Frustrating Contracts

Yes, entering into a Contract can be frustrating but did you know there is a legal doctrine known as “frustration”. This is where a Contract is brought to an end because of a supervening event that is beyond the control of the parties.

For example a Contract between A and B, where B agrees to hire a local hall on a particular night may be frustrated as a result of a wind storm that removed the roof from the hall. Hence despite the best efforts of A and B, the Contract cannot be performed and is deemed to be “frustrated”.

The doctrine of frustration only applies in a limited range of circumstances where the event renders performance of the Contract something fundamentally different from that anticipated by the parties. The Courts are unlikely to be sympathetic if the event could have been anticipated and therefore provided for by the parties in the terms of their Contract.

If a Contract is found to be frustrated, it is automatically terminated and all future obligations of the parties to the Contract are discharged.

Examples of where frustration is likely to bring a Contract to and end are where:

  • The subject matter of a contract is destroyed
  • There is an excessive delay in performance due to unforeseen circumstances
  • A party to the Contract dies or is incapacitated
  • The expected method of performance becomes impossible due to unforeseen circumstances
  • There is a natural disaster or terrorist attack.

There is no legislative test to determine whether a Contract has been frustrated, however a Court will consider factors such as whether the event in question was foreseeable and whether obligations under the contract have become impossible to perform.

Some Contracts do contain terms to deal with a frustrating event.

A Contract will not be found to be frustrated and at an end where a party simply faces loss or inconvenience or the event in question could have been reasonably foreseen.

If you have questions or requirements regarding Contract Law, we can at Everingham Solomons assist you, because Helping You is Our Business.

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Do you know the location of your Trust Deed?

A recent decision of the Victorian Supreme Court has confirmed that the consequences for a Trustee are potentially disastrous if the Trust Deed is mislaid and cannot be located.

A Trustee of a Trust has a duty to keep proper accounts and records of the Trust. This includes all documents which detail the terms of the Trust, including the initial Deed as well as subsequent variations and amendments.

Technology has simplified this process however where Trust Deeds have been set up decades ago before the advent of email and scanning, clients often find themselves searching for copies of old Trust Deeds.

Without a Trust Deed, the Trust may be deemed, void for uncertainty.

In Mantovani v Vanta P/L, it was common ground that the Deed to the Family Trust had been lost. The only document that could be located was a schedule page indicating the date of the Deed, the name of the Trust, the Settlor, the Settled Sum, the Appointor and Beneficiaries.

The Trust held several properties, one of which had been lived in by Giovanni for several decades. Giovanni was not a Director of the Trustee and was not named as a beneficiary of the Trust.

The trustee and the named beneficiaries wish to sell that property. Giovanni bought the matter to the Supreme Court seeking a Declaration that the Trust had failed for uncertainty.

There was no evidence to clarify the contents and terms of the Deed or the nature of the Trust. Was it a Fixed or Discretionary Trust? What was the basis for making trust distributions and what was the vesting procedure?

The Court observed that the Trust had been administered by the Trustee without any knowledge of its terms and such guesswork amounted to a breach of Trust by the trustee.

Further the loss of the Trust Deed rendered the Trustee incapable of determining how it could act in the future, meaning there was no basis upon which the Trust could continue to operate.

Therefore, the Court held that the Trust failed for uncertainty.

Record keeping for Trustees of privately managed trusts, such as Discretionary Trusts, Self Managed Superannuation Funds and Unit Trusts are therefore critical.

If you need assistance with respect to creating, amending, locating or advice regarding your Trust, contact us at Everingham Solomons because Helping You is Our Business.

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Head-to-Head: Solicitors v Conveyancers

Headshot of Terry Robinson - Accredited Specialist and General Counsel at Everingham Solomons TamworthIt’s the age-old question, who do you get to act for you in a property transaction?

Can you use a Conveyancer or do you need a Solicitor?

If you are dealing with a simple transaction, then the short answer is you can use either.

Licensed Conveyancers are professionals who are registered with NSW Fair Trading and have a formal qualification relevant to this area of practice.
Solicitors are professionals who must have formal qualifications (minimum of a Law Degree and Graduate Diploma) and hold a current practicing certificate with the NSW Law Society. They must also hold significant professional indemnity insurance.

Can they both do the job for you? Absolutely.

However, there are many benefits of engaging a firm to act for you who has access to both Conveyancers and Solicitors.

Simply put, if you retain a legal firm, you will get an all-in-one service. If the matter goes wrong or you need to take legal action, you won’t have to take your matter to a legal firm. This will save you from having to go through the additional cost and process of instructing another person, this time a Solicitor, and providing all of the details of your case.

Solicitors will know your legal rights as well as the Court process, have the skills to negotiate (with a view to settling a dispute) and they can represent you if the matter proceeds to Court.

Solicitors will also be able to assist with many other things that usually go hand in hand with property transactions like providing advice on the purchasing entity. Should I use a company or trust? Is the transaction subject to GST or is there an exemption? Is capital gains tax payable and are there any concessions? They can also provide advice on loan and mortgage documents, tax implications, leasing issues and estate planning. Do you need to change your Will and/or power of attorney in light of your property transaction? Unfortunately, Conveyancers are very limited in what advice and services that they can give to you.

Everingham Solomons has both Licensed Conveyancers and Solicitors on our team, so you get the best of best worlds, because Helping You is Our Business.

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Mandatory Disease Testing Act 2021

Headshot of Terry Robinson - Accredited Specialist and General Counsel at Everingham Solomons TamworthIn recent legal news, the Mandatory Disease Testing Act (NSW) 2021 is now in force.

The new Legislation will allow heath, emergency services and public sector workers to request that a Mandatory Disease Test be conducted on a person who’s bodily fluids come in contact with the worker, while performing their duties, arising out of a deliberate act that causes the worker to be at risk of contracting a disease.

Essentially if a worker meets the above criteria, they will be required to meet with a medical practitioner within 24 hours (or as soon as reasonably practical, but no later than 72 hours after contact) to discuss their contact with another person’s bodily fluids.

Once this has occurred a senior officer can either make the mandatory order against the perpetrator of the fluid event or if that person is a vulnerable person, make an application to the Courts to make an order, requiring the perpetrator to submit to mandatory testing. The senior officer or the Court can also refuse to make the order if they feel that an order is not justified or if the third party will not voluntarily submit for disease testing.

It is an offence to fail to comply with a mandatory disease test order and also if you are a worker who provides false or misleading information to a senior officer. The penalty for both of these offences is a maximum of $1,100.00 or 12 months imprisonment or both.

The Solicitors at Everingham Solomons, keep up to date with all the latest legal news, so that you don’t have to, because Helping You is Our Business.

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When there is a Will, there is a way

Headshot of Terry Robinson - Accredited Specialist and General Counsel at Everingham Solomons TamworthBut what if there isn’t a Will?  Well… there still is a way, but it does become a bit trickier and more involved process for the relatives of the deceased person.

If a person dies without making a Will or if they make a Will, but it fails to dispose of all assets properly or there is no beneficiaries who have survived the testator, then that person is deemed to have died intestate.

The Succession Act 2006 (NSW) deals with intestacy and outlines the general rules for who will benefit from a person’s estate if they die intestate.

So who gets your things if you die without a Will?

That really depends on your situation. Generally speaking, if you have a spouse, they will be entitled to your estate. The exceptions are if you have more than one spouse or you have children from a previous relationship.

If you have more than one spouse, your spouses are entitled to equal distribution of your estate.

If you have children from a previous relationship, then your spouse will be entitled to your personal effects, a gift of $350,000.00 (adjusted by CPI) and half of the rest and residue of the estate. Your children will be entitled to the balance of the rest and residue to be shared between them equally.

If you do not have a spouse, the general order for entitlement is as follows:

  1. Your children (but where a child has died and left children, their share will go to your grandchildren); and if none
  2. Your parents; and if none
  3. Your siblings (but where a sibling died and left children, their share will go to your nieces and nephews); and if none
  4. Your grandparents; and if none
  5. Your aunts and uncles; and if none
  6. Your first cousins; and if none
  7. The NSW Government.

If there is more than one beneficiary, then the share will be divided equally between them.

It is a common misconception that if you die without a Will, then the Government will receive all your assets. As you can see this is only true if the person who died had no immediate relatives that survived them.

Overall, it is much simpler for your relatives if you make a Will before you die because the process to administer an Estate of a person who died intestate is more complex and costly as the deceased did not give any person the authority to administer the Estate. This means that a grant of Letters of Administration must be sought so that there is someone with the authority to do the things necessary. More importantly, without a Will, your assets may not go to the people you wish to benefit.

If you would like to make a Will or have any questions about making a Will, please contact Everingham Solomons because Helping You is Our Business.

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Can I buy land in my name or nominee?

Headshot of Terry Robinson - Accredited Specialist and General Counsel at Everingham Solomons TamworthThis is an often asked question by Purchasers and Real Estate Agents. Typically, someone will have bought a property at auction in their own name or for an off the plan development and then decide they want to buy the property in the name of their spouse or some other entity like their Superannuation Fund.

The decision to change names often happens after the purchaser has discussed the purchase with their accountant and/or solicitor and considered things like asset planning, funding and asset protection.

Most people seem to think they can simply change the “purchaser’s name” on the contract by inserting the words “or nominee” on the contract.

That process in most cases will not work and will result in you paying double Stamp Duty.

In New South Wales the name on the Contract needs to be the same name on the Transfer. On a $1 million purchase price the Stamp Duty payable is over $40,000.00.

If the purchaser on the Transfer document is different from the Contract, then the Transfer will be treated as a sub-sale, resulting in a second or additional Stamp Duty amount of over $40,000.00 being payable, (total of $80k plus).

There is a limited exemption set out in the Duties Act that allows the ultimate purchaser to be a different person from the purchaser in the Contract, so long as they are “related persons” as defined.

A related person includes a spouse, parent and child. It can also be a private company where the person is a director or majority shareholder of that company. It can also be a Trust where the natural person is a beneficiary of the Trust. There is a catch. For that section of the Duties Act to apply, the ultimate purchaser must have been in existence when the Contract was entered into. You cannot form the Company or Trust after the date of the first Contract.

If the “related person” exemption is not available, then your only real alternative is to persuade the seller to rescind the original Contract by agreement and enter into a new Contract.

There is no obligation on the seller to do this and if they do, undoubtedly you will end up paying the sellers legal costs of the rescission of the initial Contract and the preparation and exchange of the new Contract.

The best option is to seek appropriate advice as to the purchasing entity, prior to buying and entering into the Contract in the correct name from the beginning.

Our property team at Everingham Solomons can assist you with all your property related matters, because Helping You is Our Business.

Injury Sustained on a Public Area – Is the Public Authority Liable?

Headshot of Terry Robinson - Accredited Specialist and General Counsel at Everingham Solomons TamworthA recent matter in the District Court of NSW considered a claim of negligence brought against a Council.

The claimant was a high school student participating in a touch football competition on a sports field maintained and owned by the Council.

During the game, the claimant fell to the ground alleging her foot got stuck in a hole in the playing surface of the field causing her injury to her knee.

To succeed in her claim, the claimant needed to prove on a balance of probabilities, that there was a hole in the playing surface of the field that caused her to sustain her injury.

The claimant admitted that she did not see any hole in the ground and ultimately was unable to establish that she fell into one.

The Council was also able to show evidence that groups such as touch football associations were issued permits to allow them to play on sports fields on the condition that the sporting entity had to inspect the playing field and surrounding areas prior to play for hazards and defects (such as holes) and any identified risks needed to be fixed before play and reported to the Council.

There was no evidence presented of any reports or defects in the playing surfaces from the touch football association or other sporting bodies who had recently used the sporting field.
Further the sporting Association gave evidence that their usual practice was to inspect the playing fields for risks prior to play and this was supported by a completed checklist which did not identify the hole in the surface of the field.

Additionally, Council had a system of maintenance of the park where the fields were regular inspected by a number of workers and no reports had been lodged of any defects in the playing surface.

The case highlights the importance of bodies having the control or ownership of public areas, having risk management procedures integrated into the day-to-day operation and management of public places such as sports fields, parks etc, to enable the early reporting, identification and elimination of risks on public land.

It also highlights that a claimant should have sufficient evidence and documentation to prove negligence and to prove their case as otherwise it could be an expensive gamble.
At Everingham Solomons Solicitors, we have the legal expertise to advise you regarding all of your legal matters, because Helping You is Our Business.

Council has a sewer/water main on my property but no easement?

We are often asked whether a local council requires an easement for its water and sewer pipes to remain on a person’s private land and further whether council is entitled to enter upon the private land to carry out repairs and works on that infrastructure.

The Local Government Act provides the answer in respect of storm water works, sewer and water supply works.

Section 59A of the Local Government Act provides that Council is the owner of all works of water supply, sewerage and storm water drainage installed in or on land by the council, whether or not the land is owned by council.

This means that even where council’s infrastructure is located on private land, the works themselves, if installed by council, belong to council.

The works may be considered to have been installed by council even if a developer partly funded the installation and also applies to council infrastructure that was installed prior to Section 59A being legislated.

The Section of the Local Government Act, goes on to allow the council to operate, repair, replace, maintain, remove, extend, expand, connect, disconnect, improve or do any other thing to those works to ensure their efficient operation for the purpose for which they were installed.

This enables the council to both use the works for the purpose they were installed for example, to drain storm water, water supply and sewerage and also to maintain and extend or replace the works.

In effect the section means that council owns the infrastructure works despite the fact that there is no easement or other interest registered on the certificate of title of a private person’s land and allow the council to operate, repair, replace and maintain the works and no easement is required.

It is, however, normal for council with respect to new subdivisions to require easements to be registered on the title of land being created for essential services such as water, sewerage and storm water.

The result is that a landowner cannot require council to remove any such works or prevent council from exercising those powers.

If you have any property enquiries or need assistance in a property related transaction, contact us at Everingham Solomons, because Helping You is Our Business.

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Is the sale of farmland GST free?

The answer is sometimes.

Where a farming enterprise has been carried on a rural property, for a minimum of 5 years and where the purchaser intends to carry on a farming operation, then generally the sale will be exempt from payment of GST.

A recent matter highlighted the importance of ensuring that each transaction is examined on its facts and generalisations such as the above rule, are not adopted on a wholesale basis.

The facts: The sellers had operated a farming enterprise (sheep) on their property for many years. They had agreed to sell 15 acres from their rural property to a Purchaser.

The purchaser indicated that he intended to run sheep on the property and has been advised that the GST farmland exemption will apply. That is, no GST is payable in addition to the purchase price.

At first glance this looks to be a reasonable proposition, as the seller has run a farming business for more than five years and the purchaser wishes to run sheep on the property.

The real issue to enable you to determine whether the GST exemption will apply to this sale, is whether the purchaser intends to carry on the business of primary production being the carrying on of a business of maintaining animals for the purpose of selling them for their bodily produce and natural increase.

The issue is whether the running a few sheep on a small block of land amounts to the purchaser “Carrying on a business”.

Factors which the Courts have indicated are relevant in indicating whether a primary production business is being carried on include:

a. Does the activity have a significant commercial purpose or character;
b. Does the taxpayer have more than just an intention to engage in business;
c. Is there repetition and regularity of the activity;
d. Whether the activity is similar to other businesses carried on in that line of business;
e. Is the activity planned, organised and carried on in a businesslike manner;
f. Is the activity directed at making a profit;
g. What is the size scale and permanency of the activity; and
h. Is the activity better described as a hobby, form of recreational or sporting activity?

In the above factual scenario, the running of a few sheep is unlikely to satisfy the commerciality test of “carrying on a business” and accordingly the sale would not be GST free for the sale of farm land.

At Everingham Solomons we have the expertise to advise you on all of your property needs because Helping You is Our Business.

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Beware! Family trusts to be charged surcharge land tax and stamp duty.

The State Revenue Legislation Further Amendment Act of 2020 has received Royal Assent.

In short, the Act indicates that any discretionary trust or family trust or testamentary trust that owns or will purchase residential property, may be subject to surcharge land tax and surcharge stamp duty.

This means that if a discretionary/family/testamentary trust is purchasing residential property, it will be charged an additional 8% of the market value of a property by way of surcharge stamp duty.

In addition, surcharge land tax over and above the standard rate, is increased by 2% on the unimproved value of the land.

Land tax is particularly nasty as it is levied each year on the 31 December.

Further there is no threshold amount when a trust is involved and land tax is payable on the entire unimproved value of the land annually.

If you have a discretionary/family/testamentary trust, it is more than likely you will receive a letter from Revenue New South Wales indicating that a trustee of a discretionary trust/family trust is deemed to be a foreign person and potentially subject to such additional surcharge taxes.

There is, however, a way to avoid the surcharge.

This involves reviewing the terms of the Trust Deed and if appropriate, amending the trust deed (provided it has an amendment power) to exclude current and future foreign person beneficiaries and ensuring that such amendments to the trust deed are irrevocable.

If you wish to take advantage of that opportunity however, you must make the amendment prior to the 31 December 2020.

If you do not make that change to your trust deed, your trust will not be able to avoid the surcharge duties and taxes.

Revenue New South Wales are regularly requesting copies of trust deeds to check whether those amendments have been made.

If you have a discretionary/family/testamentary trust and own or intend to own residential property, you need to get urgent legal advice.

At Everingham Solomons we have the expertise to assist you because Helping You is Our Business.

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