The Full Bench of the Fair Work Commission (Commission) has confirmed that the protection from bullying in the Fair Work Act 2009 (Act) is broad enough to cover volunteers. The decision in Bibawi v Stepping Stone Clubhouse Inc t/a Stepping Stone & Others[1] highlights that organisations with volunteers, including volunteer board members, may be subject to the FWC’s stop-bullying jurisdiction.

Background

Stepping Stone Clubhouse Inc (Stepping Stone), an organisation which provides services for people living with mental illness, runs programs whereby members can volunteer in work units to develop self-esteem, and social and vocational skills. Mr Bibawi volunteered as a member in the Clerical, Administration and Technology Unit and assisted with general clerical duties.

Mr Bibawi lodged an application for stop-bullying orders against Stepping Stone and named individuals, and claimed that he was subjected to bullying while he was a volunteer member with Stepping Stone.

To be eligible to seek a stop-bullying order, a person must be a ‘worker’ as defined in the Act. Stepping Stone argued that Mr Bibawi was not a worker

At the first instance, the Commission found that the relationship between Mr Bibawi and Stepping Stone was not “work” of a paid or unpaid type that would be done by a volunteer, but rather it was done as part of a program, funded by the Government to improve the well-being and mental health of its participants such as Mr Bibawi.

However on appeal, the Full Bench held that the definition of “worker”, which has the same as in the Work Health and Safety Act 2011 (WHS Act), is very broad, requiring the following two elements to be met:

1. the person must carry out work ‘in any capacity’; and
2. the work must be carried out for a person conducting a business or undertaking.

The Full Bench found that Mr Bibawi performed work for Stepping Stone, and despite such work being performed as part of a program funded by the Government, there is nothing in section 7 of the WHS Act which would exclude Mr Bibawi from the definition of worker.  It was immaterial that Mr Bibawi’s work was also intended to improve his health and wellbeing, because “there may be a wide range of motivations and objectives attaching to the performance of such work”.

Not-for-profit organisations that engage volunteers to assist with their activities should be mindful that people who volunteer in programs and perform work may be a ‘worker’ eligible to make a stop-bullying application.

The case also illustrates the importance of educating all workers, including volunteers, about their rights and responsibilities in relation to bullying, and ensuring that your policies and procedures apply to all people who perform work on behalf of your organisation.

How we can help

If you require assistance to manage and respond to a stop bullying application, or want to be sure your current policies and procedures are consistent with your legal obligations, please do not hesitate to contact us.

Much is happening in Family Law – in fact, you might easily say it is more exciting than the coming election! The Australian Law Reform Commission has just put out its recommendations for major changes in the family law system, following its long awaited review after 43 years of operation of the Family Court of Australia.

But a great deal is going on in addition to what the ALRC proposes such as:

1. The strange left-field proposal by government to merge the Family Court and the Federal Circuit Court has been rejected by the Senate.
2. The family law courts have just issued an update of their “Family Violence Plan”. This is a very detailed and helpful blueprint for how the courts are to make sure that cases involving allegations of family violence are handled promptly, sensitively and with focus on risk protection.
3. About a dozen new family law judges (both courts) have been appointed since November which is a marvellous way of reducing the delays in the court system and ensuring real help is provided to people when they unfortunately get into the court system.

And the Australian Law Reform Commission has made 60 recommendations for change. The big ones include:

1. Creation of state “super courts” to handle both family law and also state based family violence matters (intervention orders) and state based child welfare matters (the children’s court jurisdiction relating to children at risk). Unfortunately, this proposal needs the States and the Commonwealth to cooperate and even if the Commonwealth wanted to push ahead with this there is no way this will happen this calendar year and it could take much longer again.
2. The tortuous provisions of the Family Law Act under which the court must consider (usually then rejecting the idea) equal shared time for children in every parenting case are to be repealed, leaving a focus as it should always have been, on what is in the best interests of the child.
3. There is an important recommendation to simplify property settlements. At present property issues are totally in the discretion of the court which must take into account in excess of 20 considerations with no guidance as to which ones have more weight than others. The ALRC has picked up a recommendation made by Moores (and echoed by some others) that a court should presume that contributions made by the parties during the marriage or relationship (financial, parenting, homemaking, etc.) should be treated as equal. 
   
   This can be adjusted for contributions from other sources like inheritances, and for the parties having different future needs (such as responsibility for young children or a difference in earning capacity). This will remove bickering in family law settlements about the detail of what has gone on during a relationship, at least in relation to property settlement.
4. They recommend that the date to value assets and superannuation is the date of separation (not the current date of trial) “unless the interests of justice require otherwise”. This suggests that if somebody gets an inheritance after separation it may be disregarded in a settlement – which the law does not permit at present.
5. They recommended there be a presumption that the value of superannuation accumulated during a relationship should be split equally between the parties. Again, this means pre-relationship super and post-relationship super may be disregarded.  This will certainly simplify arguments about superannuation.
6. They recommend greatly simplifying the currently complex operation of superannuation splitting, which will make it much easier for the separating couple.
7. They recommend the introduction of a new ground for claiming money; a statutory tort of family violence. One party can include this in their family law claim and get damages from the other party for violence during the relationship.  Those damages will then not be taken into account in the family law property settlement which will go ahead in the normal way. This is a major change and while it may increase litigation, in bad violence cases it gives real hope for the injured party to get real compensation.
8. They also recommended (as Moores also suggested in submissions to the ALRC) that parties must take “genuine steps” to resolve their financial matters before going to court. This will lead to increased mediation of financial matters in family dispute resolution centres and will force people to seriously negotiate.  If not they may be ordered to pay wasted costs of the other party being dragged to court.
9. The ALRC would expand the use of arbitration (which you could loosely call rent-a-judge, done privately) to cover all financial matters, and some parenting matters where family violence is not involved. This is a highly desirable option for those who cannot settle without a third party making a decision and it is quicker and cheaper than going through the Court system in the large majority of cases.
10. They recommend removing the general rule that each party pay their own legal costs. The detail of this has to be fleshed out. We hope this means that those who unnecessarily or unreasonably escalate legal matters will be ordered to pay costs more often and that misbehaviour in the legal system will reduce accordingly.

There are many other interesting proposals. As mentioned the state super court proposal will not happen soon. We hope that most of the other proposals are legislated for this year. They promise to simplify family law and to reduce litigation which is a good thing.

If you require assistance or advice about any of these matters, please do not hesitate to contact us.

Retrospective changes to child support legislation

On 1 July 2018, amendments were made to the Child Support (Assessment) Act 1989 (“The Act”) by virtue of the the enactment of the Family Assistance and Child Support Legislation Amendment (Protecting Children) Act 2018.

The amendments directly impact the enforceability of binding and limited child support agreements by way of introducing a suspension period and then terminating event where a parent of a child ceases to be an eligible carer in accordance with the Act.

Masters & Cheyne [2016] FamCAFC

The amendments are the result of a parliamentary committee report which addressed the decision of the Full Court of the Family Court in Masters & Cheyne [2016] FamCAF where the Father was obligated to continue to pay child support to the Mother despite the child residing with him on a full time basis.

In summary, the Mother and Father signed a binding child support agreement on 31 July 2008 with respect to their three children.  The agreement provided the Father was to pay the Mother $220 per week per child until they reached the age of 18 years.  At the time of signing the agreement, the children lived with the Mother and spent time with the Father.

Fast forward to 2012, the Mother relocated to NSW and the youngest child resided with the Father. The two eldest children were now adults. The Father made an Application to the Family Court to have the agreement set aside on the basis that:

1. exceptional circumstances had arisen since the signing of the agreement resulting in the younger child residing with the Father; and
2. the Father would suffer financial hardship if he was obliged to continue to pay $220 per week to the Mother despite the child residing in his care full time.

Ultimately, the matter proceeded to Appeal. Unfortunately for the Father, the Full Court of the Family Court dismissed the Father’s application and noted that although exceptional circumstances had arisen with a change to care arrangements, the Father, who earned approximately $192,000 gross per annum and had net assets valued at an excess of $1.1 million would not suffer hardship if the agreement was not set aside.

Suspension and Termination of Assessment

The amendments to the Act have attempted to address the decision upheld in Masters & Cheyne to provide a fairer outcome.

The amendments stipulate:

1. As of 1 July 2018, if a parent who is entitled to receive child support payments ceases to be an eligible carer of that child (less than 35% care of the child per year) the binding child support agreement will be suspended for a period 28 days or 26 weeks in certain circumstances.
2. If the 28 day suspension period ends without the former carer again having becoming an eligible carer, the binding child support agreement is terminated.
3. Termination has effect on the day the former carer ceases to be an eligible carer.

How we can help

The changes made to the child support legalisation are retrospective. It is likely many people may have a child support agreement in place that does not contemplate the amendments and already be suspended or in some cases, terminated.

It is imperative that practitioners are aware of the legislative changes and carefully draft agreements that provide for a change in care arrangements and a role reversal between parents.

We would welcome a discussion with you or your clients about the risk of a prior agreement being terminated and how to ensure a future child support agreement is binding.

If you have any queries, please do not hesitate to contact us.

A “New” land tax

The Vacant Residential Land Tax (“VRLT”) commenced operation in Victoria in relation to occupation of residential land from January 2018. It operates to apply additional land tax on residential properties that were considered “vacant” in certain councils close to the Melbourne CBD.  Unlike traditional land tax however, which is calculated on the unimproved value of the property, VRLT is calculated on the capital improved value – which is usually significantly higher.

The stated policy behind the VRLT was to disincentivise property banking in the face of a housing shortage. However, it appears that in application, the new law has the potential to go beyond that stated policy, largely due to the definition of “vacancy” and as to how it relates to trusts and other private entities.

The definition of vacancy is wide and can catch private use by family members (even where rent is being paid). While there are exceptions for some private use, their application is very limited where property is held in a trust of company structure.

An example

Kim is a director of a publicly listed company and works in Melbourne. Her partner Tom lives in Albury with their 3 children where he works as an accountant. Tom owns their principal residence in Albury.

Kim regularly spends 2-3 nights a week in Melbourne rather than commuting each way. An apartment in East Melbourne was acquired for her to use for that purpose, at a cost of $1.8M. Kim and Tom did not want Kim owning the property given the risk associated with her role, so the property was acquired via their family trust.

Under this example:

• the property would likely be considered vacant for the purposes of the VLRT
• the annual VRLT on the property would be 1% of $1.8M ($18,000) in addition to the standard land tax which may include the trust surcharge as well.

In effect, the outcome is up to 3 different land taxes applying to this property.

How did this result occur?

Generally, a property is considered “vacant” for the purposes of the VRLT unless the owner or the owner’s “permitted occupier” occupies the property for more than 6 months in the relevant year or another specific exception applies. Those exceptions include:

• holiday house use by the owner (for at least 4 weeks a year)
• work use by the owner (for at least 140 days a year)

The issue for Kim and Tom is that even if her use qualified under the time periods applicable to these exceptions, because she is not the owner of the property (the trustee of her family trust is), on the face of the legislation the exceptions do not apply.  Explanatory commentary on the SRO website supports this interpretation, stating that those exceptions do not generally apply to trusts or companies.

Who will this affect?

People acquiring residential property in the relevant council areas, who are not using it as their principal residence but do not want to personally own the land as part of an asset protection strategy. 

Ironically, the very people wanting to use the work exemption are more likely to be the ones wanting to use a trust for asset ownership, if their role brings with it asset protection concerns. 

What are the lessons?

For Kim, she may be able to have considered structuring a loan from a related trust to enable her to acquire the property personally. As the owner, she would then have the potential to qualify under either the work exemption or the holiday home exemption.  However, she loses the asset protection benefits of trust ownership.

Other lessons are:

• Don’t assume your property won’t be caught by the VRLT, just because you are using it part of the time.
• Consider all implications of trust ownership of real property including general land tax, land tax trust surcharges, VLRT, foreign ownership rules and the potential for duty and tax to transfer out of a trust. 

How we can help

Getting thorough advice before nominating a trust to acquire property will minimise the chances of an unwelcome surprise assessment.

For more information or expert advice, do not hesitate to contact us.

The lessons learnt from the recent case of Re Marsella; Marsella v Wareham (No 2) [2019 VCS 65)] are two-fold:

• one, the case highlights the importance of SMSF trustees being aware of their duties and responsibilities when paying death benefits in the exercise of discretion; and
• two, it brings to the forefront how proceedings like this can be avoided by a superannuation fund member proactively addressing their estate planning before it’s too late!

What happened?

Helen Marsella (“Helen”) and her daughter Caroline were the trustees of a SMSF.  Helen was survived by her husband Riccardo and her two children from her previous relationship, including Caroline.  Riccardo was the executor of Helen’s Will.

Caroline resolved as the surviving trustee to pay all of Helen’s death benefits to herself. Helen had no valid binding nomination in place. On the same day, Caroline also appointed her husband, Martin, as a co-trustee of the fund and there was a further resolution by Caroline and Martin to distribute the death benefits to Caroline solely. The resolutions stated that the trustees had given due consideration to “the possible interests of all Dependants of the deceased member, the potential eligible Beneficiaries of the Member, and the Member’s Estate”.

Riccardo sought to have:

1. Caroline and Martin replaced as trustees; and
2. the repayment to the fund of the amount distributed as death benefits together with interest. 

Riccardo argued that the trustees did not give “real and genuine consideration to the interests of the dependants of the fund and the distribution made from the fund should be set aside”.

Of particular note in this case is that Caroline had been advised to seek specialist advice. She had been made aware of:

1. the importance of paying out the death benefits “as soon as practicable”; and
2. the need to consider the interests of all of Helen’s dependants as defined in the fund trust deed.

The Court was asked to consider:

1. Whether the trustees properly exercised their discretion in resolving to distribute the death benefits; and
2. Whether Caroline and Martin should be replaced as trustees. 

The Decision:

In setting aside the exercise of discretion, Justice McMillan held that the trustees failed to exercise their discretion with a real and genuine consideration of the beneficiaries of the fund in determining to pay the death benefits to Caroline.

Justice McMillan stated that whilst it wasn’t the Court’s role to consider the fairness or reasonableness of the outcome of the exercise of discretion or usurp the role of the trustee, if the result is “grotesquely unreasonable”, the outcome may form evidence that the discretion was never properly exercised, or was exercised in bad faith. Relevant factors for consideration included:

1. the intention of the deceased;
2. the relationship between the dependant and the deceased; and
3. the financial circumstances and needs of the dependant.

Here, the trustees ignored Riccardo’s and Helen’s substantial relationship and his relatively limited financial circumstances.   

In the judgment, Justice McMillan was particularly scathing of Caroline noting that she had proceeded with the appointment of a co-trustee and distribution of benefits in the context of uncertainty, significant conflict and lack of recommended specialist advice.

Her Honour also determined that in the context of an improper exercise of discretion, conflict and personal acrimony between the parties, Caroline and Martin should be removed as trustees.

Riccardo was required to make submissions to appoint a replacement trustee or corporate trustee.

Key case lessons

With cases on death benefit payments becoming more common, there are some key lessons from this decision:

1. Trustee Discretion

Trustees need to be aware that their responsibilities extend to decisions required to be made when paying out death benefits, as part of accepting their appointment as trustee or director of the trustee company.  In the absence of a valid binding nomination, factors that are relevant in determining whether the discretion of the trustee is exercised in good faith and upon real and genuine consideration include:

• The inquiries the trustee made, and the information they had;
• Whether the trustee has informed her or himself of the matters relevant to the decision, including seeking specialist advice in light of the size of the fund and complexities surrounding the fund deed and compliance with the SIS Act;
• The intention of the deceased;
• The relationship between the deceased and the dependants;
• The financial circumstances and needs of the dependants; and
• Whether the trustees acted in the context of uncertainties and/or misapprehensions.

2. Proper and current estate planning

For superannuation fund members who want certainty about who receives their superannuation benefits (particularly in the context of a second relationship where there may be different objectives for different assets and interests), this case illustrates the significance of having a valid binding nomination or reversionary pension in place. 

Most people still believe that it is their Will that is the most important document when dealing with the passing of assets on deal and will often prioritise updating or seeking advice on their Will, without thinking about who their superannuation is to end up with. 

Thinking about succession to control of a SMSF is also important so as to ensure that the fund has the right people in control on death (and even on incapacity). For example, it is likely that there would have been a different outcome in the exercise of trustee discretion in Re Marsella had there been a company as trustee, of which Helen (as the sole member) was the sole director. Riccardo may have taken control of the SMSF in his capacity as Helen’s legal personal representative and determined to pay all of the death benefits to himself. In this instance, it may also be prudent to have an express authority in the Will for a spouse to claim and receiving death benefits personally and not in his or her capacity as legal personal representative.

Conclusion

Whilst a trustee’s discretion is absolute and unfettered, this case highlights the willingness of the Courts to remove trustees and set aside decisions in instances where trustees have not acted in good faith. 

To avoid this, it is recommended that trustees seek advice particularly where there may be some uncertainty or complexity. Proactively though, fund members should regularly review their estate planning to ensure that their documentation accords with their intentions. Where there is a SMSF involved, this potentially includes a current binding nomination, pension documentation, Will and super fund deed.

For more information or expert advice, please do not hesitate to contact us.

In our last issue (What use is a Trust when Family Law gets involved? Part 1 of 2) we focussed on the ability of the Family Court to set aside transactions involving trusts as occurred in Kennon & Spry.

In this issue, we consider the Court’s approach to more ‘routine’ discretionary trust cases and what factors apply when deciding if trust property is property of the relationship for the sake of a family law split.  

Bailey involved sixth generation farmers.  The trust was held to be for the benefit of the wider family and not property divisible in the marriage.  Crucially, the accountant was the trustee and gave evidence that the husband’s deceased Dad, who established the trust in the ‘60’s, had told him the trust was for all the generations in perpetuity, so he would definitely not distribute capital to the husband. 

Therefore, the court simply took into account the income stream of the trust as a financial resource available to the husband in the family law split. 

Differently, in Goodwin, the husband as appointor effectively controlled the trust for his benefit.  In the circumstances that trust was treated as property of the parties available for division between them.

Ward involved the husband’s mother establishing a testamentary trust for him and his children.  The husband in the witness box admitted that his mother had removed him as trustee and executor two days before she died – to make sure the wife didn’t get a share of her money! 

The new trustees were his sister and a solicitor, so the judge was satisfied that in reality they would make sure the husband got the trust money; therefore this was treated as property in the family law split.

In Bailey, two helpful checklists detail the considerations relevant to treating trust property as property of the parties’ relationship, including: 

1. The history of the parties’ treatment of the trust property (see Goodwin);
2. The history of exercising powers and making variations to the trust (Kennon & Spry);
3. The benefits derived from the trust by the parties such as drawings, loans, salaries, payment of expenses, use of motor vehicle;
4. Capacity to borrow trust funds;
5. Contributions by the parties to the trust property (Kennon & Spry);
6. One party’s ability to transfer assets to either spouse; and
7. Whether a party has responsibility for the daily administration of the trust, including payment of accounts, etc.

The other checklist to consider relates to the control-of-trust factors:

1. Holding office as trustee;
2. Legal control of the trustee (through a corporate trustee) or personal appointment;
3. Power to replace the trustee (Goodwin);
4. Practical control (e.g. the trustees are friends, relatives or trusted advisors who act on the request of the controlling spouse – Ward).

Planning Tips

How trusts are set up, and how they are administered will be relevant to the Family Court’s powers and how they are exercised. At the set up phase relevant considerations should be around who controls the trust and who can benefit from it and to what extent. Broadly, the less control or benefit a party to the marriage can receive the better.

It is not just the set up of trusts that will be relevant. How the trust is used and who routinely benefits, is also an important factor.

Having said that, if certainty is required, the best planning tool is the use of Binding Financial Agreements or Inheritance Protection Agreements.

How we can help

If you or your clients have any questions about any of these matters, our expert Family Law team would be delighted to assist. Please do not hesitate to contact us.

On 19 December 2018, the Guardianship and Administration Bill 2018 (“the Bill”) was introduced. An overview of the Bill can be found in our first article of the series here.

This article is the third in our series, and will focus on the new regime of supported decision-making, a key change under the Bill.

What is supported decision-making?

Supported decision-making is a concept of growing importance in line with changing views on disability. 

As distinct from “substituted” decision-making – where a third party makes a decision for the represented person – supported decision-making enables encourages individuals with disabilities to make their own decisions about their lives with the support of others. It offers an alternative to guardianship or administration orders, which recognises that individuals with a disability can often preserve their autonomy with support.

Supported decision-making is becoming preferred over substituted decision-making where possible. The provisions of the Bill reflect similar reforms implemented in several pieces of recent legislation including the Powers of Attorney Act 2014 (Vic) (POA Act) and the Medical Treatment Planning and Decisions Act 2016 (Vic) (MT Act).

New powers in the Bill

The Bill introduces the concept of supportive guardians and supportive administrators. VCAT will have the power to appoint these supportive roles under orders.

When making supportive orders, VCAT will need to consider the following:

1. Decision-making capacity – VCAT will only be able to make supportive orders if it is satisfied that the power will ensure that the support given will enable the supported person to have decision-making capacity in relation to the relevant personal or financial matters.
2. Scope of powers – the orders can confer a range of powers including allowing a person to access and collect information on behalf of another, communicate information and decisions and give effect to decisions.

Unlike guardianship and administration orders, supportive roles will only be able to take action to support the individual to make decisions as opposed to making decisions on their behalf.

Duties of supportive guardians and supportive administrators

Supportive guardians and administrators have a broad range of duties which include a duty to:

1. act honestly, diligently and in good faith;
2. exercise reasonable skill and care;
3. not use the position for profit;
4. not act where there is or may be a conflict and if there is a conflict, ensuring that the interests of the supported person are the primary consideration;
5. discuss anything relating to a supported decision with the supported person in a way that the supported person can understand and that will assist them in making the decision;
6. not assist the supported person to conduct any illegal activity; and
7. not coerce, intimidate or any way unduly influence the supported person.

Supportive guardians and administrators cannot be remunerated for their role.  They must also advise VCAT of the death of the supported person in writing as soon as practicable.

Supportive guardians and administrations that act dishonestly to obtain a financial advantage or cause loss to the supported person or another person are liable for a maximum of 5 years imprisonment or 600 penalty units or both.

When is a supportive order more suitable? 

A supportive order may be more suitable than a guardianship or administration order if the supported individual has the capacity to make decisions, albeit with the support of others. 

This could include individuals suffering from early cognitive decline who might need help accessing accounts or remembering passwords or individuals with a physical disability that require assistance in collecting information or enacting decisions.

The process for determining and applying for a supportive order is complex and individuals should consider obtaining legal advice.

If an individual has decision-making capacity, they can continue to appoint a “supportive attorney” of their choosing, without going to VCAT.  For information about “supportive attorneys”, please see our previous article here.

How we can help

If you seek further advice about these matters, please do not hesitate to contact us.

This article is part of our Guardianship and Administration Bill series:
Click here for Guardianship and Administration Bill 2018 – Overview
Click here for Guardianship and Administration Bill 2018 – Administrator liability and new offences

Schools registered in Victoria must be not for profit and not be party to prohibited arrangements in order to maintain registration –  Education and Training Reform Regulations 2017 (Vic)

Consistent with its new Guidelines to the Minimum Standards, the VRQA is prioritising audit of matters relating to:

• Not for profit school – the requirement that all funds are applied solely towards conduct of the school (r7); and
• Prohibited Arrangements – the requirement that schools are not party to these (which involve diversions of funds or excessive payments to other entities, including loans made for purposes not connected to the School).

Schools which are up for review might consider that they are on notice from the VRQA that many arrangements with ELCs and school systems are considered to be in contravention of the above requirements.

Other schools should consider their arrangements, consistent with the requirements of the new Guidelines to the Minimum Standards which take effect from 1 July.

ELCs

ELCs are not considered to be schools under the legislation (Education and Training Reform Act 2006 (Vic)), so payments to them are treated as payments to third parties.  (“Schools” provide education to children aged 5 to 17, which are the compulsory school attendance ages in Victoria).

Evidence that ELC arrangements are not in contravention will need to include:

• Proper accounting;
• Agreement which meets the requirements of the Regulations, between the school and ELC regarding service and payments in both directions.

School Systems

Payments to school systems can also contravene the Regulations, if payments made are used for other schools in the School system and are not otherwise able to be justified as consistent with the system’s permitted activities under the Regulations.

Evidence that system arrangements are not in contravention will need to include:

• Proper accounting;
• The policy of the system regarding use of school funds; and
• Agreement which meets the requirements of the Regulations, between the schools and system regarding service and payments in both directions.

How we can help

If you would like further information about the required agreements, policies and accounts matters, please do not hesitate to contact us.

Is there recourse against an administrator or guardian who fail to appropriately manage a represented person’s affairs? The answer is yes.  The existing law of negligence allows a claim in damages to be brought against an administrator. The Guardianship and Administration Bill 2018 (“the Bill”) will also bring in new compensation provisions and offences where a guardian or administrator dishonestly uses their powers to obtain a financial advantage. 

Guardians and administrators are appointed by the Victorian Civil and Administrative Tribunal (VCAT). A guardian makes lifestyle decisions (where to live, medical treatments) and an administrator makes financial and legal decisions on behalf of a represented person. This article deals with administrators’ liability.

Compensation Claims Against Administrators

A represented person is and remains entitled at common law to claim compensation from an administrator in negligence. There are few reported Court decisions of claims against an appointed administrator – the majority resolve prior to issuing proceedings or prior to hearing.  In practice, examples of administrators’ breaches of duty of care include a failure to secure a represented person’s assets, failure to adequately manage a represented person’s estate or failing to invest their assets in their best interests.  

The Bill will in some respects now make it simpler for compensation claims to be brought against an administrator, whether the claim is made by the represented person or by an interested party. Interested parties will include an executor of the represented person’s deceased estate, the nearest relative of the represented person, the Public Advocate or any other person determined to have a special interest in the represented person’s affairs. The compensation provisions in the Bill will apply even if an administrator is convicted of an offence, the represented person has died, or the order appointing the guardian or administrator is no longer in force. 

Section 181 will allow the Supreme Court or VCAT to order an administrator to compensate a represented person for losses caused by them by contravening the Bill when acting as administrator. This provision mirrors the attorney compensation provision (section 77 of the Powers of Attorney Act 2014 (Vic)). An administrator will be entitled to seek to be excused from personal liability if they establish that they were acting honestly and reasonably and ought fairly be excused.

Specific Transactions Undertaken by Administrators

Section 78 of the Bill allows the represented person themselves or an interested person to apply to VCAT on “any matter arising out of a dealing or transaction in relation to that financial matter” and VCAT will have broad powers to “make any order in relation to the application which VCAT considers appropriate”. An interested person can include anyone who would be entitled to the property of the represented person, or a share of that property under any law.

Take Away Points

Individuals or organisations that are involved with represented persons or their family members should note:

1. A represented person or their family or friends can apply to VCAT on any matter arising out of a specific dealing or transaction in respect of that financial matter.
2. If a represented person or their family or friends are concerned about the management of their affairs by an administrator generally, they should take steps to investigate what has occurred.
3. If, following an investigation, a breach of duties resulting in loss is identified, a represented person or their family or friends are entitled to bring a compensation claim against an administrator.
4. Individuals or organisations currently appointed as administrators should make themselves aware of the new obligations, offence and compensation provisions incorporated in the Bill.

If you have any questions regarding a guardian or administrator abusing their powers for their financial advantage or any other matter mentioned in this article, please do not hesitate to contact us.

This article is part of our Guardianship and Administration Bill series:
Click here for Guardianship and Administration Bill 2018 – Overview.
Click here for Guardianship and Administration Bill 2018 – Supported Decision-Making

Sometimes trusts are great at protecting assets during family law disputes, other times not. This two part series will start with a High Court case involving variations to a trust deed, and conclude with details of exactly what factors are important in deciding if trust assets are in or out of the matrimonial pool. 

As a starting point, the Family Law Act says that the Court can only make orders in relation to “property” of the parties to the relationship (married or not). Hence the trust assets must be effectively property of a party if both parties are to clearly get a share.

The Family Court has a number of powers that can be used when trusts are involved including:

• the ability to set aside transactions;
• the ability to determine whether trust assets are in the pool of property available for division; and
• the ability to make orders against third parties (including trustees of trusts).

The High Court case of Kennon v Spry is a significant decision that predated the ability of the Court to make orders against third parties. The issue in this case was around setting aside transactions.

The case involved Dr Ian Spry – a famous barrister who wrote textbooks on trust law. Dr Spry first created his trust in 1968 by declaring an “oral trust”. After the marriage in 1978, he formalised this with a trust deed in 1981. He was the trustee, and the beneficiaries were himself, the wife and their 4 children. He could alter the trustee in his absolute discretion.

In 1983 he removed himself as a beneficiary of the trust. In 1998, when the marriage was in trouble, he amended the trust deed again, appointing two daughters as trustees and irrevocably excluding himself and his wife from any further distributions.

In 2001 they separated and Dr Spry then established another four trusts, controlled respectively by the four children, and he distributed the assets of the original trust equally between those four trusts.

Consequently, the trust could no longer be property of the parties as it was out of their control. However, the Court then looked as section 106B of the Act. This provides that if someone has made an instrument or disposition, which may have the effect of putting assets out of the reach of a Family Law Court order, whether intentionally or not, then the Court can set aside the instrument or disposition.

The Court easily decided that this had indeed happened. They set aside the variations of trust made in 1998 and 2002, leaving in place the 1983 variation with the wife a beneficiary and the husband the trustee. The Court then said, since he had control of the trust and had the power to appoint all the trust property to the wife, the trust property could be treated as property of the parties and divided pursuant to the Family Law Act.

Planning Issue: Restructuring and other transactions taking place during a relationship are more likely to be at risk of being set aside by the Family Court. 

In our Next issue, we will describe the characteristics of trusts which make them more or less open to family law assault. Click here to read Part 2 of 2.

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If you have any questions about any of these matters, or if your client needs to explore this, please do not hesitate to contact us.