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In Check Issue 68 | September 201521 September, 2015
Table of contents
Power of attorney – new Act and forms
The changes to powers of attorney in Victoria are now here as the new Powers of Attorney Act 2014 (Vic) (Act) came into effect on 1 September this year.
The Act covers four powers:
- General non-enduring powers of attorney (previously called general powers of attorney)
- Enduring powers of attorney – personal (previously enduring guardianship power)
- Enduring power of attorney – financial
- Supportive attorney.
Some of the major changes made by the Act include:
- the donor of a power is referred to as a principal
- a definition of decision making capacity (s.4)
- a description of matters for which a power cannot be given
- more eligibility requirements for an attorney, including an attorney must:
- not be a care worker, a health provider or an accommodation provider for a principal
- not have been convicted or found guilty of an offence involving dishonesty if appointed as attorney for financial matters
- be over 18
- not be insolvent under administration
- allowing attorneys to be appointed to act by majority or severally as well as the current arrangements of jointly or joint and severally
- witnesses for enduring powers cannot be:
- relatives of the principal or the attorney
- care workers or accommodation providers for the principal
- one witness for enduring powers must be someone who can witness affidavits or a medical practitioner
- the attorney or alternative attorney‘s signature on the statement of acceptance must be witnessed
- the power can no longer be revoked orally by the principal
- unless the power of attorney specifies how it is to be revoked, it has to be formally revoked by signing an instrument of revocation which has to be witnessed in the same way as creating the power
- the power of attorney will also be revoked if the attorney is no longer eligible
- the attorney may be ordered to pay compensation for loss caused by the attorney breaching the Act
- a range of offences created by the Act with penalties of five years imprisonment or fines of 600 penalty units.
There are new prescribed forms that need to be used from 1 September 2015 that can be found in the Powers of Attorney Regulations 2015 (Vic) and at the website for the Office of Public Advocate. The OPA has also updated their excellent publications about powers of attorney. We recommend firms give their clients copies of these publications or refer their clients to the website.
Firms who practice in this area should ensure they update their precedent forms.
No simple wills
The recent decision of the Full Court of the Supreme Court of Tasmania in Calvert v Badenach  TASFC 8 is a good reminder for lawyers preparing wills that there is no such thing as a simple will. The case concerned a professional negligence claim against a Tasmanian lawyer by a disappointed beneficiary.
The practitioner prepared the last will for his client, Mr Doddridge, who left all his estate to his de facto partner’s son, Mr Calvert. The de facto partner had passed away some time before.
After Mr Doddridge died his estranged daughter made a family provision claim and succeeded to the tune of $200,000 plus costs. Mr Calvert then sued the practitioner, alleging he was owed a duty of care and that duty was breached. The practitioner failed to ask about the existence of any children of the testator and advise the testator about a possible family provision claim and what could be done to avoid one.
In this case the major assets in the estate were two properties the testator had owned as tenants in common with Mr Calvert. It was contended that the practitioner should have advised the testator to convert the ownership of the properties into joint tenancies so that on his death, the properties would not form part of the estate and any family provision claim would have been significantly reduced.
Mr Calvert was unsuccessful at first instance. On appeal all three judges agreed that the practitioner owed a duty of care to the testator not only to enquire of the testator whether he had any children, but to advise him why the enquiry was being made, the potential for a family provision claim, the impact it would have on his wishes, and any possible steps he could consider to avoid that impact.
Two of the three judges commented on the relationship between the extent of the duty and the experience of the client. Contractual duty of care, it was said, may depend on the nature of the client and his/her need for advice. Here, the testator was elderly, terminally ill and fully reliant on the practitioner to implement his testamentary wishes.
In those circumstances the practitioner’s duty extended to not only asking questions that might elicit the existence of possible claimants but to advising about mechanisms to minimise the estate available to meet any claim
All three judges agreed that the duty owed to the intended beneficiary in tort should not be something less than a contractual duty owed to the testator.
Their Honours also all agreed that this was a case of loss of opportunity or chance. The practitioner’s negligence caused the beneficiary to lose an opportunity to obtain a better outcome. The case was remitted to a single judge to make the loss of opportunity assessment.
An application for leave to appeal to the High Court has been made by the practitioner so this is not the end of the story!
But as it stands at the moment, the Tasmanian Full Court has said practitioners owe a duty to intended beneficiaries to take reasonable care to ensure that, as far as possible, the testator’s testamentary wishes are carried into effect and not unnecessarily defeated. That could include:
- asking the testator about any children they may have (or anyone else who may have a claim)
- explaining the consequences of not adequately providing for them
- explaining what could be done to avoid or minimise a family provision claim
- checking how any real property is held or how superannuation benefits are to be dealt with to understand what assets are in the estate.
It might be time to reflect that there is no such thing as a simple will anymore and firms should not approach preparing wills as merely being asked to document what the client tells them.
LPLC Chairman retires and new Chairman announced
LPLC announces the retirement of Geoffrey Rees as Chairman and John Corcoran as the new Chairman.
Geoff Rees joined the Committee in 2007 and was appointed Chair by the Legal Services Board following the unexpected death of Matt Walsh in February 2013.
He brought his broad commercial experience to the Committee and with the benefit of experience gained serving on other boards, provided strong leadership to LPLC.
His enthusiasm for risk management for the profession meant that LPLC’s resourcing of this function remained at a high level and was enhanced during his time as Chairman.
Geoff joined the Investment Committee just prior to the GFC and was subsequently its Chair prior to becoming Chairman of LPLC. As the Investment Committee’s Chair he presided over post-GFC investment, and with his experience was well placed to lead that committee and LPLC to success in its investment strategy. He also served on the Remuneration and Appointments Committee.
As a practitioner in a boutique commercial practice and as an accredited business law specialist, Geoff was well versed to understand the challenges of smaller practices as well as those facing larger law practices.
Geoff provided leadership to LPLC and its management during his tenure. After eight years of service, he retires from LPLC due to additional demands on his time. The members and staff of LPLC wish him well for the future.
John Corcoran, who joined the Committee in July 2013, has been appointed as the LPLC’s new Chairman.
He has a Bachelor of Laws (Monash) and Bachelor of Economics (Monash) as well as being an Accredited Specialist in Business Law (Law Institute of Victoria).
John is Chairman of Russell Kennedy and his areas of practice are commercial property, retirement villages and aged care, business law and securities law.
John is a Recipient of Centenary Medal for services to Australian society and to the law, and in addition to his position as a LPLC committee member he was on the Legal Service Board from 2005 to 2010 and again in 2013.
He has been a member of the Mercy Health and Aged Care Board since 2011. John has also been Law Council of Australia President in 2009, Law Institute of Victoria President 2001/02 as well as an Honorary Life Member 2011 and an International Bar Association, London Board Member from 2009 to 2012.
John has been named in Best Lawyers’ 2013 ‘Lawyer of the Year’ for Retirement Villages and Senior Living Law and has also been recognized in Best Lawyers’ for expertise in Real Property Law.
His experience in the commercial world, together with his extensive involvement in the professional associations for lawyers, both in Australia and elsewhere, brings a national and international perspective to LPLC as the organisation continues to grow in this increasingly complex legal environment.
GST claims on the rise
There has been an increase in GST mistakes in conveyancing in the 2014/15 policy year despite GST being introduced more than 14 years go and a steady stream of enquiries on our GST hotline. Sadly, many of the claims came from simple mistakes or not even considering GST.
Missing the issue – no GST clause in the contract
In two claims, the properties being sold were clearly commercial properties but the clerks acting simply prepared contracts and section 32 statements without even considering the issue of GST. In one instance, the clerk sent the contract back to the instructing agent without the partner in charge seeing it. In the other claim, the partner in charge signed the pro-forma letter without considering the GST implications. This suggests both a lack of scrutiny and supervision by the legal practitioner.
In both of these cases the clerks needed either better training to understand or identify when GST needed to be raised or perhaps better checklists or attention to checklists to ensure the GST issue was not overlooked. When the majority of conveyancing involves existing residential property which does not involve GST it is easy to forget about GST when the property is commercial. Good checklists and attention to them is the best way to not overlook unusual issues.
The partners in these two claims could also have done better. Practitioners cannot abdicate responsibility for conveyancing matters just because they think they have a capable clerk doing the conveyancing work. There needs to be proactive supervision of all staff and if the partner is signing mail, they need to turn their mind to what is being sent.
Overlooking ‘required to be registered’
In another matter the client was a sophisticated business person, turned property developer, who was selling three units he had just built. He told the practitioner he was not registered for GST as he had sold his business and cancelled his registration. The contracts were prepared with no reference to GST. The client was audited by the ATO sometime later and it was revealed he should have remitted GST on the sales.
The question the practitioner should have considered was whether the client was required to be registered. The answer was yes because he was selling new residential property in the course or furtherance of an enterprise. The advice to the client should have been to include in the contract a margin scheme clause.
It seems the practitioner was lulled into a false sense of security because the client was a sophisticated businessman who assured him that he was not registered for GST. Coupled with that, the practitioner’s knowledge of the GST requirements was insufficient to alert him to the issue. An added distraction was that the practitioner was selling his practice at the time.
In the next example there was a simple clerical error. The contract had been prepared and sent to the vendor client for instructions on several issues including GST. The client returned the contract and section 32 statement signed and the words ‘margin scheme’ hand written in the right box in the particulars of sale. The property did not sell at auction and a perspective purchaser subsequently requested some changes to the contract. The clerk handling the matter then went on sick leave. Another clerk took over and made the changes to the electronic version of the document after receiving the client’s instructions. The oversight was that she failed to type in the words ‘margin scheme’ that had previously been handwritten on the first contract. No one noticed and the contract was signed.
This oversight could be explained in part by the change in personnel and the lack of continuity in handling the matter. The good news is the clear written record of what had occurred on the file enabled an application to be successfully made to have the margin scheme retrospectively applied.
It is a good reminder to always take time to check and double check the particulars of sale to make sure the right information has been filled it.
GST issues must be on any conveyancing checklist and should be front of mind in contracts for any commercial or new residential property.
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