The Queensland 2011-12 Mid Year Fiscal and Economic Review delivered on 13 January included an announcement of the “deferral of the abolition of duty on the transfer of core business assets until the Budget can accommodate the abolition”.

Under The Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (the GST Agreement) business asset duty was previously scheduled to be abolished in Queensland on 1 July 2013. The duty affects non-land assets. Other states have already abolished it.

For financial institutions the duty affects Queensland assets transferred under a merger, including loan securities.

Public Ruling DA000.8.1 provides ex gratia relief for the loan portfolio and any statutory liquidity requirement for ADI’s (including mutuals) in a business transfer transaction made under and in accordance with the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cwlth).

Langes can advise you on the state duty implications of financial institution mergers throughout Australia.

New APRA Standards (associated forms) for capital adequacy, market risk, securitisation and prudential disclosure commenced on 1 January 2012.

Download new APS 111, 116, 120, 310 and 330 here.

APRA’s Response to Submissions lists the changes to the previous standards.

Banking (prudential standard) determination No. 5 of 2011 - Prudential Standard APS 111 – Capital Adequacy: Measurement of Capital

Banking (prudential standard) determination No. 6 of 2011 – Prudential Standard APS 116 – Capital Adequacy: Market Risk

Banking (prudential standard) determination No. 7 of 2011 - Prudential Standard APS 120 – Securitisation

Banking (prudential standard) determination No. 8 of 2011 - Prudential Standard APS 310 – Audit and Related Matters

Banking (prudential standard) determination No. 9 of 2011 – Prudential Standard APS 330 – Capital Adequacy: Public Disclosure of Prudential Information

In Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260, the NSW Court of Appeal rejected an appeal from a Supreme Court decision to refuse a mortgagee’s application for possession of land owned by the third party mortgagors.

The mortgagors were the parents of the sole director of a property development company. They succeeded in their application under the NSW Contracts Review Act to declare the mortgage unjust and unenforceable.

The guarantors were Serbian and whilst they could read English to a simple degree and knew what a mortgage was, their capacity was insufficient to enable them to understand the lender’s commercial deed of loan and mortgage. Whilst a Serbian speaking lawyer gave them independent advice there was no evidence that they had any knowledge about the precarious financial position of their son or the company. They thought their liability would cease at the end of three months. The parents obtained no benefit from the transaction.

The trial judge found that the son pressured his parents to obtain the legal advice and to sign the documents.

In rejecting the appeal Judge Allsop concluded:

There is no reason why considerations such as those here cannot lead to the conclusion that a contract of guarantee is unjust if entered into by a lender who is uncaring of a guarantor’s capacity to repay where there is a real and significant possibility of default by the borrower and the guarantor takes no benefit under the borrowing. This is particularly so in all the other circumstances of this case – most particularly the recognition by the appellant of the only two likely sources of repayment, one (successful refinancing) having a real risk to it. The appellant lent at a significant interest rate, reflecting the underlying commercial risk, appreciating the position the parents had been placed in, without any basis to consider that the parents appreciated the commercial risk or that they could afford to take that risk.

Have a look what happens when designers try redesigning their home loan statement.

Too hard, you say?

Interestingly some of the things they are proposing will be required as part of the new Home Loan Key Fact Sheet to be required from 1 January 2012.

In ING Bank (Australia) Ltd v Leagrove Pty Ltd & Anor; ING Bank (Australia) Ltd v Stafford & Ors [2011] QCA 131 the Queensland Court of Appeal rejected a claim by a guarantor that the guarantee was ineffective as the guarantor both borrowed the $8.25 million from ING Bank and guaranteed that loan.

ING Bank contended that Leagrove as trustee could guarantee the debts of Leagrove in its own right to ING Bank. ING argued that Leagrove as trustee as guarantor was acting in a different capacity to Leagrove in its own right as debtor. There was no reason to consider that Leagrove as trustee in acting as guarantor and mortgagor was acting outside the terms of the trust.

Judge McMurdo decided that whilst Leagrove, acting in its own right, and Leagrove as trustee were not different entities, Leagrove entered into the loan in one capacity and guaranteed the loan and gave a mortgage over trust land in another capacity. Leagrove as trustee held legal title to the assets of the trust and owed a fiduciary duty to the beneficiaries of the trust. The fact that Leagrove as debtor and Leagrove as trustee were acting in such different capacities as debtor and trustee meant that Leagrove as trustee was not prohibited from guaranteeing Leagrove’s debt, at least whilst acting within the terms of the trust and consistent with its fiduciary duty.

Judge McMurdo concluded that:

The terms of the trust deed authorised Leagrove as trustee to enter into a guarantee. The agreement to extend Leagrove’s loan facility appeared to be for the benefit of the trust. There was no evidence to the contrary. Nor was there evidence that, in entering into the guarantee and in mortgaging trust land, Leagrove was breaching the terms of its trust or compromising its fiduciary duty as trustee. In the absence of such evidence, the only rational inference in the circumstances of this case was that Leagrove as trustee was acting for the benefit of and within the terms of the trust in entering into the guarantee and mortgage. I am satisfied it was entitled as trustee to guarantee Leagrove’s debt to ING Bank and to mortgage trust property.

Some clients have recently asked us about the debt collection and mortgage enforcement services provided, direct to clients, by Langes+.

Langes+ provides debt collection and mortgage enforcement legal services nationally. Our clients include financial institutions which operate in all States and Territories as well as one of Australia’s leading insurers. Our services include:

• Provision of default notice templates and other notice templates.
• Issuing default notices on behalf of clients
• Debt collection
• Goods mortgage enforcement
• Real estate mortgage enforcement

A number of our lawyers and other staff members have been engaged in this type of work for decades, and are experts in relation to all of the applicable laws.

We provide our clients with access to an online system, known as CliNet, which allows them to easily provide instructions and track the progress of their matters. We can readily customise this system, in-house, to meet the needs of particular clients.

To discuss the debt collection and mortgage services Langes+ can provide, or to arrange a no-obligation meeting and demonstration, please call Shannon Adams on 08 8168 9601 or Joshua Annese on 08 8168 9604.