Contracting Death- Real Estate

What happens when a contract is signed and the vendor or purchase passes away before settlement?

A ‘party’ is defined in the latest REIQ contract[1] to include the party’s executors, administrators or successors.

The take home message is simple: death does not release a party from their rights and obligations under the contract. This includes the parties’ obligation to complete the contract.

Do I need probate?

Practically, it may not be possible for the contract to settle until a grant of probate has been issued by the Supreme Court. A grant of probate, or a grant of letters of administration on intestacy, is a court order granting a person authority to execute the deceased’s will, or deal with property in accordance with the rules of intestacy (the Government’s rules). The grant takes approximately 10 weeks to be issued so the parties usually need to extend the settlement date out until the deceased’s executor has been able to get the grant.

The most unfortunate scenario here is where you act for the deceased’s party and the other side refuses to allow an extension of time.

What if the other party refuse to extend the settlement date?

Where a purchaser dies and the vendor refuses an extension, the vendor may place the purchaser in breach. On breach, the vendor could choose to take the purchaser’s deposit as well as either;

·        Terminating the contract, reselling the property and suing the purchaser’s estate for any loss they suffer on resale, or

·        Applying to the court for an order of specific performance, which compels the purchaser to complete the contract.

Where the vendor dies and the purchaser refuses to allow an extension, the purchaser may place the vendor in breach. On breach the purchaser could;

·        Terminate the contract and sue for damages, or

·        Apply for specific performance as above and sue for damages.

Who gets the proceeds?

In the event a vendor passes away before settlement, on settlement their personal representative becomes entitled to receive the balance of the purchase price on behalf of the deceased’s estate. In the event a purchaser passes away before settlement, if the contract settles then the property forms part of the deceased’s estate. In practical terms this means the property vests in the parties’ personal representative/s.

---

[1] Clause 10.9(1)(d).

Vicarious liability – ‘Am I liable for damage caused by my employees?’

The relevant question to ask is whether the worker is an employee or an independent contractor. This involves consideration of a range of factors.

Not every factor will be relevant in every case, nor will all be given the same weight.  Control (that the employer has over the worker) remains the central element. 

Other relevant factors include:

1. Mode of remuneration;

2. Provision and maintenance of equipment;

3. Obligation to work;

4. Hours of work;

5. Provision of holidays;

6. Deduction of income tax;

7. Delegation of work by the employee;

8. Whether uniform provided;

9. Provision of training.

An employer is liable for the conduct of an employee committed in the course of employment.

If the person who committed the liability was an independent contractor and not an employee, then the employer will not be vicariously liable for that conduct unless a non-delegable duty exists.

Independent contractors

The person who employs an independent contractor will only be liable for that contractor’s conduct if the employer owed a personal duty of care to the victim and that duty was a non-delegable duty of care. A non-delegable duty is a duty of care which the court regards as being unable to be discharged or ‘outsourced’.

Example: An employer company hires an independent contractor to operate a forklift, taking pallets from a warehouse to an awaiting truck. The forklift driver, desperate to get home decides to speed things up. Manoeuvring at twice the usual speed, the contractor hits an employee of the company. The employee may bring an action against;

• The independent contractor for negligent forklift operation,
• The employer company for negligently failing to provide a safe working environment, notwithstanding that the employer is seemingly faultless.

Where there is no non-delegable duty, an employer is not liable for the conduct of an independent contractor, even if that party was undertaking duties for the employer.

The words used to describe the relationship are not definitive of the legal nature of the relationship (just because they name themselves principal and contractor does not mean the law sees it as such), it is a matter for the courts to decide objectively.

Where an employee is lent by one employer to another employer, the company who retains control will be vicariously liable. It is not sufficient that the new employer is in control of payment, if all other forms of control remain with the original employer.

Was the conduct committed during the course of employment?

If it is established that the person who committed the act was an employee then the next question to be addressed is whether the act was committed in the course of his/her employment.

An act or omission is still considered to be in the course of employment if it is either a wrongful mode of committing an authorised act or a wrongful act actually authorised by the employer

If an employee takes an opportunity during employment to use time or resources for personal purposes the employer is not liable. This is referred to as the “frolic” doctrine   If it is argued that the employee was on a frolic, both the purpose and extent of the deviation must be considered (for example, where a driver deviated slightly off route to get refreshment from a hotel, the employer was still held liable). If the employee is engaged on employer business and on personal business at the same time, the employer may still be liable.

An express prohibition by the employer of a wrongful act will not necessarily be a defence to the employer if the employee’s act was still a mode of doing what the employee was employed to do.

An employer may be vicariously liable for both intentional and unintentional acts committed by an employee.

For a more thorough consideration of this complex area of law, or if you would like to know whether you are an employee or an independent contractor, make an appointment to speak with one of our experts about your position and rights.

Transfer Documents

There's a small suite of documents and a clutch of processes that go with them, designed to transfer to the buyer the tangible and registrable assets that make up the business. In most cases it is the buyer's responsibility to create the documents that create these transfers, and you simply need to sign and return them.

You need to be aware however of the process.

Lease
In  some jurisdictions the Lease Transfer is made up of two documents; the Assignment of Lease itself, and a Deed of Covenant.

The Lease Assignment document (it may be called the Transfer or a Deed of Assignment depending upon the type of lease you hold), will be prepared by the buyer and sent to you to sign and return. That document effectively transfers any rights that you have in the Lease. You should not return it unless you receive a written undertaking from the solicitor to the buyer, that the document is not to be used pending settlement. If you do not receive this Undertaking, do not return the document. Do not accept this Undertaking from the buyer itself.An Undertaking from the solicitor is an enforceable undertaking able to be pursued both through the Courts and through the Solicitor's disciplinary body. An Undertaking from the buyer itself is worthless.

The Deed of Covenant is a document designed to create a direct link between the buyer and your landlord. It enables the landlord to sue and creates what is called "Privity of Contract". This document is prepared by the landlord's solicitor at your expense and is often done very slowly, and in fact may not be ready by settlement.

You should check as soon as possible on the cost of this document, as prices vary wildly. You do not have an opportunity to shop for prices, as the landlord will choose its own solicitor for it.

Your responsibility after the Contract is signed, (obligations vary slightly from Contract to Contract so check yours), is usually simply to take all reasonable steps to obtain the consent of the landlord to the Assignment. Chasing the documentation is the buyers responsibility.

Business Name, Website, Telephone and other services
Again it is up to the buyer to produce documentation for you to sign, but if you want to avoid ongoing responsibility for electricity, telephone, Internet and other services, it is important to take a direct hand in seeing that these services are cut off from the day after the settlement. This will take them out of your name. Remember, many of these services have security deposits, which should be adjusted off your final bill or returned to you.

Local Authority and State Government Licences
Most authorities maintain that these licenses cannot be "transferred" or "assigned", and have to be applied for freshly by the buyer.

Regardless of the wording used, the buyer will be responsible for obtaining licenses in its name for the continuation of the business.

One potential catch for a seller is where the Contract makes the purchase of the business subject to obtaining all of these licenses, and gives the buyer the opportunity to back out if those licenses are not obtained. It is implicit in that situation that the buyer will have to take all reasonable steps to secure that outcome.

Regardless, it will be important for you to be on top of the status regarding each of those licences, and in direct contact with the licencing authority to ensure that this is happening.

Requisitions on Licenses
Some of these licences have a requisitions regime.

Particularly in a food preparation business, the Local Authority License process often creates a situation where the local authority will indicate that the license can be assigned but only once several requisitions have been completed.

The Contract will usually specify but this is your responsibility, but sometimes will place monetary cap on the value of requisitions which with you have to comply after which it is the buyer's responsibility to pay. If you believe that requisitions are possibly or likely you should attempt to limit the monetary value of your contribution.

Bennett Carroll Solicitors have offices located in Brisbane and the Sunshine Coast

Freecall: 1300 334 566
Fax: (07) 3343 8664

Email: info@bcglaw.com.au

Website: www.bcglaw.com.au  

Have you had an employee take your business secrets elsewhere? Or perhaps you’re a frustrated employee who’s considering it? Consider this:

An action for breach of confidence has quite a wide scope. It may arise where an employee takes secrets from their boss to their competitor, or even where a partner in a married couple divulges secrets of their relationship. The basis for the action can come from a variety of legal realms, however the most common is through a provision in a contract of employment.

Elements

In order to maintain an action for breach of confidence, the person who brings the action must establish three elements;

1.     That the information has the necessary quality of confidence or secrecy;

2.     The information was imparted in circumstances importing an obligation of confidence;

3.     There was (or may be) an unauthorised use of the information.

Unless you are an expert, it can be quite a complex process to determine whether these elements are met. Most people will approach a lawyer after satisfying element three, however it is numbers one and two which create the most difficulty.

 Defences

If you are concerned because you may have disclosed confidential information, do not fret. There is a range of defences which may aid you. Defences to an action for breach of confidence include:

·         Consent of the confider

·         Disclosure for the purpose of complying with the law

·         Disclosure of a crime, wrong or misdeed

·         If disclosure is in the confidant’s interests

·         Disclosure in the public interest (for national security, public health, and things of this gravity)

Remedies

Remedies awarded in breach of confidence cases include:

·         Injunction to prevent either;

a)      the information being revealed in the first place, or

b)      further misuse of the information.

·         Monetary Remedies (either an account of profits or damages)

·         Formation of a constructive trust (where a defendant acquires some property by use of the confidential information, it may be held on trust for the plaintiff)

·         Orders for delivery-up and for destruction

If you are concerned that your confidential information is at risk, or if you are unsure what you should or shouldn’t tell your next employer about your current work, make an appointment to speak with us about your rights.