Personal Property Securities Register (PPSR)

Þ           This is a new Commonwealth law.  The commencement date is 30 January 2012

Þ           From this date Queensland's REVS (motor vehicle), Bills of Sale Register and Register of Cooperative Charges will be rolled into Commonwealth Register.  It will provide a one stop shop for all registered encumbrances over assets other than company charges and land.

Þ           Searching the Register (PPSR) requires either an account or can be accessed as a guest (pay as you go if guest user).

Þ           Search criteria will include grantor details, serial number of property (if applicable), and vehicles will be searchable by serial number

Þ           The law provides for penalties against misuse of information contained in PPSR

As a Buyer: -

Þ           This applies to personal property not including land or building or a fixture

Þ           Personal property includes cars and other vehicles, art, aircraft, intellectual property, contract rights, crops, livestock, machinery,

Þ           Search facility allows you to confirm any security interest in your proposed purchase to ensure no repossession by lender after purchase

As a Grantor (person granting the security over their property): -

Þ           The Grantor uses personal property to secure lending, business assets as security for lending (example given is that of fixed and floating charge), title retentions (leasehold rather than freehold), or leases personal property for extended periods of time (ie cars, equipment)

Þ           Grantor's details can be included in PPSR where no description can be provided for the personal property – organisations provide an identifier; individuals provide name and date of birth

Þ           If information listed in PPSR is incorrect, Grantor needs to contact Secured Party (Lender) to request amendment

Þ           Upon disposal of personal property, Grantor needs to contact Secured Party to obtain relevant discharge/release

As a Secured Party: -

Þ           A Secured Party has a secured interest in personal property of the Grantor such as fixed and floating charges, long term and finance leases, chattel mortgages (interest free purchases like TVs), title retentions, commercial consignment and factoring

Þ           The law has default and specific rules as to registering personal property with priority which take into consideration:

ü             control of personal property

ü             competition existing between security interest and statutory interest.

Changes to REIQ Contracts

The REIQ has brought out a further edition of the House and Land Contract.  There are several important changes that we should all be aware of.

1. Seller must give notice of whether the property is affected by an application in relation to a tree on the land and if the property is affected, a copy of the application must be given to the Buyer prior to signing the contract.

2. Rent paid by the Buyer to the Seller prior to settlement forms part of the "Balance Purchase Price"

3. "Encumbrances" includes unregistered encumbrances, statutory encumbrances and security interests. This will be important as there is new legislation coming dealing with Personal Property Security (PPSR) (security over personal items such as washing machines etc which are bought on credit).

4. "Security Interests" means all security interests registered on the PPSR over included chattels and improvements

5. "PPSR" means "Personal Property Securities Register", which will take effect early 2012

6. The Seller must upon request provide a written statement with supporting evidence of outgoings and rent for the property which would not otherwise be available by way of search

7. The finance clause can be satisfied after 5.00pm on the due date instead of only either waiving the clause or terminating, but the Seller maintains their ongoing right to terminate for failure to notify

8. The building and pest inspections clause can be satisfied after 5.00pm on the due date instead of only either waiving the clause or terminating, but the Seller maintains their ongoing right to terminate for failure to notify

9. In relation to the pool safety inspection, if no certificate of either safety or non-conformity is provided then the Buyer can waive or terminate.  If a certificate of non-conformity is issued then the Buyer can terminate provided they act reasonably; the right to terminate is lost once a pool safety compliance certificate is issued and the receiving party must notify the other of same being in effect; the Seller is entitled to a copy of a non-conformity certificate.

10. The Seller must provide any instrument necessary to release any encumbrance over the property.  This will include any PPSR release.

Þ           "Suspension of Time" is now provided for in the case of a natural disaster; no party is in breach of contract; time of the essence is suspended and settlement is to be effected upon issuing Notice to Settle; once Notice to Settle is issued then time becomes of the essence again

Þ           Warranty given by the Seller under 7.6 excludes notices given regarding application in relation to a tree on the land

Þ           Work required by a local authority on the property excludes notices given regarding application in relation to a tree on the land

Þ           If the property is declared acquisition land then the Buyer is entitled to terminate if this has not been disclosed

Þ           The Seller must use the property reasonably until settlement; the Seller must not do anything regarding the property or tenancies that may significantly alter them or result in later expense for the Buyer; if the Seller is issued with a notice, proceeding or order in relation to the property they must give a copy to the Buyer straight away; the Seller must seek the Buyer's consent before giving any notice or seeking consent to any order that affects the property

Þ           If requested, the Seller must provide to the Buyer copies of all security interests or sufficient details of the security interest to allow the Buyer to undertake a PPSR search

Undue Influence in Estate Planning

There is a growing area of dispute relating to Wills, which is centered upon undue influence.

This area involves claims by beneficiaries (or would-be beneficiaries) of Wills, that someone has influenced the person who signed the Will (the Testator) to make a distribution which shortchanges the complaining beneficiary.

The area is not well signposted by the law, and there is a lack of clarity regarding was is undue influence.

The most common scenario is this:-

A parent has several children.  One child either has remained to live with the parent, or performs a significantly higher proportion of the support services (shopping, trips to doctor, cleaning, companionship etc) than the others.

It is quite common to see this child appointed sole executor, and there is no issue with that, as the position of executor (apart from the very rarely used right to be paid for the job) is a set of responsibilities, not a set of benefits.

Very often, however, we receive instructions from the parent to make an additional distribution to this child, beyond that to the other children.

Again, of itself, that is not unusual, improper or unsupportable. 

Inherent in that kind of relationship, however, are the seeds of an argument for undue influence.

Obviously, those two parties are close and usually have a special relationship.

The child will often hold a Power of Attorney for the parent.  The child will undertake financial and transport obligations, and it is often this child that carries out an instruction to organise for a Will to be prepared.

The record will show that it is the child that rang the law firm and engaged the firm, on behalf of the parent, to prepare the Will which favours the child.  This is logical when you think about it but can be the beginning of the argument that undue influence exists

How do you stop a claim of undue influence being made?

You can’t.  Any person who fits the definition of next of kin, who has a right to bring a claim for provision before the Court, can make such a claim.

How do you crush the prospects of success of a claim for undue influence?

There is a whole range of activities which will limit the prospects of success of such a claim.

If this range of steps is done well, someone thinking of making a claim may well withdraw or not make that claim because it seems hopeless.  This is the outcome that a well drafted Will, following a clear and sensible preparation process, should achieve.

Indicators supporting possible undue influence

1.            Were we contacted by someone other than the testator?

2.            Who made the appointment?

3.            Does the person live with the testator?

4.            Do they live together alone?

5.            Is the person receiving more than other siblings?

6.            Who made that suggestion?

7.            Were the two together in the building at the time of instruction?

If any of these are present then:

A.           explain at the first opportunity the principal of undue influence to each of the two of them;

B.           exclude the third party (TP) from any further contact with us regarding the matter, including the possibility of intercepting drafts (as far as possible);

C.          bring the TP into the first part of the instructions interview and explain together, again, the undue influence process, making particular point to testator that the allegation of influence could complicate estate process;

D.          ask testator if other children/beneficiaries are aware of any skewing of distribution of assets;

E.           then remove the TP from the area and away from earshot;

F.           do not use TP as interpreter.  Hire an interpreter if necessary;

G.          ask the following questions:

(i)                 are you certain you want to leave more to TP than to others in that category of beneficiaries?

(ii)               Why?

(iii)             have you thought about how others will feel about this?

(iv)              is how they feel important?

(v)                what has TP done in addition to others to warrant this?

(vi)              what have others not done?

(vii)            can I put something to this effect in Will?

(viii)          if not why not?

(ix)              how did you come to this conclusion?

(x)                have you made this decision voluntarily?

(xi)              has TP been consulted?

(xii)            what was his/her involvement?

(xiii)          have you considered inter vivos gift instead?

(xiv)          has any threat/promise of any kind been made to you in relation to this distribution?

Ingredients for avoiding or crushing undue influence claims

1.      Communication. 

It is essential that the testator communicate to all beneficiaries that a Will has been prepared which favours one individual, that that Will has been made voluntarily, and that the testator wants his or her wishes honoured in full.  It is important that the message is communicated to all the beneficiaries that the decision has been taken after much thought, voluntarily, and without any threat or promise having been made by the favoured beneficiary.

2.      Medical evidence.

         If there is even the slightest indication of a possible argument that the testator did not have capacity to understand the nature and effect of the document, get a medical report disproving this.

3.      Choose a law firm with specific skills in dealing with Will preparation.

         Any law firm should be able to prepare a Will.  If your Will (or that of your parent) fits into the category described above, you need a firm with experience beyond the basic Will.

         The law firm should immediately recognise (and have triggers and processes for) any circumstances which might support a claim of undue influence.

         The firm should in fact beat you to pointing out the undue influence trigger, and explain its processes for assessing, dealing with and defeating the circumstances of undue influence.

         If you are aware of any of the circumstances outlined above, point them out to the lawyer in question and ask what is their process for dealing with and managing the circumstances.

How a law firm will/should deal with undue influence issues

1.            A joint explanation of the undue influence issue followed by exclusion of the beneficiary from the interview.

2.            A restatement of the potential issue, and explanation that some questions need to be asked in order to protect the enforceability of the Will, and then enquiring of the testator about why and in what circumstances the decision was made to favour one beneficiary.

THERE IS NOTHING WRONG WITH LEAVING YOUR ASSETS IN AN UNUSUAL, LOPSIDED

OR PARTICULAR WAY

.

It is important that, when you sign your Will, you feel as though it reflects your wishes, it gives you peace of mind, and you do not feel like you have been forced to compromise or do something that you would rather not.

If, however, you are in the circumstances described above, or something similar, and if you do wish to favour one person over others in a similar position, then it is essential that you say why in the document.  A short sentence explaining:

(a)               why you are favouring the beneficiary;

(b)               that you have done so voluntarily and after much thought;

(c)               that no threat or promise has been made to you to influence you to make such a decision;

may well make all the difference to the enforceability of the distribution, or prevent a wavering potential claimant from going ahead.