The Construction Contracts Act 2004 (Act) came into operation on 1 January 2005. The primary aim of the Act is to keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted or complex disputes.
Under the Act if a payment dispute arises under a construction contract in Western Australia, any party to the construction contract may apply to have the dispute adjudicated. The object of an adjudication of a payment dispute is to “…determine the dispute fairly and as quickly, informally and inexpensively as possible.”
Applying for adjudication
To have a payment dispute adjudicated, a party to the contract must within 28 days after the dispute arises:
- prepare a written application for adjudication (the Act provides what information must be included),
- serve it on each other party to the contract;
- and serve it on any agreed prescribed appointer or the body responsible for appointment of the adjudicator.
When does a payment dispute arise?
The Act provides, a payment dispute arises if by the time when the amount claimed in a payment claim is due to be paid under the contract:
- the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full; or
- the claim has been rejected wholly or partially disputed.
Responding to an application for adjudication
After being served with an application for adjudication the other party to the contract has 14 days to respond in writing to the adjudicator and the applicant. Again, the Act provides what information must be included in a written response to an application for adjudication.
The adjudicator’s role and determination
The adjudicator must, within 14 days of being served with a response to an application for adjudication, or if no response has been served, within 14 days of the last date a response could have been served:
- dismiss the application; or
- determine, on the balance of probabilities, how much, if any, money should be paid in respect of the payment dispute and the date when the money must be paid.
When making a determination the adjudicator is required to act informally. The adjudicator is not bound by the rules of evidence and can inform themself in any way they think fit, including requesting more information, inviting the parties to meet in a conference or inspecting the work the subject of the payment dispute.
Effect of determination
An adjudicator’s determination is final and binding. There are very limited rights of appeal.
In the event a party is not satisfied with the determination of the adjudicator, it retains its full rights to go to court or use another dispute resolution mechanism available under the contract.
It is apparently a truth universally acknowledged that a single man in possession of a good fortune must be in want of a wife. These are the famous words spoken by Mrs Bennet in the opening lines of Jane Austen’s Pride and Prejudice.
Regrettably it is also a reality of life that marriages, de facto and same sex relationships often end before “death do us part” and the same “good fortune” must be distributed between two spouses.
When the family business is a major asset of a relationship, the consequences of the relationship breakdown can be financially devastating. When the family business is co-owned by other family members, dividing this asset or funding a payout can be time consuming, costly and complex. Fortunately, family law legislation now provides for the protection of assets including family businesses by way of a “Financial Agreement” between spouses, de facto and same sex couples.
What is a family law Financial Agreement?
A Financial Agreement is a binding contract between the parties to a relationship which deals with how, in the event of a breakdown of the relationship, all or any of the property or financial resources of the parties is to be dealt with. A Financial Agreement can be entered into before or during a relationship or marriage. A Financial Agreement can also finalise the financial relationship between parties after a relationship has ended. Importantly, the Financial Agreement can protect ownership of assets brought into a relationship or acquired during the relationship. The ownership and retention of a business interest can be protected by the agreement and if necessary the parties to the relationship may make the Financial Agreement with one or more other people.
Why have a family law Financial Agreement?
A binding Financial Agreement has the advantage of providing certainty to protect ownership of assets and to avoid the costs (both financial and otherwise) of Family Court litigation in the event of relationship breakdown. The Financial Agreement is also binding on the estate of a party in the event of death, if the parties are separated at that time.
Financial Agreements are common between people entering into their second or later long-term relationship. The agreement can be a means of providing for children of previous relationships. The agreements are also increasingly common between couples who are placing assets in the name of one spouse as a means of asset protection. If the relationship ends, the Financial Agreement can acknowledge and protect the financial interest of the other spouse, irrespective of who is recognised as the legal owner of an asset.
How is a Financial Agreement binding?
For a Financial Agreement to be binding, the following criteria must be met:
- the agreement must be signed by both parties;
- the agreement must contain a statement confirming that each party has received independent legal advice about the effect of the agreement on their rights and about the advantages and disadvantages, at the time that the advice was provided, of making the agreement;
- each party must be provided with a signed statement from their lawyer stating that the abovementioned advice was provided; and
- a copy of the signed statement from the lawyer must be given to the other party or their lawyer.
The circumstances in which a Financial Agreement may be terminated or set aside are very limited. A Court may make an order setting aside a Financial Agreement if, for example, the Court is satisfied that the agreement was obtained by fraud or a party has engaged in conduct that is unconscionable.
What happens in the event of separation without a Financial Agreement?
A Financial Agreement offers people in a relationship the opportunity to contract out of the property settlement jurisdiction of the Family Court.
In the absence of this form of asset protection, the Family Court has extensive powers to divide property and financial resources on the breakdown of a relationship. The assets of a relationship will usually include any assets held by corporate entities and any interest a person may have in the assets and/or income of a Trust. The Family Court now has expanded powers to make orders dealing with property owned by third parties including other family members who may have an interest in a family business.
Ms Kym Kerr, family law principal at Talbot Olivier is an Accredited Family Law Specialist accustomed to dealing with all matters arising out of marriage, separation and domestic partnerships. We are pleased to be of assistance should you have any family law queries and we are happy to provide you with preliminary legal information by telephone or email.
In our experience many companies continue to execute commercial documents incorrectly or not at all. This potentially has implications if a party wishes to rely upon the terms of a contract for example for payment, enforcement, confidentiality, breach and termination.
The commonly accepted methods of executing a document, including a deed at common law, involve the use of the common seal and signature by the directors and secretary, or by the method which is prescribed by the company’s constitution.
Execution of deeds
The prime law governing the execution of deeds by companies is section 127 of the Corporations Act 2001 (2001 Act) and section 10 of the Property Law Act 1969 (1969 Act). The rules are that a deed may be validly executed:
- by a company under seal with a signature of a director and a secretary (section 10 of the 1969 Act and section 127(2) of the 2001 Act); or
- by two directors of the company, or a director and a company secretary (section 127(1) of the 2001 Act); or
- in the case of a sole director company then that director or director/company secretary alone can sign the deed, and the document must be expressed to be a deed (section 127(1) of the 2001 Act).
Execution of other agreements
Section 127 of the 2001 Act also applies to the execution of documents other than deeds. Accordingly an agreement may be validly executed:
- by a company under seal with a signature of a director and a secretary (section 127(2) of the 2001 Act); or
- by two directors of the company, or a director and a company secretary (section 127(1) of the 2001 Act); or
- in the case of a sole director company then that director or director/company secretary alone can sign the agreement, and the document must be expressed to be a deed (section 127(1) of the 2001 Act).
What are the consequences of failing to execute a deed or agreement properly?
An outsider dealing with the company may assume that a deed or agreement has been duly executed by the company if it meets the requirements set out above, as applicable.
However, where a company fails to comply with these requirements, the legal effect is, technically speaking, that there is no contract. Statute law is silent on whether the defaulting party or parties may be allowed to escape from being bound by the contract. It would appear that this would be a decision for a court to determine, based on the facts. Section 127(4) of the 2001 Act, however, makes it clear that section 127 does not limit the ways in which a company may execute a document.
Parties dealing with a company which has, for some reason, failed to properly execute a deed, may find themselves taking comfort from section 127(4). This is because case law suggests that the section may cover the situation where, by virtue of some act, the contract is binding on the company. Hence, a contract not properly executed may nevertheless be treated as a valid and binding contract because the company had represented to an outsider that the contract had been validly executed. In that event the rules of estoppel would operate so that the company would be prevented from denying that the document was binding: Prime Constructions v Westbridge Investments (2004) 22 ACLC 1390 ([2004] NSWSC 861).
For further information or advice on whether your company contracts are validly executed and on associated risks or enforceability, please contact Paul Kordic, Principal, by email at pkordic@talbotolivier.com.au or Louis van Aardt, Senior Associate, by email at Lvanaardt@talbotolivier.com.au
As long ago as 1641, Judge Dodderidge noted that there is almost no-one who has not been an executor, who will not ever be an executor, who will never need an executor or who will not have a legacy paid to them by an executor.
If it is almost inevitable that someone will be, need or receive something from an executor, you think we’d know a lot more about what an executor does. Unfortunately, for many people, the first time they have to consider the duties of an executor is at the same time they are grappling with the emotional turmoil following the death of a loved one.
The first steps
While it is an executor’s duty to organise the funeral, this is generally done by, or in conjunction with, the immediate family of the deceased. The necessary funeral expenses are allowed to be paid prior to any other debts or charges the deceased may have had. An executor does need to be aware that the funeral must be in keeping with the size of the estate – it would be a breach of the executor’s duties to arrange an extravagant funeral that exhausted the deceased’s estate, leaving no funds to meet debts or legacies due to be paid to beneficiaries under the will.
Once the funeral has been conducted, the executor needs to start the process of winding up the estate. The first step in most cases is to apply for a grant of probate. This is the process whereby it is proved that the Will is the last and valid Will of the deceased. As a part of this application, the executor will need to state all of the movable and immovable assets held by the deceased in his or her own name as well as the deceased’s own liabilities, together with respective values. The kinds of immovable assets to be considered include real estate and land, while other assets such as personal possessions, motor vehicles, shares and bank accounts are considered movable. If you are unsure about the value of any asset, getting an expert valuation may be very useful. For liabilities, consider mortgages, loans, credit cards and small debts such as telephone and utility bills.
Example
Jim and Betty have been married for 35 years. Jim recently passed away. He and Betty owned a house as joint tenants and had a joint bank account. They also jointly owned all the furniture and household effects. Jim owned $500,000 worth of Wesfarmers shares and a car which was registered in his name. It is only the shares and car that need to be included in the grant of probate application as these are held solely in Jim’s name.
To obtain a grant of probate, the executor, also called the applicant and the deponent in this part of the process, makes an application to the Supreme Court. Because, in Jim’s and Betty’s case, Jim’s Wesfarmers shares cannot be administered until a probate is granted, it may be worth considering legal assistance with this step because the Supreme Court does have fees for making an application that may not be refundable if a serious mistake is made.
To accompany the application, you will need:
- The original Will and, if there are any, any original codicils;
- The original death certificate and a copy if you want the original returned; and
- An affidavit stating whether or not the deceased married or divorced after the Will was executed.
You will also need to provide the full names and current residential addresses for the witnesses to the Will and any codicils. If you cannot locate the witnesses, you will need to state what you have done to locate the witnesses. This is another area where legal assistance can prove useful.
Administering the estate
The executor should start keeping detailed records of all steps taken in the administration of the estate. Expenses incurred in administering the estate such as the costs of selling assets can be met by the estate. As the executor will need to account to the beneficiaries for all of the estate’s funds, a prudent executor will keep track of all expenditure and income so that any questions the beneficiaries have can be easily answered. An executor is in a similar position as a trustee and as such has a duty to perform the executor’s duties as an ordinary, prudent business person would.
An important consideration at this stage is protection of the assets. An executor takes responsibility for the deceased’s assets so it is very important to ensure that those assets are insured – an executor could end up personally liable to the beneficiaries if those assets are destroyed and insurance has not been renewed!
While there is no death duty payable in Australia, there may be outstanding taxation owed by the deceased. A taxation return will need to be filed with the Australian Taxation Office. If money is owed, it is to be paid out of the estate, and any refund belongs to the estate.
After the funeral and expenses relating to obtaining the grant of probate are met, the executor will need to pay all debts and other liabilities of the deceased. Not all of the deceased’s assets will be available to the estate to satisfy the estate’s debts. For example, if the deceased owned real estate as a joint tenant, then the surviving joint tenant will own the whole of the real estate under the survivorship provisions. Life insurance and superannuation benefits may also be in a protected position. If they are subject to a binding nomination (other than to the estate of the policy or fund holder), they will not available to the estate to satisfy the debts.
Unless an executor is certain about the deceased’s debts, it would be prudent to advertise in a suitable newspaper for any of the deceased’s creditors to come forward to advise the executor of any debts. If an executor does advertise and pays only those debts of which there is notice, the executor can distribute the estate knowing that he or she will not be personally liable for any other estate debts that are subsequently revealed.
In order to meet the estate’s debts, it may be necessary to sell some of the estate’s assets or for the estate to borrow funds. If assets are to be sold, it is important that the executor acts responsibly to ensure that the assets are sold at their market value. Any sale of assets will need to comply with the appropriate processes so expert assistance may be useful at this stage.
Once the debts are paid and there are no known challenges to the Will, the assets can be distributed to the beneficiaries. Gifts under a Will may be specific or general. A specific gift is one that is described in the Will and can clearly be identified as separate from the rest of the estate such as “my piano”, “the grandfather clock in the hallway” or “my 500 preference shares in XYZ Ltd”. By contrast, a general gift is something which can be provided from the estate such as “$10,000 to Mary”. After all other legacies are set aside or provided for, and the liabilities of the estate are met, the remainder of the estate, or residue, can be distributed to the residuary beneficiaries.
When legal advice should be sought
- If an executor considers that the task of administering the estate may prove overwhelming, the cost of using a solicitor to administer the estate instead would be a worthwhile expense and reasonable legal costs can be paid from the estate funds.
- If an executor feels under pressure from one or more of the beneficiaries to deal with the estate in a particular way, engaging a “neutral” solicitor may ensure that each beneficiary feels they are being dealt with fairly.
- If the estate is particularly complex, such as an estate that involves the deceased’s business, or a family trust.
- If it seems that the estate might be insolvent, then the executor should get legal advice as there may be special provisions under federal bankruptcy legislation that applies to the estate.
- If the executor is aware that the deceased has left someone out of the Will who might be expected to be a beneficiary, such as the deceased’s child or de facto spouse, then it is possible that the excluded person might make a claim against the estate under the Inheritance (Family and Dependants Provision) Act. It may be prudent to seek legal advice to ensure that the estate is able to defend such an action.
Dementia is a general term that is used to describe a group of illnesses which result in the progressive decline in a person’s mental capacity. In Australia, dementia ranks as the fourth leading cause of death among the population aged 65 years and over and the risk of being diagnosed with dementia significantly increases as we age.
Dementia affects estate planning and estate administration in various ways.
With respect to estate planning, although a client is generally presumed to have capacity, having dementia rebuts this presumption and can make estate planning very difficult. In cases where a client is suffering from dementia or where an estate planning lawyer suspects a client might be suffering from dementia, as with all estate planning, an estate planning lawyer should consider carefully whether the client has testamentary capacity. Whether or not a client has testamentary capacity is a legal question, but medical evidence is highly relevant.
Among other factors, the following matters should be considered when assessing a person’s testamentary capacity:
- whether or not the client understands the nature of making a Will and the effect of the document;
- whether the client knows the nature and extent of assets of which he or she is disposing under the Will;
- whether the client understands the “moral” claims which he or she should consider when leaving his or her estate, for instance, the claims of his or her spouse or children when deciding who should benefit from the estate. A person does not necessarily need to leave the estate to these individuals, but the individual should be able to show that consideration has been given to these individuals and, ideally, to provide an explanation as to the reasons for what might be regarded as potentially unusual estate planning choices; and
- whether the person could be suffering from any delusions.
If a person who suffers from dementia wishes to make a Will, and is able to pass the legal test, then it is prudent for his or her estate planning lawyer to contact that person’s doctor to request a medical opinion as to whether or not, in the doctor’s opinion, the client has the necessary capacity to make a Will. However, even if the client passes the test and obtains positive medical evidence, there is still no guarantee that having such evidence in place would prevent the Court from later declaring the Will to be invalid, but the evidence is likely to go some way towards supporting the validity of the Will.
The existence of dementia on the death certificate as a contributory cause of death can lead to problems for the executor in obtaining a grant of Probate of the Will as, unfortunately, doctors often fail to specify for how long a person was suffering from dementia. A Will is only valid if, amongst many other things, a person had the relevant level of testamentary “capacity” on the date on which he or she gave instructions to make and then sign the Will.
When considering the contents of an application for Probate of a Will where dementia appears on the death certificate, even if it is only as a contributory cause, third party evidence from both the witnesses to the Will and from the deceased’s general medical practitioner will often be required by the Supreme Court to support the contention that the Will is valid.
For more information on this matter or estate planning generally, please call either Sarah Walton (direct line 9420 7166) or Rob Durey (direct line 9420 7105).
You know who you are. Your family know who you are. So why would your estate planning lawyer require any clarification as to who you are?
From the perspective of estate planning/estate administration, potential problems may arise when people hold assets in different names; for instance, where an individual has changed his or her name as a result of a divorce, marriage or because of a personal preference.
Whilst the individual and the individual’s family may well be aware of the person’s not so “secret” identities, banks, share registries and other asset holding organisations may not be.
Accordingly, problems may arise when it comes to administering a person’s estate and either Letters of Administration or, alternatively, probate of a person’s Will is granted in only 1 or 2 names as the relevant organisations might not know the deceased by that name or names. Because copies of these Supreme Court-issued documents are often required by organisations before releasing a person’s assets, it would make the administration of an estate much more straightforward if the name under which the person holds the asset marries up with the name appearing on the Court-issued document.
To avoid such an issue, before making a Will, it is worthwhile always double checking in what name you hold assets and, if necessary, amending the title to these assets to your correct legal name. Alternatively, raise the fact that you go by another name, or indeed several names, with your estate planning lawyer, so that he or she can make reference to these names in your Will.
When considering what is an alternative name, the presence or absence of a middle name is not normally treated as an alias, nor is the use of a diminutive i.e. if a person is known by the name Sam and his full name is Samuel.
For the purpose of administering an estate, if it becomes apparent that an individual holds assets in several names, it is prudent to apply for a grant of Probate of a person’s Will or Letters of Administration in all of the individual’s names.
For more information on this matter or estate planning generally, please call either Sarah Walton (direct line 9420 7166) or Rob Durey (direct line 9420 7105).
Second and third marriages and two or three long term de facto relationships are becoming more common in today’s society. With the increase in the number of blended families and multiple spouses, “life interests” are often seen as a method of providing a place to live for the current spouse while retaining the actual asset for the benefit of the children from a previous marriage.
“Life interests”, “life tenancies” or “life estates” may be created in personal or real property. It is most commonly used as a term to describe an interest in property for the term of a person’s lifetime.
Generally, the life tenant will have a right to possess and enjoy an asset for the duration of his or her lifetime or until he or she violates a condition of the tenancy. Once the life tenant dies or violates the relevant condition, the ownership of the asset is transferred to the “remaindermen”, who are those persons who are entitled to the ownership of the asset after the life tenant’s death.
The terms of the life interest are commonly set out in a person’s Will or in a deed. Overall, life interests are often seen as a good way of allowing a party to provide for his or her current spouse, via the life interest, while preserving capital for a future generation.
In addition, life interests appear to becoming more popular as a result of more people buying property as tenants in common – that is, each party owns a distinct share (eg 50% or 30%) which he or she can “gift” under his or her own respective Wills. Unlike a joint tenancy, this distinct share does not pass automatically via survivorship to the other owner upon the first owner’s death.
However, life interests are not something that should be entered into lightly and careful thought should be given to a number of aspects of a life interest. The “mechanics” of establishing the life tenancy are fraught with potential difficulties.
For instance:
(a) who should be the legal owner of the property during the currency of the life tenancy? Should it be the executors rather than the life tenant? Should the life tenant be one of the executors of the Will?
(b) what happens if the life tenant needs to sell the property (let’s say, to go into a nursing home)? Can the life tenant (or the executor of the Will on the life tenant’s behalf) use part of the proceeds towards payment of the residential care home bond or would the life tenancy be deemed to terminate?
(c) does the life tenant have a mere right of residency in the property only or does the life tenant have a “real” life tenancy which allows he or she to enjoy all of the fruits of the tenancy, including receiving the net income received from the property by leasing it to a third party if he or she is not able to, or does not wish to, reside any longer in the property?
(d) can the life tenant (or the executor on the life tenant’s behalf) sell the property to purchase a smaller and more manageable property? If so, what happens to any excess funds?
(e) who is to pay for the upkeep and maintenance of the property, in particular, careful thought should be given to whether or not the deceased’s estate (generally, the residuary estate) is to pay for any of the rates and taxes or bills associated with the property. Should there be a separate fund in the Will to pay for these contingencies?; and
(f) are the chattels (personal possessions) in the property to form part of the life tenant’s interest and will items of specific value, such as family antiques, remain in the property?
All theses issues must be considered and the consequences of each decision considered carefully when considering whether to include a life interest or life estate in a Will.
Unfortunately, life interests have a number of serious disadvantages associated with them, including that a life interest can lead to longstanding frustrations between the life tenant and the remaindermen. Life interests can also create considerable uncertainty, in that the remaindermen may never know when they may ultimately receive the benefit of the asset. Life interests may often also add costs and delays to the finalisation of the administration of the estate. Further, life interests can often cause conflicts between the life tenant and remaindermen if the persons who will ultimately receive the property feel it is not being maintained adequately by the life tenant.
The potential negative capital gains tax consequences of life interests should not be overlooked. Typically, the general tax position is that the estate will be entitled to the main residence exemption if the property was the deceased’s home and the property is sold and settlement of the sale of the property takes place within 2 years from the date of the deceased’s death. However, a life tenancy significantly complicates this position and the position becomes even more complicated if the life tenant decides during his or her lifetime to surrender his or her interest in the property and the life tenant and the remaindermen decide it would be best to sell the property. In both cases, significant capital gains tax consequences may flow from a disposal of the property.
Overall, life interests should never be seen as an easy answer to a complex estate planning situation. Whether or not a life interest is appropriate to your circumstances, and the potential repercussions of a life interest, should always be carefully considered by your estate planning lawyer.
For further information please contact our Principal in charge of Estate Planning, Rob Durey at rdurey@talbotolivier.com.au or Sarah Walton at swalton@talbotolivier.com.au .
After several weeks of hearings, on 4 February 2010, the Federal Court handed down a landmark decision concerning internet piracy and the liability of iiNet, an Internet Service Provider to the film industry (iiNet Decision).
Justice Cowdroy of the Federal Court decided that iiNet did not authorise copyright infringement on its network, despite finding that iiNet’s customers had downloaded pirated material.
Facts
For a more detailed background of the case please see our previous article by clicking here.
In the proceedings, AFACT, (on behalf of the film and television studios), alleged that iiNet had authorised copyright infringement by failing to take reasonable steps to prevent sharing and downloading of movies and television shows via the BitTorrent system.
AFACT had collected evidence (whilst posing as an iiNet customer) showing that iiNet’s customers were using the BitTorrent system to download copyrighted movies and television programmes. AFACT sent multiple emails to iiNet informing it of the copyright infringement and asked it to take steps to prevent its customers from continuing to download such material. AFACT’s notices also required iiNet to cancel its infringing customers’ subscriptions. iiNet refused to comply with AFACT’s requests and in fact did not take any steps at all to stop the infringing conduct.
Decision
The Court found that the conduct of iiNet’s individual customers in downloading the pirated material amounted to copyright infringement. However, the critical question was:- did iiNet authorise the copyright infringement of these iiNet customers by failing to take any steps to stop that infringing conduct?
Under the Copyright Act 1968 (Copyright Act) a person who authorises the infringement of copyright is treated as if they have infringed copyright directly.
The Court commented that while iiNet had knowledge of the infringements occurring, and it did not act to stop them, that fact did not necessarily mean that it had authorised those infringements.
In deciding whether iiNet had authorised the infringement, the Court considered the following:
- the distinction between providing the “means” of infringement in contrast to providing merely a precondition to infringement occurring;
- the power to prevent the infringements; and
- the extent to which iiNet approved the infringement.
The Court distinguished providing the “means” of infringement, such as a website dedicated to peer-to-peer file sharing (such as in Cooper) or a series of photocopying machines, which could amount to authorisation, with providing a precondition to the infringement occurring. It found that merely providing access to the Internet did not amount to providing the “means” of infringement. It found that the “means” of infringement was the use of the BitTorrent system and iiNet had no control over such use.
The Court considered iiNet’s power to prevent the infringements and because iiNet had no control over the BitTorrent system itself, it found that the measures requested in the AFACT notices would not, if iiNet had taken those measures, have been considered to be a relevant power to prevent the infringement nor would they be considered reasonable steps to prevent it.
Consequently, the Court found that iiNet, by doing no more than provide the Internet to its customers could not be seen to be approving the infringement. The Court again compared the current circumstance with those set out in the Cooper and Kazaa decisions where the parties intended copyright infringements to occur.
Rather helpfully, although not required to do so, the Court also considered the following issues:
- Telco defence: Under the Telecommunications Act (Telco Act), ISPs, such as iiNet, must protect the confidentiality of information of its customers. iiNet argued that if it had adhered to AFACT’s requests it would have breached the Telco Act. The Court disagreed with iiNet and found that the information could be disclosed in accordance with one of the exceptions to the Telco Act.
- Safe harbour provisions for repeat infringers:
(a) Under the Copyright Act, if a service provider, such as iiNet satisfies certain conditions, the Court cannot impose damages, account of profits or other monetary relief against that provider (Safe Harbour provisions).
(b) In order to take advantage of the Safe Harbour provisions, the service provider must have a repeat infringer policy. Such a policy was in dispute and AFACT argued that iiNet did not have such a policy.
(c) The Court found iiNet’s policy of requiring a Court to find that an infringer had repeatedly infringed copyright was appropriate in this case and formed the basis of a repeat infringer policy in the context of the Safe Harbour provisions.
(d) Therefore, had the Court found that iiNet had authorised the infringement, it would have been able to rely on the Safe Harbour provisions to reduce its liability.
Practical Implications
This is a significant development in the decisions concerning internet piracy and copyright infringement. Importantly, the Court has confirmed that there is no legal obligation or duty on any person to protect the copyright of a third party. The extent of the obligation is a legal prohibition on doing an act comprised in the copyright or authorising another to do that copyright infringing act.
In addition, it is one of only few Australian decisions to have considered the impact of the Safe Harbour provisions. Although the comments do not form part of the Court’s decision, it will be useful as a starting point to achieve compliance with those provisions.
Future
Whilst the Court recognised the legitimate interests of the industry to prevent what it acknowledged was widespread infringement through the use of the BitTorrent system, this interest does not make ISPs, such as iiNet, responsible for protecting and enforcing the industry’s rights.
Despite the comprehensive judgement, we expect that this matter has only just begun. It is likely, that AFACT (on behalf of the film and television studios) will appeal the decision to the Full Federal Court.
Senator Stephen Conroy’s recent comments may also increase the chance of an appeal by AFACT, as he would prefer that the ISPs and the movie industry have discussions rather than introducing new laws regarding illegal file sharing. A full report of Senator Conroy’s comments is available by clicking here.
The decision is no doubt a significant development in clarifying the law as it relates to ISPs. However, for all the individuals who may think this decision gives them free reign to download as much copyrighted material as possible, they should consider the recent Australian who was fined $1.5million in damages and ordered to pay $100,000 in legal costs for illegally downloading from and uploading to, the Internet, a popular game for the Nintendo Wii. It is important to note that the infringer here went beyond a mere downloader when he uploaded the game to the Internet for download using the BitTorrent system. A full report of the story is available by clicking here.
In this case, the Victorian Court of Appeal considered a mortgagee’s statutory duty[1] to act in good faith and have regard to the interests of the mortgagor in exercising its power of sale. The statutory principles regulating a mortgagee’s power of sale are broadly consistent with the common law, and the case provides general guidance to mortgagees when exercising its power on a mortgagor’s default.
Facts
The mortgagee sold the property to an employee of the mortgagee’s solicitors for $360,000 in April 2006. The property had been valued in March 2006 at $350,000. The mortgagee advertised the property in newspapers and on the internet. But instead of sale by auction as recommended by the valuer and agents, the property was disposed of by private sale to the employee.
The mortgagor brought an action against the mortgagee and the purchaser seeking to set aside the sale and claiming damages from the mortgagee for breach of its duty to take reasonable care in selling the property at the best price which was reasonably to be obtained. The mortgagor provided evidence from two valuers, fixing the market value of the property at $415,000 and $420,000.
The question is, did the mortgagee act reasonably in relying on its valuation in March 2006 ($360,000) by selling the property to an associated party?
Decision
The trial judge held that, although evidence on the valuation carried out by the mortgagee was unsatisfactory, and the mortgagee did not provide the best opportunity to obtain the highest sale price, the mortgagor failed to discharge the onus of establishing a breach of the mortgagee’s obligation.
On appeal by the mortgagor, it was held that
- the mortgagee breached its statutory duty;
- the mortgagee was required to “fully test the market”, which it failed to do by abandoning the auction and accepting an offer from an “insider” at the lower end of the range of estimated sale prices; his Honour noted that the mortgagee’s reaction to the employee’s offer “was not to ascertain what further steps might be taken to increase the price, but rather to discover whether the offer could be accepted without incurring liability to the mortgagor”;
- the trial judge was required to determine the value of the property at the time it was sold and, in light of the trial judge’s criticisms of aspects of the valuations, should have preferred the evidence of the valuer that fixed the market value at $420,000 (i.e. damages were $60,000);
- the identity of the purchaser was relevant to both the onus of proof and the sufficiency of the steps taken to protect the mortgagor’s interests and obtain the best price;
- the fact that the sale price was within the range of possible sale prices was not sufficient to discharge the burden that a mortgagee must assume when the sale is to an “insider”. The mortgagee in such circumstances is under a duty to obtain the best price available.
Practical Implications
This case highlighted the strictness of a mortgagees’ duty of good faith, especially when there is a potential conflict, such as in a private sale to an associated party, between a mortgagee’s duty to obtain the best price available in the market and its desire to obtain the best bargain for the purchaser.
In summary, the duty of mortgagees when exercising a power of sale is a duty to exercise reasonable care to ensure the property is sold at market value. It is noted that a statutory duty is imposed on mortgagees, under the Property Law Amendment Bill[2] which is currently before the WA Parliament, to take reasonable care to ensure that land is sold for not less than its market value.
To meet this legal requirement, mortgagees should take care to:
- take the property to market through use of appropriate advertising and to seek the advice of agents to attract the largest number of potential buyers;
- sell the property at an auction when possible; and
- obtain a written valuation before sale especially where there is movement in the property market.
[1] s 77 of the Transfer of Land Act 1958
[2] Property Law (Mortgagees’ Power of Sale) Amendment Bill 2009 (WA)
In Western Australia, there are two methods for co-owners to hold property – as joint tenants or as tenants in common.
Joint Tenancy is where each owner is jointly entitled to the whole property. By necessity, joint tenants must hold their interest jointly so that their interests in the property are unified. On the death of a joint tenant, the interest of that joint tenant automatically passes to the other surviving joint tenant or tenants (if more than one) by survivorship and without reference to any intention that the deceased person may have indicated in his or her Will.
For example, if a husband and wife hold a property as joint tenants and the husband dies, the wife is automatically the owner of the property. The terms of the Will of the husband would not matter.
Tenancy in common is where two or more individuals hold property in any shares they choose. Unlike with a joint tenancy, the owners own separate shares in the property eg 50/50 or 30/70. When an owner dies that owner’s share of the property passes in accordance with his or her instructions as set out in his or her Will.
So what type of tenancy should you choose?
Asset Protection – If one of the owners is exposed to greater financial risk or to the threat of bankruptcy, there are pros and cons as to the type of holding. Please discuss with your solicitor or accountant before you buy a property and decide how to hold it.
Family Law considerations – If the financial contributions to the property are not equal, it is important to record correctly and accurately the extent of your particular contribution so that the other party, (your spouse) does not receive more than he or she is entitled to receive or more than you would like he or she to receive. A tenancy in common may be the more appropriate way of holding the property in that case.
Estate Planning – Consider this scenario – A husband (the “first husband”) and wife, who have 2 children, own a home. The husband dies leaving his widow as the sole owner of the property. She finds a new husband (the “second husband”) but wants this property to go to her 2 children from her first marriage.
If the first husband and his wife had held the property as tenants in common and the husband’s Will had been properly drafted, he could have left his share of the property under his Will in such a way that it would be held for the benefit of his 2 children. For this to be possible, the property must be held by the first husband and wife as tenants in common. If the property were held by them as joint tenants or if the first husband had left his share of the property under his Will outright to his wife, then after her death the widow’s second husband might be entitled to the property even though it was never the intention that that be the case.
Can I change my mind?
If you choose one particular tenancy over the other, it is possible to alter the holding to the other type. The most common example of this is the severing of a joint tenancy in favour of a tenancy in common. However, before embarking on this course, it would be very important to consider both the stamp duty and capital gains tax consequences (if any) of a change to the tenancy.
For further information or advice on this topic, please contact Russell Morley, Senior Lawyer, by email at rmorley@talbotolivier.com.au or Rob Durey, Principal, by email at rdurey@talbotolivier.com.au.
