Conflicts concerning directors and staff can be disruptive to an organisation’s operations and burdensome on all individuals involved. They can also be detrimental to charities and not-for-profits to the extent that they detract from their charitable purpose and the efficient use of their limited resources.

This article is part one of a two-part series concerning the duties and expectations of directors as they relate to staff. It explores the options available to manage conflicts between directors and staff as and when they arise within an organisation.

How do conflicts arise?

While the board is responsible for the governance of an organisation (including setting its objectives), staff are responsible for meeting an organisation’s immediate operational needs in order to meet those objectives. Directors and staff are often required to work together and communicate with one another to carry out their respective responsibilities.

Directors and staff may interact with one another in a number of different ways. Staff may be invited to attend and speak at board meetings, while directors may be invited to attend and speak at staff events. Directors and staff may also serve together on committees.

Conflicts may arise when there is miscommunication or a lack of communication between the board and staff. They may also arise when communications are disrespectful, discriminatory or intimidating. This makes it important for organisations to set behavioural expectations around how directors and staff treat and communicate with one another.

How can organisations reduce the risk of conflict from arising?

• Clearly articulate the separate roles of board and staff members. The role of the board is to oversee the operations of an organisation, not to carry out those operations by stepping into the shoes of staff. This can be reinforced through the board charter, the induction process (when expectations are set) and regular board conversations.
• Adopt a Code of Conduct and disputes framework consistent with the organisation’s values that applies to directors and outlines how they are expected to communicate with one another and staff. This will ensure there are clear expectations of directors and consequences for behaviour that does not meet those expectations. Establishing clear policies and processes before an issue arises can be invaluable.
• Require directors and staff to use appropriate communication channels. Outside of joint committees, communication with staff should occur through (or with the knowledge of) the board chair and/or CEO. Ideally, directors and staff should communicate through business emails instead of personal emails, signalling that communications are expected to be courteous and professional.
• Introduce new directors to staff upon their appointment. This will assist to establish a positive rapport between directors and staff and can be included in an organisation’s induction process.
• Set a positive tone. There may be occasions where the board is required to reflect on the performance of an organisation and its staff. When doing so, the board should consider the tone of their communications and how they will be received by staff.

How can conflicts be managed once they arise?

When determining how to manage conflict, organisations should consider:

• their legal obligations to create a safe working environment for staff, including in relation to responding appropriately to allegations of bullying and harassment;
• the potential power imbalance (real or perceived) between staff and board members;
• the requirements of their governing document (such as their constitution or rules), policies and procedures; and
• any relevant legislation (such as the Corporations Act 2001 (Cth) for companies or associations incorporation legislation for incorporated associations).

Typically, dispute resolution frameworks require parties to attempt to resolve the dispute informally before further steps are taken. It is appropriate for the chair to take the lead in this conversation (unless they are personally involved in the dispute). Depending on the gravity of a dispute, more formal avenues may need to be considered (such as mediation, an investigation, termination of employment or cessation of directorship). It is critical to understand and comply with the particular requirements of the applicable framework.

Whichever avenue is chosen, organisations should ensure that the parties to a dispute (or the respondent to a complaint) are afforded natural justice and given an opportunity to respond to any claims or allegations made against them. This will ensure that the perspectives of all parties are considered before a final decision is made.

How we can help

Our For Purpose team helps charities from the ground up, from support when applying for registration to assisting charities to manage complex disputes. If you are dealing with a dispute or conflict concerning your board, we can assist you to develop and implement a plan to help manage the dispute or conflict.

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When can a charity receive tax deductible donations to promote culture within Australia?

Not-for-profit organisations established in order to promote or foster culture may be able to be registered as charities with an ‘advancing culture’ subtype with the Australian Charities and Not-for-profits Commission (ACNC). Registered charities benefit from charity tax concessions, including income tax exemption.

Many kinds of charities can promote culture, including:

• theatre and dance companies;
• community choirs;
• arts festivals;
• literature societies;
• organisations that preserve and protect the arts or languages of Australian indigenous persons;
• radio broadcasters for particular ethnic groups;
• faith based music and arts funds;
• film and television;
• circus groups; and
• railway societies.

Charities may promote culture in a range of ways, including:

• creating artistic or cultural works themselves;
• exhibiting works produced by others;
• carrying out research into arts and culture;
• educating the public about cultural forms;
• teaching people how to create cultural forms;
• preserving works of art or movable cultural heritage; and
• offering scholarships that promote the arts or cultural forms.

Charities that promote culture may be able to be endorsed as tax deductible gift recipients (DGRs) if they are:

• a public library, museum or art gallery; or
• entered on the Register of Cultural Organisations (ROCO). There are over 900 organisations on the ROCO in Australia. Note that the DGR endorsement applies to a public fund operated by the charity, not to the charity as a whole.

Being endorsed as a DGR can improve a charity’s ability to attract donations from private individuals and foundations (some of which can only donate to DGRs). Endorsement as a DGR is also a prerequisite for some government grants.

To be eligible to be endorsed as DGRs, public libraries, museums and art galleries must be controlled by individuals or institutions who, because of their tenure or public office or position in the community, have a degree of responsibility to the community as a whole*. In the case of charities seeking entry on the ROCO, this requirement applies to the committee that operates the public fund (which may be a different group of individuals to the charity’s board).

Further specific requirements apply to each category of DGR which usually require (among other things) amendment of the charity’s governing document. In the case of charities seeking entry on the ROCO, these requirements are set out in detail in the ROCO Guidelines.

As with all charities, it is important to ensure the entity exists for the public benefit rather than using its resources for the benefit of those close to the charity. For example, there are detailed requirements that apply if a charity entered on the ROCO proposes to use tax deductible donations received by its public fund to construct or restore a building that will be owned by another entity or used partly for purposes other than the charity’s principal purpose.

How we can help

Moores regularly works with organisations that promote culture to support them to seek endorsement as a DGR. If we can assist your organisation, please get in touch.

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*You can find examples of individuals who meet this requirement here.

This article summarises key information that registered charities should be aware of as they prepare to lodge their annual documents with the Australian Charities and Not-for-profits Commission (ACNC).

Annual Information Statement

The ACNC has launched the 2022 Annual Information Statement Hub.

All registered charities are required to lodge an Annual Information Statement (AIS). The AIS is an online form that asks a range of questions about a charity’s operations and finances over a 12-month period. For charities with a reporting period of 1 July 2021 to 30 June 2022, the 2022 AIS must be lodged by 31 January 2023.

Failure to submit your charity’s AIS by the due date will result in it appearing as ‘overdue’ on the charity register, while failure to submit an AIS for two or more years may result in the ACNC moving towards revoking your charity’s registration.

Changes to charity size thresholds

Charity size thresholds have changed for the reporting periods covered by the 2022 AIS and beyond. The following table summarises those changes.

Charity Size	Previous annual revenue thresholds	Current annual revenue thresholds	ACNC reporting requirement
Small	Less than $250,000	Less than $500,000	– Must complete the AIS – Preparing and lodging financial reports is optional
Medium	$250,000 to less than $1 million	$500,000 to less than $3 million	– Must complete the AIS – Must prepare and lodge financial reports – Financial reports can be reviewed or audited
Large	$1 million or more	$3 million or more	– Must complete the AIS – Must prepare and lodge financial reports – Financial reports must be audited

As a result of these changes:

• charities with annual revenue between $250,000 and $500,000 will now be considered small charities and will no longer be required to lodge financial reports with the ACNC; and
• charities with annual revenue between $1 million and $3 million will now be considered medium charities and will no longer be required to have their financial reports audited.

Registered charities that are incorporated associations must continue to:

• comply with the reporting obligations in their state or territory of incorporation; and
• adhere to the financial reporting thresholds that apply for the purpose of those reporting obligations.

For further information about these changes, see our related article and the ACNC website.

Reporting related party transactions

All charities (except basic religious charities) will be required to report related party transactions in the 2023 AIS and beyond. This means that charities will need to document related party transactions from the start of their 2023 reporting period (which, for many charities, is 1 July 2022).

Medium and large charities will also need to disclose related party transactions in their financial reports in accordance with the Australian Accounting Standards (AASB 124).

For further information about this requirement, see our related article and the ACNC website.

Reporting remuneration to responsible persons

Medium charities that prepare general purpose financial statements and large charities are required to report key management personnel remuneration in the AIS. Basic religious charities are exempt from this requirement.

For the purpose of this requirement:

• key management personnel include a charity’s responsible people (such as board members, committee members and trustees) and senior staff members (such as the chief executive officer, chief financial officer and chief operating officer); and
• remuneration includes all forms of consideration in exchange for services rendered to a charity.

For further information about this requirement, see our related article and the ACNC website.

ACNC online learning program

The ACNC recently launched an online learning program comprised of eight courses covering the regulatory landscape of registered charities in Australia and the duties and responsibilities of responsible people (such as board members, committee members and trustees). It is targeted towards responsible people and people in leadership roles within charities of all levels of experience.

The program is available free of charge on the ACNC website. The ACNC intends to release an additional four courses by the end of this year.

How we can help

Our For Purpose team helps charities from the ground up, from support to applying for registration to helping charities understand and meet their regulatory requirements.

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Content warning: This article contains information in relation to sexual harm and image-based sexual abuse. If you require any support, we encourage you to contact the CASA Sexual Assault Crisis Line on 1800 806 292, Lifeline on 13 11 14, or 1800 RESPECT.

Last month the Victorian Parliament adopted an affirmative consent model, shifting the onus of proving consent onto perpetrators of sexual violence, rather than victim-survivors. The passing of the Justice Legislation Amendment (Sexual Offences and Other Matters) Act 2022 (Vic) (the Act) on 30 August 2022 will result in significant reforms to Victorian laws that prohibit sexual harm.

The Act provides for key changes to consent laws under the Crimes Act 1958 (Vic) (the Crimes Act), as well as other reforms to reflect the recommendations made by the Victorian Law Reform Commission in its Improving the Justice System Response to Sexual Offences report last year.

According to that report, one in five women and one in twenty men over the age of 15 have experienced sexual assault. Reportedly, almost eight per cent of adults have experienced child sexual abuse before they were 15, but the rate may be higher due to significant barriers to reporting and disclosure.

Broadly, the Act introduces changes including:

• an updated definition of consent;
• adopting an ‘affirmative consent model’ within Victoria;
• the inclusion of ‘stealthing’ as a sexual offence;
• changes to image-based abuse laws; and
• a range of improvements to criminal procedure to better protect victim-survivors and witnesses, including directions given to juries to address misconceptions about sexual violence.

These amendments will strengthen sexual offence laws, provide additional protections for victim-survivors of sexual harm, and promote accountability for perpetrators. Organisations should ensure that they are aware of the changes, and the implications those changes might have on how they communicate about, prevent and respond to sexual harm.

What is the affirmative consent model?

To understand the changes, we must first understand the affirmative consent model.

The ‘affirmative consent model’ places the onus on each individual person participating in a sexual act to actively seek consent from the other person (or persons), rather than relying on the other person to provide consent. This requires a person to answer the question “what did I do to confirm that the person was consenting to sexual activity?” It is a move away from assuming that a person has consented, and towards requiring active, positive and explicit consent.

Adopting the affirmative consent model, the Crimes Act now requires a person accused of a sexual offence to demonstrate that they sought and received consent for the sexual act engaged in.

A shift to an affirmative consent model will not only make it clear that everyone has a responsibility to obtain consent before engaging in sexual activity, but will also mitigate the risk of re-traumatisation for victim-survivors of sexual harm who make a report or participate in a court process.

Definition of consent – what’s changed?

One of the most significant changes to the Crimes Act is the amendment of the definition of consent. Under section 36 of the Crimes Act, consent is now defined as a ‘free and voluntary agreement’.

To provide qualification to this definition, two further amendments have been made to section 36 of the Crimes Act.

These amendments are:

• that a person does not consent to an act just because they do not resist the act verbally or physically; and
• that just because a person has previously consented to a previous sexual behaviour (whether the same or different), does not mean that they will provide consent in the present situation.

Section 36AA of the Crimes Act also outlines the circumstances in which a person does not provide consent. Five new circumstances have been added where there can be no valid consent. The new circumstances for no valid consent include where there has been:

• force, harm or fear of force or harm of any kind;
• coercion or intimidation;
• abuse of a relationship of authority or trust;
• false or misleading representation about payment for commercial sexual services; and
• agreement that a condom will be used, when in fact it is not used, removed or tampered with (otherwise known as ‘stealthing’).

The inclusion of ‘stealthing’ is particularly notable, with the Crimes Act in Victoria never having any legal consequences attached to it prior to these amendments.

Examples of consent

Commentary around the new amendments indicates that there is no one ‘right way’ to give or obtain consent. However, practical examples that have been provided are:

• verbally asking and getting a “yes” in response;
• a physical gesture such as a nod; or
• reciprocating a move such as removing clothing.

This list is not exhaustive.

‘Free and voluntary agreement’ – What does that mean?

The use of ‘free and voluntary agreement’ clarifies that consent can only be obtained in a manner that is free of coercion, threats, or other inappropriate means, and reinforces that involuntary bodily reactions are not an indication of consent. Notably, the reforms aim to capture situations where a person abuses their position of power in a relationship and acts in a manner that causes the other person to engage in a sexual act or feel as if they need to.

It also ensures consistency in the definition of consent between other jurisdictions, with both terms being part of the definition of consent in other Australian jurisdictions.

In our work with children and young people in educational settings (often who are vulnerable), Moores advocates for consent that is free, voluntary, and informed. This means that a person should understand what they are consenting to and how they feel about it, and feel freely able to say yes or no without fear of consequences, regardless of their environment.

Reasonable belief

Another significant change to the Crimes Act is the introduction of the requirement for a person to actively obtain consent from any person that they are about to engage in a sexual act with. When determining whether consent has been given, courts have previously focused on the accused’s actual belief and whether the belief was reasonable in the circumstances.

However, the reforms now place the onus on each person to take an active step to ascertain consent for their belief to be reasonable. This requires each person actively saying or doing something to find out if there is consent. Reasonable belief in consent can only occur when someone willingly and actively agrees to be involved in the sexual act.

Changes to image-based abuse laws

The amendments to the Crimes Act also target image-based sexual abuse, and apply the same definition of consent to the production and distribution of intimate images. The amendments alter the offences relating to distributing and threatening to distribute such images and increase the penalties for those offences.

Image-based sexual abuse involves the non-consensual production and/or sharing of intimate images, or threats to do so. Although the prohibition of image-based sexual abuse is not new, the amendments provide for a stronger criminal justice system approach, reflecting the serious and harmful impacts of sharing a person’s intimate images without their consent.

The definition of an ‘intimate image’ has also been expanded to include digitally created or digitally altered images, and to extend the definition to better apply to gender diverse victim-survivors.

Further, courts will now be empowered to make orders for the destruction or disposal of intimate images produced or distributed without consent, empowering courts to make a ‘disposal order’ for the destruction or disposal of an intimate image.

This is a key reform for organisations working with children and young people to consider with a recent study indicating that one in three teenagers has experienced image-based abuse.

Changes to criminal procedure

Changes to criminal procedure under the Crimes Act will see greater protections for witnesses and victim-survivors during cross-examination, which has been identified as a significant barrier to redress and source of retraumatising for victim-survivors. Courts will now be required to consider the need to minimise trauma that might be experienced by the witness, and any relevant condition or characteristic of the witness, in determining whether cross-examination is appropriate and necessary.

The Crimes Act’s new requirements for jury directions will also mean that jurors in sexual offence trials will be given further guidance in decision making, including with regard to the meaning of the relevant standard of proof in criminal trials, and the matters that should and should not be taken into account.

The new jury directions are intended to address common misconceptions about sexual offences that may otherwise lead to flawed decision-making and unjust outcomes, including in relation to the consumption of alcohol, and inferences drawn from whether a person is exhibiting obvious signs of distress when giving evidence. Juries will be directed to consider that a person’s emotional state may not reflect the truthfulness of their evidence.

The amendments also prohibit statements that undermine the credibility of complainants, because they are sex workers or have a particular sexual orientation or gender identity, in an attempt to protect against harmful stereotypes and assumptions.

Impact on organisations

Organisations need to consider how these legislative changes will impact any internal policies or sexual harm prevention strategies, and how they should be communicated throughout the organisation. This may include further training and information, including for staff, students and residents in educational and residential settings.

For organisations working with children and young people, these reforms may require consultation with the children and young people accessing their services. This is particularly so considering the new Victorian Child Safe Standards (effective 1 July 2022) which require organisations to empower children and young people to understand their rights in relation to their safety.

How we can help

Moores welcomes these reforms to consent and sexual offence laws, and acknowledges the Victorian Government’s commitments to improving the justice system’s treatment of victim-survivors of sexual violence.

If you have any queries about the affirmative consent law reforms, or how to implement an organisational strategy to prevent sexual harm, Moores can assist. Our safeguarding team is well-equipped to assist organisations with the development of policies and procedures, consultation with staff, children and young people, training and education on consent and image-based abuse, and responding to concerns of sexual harm and image-based sexual abuse.

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Plenty of businesses operate in premises which are owned by a related entity. The importance of having a proper lease in place between those entities is frequently misunderstood.

Often, such tenancy arrangements are informal – the land is owned by one entity and the business is operated by another – but because the same people are in control of both entities, there is no formal agreement in place for the use of the land by the operating entity. We see this most often with self-managed superannuation funds (SMSFs) – the land is held in the SMSF, and the SMSF members use the land to operate their business.

This scenario can prove problematic on many fronts – set out below are some of the reasons why you should consider putting a lease into place between related entities.

Compensation claims

In the recent case of Olde English Tiles Australia Pty Ltd v Transport for New South Wales, land in Annandale, NSW was owned by a family who used it to operate a tile business through a corporate entity. There was no formal lease in place.

The land was compulsorily acquired by the NSW Government and the business entity sought compensation for its business relocation costs. However, as there was no formal lease in place, the NSW Court of Appeal held that the business entity had no “interest” in the land for the purposes of the compulsory acquisition law, and therefore they were not entitled to be compensated for relocation costs.

Risk management

Leases serve an important function of allocating liability for costs and risk. If an accident occurs on the land and a claim is brought for personal injury, a proper lease will go a long way to determining who is responsible for the costs of meeting the claim by addressing matters such as risk and indemnity.

In the absence of a lease, there may also be difficulties with recovering an insurance claim if the building is damaged.

Security of tenure

Things don’t always run smoothly in families, and if there is a rift between those in control of the land and those who run the business from that land, this can have serious repercussions for the viability of the business, especially if the landowner decides to sell the land. A formal lease will ensure that the business operator has an enforceable right to continue their business on the land in these circumstances.

A lease (with the consent of any mortgagee) will also go a long way in protecting the operating business against the unfortunate circumstance were the bank might need to step in and conduct a mortgagee sale.

Sale of business

If the business is to be sold, any knowledgeable buyer will insist on there being a lease in place which entitles the business to use the land it operates on. Having a formal lease in place therefore adds value to the business.

Accounting/tax considerations

A properly drafted lease will clearly set out matters such as what rent is payable, when and how rent will be increased, and who is responsible for outgoings relating to the land.

This makes it much easier to justify payments and allocate liability for these matters when preparing the business and landowner accounts and tax reporting. Your accountant and auditor will always prefer you to have some kind of basis (like a signed lease) for setting rent payments at a particular amount.

SMSF rules

Self-managed superannuation funds are governed by the Superannuation Industry (Supervision) Act 1993 (Cth) and associated regulations. This Act requires all investments of a superannuation entity to be made and maintained on an arm’s length basis (commonly known as the “arms-length rule”).

To comply with this rule, any tenancy arrangements for property owned by the SMSF and occupied by a related party must be fully and properly documented. In practice, this means there must be a written lease in place, and the rent payable (and actually paid) under the lease must align with the market. Without a formal lease in place, it is likely the SMSF will be non-compliant.

How we can help

The team at Moores has extensive experience in handling these issues and can help you to quickly and easily get a lease into place between related parties, saving you the kinds of headaches we’ve outlined above.

If any of the above raises concerns for you, please get in touch with us and we’ll help you put into place a quick and effective solution.

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This article is a part of our series discussing Family Provisions Claims, and focusses on claims by step-children. For a broader understanding of Family Provision Claims in Victoria, click here to read our previous article.

“The time when stepchildren should be considered to have a far inferior claim to the natural child of a testator has well passed” ruled Associate Justice Melissa Daly earlier this year.

Under the Administration and Probate Act 1958, a stepchild is an ‘eligible person’ to make a family provision claim against their stepparent’s estate, seeking adequate provision for their proper maintenance and support.

Who is a ‘step-child’?

Whilst the legislation does not define who is a ‘step-child’ for the purposes of Family Provision Claims, the case law has interpreted a step-child to include a child of a spouse or a domestic partner.

Further, the case law has indicated that this step-relationship continues after the death of the natural parent and is only severed when the relationship between the step-parent and the natural parent ends by separation (in the case of a domestic partnership) or divorce (in the case of a marriage).

Treatment of step-children claims

Claims by step-children are typically made when their natural parent has already died and often involve an argument that the step-child ‘stood aside’ to some degree and allowed their step-parent to inherit assets from the natural parent’s estate. But this is not the only instance in which a claim can be made.

Historically, claims by step-children have been less successful than claims by natural children, and the courts have expressed caution when looking at such claims, particularly where the relationship between the step-parent and the step-child becomes acrimonious or non-existent after the natural parent dies.

However, a recent decision of the Victorian Supreme Court may represent a changing of the tide.

James v Rost; Langan v Rost [2022] VSC 98

This case involved a claim by a step-son and a step-daughter of the deceased.

In 1965 Vera married Jack and they remained married until Jack’s death in 2006 at the age of 83. Vera had a daughter, Michaela, from a previous relationship and Michaela had a son, Saery. Jack also had two children, Marianne and Bernard, from a previous relationship.

Bernard was 14 years old when Vera and Jack married. Bernard lived with Vera and Jack for a few years after they were married, before leaving home at the age of 19 years to study. Bernard was married and had modest assets including his home, a small amount in a bank account and superannuation of about $143,000. He relied on expert evidence from a financial advisor in order to substantiate his claim for a legacy of $150,000.

Marianne was around 18 years old when Vera and Jack married. She never lived with Vera and Jack. Although there were some years she didn’t have a close relationship with Vera, she kept in touch by telephone and visited Vera and Jack from time to time, sometimes staying with them for a number of days at a time.

Marianne was married and had modest assets including her home, a small amount in a bank account and some shares. Marianne’s husband was paralysed from the neck down and received funds pursuant to an NDIS plan.

It was recognised that Michaela and Saery were in greater financial need than Bernard and Marianne. Michaela (now 70 years of age) had a low income and nearly no assets. Saery (now 40 years of age) had no assets, a low income and a chequered employment history. Michaela maintained that her mother Vera did not owe a moral duty to Bernard and Marianne.

The chief asset of Vera’s estate was the Avondale Heights property valued at $920,000. Initially, Vera purchased the first home that she and Jack lived in from 1963. She transferred this into their joint names after Jack’s retirement and the discharge of the mortgage.

In a number of prior Wills made before Jack’s death, Vera had left Marianne and Bernard a half share in the property. For Associate Justice Daly, this was an indication that Vera considered she owed a moral duty to provide for Marianne and Bernard in her Will, even though she did not wish to do so.

The Decision

The critical issue in this proceeding was whether Vera owed the claimants, Marianne and Bernard, a moral duty to make provision for them.

The Court held that the deceased did owe a moral duty to the claimants, because:

• when their father Jack died, his own wealth passed to Vera, rather than to his children;
• they had held off making a claim against their father’s estate when he died, when they would have been able to do so; and
• each of Marianne and Bernard were in some financial need, with no or limited capacity to improve their financial position.

In the words of Associate Justice Daly, “they should be, all other things equal…, entitled to Jack’s half share of the property (had he lived), or at least a substantial portion of Jack’s notional shares of the property”.

Her Honour also held that a further reason for “imposing a moral duty upon a testator in favour of step-children in certain circumstances is that, in many such cases, the step-children have on occasion of the death of their natural parent stepped aside in order to protect the resources of the surviving spouse…”.

By stepping back and allowing their father’s estate to pass to their step-mother Vera over 20 years ago, Marianne and Bernard had effectively made a material contribution to Vera’s resources, which warranted recognition in the distribution of Vera’s estate.

Bernard’s financial position was described as “modestly comfortable rather than affluent, with there being some scope to generate further income…, but not necessarily a substantial income”. The Court awarded him $65,000.

Marianne was in greater financial need than Bernard, as she had no superannuation or significant assets other than her home. She also had greater health issues and the responsibility of caring for her husband, which limited her ability to provide for herself. She was awarded $105,000.

Key Takeaways

While Vera clearly wished to benefit Michaela and Saery, and there was no question that they each had significant financial need, neither of these factors was enough to extinguish the moral obligation that she owed to Marianne and Bernard.

There is no question that blended families are becoming more common. It is therefore important to recognise when someone may have a moral obligation to provide for their step-children, and that this may not be immediately obvious.

Less than 20 years ago, the Court considered it “novel” to suggest that a step-parent has an obligation to provide for a stepchild.

With James v Rost, perhaps it can be said that this novelty has well and truly worn off.

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We frequently meet with clients who have put off dealing with their estate planning because they don’t know who to appoint as executors. When this is the case there are a range of benefits in considering appointing an independent professional executor to handle your estate.

The role of an executor

In basic terms, the role of an Executor is to step into the shoes of the Willmaker, deal with the Willmaker’s debts and assets and to give effect to the Willmaker’s intentions under the Will.

This generally involves (but is not limited to):

• obtaining probate of the Will;
• liquidating or transferring assets;
• dealing with personal effects;
• paying debts and dealing with potential creditors;
• potentially stepping into controlling roles of existing entities, including companies, trusts and self-managed superannuation funds;
• liaising with accountants, advisors and beneficiaries;
• completing individual and estate tax returns;
• possibly defending challenges against the estate; and
• attending to beneficiary distributions in accordance with the Will.

This is a complex role and must be done with a high level of diligence, whilst upholding obligations that are legally imposed on Executors.

It is common for family or friends to act in this role and to engage an estate administration lawyer to assist them through the process. However, in some circumstances appointing a family member or friend is not possible, appropriate or practical.

When it may be appropriate to appoint a professional executor

Below are some instances where it may be appropriate to consider appointing a professional executor:

• You do not believe any family member or friend would be capable of acting in the role.
• It is a very complex estate, e.g. complicated asset structure.
• There is a high risk of challenge against the estate which may raise conflict issues.
• You have a complex family structure, e.g. second marriage or vulnerable beneficiaries.
• There are family disputes, such as children who do not get along.
• All your family lives overseas raising practicality issues and potential tax implications if appointed.
• Your assets are largely held in a discretionary trust and you do not wish to appoint family to control the trust given the potential conflict of interest.
• You have no family or other trusted person to take on the role.

What is the cost?

There are various options for appointing professional executors, including trustee companies or individual professionals, such as a lawyer or accountant. The appropriateness of these options may depend on the estate planning objectives of the Willmaker and the length of time the professional executor will be required to act.

Professional executors have various methods of charging, so it is important to confirm this with the chosen professional and to incorporate the charging method into the Will.

Often professional executors will charge commission (a percentage of your estate), or they may charge via hourly rate, or on a scale basis such as in accordance with the Victorian Practitioner Renumeration Order. It is also important that the Willmaker consents to the method of charging prior to the Will being executed.

How can we help

If you are unsure who to appoint as your executor, Moores would be pleased to assist you in determining whether the appointment of a professional executor is appropriate in your circumstances. Moores will accept professional executor appointments in particular circumstances.

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The much-anticipated review of the Privacy Act 1988 (Cth) (Privacy Act) may be happening very soon.

After announcing the Privacy Act Review on 12 December 2019, and conducting consultation in 2020 and 2021, the new Attorney-General Mark Dreyfus has pledged to bring in sweeping reforms in the coming months.

Privacy Act Review: Looking back

The Privacy Act Review was part of the government’s response to the Australian Competition and Consumer Commission’s Digital Platforms Inquiry. The purpose of the Review was to ensure privacy settings:

• empower consumers;
• protect consumers’ data; and
• best serve the Australian economy.

Concurrent measures

During the Review, there have been other amendments to the Privacy Act, notably:

1. the introduction of the Consumer Data Right;
2. Expanded powers of the eSafety Commissioner; and
3. the Online Privacy Bill.

You can read more about eSafety here.

The Online Privacy Bill is a separate reform to the Privacy Act Review. It proposes to introduce an Online Privacy Code for social media platforms.

Privacy Act Review: Looking ahead

Proposed changes to the Privacy Act include:

• strengthening individuals’ privacy rights by:
  • strengthening consent requirements; and
  • introducing a person’s right to erasure;
• creating a direct cause of action or statutory right for breaches of privacy laws; a recommendation of the Australian Law Reform Commission in 2014;
• introducing specific codes for certain industries, such as the Online Privacy Code for social media platforms, and other distinct industries; and
• increasing maximum penalties which are significantly out of step with international jurisdictions.

Strengthening consent

The principle manner to strengthen consent requirements is with pro-consumer defaults – also known as the principle of privacy-by-design – and accessible privacy settings that give individual obvious, clear ways to set privacy controls. The inherent policy idea underpinning privacy is the rights of individuals to control their information, and by result, their identity.

It is possible that the consent reforms will focus on requiring pro-privacy default settings when information about children and vulnerable people is involved. This is also a part of the Online Privacy Bill, proposing explicit parental consent to use social media platforms for children under the age of 16.

What your organisation can do now

As we await the introduction of a Privacy Bill 2022 to Parliament, we recommend organisations:

• ensure they have a privacy policy in place, even if they are a “small business” with an annual income of less than $3 million. The Privacy Act Review has considered scraping the small business exemption; and
• plan – and budget – for needing to refresh how they handle personal information. Replacing or upgrading software or client management systems can be expensive, time-consuming and critical to business infrastructure.

How we can help

With expertise in privacy and safeguarding, Moores can support your organisation to you achieve your mission by helping you:

• optimise how you use personal information in a lawful way, and
• avoid costly and embarrassing breaches of privacy.

When was the last time your team had privacy training?
For more information about your organisation’s current privacy obligations, see Moores’ Privacy Toolkit – a free online resource you can download here.

Contact us

Please contact us for more detailed and tailored help.

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Background

The benefits of using discretionary family trusts as investment or business vehicles are often stated to include increased asset protection (including against estate challenge claims) and flexibility as to distributions which can be tax effective. From an estate planning point of view, the focus with respect to family trusts is typically on the controlling roles of trustee, appointor and guardian, on the basis that those controllers will determine which of the beneficiaries can benefit from the assets and income.

The broad legal principle behind those reasons are that a trustee’s discretion is generally not able to be challenged by beneficiaries (whether those beneficiaries are in the general class or default beneficiaries). However, nothing is as simple as it seems and the question of the extent of trustee discretion and the overlay of their fiduciary obligations requires more detailed consideration.

Secondly, many trustees do not record their reasons for decisions on the basis that they are not obliged to and only if they are recorded can they be compelled to be provided and be subject to dispute.

Owies – the Case and the Judgement

The decision of the Full Court of Appeal in Victoria in Re Owies*, arose in the context of a dispute amongst family members post the death of the parents about how the trust had been and was to be administered. During the lifetime of the parents who established the trust, they held the various controlling roles and it could be said treated the trust as “theirs”. Their succession planning included making various amendments to the deed that resulted in one of their 3 children assuming the role of appointor and guardian.

The trust had also been administered so that for various years there was a pattern of income distributions (40% to Dad, 20% to Mum and 40% to Michael, one of the three children), and in one year 100% to Dad. There was also a capital distribution of the property to one of the other 2 children. The deed provided for the trustee to have “absolute discretion” as to income distribution but provided that the 3 children were the default beneficiaries.

Following the death of Mum and Dad, the directors of the Corporate Trustee had been the son who had received the distributions and the parents’ long-term solicitor.

The matter brought before the Court

Post the death of Mum and Dad, the 2 disgruntled children brought the matter before the Court and were ultimately successful in arguing that:

1. The variations of the deed which purportedly put the “good” son in control were invalid. The amendment power in the deed did not allow the changes to the role of appointor and guardian.
2. The exercise of the trustee’s absolute discretion was a breach of trust in various of the financial years, because the trustee failed to give due and proper consideration of all of the beneficiaries. They relied on the fact that the trustee had made no enquiries of the circumstances of the 2 disgruntled children and therefore could not have made a properly informed and genuine decision.
3. The trustee should be removed and replaced with an independent trustee.

The court decision

In coming to their decision in respect of the lack of due and proper consideration, the Court found that the Trustee should have informed itself as to the size and nature of the trust, the nature of the relationships, and the purpose of the power as well as the circumstances of relevant beneficiaries, which cannot be assumed to be static.

The Court took into account a number of factors including:

1. That the 3 children were the default income beneficiaries, which “reinforces the default structure of the trust deed as one providing for the benefit of the children in equal proportions”
2. There was no evidence that the Trustee made enquiries of the circumstances of the disgruntled beneficiaries, or that the information they did have was part of the deliberations of the trustee.
3. The 100% distribution to Dad in one year was noted as “remarkable”, given that he was 96 years old at the time and in residential care. The Court found this distribution was “so extreme and without any evident justification that it provides an additional factor that demonstrated it exercised its discretion… without real and genuine consideration” of the 2 disgruntled children.

The removal of the trustee and appointment of an independent trustee

In deciding to remove the trustee and appoint an independent trustee, the court said it was satisfied that the trustee had, over a number of years:

“failed to act impartially, failed to give real and genuine consideration to the interests of two of the primary beneficiaries, and relations between the beneficiaries and those involved in managing the trustee are, at least from this vantage point, irreconcilably damaged, such that it is not in the best interests of the beneficiaries for the trustee to continue in office”.

Amongst other reasons, the Court specifically cited the fractured relationship, antipathy and “total lack of trust” between the siblings as factors that favored removal of the Trustee to protect the welfare of the beneficiaries as a whole.

Notably, even though the 2 disgruntled children were successful in many respects, the Court found that the actual distributions made by the Trustee were voidable and not void. That meant that the distributions made in the past stood and because it was not sought to be set aside in the original claim, the 2 disgruntled children could not do so as part of the appeal.

Has the Game Changed?

The law has not changed as a result of this decision but it is an example of why reliance on broad principles can be dangerous.

While it is true to say that the controllers of a family trust have a broad discretion, it is equally important to consider the terms and purpose of the trust as well as how it is being administered to assess whether or not it can achieve the goals of the parties involved.

Changes to consider in respect of the establishment and operation of family trusts

In practice, the game will need to change in respect of the establishment and operation of family trusts, if the claims brought in Re Owies are to be avoided. For example:

1. Reconsider the default beneficiaries in a trust. Individuals as a default for tax purposes might be recommended, but will also feed into decisions such as this. A default as to accumulation may be preferred.
2. Consider the purpose recited in a trust. Is it to provide for the beneficiaries? Could it be capital retention for longer term generations?
3. Consider the terms of a Trustee exercising their discretion:
   • Trustees ought seek information from “main” beneficiaries at least, before exercising their discretion.
   • There should be evidence of the seeking and receipt of relevant information and that it has been considered by the Trustee.
   • Unchanging patterns of distribution and giving 100% to one person may well lead to adverse inferences, in the absence of clear evidence of consideration of the position of each party.
   • The general position of a trustee not recording their reasons may need to be reconsidered to balance a justification of their decision as against the risk of those reasons then also being challenged.
   • Family members exercising control of family trusts are well advised to be aware that family dynamics and behaviors will be considered by the courts when assessing whether the removal of a trustee will be beneficial for the welfare of the beneficiaries of a trust as a whole. This may embolden other disgruntled beneficiaries to bring court proceedings for removal of a trustee if they feel the trustee is not acting impartially or suspect that their decisions are imbued with bad faith.

Implications for Advisors

Professional advisors involved in addressing the administration and succession of family trusts will need to take note of this decision and consider the impact on various aspects including:

• When family trusts are being established consider and advise on the implications of the default beneficiaries, as well as the purpose of the trust, the breadth of the amendment power. If you are ordering off the shelf, consider who is giving that advice or might be held responsible for it.
• Ensuring deeds of variation are valid. This case is another in a long line of deeds of variation being rendered void.
• The preparation for and documenting of trustee deliberations and decision as to income resolutions each year, particularly where there is the potential for disgruntled beneficiaries. A pro-forma document printed and signed on 30 June may not cut it. The enquiry process may take some time and would need to begin the weeks or months preceding the end of the financial year.
• Estate planning advice should not be reduced to “the controller gets the trust”; it is not as simple as that. In addition, the larger the trust and the higher the risk of dispute, the greater the case for involving independent trustees as part of the succession process.

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*Owies v JJE Nominees Pty Ltd [2022] VSCA 142

The Education and Training Reform Act 2006 (Vic) has been amended to grant powers to Principals and other authorised officers to ban disruptive or threatening parents from school grounds – immediately. Long awaited since June 2021, these amendments came into effect on 28 June 2022.

The new laws have been designed to give teachers greater protection from threats and ensure schools remain a safe space, and workplace. They also significantly alter the power relationships between parents and teachers.

The amendments address the increasing occurrence of members of school communities facing harmful, threatening or abusive behaviour which does not meet the level of threat required for an intervention order, but which is nevertheless damaging and dangerous.

Then Victorian Minister for Education James Merlino said “No one should be threatened or intimidated at work or at school”.

Who can ban people from a school?

The new laws empower ‘authorised persons’ to prohibit a person from entering or remaining on any school-related premises. At a Catholic or independent school, the Principal and the proprietor of the school are authorised persons who can ban adults from school premises.

Principals do not need to apply to Victoria Police for an intervention order, but can unilaterally make an immediate order, and a lasting Safety Order – subject to some checks and balances. This significantly shifts the power balance between “problem” parent and school.

Who can be banned from a school?

An authorised person (the Principal or proprietor) can exclude anyone from school premises, except:

• people under 18 years of age;
• a staff member at the school; or
• a student at the school.

This means schools have the power to exclude a threatening parent or family member.

An adult person can also be prohibited from being on school premises, or approaching, telephoning, or otherwise contacting specific staff members, or from using a communication platform controlled by the school. This power extends to school related places, such as swimming carnivals or other similar events outside ordinary school premises.

When can an authorised person make a Safety Order?

In addition to immediate orders, the new laws empower authorised persons to make ongoing Safety Orders. An authorised person can make a Safety Order about a person only if they are satisfied there are reasonable grounds to believe the person:

1. poses an unacceptable and imminent risk of harm to another person on school premises or a member of the school community at any school related place;
2. poses an unacceptable and imminent risk of causing significant disruption to the relevant school or activities carried on by the relevant school;
3. poses an unacceptable and imminent risk of interfering with the wellbeing, safety or educational opportunities of students enrolled at the relevant school;
4. has behaved in a disorderly, offensive, abusive, intimidating or threatening manner to a member of the school community, or at a place where school related activities are taking place; or
5. has engaged in vexatious communications relating to a staff member.

There are additional necessary considerations. An authorised person making a Safety Order needs to consider if the Safety Order will address the risk of harm, disruption or interference. An authorised person must also consider any vulnerability or disability of the person subject to the order, the impact of the order on any student’s right to access education and the safety and wellbeing of any child involved.

The circumstances in which a Safety Order may be made are broad

The amendments expand protections afforded to school staff by capturing a wide spectrum of harmful conduct. The proposed Protection Act defines ‘harm’ broadly. ‘Harm’ means harm of any kind, including physical or mental harm.

The threshold of harmful conduct required for a Safety Order is far lower than the threshold required for Personal Safety Intervention Orders.

Immediate Safety Orders can only be in place for 14 days. This gives schools time to implement a longer lasting Safety Order, which have additional requirements.

Your Parent Code of Conduct and other obligations

Schools should consider amending their policies and procedures to reflect these new powers. Particularly relevant are your Grievance Policy or Parent Code of Conduct, as the amendments set review and appeal processes for the new Safety Orders.

Parent Codes of Conduct, and other tools like Communication Plans, will continue to have an important role to assist schools in dealing with serial offenders or keyboard warriors whose bad behaviour may fall short of meeting the new safety order rules but which is nevertheless damaging, disruptive and unacceptable. Safety Orders are also an additional weapon in the armoury of schools which use a Parent Code of Conduct, enabling the school to build in a clear escalation to a Safety Order in the event of continued breaches of the Parent Code of Conduct.

Schools will also have to continue to navigate the complicated interplay between intervention orders and family court orders, which might necessitate the school providing ongoing information and access to a parent even where an intervention order exists.

Lastly, schools must always prioritise the safety of students and staff, and call the police in the event of any immediate threat.

How we can help

If you have any queries about how to implement these changes to the Education and Training Reform Act 2006 (Vic) at your school, or how to amend your Parent Code of Conduct, our education team can assist and has deep expertise and experience in education, including child safety, regulation, not for profit compliance, governance, enrolments and constitutions.

Contact us

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