Felicio Law Firm, Author at Felicio Law Firm

Jun 28

Buying Property with Someone Else – Considerations for Property Owners in New South Wales

At Felicio Law Firm, we understand the inherent complexities and potential pitfalls involved with co-owning property with another. While purchasing with someone such as an intimate partner, friend, relative or business partner can bring financial advantages and increase borrowing power; it must be approached carefully and with legal support to achieve lasting benefits.

The Importance of Choosing the Right Ownership Structure

One of the most critical decisions to make when buying property with someone else is the ownership structure. In New South Wales, co-owners have two primary options: joint tenants or tenants in common. This choice will have significant and far-reaching implications for estate planning, taxation, and the ability to dispose of one’s share in the property.

Joint Tenants: Under a joint tenancy arrangement, each co-owner holds an equal and undivided interest in the property. This means that no individual co-owner can claim a specific portion of the property as their own. The most notable characteristic of joint tenancy is the right of survivorship – if one owner passes away, their interest automatically passes to the surviving co-owner(s), regardless of any provisions in their will or estate plan. This type of ownership is often chosen by couples or family members who wish to ensure that the property remains within the family in the event of one owner’s death.

Tenants in Common: In contrast, as tenants in common, each co-owner holds a distinct and separate share in the property. These shares can be equal or unequal, depending on the agreement between the parties. For instance, if two co-owners contribute different amounts toward the purchase price, their ownership shares can reflect their respective contributions. Upon the death of one co-owner, their share in the property does not automatically pass to the surviving co-owners but rather becomes part of their estate, allowing them to bequeath their share to chosen beneficiaries through a will or trust.

The choice between joint tenancy and tenancy in common should not be taken lightly, as it will have significant implications for estate planning, taxation, and the ability to dispose of one’s share in the property. It is essential to carefully consider factors such as the nature of the relationship between co-owners, estate planning goals, and potential future scenarios before making this decision.

Drafting a Comprehensive Co-ownership Agreement

Regardless of the ownership structure chosen, it is essential to have a legally binding co-ownership agreement in place. This document serves as a contract between the co-owners, outlining their respective rights, responsibilities, and obligations, and can help prevent disputes and provide clarity on various issues that may arise during the co-ownership period.

A well-drafted co-ownership agreement should address the following key aspects:

Contribution to expenses: Clearly defining how expenses such as mortgage payments, property taxes, insurance, maintenance costs, and utilities will be shared among co-owners. This can be based on their respective ownership percentages or an agreed-upon arrangement.
Use and occupancy: Establishing guidelines for the use and occupancy of the property, including any restrictions or limitations on areas that can be accessed or modified by each co-owner.
Decision-making processes: Outlining the procedures for making major decisions regarding the property, such as renovations, refinancing, or the potential sale of the property. This may involve establishing voting rights, majority requirements, or other decision-making mechanisms.
Dispute resolution: Providing a framework for resolving disputes among co-owners in a fair and efficient manner. This may involve mediation, arbitration, or other alternative dispute resolution methods.
Exit strategies: Establishing provisions for situations where one co-owner wishes to sell their share or buy out the other(s), as well as procedures for the potential sale of the entire property. This may include rights of first refusal, valuation methods, and timelines for completing the transaction.
Management and maintenance: Outlining responsibilities for the day-to-day management and maintenance of the property, including delegating tasks and determining how costs will be shared.
Insurance and liability: Addressing insurance requirements, such as property and liability coverage, and specifying how premiums and deductibles will be shared among co-owners.

Navigating Financing and Mortgage Considerations

When purchasing property with someone else, it is crucial to carefully consider the financing arrangements. Co-owners may choose to jointly apply for a mortgage or have separate financing arrangements, each with its own implications and potential challenges.

Joint Mortgage Application: If applying for a joint mortgage, lenders will typically assess the combined income, credit history, and financial obligations of all co-owners. It is important to understand that each co-owner will be jointly and severally liable for the entire loan amount, meaning that the lender can pursue any or all co-owners for the full outstanding balance in the event of default.

This arrangement can be advantageous for co-owners who may not qualify for a sufficient mortgage individually, as their combined income and assets will be considered. However, it also means that the financial decisions and creditworthiness of one co-owner can impact the others, potentially creating friction or complications down the line.

Separate Financing Arrangements: Alternatively, co-owners may opt for separate financing arrangements, where each party is solely responsible for their portion of the mortgage and associated costs. This approach can provide greater independence and flexibility, as each co-owner is solely accountable for their own financial obligations.

However, separate financing arrangements may also involve additional legal complexities, such as determining how ownership percentages align with mortgage contributions and establishing mechanisms for addressing situations where one co-owner defaults on their portion of the mortgage.

Regardless of the financing approach chosen, it is advisable to seek professional guidance from mortgage brokers, lenders, and legal experts to ensure a clear understanding of the financial obligations, risks, and potential implications involved. At Felicio Law Firm, we work closely with a network of trusted financial professionals to provide our clients with comprehensive guidance and support throughout the property co-ownership process.

Tax Implications and Estate Planning Considerations

Co-ownership of property can have significant tax implications, particularly when it comes to capital gains tax, rental income (if applicable), and deductions for expenses. It is essential to seek professional tax advice to understand the tax implications specific to your situation and to ensure compliance with relevant laws and regulations.

For example, if the co-owned property is an investment property that generates rental income, the co-owners will need to determine how that income will be reported and taxed. Additionally, when it comes time to sell the property, there may be capital gains tax implications that need to be addressed.

Estate planning is another crucial consideration when co-owning property. Co-owners should have a valid will in place to ensure their share in the property is distributed according to their wishes upon their passing. Additionally, co-owners may want to consider other estate planning strategies, such as setting up trusts or establishing power of attorney arrangements, to protect their interests and those of their beneficiaries.

Relationship Changes and Exit Strategies

Relationships and circumstances may change over time, and co-owners should have plans in place should any unanticipated events arise. A co-ownership agreement should address provisions for either co-owner to sell his/her share to or purchase out another co-owner(s), as well as procedures pertaining to selling all or part of a property if irreconcilable differences or significant life events (ie divorce/bankruptcy etc) require it (such as irreconcilable differences / sale process for total property sales etc).

Divorce or separation in co-ownership situations can be particularly complex due to legal and financial entanglements that become complicated as legal battles ensue over valuation, buyout or sale procedures and mechanisms for dealing with outstanding mortgage obligations or division of equity issues. When faced with this circumstance, an effective co-ownership agreement should provide clear procedures for valuation, buyout or sale procedures as well as mechanisms for dealing with outstanding obligations or dividing equity among co-owners.

When one co-owner faces bankruptcy or significant financial strain, their co-ownership agreement should provide guidance as to how best protect the interests of all other co-owners and ensure continued viability of property ownership arrangements.

Arguably the key component of any co-ownership agreement, having clear exit strategies outlined will help avoid conflicts and ensure an orderly dissolution process.

First Home Buyer Benefits and Eligibility

In New South Wales, first home buyers may be eligible for various grants and stamp duty concessions when purchasing a property. When buying a property with someone else, it is important to understand the eligibility criteria and ensure that all co-owners meet the necessary requirements.

For example, if you and your partner are both first home buyers, you may be eligible for a combined First Home Owner Grant and a stamp duty concession on the purchase price, provided that both parties meet the eligibility criteria set by the NSW Government. These criteria typically include factors such as income thresholds, residency requirements, and the value of the property being purchased.

However, if one of the co-owners has previously owned a property, it may impact the eligibility for these benefits. In such cases, it is essential to seek professional advice to determine whether any exemptions or partial benefits may still be available.

The Importance of Professional Guidance

Purchase of property jointly in New South Wales can be an enormously complex and financial endeavor, which necessitates professional guidance to protect both parties involved throughout. At Felicio Law Firm we understand these complexities well and strive to offer comprehensive legal support for our clients throughout this journey.

Our experienced lawyers will collaborate closely with you to understand your individual circumstances, goals, and risks before providing tailored legal guidance throughout every aspect of the process – from structuring ownership arrangements and co-ownership agreements, tax implications and estate planning considerations, as well as potential exit strategies.

As every co-ownership situation is distinct, our approach to co-ownership arrangements varies accordingly. Our legal professionals collaborate closely with trusted financial advisors, accountants and other specialists in order to make sure that every aspect of co-ownership arrangements are considered and addressed properly.

At our firm, we take great pride in maintaining an atmosphere of open communication and transparency with all clients, keeping them up-to-date at every turn and ensuring they fully comprehend any legal or financial implications related to decisions they are making.

Purchase of property with another can be an intensive and daunting endeavor; with legal assistance and support from Felicio Law Firm’s partnership, however, this journey will become both manageable and fruitful. Our firm serves as your reliable ally who strives to safeguard your interests while maximizing investment returns.

Conclusion

Acquiring property with someone else in New South Wales requires thoughtful deliberation and expert legal guidance. At Felicio Law Firm, we understand the complexities and potential pitfalls involved with co-ownership arrangements and are dedicated to providing our clients with comprehensive legal advice and support.

Jun 24

The Importance of Due Diligence When Buying an Existing Business in New South Wales

By Felicio Law Firm Business Law

At Felicio Law Firm we understand the complexities and potential pitfalls that accompany buying an existing business. While taking over an established enterprise may be appealing, it is critical to conduct a careful due diligence process to minimise risks and ensure an efficient transition process.

What is Due Diligence?

Due diligence is a multifaceted and exhaustive process of investigation and analysis aimed at uncovering potential risks, liabilities, and opportunities associated with a target business. It involves a detailed examination of various aspects, including financial records, legal compliance, operational processes, intellectual property, and market positioning. Failing to conduct proper due diligence can expose buyers to unforeseen issues, costly legal battles, and significant financial losses, jeopardizing the entire acquisition.

Navigating the Legal Landscape in New South Wales

Businesses operating in New South Wales are subject to a complex web of federal, state, and local laws and regulations. Compliance with these laws is paramount, as violations can result in severe penalties, fines, and even legal action. During the due diligence process, it is essential to assess the target business’s adherence to relevant regulations, such as consumer protection laws, employment laws, environmental regulations, and industry-specific requirements.

Financial Due Diligence

Financial due diligence is a critical component of the overall due diligence process. It involves a comprehensive review of the target business’s financial statements, tax records, assets, liabilities, and cash flow projections. This in-depth analysis provides invaluable insights into the company’s financial health, profitability, and potential risks or liabilities that could significantly impact its future performance.

Engaging a reputable and experienced accounting firm is highly recommended to ensure a thorough examination of the financial records. Their expertise can uncover any irregularities, hidden debts, or questionable accounting practices that could have a substantial impact on the business’s valuation and future profitability. Additionally, they can provide valuable guidance on tax implications, financial restructuring, and potential areas for cost optimization.

Legal Due Diligence

Legal due diligence is essential in identifying potential legal risks and ensuring compliance with applicable laws and regulations. This intricate process involves reviewing various legal documents, including contracts, leases, intellectual property registrations, litigation records, and corporate governance documents.

Engaging an experienced and reputable legal team, like Felicio Law Firm, is crucial in this aspect of due diligence. Our lawyers are well-versed in assessing the validity and enforceability of existing contracts, identifying potential breaches or non-compliance issues, and advising on the transferability of licenses, permits, and other legal obligations.

Our legal experts can evaluate the target business’s compliance with relevant laws and regulations, ensuring that potential legal liabilities are identified and addressed before the acquisition is finalised. This proactive approach can prevent costly legal battles and reputational damage in the future.

Operational Due Diligence

Operational due diligence focuses on evaluating the target business’s day-to-day operations, processes, and systems. This includes assessing the quality and efficiency of production methods, supply chain management, inventory control, and customer service protocols. A thorough examination of these operational aspects can reveal potential areas for improvement, cost optimisation, and streamlining of processes.

Additionally, it is crucial to evaluate the business’s human resources, including the expertise and retention of key personnel, employee contracts, and any potential liabilities arising from labor disputes or workplace misconduct. Ensuring a smooth transition and retaining talented employees is essential for maintaining the acquired business’s operational continuity and competitive edge.

Intellectual Property and Intangible Assets

Intellectual property can be an essential source of value in today’s knowledge-based economy, making the due diligence process essential in order to identify and assess a company’s intellectual property portfolio, including trademarks, patents, copyrights, trade secrets and proprietary software or processes that add potential.

Failing to properly assess and secure these assets can lead to costly legal battles, market share reduction, and diminished competitive advantage. At Felicio Law Firm’s team of intellectual property experts can be of invaluable assistance in navigating this tangled web of IP rights to make sure that the intangible assets that comprise your acquired business are sufficiently protected and leveraged.

Environmental and Regulatory Compliance

Depending on the nature of the business, environmental and regulatory compliance may be a critical area of focus during the due diligence process. Industries such as manufacturing, mining, or waste management often face stringent environmental regulations and reporting requirements.

Assessing the target business’s compliance with these regulations, as well as its environmental liabilities and potential remediation costs, is crucial to avoid potential legal and financial consequences.

Market and Competitive Analysis

Conducting a thorough market and competitive analysis is an essential aspect of due diligence. This involves evaluating the target business’s market position, customer base, and competitive landscape. Understanding the strengths and weaknesses of competitors, as well as potential market disruptions or emerging trends, can provide valuable insights into the long-term viability and growth potential of the acquired business.

At Felicio Law Firm we can provide in-depth assessments, leveraging their extensive knowledge and experience to help you make informed decisions and develop strategies to maintain and enhance the acquired business’s competitive edge.

How We Can Help

Given the complexity and multifaceted nature of due diligence, it is highly recommended to engage a team of professional advisors, including lawyers, accountants, and industry experts. These professionals bring specialized knowledge and experience to the table, ensuring a comprehensive and thorough evaluation of the target business.

At Felicio Law Firm, we can provide invaluable guidance throughout the due diligence process. Our team of dedicated lawyers can navigate the intricate legal landscape, identify potential risks, and ensure compliance with relevant laws and regulations. We work closely with our clients, providing tailored advice and support to safeguard their interests and facilitate a successful acquisition.

Timing and Costs of Due Diligence

Due diligence can be a time-consuming and costly endeavor, but it is an investment that can pay dividends in the long run. The duration and cost of due diligence may vary depending on the size and complexity of the target business, as well as the depth of investigation required.

It is advisable to allocate sufficient time and resources for a comprehensive due diligence process, as rushing or cutting corners can lead to missed opportunities or overlooked risks that can have severe consequences down the line. At Felicio Law Firm, we understand the importance of thorough due diligence and work closely with our clients to develop realistic timelines and budgets, ensuring that the process is conducted efficiently and effectively.

Negotiating the Purchase Agreement

The findings of the due diligence process can significantly impact the negotiation and structuring of the purchase agreement. Potential issues identified during due diligence may lead to adjustments in the purchase price, specific indemnifications, or the inclusion of specific representations and warranties from the seller.

Post-Acquisition Integration

Even after a successful acquisition, the integration process can present its own set of challenges. Our legal team at Felicio Law Firm can provide ongoing support and guidance to ensure a seamless transition of ownership and operations.

We can assist with the transfer of licenses, permits, and contracts, as well as navigate any potential employee-related issues or regulatory hurdles that may arise during the integration phase.

Conclusion

Conducting thorough due diligence when buying an existing business in New South Wales is not just a legal requirement but a strategic necessity. It serves as a critical risk management tool, allowing buyers to make informed decisions and avoid potential pitfalls that could jeopardize the success of the acquisition.

At Felicio Law Firm, we pride ourselves on our ability to tailor our services to meet the unique needs of each client. We understand that every business acquisition is different, and our due diligence processes are tailored to the specific industry, size, and complexity of the target business. This personalized approach ensures that no stone is left unturned and that potential risks are identified and addressed effectively.

Contact us today to schedule a consultation and take the first step towards a successful business acquisition in New South Wales.

Jun 19

The Legal Considerations & Ramifications when Mum and Dad are the Bank in Purchase of Property in New South Wales

By Felicio Law Firm Property Law

Rising house prices in New South Wales are pushing many young Australians to seek financial support from the “Bank of Mum and Dad”. According to a Finder survey, parents in NSW plan on contributing an average of $81,642 towards their children’s home purchases – this financial help may help overcome obstacles to saving enough deposit, especially considering Sydney’s median property price of around $1.2 million (median property price Sydney).

However, this trend comes with its own challenges. While some parents may welcome helping their children financially, others may struggle to afford such a significant contribution. Furthermore, legal considerations must also be taken into account such as whether the money should be considered a gift, loan or guarantee on loan agreement; both parents and children need a clear understanding of these agreements so as to prevent misunderstandings or financial strain down the road.

Here are some additional points to consider:

The First Home Loan Deposit Scheme: The Australian government offers this scheme, which allows eligible first home buyers to purchase a property with a deposit as low as 5%. This can significantly reduce the upfront financial burden.
Financial advice: It’s always a good idea for both parents and children to seek professional financial advice before entering into any financial agreements. A financial advisor can help ensure that the arrangement is fair and sustainable for all parties involved.

By carefully considering all of these factors, families can make informed decisions about using the “Bank of Mum and Dad” to help achieve home ownership dreams in New South Wales.

The Significance of the “Bank of Mum and Dad”

According to recent data from the Australian Bureau of Statistics (ABS), the mean price for an Australian home has reached a staggering $912,700. In New South Wales, where property prices are among the highest in the nation, the task of accumulating a substantial deposit has become a formidable challenge for many young buyers. This reality has given rise to the phenomenon of the “Bank of Mum and Dad,” where parents step in to provide financial assistance to their children, often in the form of gifts or loans to cover deposits, mortgage payments, or even the entire purchase price of a property.

While parental support offers undeniable benefits, such as enabling children to enter the property market sooner and potentially securing more favorable mortgage rates, it also introduces legal complexities that must be addressed proactively. Failure to properly document and structure these financial arrangements can lead to disputes, uncertainties, and potential legal consequences down the line.

Securing Parental Interests: Mortgages and Caveats

When parents act as the bank for their children’s property purchases, it is crucial to establish legal mechanisms that protect their financial interests. Two commonly employed strategies are mortgages and caveats.

1. Mortgages:

If parents are providing a loan to their child for the property purchase, registering a mortgage over the property in favor of the parents is highly advisable. This mortgage serves as security for the loan and grants the parents a legal interest in the property until the loan is fully repaid.

The mortgage should clearly outline the terms and conditions of the loan, including the repayment schedule, interest rates (if applicable), and consequences of default. This legally binding document not only secures the parents’ financial interests but also sets clear expectations and obligations for the child borrower.

By registering a mortgage, parents can ensure that their financial contribution is protected and that they have a legal claim over the property in the event of non-payment or default by their child. It provides a level of security and recourse that is essential when substantial sums of money are involved.

2. Caveats:

Alternatively, parents can register a caveat on the property title. A caveat is a legal notice that alerts anyone interested in the property that the parents have a claimed interest or right over the property. This interest could be the unpaid loan amount or any other financial obligation owed by the child to the parents.

A caveat serves as a temporary measure, providing legal protection to the parents and ensuring that their interests are not overlooked in any subsequent dealings with the property. It acts as a placeholder until a more permanent arrangement, such as a mortgage, can be established.
Caveats are particularly useful when time is of the essence, as they can be registered relatively quickly and serve as an interim solution while more comprehensive legal documentation is being prepared.

Binding Financial Agreements: Protecting Parental Interests in De Facto Relationships and Marriages

When children receiving financial help from their parents become part of de facto relationships or marriage, additional legal considerations arise. Under the Family Law Act 1975 (Cth), property acquired with assistance from their parents may become matrimonial assets subject to division upon relationship breakdown or divorce.

As part of protecting their financial interests and to avoid their property becoming part of matrimonial assets, parents may wish to enter a binding financial agreement (BFA) with both their child and partner.

A BFA is a legally-binding contract that sets out how assets, such as real property, will be divided and treated following relationship dissolution or divorce. This helps safeguard both parents’ contributions while prioritising their financial interests.

A BFA should clearly state that the property belongs solely to the child while parents retain legal interest through mortgage or caveat until loan payments have been fully repaid. Furthermore, this document must detail any financial obligations or consequences due to nonpayment or default that apply directly or indirectly to each party involved.

By creating and signing a legally drafted BFA, parents can protect their financial interests and ensure their contribution towards property purchase is protected, even in the event of relationship breakdown or divorce between their child(ren). By taking this proactive measure now, potential legal battles and losses down the line could be minimized and mitigated altogether.

BFAs also help ensure there is complete clarity and transparency regarding all parties involved, which reduces disputes or misunderstandings among them.

Importance of Professional Legal Advice and Proper Documentation

Given the complexities involved in these legal arrangements, seeking professional legal advice from an experienced family law practitioner is essential. A skilled lawyer can ensure that the BFA is drafted and executed in accordance with the Family Law Act 1975 (Cth), ensuring its validity and enforceability.

Furthermore, lawyers can assist in drafting and registering mortgages and caveats, ensuring that all legal requirements are met and that the parents’ interests are adequately protected. They can also provide guidance on the potential tax implications and asset protection strategies related to these financial arrangements.

Proper documentation is paramount in these situations. Clear and comprehensive records should be maintained, including tax returns, settlement sheets, directions to pay, and any other relevant documents that can support claims of beneficial ownership and intentions.

Navigating the Legal Landscape: The Role of Felicio Law Firm

At Felicio Law Firm, we understand the complexities associated with “Bank of Mum and Dad”, including any legal considerations which need to be addressed. Our experienced legal team is equipped to guide clients through this complex legal landscape while protecting their interests every step of the way.

May 06

Pt II: Barns v Barns, a Landmark Case on the Topic of Inheritance Contracts

By Felicio Law Firm Estate Planning

A landmark decision on the topic of inheritance contracts or deed of mutual wills occurred in the case of Barns v Barns (2003) 196 ALR 65, in which the High Court ruling provided crucial guidance on the enforceability and interpretation of such agreements.

Background of the case

The Barns v Barns case centred around a dispute between siblings over the distribution of their late parents’ estates. In 1958, John and Ida Barns had entered into a deed of mutual wills, agreeing on the disposition of their combined assets after their deaths. The agreement stipulated that upon the death of the surviving spouse, their remaining estate would be divided equally among their four children.

However, after Ida Barns’ death in 1984, John Barns altered his will, effectively disinheriting one of his sons, Michael. This deviation from the terms of the mutual wills agreement sparked a legal battle between Michael and his siblings, ultimately leading to the case being heard by the High Court of Australia.

The implications of the court’s ruling

In a landmark decision, the High Court upheld the validity and enforceability of the deed of mutual wills between John and Ida Barns. The court ruled that the agreement created a binding obligation on the surviving spouse, John Barns, to distribute the remaining estate in accordance with the terms of the mutual wills.

The ruling established several significant principles that have had far-reaching implications for inheritance contracts and deeds of mutual wills in Australia.

Enforceability of inheritance contracts: The Barns v Barns case affirmed that inheritance contracts, including deeds of mutual wills, are legally enforceable agreements, provided they meet the necessary contractual requirements. This recognition has strengthened the legal standing of such agreements and provided greater certainty for individuals seeking to secure their legacy through this type of testamentary will.

Strict interpretation of contract terms: The High Court emphasized the importance of strictly interpreting the terms of inheritance contracts, upholding the intention of the parties at the time the agreement was made. This principle has underscored the need for clear and unambiguous drafting of these agreements to ensure that the parties’ wishes are accurately reflected and can be enforced as intended.

Limitations on unilateral revocation: A key aspect of the ruling was the court’s determination that, once a deed of mutual wills is in place, the surviving party cannot unilaterally revoke or alter the agreed-upon terms without the consent of the other party or their beneficiaries. This principle has served to protect the interests of beneficiaries and prevent unilateral deviations from the original agreement.

Equitable remedies for breach: The Barns v Barns case also highlighted the availability of equitable remedies, such as constructive trusts, in cases where a party breaches the terms of an inheritance contract. This provision has empowered beneficiaries to seek appropriate remedies and ensure that the agreed-upon distribution of assets is upheld.

Contact expert legal professionals when estate planning

The Barns v Barns decision reinforces the importance of seeking professional legal advice when drafting inheritance contracts or deeds of mutual wills to ensure they are properly constructed and comply with all legal requirements.

It’s also important that such a contract or deed – as with any type of will – be periodically reviewed and if necessary, updated to reflect any changes in circumstances or intentions. Failure to do so may result in unintended consequences or legal challenges, a reminder that when creating such an important legal document, careful consideration, expert legal advice and meticulous drafting is essential. Contact Felicio Law Firm if you need more information on this important topic today.

To read part I: Understanding How Inheritance Contracts Work

May 03

Pt I: Understanding How Inheritance Contracts Work

By Felicio Law Firm Estate Planning

In Australia, individuals have the freedom to distribute their assets as they see fit through their wills. However, there are situations where couples or families may wish to establish a legally binding agreement regarding the collective distribution of their estates, ensuring that their wishes are respected and their legacy is preserved. This is where inheritance contracts, also known as deeds of mutual wills, come into play.

What are inheritance contracts or deeds of mutual wills?

An inheritance contract, or a deed of mutual wills, is a legal agreement between two or more parties, typically spouses or partners, that outlines the distribution of their combined estates after their deaths. It is a binding contract that ensures that the terms of their wills cannot be changed or revoked without the consent of all parties involved.

These contracts can take various forms, such as:

Joint will: In this arrangement, both parties create a single will that outlines the distribution of their combined assets after their deaths.

Mutual wills: Each party creates a separate will, but they agree not to revoke or alter the provisions concerning the distribution of their estates without the consent of the other party.

Hybrid: This approach combines elements of both joint and mutual wills, where certain parts of the will are mutually binding, while other sections can be changed independently.

Legal requirements for inheritance contracts

To ensure the validity and enforceability of an inheritance contract in Australia, several legal requirements must be met:

Contractual capacity: All parties involved must have the mental capacity to enter into a legally binding contract. This includes being of sound mind and understanding the nature and implications of the agreement.

Formalities: Inheritance contracts must be in writing and properly executed, often requiring the involvement of legal professionals and witnesses.

Consideration: In contract law, there must be some form of consideration exchanged between the parties. In the context of inheritance contracts, the mutual agreement to distribute estates in a particular manner is typically considered sufficient consideration.

Compliance with the Succession Act: The terms of the inheritance contract must comply with the relevant succession laws and regulations in the state or territory where the agreement is made.

Benefits of inheritance contracts

Inheritance contracts are favoured in particular by long-term married couples or de facto partners and families seeking to secure their legacy. Significantly these agreements provide certainty and stability regarding the distribution of assets, preventing potential disputes or challenges to the will after the death of the parties involved.

By establishing a binding agreement, inheritance contracts can help protect vulnerable individuals from undue influence or coercion regarding their estate planning decisions. By clearly outlining the distribution of assets, inheritance contracts can help avoid the common occurrence where family members who are beneficiaries of the will disagree or argue once the testator or testators pass and the estate is distributed.

In some cases, inheritance contracts can also be used as part of a comprehensive estate planning strategy to minimise potential tax liabilities.

Limitations and considerations

Depending on the specific terms of the agreement, the ability to revoke or vary the inheritance contract may be limited or subject to strict conditions. The agreement not to revoke, without notice to either party to the contract, has been implied by Australian courts from the circumstances of the making of a mutual will, and is a key element of such contracts.

Australian law also requires adequate provision for certain dependants, such as spouses, children, and other eligible persons. Inheritance contracts must comply with these legal obligations.

As circumstances change – including the couple separating, or a decision by one party to dispose of assets within the estate during their lifetime, or a change to the specified beneficiaries – inheritance contracts may need to be reviewed and updated to ensure they remain relevant and aligned with the parties’ wishes.

Speak with our experienced wills and estate legal professionals

Due to the complex legal nature of these contracts or deeds of mutual wills, guidance from experienced estate planning professionals such as our team at Felicio Law Firm is highly recommended. Our experts can ensure the agreement is properly drafted and meets all legal requirements.

To read part II: Barns v Barns, a Landmark Case on the Topic of Inheritance Contracts

Feb 15

What to Expect from the Relationship Between a Client and a Lawyer

By Felicio Law Firm General News

Most people likely hope they will never need the services of a lawyer during their lifetime but in fact, at some stage many will require professional legal advice. Whether it’s guidance on making a will, or making an application in a family law matter, or for expertise on a commercial or real estate contract, for example, the services of a lawyer are both necessary and advisable.

The relationship between a client and a lawyer is a well-established ‘fiduciary’ one, governed by professional standards legislation for lawyers, to ensure legal professionals act in the best interests of their clients. Lawyers, however, as part of their obligations on being admitted to practice, also have a paramount duty to the court and the administration of justice, which prevails in the case of any inconsistency with any other duty. All lawyers are bound by a code of ethics set out in the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015.

The key aspects of the relationship between a lawyer and their client are discussed in this article, helping a person needing legal advice to better understand how to find legal representation right for them.

A lawyer’s duties in relation to their client

As set out by the Law Society of NSW, a lawyer’s most important duties when they take on a client are:

to act in the client’s best interests;
to be honest and courteous in all dealings in the course of legal practice;
deliver legal services competently, diligently and as promptly as reasonably possible;
avoid any compromise to their integrity and professional independence;
provide clear and timely advice to assist their clients;
follow a client’s lawful, proper and competent instructions;
avoid any conflict of interests;
maintain client’s confidences;
disclose any updates or changes regarding costs to the client, and;
honour any undertakings given in the course of legal practice.

At the outset of the relationship between lawyer and client a key step is disclosure, whereby the legal professional must provide in writing details of how much they will charge the client, including expenses, before they begin the necessary work. The subsequent agreement between lawyer and client is known as a costs agreement or a retainer, which comprises the client’s assent to paying the lawyer and the lawyer’s agreement to fulfil certain obligations.

Under such an agreement the lawyer agrees to act on your behalf; engage other people (eg, accountants, valuers or barristers) to do work on your behalf; and accept certain documents. It should also provide for the solicitor sending the client regular bills clearly setting out the work completed and itemising the costs of each service. A lawyer may ask for some fees to be paid in advance to cover expenses – this money must be held in trust and cannot be paid out without the client’s permission.

Other important aspects of the lawyer-client relationship

A lawyer must follow stringent procedures to maintain complete confidentiality of conversations, correspondence and documents shared between themselves and their clients, with this material only revealed in limited situations. This is known as Legal Professional Privilege (LPP), protecting the rights of individuals to seek legal advice.

A solicitor must avoid conflicts between their own interests, or those of an associate, with the interests of a client. Where a lawyer has previously provided legal advice to or represented a person a client is now in dispute with, they can generally not continue to represent the client. A lawyer is also not able to act for more than one party in the same matter.

A person’s solicitor must provide clear and regular advice on all the client’s legal options and can only progress the matter after taking instructions directly from the client.

Termination of a retainer, including in ‘No win no fee’ arrangements

Once on a retainer a lawyer is expected to act for a client until the legal matter is resolved. Where a client terminates a retainer before resolution of the case, the client will be required to pay for the work done up to that date. If payment is not forthcoming, the lawyer is entitled to retain the client’s documents or other personal property until the fees are paid, known as a ‘lien’.

In personal injury cases, the popular ‘no win, no fee’ costs arrangement generally sees legal fees paid out of any settlement monies awarded to the client. In this situation, if a client transfers their case to a new solicitor, the former legal representative may only release relevant cases files to the new representative if they agrees to pay the former solicitor’s costs. The client will also need to agree for the new solicitor to pay the former lawyer’s assessed or agreed costs out of any settlement monies.

If a lawyer terminates the retainer and stops working for a client before resolution of the matter, they will generally have to return the client’s documents and will not be entitled to payment unless there is good cause, such as a client not paying for expenses, or where a client failed to provide the lawyer with sufficient instructions, or refused to accept and follow the lawyer’s advice, for example.

Speak with our experienced, trusted team

As long-standing, trusted law practitioners, we are happy to provide you with more information on the nature of the lawyer-client relationship as a means to helping you make a decision about the best legal representation for your case. If you need clarification on costs agreements and retainers, our duties in representing you and how we will work to resolve your particular legal matter, contact our expert team at Felicio Law Firm for more information.

Feb 09

Why do Solicitors Engage Barristers?

By Felicio Law Firm General News

While both solicitors and barristers are professionals with legal qualifications, the difference between the two roles is often not well understood by those who don’t have a law degree. In fact, the roles are quite different, with solicitors generally engaging barristers in order to advocate for their clients in court. We’ll explain more about how these important roles differ in this article.

How the roles of solicitors and barristers differ

For most people who need a legal representative, their first contact with a lawyer will be a solicitor within a law practice. Whether it’s a wills and estate matter, a compensation claim, a family law case, a commercial issue or even a more serious criminal matter, contacting a solicitor will generally be a person’s first step in the legal process.

A solicitor can advise a person of their legal rights and responsibilities, and the steps they need to take to progress their legal matter to an acceptable resolution. A solicitor will do a lot of the ‘leg work’ involved in making a legal claim – collecting evidence, drafting correspondence, contacting insurance companies, managing files and preparing applications to courts and other bodies in relation to the matter.

Another thing a solicitor will do is contact a barrister either to represent their client as an advocate in court, or to provide specialist advice in the client’s particular matter.

In contrast to solicitors, barristers do not generally deal directly with clients and their day-to-day legal issues. A barrister is usually a specialist in arguing on behalf of the client before a judge or judges, and/or is a specialist in a particular area of the law, such as contracts, defamation, or criminal defence, for example.

In their work barristers are obliged to comply with what is known as the ‘cab rank rule’, which means they must generally accept any brief brought to them by a solicitor that is within their area of expertise, regardless of their own personal opinion of the matter.

A barrister must accept a brief from a solicitor to appear before a court in a field in which the barrister practises if:

the brief is within the barrister’s capacity, skill and experience;
the barrister would be available to work at the time required and is not already committed to other work which would prevent them from working in the client’s best interests;
the fee is acceptable (the barrister is obliged to disclose the proposed fee in the same way as a solicitor); and
the barrister is not obliged or permitted to refuse the brief. Situations in which a barrister is obliged to refuse a brief include where there is a conflict of interest.

An easy way to spot a barrister, as opposed to a solicitor, is the formal wig and gown they wear in (and also, often, to and from) court.

Briefing a barrister

The decision by a solicitor to engage a barrister on behalf of a client will often be confined to large, weighty legal matters such as a criminal trial or a major commercial dispute. Once engaged, a barrister takes instruction from the solicitor, who briefs the barrister on the intricacies of the case and provides all the relevant evidence, witnesses and other legal information. The barrister then works as an advocate in the court on the client’s behalf as well as provides specialist advice.

Deciding on whether a barrister is needed

A person who needs legal representation will be advised by a solicitor whether they also need a barrister to achieve the outcome they desire. It should be noted that the roles of a solicitor and a barrister often overlap, and legal professionals dubbed ‘solicitor advocates’ often perform a role very similar to a barrister in lower courts for matters such as drink driving, AVOs and smaller drug matters. But in general, barristers are engaged because of their experience and talent in conducting cases in court when a trial is necessary, while the solicitor manages the large administrative workload inherent in any legal matter.

If you’re unsure about the distinction between a solicitor or a barrister, and whether you need one or the other for your legal matters, contact our highly experienced team at Felicio Law Firm for more information as soon as possible.

Jan 22

Everything You Need to Know about the Introduction of Voluntary Assisted Dying in NSW

By Felicio Law Firm Family Law

In a landmark move, New South Wales has recently become the last state in Australia to provide individuals with the option of Voluntary Assisted Dying (VAD). This significant development reflects years of work by campaigners and a wider community debate about end-of-life choices and the right to die with dignity.

This article provides more detail on the introduction of VAD in NSW, which is available as of November 28, 2023, in particular the criteria which govern this particularly sensitive and complex area of health management.

More detail on the new Voluntary Assisted Dying law in NSW

In order to take advantage of the VAD law in NSW, the essential criteria are as follows:

A person must be diagnosed with at least one disease, illness or medical condition that:
- is advanced, progressive and – on the balance of probabilities – will cause death within six months, or 12 months for neurodegenerative conditions, and;
- is causing suffering that cannot be relieved in a manner the person finds tolerable.
An eligible individual must also have:
- decision-making capacity in relation to VAD, meaning they comprehend and remember everything related to a VAD decision and its consequences, and are able to clearly and coherently communicate their decision;
- be acting voluntarily and not because of pressure or duress from another person;
- be aged 18 or over;
- be an Australian citizen or permanent resident who has lived in NSW for at least 12 months;
- have an enduring request for VAD.

In addition, the VAD Act emphasises the importance of an individual acting with informed consent, meaning they are fully informed about their medical condition, prognosis, and the potential implications of choosing this method of death. This step includes exploring alternative options such as palliative care.

Once eligibility is established, how does a person access VAD?

The Act mandates a comprehensive medical assessment by two medical practitioners, including at least one with expertise in the relevant condition. This process involves the eligible person making a first request to a medical practitioner, of their own volition and not as part of an advanced health directive or through an enduring power of attorney. This first request must be decided within two days, after which the practitioner will refer the individual to a second assessor.

If the second assessment confirms eligibility for VAD, a second request to access the law must be made in front of two independent witnesses. A third request is then made to the co-ordinating practitioner (generally the doctor who received the first request) – with a period of at least five days between the first and last request – where a doctor will check the individual is still eligible as a candidate for VAD. This final request demonstrates the person’s wish to proceed represents a sustained and informed desire. A person may change their mind about VAD at any stage of this process.

An individual who wishes to access VAD must retain capacity to make an informed decision throughout the steps described above. Loss of capacity between initially making the decision and a final request means a person cannot go forward with VAD. Likewise, a person who it is suspected to be suffering from dementia, depression or some other impairment of their reasoning process, will be referred for specialist help before being able to undertake the VAD steps.

Proceeding to the VAD process

Once a person decides to proceed with VAD and passes all eligibility tests, they may self-administer the drug or have a practitioner do so with the guidance of the co-ordinating medical practitioner.

Only medical practitioners trained and registered to provide this service can administer the medication, and there are specific guidelines to ensure a peaceful and dignified process. A doctor acting as a coordinating or consulting practitioner must have at least one years’ experience if they are a specialist, or 10 years’ experience as a general practitioner (GP). An administering practitioner must be a specialist, a GP with at least five years’ experience, an overseas-trained specialist with the appropriate registration, or a nurse practitioner.

There is mandatory training for health professionals involved in a VAD decision which covers their legal obligations, the strict eligibility criteria for the patient and how a practitioner assesses whether an individual meets those criteria, including identifying any signs of pressure, duress or coercion by others towards the requesting individual.

Need more information? Discuss your case with our understanding team

The introduction of Voluntary Assisted Dying in NSW represents a significant step in the evolution of end-of-life care, acknowledging the complex and deeply personal nature of the choices individuals face when confronted with unbearable suffering. The criteria established by the Voluntary Assisted Dying Act 2021 attempts to strike a delicate balance between compassion for those in pain and the need for strict safeguards to prevent abuse. If any of the information offered in this article raises questions or concerns for you, contact our professional team at Felicio Law Firm and we can provide more detail on the steps involved for you and your family.

Jan 15

What’s Involved in Acting as a ‘Litigation Guardian’ in Australia’s Federal Circuit and Family Court

By Felicio Law Firm Family Law

In some situations a person is not physically or mentally well enough to take part in family law proceedings in Australia’s Federal Circuit and Family Court of Australia (FCFCOA), lacking the capacity to manage their case or instruct legal representatives. The elderly, the disabled and the chronically ill are examples of people who may require a litigation guardian.

In such cases, as a measure of last resort, a ‘litigation guardian’ may be appointed in their place. The guardian is empowered to do anything for the benefit of the litigant that they would be ordinarily allowed to do in the proceedings. In matters heard by the FCFCOA, the need for a litigation guardian may arise in family law matters such as divorce, child custody, or property settlements.

This article looks more closely at how a litigation guardian is appointed in FCFCOA proceedings.

When is a litigation guardian needed?

Firstly, it’s important to note that the Court begins with the presumption that a person does not require a litigation guardian unless there is evidence to prove otherwise. Where a person does not understand the nature or consequences of the court proceedings, or cannot conduct their case or give instruction to legal representatives for how the case should be conducted due to some incapacity, then a litigation guardian may be necessary. It should also be noted any person under the age of 18 requires a litigation guardian.

Who can be a litigation guardian – and the appointment process

Those who are eligible to be a litigation guardian are:

an adult;
persons who have no interest in the proceeding adverse to the interest of the person needing the litigation guardian, and;
persons who can fairly and competently conduct the proceeding for the person needing the litigation guardian.

A person who is a guardian of another person under state legislation – known as ‘a manager of the affairs of a party’ – is entitled to be the litigation guardian provided the party does not understand the proceedings, or is not capable of conducting the proceedings.

If a suitable person is not available to serve a party as a litigation guardian, the Court may request that the Federal Attorney-General appoint a person to be a manager of the affairs of the party to then act in the role.

A litigation guardian is appointed through an application to the Court by an incapacitated litigant, or through the Court’s own initiative. The application can be made either before proceedings begin or during the course of the matter, and must be supported by an affidavit setting out the facts as to why the party needs a litigation guardian. The person seeking appointment as the litigation guardian must also provide an affidavit consenting to the appointment. The court considers the circumstances of the litigant and may appoint a family member, friend, or professional guardian.

Once appointed, the litigation guardian must provide notice of their appointment to other parties and any independent children’s lawyer. The Court may also make orders about the payment of the costs and expenses of the litigation guardian.

Responsibilities of a litigation guardian

The litigation guardian must at all times act in the best interests of the incapacitated party as their paramount duty. This duty extends to both the legal strategy pursued during the proceedings and decisions related to settlement negotiations. Courts closely scrutinize the actions of litigation guardians to ensure that they align with the wellbeing of the person they represent.

For elderly or unwell litigants, the guardian must be acutely aware of the party’s potential cognitive impairments, health-related issues, and emotional vulnerabilities. The guardian must work closely with the litigant, legal representatives, and healthcare professionals to ensure a comprehensive understanding of the individual’s needs and preferences.

Clear and effective communication is paramount when acting as a litigation guardian for elderly or unwell litigants, maintaining open communication with the litigant, legal representatives, and other relevant stakeholders. In family law matters, the role of a litigation guardian becomes particularly complex. Decisions related to child custody, spousal support, and property settlements require careful consideration of the individual circumstances of the incapacitated party. The guardian may need to collaborate with family members, healthcare professionals, and financial advisors to make informed decisions.

Litigation guardians must also diligently adhere to court procedures and deadlines – from diligent filing of necessary documents, attending court hearings, and participating in mediation or settlement conferences. Failure to meet these requirements can have serious implications for the case and the wellbeing of the incapacitated party.

Termination of a litigation guardian

The court has the authority to review and, if necessary, terminate the appointment of a litigation guardian. This may occur if there are concerns about the guardian’s ability to act in the best interests of the incapacitated party or if the circumstances that led to the appointment have changed.

Seek expert legal advice

Acting as a litigation guardian in the FCFCOA for litigants unable to conduct their case is a challenging yet essential role. Particularly for elderly or ill litigants, the guardian must not only understand the legal complexities of the case but also navigate the litigant’s unique needs and vulnerabilities.

The guidance and advice of experienced family lawyers can be absolutely crucial in the appointment of a competent litigation guardian who protects and manages the litigant’s best interests. At Felicio Law Firm our expert team can provide you with the right advice if you need a litigation guardian to represent you at the FCFCOA to ensure your case proceeds as smoothly as possible.

Dec 04

The Importance of Appointing an Alternative Executor When Making a Will

By Felicio Law Firm Estate Planning

Creating a will is an important and foresightful act to ensures one’s assets are distributed according to their wishes after their passing. When a person drafts a will, selecting an executor is one of the most crucial decisions they make as this person or persons are entrusted with the responsibility of distributing assets to beneficiaries and ensuring a smooth transition of the estate. An executor is often a close family member, friend, or legal professional whom the testator deems trustworthy and reliable.

Life, however, is inherently unpredictable. An appointed executor’s ability to fulfil their role may be hindered by any number of circumstances, including their own passing or losing their legal capacity to carry out their duties. Under succession laws, where the executor is also a beneficiary of the will, they must survive 30 days after the passing of the testator in order to receive any disposition of property in the will.

These rare but not unheard of situations establish the wisdom of a testator appointing an alternative executor, who can carry out the original executor’s duties. If the alternative, or substitute executor is called on to act, they are bound by the same legal responsibilities and fiduciary duties as the original executor.

In some situations, however, where an executor is also the sole beneficiary, a clause in the will may provide for other beneficiaries to become executors in the event the original executor is unable to perform the role. But if the original executor remains alive they are unable to become executors. We’re look more at this situation and how alternative executors are appointed in this article.

Why appoint an alternative executor

Appointing an alternative executor has a number of advantages. Firstly, it acts as a safeguard, ensuring that the testator’s intentions are carried out in a timely manner when the appointed executor is unable to carry out their duties. Timely distribution of the estate is essential to meet legal obligations and provide beneficiaries with the resources they need, particularly once probate of the will has been granted.

Appointment of an alternative executor can also be important in preventing or mitigating legal challenges. In situations where the original executor faces legal disputes or is unable to perform their duties due to litigation, the alternative executor can step in and try to minimise the risk of contested probate.

There are also obvious disadvantages to the appointment of an alternative executor, including where there is disagreement or significant difference between the original and alternative executors on interpretation of the testator’s intentions. An alternative executor may also introduce more complexity in decision-making, particularly if there are differing perspectives on asset distribution or estate management. This potentially complicated situation underscores the importance of selecting individuals who share a common understanding of the testator’s wishes.

What to do when the original executor can’t perform the role

A person making a will is strongly advised to obtain written agreement from their nominees as executor before including them in the will, and also regularly check on them once named to ensure they are willing and able to administer the estate.

Many people will name more than one executor so that in cases where an executor dies before the will is administered, another executor assumes responsibility. If there is no ‘back-up’ executor named, an application may be made to the Supreme Court by another beneficiary or even a creditor to be appointed as administrator of the estate.

If an executor is unable to perform their duties for reasons including ill health, unsound mind or prolonged absence (among others), and no substitute executor is named, beneficiaries or other interested parties can apply to the Supreme Court to have the executor ‘passed over’ – meaning they are removed before they have the chance to act in the role.

The Court considers what is necessary for the due and proper administration of the estate and the interests of its beneficiaries. It will also consider whether the executor is temporarily or permanently incapacitated. A limited order may be made appointing someone to act on the executor’s behalf while they are incapacitated or, if the incapacity is permanent, appoint someone to take over permanently as executor.

Importance of appointing the right person as executor and regularly reviewing a will

The issues discussed in this article reinforce the importance of appointing a person who is willing and able to perform the duties of executor in your will. Equally important is regularly reviewing the document to ensure the appointment remains realistic and actionable. Spouses often appoint each other their executors (and sole beneficiaries) and then forget about the document. Years pass and the testator dies and the spouse is unable to perform the duties due to lack of capacity but no alternative executor was appointed. This situation can potentially lead to the testator’s wishes for their estate not being carried out.

If you need guidance on this issue, please contact our wills and estate experts at Felicio Law Firm today for timely advice on how to ensure you have all bases covered when it comes to your will.

Nov 28

Recent Amendments to the Family Law Act: What it Means for Parental Responsibility and Equal Time With Children

By Felicio Law Firm Family Law

Australia’s Family Law Act 1975 (‘the Act’) provides the framework for deciding parental and financial arrangements when couples separate or divorce. One of the important presumptions within the Act since 2006 has been that of equal shared parental responsibility (ESPR) of children from the relationship. This presumption – which can be rebutted by evidence from either party – represented a shift away from notions of ‘sole custody’ to encourage parents to make joint decisions in the best interests of their children.

But the passing of the Family Law Amendment Act on October 19, 2023 brings a number of significant changes to the Act, with one of the most notable the removal of the presumption of ESPR. The overriding concern in making a parenting order no longer involves ESPR but instead focuses on what is in the child’s best interest, considering six factors (plus two additional ones for Aboriginal and Torres Strait Islander children) including a child’s safety, the child’s own views, the benefit of having relationships with both parents, and the child’s developmental, psychological, emotional, and cultural needs.

This article looks in more depth at this landmark change and what it means for those seeking parenting orders through the Federal Circuit and Family Court of Australia. It’s vital to seek professional legal advice in family law matters, particularly in light of the recent amendments.

More on ESPR and why it has been removed

Under the 2006 framework, there was a strong presumption that it was in the best interests of the child for parents to share equal responsibility for major decisions, such as education, health, religious and cultural upbringing.

Section 61DA of the Act provides for ESPR in parenting matters. The presumption does not apply if there are reasonable grounds to believe that a parent has engaged in child abuse or family and domestic violence, and can be rebutted if the court determines it is not in the best interests of a child to apply the presumption. Until the recent amendments, if the Court made an order under this section for ESPR, it was also obligated to consider – under section 65DAA of the Act – whether an order should be made for children to spend ‘equal time’ between separated parents, if it is reasonably practicable and in the best interests of a child to do so.

The result in practice has been confusion for parents, many of whom believed that an order for ESPR also meant they were entitled to equal time with children. This was not the case and often resulted in unnecessary litigation and unrealistic expectations in applying to the Court for parenting orders.

A further motivation for the amendments is acknowledgment of the diverse nature of modern families, ensuring Australia’s family law is more inclusive and accommodating of a range of family structures and dynamics. The additional flexibility the amendments provide allow for a more nuanced and individualised response to each family’s circumstances.

What do the changes mean in practice?

Under the new amendment, the Court may make a parenting order with the flexibility to give one parent the responsibility for making long-term decisions about the child’s upbringing, or it may provide for joint decision-making. An order may also stipulate that one parent has sole responsibility for certain issues related to raising the child, but that major long-term issues require joint decision-making between the parents. The allocation of responsibility for major long-term decisions is to be based on what is in the child’s best interests, as set out in section 60CC of the Act.

When the Court makes an order for joint decision-making about any issue related to the child, the parents are required under section 61DAA to:

consult each other person with joint responsibility in relation to each such decision; and
make a genuine effort to come to a joint decision (if it is safe to do so, i.e. family or domestic violence is not present).

Under section 61DAB of the amendments, once an order has been made about parental responsibility for major long-term decisions about a child, the parent the child lives with is not required to consult the other parent about minor, day-to-day issues related to the child’s upbringing.

Similarly, the changes make it clear that third parties involved with the child, such as schools, sports clubs and medical practitioners, for example, do not need to first establish a joint decision has been made about the child if they have communicated with the parent who has decision-making responsibility.

The amendments also formalise the principle first espoused in the case of Rice v Asplund (1979) FLC 90. That is, where a parenting order has been made and one party wishes to vary or set it aside, that party must show that there has been a ‘significant change in circumstances’ relating to the child, and that it would be in the best interests of the child for the final parenting order to be changed.

Speak with our family law experts

The best interests of the child has always been the paramount factor in Court decisions on parenting orders but the concept has additional primacy now that ESPR is no longer in effect. While it’s not expected the amendments will significantly change the nature of parenting orders made by the Court, the changes may lead to some parents seeking an order to be re-opened and varied based on a change in circumstances. Others may undertake new legal action if they are denied joint decision-making responsibility or believe they will see their child less under the new laws.

This is a sometimes difficult and emotionally draining area of the law. If the issues discussed are pertinent to your situation and you need more information or guidance, contact our understanding family law team today for the right advice.

Oct 30

What to Do if You are Arrested by Police in NSW

By Felicio Law Firm Criminal Law

Whether you’ve done anything unlawful or not, being arrested by the police is a distressing and often confusing experience, one in which it’s important to be aware of your rights and responsibilities.

There are certain things police can and can’t do when they arrest a person in NSW, which is the subject of this article. Firstly it’s important to acknowledge that should you be arrested by police, it’s crucial to remain calm and cooperative despite your fear of the situation. The next thing to do is make contact with a legal representative with experience in criminal law matters as soon as possible.

What happens when the arrest takes place

Under the Law Enforcement (Powers and Responsibilities) Act 2002 in NSW, police have the power to arrest any person who they reasonably suspect of having committed an offence, or who is about to commit an offence. Police can also arrest a person if there is a warrant for their arrest, if they have breached bail conditions, failed a roadside breath test or if they have breached the peace.

When conducting an arrest, the police officer should make it clear they are, in fact, arresting you and give you instructions on how to comply with the order, such as coming with them to a police station. They should also provide their name and place of work. Police are permitted to use reasonable physical force to conduct the arrest but if you believe the force used was unreasonable, advise your legal representative as soon as possible after the arrest.

A person being arrested is perfectly entitled to ask why they are being arrested and the nature of the offence police believe they have committed.

You do not need to answer any police questions and police are not able to arrest you simply to answer questions as part of an investigation. Ideally you will have a legal representative with you before you answer any police questions. It’s important to note, however, that resisting lawful arrest is a serious offence and so the wisest course of action is to comply with police requests, even if you know you are innocent of the offence they suspect you committed.

What happens after you’ve been arrested

Generally speaking police will take an arrested person to a police station to conduct an interview as part of an investigation. They will ask you for basic details such as your name, address and occupation, and possibly take fingerprints and photographs. A search of your person may also be conducted but it is limited to a search of outer garments and bags and/or scanning by a metal detector. The search must be conducted so as to preserve a person’s dignity and respect.

The station’s custody manager will then inform you of your rights to contact a relative, friend or legal representative. You must also be informed that you will be held for a period of six hours. After being held for that period police must seek a warrant to hold a suspect for an additional eight hours. You may then be subjected to an interview about the alleged offence, where you should have a legal representative present, as is your right. You have the right to not answer any specific questions, unless compelled by a specific law (such as investigations into terrorist activities) to do so. An arrested person also has the right to an interpreter, if required, and medical treatment if needed.

Police must inform you that any answers you give may be used in evidence against you in court, which requires you to be cautious about making any statements without legal advice. A special caution must also be given to those arrested on a serious indictable offence – one punishable by a term of imprisonment of more than five years – indicating that a failure or refusal to mention something that is later relied upon in court may harm the arrested person’s defence. This caution must be given in front of the person’s lawyer.

Police may then charge you with a crime before a Magistrate or release you. A person may not be held for an unreasonable period without being charged.

To protect your rights and gather evidence, it is advisable to document the arrest process as much as possible. This might include taking note of the names and badge numbers of the arresting officers, recording the time and location of the arrest, and collecting contact information from any potential witnesses.

Seek urgent legal advice

As is clear from the information in this article, it is crucial to seek legal representation as soon as possible if you’ve been arrested. At such a stressful time, most people are unaware or forget their rights when faced with allegations of criminal behaviour. At Felicio Law Firm, we have wide experience in criminal law matters and can provide prompt, clear advice on what you should do if arrested by police. If anything raised in this article is relevant to your situation, contact our professional team now.

Oct 24

The Importance of Making Binding Nominations of Beneficiaries in a Self-Managed Superannuation Fund

By Felicio Law Firm Estate Planning

Self-Managed Superannuation Funds (SMSFs) have become an increasingly popular choice for Australians seeking to take control of their retirement savings, offering flexibility and autonomy about which type of investments they want to make, including property, shares, and other assets.

SMSFs also offer other advantages including tax benefits, lower fees and charges, and more estate planning options when it comes to the transference of wealth from one generation to the next.

An important aspect of that last advantage is the making of binding death benefit nominations (BDBN) of beneficiaries, determining a person’s superannuation benefits are distributed upon their death. A BDBN is particularly important in safeguarding assets when estates are disputed by beneficiaries.

Why binding death benefit nominations are important

A BDBN is a legally binding document that directs the trustee of a person’s SMSF on how to distribute the deceased member’s superannuation benefits. A BDBN can specify who the beneficiaries are and the proportion of benefits each beneficiary is entitled to receive. In the absence of such a nomination, the trustee of the SMSF has discretion on how the funds are distributed, often leading to dispute. In the context of a contested estate, BDBNs provide:

Clarity and certainty about how the deceased member’s superannuation benefits will be distributed, ensuring their final wishes are respected as to who receives distributions from the fund.
Pre-empting costly and time-consuming legal challenges by specifying the intended beneficiaries and the distribution of assets. When beneficiaries are already defined in the nomination, it becomes more difficult for disgruntled family members to contest the distribution.
Protection of vulnerable beneficiaries, such as children or dependent family members. A BDBN safeguards these interests by legally obligating the trustee to follow the member’s instructions. This is particularly crucial when there are concerns about vulnerable beneficiaries being left without support.
Tax efficiency for beneficiaries, with the BDBN allowing them to plan for the most tax-effective distribution and help preserve the wealth for their loved ones.
Simplicity in estate planning by clearly outlining the distribution of superannuation benefits’, reducing the burden on the executor or trustee and allowing for smoother administration of the rest of the estate.

Things to consider when making a BDBN

In most cases it’s important to specify the BDBN is ‘non-lapsing’, as opposed to lapsing. A lapsing BDBN can expire after three years and, if not updated, means the trustee of the SMSF can choose how and to whom the super benefits are distributed. This is problematic if there is a dispute among beneficiaries with various claims on the fund. For this reason it’s essential to regularly review and update BDBNs to ensure they reflect changing circumstances, such as the birth of new family members or the dissolution of a marriage.

BDBNs must also meet certain legal requirements to be considered valid, which is why consulting experienced estate planning lawyers when making one is highly advisable. Witnesses to a BDBN must be over the age of 18 and not be the designated death benefit nominee. The BDBN is also only valid once received by the trustee. It is also part of Australian superannuation law that only dependants of the deceased – being a de facto partner or spouse of the deceased, a child or anyone in an interdependent relationship with the deceased – is eligible to inherit their superannuation death benefits.

The importance of legal advice

Superannuation can be a complex area, with different rules about how benefits are distributed on the death of the member compared with distributions from their will. By specifying the beneficiaries and distribution of assets through a BDBN, SMSF members can ensure their superannuation benefits go to the beneficiaries they intended.

Seeking the assistance of very experienced estate planners like our team at Felicio Law Firm can help you clarify the issues involved and make a valid BDBN to give you peace of mind about how your important superannuation asset will be dealt with once you die.

Oct 01

What to do When Loss of Mental Capacity Prevents the Making of an Enduring Power of Attorney and Guardianship Appointment?

By Felicio Law Firm Estate Planning

Australia’s society is aging as medical science and improvements in diet and lifestyle allow Australian to live longer than they ever did before. But this development comes with a range of challenges – to government budgets, policy-making and aged care – to name a few.

At a more personal level, more people are living to an age where their mental capacity diminishes to the point where they can no longer make informed decisions about their personal, financial, or health matters. This is an important reality to acknowledge in areas such as estate planning and the topic addressed in this article, making an enduring power of attorney (EPOA) or guardianship appointment, with a focus on how solicitors and medical professionals determine mental capacity and the role of the NSW Civil and Administrative Tribunal (NCAT).

Understanding and determining mental capacity

Mental capacity refers to an individual’s ability to make decisions and understand the consequences of those decisions. When a person’s mental capacity declines due to factors such as aging, illness, or cognitive impairment, they may no longer be able to manage their affairs effectively.

In cases of suspected loss of mental capacity, medical professionals play a crucial role in assessing an individual’s cognitive abilities. This assessment typically involves a thorough evaluation of the person’s mental and physical health, including cognitive testing and psychological assessments. A medical diagnosis and evaluation is valuable and essential evidence in determining whether an individual still has capacity to make decisions.

Solicitors, too, are often involved in the process of determining mental capacity, especially when it pertains to legal matters like creating an EPOA or guardianship appointment. While no-one expects a solicitor to have expertise in assessing a client’s mental capacity, they can make a ‘legal’ assessment of the person’s capacity through their dealings with the individual to evaluate their understanding of the legal documents and the implications of their decisions.

The Law Society of NSW recommends solicitors can:

Make a preliminary assessment of mental capacity – looking for warning signs or ‘red flags’ using basic questioning and observation of the client.
If doubts arise, seeking a clinical consultation or formal evaluation of the client’s mental capacity by a clinician with expertise in cognitive capacity assessment.
Making a final legal judgment about mental capacity for the particular decision or transaction.

Role of mental capacity in creating an EPOA and guardianship appointment

An EPOA is a legal document that allows an individual (the principal) to appoint someone (the attorney) to manage their financial and legal affairs when they are unable to do so themselves. It is crucial that the principal has the requisite mental capacity when creating this important document to avoid potential later legal repercussions.

A guardianship appointment differs from an EPOA in that it relates to designating a ‘guardian’ who can make decisions regarding an individual’s health and lifestyle when they no longer have capacity to do so. Choices about care accommodation, healthcare, medical procedures and other personal matters become the responsibility of the appointed guardian.

Role and process of NCAT in EPOA and guardianship matters

When an individual loses mental capacity and has not previously established an EPOA or guardianship, it can create a challenging situation for family members and caregivers who may disagree about the best way to protect the person’s wellbeing and interests. In such cases, NCAT can step in to address the person’s needs and make decisions on their behalf.

NCAT is a legal authority in NSW that specializes in resolving disputes and making decisions related to guardianship, financial management, and other civil and administrative matters. When mental capacity is lacking, and no prior legal arrangements exist, a family member, friend, or concerned party may apply to NCAT for orders regarding the appointment of a guardian or financial manager for the person who has lost capacity.

NCAT will carefully consider all relevant evidence, including medical assessments and input from family members and healthcare providers, to determine the person’s best interests. If necessary, NCAT may appoint a guardian to make decisions related to the person’s healthcare, accommodation, and lifestyle. Additionally, a financial manager may be appointed to handle their financial affairs. NCAT may also review an existing EPOA or guardianship appointment.

NCAT also has the power to regularly review its decisions to ensure that the appointed guardian or financial manager continues to act in the person’s best interests.

Talk to our expert team

The loss of mental capacity is a challenging and sensitive issue for both the individual and their family, with significant legal and personal implications. It’s crucial to consult with legal professionals with experience in elder law and estate planning where an individual with diminished capacity needs to make an EPOA or guardianship appointment, or an application to NCAT is required.

The process of engaging medical professionals to assess capacity, or navigating the requirements of an NCAT application, can be stressful and time-consuming. Contact our friendly and approachable team today if any of the information in this article raises questions or concerns.

Sep 26

Understanding Apprehended Domestic Violence Orders (ADVOs) – Including How to Defend One

By Felicio Law Firm Family Law

Apprehended Domestic Violence Orders (ADVOs) are a key legal tool in NSW to protect individuals from domestic violence or the threat of such violence.

Increasingly domestic violence is understood to encompass a wide range of behaviours within a family relationship, from physical, emotional and financial abuse, to harassment, stalking and coercive control. An ADVO aims to provide immediate protection to victims by imposing restrictions on the alleged perpetrator’s behaviour.

This article provides an overview of ADVOs, including the legal grounds for obtaining one, what happens before the matter is dealt with in court, how to seek an ADVO and how to defend against one.

Understanding the legal grounds for obtaining an ADVO

To obtain an ADVO in NSW, an applicant must establish certain legal grounds, including:

Fear of violence or harm: The applicant for an ADVO must have a reasonable fear of violence, threats, harassment, or intimidation from the alleged perpetrator. This fear must be based on actual or perceived actions, and it can extend to not only the victim but also any other person whom the victim believes is at risk.
Domestic or family relationship: There must be a domestic or familial relationship between the applicant and the alleged perpetrator. This can include current or former spouses or de facto partners, family members, or people living together in a domestic setting.
Acts of domestic violence: The applicant must provide evidence of specific acts of domestic violence, such as physical assaults, verbal abuse, stalking, or any other behaviour that causes fear or harm. These acts must be recent or ongoing.
Protection and safety: The court will consider whether the ADVO is necessary to protect the safety and wellbeing of the applicant and any other person at risk.

Some of the actions a person is prevented from taking under an ADVO includes assaulting or threatening the protected person; stalking and intimidating; destroying or damaging property; going within a certain distance of the other person; attending the protected person’s house, or contacting them.

An ADVO lasts for 12 months from the date the order it was made unless the court specifies a different time period.

What happens before the matter is dealt with in court

The process begins with the victim (or someone on their behalf) filing an ADVO application with the local police station or the court registry. NSW Police will most commonly apply for an ADVO on the basis of a report of domestic violence, even where the alleged victim thinks that the order is unwarranted or unnecessary.

In cases of immediate danger, the court may grant interim orders to provide protection right away to the applicant. These orders can be issued without the alleged perpetrator being present or informed. The police are responsible for serving the ADVO application and any interim orders to the alleged perpetrator. This serves as notice of the legal proceedings.

A person the subject of an ADVO should consult a legal professional with experience in domestic violence matters as soon as possible after becoming aware of the order to discuss the steps they should take to possibly have the order dropped.

The matter will typically be listed for a first court appearance where both parties are required to attend. During this appearance, the court may make further orders, including extending interim orders or setting a hearing date. Both parties will have an opportunity to gather evidence to support their case. This may include witness statements, photographs, text messages, or medical reports.

In some cases, the court may suggest mediation or dispute resolution services to attempt to resolve the matter without a full hearing.

The person who is the subject of the ADVO can defend the application at the first hearing by attempting to prove, on the balance of probabilities, one of the following to the court:

that the complainant or protected person does not fear the defendant;
the complainant does not have reasonable grounds to fear a personal violence offence from the defendant;
it is inappropriate for the ADVO to be made.

A person the subject of an ADVO may also consent to it without admissions, meaning they do not agree with the grounds on which the order was granted. A legal representative with experience in this area may then be able to negotiate with police and/or the other party to amend the conditions of the order. Legal advice is highly advisable before agreeing to an ADVO in this manner as it has the potential to affect current family law proceedings, particularly in relation to parental rights.

A person subject to an ADVO may also file a cross-application against the protected person, claiming that they fear the other person and have reasonable grounds to do so. In the case of this type of application, the court will generally hear both applications at the same time.

An ADVO may be appealed within 28 days of a final order being made by the court. It’s possible the ADVO may be ‘stayed’ – or has no effect, in other words – once the appeal is filed and until it is decided.

What factors influence acceptance of the application?

The chances of being granted an ADVO by the court in NSW depends on several factors, including:

The strength and reliability of the evidence – witness statements, photos, text messages, and medical reports can all play a significant role in supporting the application.
Credibility of both parties – in considering an ADVO application, the court will assess the consistency of the statements and any evidence presented by both parties.
Testimony of witnesses – first-hand accounts of the alleged domestic violence may strengthen the applicant’s case.
Conduct and past incidents – the court may consider any past examples of domestic violence and the alleged perpetrator’s conduct in determining whether an ADVO is warranted.

Other important things to consider

Both parties have the right to legal representation – the presence of a solicitor with experience in ADVO proceedings can be essential to the application being granted.

In some cases, mediation may lead to a resolution that does not require a full ADVO hearing but this depends on the willingness of both parties to engage in the process. In cases where there has been long-term or repeated instances of serious domestic violence, mediation is unlikely to be a suitable suggestion.

The court’s primary concern is the safety and wellbeing of the victim and any other person or persons at risk. If the court determines that an ADVO is necessary to provide protection, it will issue the order, outlining the conditions and restrictions imposed on the alleged perpetrator.

Our expert team can help

Family law matters, including how to approach domestic violence matters, are one of our specialities at Felicio Law Firm. We can advise on ADVO whether you need urgent protection from the violence of a partner or family members, or you are the subject of an ADVO you believe is unwarranted or unnecessary. Call our professional team today for more details on anything raised in this post.

Aug 14

Why you should check whether your strata scheme has complied with the new reporting requirements if you're buying or selling property

Why You Should Check Whether Your Strata Scheme Has Complied with New Reporting Requirements if You’re Buying or Selling Property

By Felicio Law Firm Property Law

Designed to enhance transparency and accountability in the strata management sector, NSW Fair Trading launched the NSW Strata Hub online portal on April 1, 2023. The portal’s purpose is to streamline reporting obligations for strata management companies and create a more efficient and accessible system for managing strata schemes.

The online portal followed the implementation of the Strata Schemes Management Amendment (Information) Regulation 2021 (‘Information Regulation’), introduced to address long-standing issues in the strata management sector, including inadequate reporting, lack of transparency, and the challenges faced by owners in accessing vital information about their strata schemes.

The hub is also designed to improve monitoring of maintenance and defect management in more than 83,000 strata buildings across NSW.

Under the new regulation, strata management companies were mandated to submit comprehensive reports on their clients’ strata schemes by December 31, 2022. These reports provided crucial financial data, operational details, and other relevant information for the purpose of creating a centralised database of strata scheme information accessible to owners, tenants, and other stakeholders (including local council and emergency services).

These stakeholders plus other authorised individuals are able to log in to the portal to securely view essential information such as financial statements, meeting minutes, maintenance schedules, and insurance details.

Other key information entered on the portal includes:

Strata plan number and address;
Number of lots;
Classification as residential, commercial or mixed use, for example;
Contact details for the strata committee, strata managing agent, building manager, etc;
Date of most recent annual general meeting;
Cash balance held within the capital works fund (updated annually);
Due date for annual fire certification; and
Insurance replacement value.

Deadline for compliance

NSW Fair Trading set a final deadline of June 30, 2023 for all strata schemes within the state to comply with the regulation. The introduction of this grace period was designed to allow strata schemes extra time to gather and organise their data to make the transition to the NSW Strata Hub effective. Non-compliant schemes face potential penalties and restrictions until they fulfil their reporting obligations – these are not intended to be punitive but to encourage compliance for overall improvement of the strata industry in NSW.

For those buying or selling a property within a strata scheme, it’s important to consider whether the scheme has complied with the regulation. Those schemes that embraced the new reporting system have provided confidence for owners, tenants, and prospective buyers, and easier access to financial records so that owners have sight on how strata levies are employed for greater financial accountability.

An additional claimed benefit is improved communication between strata managers and owners, with prompter responses to queries and concerns on issues such as property maintenance and improvement, and faster dispute resolution.

Administration and enforcement of the new portal is funded through a lodgement fee of $3 per lot (GST exclusive) with the strata scheme’s annual report, inclusive of parking and other utility lots if they are deemed to be separate lots for levy contributions. The fee will need to be included in the scheme’s annual budget as an ongoing compliance cost.

Seek expert advice if unsure

At Felicio Law Firm, helping both buyers and sellers with the complexities of strata schemes is one of our specialities. If you have questions or concerns about a strata scheme’s compliance with the requirements of the NSW Fair Trading’s Strata Hub online portal, contact us today for a discussion about how we can help.

Aug 04

What is the Difference Between Buying a Business Through a Franchise or a Licence Agreement?

By Felicio Law Firm Business Law

Two popular ways to get into running a business are through franchise and license agreements, both offering the benefit of allowing an entrepreneur to realise their goals through an established business model. Both types of agreements have different requirements in an operational and legal sense, which we’ll try and address in this article.

What are the basics of each type of agreement?

Franchise agreements: A franchise agreement is a legally binding contract between the franchisor (the established business owner) and the franchisee (the buyer), granting the franchisee the right to operate a business using the franchisor’s brand, products, and systems. In return, the franchisee pays initial fees and ongoing royalties to the franchisor.

The franchise agreement should cover matters such as the key terms of the business, training and support, non-compete clauses, how long the franchise relationship will last, royalty payments, renewal and sale rights, dispute resolution and a termination clause.

License agreement: A contractual arrangement between the licensor (the business owner) and the licensee (the buyer). The license agreement grants the licensee permission to use the licensor’s intellectual property, such as trademarks, patents, or proprietary technology, to operate their business. Unlike a franchise agreement, licensees usually have more independence in operating the business under license.

Typically the license agreement should cover the scope of the property being licensed, the agreed purpose for using the property, confidentiality clauses, exclusivity, payments or royalties, and any rights to transfer the license.

One of the key distinctions between a franchise and license agreement lies in the level of control and support provided by the original business owner. Franchises typically offer a higher level of support, as generally speaking the franchisor will provide comprehensive training, ongoing assistance, and a proven business model. In return the franchisee is also expected to adhere to specific guidelines and standards set by the franchisor, maintaining uniformity across all franchise locations in terms of factors such as business appearance, staff policies, and more.

License agreements, by contrast, tend to grant the licensee more autonomy in operating their business. While they gain access to the licensor’s intellectual property, the licensee will often receive limited other support and guidance. The licensee has the freedom to implement their own business strategies and practices as long as they stay within the terms of the license agreement.

Other key differences between franchising and licensing

When buying a business through a franchise agreement, the franchisee benefits from the established brand recognition and reputation of the franchisor. Customers are more likely to trust and frequent a business with a well-known brand, potentially leading to a faster return on investment.

License agreements, on the other hand, may not offer the same level of brand recognition, as the focus is primarily on accessing specific intellectual property. The success of the business largely depends on the licensee’s ability to market the product or service effectively under their own brand identity.

Franchise agreements will generally involve higher upfront costs than license agreements. In addition to an initial franchise fee, the franchisee is required to pay ongoing royalties to the franchisor, usually based on a percentage of their sales. These ongoing fees contribute to the support and resources provided by the franchisor.

License agreements often come with lower upfront costs, as they typically require a one-time licensing fee. The licensee may also negotiate a share of their revenue with the licensor, but this is usually less than the ongoing royalties associated with franchises.

Legal and regulatory requirements

Franchise agreements are subject to more stringent legal regulations compared with license agreements. In Australia, franchises are governed by the Franchising Code of Conduct, a mandatory regime that forms part of the Australian Consumer Law and which demands specific disclosure requirements, dispute resolution processes, and cooling-off periods for potential franchisees. This ensures transparency and protects the interests of both parties.

License agreements are generally less regulated, offering greater flexibility in their contractual terms. However, businesses should still seek legal advice to ensure that their licensing arrangement complies with relevant laws and regulations.

The importance of expert legal advice

Choosing between a franchise and a license agreement when buying a business requires careful consideration of various factors, including the level of support, brand recognition, costs, and legal requirements. Franchise agreements offer a turnkey solution with established support and a recognisable brand, but they come with higher costs and stricter regulations. License agreements, on the other hand, provide more independence and lower upfront expenses but may require the licensee to take on greater responsibilities for the business’s success.

Ultimately, prospective buyers must assess each agreement based on their individual preferences, circumstances, resources, and long-term business objectives to make an informed decision. At Felicio Law Firm our professional team regularly provide expert advice on the benefits and drawbacks of both franchising and license agreements, and can help clarify the issues involved for you, so contact us today.

Jun 26

How Does the Small Business Restructuring Process Work?

By Felicio Law Firm Business Law

The small business sector is one of the engine rooms of the Australian economy, driving economic growth and employment for millions of people. But running a small business can also be highly challenging in an environment where bigger picture events such as Covid-19 and rising inflation can present a threat to the sector’s growth and survival.

In response, the Australian government introduced the Small Business Restructuring (SBR) process in 2021, aimed at providing a simplified and efficient framework for debt restructuring. SBR allows a small business to create and propose a plan to its creditors to restructure its debts while the directors remain in control of the business and still trading.

In this article we’ll look in more detail at the SBR debt restructuring process and how it empowers entrepreneurs to regain control of their financial future.

Understanding the Small Business Restructuring process

The SBR reform introduced as part of the Australian government’s insolvency reforms allows eligible small businesses with debts up to $1 million to reorganise their financial affairs and operations while continuing to trade. The primary objective of the SBR process is to provide struggling small businesses with a chance to turn around their operations and avoid insolvency, thereby preserving jobs and fostering economic stability.

To qualify for the SBR process, small businesses must meet specific eligibility criteria, including:

being incorporated in Australia;
having liabilities of $1 million or less (exclusive of employee entitlements)
being insolvent or likely to become insolvent;
with none of its directors having been a director of another company that has gone through another Small Business Restructuring or a Simplified Liquidation process within the last seven years;
and, the company is up to date with its tax lodgements and all employee entitlements..

Upon meeting the eligibility requirements, the small business appoints a registered restructuring practitioner to assist in formulating and implementing the restructuring plan. The ASIC website maintains a list of Registered Liquidators, including those who can only take the work of a small business restructuring practitioner.

Developing a restructuring plan: The appointed restructuring practitioner works closely with the small business to develop a restructuring plan tailored to its unique circumstances. The design of the plan should propose strategies and actions to address the company’s financial challenges and give insight into how it can secure future sustainability.

The plan may detail the need for the directors to negotiate with creditors for extended payment terms, debt forgiveness, or partial debt repayment. Under the SBR process, the restructuring plan must be presented to the creditors within 20 business days of the appointment of the restructuring practitioner.

Voting and approval by creditors: Once the plan is presented, the creditors hold a meeting to vote on approving its terms within 15 days. To be accepted, the plan must receive support from a majority in both value and number of the creditors. If the plan is approved, it binds all unsecured creditors, and the small business can proceed with its implementation.

If creditors accept the plan, the company pays what is agreed in the document then is free of the balance of the debt. SBR has quickly become a popular alternative to negotiating a payment arrangement with the Australian Tax Office.

If creditors don’t accept the plan, the company can proceed to choose its preferred course of action, such as another company liquidation process, voluntary administration or other actions.

Effects and benefits of the SBR process: The SBR process provides several advantages for small businesses facing financial distress. Firstly, it offers a cost-effective alternative to traditional insolvency processes, reducing the financial burden on the business. Secondly, it allows business owners to retain control and continue operating, preserving jobs and maintaining relationships with suppliers and customers. Furthermore, SBR facilitates open communication between the small business and its creditors, fostering collaborative solutions and better outcomes for all parties involved.

Seek expert legal advice for more detail on the SBR process

The SBR process in Australia provides a vital lifeline for struggling small businesses, offering a simplified and efficient debt restructuring framework. In uncertain times where the economy is still shakily emerging from the shock of the Covid-19 pandemic, SBR provides a cost-effective and time-saving way for a business owner to try and regain control of their finances and get the enterprise back on its feet.

If you need some expert guidance on utilising the SBR process, contact our friendly team at Felicio Law Firm. We have the skills and experience to offer you the right advice on restructuring debt for your small business.

Jun 23

Disputes When a Parent Gives Money to a Child to Buy a Property: Explaining the Presumption of Advancement

By Felicio Law Firm Estate Planning

A recent case in the New South Wales Court of Appeal, Koprivnjak v Koprivnjak 2023 NSWCA 2, dealt with the presumption of advancement and the application of this equitable doctrine to a property transaction between a father and a daughter.

The case revolved around a payment of $75,000 made by the father to his daughter for the purchase of a real estate property. To understand the dispute, in which the father said the money given to his daughter was a loan, while she claimed it was a gift, it is first necessary to briefly explain the presumption of advancement doctrine.

The legal concept dates back to 17th century England and presumes that transfers of assets from husbands to wives, male fiancés to female fiancés and from parents to children are gifts, in the absence of any evidence to the contrary. In relation to parents and children, as the Koprivnjak case deals with, the presumption is based on society’s expectation that parents naturally intend to advance their children’s interests and promote their financial wellbeing.

The presumption, however, can be rebutted if sufficient evidence is presented to prove that the transfer was intended as a loan or an investment rather than a gift. In this case, a resulting trust may be presumed where the legal title of the property – in this case in the name of the daughter – does not reflect the contributions to the purchase price, so that the person with legal title holds the property on trust for the person who made the contribution.

The details of the Koprivnjak case

In the case of Koprivnjak, the daughter purchased a rental property in Shoal Bay, NSW for $300,000 in 2011. Her father provided $75,000 to his daughter to assist her in purchasing the property, comprising $15,000 for the deposit and a further $60,000 towards the purchase price. The property was later sold and the proceeds placed in a trust account until the dispute between the estranged family members was resolved.

The father argued that the payment was a loan that gave him a beneficial interest in the property, while the daughter claimed it was a gift. The primary issue before the court was whether the presumption of advancement applied, and if so, whether the father had successfully rebutted it.

The court heard evidence from both parties to determine the true nature of the transaction and considered factors such as the relationship between the father and daughter, the financial circumstances of both parties, and the intention behind the transfer. The court noted that the presumption of advancement applies when a parent provides financial assistance to a child, particularly in cases involving property transactions.

The findings of the court

In the first instance the court rejected the father’s claim the property was held on trust for him by his daughter, finding he failed to discharge his onus of establishing a trust to rebut the presumption of advancement. His loan claim, however, was accepted and an order made that the loan and interest be paid to the father from the sale proceeds, with the remainder to be paid to his daughter.

The father appealed the judgement in relation to the trust argument. His appeal was dismissed with costs, the court of appeal finding in the father’s evidence that he could not prove the intention was for the property to be held on resulting trust, determined at the time of purchasing the property.

Instead, the evidence suggested that the father had intended the payment as a gift, supporting the daughter’s claim. The court emphasised that the presumption of advancement can only be rebutted through clear and compelling evidence that demonstrates a different intention.

The judgement cited the High Court case of Bosanac v Commissioner of Taxation [2022] HCA 34 (‘Bosanac’), whereby the court must look at the objective facts and enquire into the parties’ words or conduct at the time of the transaction (or immediately after the transaction) to determine the parties’ objective intention as to who has beneficial ownership of the property.

Lessons from the case and the need for good legal advice

While the presumption of advancement has been described as ‘anomalous, anachronistic, and discriminatory’ by the Australian Taxation Office (in Bosanac), the ruling in the Koprivnjak case reinforces the significance of the doctrine in property transactions between parents and children. Where parents make substantial financial contributions to their children, these transfers are generally presumed to be gifts. The burden of proving otherwise generally requires strong documentary evidence the parent/s intended the money as a loan giving them a beneficial interest in the property.

If you’re still uncertain about how this legal principle operates and are in a family situation where you’re lending money to a child, or receiving funds from a parent for a property purchase, contact our friendly, professional team at Felicio Law Firm before doing so to avoid any later disputes.

Jun 07

What You Need to Know About Adverse Action by an Employer

By Felicio Law Firm Employment

In Australia an employee is protected from ‘adverse action’ by an employer under the Fair Work Act 2009 (‘the Act’). This means that an employer cannot take certain actions against a worker because:

the employee exercises a workplace right – such as expressing an entitlement, benefit, role or responsibility that is provided by a workplace law or instrument, or an order made by an industrial body; initiating or participating in a process/proceeding under a workplace law or instrument; or making a complaint or inquiry to an industrial body or person under law or in relation to employment;
the employee partakes in industrial action against the employer;
of a protected characteristic of the employee, such as their race, gender, sexuality, pregnancy, age, disability, etc.

A worker who believes they have been the subject of adverse action by their employer may bring a general protections application in the Fair Work Commission for compensation for both economic and non-economic loss. In this article, we’ll provide more detail on what constitutes adverse action and the process for making a compensation claim.

It should be noted that an employee may also take adverse action against an employer if the worker threatens or takes action by:

ceasing work in the service of the employer, or;
taking industrial action against the employer.

Examples of adverse action by an employer

Section 342 of the Act provides examples of adverse action, including where an employer:

Dismisses an employee;
Injures the employee in their employment (injury meaning an action or behaviour which can harm a person, such as demoting them or treating them differently);
Alter the position of the employee to their prejudice, or;
Discriminate between the employee and other employees.

These actions may also include an employer’s decision not to hire someone, or where a potential employee is offered different (unfair) terms and conditions compared to other employees, or where an employer ends or refuses to enter into, or alters, a contract with an independent contractor.

Deciphering the language of the Act with examples, employers must be cautious about taking action against an employee who takes leave to care for a sick relative, or who raised a health and safety concern about the workplace.

Conversely, not all actions by an employer will fit the adverse definition. Offering a worker a lower salary because they lack experience, or refusing to employ a job applicant because they do not meet all the criteria for the position (such as possessing a driver’s licence, for instance), or a supportable decision to make a person’s role redundant, are examples of management decisions that may not be described as adverse action.

Other protections in the Act guard against coercion, undue influence or pressure, misrepresentation or inducement in a range of matters, including a person’s characteristics. The only exception to these protections is where the action is permitted by discrimination legislation or is taken because of the inherent requirements of the position.

What is the process of an adverse action claim?

In a ‘general protections’ complaint, an employee claims adverse action against them based on their expression of a workplace right, involvement in an industrial activity, or on grounds of discrimination. If the employee was dismissed, their application may be for unfair dismissal.

The onus is on the employer to show that the reason for their action against the employer was lawful and not in breach of the general protections. To this end they will generally need to prepare a formal response setting out their defence to the claim. Mediation will then ensue to see if employer and employee can negotiate a resolution to the dispute but if not, will proceed to the Federal Circuit Court, the Federal Court or in some cases, a formal arbitration in the Fair Work Commission.

Remedies for a person who brings an adverse action claim include compensation for non-economic loss and the financial impact of the employer’s action. The Federal Court has unlimited jurisdiction to award damages.

Case example

The High Court of Australia provided guidance on adverse action claims in Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2012] HCA 32. In this case, Mr Barclay, a TAFE team leader who was also a union official, sent an email to union members at his workplace warning of producing ‘false and fraudulent documents’ as part of the Institute’s process of applying for re-accreditation. He was subsequently suspended from his role and brought an adverse action claim.

The trial judge found Mr Barclay was not suspended because of his email but because he had not reported the allegation of fraud to the CEO. The full federal Court overturned this decision on appeal, finding the decision was based on Mr Barclay’s role as a union official. In restoring the trial judge’s verdict, the High Court found among a number of reasons that:

The fact a person claims a protected attribute, such as union membership or activism, does not make them immune from adverse action;
An employer’s reasons need to be ‘substantial’ and ‘operative’ in the decision-making process;
The employer’s reasons for the action need to considered against all the facts and circumstances, including the evidence of the decision making.

The High Court’s decision confirmed that the subjective reasons of the employer are significant and important in working out whether adverse action was taken for a prohibited reason. In conjunction with the decision in Construction Forestry Mining and Energy Union v Endeavour Coal Pty Ltd [2015] FCAFC 76, the High Court has confirmed that a distinction exists between the impact and the exercise of a workplace right by an employee.

Contact our expert employment law professionals

If you’re an employee who believes your employer has taken an adverse action against you, or an employer who has this type of claim brought against you, set up a meeting with one of our employment law experts at Felicio Law Firm. An adverse action claim can be complex, is subject to time limits and require strong supporting evidence to succeed. Our professional team will explain the issues we’ve raised in this article in greater depth to help assess your case.