Category: Dispute Resolution

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.

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.

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.

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

Posted on by au_common_admin

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.

Contact us

HAMILTON OFFICE

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E. reception@mccawlewis.co.nz

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Hamilton 3204
New Zealand

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