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Health and safety lessons

The eruption of Whakaari/White Island on 9 December 2019 was a tragedy. Of the 47 people on the island when it erupted, 22 people were killed. The other 25 people were severely injured, many with life-changing injuries. The last of the prosecutions brought by WorkSafe due to the eruption concluded on 31 October 2023. We look at the lessons landowners and company directors can learn from these prosecutions.

 

After the eruption, WorkSafe brought charges against 13 parties under the Health and Safety at Work Act 2015. These included charges against tourism operators, two government agencies responsible for advising on volcanic risks and the landowners. The charges against the landowners are the most legally significant.

 

Whakaari Management Limited

Whakaari/White Island has been in the Buttle family since 1936. The family currently owns it through the Whakaari Trust; the trust leased the land to Whakaari Management Ltd (WML). The directors of WML are three members of the Buttle family. WML used to contract with tourism operators to allow them to conduct tours on the island. WML had no presence on the island and its staff did not work there.

 

Charges brought against WML and its directors

WorkSafe charged WML under sections 36 and 37 of the Act. Section 36 requires employers to ensure that, as far as is reasonably practicable, the health and safety of their employees. Section 37 requires an employer to take all reasonably practicable steps to ensure the safety of anyone who enters a workplace controlled by the employer, whether they work for the employer or not.

 

WorkSafe also charged WML’s directors under section 44. Where an employer is a company, section 44 requires directors to take reasonable steps to ensure that their company complies with its obligations under the Act.

 

The court’s decisions[1]

The charge against WML under section 36 was dismissed. The court held that section 36 only applied to the employer’s business activities, and WML did not carry out its business on the island. Section 36 will generally only apply to an employer’s premises or anywhere else its staff are working.

 

WML was convicted[2] under section 37 because Whakaari was a workplace that it controlled, and it had failed to obtain expert advice on the risk posed to visitors by a volcanic eruption. The court found that WML could exercise control over the activities of tour operators on the island and that it had been involved in managing their activities in the past as it had actively engaged with the tour operators regarding their operations. WML could also control the workplace by terminating, or threatening to terminate, its agreements with tourism operators that allowed them to access the island.

 

Implications for landowners

If you are a landowner and allow other parties access to your property for commercial purposes, you may have health and safety obligations as WML did on Whakaari. Section 37 will not usually apply if you operate solely as a landlord because a landlord will not usually have sufficient control to meet the section 37 requirements. Section 37 also contains a specific exemption to prevent the section from applying to farmers who allow people onto their farms for purely recreational purposes such as walking or hunting.

 

The charges against the directors of WML under section 44 were dismissed, despite WML being convicted under section 37. The court held that it could not conclude that any directors had breached their personal duty under section 44 based on the company’s failure to meet its obligations as it had no information about how the directors had made their decisions. For example, one director could have argued that WML should have sought expert advice on the risk of volcanic eruption but was outvoted by the remaining two directors.

 

What directors need to do

Following the Whakaari/White Island decision, WorkSafe will likely seek full disclosure of all board documents before bringing similar future prosecutions.  To avoid any potential criminal liability, any company director who is uncomfortable with their fellow directors’ stance on a health and safety matter should ensure that their dissenting view is recorded.

 

As a company director, if you are concerned about any decisions that your board proposes to make, or has made, about a health and safety matter, it would be useful to talk with us to clarify your position.

[1] WorkSafe New Zealand v. Whakaari Management Ltd [2023] NZDC 23224.

[2] Sentencing will take place in late February.

 

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Generative AI and copyright

Are you taking the right precautions?

Many businesses have been using artificial intelligence (AI) for a long time to gather insights into their data and make strategic decisions. Recent generative AI improvements, however, have brought the power of AI into the public’s hands like never before. As a certain spider[1] once said: With great power comes great responsibility.

 

Generative AI technologies can now be used to create almost any type of content you can imagine; everything from a poem about pineapples to music in the style of Mozart and even three-dimensional models of motorbikes. However, the legal and human issues these technologies create are far less inspiring.

 

At its core, generative AI models are trained on large datasets of predominantly human-generated works to generate new works, that are ‘inspired’ from works within the training dataset. This approach raises several important legal questions, including:

  • Are companies allowed to train an AI model on content which they do not own? This is particularly significant considering much of the content is not in the public domain and is, arguably, covered by copyright
  • Once a model has been trained, who owns the content the model produces, and can it be used without infringing the intellectual property (IP) of others, and
  • Can you own and protect the output from an AI model?

 

There are also the ethical and fairness issues of using the creative works of others without compensation.

 

Many of these topics are currently being litigated in courts around the world, and while it would take a lengthy article to cover each issue in detail here, we discuss three key issues below.

 

  1. IP laws vary from country to country
    While there are international agreements on copyright provided under the Berne Convention, there are still significant differences in copyright law in different countries. This is particularly important when it comes to issues such as relying on ‘fair use’ as a defence to copyright infringement.

    Copyright is also only a small piece of the puzzle. Depending on how you use AI, you may need to also consider local and international laws covering moral rights, consumer protection such as the Fair Trading Act 1986 and the tort of passing off, breach of contract, violations of the American statute Digital Millennium Copyright Act 1998 and unfair competition laws – to name just a few.

 

  1. AI-generated content can still infringe the rights of others
    Even if an AI is tasked with creating new content, this does not guarantee that content can be used without infringing the rights of others. Most AI models have been trained on datasets that include works protected by copyright, patents, trademarks and registered designs. Therefore, before being used, the generated outputs should be reviewed to assess potential infringement issues.

 

  1. The use of a generative AI may prevent you from asserting copyright in the generated works
    Most guidance from overseas markets at this stage is that to be copyright-eligible, the creative work requires a human author. Prompting an AI to generate content is unlikely to meet the human authorship standard. The extent to which you can claim copyright on an AI-generated work is likely to be limited to a detailed analysis of exactly what the human inputs were when compared with the computer-generated outputs.

 

What can you do to reduce risk?

Despite these above issues, you can take practical steps to help reduce your risk in using AI-generated content. These include:

  • Searching to determine how different your AI-generated content is from existing, potentially protected works
  • Ensuring that key issues such as privacy and confidentiality are not breached by your use of the AI
  • Fact checking the outputs of the AI
  • Ethical use of the AI, including not using the AI as a tool to copy or mimic the art style of another person or company, and
  • Keeping detailed records of what the generative AI was used for, including details of prompts, intermediate outputs, manual edits and so on.

 

Since generative AI technologies can be used in a seemingly endless number of different applications, your risk exposure will depend on exactly what you are using these technologies for and what precautions you can take to reduce your risk.

[1] Spider-Man said this, but it has also been attributed to Winston Churchill.

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Mainzeal decision

Major implications for company directors

Taking on the responsibility of a directorship is not a decision to be taken lightly. For New Zealand directors, the magnitude of the director role has been hammered home with the decision of the Mainzeal case from the Supreme Court in late August.[1]

This decision has sent a strong signal from the New Zealand justice system that directors can, and will be, held personally liable for financial losses experienced by creditors if the directors allow the company to trade recklessly and/or trade while insolvent.

 

About Mainzeal

Mainzeal Property and Construction Limited was one of the largest New Zealand construction companies in the years leading up to its financial collapse.  In 2013, the company went into receivership and liquidation owing unsecured creditors around $110 million. The Mainzeal liquidators believed that the directors of the company had breached s135 (reckless trading) and s136 (insolvent trading) of the Companies Act 1993 and should be held personally liable for the losses of the company’s creditors.

 

Supreme Court decision

While going into the nuances of each of the court hearings is too complex for the scope of this article (the Mainzeal case has been heard in the High Court, Court of Appeal and Supreme Court), it is noteworthy that each court accepted that the directors should be held personally liable to some extent for a breach of their director’s duties.

At the highest court in New Zealand, the Supreme Court, the judges found that the directors should be liable for $39.8 million plus interest payable at 5% pa from the date of liquidation (together more than $50 million). The chief executive of Mainzeal is responsible for the full sum, and the liability of the three other directors was capped at $6.6 million each plus interest.

 

Facts rather than intentions

Critically, personal liability falling on a director due to a breach of directors’ duties under s135 (reckless trading) and s136 (insolvent trading) is a matter of facts, not intentions.

The Mainzeal directors were not accused of any conflict of interest or lack of honesty, and were taken on their word that they acted with good intention while running the company. Regardless, it mattered that on the facts they permitted the company to trade in a way that was reckless and allowed the company to trade while it was insolvent.

 

Companies Act 1993 may need a refresh

Both the Court of Appeal and Supreme Court indicated that a review and update of the Companies Act will be helpful.

The Mainzeal case reinforces to directors the consequences of failing to avoid reckless or insolvent trading, however the current legislation does not provide additional guidance or safe harbour for directors and their decision-making. Adding new guidance for directors’ duties into the Companies Act could enable directors to more confidently navigate the complexities of commercial decision-making with a need for accountability to their creditors.

 

Personal liability

After the announcement of the Supreme Court decision, many directors may want to take a moment to step back and allow the lessons of Mainzeal to sink in. Becoming personally liable for a company’s debts is a significant risk associated with accepting (or continuing) a director role.

Every director of a company should ensure they feel adequately knowledgeable about all key aspects of their company and the sector in which it operates. Accepting a directorship role where there are gaps in skills, or knowledge of the company or sector, can lead to an increased risk that the director may unwittingly allow, or join their other directors in, a decision that permits the company to trade in a reckless or insolvent manner, opening up personal liability and prejudicing creditors.

If you are considering taking on a directorship, you should take independent legal and accounting advice to not only carefully assess whether your skills are a good match for the company and sector, but also to be clear on any potential personal liability.

If you would like some help in assessing whether a directorship is a good fit for you, please don’t hesitate to contact us for further guidance.

 

[1] Yan v Mainzeal Property and Construction Limited (in liquidation) [2023] NZSC 113.

 

 

DISCLAIMER: All the information published in Commerical eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Business briefs

Fair Pay Agreements Bill on the table

The long-awaited Fair Pay Agreements Bill was recently introduced in Parliament proposing a framework for collective bargaining of fair pay agreements (FPA).

What is an FPA? An FPA is an agreement that establishes mandatory minimum employment terms (such as wages or hours of work) across an entire industry or occupation that exceed the minimum entitlements outlined in employment law. Currently, an employer and employee are free to negotiate the terms of employment without being subject to fair pay obligations, provided the minimum entitlements in employment law are met.

What is the FPA process? A union initiates the bargaining process by applying to the Ministry of Business, Innovation and Employment (MBIE). If MBIE approves the application, the union begins bargaining with an employer association (that represents employers in the relevant industry).

What does this mean for employers? If the negotiation is successful, all the employers in an industry covered by an FPA would have to provide their employees with at least the minimum entitlements required by the FPA, regardless of whether the employer engaged in the bargaining process.

The Bill also proposes granting employees and unions other rights such as the right for a union to enter a workplace without an employer’s consent to meet with employees to discuss FPAs. This may be confronting to some employers, particularly smaller businesses that may be new to collective bargaining.

Next steps: Public submissions on the Bill closed on 19 May 2022, so we now await the Select Committee’s report. The Bill is expected to become law by the end of 2022.

Proposed legislation to address modern slavery and worker exploitation

The government has released a consultation paper proposing new legislation to reduce modern slavery and worker exploitation in New Zealand and internationally. As currently proposed, the legislation may have a material impact on the way businesses operate in this country.

The paper defines ‘modern slavery’ as severe exploitation that a person cannot leave due to threats, violence or deception, including forced labour, debt bondage, forced marriage, slavery and human trafficking. ‘Worker exploitation’ is behaviour that causes material harm to the economic, social, physical or emotional well-being of a person, which essentially includes non-minor breaches of New Zealand employment standards (such as providing no less than minimum wage or annual holiday entitlements).

The legislation as proposed would require:

  • Organisations to take action if they become aware of modern slavery or worker exploitation in their operations or supply chains
  • Medium and large organisations to report on steps they are taking to address modern slavery or worker exploitation in their operations or supply chains, and
  • Large organisations to undertake due diligence to prevent, mitigate and remedy modern slavery and worker exploitation in their operations and supply chains.

Although this proposed legislation is not yet law, businesses should start considering now how these changes will affect the way they operate, and the consequences associated with any breach such as monetary penalties and reputational risk.

Incorporated societies – what’s next?

After many years of consultation and deliberation, the new Incorporated Societies Act 2022 was finally passed on 5 April 2022. The Act’s changes will affect all of New Zealand’s 23,000+ societies.

The legislation puts in place a modern framework of legal, governance and accountability obligations for incorporated societies and the people who run them.

All existing societies have at least until 1 December 2025 to ensure their constitution complies with the new requirements and to apply to re-register under the new Act. Societies that do not re-register by that date will be removed from the register.

Although the Act is now in place, there are still regulations to be developed before existing societies can start the re-registration process. These regulations are expected sometime in the next 12 months.

We can help if you are unsure of your obligations under the Act or would like some help with the transition.

 

Next stage of vaping legislation coming into effect

Changes made to New Zealand’s vaping laws are being phased in, with the next changes taking effect over the coming months. The latest changes require all packaging for smokeless tobacco products and vaping products containing nicotine to include specific labels warning of the health dangers and addictive nature of the products. Critical dates for this labelling are:

  • 11 May 2022: manufacturers and importers (should be achieved by now)
  • 25 June 2022: distributors, and
  • 11 August 2022: general and specialist vape retailers.

The staged approach is to allow for stock rotation of products with non-compliant packaging.

You can find more information on vaping regulation here or don’t hesitate to talk with us if you need some help.

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Gift or loan?

The importance of properly documenting advances between family members

The trusty Kiwi “She’ll be right” approach is often manifested in a reluctance to formally document intra-family lending arrangements. Catch cries of “I trust the kids to sort things out between themselves after I’m gone” and “My new partner says she will never make a claim and I believe her” are common, but all too often lead to disputes down the track.

In this article, we look at three different scenarios that are based on Maddy’s story.

Maddy’s parents help out

In 2016, Maddy’s parents decide to help her buy her first home. The bank will not lend to Maddy without a 20% deposit; her parents offer to lend her $250,000 to make up the 20%. The bank’s rules also require her parents to sign a gifting certificate, confirming that they will not require repayment of the money. Despite that, Maddy and her parents agree verbally that the money is a loan, not a gift, and Maddy will pay them back when she can. This is important to Maddy’s parents, as they also want to help their younger daughter, Sarah, into her first home in a few years’ time once Maddy has enough equity in her home to repay them. Maddy takes out a bank loan, secured by a first ranking all obligations mortgage in favour of the bank and buys her first home. Exciting times.

Let’s look at three different ways in which the failure to document that loan could play out.

Scenario 1: Insolvency

Maddy also owns a hospitality business, which she operates as a sole trader. Maddy doesn’t really understand how it all works, but is pleased that having a mortgage means she gets better lending rates for the business, which improves her caé’s cash flow no end.

Unfortunately, in 2020 Covid hits. While the business manages to hang in there for some time thanks to the Covid business loan and the wage subsidy, the recent removal of all government financial assistance and the move to red level in the traffic light system tip the business over the edge. It owes more than $500,000 to the bank, as well as the debt to the government and various suppliers. Maddy’s creditors file bankruptcy proceedings.

Maddy receive a demand from the bank to pay the $500,000-plus it is owed, which means she must sell her house. There is just enough money left after doing that to repay the bank and all the unsecured creditors.

In an attempt to salvage something from the situation, Maddy argues that the amount her parents contributed to the equity was a loan and not a gift. Unfortunately, there is no documentation to support that; the only documentation is the signed gifting certificate. The creditors rightly say that there is no evidence the money was a loan, and therefore they require repayment of their debts in full.

Scenario 2: Succession

Maddy’s parents died shortly after lending her the $250,000 house deposit. Younger sister, Sarah, is shocked when the estate lawyer says that there is only a house property to divide; Sarah says that she knows her parents had more than $250,000 in the bank which they had lent to Maddy to help buy her house.

Sarah appeals to Maddy, saying that they both know their parents lent Maddy the money. Maddy disagrees, pointing to the bank gifting certificate: she says that it was clearly a gift and she refuses to pay anything back. Lacking any evidence of the arrangements between her parents and Maddy, Sarah is forced to reluctantly accept a lesser inheritance than she believes she was entitled to.

Scenario 3: Relationship property

Maddy’s boyfriend Tom moved into her new home shortly after she bought it. Their relationship broke down four years later in 2020 and Tom claims half the equity in the home under the Property (Relationships) Act 1976.

Maddy accepts that the home is their ‘family home’ and that the equity must be divided equally. She argues, however, that in addition to the bank loan they need to take into account the $250,000 owed to her parents.

Tom says that is the first he heard of any loan from Maddy’s parents, and points to the gifting certificate that he found when he was cleaning out some drawers. Maddy is unable to produce any evidence to support her argument that money is owed to her parents, and has to divide the equity without factoring that in.

The lesson

In every scenario outlined above, a dispute could have been avoided, or minimised, had Maddy and her parents entered into a simple agreement recording the existence of the loan. A deed of acknowledgment of debt, prepared at the time that Maddy bought her house, could have been produced for a minimal fee, thus preventing a multitude of unintended consequences later on.

If you are lending money within your family, do contact us to ensure the loan is documented in a way that protects everyone — both now and in the future.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Comparing with Britney Spears’ conservatorship

In the Spring 2021 edition of Trust eSpeaking, we looked at whether someone in New Zealand could end up in a similar situation to American entertainer Britney Spears. Britney was under a conservatorship (or guardianship) arrangement that was established against her wishes.

Britney Spears’ conservatorship has now been formally ended. Since then, she has made a number of specific allegations against her conservators including these four points:

  1. She was paid $2,000 per week, despite earning millions per year; this was less than her conservators were paid
  2. Her conservators were unwilling to allow her to marry
  3. Her conservators required her to use contraception so she could not become pregnant, despite her wanting to start a family, and
  4. Britney was forced to work long hours, against her wishes, and despite her sometimes being very unwell.

Could any of these things have happened in New Zealand under the Protection of Personal and Property Rights Act 1988 (PPPRA)? This legislation allows for the appointment of property managers and welfare guardians to make decisions for people who are unable to make decisions for themselves.

The PPPRA also contains what is known as the ‘minimum intervention principle’. When making orders, the court must make the least restrictive intervention possible in a person’s life. Any orders which are made must enable that person to exercise and develop any capacity they may have, to the greatest extent possible.

Let’s look at the four major issues brought up by Britney to illustrate how they would be dealt with in New Zealand. We will call the property manager, Aroha; the welfare guardian, Sam; and Jane is the person whose affairs they manage.

Spending allowance

In New Zealand, Aroha could provide an allowance for Jane. An allowance will help ensure Jane does not spend all of her money and jeopardise her future wellbeing; this allowance will usually be proportionate to Jane’s assets and income. If Jane asks for an increased allowance, the funding for which is available and can be responsibly released, Aroha may well release that money in accordance with the minimum intervention principle.[1]

Aroha can be reimbursed for her out–of-pocket costs, but will not usually be paid for her time administering Jane’s affairs unless the Family Court directs this.[2] Usually only lawyers or other professionals would be paid to act as property manager — not family members.

Marriage

In New Zealand, marriage is not just a social issue; it is a decision that has significant consequences for property under the Property (Relationships) Act 1976. Sam, as Jane’s welfare guardian, may not sign marriage documents on Jane’s behalf nor apply for a divorce for Jane. Marriages have been declared void on the basis that a person did not have sufficient capacity to understand the implications of their decision, particularly the property consequences.[3]

If Jane wants to marry, and given Sam cannot sign marriage documents on her behalf, Jane could approach the Family Court for a capacity assessment and a determination as to whether or not she had capacity to understand the consequences of her decision.

It is possible that Jane may still be able to enter into a de facto relationship; as with a marriage this may also have consequences relating to any property Jane holds.[4]

Medical decisions

Sam can make medical decisions for Jane. It is possible for Sam to decide that Jane should use contraception. If there are concerns about Jane becoming pregnant, the court will usually order long-term reversible contraception rather than sterilisation, in accordance with the minimum intervention principle.[5]

If Sam thought it was important for Jane to use contraceptives, Sam should consult Jane to discuss her wishes. The court might hear from all parties if Jane did not use contraception.

If there was no risk of sexual activity then contraception might not be necessary. If Jane was in a relationship and wanted to have children, the court would consider her capacity to make that decision and direct accordingly.

Working

Jane’s property manager (Aroha) and welfare guardian (Sam) are required to have her best interests at heart. If Jane does not want to work, and is financially secure, it is unlikely that either Aroha or Sam could force Jane to work against her will – even if Jane could generate a substantial income for herself.

Could Britney’s situation arise in New Zealand?

It seems much less likely that someone in New Zealand such as Jane would end up in Britney’s position.

The safeguards discussed in the Spring 2021 edition of Trust eSpeaking would go a long way towards protecting Jane from suffering at the hands of Aroha or Sam. Many of Britney’s specific complaints simply are not permitted under New Zealand law, and others would depend on her capacity. If Britney had capacity to make any specific decision, she would be able to make it herself.

 

[1] Section 28, Protection of Personal and Property Rights Act 1988.

[2] Ibid, Section 50.

[3] X v X [2000] NZFLR 1125; see also Re W [1994] 3 NZLR 600.

[4] See the discussion in E v E (High Court Wellington, CIV-2009-485-2335, 20/11/2009,
Simon France J) at [30]-[35] and [57]-[60].

[5] See the discussion in Darzi v Darzi [2014] NZFC 359 at [32]-[37], although sterilisation was ultimately ordered in that case.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


A parent dies, but the child is unaware of the death

A child (of whatever age) can make a claim[1] against the estate of their parent under the Family Protection Act 1955 (FPA) if their parent dies and makes insufficient provision for them in their will. What happens, however, when a parent dies and their children aren’t aware of the fact?

This situation can be a tricky position for the executor of a will. Executors are obliged to carry out the terms of the will, and they have duties toward the beneficiaries. However they also have duties toward prospective claimants against a will. When an executor is aware that a person intends to make a claim against an estate, they owe a duty of even-handedness toward that person; this includes ensuring that they do not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate.[2]

This means that if a child has, for example, engaged a lawyer to act for them and indicated that they intend to make a claim against an estate, the executor must provide information to them and consider their position when administering the estate. The executor cannot sneakily pay out all of the estate assets without telling the child or their lawyer.

There is no general duty, however, on an executor to search for all possible claimants against an estate, nor to inform those people of the fact of death or of their right to make a claim against an estate.

In a 2018 case concerning a relatively small estate, the High Court commented that when assessing an executor’s obligations, ‘regard must be had to the cost and difficulty’ of locating possible claimants or interested parties.[3]

This means that if a child is estranged from their parent and may not be aware that their parent has died, an executor does not have to find them and tell them — particularly if the estate is small and a significant cost would be incurred.

By the time the child finds out about their parent’s death, the estate might have been distributed and the child may no longer be able to make a claim.

The extent of an executor’s obligations toward those of whose claims an executor should be aware has not yet been decided by the New Zealand courts. This might be the case where there is a very large estate and the executor knows a child is impoverished and receives nothing under the will. The child might have contacted the executor at some point, but has not indicated they intend to make a claim against the estate. It is not clear, legally speaking, whether the executor has obligations to that child before distributing the estate and, if so, what those obligations are.

The Law Commission’s report

In December 2021, the New Zealand Law Commission released its final report on the law of succession, along with its recommendations for the government, including a new Succession Act. The report includes recommendations regarding an executor’s duty toward prospective claimants against an estate.

One of the two options that the Law Commission recommends in respect of claims by children is that only children under 25 years old or with a disability be able to make a claim for further provision from an estate. This would limit the ability of adult children to bring claims, which they can currently do under the FPA.

The Commission also recommends that the law should require an executor to notify prospective claimants of relevant information related to their rights. If the first recommendation is accepted, this would mean an executor only needs to notify children under 25 years old or with a disability that the death has occurred and of their rights.

Where a prospective claimant is not known or cannot be found, the Commission proposes that an executor’s duty will be satisfied where they take reasonable steps to search for and give notice to that person. This means that if an executor is unaware of a child, and reasonable searches for information do not disclose the child’s existence, the executor won’t be liable for failing to provide notice or information to that child.

Alternatively, and if the government decides to allow all children to continue to make claims against an estate, the Law Commission does not recommend that executors be required to notify children of the death and/or of their rights. This would continue the current situation.

Conclusion

The Law Commission’s recommendations may dramatically change the law about who can claim against their parent’s estate. If the government takes up those recommendations, the Law Commission also proposes that an executor’s duties should change, and that an executor be required to notify children under 25 or disabled children that their parent has died and what their rights are. This could lead to an increase in estate litigation, though in a smaller group of eligible claimants than is currently the case.

 

[1] Minor children, however, will need someone to bring the application on their behalf.

[2] Sadler v Public Trust [2009] NZCA 364, (2009) 28 FRNZ 474 at [35] and [41]; as referred to in Re Application by Lane (in their capacity as trustees and executors of the estate of the late Carson) [2017] NZHC 3144.

[3] Rattray v Palestine Childrens Relief Fund [2018] NZHC 466.

 

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Contractors

A veritable minefield of employment law

From a legal perspective, hiring contractors has always been tricky. The onus of correctly identifying who is an employee versus a contractor, and ensuring legal compliance, remains an employer’s responsibility. The financial consequences of misidentification can be significant for a business owner.

With the rise of the ‘gig economy’, employers are increasingly relying on contractors to fulfil essential roles, so correctly identifying these people’s employment status is more important than ever. The Employment Relations Authority has been very clear that it does not matter that a ‘contractor agreement’ is in place, if the individual behaves like an employee, their employer is responsible for ensuring compliance with the Employment Relations Act 2000 and will be penalised if they fail to do so.

We explore the key features to differentiate between contractors and employees, and what changes may lie ahead for those who fall into the grey area in between.

Defining a contractor

A contractor is a self-employed person who is engaged to provide services privately under contract law and issues invoices for those services. As such, the Employment Relations Act 2000 and all associated entitlements do not apply to the relationship. Key identifying features of a contractor are:

  • They have their own business and are responsible for all their own taxes and associated expenses such as ACC levies
  • They are considered to have an equal bargaining position to the business they are contracting with (in contrast to the power imbalance between an employer/employee)
  • The relationship may not be exclusive
  • They will ordinarily have an element of control or discretion over their daily tasks and work, and
  • Under normal circumstances they are freely able to accept or decline work.

Who is an employee?

Anyone who is not clearly a contractor should be considered an employee until determined otherwise. Red flags should be raised to treat an individual as an employee if there is little discretion on daily tasks, an exclusivity of relationship or they do not complete all their own financial accounting and reporting.

If they are an employee, you will need to assess if they are casual, part-time or full-time and are provided with the appropriate employment agreement and entitlements.

Consequences of getting it wrong

Misidentifying your employee as a contractor can give rise to a personal grievance (PG). The outcome of that PG could result in your employee being entitled to backdated entitlements such as annual leave and sick leave all the way through to the beginning of the relationship. There may also be other financial penalties imposed by the Employment Relations Authority.

Introducing the ‘dependent contractor’

A grey area arises when a person clearly runs their own business but works exclusively for one company or depends heavily on one contract for an income, and has very little discretion in daily tasks.

An example of this is a courier driver who owns their own vehicle, runs their own accounts, is free to contract with third parties and take on additional duties. For the majority of the time, however, they work for one company, are dependent on one income source and have very little control over the day-to-day activities as this is dictated by that company.

The government has consulted on a proposal to introduce legislation designed to protect this type of vulnerable worker. A new category under employment law is proposed called the ‘dependent contractor’ that is designed to protect and enhance the entitlements of this type of contractor such as a courier or rideshare driver. These contractors’ protections would be extended into parts of employment law which means a dependent contractor may be entitled to certain benefits such as sick leave.

These proposals have not been finalised and further consultation is expected this year. If this proposal is enacted, employers will need to be proactive in promptly reviewing and reclassifying (if necessary) their workforce to ensure all dependent contractors are given their new protections and entitlements.

Classify your employees

Ensuring your employees are correctly classified as contractors or employees is essential. Roles such as marketing, social media management, IT support, website management and virtual assistants are all examples of valid contractors who, under the right engagement circumstances, could be considered employees or, if the new proposal becomes law, a dependent contractor.

If you have concerns about correctly classifying an existing contractor or you are a contractor but believe you are probably an employee, please feel free to discuss this with us.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Grounding your jet-setters

The Covid dilemma of annual leave and holidaying offshore

Since Covid appeared in New Zealand in early 2020, employers have navigated a variety of complex matters relating to vaccinations, vaccine passes, alert systems and workforce management.

In this third year of the pandemic, many employers now face difficult decisions around annual leave and international travel ambitions of their valuable staff.

Can employers legitimately deny leave if their staff disclose an intention to travel internationally? What happens when employees are stranded overseas?

As with many employment law areas, responses will depend on the individual circumstances, but we look at some of the general principles that will govern these scenarios.

Disclosure is optional

While most employees freely disclose their leave plans, they are not legally required to tell you what they will be doing in their personal time — including how they take annual leave. As an employer, you may only request additional information relevant to the good faith assessment of the leave request, ensuring that it is not ‘unnecessarily unfair to your employee in the circumstances or unreasonably intrusive on your employee’s personal affairs’[1]. Quizzing employees about their plans could be considered a breach of the Privacy Act 2020 and employer good faith.

Approving/denying leave

You must consider ‘in good faith’ every leave request submitted by your employees. This means you may only reject the leave request on objectively reasonable grounds.

Reasonable grounds to reject leave may apply if your employee:

  • Is required to be present in your workplace during their proposed leave due to prior commitments or key business dates
  • Is required to be present immediately after, or shortly after, their proposed leave and that quarantine or self-isolation may jeopardise that availability, or
  • On their return to New Zealand they may present a significant health and safety risk to themselves or your workplace.

It is anticipated that the majority of leave that is reasonably denied will be due to essential staff shortages and a requirement to be physically present either during the leave period requested or shortly after. It is important to remember, however, that your employees must be allowed to take annual leave within 12 months of their entitlement arising, so perpetual rejection of leave is not permitted.

An argument that a returned employee could present a health and safety risk is unlikely to be considered ‘reasonable’ given that the government is already enforcing stringent public protection measures such as quarantine, self- isolation and ‘trans-Tasman bubble’ pauses. This could change, however, if the government relaxes protection measures and increased responsibility falls on employers to provide a safe workplace.

Someone stranded!

What happens when you have granted annual leave and your employee is stranded overseas or in MIQ? When can you terminate their employment and move on?

Again, the principle of acting in good faith will be the prevailing principle and each situation will be unique.

Some of the most relevant factors to consider are:

  • How long is your employee stranded? If it’s only an additional two to four weeks for MIQ, it’s likely you will have to make do until their return. The appropriate time frame before termination will vary, but in almost all circumstances it would be months before termination was considered a reasonable response.
  • Can your employee work remotely in some capacity? If so, you should support them to work in this way. Dismissing an employee who can work remotely (even if it’s less desirable than in person) would likely be valid grounds for a personal grievance claim.
  • Can your business take alternative measures such as hiring casual or fixed-term contractors? If so, it is likely the role will need to remain open for a much longer time frame before terminating your employee.

During the time your employee is stranded overseas, you must continue to communicate proactively with them and consult with them on how to best rectify the situation. If you have a Covid policy (which is now recommended  for all businesses), this should be followed.

If, after considering all relevant information, it is unlikely that your staff member can return in an acceptable time frame, you may be able to terminate their employment in accordance with their employment agreement.

Employers must ensure their staff have appropriate opportunities to rest and enjoy their accrued entitlements and, generally, this leads to a healthier and more engaged workforce. However, business disruptions can and do happen. Ensuring your Covid policy is up-to-date and undertaking good consultation with employees can lay the foundation to manage whatever circumstances arise.

If you have any difficult annual leave conversations ahead and would like additional support, please contact us.

[1] Privacy Act 2020 Principle.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Business briefs

Charges against Bunnings dismissed

Certain rules for interpreting whether broad marketing statements comply with the Fair Trading Act 1986 (FTA) were clarified in a 2021 case brought by the Commerce Commission against Bunnings[1].

The Auckland District Court dismissed charges that Bunnings had misled consumers regarding its prices when it made statements such as ‘lowest prices are just the beginning’, ‘lowest price guaranteed’, ‘lowest prices on all your DIY jobs’ and ‘unbeatable prices’. The Commerce Commission claimed such statements breached the FTA by misleading consumers into thinking Bunnings had the lowest price on all of its items, when in practice it did not.

In finding Bunnings successful, the court considered the following key factors:

  • Bunnings routinely conducted surveys of competitors’ prices and had processes for adjusting prices if a competitor’s pricing was found to be cheaper
  • A reasonable consumer would be aware that a store the size of Bunnings could not know on a daily basis exactly what competitors were charging for every product and that a small number of products may be more expensive
  • The guarantee to beat a lower priced product by 15% implied that some items may be cheaper elsewhere, but it provided a means to ensure consumers could get a lower price at Bunnings, and
  • There was no evidence that consumers had complained of being misled by Bunnings and only one of its competitors had made a complaint.

This case provides guidance to businesses when making broad marketing statements. You should, however, be aware of your obligations under the FTA; if you are unsure about any aspect of the legislation, we can help.

Directors found trading recklessly may face multiple fines

In October last year, the High Court found a director who traded recklessly not only breached his directors’ duties under the Companies Act 1993, but also breached the Fair Trading Act 1986 (FTA)[2].

Panama Road Development Limited (PRDL), a property development company, was encountering delays on a project and its funding was due to expire. Mr Gapes, a director of PRDL, was working to secure further funding. Dempsey Wood Civil Limited (Dempsey) had provided services to PRDL and Mr Gapes assured Dempsey that PRDL had funds to pay for ongoing work. However, PRDL was unable to secure further funding and was put into liquidation.

There were insufficient funds in the liquidation to pay Dempsey for its work, so Dempsey sued Mr Gapes personally. Dempsey alleged that Mr Gapes had not only breached his directors’ duties, but that he also breached the FTA by misleading Dempsey into thinking PRDL had sufficient funds to pay it.

The High Court ordered Mr Gapes to pay $100,000 to PRDL for the breach of his directors’ duties, and an additional $280,000 to Dempsey for breaching the FTA.

This judgment is good news for unsecured creditors who may have an additional avenue for recovering funds in an insolvency situation. It is also a cautionary tale for directors to be careful about any representations they make regarding the financial position of a company should it encounter financial difficulty.

Important upcoming legislation drafted

Two bills introduced in Parliament in 2021 will, if passed, make small but significant changes to the law as it relates to business.

Company law: The Companies Act 1993 requires directors to act in the ‘best interests’ of the company, which was traditionally understood to mean maximising return to shareholders.

If passed, the Companies (Directors Duties) Amendment Bill will clarify that a director may also consider environmental, social and governance factors when determining the best interests of the company,  including:

  • Recognising the principles of the Treaty of Waitangi
  • Reducing adverse environmental impacts
  • Upholding high standards of ethical behaviour
  • Following fair and equitable employment practices, and
  • Recognising the interests of the wider community.

Sexual harassment: The Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Bill, if enacted, will extend the time frame for raising a personal grievance for sexual harassment from 90 days to 12 months in an effort to recognise that being exposed to sexual harassment can be traumatic and may take time to process before coming forward.

While it’s expected both bills will become law, they are currently awaiting their first readings and may be changed before being enacted. We will keep you posted.

[1] Commerce Commission v Bunnings Limited [2021] NZDC 8918.

[2] Dempsey Wood Civil Ltd v Gapes [2021] NZHC 2362.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650