Friday, April 23, 2010

Typos and big legal bills

Given Monday is a public holiday, the Blog for next week is posted below.

Yesterday ended up being a very long day and unnecessarily expensive (both in terms of time consumed and bank, accounting and legal charges).

The day was also a particularly frustrating one due to the relatively underwhelming cause of all the hassle – a typo in an on-line created trust deed.

While the typo was not ours, it served as an extremely timely reminder of how critical it is to get even the simple things right.

For those that attended our Master Class on trusts a few years ago (our Master Class series is run once a year and is a half day program built entirely around a practical case study), you may remember one of the examples (based on a real life situation) where the vesting (or ending) date of a trust was accidentally noted as 18 years instead of the more standard 80 years.

Yesterday, the error (which had been generated by a client’s former accountant using an online trust provider) was simply the spelling of the name Stephen with a 'v' instead of the 'ph' in the schedule.

While the trust had borrowed money from the bank before, no one had ever picked up on this typo.

Yesterday was the settlement day for a relatively large transaction and mid morning a Sydney bank officer identified the typo and insisted that the bank security could not be perfected because of it until the error was remedied.

After much (often quite illogical) negotiation, the bank finally agreed to a deed of variation being implemented.

As is often the way in these situations however, the deed (which ran to less than two sentences of actual substantive terms) was redrafted three times to satisfy the precise requirements of the bank.
Furthermore, even having produced the deed, there was the threat of the bank refusing to settle unless it was stamped prior to settlement.

The irony here of course is that the particular form of document is not liable to stamp duty in Queensland and due to recent changes at the Stamps Office trying to discourage people to lodge these documents for duty assessment (I might touch on this in more detail next week), it was going to be impossible to achieve a same day stamping.

Finally, based on a written undertaking provided by us, the bank did agree to settle.

Until next week.

Matthew Burgess