Issue 48 - January 2008

• The franchising relationship and the duty of disclosure by the franchisor
• What is a trust?
• Insuring through super
• Forget harmony, settle for peace!
• The Verdict

The franchisor's obligations of disclosure to franchisees  The franchising relationship and the duty of disclosure on the franchisor

Thinking of franchising your existing business or purchasing a franchise?  Are you aware of the government regulations on franchising?

In 1998, the Federal government introduced the Trade Practices (Industry Codes – Franchising) Regulations 1998 (the Code), which is a mandatory code governing the relationship between a franchisor and its franchisees.

Generally speaking, a business system will be classified as a franchise if it contains at least the following characteristics:

an agreement – either oral, written or implied;
an existing system that is controlled by the franchisor;
the business operates under a symbol or trade mark; and
a fee is paid by the franchisee to the franchisor to operate the business, using the system and the mark or symboi.
The franchisee operates its business under agreement from the franchisor.  The franchisee is usually required to pay a fee to the franchisor and in return, the franchisee benefits from the existing brand and standards imposed by the franchisor.  The brand and standards must be maintained by each franchisee to maximise the benefit for the whole franchise chain.

An important requirement of the Code is the requirement for the franchisor to provide a prospective franchisee with a “Disclosure Document”.  There is a standard of disclosure and this standard is set out in the Code.

The purpose of the Disclosure Document is to provide prospective franchisees, and existing franchisees that wish to renew or extend their existing agreement, with information about the business and the franchisor to allow the franchisee to make an informed decision about the franchise and obtain current information regarding the franchised business.

The Disclosure Document must provide information on the business, including:

the franchise territory;
the business experience of the people operating the franchise;
details of other franchisees;
details on marketing and cooperative funds;
details of establishment costs and other fees; and
details on any trade marks and patents that are part of the business.
If you would like further information or advice concerning franchising, please contact Rebecca Flynn or David Nicoll or email rebecca@wmdlaw.com.au or david@wmdlaw.com.au.

Trusts can be very useful for asset protection and estate planning  What is a trust?

A trust exists when the holder (the trustee) of a legal interest in an asset (the trust fund) is bound by an obligation to hold that interest in that asset for the benefit of another person or persons (the beneficiaries) and not for the trustee’s own exclusive benefit.

All transactions in respect of the trust are undertaken by the trustee pursuant to the powers stated in a deed outlining the terms of the trust (the trust deed). If there is no trust deed, then the powers of the trustee are defined by the Trustee Act. These statutory provisions are limited in their powers and it is desirable therefore to have a written trust deed.

The trust is created by the payment by a third party (called the settlor) to the trustee of an amount (usually $10.00 and called the settled sum) which the trustee agrees to hold, together with any other money paid or property transferred to it, in accordance with the trust deed executed by the settlor and the trustee at that time.

The initial trustee can be changed and a new one appointed by a person called the appointor. The appointor can decide who the trustee is from time to time.

There are 2 main types of trust - the unit trust and the discretionary trust. A unit trust is more like a company where the beneficiaries own a specified share in the trust, similar to shares in a company. A discretionary trust is a trust where, generally, the trustee holds the trust fund on behalf of all beneficiaries but with no beneficiary having the right to call for distribution of the income or capital of the trust. In this type of trust, the trustee has the discretion as to whether or not to make a distribution and if so, to who and in what amount.

It is this latter type of trust that is more useful for asset protection as the person at risk of losing their assets has no right to any distribution of the trust fund but only has a right to be considered by the trustee. In addition to asset protection, the other main reasons to establish a discretionary trust are income splitting, limited liability and estate or succession planning.

If you wish to discuss any current or intended trust or business structure, please contact Craig Pryor or email craig@wmdlaw.com.au.

The benefits of personal insurance polices being held by your superannuation fund  Insuring through super

Buying personal insurance through a super fund is a tax-effective way to protect yourself and your family. It may be considerably cheaper than purchasing insurance through a regular insurance company and may enable you to purchase a higher level of cover. A range of tax concessions may also be available to people who insure through super. For example:

Self-employed persons can claim super contributions as a tax deduction;
Employees who are eligible to make salary sacrifice contributions, may be able to buy insurance through a super fund from their pre-tax income;
People who earn 10% or more of their income from carrying on a business and make personal after-tax super contributions may be eligible to receive a Government contribution of up to $1,500 that could be used to cover the cost of insurance.
Legislative changes which commenced from 1 July 2007 have made life insurance policies from your super fund more desirable, especially to people with a spouse or young children, as dependants can now receive unlimited tax-free lump sum payments in the event of the insured's death.

Whilst we are unable to provide financial advice, if you are interested in finding out more information about your personal insurance and superannuation options please contact Craig Pryor or email craig@wmdlaw.com.au and we can refer you to a specialist in this area.

The impact of conflict in the family Forget harmony, settle for peace!

A common mistake when working with high conflict separated parents is to attempt to move them towards getting along and working co-operatively for the wellbeing of their children. It is a worthy goal, but unfortunately often beyond the grasp of people who would prefer to see the other party disappear for a more immediate and permanent solution to end their conflict. The more they are pushed together, the more intense the conflict.

Instead of co-operative parenting, where both are helped to get along, sometimes it is more achievable to try to help them disengage. High conflict parents can be helped to see the futility of lobbing bombs that only serve to keep the conflict alive, which often results in minor ailments, restless nights or inability to concentrate at school for their children. They should be helped to set clear boundaries and rules of engagement.

Some parents will argue that their divergent parenting styles and expectations will confuse the child. This is a reasonable question, but parents need to be reminded that kids adjust to many different expectations and behavioural styles. At school, they learn to interact differently with teachers who have different rules and expectations in each classroom. As one teacher does not tell another how to run his class. The children adjust to the needs of each teacher. Similarly, one parent cannot tell the other how to parent.

To achieve this disengagement, a parenting plan can be constructed that addresses and anticipates as many areas of potential conflict as possible. Clear boundaries should be established as well as the respective areas of authority under given situations. In setting up such plans, the devil is in the detail. Any matter left to chance will likely be the subject of a new round of conflict.

Keeping the parents apart is often the key to success in such high-conflict situations as it is often the parental conflict that is the main cause of poor outcomes for children of divorce. The goal is to limit the opportunity for conflict and not to encourage parents, often keen on each other’s destruction, to get along.

For high-conflict parents, forget about encouraging the parties to live in harmony, but instead encourage them to leave each other alone and live in peace! This will free the children from their conflict to then attend to the more important tasks of childhood.

This article was taken from an article written by Gary Direnfeld, who is a Canadian Social Worker.

For further information or any advice concerning family or defacto law issues please contact Greg Dickson or email greg@wmdlaw.com.au.

Your questions answered The Verdict

In this section, we answer your general questions in relation to any area of law. Obviously, we are not able to provide specific legal advice or advice in relation to a current legal matter. If you have a question you would like us to answer, please submit it by email to rebecca@wmdlaw.com.au.

If I am unable to look after my own financial affairs and can no longer make other decisions for myself, can I authorise someone to do it for me?

Yes, a power of attorney is a legal document by which you can authorise someone (known as your “attorney”) to make financial decisions and sign papers on your behalf. For example, if you are travelling overseas for a lengthy period, you may want to give someone a power of attorney to manage things while you are away.  Often a power of attorney is beneficial for older persons who may be unable to get to the bank or manage their own finances anymore.

It is possible to appoint more than one attorney, and they may exercise their functions as attorney jointly with another attorney or separately. You can have as many attorneys as you wish and a power of attorney can be revoked at any time by signing a revocation of power of attorney and informing your attorney in writing that the power of attorney has been revoked.

An enduring power of attorney is one that will continue to be effective if you suffer incapacity through unsoundness of mind.  An enduring power of attorney must be explained to you and witnessed by a “prescribed person” such as a lawyer.

You do not have to be incapable of managing your own finances, or suffer incapacity, for your attorneys to act on your behalf (although they can be stated to operate on such events occurring). A power of attorney can be made effective immediately, or from the date of acceptance of the attorney or for a specified period of time.

As a separate matter, you can appoint an Enduring Guardian to make personal or lifestyle decisions, for example admission to hospital, decisions on medical treatment etc, on your behalf when you are not capable of doing this for yourself. The appointed enduring guardian cannot be a person who, at the time of the appointment, provides medical treatment or care to you on a professional basis or provides accommodation or support services for daily living on a professional basis or is a relative of one of these.

You can choose which decisions you want your enduring guardian to make.  These are called functions, and you may wish to direct your enduring guardian on how to carry out the functions. Both the functions and specific directions can be contained in the document which your enduring guardian must sign to accept their appointment. Like an enduring power of attorney, an enduring guardian must be explained to both you and your enduring guardian(s) and witnessed by a prescribed person such as a lawyer.

Similarly to the power of attorney, you can appoint more than one enduring guardian and they make act jointly or separately. An enduring guardian is only effective if you are no longer able to make your own medical and lifestyle decisions.

Enduring guardianship ends when you die, if you regain capacity or when you revoke the appointment.  An enduring guardianship appointment is suspended if the Guardianship Tribunal makes a guardianship order.  The Tribunal may also review or revoke the appointment if they feel that your enduring guardian is not making appropriate decisions on your behalf.

If you would like further information or specific advice regarding Powers of Attorney and Guardianship please contact please contact Jayne Humphreys or Melissa Grant or email jayne@wmdlaw.com.au or melissa@wmdlaw.com.au.

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