Question: My new client is in a pickle. His family trust has 3 Appointors: himself, his wife and his ex-accountant (his “Ex”). My client’s relationship has soured beyond the point of repair. My client wants nothing to do with his Ex (from what I’ve been told, Mel Gibson’s tirades have nothing on this loose cannon).
When my client set up his family trust in 1995, he said he followed his Ex’s advice blindly – including appointing the Ex as a joint Appointor for security of costs. Now my client and his wife want to remove the Ex as Appointor. But when I told him that he needed to get his Ex to sign the deed of resignation, he was not happy. My client argues that it is his trust and had he have known the power the Appointor has, he would have never given it to him in the first place.
I never understand why some accountants put themselves as joint Appointors. They have no business in the trust assets. I think it is unethical for an accountant to put themself as a joint Appointor as security for costs.
What are my client’s options? Can he go behind the back of the unwanted Appointor and sack him?
Answer: It is not generally in the best interest of the accountant to take up the role of Appointor or even co-Appointor. It puts tremendous pressure on the accountant and is often against the requirements of their governing body. The Accountant ends up wearing two hats. They are both the bossy Appointor and fiduciary accountant.
There is an argument that the accountant can take all the assets out of the trust. This has happened a number of times in my 21 years of practicing in this area. We generally get the money back, often without reverting to blackmail and threat of going to the press or courts.
However, thanks to Richstar and Dr Spry’s case there is an argument to have independent third parties hold positions of Appointor. However, in these instances you need a Shareholders Agreement or some other agreement to fetter and control the direction of the independent persons – again – otherwise they end up taking the money for themselves.
Surely the client should have read what they were signing?
It is a delicate balancing act – on one hand, clients shouldn’t set up trusts if they have no idea what is going on. It is lazy for the client to just say they didn’t understand. However, part of the job of professional advisers is to explain these obscure structures to clients.
When accountants take the time to advise their clients properly, it protects everyone:
Clients are protected because they make informed decisions;
Advisers are protected because the client can’t accuse you of forcing them into something they didn’t understand. It saves your professional reputation – clients have no grounds to complain about you to your professional body. It also stops costly negligence claims – which your PI insurance thanks you for.
Prevention is always better than cure.
What to do now
What can your client do? Well, he has three options (in this order):
Check the deed.
Ask the ex-accountant to resign.
Instruct a lawyer to prepare a deed of rectification (a risky last resort).
Check the deed
First, get a lawyer to check what the powers of the Appointor are. Must they act jointly, or can a majority of Appointors override the minority? If a majority can override the minority, then your client may be in luck. Get your client and his wife to sign a deed removing the old Appointor. The ex-accountant has no need to get involved. However, you need a lawyer to sign off on this. It is risky to change an Appointor without following the trust rules. If the removal is invalid, then all subsequent acts of the “new Appointor” have no effect. This surely causes taxation consequences.
Ask the ex-accountant to resign
The trustee is merely a ‘puppet’. The Appointor is ‘god’. You (or someone you control) should be the Appointor or joint Appointor. It is your trust, after all. So, what do you do now? Get a lawyer to prepare a Deed replacing the Appointor. Your client needs to swallow his pride and ask the accountant to sign this. If he refuses, argue that he only holds the position on trust for you. Tell him that he acted as your accountant, rather than a family member.
If the accountant digs in his heels, your best bet may be to jump ship. Form a new Family Trust and abandon the old one. You can only do this if you have no assets in your Family Trust. If there are assets in there, you might have to pay CGT and transfer duties. Harsh, but true.
You could also go to court and try and have the accountant removed. (Interestingly, our litigation team at Brett Davies Lawyers often goes to court to argue that the accountant should remain as the Appointor – but this is as against the trustee in bankruptcy. We usually win these. However, your position is different.)
Instruct a lawyer to prepare a deed of rectification (a risky last resort)
Read on if:
your Appointors must act jointly;
your accountant refuses to sign;
you don’t want to go to court; and
you have significant trust assets.
This is a site in progress.
The purpose of this site is to be a reference for working lawyers and students in the field of criminal law in New South Wales, Australia, about recent cases in the areas of criminal law and evidence, and to assist in public discussion and education about important issues which have practical importance for many people.
This website is written by John Stratton. I am a public defender.
The inspiration of the site was the fact that although criminal lawyers in Australia are pretty well served for primary materials (statutes and cases) there is very little by way of analysis on the Internet. Many of the Australian cases I have referred to can be found at Austlii.
Although I have tried to keep this site as up to date as possible, obviously anyone using it should rely on their own enquiries. In other words, no-one involved with the site has legal liability for damages for any decisions you may decide to make based on material on this web site.
The text of the Criminal Law Survival Kit is in two large documents, one on Crime and one on Evidence. At this stage I want to keep it that way to make searching easier. If you are having trouble searching either part, remember to make sure that the document has finished downloading onto your computer before you search.
Hopefully most of the abbreviations should be obvious but the reference to ‘PD’ is the Public Defender’s Recent Cases published in New South Wales Australia. Most of these summaries are now available at the Public Defenders’ Defender Bank.
Articles and Papers
By far the best place to look for Australian legislation and case law is Austlii.
Specific Case law Databases
Some Frequently Used Legislation
NSW Parliamentary Counsel’s Office (for historical versions of NSW legislation)
Search this site, courtesy of Austlii.
When the notorious “Queen of Mean” Leona Helmsley died and left $12 million to her dog Trouble – trouble indeed ensued. Her surviving family, left distraught and penniless, were not pleased.
But regardless of Helmsley’s reasons, it does pose an interesting question. Our Will should reflect our will. So, why can’t we just leave what we want to whom we want? Unfortunately, it is a bit more complicated.
Who can challenge my Will?
It doesn’t matter who you are – your Will can be challenged. But only by certain people. Potential challengers can only come from 5 types of relationships:
- Your parents
- Your spouse
- Your children (adopted children but not children born from sperm or egg donation)
- Your grandchildren
- Anyone that you are ‘maintaining’ (but not in all States).
Who is your spouse? It’s not as simple as it sounds. Of course, the person you are married to is your spouse. But the ‘spousal level’ also includes your de-facto. In some States, it also includes your gay partner. The government now allows for such bigamy. You owe spousal obligations to your wife, de-facto and gay partner – all at the same time.
How do I stop people from challenging my Will?
Sadly, you can’t stop anyone from challenging your Will. You’re dead, so I guess you can’t really do anything anyway. If the challenger falls within any of the categories above, then they have a right to challenge. Nothing you can do can take away this right. For example, you can’t say, “I give $20,000 to Bertie White, but if she challenges my Will then the gift is void.” That’s the Court’s job to decide, not yours.
What is the silver lining? Just because someone can challenge your Will, doesn’t mean that they are successful.
How do I stop people from vulturing my money?
- Instruct a specialist lawyer to prepare your Will.
The benefit? Your Will is explained by a lawyer. It’s not like you bought some $20 penny-dreadful Will kit from the Post Office and signed it blindly. Your lawyer keeps contemporaneous file notes about what you say. Your lawyer explains the effect of your Will before you sign it. This is about the strongest indicator that you can give the Court.
Where required, Brett Davies Lawyers, drafts a ‘considered person’ clause into your Will. It shows the Court that you haven’t merely ‘forgotten’ about the person you decided to disinherit. It’s a non-offensive clause that confirms that you have considered your obligation to the person and have decided that they should not receive anything further from you. Some people want to put in the gory details such as infidelity. While perhaps an enjoyable read to the public, it’s not a good idea to put in any reason why you’ve disinherited them. Why? Well, once your executors lodge the Will to get a Grant of Probate, it becomes a public document. Anyone can see it -including Ms Busybody next door. There is no reason to air your dirty laundry.
I want to leave it all to my dogs
You can’t just leave money to an animal. You need your Will to set up a trust for the benefit of your pet. You would appoint someone that you trust as the appointor and trustee of the trust. That person can only use the money for the benefit, happiness and upkeep of your pet.
SMSF Borrowing documents updated to reflect law changes
What are the changes to the law?
The highlights of the changes to the law are:
- The name of the SMSF borrowing arrangements has changed from ‘Instalment Warrant Borrowing arrangements’ to ‘Limited Recourse Borrowing arrangements’.
- The SMSF can use the borrowed money to meet expenses incurred in connection with the borrowing – for example: conveyancing fees, stamp duty, brokerage or loan establishment costs. Previously, it was uncertain whether the money could be used for those expenses.
- The concept of ‘single acquirable asset’ has been clarified, and narrowed, in relation to shares etc.
- The SMSF can refinance its borrowing.
What new rules? Can I take a look?
Parliament is considering a new bill which proposes amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act). You can access a copy of the bill, and explanatory memorandum, here.
The bill was introduced to Parliament on 26 May 2010. It will be examined by the Senate Economics Legislation Committee which is due to file a report by 15 June 2010.
When will the new rules apply?
The new rules will apply to super fund borrowing arrangements made from the day after the Bill receives Royal Assent — which is the last stage of the enactment process after both Houses of Parliament have passed the Bill.
However, the rules will apply to any existing arrangements if (after the bill receives Royal Assent) those arrangements:
- are refinanced; or
- are varied to the extent that the original borrowing arrangement has effectively been rescinded or replaced.
What do the new rules clarify or change?
The new rules clarify these issues:
- The super fund can use borrowed money only to acquire a ‘single acquirable asset’ (original asset), except that the money can be used to meet expenses incurred in connection with the borrowing;
- The concept of ‘single acquirable asset’ extends to a collection of shares in a company, a collection of units in a trust, or a collection of stapled securities (shares in a company stapled to units in a trust) — as long as the collection is of shares, or units, or stapled securities of the same class with the same market value;
- If the original asset purchased is shares, units, or stapled securities, then the original asset can be replaced — but only with shares, or units, or stapled securities, in the same entity and in the same class and of the same market value; and
- The super fund can refinance its borrowing.
What do the new rules restrict?
The new rules add the following new restrictions:
- As discussed above, the concept of ‘replacement assets’ is limited to replacing shares in companies, units in trusts and stapled securities;
- The rights of any person (not just the lender’s) against the super trustee in relation to a super borrowing arrangement are limited to rights relating to the original asset; and
- The only security (that is, a mortgage, charge, lien, etc) which can be given or held over the original asset must be one which is associated with the direct borrowing arrangement.
What has not changed?
For those of us waiting to see whether there is a radical policy shift in the area of borrowing by super funds, it is interesting that the changes really focus on:
- providing some clarity on how the rules work; and
- building in some new restrictions.
But the Federal Government is not proposing a radical reworking of the rules. So:
- super funds can still borrow;
- the arrangements in respect of custodians and custody trusts remain the same; and
- trustees, and their lenders, need to continue to be careful about quarantining rights in respect of default to the single superannuation asset.
The new rules are before the Parliament, and Parliament will consider making them law (provided that the Senate Committee provides its report by 15 June) when it sits from 15 June until 24 June 2010 – so hopefully the new rules will be finalised before the end of the financial year.
We will keep you posted.
Victoria Legal Aid
Tel: 9269 0234
Tel: (toll free for regional callers) 1800 677 402
Legal Information Service
Tel: 9269 0120
Tel: (toll free for regional callers) 1800 677 402
Child Witness Service – Department of Justice
Tel: 03 9603 9266
Tel: 1300 790 540 (regional callers)
State-wide Court Network Telephone and Referral Service – open between 9.00am and 5.00pm every weekday.
Tel: 03 9603 7433 or
Tel: (toll free) 1800 681 614
Witness Assistance Service
If the court case is being prosecuted by the Office of Public Prosecutions
Tel: 03 9603 7523 or 03 9603 7422 or
Tel: (toll free)1800 641 927
Victims Assistance and Counselling Program
Victims of Crime Helpline: 1800 819 817
Going to Court
There are a number of reasons you may need to attend court – either as a party to a case, as a witness or to support family or friends. In this section you will find introductory information about:
- giving evidence in court
- making an oath or affirmation
- how different people are able to provide affidavits to the court.
You will also find:
- clear explanations of commonly used terms including who the accused persons and plaintiffs are
- how juries are selected and their rights and responsibilities
- how judgments are passed.
There is also a list of support services including information about legal aid and victim support.
You should visit individual court sites to find specific information about how each court works. If you are going to court you should also seek legal advice.