Pets In Rental Properties - A Trickle Or Flood Of Requests?

October 3, 2022 Edward Dever

1 October 2022 marked the commencement of a number of residential tenancy changes in Queensland, including those relating to tenant requests to keep pets.

It is not clear whether the change will lead to a trickle or flood of pet requests and how resistant landlords will be to these changes.

In Victoria, there did not seem to be a dramatic rise in VCAT cases when similar pet laws were introduced.

Time will tell how landlords in Queensland deal with these requests.

RTA - Changes that commenced from 1 October 2022

October 2022

The content of this publication is intended to provide a general overview on matters which may be of interest. It is not intended to be comprehensive. It does not constitute advice in relation to particular circumstances nor does it constitute the provision of legal services, legal advice or financial product advice.

Queensland's Land Tax Changes Shelved - For Now

September 30, 2022 Edward Dever

In a backflip worthy of a competitor at the 2032 Olympic Games in Brisbane, Qld Premier Annastacia Palaszczuk has now ditched the 2023 land tax changes which sought to assess land tax based on land holdings throughout Australia.

Shelved at least for now but perhaps not forgotten.

Earlier this week, the Qld Treasurer Cameron Dick was adamant the changes would proceed.

"It is understood Ms Palaszczuk made the decision on Thursday night to shelve the scheme after speaking to her interstate counterparts."

NSW, NT and Tasmania were not particularly keen to co-operate.

The Qld Treasurer claimed the tax was to close a loophole used by people in Sydney to flip properties in Qld. However, this side stepped the fact that it applied equally to people in Qld who owned an interstate property. The Government's own example of "Lena" on its website related to a person who owned a property in Qld who then buys a property in Victoria.

The Qld Treasurer also claimed that investors use the tax-free thresholds in each State to avoid paying land tax. While this may be the case, he offered no details on how widespread this practice is.

He also stated that rents in Qld would not be affected by the land tax changes. It seems reasonable that any landlord impacted by the land tax changes would have tried to pass at least some of that cost onto their tenants. The timing of the land tax changes, in the midst of a rental crisis, was unfortunate.

The now scrapped changes would have resulted in a person already paying land tax in another State being assessed on that property again by the Qld government. No credit was to be given for the land tax already paid in that other State.

It would be interesting to see the Qld government's evidence that investors use the tax-free thresholds in each State to avoid paying land tax. I would be surprised if land tax avoidance is the primary broad-based reason for interstate investment property decisions. But, if that is the case, perhaps something can be (better) tailored to deal with it.

Qld shelves controversial land tax plan

September 2022

Thailand - The Wheels of Justice Turn Slowly

September 27, 2022 Edward Dever

Rakesh Saxena, 70, was recently sentenced to 335 years in jail (yes, 335 years) over three lawsuits stemming from the Bangkok Bank of Commerce embezzlement scandal in the 1990s. He will serve only 20 years behind bars, the maximum term under the Thai Penal Code.

Bangkok Bank of Commerce was one of the first banks to fall ahead of the Asian Economic Crisis. Between 1993 and 1994, BBC spent over Baht 36 billion on business takeovers and leveraged buyouts. BBC also granted loans with insufficient or overpriced collateral to companies controlled by Saxena, BBC executives and associates, including politicians.

When the music stopped, it was clear that BBC was hopelessly insolvent and the Bank of Thailand took control. It was then liquidated in 1998.

Krirkkiat Jalichandra, the disgraced BBC president, was sentenced to 20 years in jail and fined Baht 3.1 billion. He died in October 2012 while serving his prison sentence.

Saxena fought extradition from Canada between 1997 and 2009. He then fought a legal battle in Thailand that ended this month with a final Supreme Court ruling.

The shenanigans at BBC mostly predated my time in Thailand. However, in my early days, I did come across it on the periphery of several transactions. One treated BBC with caution as rumours circulated that all was not well within the bank.

Rakesh Saxena and the Thai banking scandal that triggered Asia’s financial crisis

September 2022

Cambodia - Crypto and new-age 'pig butchering'

July 18, 2022 Edward Dever

‘A fool and his money are lucky enough to get together in the first place.’
Gordon Gekko, Wall Street

In something reminiscent of a Hollywood movie, Cambodia appears to be fast becoming the new centre for online scams.

It does not seem that long ago when the main scam in Cambodia seemed to be trademark infringement. The fake ‘Sheraton Hotel’ in Phnom Penh (subsequently changed to ‘Sharaton’). Or the ‘McSam Burger Restaurant’, complete with its own Golden Arches. Or the ability of certain businessmen to magically remove trademark applications from the Ministry of Commerce’s Trademark Register and substitute their own applications.

Fast forward to 2022 and the latest game seems to be online scams. Once centered in Nigeria, this new style ‘419’ scam involves large scale operations in Sihanoukville and other centres using the full gambit of online communication channels to scam people, including WhatsApp, Facebook and Instagram.

Sihanoukville, transformed from a sleepy town into a Macau-style gambling haven, before a Cambodian-government crackdown outlawed online gambling and decimated the related property sector, has apparently become a centre for these scams utilising former casinos as bases for their operations.

In the past, boiler room operations were sometimes staffed by backpackers. At one point in Bangkok, they were operating out of the prestigious PwC building on South Sathorn Road. The workers were easy to spot among the suited-up accountants and lawyers that inhabited the surrounding buildings. Their uniform of cheap Khao San Road purchased shirts, pants and ties stood out among the tailored suits wandering the foyers at lunchtime.

Based on the Vice article, it seems the current crop of operations are staffed by a mix of people who are either conned into the work or voluntarily offering their skills. The impact of Covid-19 on employment in South East Asia has resulted in the unemployed across the region being lured by promises of well-paid employment in Cambodia. The operations no doubt operate under an umbrella of local officials and law enforcement protection.

One scammer’s playbook apparently includes the quote - ‘There is no un-scammable person. Only scripts that don’t fit.’

That may well be the case. I remember working with a senior foreign lawyer who had flown into Bangkok for several days. The lawyer was out of my sight for only a few hours at the end of days of meetings and was scammed by the well-known ‘Grand Palace is closed today jewellry scam’ in Bangkok.

As highlighted in the Vice article, awareness is perhaps the best form of defense against the scammers. Shutting down operations in Cambodia and neighboring countries is likely to merely force them elsewhere.

From Industrial-Scale Scam Centers, Trafficking Victims Are Being Forced to Steal Billions

July 2022

Australian PM's WeChat account hijack highlights risk in Asia dealings

January 27, 2022 Edward Dever

News reports indicate that Prime Minister Scott Morrison's WeChat account - more likely his China Mainland Weixin account - has been hijacked.

As is often the case in Asia, everything is not always what it seems.

The PMs account appears to be a Weixin account, registered using a China Mainland mobile number. The registrant, a Mr Ji, seems to have been operating the account for the PM, a fairly common practice to circumvent Weixin user rules.

Mr Ji is alleged to have transferred the account (with its 75,000 followers) to Fuzhou 985 Information Technology in breach of Weixin rules. Tencent Weixin doesn't seem to care.

So, it seems it was never PM Morrison's account and he relied on Mr Li operating the account in good faith in accordance with his wishes.

Restrictions on foreigners doing business in Asia often requires the use of corporate structures or nominees to deliver control of an asset - whether a company or a social media account. The use of a bare nominee sits at the riskier end of the asset control spectrum, as PM Morrison seems to have found out.

With a bare nominee arrangement, the foreigner is reliant on the nominee acting in accordance with their wishes (usually for a fee), knowing that legally, in many Asian countries, there is no recourse if the nominee suddenly decides to act as if the asset (in this case, a social media account) is their own property to use or sell.

This issue often arises with shareholdings or land purchases. When things go wrong, the foreigner is unable to bring local court proceedings as they would need to rely on an illegal arrangement to prove their ownership.

Typically, the use of corporate structures with different voting rights delivers control while not offending local foreign ownership legislation which often focuses on shareholding percentages, and not control, as the determining factor.

However, this is less useful with social media accounts where a local phone number is required for registering the account. Key in these circumstances would be control of the phone number.

Chinese businessman reveals why he bought Scott Morrison's WeChat account

January 2022

Thailand - Investors optimistic about Kingsgate resolution

October 11, 2021 Edward Dever

Judging by the recent run up in the share price of ASX-listed mining company Kingsgate Consolidated Limited, investors may be punting on a successful resolution of its long running dispute with the Thai Government. (Kingsgate also announced that it continues negotiations for the sale of its gold-silver exploration and development project in Chile, which may also be a contributing factor in the share price rise.)

Kingsgate commenced arbitration proceedings against the Thai Government under the Thailand-Australia Free Trade Agreement (TAFTA) in 2017 following the Thai Government's 2016 order suspending mine operations. This is the first significant test of TAFTA's provisions.

In its latest ASX release, Kingsgate states that "negotiations between the Company and the Royal Thai Government are now entering the final stages. Kingsgate has also been advised that the arbitral tribunal is now ready to issue the award after a lengthy period of deliberations".

The parties have jointly requested that "the arbitral tribunal hold the award until 31 October 2021, to allow the parties a short extension to conclude their settlement negotiations."

Interestingly, the 23 September release makes no reference to compensation by the Thai Government for Kingsgate's losses. Kingsgate's Chairman was previously quoted as stating "[t]here is a definition of expropriation in the Tafta agreement and this certainly fulfils that and so we want full compensation.”

The release sets out a non-exhaustive range of steps as part of settlement negotiations. But no reference to compensation. That does not mean that there will be no compensation as part of any settlement but it seems odd that it was not mentioned. A likely sticking point in the negotiations.

Other disputes between the Thai Government and foreign companies have shown how hard it is to extract compensation from the Government, even with the benefit of an arbitral award. Kingsgate's approach presumably takes these difficulties into account.

It will be interesting to see if Kingsgate can conclude a successful resolution and whether the Thai Government will honour any settlement commitments.

Thailand Update – 23 September 2021

October 2021

Evergrande - Not So Grand Or Too Big To Fail?

September 21, 2021 Edward Dever

That is the main question troubling markets in Asia and elsewhere at present.

And it is perhaps a question only President Xi Jinping in China can answer.

China Evergrande Group is a Fortune Global 500 China-based property conglomerate which has diversified into eight major industries, including automobile manufacturing, film and TV production, theme parks, healthcare and food production. In the property sector, it owns more than 1,300 projects in over 280 cities in China.

For students of Australia's 1980s corporate excess, think Alan Bond and Bond Corporation, just on steroids.

Evergrande has around USD 300 billion of debt to 171 domestic banks and 121 other financial firms and is facing looming interest payments on its bank loans and bonds and a collapsing share price. Protests have taken place outside its offices in China.

The level of Evergrande's debt is around three times the national debt of New Zealand.

Recently, Evergrande has been borrowing money from its employees to stay afloat (apparently telling employees to lend it cash or lose their bonus) and offering properties (including car park spaces) in satisfaction of its debts. Rumours abound that local creditors will be paid in full while foreign creditors will be required to take haircuts.

Any restructuring would be a complex affair. Bondholders are already establishing creditors committees to engage in discussions with Evergrande. Creditors may agree to defer interest payments and rollover loans although this would seem to just delay some form of inevitable restructuring.

Ultimately, despite discouraging government bailouts, the Chinese Government may step in and organise an orderly sell down of assets. This would be driven by a need to ensure market stability and may involve selling off non-core assets - Evergrande has apparently already been completing asset disposals - and hiving off other assets into a workout vehicle. A split between Evergrande and a bad asset vehicle, probably not named "Not So Grande".

With China's current crackdown on wealthy entrepreneurs and its tightening of restrictions on indebted developers, founder Hui Ka Yan will need to rely on his Party connections to determine if he has a role going forward. This assumes President Xi does not decide to use Evergrande as an example of how capitalism goes wrong. If so, the founder's prospects of remaining involved in Evergrande seem slim.

What Is China Evergrande and Why Is It In Trouble?

September 2021

The Art of Due Diligence

September 8, 2021 Edward Dever

News that there are eight potential suitors doing second stage due diligence on the Thai-based consumer assets of Citibank is a reminder of the level of necessary redundancy in corporate transactions.

Eight law firms (and other advisers) running the ruler over the same set of assets, perhaps with different materiality criteria. Eight sets of due diligence reports essentially stating the same thing.

I have worked on numerous transactions where multiple due diligence reports were prepared by different firms. On one transaction, it seemed that most of the larger law firms in Bangkok had spent time in the due diligence data room.

If there are any potential issues within the business, it is always interesting to see which firms correctly identify them. On the sell side, tidying up physical data rooms at the end of each day made it easy to see what documents teams had focused on. Virtual data rooms make document reviews easier to monitor.

On one transaction working with the seller, the work habits of the potential buyer and its advisers were curiously observed. The buyer's team would leave the data room each day at 4.00pm, the lawyers left at 5.00pm and the accountants left at 9.00pm. On that transaction, I rated the accountants best able to identify relevant issues. (They would be emailing follow up questions at 11.00pm.) In saying that, none of the parties seemed to focus on potential tax concerns which were clearly identified in the data room and subsequently in the Disclosure Letter.

On another telecoms transaction, the potential buyer requested the seller pay for a team's five week trip around Thailand's provinces while a detailed study was undertaken of all the company's transmission towers and cell sites. The request was denied.

With one sale which dragged on for over a year, we became adept at refreshing the data room to ensure documents were up to date and were able to shift the entire data room from the company's HQ to the main external counsel's offices at a moment's notice without any of the company's staff learning we had done this. This was driven by the buyer's need for confidentiality. It was no secret that the business was for sale.

Best suggestion on the buy side is to clearly discuss due diligence goals with the buyer's management. Find out their concerns and their areas of particular interest. Work with them to establish appropriate materiality criteria. More often than not, they will have a better understanding of the seller's business than the lawyers. Quickly focus on crucial legal issues such as foreign ownership or other structural or compliance issues.

Weighty tomes reviewing every document ever signed by the seller's business are destined to gather dust on a shelf and crucial issues may be lost somewhere deep in the report.

At least 8 suitors vying for Citibank’s Thailand operations amid sales complications

September 2021

Pets in Apartments - NSW Update

July 27, 2021 Edward Dever

Some interesting comments in the post-Cooper March 2021 decision in McGregor v The Owners – Strata Plan No 74896 [2021] NSWCATCD 1.

This NCAT matter involved the refusal by an owners corporation for a dog to be kept in an apartment block which was part of a larger complex, each block with separate by-laws and all subject to a community management statement.

The applicant dog owners were self represented. And that was probably their downfall.

The by-laws expressly prohibited dogs but not other pets such as cats, with an exception in the townhouse by-laws for small dogs which were permitted in the townhouse section of the complex.

The applicants placed significant reliance on the decision of the NSW Court of Appeal in Cooper. In that case, the effect of the Court’s decision was that a “blanket ban” on the keeping of pets was “harsh, unconscionable or oppressive”.

The applicants' prime application was misconceived as it sought relief under Section 157 of the Strata Schemes Management Act which allows the Tribunal to approve a pet where the by-laws permit a pet with owners corporation approval and that approval has been unreasonably withheld. Neither of these conditions was met.

The applicants also chose the wrong by-law to request the Tribunal to declare as invalid. The applicants should also have included the Community Association as a respondent.

In the circumstances, it was not necessary for the Tribunal to consider the effect of Cooper on the relevant by-law but the Tribunal did note that the by-law did not, in any event, constitute a “blanket ban” of the type considered in that decision.

It will be interesting to see whether other owners corporations seek to distinguish Cooper on the basis that their by-laws, while prohibiting dogs, do not prohibit other animals.

July 2021

Queensland Tenancy Reforms Draw Near

July 8, 2021 Edward Dever

On 18 June 2021, the Qld Government introduced the Housing Legislation Amendment Bill 2021.

The Bill sets forth the long awaited reforms of tenancy legislation which were the subject of a lengthy public consultation process.

Part of the draft reforms relate to tenants' rights regarding pets.

It was expected that Qld would follow the southern States approaches.

The Bill falls short of Victoria's keeping pets as of right approach . (The Qld Greens Private Member's Bill is closer to the Victorian model.) Further, Qld strata schemes would be entitled to use their by-laws to restrict pets which seems contrary to the position in NSW following the Cooper case.

It is not clear at this stage whether a blanket 'no pets are allowed' strata by-law will be acceptable to the Qld Government given that a landlord will be unable to use 'no pets are allowed' as grounds for refusing pets. But it seems unlikely.

Proposed Section 184E(1)(f) is quite broad. However, the days of complete strata pet bans seem over and not destined to make a return.

The Qld Government may take the view that QCAT (or an appeal court) will confirm that the use of blanket no pet by-laws in Qld strata schemes is "oppressive or unreasonable" and therefore adopt a similar approach to the NSW Court of Appeal in Cooper. In the past, strata by-laws that have prohibited pets have been ruled as oppressive and unreasonable by QCAT and, prior to that, by the CCT.

This may be the reason the Qld Government has not moved to amend the Body Corporate and Community Management Act 1997 to exclude no pet by-laws and align this Act with the prohibition on complete pet bans in Section 184D(5) of the Bill.

The Bill has been referred to the Queensland Parliament Community Support and Services Committee with a report due by 6 August 2021.

The closing date for written submissions to the Committee is 12.00pm, Tuesday 13 July 2021.

Participate in the Committee process

Housing Legislation Amendment Bill 2021

Housing Legislation Amendment Bill 2021 - Explanatory Notes

Greens Private Member's Bill - Residential Tenancies and Rooming Accommodation (Tenants’ Rights) and Other Legislation Amendment Bill 2021

Cooper v The Owners – Strata Plan No 58068 [2020] NSWCA 250

July 2021