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The federal government has introduced new insolvency legislation (Treasury Laws Amendment (2017 Enterprise Incentives No 2) Bill 2017) that prohibits the enforcement of ipso facto clauses. These clauses are often contained in leases and permit a landlord to terminate a lease if the tenant becomes insolvent. Under the new legislation, ipso facto clauses cannot be enforced against a tenant if the tenant enters into voluntary administration, if administrators or receivers are appointed, or if the tenant enters into a scheme to avoid being wound up in insolvency. These amendments will apply to contracts entered into after 1 July 2018.

In Kennedy v Locker [2018] NSWDC 56 the plaintiff lent $300,000 to the defendant which was to be repaid with interest. The oral agreement was recorded in a document signed by the defendant. Following a failure to repay the full amount, the defendant argued that he lacked capacity to enter into the contract due to his habit of binge drinking. He stated he had no memory of signing the document, and that if he did sign it he must have been drunk at the time.

The Court held that for lack of capacity to arise, the defendant would need to have been so drunk that he lacked capacity both when the oral agreement was made and when the document was signed. Also, the drunken condition must have been known by the other party at the time. There was no evidence that the defendant was drunk at the time or that the plaintiff was aware of any drunkenness, especially since the defendant typed the document and the plaintiff regularly told him only to speak when he was sober. The defendant’s inability to recall signing the document was not evidence that he was drunk. He likely just had no memory of it due to his binge drinking. The Court ordered the defendant to pay the amount owing. Read full case.

In Cooney v Chief Commissioner of State Revenue [2017] NSWCATAD 375, Mr Cooney and Ms Grant owned and lived together in a residence (No. 25) and purchased an adjoining block (No. 27). There was a residential building on No. 27, however they had not lived in it for many years. The owners claimed that the two blocks should be regarded as a single parcel of land as their place of residence and thus exempt from land tax assessment under Schedule 1A of the Land Tax Management Act 1956.

The Court applied the ‘four unities’ test which states that continuous blocks of land comprise a single parcel if they are undivided by physical separation, use, occupation and title. The lots were physically undivided and there was unity of title and occupation of the blocks. Both blocks were used as part of their surrounding environs of their home and for storage. The clause 13 restriction that tax exemptions are not permitted for dwellings capable of separate occupation did not apply since the dwelling on No. 27 was dilapidated and not capable of occupation. The Court ordered that the land tax assessments for 2015 – 2016 be revoked. Read full case.

In Sun v Randwick City Council [2017] NSWLEC 188, Randwick City Council issued Mr Sun an infringement notice for contravening s76A(1)(a) of the Environmental Planning and Assessment Act 1979 by carrying out development of a dwelling without development consent. The Court had to consider whether the premises was a boarding house as alleged by the Council or a dwelling in the form a share house as alleged by Mr Sun.

The Court held that the development was a boarding house. The building was wholly leased to lodgers who had their own rooms with communal facilities. The relationship between Mr Sun and the renters was consistent with that of a boarding house manager and lodger. He organised maintenance of the building, put in place rules, paid utility bills and found new renters. Mr Sun’s control of the functioning of the house and the minimal independence of the renters meant that the house was in fact a boarding house. The Court upheld the decision of the Council. Read full case

In ACN 116 746 859 v Lunapas Pty Ltd & Anor [2017] NSWSC 1583, Lunapas leased to Palermo retail premises from which Palermo operated a seafood restaurant. Lunapas wrongfully terminated the lease and re-entered the premises. After the lockout, Lunapas re-opened the premises as a new seafood restaurant and used the stock, machines and equipment belonging to Palermo.

Palermo sought damages against Lunapas for alleged wrongful conversion of the equipment which remained on the premises. The Court held that conversion was made out both at the moment of lockout and in the period after in respect of all goods. The Court rejected the defenced raised by Lunapas that conversion could not be made out because Palermo lost actual possession at the time of lockout and subsequently either abandoned or disclaimed its right to possession. The Court awarded Palermo $250,000 representing the market value of the equipment and stock converted. Read full case.

The Building Products (Safety) Act 2017 commenced on 18^th December 2017. The Act is part of the NSW Government’s plan for fire safety following the Grenfell Tower fire in London in June 2017. The external cladding on the tower is believed to have accelerated the spread of fire in the building. Under the Act, NSW Fair Trading may ban a specific building product if it is deemed unsafe. Accordingly, building owners will be required to rectify their building where unsafe building product has been installed. Owners Corporations will need to include particulars of outstanding building product rectification under the Strata Schemes Management Act 2015. The contravention of a building product ban is an offence and may result in fines and/or imprisonment. Read more.

In Al Maha Pty Ltd v Coplin [2017] NSWCA 318, a buying agent offered to purchase a property with an 18 month settlement. Both parties learned that the land could be rezoned to high density residential. The transaction was to be carried out by use of put and call options. However the owner complained was that he was deprived of the opportunity to take legal advice. The primary judge agreed and held that the option agreement was unjust under the Contract Review Act 1980 (NSW).

The Court of Appeal overturned this decision and held that a contract can be considered “unjust” if a defendant has engaged in conduct depriving the claimant of a real or informed choice to enter into a contract. A contract that is merely not in the interest of the claimant or where a claimant had no independent legal advice does not render the contract unjust. The Court also highlighted other relevant considerations for potentially unjust contracts including inequality in bargaining power and the public interest test. Read full case.

In Dasreef Developments Pty Ltd v Josiv Velkovski [2017] NSWSC 1698, A purchaser failed to complete a contract for sale of land. The vendors then terminated the contract and retained the deposit of $63,000. The purchaser sought relief against forfeiture of the deposit under s 55(2A) Conveyancing Act 1919 (NSW). The purchaser argued that the deposit should be returned, especially since he was seeking approval for a bank loan at the time of termination.

The Court held that s 55(2A) does not grant the Court an overall supervisory role over parties to a contract which has been terminated and the deposit forfeited. A Court will not deprive a vendor of a deposit forfeited in strict enforcement of their legal rights unless it is unjust and inequitable to permit its retention. The Court held that despite the undesirable position of the purchaser, there was no unjust or inequitable outcome. Had the purchaser actually informed the vendor that he was raising finances when the contract was terminated, it may have been unjust and inequitable to retain the deposit. Read full case

All residential strata buildings in NSW must have window safety devices installed to prevent children falling from windows. The deadline is 13th March 2018. The regulation applies to windows that can be opened and are less than 1.7m above the internal floor, where the internal floor is more than 2m above the outside ground. The devices must enable the maximum opening to be less than 12.5cm A device that allows for a window to be fully opened or limited to less than 12.5cm is compliant. Complying safety devices include devices attached to a window frame or robust bars. The devices must also be installed on applicable windows in common access areas such as stair landings. Read more.

In Hyder v McGrath Sales Pty Ltd [2017] NSWCA 1647, McGrath was the agent for a battle-axe property that was sold. In previous years, an area of the driveway had been treated as a private parking area for this property. However after the Hyders purchased the property there was a dispute as to whether the area was in fact a private parking area. The Hyders claimed that McGrath made misleading and deceptive representations when describing the area as a private parking area.

The judge found that McGrath’s representations both orally and in the marketing material were misleading and deceptive. However, the Hyders failed to show that if these representations not been made, they would not have purchased the property. Also, the Hyders failed to take reasonable care for their own interests by not conducting pre-contractual enquiries. The judge reduced the damages by two thirds to take account of this. Read full case