State Budget Changes to “Land Rich” Stamp Duty Provisions

As part of its 2006/2007 State Budget, the South Australian Government has announced various changes to Part 4 of the Stamp Duties Act 1923.  These provisions, known as the “land rich stamp duty provisions”, are an anti-avoidance mechanism to ensure that duty is not paid at lower marketable securities rates by parties to a transfer of shares or units in an unlisted company or unit trust which owns land rather than by a transfer of the land which would attract duty at the higher conveyance rates.  These provisions exist in all states although the detail of these provisions varies from state to state.

The new provisions, which will apply to transactions entered into on or after 22 September 2006, are as follows:

• conveyance rates of duty will be payable on the acquisition of an interest of 50% or more in a land rich entity as opposed to the previous test which required an acquisition of more than 50%;
• an entity owning South Australian land with a value of $1 million or more will be a land rich entity if the value of the land held by the entity comprises 60% or more of the value of the entity’s total underlying assets (disregarding any mortgages or other encumbrances).  The previous 80% threshold will be retained only for primary production entities, provided that the entity does not cease to be a primary production entity within 3 years of the relevant acquisition;

• a transaction or a series of transactions by which a person or a group of persons acting together acquires an interest in a land rich entity that owns South Australian land at $1 million or more will be brought within the land rich provisions;
• for the purposes of the provisions, land will be taken to include anything fixed to the land, including anything that is separately owned from the land unless the Commissioner of Taxation is satisfied that the separate ownership is not part of an arrangement to avoid conveyance rates of duty;

• in determining an entity’s underlying assets for the purposes of the 60% test, the Commissioner of Taxation will have a discretion to include contractual rights or interests; and
• a duty offset will be available for duty already paid on the acquisition of units in a private unit trust scheme against any subsequent land rich duty payable.

Johanna Churchill
PARTNER
Direct Line: (08) 8210 1203
e-mail: jchurchill@normans.com.au

Tree Preservation Prosecutions

The recent decision of the NSW Court of Criminal Appeal in Tauszik v Gosford City Council [2006] NSWCCA 193 upholding an appeal against a conviction for breach of a Tree Preservation Order has caused some consternation in Council circles.  However, on closer reading, it is likely to be of limited effect only.

What the Court of Criminal Appeal held in that case was that, because of the way the particular tree preservation clause in the Gosford LEP was worded, a prosecution for breach of a TPO made pursuant to that clause had to be brought within the general 6 month time limit imposed by s 127 (5) of the Environmental Planning and Assessment Act, and not the longer 12 month limit provided for in s 127(6)(a).  Because the relevant prosecution was instituted more than 6 months but less than 12 months after the relevant events, it was out of time.

Tree preservation clauses in LEPs are of 3 basic types.

1. A clause allowing the council to make an order prohibiting the relevant conduct without consent and usually providing that a person breaching such an order is guilty of an offence.  It was a clause of this type which was under consideration in Tauszik.
2. A clause empowering the Council to make such an order, and further providing that a person cannot carry out the relevant conduct without Council consent.  There was a clause to this effect in the Hornsby LEP which was the subject of consideration in two decisions referred to by the Court in Tauszik.  The Court distinguished that type of provision from the one before it in that the clause in the LEP expressly prohibited the relevant conduct (which was held to be “development” for the purposes of the Act) without consent, whereas in the Gosford clause under consideration in Tauszik, that prohibition was contained in the order.
3. A clause providing directly that a person cannot engage in the relevant conduct without Council consent.  This does away with the need for any ancillary order by Council.  Although it was not before the Court in Tauszik, the reasoning in that case would seem clearly to indicate that a breach of such a provision would invoke the longer time limit for a prosecution. 

The first thing to be said about the effect of Tauszik is that a prosecution brought within 6 months (provided it is properly framed and otherwise in order) will be good whatever the wording in the LEP, or the order made pursuant to the LEP.  More notably, however, clause 32 of the standard template introduced by the Standard Instruments (Local Environmental Plans) Order 2006, in effect adopts the second type of clause referred to above, although substituting the making of a DCP for that of an order.  It appears fairly clear from Tauszik that a prosecution brought pursuant to that clause would have a limitation period of 12 months rather than 6.  Although clause 32 is an “optional” clause, we would expect most Councils to include it, as its omission would result in there being no general control over destruction etc of trees in the relevant Council area.  Therefore, as the template LEP is gradually adopted by Councils over the next 4-5 years, the significance of Tauszik will dwindle and eventually disappear.

Retirement Villages Changes

Amendments to the Retirement Villages Act and Regulations, introduced under the Retirement Villages (Miscellaneous) Amendment Act 2005, will come into effect on 1 November 2006. 
Some of the most significant amendments include:

• Requiring residence contracts to comply with new requirements regarding contents and format as prescribed by the Regulations.  For example:
• operators will no longer need to give to residents the Checklist, Form 1 Notice to Prospective Resident of a Retirement Village or the Form 2 Disclosure Statement.  Instead, residence contracts must contain a conspicuous statement advising the residents to seek independent legal advice and setting out their cooling off rights.  Information currently required to be given under the Disclosure Statement will have to be incorporated into the contract;
• the residence contract must include procedures for dispute resolution including the right for a resident to be accompanied by a person of the resident’s choice at any meeting held to resolve the dispute;
• the premises condition report must specify the year in which any item in the residence is to be repaired or replaced;
• a new Code of Conduct must be given to the resident in place of the existing one.
• The “settling-in period” has been redefined as the period ending 90 days after the date of the contract or the date of first occupation, whichever is later (currently the “settling-period” is the earlier of 90 days from the date of first occupation or 180 days after the settlement date).  The new provisions preserve the ability of the parties to agree on a longer settling-in period.
• Refund of the premium is to be calculated from the “date of occupation”, namely the date on which the resident was given access to occupy the residence, and up to the “date of termination”, namely the date on which the resident ceases to reside in the retirement village.
• Refunds of the premium to an out-going resident must be made within 10 business days after the date of settlement on the residence by the in-coming resident (currently within 25 business days after the date of settlement).
• If a prospective resident decides not to enter into occupation of a residence, the premium (including deposit and registration of interest fee) must be refunded within 10 business days of the resident giving notice of that decision to the administering authority (currently such refunds are handled in accordance with the contract).
• Costs incurred by the administering authority in obtaining legal advice or undertaking legal proceedings relating to the retirement village cannot be charged to the residents without the residents’ approval given by special resolution.
• Costs for preparing and providing residence documents required under the Act cannot be charged to residents. 
• If a manager is employed to run the retirement village, each resident must be notified in writing of the manager’s name and contact details.
• A resident who is leaving the retirement village to move into an aged care facility will have up to 60 days after being approved for entry or leaving the village to apply for early refund of the premium (currently residents may only apply before leaving the retirement village or within 2 weeks after leaving the retirement village).  The administering authority will have to make the repayment within 60 days after receiving the application.  There is no provision for extension of that period.
• Administering authorities must consult with the residents regarding any proposed redevelopment to the retirement village.
• There is a new requirement for retirement villages to be registered.  Existing villages must be registered within 6 months after the amendments come into effect.  New villages must be registered within 28 days after the first person is admitted to occupation.

The above amendments will have a significant impact on the operation of retirement villages in South Australia.  Operators are well advised to familiarise themselves of their new obligations and must ensure that their residence contracts are compliant with the new requirements as at 1 November 2006. 

If you require assistance in this area or would like more information, please contact:

Maria Ho
SENIOR ASSOCIATE
Direct Line: (08) 8210 1274
e-mail: mho@normans.com.au  

“To settle or not to settle?”

“For plaintiffs and defendants alike, litigation proves a miserable, disruptive, painful experience… Even those who prevail may find the process very costly”.

– Marc Galanter (1986) “The Day After the Litigation Explosion” 46 MD L Rev (3) 8-11.

In this light, it is unsurprising that well over 95% of disputes are settled by Alternative Dispute Resolution (“ADR”). ADR is a process whereby parties to a dispute seek to settle the dispute outside, or with the assistance, of the Courts. The ADR process may begin at just about any stage (including during or after a trial) and the outcome of ADR can be confidential to any litigation.

An attempt to resolve should always be made, particularly in disputes concerning small sums of money, clear culpability on one or both sides and in complex matters that will exceed their financial benefits in legal costs. To this end, you should consider the following ADR processes which are listed in order of formality and potential cost:

1. Negotiation – whereby parties or their legal representatives discuss the dispute and try to find a pragmatic solution;
2. Mediation – whereby parties and/or their legal representatives meet in the presence of a neutral third person (or persons) who identifies the issues in dispute and assists the parties to negotiate a settlement that will address those issues;
3. Conciliation – whereby a mediator chosen by the parties takes a more interventionist role in the process than in a mediation by contributing their own views and knowledge of the law;
4. Expert Appraisal or Determination – whereby anexpert in the area of the dispute chosen by the parties provides their views of the dispute and advises of probable or desirable outcomes that may be achieved. An Expert Determination goes further, with evidence being provided to the expert who gives a determination that the parties agree to accept;
5. Arbitration – which is similar to litigation, however the process isless formal, quicker and the parties get to choose the arbitrator(s). The arbitrator's decision may be legally binding on both parties.

It is an objective of the Courts that disputes go to ADR before trial. To this end, most Courts (including the Federal Court and the State Courts of South Australia) send disputes to conciliation conferences prior to being listed for trial and have the power to order disputes to mediation or arbitration.

However, ADR will only work when parties are co-operative towards achieving an end result. Just as some disputes are suited to ADR, other disputes aren’t, particularly disputes involving non-co-operative parties where one party has a distinct advantage in the ADR process or where the dispute involves a genuine question of law to be considered by the Courts.

Legal advice should always be sought before choosing an ADR process. For further information about issues covered in this article, please contact either Damian McGrath (on 08 8210 1283 or E-mail dmcgrath@normans.com.au) or Daryl Cox (on 08 8210 1271 or E-mail dcox@normans.com.au )

Daryl Cox
ASSOCIATE
Direct Line: (08) 8210 1271
e-mail:dcox@normans.com.au

Daryl Cox

Employee Records – New Requirements

Since the inception of the amendments to the Workplace Relations Act 1996 (Cth), employers have been coming to terms with the changes and their impact, particularly from an operational viewpoint. This is particularly so of the record keeping obligations outlined in Part 19 of the Workplace Relations Regulations 2006 (“the Regulations”).

Under the Regulations as originally published, there were relatively onerous record keeping obligations.  Employers were obliged to keep records for all employees that detail the following:

1. Actual hours worked by each employee, including daily start and finish times;
2. The Industrial instrument from which the employee derives entitlements;
3. Classification of employee (i.e. full-time, part-time, casual, permanent, temporary);
4. Pay, including gross rate of pay, net amount received, details of any incentives/bonuses, period to which the payment relates, date of payment, details of any deductions;
5. Superannuation;
6. Annual leave, including rate at which leave accrues, amount owing and amount taken by the employee;
7. Personal leave, including rate at which leave accrues, amount owing and amount and type taken by the employee; and
8. Termination details (namely, the reason(s) for the termination of an employee and the name of the person responsible for effecting the termination). 

All such records must be written in legible English, be retained by the employer for seven years and be made readily available for workplace inspectors.

Subsequent to the initial publication of the record keeping requirements, the Federal Government announced amendments to the requirements relating to time-keeping only, so as to minimise the burden on employers. This announcement was primarily in response to pressure from employer groups who have argued that requiring employers to record the daily starting/finishing times and total hours worked each day is too onerous. This is particularly true for managerial employees, who often work flexible and irregular hours.

The amendments provided for the following record keeping obligations with respect to daily starting and finishing times and hours of work:

The remaining record keeping obligations listed above, however, will still apply to all employees, regardless of their level of earnings.

Compliance with the Regulations will be monitored and enforced by the Office of Workplace Services, with hefty penalties of up to $33,000 for employers who fail to comply with the Regulations.

The new record keeping requirements which were introduced with the WorkChoices laws in March 2006 came with a 6 month moratorium period in relation to enforcement, which was due to end on 27 September 2006. The Federal Government has announced an extension to the moratorium until 27 March 2007. After that time, employers will face penalties if found to be in breach of the record keeping requirements.

All employers should make themselves familiar with the new requirements, and ensure that proper record keeping in accordance with the Regulations is implemented as a matter of priority, or risk exposing themselves to severe financial penalties.

Cecilia White
SENIOR ASSOCIATE
Direct Line: (08) 8210 1286
cwhite@normans.com.au 

“Constitutional corporations” and trusts – how far does Work Choices extend?

The recent certification of two enterprise agreements in the South Australian Industrial Relations Commission has further clarified the concept of the “constitutional corporation” for the purposes of the Workplace Relations Act 1996 (Cth) (the Act) in relation to trust arrangements.

Deputy President Hampton reiterated the established position that a trust is generally not recognised to be a corporate entity, but rather a legal relationship where the trustee holds property or rights on behalf of a beneficiary. Eligibility for status as a “constitutional corporation” requires the employer to be incorporated and engaged in foreign, financial or trading activities, whereas “unincorporated bodies or persons do not fall within this category notwithstanding the extent and substance of their financial and/or trading activities.”

Accordingly, whether a trust relationship can be captured by the recent Work Choices amendments to the Act is to be determined on a case-by-case basis following a consideration of the identity and nature of the trust arrangement.

As postulated by DP Hampton, where a trustee is a corporation, it will be necessary to establish whether the trustee is the actual employer and, if so, whether it engages in foreign, financial or trading activities within the meaning of the Constitution.

Similarly, where the trustee is a family, partnership or individual (that is non-corporate), DP Hampton suggests that consideration must be given to the identity and activities of the beneficiaries, should a beneficiary fall within the definition of an employing entity for the purposes of the Act.

Independent Contractors - a new regime on the horizon?

The Federal government has recently introduced the Independent Contractor’s Bill 2006 (IC Bill) and the accompanying Workplace Relations Legislation Amendment (Independent Contractors) Bill 2006. The basis for this legislative intervention is the government’s claim that there are an estimated 1.9 million independent contractors in Australia who need protection from State laws that deem them “employees” and endow with them with “employment” entitlements.  The IC Bill seeks to regulate independent contractors in a new, purely commercial, regime complete with its own unfair contracts jurisdiction.

Despite the Work Choices legislation introducing a prohibition on clauses in workplace agreements that regulate or restrict the use of contract labour, the Federal government intends to further limit the role of the States in this area. The IC Bill removes deeming provisions, such as those found in the Fair Work Act 1994 (SA) and the Industrial Relations Act 1996 (NSW), that currently enable the States to regulate contractual arrangements within the industrial relations regime.  Instead, the IC Bill squarely recognises these arrangements as a commercial activity, worthy of a separate regime.

The IC Bill draws a distinction between independent contractors and employees. Yet it may not go far enough.  It falls short of providing a clear definition to distinguish between these parties, thereby doing little to alleviate the root cause of much litigation in this field. 

The IC Bill only protects those contractors that, according to common law principles, are truly independent contractors.  Therefore, it comes as no surprise that the IC Bill prohibits employers from terminating employment contracts only to re-hire workers as contractors.  On the one hand, the IC Bill restricts businesses from utilising sham contracts to avoid employment obligations, while on the other, it allows freedom for workers to perform work under “services contracts”.

There are two main exceptions to the general exclusion on State deeming provisions. They relate to outworkers in the textile, clothing and footwear (TCF) industry and transport owner-drivers.  The Explanatory Memorandum accompanying the IC Bill justifies the exceptions on the grounds of the “unique” position of these workers.  In particular, the IC Bill allows the TCF outworkers to maintain their status as employees under state legislation, an approach consistent with that taken under Work Choices.

As far as constitutionally possible, the IC Bill serves to create a national commercially based unfair contracts jurisdiction.  This will override State-based unfair contracts jurisdictions that currently operate in New South Wales and Queensland.  The proposed regime allows for “services contracts” that are harsh or unfair to be varied or set aside, either in whole or in part.  The jurisdiction to hear such matters will be vested in the Federal Magistrates Court and the Federal Court.

While the IC Bill is clearly an adjunct to the Work Choices legislation introduced earlier this year, the Bill is yet to navigate the legislative process unscathed.  While Workplace Relations Minister, Kevin Andrews, touts the IC Bill as a major win for Australia’s entrepreneurial spirit, our advice is to stay tuned until the final form of the regime is known.

Amanda Green
SOLICITOR
Direct Line: (08) 8217 1306
agreen@normans.com.au 

The Draft Local Government (Stormwater Management) Amendment Bill 2006

A joint initiative between the Local Government Association and the State Government of South Australia sees some real progress towards addressing South Australia’s stormwater management issues with the introduction of the Draft Local Government (Stormwater Management) Amendment Bill 2006.  The Bill seeks to amend the Local Government Act 1999 and if passed will create a special purpose authority, known as the Stormwater Management Authority, to oversee the preparation and implementation of Stormwater Management Plans.

The Stormwater Management Authority (“the Authority”) will be established as a body corporate and will comprise seven selected members who must have appropriate qualifications and experience in public administration, water resources, stormwater management, and environmental management or infrastructure development. The functions of the Authority will include working with public authorities including local councils. The Authority will, facilitate and co-ordinate stormwater management planning, administer the funding, undertake works in limited circumstances as well as provide advice the Minister.         

The implementation of infrastructure development will be through the approval of Stormwater Management Plans (“ Plans”). The Act contemplates that the Plans will be submitted by local council’s and conform with the guidelines that have recently been prepared by the Authority and approved by the Natural Resources Management Council.        

The guidelines indicate that the Plans will form the direction needed to address stormwater management issues in each catchment. The Plans will identify strategies and management objectives for the relevant catchment area.  The Plans must be prepared jointly with other councils who are within a catchment area. It is anticipated that the Plans will operate coherently and in conjunction with Council’s Development Plan and Regional Natural Resource Management Plan(s) and will identify any necessary amendments to such plans to ensure the management of stormwater is all encompassing.        

The Authority will be able to require Plans to be prepared by publishing a notice in the Government Gazette, and will be responsible for approving the Plan. It is important to note that a plan to be prepared by council is only considered ‘prepared’ when it has been approved. Should a council fail to comply with a notice directing it to prepare a Plan or fail to comply with an approved Plan then the Authority may serve an order on the council, which may impose “any requirement reasonably required for the purpose for which the order was issued”. There is also a broad power permitting the Authority to make an order requiring a council to perform any work necessary to preserve and maintain the proper functioning of stormwater infrastructure.   Before an order can be issued the Authority must give the council a reasonable opportunity to make submissions to the Authority in relation the matter. 

The implementation of Plans may be partly financed by the Stormwater Management Fund (“the Fund”) and allocation of funding is at the discretion of the Authority.  The Fund will comprise funds from several sources.  The State Government has already agreed to contribute $4 million per annum for a period of 30 years.  We also understand that an account for the Fund has already been created with the LGFA and a contribution of $7 million has been received from the Commonwealth Government.  The Authority has the power to apply the Fund for various purposes such as the preparation of Plans, the carrying out of works or the acquisition of land, community education and awareness projects and investigations relating to stormwater management. Please note that there is no provision in the Bill for issues such as liability relating to the ownership of works, nor the general legal principles relating to negligence.  

It is expected that the Bill will be introduced into the Parliament of South Australia in late spring and if passed will probably commence operation soon after.  For more information the Draft Local Government (Stormwater Management) Amendment Bill 2006 package can be downloaded from the Local Government Association website at: http://www.lga.sa.gov.au/site/page.cfm?u=575     

Also in this issue

• State Budget Changes to “Land Rich” Stamp Duty Provisions
  by Johanna Churchill, Commercial Services
  
• Tree Preservation Prosecutions
  by Peter Kelso, Business and Property Services
  
• Retirement Villages Changes
  by Maria Ho, Commercial Services
• Employee Records – New Requirements
  by Cecilia White, Employment and Industrial Relations
  
• “To settle or not to settle?”
  by Daryl Cox , Commercial and Dispute Resolution
  
• “Constitutional corporations” and trusts – how far does Work Choices extend?
  by Amanda Green and Sharon Kelsey , Employment and Industrial Relations
• The Draft Local Government (Stormwater Management) Amendment Bill 2006
  by Felicity Niemann, Environment and Planning
  

What's Happening at Normans...

New Appointments

We are pleased to welcome these new members to the Norman Waterhouse Team:

• Nick Robertson – Associate, Environment and Planning
• Melanie Lynn – Conveyancer, Property, Infrastructure and Development
• Brooke McEvoy – Solicitor, Financial Services
• Maria Ho – Senior Associate, Commercial Services
• Victoria Treloar – Senior Associate, Family Law
• Pierina (Rina) Reina – Senior Associate, Local Government and Environment and Planning Teams
• Damien Timms – Solicitor, Insurance, Trade and Transport Services
• Clifford To – Solicitor, Town Planning and Local Government Services.

Corporate Responsibility

• Congratulations to Ian McKnight
• National Trust Corporate Breakfast
• City to Bay Fun Run – Adelaide

• Local Government Managers Australia – SA Division Sponsorship
• Local Government Monthly Seminars – Upcoming and previous