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One of the benefits of the use of a testamentary discretionary trust in making a Will is that – by giving the gift to a trust for the benefit of a particular class of people – if one of them is bankrupted then the gift will potentially be protected from claims by the trustee in bankruptcy as the bankrupt beneficiary was not the “owner” of it, due to the discretion of the trustee to apply the benefit among different people. That is linked to the ability to distribute income amongst potential beneficiaries which may have taxation benefits. It is common for these sorts of Wills to be accompanied by a letter of wishes which provides guidance to the trustees of the testamentary discretionary trust.  It is important however to ensure that these letters of guidance do not form binding directions which would otherwise create a situation where the trust is no longer discretionary but a fixed trust, undermining the effectiveness of the trust structure so that the gift can be taken by the trustee of a bankrupt beneficiary.  We have recently seen an example of such a document which in this case was characterised as instructions to the appointors of the trust.  In this case, the letter of instructions, signed by the Will maker, went into some detail to explain that the purpose of the trust structure was to protect the assets of the beneficiary in the event that a claim was made against her and there was a risk of creditors accessing those assets.  It then went on to set out what should be done if there was a risk of the bankruptcy of the beneficiary, or matrimonial proceedings. This sort of document might evidence that the purpose of the structure is to hinder or delay future creditors from recovering their debts and thereby trigger the entitlement of the trustee in bankruptcy of the bankrupt beneficiary to claw back the estate gift under section 121 of the Bankruptcy Act. It might also create some question as to the effectiveness of distributions of income, for taxation purposes although that is something that a taxation specialist would need to consider. For questions concerning testamentary discretionary trusts and Wills, please contact Peter Muller at peterm@qbmlaw.com.au or Jessica Murray at jessicam@qbmlaw.com.au

Hot on the heels of the criminalisation of wage theft in Queensland which we mentioned a few months ago, the Federal Government has (in December 2020) introduced a bill to amend the Fair Work Act so as to criminalise wage theft at a Commonwealth level. At the time of posting (17 December) the bill has not passed. The bill requires that the wage theft is dishonest and systematic, and sets out indicia for those terms which makes for an easier assessment than the Queensland legislation which requires a fraudulent act. Interestingly the Commonwealth legislation also clarifies that “an individual involved in the contravention” is liable to be prosecuted, which would include the officers of corporations where they have engaged in the conduct, and potentially other persons even if they are not officers. Maximum penalties are very significant – imprisonment for 4 years and fines exceeding $1M for individuals, fines exceeding $5M for corporations. All the more reason to be careful with wages and entitlement, and also to ensure that if it is a delegated task, it is reviewed externally to make sure it is being done correctly.

Plenty of people try to save some money by making their own will, sometimes through the use of a will kit from a newsagent. I suppose that I am of two minds about this. On the one hand, we lose the fee (usually under $1,000) that we would have made had we been instructed to prepare a perfectly good, enforceable will that can easily be used in administering the estate at a minimum of cost. But then on the other, we stand to gain the fees (usually over $10,000) associated with sorting out the mess of the home made will. Common problems with home made wills (and I am not going to tell you all of them, otherwise why would you need me?) include not having the document signed and witnessed correctly (and this is a bit more complicated than people think), referring to specific assets that are later sold or substituted, not providing alternatives in the event of the death of a beneficiary, partial intestacies, attempting to leave superannuation benefits or trust or company interests in a fashion that cannot be achieved at law, or giving a gift then trying to impose a subsequent condition on it (eg “I give my house to my wife and when she dies to my son”). Another major issue is people not appreciating their own financial affairs, a common issue being loans to or from companies or trusts which can be an asset or liability of the estate. Other problems come with people making alterations to wills after they are signed and witnessed, or leaving paperclip, clamp, or staple marks on the will. Each one of those issues translates to more fees for the lawyer acting in the estate (see, there is a silver lining after all) but then it can have a significant adverse impact on what the will maker really wanted. The take home point is that the lawyers are going to get paid one way or another, it is just that by making the will yourself not only do you risk very unhappy outcomes but it could be that the lawyers will be paid a lot more – and we wouldn’t want that, would we?

There has been consumer protection from unfair contract terms in relation to standard terms contracts for around a decade, and similar protection for small businesses for around 4 years.  The Federal Government has now announced that it intends to make changes to the laws concerning unfair contract terms to beef up their operation in a number of important areas: Instead of simply having the effect that the unfair term is void, courts will be able to impose penalties for breaches of the law; There will be a wider application of the laws to small business, with the ability for some very substantial businesses to have access to remedies; There will be some evidentiary improvements, with guidance for the definition of a standard form contract; The courts will have the ability to be flexible in giving remedies rather than simply declaring the term to be void. While there is no timing set for these changes, it is always prudent to have business standard forms of agreements reviewed to ensure that there are no unfair terms.  Generally speaking, an unfair contract term is one which: Causes a significant imbalance in the parties rights and obligations (usually with the party who prepares the contract having the greater rights); The term is not reasonably necessary to protect the legitimate interests of the party advantaged by it; and It causes financial or other harm (such as delay) if it was relied upon. While there are different drafting styles for business agreements, there is much to be said for agreements that are as brief as is reasonable given the subject matter and are clear and easily understood. For advice in relation to business contracts, please contact Peter Muller at peterm@qbmlaw.com.au or Kayla Davison at kaylad@qbmlaw.com.au