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Rapid Reforms: New fast-track regime under scrutiny for environmental impact

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The Government is actively engaging with various iwi and hapū across the motu, discussing the repeal of the resource management reforms and the development of new legislation aimed at accelerating the resource consent process.

The Hon. Chris Bishop, the newly appointed Minister in charge of resource management, has introduced the concept of a “one-stop shop” for fast-track consent applications within the changes to the resource management legislation.  The legislation is scheduled to be presented to Parliament as a Bill by 8 March 2024.

With the Natural and Built Environments Act 2023 (NBA) repealed, the new legislation is expected to retain elements of the resource management reforms, specifically the fast-track consenting process.  The current process streamlines industry-specific projects through a two-step application and assessment process overseen by the Environmental Protection Authority (the Authority).

The new government has indicated a significant shift within the new fast-track regime with a focus on economic development, adding a wide array of industries such as mining and aquaculture to the fast-track criteria.  However, criticisms have emerged, including concerns about potential neglect of environmental and social considerations, the subjective nature of project referrals from Ministers, and possible impacts on environmental protection measures.

While the Government has expressed a commitment to upholding Treaty settlements through development of the new scheme, challenges for iwi and hapū include ensuring meaningful participation in the process, particularly in areas that are subject to Statutory Acknowledgment Areas (SAAs) as set out in their respective settlement legislation.

Key considerations arising from these discussions include:

  • Public Participation Concerns: There are concerns about reduced public participation in decision-making, prompting a need for legislative pathways to guide decision-makers in assessing cultural effects on iwi and hapū.
  • Stakeholder Engagement: Stakeholder input is more limited in the fast-track process, for example the expert panel can choose to opt out of a hearing, which has been common practice.  Additionally, applications under the previous legislation required a cultural impact assessment from the relevant iwi authority, leading to potential issues in identifying the appropriate authority.  It is also unclear whether this requirement will be carried over into the new fast-track scheme.
  • Lack of Clarity: It is important to note the requirement for clear criteria regarding the panels’ ability to reject applications referred from Ministers, particularly when it comes to projects that could have significant impacts on the environment and cultural values.

In summary, iwi and hapū should be cautious regarding the imminent introduction of the new fast-track regime to Parliament.  Concerns revolve around reduced public participation and the potential for political interference.

Provisions for SAAs and clear legislative pathways for iwi and hapū engagement are crucial to addressing potential cultural and environmental impacts, ensuring a fair and comprehensive assessment of fast-track consent applications that align with established Treaty settlement commitments.

If you’re interested to learn more about the new regime, the Government has released more detailed comments that you can access in the following link.  Should you have any questions on these developments or on other resource management matters, don’t hesitate to reach out to one of our resource management experts.

Tipene is a Senior Solicitor in our Kahurangi Team and can be contacted on 07 958 7430.

“Right to Disconnect” Bill – A look into Australia’s new working hour bill and how it stacks up against New Zealand Employment law

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Our phones make us contactable at all hours, and COVID-19 has taught us that office workers can work from pretty much anywhere.  The Australian Senate recognised that this blurs the lines of “working hours” and passed the Right to Disconnect Bill.  The Bill gives employees protection to ignore calls, texts and/or emails after hours without fear of penalty.

In this article, we look at the Bill and how it stacks up against our laws in New Zealand regarding working hours.

Right to Disconnect Bill (Australia)

The Right to Disconnect Bill has been introduced in Australia in response to the growing connectedness created by phones and social media.  Under the Bill, employees can ignore any after-hours calls/emails and/or text messages from their employer, and there can be no retribution from the employer and/or detriment to an employee’s role or progression.  In fact, an employer could be fined AU$18,000 if an employee successfully raises concerns regarding an employer’s after-hours contact.

What is the situation closer to home?

While France, Italy and Belgium have taken a similar approach to Australia, we have yet to jump on this bandwagon here in Aotearoa.

Under the Employment Relations Act 2000, New Zealand employees have the right to work no more than 40 hours per week – unless otherwise agreed.  Since 2016, Zero-Hour Contracts have been prohibited – an employer can no longer require an employee to work whatever hours are required, whenever.  There must be a number of “guaranteed hours” for an employee, and any additional hours and availability requirements must be agreed and compensated.

Many salaried employees have provision in their Employment Agreement that they may be required to work additional hours to meet the demands of the business/perform their role effectively.  In these provisions, employees agree that their salary compensates them for that extra availability.

Practically speaking, work hours and expectations are best managed where there is honest and positive discussions between employers and employees from the outset of an employment relationship.  For example, some employees may seek flexibility in their working hours or arrangements to attend to personal matters during work hours.  The reasonable trade off for that may be that there is an email or two to check after hours.  Again, positive communication and reasonable expectations – in line with the values or aspirations of an organisation – can go a long way toward avoiding issues in this respect.  If there are queries in your workplace, a policy in this respect may be useful to provide that clarity.

Employment law assistance

Our Workplace Law Team is able to assist with all working hour-related employment pātai that you may have.  We are also available to discuss employment processes and any other bespoke employment queries.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

Employment Law Changes – What’s Ahead for 2024

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The Government has already implemented changes to Aotearoa’s employment law framework, with further changes forecast for 2024.  We set out a few of the most notable changes and what employers should be mindful of.

90-day Trial Periods

The previous Government determined that 90-day trials could only be used for businesses of 19 employees or less.  As of 23 December 2023, 90-day trial periods can again be utilised by all employers in Aotearoa.

In light of this change, we recommend that employers re-familiarise themselves with trial periods to ensure they are clear on their obligations.  90-day trial periods cannot be utilised in conjunction with probationary periods and can only apply to new employees.

Minimum Wage

From 1 April 2024, the adult minimum wage will be increasing from $22.70 to $23.15 per hour.  For a full-time employee on a 40-hr week, this equates to $48,152 per annum.  Living wage is currently at $26.00 per hour (as at September 2023).

The Starting Out/Training minimum wage will be increased from $18.16 to $18.52 per hour.

Employers need to ensure that all employees are paid at least the minimum wage for every hour actually worked (regardless of any employment agreement).  Any payroll systems and employment records will also need to reflect the minimum wage changes.

Worker Protection Act

On 6 January 2024, the Worker Protection (Migrant and other Employees) Act 2023 (WP Act) came into effect. The WP Act aims to protect employees from exploitation in Aotearoa.  A key provision of this Act is the ten day timeframe for employers to comply with any Labour Inspector requirement.  The main role of a Labour Inspector is to ensure workplaces are upholding employment law standards.

The WP Act also disqualifies offenders convicted of migrant exploitation and/or trafficking from being able to manage or direct a company.  This provision helps limit the chance of reoffending in that capacity.

Fair Pay Agreements

In December 2023, the Fair Pay Agreements Act 2022 (FPA) was repealed.  The FPA meant that unions and employer associations could bargain for employment terms and conditions which would then apply to all covered employees in that particular industry or occupation.  In short, the removal of this will not affect all workplaces and/or employees but if you think it affects your area, you may wish to seek specific advice.  Collective bargaining remains available for unions and employers under the Employment Relations Act.

Get in touch

If you need help identifying what these changes mean for you or your business or want to talk through any employment related matters, our Workplace Law Team at McCaw Lewis is well-equipped to assist you and make things that bit easier.

Tazmyn is a Solicitor in our Workplace Law Team and can be contacted on 07 958 7467.

Annual Leave and Public Holidays – Frequently Asked Questions

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The Christmas Holidays are fast approaching!  Here is a quick guide to frequently asked employment questions around this time of year.

What are employees’ entitlements for public holidays?

If your employee works on a public holiday, they must be paid time and a half.  Further, if the public holiday falls on a day your employee would ordinarily be working, and they do work, that employee is also entitled to a day-in-lieu.

Since our public holidays over the Christmas break this year are either on a Monday or Tuesday, for many they will fall on a day that an employee would otherwise be working.  If this is the case, and the employee is not required to work (e.g. there is a closedown), the employee is entitled to be paid for that day.

For example, in the recent case Unite Union v Wendco (NZ) Limited, the Employment Relations Authority determined that Wendy’s fast food restaurants are not exempt from paying their employees on Christmas Day.  Wendy’s claimed it was customary for them to close on Christmas Day, therefore it would not be an “otherwise working day” for employees who were rostered on.  The Authority disagreed, stating that if Christmas Day were not a public holiday, Wendy’s would not be closed and employees would be rostered on.  Accordingly, those employees would be entitled to wages for the non-worked public holiday.

Is a casual employee entitled to payment for a non-worked public holiday?

Potentially.  In Unite Union v Wendco (NZ) Limited, the Authority explained that casual employees can be entitled to wages for a non-worked public holiday.  With Christmas Day being on a Monday this year, if a casual employee has been regularly working on Mondays for the weeks preceding, then they will be entitled to wages for the non-worked public holiday.

An employee resigned, and their last day is just before the Christmas break.  Do we still need to pay them public holidays?

If your employee has accrued annual leave to be paid out, then they may be entitled to payment for the public holidays as well.  An employer needs to calculate how many annual leave days will be paid out, and add that to the last day of employment.  An employee must be paid for the public holidays if their annual leave entitlement adds up and takes them through those public holidays – as if they had applied for, and taken, all their leave before their last day of work.

Can an employee refuse to work a public holiday?

An employee does not have to agree to work a public holiday, unless:

  • They have agreed to work the public holiday in their employment agreement; or
  • The public holiday is on an “otherwise working day” and their employer requires them to work.

Employment law assistance

Our Workplace Law Team are able to assist with all holiday-related employment pātai that you may have prior to the Christmas break.  We are also available to discuss employment processes and any other bespoke employment queries that you may have – festive or not.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

Waitangi Tribunal MACA Report – Everything you need to know

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The Marine and Coastal Area (Takutai Moana) Act 2011 (the Act) was introduced in 2011, replacing the Foreshore and Seabed Act 2004. This legislation was aimed to restore customary interests previously extinguished under the 2004 Act, establish statutory tests for recognising customary interests and provide for public access.

Under the Act, Māori can obtain legal rights in the form of customary marine titles or protected customary rights, with two application pathways available.  Māori can apply to the High Court for a recognition order or engage directly with the Crown or do both.  In each case, applications for customary rights had to be filed by the statutory deadline of 3 April 2017.

The Waitangi Tribunal has recently inquired into the Act as a priority, acknowledging its impact on Māori and the importance of customary rights.  In its Stage 1 Report, released in 2020, the Tribunal found that certain aspects of the procedural and resourcing arrangements breached the Treaty of Waitangi and negatively affected Māori.  The Tribunal’s Stage 2 Report was released in October 2023 and examines whether the Act breaches Te Tiriti o Waitangi (Tiriti) principles and prejudices Māori.

Overview

In its Stage 2 Report the Tribunal found that aspects of the Act do breach Tiriti principles and cause prejudice to Māori for various reasons, including:

  1. The Crown’s inability to facilitate well-informed and meaningful Māori participation in the consultation process.
  2. The inability to provide a fair and reasonable statutory test for customary marine title.
  3. Failing to offer Māori a choice between having their applications heard in either the High Court or the Māori Land Court.
  4. Unjust exceptions that limit the scope of protected customary rights.
  5. The exceptions of accommodated activities and deemed accommodated activities reducing the regulatory authority of customary marine title holders, weakening their permission rights.
  6. Insufficiently empowering Māori to preserve wāhi tapu and wāhi tapu areas under the wāhi tapu protection right.
  7. Vesting reclaimed land in the Crown, resulting in the extinguishment of Māori customary rights without compensation and preventing the granting of customary marine titles and protected customary rights.

Duty of Active Protection

The Report emphasises that under the principle of active protection, the Crown must seek input from Māori on what they consider taonga and ensure their protection.  The Tribunal confirms that, “the marine and coastal area as a whole is a taonga that has significant importance to Māori.”

The current rights provided by the Act do not sufficiently support Māori in their kaitiakitanga duties and rangatiratanga rights.  The Act fails to address certain types of rāhui undermining the ability of Māori to exercise tino rangatiratanga.

The Act’s statutory deadline for filing applications has caused prejudice to those who missed the deadline altogether, as they can no longer seek legal recognition of their customary interests in te takutai moana.

The Act’s restrictions on the alienation of customary marine title also contributes to the breach of the Crown’s duty of active protection.  Under section 58 of the Act, adding ‘without substantial interruption’ to the test raises the risk of some applications failing.  The Act already covers the protection of existing interests in te takutai moana in other sections, so the Tribunal found that the addition is not necessary.

Duty to Consult

The Report states that even though the principles of partnership and active protection required the Crown to consult with Māori to a greater degree than the public, given the particular interest that Māori have in the taonga that is te takutai moana, there was little evidence to suggest that the Crown made meaningful efforts to engage with Māori specifically.

The Act has a substantial impact on the relationship Māori have with te takutai moana.  The Crown’s duty to consult with Māori in developing the Act is of the utmost importance and goes beyond simple outreach or data gathering.  When key elements of a policy are deemed non-negotiable, it severely undermines meaningful consultation.  The Crown’s insistence on these non-negotiables is seen as a lack of good faith toward Māori.

Duty to Act in Good Faith as Treaty Partners

Partnership

The Tribunal has consistently upheld the idea that Te Tiriti signifies a partnership between the Crown and Māori.  The partnership is built on the fundamental premise that each partner should act reasonably and in the utmost good faith towards the other.  It encompasses a commitment to act honourably, reasonably, and in good faith, aligning with the principles of reciprocity and mutual benefit.

The notion of reciprocity does not imply that Māori gave the Crown unrestricted legislative supremacy over resources.  Instead, it highlights the need for a balanced approach where the interests of both Māori and non-Māori are considered fairly and reasonably.  The Tribunal believes there is a place for both peoples and their interests in the foreshore and seabed.

The Tribunal considers that the Act’s statutory deadline unjustified and does meet the standard of acting reasonably and in good faith toward Māori.  This conclusion is based on the lack of compelling evidence supporting the choice of a six-year deadline, and the Crown’s flawed argument about legal certainty.  The Tribunal found the Act’s statutory deadline is in breach of the Treaty principles of partnership and active protection.

Tribunal’s Recommendations

In summary, the Tribunal finds that the Act fails to adequately support Māori in their roles as kaitiaki and in exercising rangatiratanga rights.  The Tribunal recommends specific amendments to the Act to rectify these issues.  These include:

  1. Improving the statutory test for customary marine titles.
  2. Repealing the statutory deadline.
  3. Allowing applicants flexibility between the High Court and Māori Land Court.
  4. Addressing exceptions to protected customary rights.
  5. Repealing specific exceptions to the scope of permission rights.
  6. Increase the scope of the Act’s compensation regime.
  7. Separating the legal protection for wāhi tapu areas from the regulations and requirements associated with customary marine title under the current regime.
  8. Compensate affected iwi, hapū, and whānau for all reclaimed land vested in the Crown.

Conclusion

The Tribunal supports that te takutai moana is a taonga.  Consequently, the Crown is required under the principle of active protection, to engage in genuine and meaningful consultations with Māori to seek their perspectives and ensure the safeguarding of this taonga.

At this stage, it is uncertain to what extent the Tribunal’s findings or recommendations will be addressed by the Crown.  For those with takutai moana applications before the High Court or in engagement with the Crown, the Tribunal’s findings and recommendations will be relevant in some respects.

The experienced team at McCaw Lewis can help you navigate any aspect of your Takutai Moana matters and answer any questions you may have.

Developments of Tikanga Within Employment Law

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The GF v Comptroller of Customs case is a significant decision reinforcing the relevance of tikanga/tikanga values in the employment jurisdiction and the heightened obligations on public service employers.

The applicant GF was hired by New Zealand Customs Service (Customs) as an Assistant Customs Officer in a maritime border role.  During the COVID-19 pandemic, GF was dismissed due to not being vaccinated.

GF challenged the dismissal with the Employment Relations Authority and was unsuccessful.  GF then appealed the ERA’s decision to the Employment Court where the Court overturned that ERA decision.  The Court awarded GF compensation for breach of good faith and lost wages, and found that the dismissal was unjustified as Customs failed to act as a fair and reasonable employer.

Tikanga

Customs had incorporated, tikanga values/principles into its employment documentation, including as kotahitanga, kaitiakitanga and manaakitanga.

Against that background, the Court stated:

“While the Employment Relations Act does not expressly incorporate tikanga/tikanga values, I agree with Te Hunga Rōia Māori that the statutory framework for employment relationships does not preclude their incorporation. Indeed the tikanga/tikanga values identified in this case seem to me to sit entirely comfortably with an area of law which is relationship-centric, based on mutual obligations of good faith, and focussed (where possible) on maintaining and restoring productive employment relationships”

Despite GF not being Māori, the application of tikanga values was not limited to those of Māori descent, given tikanga was incorporated generally into Customs’ relationship with all staff.

The Court held that where an employer operates an employment relations framework which purports to incorporate tikanga/tikanga values, the extent to which such commitments have been met is relevant to assessing the fairness and reasonableness of an employer’s actions, compliance with the good faith obligations and where the evidence demonstrates a commitment to act in accordance with tikanga, an employer should be obliged to do so.

Important Lesson for Employers

While this case puts all public service organisations on notice that they will likely be held to a higher standard, and that the “good employer” obligations factor into the section 103A of the Employment Relations Act 2000 fair and reasonable employer test, it is important that employers who incorporate tikanga values within their business, organisation or firm also ensure they are operating in line with those tikanga values.  It is helpful to understand:

  • what values you seek to incorporate, including from a te ao Māori perspective;
  • how these values are being incorporated through your business (i.e. through employment agreements, policies and procedures, contracts, etc); and
  • how will you, as the employer and employee act in accordance with those.

If you have tikanga values within your business, it would be helpful to go through and check how these are working for you, or whether you need to adapt these to provide clarity and certainty as to working in line with those values/principles.

Cree is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 808 6069.

Workplace Investigations – Addressing Allegations, Complaints and Concerns in the Workplace

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As an employer, it can be difficult to know what to do when faced with allegations of a serious nature.  Allegations could form an employee’s formal complaint of bullying and/or harassment, or they could be the employer’s own concerns that an employee has engaged in serious misconduct.

As a starting point, the complaint/concern needs to be taken seriously and the employer needs to determine whether an investigation is required to then be in a position to make an informed decision about what to do next.  Not all allegations or minor complaints require a formal investigation straight away, but employers need to turn their minds to this.  If an investigation is the way forward, this article provides some basic tips to start.

Some employers will have the resources internally to undertake a investigation into the matter.  Others will not have the resources/expertise or are run off their feet trying to operate their business, and may wish to take a more risk-adverse approach and outsource the process.

Set out below is a glimpse into the process of a workplace investigation, the circumstances where an investigation could be required, and whether an internal or external investigation may be better suited.

What does an investigation entail?

Any investigation must follow what a fair and reasonable employer could have done in all the circumstances.  An investigation must:

  • Be undertaken in good faith;
  • Follow a fair and thorough process;
  • Utilise principles of natural justice.

The purpose of an investigation is to gather information and establish the facts.  An investigator should not recommend next steps or advise what decision should be made – they will make findings of what they consider occurred based on evidence gathered.  The investigator will also adhere to agreed Terms of Reference, which outlines the matters for investigation and the process.

The investigator must conduct their investigation without bias or predetermination.  They must uphold confidentiality and allow the employee a reasonable opportunity to respond to the allegations, and those interviewed the opportunity to be heard.

The process depends on the kind of investigation required.  As a starting point, the employer needs to:

  • Review the employment agreement and company policies to check for the process.
  • Identify a preferred investigator.
  • Identify a preferred decision maker.
  • Formulate Terms of Reference for the investigation. These form a roadmap and explain the process to be undertaken.
  • Advise the employee concerned about the allegations, and share the draft Terms of Reference. Seek their feedback on the proposed investigator, decision maker, Terms of Reference and process.

An investigation can now begin, which broadly involves an investigator:

  • Interviewing witnesses and formalising their statements;
  • Providing the witness statements to the employee concerned;
  • Interviewing the employee concerned and seeking their feedback to the allegations and witness statements;
  • Formalising a draft report for feedback;
  • Considering feedback received and finalising the report;
  • Providing the report to the decision maker. The report will not contain recommendations for next steps – it will only contain the investigator’s findings linked to the evidence.

The decision maker can then consider the findings and make an informed decision as to next steps.

Who should undertake the investigation?

Employers can choose to investigate internally if they have the resources and time required, or alternatively can utilise an external workplace investigator.

Employers may opt to undertake the investigation internally if they have the resources and time needed.  The investigator must remain neutral and present the evidence gathered in a balanced way, for the decision maker to consider.  If an employer is looking to undertake the investigation internally, we recommend seeking legal advice regarding the process.

If an employer is looking to appoint an external workplace investigator, they must be:

  • a licensed private investigator under the Private Security Personnel and Private Investigators Act 2010; or
  • a lawyer holding a current practising certificate from the New Zealand Law Society.

The content of the allegations will also determine whether to conduct the investigation internally or outsource.  We recommend engaging an external workplace investigator for:

  • Serious allegations made by an employee against their employer/senior employees.
  • Any matters where there may be concern as to bias or predetermination.
  • Serious allegations that include bullying, harassment or discrimination. These issues are complex, sensitive and are best investigated by an independent.
  • Allegations of dysfunction amongst a team of employees.
  • Allegations regarding concerns of health and safety.

Summary

Overall, the best approach is to look after your employees and take every complaint seriously.  Each complaint and/or concern will require a tailored approach as to best practice, however if an investigation is required, any investigator – whether internal or external – needs to handle matters confidentially, impartially and fairly.

Investigating complaints and concerns can be complicated.  Whether you require a workplace investigator, or are looking to carry out the investigation internally, and would like guidance, our team is able to assist.

Employment law assistance

Our Workplace Law Team is able to assist with all employment processes, workplace investigations and any other bespoke employment queries.

Chantelle is a Senior Solicitor in our Workplace Law Team and can be contacted on 07 958 7473.

Things to talk to your lawyer about pre-Christmas

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It’s that time of year again when we start seeing Christmas-related advertisements, decorations on display and holiday songs on the radio.

Most years, McCaw Lewis sees a bit of a rush in the lead-up to Christmas, as people realise that most law firms shut down for the Christmas break, and scramble to sort out the things they may have been putting off.

To avoid that last-minute panic, here’s a handy list of things to turn your mind to now – to beat that Christmas rush:

  • Do you have appropriate documentation in place to govern your business relationships, e.g. an up to date and comprehensive Shareholders’ Agreement? Things might be ticking along nicely right now, but a stressful holiday period can lead to potential disagreements among co-owners.  It is better to make a plan of how you will work together now, rather than wait until things start to go awry.
  • On a related note, are you or someone you are in business with planning on taking some longer leave and going off-grid these holidays? If so, you may wish to consider putting specific power of attorney (or similar) documentation in place to make sure things can continue to run smoothly.
  • Personal asset planning.  On a personal level, are your asset planning matters current? Do you have up-to-date Wills (and wishes if you have a trust)? Are your Enduring Powers of Attorney in place? Do you have someone who can continue to run your business if the unthinkable happens?
  • Employment matters.  If you have a shutdown period, have you advised all your staff (and do they all have enough leave to cover that period)? Are your staffing needs sorted, or will you need to employ casual staff?  Do you know your obligations in relation to holiday pay?  Are you on top of the employment law changes that might affect your business during the busier season – e.g. your health and safety obligations if you are having a Christmas party?
  • Don’t forget that under many standard agreements (including the standard ADLS agreement for the sale and purchase of real estate), the period between Christmas Eve and 5 January are not considered “working days”, meaning the agreement is essentially put on pause. Is there anything you may want to settle up prior to the new year?  Best to get on to it now.
  • Are your terms of trade/contracts sufficient?  Have a read through to ensure they are up-to-date and reflect what you want to achieve, especially if you expect to see an increase in business over the silly season.
  • Compliance and regulations.  In general, are you on top of the ever-changing NZ laws and regulations that may apply to you and/or your business?  Chat to us if you have any concerns, particularly if you expect to see an increase in business in the coming months e.g. via sales and promotions.
  • E-Commerce and data security. Particularly if you operate an online function in your business, are your systems secure, and compliant with data protection laws?
  • Privacy policies. Particularly if you collect customer/client data, you will want to ensure these policies are up-to-date and compliant.
  • Intellectual property. Is your brand/unique product adequately protected? We can help you with any trademark/copyright/patent queries you may have.

It may seem a way off yet, but December is just around the corner, and it may save you a lot of stress to sort your affairs our early so you can round out the year knowing you are well protected no matter what may come.

No question or issue is too small, so please do get in touch if anything you’ve read here has made you ponder.

Laura is a Director in our Commercial Team and can be contacted on 07 958 7479.

The Mainzeal Decision: What does it mean for Directors?

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After nearly a decade of litigation, the Supreme Court has dismissed appeals from the four former Mainzeal directors that they breached their duties under the Companies Act 1993.  The decision has sent shockwaves through the NZ business landscape, setting a significant precedent for company law and having the potential to redefine the responsibilities of company directors.  So, what does it mean for company directors going forward?

Background

Mainzeal, once a prominent player in the New Zealand construction space, went into liquidation in 2013, and left behind it a long trail of unpaid debts and unfinished construction projects.

The liquidators subsequently filed a lawsuit against the four former Mainzeal directors – Richard Yan, Dame Jenny Shipley, Peter Gomm and Clive Tilby – alleging that they had breached their fiduciary duties under companies legislation by allowing the company to continue to trade while insolvent, failing to act in the best interests of the company and its creditors, and allowing the company to enter into contracts that it could not fulfil.

The decision

The court has ultimately ordered the four directors to contribute nearly $40m towards Mainzeal’s assets.  Ultimately this endorses the previous decisions on the matter, and awards a similar amount of compensation as that awarded in February 2019 in the High Court.

This decision emphasises how important it is that directors understand and fulfil their duties under companies legislation – particularly where they are on the boards of companies that are in potential financial difficulty.  More important, it is prompting discussions and potential reforms in the area.

What now?

So, what are the key takeaways if you are a company director?

  • Make sure you understand your company’s financial position – particularly in the current economic environment. It’s not enough to simply make decisions in good faith; you need to do so with all the relevant information available.  Set up systems that allow you to monitor your financial position, and get good advice.
  • If you have any concerns about the financial stability of your company, get advice early. The Supreme Court judgment is clear that directors will be allowed a reasonable time to take stock and get financial and legal advice, even if that means that the company is technically trading while insolvent in the short term.  Get a plan in place for managing and mitigating any potential issues, and avoid taking on any substantial new company obligations.
  • If you then decide to continue trading, make sure you follow sound corporate governance principles, get ongoing advice, continually monitor the situation and keep reviewing that decision until you can be confident you are in the clear.

Importantly, the Supreme Court did endorse the view put forward by the Court of Appeal that a review of New Zealand’s companies legislation, particularly around insolvent trading, is appropriate – so watch this space.

Laura Monahan is a Director in our Commercial Team and can be contacted on 07 958 7479.

Is My Inheritance Relationship Property?

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Following on from our article “Is My KiwiSaver Relationship Property” we continue our Relationship Property Series by addressing the question “is my inheritance relationship property”.

To answer this question, we need to understand the term known as “intermingling”.  Understanding what intermingling is, and how it occurs, will help ensure your inheritance is applied as intended.  This article outlines several common examples of intermingling, and actions you can take to prevent this from happening.

The starting point for inheritance is that it is classified as a gift, which makes it “separate property” under the Property (Relationships) Act 1976 (the Act).  However, an inheritance that is “intermingled” with relationship property can lose its status as a gift.

Common Examples of Intermingling

Intermingling occurs when property (or its proceeds) become so entangled with other relationship property, that it becomes impracticable to classify it as separate property.  The whole property then becomes relationship property.

Examples of when inheritance can become intermingled are:

  • Using inheritance to repay a relationship debt/loan. A typical situation is parties using inheritance monies to service a house mortgage;
  • Depositing inheritance monies into bank accounts used by the relationship, for instance, joint bank accounts;
  • Purchasing assets with inheritance monies, which are then used in the relationship. Buying a car that becomes the family vehicle, would be a common example.

In each of these scenarios, while it may make financial sense in the moment, as time goes on it becomes harder and harder to distinguish if the inheritance monies are separate, or relationship property.  If it becomes too hard to tell, the chances are your inheritance has “disappeared”, and become intermingled with other relationship property.

Keeping Inheritance Separate

If you are looking to protect or manage your inheritance in these sorts of situations, common ways to do so are as follows:

  • Using/investing the inheritance in something completely separate from the relationship, such as a term deposit in your own name;
  • Entering into a contracting out agreement with your partner under the Act, often referred to as a “pre-nup” or “pre-nuptial agreement”. This agreement would specify how the inheritance, regardless of its use, is treated upon separation.  A contracting out agreement can be entered into at any point before, or during, the relationship;
  • Setting up a trust to deal with the inheritance, separate from the relationship.

Knowing which option to take can be confusing at the best of times, but being aware of those options is a great first step.  As with most things, it is better to seek advice early.  The experienced team at McCaw Lewis can help you navigate any aspect of your relationship property matters and answer any questions you may have.

Andrew Hong is a Senior Solicitor in our Dispute Resolution Team and can be contacted on 07 958 7447.

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