Issue 31 - August 2006

• Asset protection - trust assets may be open for the taking
• Changes to Occupational Health & Safety Laws
• The powers inherent in powers of attorney
• Access prior to settlement
• Cost Orders in family law proceedings
• Miranda Chamber of Commerce 
   

So you thought your trust assets were safe? Think again Asset protection - trust assets may be open for the taking

A recent decision of the Federal Court of Australia has challenged the notion that trusts are "safe" structures, potentially opening the door to a multitude of claims from unsatisfied unsecured creditors.

On 29 June 2006 in Australian Securities & Investments Commission, RE: Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey, Justice French was faced with the question of whether property of a person could include property held by a third party as trustee for any trust in which that person was a beneficiary.

Justice French answered the question in the affirmative, where the person controls the trust, stating:

"... [T]he beneficiary who effectively controls the trustee's power of selection [of who to distribute to] because he is the trustee or one of them and/or has the power to appoint a new trustee has something approaching ... ownership of the trust property."

The Court found that, where the trust is really the "alter ego" of or under the effective control of a person (either personally or though a corporate entity he or she controls), property of the trust is able to be treated as property of that person for the purpose of a receiver appointed under section 1323 of the Corporations Act 2001 exercising control over it.

In this case, Mr Beck was a beneficiary of a discretionary trust which had a corporate trustee. Mr Beck was the director and secretary of that trustee company. Mr Beck was also the original appointor under the deed establishing the trust and his wife was the current appointor. Pursuant to the trust deed, the trustee had a wide discretion including the power to prefer one or other beneficiary to the total exclusion of another beneficiary. Mr Beck was found by the Court to have, through his trustee company, the effective control of the assets of the trust such that his interest in that company would appear to amount to effective ownership of the trust property.

Given that this judgment has turned the usual principals of asset protection on its head, where a discretionary trust has been established as an asset protection measure (and not simply as a means to allocate income), the person whose assets are seeking to be protected should not be:

A trustee;
An officeholder or shareholder of the trustee, in the case of a corporate trustee; or
An appointor of the trust.
Due to the far reaching consequences of this decision, we would recommend a complete review of all family trust/discretionary trust structures.

For further information regarding discretionary trusts, asset protection or any trust related matter, please contact Craig Pryor or email craig@wmdlaw.com.au
 

Redefining the scope of OH&S Changes to Occupational Health & Safety Laws

The NSW Government has recently released a draft Occupational Health and Safety Amendment Bill which would significantly effect the duties and rights of both employers and employees.

Key components of the Bill include replacing existing directors' and managers' duties with a new duty for "officers of corporations". The proposed legislation also requires employees to take responsibility for their own health and safety at work in addition to the safety of others.

How this will affect the nature of claims relating to injuries suffered at work is uncertain.

Additional changes include:
Allowing entry to authorised employee representatives to discuss health and safety matters, conditional upon 24 hours written notice being provided; and

Enabling employers to enter into enforceable undertakings with WorkCover, as opposed to being prosecuted.
If the proposed changes are accepted by parliament, it is expected the amendments to the Occupational Health and Safety Act will take effect as of October this year. We will keep you informed of the progress of the amendments.

If you have any questions regarding OH&S issues, please contact Dean Groundwater or Kevin Dwyer or email dean@wmdlaw.com.au or kevin@wmdlaw.com.au.

Do you trust your attorney? The powers inherent in Powers of Attorney

Powers of attorney are extremely important documents which have the ability to provide peace of mind to the principal. However, considerable problems can arise if the principal appoints the wrong person. It is important to remember that a duly appointed attorney has significant powers in relation to the principal's property.

Unless otherwise expressly limited in the Power of Attorney, an attorney has the right to deal with the principal's property in any way in which the attorney sees fit, provided that it is in the interests of the principal (or not against the principal's express wishes ensuring that he or she is of sound mind). Simply, this means that the attorney can do anything that the principal can ordinarily do. This may include:

Withdrawing money from bank accounts;

Entering into or altering financial investments; and

Buying or selling property.
Accordingly, it is important that a principal has complete trust in their appointed attorney.

It is possible to limit the powers granted to an attorney. If you would like to review your existing Power of Attorney or would like to discuss your personal circumstances, in particular whether you need a Power of Attorney, need to limit the powers you have granted to your attorney or need to revoke such an appointment, please contact Jayne Humphreys or email jayne@wmdlaw.com.au or Joel Hiscox or email joel@wmdlaw.com.au.

Beware of pitfalls of giving access to a property prior to settlement Access prior to settlement

Many purchasers, following an exchange of contracts and prior to settlement, ask the vendor for access to the property for various reasons. These may include:
to have tradespeople provide quotes;

to have surveys carried out;

to paint;

to carry out renovations; or

to undertake further inspections.
Is the vendor obliged to grant access?

The standard terms of the contract state that a vendor must grant access for the purpose of carrying out a final inspection prior to settlement. However, in all other circumstances the vendor is not obliged to grant access.

Is there any risk in granting access other than for a final inspection?

When granting access to a property there is always risk. This risk may relate to:
damage to the property;

injury to person (this includes the purchaser or any tradesperson the purchaser invites to attend at the property);

renovations not being completed and the purchaser not completing the contract; and

damage to or theft of the vendor's belongings.
The above list is by no means exhaustive and the range of problems which may arise can be considerable.

How can the risk be minimised?

The risk can be minimised by the terms pursuant to which access is granted. Therefore a vendor should not readily agree to grant access to a purchaser without first obtaining proper legal advice.

If you wish to know about minimising the risks in granting access to the purchaser prior to settlement, please telephone Gina Haramis or email gina@wmdlaw.com.au.

Who says no-one wins in family law? Cost Orders in family law proceedings

Unlike many jurisdictions where the costs of proceedings are ordered to be paid by the part party who loses a case, the costs in family law proceedings are met by each party to the proceedings unless the Court is of the opinion that there are circumstances that justify an order for costs being made. In determining this matter the Court considers a range of factors including the financial circumstances of the parties, the conduct of the parties in the proceedings including whether there has been any non-disclosure or failure to comply with a court order, whether any party to the proceedings has been wholly unsuccessful and whether either party has made any written offers to settle the proceedings and the terms of such offer.

Recently we were involved in proceedings where our client sought to have transferred to her the former matrimonial home along with a lump sum amount of cash to pay for her living expenses for the remainder of her life. The husband in the proceedings refused to provide any cash component arguing that the value of the house was sufficient to meet our client's entitlements.

In the final hearing of the matter we were successful in obtaining for our client an amount greater than the initial offer which was made to settle proceedings. In doing so our client was then able to make an application for an order that her costs of the proceedings be paid by the husband as they would not have been incurred had he agreed to our client's settlement offer at the time it was made.

Our client succeeded in obtaining an order that the husband pay the wife's costs not only of the proceedings but also for the costs application and hearing as to costs. The message borne out by this case to all family law litigants is to make an assessment of your entitlement early in proceedings and formalise an offer of settlement which can then be relied upon as to the question of costs. Similarly, all offers to settle proceedings made by the other side must be treated seriously as they may sound in a costs order if a suitable offer is rejected.

For advice upon family law property entitlements, please telephone Greg Dickson or email greg@wmdlaw.com.au or Kevin Dwyer or email kevin@wmdlaw.com.au.

Warren McKeon Dickson's initiative to promote local business Miranda Chamber of Commerce

Warren McKeon Dickson, in conjunction with IMB, Tony Graham Real Estate and KPR Partners Chartered Accountants, are currently involved in the establishment of a local Chamber of Commerce centred in Miranda.

Membership of a Chamber of Commerce provides the opportunity to join forces with new business partners and to build relationships with other local businesses, to develop and expand your client base and to learn from others in similar industries.

There are many advantages of participating in a Chamber of Commerce including:
Regular seminars with invitations to guest speakers to provide accurate and up to date information relevant to the running of your business;

Participation in members' functions to extend networking opportunities and to strengthen local bonds;

Publication of members' interests through business newsletters and local publications;

Marketing and advertising opportunities;

The identification and promotion of short and long term business opportunities; and

Representation and access to the Government and local authorities using the Chamber's voice. The size of membership provides credibility to respond to issues of importance to local businesses and the community generally.
We are currently seeking expressions of interest from local business owners and we will be holding a meeting of interested business owners at our office on Wednesday, 24 August 2006 at 12:30pm.

For more information and to reserve your place at this meeting, please telephone Greg Dickson or email greg@wmdlaw.com.au.

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