Who is considered eligible to make a family provision claim as a de facto?

Was the claimant the “de facto” of the deceased and accordingly an “eligible person” for the purpose of making a claim for a family provision order under the Succession Act?

The Property (Relationships) Act 1984 NSW defines a de facto relationship as two persons who live together as a couple though not married to one another.

In determining whether two persons are in a de facto relationship the Court must take into account all the circumstances of the relationship including the length and permanence of the relationship, the degree of emotional and financial support and the residential arrangements.

The Court has determined that is not necessary for the two persons to be physically cohabitating as long there is a genuine domestic arrangement which is not accidental or contrived.

Accordingly in Weston V Public Trustee (1986) NSW the Court found that a woman who had been living with the deceased for several days every week for over thirty (30) years and had at the same time kept a separate residence was an eligible person.

What happens if a residential property is damaged between exchange and completion?

With the early onset of bushfires this summer you might be wondering what happens if a catastrophic event like a bushfire occurs and a dwelling is destroyed or damaged between exchange and completion of a contract for the sale of residential property.

Who is responsible for the property between exchange and completion?

In the sale of a residential property, risk as to the property does not pass to the buyer until completion of the property. This means the seller is responsible for the property and should retain insurance until the sale completes. The only time this position would be different would be if the buyer took early possession of the property. In this case, the buyer takes on the risk for the property from the day they take possession. This means the buyer needs insurance from that date. In practical terms, a seller should never give a buyer early possession without seeing evidence that the buyer has insurance in place.

If there is damage to the property after exchange but before completion the options available to the parties are governed by the provisions of Part 4 Division 7 of the Conveyancing Act and depend on whether the damage is categorised as substantial or not.

Substantial Damage

If the damage to the property is categorised as substantial the buyer may rescind the contract within 28 days of the buyer becoming aware of the damage. In this case, the buyer will receive their deposit back and is released from any obligations under the contract. An exception to this right is if the damage is caused by a wilful or negligent act or omission of the buyer. This provides some protection to the seller if early possession was granted to the buyer and after the buyer took possession and before completion the buyer caused substantial damage to the property. In that case, if the buyer caused the damage the buyer would have to complete and wear the cost of the damage.

However, if the damage is substantial and the buyer still wants to proceed with the purchase, the seller cannot be forced to perform the contract if it would be just or inequitable to require the seller to complete the sale. For example, if a house was destroyed by fire and a total rebuild were required it would be onerous on a seller to have to claim on insurance and re-build the dwelling. The best course of action would be for the buyer to rescind the contract so that the seller could manage their own insurance claim and any rebuild.

Substantial damage is defined as damage which renders the land materially different from that which the buyer contracted to buy. The definition of land includes buildings and other fixtures. In practical terms, if a residential dwelling was purchased for the purpose of a residential use and it was burnt down and uninhabitable before completion, a buyer would be able to rescind on the basis that the land was substantially damaged.

An example where damage was found not to be substantial so as to invoke the buyer’s right to rescind is Bakhos v Fenner and Anor [2007] NSWSC 641. In this case, there was a fire in a property in Lane Cove which resulted in smoke damage, the windows being shattered, carpets being burnt and two ceilings were sagging from water from the fire fighters. The court found that there had not been substantial damage and the buyer’s attempt to rescind the contract was taken to be a repudiation of the contract and the seller was entitled to retain the deposit.

The circumstances which resulted in this finding were the fact that the structure of the property had not been damaged and the condition of the property before the fire. The property was a 50 year old 2 bedroom brick and tile house which was showing signs of its age. In addition, the seller had fixed the damage within a few weeks and before the required date for completion. The court took the view that these circumstances combined with the buyer having lodged an application to redevelop the property and the buyer’s behaviour (which suggested he had no intention of completing the contract) indicated that it was ‘extremely improbable that the house and the condition of the house were material in the valuation of the property or in [the buyers] decision to buy the property.’ In short, the court took the view that the buyer had purchased the property to re-develop the site so the damage caused by the fire did not result in the land being materially different to that which the buyer had contracted to buy.

Damage which is not substantial

If there is damage to the property after exchange and before risk passes to the buyer the purchase price is to be reduced by a just and equitable amount and, if the purchase price is not reduced on completion, the buyer may recover the amount by which the purchase price should have reduced from the seller as a debt. If a buyer takes early possession they cannot claim an abatement of the purchase price after they take early possession even if the property is damaged.

Tips for buyers and sellers

Buyers

If there is substantial damage after exchange and before completion buyers have options to address the damage either by getting out of the contract or negotiating a price reduction. If the damage is not substantial, buyers are still entitled to negotiate a price reduction.

Ideally buyers should sort out any price reduction before completion as the risks, costs and difficulties associated with pursuing the price reduction after completion may make the recovery of those costs impractical. Although the price reduction applies where damage is not substantial these protections are only to be relied on in the case of significant damage to a property and not something minor. Regardless, these provisions highlight the importance of a thorough pre-settlement completion so that if there is significant damage it can be addressed with the seller before completion.

If you agree to take early possession make sure you do a thorough inspection before taking possession. The act of taking possession passes the risk to the buyer and ends the buyers right to claim for any damage to the property before completion.

Sellers

Keep your insurance in place! Where there is significant damage to a property you are selling (but it is not substantial or it is substantial but the buyer still wants to proceed) you may have to consider a price reduction or to agree to fix the damage before completion. However, sellers can’t be forced to complete the contract if the damage is substantial and it would be just and inequitable for the buyer to require the seller to complete.

Executors: an overview of duties & responsibilities

This is a guide for executors about their role, their obligations and what is involved in managing and finalising an estate.

The role

The executor’s role is to personally carry out the wishes of the will maker as specified in the will and is a position of great trust. The executor must always act in the best interests of the estate and the beneficiaries and cannot intermingle his or her interests with the estate.
The executor is responsible for managing and protecting all of the assets of the estate until they are distributed. The executor is also responsible for paying all of the liabilities of the estate.

An executor should keep full and accurate records of how the estate has been managed and provide a summary of the estate’s transactions to the beneficiaries.

An executor cannot take sides with one of the beneficiaries if there is a dispute.
The executor must at all times act with care, and in the interests of the beneficiaries, must endeavour to administer the estate in accordance with any direction or power in the will as quickly as possible.

The executor may be liable in damages to beneficiaries for negligence in respect of any avoidable delay which results in loss to the beneficiaries either in relation to lost investment income or a lost opportunity to invest.

The funeral

The executor is responsible for making funeral arrangements and should follow any directions in the will in relation to those arrangements but is not bound to do so. The executor should consult with the family about the funeral arrangements. The reasonable cost of the funeral is an expense of the estate but the executor should be careful not to incur expenses beyond the available funds in the estate.

The body

As the executor is responsible for deciding whether the body is to be buried or cremated. Also the executor may be asked whether the organs can be donated. This is the decision of the executor usually in consultation with the next of kin. The executor should check the will for directions in regard to the body of the deceased. A direction that the body is not to be cremated is binding on the executor.

The will

It is not usual in Australia to have a formal reading of the will. In New South Wales the Succession Act specifies who is entitled to a copy of the will. The executor should consult with an experienced legal practitioner as to who is entitled before releasing a copy of the will to anyone.

The estate

The executor is responsible for the safekeeping of the assets of the estate. The executor should:

  • identify the deceased’s beneficiaries
  • ascertain what are the deceased’s assets and make a list as soon as possible (consideration should also be given to digital assets e.g. photographs, social media & email accounts)
  • ensure that assets are adequately insured where necessary
  • ensure that items such as jewellery & paintings are adequately secured
  • consider whether the locks to property need to be changed
  • ascertain what are the deceased’s liabilities (including tax)
  • ascertain if there is a superannuation death benefit payable
  • ascertain if the deceased had life insurance
  • redirect or collect the deceased’s mail

The executor must apply for (within 6 months of the date of death) and obtain a Grant of Probate, except in the case of estates with only jointly owned property or small bank accounts or personal items.

A Grant of Probate is a Supreme Court order that is issued by the Registrar of the court as a result of the executor complying with the stringent court Rules. In some situations the process is judicial and requires the making of the order by a Judge of the Supreme Court.

The Grant of Probate is necessary to give the executor the legal right to deal with certain assets in the estate such as real estate, shares and money in bank accounts. Those assets cannot be transferred, collected or sold unless a Grant is obtained.

After the Grant of Probate is obtained the executor must properly administer the estate by collecting any income, transferring and/or selling the assets, filing tax returns and paying any outstanding tax and satisfying the liabilities of the estate.

The executor is entitled to apply to the court for a commission, if the executor wishes to do so.

The executor has a final duty to distribute the estate in accordance with the terms of the will or any supervening court order.

Communication

The executor should keep the beneficiaries informed of progress with the estate, the date and amount of likely distribution, and if there is some unavoidable delay, inform them promptly explaining the reason.

Costs

The executor must realise that where a professional such as a solicitor or accountant is retained to carry out executor or real work, costs of such work are payable by the executor, although the costs of general estate administration are payable by the estate. The executor is entitled to reimbursement of any properly incurred costs paid by the executor in respect of the administration of the estate.

General

The administration of an estate and the role of the executor can be complex and time-consuming. In most cases it involves knowledge of the law of wills and succession and Supreme Court procedures together with access to the prescribed documents and forms.

At Best Practice Lawyers we recommend that executors instruct an appropriately qualified lawyer to provide professional advice and to ensure that the estate is administered properly. This will avoid the executor having personal liability to the beneficiaries of the estate for any aspect of the administration that is not carried out correctly or in accordance with the law.

Protecting your business interests with clear and concise contracts

Businesses need to issue clearly marked terms and conditions before entering into a contract for services. A recent decision by the Court of Appeal in Western Australia highlights the risks of not providing the terms of your contract to your client before the services have been delivered.

In the case of La Rosa v Nudrill Pty Ltd the Court deliberated over a situation where the parties had a ten (10) year business relationship and one party (Mr La Rosa) attempted to rely on terms and conditions being printed on the back of his invoice’s in order to enact an exclusion clause.

The dispute arose when Mr La Rosa damaged a drill rig he was transporting because he was speeding and driving negligently. Mr La Rosa tried to rely on an exclusion clause (which stated “all goods are handled, lifted or carried at the owner’s risk”) printed on the back of his invoice to avoid any liability for the damage to the drill rig.

The key issue the Court considered was whether Nudrill and Mr La Rosa, by their past conduct, had incorporated the exclusion clause into the contract for services. When determining whether a term is to be incorporated into a contract due to prior dealings in a commercial relationship the Court insisted the test should at the very least rely on the number of prior dealings, how recent those prior dealings were and the consistency between the prior conduct and the dealing in question.

The Court of Appeal unanimously held that the receipt of Mr La Rosa’s invoices by Nudrill was not sufficient enough to justify an inference that Nudrill had accepted, or was willing to be bound by, the terms and conditions printed on the back of the invoices.

The two (2) main points the Court relied on in justifying their position were that there was no evidence that Nudrill had actually read the terms on the back of Mr La Rosa’s invoices and that it was reasonable for a person to regard the invoice as simply a request for payment rather than a document containing contractual terms governing the transaction that had already occurred.

Without having explicitly agreed to terms and conditions businesses run the risk of leaving themselves unsure and uncertain as to the potential dangers and liability they may raise its head in the future. Just because your business has always contracted with another business many times does not mean that a term will always be incorporated into a contract because of the prior dealings. Businesses need to protect their own interests by learning from the La Rosa v Nudrill case and ensuring their contracts explicitly cover their own interests.

If your business needs help reviewing, renewing or drafting clear and concise terms and conditions contact a Best Practice Lawyer.

Wills for the intellectually disabled

To make a valid will a person must have adequate mental capacity to carry out that act. We lawyers call it testamentary capacity. This requires a person to understand:

  1. what a will is and what it can do;
  2. what their assets are;
  3. who it is appropriate to consider as a beneficiary; and
  4. to properly consider the claims upon their estate and distribute their assets free of any insane delusion or disorder of the mind.

Unfortunately, many people lack this capacity. This could be from birth, by accident or by illness. Dementia and Alzheimer’s disease commonly deprive people of capacity.

Yet many disabled people may have substantial estates. They may have built this up before losing capacity, received a compensation payout or an inheritance.

We have laws of intestacy that distribute the estates of people who do not have a will. This applies to those who simply do not have a will through choice or neglect and those who lack capacity. However, the statutory distribution may favour unworthy people who have abandoned, neglected or abused the intellectually disabled person. Furthermore, those worthy of a legacy may have no entitlement to benefit at all.

So what can the law do to address this problem?

The answer lies in Section 8 Succession Act, 2006, which allows the Supreme Court to authorise a will to be made, altered or revoked for a person without testamentary capacity. The will must be one that is, or is reasonably likely to be, one that would have been made by the person if he or she had testamentary capacity.

If you care for an intellectually disabled person a Best Practice Lawyer can advise and guide you through the available process.