward and tell the truth when examined. It also preserves personal liberty, particularly for vulnerable witnesses.
SIP has three branches of application:
(i) Including against monetary penalties stemming from administrative proceedings; but
(ii) Excluding private civil proceedings for damages; and
Of course, SIP can be abrogated to protect the public interest.
Some notable examples of SIP being diminished by statute are:
Comment
WPP and SIP are important doctrines as part of the greater category of legal privileges, providing important social functions.
Nevertheless, there are a substantial number of exceptions to both. The exceptions to SIP can be especially difficult to navigate given the number of statutes that alter its usage.
This series of articles will examine the general types of privilege that exist. In Part 1, we will look at legal professional privilege (LPP). In Part 2, we will discuss without prejudice privilege (WPP) and self-incrimination privilege (SIP).
Legal Professional Privilege
LPP is an important doctrine enshrined in both the common law and in the Uniform Evidence Acts. It encourages full disclosure by the client to their lawyers, which is in the public interest.
Not all communications and documents shared with a lawyer are subject to legal professional privilege. Documents and emails simply marked “confidential” may not be as private as one would imagine.
There are two main forms of LPP, as stated by Kenny J in Pratt Holdings Pty Ltd v Commissioner of Taxation (2004) 207 ALR 217 (Pratt):
LP applies only to communications made in the course of or in reasonable contemplation of litigation, whereas LAP attaches to all advice requested by and given to a client in general.
Legal Advice Privilege
Crucially, LAP does not cover all communications between professional and client. You should be aware of the following limits:
Litigation Privilege
There are several points to note regarding LP:
Comment
Though a distinction between the two types of LPP may be blurry and somewhat artificial, it was nevertheless upheld in Pratt and subsequent cases. LAP protects the relationship between a lawyer and client, while LP upholds the functions of the adversarial court system.
Clients seeking legal advice should be aware of these complexities surrounding privileged communications and be aware that what they say and write may not be as private as originally thought.
This is Part 1 of a two-part series on legal privilege. Part 2 on Without Prejudice Privilege Self-Incrimination Privilege is also available here.