Bradley Allen Love Lawyers is comprised of devoted teams covering a wide range of legal services. We have a strong focus on commercial and business law, property, local government, employment, dispute resolution, estate planning and litigation.
Residents of Opal Tower were recently given a rude shock when forced to vacate their apartments on Christmas Eve. Cracks appeared on several levels of the 36 storey mixed use building in Sydney only completed in August 2018. The ongoing saga involving residents, builder Icon and developer Australia Avenue Developments Pty Ltd is a cautionary tale for anyone buying an off-the-plan unit or involved in the construction process. However, what steps can you take to avoid a similar situation and remedy structural defects if you are a buyer and conversely, what should you consider if a buyer subsequently claims that the building or renovation you have constructed is defective?
Most contracts in the ACT for the purchase of an off-the-plan unit or construction of a single dwelling contain a defect liability period. This permits the buyer to submit a list of defects to the builder (or developer) which the builder will be required to repair. Defects are generally considered to be flaws in construction due to improper materials or faulty workmanship. However, it is important to be aware of the particular defects liability provisions as these can be drafted to limit the defects required to be repaired. Often this is reasonable, for example by excluding defects covered by manufacturer’s warranties. However, these provisions can also include unreasonable exemptions, for example, ‘settlement cracks’. The defect liability period will also set a defined period for the buyer to submit the defect list. A builder will not be required to rectify any defect notified outside of this period.
Where a defect is revealed after the end of the defect liability period, often the only recourse available for defective building work is for breach of a statutory warranty (found in the Building Act 2004 (the Act). The Act implies important warranties into contracts with respect to carrying out residential building work or for the sale of a residential building, that provides the work will be carried out in accordance with the Act and the approved plans, in a proper and skilful manner and good and proper materials were used.
These warranties exist for a period of 6 years in respect of structural defects and 2 years in respect of non-structural defects. Although considering the case Kondouras v The Owners – Units Plan No 1917 (2017) ACTCA 36 a buyer may be able to make a claim after the end of the six year period if the builder was in breach of the warranty at the end of the warranty period or if further building work is undertaken.
While the ACT has not experienced its own Opal Tower yet, issues with defect building work nonetheless remains topical and the ACT courts have generally adopted a pro-buyer approach. Regardless, those buying off-the-plan should conduct due diligence to ensure that the contract protects their interest and that they seek legal advice on options available if a defect is revealed after the end of the defect liability period. Builders and developers should ensure their contracts are adequately drafted so that only reasonable defects are required to be repaired and seek legal advice if a buyer claims breach of a statutory warranty.
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On 18 December 2018, the NSW Court of Appeal handed down a decision that will impact the way a commercial occupier’s duty of care is measured in regards to accidents that may occur on their premises.
In Bruce v Apex Software Pty Limited t/as Lark Ellen Aged Care [2018] NSWCA 330, Mrs Bruce, a retired 70 year old, tripped outside the entrance of an aged care facility where her elderly father resided, causing her to suffer injury. The path on which she tripped was relatively standard, consisting of concrete slabs boarded by rows of red bricks. At the heart of the dispute, there was a height discrepancy of 10-20mm where the edge of the concrete met the red bricks, creating a “lip”. Predictably, Mrs Bruce tripped on the said lip.
The NSW legislation on which the Bruce case was decided is comparable to the ACT’s (and other jurisdiction’s) civil liability legislation, making the NSW Court of Appeal’s decision a cautionary tale for business owners regardless of their location. In the case of each of NSW and the ACT, the general statutory principles for the court to consider are that:
In relation to this, in Bruce, Meagher JA held:
This decision reaffirms the standard required by law for commercial occupants in conducting repairs and their due diligence in mitigating risk of injury on the premises. Specifically in this case, based on several different factors, the defendant was not liable for the injuries sustained by Mrs Bruce. Helpfully for defendants (and not so for plaintiffs), Bruce is a reminder that the presence of a risk that “could” be fixed by some forethought of the occupier does not equate to their being an obligation that the risk “must” be fixed.
All cases will, of course, turn on their own facts. Where safety risks are identified by an occupier that reasonably can be attended to without any great burden arising, taking whatever reasonable steps that are available to prevent an incident from occurring is always the preferable path to follow.
For more information about duty of care please contact our litigation team.
Written by Ian Meagher and Zoe Zhang.
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In recent articles in this series, we have explored the basics of blockchain and some of the associated legal challenges that can arise from the proliferation of this technology across various industries. Despite the challenges, however, there are a number of exciting legal applications on the horizon. In particular, there are few areas of law that could benefit quite as much from the real-time, distributed and immutable nature of blockchain as intellectual property (commonly referred to as “IP”).
When it comes to IP, it’s the nature of the beast that effective enforcement of rights will be predicated on keeping robust and comprehensive records regarding applications, registration, licencing, assignment, use and so on. For certain IP rights, much of this is centrally managed by IP Australia, but the burden is shared across all those who create or use valuable IP.
These processes could be streamlined and strengthened with the use of blockchain. By incorporating the central IP registries onto a blockchain platform, this information could be fed into the system in real time, creating an immutable and time-stamped record of the IP ‘life cycle’. This would not only be of enormous benefit in terms of record keeping and rights management, but may be critically important to certain disputes where evidence of creation, use or goodwill plays a determinative role.
Excitingly, this opportunity is one that has been recognised by IP Australia, which is undertaking trials of a ‘smart’ trademark that can be traced throughout the supply chain using a blockchain platform.
In Australia, as with many jurisdictions, copyright is unregistered and comes into existence automatically on creation of an original work. As such, disputes can arise about creatorship where evidence of conception, originality or use is incomplete or uncertain. By using a blockchain platform as a registry of original works, copyright authors, owners and users can rely on tamper-proof and time-stamped evidence of ownership to give them peace of mind in protecting their IP rights.
Not only can blockchain enhance the establishment and protection of IP rights, it presents a unique opportunity for businesses to improve the management of those rights in everyday governance, dealings and transactions.
For example, IP audits may be greatly simplified if businesses have access to a comprehensive, time-stamped and unchangeable record of all IP generated by or within the business, as well as all third party IP that it uses. This provides an important safeguard against liability for infringement of the IP rights of others due to poor governance or oversight, as well as an enhanced capacity to recognise and protect the value of the IP created within the business.
The use of blockchain in this way may also reduce a lot of the ‘grunt work’ associated with the assignment of IP rights, such as in mergers and acquisitions, for which due diligence must be undertaken.
In a more day-to-day sense, blockchain technology could also be employed in the form of smart contracts to streamline the execution and enforcement of IP licences. The self-executing nature of smart contracts means that IP owners can receive payment automatically and in real-time wherever their IP is used by third parties.
By this point, it should be clear that the potential legal uses of blockchain are endless—and we’ve only just scratched the surface. The protection of IP rights can be enhanced in multiple other ways with the use of this technology, such as tracking and authenticating the provenance of products to tell a genuine from a fake, or helping to keep track of compliance with regulatory requirements.
Stay tuned for our future articles on the potential uses of blockchain. In the meantime, if you have any questions about the protection and management of your IP rights, and how this may be impacted by the rise of blockchain, feel free to get in touch with our Business team.
Written by Shaneel Parikh with thanks to Bryce Robinson
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This month at Business Breakfast Club, we had a roundtable discussion on the standout issues of 2018 and the impact these issues will have in 2019. In particular, we discussed the changes to the Privacy Act, the introduction of the General Data Protections Regulation (GDPR), the proposed changes to bankruptcy legislation, the impacts of the recent Royal Commissions and changes in financial markets (to name a few).
We revisited the changes to the Privacy Act in February of this year, which introduced a mandatory notification procedure for eligible data breaches. All entities bound by the Australian Privacy Principles (APPs) have new reporting obligations if there is an eligible data breach, namely, to notify the Office of the Australian Information Commissioner (OAIC) and any parties at risk because of the breach.
We explored the type of harm individuals have suffered as a result of eligible data breaches and how these breaches have led to an increase in identity theft and online hacking. We discussed a real life experience of scam activity in Canberra that illustrated the high level of sophisticated online hacking that exists in the digital age. Eligible data breaches and instances of scam activity and identity theft must be kept in the forefront of a business’ risk management policies as it can undoubtedly have serious consequences such as loss of personal savings.
The European Union also passed similar privacy legislation (the GDPR) regulating how companies protect citizens’ personal data. The GDPR is designed to give EU citizens’ control of their personal data and simplify the regulatory environment for international businesses by unifying the regulation within the EU. If you are engaging an overseas entity that is bound by the GDPR and that entity is collecting and storing personal information provided by you (or for your benefit), we recommend you seek legal advice about whether the overseas entity’s privacy policy is compliant with the GDPR.
We also discussed the proposed changes to insolvency laws, currently before Parliament, which could see the bankruptcy discharge period in Australia reduced from three years to one. The proposals are contained in the Bankruptcy Amendment (Enterprise Incentives) Bill 2017. It’s unlikely the Bill will be enacted before the Federal election next year. Many suggested that the current debt arrangements mean that individuals are paying more to their creditors and are locked in for longer than three years but if the Bill is enacted such arrangements would end altogether.
For more information on any of the above, please contact Lauren Babic. The next Business Breakfast Club will take place on 15 February 2019. If you would like to attend, please contact us.
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Rare are the circumstances where “The Tax Man” offers any dispensation from our tax-paying duties. Death is one of those circumstances.
Deceased estates enjoy roll over relief from the payment of capital gains tax.[1] One power of an executor (or administrator, where there is no will) is to decide how assets within an estate are dealt with. Subject to any specific direction in a will, an executor will ordinarily have the power to sell assets. They will also have the power to appropriate certain assets in-specie, and apply them towards a beneficiary’s share of the estate.
For example, an estate may have two equal residuary beneficiaries with the assets comprising $200,000.00 cash and shares Medibank Private Limited also valued at $200,000.00. In discharging their duties, the executor could give beneficiary 1 $200,000.00 and could transfer the shares to beneficiary 2. While these types of decisions are often made in consultation with the beneficiaries, the executor generally does not require the consent of the beneficiaries to make these decisions.
Where there are multiple beneficiaries of an estate, from a practical point of view, often the easiest thing for an executor to do is say “show me the money”. That is, an executor elects to sell an asset within the estate. It is then easy to divide the sale proceeds among the various beneficiaries with little argument. Executors are often pressured by beneficiaries who have large debts and would prefer to receive “liquid” funds. However, from a tax perspective, often it is not prudent for an executor to engage their powers of sale.
The sale of assets within an estate will often attract the payment of capital gains tax liabilities. However, where assets are transferred to beneficiaries of an estate, there are no immediate tax consequences.[2] On transfer, The Tax Man allows you to “roll over” or defer the tax consequences until some later time or event.
The general rule of thumb is that if the deceased person would have been entitled to reduce or disregard a capital gain while they were alive, that right continues in the estate. The right continues for a two year period beyond the date of the deceased’s death.[3]
For example, let’s say that at the date of Lucy’s death, she:
Lucy left a will appointing Matthew her as her sole executor and nominating James as her sole beneficiary.
On Lucy’s death, if Matthew transferred the Commonwealth Bank shares to James, there would be a capital gains tax rollover. No tax is payable on the transfer. James would enjoy the assets with the benefit of regular dividend payments. For calculating any future capital gains tax, James would acquire Lucy’s cost base when she initially purchased the shares ($40.00 per share).
If James later sold the shares for $40,000.00 ($80.00 per share), he would have to pay capital gains tax on $60,000.00 (the difference between the ultimate sale price and Lucy’s purchase price). James may be entitled to a reduction in the tax depending on how long he retained the shares.[4]
If Matthew, as the executor, elected to sell the Commonwealth Bank shares within the estate, there would be a capital gains tax event and the estate would be liable to pay tax on the gain. This would reduce the overall “value” of the inheritance being received by James.
The National Australia Bank shares were acquired by Lucy in 1984, before capital gains tax was introduced. If Matthew sells these shares, there will be no tax payable. If Matthew transfers these shares to James, there will also be no capital gains tax payable. James would acquire the shares at their value on Lucy’s death.
In relation to the main residence of the deceased person, there is an exemption from paying capital gains tax.[5] While it is a complicated area of law, if an executor sells the deceased’s main residence, provided settlement is effect within two years of deceased’s death, the sale proceeds will be exempt from capital gains tax.
Any income earned beyond the date of the deceased’s death (by way of dividend payments, share sales etc.) must be declared in a separate tax return filed on behalf of the estate. This is another obligation of an executor. The estate requires its own tax file number because it is a separate tax paying entity. The estate is treated like an individual for tax purposes and can take advantage of the tax free threshold for three years. Because of this, if assets within an estate are to be sold, there is merit in spanning the sales out over several financial years.
While selling assets within an estate may seem like an easy and efficient way to approach the estate administration, executors should seek legal and accounting advice before relying on the powers of sale bestowed upon them.
[1] Income Tax Assessment Act 1997 (Cth) Division 128.
[2] Provided those transfers are consistent with the terms of the will or the applicable intestacy laws.
[3] Income Tax Assessment Act 1997 (Cth) Section 152.80.
[4] Income Tax Assessment Act 1997 (Cth) Division 115.
[5] Income Tax Assessment Act 1997 (Cth) Division 118.
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In our first article in this series, we stepped through the basics of blockchain and how it might influence the way we transact with one another. Blockchain is rapidly finding its way into all sorts of enterprises, presenting exciting opportunities for businesses to optimise their business operations. It might be surprising to consider that there are few pairings that are more natural—and perhaps less expected—than blockchain and co-operatives.
Co-operatives and blockchain share a theme of mutual benefit: they exist to serve their members. At their core, the members are a group of people working together towards achieving shared social, cultural or economic goals. Importantly, this form of organisation is distinct from many typical corporate structures where the ultimate purpose for directors is always to serve their shareholders.
In simple terms, a co-operative is a legal entity owned and democratically controlled by its members, who typically have a close association with the business of the co-operative. Common and historically successful co-operatives are those in the agricultural sector, including those in the dairy, grain, and meat export industries. The co-operative model shares risk and reward amongst its members. They are also “decentralised” in that there is no one member in a position of power or control above the others. This element of democratic control is a core element of the co-operative structure. Coincidentally, this decentralised notion of power and democratic control is also a core element of blockchain.
Blockchain is the technology that allows, for example, crypto-currency such as Bitcoin to exist without a central bank. It provides a secure, decentralised and un-editable record of all transactions.
So, think of a co-operative as the corporate structure and blockchain as the technological vehicle.
Blockchain may be of particular use to co-operatives in relation to their governance. For example, it can enable co-operatives to operate on a system in which by-laws, amendments, terms of membership and voting rosters are all written into a blockchain, providing an irrefutable history of all legal and administrative procedures.
Blockchain can provide a trusted mechanism for operational activities such as decision-making, finance and record-keeping without the need for physical proximity. That is, with blockchain, a co-operative can be governed remotely, without the need for members to physically meet or even align schedules (possibly in different time zones) for teleconferences. It can be coded to action and deal with common business matters like voting functions, for example, which could be “built-in” to the chain to record (and action) acceptance or rejection of by-laws, amendments, membership and other matters requiring a vote.
Beyond these legal and administrative functions, co-operative entities around the world are utilising blockchain technology in various ways to support their activities. For example, one of the world’s largest consumer co-operatives, Co-Operative Group Ltd (UK), is working with an organisation called Provenance to use blockchain to trace the journey of fresh produce from ‘paddock to plate’ in real-time. By referring to this immutable and time-stamped record of a product’s processing, final purchasers can be assured of the origin and quality of the product, as well as environmental and social impacts of the business.
Blockchain undoubtedly has the ability to enhance trust and efficiency to the operational activities of a co-operative. We look forward to seeing the benefits of this technology become a reality in Australia.
If you have any questions about how blockchain might benefit you or your business, please get in touch with Shaneel Parikh. If you have any questions about co-operatives, please get in touch with Katie Innes.
Written by Shaneel Parikh and Bryce Robinson.
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