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ramoslawyers · 5 years

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99-year lease of farm land - who pays the Land tax? Owner or tenant?

Citation: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12.

The above case was about how to determine a contract clause regarding the payment of land tax. The landlord and original tenant entered into a lease contract for 12.15 hectares of farm land. The land was part of a bigger broadacre land. It was intended by the parties that the land would be sold to the original tenant. However, due to planning restrictions preventing subdivision, the sale could not proceed. Because the sale could not proceed, the parties decided to enter into a long-term lease.

The lease contract was a standard form farm lease to which the parties struck out many parts of clauses. Importantly, the landlord and original tenant struck out part of clause 4 which is the key clause determining liability for land tax. The clause looked like the following:

Clause 4: [That the lessee] will pay rates taxes assessments and outgoings whatsoever excepting land tax which during the said term shall be payable by the Landlord or tenant in respect of the said premises (but a proportionate part to be adjusted between Landlord and tenant if the case so requires).

The tenant argued that because certain words are crossed out, then the intention is that the tenant only pay those imposts levied on it as a tenant.

On the other hand, the landlord emphasised clause 13 which states:

Clause 13: The parties acknowledge that it was the intention of the Lessor to sell and the Lessee to purchase the land and improvements hereby leased for the consideration of $70,000.00 and as a result thereof the parties have agreed to enter into this Lease for a term of ninety-nine years in respect of which the total rental thereof is the sum of $70,000.00 which sum is hereby acknowledged to have been paid in full.

With an emphasis on clause 13 in determining liability to pay land tax under clause 4, it is an argument for the landlord that the parties assumed obligations as if a sale had proceeded.

The High Court determined the striking out of words in clause 4 as merely a matter which both parties rejected. In other words, the crossing out of words is not to be read as intention. The proper reading of clause 4 is to refer it to the commercial purpose of the lease as a whole, namely, what achieves a commercial result or what makes commercial sense. Nevertheless, the court acknowledged that each of the constructions the parties’ proposed were plausible.

In any event, the High Court decided that consideration of the commercial object of the lease invited attention to clause 13. Clause 13 explained that the parties intended a transfer of the land for $70,000.00 which is why they entered into a 99-year lease of which rent is $70,000.00 already fully paid.

In support of the view that the agreement intended obligations which were as close as possible as if a transfer actually occurred were other terms of the lease as follows:

* prepaid rent which equals the market value of the land;

* the lessee’s unrestricted use and capacity to deal with the land;

* lessee was free to assign and transfer the lease, and build on the land;

* removal of the lessor’s right of re-entry, inspection, and termination for breach;

It was noted by the court that the option to renew and option to purchase for a nominal value were omitted from the lease. These omissions may support the argument that the Landlord was to pay Land tax taking into account the value of the land to the Landlord upon reversion. An alternative view is that the omissions were merely due to inadvertence. The High Court decided that it was merely inadvertence. Further, the court added that a reasonable business person would be aware that the Landlord was in receivership and it was unlikely that a receiver would burden the Landlord company with an uncertain obligation to pay Land tax over a 99-year period.

Essentially the court concluded that it made commercial sense, having regard to the agreement as whole, that the tenant pay the land tax, or any other rates, taxes, and outgoings as if the tenant owned the land.

Finally, it was pointed by the court that there is redundancy in clause 4 where it says “the lessee will pay rates... which during the said term shall be payable by the tenant”. This redundancy, according to the court strengthens the argument that the agreement was ‘clumsily’ drafted. To interpret clause 4 with special attention to its words and strike-outs is to overweigh the clause when it is clearly a poor draft of a cookie-cutter contract which did not fit the agreement.

Have you had experience with any contract ambiguity (employment, residential tenancy, marriage)? How did you approach the ambiguity and what did you do about any issue that ‘fell through the cracks’?

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ramoslawyers · 5 years

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Author and publisher successfully defend against restraint to further produce murder non-fiction book

Citation: MORAN -v- SCHWARTZ PUBLISHING PTY LTD [2014] WASC 334

The picture above depicts that of a woman 25-years old from Germany, who was travelling around Australia in 2005 on a working visa. She took a year off to explore the smallest continent, in the company of her boyfriend and two other parties who are from the same German village. Little did anyone know that this mid-twenties excursion would bring to end the life of an otherwise promising path.

Her murder case remains unresolved, with only an inquest to yield the strongest trace of her sinister killer. The declared cause of her death was asphyxiation, or smothering/suffocation, that was caused by a person. The said inquest was attended by Virginia Peters, along with other investigations that she conducted privately. Her inquiries led her to write a book “Have you seen Simone?” which delves into the unanswered murder story. The book had been published Australia-wide in hardcopy and electronic forms. Such publication then became the cause for Tobias Moran to apply for a restraint to further publish more of the book.

In Moran’s injunction application, he claims that the book more than merely incites suspicion on a reasonable reader that he caused the death of Simone. Allegedly, he claims that the book practically accuses him of murder.

On the other hand, in the defence to the injunction application, a large volume of internet materials spanning from 2005 to 2014, discussing the murder of Simone, was produced as evidence by Virginia and the publisher. Some of the said publications go beyond eliciting suspicion to the extent of express statements of guilt. The evidence included a transcript of a tv program which aired nationwide with the tagline “Australia’s prime suspect”.

Against the public availability of arguably already damaging publications against Tobias, he needs to prove, for a successful injunction application, that on a first impression he has grounds for a defamation. Next, he must show that the inconvenience to him of publishing the material is greater than the inconvenience to the author or publisher if the book is not published. In other words, on a balance, who is more inconvenienced by a stop to the publication?

For the author or publisher wishing against an injunction, it needs to be shown that if a defamation case goes to trial, they can justify the publication. Justifying does not need to be because Tobias is the actual murderer (level 1 justification), it only needs to be that there are reasonable grounds to suspect that he is (level 2 justification).

In addition to the two tests stated above, courts in Australia are more flexible in considering other factors, the strongest of which is ‘free press’ or ‘free speech’ where practically trial by media is supported for public interest. It is believed that investigation and exposure of wrongdoing is not the exclusive domain of the police or the criminal justice system.

In assessing Tobias’s injunction application, the court read the book from cover to cover, not just one chapter. It was noted that there was a disclaimer-like introduction where it says that “For the avoidance of any doubt, this book does not and cannot say that Tobias is guilty of murdering Simone Strobel... Readers must not read anything in this book as concluding, or even inferring, that he is guilty of murder...”

The question then becomes, on a whole, what does the book do to a reasonable reader? A reasonable reader, for the court, is someone who reads a book cover to cover, literate in English, reasonable, logical, suspicious and inquisitive, but not scandal-fanatic.

The court proceeded to assess the body of evidence in its possession. From the material in front of the court, some facts emerge:

1. Tobias and Simone, in February 2005, had been boyfriend/girlfriend for around six and a half years;

2. At the time of the incident, they were both German citizens visiting Australia;

3. In February 2005, the couple were travelling Queensland and NSW in a camper van along with two other parties;

4. Although on a long-term relationship, some days before Simone’s disappearance, the relationship had worsened and they were arguing;

5. Diary entries of both Simone and Tobias (translated from German) indicate that days before Simone disappeared, they had not been getting along well;

6. On the night that Simone was last seen alive, there were verbally aggressive behaviour from Tobias towards Simone;

7. On the night that Simone was last seen alive, the party of four consumed an excessive amount of alcohol;

8. Their party of four were later refused entry to a hotel and it was captured on camera;

9. There were suggestions that the party further consumed alcohol upon returning to their camping ground, and marijuana was also taken;

10. There was an argument between Simone and Tobias at the caravan park before Simone walked off that night;

11. The remaining three of the four were the last people to see Simone alive before Simone disappeared that night;

12. Simone’s body was found six days later, around 90m away from the camping grounds, covered by palm branches;

13. Some lies were told to the police by the three remaining parties in reporting Simone’s disappearance, namely, that there was a harmonious relationship between Simone and Tobias and not mentioning the arguments and verbal abuse days before the disappearance;

14. There was seemingly an attempt to mislead the police on the level of alcohol consumed the night before Simone left the site, and denial about taking marijuana.

Of course, the facts do not indicate guilt. However, Tobias lacked a solid alibi as to his movements of the night before, there was delay in reporting Simone’s disappearance, and Simone’s body was found so close to the camping site. For the court, these provide a reasonable basis for suspicion.

As to a local reputation, the court said that Tobias was not an Australian citizen or permanent resident. It was noted that Tobias has had a surname change since having an Australian citizen partner. There is no evidence of active employment in Australia at the time of deciding on the injunction application. The court decided that Tobias did not have a well-established root in Western Australia where the case was brought. And these all are outweighed by the public interest in free speech.

In conclusion, the courts thought that disallowing the publication will not save any reputation damage to Tobias, and that there is more inconvenience to the author and publisher, in terms of monetary loss, if they were restrained from publication.

Do you agree? I think it was fair enough, given the disclaimers, but I would argue that the standard of the reasonable reader is a bit high. I would say there’s room for argument there.

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ramoslawyers · 5 years

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Investment scheme attempt at $0.00 stamp duty fails on appeal to Supreme Court

Citation: Commissioner of State Revenue v Antonino Arrigo [2016] VSCA 339

Antonino Arrigo is one of five persons or groups of persons who decided to pool their money, contributing $75,000 each party, towards a common fund to buy property for investment purposes at 34 Petrie Street Frankston. The property had a 5-unit apartment on it. The rest of the purchase price for the property was financed then by Bank West. The group formed a unit trust prior to settlement of the property which sold for $906,000.

According to the trust deed which established the unit trust, the trustee held all the contributions from the investors, the property to be bought, and any profits from conversion of the property, in trust for the benefit of the investors.

The sale then proceeded on 15 February 2010 which named the trustee as the transferee of the Frankston property. This sale was considered a ‘dutiable transaction’ under the Duties Act and attracted a $49,430 stamp duty.

On 25 March 2013, presumably in pursuit of investment milestones, the property was subdivided into five through registration of the plan of subdivision. This subdivision resulted in five separate titles for each lot created. Then on 15 April 2013, a transfer was done for Lot 2 to Antonino.

The issue which arose between Antonino and the Commissioner of State Revenue was whether the transfer of lot 2 to Antonino was subject to stamp duty. The Commissioner issued an assessment claiming stamp duty as it alleged that the transfer of lot 2 was ‘dutiable’. Antonino objected to the assessment on the basis of exemptions under the Duties Act. The first basis was that he was exempted from stamp duty as the transfer involves property subject to a fixed trust. An alternative argument was that the transfer of the lot was subject to a unit trust. In any event, Antonino would pay $0 or nothing if his first argument succeeds. Under the second argument, he may receive a discounted stamp duty to be computed in proportion to how much he will profit from the transfer.

When the issue reached VCAT, VCAT decided in favour of Antonino, saying that the transfer of lot 2 was a transfer of property subject to a fixed trust. According to the decision-maker, who was VCAT vice-president Judge Dyer, the trust deed created a unit trust, and then the subdivision of the parent property created a fixed trust. The eventual transfer of lot 2 was thus subject of a fixed trust. And as the transfer of lot 2 was decided to be subject to a fixed trust, then the fixed trust exemption under the Duties Act applied.

The Commissioner of State Revenue rejected this by saying that only one trust was created and it was the one created before settlement of the entire property. The terms of the trust deed, including a reference to the trustee’s power to subdivide the property, was construed to mean that only one trust, a unit trust, was created. They appealed against the VCAT decision on the ground that the trust deed terms were misconstrued and the Duties Act provisions incorrectly interpreted.

When the issue reached the Supreme Court of Appeal, the VCAT decision was set aside. The court agreed with the Commissioner that only one trust, a unit trust was created. The court with three judges then decided to remit the issue to VCAT for a re-determination but only on the remaining grounds of Antonino’s objections, in short, not including the issue of whether there were one or two trusts created. VCAT would re-determine only on amount payable.

As for the turn of events above, the care in drafting the trust deed in investment transactions is emphasised. It should be noted how much duty is payable under one arrangement as opposed to another. It can mean the payment of $12,170 or $0.

What is your experience with stamp duty? Being quite a heavy expense how did you decide on any advice in relation to it?

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ramoslawyers · 5 years

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IT Business Development Manager loses fight for higher commission payment upon his termination

Citation: Dialog Pty Ltd t/as Diamond Information Technology v Sklar [2019] NSWSC 15

Andrew Sklar was employed by Diamond Information Technology from 30 January 2014 to 31 July 2015, a little over one year. His employment contract was to act as Diamond’s business development manager, with a base salary of $150,000 plus superannuation, plus 7.41% commission on the gross margin of revenue he was able to generate.

His employment contract was subject to a ‘sales target’ of $6,000,000. However, by mid 2015, Sklar was only able to bring in $1.42 million for Diamond which was far from the sales target in his employment contract. This inability to meet the target formed the basis of his termination with effect from 31 July 2015. On his termination, the issue between Diamond and Sklar was how to compute the gross margin for the purpose of the 7.41% commission.

Computation of the gross margin was not detailed in the employment contract. There was also no discussion on how gross margin is to be calculated before and when Sklar signed the employment agreement.

According to Diamond, the gross margin is calculated by subtracting from the revenue Sklar’s remuneration, services costs, and a refund to one of its clients.

For Sklar, the computation of the gross margin should not deduct from the revenue his salary, services costs, and the refund to one of their clients. In a nutshell, the different computational approaches between Diamond and Sklar are as follows:

The reversal on item 3 in the table pertains to a refund to a client of costs of iSpatial software, which turned out to be incompatible with the client’s hardware, operating system, and other software. It was Sklar who recommended iSpatial to the client. The client however requested the refund after Sklar’s termination.

In the lower court (Local Court of NSW) the Magistrate decided in favour of Sklar but deducting any commission from transaction with the client who ordered the iSpatial software. In short, the Magistrate decided that the commission should be $52,089. The Magistrate took a strict ‘sales of goods’ approach to computing the gross margin, namely, revenue minus the buy price of softwares procured. The Magistrate took this approach because it was not stated in the employment contract or in any oral or email discussions about the employment terms, that the computation would be in accordance with general accounting principles for service organisations. In addition, the Magistrate held that if it is unclear between the parties how a clause should be interpreted, then interpretation should be against the party who drafted the clause, which in this case is Dialog.

On appeal, however, the Magistrates’ decision was reversed. In interpreting what gross margin is for the purpose of the employment contract, the Judge considered the nature of Diamond’s business, which not only sells software, but provides IT services to its clients such as software installation and configuration. At times, they also trained its clients’ staff on the use of the new technologies it implemented. On the basis of this approach, the Judge adopted the computation of Dialog, which as shown on the table above, yields a much lower commission payment to Sklar. The Judge decided that there was no need to interpret the ‘gross margin’ clause as against Diamond because there was no unclearness in the first place. For the Judge it is clear that the calculation should be as what is expected for a service organisation. The commission to Sklar was then reduced to $13,119. Sklar was made to pay costs in the lower court, and Dialog was made to pay costs on appeal.

Have you ever worked for commission? How was the commission calculated and have you raised any unclearness regarding the commission calculation?

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ramoslawyers · 5 years

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Injuries sustained at equestrian championships put venue controller and event organiser in legal quagmire

Citation: NSW Arabian Horse Association Inc v Olympic Co-ordination Authority [2005] NSWCA 210

When a person suffers an injury at a sporting event, such as the East Coast Arabian Championships, he or she may or may not sue a party for medical costs of the said injury. It is likely that a less astute aggrieved would have simply paid the costs himself without directing the monetary injury somewhere else. But in the case of Mr and Mrs Scholes, they filed a lawsuit against the Olympic Coordination Authority which is the manager and controller of the Sydney International Equestrian Centre.

At the time, Mr and Mrs Scholes made use of the parking spaces in the event venue, paying the Authority a parking fee, to see the event. On their way back to their car in the car park, they fell into a culvert and sustained injuries. They directed the medical costs by suing the Olympic Coordination Authority for $109,500 in damages. The Authority settled the claim, filing terms of settlement at court, and paying Mr and Mrs Scholes. However, they filed a cross-claim against NSW Arabian Horse Association, the event organiser who held the East Coast Arabian Championships.

The Authority and the Association had a separate contract. The relevant terms stated that the Association, in holding dressage and horse-riding events, should take out Public Liability Insurance “for the event”. The agreement stated that the Authority will be indemnified against any loss or damage occurring as a result of the event.

The Association tried to argue their way out of liability through saying, on appeal, that their responsibility is limited to occurrences that are part of the event, and not situations that are deviations. They argued that Mr and Mrs Scholes performed a deviation from situations occurring as part of the event by a detour that caused their injury while they were on their way to the car park. They went on to say that the Authority had particular, as opposed to public, liability for situations which were deviations from those that are part of the event. These arguments were rejected on trial and appeal on the basis that first, the deviation argument was not raised at trial. It was raised only on appeal. The judge said that accepting such fact on appeal is unfair as the fact was already accepted and agreed at trial. On this premise, the judge then reasoned that as it is accepted that there were no ‘deviations’ from situations forming part of the event, then the injuries were sustained in the course of attending the event, which includes going to your car parked at the car park. The fact that going to the car park formed part of the event is strengthened by the fact that the Association took shares in the whole lot of parking fees raised by the event. The judge took a referencing as opposed to discriminatory approach to reading the two clauses at issue between the Authority and the Association. These gave an outcome in favour of the Authority.

Nevertheless, if the Association was covered by Public Liability Insurance, which they probably are because it is a condition of the agreement with the Authority, then they can direct the money injury at the Insurance provider, which is the point of the insurance anyway. It was stated in the case that the cover was for $10,000,000 which easily covers $109,500 for Mr and Mrs Scholes injuries, the Association’s legal costs for suing the Authority, plus the legal costs of losing to the Authority. They just need to succeed in a valid ‘claim’ against the Insurer, which is a separate hurdle, but worthy of pursuing.

Would you sue if you were injured at a sporting event? Have you been injured in a sporting event and what course did you take regarding the medical fees?

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ramoslawyers · 5 years

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Professional Indemnity Insurance: watch the definition of ‘claim’ in your policy

Citation: Junemill Ltd (in liq) v FAI General Insurance Co Ltd [1997] QCA 261

Insurers sometimes dispute liability through saying that the insured does not have a valid ‘claim’ under their policy. In one published case, a valuation business conducted several property valuations for a company with a mortgage portfolio. Eventually, the company holding the mortgage portfolio found grounds for a lawsuit against the valuation business. The valuation business was warned of this through a facsimile letter. There was not any monetary demand in the letter, only a warning that if the mortgage portfolio suffers any losses due to the valuations, then a lawsuit awaits the valuation business.

One of the many issues at trial was whether the said letter was a ‘claim’ under the valuation business’ PI insurance policy. Resolution of the issue rested on whether the letter satisfied the definition of a ‘claim’ in the policy. ‘Claim’ is defined in the policy as “the demand for compensation made by a third party against the Insured but shall not include the Insured's costs and expenses. . . .”

The insurer argued that the letter was not a claim because there is no monetary demand in it, nor any existing loss. It was eventually found on appeal that the letter, combined with another letter which states an existing loss, constituted a ‘demand for compensation’ because there is another provision which actually refers to a loss. However, the said letter, in isolation, is also a ‘demand for compensation’ under the policy because what is required is a mere form of demand, and not a formal demand. In any event, the lawsuit warned about in the letter must surely have been for damages. The court took account of dictionary meanings of the word ‘demand’. A distinction was made between the act of demanding and demand as a noun. Applying both usages of the word ‘demand’ to the definition, the court held that ‘demand’ was used in the case as a subject rather than an act because doing so would make the entire definition of claim sensible given that ‘costs and expenses’ apply to the said demand.

As per indemnity clauses in policies, upon a finding of a successful ‘claim’, an insured can then claim indemnity against any loss resulting from the claim. The insured should refer to the limit of liability under the insurance. Early resolution of what actually is and is not a claim, as supported by determined cases, is always practical to avoid paying costs.

In the case mentioned above, the insurer was made to pay costs of the trial and appeal.

Have you had any experience in a contested claim? What other formats of claims and bases have been given for rejected claims?

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