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Tova O’Brien v Discovery – Restraints of Trade and Learnings from a High-Profile Decision

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Tova O’Brien’s Restraint of Trade found enforceable

Many employment agreements contain restraints of trade.  Some restraints may be enforceable, and some completely unreasonable.  This article explores the recent high-profile decision of the Employment Relations Authority in O’Brien v Discovery NZ Limited and the general position regarding restraints of trade.

Background

As TV3’s Political Editor, Tova’s employment agreement stipulated she could not take any role with any competitor nationally for 3 months, and contained a six month non-solicitation and non-dealing clause. TV3’s owner, Discovery NZ “Discovery” justified this restraint in the agreement by stating “we naturally wish to protect our business relationships and our confidential information.”

Arguments

Tova’s counsel argued the restraint was unenforceable as she was taking a role that would not directly compete with her prior role. Tova’s role with Discovery was in television, predominantly presenting in the 6.00pm timeslot. In her projected move to MediaWorks, she would occupy a morning timeslot over radio. Tova asserted that she would not be directly competing with her prior role, and since Discovery did not have any radio shows or presence on that media, she would not be competing with Discovery’s television presence in the mornings as the commuter audience that radio attracts would not usually be in a position to watch television.

Discovery disagreed, claiming that the terms of restraint were not related to Tova’s role – they related to her being “key on-air talent” for Discovery, and going to a competitor (MediaWorks) and being “key on-air talent” for them. The Employment Relations Authority agreed with Discovery’s assertion that Newshub’s AM Show will be competing against Tova’s new radio show for audiences and attention, which brings about significant advertising revenue.

Decision

The Authority ruled that Discovery’s proprietary interests (advertising revenue and Tova’s political sources in Parliament) were reasonable and capable of protection, and therefore found the restraint enforceable. However, the Authority did consider the restraints too broad, and lessened her non-compete restraint to seven weeks, and her non-solicitation and non-compete restrictions to three months.

The Authority also ordered Tova to pay $2,000 to Discovery for breaching her conflict of interest clause by undertaking promotional activity for MediaWorks while she was still employed by Discovery.

The Default Position – Restraints of Trade

Restraints of Trade exist to protect employer’s proprietary interests, trade secrets and business connections. They cannot be unreasonable to the point they do not achieve those means, or are unreasonably restrictive and unfairly prevent an employee from making a living.

The default position is that restraints are unenforceable, and employers need to prove that the restraint is necessary to protect their tangible proprietary interest, without unreasonably restricting their employee’s ability to make a living, or preventing healthy competition in the market. In determining enforceability, there are multiple considerations including the seniority of the employee, the nature of the industry they are in, and the level of confidential information or the trade contacts they have access to.

Going Forward

The restraint in O’Brien v Discovery NZ Limited is certainly not your average restraint of trade. Tova is a high-profile individual, who brought in considerable advertising revenue and had multiple parliamentary sources that Discovery were trying to protect their proprietary interests in.

The biggest lesson from this case is to avoid the assumption that employers will not try to enforce restraints of trade. This case also dives deep into the facts of the matter, and reinforces that the enforceability of any restraint will be very fact-specific and differ on a case-by-case basis.

If you have concerns regarding the enforceability of a restraint of trade in your Employment Agreement, or wish to enforce a restraint of trade, we recommend getting in touch.

Employment Law Assistance

Our Workplace Law Team are able to assist with employment matters relating to restraints of trade, and provide guidance on plausible restraints and potential enforceability concerns.

Chantelle is a Solicitor in our Workplace Law Team. She can be contacted on 07 958 7473 or chantelle.tyler@mccawlewis.co.nz.

Can I Enforce a Contract with Someone Who Has Died?

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A contract can be enforced against a deceased’s estate.  It is still a valid agreement even if the other party has died, provided they did not need to be alive to perform the contract (for example, an employment agreement).

In most cases you will have remedies under the contract and general law.

If, because of the death of the other party,:

  • the contract cannot be performed: the contract may be frustrated by circumstances beyond the parties’ foresight and ability to control.  You should check the contract to see if it deals with such a situation.
  • the contract is breached: there are potential remedies such as damages, specific performance or in some circumstances a Court ordered injunction.

You should have your lawyer find out who is acting for the deceased’s estate and see what your options are or whether the contract can still be performed.

Example

Mr Jones is selling his house.  Ms Mable makes a suitable offer to Mr Jones.

The offer is accepted and goes unconditional.  Unfortunately, Mr Jones dies of a heart attack before settlement.  Ms Mable really wants to buy the house.

Can the contract be performed?

Yes, but settlement will be delayed.  Mr Jones’ executors must obtain probate of his will before the property can be transferred to the executors and then to Ms Mable.  If Mr Jones did not have a valid will, then letters of administration will have to be granted before the property can be transferred to the administrators and then transferred to Ms Mable), which is a longer process. 

If you have questions about enforcing a contract against an estate, our Disputes Resolution Team are able to assist you.

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

Have You Set Up a Trust During Your Marriage/Civil Union?

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Trusts in New Zealand are incredibly common, particularly family trusts.  When relationships breakdown the Property (Relationships) Act 1976 has some limited provisions to address dispositions to trusts.

However, if you have been married or in a civil union, there is a much more powerful tool that may apply – Section 182 of the Family Proceedings Act 1980 (“Section 182”).

Section 182 has a wide application, which includes to family trusts.  This article focuses on this aspect of Section 182.

The Purpose

The purpose of Section 182 is to remedy the consequences of the failure of a trust’s premise of a continuing marriage/civil union.

This essentially means that when the trust was set up it was based on the relationship not ending.  If the relationship has ended then injustices may arise, such as one person benefiting over the other due to the change in circumstances, therefore Section 182 empowers the Court to look into the trust and make orders to ensure justice between the parties is achieved.

Requirements

For Section 182 to apply:

  • Firstly, there must have been a marriage or civil union.  This explicitly excludes defacto couples, which differs from the position under the Property (Relationships) Act 1976.  There does not need to be children of the marriage/civil union however the interests of children, particularly dependent children, are especially important.
  • Secondly, the Court must have made an order dissolving the marriage or civil union, which first requires the couple to have been living apart for two years.
  • Thirdly, the order must have just been made or made within a “reasonable time”.  What constitutes a reasonable time will be highly fact specific, but it is important not to delay.
  • Lastly, there must be the existence of “any agreement between the parties to the marriage or civil union for the payment of maintenance or relating to the property of the parties or either of them, or any ante-nuptial or post-nuptial settlement made on the parties,”.  This last element being the most complicated.

The most common use of Section 182 is to nuptial settlements, with family trusts being the most common nuptial settlement.  To be considered a nuptial settlement requires a trust to make continuing provision for one or both of the parties, such as through their status as beneficiaries, and there must be a connection between the trust and the marriage/civil union.

Where a trust has been settled during a marriage/civil union, with one or both parties as beneficiaries, it will almost inevitably be considered a nuptial settlement.

Whether a trust settled prior to the marriage/civil union will be a nuptial settlement is more difficult to determine.  Where such a trust is not a nuptial settlement when it is settled, then dispositions to that trust of property during the marriage/civil union may make that trust a nuptial settlement in respect of that specific property.

What is clear however is that the Court is giving a generous approach to the meaning of nuptial settlement.

If all the four above elements are present an application can be made to the Family Court.  The Court then has a wide discretion to make orders under Section 182.

Exercising the Discretion

The Test – Whether the Court Should Exercise its Discretion

The Supreme Court has set out a test to apply (refer to Clayton v Clayton [2016] NZSC 30).  The Court will compare the position of the parties under the trust assuming a continuing marriage/civil union, with the position of the parties under a dissolved marriage/civil union.

Factors that are relevant to the exercise of the discretion are not exhaustive but can include the terms of the trust and how the trustees are exercising, or are likely to exercise, their powers in the changed circumstances.  The manner in which the trustees would have exercised their discretion assuming a continuing marriage/civil union is relevant.  It is significant who established the trust and the source and character of the trust’s assets.  Particular attention must be paid to dependent children.  While need is not a prerequisite it may also be taken into account, as well as the parties’ expectations. The length of the marriage/civil union can also be relevant, as is the existence of any other beneficiaries.

One matter to note is that Section 182 cannot be used to defeat or vary any agreement entered into under Part 6 of the Property (Relationships) Act 1976 – the contracting out provisions – unless the interests of the children of the relationship require it.  However, the mere existence of a contracting out agreement is not determinative as there must be a sufficient connection between the trust and the agreement.

The Remedy – How the Court Should Exercise its Discretion

Unlike the Property (Relationships) Act 1976, the starting point is not a 50/50 split.

In line with the purpose of Section 182 and the above test, an assessment of the likely position under the trust assuming the marriage/civil union had continued is undertaken and then compared with the likely position following the dissolution of the marriage/civil union.  A remedy that can best minimise the negative impact of the failure of the trust’s premise of a continuing marriage/civil union is then implemented.

Remedies can include the trust being split into two separate trusts, payment of a sum to one party, the trust purchasing property for the use of one party, the trust deed being varied, removal and appointment of trustees or a combination.  The Court has a wide discretion so the remedy can be appropriate to the specific circumstances.

Conclusion

Section 182 is a powerful tool, particularly in respect of family trusts settled during a marriage or civil union.

The experienced team at McCaw Lewis can help you navigate any aspect of your relationship property matters, including the application of Section 182, or answer any questions you may have.

Zane is an Associate in our Disputes Resolution Team and can be contacted on 07 958 7431.

Recent Updates in the Employment Law Space

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Following a raft of updates in the employment law space, we encourage employers to ensure their employment agreements are fit for purpose and in line with recent updates.

With everything else employers have been dealing with, you may have missed some of the changes in the following areas which might affect your employment agreements:

  • Minimum wage
  • Public holidays
  • COVID-19 related developments, including force majeure and/or business interruption
  • Family violence leave
  • Sick leave
  • Parental leave
  • Bereavement leave
  • 90-day trial period or probationary period
  • Holiday pay
  • Discretionary payments; and
  • Fair pay agreements

Of course, there are also some practical changes to how many businesses are operating with COVID-19 considerations and restrictions.  If you haven’t had your employment agreements reviewed in the last year or so, we’d recommend checking that they cover your minimum requirements and reflect your values and approach with your team.

Our Workplace Law Team are available to review and update your employment agreement templates, advise on any COVID-related queries and answer any general employment questions you may have.

Employment Law Assistance

We are able to assist with all of your employment matters – whether you are an employer or an employee.  If you would like to discuss any of the recent updates in the employment space, or any other matter, please do not hesitate to contact us.

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

Land and Property Development – Legislative changes on the way

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The Resource Management (Enabling Housing Supply and Other Matters) Amendment Bill (“the Bill”) was introduced in October of this year to speed up implementation of the National Policy Statement on Urban Development 2020 (NPS-UD). The NPS-UD aims to remove restrictive planning rules and will require councils to plan better for growth. The introduction of the Bill, alongside the NPS-UD, will change the way that New Zealanders develop land, making it easier and faster to create higher-density housing.

The Bill was read for the third and final time on 14 December 2021 and we expect to see it take effect from August 2022 (the deadline for councils to incorporate changes into their district plans). It will amend the Resource Management Act 1991 to require specified territorial authorities (including those located in Auckland, Hamilton, Tauranga, Wellington and Christchurch) to set more permissive land use regulations to enable greater housing intensification.

The main way that the Bill does this is by requiring those specified territorial authorities to incorporate medium density residential standards (MDRS) into their district plans. These MDRS will designate high-density building as a “permitted activity” and will remove some of the barriers to getting resource consent for these kinds of developments. The new rules will allow developers to construct three-storey buildings with up to three residential units on a single site, and will also remove minimum size restrictions on lots created by subdivision, making it much easier to create freehold parcels for new high-density units.

The new Bill does, however, set some minimum building requirements to enable and control development (shown below).

Capture

The MDRS will only take legal effect from the time that council notifies that it has made the relevant plan changes. In the process of doing so, councils can modify the MDRS rules to make them less enabling of development where certain exceptions apply. One such exception being that a “qualifying matter” applies and an area has certain features such as significant infrastructure, natural hazards, open space for public use, heritage and consistency with iwi participation legislation. An example that applies to the Waikato specifically is where strict application of the MDRS would contravene the objectives of Te Ture Whaimana o Te Awa o Waikato — the Vision and Strategy for the Waikato River.

Watch this space

Overall, the new process proposed by the Bill (shortly to be the Act), is expected to result in fewer resource consents being required and a simpler development process. While this sounds positive, it is still unclear exactly how each council will adopt and manage this change and there are still a number of unanswered questions about how the Bill will interact with the current development environment – i.e. the current subdivision process and the number of private land covenants that exist preventing further development.

In particular, McCaw Lewis will be paying close attention to Hamilton City Council’s response to the Bill and how that will affect property development within the city. We will post updates as we receive them.

In the meantime, please get in touch with our property lawyers if you have any questions.

Amy and Emma are Solicitors in our Property Team. Amy can be contacted on 07 958 7459, and Emma’s contact number is 07 958 7439.

Hospice and the End of Life Choice Act 2019

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The End of Life Choice Act 2019 (“the Act“) has been the subject of significant debate due to the controversial nature of the topic involved. With 65.1% of New Zealander’s voting in support of the Act in the 2020 referendum, the Act came into force on 6 November 2021. Healthcare providers have many questions around the extent of their rights and obligations – in particular, their ability to refuse to provide end of life services. The issue was taken to the High Court in the case of Hospice New Zealand v Attorney General.

Hospice New Zealand (Hospice) is an organisation that provides palliative care during the stages of the end of life. Hospice applied to the Court for directions on a number of queries they had, being:

  • Whether an organisation could lawfully operate a ‘euthanasia-free’ service;
  • Whether such an organisation would be subject to any funding disadvantages;
  • What obligations such an organisation would have if a client requested end of life services; and
  • Whether individuals can refuse to undertake end of life services.

The jurisdiction of the Court to answer these questions was limited at the time of the judgment – as it was prior to the referendum the queries were hypothetical in nature. Despite this, some relevant points of guidance were able to be provided.

First, it was made clear that no organisation is under an obligation to provide assisted dying services – any organisation is free to refuse to provide such services for any (or no) reason. Following from this, such an organisation must have proper processes in place to ensure any medical practitioner is able to meet their objection obligations under the law. These obligations are to inform a person requesting assisted dying services of the practitioner’s conscientious objection, and of the person’s right to ask the SCENZ Group for the contact details of a replacement practitioner who is willing to provide assisted dying services. Finally, the Act does not impact professional obligations – above all, health practitioners must only act in any situation if they have the competence to do so.

The case provides greater guidance on the ability for organisations and individual practitioners to object to the provision of assisted dying services. Ultimately, each situation that arises will depend on the individual circumstances at play.

The Act also brings up a lot of questions around a person’s affairs at the end of life. If you would like to review your estate arrangements, get in touch with our Asset Planning Team.

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

Name Your Discount – What is a “Fair Abatement” of Rent?

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On 28 August 2021, the COVID-19 Response (Management Measures) Legislation Bill (“the Bill”) was passed, and the Bill will be rubber stamped into the law shortly. Somewhat surprisingly, the Bill introduces a new “rent reduction in an emergency” clause which will function as the default “rent reduction” clause for leases that do not already have one. This article discusses what the Bill means for landlords and tenants in the commercial space.

Background – ADLS clause 27.5

The current standard form ADLS commercial lease, the ADLS Deed of Lease 6th edition (2012) (5) (“ADLS Lease”) includes clause 27.5, titled “no access in an emergency”. This clause was formulated as a response to the 2012 Christchurch earthquakes. The concern then was that tenants should not have to continue to pay the full rent for premises they could not access (i.e. premises in the Christchurch Red Zone). In the wake of the COVID-19 pandemic, clause 27.5 has been thrust into the spotlight as a way to justify rent reductions for tenants unable to access their business premises, but there are a number of problems:

  • The operating terms of clause 27.5 (emergency; inability to gain access to the premises; and inability to operate fully from them) are vague, and vary from lease to lease;
  • Clause 27.5 was designed as a response for emergencies in localised areas (i.e. Christchurch), and most likely did not contemplate an emergency stretching across all of New Zealand;
  • Clause 27.5 has never actually been interpreted by the Courts, meaning despite its existence, there is very little guidance on what to do if a “fair abatement” of rent cannot be agreed.

As a result, working out the exact amount of rent to “discount” has largely been left to landlords/tenants to work out between themselves, and various landlords and tenants have resorted to drafting their own “no access in emergency” clauses which are yet to be tested in the event of disagreement.

The Bill

The Bill was passed on 28 September 2021. One of the Bill’s key changes is introducing a standardised “no access in emergency” clause (“the Amendment”). The Amendment is largely based on the ADLS Lease clause 27.5, and allows landlords and tenants to agree an appropriate rent reduction for an “affected period”, which is effectively the period of the pandemic. The start date of the affected period stretches as far back as 18 August 2021 (i.e. the date that all of New Zealand moved back to Level 4), and the Amendment is implied into all commercial leases that do not already have a similar clause.

The Amendment will be contained in the Property Law Act 2007, and we outline our key observations.

Who does this affect?

The Amendment affects anyone with a lease that does not contain an equivalent “no access in emergency” clause; and/or parties that have not otherwise agreed an existing arrangement. This means recent, unamended, ADLS leases are likely unaffected, but parties with non-ADLS leases, amended ADLS leases, or hastily made alternative rent arrangements, may be caught out. If you have an ADLS lease that commenced on or before December 2012, there is a good chance that it will not contain a “no access in emergency” clause and you will be affected by the Amendment.

What is the “affected period”?

The “affected period” is a rental period:

  • That runs from 18 August 2021, and ends when the Epidemic Preparedness (COVID-19) Notice 2020 expires or is revoked. It does not apply to the initial lockdown in 2020;
  • Where the lessee is unable to access all or any part of the leased premises to fully conduct their operations because of reasons of health or safety related to the epidemic.

The “affected period” also includes any rent or outgoings arrangements made from 18 August 2021.

What is a “fair proportion” of rent reduction?

The Bill does not list any particular considerations to take into account when agreeing rent reductions. This is to avoid restrictions on what can and cannot be taken into account. A submission from the NZLS (which was not implemented into the Amendment) suggested these factors to consider:

  • the lessee’s ability to operate remotely;
  • the nature of the lessee’s business;
  • the continuing right of the lessee to store goods and business equipment in the premises;
  • any Government wage subsidy;
  • the number of staff able to attend at the premises and the extent to which the premises can be used in a manner that is consistent with social distancing requirements;
  • the borrowings and commitments of the lessee in relation to its business, and the borrowings and commitments of the lessor in respect of the lessor’s building in which the premises are situated.

This means that ultimately, the reduced rent amount will be agreed by the landlord and tenant on a case-by-case basis.

What happens if there is no agreement on rent reduction?

Any disagreement for an appropriate rent reduction under the Amendment will first be resolved between the parties, or failing that, by arbitration.

Would this apply to ground leases?

While the changes in the Bill will apply to all leases, the Amendment provides relief for leases that cannot fulfil their purpose. It is unlikely a ground lease will have an applicable no access provision because, for ground leases, the purpose is long term land use for the improvements to the land (primarily buildings) and that purpose has not been interrupted by the epidemic.

Can I get out of the Amendment?

People can “contract out” of the Amendment, but this does require agreement from both sides. Landlords that try to contract out of the Amendment, without a satisfactory alternative in place, will find this position difficult to support.

It is worth noting that the Amendment will expire when the Epidemic Preparedness (COVID-19) Notice 2020 expires or is revoked. You will need to consider whether a “no access in emergency” clause is appropriate for any other emergency or natural disaster that may occur.

Conclusion

The Amendment will be keenly observed by many, and we will continue to keep a close eye on developments in this space. We would advise anyone with commercial interests to closely examine their version of a “no access in emergency” clause, especially if they are under an older version of the ADLS lease or a non-standard ADLS lease.

Should you have any concerns or questions about the Bill and how it affects you, get in touch with one of our experts at McCaw Lewis.

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

Relationship Property v Entitlement Under a Will

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When a spouse dies, it can be a challenging time for the one left behind. After the grieving, organising the funeral and saying goodbye, a surviving spouse or partner will normally turn to the will. Few people know the surviving spouse has a choice between taking their entitlement under the will or applying to the court for a division of the relationship property.

Current Law

What is s 61 Property (Relationships) Act 1976 (“PRA”) for?

Section 61 of PRA gives a surviving spouse two options:

  • Option A: is to apply for a division of the relationship property, the starting point being a 50-50 split.
  • Option B: to not choose to make a division of relationship property. This means:
    • If the deceased spouse had a will: to receive the inheritance from the deceased spouse or partner as under the will;
    • If the spouse did not have a will: to take their entitlement under the Administration Act 1969.

Who can apply?

A “surviving spouse or partner,” may apply. This covers:

  • Married persons;
  • Civil union partners;
  • De facto partners (two adults persons living together in a relationship and are not married or in a civil union).

There is one exception where the surviving spouse cannot apply. If relationship property court proceedings have been started to divide relationship property while both spouses or partners were alive, the court proceedings continue and the surviving spouse or partner cannot choose option A or B. However, the surviving spouse can choose to discontinue court proceedings and then choose option A or B.

Why make a choice?

The surviving spouse or partner:

  • Is entitled to 50% of the relationship property plus any other entitlements under the PRA;
  • Could be entitled to more under the PRA than they receive under the will;
  • Can choose not to make a choice, meaning their entitlement defaults to their entitlement under the will.

How long do you have to make an election?

There are two different time limits:

Small estates: A small estate (usually, one without significant assets):

  • Within six months after the date of death;

Or

  • Where administration/letters of probate are granted, no later than six months after the grant of administration/probate.

Whichever is the later.

All other estates: no later than six months after administration/probate of the estate of the deceased spouse or partner is granted in New Zealand.

Like all court rules, there is an exception. The surviving spouse can ask for permission to apply out of time. In the s 61 case, at any time before the final distribution of the deceased’s estate.

Proposed Changes

The Te Aka Matua O Te Ture Law Commissions’ Review of Succession Law: Rights to a Person’s Property on Death 2021 Issue paper 46 is proposing a new Act to bring together the various succession laws. Although these are only proposals and are not the current law, for s 61, it made the following recommendations:

  • A surviving partner should keep whatever gifts they receive under the will plus their PRA entitlement;
  • De facto relationships of less than three years will need to satisfy additional criteria to qualify;
  • Where the partners have separated prior to the death, the survivor can claim up to two years after separation;
  • Where there are multiple eligible surviving partners, the court would apportion contested relationship property between surviving partners depending on the purchase, maintenance and improvement of that property;
  • A surviving partner’s relationship property entitlements should be based on the classification and division rules recommended in the PRA review that would apply when partners separate, including that:
    • Property acquired before the relationship or as a gift or inheritance should be separate property, including the family home;
    • The burden of proof of establishing if property is separate property should be on the party that is on the title to the property; and
    • The court should have discretion to order unequal division of relationship property where there are extraordinary circumstances that make equal sharing repugnant to justice.

The most significant proposed change is removing the family home (if purchased before the relationship) from the relationship property pool. The house is usually the most significant estate asset, so moving this out of the reach of the surviving spouse disadvantages them to the benefit of the will beneficiaries. It will be interesting to see if this proposal is adopted.

If you have questions about making a division under the PRA or challenging a will, our Dispute Resolution Team are ready to assist you.

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

Tikanga and Good Faith in the Workplace

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Our people and our workplaces will grow and prosper when our systems reflect those within it.  From an employment perspective, our legislation doesn’t expressly reflect our Māori workplaces or those who embody tikanga and/or Māori values.  But that doesn’t mean your employment space has to be void of tikanga.

Despite the Employment Relations Act and other employment legislation not referring to tikanga or Māori values, tikanga has been confirmed as part of our common law.  Tikanga is about doing what is right, at the right time and for the right reasons.  It can be strict or, at times, flexible, depending on the circumstances.  That sounds an awful lot like good faith – doing what is fair and reasonable.

If you want to ensure that tikanga is present in your organisation’s employment rules, just as much as it is in the everyday mahi, here are some tips:

  • Line up the paperwork – Incorporate your values and your tikanga into your paperwork; from your employment agreements to your policies, the approach to disciplinary processes or the setting of expectations.  For example, if you want to focus any disciplinary processes on restoring mana through hohou te rongo and including whānau in that, incorporate those processes into your written paperwork so that you don’t inadvertently breach your own rules and get caught out trying to find other, tika pathways.
  • Think why? – Give weight to your policies and procedures by taking time to craft them, reflect on the “why” and explain that to the team.  If their are specific tikanga behind a certain kaupapa, let people in on the rationale.  For example, if your alcohol policy is conservative to show manaakitanga, uplifting mana by not allowing people to embarrass themselves in a work setting – share that whakaaro.
  • Consistency – Do what is tika by enforcing your policies consistently and, in turn, you will be reinforcing your values.  For example, if your approach to COVID-19 is one of kotahitanga and hauora by ensuring the team stays home and stays safe, be consistent in that approach and rationale (regardless of how long any given alert level may be or how inconvenient it might be on occasion).
  • Reflect who you are – Weave your language through your communications, whether that is te reo Pākehā or te reo Māori, or just using the actual, everyday language used in the office – make your documents reflective of your workplace and don’t get too caught up on the fact that they are different from your standard off-the-shelf (or internet) employment agreement.  For example, if you will never enforce a three-day maximum for tangihanga leave, why have that in your employment agreements?

Ultimately, being a good employer is about doing what is fair and reasonable, and acting in good faith.  While our laws might be silent on it, there is nothing to stop employers being fair and reasonable through applying tikanga.  The key is to ensure that as an employer you are consistent throughout your actions, spoken word and written documentation.

Hīkoia te kōrero – walk the talk.

If you need assistance or advice on ensuring your tikanga are front and centre of your employment processes, documents and disputes, please contact Renika Siciliano.

Renika is the Executive Director of McCaw Lewis, and leads our Māori Legal and Workplace Law teams. She can be contacted on 07 958 7429 or renika.siciliano@mccawlewis.co.nz.

“Put Up or Shut Up” – A Valuable Trustee Tool

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Being a trustee is an onerous duty, particularly when someone is alleging they have a claim against you personally as a trustee or that they have a claim against the property of the trust/estate you are administering.

As a trustee, if you reject the claim, what can you do?  If the claim is not pursued in any formal way, this unresolved claim can affect the administration of the trust/estate and place you at risk if you proceed.

Section 135 of the Trusts Act 2019, formerly section 75 of the Trustee Act 1956, provides an effective, but not often utilised, solution – it enables you to require the person making the allegation to “put up or shut up”.

The “Claim” and Associated Risk

If there is an unresolved claim against you personally as a trustee, or against the property of the trust/estate that you administer, choosing to proceed to administer/distribute the trust/estate property could have significant ramifications.

This is particularly so if the claim is eventually brought before the High Court and the property in question has been distributed or the trust/estate wound up:

  • You could be held personally liable;
  • You could find yourself in the position of having to defend against a High Court proceeding with no trust property to indemnify yourself from if you are successful.

To protect yourself once a claim has been made the process under section 135 of the Trusts Act 2019 should be initiated.

The Notice

The first step is to serve a notice on the person making the claim.

The notice must be served in accordance with the High Court Rules 2016 and set out, pursuant to section 135 of the Trusts Act 2019:

  • The general nature of the claim as you understand it to be; and
  • That if they do not commence legal proceedings within 90 days of receiving the notice, the High Court may bar their claim or authorise you to administer the trust/estate property without regard to their claim.

The effect of the notice is that time begins ticking.  The person making the claim has 90 days after being served with the notice to commence a proceeding in the High Court to enforce their claim – case law refers to this as requiring them to “put up or shut up”.

The Application

If proceedings have not been commenced by the expiry of the 90-day period then you can make an application to the High Court to bar the claim.

As part of the application you can seek that the costs of the application are to be paid by the trust, if appropriate, or are to be paid by the person making the claim.

High Court Approach

The High Court’s approach to your application will in part be dependent on whether the person making the claim takes any steps following receipt of your application.

If they do nothing, then the High Court will proceed to make orders on your application, after following a particular process under the High Court Rules 2016 referred to as a formal proof hearing.  If the High Court considers your application has merit, then it may bar the claim or authorise you to administer the trust/estate property without regard to the claim.

If the person making the claim does take steps, then case law, under section 75 of the former Trustee Act 1956 (such as Poulter v Poulter [2020] NZHC 3095), sets out various principles the High Court will apply, including:

There is no requirement for the High Court to undertake a substantive assessment of the merits of the claim, however whether the claim has any merit may be taken into account when considering if it should be barred;

  • A lack of action both before and after the notice being served will count against the person making the claim;
  • An explanation will be required as to why no steps were taken to initiate proceedings from the time the notice was served;
  • Evidence that a claim may not be progressed with all due diligence will count against the person making the claim;
  • Even where the claim is meritorious, and there is an explanation for the failure to initiate proceedings, the High Court would only extend the time for bringing a claim on conditions requiring proceedings to be initiated in a specified period of time, failing which it would be barred.

What the High Court will ensure is that the claim is either brought to a head within a reasonable time or is put to rest.

Conclusion

Unresolved claims against a trust/estate can have serious implications if, as a trustee, you proceed to administer a trust/estate.

Requiring the person making the claim to “put up or shut up” is a valuable tool which can be utilised to safeguard yourself.

The experienced team at McCaw Lewis can help you navigate the legal aspects of the process required under section 135 of the Trusts Act 2019 and the High Court Rules 2016 or answer any questions you may have.

Zane is an Associate in our Disputes Resolution Team and can be contacted on 07 958 7431.

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