Christmas is a time that we reflect on the year gone by and celebrate with our family members. For some this can mean a get together at home or travelling overseas or interstate to spend time with family members. Everyone should have an estate planning strategy in place and the lead up to the Christmas season is the perfect time to consider your situation. Enjoy your holiday in the knowledge that, if the worst does happen, you have a plan which protects your assets, keeps your businesses and trusts running smoothly in the right hands and provides for your family in the long term.
A well drafted Will with Discretionary Testamentary Trust can achieve your estate planning goals in a manner that offers your beneficiaries maximum asset protection and minimum income and capital gains tax liability.
Where your beneficiary has reached the age of 25 (or another age that you choose, called the ‘preservation age’) they can choose to take their inheritance outright (as a gift) or they can choose to take it through a trust. Where your beneficiary is under the preservation age, their share of your estate is automatically held in a testamentary trust until they attain the preservation age with directions that the capital be preserved for the beneficiary’s education, reasonable maintenance and welfare and medical and dental treatment.
A testamentary trust provides a greater level of asset protection than an outright gift. This is because the trustee, and not the beneficiary, is the legal owner of the asset. A trust therefore allows you to protect your family assets from various threats, including a beneficiary’s wasteful habits or addictions, claims by creditors in bankruptcy proceedings or claims by spouses in a marital breakdown.
One of the most significant and arguably most underappreciated benefits of a discretionary testamentary trust is its tax effectiveness. A discretionary testamentary trust allows a beneficiary to split and stream income and capital to the potential beneficiaries of the trust. The tax effectiveness of testamentary trusts arises out of the fact that rather than paying marginal rates of tax on the income generated by their inheritance (as would be the case under a simple Will), when assets of a testamentary trust are sold, or where income is generated from trust
assets, the trustee has the ability to strategically pass out such taxable income to those beneficiaries who will pay the least tax (the income being assessable in the hands of the recipient beneficiary). This becomes particularly tax effective where the beneficiary has a spouse that does not work (or is on a lower tax rate) or where they have minor children (a testamentary trust treats distributions to minors as if they were adults).
Example:
Mary dies with a simple Will leaving an investment property and cash to her son John. In that income year, John’s inheritance generates $40,000 in income. John works as an accountant and is on the top marginal rate. He will pay $18,600 in income tax for that income year and for each year thereafter (assuming that the income remains constant).
Let’s assume Mary sought advice on her estate planning and had a Will with discretionary testamentary trusts prepared. Mary’s Will offers John the option of taking his inheritance outright or via a testamentary trust. John elects to take his inheritance in the trust. As John has two children, he is able to have trust income distributed equally between his children. John distributes $20,000 to each of his children and since they are able to receive $20,452 tax fee after applying the low income rebate, he is able to receive the entire $40,000 tax free. John has made a tax saving of $18,600 and that is only in year one.
As many people go travelling over the holiday break, it is also important to appoint someone who can act on your behalf in the event that you become incapacitated. If you do not do this then somebody (for example, your spouse) must apply to the ACT Civil and Administrative Tribunal for a guardianship order over you. There is no guarantee of success, and the process can be lengthy and stressful. Appointing an attorney before you lose capacity is a simple matter of filling in a form and specifying the matters (financial, medical and personal care)
over which you want your attorney to have power.
Make putting in place an estate planning strategy your new years resolution and ensure that should the unexpected happen, you will have provided for your family members in a tax and asset protective manner.
Vik Sundar is Managing Director and Advisory of Private Wealth & Tax at Chamberlains Law Firm.
To make an appointment with Vik
call 02 6215 9100 or
email chamberlains@chamberlains.com.au
On 16 September 2016, the Australian Competition & Consumer Commission (ACCC) announced that London-based online clothing retailer Charles Tyrwhitt LLP had paid a penalty of $10,800 after being issued with an infringement notice by the ACCC.
You might recognise Charles Tyrwhitt from their various advertisements and marketing material in flyers, magazines and on your Facebook news feed. The company markets itself in Australia as a manufacturer and retailer of high quality shirts, at discounted prices.
The ACCC’s investigation, and infringement notice, focused on Charles Tyrwhitt’s practice of using two-price comparison advertising. Two-price comparison advertising typically involves promoting an item with a previous ‘was’ price and a current ‘now’ price which indicates savings to the customer.
While two-price comparison advertising is common practice amongst retailers, there is a fine line between when such pricing strategies are lawful and when that strategy becomes misleading or deceptive conduct, in breach of sections 18 and/or 29 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)).
In Charles Tyrwhitt’s case, the ACCC found that the company’s advertisement of its men’s ‘’slim fit, non-iron, micro-spot white” shirt with a ‘was’ price of $160 and a ‘now’ price of $69 was misleading and deceptive.
The ACCC’s reasoning for this finding was that:
As such, it was found to be misleading for the company to represent that customers would receive certain savings when the product was not sold at the pre-discounted price.
The ACCC’s findings are consistent with past cases in relation to two-price comparison advertising.
In 2013, the Federal Court dismissed an appeal by a jewellery retailer in substantially the same position as Charles Tyrwhitt[1]. The jewellery retailer was found to have engaged in misleading and deceptive conduct pursuant to the relevant provisions in the Trade Practices Act 1974 (Cth), the predecessors of sections 18 and 29 of the Competition and Consumer Act 2010 (Cth).
In that case the Court indicated that to use two-price comparison advertising, the ‘was’ price must:
However the Court also found that two-price comparison advertising may still be valid, despite no recent sales at that price, if the company is able to show that an ‘ordinary or reasonable’ consumer would have been willing to pay that price for the product.
[1] The Jewellery Group Pty Ltd v Australian Competition & Consumer Commission [2013] FCAFC 144
Recently Frucor Beverages, the V Energy Drink maker, attempted to register the colour green (Pantone 376C) as a trade mark but the Coca-Cola Company had other ideas.
Section 17 of the Trade Marks Act 1995 (Cth) defines a trade mark as ‘a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade…’
Section 6 of the Trade Marks Act 1995 (Cth) defines a ‘sign’ broadly to include colour, sound or scent.
If Frucor Beverages had been successful in registering the colour green as a trade mark, they would have had the exclusive right to use that colour in the class of goods and services in which it was registered. This may have prevented other competitors such as the Coca-Cola Company from using the particular shade of green in its products.
In this case Frucor Beverages failed to establish that the green colour alone was recognised as its brand. Green was not the only colour it used to market the drinks, so the question was raised whether green represented the drink’s flavour or type as opposed to the brand.
There was also no evidence that the consumer exclusively associated the colour green with the product and there were also other similar products in the market using the colour green – such as a variant of the Coca Cola Company’s energy drink “Mother”. Survey evidence introduced by Frucor Beverages to argue its position was considered imprecise and inconclusive.
A feature of a trade mark capable of being registered is that it must distinguish the product from other products and services of its competitors. Generally, it is difficult to seek registration of a colour as a trade mark because it is difficult to establish that a certain colour is exclusively associated with a product.
However, it is not the first time that colour green has been caught in the midst of a legal battle. British Petroleum was embroiled in a legal battle for many years over the colour green against Woolworths. Another famous battle raged between Darrell Lea and Cadbury over the colour purple.[1] It is certainly possible to register a colour as a trade mark, which will undoubtedly provide many exclusive benefits to the trade mark holder, but it is not easy to do so.
[1] Cadbury Schweppes Pty Limited v Darrell Lea Chocolate Shops Pty Limited [2009] FCAFC 8.
On 23 August 2016 the Minister for Revenue and Financial Services announced that the commencement of a portion of the Insolvency Law Reform Act will be delayed until 1 September 2017
The delay comes off the back of the lengthy government caretaker period during the federal election, which halted all work on the Insolvency Practice Rules. The Rules are not likely to be formalised till December 2016.
The purpose for this partial delay is to provide industry members with enough time to become compliant with the Act by the scheduled commencement date, including adjusting their IT systems and/or completing necessary staff retraining.
Commencing 1 March 2017 as originally planned
Commencing 1 September 2017
Sometimes a party to a dispute requires urgent relief.
Some examples of circumstances where urgent relief would be necessary includes where:
An injunction is a form of urgent relief that can be granted by the Court in certain circumstances.
An injunction can be prohibitory or mandatory.
A prohibitory injunction prevents the other party from taking some kind of action; some examples include preventing disseminating confidential information or preventing an eviction.
A mandatory injunction is where a party is required to take positive steps; some examples include being compelled to perform an obligation pursuant to a contract or compelling the removal of a publication from the public domain.
To get an urgent injunction on an interlocutory basis, a party is required to establish the following:
Whether or not it is advisable to apply for an injunction depends on a case by case basis. It is a remedy available in circumstances where it is necessary to preserve the status quo pending a final hearing. Where there is a case for irreparable harm – for example, a pending major disruption to a business due to threat of eviction or irreparable harm to the reputation of a person or business – a case can be made to justify the grant of an injunction.
An ex-parte injunction is where an injunction is applied for without notice to the other party. Ex-parte injunctions can be applied for in circumstances where there is such urgency that immediate relief is necessary. However, it is likely that the matter will be made returnable in a few days’ time to provide the other party with an opportunity to be heard.
When applying for an injunction, the person or entity making the application is required to provide an undertaking as to damages. The intention of this is to balance the interests of the parties given that injunctions are often granted on an interim basis without an opportunity for the parties to be heard in full.
If you require urgent assistance with a matter, our litigation team is well equipped to provide you with advice concerning the remedies available to you. Please contact Rory Markham or Stipe Vuleta on (02) 6215 9100.
We are pleased to announce that Louise Morris has joined our team as our new Director and Practice Leader of property. Louise brings a wealth of knowledge to our firm with over 10 years of experience in law both as a commercial and property lawyer at Meyer Vandenberg and as the Development Director and In-House Counsel at Morris Property Group.
In the recent case of Bull v Australian Quarter Horse Association [2015] NSWCA 354 the New South Wales Court of Appeal examined a case where a cloned horse was denied registration based on the breed association’s regulations.
The Facts
In December 2010 Mr Bull purchased a Quarter Horse from the USA which was a clone. This horse had not been registered with the American Quarter Horse Association. In April 2011 Mr Bull imported this horse and applied to register the horse with the Australia Quarter Horse Association (“AQHA”). His application was refused. He brought proceedings in the Supreme Court of New South Wales seeking relief from that refusal.
The AQHA had amended its regulations in December 2010 and April 2011 in order to prevent the registration of cloned horses however these changes had not been published in the hard copy regulations available to members. Mr Bull sought to rely on the previous version of the regulations, which did not prohibit the registration of clones, or alternatively he sought to argue that he was entitled to register the horse under the new regulations. There was a significant difference between the previous and amended regulations. The new regulations disallowed the registration of cloned horses whereas the previous regulations had allowed cloned horses, so long as the other requirements for registration were met. One of the requirements for registration was that any imported horse had to be registered with an international Quarter Horse stud book before it could be registered with the AQHA.
The First Decision
Justice Hallen found that the horse could not be registered on the basis that the AQHA regulations required imported horses to be already registered with an international stud book in order to be registered in Australia. As the horse in question was not registered with the American Quarter Horse Association, it was not possible to register the horse under the Australian regulations.
The Appeal
Mr Bull appealed the decision of Justice Hallen on 4 grounds, with the fourth ground requiring leave as it was an argument not raised previously:
In relation to the first 3 grounds of appeal, the Court agreed with the original decision that the horse did not meet registration requirements. In relation to the implied term, the Court held that the implied term was contrary to the express terms in the AQHA constitution and regulations. These both provided that amendments to regulations applied when the resolution was passed, regardless of whether any copy was available for members at that stage. The Court refused leave in relation to the fourth ground of appeal on the basis that the estoppel issue raised factual issues requiring an examination of evidence which Mr Bull failed to adduce at trial.
The Result
The appeal was dismissed with costs.
Take Home Message
When applying to register a horse with a breed association or stud book, you should check the registration requirements for that organisation, which may be contained within the association’s constitution, rules and regulations and other such documents. You should check with that organisation that you are viewing the most up to date version, and whether any amendments are soon to take effect that may impact you.
A new draft code of practice has been issued by Safework NSW entitled ‘Managing Risks when New and Inexperienced Persons Interact with Horses’ (“Draft Code”). You can access the Draft Code here. This is an important document for any individual or business to review which has new or inexperienced people working with or around horses.
The Draft Code is still currently in the consultation process and you can make a submission here, if you wish to comment on the Draft Code and these submissions will be accepted by Safework NSW until 30 June 2016.
What Does the Draft Code do?
The Draft Code is a practical guide for achieving health and safety standards and if approved following the consultation process, it will form an approved code of practice under section 274 of the Work Health and Safety Act 2011 (NSW).
Do I need to follow it?
There are legislative requirements to eliminate and/or manage health and safety risks. The Draft Code will assist you in complying with work health and safety requirements by addressing the particular issues of new and inexperienced people working with and around horses. As all experienced horse people are aware, the inexperienced are at risk. For example, a beginner may be injured by a spooking horse because the beginner stood in front of the horse instead of beside the horse when leading.
The Draft Code provides a guide to the particular risks that exist when inexperienced people handle or ride horses. Reputable businesses and individuals are likely to already abide by much, if not all, of what is detailed in the Draft Code however they should review it to ensure compliance.
The Draft Code applies in New South Wales. If you are in a different jurisdiction, you will need to check your local requirements. If you are unsure, please contact Chamberlains Law Firm and we can assist you to find the legislation that applies to you.
For updates as to the status of the Draft Code, you can click here.
Behavioural Issues
The horse behaved just fine when I tried him, and now he’s bucking me off. Can I return the horse?
As we discussed in Part 1 of Misrepresenting Horses for Sale, it is important to get a pre-purchase examination done when you are considering purchasing a horse. The buyer should also get the horse’s medical history and fitness stage from the seller before purchase, so that the buyer is aware of any past problems or tendencies that do not exist at the time of the pre-purchase examination. This should preferably be recorded in writing from the seller, so that any representations about the horse’s medical history are on record.
It is recommended that both you and your trainer view and try the horse before purchase. You can also ask the owner if he or she would bring the horse to a local competition ground or equestrian centre so that you can view and ride the horse out of its home environment, as this may help to show how the horse behaves in an unfamiliar situation. If the seller will allow it, the buyer may use a trial period to further evaluate the horse’s appropriateness for the buyer.
Despite taking these precautions, some riders find that the horse’s temperament and behaviour changes when they bring the horse home. What can you do then? What if you have sold a horse that seemed a perfect match for its new owner at the inspection, but now the buyer wants to return it?
If the horse shows a sudden change in behaviour, physical causes should be ruled out. A veterinarian should examine the horse to ensure that the behaviour is not caused by pain or injury. For example:
It is also possible that the horse may have been drugged and/or fed excessive calming supplements in preparation for your inspection. Click here to read a recent story out of the UK which resulted in criminal convictions for the sellers, who are currently awaiting sentencing:
The fit and appropriateness of the tack should also be checked. When you purchase a new horse, take note of exactly what the previous owner has been using on the horse in terms of fit, size and type. An ill-fitting saddle or bit, for instance, can cause a normally quiet horse to show behavioural problems or resistance under saddle.
If you are purchasing a horse from a reputable breeder or trainer, he or she may be willing to continue to train the horse and/or give you lessons on your new horse to ensure safety as well as to evaluate whether you are inadvertently causing or permitting the behaviour. If the horse must remain in training for a long period of time, this will likely increase the cost to the buyer of keeping the horse. As a buyer, you may need to consider whether it is indeed the right horse for you.
We recommend that when buying and selling horses, you insist on a properly drafted sale contract regardless of whether you are the buyer or the seller. This contract should address these issues and allow for an agreed way of dealing with a potential return. If you are the seller, you should consider carefully how you wish to handle this scenario. If you sell a horse to a client and it does not work out, there is a risk that you could be found liable if the client gets injured or if the client pursues you for misrepresentation. Stories from unhappy clients also spread throughout the horse community very quickly, especially in these days of social media, so an unhappy client can damage your reputation.
Intellectual Property (IP) Valuations are often necessary when determining the value of a Company’s assets both in contested proceedings and in restructures.
However, sometimes valuers and experts fall into the trap of making errors that can result in a dispute as to the true value of the assets. Based on our experience and the existing case law, we have identified a few common pitfalls for parties to avoid when seeking such valuation:
i. Expertise — if there is a challenge to the validity of a patent requiring technical or scientific expertise, it is vital that the valuation considers such technical expertise.
Valuation of intellectual property does not necessarily require a special expertise to the valuation of a business. This is because value of intellectual property is closely linked to the value of the business in exploiting that intellectual property. However, where the value may depend on whether an invention is patentable or not, technical expertise would be vital.
ii. Failing to consider existing agreements — intellectual property cannot be valued purely on the basis of the value of technology. The value that can be derived from that technology is dependant on any licensing agreements or other agreements placing any restrictions on the manner or the level to which that particular intellectual property can be exploited.
iii. Method of Valuation — Intellectual property valuation experts are generally well-versed in the varying methods that can be employed to provide an appropriate valuation. Often in case of insolvency, liquidation value is where the lowest price that the asset can be sold for is calculated given the distressed situation of a company in liquidation. However, this may not be the appropriate method to use even in case of insolvency, if the value obtained by such method does not reflect a true and fair view of the asset’s worth.
The method valuation should be determined on a case by case with due regard to the purpose of the valuation and the business context in which the intellectual property is utilised. Using the incorrect methodology can be subject to challenge in the event of litigation.
iv. Failing to provide reasons — as in the case of any expert report, an expert report valuing intellectual property must provide reasons for any conclusions reached to withstand any scrutiny. Where conclusions or assumptions made in a report are not backed up by evidence or reasons arising from such evidence, the credibility of such a report can easily be challenged.