Most not-for-profit (NFP) directors volunteer their time and expertise without the expectation of payment. However, as the risks and required level of knowledge and skill expected of directors continues to increase, more NFPs are choosing to remunerate their directors for a variety of reasons, including to incentivise engagement and participation and to attract more skilled directors.

While there is no blanket prohibition on director’s fees, NFPs that are (or are considering) paying Director’s fees should consider the following matters.

Governing document

It is important to check your organisation’s governing document. Many governing documents contain a clause that expressly prohibits the payment of directors’ fees or requires member approval to do so. If a NFP proposes to remunerate directors and its governing document prohibits payments to directors, the NFP will need to amend the governing document.

Use of the term “Limited”

In accordance with s 150 of the Corporations Act 2001 (Cth), companies limited by guarantee that are registered with the Australian Charities and Not-for-profits Commission (ACNC) are not required to use the word “Ltd” or “Limited” in their name provided the constitution prohibits the payment of directors’ fees and requires the board to approve all other payments the company makes to directors.

A company that proposes to remunerate directors will need to both amend its governing document and begin using the term “Ltd” or “Limited” in its name.

Funding agreements

It is common for philanthropic and government grants and/or contracts to impose conditions, which may include a condition that directors not be remunerated. All funding agreements should be reviewed to ensure they do not prohibit director remuneration.

Fundraising

Organisations that are authorised to fundraise in New South Wales must not remunerate their directors unless: the individual serves on the board by virtue of being a minister of religion or a member of a religious order or prior ministerial approval is obtained (section 48 of the Charitable Fundraising Act 1991 (NSW)).

Accountability and transparency

Registered charities must comply with the ACNC Governance Standards. Governance Standard 5 requires a charity to act in the best interests of the charity and to manage the charity’s finances responsibly. In order to comply with this standard, a charity must ensure that any director’s fees are not unreasonable, unauthorised or unjustifiable.

Governance Standard 2 requires a charity to be accountable to its members. In order to comply with this standard, a charity should present opportunities for members to raise any concerns about the payment of directors’ fees.

Public perception

NFPs may wish to consider the potential impact on public perception – that is, how the payment of directors’ fees may be viewed by the members of the public, supporters and donors. Some supporters and donors may view director remuneration as inappropriate in the context of the organisation’s financial position, mission, values or some other relevant consideration.

Personal liability

Volunteer directors enjoy slightly greater protection from personal liability than paid directors under work health and safety laws and civil liability laws, including industrial manslaughter.

How we can help

Moores’ For Purpose team can advise your NFP or charity in relation to the implications of paying directors’ fees.

Contact us

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Changes made to the Victorian land tax laws in December last year potentially have significant implications for non-profit entities and should be on the radar of charities as we vote in the State election this week.

What is the problem?

Prior to December 2021, the charitable land tax exemption simply required land to be used by (or held for future use by) a charitable institution exclusively for charitable purposes.

In December 2021, the Land Tax Act was amended to add a requirement for the land to be used and occupied by a charitable institution for charitable purposes in order to qualify for the exemption.

The addition of the “occupation requirement” has significant consequences for churches and other charitable organisations who allow community groups and other members of their communities to use the charity’s facilities on an informal or casual basis.

On the strict wording of the legislation, unless the user is themselves a charitable organisation, hiring activities may trigger a liability for land tax on part or all of a charity’s property.

We are seeing some concerning results for our clients:

• A church assessed for land tax on the basis that it allowed its hall to be used by a children’s playgroup and for ad-hoc hire by individuals and a community group.
• Another church assessed for land tax due to a solitary hire of a meeting space to a non-charity during the relevant year.

Most charities want to benefit their local community, but some are understandably nervous about hiring their facilities to others – an undesirable outcome both socially and economically.

What is Moores doing?

Moores has been actively involved in advocating for change in this area of the law. We have made submissions to both the current Government and the Opposition.

What are the major parties saying?

Current Labor Treasurer, The Hon Tim Pallas MP, has advised that the Department of Treasury and Finance is undertaking a review into the application of the charitable land tax exemption. The Treasurer is willing to accept submissions in that regard.

The Liberal Opposition has announced they intend to revisit the charitable land tax exemption should they win this weekend’s election. Subsequent Liberal press releases have stated an intention to do away with land tax on charities who hire out their facilities for community use.

Regardless of which party is successful this weekend, Moores is hopeful that the matter of land tax on charities will be on the agenda for change when Parliament recommences.

Contact us

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Company directors and committee members of incorporated and unincorporated associations (Directors) have a range of duties, including duties regarding an organisation’s workplace health and safety systems and processes. Directors can demonstrate compliance with these duties by establishing governance frameworks that ensure organisations maintain safe working environments without risks to health.

This article is the second part of a two-part series concerning the duties and expectations of Directors as they relate to staff. The first part of this series, which explores the options available to manage conflicts between Directors and staff, can be found here.

General duties of Directors of registered charities

Registered charities must comply with a set of core, minimum standards imposed by the Australian Charities and Not-for-profits Commission (ACNC) known as the ACNC Governance Standards. Under Governance Standard 5, registered charities must take reasonable steps to ensure that Directors comply with the duties of Responsible People. Those duties include acting with reasonable care and diligence, acting honestly in the best interests of the charity and for its purposes and not misusing their position or information obtained by virtue of their position.

Duties relating to health and safety

In addition to the general duties listed above, Directors are subject to a range of duties to ensure the health and safety of workers. These duties apply not only to Directors but to ‘officers’ within the meaning of the Corporations Act 2001 (Cth).

All jurisdictions except Victoria have enacted workplace health and safety legislation that mirrors the provisions of the Work Health and Safety Act 2011 (Cth) (Model Legislation).

In Victoria, the principal legislation governing workplace health and safety is the Occupational Health and Safety Act 2004 (Vic) (OH&S Act).

The Model Legislation and OH&S Act are largely consistent with one another and embody the non-delegable common law duty to ensure workplace health and safety.

Model Legislation (all jurisdictions except Victoria)

Under the Model Legislation, a person conducting a business or undertaking (including a company, an incorporated association or an unincorporated association) has the primary duty to ensure, so far as is reasonably practicable, the health and safety of workers while they are at work. Additionally, persons with “management or control” of a workplace must ensure, so far as is reasonably practicable, that the workplace is without risks to the health and safety of any person.

Under section 27 of the Model Legislation, Directors must exercise “due diligence” to ensure that these persons comply with their duties. Due diligence includes taking reasonable steps to:

• acquire and keep up-to-date knowledge of work health and safety matters;
• gain an understanding of the nature of an organisation’s operations; and
• ensure that appropriate resources and processes are used to:
  • eliminate or minimise risks to health and safety;
  • receive and consider information regarding incidents, hazards and risks; and
  • comply with all duties and obligations under the Model Legislation.

OH&S Act (Victoria only)

Under the OH&S Act, employers are subject to a range of duties relating to the health and safety of their “workers”. This is a broad group that includes employees and others engaged by an employer in the course of the employer’s undertaking. Additionally, any person who “manages or controls” a workplace must ensure so far as is reasonably practicable that the workplace is safe and without risks to health.

There is a common misconception that those duties fall squarely on the management function rather than the governance body of the employer. In fact, a Director of a body corporate (including a company, an incorporated association or an unincorporated association) may be guilty of an offence and liable to a fine under the OH&S Act if:

• the body corporate contravenes a duty under the OH&S Act; and
• the contravention is attributable to the Director failing to take reasonable care.

The Courts will look at the circumstances of a safety breach to assess liability. Liability can be found against the “employer” (that is, the legal entity) as well as individuals (including Directors).

The duty of Directors is different to those with day to day operational management but is nevertheless significant. In determining whether a Director is guilty of an offence under the OH&S Act, regard must be had to the Director’s knowledge of the matter concerned and the extent of their ability to make decisions relating to the matter concerned. In light of this, a Director may be found to have failed to take reasonable care if they make (or participate in the making of) a decision that leads a body corporate to contravene any of the duties under the OH&S Act.

What steps can Directors take?

Given the broad duties imposed on Directors in relation to workplace safety, it is prudent for Directors to take steps to mitigate risks of being personally liable for a safety breach of the organisation for which they serve. Directors should ensure they actively turn their mind to workplace health and safety matters, including by:

• communicating with management and staff about risks to health and safety in order to understand those risks and “nip them in the bud” before they surface;
• adopting policies and procedures that clearly identify what steps must be taken to manage risks to health and safety as and when they arise;
• ensuring policies and procedures are implemented;
• embedding a culture of workplace safety and compliance in their organisation;
• ensuring they are appropriately informed about their organisation’s operations and any particular risks posed by those operations;
• ensuring there is adequate reporting to the board on incidents, hazards and risks; and
• seeking external assistance to investigate and respond to risks to health and safety as and when they arise.

How we can help

Our For Purpose team helps charities from the ground up, from support to apply for registration to assisting Directors to understand and comply with their duties. If you are dealing with a risk that might affect the health and safety of staff, we can assist you to take steps to manage the risk and prevent it from arising in future.

Contact us

Please contact us for more detailed and tailored help.

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The implications of the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022.

In what shapes up to be the most significant reform to the workplace relations framework in over a decade, it is yet to be seen if the promise of more ‘secure jobs’ and ‘better pay’ will be fulfilled.

The Albanese federal government had always planned to change some parts of the Fair Work Act 2009 (Cth) (Act) as it campaigned to win government earlier in 2022.

However, major workplace relations change was not a central election promise. That may be why the details of the proposed changes in the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 (Bill), released over a week ago, took many by surprise. The changes are not law yet but they passed the first hurdle late last week by moving through the House of Representatives. Over 150 changes were made to the original Bill to secure that passage.

The next step is the conclusion of the Senate Inquiry, fast tracked over a three week process, and consensus amongst the cross benches. The Bill may be passed in early December in the last sitting week before Parliament breaks for the year.

There is much commentary out there already about the key changes. You can click here to watch a webinar we presented as soon as the Bill was released.

Key changes

We’ve broken down the key changes as follows.

Reigning in fixed term contracts

Rolling fixed term contracts may be a thing of the past for some employers.

The changes will limit a fixed term contract for more than two years as well as limiting how many times the contract can be renewed.

There will be exceptions to the restrictions including where:

• an award permits the fixed term length or renewal;
• the employment relates to a training arrangement;
• the employee earns over the high income threshold;
• the term is linked to government funding and funding is for more than two years but there are no ‘reasonable prospects’ of funding renewal; and
• the position relates to governance.

The changes will affect new contracts entered into after the legislation takes effect and may impact some existing contracts in place where there has been a renewal of a fixed term, in some circumstances, prior to the legislation taking effect.

Pay secrecy

Pay secrecy clauses in employment contracts and related practices will be banned.

The changes include an express right for employees to discuss pay and pay related terms with other employees. Any term in an employment contract that is ‘inconsistent’ with the employee’s ability to discuss their pay with another person will be unlawful.

The reforms aim to improve pay transparency which is viewed as an underlying factor that contributes to pay disparity, particularly disadvantaging women.

While many employment contracts do not expressly state that the employee is banned from disclosing their pay or pay increases, the effect of broad confidentiality clauses can impose pay secrecy obligations.

The changes will impact new employment contracts after the legislation takes effect and current employment contracts which do not contain pay secrecy terms (in that they cannot be varied to include such terms).

Sexual harassment prohibition

The Act is set to include a new express prohibition on sexual harassment in the workplace.

Building on current protections through the ‘Stop Bullying and Sexual Harassment’ framework in the Act and the definition of serious misconduct (which now includes sexual harassment) in the Act, the changes will provide a new avenue for a ‘worker’ to raise a sexual harassment dispute in the Fair Work Commission. The process is similar to the general protections disputes avenue and enables disputes about past conduct and/or the risk of future conduct. The Fair Work Commission will have a role to play to resolving a dispute. Where a dispute cannot be resolved, an employee will have the option to make a court application.

The new rights will operate in conjunction with existing state and federal legislation regulating unlawful sexual harassment and the redress mechanisms available through those frameworks.

Flexible work arrangements (FWAs)

Currently part of the National Employment Standards, FWA requests currently remain at the workplace level if there is any disagreement. The proposed changes will see a FWA available for arrangements required to support family violence circumstances and the enhanced ability for the Fair Work Commission to conciliate and arbitrate disputes about a FWA.

The changes will also require an employer to make ‘genuine efforts’ to identify alternative arrangements where a FWA request cannot be accommodated, as well as to discuss and give reasons to an employee if the FWA request is refused.

Enterprise bargaining

Much of the public commentary about the reforms has focussed on the changes to enterprise bargaining.

Some of the changes are welcome by many employers including the changes to remove some of the pre-approval steps to make a new enterprise agreement and provide the Fair Work Commission with a broader discretion to approve a new agreement where employees have ‘genuinely agreed’ to the terms.

The ‘better off overall test’ (BOOT) is set to move away from a line by line assessment by the Fair Work Commission that often involves assessing if an individual employee will be better off or not. The new test will enable the Fair Work Commission to consider whether employees are better off having regard to the types of employees and their patterns of work at the time of the application (ie. ‘test time’) and that are reasonably foreseeable at the test time.

Changes secured in the House of Representatives last week will see a limited ability for the Fair Work Commission to re-visit the BOOT once an agreement has started operating. That reassessment will however be available where there are different circumstances that may apply to new employees after the BOOT was first assessed.

In a significant change to how employers can be required to bargain and be bound by an enterprise agreement, it is proposed that multiple employers can be joined to enterprise agreement bargaining or an agreement that has been made where there is a ‘single interest’ that applies to the employers. That ‘single interest’ requires a ‘common interest’ between the employers (or ‘commonality’ for franchises and related companies).

Factors relevant to that test include ‘geographic location, regulatory regime as well as the nature of the enterprises to which the agreement will relate and the terms and conditions of employment in those enterprise’. The joinder must also not be contrary to the public interest. The construction sector will have limited access to multi-employer agreements. Employers who can also demonstrate a history of bargaining for a single enterprise agreement may seek to avoid being joined in one of the single interest multi-employer agreements.

It is expected that the Senate inquiry and debate process in the coming weeks will result in further changes to the Bill, particularly to bargaining and single interest multi-employer agreements.

Other changes in the bargaining space include:

• the sunsetting of ‘zombie enterprise agreements’ (those made prior to the Act coming into force in 2009) after 12 months; and
• employers who are party to an enterprise agreement that has passed its nominal expiry date may be compelled to commence bargaining at the initiation of the employee bargaining representative (eg. union) even where it is not ready or willing to commence bargaining for a new agreement.

Getting prepared

Your organisation should be keeping up to date on the likely changes. Some employment contracts will need to be reviewed to ensure compliance following the enacting of the Bill and enterprise bargaining plans may need to be brought forward to respond to the new landscape.

This article is current as at 14 November 2022 and it is expected that there will be more changes to Bill before it is passed. Moores will be closely watching these developments and updating clients in the coming weeks.

How we can help

For further assistance including auditing your existing employment contract templates, reviewing current enterprise agreements and planning your enterprise bargaining strategy, please reach out to our Workplace Relations team. Our team is well equipped to provide advice on your obligations and conduct reviews of your internal policies and procedures.

Contact us

Please contact us for more detailed and tailored help.

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Following high profile data breaches in Australia, the privacy reform which has been in the works for years has been brought forward – partially.

The cost of this expedited bill has been the omission of a number of key reforms recommended in 2017 by the Productivity Commission.

The Privacy Legislation Amendment (Enforcement and Other Measures) Bill 2022 (Privacy Bill) introduced to Parliament on 26 October 2022 increases enforcement powers and possible fines for interferences with privacy, and strengthens the Notifiable Data Breach Scheme (NDB Scheme).

What we do have

The Privacy Bill includes:

1. Increased penalties for serious or repeated interferences with privacy.
2. Greater enforcement powers for the Office of the Australian Information Commissioner (OAIC).
3. Increased information gathering requirements under the NDB Scheme.

Increased penalties

The penalty for serious or repeated interferences with privacy have been increased to an amount not exceeding the greater of:

• $50 million; or
• three times the value of the benefit obtained; or
• if the court cannot determine the value of the benefit, 30% of the organisation’s adjusted turnover in the relevant period.

For context, the current maximum penalty is $2.2 million.

Greater enforcement powers

These include:

• expanding the extraterritorial jurisdiction of the Privacy Act by removing the requirement for an “Australian link” – aka reaching the regulatory fingers of the Privacy Act into activities or organisation in other countries;
• powers to penalise organisations for failing to provide information when investigating a complaint; and
• powers to share information with other regulators and enforcement bodies.

Information gathering for the NDB Scheme

When notifying the OAIC of a notifiable data breach, organisations must be more specific about what particular kinds of information were affected.

The OAIC may also request information from organisations that the OAIC considers to be relevant to an actual or suspected eligible data breach.

What we’re missing

Many of the key reforms recommended in 2017 have not been included at this time. Reforms that were included in the consultation of the Privacy Act Review but that are not included in this Privacy Bill include:

• changing the definition of personal information.
• Removing the employee records and small business exemptions.
• Creating a direct cause of action for individuals to take privacy matters directly to court.
• Strengthening consent requirements, and addressing privacy and consent for minors.

Strengthening children’s rights to privacy is currently a global trend. There are many elements of the consultation which are not included, some of which are much greater, wholesale reforms that will change the scope and application of privacy law. We discussed these further in a previous article.

For now, it is a “watch this space” message.

What it means for not-for profit and education organisations

This is not the end of the privacy story. There will be more reform to come.

Amendments that may specifically concern not-for profit and education organisations include:

1. The clarification that the OAIC can publish determinations on its website. This means there is a stronger “name and shame” culture around privacy determinations which may affect not-for profit and education organisations who highly value their reputation and image in the public sphere.
2. Similarly, there are additional requirements for organisations to publish notices on their websites about privacy breaches or determinations. Again, this may impact reputation and brand which can be particularly important for charities who rely on trust from the public.
3. The eSafety Commissioner will be included in the Privacy Act 1988 (Cth) as an alternative complaint body, so the OAIC can transfer complaints to the eSafety Commissioner when privacy complaints overlap with cyberbullying, cyber abuse or image-based abuse – factors over which the eSafety Commissioner has jurisdiction. This follows the trend in the last five years of increasing the eSafety Commissioner’s powers. The ability for complaints to be referred to the eSafety Commissioner is relevant for organisations who work online, with individuals who may be subject to image-based abuse or cyberbullying such as teenagers. With referral powers, there may be an increase in complaints in both realms; privacy and eSafety.

How we can help

To respond to the proposed reforms, we can help you implement data breach response plans to minimise the impact of data breaches, help you report under the NDB Scheme, and be a helping hand through any privacy complaints you may receive.

To prepare for the next stage of reforms, organisations should consider building into their systems and software the ability to know where data is stored, how it is collected and who has access to it. This will equip you to pivot if (or when) the law changes, such as removing the employee records exemption. We can help with this change management through privacy audits and empowering you to conduct privacy impact assessments.

You can also register for our upcoming webinar, Data breach simulation: How to manage a data breach, to be presented on 17 November, here.

Contact us

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There has been an important wage decision handed down by the Fair Work Commission (Commission) impacting the aged care sector. The change impacts a number of modern awards.

On 4 November 2022, the Commission issued a 15% increase to base award rates of pay to ‘direct care’ workers in the aged care sector, which includes registered nurses, enrolled nurses, assistants in nursing, personal care workers and health care workers. The changes impact the Social, Community, Home Care and Disability Services Industry Award 2010, the Aged Care Award 2010 and the Nurses Award 2020 (for the particular classification of workers).

The pay increase has not come into effect just yet. The timing of the increase will be issued by the Commission following the next stages of the process. The next immediate step is a Commission mention hearing on 22 November 2022 to issue directions about the opportunity for relevant parties to submit further information about the timing and method of implementation of the pay increase.

Those employers that rely on the relevant awards to determine pay rates and employment conditions will be impacted by the decision once it comes into effect. If your company or organisation has an enterprise agreement in place, the award increases may also impact your workforce where the rates of pay in the enterprise agreement fall below the award minimum rates once the 15% increase is applied (in whole or part).

It is important to review those minimum agreement rates following the award changes to ensure compliance with the Fair Work Act 2009 (Cth) at all times.

Moores will be closely watching these developments and updating clients in the coming months.

How we can help

For assistance with your organisation’s pay rates and compliance, please reach out to our Workplace Relations team. Our team is well equipped to provide advice on your obligations and conduct reviews of your internal policies and procedures.

Contact us

Please contact us for more detailed and tailored help.

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Following on from our recognition as a First Tier Law firm in Victoria for both ‘Wills & Estates Litigation‘ and ‘Wills, Estates & Succession Planning‘, we are proud to share that our ‘Wills & Estates Litigation’ team has also featured in the national rankings.

This recognition places Moores as the only Victorian law firm to have two lawyers in the National Doyle’s Guide Wills & Estates Litigation rankings. It is also the sixth consecutive year that Moores has featured in the national rankings.

For more information or to speak with one of our experienced lawyers, please do not hesitate to contact us.

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Jennifer Dixon, Practice Leader

• Leading Wills & Estates Litigation Lawyer – Australia, 2022

Lachlan McKenzie, Practice Leader

• Recommended Wills & Estates Litigation Lawyer – Australia, 2022

Electronic Signing Legislation

There was no ability for a Will to be signed electronically in Victoria prior to the advent of COVID-19. The concept was first introduced via the temporary COVID-19 Omnibus Emergency Measures regulations in 2020 and has since been made permanent via amendments to the Wills Act 1997 (Vic) in 2021.

Relevantly, the new section 8A of the Wills Act provides that a Will may be executed via a ‘remote execution procedure’. The key requirements are the same as for a Will signed in hardcopy, in that there must be a document that is signed (including by electronic signature) in the presence of (including by audio visual link) two witnesses who must also sign. However, additional requirements are imposed including that:

• all witnesses must be reasonably satisfied that the document transmitted to them via electronic communication is the same document signed by the testator;
• the witnesses must clearly see the signature of the Willmaker being made by audio visual link plus the Willmaker must clearly see the signature of the witnesses being made via audio visual link;
• one of the witnesses must be a ‘special witness’ (a lawyer or similar) and they must sign last; and
• the Will must contain a statement that it is executed in accordance with the remote execution procedure, plus contain details of the special witness and a statement as to whether a recording of the signing meeting has been made.

Re Curtis [2022] VSC 621

This case is the first example where the Supreme Court has considered the requirements of the remote execution procedure in detail.

The facts were:

1. The Will in question was electronically signed by Mr Curtis during one of Melbourne’s COVID lockdowns which prevented him from attending his lawyer’s office for signature.
2. Mr Curtis and two witnesses (including his lawyer) attended a meeting via Zoom. The Will had been uploaded onto the Docusign electronic signing program by his lawyer and an email link for Docusign sent to him.
3. Mr Curtis was using a PC to operate zoom but using a laptop to access his email and operate the Docusign program. The witnesses could see Mr Curtis operate his laptop to access his Will via the Docusign link and he held it up to the screen so they could see the Will had loaded. He then put the laptop down out of sight while he completed signature via Docusign.
4. The Docusign program then sent links to each of the witnesses who were just using the one device each to operate both Zoom and the Docusign program. They each shared their screen as they operated the Docusign program to sign electronically as witnesses, meaning it was possible to see their faces and their cursor moving around their screen, but you could not necessarily see their hands operating their computer.
5. The meeting was recorded, so the Court had the ability to watch the entire signing meeting.

The main issue the Court considered was whether the requirement for the witnesses to ‘clearly see’ the Willmaker sign and for the Willmaker to ‘clearly see’ the witnesses sign was satisfied by that procedure. The Court found it was not and therefore the Will was not valid.

The Court reasoned that because the witnesses could not actually see Mr Curtis’ hands operating the laptop, or see what the laptop had on its screen at the time, they had not clearly seen him sign the Will electronically.

Likewise, the Court reasoned that in the witnesses sharing their screen, without the ability for the Willmaker to actually see the person operating their computer mouse, the Willmaker could not have clearly seen the witnesses sign the Will. Although, the Court did appear to leave the door slightly open that this process might be acceptable if the Willmaker verbally confirms that they can see the screen which is being operated by the witnesses.

The Will was ultimately admitted to Probate as an ‘informal Will’ meaning the Court was satisfied it was intended to be a final Will notwithstanding that it was not correctly executed.

Issues

It seems that in order for a Will to be signed by the remote execution procedure, each party (Willmaker and two witnesses) will need to use two devices as follows:

• a primary device that they use to operate the electronic signing program or otherwise electronically sign the Will; and
• a secondary device which is operating as a bird’s eye camera to show both them operating the primary device and the screen of the primary device.

This is not likely to be easy for elderly clients or clients who are not technologically savvy. Our experience of electronic signings is that many clients struggle to have one device with the correct software that is logged in and operating.

Adding to this are warnings from the Court that:

• practitioners can expect any Will that is signed via the remote execution procedure to be subject to greater scrutiny than a physically signed Will; and
• the Probating of this particular Will as an ‘informal Will’ should not be taken as a given that in other instances where a Will fails to comply with the remote execution procedure it will likewise be admitted as an informal Will. Of relevance, when a Will is not properly executed, then there is a requirement for the plaintiff to positively prove other matters such as testamentary capacity and knowledge and approval and this may not be possible, subject to available evidence.

The option of having a Will signed electronically is, in theory, worthwhile to allow flexibility for people who live remotely or are required to be in isolation. However, the complex requirements of the legislation and the narrow interpretation of the Court means that practitioners are likely to be reluctant to offer this procedure to a client.

How We Can Help

For expert advice or guidance regarding Estate Planning please contact us.

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In a previous article, we have highlighted issues that can arise when a Will gifts specific property to a beneficiary.

A recent case of Wheatley v Lakshmanan [2022] NSWSC 583 provides another example of issues that can arise, particularly when the property is not owned by the individual Willmaker.

In that case, a company of which the Willmaker was sole director and shareholder owned the property that was purportedly gifted in the Will and a dispute arose as to the effect of the clause.

Gifting in a Will – General Principals

Generally, a Will can only pass down assets owned in that person’s sole personal name at date of death. The typical items tend to be:

• jewellery;
• artwork;
• cars;
• cash;
• shares; and
• property.

When choosing to gift a family member real property, the initial thought tends to be ‘I am providing a valuable asset that they can have the full use and enjoyment of’. However, it is important that consideration be given to the legal owner of the asset and potential tax consequences.

Wheatley v Lakshmanan [2022] NSWSC 583 – The Case and Judgement

The Will of the deceased gifted a specifically named property to one of her daughters, Alexis. This was the only provision provided for Alexis in the Will. The balance of the deceased’s assets were to pass to her other daughter, Erin.

The matter came before the Court because the property that the deceased purported to gift to Alexis was not owned by the deceased personally, but rather was owned by a company in which the deceased was sole shareholder. The deceased shareholdings in the company passed to her daughter, Erin, not Alexis.

There was argument in the Court about whether the Will could be interpreted to allow the property to pass to Alexis but that argument was unsuccessful based on this, the Court ruled that the clause gifting the property to Alexis in the Will failed, with the result being that Alexis received nothing under her mother’s Will. The Court touched on whether the Will had provided the executor with sufficient powers to deal with the shares in the company as if it were the beneficial owner, then this may have been sufficient to require the executor to ensure that the property passed in accordance with the Will (referring to the decision of O’Callaghan [1972] VR 248).

As a result of the gift failing, Alexis was granted provision of $820,000 from the Court (by way of a family provision claim). However, the gift of this particular property had significant unintended consequences for each beneficiary and the estate:

• there were high legal and accounting fees to resolve the issue;
• Alexis did not receive the value her mother intended (had she inherited the property);
• the estate was left with a significant tax burden, being a total of $1 million;
• the Court had to weigh up the tax liability when deciding what to grant Alexis as Erin’s inheritance in the estate was also impacted by the tax burden.

Key Takeaways & How We Can Help

The potential consequences of leaving a gift of property in a Will should not be underestimated, or ignored. Tax consequences, legal fees, accounting fees, and the burden of stress can be substantial where an intended gift of property fails.

From a Will drafting perspective, it is important to ensure that property ownership is determined from the outset and that the gift in the Will is carefully drafted to ensure that potential consequences are mitigated and the deceased’s wishes are given effect to as intended.

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High Court keeps presumption of advancement – for now.

A recent High Court decision has confirmed that contributions of funds or transfers of assets from a husband to a wife, or from a parent to a child, are still presumed to be gifts under Australian Law. But in its lead judgement, Chief Justice Susan Kiefel and Justice Jacqueline Gleeson stated that the presumption of advancement was “especially weak today” and the presumption could be readily rebutted by evidence of the intention of the parties to the contrary.

What is the presumption of advancement?

The presumption of advancement, an equitable doctrine that dates back to the 17th century English Law, presumes that transfers of assets from husbands to wives, male fiancés to female fiancés and parents to children are gifts in the absence of evidence to the contrary. For all other categories of relationship (including asset transfers from a child to a parent, from a husband to a husband, a wife to a husband or wife, sibling to sibling or even from a de-facto partner to another de-facto partner) the presumption does not exist and such transfers – where something has been given without anything being received in return – are presumed to be held by the recipient on a “resulting trust” for the transferring party.

By presuming that a transfer of assets or contribution of funds in these categories of relationship are held on a resulting trust, the evidentiary onus is on the recipient to prove that the transfer was intended as a gift and they do not hold the asset “on trust” for the transferring party. But for those few categories of relationship where the presumption of advancement applies, it is up to another party seeking to allege the gift is held on resulting trust to disprove the presumption of advancement.

How the High Court ruled

The High Court’s decision in Bosanac v Commissioner of Taxation [2022] HCA 34 came about after the tax office sought a declaration that half of a property that Mrs Bosanac was the sole owner of in the Perth suburb of Dalkeith was held on trust by her for her husband, who she had since separated from. The ATO sought the declaration in an effort to recoup a tax debt owed by the husband to the ATO. The property had been purchased for $4.5m in 2006 with joint loans the couple had taken out. The ATO argued that where a husband and wife have each contributed purchase funds it should be presumed that both intended to each have a one-half interest in the property. It called for the presumption of advancement to be abolished, describing the principal behind it as “anomalous, anachronistic, and discriminatory”.

While describing the categories of relationships that do (and do not) give rise to a presumption of advancement as “inconsistent and discriminatory”, Justice Gageler stated in his judgement that unless the parliament takes some steps to modify them, the duelling presumptions “are here to stay”.

Justice Kiefel and Gleeson acknowledged there was a question whether the presumption of advancement should apply more generally between relationships between spouses, however said these were not issues that arose in the appeal. They said “much has changed with respect to the various ways in which spouses deal with property”, continuing “when evidence of this kind is given, inferences to the contrary of the presumptions as to intention may readily be drawn”. In reaching its decision that Mrs Bosanac did not hold half of the property on trust for her husband, ultimately the court did not rely on the presumption of advancement but reached its opinion based on the evidence before it of her and her husband’s intentions at the time of the purchase.

Arguments about presumptions of advancement or resulting trust arise commonly in deceased estate disputes and sometimes in Guardianship disputes when disputing parties clash about the beneficial ownership of assets. In Wilkins v Wilkins [2007] VSC 2007 a beneficiary of a deceased estate was successful in overcoming the presumption of advancement and obtaining a declaration that a farming property purchased by his parents for two of his brothers in 1976 was beneficially owned by his deceased mother’s estate, entitling him to a share of it. The use of the farming property had been shared by the parents and the brothers and the payment by the mother of most of the rates for the property was amongst the evidence sufficient to overcome the presumption of advancement.

What does this mean for those making and receiving gifts?

Ultimately, these presumptions are just that – presumptions of law that can be overcome with evidence, and the best form of evidence is a contemporaneous legal agreement or other documentation that sets out exactly what was intended.

If a parent purchases an asset in their child’s name but regards themselves as retaining some legal interest in it, the parents intentions should be documented. Leaving the question to be resolved by their surviving family after their death can tear families apart and the passage of time may make obtaining evidence of the parties’ intentions an insurmountable hurdle. Conversely, where (for instance) a person wants to acquire an asset as a gift for their de-facto partner, or a grandparent wishes to provide a benefit to a grandchild, legal advice should be obtained and the intention to make the gift should be explicitly documented.

For married couples in which only one party has commercial risk and it is intended that an asset acquisition be only beneficially owned by the recipient spouse, there is a range of documentation that needs to be considered. The effects of such transactions on the parties’ estate planning also needs to be considered, as well as any litigation risk that may result from the transaction.

How we can help

Legal advice is essential before entering such transactions, which can have tax, pension and other implications. Please get in contact with our Private Clients team if you would like more information or advice pertaining to presumptions of advancement.

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