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In February 2023, the Queensland Government announced proposed changes to Body Corporate legislation which would “make it easier for units to be redeveloped”.  The background is that, when looking to sell all units in a Body Corporate complex so that a developer can redevelop the site, it is common for there to be a small number of “hold outs” who will refuse to sell, whether at all or at a particular price. Hold outs may not necessarily be acting out of greed or opportunism.  Often, people are particularly happy with a modest apartment due to its location, and could not afford to buy elsewhere in a similar location.  Some people might have a sentimental attachment to a building that they are in, and it might meet their needs perfectly.  Further, there are a number of reasons why contracts usually proposed by developers for the assembly of a development site (ie for all of the units in a building) might not necessarily be attractive.  They generally contain terms which favour the developers.  Most will be subject to conditions such as the obtaining of satisfactory development approvals, which might not be achieved for a few years.  Then they would generally be conditional upon the settlement of all other lots, a condition which might fail for any number of reasons.   As a consequence, an offer to buy a unit by a developer – even if for a price premium – will often involve very unattractive terms, and lead to significant uncertainty such that the owner would be unable to plan for some years not knowing whether or not the contract would settle.  Furthermore, a price that was attractive at the time of the signing of the contract might be particularly unattractive one to three years later once all conditions are satisfied.  In addition, even if the contract is unconditional, many are entered into by special purpose vehicle companies with no assets meaning that if the contract fails and the buyer does not settle, the seller is left with no remedy. Against those matters, the Queensland Government is proposing to amend the Body Corporate legislation to allow (indirectly) for owners to be compelled to “sell”.  I’ve put the word “sell” in inverted commas because that is not what is proposed.  Instead, what would happen is that, if 75% of owners or more supported the termination of the scheme itself on the basis of an agreement that it is more financially viable for lot owners to terminate rather than to maintain or remediate the scheme, then the scheme is terminated which has the result that the freehold interests are lost, and the Body Corporate itself then is the owner of the entire site which it can sell.  This would have the result that (say) a scheme in which there had been 50 lots, all individually owned by different owners will have (post termination) 1 lot with those 50 owners all holding as tenants in common proportionate to their interest schedule lot entitlements.  If the owners could not agree on the sale, then an external trustee would have to be appointed to facilitate the sale, with the owners to eventually receive their share of the proceeds after expenses.  The proposed amendments (which have not been published) would need to deal with transparency and allow for remedies to be available to allow for an independent assessment of what is or is not financially viable.  The draft legislation is not yet available. For advice in relation to community titles scheme and contracts generally, please contact Peter Muller at peterm@qbmlaw.com.au, Jessica Murray at jessicam@qbmlaw.com.au or Megan Hanneman at meganh@qbmlaw.com.au

In this time in which the failure of building companies is quite frequent, it is good to be mindful of the presence of “charging clauses” in credit agreements.  Charging clauses quite often appear in the fine print of director’s guarantees given in favour of credit supply agreements.  As an example, a painter might operate his business through a company, in which he and his wife are directors.  The painting company might run a credit account with a supplier, which commonly will be supported by a director’s guarantee.  Frequently, the director’s guarantee appears fairly innocuous, and will be in very small print, or otherwise be written in a way which is disarming.  For example, the guarantee might have signing provision that says “signature of director” instead of “signature of guarantor” with the consequence that often guarantees are signed by directors who have not properly read the document and do not necessarily appreciate that they are giving a personal guarantee.  The issue however goes further because many of these guarantees contain charging clauses.  These clauses can be quite bland, for example words such as “the guarantor charges all of the guarantor’s land in favour of the creditor to secure payment of moneys owing by the customer to the creditor”. Some clauses are more sophisticated, and will appoint the creditor to be the agent of the guarantor to sign mortgages and register them over the guarantor’s land.  While generally a mortgage – to be registered over land – needs to be witnessed by a qualified person, that is not the case for a charge given under this sort of agreement.  The creditor can lodge a caveat securing its interest under the charge and then start court proceedings to enforce the charge which can include seeking orders to sell the land, which might include the guarantor’s home.  It is important to bear in mind these potential liabilities, and other potential liabilities such as responsibilities for breaches of workplace health and safety laws when deciding who should be a director of a trading company.  In particular, care should be given in nominating a spouse who has no significant role in the operation of the business as a director.  For advice concerning the structuring of businesses and responsibilities under business agreements, please contact our commercial lawyers Peter Muller at peterm@qbmlaw.com.au, Megan Hanneman at meganh@qbmlaw.com.au and Jessica Murray at jessicam@qbmlaw.com.au

Power of attorney duties, often people will appoint a trusted person to act as their attorney for health and financial matters if they lose capacity.  When that person loses capacity (and for the period of time that they have lost capacity, as it is not always permanent), the attorney becomes entitled and responsible to manage the financial affairs of the person appointing them (the principal).  So what are the power of attorney duties in relation to the investments? The Powers of Attorney Act provides that (save for Enduring Powers of Attorney made before the commencement of the Powers of Attorney Act in 1998), the attorney can invest only in “authorised investments” but that if the principal had investments at the commencement of the power which were not authorised investments, then the attorney can continue with them. The Act goes onto identify authorised investments as being investments which would be permitted for a trustee exercising a power of investment under the Trusts Act 1973, or as may be approved by the Tribunal. While historically, the Trusts Act set out fairly rigid types of investments that trustees were permitted to engage in, the Trusts Act now simply provides (at section 21) that unless expressly forbidden by the trust instrument, the trust funds may be invested in any form of investment.  Section 22 then sets out duties of the trustee, including: The trustee is obliged to comply with whatever trust instrument binds them, and must at least once in each year review the performance, individually and as a whole, of trust investments.  Section 23 goes on to preserve principles of law and equity insofar as they are not inconsistent with the trust instrument, including: Section 24 sets out various matters that a trustee can take into account when exercising a power of investment, so far as they are appropriate to the circumstances of the trust.  These include: Section 24 provides that a trustee may obtain and must consider if obtained independent and impartial advice reasonably required for the investment of trust funds and its management from a person that the trustee reasonably believes to be competent to give the advice. So these duties have become the duties of an attorney when investing for a principal. An attorney can be responsible if it breaches its obligations in relation to the management of the fund.  As an example, in the guardianship matter of HLB v Trust Company Ltd [2010] QCAT 40 – where the appointed guardian has similar obligations to those of an attorney under a Power of Attorney – The Trust Company Limited was ordered to compensate their client for failing to comply with their obligations in relation to their management of the client’s funds. In that case, the funds were maintained in a fund paying a low rate of interest for approximately one year when they could (and should) have been invested in investments which were equally safe and having a far greater rate of return. As a consequence, when managing the affairs of a principal, an attorney would often be wise to take advice from a qualified person and have regard to that advice when making investments.  For matters concerning Power of Attorneys, please contact Jessica Murray at jessicam@qbmlaw.com.au or Peter Muller at peterm@qbmlaw.com.au

In a recent decision of the Queensland Supreme Court (Rocky Point Holdings Pty Ltd v TEB Enterprises Pty Ltd [2023] QSC 20), the Court considered a number of issues arising out of a transaction involving call options in respect of land.  Relevantly, the landowner had given a call option right to an interested party (“the Buyer”).  The parties came into dispute whereupon the Buyer lodged a caveat. In Queensland, except in very limited circumstances, caveats lapse three months after lodgement.  In order to preserve the continuation of the caveat, proceedings must be commenced within three months of lodgement and the Land Title Office given notice of those proceedings.  In this particular case, proceedings were commenced, however notice was not given to the Registrar of Titles as a result of which, the caveat lapsed on 20 October 2022.  The first observation (at paragraph 17 of the judgment) was that the Buyer “at least from the time it purported to exercise the option, had an interest in land sufficient to support the caveat”.  This comment relates to the question of whether a call option itself gives rise to an equitable interest in the land which is sufficient to support a caveat, or a “mere equity” in the land which may not be. In any event, being satisfied that given that the Buyer had given notice of the exercise of the option, it would have an interest capable of supporting a caveat, the Court went onto consider whether it should allow the lodgement of a second caveat.  In that regard, section 129 of the Land Title Act provides that “a further caveat with the same caveator can never be lodged in relation to the interest on the same or substantially the same, grounds as the grounds stated in the original caveat unless the leave of the Court of competent jurisdiction to lodge the further caveat has been granted.” In this matter, ultimately it was the position of the caveator that the failure to notify the Registrar of Titles that proceedings had been commenced was an oversight on the part of their lawyers.  While the Court criticised the evidence in that regard, the Court accepted that there was an error on the part of the lawyers which led to the notification not being given, and that it was satisfied that it had been the intention to maintain the caveat and press for the claim for specific performance of the agreement which arose by the exercise of the option.  As a result, the Court considered it appropriate to give leave for the Buyer to lodge a second caveat claiming the same interest as claimed in the first caveat.  A further issue was considered by the Court in the course of its assessment of the application and that was the question of whether an unstamped document (ie a document which has not been assessed for the payment of stamp duty) can support a cause of action.  This is something that does arise quite frequently in commercial litigation, but is still surprisingly unclear.  In this case, the Court found that the giving of an undertaking by the Buyer to stamp the call option document (that undertaking being to submit the call option deed to the Commissioner of State Revenue for assessment, and to cause any duty assessed on it to be paid) was sufficient, and in that regard, the Court declined to follow previous comments of the Supreme Court to the effect that giving the undertaking might make the document admissible in the court proceedings, but until it was stamped, it would not be effective to found a cause of action. The judgment provides very useful guidance in relation to these issues. For matters concerning caveats, please contact Jessica Murray at jessicam@qbmlaw.com.au Megan Hanneman at meganh@qbmlaw.com.au, or Peter Muller at peterm@qbmlaw.com.au