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Māori business – Employment fundamentals

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Building a successful business requires more than just effective marketing, you need to have something to market and that starts with the foundations.  Building a business is like building a whare – you need solid foundations, and a solid structure, or no amount of decoration will sell your house.

Ensuring that you tick all the boxes in terms of governance and structure is vital.  The same applies to employment procedures and requirements at every step of the way.  These are the foundations on which you build a business that will withstand the test of time.  The following are four key pillars from which to develop a solid business.

He aha te mea nui o te ao?  He tangata
  • Hiring the right people can make or break a business.  As Māori, we often look to hire whānau and friends – this is not a bad thing.  But it can turn bad if it’s done for the wrong reasons and without proper consideration.  In the long run, hiring the wrong people can have devastating effects on your business and, as most will know, it is not easy to get rid of difficult staff or underperformers.  Worse still, where an employee just doesn’t fit the culture of the business, there is even less that can be done.
  • People are at the heart of a business and they should be treated like that.  Before hiring, think about what you need in an employee or contractor and how you can tailor the relevant employment documents to match those needs in the wider business context.
Process is crucial
  • With employment matters, and even matters of general governance, process can be as important as substance.  Take for example the 90 day trial period – if the employer does not tell the employee that his/her employment is terminated before the end of the 90 day period then it becomes too late.  Or if the employee starts work without signing off an employment agreement recording the 90 day trial period then it is unenforceable.
  • If in doubt, seek advice to avoid missing any step in the process before it happens and keep the whare standing.
Setting the ground rules
  • Having sound policies and procedures in place which cover off how to deal with various employment situations can help avoid procedural issues.  Policies and procedures are designed to help both employers and employees by providing a clear set of boundaries.  Without these, disciplinary processes are made infinitely more difficult and drawn out for everyone involved.
  • As an employer, don’t let your employees take you for granted.  The obligation of good faith works both ways in the employment relationship.  Providing clear expectations from the outset – from the wording of the letter of offer to the job description and content of the employment agreement – puts all parties on the same page.
Don’t pretend to be something you’re not
  • Above all, you should always incorporate your values and tikanga into your foundations in an appropriate way.  This might be through provisions in the employment agreements, objects of a Trust or specific policies and procedures.  By ensuring that your fundamental documentation reflects your business values and objectives, all of the above will fall more easily into place.  If you want to hire whānau, at least you can ensure that they understand exactly what the business aims to achieve and their role within that.
  • Your marketing and image will no doubt come more naturally as well, when you think about who you are as a business and have strong foundations based around your core values.

When thinking about your image and your brand, also think about what lies beneath that.  Keep in mind those bare minimum legal requirements and figure out how to include them in your foundations.

This article was also published in the September 2014 newsletter for Stratigi – www.stratigi.co.nz.

Renika is an Associate in our Workplace Law and Māori Legal Teams and can be contacted on
07 958 7429.

Treaty settlements – How do I fit?

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For any iwi/hapū group, the idea of representation is something that is often grappled with and rarely mastered.  In the context of Treaty settlement negotiations with the Crown, representation is a major issue.  As a result, the focus is often placed on this at a very early stage in the negotiations process.

Hand in hand with the issue of representation is the issue of who is being represented by any particular body.  In a Treaty settlement context, this is known as claimant definition and is a fundamental aspect of the mandating process and the overall settlement.  This article outlines some of the key Crown policies and considerations to be taken into account in settlement negotiations in terms of representation and claimant definition.

Large Natural Grouping

The starting point for any issues of representation and claimant definition is the development for recognition of a “Large Natural Grouping” (LNG).  The Crown policy is that, fundamentally, it will only negotiate comprehensive Treaty settlements for historical claims with LNGs.

The definition of an LNG is not a mathematical one and is generally judged by the Crown.  The term has been interpreted in a number of different ways over the years and across the country to the point that it can truly be said that Treaty settlement negotiations is a political beast and Crown policy is simply a guideline in this regard.

Where the Crown recognises a LNG for the purposes of settlement negotiations, the detail around exactly who that LNG includes, and who will represent it, must then be addressed.  The basic premise is that any LNG will have one mandated body to represent it in all negotiations with the Crown through to a comprehensive Deed of Settlement.  In order to achieve the mandated body status, the entity must go through a robust mandating process with its beneficiaries (the iwi/hapū group that it represents) in order for the mandate to be formally recognised by the Crown.

As part of the mandating process, the entity which seeks the mandate must clearly outline a claimant definition to indicate to the Crown and to its beneficiaries who it seeks to represent and whom it seeks to settle on behalf of.

Claimant definition

Claimant definition has four distinct parts:

  • Area of interest;
  • Hapū;
  • Marae;
  • Wai claims.

All of these contribute to the LNG status of an iwi/hapū grouping in different ways and serve different purposes.

Area of interest

The area of interest included for a LNG outlines the rohe of that group and should include the specific rohe of the hapū, whānau and Wai claims within the mandated body.  The boundary lines for an area of interest should have a basis in historic evidence, which is often where the work carried out through a Waitangi Tribunal process can be very helpful, and should factor in overlapping claimant groups and the discussions that may be required there.  It may be that some hapū/whānau or Wai claims within the mandated body are also partly covered by overlapping claimant groups and their mandates.  This is a matter for discussion as part of negotiations and mandating.

Hapū

The hapū listed within a claimant definition may or may not be intended as an exclusive list of hapū for that LNG.  A list of hapū is usually found in the final claimant definition under a Deed of Settlement to ensure that all individuals are captured where specific hapū are known or recognised as part of a LNG.  Specific wording is generally used by the Crown to ensure that the recognised ancestors of those hapū groups are also included as ancestors of the LNG in the sense that any person can benefit from the settlement by virtue of being descended from a recognised ancestor of one of those hapū within the LNG.

Marae

A list of marae is also sometimes included, particularly at very early stages of the settlement negotiations process, such as mandating.  It is not generally included in the final claimant definition for the settlement as whakapapa lines to marae are of course quite difficult as opposed to specific descent from a tupuna.

It is generally accepted that a list of marae will not be exhaustive, particularly where a LNG covers a very large area of interest.

Wai claims

Wai claims also make up an integral part of claimant definition for the very fact that all historical Treaty of Waitangi claims for a LNG must be settled.  This is part of the full and final policy of the Crown in relation to settlement negotiations.  That is, any settlement must be full and final for the region and the group which it is made on behalf of.  Any list of Wai claims will usually be concluded with a provision to include all other registered or unregistered claims made by a member of the LNG.

These four key elements, for the most part, make up the overall claimant definition for a LNG.  As part of the settlement negotiations process, the mandated body will need to engage with all those who fall within the claimant definition and will generally do so in a range of ways, as set out within a Deed of Mandate.  These will generally include things like regular newsletters, updates to websites, hui-ā-iwi and other pānui to iwi members.  It is not necessary that the mandated body come back to the wider iwi/LNG to “ratify” every step of the process.  Some groups will choose to do this because of special dynamics within their groups but it is important to note that this can be costly and time consuming, and sometimes detrimental to maintaining momentum with settlement negotiations.

At a very minimum the mandated body must report back on key milestones and must present a Deed of Settlement and any post settlement governance entity to the group for formal ratification.

Challenges to mandate/settlement

Challenges to a mandate, or settlement, can often arise from within the claimant definition group.  There is no one way to manage these disputes and each group will differ in its approach in accordance with tikanga and iwi dynamics.  The important aspect of any internal dispute resolution is ensuring that any process (as per the Deed of Mandate and/or Trust Deed/Constitution for the mandate entity) is followed.  There must always be an ability for any person or group raising issues to be heard.

When managing internal disputes there are, however, some key principles and Crown policies which have been demonstrated in previous negotiations and sometimes supported by the Waitangi Tribunal through urgency inquiries.

It is accepted now that, a challenge from a Wai claimant, without the support of a wider grouping, is not sufficient to upset a robust mandate given by the iwi and recognised by the Crown.  The role of a Wai claimant is much like the role of any individual beneficiary to the settlement in the sense that any Māori can file a Waitangi Tribunal claim.  The fact that one person has done that where another has not, generally, does not give them any greater rights as a beneficiary or to have a say over the settlement of those Treaty grievances.

This is an area which is often confronted by mandated entities in negotiations whereby individual claimants consider that they personally should receive some form of redress based on what is set out in their statement of claim and any evidence presented to the Waitangi Tribunal.  This is not the case as settlement negotiations are of a political nature and are dealt with directly between the Crown and the mandated entity on behalf of all of those within a LNG.  This will include any Wai claimants and their claims but it does not mean that specific redress would be afforded to that Wai claimant.

With that in mind, the Tribunal has also supported the decision of the Court of Appeal in Attorney General v Mair, saying that where a challenge has significant support from a wider group within the LNG, more weight will be given to that challenge.  This is because the prejudice arising from the settlement continuing will be more substantial.  In that regard, where hapū groups seek to be removed from a mandate (rather than individuals or Wai claimants) this will be looked at more closely by the Crown and any mandated entity.

Ultimately, the decision on whether the Crown will negotiate separately with any group who wishes to remove themselves from the mandated body or existing LNG is one for the Crown and will often be based on Crown resourcing and willingness to negotiate those hapū claims distinct and separate from the claims of another LNG.

What to look for

When reviewing a proposed Mandate Strategy and/or Deed of Mandate, it is important, to look at the dispute resolution provisions around internal disputes, together with the provisions to amend the mandate.  It is not just important that there are provisions to remove the entire mandate for an entity but that there are clear provisions as to how a group may seek to be removed from the mandate and/or how the mandate itself will be amended.  This will generally include discussions amongst the mandated entity itself first, followed by discussions with the Crown and then potentially presentation to a hui-ā-iwi for a formal decision.

Amendment to mandate clauses are often left out of Deed of Mandates but in our view, it is generally best practice in order to avoid uncertainty where there are disputes in future.

It is also of course important to look at the representation clauses within the proposed Mandate Strategy or Deed of Mandate to understand exactly how the wider iwi/group will be represented.  Some groups may have specific hapū representation or representation of smaller rohe within the overall area of interest, whereas others may consider that a “best person for the job” model is the right approach given the iwi dynamics.  This will be determined on a case-by-case basis and often it is appropriate to look at existing structures for that iwi grouping to understand what type of model will work best, and what will provide the best accountability and results in a settlement negotiations content.

Renika is an Associate in our Māori Legal Team and can be contacted on 07 958 7429.

Unit titles – Would you join the “club”?

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Owning a unit title property is similar to joining a club.  Considerations such as how well run the club is and what the club rules are will influence whether (or not) you might want to join the club.  In this article, we summarise a recent case that highlighted this message and the need to understand the difference between owning a unit title property compared with other types of property ownership arrangements.

Message from the High Court

The reality is that owning a unit title property can be a lot more restrictive than owning either a freehold or even a cross lease property.  While owners are given exclusive rights over their units, each unit owner must adhere to the Unit Titles Act 2010 (the Act), Unit Title Regulations 2011, body corporate operational rules, and owners must also work alongside the body corporate to help run and carry out an effective unit title development.

In Wheeldon v Body Corporate 342525 the High Court stated:

 “…people who want to be able to choose how and when they might repair building elements should carefully reflect on whether unit title ownership is appropriate for them.”

This case dealt with a repair and maintenance issue in a unit title development that had 22 individual units set out in a “wedding cake” design.  The unit title development needed extensive repairs and maintenance to the whole development to bring it in line with building standards.  The estimated costs to complete the extensive works were around $3,000,000.

Five unit owners opposed the works and the subsequent levies raised to cover the works.  These opposing unit owners brought a case to the High Court seeking a declaration and injunctive relief relating to the scope of the remedial work.

In determining the scope of the remedial works the Court went “back to basics” by looking at the intention of the Act.  In particular, the Court reviewed the purpose of the Act, which is set out in section 3, and highlighted subsection 3(d) which states “…to protect the integrity of the development as a whole” . In reviewing the purpose against the factual background of the case, the Court found that the body corporate was entitled to repair the whole building without first giving individual unit owners the opportunity to effect their own repairs.

The Court then moved on to consider section 138 of the Act, which sets out the body corporate’s duty to repair and maintain building elements and infrastructure that relate to or serve more than one unit.  In looking at whether the criteria under section 138(1)(d) of the Act was met by the body corporate, the Court referred to the Re Bell case.  In this case it was found that the merits of the body corporate’s proposed work should be determined by the affected owners, as they have personal knowledge of the matter.  The matter should not be determined in Court; the Court can only decide on whether the correct procedure was undertaken in passing the resolutions and the material that could justify such decision.

It was found in this case that the body corporate had sought an expert opinion, which was provided to it in good faith, and the body corporate acted on that opinion.  It therefore falls to the body corporate to decide how to act, whether via a holistic solution put forward by the defendants or a targeted approach supported by the plaintiffs.

The next question then for the Court was whether the decks of levels 4, 3 and 2 were building elements and whether they related to or served more than one unit.  The Court very simply and precisely determined that the decks were building elements and referred to the interpretation section of the Act, in order to arrive at their conclusion.  Following this, the Court went on to determine the meaning of “relate to”.

The Court adopted the meaning as set out in Young & Ors v Body Corporate where Harrison J stated:

“Something is incidental if it naturally attaches or is causally relevant to something else.  The phrase “relates to” has a similar meaning of reference to or concern with.”

The Court therefore found that the work did not have to just physically affect more than one unit to meet the criteria under section 138(1)(d).  There could be an economic impact on the other units if the work was not completed to the building elements and infrastructure as this would in turn ultimately have a physical impact on the other units, albeit at a later point in time.

In that sense, and in applying the evidence from the experts, the building elements related to more than one unit as the inevitable consequence of the “wedding cake” design meant that any water leaking from a deck would migrate vertically and horizontally through the building structure and in turn affect all units of the development.  The Court also found that the small in-fill panels in certain units, although they were within the boundary of each unit, related aesthetically to the other units and should be replaced as part of the whole repair and maintenance exercise.

The Court determined that the work to be carried out was essential to bring the building up to standard.  The Court did exclude some of the improvements, such as double glazing, and stated that these should be presented to owners as optional extras.  This determination was qualified by the Court on the basis that should the relevant local authority issue a building consent for a reduced scope of work than the work that was contemplated, then the body corporate would need to consider its position further.

Unit title ownership

This case highlights the often complicated nature of unit title property ownership.  There are many more aspects to consider when owning a unit title property, compared with owning a freehold property.  It is important to understand, as both an owner and a potential purchaser, your roles and responsibilities under the Act, the Unit Title Regulations 2011 and also the body corporate operational rules of your unit title property.

While this case deals with repair and maintenance issues, there are number of other matters that the body corporate is responsible for and a number of other matters that the body corporate can control.  For example, the body corporate can limit the number of pets you can keep, or whether you are even allowed any pets at all.

When buying a unit title property or if you currently own a unit title property, we believe it is crucial to understand your rights and responsibilities as a unit owner, and to also understand the role and obligations of the body corporate.  If you are unsure of these matters or would like further advice on any issues you may have, please do not hesitate to contact a member of our Property Team.

If you would like further information please contact Dale Thomas on 07 958 7428.

Family Protection Act 1955 and the concept of moral duty

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Introduction

The Family Protection Act 1955 (“the Act”) gives the Court a discretion to order that provision be made for the “proper maintenance and support” of certain family members out of the deceased’s estate.  The Act is embedded in the social landscape of the day, and the extent to which the deceased owes a “moral duty” to provide for the claimant will vary considerably.

Relevant factors

Currently a spouse, de facto partner, or a child may lodge a claim against an estate, and in limited circumstances grandchildren, stepchildren or parents have the ability to do so.  Section 4 of the Act requires the Court to decide whether the deceased has provided for the “proper maintenance and support” of the claimant.  This stage involves a high degree of judicial discretion.

Vincent v Lewis (2006) provided a summary of the case law until 2006, looking at all the factors the Court will take into account when assessing whether there has been a breach of a moral duty owed to the claimant.  The key consideration in each case is whether, objectively considered, taking into account all the circumstances of the particular relationship, the deceased breached the moral duty owed to the claimant.

This duty is not owed simply because of the existence of the relationship, but due to the strength of the relationship.  Periods of estrangement and family rifts will weaken the moral duty owed, while dependence on and care for the deceased will strengthen it.

The Court of Appeal in Williams v Aucutt stated that “support” is an additional and wider concept than maintenance, which entails “sustaining, providing comfort”.  Ethical considerations are relevant when assessing whether adequate provision has been made for the support of the applicant, as opposed to “maintenance”, which is directed at the claimant’s economic (or financial) needs.  The two are assessed concurrently however, and factors under both may strengthen or weaken a claim.

The following are factors which are relevant to assessing the strength of a claim, although they do not constitute an exhaustive list; all circumstances of the particular case will be relevant.

Nature of the relationship with the deceased

Section 5 of the Act allows the Court to “refuse to make such an order in favour of any person whose character or conduct is or has been such as in the opinion of the court to disentitle him.”

There are two categories of misconduct that will justify exclusion:

  • Outrageous conduct by the applicant to the deceased; and
  • Distinct and meaningful periods of estrangement brought about by the claimant.

The level of misconduct required to be disqualified however, is serious misconduct.  In MAVM v Public Trust (2009), the claimant had physically and verbally abused his father and had exploited the father’s “good nature” most of his life.  Similarly, Horton v Wakeham (2007), stated disentitling conduct required “deliberate malice directed toward the testator or committing serious criminal offences with no remorse”.

The Horton and MAVM cases illustrate that the threshold to be disqualified requires conduct with a high degree of malice.  Estrangement or conduct that does not amount to disentitling behaviour will however still be relevant, and will not preclude relief entirely.  In Re Green the Court of Appeal found that conduct of the testator’s daughter had weakened the relationship with the deceased, due to taking up residence overseas and having little contact; however it did not warrant a complete exclusion. The estate in question in that case was a relatively large one, a factor that will encourage Courts to be more liberal in an award.

A key consideration when the Court is deciding whether or not to exclude an applicant is always where the fault lies.  If the fault is purely on the deceased, this may in fact increase the moral duty that is owed to the applicant, for example, if the deceased neglected or failed to provide when he or she had the means to.  If the fault is on the claimant, the question is whether the conducted amounted to a level that would exclude an application, as noted in the cases above. The time elapsed for the period of estrangement will always be relevant in assessing the level of the conduct.

Other factors relevant when the court is assessing the nature of the relationship with the deceased will be the duration of the relationship, the conduct of both parties, and the intention of the testator.  All factors will be weighed differently depending on the circumstances of the particular case.

Strength of competing moral claims

The strength of a claim will always be dependent on the actual form of the relationship between the deceased and the claimant.  For example, there is a “paramount duty” firstly to the widow of the deceased, and Courts will always be more liberal when assessing a claim to a widow than, say, a niece or nephew.  This is one way a Court will distinguish between competing moral claims from various parties.  A moral duty may be increased to one applicant over another due to the closeness of the relationship; in Re Cairns one child brought support and comfort to a parent in her declining years, and the Court was justified in favouring that child over another.  Relevant circumstances will include whether the claimant has dependent children, and the financial position of each party relative to the other parties.  The financial need and position of a claimant is discussed further below.

Financial need/position

The financial need and position of a claimant will include the value of the claimant’s assets, their income, and any other relevant financial considerations such as whether the claimant is receiving welfare payments or income from other sources. The number of financial dependents the claimant has will also increase the person’s “needs”, and increase the likelihood of the finding of a moral duty to provide adequately.  When assessing the financial position of the claimant, the Court will look at the current and expected future financial position of the claimant, even though the moral duty is traditionally assessed at the date of the testator’s death.  The Court may also take into consideration factors such as the current or future health needs of the claimant, or for a claim by a partner the maintenance of the lifestyle enjoyed during the relationship may be relevant.

Size of the estate

The size of the estate will always be a vital consideration, as it will determine the extent to which the deceased can satisfy his or her moral duty to eligible claimants.  Larger estates allow more leeway for the testator to distribute the estate as they see fit, so long as those to whom he or she owes a moral duty are catered for.  In smaller estates, the role of the Court will be to ensure all moral duties are met so far as possible.

Contributions

Contributions made to the deceased’s assets or to the relationship are highly relevant when assessing the strength of the moral duty owed to the claimant.  Such an example is B v Adams (2005), where a widow had contributed significantly to the husband’s farm.  The Court in that case increased the strength of the moral duty owed to the claimant. Alternatively, a contribution to the relationship may be sufficient to increase the moral duty, as in Re Wilson, where the wife had “performed outstandingly the services of a loving wife”.

Trend and current position as to quantum of reward

What constitutes “proper maintenance and support” has varied significantly since the first family protection legislation, the Testator’s Family Maintenance Act 1900.  The initial approach was exceptionally conservative, aimed at ensuring claimants were given only enough to prevent the burden of maintaining the claimant falling on the state welfare system.

This restrictive approach was followed by a long period of generous orders through the majority of the 20th century, characterised by the rising liberal movement.  Courts began to have a wider regard to the nature and circumstances of each claimant’s position with a key consideration being whether the testator had breached the “moral duty” owed to the claimant.

The notion of a moral duty and assessment of whether it has been breached is still central to the Court’s methodology when determining a claim under the Act.  However, recognising the increase in frequency and size of awards that were being made, a return to conservative principles was prompted, the turning point being the Court of Appeal’s decision in Williams v Aucutt.  Justice Blanchard cautioned “it is not for the Court to be generous with the testator’s property beyond ordering such provision as is sufficient to repair any breach of moral duty”.  This more conservative approach has been reiterated in subsequent decisions and the number of cases where the Court has found a breach of the moral duty has declined in the past decade.

The Court of Appeal in Williams v Aucutt stressed that it is not the role of the Court to rewrite the testator’s will.  Because of this, claims have diminished since the turn of the millennium and Williams v Aucutt is still the leading authority used to quantify a claim under the Act.

Conclusion

In summary, the Court is required to look at all of the relevant circumstances in a particular case when deciding whether or not there has been a breach of a moral duty by the deceased.  The moral duty is assessed at the date of the death of the deceased, however the future financial position of the applicant may be considered.  Although estrangement will be a relevant factor that may decrease the moral duty (or, if due to the fault or neglect of the deceased, increase the duty), it will only extinguish a duty in cases of serious misconduct or estrangement, taking into account all of the relevant circumstances.

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

Urgency applications in the Waitangi Tribunal: How urgent is urgent?

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The Waitangi Tribunal (“the Tribunal”), established under the Treaty of Waitangi Act 1975, is a commission of inquiry charged with making recommendations on claims brought by Māori relating to actions or omissions of the Crown that potentially breach the promises made under the Treaty.

The Tribunal, through stringent planning processes, determines the order in which claims are to be heard.  In some circumstances, claimants may seek an adjustment to the priority that the Tribunal has given to their claim by outlining the main reasons for the urgent adjustment sought.  There are two circumstances in which parties involved in the Tribunal claim process may apply for urgent consideration:

  • Applications for an urgent inquiry; and
  • Applications for an urgent remedies hearing.

This article discusses the criteria set by the Tribunal in determining applications for urgent inquiry.

The Tribunal will only grant such applications in exceptional circumstances. This is because when applications for an urgent inquiry are filed, the Tribunal must review how it will allocate its resources to claims and inquiry districts.  This re-allocation may affect the order in which claims are heard and the Tribunal reserves its discretion to amend its priorities as circumstances require.

Criteria for applications seeking urgency

The Tribunal’s Guide to Practice and Procedure sets out the criteria for determining the proper allocation of resources.  The Tribunal has indicated that it will only grant an urgent hearing if it is satisfied that adequate grounds for priority have been made out.  Urgent hearings effectively delay hearings that are already in progress, such that the claims of those seeking urgency must be balanced against the claims involved in inquiries.

By way of illustration, some of the applications for urgent hearings that have been brought before the Tribunal to date include matters relating to the Kohanga Reo kaupapa, the grounding of the MV Rena and the preservation of the Maui’s dolphin.  The main basis of these applications, as stated above, is an alleged breach of the principles of the Treaty of Waitangi by the Crown.

Applications seeking an urgent inquiry

In deciding whether to grant an urgency application, the Tribunal will consider a number of factors and have particular regard to whether:

  • The claimants can demonstrate that they are suffering, or are likely to suffer, significant and irreversible prejudice as a result of current or pending Crown actions or policies;
  • There is no alternative remedy that would be reasonable for the claimants to exercise; and
  • The claimants can demonstrate that they are ready to proceed urgently to a hearing, meaning that claimant briefs of evidence have been prepared and a majority of the technical research has already been undertaken.

In addition, the Tribunal will consider other factors, including whether:

  • The claim challenges an important current or pending Crown action or policy;
  • An injunction has been issued by the courts; or
  • Whether other grounds justifying urgency have been made out.

Upon receipt of an application for urgency, the Chairperson or Deputy Chairperson may determine the application or may delegate consideration to a Tribunal Member.  The urgency application may be determined either on the papers or by convening a conference to hear submissions from the claimants and others who have a sufficient interest, including the Crown.  The process will normally be discussed amongst the parties involved and set out by the presiding officer.

The Tribunal will expect the parties, and especially the claimants seeking urgency, to be ready to do all that is reasonably possible to promote the prompt inquiry into, and reporting of, an urgent claim.  These circumstances will make it desirable or necessary that the Tribunal hear and report on an urgent claim as quickly as possible.   It is also important to note that upon approval, as with claims in the Tribunal District Inquiries, the costs of urgency applications are covered by the Ministry of Justice.

Conclusion

It is generally understood that the Tribunal will only grant urgency in exceptional circumstances.   Despite this, and in light of the stringent conditions for urgency applications, the Tribunal will endeavour to give priority to claims that can satisfy the criteria.  Legal professionals with experience in this area of law can assess whether a particular claim meets the Tribunal criteria to be considered for urgency.

Jerome is a Solicitor in our Māori Legal Team and can be contacted on 07 958 7427.

Part three: New financial reporting standards – charities

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Background

The new financial reporting standards are now in place (as at 1 April 2015) for registered charities.  Part one of this series summarised the different tiers of the reporting standards, and how to move between tiers.  Part two of the series outlined the non-financial information which is required to be included in the reports.  This is the final article in this series and summarises the rules for related entities and provides guidance as to when consolidated accounts are required.

Branches or divisions of a charity

For the purposes of the new standards, a registered charity is a “reporting entity”.  Some charities set up sub-entities to carry out their different activities (for example, a second hand shop, or a trust to manage properties).  For the purposes of financial reporting, these would be considered part of the “reporting entity” and the charity would need to include information about these branches in their performance report.

Related entities and consolidated accounts

Consolidated accounts are required when a charity holds a control relationship with another organisation.  Charities that maintain a control relationship or powers to govern the policies of other organisations are known as related entities.  Power to govern could be indicated by a charity’s ability to veto, overrule or modify decisions of an organisation’s governing group.  This may include decisions on revenue policy; how money is raised and spent as well as the ability to appoint/remove members of the governing body and close or wind up the organisation.  A control relationship exists if a charity receives a benefit from the power it holds over another separate organisation.  Charities may receive benefits from these other organisations by receiving portions of profit or surplus or the use of goods or services that contribute to the charity’s objectives.  Charities in these types of relationships will need to include information about these related entities and include these in their performance reports as “consolidated financial statements”.

Consolidated financial statements present information about a charity and the organisation it controls as one single entity or the “reporting entity”.  When reporting on a consolidated financial statement, charities should combine their assets, liabilities, income, expenses and cash flows with those of the organisations it controls.  The combined expenditure of consolidated financial statements is required to better determine the charities correct reporting tier and could indicate that the charity is required to report in a higher tier.  Refer to part one of this series for further information about the applicable tiers.

This article is part three of a three part series. 

If you would like further information please contact Jessica Middleton on 07 958 7436.

Introduction to the Disputes Tribunal

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An unfortunate fact of life is that people occasionally end up in dispute with one another.  Sometimes these can be big, and other times it can be over small amounts or issues.  When the latter happens, it is not always economical to engage a lawyer to help resolve the issues and often people are left feeling like there is no remedy.  The Disputes Tribunal is aimed at providing access to justice and assisting people in these situations.

The Disputes Tribunal

The Disputes Tribunal (“the Tribunal”) is a forum for hearing and determining disputes without requiring the assistance of lawyers.  The responsibility of preparing and attending a hearing will fall on the parties themselves.  The focus of the Tribunal is on practical dispute resolution and not technical legal analysis.

The Tribunal can hear most claims in relation to contract or tort, provided it is in relation to the destruction, damage or recovery of property.  The upper limit of any claim that can be heard by the Tribunal is $15,000 (or $20,000 by agreement between the parties), although there is currently a proposal to increase this agreed upper limit to $30,000.

Lodging a claim

In order to lodge a claim in the Tribunal, you must file an application with a filing fee (the amount of which depends on the amount of your claim) at your local District Court.  Alternatively, claims can be filled out and submitted online and you can even apply online for a rehearing.   Once you begin a claim online it must be completed; you cannot save your progress and return to the application later.

To avoid delays, it is important that your claim is filled out correctly.  Commonly, parties fail to correctly identify the parties involved or interested in the proceeding.  For example, claims may refer to an employee or director of a company rather than the company itself that was party to a contract.   Parties may also fail to include an important element of their claim in the claim form, causing the element that was not included to be deemed outside the jurisdiction of the Tribunal and therefore unable to be resolved at that particular hearing.

Defending a claim

When a claim is lodged against you, you will receive a notice informing you of what the claim is about and when it will be heard.  It is in your best interest to consider whether you settle the claim, attend and defend the hearing or lodge any counterclaims.   If you choose to lodge a counterclaim, both claims are typically heard at the same time.

Preparing evidence

Careful preparation of the evidence in support of your claim or defence is important to successfully bringing or defending a claim in the Tribunal.  Having accurate and relevant evidence will strengthen your case.  It is useful to create a timeline of events relating to the claim.  It is very important to include evidence to support the value or issue of what you are claiming (for example, quotes, invoices, receipts or bank statements and photographs).  It is also good practice to provide copies of all the evidence you intend to present at the hearing to the other party and to the referee before the hearing begins.

What to do before the hearing

After you have lodged a claim, or a claim has been lodged against you, a hearing will typically be scheduled within six weeks.  We set out below some points which you might consider in preparing for the hearing:

  • Make sure that you have read the notice of hearing (check the time, date and location of the hearing).  If you do not turn up, it is likely that the hearing will still proceed with the risk of an order being made in your absence.
  • If the hearing date is not suitable, contact the Tribunal as soon as possible to ask if a new date can be allocated.  You are more likely to obtain a new date for the hearing if you have strong grounds for not being able to attend on the original date.
  • Organise a support person to attend the hearing to help you sort through your evidence or remind you of important points.
  • The Tribunal aims to settle the claim by agreement between the parties during the hearing, so consider the basis on which you would settle and be prepared to negotiate.  With any Tribunal hearing there is a chance that the referee will not make an order in your favour.  When considering whether or not to settle, you should consider the strengths and weaknesses of your position and what you would accept to resolve the dispute.

It is important to notify the Tribunal if settlement occurs at any stage, particularly prior to hearing.

The hearing process

The hearing will begin with the referee outlining the procedure and rules for the hearing.  Both parties will then present their evidence during which the referee will ask questions about the evidence being presented.

Following this, any witnesses giving evidence at the hearing for the claim or defence will be called into the room separately.  After a witness has presented their evidence, the other party will have the opportunity to ask the witness questions.

The referee will then explain to both parties the relevant law and issues that need to be determined to resolve the dispute.  If you do not understand the law or the issues that the referee outlines, let the referee know.

When the issues have been worked through and both parties have a better understanding of their position, the referee will often ask whether the parties are willing to settle the dispute on their own terms.  Depending on the circumstances settlement may be the best option, so be aware of the strengths or weaknesses of your position throughout the hearing and how that may affect your decision to settle.

At the conclusion of the hearing and if settlement is not reached, the referee will not immediately issue a decision but will instead take time to further consider the evidence that has been presented by both of the parties.  The referee’s order and reasoning will be sent to the parties approximately two weeks after the date of the hearing.

What you can do

The Tribunal is an accessible dispute resolution option for the general public.  While lawyers are typically not able to appear in the Tribunal, our Dispute Resolution Team is able to assist with the preparation of claims or review of submissions for the process.

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

A practical approach to supervision under the Financial Markets Conduct Act 2013

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Introduction

The introduction of the Financial Markets Conduct Act 2013 (FMCA) was hailed as a ‘once in a generation rewrite’ with the aim of restoring confidence in New Zealand’s financial markets.  Phase 1 of the FMCA came into effect on 1 April 2014.  This was later followed by the introduction of Phase 2 on 1 December 2014.

We are currently in the ‘transition’ period between the full implementation of the FMCA (and associated legislation) and the full repeal of the Securities Act 1978 (and associated legislation) on 1 December 2016.

A key aspect of the FMCA was to consolidate and clarify the law relating to the governance of offers of securities under the Securities Act 1978 and its associated legislation, which tended to be a ‘mish-mash’ of governance rules that were scattered amongst several pieces of legislation.

Governance in general

Part 4 of the FMCA introduced stringent new governance requirements for regulated offers of financial products.  In general, these requirements impose overarching duties on issuers to maintain electronic registers and keep copies of documents for all such regulated offers, be they debt securities or managed investment products (MIP) under a managed investment scheme (MIS).

Specific requirements imposed on issuers of regulated financial products include:

  • A trust deed and supervisor for regulated offers of debt securities, in addition to general issuer and supervisor obligations.
  • A governing document, manager and supervisor for regulated offers of MIP under a registered MIS, in addition to general issuer, manager and supervisor obligations.

These requirements ensure a better understanding on the part of issuers, managers and supervisors with regard to the management of their accountability and responsibility to both investors and the Financial Markets Authority (FMA) by ensuring that compliance with the FMCA is achieved and the requisite information is provided to the FMA.

By giving supervisors less ability and opportunity to protect themselves from liability, the FMCA has promoted greater involvement on the part of supervisors in ensuring investor protection.

The role of the supervisor

The FMA regards the role of the manager of an MIS in a similar light to that of supervisors, namely being to ensure governing documents and governance arrangements are fit for purpose in placing investors’ interests above all else.

The FMA’s expectation is that those persons in a supervisory role must be able to demonstrate that they are empowered to carry out that role by:

  • Working with the manager/issuer in the development of appropriate governing documents.
  • Ensuring the governing documents allow them to act in the best interests of investors.
  • Ensuring that there are a range of tools available for use where the interests of investors are not met.

In addition, supervisors will generally be responsible for ensuring that managers of an MIS are adequately discharging their duties.

A practical approach

In a recent speech, the FMA’s Director of Compliance, Elaine Campbell, has recommended a practical approach be taken to the supervision responsibilities under the FMCA.  Supervisors occupy a key role under the FMCA and Campbell indicated the FMA would begin to place increasing emphasis on supervision responsibilities.  The FMA has advised issuers to start their planning from the top in the anticipation that boards and senior management will best understand the processes their firms are running.

The FMA’s focus is that an approach of preventative regulation will be most effective in identifying and anticipating potential causes of harm to market integrity and the interests of investors.  In a Media Release dated 9 March 2015 the FMA identified seven practices to overcome potential harm which are:

“ensuring quality sales and advice practices, addressing conflicted conduct in financial services, ensuring high standards of governance and culture among firms, ensuring integrity and growth in capital markets, ensuring effective frontline regulators, and improving information and resources for investors making decisions about products”.

The FMA has also intimated an approach that thinks beyond compliance.  It has advised that the effectiveness of the FMCA hinges on issuers going above and beyond the mere basic requirements prescribed by the FMCA, and it has indicated that it expects issuers to do just this.  The FMA anticipates that businesses will run systems to ensure that the highest standard of conduct is maintained.

The FMA has set out that supervisors will need to ensure they are sufficiently empowered to discharge their duties under Part 4 of the FMCA.  Supervisors must be assured of this before accepting any supervisory appointment.

Prior to accepting an appointment, supervisors should also review the relevant governing documents to ensure the minimum standards under the FMCA are met.  The FMA has emphasised the importance of ensuring that governing documents are well-structured from the outset in order to better allow supervisors to perform their obligations.

When to transition

The key decision for many businesses will be deciding when to adopt the new governance rules (and commit to FMCA compliance).

The expectation of the FMA is for supervisors to not take a ‘silent’ role but rather actively engage themselves with their subjects.  This includes consultation on the transition process from the Securities Act 1978 to the FMCA.

While some issuers may have already transitioned to the FMCA regime, others may be waiting for further clarification.  The decision on when to transition will ultimately depend on the individual circumstances with each situation being unique.  However, what the FMA has made clear is its willingness to act as a facilitator in encouraging and assisting businesses and other professionals in achieving compliance with the FMCA.  This facilitative approach indicates the FMA’s desire to ensure problems are identified and rectified and assist in a smooth transition for affected parties from the Securities Act 1978 to the FMCA.

The new framework encourages supervisors to take a more central and active approach to their role.  Issuers and supervisors should therefore be more accommodating and open with one another in regard to information and what each party needs from the other.

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

Fair Trading Amendment Act update: Section 26A – unfair contract terms

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Almost one year after the introduction of the Fair Trading Amendment Act 2013, section 26A, which relates to unfair contract terms in standard form consumer contracts, came into force on 17 March 2015.

The purpose of the ten month delay between the introduction of the Act and the enactment of section 26A was to allow businesses enough time to ensure that all standard form consumer contracts comply with the new laws.  The Commerce Commission has stated that there will be no ‘grace period’ for businesses now that this section has come into effect.

If a consumer believes a contract term is unfair, the consumer is able to make a complaint to the Commerce Commission.  Section 26A allows the Court, on application by the Commerce Commission, to declare a term in a standard form consumer contract to be unfair.  A term that is found to be unfair cannot be enforced across all contracts of that business.

Section 26A applies to all contracts entered into from 17 March 2015.  It will also apply to any pre-17 March 2015 contract that is varied or renewed after the enactment date, even if the variation or amendment is a minor one.

A business or trader that breaches section 26A could be liable to a fine of up to $200,000 for an individual or up to $600,000 for a body corporate.  The business or trader may also be required to make a Court enforceable undertaking, prohibiting the use of the term in future contracts.

Section 26A can only apply to standard form consumer contracts.

A standard form consumer contract is a contract that has not been subject to “effective negotiation” by the parties.  Gym contracts, telephone/mobile phone contracts and hire purchase agreements are all examples of standard form contracts likely to fall into this category.

If the Commerce Commission alleges a standard form contract exists, the onus is on the defendant business to prove otherwise.

Terms that define the main subject matter of the contract or which transparently set the upfront price of the goods or services are exempt under the section and may not be declared unfair contract terms.  This encourages clarity and certainty in trade and business.

What is an ‘unfair’ term?

For a term to be found to be ‘unfair’, the Court must be satisfied:

  • That the term causes significant imbalance to a party’s rights or obligations.  In determining this, the Court will consider the contract as whole, and whether the unfair term in question is balanced by other, more favourable, terms in the contract.  For example, the high early cancellation cost in a gym membership contract may be balanced by the cheaper membership price initially paid by the consumer.
  • That the term is not reasonably necessary to protect the legitimate interests of the party that is advantaged by the term.  The onus is on the business to prove that the unfair term is ‘reasonably necessary’ to protect the interest of that business.  For a clause to be reasonably necessary, it must be shown that the interest of the business cannot be reasonably protected by any fairer means.

    An example of where such a term may be necessary is in a Sale and Purchase Agreement for a mortgagee sale, where a bank has excluded the usual vendor warranties. This may cause an imbalance prejudicial to the purchaser as the purchaser does not have the protection of the vendor’s warranties, however it is necessary to exclude these terms to protect the bank.  The bank will not have day-to-day knowledge of the property and cannot give these warranties.

  • That the term would cause detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied on.  The threshold for showing detriment to a party is not high.  In the Australian case of ACCC v ByteCard it was found that temporary loss of internet and access to emails was detrimental to consumers.  It is likely that the New Zealand Commission will take a similar approach.
Tips for businesses and traders

It is important for a business to be able to identify potentially problematic terms.  Be aware of ‘grey list’ terms, review the guidelines published by the Commerce Commission and keep up to date with Commerce Commission decisions.

When drafting or reviewing contracts:

  • Aim for mutuality of clauses (for example, when considering termination rights).  Is a potentially unfair term balanced by a more favourable term?
  • Ensure you can justify the use of the term and show that is it is reasonably necessary to protect a legitimate commercial interest.  Be prepared to identify the reason for any potentially unfair term, and keep any evidence that helps show that the term may be reasonable.
  • Avoid using clauses that overreach.  Any penalty or liquidated damages clauses should reflect actual costs that would arise from a breach of contract.
  • Consider whether contracting out of the Fair Trading Act 1986 is an appropriate option in business-to-business transactions.
  • Make sure any surprising, unusual or particularly onerous contractual provisions are clear and visible.  Consider including these in a prominent position, such as in the definitions or interpretation sections of the contract.

It is important that all businesses review their standard form consumer contracts to ensure that they comply with the new consumer protection laws.

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

Fair Trading Amendment Act

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Enacted in 1986, the purpose of the Fair Trading Act is to encourage competition in trade, while protecting consumers from misleading and deceptive trade practices.  2014 saw a number of significant changes in New Zealand consumer law, specifically, the introduction of the Fair Trading Amendment Act 2013 (“the Act”).

We set out the changes below.

Unsubstantiated representations

The new Act has introduced a provision that prohibits traders from making unsubstantiated representations.  The purpose of this change is to discourage traders from making claims that are untrue.  A Business must be able to ‘back up’ its claims before its product goes to a consumer.  A representation is unsubstantiated if the person making the representation does not, when the representation is made, have reasonable grounds for the representation, irrespective of whether the representation is false or misleading.

Contracting out of the Act

Previously, a business was unable to enforce any agreement that was contrary to its obligations under the Fair Trading Act.  The new Act gives businesses the ability to contract out of certain Fair Trading Act obligations in their dealings with other businesses.  Businesses may only contract out of the provisions relating to misleading and deceptive conduct, and representations.  Both parties must agree to contract out of the provisions, and the agreement must be in writing.

Unfair contract terms

In March 2015, the Court, on application by the Commerce Commission, will be able to declare terms in some consumer contracts to be unfair contract terms.  For further information on this change, please see our article on the new section 26A.

Product safety

The Act now includes a provision for voluntary recalls of products that are found to be unsafe and increases the powers of the Commission relating to this.  The Minister of Consumer Affairs may require a supplier to recall goods, disclose information or provide a repair, replacement or refund, if it was reasonably foreseeable that use or misuse of a good could cause injury.

Unsolicited goods or services

Under the Act, it is an offence for a person to assert or appear to assert that they have any right for payment for unsolicited goods or services.  An unsolicited good or service is a good or service provided to a person when that person has not asked for that good or service.  A sender of unsolicited goods must inform the recipient of their rights and obligations.  The recipient is not obliged to pay for unsolicited goods, his or her only obligation is to make the goods available for collection by the sender within 10 working days after the goods are delivered.  If the goods are not collected within that period, the recipient takes the goods as an unconditional gift.

Layby sales

The Act now regulates layby sales, however these new provisions only apply to agreements entered into after 17 June 2014.  The Act provides that a layby sale must be in writing, and a copy of this is to be given to the consumer.  Information relating to cancellation of the sale, including any fee to be charged and how this is calculated must be also be provided.

Uninvited direct sales

An uninvited direct sale is when a business, or their agent, approaches a consumer uninvited at their home, workplace, or over the telephone.  The Act replaces the Door to Door Sales Act 1986 which previously regulated door-to-door and telemarketing sales.  Under the  Act, a consumer has  a five working day period from receipt of the sale agreement (or at any time if no agreement is given) in which the consumer may cancel the contract.  The consumer must be given oral notice of the cancellation provision and a written copy of the sale agreement before agreeing to the transaction.

Extended warranties

Regulation relating to extended warranties has been introduced to allow for greater consumer protection.  When offering extended warranties, suppliers must set out the existing rights of the consumer and what extra rights the extended warranty will provide.  There is also a regulated cooling off period and liability for the actual warranty provider as well as the supplier who arranged the extended warranty.

Auctions

The auction process is now specifically regulated under the Act.  Auctions, for the purpose of this section, are conducted by auctioneers and a fee or commission is charged.  Online auction-style sites, such as TradeMe are excluded.  This section makes it clear how auctions are to be run and introduces new rules relating to vendor bidding.  The Consumer Guarantees Act 1993 will now also apply to goods and services sold at auctions and by tender.

Conclusion

The Fair Trading Amendment Act is a key development in New Zealand consumer law and seeks to modernise the legislation relating to the sale and purchase of consumer products.  It will also align our consumer standards with similar Australian legislation as many of our goods and services cross the Tasman.

The Act is a positive change to consumer law, it has not only strengthened consumer rights and created bold new obligations on businesses in trade, it has also provided the Commerce Commission with the tools needed to successfully enforce the Act.

The Fair Trading Amendment Act will significantly impact most businesses.  We suggest that all businesses review their current procedures to ensure that they comply with the changes.  Please contact one of our Team for assistance should you have any queries.

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

Contact us

HAMILTON OFFICE

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E. reception@mccawlewis.co.nz

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Hamilton 3204
New Zealand

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