July 2014 - McCaw Lewis

Building law changes that could affect you

Posted on July 1, 2014March 19, 2026 by au_common_admin

We have previously reported on the Building Amendment Bill which became law in November 2013. The bill has made significant amendments to the Building Act 2004 (“the Act”) that could affect you.

There has been some confusion around the timing of the changes, so this article addresses the key changes that are already in effect and those that are yet to come into force.

What changes are already in effect?

The changes that are already in effect include changes to categories of building work that do not require building consent. The “exempt work” is set out in Schedule One of the Act, which is relatively easy to follow. Some examples include building work that is in connection with:

Single storey detached buildings that fit within certain requirements e.g. less than 10m²;
Detached buildings that either people cannot or do not normally enter; and
The repair or replacement of detached outbuildings, such as garages and sheds, if certain conditions are met. For example, the outbuilding must not be intended for public use.

You can also now demolish a building that is detached and is not more than three storeys without a building consent. You could not do that previously unless the building was damaged.

The changes do not affect exempt work that was started before 27 November 2013. It is also important to note that, even though some building work is now exempt, it must still comply with the Building Code. A building’s level of compliance with the Building Code must also not be adversely affected once the exempt building work is completed.

There are now also higher penalties for carrying out building work without a building consent (where one is required). The maximum penalty for constructing, altering, demolishing or removing buildings without a building consent has increased from $100,000 to $200,000. This amount also increases by $10,000 per day or part day that the offence continues. The infringement fee for carrying out building work without a building consent has also increased from $750 to $1,000.

Too much left for the Courts?

There are clearly some issues that will arise as a result of the new exemptions. In particular, where the exemption conditions are not clearly measurable and are subject to interpretation. For example, in terms of detached buildings, “do not normally enter” could be interpreted in a number of ways. Similarly, in terms of the repair or replacement of detached outbuildings, “not intended for public use”, is open to interpretation. When is intention assessed? And who will be regarded as the “public”? It appears that much will be left up to the Courts.

Despite these issues, the exemptions will of course also have some benefits, such as freeing up council time to deal with more significant issues. This will in turn reduce procedural delays.

What changes are we waiting on?

The changes that we are waiting on are the most significant and relate to the new consumer protection measures that have been introduced into the Act. These further changes are to come into force via regulations that are expected to be passed at the end of the year. The main changes are:

The requirement for written building contracts for residential work that is over a certain value. This will only apply to contracts between building practitioner and client, and not, for example, builder and subcontractor. It also does not apply to contracts for design work. If builders do not comply with the written contract requirement, they may face a fine of up to $2,000;
The requirement for minimum contractual terms such as setting out the contracting parties, the payment process, timeframes, the process for varying the contract and dispute resolution;
The requirement for builders to provide information to certain clients before a contract is signed, such as:
- information about their skills, qualifications, licensing status and dispute history; and
- a checklist that includes matters such as an explanation of the legal obligations of both parties and the risks of a payment in advance arrangement.

Essentially if the building work is over a certain value or a client specifically requests the information, it must be provided. If not, the builder may face a fine of up to $2,000;
The ability for a client to require defective building work to be remedied within 12 months – essentially on a “no questions asked” basis. The remedial work must be carried out within a reasonable time after notice in writing of the defect has been received by the builder. The client is also able to claim compensation for loss or damage arising from the defective work;
A number of warranties will be implied into building contracts, and there will be a number of remedies available for breach of those warranties. The implied warranties include:
- That the building work will be carried out in a proper and competent manner, in accordance with the plans and specifications set out in the contract and the relevant building consent; and
- That all materials to be used will be “fit for purpose” and, unless otherwise stated in the contract, will be new; and
- That the building work will be completed by the date or within the period specified in the contract (or if no date or period is specified, within a reasonable time).

Remedies for breach of the implied warranties include remedial work and/or payment of the costs of remedial work, compensation and cancellation of the contract. Importantly, the implied warranties cannot only be enforced by the owner who was/is a party to the relevant building contract, but by subsequent owners as well.

A false sense of security?

Largely the changes to the Act that increase consumer protection are positive. In some cases, such as with the written contract requirement, these changes are beneficial to both parties. An increase in information exchanged between the parties may also result in a “no surprises” relationship and therefore improve the relationship.

However, there is also some concern that provision of the required information will cause consumers to consider that further advice, such as legal advice, is not needed. This is not the case. Seeking legal advice before entering into a contract is always recommended so that issues and potential risks can be identified and dealt with in advance.

Progress with the regulations

There has been no update as yet regarding progress with the regulations. The Ministry of Business, Innovation and Employment is expected to release an initial draft for public feedback before the regulations are finalised and ultimately passed. The Ministry must be aiming to do that soon to meet their initial timeframe of the end of 2014.

If you would like further information please contact Daniel Shore on 07 958 7477.

Internet and online traders

Posted on July 1, 2014March 17, 2026 by au_common_admin

Introduction to online consumer law

Consumer rights are protected by the Fair Trading Act 1986 (the FTA) and the Consumer Guarantees Act 1993 (the CGA). The purpose of this legislation is to ensure consumers receive the goods and services they pay for, and to ensure that the goods and services received are of reasonable quality.

There are many different ways of selling goods and services online. This includes through online auctions such as Trade Me, Daily Deal websites like One Day, and via social media, text message or email. Despite this wide marketplace, the internet is not the proverbial “free for all” where anything goes. Recent changes to consumer law that came into effect on 17 June 2014 have seen amendments made to the FTA and CGA, with the aim of better protecting online consumers. These changes and how they relate to existing consumer law provisions are described below.

When will the Fair Trading Act 1986 apply?

Section 28B of the FTA provides that where goods and services are offered for sale to consumers on the internet, and that offer is capable of acceptance via the internet, the seller must clearly identify to potential consumers whether or not it is in trade. This allows consumers to recognise whether or not they are protected by the provisions of the FTA and CGA.

Where the offer and any resulting sale is managed through an intermediary who is not a party to the sale, that intermediary must still take reasonable steps to ensure the seller complies with the FTA. For example, Trade Me now offers sellers the option of having an ‘In Trade’ banner appear on their profile, thereby allowing both parties to satisfy their new obligations.

If a seller is in trade and does not make this fact known to the consumer, the seller can be liable to a fine from the Commerce Commission.

While “in trade” is not defined in the FTA, or the CGA for that matter, “trade” under both means any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services. In determining whether someone is in trade, factors to consider include whether the seller:

Regularly offers to sell goods or services online;
Makes, buys or obtains goods with the intention of selling them;
Is GST registered;
Has staff or assistants to help manage sales; and
Has incorporated a company or set up a form of trading vehicle.

Sellers are unable to avoid their obligations under the FTA or the CGA by using a third party to make offers or to sell goods and services on their behalf. Where this occurs, the principal seller will still be considered to be in trade, with their agent also facing potential liability.

However, the exception to the rule is where goods are sold that were initially bought or acquired for personal use. If this is the case, then the seller will not be considered to be in trade.

What other obligations does the Fair Trading Act 1986 impose on online sellers?

Other obligations that a seller must comply with under the FTA when selling goods online include:

Avoiding misleading or deceptive representations about the goods or services being sold;
Avoiding misleading consumers about any rights and/or obligations they may have;
Avoiding unfair sale practices, like bait advertising (where goods and services that cannot be supplied are advertised in order to lure consumers into the store);
Having reasonable bases for any claims made about their goods or services, irrespective of whether such a claim is express or implied; and
Complying with product safety and consumer information standards where relevant.

What protection is offered under the Consumer Guarantees Act 1993?

The CGA applies to goods and services purchased for personal or domestic use. This includes sales that are made through online bidding using websites such as Trade Me. The CGA sets out several warranties a seller makes when selling goods and services, which include that the goods and services:

Match their description;
Have no undisclosed defects;
Are fit for their normal purpose; and
Are safe, durable, of reasonable quality, and acceptable.

Under the new changes, sellers must ensure that any goods sold online that are sent or delivered to the consumer arrive in acceptable condition and on time.

Contracting out

Businesses cannot contract out of the FTA as a whole in dealings with individual consumers. However, section 5D of the FTA provides that certain provisions of the FTA can be contracted out of where:

All parties to the agreement are in trade and have agreed to contract out of one or more of Sections 9 (prohibiting misleading and deceptive conduct generally), 12A (prohibiting unsubstantiated representations), 13 (prohibiting false and misleading representations) and 14(1) (prohibiting false or misleading representations in connection with the sale or grant of land);
The agreement is in writing;
The goods or services are supplied and acquired in trade; and
It is fair and reasonable that the parties are bound by the contracting out provision.

Section 43 of the CGA allows parties to contract out of the provisions of the CGA where:

The agreement is in writing;
The goods and services are supplied and acquired in trade;
All parties to the agreement are in trade and agree to contract out of the provisions of the CGA; and
It is fair and reasonable that the parties are bound by the contracting out provision.

In determining whether it is fair and reasonable to contract out of the relevant FTA or CGA provisions, the court will take into account the circumstances of the agreement, which include:

The subject matter of the agreement;
The value of the goods and services;
Whether either party obtained legal advice before signing the agreement; and
The respective bargaining power of the parties, including the extent of their ability to negotiate the terms of the agreement.

Breaching the FTA and CGA

While the Commerce Commission cannot enforce the CGA, if a seller breaches the CGA, then that seller may also be in breach of the FTA, over which the Commerce Commission does have authority.

The Commerce Commission is New Zealand’s primary competition enforcement and regulatory agency. Set up by the Commerce Act 1986, it enforces the legislation that prohibits misleading and deceptive conduct by traders and the promotion of competition in New Zealand markets. Part of the Commerce Commission’s role is to investigate complaints and bring Court claims against parties who breach the FTA.

A company breaching the FTA can be fined up to $600,000 and an individual up to $200,000.

Conclusion

The ultimate aim of consumer law legislation is to protect non-business savvy consumers from being ripped off. In the event of a complaint or claim, the particular facts of the matter in question will always be relevant. As a consumer, you can protect yourself by:

Researching a seller online and reviewing any feedback and comments before making a purchase;
Understanding what you are buying by reading the description of the goods or services carefully; and
Reviewing the terms and conditions and ‘fine print’ of any offer.

If you would like further information please contact Laura Monahan on 07 958 7479.

Erceg v Erceg: A balancing act between trustee and settlor

Posted on July 1, 2014March 19, 2026 by au_common_admin

Case law has established that a beneficiary of a trust has a clear right to seek information relating to the trust to enable that beneficiary to ensure trustee accountability. However, one of the main obligations of a trustee is to satisfy the intentions of the settlor. When a settlor intends the matters of the trust to remain confidential, the rights of the beneficiary and the obligations of the trustee may no longer be compatible.

The recent case of Erceg v Erceg highlights this conflict and provides guidance in balancing the obligations of a trustee to fulfil a settlor’s intentions, and the rights of beneficiaries to have access to information.

In 2004 Michael Erceg, the founder of Independent Liquor NZ Limited, settled the Acorn Foundation Trust. Michael was both settlor and trustee, and the Acorn Foundation Trust was one of a number of trusts settled by Michael.

The Acorn Foundation Trust deed contained a confidentiality clause which stated:

“Without prejudice to any right of the trustees under the proper law to refuse disclosure of any document or information, the trustees shall not, unless required by law, be bound to disclose to any person any document or information relating to this Trust, the Trust fund or any Trust property, the beneficiaries or any document setting forth or recording any deliberations of the trustees as to the manner in which they have or should exercise any power or discretion, or the reasons for any particular exercise of any such power or discretion, or any other related documents including this instrument”.

Michael was killed in an accident in November 2005. Following Michael’s death, his widow and the second defendant, became the trustees of the Trust.

The plaintiff, Millie Erceg, was Michael’s mother. She was named as a secondary beneficiary of the Trust.

The Trust sold its shares in Independent Liquor NZ Limited for a substantial sum. The Trust was then distributed. Millie Erceg did not receive any distribution.

Millie sought an order from the Court that she was a beneficiary of the Acorn Foundation Trust and requested copies of documents relating to the Trust. These included copies of the Trust Deed, financial accounts for the Trust, the agreements for the sale of the Trust’s shares in Independent Liquor NZ Limited and the minutes of all trustee meetings.

Millie argued that it was her right as a beneficiary to have access to certain information to ensure that the trustees were accountable for their actions. She requested copies of the Trust’s resolutions and financial statements which would have shown the distributions made to the beneficiaries. In order for her to be properly advised of her rights and position by her counsel, disclosure of the documents was necessary.

In response to Millie’s argument the trustees claimed that they were bound by Michael’s intention as settlor that the Trust and its affairs remain confidential. It is an established principle that trustees, when exercising a discretionary power, are not bound to disclose any information to beneficiaries.

The Court acknowledged that there was a conflict between Millie Erceg’s right as a beneficiary to have access to certain information to ensure the accountability of the trustees, and the principle that the trustees were not bound to disclose the reasons behind their decisions, which had been the intention of the settlor.

Case law

To assist him in reaching his decision, the Judge considered the two leading trust law cases on the issue.

One of those cases was the 2003 UK case Schmidt v Rosewood Trust Ltd. In that case the Court found that it was not a beneficiary’s proprietary right to have the trust documents disclosed to them, rather it is within the Court’s jurisdiction to supervise, and in some cases, intervene in the administration of trusts. In a case involving personal or commercial confidentiality, the Court may have to balance competing interests of different beneficiaries, trustees and third parties in deciding whether or not to do so.

The Court also considered the New Zealand case of Foreman v Kingston. Similarly to the Erceg case, the beneficiaries in this case requested the disclosure of certain trust documents and argued that the trustees were under a duty to disclose these to the beneficiaries. The Court in this case determined that the beneficiaries have the right to receive information which will enable them to ensure the accountability of the trustees, however, that this right is subject to the discretion of the Court.

Erceg v Erceg decision

In relation to Millie Erceg’s first claim, the Court determined that an order declaring her as a beneficiary was unnecessary. The Acorn Foundation Trust deed named Millie as a secondary beneficiary.

When the Court considered Millie’s second claim, it acknowledged that there was a conflict between her right as a beneficiary to have access to certain information, so as to ensure the accountability of the trustees, and the principle that the trustees were not bound to disclose any reasoning behind their decisions.

The Court agreed that there should be disclosure of the documents requested to allow Millie to be properly advised of her rights and position. This was, however, to be limited by Michael Erceg’s intention that the Trust remain confidential. The trustees had an obligation to fulfil Michael’s intention as settlor, subject to their legal obligation to comply with directions of the Court.

Because of this, the Court ordered that the Acorn Foundation Trust Deed and the valuation the trustees received for the Independent Liquor NZ Limited shares were to be made available to Millie Erceg. Millie and her counsel were also to have access to the financial accounts and resolutions of the Trust, however these were to be subject to redactions to ensure that the names of other beneficiaries and the amounts of individual distributions and loans were to remain confidential.

Case law both internationally and in New Zealand has shown that a beneficiary of a trust has a right to seek information relating to the trust to enable that beneficiary to ensure accountability. The extent of this right however is subject to the discretion of the Courts, and may be limited by the intentions of the settlor. Erceg v Erceg provides guidance as to how the Court may balance competing rights and obligations.