With an ageing population and mental illness on the rise, a recent Supreme Court case provides a unique insight into how one family resolved the dilemma of administering an incapable family member’s estate to accommodate his needs and the wider needs of his family as a means of avoiding future litigation after the man passed away. The case was unique insofar as it resulted in a 94 year old family patriarch’s estate being distributed before his death and was facilitated by family agreement with the approval of the court.
The case involved a 94 year old patriarch of a family, whose estate was subject to a financial management order (because the man had previously been declared incapable of managing his own affairs) with an estimated worth in excess of $15 million. The man’s family consisted of his de facto partner of over 30 years, a step-daughter and three adult sons by a previous relationship. One of the adult son’s was the appointed financial manager of his father’s estate pursuant to the NSW Trustee and Guardian Act. Prior to his admission to hospital in 2014, the man had lived in his own home with his de facto partner and step-daughter. Following his admission to hospital in 2014, it was clear that the man would not be fit to return home and would need to take up residence in an aged care facility.
The man was asset rich and cash poor. He owned his own home in which his partner and step daughter lived, and an investment property but a decision needed to be made as to what assets would be sold to come up with the funds necessary to meet the man’s ongoing needs. This inevitably led to family tensions. The issues to be resolved were fourfold:
(a) whether one or both of the man’s properties should be sold;
(b) the nature and extent of provision to be made, for the man’s de facto partner and step daughter, out of his estate;
(c) whether the Court could, and should, authorise the making of a statutory Will for the man; and
(d) if so, the terms of any such Will.
With the approval of the court, the man’s home was sold and out of that sale funds were paid to the de facto partner and step daughter to enable them to buy another home, the creation of a court made Will which amongst other things, made provision for the man’s three sons, and the man’s son was confirmed as his financial manager for the remainder of the man’s life.
Although each case turns on its own facts, this case demonstrates how in appropriate circumstances, a court can be empowered to facilitate the administration of estates, before and after death provided that stringent safeguards are adopted so as to ensure primacy is “given to the welfare, interests and benefit of the person in need of protection”.
Whilst this case was in many ways unique it does serve to highlight the need for people to plan ahead in case disaster strikes. At Everingham Solomons, we have the experience and expertise to assist you with all your Estate planning needs because Helping You is Our Business.
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A asked his colleague B (a long term employee and union delegate at their workplace) to be his support person during an investigation process being conducted by their employer. A gave B a copy of a letter A had received from the employer. The letter referred to the confidential nature of the investigation being undertaken. B responded to that letter to the employer on behalf of A and provided a copy of the letter and his response to the union, and to other members of his work group at the workplace.
The employer was not impressed with B, who later acknowledged and apologised for the breach of confidentiality as a support person but said he was not aware of his confidentiality obligations. The employer then issued B with a final written warning.
The union applied to the Fair Work Commission (FWC) on B’s behalf, submitting that the final written warning was harsh and disproportionate in all the circumstances, and should be removed from B’s employment record. The employer said that it had considered summarily dismissing B for serious misconduct but had settled on the lesser disciplinary measure of a final written warning.
The FWC held that:
“Any person in that role of support person should understand an investigation into issues to do with an employee’s work performance or behaviour are private matters between the parties, and the confidentiality of those processes should be respected at all times”.
Nevertheless, the FWC held that the decision to issue B with a final written warning was harsh and warranted review. Relevant factors were:
B’s role as union delegate meant he should know better but also that he had an active role to play for employees in that workplace;
there was little in the letter B circulated that was truly confidential;
B was a long term employee (over 11 years) with a clean disciplinary record;
B did not act intentionally or maliciously to damage the employer.
The FWC ruled that B’s final written warning should be downgraded to a written warning only. The FWC “emphasised that it is to be expected the parties involved in issues to do with individual employee disciplinary processes will respect the confidentiality and privacy of those processes”.
For employers, a lesson is to ensure that, when an employee requests a colleague as a support person, the colleague is clearly informed of the strict confidentiality of the process and then disciplinary measures can result if that confidence is breached. When an external support person is brought in, an employer may wish to request that person sign a brief confidentiality undertaking (even if just to re-emphasise the confidentiality of that process).
At Everingham Solomons, we have the resources and expertise to assist with issues in your workplace because Helping You is Our Business.
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Acting as the Executor of an Estate can be a demanding task, especially if the deceased had complicated business affairs and/or left a complex Will. So can an Executor charge for time and effort spent in administering an Estate? In short: Yes.
There are two basic types of payments an Executor may claim:-
Professional fees for services provided to the Estate by the Executor acting in a professional capacity (i.e. accounting or legal services); and
Commission for the Executor’s “pains and trouble” suffered as a result of acting as Executor of the Estate.
Professional Fees
Many Wills will contain a clause which specifically allows an Executor to charge professional fees for work performed in his or her professional capacity in connection with the Estate.
If such a clause is present, an Executor will be able to recover payment for work performed in a professional capacity, provided that:-
he or she renders the Estate with accounts for work performed; and
the residual beneficiaries of the Estate (i.e. those whose share of the Estate will be diminished by the payment to the Executor) authorise such payment.
If there is no such clause present in the Will, an Executor cannot charge the Estate directly for professional fees. An Executor may, however, seek to have professional services provided to the Estate taken into account in a claim for commission under Section 86 of the Probate and Administration Act 1898 (“the Act”).
Commission
The Act provides that the Court may allow an Executor to be paid commission for “pains and trouble” as is “just and reasonable”.
Some factors the Court will look at when assessing how much (if any) commission to allow an Executor include:-
The time spent by the Executor in performing the duties;
The skill and responsibility displayed by the Executor;
The success which attends the Estate’s administration etc.
An Executor is able to claim commission without going to Court, if the residual beneficiaries unanimously consent to the commission being paid.
If you are an Executor and need guidance, please contact the experienced team at Everingham Solomons because Helping You is Our Business.
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As is well known, the consequences of allowing a statutory demand served on a company to expire can be severe. First of all, under the Corporations Act, a presumption of insolvency arises against that company. Secondly, an application brought by the company after expiry to set aside the statutory demand on the grounds of a genuine dispute as to the relevant debt will be incompetent and is liable to be dismissed. Thirdly, the creditor is then able to proceed with an application to wind up the company.
Problems relating to the expiry of statutory demands or other important notices, such as Director Penalty Notices issued by the Australian Taxation Office, arise frequently when a company’s external registered office (often its accountant’s office) has inadequate procedures in place to: collect mail received at the address it nominates for its clients’ registered offices; record the date that correspondence and notices are received; and then pass the correspondence and notices to clients in a prompt fashion.
A problem of that kind arose In the Matter of Futre Developments Pty Limited [2014] NSWSC 1712. In order to be able to proceed with its application to set aside a statutory demand, Futre Developments had to satisfy the Supreme Court that its registered office had been served with the statutory demand on or after 18 September 2014. In that way, its application filed on 9 October 2014 to set aside the statutory demand would not have expired (being within 21 days after service of the statutory demand). The creditor asserted that service of the statutory demand occurred on 17 September 2014, which was supported by Australia Post’s records.
If the creditor was correct, the application to set aside would have been out of time. Futre Development’s accountant, who maintained the registered office for that company, gave evidence of his usual mail delivery, collection and opening processes. His evidence was that he had opened the envelope containing the statutory demand on 19 September 2014 and that he stamped it as received that day. His evidence was that the earliest it could have been received at his office’s letterbox was 18 September 2014.
Under scrutiny during cross examination, however, the accountant’s system for delivering proper registered office services did not hold up. Some mail came to be delivered to his letterbox and some to his PO Box but it was not clear which occurred in this instance. The accountant could not be sure that he attended the office on 18 September 2014 at all and his calendar did not clear matters up. Thus, the mail collected by him on 19 September 2014 could have been there on 17 September 2014, as asserted by the creditor.
The best evidence available to the Court, therefore, was that the statutory demand had been served on Futre Developments’ registered office maintained by its accountant on 17 September 2014. Futre Developments’ application to set aside the statutory demand was therefore out of time. Its application was dismissed and it had to pay the creditor’s costs. To avoid being wound up by the creditor, it would then have had to pay the amount demanded.
The case is a lesson for companies that maintain an external registered office with their accountant, solicitor or some other person. The procedures in place at the registered office to collect and receipt important correspondence and notices on a daily basis, and then promptly bring those to the attention of clients, must be of the highest order. Companies should enquire about the procedures in place at their registered offices and be satisfied that correspondence and notices sent there are dealt with appropriately. For the accountants, solicitors and others whose premises are nominated as their clients’ registered offices, there is a degree of risk involved in that role but also the opportunity to provide an additional quality service to clients, and to be the first informed when issues arise for clients that require additional advice and assistance.
At Everingham Solomons, our Commercial and Dispute Resolution teams are well equipped to advise you on corporate governance issues and to promptly address problems such as that experienced by Futre Developments when they arise because Helping You is Our Business.
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If you and your spouse or your de-facto partner decide to separate it is imperative that you seek out legal advice in regard to a formal property settlement to not only protect your assets but also to protect yourself from your estranged partner’s liabilities. The Commonwealth Family Law Act 1975 governs the legal aspects of property settlements.
The High Court case of Stanford highlights the principle that a party has no automatic right to division of assets. The overarching consideration therefore is whether it is “just and equitable” to make property orders in the first place.
If it is indeed just and equitable to proceed with a property settlement, parties’ current assets and liabilities are identified and valued and form part of the matrimonial pool. Whether parties have access to any financial resources such as income from family trusts or companies for example, this is also taken into consideration.
Assets will include real property such as residential and rural land, shares in companies and business assets, as well as cars, cash in bank accounts, and superannuation funds. Liabilities might include home mortgages, personal loans, hire/finance arrangements and credit card debts. The assets and liabilities can be held in one party’s name or in joint names, and are all added into the matrimonial pool.
In respect of assets acquired prior to marriage or cohabitation, or in relation to an inheritance or asset gifted to a party late in a marriage or post separation, the court may still take these into consideration when assessing the matrimonial pool of assets.
The courts also understand that parties need to continue paying bills and operating businesses until property settlements are finalised. Nonetheless the court will be critical of parties who attempt to dispose of assets and or recklessly use funds or waste funds for instance to diminish the matrimonial pool of assets.
Ultimately, the court must ensure that the final orders are also “just and equitable”, or in other words, fair and reasonable in light of all the unique circumstances of the matter.
As you can see, a property settlement is essential in order to deal with, and in order to finalise, the legal interests of the parties.
At Everingham Solomons we have the expertise and experience to assist you with property settlements and any other family law matter because Helping You is Our Business.
A Will, as most people know, is a document prepared to express the wishes of a person upon their death, including most frequently, how the deceased’s estate is to be distributed.
The Will is obviously an important document and for this reason, there are a number of formal requirements mandated to the effective execution of a Will.
The NSW Supreme Court holds the power to grant Probate over a Will. A grant of Probate means that a Will has been certified by the court as being an effective expression of the deceased’s intention and that the deceased’s assets can be distributed in accordance with the Will.
Wills are however open to challenge on two main bases.
Firstly, the grant of Probate over a Will can be challenged. This is appropriate where it is asserted that the Will does not reflect the true intention of the deceased. That situation arises if the Will was said to have been executed under duress, through fraud or whilst the deceased was suffering an incapacity.
Secondly, the effect of a Will can be challenged under what has become known as a Family Provisions Claim (hereafter ‘FPC’). A FPC does not affect the grant of Probate and is often made after Probate is granted. It is not a claim against the intention of the deceased but rather a recognition by the law that there is an expectation on people to make adequate provision for their relatives when they pass away.
In FPCs, courts are not really concerned with what appears to be a fair or predictable distribution of an estate, but rather what the claimant needs for the maintenance and advancement of their life. Where a claimant is plagued by illness or disability which increase their need, their claim will be stronger.
For the reasons above, it is important that a Will is well drafted to ensure that it is effective. If you have concerns about the way a Will was drafted or executed, or the way an estate is to distributed, then contact us at Everingham Solomons because Helping You is Our Business.
When couples separate, often one of the parties wishes to move to a new location for a new job, to be closer to their family, or to make a fresh start. Questions arise however when these parties are parents and wish to move away from the other parent.
As a general rule, parents should be open and discuss their relocation plans with the other parent as well as seeking their consent before they move. The 2014 Family Court gave judgment in the case of Adamson which highlighted the legal complexities involved when a parent relocates with children away from the other parent.
The facts of Adamson were as follows: It involved a married couple living in Sydney with a child who was only 12 months of age when the parties separated. There was a domestic violence incident at separation which resulted in the husband receiving a 12 month AVO against him and a conviction for common assault.
As a result of the separation both parties moved from Sydney. The wife at first instance moved 200 kilometers north of Sydney to live with her parents for extra support. The husband later moved in the same direction and resided on the Central Coast. From the date of separation to the date of the hearing the father saw his child approximately once per month for a number of hours on each occasion. The father considered that he maintain a relationship with his child.
An application was filed in the Family Court by the father, for the mother to return the child to live no further than 20 kilometers from him. The father sought an order for the Court to restrict where the mother lived and worked and which would force her to relocate once again, this time to the Central Coast, as the father desired for the father to be able to spend more time with the child.
The Court declined to make an order for the mother to relocate. The court found that the father could continue to maintain a meaningful relationship and spend reasonable time with the child, despite the distance that the parties lived apart. The Court decided that it was not in the child’s best interest to make such a restrictive order on the mother and she was not required to move.
In extreme circumstances, the Family Court has the power to make an adult relocate. The Court must be satisfied it is reasonably practicable, and ultimately in the best interests of the child.
Parents should seek out legal advice as each case differs depending on the facts and circumstances. At Everingham Solomons we have the expertise and experience to assist you with parenting matters and any other family law matter because Helping You is Our Business.
Business people regularly come together as shareholders of a new or existing company to advance a joint venture. Mostly, things go smoothly and the relationship is mutually beneficial. There are times, however, when relationships sour (mostly over money) and the company comes to be dominated by one or two individuals. The less dominant shareholders can find the company’s affairs being run contrary to the interest of the shareholders as a whole or in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against those shareholders. What to do?
The Corporations Act 2001 (Cth) contains provisions that allow shareholders who find themselves in this position, and without other options to resolve matters, to seek a range of orders through the relevant Court. For example, the Court can modify or repeal the company’s constitution. The Court can make orders regulating the company’s affairs. It can order one party to buy out another’s shares. It can restrain a person from engaging in certain conduct and it can require a person to do a certain act. In the worst cases, the Court can order the company to be wound up and a liquidator appointed.
Of course, seeking orders from the Court comes with stress, inconvenience and significant cost. At Everingham Solomons, we prefer our clients to take steps at the outset of their joint venture to talk with their joint venture partners about what will happen if a dispute arises and how such a dispute will be resolved. Dispute resolution mechanisms can be built in to a company’s constitution or a joint venture agreement that take the parties through informal settlement steps, a mediation and/or an arbitration before taking the option of seeking relief from the Court. With the help of a trained mediator and/or arbitrator, this can often see disputes resolved cheaply and efficiently or, if not, a plan developed for the parties to part ways without loss or future acrimony.
We have the expertise at Everingham Solomons to smooth your entry into business and your exit because Helping You is Our Business.
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Section 67A allows a Self-Managed Super Fund (“SMSF”) to borrow to acquire an asset subject to strict conditions such as holding the asset in a separate Holding Trust, using a nonrecourse loan and the SMSF must only purchase a single acquirable asset.
It has long been known and the ATO has confirmed that a related party to a member of a SMSF is entitled to lend to that person’s own super fund. For example you can personally or an associated entity can lend to your own SMSF to acquire an asset.
In 2010 the ATO issued an interpretative decision indicating that a related party could charge less than a market rate of interest on a loan to their SMSF, but could not charge more than a market rate.
For many years super fund advisors have operated on the premise that it is okay to allow related party loans to a SMSF to operate on more favourable terms than might, otherwise, be able to be obtained from a commercial lender. Such things as lower or no interest rate, no repayment requirements and no security.
In December 2014, however, the ATO issued a further interpretative decision indicating that a related party must lend to an SMSF on full commercial terms and they must not be more favourable to the SMSF than would be available in the open market.
The problem is that income earned from an SMSF from a property acquired with borrowed funds from a related party at zero interest or other favourable conditions, could be considered “non-arm’s length” income and consequently subject to tax at the maximum tax rate (47%).
It is therefore suggested that a related party who lends to their SMSF, must charge a commercial interest rate, the loan to valuation ratio must be no less than what a bank would permit, there must be adequate security such as a mortgage and there must be regular repayments and perhaps even personal guarantees.
If you are considering lending to your SMSF or you have already done so, then you need to carefully check your documentation to ensure that they are on commercial terms so that income or gains are not potentially deemed to be non-arm’s length and therefore subject to maximum tax rather than the concessionary rate charged normally on a super fund.
At Everingham Solomons, we have the expertise to assist you in these complex issues because Helping You is Our Business.
It is very common to find restraint on competition clauses in commercial agreements such as employment contracts and business purchase agreements.
There is a very developed body of law in relation to restraint clauses in employment contracts. Essentially they are very difficult to enforce as they are scrutinised very carefully by Courts with the onus being on the employer to prove that they are reasonable and necessary to protect the employer’s legitimate interests. For that reason, employee restraints need to be very carefully and conservatively drafted. Broad probations on the employee trading in competition with the ex-employer are most unlikely to be successful.
In a purchase of business situation however anti-competitive restraints have traditionally been viewed more favourably by the Courts. If a purchaser has paid a large amount of money for the good will of a business, it is often reasonable that the purchaser be protected from future competition by the vendor which might diminish the value of what the purchaser has paid for.
A recent decision of the NSW Supreme Court in the case of “Then There Were Three Pty Ltd v Douglas” is a reminder that even in a purchase of business situation, restraints will be carefully considered with the onus still being upon the party seeking the protection of the restraint to prove that it is reasonable and necessary.
In that case, the vendor and purchaser to a share sale transaction had agreed to a restraint which even contained an express acknowledgement by the vendor that it was reasonable in all the circumstances. The purchase price was payable by instalments over a four year period with those instalments being subject to adjustment depending upon the financial performance of the business after completion and also the retention of a key employee. Ultimately the Court held that these other grounds for adjusting the purchase price made the restraint clause less important to the protection of what the purchaser had paid for and declined to enforce the restraint.
Proper drafting of restraint provisions and enforcement of them when necessary is a matter requiring expert advice.
At Everingham Solomons, we have the expertise to assist you in all issues relating to the drafting and enforcement of commercial contracts becauseHelping You is Our Business.
With an ageing population and mental illness on the rise, a recent Supreme Court case provides a unique insight into how one family resolved the dilemma of administering an incapable family member’s estate to accommodate his needs and the wider needs of his family as a means of avoiding future litigation after the man passed away. The case was unique insofar as it resulted in a 94 year old family patriarch’s estate being distributed before his death and was facilitated by family agreement with the approval of the court.
