E-Sign of the Times

The permanent modernisation of key aspects of the Corporations Act 2001 (Cth)

Under Australian law contracts and company documents must be correctly signed to be valid, binding and enforceable.  Among the archaic common law rules that have existed is that deeds had to exist in ‘paper, parchment or vellum’.  Until now.

The long awaited Corporations Amendment (Meetings and Documents) Act 2021 became law on 22 February 2022.  This legislation has permanently modernised a number of aspects of the Corporations Act 2001 (Cth) by allowing companies to use technology to meet regulatory requirements including the electronic execution of company documents by the use of what we currently refer to as “e-sigs”.  In the process these archaic laws have rightly been consigned to legal history making it clear that corporate deeds can now exist in purely electronic form.  

Importantly, the new legislation ensures that company documents will no longer be invalid or unenforceable due to non-compliance with mere formalities.  For example, it is no longer a requirement that a corporate deed be witnessed or delivered to be valid.  

The new legislation also introduces new provisions to enable companies to send notices electronically as its default position and to hold online meetings.  

The reforms build on temporary relief measures (due to COVID) which will remain in place until 31 March 2022.  

Regarding the timing of the implementation of the changes introduced by the new legislation, it applies to documents executed on or after 23 February 2022 and meetings held after 1 April 2022.

If you would like further information in relation to any of the reforms noted in this article please contact David Vilensky or Alana Shaddick of our corporate advisory team on 9325 9644.

Tougher Laws – Are You Ready?

mining lawyers perth

New Work Health and Safety Act 2020 (WA)

Are you ready for tougher laws? In November 2020, the WA Parliament passed the Work Health and Safety Act 2020 (WA) (“the Act”). The Act will take effect once the industry regulations have been finalised, which is now likely to be sometime in early to mid-2022.

When implemented, all Western Australian workplaces will come under this single Act.

The Act will be supported by regulations including which include the Work Health and Safety (General) Regulations  (which apply to all workplaces except those covered by the other regulations), the Work Health and Safety (Mines) Regulations (which apply to mining and mineral exploration operations); and the Work Health and Safety (Petroleum and Geothermal Energy Operations) Regulations (which apply to onshore and offshore petroleum, pipeline and geothermal energy operations).

Will It Affect Me?

The following are some key aspects of the new Act of which you should be aware.

The Act has wide application and applies to Persons Conducting a Business or Undertaking (“PCBU“).

The terms business and undertaking have their ordinary meaning. It is intended to cover a wide range of businesses or undertakings. 

The Act applies to workplaces and workers. These terms are also defined broadly to incorporate a range of environments and situations. A workplace is defined to be a place where work is carried out for a business or undertaking and includes any place where a worker goes, or is likely to be, while at work.  A person is a worker if the person carries out work in any capacity for a PCBU, including work as an employee, a subcontractor, or an employee of a contractor or subcontractor.

This definition is likely to capture working from home arrangements. 

The term health has also been expanded, to include both physical and mental health.

Labour hire employees are also now deemed to be workers.

Primary Duty of a PCBU

A PCBU will have a primary duty of care to ensure that workers and others are not exposed to a risk to their health and safety.

This applies where the PCBU can engage or cause to engage a worker to carry out work (including through a subcontracting arrangement), can direct or influence work carried out by a worker, or has management or control of a workplace.

A PCBU must ensure, amongst other things, that the health of workers and conditions in the workplaces are reasonably and sufficiently monitored to prevent illness or injury arising in the workplace, and that there are adequate facilities to ensure workers’ welfare when carrying out certain functions.

Officers of a PCBU are also required to exercise due diligence, to ensure that the PCBU is complying with its duties and obligations. This requires taking reasonable steps to become familiar with the relevant work health and safety knowledge base, and to ensure that the PCBU has appropriate resources and processes to minimise if not eliminate health and safety risks in the workplace. 

Enforcement And The New Industrial Manslaughter Laws

Significantly, the Act introduces strict enforcement measures including a new regime of industrial manslaughter provisions.  

The Act creates two categories for industrial manslaughter – one for simple offences (Category 1) and one for crimes (Category 2). A Category 2 offence has substantial maximum penalties.

A Category 1 offence is committed where the person fails to comply with a health and safety duty as a PCBU, and this failure causes the death of an individual. An officer of a PCBU will commit a Category 1 offence where the PCBU’s conduct can be attributed to any neglect on the part of the officer or is engaged in with the officer’s consent or connivance. For these offences, an individual (including an officer) will face a term of imprisonment of up to 10 years and a fine of up to $2.5 million and a body corporate will face a fine of up to $5 million.

A Category 2 offence is committed where:

  1. the person has a health and safety duty as a PCBU;
  2. the person engages in conduct that causes the death of an individual;
  3. the conduct constitutes a failure to comply with the person’s health and safety duty; and
  4. the person engages in the conduct:
    1. knowing that the conduct is likely to cause the death of an individual; and
    2. in disregard of that likelihood.

An officer of a PCBU will also commit a Category 2 offence where, the PCBU’s conduct above is:

  1. attributable to the neglect of the officer or engaged in with the officer’s consent or connivance; and
  2. the officer knew that the PCBU’s conduct was likely to cause death or serious harm and disregarded that likelihood.

For these offences, an individual (including an officer) will face imprisonment for up to 20 years and a fine of up to $5 million whereas a body corporate faces a fine of up to $10 million.

With the imminent introduction of the Act and its more severe penalty regime, all PCBU’s and their directors and officers should act now to audit their safety and risk management controls, culture, and practices to ensure that these will meet their obligations under the Act.

 Contact BBV Legal to book an appointment today.  Bowen Buchbinder Vilensky has over 25 years of experience providing legal services in Perth.

The Bank of Mum and Dad Needs A Paper Trail

legal services perth

The Australian Financial Review recently reported (8-9 May 2021) that parents are now among the nations’ top 10 lenders for home loans with data showing more than 60% of first home buyers are receiving assistance from their parents to purchase their first home.

Unsurprisingly with the world in the middle of a pandemic and the economy in recession, now more than ever, children are turning to their parents for financial assistance. It is incredibly important that prior to parents providing financial assistance to children, parents must first be clear on whether the assistance is to take the form of a gift or loan.

The distinction between the financial assistance provided being a gift or loan becomes incredibly important in the following scenarios:

  • the child’s relationship breaks down and their spouse alleges that the financial assistance was a gift rather than a loan;
  • the parents pass away and their Executor is left to determine whether or not the financial assistance is to be repaid to the Estate;
  • a sibling makes a claim for further provision from the parents’ Estate on the basis that the child has already received financial assistance during their lifetime;
  • the child becomes bankrupt and the trustee in bankruptcy classes the financial assistance as an asset as opposed to a liability;
  • the relationship between the parents and child breaks down;
  • the parents are receiving a Centrelink pension which may be affected by providing the financial assistance to the child.

In the above scenarios, it is generally the parents or their Executor who bear the onus of proving that the financial assistance was a loan rather than a gift. Often the only written evidence available is the bank transfer, with the only other evidence being verbal communications resulting in a “he said, she said” argument.

Disputes of this nature can so easily be avoided by first consulting with a Solicitor to create a paper trail and have a properly prepared and executed loan agreement in place.

If you or someone you know of are considering providing financial assistance to a child or any other person, please contact our office to make an appointment to meet with one of our experienced Solicitors. We are also able to advise on any existing arrangements that have not yet been documented. 

When Does Your Resignation As A Director Become Effective?

Can A Director’s Resignation Be Backdated?

There are over 2000 laws and regulations in Australia that impose personal liabilities on Directors of both private and public companies.  These laws and regulations range across areas as diverse as taxation, superannuation, occupational health and safety, insolvency and consumer law.

For these reasons, it is important that when a person resigns as a Director of a company for whatever reason, such resignation is done properly in order to be effective.  Failing which a Director can remain personally liable for a range of obligations and liabilities even after they believe they have resigned their position.

Recent amendments to the Corporations Act which came into effect on 18 February 2021 have put into sharp focus the need for resigning Directors to ensure that the appropriate paperwork is prepared and that the Australian Securities and Investments Commission (ASIC) is properly and promptly notified. 

Under the recent amendments a Director’s resignation will now take effect on:

  • The date that the person ceased to be Director (which requires a formal letter of resignation) if ASIC receives notice of the resignation within 28 days of it occurring; or
    • The date the notice is received by ASIC, if ASIC receives notice of the resignation more than 28 days after it has occurred.

It is also worth noting that if the resignation of a Director will leave the company without at least one Director it will not take effect.

When a Director resigns the company is required to notify ASIC within 28 days of the resignation occurring.  This is done by filing with ASIC an appropriate Form 484 which can be completed online.  This is normally attended to by the company secretary or the external accountants of the company.  Prior to the amendments coming into effect, if the company failed to lodge the notification with ASIC within 28 days it was liable only to pay a late lodgement penalty, however, the resignation was still effective from the date of the letter of resignation irrespective of when ASIC was formally notified. 

Now, a resignation as a Director will not take effect unless and until ASIC is notified.  This prevents the improper backdating of Director resignations and ensures companies are not improperly left without Directors. 

Importantly, persons who resign as Directors remain exposed to liability after their resignations unless ASIC are notified within 28 days.  Until ASIC are notified the Director resignation is not effective and the exposure continues.

For these reasons the importance of proper company processes which include the prompt notification to ASIC cannot be underestimated.

For professional advice from our team of Commercial Lawyers in Perth, please contact David Vilensky, Les Buchbinder or Alana Shaddick on 9325 9644.

Coronavirus – A note from the Directors

The threat of coronavirus causing the man to work from home

Given the spread of the coronavirus (“Covid-19” ) and the public health emergency that it has
created, like many other organisations, Bowen Buchbinder Vilensky (BBV) is taking active steps to
help ensure the safety, health and wellbeing of our people and clients.

To support the health and wellbeing of our people, clients and the community around us, our
professional and support staff are currently working remotely from home.

While we are working remotely, to the fullest extent possible it will be business as usual in terms of
our professional services and our client service. We are still ready, willing and able to take on new
clients. While we cannot meet you in person, we are still able to conduct consultations with video
conferencing technology. Our current platform of choice is Zoom.

We have taken steps to ensure we have the training, technology, and support in place to assist our
staff working from home for an extended period.

Our office at Level 14, 251 Adelaide Terrace, Perth is currently closed. However, please continue to
call us on (08) 9325 9644 and you will be directed to whichever member of our team you wish to
speak to in the usual way.

These are indeed challenging and uncertain times but for us at BBV it is business as usual, and we
will be doing our best to continue to provide our range of legal services.

What are the Duties of a Company Director?

Company Director fulfilling duties by signing documentation

Directors are responsible for the management and control of a Company.  They are the controlling minds of the Company.

Under common law principles the fiduciary duties of a director can be summarised as follows:

  • To act in good faith and for a proper purpose;
  • To exercise care, skill and diligence;
  • To exercise the powers for the purpose for which they were conferred; and
  • Avoid conflicts of interest.

In addition to the fiduciary duties owed by directors at common law as outlined above, the Corporations Act imposes extra statutory duties which to a large extent restate and reinforce the common law duties imposed on directors.  What is not widely known is the existence in our law of the so-called “business judgment rule” which is contained in section 180(2) of the Corporations Act.  The business judgment rule states, as a general rule, that if a director acts with care and diligence which is reasonably expected of a person with their knowledge and experience and if they act in good faith and for the benefit of the Company, then they will be exercising their duties and obligations to the Company correctly.

More to the point, a director of a Company will have met the requirements under the business judgment rule if they:

  • Make the particular business judgment in good faith and for a proper purpose;
  • Do not have a material personal interest in the subject matter of that judgment;
  • Inform themselves about the subject matter of the judgment to extent they reasonably believe to be appropriate; and
  • Rationally believe that the judgment is in the best interest of the Company.

While the purpose of the business judgment rule is to provide directors with an indemnity from personal liability for breaches of their statutory and general law duties of care and diligence, this defence will only apply if the decision making process is not flawed.  However, if a director departs from the principles of the business judgement rule, he or she will not have the protection afforded by the legislation and could be exposed to personal liability via litigation where it is alleged there has been a failure in the decision making process and the Company has suffered loss or damage as a result.

The potential ramifications that result from a director not meeting their obligations to their Company can be dire.  If the Company enters into a business transaction which sours or fails and the director did not conduct a proper and careful due diligence, that director may be held liable for damages sustained by the Company due to the imprudence of that director.

Caution should therefore always be exercised by a director of a Company before exercising their business judgment or embarking on a transaction which may affect the Company.

PLEASE CONTACT

If you would like advice in this area please contact David Vilensky at dvilensky@bbvlegal.com.au or Alana Stallard at astallard@bbvlegal.com.au of our corporate advisory team.

The Sham Of It All!

Surely I can save money by terminating the employment of a worker and then re-engage them as an independent contractor?

Not so fast….

Recently the Federal Court of Australia imposed a significant financial penalty against a company after that company was found to have breached the sham contracting provisions of the Fair Work Act 2009 (Cth) (“the Act”).

Section 357 of the Act protects genuine employees from “sham” arrangements in which they are portrayed as being independent contractors whereas in reality they are genuine employees.

Genuine employees are entitled to a range of rights and benefits (including sick leave, holiday pay and superannuation) whereas independent contractors do not enjoy these same benefits.

A sham self-employment contract arises in circumstances where a person is engaged to undertake certain work and/or provide certain services ostensibly as an independent contractor when the true situation is that they are not actually an independent contractor at all but an employee.

Cases where employers have misrepresented employees as being independent contractors have become more prevalent primarily because there is a financial benefit in doing so.   It is often less expensive to engage an independent contractor than to engage the services of an employee and, further, very often there are not the same risks associated with terminating an independent contract as there are in terminating the services of an employee.

On 2 December 2015 the High Court of Australia handed down its decision in the matter of Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) HCA 45, which was a case in which in 2009 Quest South Perth Holdings Pty Ltd, through the services of an independent  staffing agency, terminated the employment of two housekeepers and then immediately re-hired them but allegedly as independent contractors to perform the same duties.  The Fair Work Ombudsman commence legal proceedings against Quest South Perth Holdings Pty Ltd alleging that this arrangement was in breach of the sham contracting laws set out in Section 357 of the Act.

Initially the proceeding commenced by the Fair Work Ombudsman in the Federal Court of Australia was unsuccessful. However, in a subsequent Appeal to the High Court of Australia, the Court held that Quest South Perth Holdings Pty Ltd had breached the sham contracting provisions of the Act by misrepresenting an employment relationship with the the two housekeepers as that of independent contracting. The High Court of Australia said that the two housekeepers continued to perform precisely the same work for Quest South Perth Holdings Pty Ltd in precisely the same manner as they had always done. The Court said that in law, the two housekeepers had never become independent contractors.

The Federal Court of Australia when it initially rejected the argument of the Fair Work Ombudsman found that the sham contracting provisions of the Act had not been breached because the arrangements had been made through the services of a third party (an independent labour hire firm) and not directly between Quest South Perth Holdings Pty Ltd and the two housekeepers. However this finding was rejected by the High Court of Australia and the fact that the arrangement was conducted through the services of the labour hire firm did not mean that the sham contracting provisions of the Act had been circumvented and not breached. Indeed the High Court of Australia went on to say that the misrepresentation by Quest South Perth Holdings Pty Ltd was exactly the type of activity which was intended to be caught by Section 357 of the Act.

The High Court of Australia referred the matter back to the Federal Court of Australia for it to impose appropriate penalties.  The Federal Court of Australia has recently dealt with the issue of penalty and imposed  a fine of  $59,000 against the company for breaching the sham contracting provisions of the Act.

This case highlights the difficulties faced by those who engage the services of workers and those workers themselves in determining whether a particular relationship is one of employer and employee or, alternatively, one of principal and contractor. This distinction can have significant financial and other consequences for all involved.  The Courts have developed a series of key indicators to assist in determining whether a particular relationship is one of employer and employee or, alternatively, one of principal and contractor.   None of these indicators is alone determined in a true and ultimately it is for the Court to decide based on all of the evidence before it.

Perhaps the more significant feature of this decision is that it highlights that the sham contracting provisions of the Actcannot be avoided by utilising a labour hire firm through which to engage the worker.

In order to minimise the risk of being caught in a sham contracting situation, employers should:

  1. ensure that the relationship with their workers is what they have assumed them to be.   If in doubt, they should seek competent legal advice;
  2. ensure that they do not misrepresent the nature of relationship to workers otherwise they will face prosecution and potentially significant penalties, for breaching the Act;
  3.  if engaging workers through a third party such as a labour hire firm, continually examine the relationship and implement risk management strategies.   If an employment relationship is later found to exist instead of one of contractor, the employer can be liable for significant back payment of entitlements in addition to any penalties that may be imposed for breaching the Act.

PLEASE CONTACT

Contact Les Buchbinder at lbuchbinder@bbvlegal.com.au if you wish to discuss this matter or your estate planning objectives further.

What’s to Know About a Commercial Lease?

When first entering into a lease of commercial premises the task may seem daunting as well as confusing.

A lease is a legally binding contract (carrying significant legal consequences if its terms are breached) which creates certain rights and obligations between a landlord and a tenant in respect of a particular property. A commercial lease is used where the main use of the property is for business purposes.

It is critically important for prospective tenants to be aware of, and to fully understand, all of the important terms and conditions of the proposed lease. Entering into a lease without doing so can lead to significant and potentially fatal financial consequences.

Most, if not all, commercial leases contain several key terms which must be well understood before any prospective tenant finally commits to entering into the lease. These include:

Rent
What is the rent that you will be expected to pay? When will it fall due and payable (i.e. each month or each fortnight)?

Generally rent is calculated based on the area (per square metre) of the premises being leased. Sometimes reaching agreement as to the area that is being leased and for which rent is payable is not a straight forward exercise.

Rent Increase
Equally as important as ascertaining what is the actual rent payable, is understanding when rent increases are due and how they are to be calculated. Rent usually increases annually during the term of the lease determined either by a fixed percentage, market-value or possibly with respect to the Consumer Price Index (CPI). In the event that the lease provides for a market value review (as opposed to fixed increases) a market value review is required to take place at the expiry of the initial term and at expiry of any option to renew the lease.

Security/Bank Guarantees
In some instances, a landlord may ask for some form of security from the tenant or proposed tenant in order to cover a situation where the tenant fails one of the key obligations under the lease, such as failing to pay the rent. Sometimes the security required is a payment equal to 3 or 6 months’ rent and in some instances this is sought to be further guaranteed by some form of a bank guarantee. If such a security is sought in the lease, then the lease should also set out clearly the terms as to when the security payment will be returned back to the tenant. Similarly, if the tenant is a company then it is common for a landlord to require one or more of the company directors to provide a personal guarantee that the company will meet all of its obligations under the lease, including the obligation to pay rent.

Term (Duration)
Another key term of the lease is the duration of the lease itself. The lease document should set out clearly the length of the lease as well as any further options to renew the lease and any particular terms or preconditions that may be required relating to the renewal of the lease. Where a lease provides for one or more options for the tenant to renew the lease, it is essential that the tenant be aware of both when each option must be exercised and how it must be exercised (i.e. what form of written notice is required to validly exercise that option to renew the lease). Failing to exercise each option by the prescribed date and/or in the prescribed manner will (unless otherwise agreed) result in the lease ending and either no further lease being offered to the tenant or a new lease being offered but potentially on less favourable terms. This, of course, can be financially disastrous to a small business.

PLEASE CONTACT

Contact Les Buchbinder at lbuchbinder@bbvlegal.com.au if you wish to discuss this matter or your estate planning objectives further.

Leasing Incentives – the Disincentive is in the Detail!

A recent survey by  Property Council of Australia found that the Perth office vacancy rate rose from 19.6 percent to 21.8 percent in the six months leading up to July.  This high vacancy rate has resulted in an increase in lease incentives being offered by landlords to prospective new tenants and to existing tenants whose leases are due to expire.

In a significant turn around to the recent past, the commercial rental market today is very tenant friendly and we are seeing (among other things) a resulting drop in effective rents.

Incentives

A lease is a legally binding contract which sets out the respective rights and obligations to both the landlord and the tenant in respect of the use by that tenant of a property owned by the landlord. The terms of a lease are negotiated between the landlord and the prospective new tenant and there are sound reasons why leasing incentives are offered.

Landlord’s reasons to offer incentives

 

  • Landlords can choose between their premises becoming or remaining vacant or accepting a lower rent or offering other incentives
  • Landlords can achieve a rent that provides some or all of the cash flow to pay for ongoing holding and operating costs (and possibly pay off development costs)
  • Landlords can encourage tenants to take up longer lease terms (the longer the term, the higher the incentive)

 

Tenant’s reasons to accept incentives

 

  • Tenants will seek to maximise the benefits that can be obtained when entering into a lease;
  • Tenants may have the choice as to whether to pay a higher rent and receive an incentive or pay a lower rent and receive no incentive
  • Landlords may offer an incentive to fund some or all of the fit-out costs or (in some other way) free up the tenant’s finances to enable the tenant to meet those fit-out costs.

 

Lease incentives can take one, or a combination, of the following forms:

 

  • Rent free period or reduced rent period;
  • A cash payment to the tenants or other in kind payments;
  • A free office or other fit-out, whether paid directly by the landlord or by way of reimbursement to the tenant for fit out expenses; and
  • The landlord assuming the tenant’s liabilities under an existing lease (i.e. lease legacy or lease tail).

 

So, What’s the Disincentive?

Negotiating the terms of a lease and any incentives to be offered or gained is often an extensive and robust process. At the conclusion of this process it is vitally important that both parties have a very clear common understanding as to the agreed key terms of the lease  and  exactly what incentives have been agreed to by the parties. Failure to achieve this will almost certainly result in misunderstandings, disputes and ultimately expensive protracted litigation.

Settling the wording of a lease is also a critical step in the process of securing a viable long-term tenancy for any property. This includes ensuring that all agreed incentives offered by the landlord are carefully and accurately recorded in the lease document. This is as much for the protection of the landlord as well as the tenant.

In addition, careful consideration must also be given to what other implications of the agreed incentives may exist.  For example:

 

  • Are there any tax implications?
  • Are there any government approvals that must be first obtained?
  • Has an agreement been reached as to what is to happen to any of the assets from which the tenant has benefited and for which the landlord has paid once the lease comes to an end?

 

Sometimes, where a tenant accepts certain incentives offered or agreed to by the landlord, the effective rent payable by the tenant is significantly reduced  and the Landlord may wish to keep this information confidential in order to preserve other tenancy arrangements with other tenants and/or to preserve the value of a building’s capital value. Such a confidentiality requirement can be recorded in the lease itself or, alternatively, as a separate Deed.

Whilst there are many incentives on offer to prospective tenants which are very attractive, it is essential that prospective tenants fully explore and understand the incentive being offered, whether it is a real benefit to the tenant’s business and what are all of the implications and obligations in accepting such an incentive. It is also essential to both the landlord and the tenant that the incentive agreement be fully and properly recorded in writing as part of the lease so that both parties have a clear understanding of the nature and full extent of the agreed incentives.

It is strongly recommend that all lease agreements be carefully reviewed by a lawyer before being signed by either the landlord or the tenant to ensure that it appropriately records all of the required terms and conditions including any incentives that may have been agreed to by the parties during the negotiation process.

PLEASE CONTACT

Contact Les Buchbinder at lbuchbinder@bbvlegal.com.au if you wish to discuss this matter or your estate planning objectives further.

Slap on a Caveat!

A reoccurring issue that I deal with relates to people or businesses that are looking to register a caveat against the Certificate of Title (“Title”) to land. A caveat when registered against the Title to the land will generally prevent ownership of the land from being transferred into another person’s or entities name. More often than not, such people are looking to register the caveat against the Title because the registered owner of the property owes them money and they are trying to stop the land  from being sold so as to secure payment of the debt owing to them.

Unfortunately, a caveat cannot be registered against a Title simply because the registered owner of the land owes money to the person or entity seeking to register the caveat or for some other reason that person wishes to prevent the transfer of ownership of the land into the name of a third party.

In order to be entitled at law to register a caveat against the Title of land owned by another person or entity you must have what is referred to as a ‘caveatable interest’ in the land.

So, What Exactly is a Caveat?

As I mentioned above, a caveat is a document registered on a Title to land, that prevents dealings (such as buying, selling or mortgaging the land) with the land. A person who registers a caveat is known as a “caveator”. The caveat itself does not create an interest in the land or give the caveator the power to sell the land. Rather what it does do is to act as a:

  • warning that the caveator has some form of interest in the land; and
  • an  injunction to prevent any dealings in relation to the land.

Importantly, in Western Australia a person who registers a caveat against a Title to land without having a valid a ‘caveatable’  interest in the land  becomes  liable to pay compensation to any person who suffers financial  loss as a consequence of the caveat being registered against the Title to that land. Such compensation may amount in some cases to many thousands of dollars, such as where a sale of land is lost because the caveat is registered against the Title unlawfully.

Therefore, whilst the actual process of registering a caveat against the Title to land is a relatively straight forward one, the consequences of doing so if you do not have a clear caveatable interest in that land can be very significant and sometimes financially fatal.

When do I have a caveatable interest?

There are different kinds of interest in land that will satisfy the requirements of a “caveatable interest’ in the land. The following kinds of interest in land have been accepted by the Courts as caveatable interests:

  • as purchaser under a contract to acquire the land;
  • as grantee of an option to acquire the land;
  • as tenant of the land;
  • as the holder of an equitable mortgage in relation to the land; and
  • as chargee of the land;

A caveatable interest in land can arise in several different ways including by agreement. The latter is very important in commercial transactions because it is possible in many circumstances for parties to a contract to agree to the creation of a caveatable interest in one or more nominated pieces of land to secure a debt thereby providing the creditor or potential creditor with the ability to secure debt against tat land by way of a valid caveat

Is there More Than One Kind of Caveat?

There are different kinds of caveats and so it is important that if you are intending to register a caveat against the Title to land  that you also ensure that the correct kind of  caveat is lodged in the circumstances. There are 3  kinds of caveats that can be registered against the Title to land  in Western Australia. These are caveats that prevent dealings relating to the land:

  1. absolutely (absolute caveat);
  2. until after notice is given to the caveator that the caveat has been registered against the Title to the land (notice caveat); and
  3. unless the caveat registered is expressed to be subject to the claim of the caveator (subject to claim caveat).

Each of these kinds of caveats have different characteristics and benefits depending on the situation at hand. Care needs to be taken in selecting the most approprate caveat for the situation at hand.

Conclusion

Registering a caveat against a Title to land can often provide a swift and cost effective way of securing an existing or anticipated future debt. However, unless there is a valid caveatable interest in the land and  the correct kind of caveat is selected the exercise can quickly turn into a financial disaster. If the validity of the caveat is challenged then the caveator must either withdraw the Caveat voluntarily (thereby losing the security for the debt) or take a potentially significant financial risk in maintaining the caveat registered against the Title to the land and hope that he/she/it is found to have a valid caveatable interest in the land in question.

It is highly recommended that competent legal advice be obtained before proceeding to register or attempt to register a caveat against the Title to land to ensure that a valid caveatable interest exists and that the correct kind of caveat is selected to register against the Title to the land. It is also highly recommended that competent legal advice be obtained before entering into any significant commercial transactions to ensure that either:

  1. you  are aware of, and agree to, the creation of a caveatable interest in a Title to land registered in your name or one of your business entities; or
  2. a valid caveatable  interest is in fact created in Title to land if as a creditor or potential creditor you wish to secure debt against Title to land.

PLEASE CONTACT

Contact Les Buchbinder at lbuchbinder@bbvlegal.com.au if you wish to discuss this matter or your estate planning objectives further.