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  • blockchain and cryptocurrency - bitcoin

    Business Breakfast Club May Summary: Blockchain and Cryptocurrency

    This month at Business Breakfast Club, Shaneel Parikh and Harry Hoang of Tailored Accounts, discussed blockchain and distributed ledger technology. Whilst Bitcoin and cryptocurrency has certainly created much hype and challenged the legal and financial landscape, Blockchain is much bigger than Bitcoin. It has the potential to revolutionise multiple industries as well as alter our social and economic infrastructure.

    Some of the topics covered:

    What is Blockchain Technology?

    Blockchain is a continuously growing list of records or transactions which are linked and secured in blocks using cryptography. These blocks subsequently reside within the ledger amongst all users. Important to an understanding of blockchain is a consideration of what distributed ledger technology is as whilst every blockchain is a distributed ledger, not every distributed ledger, is a blockchain.

    What is Distributed Ledger Technology

    A distributed ledger is a database of transactions (or data) that is shared across a network of participants. It is “distributed” because the record is held by each of the users of the network, and when a record is added, each user’s copy is updated with new information both instantaneously and simultaneously.

    What types of Blockchain Systems Exist and What are their Governance Structures?

    In practice, there are two key types of “Blockchain” systems that exist: permissioned or private blockchain and unpermissioned or public blockchain systems. Whilst the courts are yet to consider the legal structure of either system, it is important to consider how the courts could analyse such structures and in particular, which players in such systems the court may ultimately deem liable if something goes wrong.

    Benefits of Blockchain

    • each record is near real time and therefore provides an accurate and time-stamped record of a transaction;
    • public blockchain systems are widely accessible to any individual with a computer;
    • it uses DLT, each network node verifies the transaction and holds an updated copy therefore providing an immutable record ;
    • it is censorship resistant meaning that once it a transaction is made and paid for, it cannot be subject to third party intervention; and
    • each transaction is irreversible.

    Data Protection

    With the recent changes to the Privacy Act, there are certain considerations for Privacy with blockchains. For the owners of private blockchain systems, there are concerns regarding assumption of responsibility for an eligible mandatory data breach that occurs on the private blockchain system. If you operate private blockchains and provide ‘administrator’ access to a third-party contractor for example, and that third-party contractor unlawfully discloses information, irrespective of whether you played any part in the disclosure, there is a strong chance that you will be held jointly-liable for the privacy breach as ultimately you control the system and the information within.

    For more information, please contact Shaneel Parikh. The next Business Breakfast Club will take place on June 8 – if you would like to attend, please contact us.

    A copy of the slides is available here.

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  • The protection of Financial Agreements after death

    The protection of Financial Agreements after death

    Financial agreements are an increasingly common part of 21st century relationships. Financial Agreements may be made by those contemplating marriage (commonly referred to as a Prenuptial Agreement or “pre-nup”) or made during the marriage or made following separation to divide property.

    These agreements are a private determination of the parties’ rights and obligations. The terms of the Agreements deal with the couple’s assets during the relationship, at the end of the relationship and can even have an impact on the death of one of the parties.

    It is commonly held that a will-maker has a freedom of testation to determine how they would like their assets to be distributed upon their death. However, certain people who meet legislative requirements such as a spouse or former spouse who are not provided for to their satisfaction in a will may be entitled to make a Family Provision application for an order that they receive a greater share of an estate.

    When a Court determines a Family Provision application it will take into account a myriad of considerations. A Court will consider whether a Financial Agreement has been signed between the applicant and the deceased person.

    The general view taken by the High Court is that rights given by Family Provision are inalienable and it is contrary to public policy to hold a person disentitled to relief merely because they entered into an agreement with the deceased person.[1] Courts in most states have also held that you cannot contract out of making a Family Provision application by signing a Financial Agreement.[2]

    In some cases a Financial Agreement can be relevant to a Family Provision application as it explains the totality of a relationship and shows that a person may not expect to receive anything more from their partner’s estate than what the deceased decided to leave them.[3] However, a Family Provision application will still be available to someone even if there is a Financial Agreement but the Agreement can be used as evidence of the nature of the relationship.

    New South Wales is the only jurisdiction in Australia that gives parties the ability to “contract out” of their rights to make a Family Provision application.[4] This is usually done with a release of rights clause in a Financial Agreement. However, the release must be approved by the Court to be valid.[5] The Court may approve the release before the deceased’s death in a Family Law property settlement or after the deceased’s death as part of the settlement of a family provision claim.

    The release will not be approved by the Court merely because both parties consented to it. The Court will consider whether the release was to the releasing person’s financial advantage or otherwise, whether the provisions of the release were fair and reasonable at the time, and whether independent legal advice was taken and considered.[6]

    In Colosi v Colosi,[7] a release clause in a Financial Agreement was not approved by the Court as the judge held that a clause warranting that legal advice was sought is valueless where the other party must have known the warranty to be untrue.

    Similarly, in Neil v Jacovou,[8] the Court did not approve a release clause as it found that the independent legal advice sought by the widow was not proper and her entitlement was not fair and reasonable as the release of the rights was not for the widow’s benefit.

    Therefore, in all States and Territories, when preparing a Financial Agreement with your partner or former partner, you must also have considerations as to how the document affects your estate plan. Signing a Financial Agreement is not always enough to ensure the intended division of assets after death or prevent a claim. Making your intentions clear and ensuring that both parties have sought appropriate independent legal advice is integral to protecting your interests.

    Written by David Toole and Laura Godfrey. If you would like advice on Estate Planning, please contact us

    [1] Lieberman v Morris (1944) 69 CLR 69.

    [2] Kozak v Matthews [2007] QCA 296.

    [3] Hills v Chalk & Ors [2008] QCA 159; Kozak v Matthews [2007] QCA 296.

    [4] Succession Act 2006 (NSW) s 95.

    [5] Succession Act 2006 (NSW) s 95(1).

    [6] Succession Act 2006 (NSW) s 95(4).

    [7] Colosi v Colosi [2013] NSWSC 1892

    [8] Neil v Jacovou [2011] NSWSC 87.

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  • Estates Update - The 2018 Budget, Testamentary Trusts and Elder Abuse

    Estates Update - The 2018 Budget, Testamentary Trusts and Elder Abuse

    The 2018 Federal Budget was handed down by Treasurer Scott Morrison at 7.30pm on Tuesday 8 May 2018.

    Of particular interest to those in the Estate and Elder Law “space” was the Government’s clarification on the taxation of income derived within a Testamentary Trust and the Government’s $22 million funding to protect the ageing population from elder abuse.

    Testamentary Trusts

    The Federal Government has stated that from 1 July 2019, the concessional tax rates available for minors receiving income from Testamentary Trusts will be limited to income derived from assets that are transferred from the deceased estate or the proceeds of the disposal or investment of those assets.

    Currently, income received by minors from Testamentary Trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors.

    This measure clarifies that minors will be taxed at adult marginal tax rates only in respect of income a Testamentary Trust generates from assets of the deceased estate (or the proceeds of the disposal or investment of these assets).

    (Source – Budget Measures 2018-2019 – Part 1 Page 44)

    In other words, if a Testamentary Trust is “topped up” or injected with new assets that have not derived from a deceased estate, the concessional treatment will not apply.

    Does this measure change anything?

    The short answer is “no” – we believe this has always been the case.

    Section 6AA of the Income Tax Assessment Act 1936 applies penalty tax rates to unearned income of a minor except where the income is considered “Excepted Trust Income”.

    Section 102AG (2) of the Income Tax Assessment Act 1936 defines “Excepted Trust Income” to include (among other things) amounts which:

    • Is assessable income of a trust estate that resulted from:
    • a Will, codicil or an Order of a Court that varied or modified the provisions of a Will or codicil or
    • an intestacy or an Order of a Court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate.

    So in other words, income of a minor which derived from a deceased estate does not attract penalty tax rates but instead, is taxed at adult progressive tax rates. This is precisely one of the major reasons why Testamentary Trusts are (and continue to be) a major tax planning tool for families when drafting their Wills.

    The Budget measure simply serves to clarify and remind us that assets injected into a Testamentary Trust that have not been derived from the deceased estate will not receive the concessional tax treatment with regard to minors.

    This measure does not mean that assets which have not derived from the deceased estate cannot (or should not) be injected into a Testamentary Trust that has already been established. Assets held within a Testamentary Trust structure (provided it is drafted carefully and correctly) can be significantly safeguarded when it comes to Family Law separation or bankruptcy.

    Of course, specialist advice should always be obtained if assets are subsequently injected into a Testamentary Trust for the sole purpose of defeating a Family Law or creditors claim.

    Elder Abuse

    The 2018 Budget has also announced a $22 million commitment to protect the ageing population from elder abuse. The Government has committed to the creation of an Elder Abuse Knowledge Hub, a National Prevalence Research scoping study, and development of a National Plan.

    The Law Council of Australia has provided some comment as to the spending of these funds, but no doubt in  the weeks and months that follow, we should hear more about how the Federal Government intends to use these funds towards the combat of elder abuse.

    Written by Golnar Nekoee, Associate, Wills and Estate Planning. To create a power of attorney, or review your will and estate plan, please contact us.

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  • I fart in my colleagues general direction Intentional flatulence as workplace bullying

    I fart in my colleague's general direction: Intentional flatulence as workplace bullying

    Intentional flatulence is often cited as evidence of workplace bullying.

    Comic geniuses Monty Python were never accused of holding back from crude humour. One of their more memorable lines – “I fart in your general direction” – uttered by the Insulting Frenchman, fits this bill. Yet their scenes are often divorced from reality, skirting outside the bounds of the possible.

    However you say it – flatulence, bum sneezes, letting one rip or plain old farting – it is (usually) an involuntary act that is met with embarrassment. This is particularly true in the office, where it certainly is not met with the triumphant gloating of the Insulting Frenchman.

    So it may surprise some readers to learn that intentional farts are in fact frequently cited as sources of workplace grievances and evidence of bullying. Not only are accusations levelled that a colleague farted in their general direction, it is often the case that someone farted in their specific direction.

    Could it really be that fact, at least when it comes to flatulence in the workplace, is stranger even than Monty Python?

    The recent case of Hingst v Construction Engineering involved an allegation that the plaintiff’s immediate supervisor deliberately farted in his specific direction. This resulted in multiple altercations, where the plaintiff, David Hingst, sprayed his supervisor, Greg Short, with deodorant while calling him the imaginative name “Mr Stinky”. Among other allegations, Hingst alleged that Short’s actions amounted to a “complex conspiracy” to “marginalise him and terminate his employment”. This resulted, it was claimed, in Hingst suffering psychiatric injuries.

    The Victorian Supreme Court threw the case out, with Justice Rita Zammit ultimately concluding that no bullying had occurred.

    Aside from being the source of many jokes, the case raises questions about what constitutes bullying and unacceptable workplace behaviour. Indeed, it raises questions about the potential consequences of even an involuntary act for employees and employers. These consequences could be amplified further in the Australian Public Service, where the APS code of conduct is brought into play.

    It is established that a mental element, such as knowledge, intent or recklessness, is not (usually) required to establish a breach of the code. Even in circumstances where a public servant’s behaviour was not deliberate, intentional or even voluntary, it can still be harassment. This is because harassing behaviour is not measured against the perpetrator’s intentions; rather, it is based on whether a reasonable person would conclude the behaviour would humiliate, offend, intimidate or cause a person unnecessary hurt or distress. Had Hingst been an APS employee and made a code of conduct allegation against his supervisor, it is quite possible that the allegations would have been investigated – I have seen lesser allegations upheld.

    In Hingst, Zammit found it was the termination of Hingst’s employment that led him to return obsessively to the flatulence episode, which at the time had not created the alleged psychiatric harm. Rather, it was held that Hingst had “reacted in an extreme and unreasonable way to the termination of his employment, which led him to seek revenge against those whom he blames for his loss”. On Hingst’s own admission, had he not lost his job and if other incidents had not occurred, such as an alleged abusive phone call, the flatulence would “never have been a big issue”.

    From this, we can hypothesise that a reasonable person would not conclude in these circumstances that Short’s flatulence would humiliate, offend, intimidate or cause Hingst unnecessary hurt or distress. Therefore, it’s unlikely that Short, in an APS workplace, would be found to have breached the code of conduct, again in these specific circumstances.

    Having said this, there have been other instances where the act of targeted flatulence would most certainly breach the code. For example, in Bell v Boom Logistics, an act of targeted flatulence was found to “possibly attract dismissal, being an assault”. However, this incident was manifestly targeted: the perpetrator “had his hand on his bum cheek, pulled his cheeks apart and farted in my face”. Of course, Bell is a severe example, but it nevertheless illustrates that involuntary acts can meet the standard required to establish a bullying and harassment – or (as the case may be) a breach of the APS code of conduct.

    Should you find yourself in Hingst’s position (or in the shoes of the unfortunate victim in Bell), it is important to report the unwanted conduct to HR. Your employer owes you a duty of care, and in some instances farting, when it is part of a pattern of bullying or abuse, could give rise to a claim in negligence. In such cases, employees must establish that the harm was reasonably foreseeable and recognisable, and the employer failed to take reasonable steps to mitigate that risk. As Justice Robert Osborn provides in Brown v Maurice Blackburn Cashman:

    “[A] finding that a particular risk of injury is reasonably foreseeable involves a judgment of ‘fact and value’ and it is a matter of fact for the decision-maker to determine whether a defendant ought to have reasonably foreseen his or her conduct might cause psychiatric injury.”

    By contrast, in Hingst, the harm manifested from termination of employment. However, had Hingst suffered psychiatric injury directly from his supervisor’s conduct, the case might have been decided differently.

    Whenever conduct is alleged to have caused psychiatric injury, it should always be cause for pause in a workplace. However curious behaviour like alleged targeted flatulence is, even if it doesn’t amount to bullying, as Zammit concluded, it did paint “a picture of the working culture” at the workplace. Those prone to flatulence should take care to ensure their behaviour doesn’t result in messy, if unintended, consequences.

    John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. He thanks his colleague James Connolly for his help in preparing this article.

    First published in The Canberra Times.

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  • Risks for property investors Can strata body corporate prevent listing apartment airbnb

    Risks for property investors: Can your strata body corporate prevent you listing your apartment on Airbnb?

    As the popularity of the “sharing economy” continues to grow unabated, issues can arise where regulations and commercial practices struggle to keep pace with technological change.  While Airbnb hasn’t yet attracted the storm of controversy that Uber has, this may be starting to change as cities around the world, including in Australia, crack down on the home-sharing site.

    In Australia the use of property for Airbnb is subject to regulation at multiple levels.  For owners of units in apartment buildings however, there is an additional layer of regulation, the strata company by-laws.  Since strata units are in such close proximity to each other, conflicts between unit owners can easily arise.  Some unit owners may want to use Airbnb to let their units, because of the high returns, and indeed may have purchased an investment property on the basis of those returns.  Other unit owners may object to short stay holiday accommodation in their complex because of fears of noise, disruption, security, loss of amenity and insurance and repair costs.

    This situation has seen an increasing number of by-laws which purport to restrict short term letting.  But are such by-laws valid?

    The Position in NSW

    The ability of strata by-laws to restrict short term letting varies between states.  In NSW, the largest market for Airbnb in Australia, the position has been summarised by NSW Fair Trading’s ‘Strata Living’ fact sheet as follows:

    “Strata laws prevent an owners corporation restricting an owner from letting their lot, including short-term letting. The only way short-term letting can be restricted is by council planning regulations.”

    This is because of s.139(2) of the Strata Schemes Management Act 2015 (NSW) (SSMA) which states:

    “No by-law is capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot”

    NSW tribunal decisions such as Estens v Owners Corporation SP 11825 [2017] NSWCATCD 63 have followed the interpretation outlined by NSW Fair Trading and struck down by-laws restricting short term letting.   The position is similar in Victoria, where in Owners Corp PS 510391P v Balcombe [2016] VSC 384 the Supreme Court found that owners’ corporations did not have the power to restrict short term letting.

    Recent WA and Privy Council Decisions

    In contrast, the recent WA decision Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2017] WASCA 104 saw the Court of Appeal uphold a by-law restricting short term letting to no more than 3 months in 12.  The Court of Appeal found that the by-law did not present a restriction on disposal of units in the strata scheme, but only a restriction on how the units could be used.

    The Byrne decision has been well-received in a recent UK Privy Council decision, O’Connor (Senior) and others v The Proprietors, Strata Plan No. 51 [2017] UKPC 45, dealing with by-laws in the Turks and Caicos Islands.  It may seem odd that a Privy Council decision should be seen as relevant in Australia, given the Privy Council is no longer a part of the Australian legal system, however the relevant provisions in the legislation of the Turks and Caicos Island had been lifted directly from NSW legislation and was identical to s.139(2) of the SSMA.

    The Privy Council found that:

    “statutes prohibiting restrictions on dealing in strata lots do not prevent reasonable restrictions on the uses of the property, even though such restrictions may have the inevitable effect of restricting the potential market for the property.”

    The Impact of these Decisions

    Decisions of the Privy Council are no longer binding in Australia.  However, the expectation of many is that NSW courts and tribunals will now follow WA and Privy Council decisions and determine that s.139(2) of the SSMA does not prevent by-laws from restricting short term letting.

    In fact, there is already a NSW Supreme Court decision, White v Betalli [2006] NSWSC 537, which sets out that principle.  In that case it was held that a restriction on the use of part of a strata complex for boat storage was not a restriction on dealing in granting an easement for boat storage.


    There is now considerable doubt over whether the SSMA actually does prevent strata company by-laws from prohibiting short term letting in NSW.  The uncertainty resulting from recent case law provides an extra headache for strata unit owners wishing to let their apartment on Airbnb, in addition to complying with zoning and planning requirements.  It remains to be seen whether there will be legislative changes to clarify whether a body corporate can prevent short-term letting.

    In the meantime, if you are purchasing a unit in a strata complex and you intend to use it for Airbnb, you need to pay close attention to the by-laws that exist in that complex, and be well aware that those can change over time.  It is important to be involved in your strata body corporate and to be active in figuring out how to best manage any downsides associated with short term letting

    Written by Penelope Coffey and Alexander Patton. If you are considering purchasing property in the ACT and require expert advice, contact us.

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  • Strata schemes and minimum lot sizes in the standard instrument

    Planning Update: Strata schemes and minimum lot sizes in the standard instrument

    In our article, “Can strata subdivision avoid minimum lot sizes in NSW?” we reported on the decision of the Land and Environment Court in DM & Longbow Pty Ltd v Willoughby City Council [2017] NSWLEC 17. In that case the Court held that the minimum lot sizes specified under clause 4.1(4) of the Standard Instrument LEP applied to lots being created under a strata scheme. While no doubt legally correct, this outcome came as a great surprise to many of us and was clearly not what was intended.

    The New Amendment

    The Standard Instrument (Local Environmental Plans) Order 2006 (the Standard Instrument Order) has now been amended to clarify that lots under a strata plan or community title scheme are not required to meet the minimum lot sizes shown on the applicable Lot Size Map of a local environmental plan. This amendment effectively reverses the Court’s decision in the Longbow case.

    Where a Council has adopted clause 4.1(4) of the Standard Instrument in its LEP, following the amendment of the Order on 20 April 2018, the sub-clause should now read:

    4.  This clause does not apply in relation to the subdivision of any land:

    1. by the registration of a strata plan or strata plan of subdivision under the Strata Schemes Development Act 2015, or
    2. by any kind of subdivision under the Community Land Development Act 1989.

    A sting in the tail…

    Clause 8 of the Standard Instrument Order provides that the amendments made by an amending order “do not apply to or in respect of any development application that was made, but not determined, before the commencement of the amending order”.

    This means that the amended provision won’t apply to any pre-existing DA and that, to take advantage of the changes brought about by the amendment, existing DA’s will need to be withdrawn and replaced with a new DA.

    Unless a further amendment is made to apply a different savings provision, Councils will need to be careful to apply the correct version of clause 4.1(4) having regard to the date on which a DA was made. Any DA lodged prior to 20 April 2018 proposing the creation of lots by registration of a strata plan will still need to comply with the relevant minimum lot size specified in the local environmental plan despite the amendment of the Standard Instrument Order.

    For more information about this decision, or Strata subdivision, please contact Alan Bradbury.

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