Lawyers

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GUEST OBSERVER
The Conveyancing Amendment (Sunset Clauses) Act 2015 came into effect on 2 November 2015, as the new division 10 s66ZL of the Conveyancing Act 1919 (NSW).
The amendments require vendors to either obtain the consent of all of the purchasers before they can rescind an off-the-plan contract in reliance on a sunset clause in the contract, or alternatively, obtain the permission of the Supreme Court to rescind.
These new laws apply to all attempts to rescind for sunset dates in all off-the-plan contracts for sale of residential lots in New South Wales after 2 November 2015, no matter when the contract was entered.
The Case
Jobema Developments Pty Limited v Zhu &amp; Ors [2016] NSWSC 3 is the first case in which the Supreme Court had a developer's request to rescind a contract in reliance of a sunset clause for an off-the-plan property since new laws came into effect. The Court rejected the developer’s application to rescind a contract pursuant to a sunset clause.
Background
Mr Wu (defendant) entered into the contract with Xycom, the original vendor, on 6 December 2013, to purchase a home unit off-the-plan. It was in a 14 storey property development project for 72 residential units and 7 commercial lots in Dora Street, Hurstville. The sunset date for the registration of the Strata Plan was 31 December 2015. After that date, either party had 14 days to rescind the contract. The developer’s right to rescind the contract was qualified by the requirement to ‘use all reasonable endeavours to have the Strata Plan registered by the sunset date'.
However, although Xycom obtained the development approval, they carried out little to no construction work after entering into the contracts to the Purchasers. Subsequently, in October 2014, Xycom sold the development site to Jobema Developments (plaintiffs) which settled in January 2015. The sale was subjected to the existing off-the-plan sale contracts, which were novated to Jobema. Jobema assumed the development and other obligations of Xycom under the existing off-the-plan contracts, however was unable to get the strata plan registered within the contemplated time in the contract. 
On 1 December, Jobema served a notice to Mr Wu proposing to rescind the contract under s66ZL(4):
"Jobema is proposing to rescind the contract because:
<ol>
<li>Since the date that the Contract was entered into, construction costs have increased significantly;</li>
<li>(Xycom) did not advance the property to the time that Jobema acquired it in 2015;</li>
<li>The contract does not meet the financial requirements for funding the project in 2015;</li>
<li>Jobema has offered [Mr Wu] the opportunity to continue with the purchase at a new price which reflects 2015 current market conditions;</li>
<li>[Mr Wu] [has] elected not to continue on the basis set out in paragraph (d);</li>
<li>Jobema has the opportunity to sell the property in the Contract at a price which reflects the 2015 market and takes into account the increased construction costs referred to in paragraph (a).</li>
</ol>
The lot which is the subject of a Contract has not yet been created for the following reasons:
<ol>
<li>From the date of the Contract until 5 February 2015 [Xycom] carried out little or no physical work for the Project;</li>
<li>Since 5 February Jobema has entered into contracts to sell other lots in the Project in order to secure finance for the Project;</li>
<li>Jobema has commenced physical works but anticipates that the lot will not be created until sometime in 2017.”</li>
</ol>
Mr Wu did not consent to the rescission and Jobema applied to the Supreme Court under s66ZL of the Conveyancing Act seeking the Court’s permission to rescind the contract pursuant to the sunset date clause contained in the contract. 
The Court's Decision 
Justice Black of the Supreme Court found against the developer in all factors outlined in s66ZL.
In s66ZL(7)(g) – any other matters or factors that the Court may consider to be relevant, the developer raised two matters:
<ol>
<li>That there was an increase in construction costs that affected the construction funding. However, the Court noted that ‘an inability to rescind’ the contract would not affect the availability of construction finance – it would only result in a requirement ‘to contribute additional capital to meet its lender’s requirements’.</li>
<li>That the new Sunset Clause Law was unforeseeable when Jobema purchased the property from Xycom, and thus Jobema’s rights should not be restricted. The Court disagreed, stating that legislative change is generally a foreseeable risk of business activity.</li>
</ol>
Not Just and Equitable
An order under s66ZL(6) of the Act is only made if the Court is satisfied that the order is just and equitable in all the circumstances to do so. Whilst the Court accepted that the evidence indicated that since buying the site in 2014, Jobema had exercised diligence in progressing the construction of the site, the court was unable to disregard Xycom’s lack of diligence in considering an order where Jobema had expressly assumed Xycom’s obligations. 
The Court dismissed the application for an order allowing the developer to rescind for the sunset date under s66ZL(6) because it was not satisfied that it was just and equitable to make the order.
Importance
The reason sunset clauses are included in “off-the-plan” contracts is to protect both parties and prevent contracts with no end date from going for too long. The new laws do not prohibit or discourage sunset clauses, however they do put the onus on the developer to show that the rescission is just and equitable (s66ZL(6)) when the purchaser does not consent to the rescission. 
The Court took into account the prescribed factors laid out in s66ZL of the Act, including that it will look at what was done by the present vender developer and also what was done by the prior vendors. This case serves as guidance as to how the Court is likely to interpret these new provisions of the Act in the future. 
If you have any queries regarding Sunset Clauses or this case please do not hesitate to contact TressCox Lawyers <a href="https://www.tresscox.com.au/" target="_blank">here</a>.
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Property 101: Developer's application to rescind contract rejected in first case on new Sunset Clause Laws 

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Lawyers who prepare Wills regularly as part of their usual practice are familiar with the expression ‘only a simple Will’ and just as regularly understand there is no such creature, as a Will is only as simple as the personal circumstances and assets of the client.
In this newsletter we examine matters which should form part of a client’s instructions to a lawyer when making a will. Failure to consider and discuss these particular matters can have serious implications for your intended beneficiaries.
1. Your personal circumstances
The intentions in your will can be thwarted and the estate’s assets diminished by significant legal costs if a successful family provision claim is brought against your estate. When making a will it is therefore important a potential claim is discussed with your lawyer. This requires establishing the existence of:
<ul>
<li>a current or former spouse,</li>
<li>a current or former de facto spouse,</li>
<li> children; and</li>
<li>other persons who may be eligible under legislation to bring a claim for provision </li>
</ul>
2. Your assets
The provisions of a Will reflecting your wishes only have effect in accordance with those wishes if the assets held at the time of your death and forming part of your estate can be conveyed to the intended beneficiaries. Realty is to most clients an important asset, whose ownership must be considered and advice sought.
Joint assets pass on the death of a joint owner by survivorship and operation of law to the surviving joint owner, regardless of the provisions of the will, and do not form part of your estate. Implications which arise from this include:
2.1. Severing a joint tenancy: Any jointly held real estate must be identified before finalising your will. A Will that purports to leave an interest in a joint asset to a beneficiary will fail, and the named beneficiary will be disappointed. You need to discuss with your lawyer the rights of joint owners and the ability to sever the joint tenancy to create a tenancy in common of a half share which can be conveyed by your will.
2.2. Creating a joint tenancy: This is a correlation of the previous issue, namely, by creating a joint tenancy in relation to assets held as tenants in common with an intended beneficiary may remove the asset from the estate. (Uniquely in NSW (compared to other states) this will not however prevent a notional estate orderbeing made whereby half the property can in certain circumstances become available to satisfy an order for provision in favour of an eligible claimant. It is still useful for the other reasons stated below.)
In either case, the means of conducting a title search against realty are readily available, whereby the determination of whether assets are held solely, or as tenants in common, or joint tenants can easily be ascertained and advice given.
A recent decision of the Tasmanian Full Court drew attention to the above matters which are the subject of necessary and proper instructions when considering a will.
Superannuation is an asset that may or may not be within your control to dispose of by Will.  Advice should be sought as to the potential destination of superannuation benefits, the existence of binding nominations, and taxation advantages of leaving superannuation to dependents who will receive it tax free.
3. Other considerations when making your will
Creating a Joint Tenancy- for ease of estate administration
If your intention is to leave the home in your sole name to your spouse, you may consider creating a joint tenancy in favour of your spouse to minimise the costs of Probate which would be incurred on your death if the asset remained in your sole name and therefore part of your estate.  Whilst there may be duty implications in the creation of a joint tenancy, an exemption from duty applies in the case of the matrimonial home.
Similarly where the testator holds assets as tenants in common with the intended beneficiary named in the will, and whether spouse or not, no duty is attracted by creating a joint tenancy.
The costs of registration of a notice of death are minimal in comparison with the costs of a probate application.
Preparation of a Statement by Testator:
You may consider the preparation of a statement for use in evidence in the event of a claim against your estate, setting out factual matters which may only be within your knowledge, or which may otherwise assist the defence of a claim after your death.  
This could include reference to provision made during your lifetime to the potential claimant, annexing bank or other documents which evidence such provision having been given.  Without the statement, the executors who will be defending the claim may have been unaware of the provision given to the plaintiff during your life, or other facts raised in the statement, which would have been useful evidence in the defence of a claim. 
Statements by a testator setting out the nature of a relationship may also assist the defence of a claim by a person alleging the existence of a de facto relationship.  Whilst such statements have limited weight given the testator cannot be cross-examined, the Court may take the statement into account, when the only other evidence before the Court may be the unchallenged evidence of the claimant seeking to prove a relationship.
Any such statements should be prepared carefully with the assistance of an experienced estate planning lawyer.
For more information, check out TressCox Lawyers <a href="https://www.tresscox.com.au" target="_blank">here</a>.
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