Smokeball Australia's Blog

High Court decision underlines the need for urgent estate planning for Baby Boomers

The High Court case of Stanford v Stanford (judgment delivered 20 November 2012) underlines the urgent need for families, particularly blended families “baby boomers” to carefully organise their affairs while they are able to do so.

Stanford involved a couple that had been married for 40 years. It was the second marriage for both, and both had adult children of their previous relationships. The marriage had not broken down. However, they were physically separated as the Wife needed to move to a nursing home. The Husband remained in their matrimonial home. The Wife’s children applied as case guardian for a property settlement in the Family Court. Not surprisingly the Husband opposed that application. The Full Court of the Family Court determined that a property settlement in these circumstances could be ordered. However, the High Court unanimously rejected that proposition. While spousal maintenance could be ordered, the ability to seek a property settlement in these circumstances would be a rare occurrence.

The above decision highlights the need for urgent estate planning to ensure that assets follow the line intended. With blended families the likelihood of plans being thwarted is high and restructuring is difficult without the consent of the donor. As indicated in the High Court decision, the Wife could not change her Will. She had lost capacity. A division under the Family Law Act would result in a far more favourable result for the Wife’s estate and the ultimate recipients, her children. Their entitlements under family provision legislation would be far less generous.

There are options available to ensure that the Stanford problem does not arise. For example, a pre-nuptial agreement at the time the couple married could set out their intentions should they separate. Their intentions in that document are also relevant if they are married or one of the parties dies. Clearly such planning must take place well before the Stanford situation arises.

This article was written by Peter Szabo, Principal, M+K Private Clients team. 

What happens when SMSF trustees don’t agree?

Abstract:  A recent NSW Supreme Court case highlights the importance of appropriate trustee combinations as well as strategic mechanisms that assist when trustees don’t agree

 

By David Oon (doon@dbalawyers.com.au), Lawyer, and Daniel Butler (dbutler@dbalawyers.com.au), Director, DBA Lawyers

 

The last thing on the mind of most new SMSF trustees is what might happen years down the track when they are unable to agree with their fellow trustees. Unfortunately, a number of things can sometimes go wrong with an SMSF’s management. This article considers several thorny issues and a number of preventative steps.

 

Unwise combinations in the office of trustee — Notaras v Notaras

 

Often, as two or more people’s affairs intermingle (usually because they are family or business partners), the natural desire may be to start an SMSF to act as a vehicle to hold assets such as real property. Of course, there is nothing inherently wrong with this. No relationship is immune from conflict. However, some combinations of trustees are more unwise than others. This is illustrated well by the recent New South Wales Supreme Court decision of Notaras v Notaras [2012] NSWSC 947 (‘Notaras’).

 

The facts of Notaras are hinted at by the case title, representing an unfortunate dispute between two brothers. The plaintiff (Basil) was the brother of the defendant (Brinos). Both were the only trustees and members of an SMSF. By 2011, relations between the two had soured over a separate property dispute that also reached the Supreme Court of New South Wales, which was decided in favour of Basil. In December 2010, Brinos had made withdrawals of over $220,000 from the SMSF’s bank accounts. This was $57,839 more than Brinos was entitled to as a member. Subsequent to the withdrawals, the SMSF’s accountant (who was also Basil’s wife) sent a letter to Brinos, including tax returns and member statements that needed signing. Brinos returned the documents without signing them. While the judge in the case (Rein J) did not explicitly find that Brinos refused to sign them (partly because Brinos had not been expressly asked to do so in the letter), his Honour found (at [7]) that the ‘net effect…was that no further steps were taken… with a consequence that the trustees of the Fund [had] put themselves in breach of the Act’.

 

Basil sought an order (pursuant to s 70 of the Trustee Act 1925 (NSW)) that Brinos be removed as a trustee and replaced with a company. The company, Bazport, had Basil as the sole director and shareholder. Other states and territories usually confer similar powers on courts (eg, s 48 of the Trustee Act 1958 (Vic)).

 

The order was granted. This was an unusual outcome in that it contemplated the trustees of the Fund becoming both Basil, as well as his company Bazport. Because Rein J still considered Brinos to be a member despite having only a ‘nominal interest’ ([12]), his Honour noted that Basil and Bazport would be seeking permission from the ATO to have the SMSF exempt from the relevant requirements of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’). That is, an exemption would be sought from the requirement that each member is a trustee or a director of the corporate trustee.

 

The eventual result of Basil’s request to the ATO will probably not be made public. What is quite certain, however, is that the exercise of resolving the dispute via the Supreme Court was likely to have been time-consuming and quite costly. The case therefore shows that one should think carefully before starting an SMSF along with a family member, especially where there are shared business interests. Further, there are other relationships that may present a higher degree of risk that a dispute will arise. These include: parent–child SMSFs, SMSFs with in-laws and SMSFs shared between business associates.

Decision making — must it be unanimous?

Related to the issues raised by Notaras is the topic of trustee decision making. There is a general law principle that, where joint trustees are appointed, they must act unanimously. This was affirmed by Kaye J in Beath v Kousal [2010] VSC 24 [18] (12 February 2010). This means that it is near impossible to make decisions if joint trustees do not agree. However, this general position can be modified by the governing rules (usually annexed to the trust deed) providing that decisions can be made in some other manner. For example, deadlocks in trustee decisions could be broken if the governing rules provide that votes are weighted according to the member balance that each trustee has (if any). Not all governing rules will provide for this.

 

Removal of a trustee

 

A pertinent question to ask in the case of SMSFs where trustees cannot agree is: can the trustee be removed, other than by a court? In order to avoid a costly court process and likely time delays, a properly drafted trust deed and governing rules can provide for a procedure by which a trustee can be removed, and a new one appointed. An appropriate process may be that the member or members who have greater than half the total account balance are able to appoint a new trustee and remove an existing one. Again, not all governing rules are the same, and many will not provide for this.

 

Interestingly, Notaras did not contain any discussion of the trust deed or governing rules of Basil and Brinos’ SMSF. It appears that under the governing rules of Basil’s SMSF, he did not have adequate power to remove Brinos, despite Basil clearly being the member with the majority account balance.

 

Additionally, the governing rules also determine whether the power to hire and fire a trustee (ie, the appointor power) comes with fiduciary obligations attached, such as the obligation to exercise the power in good faith (Berger v Lysteron Pty Ltd [2012] VSC 95). Unless the rules provide that the power does not have to be exercised in good faith, the decision to remove and appoint a trustee may be subject to attack on various grounds.

 

Accordingly, to protect the interests of the members with the majority of benefits, governing rules should ensure that the appointor power can be exercised without associated fiduciary duties (these duties would be similar to those of a trustee). Few governing rules will provide for this.

 

Forcibly removing a member

 

A trustee who cannot agree with fellow trustees is also likely to be a member of the SMSF. This individual may not reply to correspondence and may generally refuse to participate in management of the SMSF. The question then arises: is it possible to forcibly remove the person as a member?

The governing rules can provide for a mechanism to remove a member. However, the larger hurdle is the requirements under the regulations, where, broadly, prior consent of the member to be removed is required. Of course, this may be impossible to obtain where there is a falling out.

Going forward, a strategy for SMSFs to consider to overcome this potential impasse is for the member with the larger account balance to obtain a signed consent up-front from the other member (in their capacity as both trustee and member) that, upon the occurrence of certain events (eg, disagreement about a material SMSF decision, relationship breakdown or legal dispute), the trustee can remove the other member from the fund and transfer their benefit to another complying superannuation fund.

Another option for a person ‘stuck’ in an SMSF with a trustee/member who will not cooperate is to remove themselves from that fund (and roll over funds into a new SMSF). However, legally and (sometimes) practically, this itself may require the consent of the other trustees (for example, authority to deal with the bank).

Conclusion

 

The problem of an uncooperative trustee can prove extremely difficult due to the law of trusts, as well as laws protecting the interest of members of superannuation funds. This can be made more difficult by documents that do not confer strategic powers.

 

In closing, a wise initial step is to consider carefully who to share an SMSF with.

 

Further, strategically drafted trust deeds and governing rules, as well as good initial planning, can assist to cure problems, or better yet, prevent them.

 

Lastly, for those already part of an SMSF, it worth considering whether the current structure is prone to problems, and whether a restructure would be worthwhile.

 

*        *        *

 

This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

 

Note: DBA Lawyers hold SMSF CPD training at venues all around Australia and online. For more details or to register, visit www.dbanetwork.com.au or call Marie on 03 9092 9400.

Amendments to the Fair Work Act 2009

Amendments to the Fair Work Act 2009 Fair Work Australia renamed Fair Work Commission; and changes to time limits for bringing unfair dismissal and general protections applications. Amendments to the Fair Work Act 2009 commenced on 1 January 2013. A few of the more important changes are noted below. Fair Work Australia has been renamed the Fair Work Commission. There are various other organisational changes, including the introduction of two new vice president positions. The time limit for lodging unfair dismissal applications has increased from 14 to 21 days. The amendments also introduce additional circumstances in which the Commission may make a costs order against a party or lawyer in unfair dismissal matters. The time limit for lodging a general protections (or adverse action) application arising out of a dismissal has been reduced from 60 days to 21 days. The changed time limits noted above apply to all employees dismissed on or after 1 January 2013. The Employment Law Guide provides detailed commentary on how to bring and conduct unfair dismissal and adverse action matters before the Fair Work Commission, with links to the relevant forms. That commentary will shortly be updated to reflect the recent amendments. The Employment Law Guide, written by barristers Paul Moorhouse and Gerard Boyce, includes detailed commentary on how to bring and conduct unfair dismissal and adverse action matters before the Fair Work Commission, with links to the relevant forms. Unsubscribe

OFF the PLAN SALES

Many properties are sold ‘off the plan’.  This is the phrase used to describe a property that is a lot on a PROPOSED plan of subdivision, meaning that the plan of subdivision creating the lot has been drawn but it is not yet registered at the Land Titles Office.

 

Historically, it was not permissible to sell ‘off the plan’.  Until amendments to the Sale of Land Act 1962 it was basically illegal to enter into a contract for the sale of a piece of land unless that land had its own title.  Unfortunately the subdivision process can be very time consuming as the infrastructure required for the plan to get to a stage where responsible authorities are satisfied that the plan can be registered and separate titles issued is often substantial.  In the case of land subdivision, this involves the provision of roads and services and in the case of building subdivision, it involves construction of the building.  However the market consisted of vendors who were keen to secure purchasers for these separate lots and purchasers who were keen to secure their ‘little piece of heaven’ and so the restriction on sale that was a dampener on economic activity was eased.

 

However, in recognition that such contracts generally involve a developer and a consumer and therefore are conducted in an uneven bargaining environment, some restrictions still apply to such sales.  These restrictions also recognise that there is likely to be a substantial delay between contract and settlement.  Indeed, this very month, an obligation to include a conspicuous Notice to that effect in every off the plan contract has come into force.  Other statutory provisions relating to such sale include limitation on the amount of the deposit and an obligation that it be held on trust, an obligation to include information about land surface works, a default period for registration (sunset clause) after which time the purchaser may avoid the contract and protection against changes to the proposed plan.  These obligations require the inclusion of various provisions in the contract and these are included in the General Conditions.

 

Despite the fact that off the plan sales form a substantial part of the market, there have been relatively few decisions that have considered the meaning of these statutory protections.  In the apartment market, there were some proceedings involving dissatisfied purchasers in the early days of the Docklands project, but those complaints tended to relate to price rather than off the plan issues.  In the land subdivision market, the lack of cases probably reflects the fact that it is just too expensive for John Citizen to consider taking a land developer to Court in relation to such matters.

 

In recent years off the plan sales have become popular in an area that is something of a combination of the other two areas.  Urban renewal and infill housing has created a market for small land subdivisions that involve the subdivider either constructing a home on the subdivided land or arranging for that construction.  This scenario produced the recent case of Joseph Street P/L v Tan discussed in the September 2012 column and has now produced Besser v Alma Homes P/L [2012] VSC 460.

 

This case involved a 4 lot plan of subdivision of a large block on a main road in Caulfield and the purchaser entered into an off the plan contract for a ‘front’ unit for $1,250,000.  The contract included a copy of the proposed plan of subdivision which included a plan showing a common driveway between the two front blocks giving road access for the two rear units and revealed that an owners corporation would be created with each unit having a 25% entitlement and liability.  After registration of the plan the purchaser became aware that the lot entitlement and liability had changed so that each front unit had an entitlement and liability of 1 out of 202 – less than 0.5%.  This unilateral decision by the developer had apparently been made on the basis that the front units would not use the common property and, on a liability basis, could be seen to advantage the front units.

 

However this proposal had not been communicated to the purchaser, who took the view that the change amounted to “an amendment to the plan of subdivision which will materially affect the lot” thereby entitling the purchaser to avoid the contract pursuant to s.9AC of the Sale of Land Act 1962.  The vendor argued that the change to the lot entitlement and liability schedule was not a change to the plan, but that argument was rejected.  Similarly, the vendor’s argument that the amendment did not “materially affect” the lot was, not surprisingly, rejected.  Pagone J. alluded to the loss of voting rights consequent upon the amendment, but the affect on insurance entitlement in the case of a combined building policy would also be a powerful reason to find material affectation.

 

Interestingly, the fact that the notification of the amendment and the purchaser’s avoidance was made after registration of the plan was not an issue.  Section 9AC(1) does include the words ‘before the registration of the plan’ but presumably the vendor accepted that as notification came after registration of the plan, an attempt to limit the purchaser’s avoidance right to prior to registration would be doomed to fail.  The interaction between s9AC and s.10, which also creates an avoidance right but is limited to exercise prior to registration, is uncertain and legislative clarification of the purchaser’s rights in this regard is needed.

 

Russell Cocks

LANDLORDS BEWARE

Distress is an ancient common law right entitling a landlord, initially, to seize and retain a tenant’s goods if the tenant failed to pay rent.  Eventually the right was extended to permit the landlord to sell those goods if the tenant continued to fail to pay the rent.  It would be hard to imagine, perhaps short of flogging, a right more at odds with modern consumer protection principles and, not surprisingly, this right fell by the wayside many years ago, 1948 to be exact.  However, as observed by DP. Macnamara in VCAT in Kiwi Munchies P/L v Nikolitis [2006] VCAT 929 “It is staggering the number of agents and solicitors who seem to be ignorant of this fact.”

 

That case, amongst other issues, considered the consequences of the landlord effectively exercising distress by demanding that a defaulting tenant pay arrears of rent before allowing the tenant to recover the tenant’s goods from the premises.  Absent a right to distress, now long since gone, the landlord’s actions in seizing the tenant’s goods amount to trespass and conversion.  The result was disastrous for the landlord, with an order for compensation for equipment and stock, at that stage stored in a shed in the landlord’s backyard, of $14,000 in respect of premises that were let for less than $12,000 per year.

 

The recording of the contractual agreement between the landlord and tenant in that case was less than clear. The arrangement had commenced with a ‘skeleton’ lease of 12 months, was then recorded by a ‘standard’ lease which included an option, and by the time the dispute arose it appears that the tenant was over-holding in accordance with the terms of the ‘standard’ lease.  The landlord’s agent served a (badly worded) ‘Notice to Remedy’ and subsequently re-entered the premises and changed the locks.  Whilst it was common ground that the lease had eventually come to an end, the exact timing of the determination of the lease was not identified and the actions of the landlord, which amounted to distress and were thus illegal, were regarded as having taken place before the lease had come to an end.

 

This was a distinguishing feature with the recent case of Sharon-Lee Holdings P/L v Asian Pacific Building Corporation P/L [2012] VCAT 546.  This is a real David v. Goliath dispute but again centred on the tenant’s failure to pay rent and the seizure by the landlord of the tenant’s equipment and goods.  The tenant issued proceedings based on detinue and conversion and if the landlord’s actions amounted to distress then they were unjustified and the tenant would succeed.

The landlord however foreswore the remedy of distress and based its claim on particular clauses in the lease that it claimed created a contractual right for the landlord to remove any of the goods of the tenant from the premises after breach and store them at the cost of the tenant.  The landlord did not claim the right to sell the goods, merely that the lease gave the landlord a possessory lien over the goods and thereby a defence to the claim of conversion.

 

The landlord argued that the possessory lien created by the lease could only come into existence after the lease had been terminated and the landlord had taken possession of the goods.  The lease created the contractual right, but it only crystallised after termination of the lease when the landlord actually took possession of the goods.  Hence that could not amount to distress, as distress can only be levied during the subsistence of the lease, as had been the case in Kiwi Munchies.  This argument was accepted.

 

The landlord relied upon two clauses in the lease to justify its actions.  Whilst one of the relevant clauses referred to the right to remove the tenant’s property as arising after ‘re-entry’ (which amounted to termination of the lease), another clause suggested that the lien arose upon mere ‘breach’ by the tenant.  The Tribunal concluded that as this clause was capable of giving the landlord the right to seize the tenant’s goods for mere breach that did not amount to termination of the lease, the clause therefore purported to authorise conduct that ‘amounts to distress for rent and is illegal’.  It followed that such a clause is contrary to public policy and therefore void.  It was irrelevant that the possessory lien had in fact been exercised after termination and therefore did not amount to distress, it was sufficient that the clause purported to authorise such conduct during the term of the lease, which conduct would have amounted to distress.

 

The Tribunal therefore concluded that whilst the landlord’s conduct had not constituted distress, as it had occurred after the lease had been terminated, nevertheless there was “no contractual or other right to seize or retain the Goods following termination of the Lease, pending payment of outstanding monies owed under the Lease.”  The hearing was adjourned to consider the appropriate order, which would have included an order for compensation to the tenant for trespass and conversion.

 

This case does not mean that a lease cannot include clauses giving landlords contractual rights in respect of tenant’s goods AFTER termination of the lease.  It simply means that such clauses must be VERY carefully drawn.

 

Russell Cocks

TWO TOPICS

This column is concerned with two cases on entirely different topics, but connected by a similarity in the name of the principal parties and the fact that they are recent decisions in the Real Property List of VCAT, a jurisdiction that is growing in importance for property lawyers.  Pavlovic v GEADSI Nominees P/L [2012] VCAT 997 (Pavlovic) concerns an easement and Pavlovich v Pavlovich [2012] VCAT 869 (Pavlovich) concerns co-ownership.

 

Pavlovic took place in a fairly conventional inner suburban setting.  The two protagonists were neighbours, with Pavlovic having purchased his property in recent years with the intention of renovating and living in the property and GEADSI having constructed three units on the adjoining property some 15 years previously.  At that time GEASDI had obtained from the then owner of the Pavlovic property consent to construct a stormwater drain across the Pavlovic property and a stormwater pipe had been constructed such as to take the stormwater from the GEADSI land through the Pavlovic land and to a laneway at the rear.  This pipe was below the surface of the ground and Pavlovic was not aware of the pipe when he purchased the property as it was not recorded as an easement on the title, not evident to a physical inspection and he was not otherwise been informed of its existence.

 

Pavlovic intended to construct improvements in the backyard and discovered that the soil was so saturated that it would be necessary to remove the soil at a cost of $15,550 before commencing construction. Additionally, it would be necessary relocate the pipe to prevent the ongoing saturation of the soil below the improvements.  Pavlovic wanted the pipe removed.  He commenced these proceedings for an order pursuant to s.16 Water Act 1989.

 

GEADSI argued that the pipe constituted an implied easement and that Pavlovic, as subsequent purchaser, was bound by that easement.  The Tribunal rejected that argument, effectively finding that the consent given by the previous owner did not create a proprietary right and was not enforceable against subsequent owners.  An argument based on a prescriptive easement was rejected on the basis that the right to use the pipe arose by consent.  The recent case of Kitching v Phillips [2011] WASCA 19 was referred to.  Effectively, the Tribunal was of the view that the original temporary solution to the drainage problem should not be allowed to impact on the proprietary rights of the new owner – a glowing endorsement of fundamental Torrens principles.

GEADSI was ordered to pay the costs of removing the saturated soil and to remove the pipe.

 

Pavlovich on the other hand concerned an application by a co-owner pursuant to the ‘partition provisions’ of the Property Law Act 1958, specifically s.228.  The parties to the proceedings were registered joint tenants and, unusually, the application was not for a ‘partition’ as that word is generally understood but rather a transfer from one co-owning joint tenant to the other joint tenant.  Whether VCAT had power to do so occupied the first portion of the judgement, with a conclusion that the power conferred by s.228 did indeed authorise such a transfer.

 

The parties were mother and son.  There was evidence that as part of a downsizing exercise the mother had purchased a property but was unable to gain temporary finance, so the son was added as a joint tenant.  Shortly after, the loan was repaid from the proceeds of sale of the mother’s original property and so the subject property was owned as joint tenants, although the son had effectively made no financial contribution.

 

Ten years later the mother applied for an order that the son transfer his interest in the property to the mother.  The mother argued that it had always been intended that the son would do so when the loan was repaid.  The son argued that it had been agreed at the time that the son would remain as joint tenant and then ‘inherit’ the property upon his mother’s death as gifts were made to other siblings that would be ‘offset’ by the son taking the property.  Essentially the issue was a factual one and the Tribunal accepted the mother’s version.

 

The Tribunal concluded that whilst the son was a legal joint tenant, beneficial ownership resided entirely with the mother, therefore the son was ordered to transfer his interest in the property to the mother so that she would become sole legal and beneficial owner.  Concern was raised, but dismissed, that because the Tribunal was therefore finding that the son had no beneficial interest, he could not be a co-owner within the meaning if the Act and VCAT therefore had no jurisdiction.

 

This is similar to an argument raised in Garnett v Jessop [2012] VCAT 156.  Jessop was the sole registered proprietor and Garnett sought partition on the basis that he had made contributions and therefore held an equitable interest on the basis of a constructive trust.  VCAT dismissed a submission that only legal (registered) owners qualify as ‘co-owners’ within the meaning of the Act and held that a party claiming an equitable interest is a ‘co-owner’ and therefore entitled to seek partition.

 

Russell Cocks

BEST ENDEAVOURS (part 2)

The April 2011 column considered the case of Joseph Street Pty Ltd v Tan, a decision at first instance reported at [2011] VSC 586.  The case has now been reversed on appeal, reported at [2012] VSCA 113.

 

The effect of the Court of Appeal decision would appear to make the entering into of a s.173 Agreement COMPULSORY for developers in all circumstances where the municipal council is prepared to enter into such an Agreement.

 

The case involved a ‘villa unit’ style development of 6 single storey units in Box Hill.  Units were sold off the plan with settlement to be after registration of the plan in accordance with common practice.  The builder that the developer had contracted to undertake construction failed to do so and the developer was forced to find another builder.  As a result, construction was not completed within the time allowed by the contract for registration of the plan (the sunset period) and the developer rescinded the contract.

 

The purchaser refused to accept rescission and sued for specific performance of the contract on the basis that the vendor had failed to use ‘best endeavours’ to have the plan registered.  It had been established at first instance that this obligation consisted of BOTH an express contractual obligation and also as an implied obligation.

 

The Full Court identified that registration of the plan could only be achieved when the council had issued a Certificate of Compliance, but that there were two methods by which the developer could obtain that Certificate and thus fulfil the contractual obligation to secure registration of the plan:

 

1.       the developer could complete all the building works to the satisfaction of all relevant service authorities; or

 

2.       the developer could enter into a s.173 Agreement with Council after entering into agreements with service providers.

 

Evidence given on behalf of the developer suggested that the s.173 Agreement option was limited to ‘greenfield’ developments and had not been contemplated by the developer as an option.  However evidence from the council suggested that s.173 Agreements were common in ‘smaller’ developments and indeed the planning permit issued in respect of the development had referred to the possibility of just such an Agreement.

 

The effect of the s.173 Agreement is to give the council the ability to register on the ‘parent’ title (the title to the unsubdivided land) the requirement that the development be constructed in accordance with the planning permit issued in respect of the development.  If council has the benefit of such an Agreement then, subject to the satisfaction of other relevant authorities, council is able to be satisfied that the development will be built in accordance with the permit and council’s planning responsibility in relation to supervision of construction is thereby satisfied.  If construction is not in accordance with the permit, council is entitled to enforce the s.173 Agreement against the developer and all subsequent registered owners.

 

The s.173 Agreement process appears to be a shortcut to registration of the plan, as a certificate of compliance may be issued by council well in advance of completion of all construction and infrastructure works.  The requirement that the developer enter into satisfactory agreements with infrastructure providers is a pre-condition to a s.173 Agreement and such arrangements may be tedious to negotiate, but once achieved registration of the plan can quickly follow.

 

This might cause concern for a purchaser if the only requirement on the vendor is registration of the plan.  As can be seen from the above, this could be achieved well before construction is complete, but no purchaser is going to want to pay for a half finished property.  Thus a purchaser needs to be satisfied that settlement will only be due after BOTH registration of the plan AND issue of a certificate of occupancy.  Whilst there is much to be said against a certificate of occupancy being a true reflection that all works have been completed, it is at least an objective confirmation that most works have been completed.  A better test is a satisfactory report from the purchaser’s building consultant, but few developers are prepared to countenance such a hurdle.

 

Whilst the Court of Appeal in Joseph Street may have identified a shortcut that was open to the developer, it is interesting to note that the developer was not aware of that possibility and there is no suggestion that the purchaser ever suggested to the developer that such a process was available, let alone that the developer refused to follow that course.  Apparently, the mere fact that the option was available and not taken was enough to satisfy the Court that the developer had failed to use his best endeavours.  A true case of IGNORANCE IS NO EXCUSE.

 

Russell Cocks