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Subsidiary Structuring for PSGEs – Charitable Trusts

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As iwi move through their Waitangi Tribunal claims process to a settlement, the next question for many is how to manage settlement assets in the best interests of beneficiaries – both immediately and in the longer term. Charitable trust are often set up by iwi looking to help its members directly with a range of needs.

A primary concern for many iwi once they receive settlement assets is how to help their members with urgent and direct needs like education, housing and healthcare. Charitable trusts can be an effective way to meet this need.

Charitable Purposes

To qualify for registration, a trust must be established for “charitable purposes”, being the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community, and can also include the administration and maintenance of marae.

For a charitable trust set up by a PSGE, charitable purposes can include things like supporting education by way of grants to individuals for tertiary study, promoting cultural competence by providing Te Reo language courses, aiding healthcare by providing support with dental care and doctors’ visits for tamariki or kaumatua, or addressing housing deficiencies with items like heating or insulation. A charitable trust will need to specify what charitable purposes it intends to pursue in its governing document.  Any income earned by or donated to a charitable trust can only be used for those charitable purposes.

Trustees

A charitable trust is operated by trustees, who will usually be appointed by the PSGE but alternatively could be elected if the relevant trust deed allows. Trustees must meet certain criteria to be an officer under the Charities Act 2005, and are also subject to duties and obligations under the Trusts Act 2019.

If the trust intends to hold assets, it may also be advisable to incorporate as a charitable trust board. This is a registered incorporated entity, providing additional limitation of liability for trustees as well as making ownership succession easier if and when trustees change.

Funding

In this context, a charitable trust’s activities would be funded primarily by the PSGE trust donating a portion of income earned on its commercial activities or passive investments. This may also provide a tax benefit to the PSGE. The trust can also seek donations from iwi members or other parties.

Charities are required to file annual returns and financial statements with Charities Services – the standard and amount of detail required to be provided will depend on their size, but trustees need to ensure that all decisions and transactions are recorded thoroughly.

Risk and Liability

Generally, we don’t recommend that the PSGE trust’s assets are transferred to the charitable trust. Such a transfer could limit the PSGE’s ability to deal with those assets in future, and can also impact the beneficiaries’ rights to those assets.

In some contexts it may be appropriate for certain assets to be held by a charitable trust, for example culturally significant land that will never be developed or sold. However, any transfer of ownership should only be done in consultation with the PSGE’s lawyers and accountants.

Jessica Middleton is a Senior Associate in our Commercial Team and can be contacted on 07 958 7436.

Subsidiary Structuring for PSGEs – Limited Partnerships

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As iwi move through their Waitangi Tribunal claims process to a settlement, the next question for many is how to manage settlement assets in the best interests of beneficiaries – both immediately and in the longer term. A post-settlement governance entity’s structure will depend on several factors, but there are few common vehicles that we see across the board which can be tailored to an iwi’s particular values and considerations. Limited partnerships are often set up to manage commercial activities.

Limited Partnerships v Companies

If a PSGE intends to take on any major particular commercial project or investment, either by itself or with third parties, we generally recommend that a new entity (i.e. separate from the PSGE) is established to protect the PSGE’s assets from any associated risk. These new entities generally fall under two types: companies or limited partnerships.  Companies are simpler structures and can be easier to set up; however they may be less advantageous from a tax perspective.

Under current tax law, entities deemed to be “Māori authorities” can take advantage of a lower income tax rate of 17.5% (compared to the corporate tax rate of 28%).  While PSGEs can benefit from this lower rate on income earned directly by the PSGE, a current “loophole” in the law means that a subsidiary company, even if it is wholly owned by a Māori authority, is not itself deemed to be a Māori authority and will consequently be taxed at the full corporate rate. As a result the PSGE may end up with unusable imputation credits on dividends.

However, limited partnerships tax income on a “flow-through basis”, whereby each limited partner gets taxed at its own rate on distributions of income earned by the partnership. For that reason, a limited partnership is usually the vehicle we will recommend to a PSGE looking to establish or expand its commercial activities.

This flow-through arrangement also makes limited partnerships an ideal vehicle for joint venture arrangements, where a PSGE partners with third parties (including private companies, charitable trusts or government entities) to undertake commercial activities – as each partner can be taxed at their own applicable rate.

Structure

A limited partnership is a separate legal entity, comprised of

  • A general partner, which can be an individual, a company or some other entity. The general partner is responsible for the day-to-day management of the partnership’s business. A general partner will often be set up as a new entity specifically to act in this capacity.
  • One or more limited partners. These are equivalent to a company’s shareholders, being the parties contributing capital and receiving distributions of income. The PSGE would be a limited partner, either alone or with joint venture parties.

Risk and Liability

In addition to their tax advantages, running commercial activities through a limited partnership also provides a level of protection for assets remaining in the PSGE trust from commercial risk via limited liability (similar to a traditional company). Unless assets are actually transferred to the ownership of the limited partnership, they are not part of the property of the limited partnership and will not be put at risk by the limited partnership’s activities.

However PSGEs using limited partnerships to manage risk do need to be vigilant to ensure they are not taking part in the management of the limited partnership – this must be done separately by the general partner. If the PSGE undertakes management activities itself, that limitation of liability is lost and the PSGE could end up bearing the responsibility for all of the limited partnership’s debts and liabilities.

Limited partnerships are a common vehicle used to help PSGEs best utilise their settlement assets for the benefit of iwi both short- and long-term. However the exact structure appropriate for your PSGE will depend on your particular values and considerations, and should be discussed with your lawyer in the first instance.

Jessica Middleton is a Senior Associate in our Commercial Team and can be contacted on 07 958 7436.

Charities Amendment Bill

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The Charities Amendment Bill (the Bill) was introduced to Parliament on 21 September 2022.  The Bill is the result of a process to review and modernise the Charities Act 2005 (the Act) which began in 2018 and, like many things, experienced delays due to the COVID-19 pandemic.  The intention of the Bill is to increase transparency within the charities sector, improve access to justice services, and reduce the barriers faced by smaller charities.  Below, we set out some of the amendments proposed by the Bill.

  • The appeals framework is expanded to allow appeals against the decisions of the Charities Registration Board (or certain decisions of the Chief Executive) to be heard by the Taxation Review Authority (the Authority). It is intended that the Authority will be a faster, less formal, and cheaper avenue than the High Court.  The High Court would remain as an appeal court for the Authority’s decisions.  Charities would be able to represent themselves, further reducing legal costs, and the timeframe to lodge an appeal is increased from 20 working days to two months.  Appealable decisions are also expanded to include, among other things, all decisions of the Charities Registration Board.
  • The Chief Executive of the Department of Internal Affairs will be able to exempt ‘very small charities’ from meeting the current reporting standards. Exempt charities would still be required to provide an annual return with ‘minimum information’.  What constitutes a very small charity and minimum information will be defined by future, supplementary regulations.  This is a particularly welcome change as even the tier 4 reporting standards can be onerous in terms of time and cost for very small charities.
  • The roles and responsibilities of officers is also clarified within the Bill. The grounds for disqualification of officers are outlined and expanded on, and the Charities Registration Board is given the power to disqualify officers for serious wrongdoing or significant/consistent failures to meet their obligations.
  • One key change to be aware of is that the Bill would require charities to review their rules/governance procedures annually. Many charities may already undertake such reviews as a matter of good practice, however for smaller charities this may become a more onerous task.  This does present a timely reminder to charities to ensure that they are both following their rules and that their rules are fit for purpose.

Notably, amendments relating to the definition of charitable purposes or around political purposes are not considered by the Bill. The sector has been calling for a more thorough review for some time, and such a review is still intended to be undertaken in the future alongside additional non-legislative changes to improve the sector.  In the meantime, the Bill – if passed in its current form – does provide practical improvements to reporting requirements, appeals, governance, decision-making and compliance.

Public submissions are now open until 10 November 2022, and more information around making a submission can be found here Charities Amendment Bill – New Zealand Parliament (www.parliament.nz).  The Bill does not propose significant changes to the Charities Act 2005, therefore there is little required of charities while the Bill is in its early stages.  It will be worth reviewing the Bill as it progresses through Parliament to consider whether action is required at a later date.  The McCaw Lewis team can assist you in reviewing your charity’s rules and understanding what changes apply to your charity.

Kaylee is a Senior Solicitor in our Asset Planning Team and can be contacted on 07 808 6066.

My Relationship Has Ended. What Now?

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A relationship breakdown can be an incredibly challenging time, emotionally, mentally, and financially.  This is even more so when tensions are high.  While the care and welfare of any children and personal safety, are paramount, when it comes to relationship property where do you start?  What are the key considerations and practical matters you need to be aware of? How do you go about finalising your relationship property affairs?

Key Considerations

Everyone’s own relationship and situation is unique and with that comes many different considerations.  However, there are a number of general questions to ask yourself and general matters to consider initially.  The time between the relationship breakdown and finalising your relationship property affairs can be incredibly difficult.  It is also not unusual to have power imbalances both financially and in having access to key information, due to the different roles that may be held in a relationship.

  • If you own your own home how will the mortgage, insurance, rates, and other pressing matters be paid initially?
  • Who will live where in the interim?
  • How are you going to support yourself and how is your former partner going to support themselves?
  • What are your options or obligations if either one of you is unable to support yourself?
  • Are there other financial obligations that must be met in the interim, such as hire purchases, credit cards etc?
  • If you are operating all your financial affairs from joint accounts, how are you going to ensure you each have what you need in the interim?

Do not hesitate to reach out at this early stage for support through your lawyer, accountant, or other financial advisors.  Sometimes a third-party perspective/assistance can make all the difference in this trying time.

Practical Matters

Now is also the time to start thinking about some practical matters as you move forward in finalising your affairs.

Something that can easily be forgotten is passwords and access to email accounts, mobile phones, computers, social media, separate bank accounts, etc.  It is not uncommon for couples to know each other’s passwords or for accounts such as email to be shared.  It is particularly important to ensure that you have a private and secure email account to receive and send communications, especially when it comes to communicating with your lawyer.

Related to updating of passwords is ensuring you secure and obtain any records and previous communications.  Common examples include joint email accounts, tax returns, bank statements, KiwiSaver statements and annual returns filed for a family business.  Securing the records from the outset can result in significant time and cost savings.

What Next?

To address your relationship property matters requires one of two things, an order from the Court or a particular form of settlement agreement.  We will always advocate for you to reach a negotiated outcome if it is fair but, unfortunately, this is not always possible.

While you do not need a lawyer to go to Court, though we would always recommend that you instruct one, a separate lawyer is required for each party to reach agreement through a settlement agreement.

The way we initially approach relationship property matters, to ensure that it is handled as cost effectively and efficiently as possible, is through the use of a secure online system, Settify.

Settify is a free online tool which you can find on our website, or we can provide you with a link.  Settify enables you to cost effectively provide us with some background information regarding your relationship, the details of your assets and liabilities, contributions made to the relationship both initially and throughout, your future needs and your contact details.

Settify is safe, confidential, and secure.  Best of all it enables you to fill it in at your own pace and in the environment of your choosing – you can also save as you go.  By providing information through Settify you save on the time and cost of sitting down with a lawyer and working through all the matters that Settify covers.  This can be particularly helpful if you have complicated financial structures and affairs.

Of course, Settify is not for everyone and if you prefer, we can instead meet with you in person, talk over the phone or by video call, to obtain the necessary information.

Once Settify is completed and you submit your information, Settify generates a confidential report for us.  We then review this to understand your particular needs after which we get in contact to arrange a meeting at a time that suits you.

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

Zane is an Associate in our Dispute Resolution Team, specialising in Relationship Property, and can be contacted on 07 958 7431.

Do I have a claim against a property if I contributed financially to it?

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You may contribute funds, maintenance or services to a property you don’t own.  When the contributions are more than minimal, it can give rise to a claim against the property.  What are some examples of a contribution?

Types of Contributions

Loan

If you contribute $100,000 to a property and document it as a loan you are contractually entitled to be repaid on the agreed terms.  For instance, if you intend to loan $100,000 to your parents to help purchase a retirement flat, you should document the arrangement specifying that it is a loan, any conditions your parents’ have to comply with and the repayment process.  A loan will not give an interest in a property unless there is a contractual agreement securing the loan by a mortgage.

Gift

In the above scenario, advancing an owner $100,000 as a gift does not entitle you to be paid back or to have an interest in the property.  Simply saying to your parents “I will give you $100,000 for your retirement flat” and not documenting it leaves it as a bare gift, whereby when both parents have passed, you would not be able to claim against the retirement flat.

Constructive Trust

Contributing $100,000 with a clear expectation of gaining an ownership interest can give you a proportionate interest in a property, where an owner is taken to hold your interest in the property on constructive trust.

A constructive trust may apply when:

  • An undocumented contribution is made;
  • There is an intention that the contribution gives an interest;
  • The expectation is reasonable; and
  • It is reasonable for the owner to yield an interest.

Although a contribution is often easy to show, establishing that there was a reasonable expectation of an interest is more difficult.

Non-Monetary

Non-monetary contributions to a property can give rise to a constructive trust claim.  Landscaping, ground maintainance, home improvements and housework are examples where a person has contributed to the preservation or enhancement of the value of the property giving rise to a potential claim.

It does not matter if the partner working in the home knew it was separately owned (such as by a family trust).  Provided the partner carrying out the work had an expectation of gaining an interest which was reasonable, the Court can find the owner must yield an interest proportionate to the contribution.  It is important to note that this must be considered relative to the benefit the contributing party received (e.g. not paying rent).

Family Home

Often kiwis have the family home owned by a family trust.  A common misconception is this protects the family home from claims from third parties and non-beneficiaries of the family trust.  However, the law is that if you have been in a relationship for three years, living in a property owned by your partner or a related entity (such as your partner’s family trust), you may have a claim for a share in the property under the relationship property regime.

Act Fast

Lodging a caveat over a property on the basis of a loan, constructive trust or the relationship property regime is a quick way to stop a sale or transfer.  A caveat is inexpensive; however, the caveat document needs to carefully describe the underlying interest, there must be a valid basis for lodging the caveat, and must be against the current owner.  If the ownership changes, a caveat cannot be lodged against the new owner.

If you have questions about contributions to a property, our Dispute Resolution Team are able to assist you.

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

A Right To Copy – Is Copyright Relationship Property?

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The creation of an original work often gives its owner immense personal pride.  For some, it also provides their source of income, and these economic and personal rights are protected through the use of copyright law.  However, creative workers and copyright holders were in for a shock recently, when the High Court in Alalaakkola v Palmer [2021] NZHC 2330 ruled copyright for a set of paintings was “relationship property”, meaning copyright created during a marriage is part of the divisible property pool, and effectively up for grabs.

The decision has the potential to impact on creative workers of all types, most obviously artists.  We break down the case, its potential effects on New Zealand copyright, and what it means for you, below.

Legal Position

Although intangible, copyright has long been understood in law to be a form of property.  The intention of the Copyright Act 1994 (CA) is to provide copyright owners with an exclusive right to original works.  However this exclusivity provided by the CA runs against the Property (Relationships) Act 1976 (PRA), which states that all property acquired during a marriage is considered “relationship property”, to be divided equally between both spouses, except in extraordinary circumstances. So, there are two questions to consider:

  1. whether copyright created during the course of the marriage could be considered “relationship property”; and
  2. if it is relationship property, whether that copyright can potentially be transferred from the creator, to the opposing spouse, as part of a division of relationship property under the PRA.

Case Study – Alalaakkola v Palmer [2021] NZHC 2330

In Alalaakkola v Palmer, Finnish-born artist Sirpa Alalaakkola separated from her husband Paul Palmer after 20 years of marriage.  In that time, Ms Alalaakkola created a vast number of paintings, some of which Mr Palmer took as “leverage” during the breakup.  Mr Palmer wanted ownership and copyright for the paintings, to be able to reproduce prints of them for sale.

The Family Court was initially reluctant to split the copyright of the paintings.  The Judge considered that the creation of each painting relied solely on Ms Alalaakkola’s personal skill, which was something separate to the relationship, and hence not relationship property.  However on appeal, the High Court Judge considered the proper focus (through the PRA) should be on the property created, as opposed to the skillset that created it.

The High Court decision effectively ruled that copyright was a part of the relationship property pool.  The case is now back before the Family Court to decide who gets what, but there are several follow on concerns – the obvious one being how does this decision affect the current, and future values of the copyrighted works, and other works created by the same creator?

Discussion amongst copyright and intellectual property experts have pointed out that creators have other rights, such as moral rights, as a means of protecting the commercial and reputational value of their works.  However, creators who wish to avoid this problem entirely will want to consider specifically accounting for copyright division in their relationship property agreements, or via other such legal mechanisms.

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

I was promised something under a Will but received nothing. What can I do?

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The Law Reform (Testamentary Promises) Act 1949 (TPA) allows you to claim against the estate of the deceased person if they promised to leave you something under their Will but they don’t. The promise must be in exchange for services. Mowing lawns, driving them to the shops, working on a farm without pay, companionship and home cleaning are all examples of “services” that have been recognised under the TPA. The “promise” can be express, usually orally or in writing, or implied. The value can be explicit in dollar terms, but if not, the Court needs to assess the amount that should be awarded.  “Property” can be money, real estate or any other property.

Test

To make an award the Court needs to be satisfied:

  • The applicant carried out services or performed work for the deceased during the deceased’s lifetime;
  • The deceased either expressly or impliedly promised to reward the applicant;
  • There is a connection between the services rendered or work performed and the promise; and
  • The deceased failed to keep the promise in their Will or to otherwise pay the applicant.

Award

The award size must be reasonable in all the circumstances including the:

  • Particular circumstances in which the promise was made, the services were carried out or the work was performed;
  • Value of the services or work;
  • Amount promised;
  • Estate size;
  • The nature and amounts of the claims of other persons in the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin or others.

Example

Kevin Lock is a builder working in Hamilton.  He is asked to help Mrs Sand, a housebound elderly lady, by fixing her roof, which he does and is paid for.  Mr Lock gets along really well with Mrs Sand.  He lets her know he can help with any other tasks she needs and leaves his business card.  Mrs Sand calls up Mr Lock about once a month to do “odd jobs” around the house such as cleaning windows, fixing her TV and feeding her cat.  Occasionally he also stays for a cup of tea and a chat.  One day Mrs Sands says to Mr Lock “You are so helpful. What would I do without you? I’ll be sure to look after you in my will”.

After a year Mrs Sands needs to move to a rest home. Mr Lock helps coordinate with the rest home, move Mrs Sands into the rest home and ensures her house is secure.  He continues to visit her in the rest home, taking her for garden walks and talking with her.  The visits normally last for 1 to 2 hours.  Mrs Sands becomes frail and passes away peacefully with Mr Lock by her side.  At the funeral Mr Lock gives a eulogy.  Afterwards he talks to the lawyer for the estate who mentions Mrs Sands’ will left everything – her $900,000 house, KiwiSaver and share portfolio – to two charities.  Under the TPA Mr Lock was made a promise to be “looked after” in the will.  Because Mrs Sands did not specify the amount of the gift, the task for the Court is defining and valuing the  “services”:

  • Roof fixing: Paid for during the deceased’s lifetime does not qualify;
  • Domestic services: Odd jobs and window fixing are a valid claim;
  • Feeding the cat: An intangible service.  The value depends on how much Mrs Sands appreciated this;
  • Having a cup of tea with Mrs Sands: Companionship is a valid intangible service but it blurs into friendship;
  • Helping Mrs Sands move to a rest home: Valid service;
  • Companionship in the rest home: Again, potentially valid companionship service or alternatively friendly;
  • Eulogy at funeral: Services done after Mrs Sands passed are not valid.

Comment

Because Mrs Sands did not specify the amount she would leave Mr Lock the Court can assess the value of the services by comparing the work to commercial rates for the same services, the value the deceased put on the services and what the Court considers just in the circumstances.

If you have questions about enforcing a promise of someone who has died, our Disputes Resolution Team are able to assist you.

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

Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022

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In response to the need for more houses in New Zealand and as a result of newly introduced legislation which will allow for the faster creation of high-density housing, we are likely to see a greater number of people living in unit title developments. While this will undoubtably change the landscape we are used to living in, it also places a spotlight on how people buy into apartment blocks, get the right information, interact with their fellow unit title owners, make decisions, and live together.

After a long wait since it was first raised that changes in legislation surrounding unit titles were needed the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 (Body Corporate Amendments) brings a suite of changes to the Unit Titles Act 2010.  If you are part of a body corporate committee, a manager, owner or person thinking about buying an apartment, you should be aware of the new sections which received Royal Assent on 9 May 2022.  While the date of effect of the Body Corporate Amendments is yet to be set, it has been announced that all new sections must be in force by no later than 9 May 2024.  This article summarises the new sections.

Summary of New Sections

For Body Corporate Committees

  • Members can attend committee meetings by audio-visual means (s 88)
  • A proxy may call a poll (s 99)
  • Certain body corporate operational rules cannot be delegated (s 108)
  • The body corporate chairperson and committee chairperson are the same person (s 112A)
  • A committee must have an agenda for each meeting and must keep written records of meetings and decisions (s 113)
  • Committee members must comply with a code of conduct (a new requirement under the Body Corporate Amendments) and keep a conflict of interest register (ss 114A-F)
  • If a body corporate has decided not to establish a long-term maintenance fund, this decision must be reviewed annually

For Body Corporate Managers

  • A ‘body corporate manager’ is defined as a person employed or engaged to undertake record-keeping, financial and/or regulatory compliance services
  • A body corporate must keep records in order to provide required disclosure information (s 84)
  • The duty to maintain committee meeting minutes under s 113 falls to the body corporate manager
  • Each manager must:
    • Have a written agreement
    • Disclose any conflicts of interest
    • Comply with their own code of conduct (ss 114G-J)
  • Large unit title developments (10 or more units) must have a body corporate manager (unless vetoed by special resolution)
  • Large unit title developments must have a long-term maintenance plan
  • The Tenancy Tribunal can make pecuniary penalty orders where a body corporate manager has intentionally and unreasonably breached certain duties. A body corporate may also be subject to such an order in some instances (ss 176A-D)
  • MBIE can require copies of 39 documents or inspect a unit title development with widened powers (ss 202A-F)

For Owners

  • A utility interest can now be a single interest or a multiple set of interests (s 39(2B))
  • The extent of unit owners’ rights and responsibilities are clarified in (ss 79-80)
  • Owners can attend committee meetings by audio-visual means (s 88)
  • “A pay up to vote” provision mean owners must have paid their levies in order to vote (s 95)
  • A vote can be in person, by proxy or electronically (ss 102 and 103A)
  • The original owner’s obligations in relation to service contracts have been recast and extended to signage agreements, such that 24+ month contracts are subject to compliance requirements (s 139)
  • Selling or buying: Pre-contract and pre-settlement disclosure is retained, and the information required to be provided expanded, but additional disclosure has been removed. Matters include:
    • A purchaser can delay settlement or cancel if pre-contract disclosure is not properly provided, (although notice and an opportunity to remedy must be given before these rights are exercised)
    • Cancelling the sale and purchase agreement on the grounds of disclosure is limited to where the information is incomplete or incorrect and it therefore substantially reduces the benefit or increases the burden on the buyer (ss 146, 149, and 149A);
    • Settlement may be delayed, or the agreement cancelled following notice and an opportunity for the seller to remedy the failure to properly disclose (ss 151-151A)
  • The jurisdiction of the Tenancy Tribunal has been increased to $100,000, and legal costs have been better provided for. This makes it more worthwhile to engage lawyers and present matters through the Tenancy Tribunal.

Comment

The Body Corporate Amendments help clarify what information prospective purchasers are getting and how, once they are owners, they are to work with their fellow body corporate members.  While a big step in the right direction as far as strengthening the rules, we expect that once in force there will still be issues that come to light and further tweaking will be required (the Body Corporate Amendments did not go as far as some people would like). The Tenancy Tribunal/Courts will also apply the Body Corporate Amendments, creating a new benchmark.

In Hamilton, as residential intensification has already arrived (for example the Hamilton East Residential Intensification Zone) hopefully the Body Corporate Amendments will provide greater peace of mind for those wanting to buy into an apartment complex.

If you have queries about Body Corporate Amendments, our Property Team is able to assist.

Emma is a Solicitor in our Property Team and can be contacted on 07 958 7439.

Ewen is a Senior Solicitor in our Dispute Resolution Team and can be contacted on 07 958 7466.

Left Out of a Will?

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A spouse, child, grandchild, stepchild or parent of the Will maker can bring a claim if they consider they did not receive enough under the Will.

How much you receive depends on a number of factors, including the needs of the claimant.  For someone without significant needs, acknowledging the claimant as a family member (and short of disentitling conduct) Courts have previously awarded about 10%-15% of the estate.  However, the Court of Appeal has confirmed that an award is not limited to this range.  For claimants with greater maintenance and support needs, Courts have discretion to increase awards.

Moral Duty

Without being overly moralistic, every person owes a moral duty to provide proper maintenance and support to their family.  The degree of support depends on the nature of the relationship.  A parent-child relationship has a higher moral duty than an adult’s moral duty to their wealthy parents.  The key question is “did the deceased breach the moral duty owed to the claimant from the standard of a wise and just Will maker?” To answer this Courts look at:

  • The relationship between the deceased and claimant;
  • Any particular closeness or estrangement;
  • The size of the estate (relative to other claims under it, such as other Will beneficiaries);
  • The claimant’s circumstances and need of maintenance and support (i.e. sustaining and providing comfort). Special needs such as a disability may warrant a higher award;
  • The Will maker’s wishes;
  • Any gifts the Will maker gave the claimant during their life;
  • Ethical, moral and social norms.

Award Size

Any award depends on the estate’s size and the facts of each case.  The Court of Appeal says Judges will be guided by the following principles:

  • An unequal distribution is not enough to be a successful claim (because a Will maker can deal with their property as they like);
  • An award should not be nominal nor overly generous;
  • An award should be no more than is necessary to remedy the breach by making adequate provision for the claimant’s maintenance and support.

Process

A Family Protection Act Claim commences by filing a Statement of Claim in the Family Court.  The time limit is 12 months from the date of the grant of probate, however, ideally a claim is filed less than 6 months from the grant of probate.  All interested parties will be notified of the claim, and have the opportunity to oppose the application and provide evidence to counter it.  A Court timetable is then put in place, which may include a Judicial Settlement Conference to explore a negotiated settlement.  If the matter does not settle it proceeds to a trial with the Court determining if the duty has been breached and, if so, what is required to remedy that breach.

If you have questions regarding a claim against an Estate or defending a claim, our Dispute Resolution Team are able to assist you.

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

Incorporated Societies Act 2022

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The Incorporated Societies Bill received Royal Assent on 5 April 2022, passing the Bill into law as the Incorporated Societies Act 2022 (“the Act”).  The provisions of the Act will likely come into force in stages, with the first subparts having come into force on 6 April 2022.  The rest of the Act comes into force on a date/dates appointed by the Governor-General, with a final date for full enactment (if not completed prior) of 5 April 2026.

The Act intends to replace the Incorporated Societies Act 1908, modernising the requirements of incorporated societies and providing a clear framework for high quality governance.

There are a number of key elements to be aware of under the Act:

  • Officer duties are clarified – while this does not change the current law, the duties are not necessarily widely understood or followed by officers;
  • Reporting standards/requirements have been clarified, with large incorporated societies required to have their financial statements audited;
  • Changes have been made to the requirements for officers, with certain factors that will disqualify some from being officers;
  • There is an ongoing requirement for incorporated societies to have a minimum number of members; and
  • There are clear, updated requirements for what must be included within a constitution.

Some incorporated societies may find that they need to appoint new officers, and many will need to update their constitutions to comply with the Act’s requirements.

Importantly, the Act requires all current incorporated societies to re-register as a society under the Act.  The transition period is not yet set in stone, however it will be two years and six months after clause 4 of schedule 1 comes into force, whenever that may be (or no later than 1 December 2025).

There are over 24,000 incorporated societies in New Zealand needing to ensure their rules comply with the requirements of the Act and re-register with the Registrar of Incorporated Societies.  It is recommended that societies wanting to make the transition begin the process as early as possible to create as little disruption to operation as possible.

The Act also makes provision for registered charitable societies by amending the Charitable Trusts Act 1957 (“the CTA”).  Any society currently incorporated as a charitable trust board has a choice to transition to the Act.  Once the relevant section of the Act comes into force, societies will no longer be able to apply to incorporate as a charitable trust board under the CTA.

Incorporated societies should embrace this opportunity to review their constitutions and create a governing framework that is fit for purpose to serve them well into the future.  For assistance with reviewing your constitution, guidance through the re-registration process, or to further discuss how the Act impacts your society, get in touch with our team.

 

Kaylee Bird is a Solicitor in our Asset Planning Team and can be contacted on 07 808 6066.

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