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In Check Issue 47 (June 2010)


In this issueDownload this issue of InCheck
What is an unfair term?
When is a deceased’s property dutiable?
Timing is everything in the Magistrates’ Court 
Certainty needed for sunset clauses
GST: Subjective test for ‘use as residential accommodation’
Risk Management Intensive for 2010
In Check will finally be going electronic  

What is an unfair term?

The Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010 (Cth) was assented to on 14 April 2010 and heralds in a new unfair terms regime.As a result of agreement between Commonwealth and States for a national approach the Victorian Government has passed the Fair Trading Amendment (Unfair Contract Terms) Act 2010 to align the Victorian unfair contract provisions with the Commonwealth provisions. The
unfair terms provisions in the Commonwealth Act will come into operation on 1 July 2010. The Victorian Act has not yet been proclaimed. The provisions apply to standard form contracts entered into by consumers. New civil penalties have also been introduced for corporations and individuals for breaches of provisions relating to various consumer protections provisions and for unconscionable conduct. Practitioners should ensure they follow the changes brought by this new consumer protection legislation and consider the effect of these new provisions on any standard form contracts they prepare or advise on.  

When is a deceased’s property dutiable?

We recently completed our risk management tour around country Victoria. One of the issues that was raised in the wills and estates session was the stamp duty implications when beneficiaries enter into a Deed of Family Arrangement. 

Where beneficiaries consent to alter the way the assets of the estate are distributed a Deed of Family Arrangement is usually executed to record the agreement reached. What beneficiaries need to appreciate is that these arrangements may affect the deceased estate stamp duty exemptions in section 42 of the Duties Act 2000 (Vic). The State Revenue Office has recently published a Revenue Ruling DA.051 ‘Transfer of dutiable property from a deceased estate’ in relation to the issue. It can be found at the State Revenue Office website at www.sro.vic.gov.au under the Legislation and Rulings tab. The ruling refers to changes made by the State Taxation Acts Amendment Act 2009 (Vic) and gives examples of how changing a gift under a will can exclude the stamp duty exemption. Practitioners should advise beneficiaries to obtain independent legal and financial advice before signing a Deed of Family Arrangement. 

Timing is everything in the Magistrates’ Court 

Practitioners should bear in mind the effect of Rule 10.20 of the Magistrates’ Court Civil Procedure Rules 2009 (Vic) when negotiating payment plans with defendants who have not yet filed defences.

Subrule 10.20(1) provides that a complaint stands dismissed 15 months after it has been issued if the defendant has not filed a notice of defence and an order in default of a defence has not been made. There is provision in subrule 10.20(2) for the time in subrule 10.20(1) to be extended by a further three months. Practitioners should consider extending the time where the payment of any outstanding amount will take longer than 15 months from the date of issuing of the complaint or ensure that payments are made within the 15 month period. 

Certainty needed for sunset clauses

We published a bulletin in July last year about the case of Clifford & Anor v Solid Investments Australia Pty Ltd [2009] VSC 223 concerning off the plan sales. Bonjiorno J found that the special condition allowing the vendor to extend the date for registration of the plan of subdivision contravened section 9AE of the Sale of Land Act 1962 (Vic) because it was open-ended and uncertain. The case went on appeal and judgment was handed down in March 2010: Solid Investments Australia Pty Ltd v Clifford & Anor [2010] VSCA 59. The Court of Appeal unanimously dismissed the appeal and confirmed Bonjiorno J’s findings about the plain meaning of section 9AE(2). Section 9AE(2) allows a contract to specify ‘another period’ instead of the statutory period, after which a purchaser may rescind if the plan remains unregistered. The Court of Appeal confirmed that the contract must establish a certain, identifiable period of time at the time the contract is entered into [31]. In Clifford’s case the clause did not comply with section 9AE(2) because it allowed the vendor to extend the time for registration of the plan of subdivision ‘as he may reasonably determine’. 

GST: Subjective test for ‘use as residential accommodation’ 

Whether or not the sale of a property is considered to be the supply of residential premises to be used predominantly for residential accommodation was confirmed to be a subjective test by Perram J in Sanchen Pty Ltd v Commissioner of Taxation [2010] FCA 21.

Perram J noted that while he thought the wording of the relevant section (section 40.65(1) A New Tax System (Goods and Services Tax) Act 1999 (Cth)) required an objective test he was not persuaded that the earlier decision of Toyama Pty Limited v Landmark Building and Developments Pty Ltd [2006] NSWSC 83 was clearly wrong. He therefore concluded that Toyama must be followed and the test involves the subjective intention of the purchaser at the time of purchase. Practitioners acting for vendors should continue preparing contracts on the basis that the purchaser’s intention is relevant to the tax treatment of the sale of real estate. Practitioners should ensure that they continue to include a purchaser’s warranty as to use by the purchaser and a GST clawback clause in the event that the supply is later found to be a taxable supply. 

Risk Management Intensive for 2010

The 2010 city Risk Management Intensive will be held on the following dates:

Topics to be covered include the following:

 

In Check will finally be going electronic

The next issue of In Check will be sent to every insured firm by email. If your firm does not have an email address we would like to hear from you so we can make alternative arrangements.

The change to fully electronic delivery will allow us to send information more quickly and at a greatly reduced cost. It will also mean we reach more people and have less waste as we receive large numbers of returned mail from firms where employees have left the firm and not updated their details. Firms will be asked to forward the In Check email on to all their practitioners and clerks when it is received.