Uncategorized Archives | Edmonds Judd

Succession drama for Rupert Murdoch trust

February 26, 2025

How would it play out in New Zealand?

The critically-acclaimed TV show Succession was loosely based on the trials and tribulations of the wealthy media mogul, Rupert Murdoch and his family. Rupert Murdoch controls Fox News and other influential news publications through the US-based Murdoch Family Trust, which he settled in 1999 after his divorce from his second wife, Anna.

Murdoch Family Trust

The Murdoch Family Trust is an irrevocable trust which owns large shareholdings in various media enterprises. Many American trusts are established as ‘revocable’ trusts, but this trust was settled as an ‘irrevocable’ trust, which means its terms are very difficult to change. They could only be changed by Rupert (the settlor) if he acted in good faith and if the changes were beneficial to the beneficiaries.

The trust’s beneficiaries are Rupert’s children. Different children were set to receive different rights on Rupert’s death. His oldest four children – Prudence, Lachlan, James and Elisabeth – would each receive 25% of the voting rights in relation to the media companies. Rupert’s youngest two children would receive equal shares of the value of the trust’s assets, but they would not have any voting rights.

Some years ago, Rupert became concerned at the different political views amongst his children. Lachlan most closely shared Rupert’s views, but Prudence, James and Elisabeth were thought to be more liberal. Rupert attempted to change the terms of the trust so that after his death, Lachlan, would have sole voting rights and, therefore, more control over the media entities.

The dispute went to court in the state of Nevada. Rupert and Lachlan argued that it was in the interests of family harmony that the terms of the trust be changed and Lachlan given control on Rupert’s death. Prudence, James and Elisabeth argued that it was not in their interests to lose control. The court found that the attempt to change the terms of the trust was not in the interests of the beneficiaries and that it was a ‘carefully crafted charade.’

Rupert and Lachlan say that they will appeal the decision but, for now, the terms of the trust remain in force.

What would this look like in New Zealand?

If something similar happened in New Zealand, this scenario would look very different from a trust law perspective.

Irrevocable trusts are not generally used in New Zealand; almost all trusts, once settled, exist from that point onward. However, our trusts are usually very flexible. Even if a trust cannot be revoked, it can usually be resettled, varied, or distributed early.

If Rupert Murdoch had settled a trust in New Zealand, it would probably give him discretionary powers to benefit his children during his lifetime. On his death, the trust assets would be divided between his children (or transferred to new trusts for each of them).

Many New Zealand trusts can be resettled onto a new trust with different terms (and sometimes with different beneficiaries). As long as the resettlement is genuinely for the benefit of at least one of the beneficiaries, it is often permitted, even if it is detrimental to others.

If Rupert wanted to significantly change the terms of the trust, and had a resettlement power, he may be able to move the trust assets to a new trust. However, tax problems often arise on resettlement, particularly with commercial assets, so resettlement may not be a good option.

Most New Zealand trusts can be varied, but variation powers are often limited to the terms of the trust relating to management and administration. They cannot usually be used to change the beneficiaries or their entitlements. A variation power might not help Rupert achieve his goals.

New Zealand trusts usually give trustees discretionary powers to distribute income and capital early. If Rupert was a trustee, he may try to transfer the voting rights to Lachlan early – before Rupert’s death. Many New Zealand trusts would allow this, although it would depend on the terms of the trust and how much discretion the trustees were given.

Conclusion

The New Zealand trust landscape is very different to that in America. Our trusts are often more flexible than an American-style irrevocable trust. If the Murdoch Family Trust had been settled in New Zealand, Rupert might have found a way to make the changes he wanted. It is also, however, possible that the terms would not have permitted him to make changes at all.

New Zealand trusts can be used for many purposes and drafted with a great deal of flexibility, or very little flexibility. It depends on the terms of the trust used at the outset when the trust is settled. Each family’s needs will be different.

The Murdoch case illustrates how important it is to get things right from the outset to protect the beneficiaries from someone trying to make unexpected changes later.

DISCLAIMER: All the information published in Trust 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 Trust 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

Gloriavale

February 26, 2025

De-banked!

The Christian Church Community Trust and associated entities (commonly known as Gloriavale) has received a great deal of media attention.

In particular, various allegations have been made that its leaders:

Breached a number of employment obligations, including using forced labour and child labour
Physically and sexually abused members of the community, including children, and
Ignored their legal obligations towards the people in its community, including ensuring their safety.

For many years, Gloriavale has banked with the Bank of New Zealand (BNZ). In July 2022, BNZ notified Gloriavale that it intended to end its contractual relationship and stop providing banking services.

What happened next?

BNZ originally gave Gloriavale three months to make new banking arrangements. This was extended by agreement, but BNZ did not agree to an extension beyond 30 November 2022.

Gloriavale tried, but was unable, to make alternative banking arrangements within that timeframe. Gloriavale then sued BNZ^[1]; it said that BNZ had an obligation to provide it with continued banking services, particularly where there are no other options available. However, as litigation can take many years, this did not solve the problem that BNZ intended to terminate the banking relationship immediately.

Gloriavale therefore made a separate legal application for an injunction. The injunction case was brought alongside the main legal case. The main case argued that BNZ had to provide Gloriavale with continued banking services; this may take years to determine.

The injunction case argued that BNZ had to provide banking services until the main legal case had been determined. The High Court agreed with Gloriavale in the injunction case, but the Court of Appeal overturned that decision in December 2024. The result is that Gloriavale must find a new bank to use while the main legal case against BNZ goes through the court system. This is very significant in light of the evidence that Gloriavale has not been able to find another bank.

The arguments

An injunction will only be granted where there is a serious question in the main court case. In this case, the question was whether Gloriavale could seriously argue that BNZ was not entitled to end the banking relationship.

BNZ argued that its terms and conditions allowed it to terminate a banking relationship whenever it wishes. Just as a customer can fire a bank at any time, a bank can fire a customer. The bank’s terms and conditions allowed it to decline to provide any product or service without needing to give a reason. It simply no longer wanted to work with Gloriavale.

Gloriavale argued that BNZ had to act reasonably and, that if it was concerned about recent allegations, it should have asked Gloriavale for more information rather than giving notice of termination with no warning. BNZ might have been wrong, and it would be unfair for the bank to cancel if they did not at least take steps to find out if they were right.

Court of Appeal decision

The Court of Appeal found that the main court case was weak. The banking contract did not require BNZ to undergo any kind of consultation process, to act reasonably or to verify any concerns it might have before terminating the banking relationship. BNZ did not act in bad faith; it had concerns that the Gloriavale community acted inconsistently with a variety of basic human rights and it no longer wanted Gloriavale as a customer. This was actually quite reasonable, as it transpired that other banks also did not want to work with Gloriavale.

Other arguments made on behalf of Gloriavale were similarly not persuasive.

While the Court of Appeal was only considering the issues on an interim basis, and the main court case would still continue to a full court hearing, the court did not find that Gloriavale had strong enough arguments to justify forcing BNZ to provide banking services in the meantime. It therefore overturned the High Court’s decision to issue an injunction.

What next?

Gloriavale is a complicated commercial enterprise and it will need to find alternative banking arrangements. It will be interesting to see which trading bank will offer those services, when it seems that a number of banks have already declined.

It will also be interesting to see what happens in the underlying court case. Gloriavale is still arguing that the BNZ could not terminate the banking relationship. While the Court of Appeal doesn’t think the arguments were strong, it is possible that a later judge will disagree after hearing the full argument. Gloriavale could still be successful and, if so, could pursue BNZ for any losses suffered due to the termination.

Banks are in a position of power in their customer relationships. Their terms and conditions usually let them terminate a relationship with a customer at any time. This is highly relevant for people or organisations that do not have many options.

^[1] Bank of New Zealand v The Christian Church Community Trust & Ors [2024] NZCA 645.

Annual Leave and the Path to Parenthood: Luke’s Story

February 21, 2025

Jamie Graham

Employment, First Job, House, Kids, Latest news, Media, News, Uncategorized

Luke is very excited about the impending birth of his first child and is taking the time to reflect on his life so far. As he is driving to the store to pick up some groceries, he recalls the first job he ever had – working as a bartender in a lovely little Scottish pub in Dunedin. His pay wasn’t significant back in those days, but he worked hard and he saved his pennies. It wasn’t long before he’d saved up enough to go on a big holiday!

Luke had always dreamed of flying to Indonesia to see the Komodo dragons in the wild. Once he was sure he had enough in the bank, he went to ask his manager, Mr Moyes, if he could have some time off.

“Tell me lad,” Mr Moyes said, furrowing his brow, “how long have you been working for me now?”

“Why, nearly six months, Mr Moyes! I reckon I deserve a break” Luke said, sheepishly. Beads of sweat began to drip down his pimply face.

“Well, Luke,” Mr Moyes began, shifting uncomfortably in his seat, “it’s not that I don’t think you deserve a nice holiday. Aye, you’re an excellent worker, and you have a knowledge of whisky as fine as any Scotsman! But I just wonder, won’t the shortfall from the lack of wages during your holiday be an issue?”

Luke gulped.

“But sir, I thought I would simply take annual leave. After all, I’ve accrued ten days’ worth. That’s more than enough for my holiday, assuming it doesn’t take longer than that to find the Komodo dragons.”

“Well, you see Luke,” Mr Moyes responded, offering a wry grin. “Here in Aotearoa New Zealand, you can’t actually take annual leave until you’ve been working continuously at the same place for 12 months. You continue to accrue it, yes, but there’s no entitlement to actually take the accrued leave until your first anniversary of employment. You can take annual leave you’ve accrued before then, but this is at my sole discretion, being your gaffer and all”.

“Oh,” Luke exclaimed, crestfallen. He had so been looking forward to travelling to Indonesia. Mr Moyes looked him up and down and sighed.

“Tell ya what lad, I think we’ll manage without you. You can take the leave you’ve accrued, no problem”.

Luke jumped for joy. He was going to Indonesia! He paused, wondering if he could try his luck further.

“Actually Mr Moyes, how would you feel if I went to Indonesia for three weeks instead of two?” Mr Moyes jumped out of his seat.

“That’s a bit cheeky!” he said, his eyes as big as wagon wheels. “But alright, you can take leave that you haven’t accrued yet in this country too, also at my own discretion. Just be warned, though. If you leave my employ before you’ve accrued that extra week of leave, I’ll require you to pay me back. Every cent!”

Mr Moyes’s warning fell on deaf ears though, as Luke could think only about Indonesia, sipping on coconuts and surveying the local fauna.

Of course, Mr Moyes was right. Most employees are entitled to four weeks of annual holidays, and they start accruing this leave from their first day on the job. Accrued leave then sits there, unused, until the 12-month anniversary of your employment. Your employer can let you take the leave you’ve accrued before the 12-month anniversary, but this is at their sole discretion.

You can also take leave before you’ve accrued it but this can be risky, as you may have to pay your employer the difference, if you resign before it’s accrued.

Luke snapped back to reality. He hadn’t worked for Mr Moyes for some time now, but he would always remember his words and his warning. He smiled, and thought about the life lessons he would pass down to his child. Unfortunately, contemplating this was very distracting for Luke, and he crashed into the car in front of him! Luckily, no one was hurt, but Luke wondered what Sally would think of him crashing her brand new Tesla…

Jamie Graham

Eligible investor exemption

November 21, 2024

In light of the Du Val insolvency

The recent interim receivership and subsequent statutory management of the Du Val Group has brought the use of, and reliance on, ‘eligible investor’ certifications under the Financial Markets Conduct Act 2013 (FMCA) back into the public spotlight. In this article we discuss this exemption and provide insights to market participants on best practice.

The FMCA

The FMCA is the legislative mechanism for the regulation of New Zealand’s financial markets. It prescribes a comprehensive disclosure regime in relation to offers of financial products. Financial products include, but are not limited to, debt and equity securities, and managed investment products.

Wholesale investors

An investor may be classified as a retail investor or a wholesale investor. While there is an extensive list within the wholesale investor exemptions, relevant examples include:

Participants who invest a minimum of $750,000 into a single investment
Those who are considered ‘large’, as in they hold net assets or have consolidated turnover of at least $5 million
Government agencies, and
Investors who meet certain investment activity criteria, for example, they own a financial products portfolio of at least $1 million in value.

Wholesale investors have access to a broader range of investment opportunities than those available to the general public. Public offers are subject to significant disclosure requirements, statutory oversight and compliance costs. To counter this, fewer consumer protections exist for wholesale investors.

The ‘eligible investor’ exemption

Under the umbrella of wholesale investors is the ‘eligible investor’ subset; this allows experienced investors who possess the skill and judgement necessary to assess the merits of a transaction, without full statutory disclosure, to be deemed a wholesale investor.

This rationale is reflected in the criteria used to determine who qualifies as an eligible investor. An investor may be eligible where their prior experience allows them to assess a transaction’s merits, their own information needs and the adequacy of any information provided.

If an investor has the expertise to assess the criteria, they may self-certify that they are an eligible investor. As part of this process, an appropriately qualified financial adviser, accountant or lawyer must confirm the investor has been adequately advised of the consequences of certification. The relevant professional must confirm they have no cause to doubt the certification.

The Du Val Group situation

In October 2022, the Financial Markets Authority (FMA) warned two entities within the Du Val Group that certain investor certificates it was relying upon were incomplete. The FMA cautioned that, within the certificates, the relevant grounds investors were giving ‘did not refer to any previous experience in acquiring or disposing of financial products and so are not capable of supporting the certification and should be disregarded.’

In addition to those 2022 findings, recent media reports have suggested that the Du Val Group continued to market their financial products to retail investors and encouraged them to use the eligible investor category. The report suggested they were not sufficiently experienced or high-net worth individuals for whom the exemption is intended. At the time of writing, it appears these investors are unlikely to receive their investments back in full.

Who should exercise caution?

The Du Val insolvency process is a reminder of the risks involved with financial markets and financial products. Market participants should be fully aware of the risks associated with using the eligible investor exemption:

Investors must understand fewer regulatory protections are afforded to them within this class. It is, therefore, particularly important that eligible investors are appropriately experienced to allow them to properly assess investment opportunities and associated risks
Financial advisers, accountants and lawyers must exercise caution when giving certifications, particularly for investors with whom they have had no previous dealings. The assessment as to whether an investor is sufficiently equipped to transact without the default protections of the FMCA is not an exercise that should be taken lightly, and
Issuers and offerors relying on eligible investors to raise capital must be careful to correctly classify investors. Encouraging inexperienced investors to proceed as eligible investors does not support an informed or balanced decision and may result in significant penalties.

For more advice on eligible investor status, please don’t hesitate to contact us.

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

Wait! Before you sign that pre-nup! Step 3 – Advice

November 12, 2024

Kerry Bowler

House, Kids, Property, Relationships, Uncategorized

In this article we look more closely at Step 3 – Advice.

Once your lawyer has the details of all property owned by each of you they can assess what your rights would be if that property were divided under the RPA, and provide you with advice on how the agreement affects your property rights and the implications for you if property were divided under the agreement.

Why do I need advice on rights under the RPA if it’s just 50/50 and I’m contracting out?

This is where the law jumps in and says “woah there, partner! There’s a lot more to it (131 pages to be precise), so you should definitely get legal advice to check it’s what you want first”.

It is important that you fully understand your current property rights under the RPA before agreeing to change or give up those rights. The starting point for under the RPA is that relationship property will generally be divided equally between partners in a qualifying relationship. However, this is just a presumption, not a rule set in stone. There are numerous exceptions and adjustments within the RPA that can alter how property is divided based on the specific circumstances of your relationship. Even the most experienced relationship property lawyers can find the RPA complex. That’s why seeking legal advice is essential before making any decision to contract out of the RPA.

Great, now you’ve had advice and know what your actual property rights are under the RPA, let’s compare that to your position under the contracting out agreement.

Even if you’re planning on entering into a contracting out agreement with the intention of maintaining a 50/50 split, it’s important to realise that the implications could be far-reaching. Property rights, financial arrangements, estate planning, and even third-party property rights (such as those held in trusts or companies) can all be affected. The agreement might impact more than you expected. (*Hot tip* now is a good time to consider whether you should create or update your will as it works hand-in-hand with your contracting out agreement)

Your lawyer will be able to assess your specific situation and help you understand how the contracting out agreement compares to your rights under the RPA. They can guide you through the various consequences and ensure you’re fully informed before agreeing to anything.

But wait!!! It’s not enough just to receive legal advice—you need to understand it. Ensure your lawyer explains the details and feel free to ask lots of questions, we love to know you are thinking about how this all applies to you.

If you’re satisfied with the advice and understand the implications, it’s time to book an appointment with your lawyer to sign that contracting out agreement. This step is crucial to ensure your rights are protected and your intentions are clearly outlined.

Kerry Bowler, solicitor

Are Uber drivers employees and why does that matter for you?

August 29, 2024

Nicolette Brodnax

Commercial, Employment, First Job, Uncategorized, Your Own Business

A case from the Court of Appeal on Monday acts as an urgent reminder that you can’t contract out of the Employment Relations Act (the Act) and that includes by calling the relationship an independent contract when it is not. The case involved four Uber drivers and the companies that own and run Uber Drive and Uber Eats.

Uber argued that they were not employers but provided an introduction service. Interestingly, adapting to new ways of working, the Court held that the drivers were all employees when they were logged in to the Uber Drive App.

Using an independent contractor rather than taking on an employee is attractive because it cuts out a whole swathe of costs, paperwork, responsibility and inconvenience: holidays, sick leave, termination issues and PAYE to name a few. If you get the nature of the relationship wrong however, it can have an enormous impact on the employer: investigation, prosecution, fines and penalties, PAYE arrears, holiday pay arrears and much, much more.

So how do we know when a relationship is actually employment if we can’t rely on what the parties themselves agree in the contract? The answer is section 6 of the Act. Section 6 requires the court to focus on the realities of the parties’ mutual rights and obligations. In particular: how is the relationship working in practice (especially if that differs from the contract)?

Three key issues that the Court must weigh up are:

the extent of the control over the worker,
the degree of integration of the worker into the business, and
the “fundamental test” of whether the worker is carrying on their own (independent) business.

The Uber case in particular emphasised Uber’s control of the workers which included Uber controlling fare setting and performance management, and right to discipline. They looked at the practice as it varied from the contract: even though the drivers could theoretically choose when and where they worked, they were penalised for not working regularly. They were not an independent business as the drivers were restrained by Uber from expanding their business. For example, there was a ban on contacting clients independently.

This situation might not be substantially different from many ‘independent contracts’ on our farms or in a small business setting.

If you have an independent contractor and that worker only works for you (perhaps because you do not permit subcontracting or them taking on other jobs, or simply because the job takes up all available time), if you can dictate what that worker must do from day to day and how they do it, if you can discipline them, if they work on your site and you provide most of the equipment, then it might be time to take a second look and seek independent professional advice.

Postscript

July 17, 2024

Latest news, News, Uncategorized, Your Own Business

Holidays Act 2003 to be overhauled

Both employers and employees will be relieved that the government is prioritising overhauling this legislation.

“Change has been a long time coming, and I know there are many who are frustrated with the Holidays Act. We need an Act that businesses can implement, and that makes it easy for workers to understand their entitlements,” said the Minister for Workplace Relations and Safety, Brooke van Velden.

The government will develop an exposure draft of the new legislation for consultation. It has indicated that the previous government’s decision to double sick leave entitlements for all eligible workers has caused difficulties to some businesses and increased the disparity between part-time and full-time workers. As well, employers have long struggled with apportioning annual leave; an accrual system is mooted, rather than the current entitlements system.

It is expected that the exposure draft of the Holidays Bill will be released for targeted consultation in September. “I believe it is important to hear from small businesses in particular, given small businesses will adopt a range of working arrangements and often do not have the same payroll infrastructure as larger organisations,” the Minister added.

Although registration for targeted consultation closed on 8 July, we will keep you up-to-date with how this new legislation progresses.

Roadside drug testing to be rolled out

In May, the Minister of Transport, Simeon Brown, indicated the government will introduce legislation that will enable roadside drug testing to improve road safety.

“Alcohol and drugs are the number one contributing factor in fatal road crashes in New Zealand. In 2022, alcohol and drugs contributed to 200 fatal crashes on our roads. Despite this, only 26% of drivers think they are likely to be caught drug driving,” said the Minister.

The legislation is likely to be introduced mid-2024 and passed towards the end of the year.

Visual artists will receive royalties when work on-sold

Long-awaited legislation that comes into force on 1 December 2024 will allow New Zealand’s visual artists to receive royalties when their work is sold on the secondary market.

Passed in August last year, the Resale Right for Visual Artists Act 2023 will enable the collection of a 5% royalty each time an eligible artist’s work is sold on the secondary art market. The scheme is for artworks that sell for $1,000 or more. The collection agency, Copyright Licensing New Zealand, will deduct a percentage of the royalty as an administrative fee.

Avoiding scams

July 17, 2024

Tips to protect yourself

Every year thousands of people fall victim to scams through emails, phone calls and text messages. Scams are fraudulent schemes designed to deceive you and steal your money or personal information.

The danger of scams lies in their ability to look and sound genuine – at least until it’s too late. Scammers are becoming more cunning, often using technology and psychological manipulation to trick you. Fortunately, there are a few easy steps that can help you.

Phone scams

Scammers often try calling and pretending to be from your bank. They usually create a sense of urgency, claiming there are issues with your bank account such as unusual account activity or overdue fees; scammers will make you think that the matter needs immediate attention.

To spot a phone scam, be wary of unexpected calls that ask for personal information such as your account details or your passwords. Most organisations do not request sensitive information over the phone. An easy way to verify if the call is genuine is to hang up and call back using the official number.

Text message scams

Text scams are when you receive messages designed to trick you into providing personal information or clicking on malicious links. These messages might say they’re from your bank, a courier company or even your insurer. They often contain urgent requests to verify your account, claim a prize or resolve a problem.

To protect yourself from text scams, never click links or respond to messages from unknown numbers. If you receive a message claiming to be from an organisation, call them directly and check.

Email scams

Email scams, or ‘phishing’ emails, are a common way scammers try to steal personal information. These emails, similar to texts, appear to be from your bank, a courier or even a shop. Like many scams, they are often ‘urgent’ and ask you to update your account information, reset your password or review suspicious activity.

Don’t click on links or download attachments from unknown or suspicious emails, especially if you’ve never heard from them before. Organisations will never ask (or should not ask) for sensitive information by email.

Key points

We are exposed to scams more and more in today’s world. To keep yourself safe:

Be suspicious – who is contacting you and why?
Don’t trust any unexpected contact
Resist the urge to act immediately, despite what the message says
Never open attachments or links if you’re not sure where they’ve come from, and
Trust your instinct! If something doesn’t feel right, it probably isn’t.

Staying vigilant and informed is crucial in protecting yourself from scams.

If you think you’ve received a text or email that you think is a scam, you can report it to the Department of Internal Affairs, following the instructions on its website (www.dia.govt.nz).

Business briefs

June 11, 2024

Commercial, News, Uncategorized

Five companies sentenced over Whakaari/White Island eruption

In our Summer 2024 edition published in early February, we wrote on the Whakaari/White Island prosecutions brought by WorkSafe; in this Winter issue we report on the court’s late February sentencing.

Almost five years after the Whakaari/White Island eruption that left 22 people dead and 25 others severely injured, the District Court delivered its sentence for safety failings under the Health and Safety at Work Act 2015.^[1]

Five companies were collectively fined $2 million for failing to assess and mitigate risk, and three of the five have been ordered to pay a collective total of $10.21 million in reparations to victims and their families. GNS Science was also fined $54,000 for failing to adequately communicate risk to contractors.^[2]

Whakaari Management Limited (WML), one of the five companies sentenced and responsible for managing access to the land, was held liable for a significant portion of the penalties. WML has claimed it is unable to pay the penalties as it has no assets or bank account, even though evidence at trial indicated WML received about $1 million annually from island tours. The judge acknowledged he cannot make orders against WML’s shareholders, but appealed to their ‘inescapable’ moral duty to advance the necessary funds – even if this means reaching into their own pockets.

These penalties are a strong reminder for businesses to take seriously their health and safety obligations or risk hefty penalties.

Navigating financial distress

What should you do if your business is in rough financial waters? If you feel financial strain creeping into your business, it is important to take action early to address the situation rather than hoping it improves on its own. Below we suggest some options to help you navigate financial distress.

Engage with lenders: Communicate transparently with your lenders early on. This will maximise available options and strengthen your relationship. Most lenders are willing to agree to an approach where borrowers are transparent and can demonstrate a plan

Reach out to suppliers and customers: Have open conversations, where appropriate. Clarity around payment timeframes, late payment fees and other expectations will provide certainty for all parties involved

Review business contracts: Understand the terms of your business contracts, what obligations are owed and the implications if you default

Keep directors’ duties in mind: Ensure you are complying with your director duties, including avoiding trading recklessly or incurring obligations the company is not able to perform. You can be found personally liable if you breach your director duties. Maybe you have to make the difficult decision of winding up your business to avoid breaching your duties, and

Seek professional advice: Speak to your accountant or financial advisor to assess the financial position and solvency of your business. We can also advise on your options at any stage.

Commerce Commission win over Viagogo

In a recent judgment, the High Court provided useful guidance on misleading and deceptive conduct, and unfair contract terms under the Fair Trading Act 1986 (FTA). The decision followed a six-year legal battle between Viagogo and the Commerce Commission.^[3]

The Commission commenced proceedings against Viagogo in 2018 after receiving thousands of complaints by consumers who had purchased event tickets from Viagogo, only to be refused entry at the events because their tickets were not authentic.

The High Court found that Viagogo had misled consumers in breach of the FTA by:

Failing to adequately disclose its status as a resale platform
Guaranteeing customers’ tickets to events, when in practice it often refunded invalid tickets after a customer had already missed the event
Creating a false sense of urgency for prospective purchasers seeking tickets
Disclosing additional ticket fees at a late stage of the purchase process, and
Stating it was an official or authorised source of tickets when it was not.

A clause in Viagogo’s terms and conditions requiring customer disputes to be resolved in Switzerland was also found to be unfair and unenforceable.

Viagogo was ordered to correct the misleading information on its website and update its terms and conditions.

This judgment emphasises the importance of using honest and fair trading practices, and ensuring your terms and conditions comply with the FTA.

Viagogo has appealed the judgment.

CCCFA update

The government recently announced changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) as part of a larger, two-phase financial reforms package to address concerns about the accessibility of credit and burdensome obligations on lenders.

Phase 1: Already underway, this phase includes the removal of overly prescriptive requirements around loan affordability assessments, and exemptions for local authorities and providers of non-financial goods and services (such as certain car dealers).

Phase 2: As this phase is rolled out, it is expected the CCCFA will be updated to further streamline the lending process and continue to support more accessible lending practices.

The Ministry of Business, Innovation and Employment will publicly consult on revisions to the Responsible Lending Code and possible amendments to the CCCFA as they become available.

^[1] WorkSafe New Zealand v Whakaari Management Limited, White Island Tours Limited,
Volcanic Air Safaris Limited, Aerius Limited, Kahu (NZ) Limited [2024] NZDC 4119.

^[2] WorkSafe New Zealand v Institution of Geological Nuclear Sciences Limited [2024] NZDC 4149.

^[3] Commerce Commission v Viagogo AG [2024] NZHC 713.

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

Business briefs

September 19, 2023

Amanda Leahy

Uncategorized, Your Own Business

Lego wins trade mark dispute with Zuru

The recent High Court decision in Zuru v Lego^[1] is a reminder to all businesses that any use of another trader’s registered trade mark carries significant legal risk. The issue arose when Zuru used the words ’Lego brick compatible’ on the packaging for its Max Build More building brick toys. Lego argued this infringed its registered trade marks.

Zuru attempted to rely on defences that it used Lego’s mark in ‘comparative advertising’ and to ‘indicate the intended purpose’ of its product. The Trade Marks Act 2002 permits the use of another trader’s registered trade mark for these purposes, provided such use is ‘in accordance with honest practices in commercial matters.’ The court rejected the ‘comparative advertising’ defence, finding the statement did not actually compare Zuru’s and Lego’s products in any way.

The court also found that Zuru’s use of ‘Lego’ did alert customers to a characteristic of Zuru’s bricks in that they were compatible with Lego’s bricks, but it was not done in accordance with honest practices. Relevant factors leading to this conclusion included:

Zuru intended to gain market share from Lego by selling similar products at a cheaper price
There were concerns that Zuru’s actions were a ploy to strengthen Zuru’s legal action against Lego in the USA, and
Zuru did not obtain prior consent from Lego or advise Lego of its intention to use Lego’s trade mark.

The court determined that Zuru’s use of Lego in the compatibility statement was a deliberate attempt to leverage off Lego’s established reputation and infringed Lego’s registered trade mark rights. If you are considering using another trader’s registered trade mark for any reason, we recommend you talk with us early on. Otherwise, you could be on dangerous, and expensive, ground.

Start preparing for the Incorporated Societies Act 2022

At long last the Incorporated Societies Act 2022 will come into full force on Thursday, 5 October 2023, replacing its predecessor after 115 years. Societies can re-register under the 2022 Act from this date, and must do so by 5 April 2026 or they will cease to exist. When applying to re-register, all societies must file a new or updated constitution that complies with the new legislation.

Other key changes under the 2022 Act include:

All societies must have a governing body
Officer duties have been set out, and are comparable to, director duties under the Companies Act 1993
A person must give consent to become a member of a society
Annual general meetings must be held, and financial statements and annual returns must be filed, within six months of the society’s balance date, and
Every society must have a dispute resolution process set out in its constitution.

The Incorporated Societies Regulations were released this month. Every society should be drafting or reviewing its constitution in preparation for re-registration. Under s30(A) of the Charitable Trusts Act 1957, existing trust boards incorporated under that Act, need not re-register under the 2022 Act, but can elect to do so if they wish. If you need a hand in doing this for your society, please don’t hesitate to be in touch – we are here to help.

ESG and directors: The Companies (Directors’ Duties) Amendment Act 2023 becomes law

The Companies (Directors’ Duties) Amendment Act 2023 was passed on 3 August 2023 and is now in force. The legislation clarifies that company directors may consider matters other than profit maximisation when assessing what is in the best interests of the company such as, for example, environmental, social and governance matters.

The Act has attracted criticism from, amongst others, the Ministry of Business, Innovation and Employment; the New Zealand Law Society; and the Institute of Directors, with many arguing the new legislation will have a marginal impact, if any. In any event, it acts as a signpost to directors clarifying that profit maximisation is not the only consideration when discharging their duties to act in the best interests of the company.

^[1] Zuru New Zealand Ltd v Lego Juris A/S [2023] NZHC 1808.

1 2 3 4 5