Category: Dispute Resolution

Health and safety reforms: What you should know

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Introduction

After the Pike River Mine tragedy and the subsequent Independent Taskforce report, the Government embarked on reviewing the current Health and Safety in Employment Act 1992.  As a result, the Health and Safety Reform Bill was introduced to Parliament on 10 March 2014 and passed its first reading a few days later.  The Bill provides for many changes to the current Act with key changes including:

  • New duty holder definitions;
  • New obligations on all parties, with increased worker participation requirements; and
  • Increased enforcement and penalties.
New duty holder definitions

The Bill seeks to define the parties that will be affected by the new Act.  The newly defined duty holders include:

  • A person conducting a Business or Undertaking (“PCBU”) who is a person or company conducting a business or undertaking whether working alone or with others.  A PCBU may or may not conduct a business or undertaking for profit or gain;
  • Officers who may be directors of companies or equivalents, and partners of partnerships.  Officers may also include any person occupying a position in a body corporate that is comparable to a director of a company and any person who is in a position of making decisions that will affect the whole or substantial part of the PCBU; and
  • A worker who is a person who carries out work for a PCBU which may include employees, contractors, subcontractors or their employees, apprentices, trainees, persons on work experience, volunteers, employees of labour hire companies.
New obligations on all parties

There is a shift from the current obligations of employers to take “all practicable steps” to the new standard of PCBUs, officers and workers taking “reasonably practicable” steps to ensure the safety of workers.  While on the face of it, the obligations appear to be the same however the new obligation means that the PCBU must do what is (or was at a particular time) reasonably able to be done in relation to ensuring the health and safety of workers.  This means that cost can no longer be relevant consideration, unless it is grossly disproportionate.

PCBU

It is the general duty for all PCBUs to ensure, so far as reasonably practicable the Health and Safety of:

  • Workers employed or engaged or caused to be employed or engaged by the PCBU, while in the business or undertaking; and
  • Workers whose activities in carrying out work are influenced or directed by the PCBU, while the workers are carrying out the work.

In addition to this, the PCBU must also take all reasonably practicable steps to ensure that the health and safety of others is not put at risk from work carried out as part of the conduct of the business or undertaking.

Officers

Under the Bill, Officers will also have duties to exercise due diligence to ensure that the PCBU complies with its duties.  Among other matters, Officers are required to:

  • Acquire and keep up-to-date knowledge of work health and safety matters;
  • Gain an understanding of the nature of the operations of the PCBU and the associated hazards and risks;
  • Ensure that the PCBU has and uses appropriate resources and processes to eliminate or minimise risks;
  • Ensure that the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards and risks;
  • Ensure that the PCBU has and implements processes to comply with the duty the Act will imply; and
  • Verify the provisions and use of the resources and processes by the PCBU.
Workers

There is a shift to putting more onus and obligations on workers (formerly employees) in relation to taking care of their own health and safety.  Under the Bill, workers must:

  • Take reasonable care of their own health and safety;
  • Take reasonable care of their own acts or omissions so that they do not adversely affect others; and
  • Comply with any reasonable instruction that is given by the PCBU to allow the PCBU to comply with the Act.
Worker participation

The Bill puts further focus on worker engagement as it is believed that effective worker participation can reduce accidents and as a result improve safety.

Increased enforcement and penalties

Under the Bill, there will be number of enforcement mechanisms that are available to the Health and Safety Representatives within a PCBU.  The Health and Safety Representatives would be able to issue notices if they believe a person is in breach or is likely to breach the provisions of the Act or regulation.  If a party is issued with one of these notices, the party can apply to WorkSafe for an internal review into the actions and for recommendations on how to improve.

A party can be convicted for breaches relating to the Health and Safety namely for the following:

  • Reckless conduct exposing an individual to risk of death or serious injury with a maximum conviction of $3million fine or imprisonment term not exceeding 5 years;
  • Failing to comply with a health and safety duty that exposes an individual to risk of death or serious injury or illnesswith a maximum conviction of $1.5million fine; and
  • Failing to comply with a health and safety duty with a maximum fine of $500,000.
What this means for you

Overall the Health and Safety Reform Bill seeks to improve the workplace health and safety culture within New Zealand.  While the concept of protecting employees and workers is not new, the obligations have increased and so have the penalties.  The good news is that by ensuring your business has the correct processes and procedures in place to effectively manage and mitigate any health and safety concerns, you are able to protect yourself against maximum exposure.  Similarly, if you are a worker, you are able to personally reduce your exposure by ensuring you follow correct procedures and by bringing any health and safety concerns to the attention of your PCBU.

If you would like further information please contact Renika Siciliano on 07 958 7429.

The District Plan appeal process put simply

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As many will be aware, the updated version of the Hamilton City Proposed District Plan was released on 9 July 2014 (“July Plan”).  The July Plan was the result of a lengthy negotiation and Council hearing process during which Council received, reviewed, negotiated over and/or heard further evidence in relation to over 1,000 submissions on the Proposed Plan as notified in December 2012 (“December Plan”).  The purpose of this article is to explain the next phase of the process in adopting a Proposed District Plan using the Hamilton City Proposed District Plan proceeding as an example.

The appeals

Since the notification of the July Plan, the original submitters on the December Plan were given the option of lodging appeals with the Environment Court.  Out of almost 1,300 original submitters, fewer than 50 persons/entities chose to lodge an appeal in Court (“appellants”).  A list of the appeals (as well as a copy of the appeals themselves) can be found on Hamilton Council’s website.

In addition to the appeals lodged, some chose to join specific appeal proceedings through “interested party” notices under section 274 of the Resource Management Act 1991.  An interested party notice gives people the right to join an appeal provided they fulfil a defined set of criteria.  The most common reason people join an appeal is because they made a submission on the original Proposed Plan (in this case, the December Plan) and the appeal they wish to join relates to one (or more) of the provisions they made submissions on. However, people can join even if they did not make submissions on the original Proposed Plan, so long as they can show they have an interest that is “greater than the general public”.

The process

The appeal process is different to the previous Council-controlled process in that this step is controlled by the Environment Court.  This means that the Court determines what the next step of the process will be, albeit by seeking input from Council (and its advisors) and all other parties (both appellants and interested parties).

Given the appeals lodged in relation to the July Plan relate to a large number of provisions, some of which are interlinked, it would be entirely impractical for each appeal to be dealt with separately.  Instead, matters will be dealt with together to the extent they relate to the same subject or topic.  The decision on which appeals will be heard together is determined by the Environment Court with input and suggestions from all parties.  In relation to the July Plan, the parties have decided on a structure for how to group the appeals.

The next step in the process is to determine whether the appeals are likely to be resolved by:

  • Negotiation leading to a Consent Order;
  • Mediation; or
  • Court hearing.

A Consent Order is where the parties, through negotiation, agree on a resolution of the appeal by preparing a draft Order for the Court’s approval.  It is a relatively quick and easy method of resolving an appeal.  In order for an appeal to be resolved by Consent Order, all the parties (including the interested parties) have to agree to and sign the Order.

Mediation is the most preferred way of resolving an appeal if negotiations are unsuccessful, as it provides the parties with input into the process and, if successful, avoids a Court hearing altogether.  The mediators are often Court appointed Environment Court Commissioners with previous experience in environmental matters.

If an appeal is unable to be resolved by way of a Consent Order or through mediation, the matter will proceed to be heard in the Environment Court.  This is a Court directed process in which the Judge and the Commissioners will hear submissions from all parties, along with any relevant evidence.  It is a formal procedure where strict rules of process apply which will need to be abided by.  A failure to adhere to time frames etc, may result in a loss of the appeal altogether.  The hearings in relation to the July Plan (if any) are not scheduled to commence until 2015 in order to give the parties enough time to negotiate and/or mediate.

What to think about

Whichever process is chosen, it is important to ensure that the correct mandates (particularly from the Council) have been sorted out early.  Engaging in a Plan appeal process is time consuming and can be costly, so it is vital to be clear on who is responsible for negotiating and who has authority/mandate to make decisions. This will avoid unnecessary delays and/or the risk of a negotiated resolution being rejected by the decision-makers.

All parties (including interested parties) should be conscious of the length of time a Plan appeal process is likely to take.  Not only because it usually involves a large amount of parties (including interested parties), but also because a Proposed District Plan is a very comprehensive document which often evokes a large amount of local, public interest (as noted, the December Plan gave rise to over 1,300 submissions which led to 50 or so appeals being lodged in relation to the July Plan).

In addition, if an appeal has to be resolved by a Court hearing, further delays may incur as a result of Court availability (particularly if a number of districts are going through the Proposed District Plan appeal process at the same time, as is the case at the moment in New Zealand).

While the Environment Court is considered more layman-friendly than the civil Courts (such as the High Court), it is key not to underestimate the importance of obtaining expert advice, both planning wise and in a legal sense.  Technical expert evidence is sometimes required to give strength to an appeal and it is vital that such evidence is prepared in a legally compliant manner (having regard to rules of evidence, the expert Code of Conduct etc).

Funding

Plan appeals can be costly exercises.  In certain circumstances however, a party can seek to have an appeal funded by the Environment Legal Assistance Fund (ELA Fund).  The ELA Fund provides not-for-profit groups (such as environmental, community, iwi and hapū groups) with financial assistance to advocate for an environmental issue of high public interest at the Environment Court. In general it is expected that groups are incorporated or a Trust. The Fund is unfortunately not available to individuals.  More information on the ELA Fund can be found on the Ministry of the Environment’s website.

Summary

The Plan appeal process is a key aspect of the democratic process in which one of the most important local planning documents is prepared.  It gives people an opportunity to further engage with the Council before a Proposed District Plan becomes operative.

While all appeals are lodged with the Environment Court, there are a number of ways in which an appeal can be resolved.  The manner in which a resolution is reached is based on a variety of factors, most importantly by the stance of the parties to the appeal.  Time will tell whether the July Plan appeals are resolved by negotiation, mediation or hearing.

It is imperative to obtain appropriate technical and legal advice through the Plan appeal process, which can be lengthy and costly.  Funding through the Ministry for the Environment is available in certain circumstances.

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

Building law changes that could affect you

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We have previously reported on the Building Amendment Bill which became law in November 2013.  The bill has made significant amendments to the Building Act 2004 (“the Act”) that could affect you.

There has been some confusion around the timing of the changes, so this article addresses the key changes that are already in effect and those that are yet to come into force.

What changes are already in effect?

The changes that are already in effect include changes to categories of building work that do not require building consent.  The “exempt work” is set out in Schedule One of the Act, which is relatively easy to follow.  Some examples include building work that is in connection with:

  • Single storey detached buildings that fit within certain requirements e.g. less than 10m²;
  • Detached buildings that either people cannot or do not normally enter; and
  • The repair or replacement of detached outbuildings, such as garages and sheds, if certain conditions are met.  For example, the outbuilding must not be intended for public use.

You can also now demolish a building that is detached and is not more than three storeys without a building consent.  You could not do that previously unless the building was damaged.

The changes do not affect exempt work that was started before 27 November 2013.  It is also important to note that, even though some building work is now exempt, it must still comply with the Building Code.  A building’s level of compliance with the Building Code must also not be adversely affected once the exempt building work is completed.

There are now also higher penalties for carrying out building work without a building consent (where one is required).  The maximum penalty for constructing, altering, demolishing or removing buildings without a building consent has increased from $100,000 to $200,000.  This amount also increases by $10,000 per day or part day that the offence continues.  The infringement fee for carrying out building work without a building consent  has also increased from $750 to $1,000.

Too much left for the Courts?

There are clearly some issues that will arise as a result of the new exemptions.  In particular, where the exemption conditions are not clearly measurable and are subject to interpretation.  For example, in terms of detached buildings, “do not normally enter” could be interpreted in a number of ways.  Similarly, in terms of the repair or replacement of detached outbuildings, “not intended for public use”, is open to interpretation.  When is intention assessed?  And who will be regarded as the “public”?  It appears that much will be left up to the Courts.

Despite these issues, the exemptions will of course also have some benefits, such as freeing up council time to deal with more significant issues.   This will in turn reduce procedural delays.

What changes are we waiting on?

The changes that we are waiting on are the most significant and relate to the new consumer protection measures that have been introduced into the Act.  These further changes are to come into force via regulations that are expected to be passed at the end of the year.  The main changes are:

  • The requirement for written building contracts for residential work that is over a certain value.  This will only apply to contracts between building practitioner and client, and not, for example, builder and subcontractor.  It also does not apply to contracts for design work.  If builders do not comply with the written contract requirement, they may face a fine of up to $2,000;
  • The requirement for minimum contractual terms such as setting out the contracting parties, the payment process, timeframes, the process for varying the contract and dispute resolution;
  • The requirement for builders  to provide information to certain clients before a contract is signed, such as:
    • information about their skills, qualifications, licensing status and dispute history; and
    • a checklist that includes matters such as an explanation of the legal obligations of both parties and the risks of a payment in advance arrangement.
  • Essentially if the building work is over a certain value or a client specifically requests the information, it must be provided.  If not, the builder may face a fine of up to $2,000;
  • The ability for a client to require defective building work to be remedied within 12 months – essentially on a “no questions asked” basis.  The remedial work must be carried out within a reasonable time after notice in writing of the defect has been received by the builder.  The client is also able to claim compensation for loss or damage arising from the defective work;
  • A number of warranties will be implied into building contracts, and there will be a number of remedies available for breach of those warranties.  The implied warranties include:
    • That the building work will be carried out in a proper and competent manner, in accordance with the plans and specifications set out in the contract and the relevant building consent; and
    • That all materials to be used will be “fit for purpose” and, unless otherwise stated in the contract, will be new; and
    • That the building work will be completed by the date or within the period specified in the contract (or if no date or period is specified, within a reasonable time).
  • Remedies for breach of the implied warranties include remedial work and/or payment of the costs of remedial work, compensation and cancellation of the contract.  Importantly, the implied warranties cannot only be enforced by the owner who was/is a party to the relevant building contract, but by subsequent owners as well.
A false sense of security?

Largely the changes to the Act that increase consumer protection are positive.  In some cases, such as with the written contract requirement, these changes are beneficial to both parties.  An increase in information exchanged between the parties may also result in a “no surprises” relationship and therefore improve the relationship.

However, there is also some concern that provision of the required information will cause consumers to consider that further advice, such as legal advice, is not needed.  This is not the case.  Seeking legal advice before entering into a contract is always recommended so that issues and potential risks can be identified and dealt with in advance.

Progress with the regulations

There has been no update as yet regarding progress with the regulations.  The Ministry of Business, Innovation and Employment is expected to release an initial draft for public feedback before the regulations are finalised and ultimately passed.  The Ministry must be aiming to do that soon to meet their initial timeframe of the end of 2014.

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

Erceg v Erceg: A balancing act between trustee and settlor

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Case law has established that a beneficiary of a trust has a clear right to seek information relating to the trust to enable that beneficiary to ensure trustee accountability.  However, one of the main obligations of a trustee is to satisfy the intentions of the settlor.  When a settlor intends the matters of the trust to remain confidential, the rights of the beneficiary and the obligations of the trustee may no longer be compatible.

The recent case of Erceg v Erceg highlights this conflict and provides guidance in balancing the obligations of a trustee to fulfil a settlor’s intentions, and the rights of beneficiaries to have access to information.

In 2004 Michael Erceg, the founder of Independent Liquor NZ Limited, settled the Acorn Foundation Trust.  Michael was both settlor and trustee, and the Acorn Foundation Trust was one of a number of trusts settled by Michael.

The Acorn Foundation Trust deed contained a confidentiality clause which stated:

“Without prejudice to any right of the trustees under the proper law to refuse disclosure of any document or information, the trustees shall not, unless required by law, be bound to disclose to any person any document or information relating to this Trust, the Trust fund or any Trust property, the beneficiaries or any document setting forth or recording any deliberations of the trustees as to the manner in which they have or should exercise any power or discretion, or the reasons for any particular exercise of any such power or discretion, or any other related documents including this instrument”.

Michael was killed in an accident in November 2005.  Following Michael’s death, his widow and the second defendant, became the trustees of the Trust.

The plaintiff, Millie Erceg, was Michael’s mother.  She was named as a secondary beneficiary of the Trust.

The Trust sold its shares in Independent Liquor NZ Limited for a substantial sum.  The Trust was then distributed.  Millie Erceg did not receive any distribution.

Millie sought an order from the Court that she was a beneficiary of the Acorn Foundation Trust and requested copies of documents relating to the Trust.  These included copies of the Trust Deed, financial accounts for the Trust, the agreements for the sale of the Trust’s shares in Independent Liquor NZ Limited and the minutes of all trustee meetings.

Millie argued that it was her right as a beneficiary to have access to certain information to ensure that the trustees were accountable for their actions.  She requested copies of the Trust’s resolutions and financial statements which would have shown the distributions made to the beneficiaries.  In order for her to be properly advised of her rights and position by her counsel, disclosure of the documents was necessary.

In response to Millie’s argument the trustees claimed that they were bound by Michael’s intention as settlor that the Trust and its affairs remain confidential.  It is an established principle that trustees, when exercising a discretionary power, are not bound to disclose  any information to beneficiaries.

The Court acknowledged that there was a conflict between Millie Erceg’s right as a beneficiary to have access to certain information to ensure the accountability of the trustees, and the principle that the trustees were not bound to disclose the reasons behind their decisions, which had been the intention of the settlor.

Case law

To assist him in reaching his decision, the Judge considered the two leading trust law cases on the issue.

One of those cases was the 2003 UK case Schmidt v Rosewood Trust Ltd.  In that case the Court found that it was not a beneficiary’s proprietary right to have the trust documents disclosed to them, rather it is within the Court’s jurisdiction to supervise, and in some cases, intervene in the administration of trusts.  In a case involving personal or commercial confidentiality, the Court may have to balance competing interests of different beneficiaries, trustees and third parties in deciding whether or not to do so.

The Court also considered the New Zealand case of Foreman v Kingston.  Similarly to the Erceg case, the beneficiaries in this case requested the disclosure of certain trust documents and argued that the trustees were under a duty to disclose these to the beneficiaries. The Court in this case determined that the beneficiaries have the right to receive information which will enable them to ensure the accountability of the trustees, however, that this right is subject to the discretion of the Court.

Erceg v Erceg decision

In relation to Millie Erceg’s first claim, the Court determined that an order declaring her as a beneficiary was unnecessary.  The Acorn Foundation Trust deed named Millie as a secondary beneficiary.

When the Court considered Millie’s second claim, it acknowledged that there was a conflict between her right as a beneficiary to have access to certain information, so as to ensure the accountability of the trustees, and the principle that the trustees were not bound to disclose any reasoning behind their decisions.

The Court agreed that there should be disclosure of the documents requested to allow Millie to be properly advised of her rights and position.  This was, however, to be limited by Michael Erceg’s intention that the Trust remain confidential.  The trustees had an obligation to fulfil Michael’s intention as settlor, subject to their legal obligation to comply with directions of the Court.

Because of this, the Court ordered that the Acorn Foundation Trust Deed and the valuation the trustees received for the Independent Liquor NZ Limited shares were to be made available to Millie Erceg.  Millie and her counsel were also to have access to the financial accounts and resolutions of the Trust, however these were to be subject to redactions to ensure that the names of other beneficiaries and the amounts of individual distributions and loans were to remain confidential.

Case law both internationally and in New Zealand has shown that a beneficiary of a trust has a right to seek information relating to the trust to enable that beneficiary to ensure accountability.  The extent of this right however is subject to the discretion of the Courts, and may be limited by the intentions of the settlor.  Erceg v Erceg provides guidance as to how the Court may balance competing rights and obligations.

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

“What’s mine is mine and what’s yours is mine”

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Introduction

Thompson v Thompson  [2014] CA 117 is a case about relationship property and specifically relates to a post-separation payment made to one spouse under a restraint of trade covenant in a business sale agreement.  The Court of Appeal had to determine whether that payment was to be treated as separate property or as relationship property.  The case considers the nature of the restraint of trade covenant and, in doing so, the question of to what extent the post-separation payment reflected business goodwill or whether it was compensation for personal skills and attributes.

Facts of the case

Following the dissolution of their marriage in 2005, Mr Thompson, (the appellant), and his wife, Mrs Thompson, (the first respondent), agreed on the division of their considerable assets.  These included the family home, a holiday home, various chattels, and the proceeds of the sale of the business, Nutru-Life Health & Fitness (NZ) Ltd (Nutra-Life) and its holding company, Health Foods International Limited (HFI). Both companies had been transferred to the M L Thompson Family Trust (the MLT Trust) some 10 years earlier.  The second respondents were the trustees of the MLT Trust.  The parties were unable to agree on their respective entitlements to a payment of $8 million, made to Mr Thompson under a restraint of trade covenant entered into in December 2006.  This payment was made over four years after the parties first separated in 2002.

Upon their separation in August 2002, Mr and Mrs Thompson had been married for nearly 31 years and had five children together (now all adults).  Mr Thompson had many years experience working in the health foods/dietary supplements industry. In December 2006, the trustees of the MLT Trust sold the business assets of HFI and two other entities to companies associated with Next Capital Health Ltd (Next). The purchase price was $72.3 million. The sale agreement was conditional upon, among other requirements, Mr Thompson entering into a restraint of trade covenant.  Upon entering into the covenant on 21 December 2006, Mr Thompson received a payment of $8 million. It is common ground that the sale of HFI Group was at a very good price, and a significant factor in achieving that price was Mr Thompson’s agreement to enter into the restraint of trade covenant.

The Family Court decision

Mrs Thompson’s claim to half of the $8 million payment was first determined in the Family Court.  The Family Court held that the payment was the separate property of Mr Thompson because the payment was received some four years after the parties had ceased living together as husband and wife.  Therefore the Court found that it was not just to treat any portion of the payment as relationship property.  Mrs Thompson appealed to the High Court.

The High Court decision

According to the High Court, the restraint of trade covenant and the payment raised two separate considerations.  Firstly, the Court considered whether the restraint of trade covenant was given to protect the value of the HFI business.  Therefore it was necessary to focus on the value of restraining Mr Thompson from certain activities for a specified period.  The second consideration was that the covenant restrained Mr Thompson from using his personal skills and attributes.  The Court held that, as the payment for business goodwill was incorporated in the total purchase price, the payment for the restraint of trade covenant had to have been for Mr Thompson’s personal goodwill.

The High Court agreed that the payment was the separate property of Mr Thompson, however the Judge still decided to use her discretion under s9(4) of the Property Relationships Act 1979 to treat part of the restraint of trade payment to Mr Thompson as relationship property. The Court considered that there was a connection between the restraint of trade payment and efforts made during the marriage.  However the evidence before the Court was insufficient to allow the Court to apportion the payment between the amount pertaining to Mr Thompson’s business performance during the relationship and the amount of compensation for the loss of Mr Thompson’s future earnings. The Court held that if the parties failed to reach agreement on apportionment, additional evidence would be required at a further hearing.   Mr Thompson appealed to the Court of Appeal.

The Court of Appeal decision

The two main issues for the Court of Appeal were as follows:

Is the $8 million payment relationship property or separate property?

The Court of Appeal considered that the sum of $8 million as consideration for the restraint of trade covenant reflected the loss of Mr Thompson’s future business opportunities along with the other burdensome commercial obligations he undertook as part of the agreement.   The Court of Appeal held that the payment of $8 million was Mr Thompson’s own separate property and accordingly there was no basis for concluding that part of the business goodwill could be said to be attributable to Mrs Thompson and be available as an item of relationship property.

Should any portion of that payment be treated as relationship property under Section 9(4) of the Act?

The Court of Appeal stated that the starting point for the ascertainment of property resulting from a marriage partnership is the date of separation.  Property acquired after that date is usually considered the separate property of the acquiring spouse.  The key factor in deciding whether such property should be shared is to determine whether there is a link between the relationship and the benefit or burden of changes in assets and liabilities after separation.  There are strong policy reasons behind the differentiation between changes in the relationship property and changes brought about by the actions of one of the parties after separation.  The Court of Appeal held that “we see no principled basis upon which it would be just to treat any part of the $8 million separate property as relationship property”.

Implications of decision

The Court of Appeal decision of Thompson v Thompson endorses the “clean break” policy behind the Property Relationships Act that separate property is not required to be shared with the non-owning spouse. If a spouse could claim against future efforts or attributions of the other spouse then each party would continue to have a stake in the conduct and fortunes of his or her ex-partner, despite the dissolution of the relationship.  It could also unnecessarily promote the malicious post-separation consumption of relationship property, while discouraging the “energetic party” from acquiring or improving assets and repaying debts after separation.  This is because the benefits of these efforts would then have to be unfairly shared with the other party.  The recognition of and the giving of effect to separate property is as much a policy of the Property Relationships Act as the general policy of equal division of relationship property. In other words, the Property Relationships Act recognises that, in some cases, what’s mine is mine and what’s yours is yours.

If you would like further information please contact Daniel Shore on 07 958 7429.

Update on the Construction Contracts Amendment Bill

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Introduction

We were expecting the proposed changes to the Construction Contracts Act 2002 (via the Construction Contracts Amendment Bill (Bill)) to come into force on 1 November 2013. However, the Commerce Committee (Committee) only released its report on the Bill on 11 December 2013.  The result is that the timeframe for the changes has now been pushed out, for the most part, to 1 November 2014.

The purpose of this article is to summarise the key points made by the Committee in its report.

Recap on the proposed changes to the Act

The main proposed changes to the Act are:

  • Removing most of the distinctions between the treatment of residential and commercial construction contracts;
  • Extending the scope of the Act to include contracts for design, engineering and quantity surveying work (by amending the definition of construction work);
  • Allowing for enforcement of adjudication determinations about rights and obligations of parties to a construction contract; and
  • Making the process of enforcement of adjudication determinations more efficient.
Committee report

The Bill was referred to the Committee on 11 June 2013, with public submissions closing on 25 July 2013. The Committee received 31 submissions from interested groups and individuals and heard 22 of those submissions.

Although the Committee does not appear to disagree with any of the above proposed amendments, it has recommended some changes to the relevant clauses in the Bill as well as additional recommendations – some positive, others not so much.  This includes recommended changes to the adjudication process and a recommendation that will expand the scope of payment claims.

Definition of construction work

Significantly, the Committee has recommended that the definition of construction work under the Act is further extended to include “operations that are critical for the completion of, or preparatory to, the scope of design, engineering, and quantity surveying work”.  This is because, in the Committee’s view, these “related services” directly affect the quality of building work, and it would benefit consumers if they were covered by the Act.

This may have been inspired by section 6(1)(f) of the Act, which includes in the current definition of construction work “any operation that forms an integral part of, or is preparatory to or is for rendering complete” particular categories of “construction work”.

Adjudication process

In its report, the Committee has acknowledged that the tight timeframes set out in the Act in regard to the adjudication process could create opportunities for “ambush claims”.  This is because, at the moment, claimants can set adjudication in motion straight away, and the respondent is required to reply within five working days of receiving an adjudication claim (unless an extension is agreed to between the parties or granted by the adjudicator).  The Committee noted that this is particularly an issue for residential home owners and smaller contractors as they are not likely to be familiar with the adjudication provisions of the Act.

It appears that the Committee has recommended changing the timeframe for selecting an adjudicator to two to five working days after the notice of adjudication has been referred to the adjudicator (where the parties have agreed on two different adjudicators but they are unable or unwilling to act).  The reason for this is stated in the report as being “to limit the ability of a claimant to rush an adjudication for tactical reasons”.  However, this is in fact a reduction in the timeframe that is currently prescribed under the Act of five working days, which would have the opposite effect.

The Committee has also recommended adding a new provision so that an adjudicator is required to allow a respondent additional time if it is believed that the claim has been served with “undue haste” and the respondent has “insufficient time” to prepare a response.  This is a positive change for respondents of course, however, the fact that a claimant only has five working days from service of the notice of adjudication to file their adjudication claim, means many claimants pre-prepare their claims.  On that basis claims are quite often served with “haste”, therefore it would seem that an adjudicator would be bound by this provision more often than not.

Content of payment claims

The Committee has also recommended changing the definition of“claimed amount”under the Act to include liquidated damages, breaches of implied warranties under the Building Act 2004, and construction work already carried out.  This amendment would clarify that damages could be claimed in a payment claim if they were specifically agreed in a contract or implied by law, which is a matter that has previously been the subject of uncertainty.  This will therefore be a positive and welcome change to the Act.

Conclusion

The Committee has included some positive recommendations in its report, which will be welcomed by the industry.  On the other hand, there are some recommended changes that do not make a lot of sense.  It will therefore be interesting to see whether or not those recommendations are in fact adopted in the much anticipated Construction Contracts Amendment Act.  The second reading of the Bill in Parliament, which is the next step, may shed some light on that.  We will continue to ‘watch this space’ and report back on any interesting developments.

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

The Disputes Tribunal process

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This article discusses lodging or defending a claim in the Disputes Tribunal, including tips on what to consider when preparing evidence for a hearing and some comments on what to expect from the hearing itself.

The Disputes Tribunal

The Tribunal is a lay people’s forum for hearing and determining disputes.  The focus of the Tribunal is on practical dispute resolution and not technical legal analysis.  The Tribunal aims to resolve claims in an informal, inexpensive and speedy manner.  In most Tribunal hearings, claimants or defendants are not allowed to make use of advocates.  In these circumstances the responsibility of preparing for a hearing will fall on the parties themselves.

If you have a claim in contract, quasi contract (a contract that is implied or created because of the circumstances) or tort (negligence, injury or damage to property) then it is likely that the claim can be heard and determined by the Tribunal.  However, the upper limit of any claim which can be heard by the Tribunal is $15,000 (or $20,000 by agreement between the parties).

Lodging a claim

In order to lodge a claim in the Tribunal, a claim form needs to be completed and filed and a filing fee paid (the amount of which depends on the amount of your claim).  The claim form is available on the Ministry of Justice website (www.justice.govt.nz).

To avoid delays, it is important that your claim is correctly lodged.  This may seem obvious but mistakes are often made.  Common mistakes to avoid include:

  • Failing to correctly name the party that you are bringing the claim against.  For example, failing to recognise the distinction between a company and an individual.  In a breach of contract situation a key question to ask is who is my contract with?
  • Failing to name an interested party.  Parties who are affected by the outcome of a Tribunal hearing need to be named when a claim is lodged.
  • Failing to include important details in your claim.  For example, if you do not include an important element of your claim in the claim form, it may be determined at the hearing that the element you failed to include is outside the jurisdiction of the Tribunal and therefore unable to be resolved.
Defending a claim

When a claim is lodged against you, a notice will be sent informing you of what the claim is about, and when it will be heard.  Options to consider when a claim has been made against you are:

  • To try and settle the claim with the other party before the hearing.
  • To attend the hearing and defend the claim.
  • To lodge your own claim against the other party (a counterclaim).  If you lodge a counterclaim, both claims will typically be heard at the same time.  The above comments on lodging a claim apply equally to counterclaims.

The Tribunal information page contains comprehensive information that is useful for both applicants and defendants.  Again, this information can be accessed at (www.justice.govt.nz).

Preparing evidence

Proper preparation of the evidence in support of your claim or defence is extremely important to successfully bringing or defending a claim in the Tribunal.  Having accurate and relevant evidence will strengthen your case.  Consider the following when compiling your evidence:

  • Begin by creating a timeline of events relating to the claim.  This will provide you with a blueprint for your preparation.  Only include the events that are most relevant to the dispute.
  • Gather relevant evidence (for example, letters, emails, photos, invoices) to support each event.
  • Organise your evidence logically so that it can be easily accessed and referred to.  This could include using a folder and dividers, numbering the pages of your evidence and including an index.
  • It is very important to include evidence to support the dollar amount of what you are claiming (for example quotes, invoices, receipts or bank statements).  This is equally important if you are disputing the amount claimed against you by the other party.
  • Arrange for any witnesses who can support your claim or defence to be involved in the hearing (It is possible for a witness to give evidence over the phone if necessary).  It is important to note that a witness and a support person should not be the same person.  A witness will not be allowed to be in the room during the course of the hearing and will only be present when giving evidence.

Note: Make sure you provide copies of all the evidence you intend to present at the hearing to the other party before the hearing begins.

Pre-hearing considerations

After you have lodged a claim, or a claim has been lodged against you, a hearing will typically be scheduled within 6 weeks.  Useful pre-hearing considerations are:

  • Making sure you read the notice of hearing (checking the time, date and location of the hearing).  If you do not turn up, it is likely that the hearing will still proceed and an order can be made in your absence.
  • If the hearing date is not suitable, contact the Tribunal as soon as possible to ask if a new date can be allocated.  You are more likely to obtain a new date for the hearing if you have strong grounds for not being able to attend on the original date.
  • Organise a support person to attend the hearing to help you sort through your evidence or remind you of important points.
  • The Tribunal aims to achieve settlement between the parties during the hearing so consider the basis on which you would settle the claim by agreement with the other party and be prepared to negotiate.  With any Tribunal hearing there is a chance that the referee will not make an order in your favour therefore, depending on the circumstances, settlement may be the best option.  Throughout the hearing, consider the strengths or weaknesses of your position and how it may affect your decision to settle.
The hearing process

On average, hearings are around 45 minutes in length (although this can be shorter or longer depending on the complexity of the claim).

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

Following this, any witnesses giving supporting evidence at the hearing for the claim or defence will be called into the room separately.  After a witness has presented his or her evidence, the other party will have the opportunity to ask the witness questions.  Helpful tips for questioning a witness are:

  • If possible, prepare your questions prior to the hearing.  Even if you add to or change them at the hearing, it is recommended that you have a list of questions in mind beforehand.
  • Avoid asking suggestive questions.  For example, “He was wearing a red hat wasn’t he?” is a suggestive or leading question because it suggests to the witness that the hat was red.  In contrast, a question like “What was the colour of the hat he was wearing?” is an open-ended question which prompts the witness to recall the answer from memory.

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

When the issues have been worked through and both parties have a better understanding of their position in the dispute, the referee will often ask whether the parties are willing to settle the dispute on their own terms.   When considering whether or not to settle, you should consider the strengths and weaknesses of your position and what you would accept to resolve the dispute.

At the conclusion of the hearing, the referee will not issue a decision but will instead take time to further consider the evidence that has been presented by both of the parties.  The order and the reasons for it will be sent to the parties approximately two weeks after the date of the hearing.

Summary

When lodging a claim with the Tribunal, attention to detail is paramount.  Ensure you have not made any errors and that you have included enough detail in the description of your claim.  When defending a claim, your options are to try and settle the claim before the hearing, defend the claim and/or bring a counterclaim against the applicant.

When preparing evidence, create a timeline of the events surrounding the claim, gather relevant evidence to support your interpretation of the events and organise your evidence well.  Also, consider whether your evidence will be strengthened by the involvement of a witness.

Before the hearing, determine whether you will need a support person to attend the hearing with you.  Also, consider your position on settlement as negotiations may occur during the hearing.  Remember that any decision to settle should also be informed by what you learn about your position as the hearing unfolds.

During the hearing, if the other party has brought a witness to give evidence, organise some basic questions to ask the witness beforehand.   Avoid asking suggestive questions.  Also, if you do not understand anything the referee has said or the issues they outline at the hearing make sure you let them know.

Final word

The Tribunal is a very accessible forum for the general public to use for resolving disputes.  However, not having a legal representative can leave many floundering as to how to best approach a Tribunal hearing.

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

Caveats: What, when, how and why?

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What is a caveat?

In general terms, a caveat is a notice that is lodged against the certificate of title for someone else’s land.  The person who registers a caveat is known as the “caveator”.

A caveat serves as a notice that the caveator claims an interest in the land subject to the caveat, even though the caveator may not be the legal owner of the land.  Lodging a caveat means that the owner of the land cannot transfer, mortgage or otherwise deal with the land without the caveator’s consent (unless the caveat is released or a Court orders otherwise).

It is important to remember that a caveat does not create an interest in land – it is simply notice that an interest is claimed by the caveator, which can be disputed by the land owner.

When and why would you register a caveat?

Only a person with a “caveatable interest” in land can lodge a caveat against it. What is a “caveatable interest” will depend on the circumstances, but some common examples are:

  • Interest of a purchaser who has an agreement to purchase land;
  • Interest of a person who has an option to purchase land;
  • Interest of a mortgagee/lender where there is an agreement to mortgage land;
  • Interest of a beneficiary who has an interest in land under a trust or estate;
  • Interest of a tenant who has a lease of land.

The most common situation we see as lawyers is where a purchaser has signed an agreement to purchase land and the settlement date is some time away.  In that case, the purchaser can lodge a caveat against the title to stop the owner from dealing with the land before the sale is completed.

Another common example is where a family member has loaned money secured by an agreement to mortgage, rather than a full registered mortgage.  In that case, the lender can lodge a caveat to ensure that there is notice on the title of the agreement to mortgage.

As mentioned above, the caveator must have a “caveatable interest” to lodge a caveat.  Some examples of when a caveat cannot be used are:

  • A lender who is owed money by a borrower cannot lodge a caveat  against land owned by the borrower (unless there is a mortgage, agreement to mortgage, or other charge in place);
  • A shareholder in a company cannot lodge a caveat against land that the company owns.

If a caveat has been lodged without reasonable cause, the caveator may be liable for loss and expenses caused to the land owner or any person who suffers loss resulting from the wrongful registration.

How is a caveat lodged?

If you have an interest in land that you believe can be protected by a caveat, you need to contact your lawyer to prepare an authority and instruction form. This form is the authority required to register an interest in land.

Your lawyer can sign this form on your behalf “as agent” and arrange for it to be lodged. This process can occur relatively quickly, provided you have the relevant information available for your lawyer.  Land registration fees will apply.

How can a caveat be removed?

The easiest way to remove a caveat is for the caveator to agree to withdraw the caveat. Similar to the lodgement process referred to above, the caveator simply needs to sign an authority and instruction form for the withdrawal of the caveat, which is then registered. Unlike lodging the caveat, the lawyer for the caveator cannot usually sign the authority and instruction form as agent for the withdrawal of the caveat – it must be signed personally by the caveator in most circumstances.

If a caveator does not agree to withdraw a caveat and the land owner believes it is wrongfully recorded, the landowner can:

  • Apply to the High Court application to have the caveat removed;
  • Apply to the Land Registrar to remove the caveat or have it lapse.

Where the land owner has applied for a caveat to lapse or be removed, it will be up to the caveator to prove that the caveat is supported by a caveatable interest and should remain lodged against the title to the land.

Conclusion

If you have an interest in land which you would like to protect, a caveat may be a suitable way to do so.  On the other hand, if you are a land owner who has had a caveat lodged against the title to your land, you have the option to apply for removal if you believe the caveat is wrongfully recorded on the title.

Talk to your lawyer for advice regarding your particular circumstances.

If you would like further information please contact Zane Mora.

Where there is a will – is there always a way?

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Introduction

In 2007, the new Wills Act (the Act) came into force.  The primary aim of the new Act was to give better effect to a will-maker’s intentions by simplifying the law, expressing it in plain language and modernising aspects of the law.

As before, the Act only partially regulates the law of wills.  Much of the law governing wills is left to the Courts.  Since the Act came into force, there have been many High Court declarations that particular documents are valid wills, which documents previously would not have met the required standard of a final will and testament of a deceased.  These include:

  • Unsigned draft wills;
  • A collection of documents that, when read together disposed of the will-maker’s estate;
  • An unsigned will prepared on a will kit form where the will-maker had discussed her wishes with her surviving children at different times; and
  • A letter named as a will, left with a daughter and a brother to be opened on the “will-maker’s” death.

Set out below are summaries of recent cases in which certain documents have been held to be valid wills.  Some of the restrictions on one’s ability to dispose of property by will are also noted, which show that, even where the Court finds that there is a valid will, there is not always a way.

In the Estate of Lawrence

The 2014 case of In the Estate of Lawrence dealt specifically with an application for validation of an unsigned draft will prepared for the deceased.

The deceased was diagnosed with a terminal lung disease in late 2009.  By mid-February 2013 she was very unwell.  On 1 July 2013, Ms C, a Solicitor, received instructions from the deceased about finalising the terms of her will.  A will was prepared in accordance with those instructions and taken to the deceased in hospital.  In the presence of the deceased’s daughter, the deceased confirmed that she was happy with the contents of the draft will.  Unfortunately, the deceased’s condition rapidly declined and she died before executing the will.  The deceased’s partner and daughter applied to the High Court for validation of the unsigned will.

The Court was satisfied that there was no previously executed will for the deceased and that the deceased’s wishes as set out in the draft will should be given effect to.  The Court made a declaration under section 14 of the Act that the undated and unsigned document was the valid will of the deceased.

In the Estate of Su-Yun Chiang

Another 2014 case, In the Estate of Su-Yun Chiang,dealt with “correction” under section 31 of the Act.  This provision allows the Court to make an order correcting a will if the Court is satisfied that the will contains a clerical error or does not give effect to the will-maker’s intentions.

In this case the will-maker was a Buddhist nun with a modest estate and limited family.  She made a will herself using a pre-printed form, without seeking legal advice.  The will appointed two executors and trustees, directed the payment of debts and expenses from estate funds, and provided that the residuary estate was to be held by the executors and trustees.  The will did not give any directions as to the distribution of the residuary estate (the rest of her estate).   However, at the time the will was signed, the will-maker told witnesses, including the executor, that she wanted the residuary estate to be distributed to a Tibetan monk who was a resident of the United States of America but a periodic visitor to New Zealand.

The issue for the Court to decide was whether the omission of any direction in the will to distribute the residuary estate to the Tibetan monk was a clerical error or an oversight capable of being corrected by the Court.  The Court was satisfied by the evidence that the omission of a direction regarding distribution was an oversight and made an order under section 31(2) of the Act correcting the will so that the will-maker’s expressed intentions could be given effect to.

Restrictions on testamentary freedom

It is important to note that, although the primary aim of the Act is to give effect to the ascertainable intentions of will-makers, there are still substantial restrictions on a person’s ability to dispose of his or her property by will in whatever manner he/she chooses.  The Family Protection Act 1955, the Property (Relationships) Act 1976 and the Law Reform (Testamentary Promises) Act 1949 (the Acts) have proved to be successful “tools” used to override the testamentary wishes of will-makers.

Under the Family Protection Act 1955, a spouse, partner, child, grandchild, and in some cases stepchild and step-parent, are entitled to make a claim against an estate where they have not been provided for in a will.  The Testamentary Promises Act 1949 provides for persons who have provided services to a will-maker in the expectation that payment would be provided for in the will.  The Property Relationships Act 1976 allows the revocation of gifts in a will to a spouse or partner who elects to apply for the division of relationship property under the Property Relationships Act 1976 on the will-makers’ death.

These Acts are arguably at odds with the primary aim of the Wills Act 2007 to give effect to the intentions of will-makers.  Therefore, as far as a will-maker’s intentions go, where there is a will there is not always a way.

Conclusion

Although the approach being taken by the Courts in applying the Wills Act is to ensure as far as is possible that a deceased’s wishes are fulfilled, it is advisable to seek legal advice to ensure execution of a compliant will to avoid your  family the costs, delays and uncertainty of an application to the High Court.  Furthermore, there is no guarantee that the Court will validate a will.  Additionally, in light of the restrictions imposed by the Acts mentioned above, seeking legal advice at the outset is even more imperative to ensure that, where there is a will, there is an inexpensive, simple way to give effect to your wishes.

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

New workplace bullying guidelines

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New WorkSafe “Preventing and responding to workplace bullying” guidelines issued on 20 February 2014 provide assistance to employers and employees on how to deal with workplace bullying.  The guidelines outline best practice for dealing with all levels of workplace bullying.  They include a series of templates and checklists aimed to enable such issues to be resolved in the workplace before turning to third parties such as mediation services through the Ministry of Business, Innovation and Employment.

Whilst it is nothing new, workplace bullying is increasingly being brought to the fore and this has highlighted the need for clarity around processes and expectations for both employers and employees.  Employers have an obligation to provide a safe work environment for employees and conversely employees also have an obligation to raise potential safety hazards with their employers, including bullying.  The new WorkSafe guidelines define bullying as:

“repeated and unreasonable behaviour directed towards a worker or a group of workers that creates a risk to health and safety. Repeated behaviour is persistent and can involve a range of actions over time. Unreasonable behaviour means actions that a reasonable person in the same circumstances would see as unreasonable.  It includes victimising, humiliating, intimidating or threatening a person.”

Employers must ensure that, where a bullying complaint is made, a thorough investigation must be completed by an impartial investigator to determine:

  • Whether or not the allegations of bullying have merit, based on the collection of all relevant evidence including interviews with other employees and documentary evidence; and
  • What next steps need to be taken to ensure a safe workplace, regardless of whether the allegations are proven.

The key focus is on protecting the health and safety of employees and acting in good faith by carrying out a fair and thorough investigation process.  The general principles of natural justice apply to the process itself and employers must protect all employees throughout the process, meaning that the rights of the complainant and the alleged bully are to be balanced carefully.  Keeping the parties informed of the process and next step(s) at each stage of the process is important so that both parties are not unnecessarily affected by the process itself.  This can occur through delays, causing stress for the parties involved, or failing to ensure confidentiality.

The WorkSafe guidelines can be found online on the WorkSafe New Zealand website.  Our Team can provide legal advice on the management and investigation of bullying claims and the drafting of policies/procedures to cover these issues.

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

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