Your Own Business Archives

Business briefs

February 4, 2025

Commercial, Employment, News, Your Own Business

Commerce Act 1986 and Commerce Commission review

Last year the government announced a comprehensive review of New Zealand’s competition framework to combat monopolistic practices and boost economic productivity. Limited options and high price points in the grocery, banking and building supply sectors are reflective of market failures resulting from such practices and, subsequently, prompted this review.

Commerce Act 1986: The review includes a revision of the long-standing merger regime embedded in this legislation. Although mergers can enhance efficiency, they may also create a power imbalance in the market and limit consumer choice. The current regime will be reconsidered to mitigate the risks posed by larger companies that make small, incremental acquisitions of smaller companies.

The government also wants to provide greater clarity to the Act’s anti-competitive conduct provisions. Its aim is to increase certainty as to what constitutes anti-competitive collusion – in turn, appeasing concerns that typically deter businesses from engaging in beneficial collaboration.

Commerce Commission: The review will also evaluate the commission’s structure and governance – specifically, whether it is capable of effectively enforcing competition laws. The introduction of specific commissioners and a divisional model to contribute to accountability and strategy will also be considered.

The government’s focus on strengthening competition laws aims to deliver greater choice, lower costs and increase productivity for all New Zealanders.

Reform of overseas investment laws to boost economic growth

The Overseas Investment Act 2005 will undergo significant reform, the government has announced. New Zealand is currently ranked the most restrictive country in the OECD for overseas investment.[1] The reform intends to combat this position by increasing openness to foreign investment that should attract more international investors.

To achieve what the government believes will be a more dynamic and competitive economic environment, a suite of statutory changes have been proposed to reduce barriers to investment where such investment does not present any identified risk to New Zealand’s interests. Key proposed changes include:

Fast tracking approvals: simplifying the assessment process by establishing basic tests and assuming investment will be permitted unless risks are flagged
Targeted scrutiny: retaining flexibility to analyse investments on a case-by-case basis and impose conditions or block them if necessary, and
Retaining current scope: ensuring the government can continue to scrutinise sensitive investments, including farmland.

Legislation to implement these changes is expected to be introduced this year.

Tax changes for charities

Charities can expect to see a raft of tax changes in May. These changes are intended to reduce the scope for exploitation of loopholes in the current framework. In other words, the government wants to ensure that entities receiving tax benefits are distributing their funds for charitable purposes – as opposed to structuring themselves as charities and building up funds that are not being used for charitable purposes.

This review will focus on charities that operate commercial businesses and whether they should pay tax on profits retained in the business. When announcing the changes, the Minister of Finance, Nicola Willis, mentioned that entities such as cereal manufacturer Sanitarium and early childhood education provider BestStart are among the types of organisations potentially impacted by the changes.

This removal of tax-free status is to be balanced against the need to support charities and to recognise the significant role New Zealand charities play in our communities. As a result, some charities may lose certain tax benefits.

These changes are part of a broader tax policy work programme that also includes exploring user-pays models for infrastructure projects and other revenue raising measures. The changes aim to ensure fairness while maintaining vital support for the charitable sector.

[1] BusinessNZ, 6 September 2024. https://businessnz.org.nz/wp-content/uploads/2024/09/240906-A-future-for-Foreign-Direct-Investment-into-NZ.pdf

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

Fair Pay Agreements Repeal Act 2023

February 4, 2025

Commercial, Employment, First Job, Your Own Business

What this has meant for you

Many people welcomed the introduction of the original Fair Pay Agreements Act 2022 (FPA) to set minimum pay and working conditions across various sectors. Others worried it could limit flexibility or create extra compliance costs. Now, the Fair Pay Agreements Repeal Act 2023, enacted just over a year ago, has turned back the clock on these industry-wide agreements.

Why repeal?

The main reason for the repeal stemmed from a change in government policy. The FPA, introduced by the previous government, aimed to improve wages and standardise conditions for employees in historically low pay sectors such as cleaners, hospitality workers and early childhood educators. Critics argued that this approach was too broad, as it could force employers to follow terms that they hadn’t agreed on, leading to reduced flexibility in workplaces.

By repealing the FPA, the current government signalled that pay and conditions should largely be negotiated between individual employers and employees or through standard collective bargaining processes rather than a universal, sector-wide system. Supporters of the repeal believed this would allow businesses to be more agile and able to respond quickly to changing market conditions.

Implications for employees and unions

For employees who would have benefitted from agreements under the FPA, the repeal has meant a return to individual employment agreements or traditional collective bargaining through unions. Workers in industries where wages are typically low may feel the difference most, especially if they were expecting a lift in pay or improved working conditions under the FPA process.

Unions have lost a tool for coordinating negotiations. The FPA regime gave unions a clear pathway to start negotiations on behalf of employees across an entire sector, even if there was initially low union membership. Without the FPA, unions are now focussing again on bargaining at a company level or encouraging voluntary industry-wide agreements. This may be a setback for union-led initiatives to raise pay and conditions in sectors with historically vulnerable workers.

Implications for employers

Employers now have more freedom to negotiate pay and conditions directly with their teams, without the worry of being locked into sector-wide rules. Businesses that operate in specialised markets or have unique staffing needs may welcome this. They can continue to tailor employment agreements to suit their circumstances, offering different pay structures, benefits or flexible arrangements.

On the other hand, before the repeal some employers saw a benefit in a level playing field for everyone in their industry. If all competitors had to meet the same pay and conditions then there was less concern about undercutting each other on labour costs. Those businesses may now have to keep a closer eye on what others in their sector are doing, particularly if new entrants offer lower pay.

Looking ahead

With the Fair Pay Agreements Repeal Act 2023 having been enacted just over a year ago, any ongoing negotiations under the FPA system may have continued in the same manner. In many cases, however, collective bargaining would have reverted to the familiar structures of individual employment agreements or smaller-scale union negotiations.

Unions and advocacy groups are now working on other ways to improve working conditions, such as lobbying government for different legislation or regulations. Meanwhile, most businesses wanting to be seen as good employers have developed their own internal policies to offer competitive pay and benefits. Despite the repeal, it’s unlikely the debate over fair pay will disappear. The broader issues of cost of living, pay equity and income inequality remain hot topics, particularly for Māori, Pasifika, women and young people.

Final thoughts

By repealing the FPA, the government returned New Zealand’s industrial relations framework to a more traditional form of negotiation. That shift has had significant effects on those who had hoped the FPA would boost minimum wages and conditions.

Whether you are an employee wondering about your pay, a union leader planning next steps or an employer seeking certainty around labour costs, the key takeaway is the same: make sure you understand your current rights and obligations, and be ready to adapt.

If you’re unsure about how this change has affected you, do talk with us. With the future of workplace legislation still in flux; staying informed and being proactive will serve you best.

Health and safety: Successful prosecution of former chief executive

February 4, 2025

Commercial, Employment, Your Own Business

Lessons to be learned

Stevedore, Pala’amo Kalati, was struck and killed by a falling container at the Auckland port on 30 August 2020.

Mr Kalati’s death led to Maritime New Zealand’s successful prosecution under the Health and Safety at Work Act 2015 (HSWA) of both Port of Auckland Ltd (POAL), the company that runs Auckland’s port, and its former chief executive.^[1]

This is the first time that the chief executive of a New Zealand company has been prosecuted over a workplace death.

The accident

The circumstances leading to Mr Kalati’s death were complex. However, the principal cause of his death was that he had been instructed to work on the deck of a ship contrary to the port company’s policy of remaining more than three container lengths away from an operating crane. Consequently, Mr Kalati was in the path of a falling container when the mechanical locking mechanism securing it to the crane failed while it was being lifted.

Prosecutions

Maritime New Zealand brought prosecutions against both POAL and its chief executive under section 48 of the HSWA. This section makes it an offence to fail to comply with a duty under the legislation that exposes a person to a risk of serious injury or death.

POAL pleaded guilty; it was fined $561,000 in 2023. The port’s chief executive defended the charges.

Due diligence requirement

Section 44 of the HSWA imposes a duty on the officers of a company, which includes directors and senior managers such as a chief executive, to exercise due diligence to ensure that their company complies with its legal duties under the legislation. This is defined as exercising the skill and care that a reasonable person would use, taking account of their position, their responsibilities and the nature of the company’s business.

This section of the HSWA specifically states that to exercise due diligence, an officer must:

Keep up to date on health and safety issues
Understand their business and its health and safety risks
Ensure their business has, and uses, appropriate measures to eliminate or minimise health and safety risks
Ensure their business has processes for assessing new information about health and safety risks, such as incident reports, and acting on it promptly, and
Confirm that the measures and processes referred to above are being used and are working.

The court had to consider the duty imposed by section 44 on an officer in a large organisation when they were not involved in the day-to-day operations of that organisation. The chief executive’s lawyers argued that the chief executive could not be expected to know about everything that was going on at the port. The court accepted this but it found that the chief executive had a personal duty to ensure that the port company had measures in place to counter health and safety risks, and that they were implemented. He also had a duty to verify from time-to-time that these measures were effective.

The former chief executive was found guilty of two of the three charges brought against him. He is yet to be sentenced.

Lessons for company officers

This is the first case in New Zealand in which a senior officer of a company has been convicted following a workplace death. The outcome of any similar future prosecution will depend heavily on the facts of the individual case. For example, the extent of the duty in section 44 depends on the exact role the officer has in the company and the type of business it operates. The court’s decision, however, makes it clear that officers need to ensure that:

Their company has systems to ensure accurate information about health and safety matters flows to them from those carrying out the company’s work
They know how the company’s staff actually carry out their work as opposed to how they are supposed to do it (work as done v work as planned), and
New health and safety measures are implemented promptly once they know they are needed.

If you have any concerns about whether your company is fulfilling its duties under the HSWA, or the extent of your personal duties as an officer of a company or other organisation, please do not hesitate to contact us.

^[1] Maritime New Zealand v Gibson [2024] NZDC 27975.

Hiring casual employees

November 21, 2024

Employment, Your Own Business

Employers have significant legal responsibilities

With summer shortly upon us, the up take in casual work is synonymous with school and university holidays. Despite the short-term nature of these roles, whether it’s seasonal fruit-picking, a retail Christmas-casual or a restaurant needing extra cover for busy nights, if you hire staff on a casual basis you still have significant legal responsibilities.

Hiring casual employees can provide beneficial working arrangements for both parties, with employers able to offer work on an ‘as needed’ basis and employees having the flexibility to decide when they wish to work and which shifts they would like to perform.

However, as an employer you must remember that during ‘agreed periods of work,’ casual employees are entitled to similar protections to those to which permanent employees are entitled. This is highlighted in a recent case before the Employment Relations Authority (ERA).^[1]

Background

Mr Ford was employed by Haven Falls Funeral Home as a casual employee. It was agreed he would complete an initial eight-week training period.

Mr Ford completed about three weeks of this training in Northland before incidents occurred that led to him returning home to Whanganui. As a result, Haven Falls decided not to offer Mr Ford any future work and notified him via a phone call and a letter soon after. Haven Falls believed that because Mr Ford was a casual employee, he had no expectation of ongoing work and they could simply inform him he was no longer required.

Mr Ford filed an application in the ERA claiming he was a permanent employee and had been unjustifiably dismissed. The ERA upheld Mr Ford’s casual employee status and disagreed that he was a permanent employee. Nevertheless, his dismissal was still deemed to be unjustified.

The ERA held that Mr Ford was dismissed by Haven Falls during a period of employment. This meant that despite being employed on a casual basis, whilst Mr Ford was engaged for his eight-week training programme, he was entitled to the same entitlements a permanent employee is owed – including a fair process of dismissal. (Haven Falls informed Mr Ford of his dismissal via a phone call and a follow up letter.) Haven Falls did not carry out an investigation of the incidents, nor was there consultation with Mr Ford before the company decided to dismiss him. Haven Falls also failed to give Mr Ford a reasonable opportunity to respond.

Due to Haven Falls’ failure to follow the fair process owed to an employee engaged for a period of work, it was ordered to pay the following amounts to Mr Ford:

Lost wages of four weeks’ pay for the remainder of the agreed training period
Eight per cent holiday pay on top of the lost wages
Interest on the lost wages from 11 March 2020, until payment was made, and
$20,000 compensation^[2] for humiliation, loss of dignity and injury to feelings.

Employers’ obligations

Previous cases have also stated that there are responsibilities to casual employees during periods of engagement. This case confirms that obligations are owed to a casual (or fixed term) employee during agreed periods of work. The high price for failing to meet these obligations is also shown in this case with, amongst other remedies being awarded to Mr Ford, an additional $20,000 compensation on top of the lost wages award.

The key outcome in this case is that when hiring casual workers or if you are signing up to a casual role this summer, be sure to keep these obligations and rights in mind. If you have any hesitation at all or if you are involved in a similar situation, please contact us.

^[1] Ford v Haven Falls Funeral Home [2024] NZERA 224.

^[2] Section 123 (1)(c)(i) Health & Safety at Work Act 2015.

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

Assignment of commercial leases re-settlement property inspection

November 7, 2024

Edmonds Judd

Commercial, Property, Your Own Business

When your tenant sells their business

A common question that arises for landlords owning commercial premises (or tenants leasing those premises) is what happens to the lease when your tenant sells their business. The answer to this is usually found in the deed of lease itself.

Assignment of the lease

When your tenant sells the assets of their business, the lease of their premises will usually be assigned to the purchaser on the settlement date. This is documented by you (as landlord), your tenant (as assignor) and the purchaser (as assignee) entering into a deed of assignment, which will assign the rights and obligations of the lease to the purchaser of their business. Your existing tenant will usually continue to be liable under the lease for the remainder of the current lease term. The assignee will also be liable to meet the lease obligations.

Under The Law Association (previously the ADLS) form of deed of lease, your tenant cannot assign the lease without your prior written consent, which you cannot unreasonably withhold. Your tenant must demonstrate to your (reasonable) satisfaction that the proposed assignee is respectable and has the financial resources to meet the obligations under the lease. Your tenant must also be up to date with rent and not be in breach of the lease. You can also require your tenant and the proposed assignee to sign a deed of assignment, and you may also be able to request a bank guarantee or a personal guarantee from the proposed assignee.

Your reasonable legal fees relating to the assignment of the lease will usually be paid by your tenant.

Deemed assignment

If your tenant is a company, the shareholding in that company may change. Existing shareholders may be selling some (or all) of their company shares to a third party, or transferring some (or all) of their company shares to other existing shareholders.

Where shares in your tenant’s company are being sold, you will not need a deed of assignment as the tenant will remain the same. However, if those shareholding changes result in a change in control of the company, which is a deemed assignment under the lease, your tenant is required to obtain your written consent before transferring the shares.

You will have the opportunity to assess the financial resources and experience of the incoming shareholder and propose reasonable conditions to your consent as part of the process. You, the exiting shareholders and the new shareholders will need to negotiate in relation to the release or replacement of any existing guarantees as part of your consent.

Agreement to lease

You may not have a deed of lease with your tenant, with the terms of your lease instead documented in an agreement to lease, which is a basic document setting out the broad material terms without going into detail about the day-to-day workings of the lease (which is contained in the deed of lease). A tenant’s rights and obligations under an agreement to lease cannot be assigned, so if your tenant is selling their business and wishes to assign its lease which is documented in an agreement to lease, they will first need to enter into a deed of lease with you, which can be assigned to the purchaser of the business (with your consent).

While agreements to lease can be helpful for the parties to initially agree material terms, they still technically require both parties to enter into a deed of lease reflecting those terms. We recommend that you promptly enter into a deed of lease after signing any agreement to lease so that both parties are aware of their full rights and obligations under all the terms of the lease.

We can help

Whether you are a landlord or a tenant negotiating through an assignment of the lease, we recommend early contact with us.

If you are a landlord, we can advise on what information you should request from any proposed assignee to allow you to make an informed decision on whether you consent to the assignment of the lease.

We can help both landlords and tenants in navigating what is and isn’t reasonable from each party in the circumstances.

DISCLAIMER: All the information published in Property Speaking 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 Property Speaking 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 25, 2024

Commercial, Employment, News, Your Own Business

Companies Act reforms announced

The government has announced a suite of changes to the Companies Act 1993 aiming to improve fairness and the ease of doing business in New Zealand. The reform is expected to take place in two phases.

Phase One: The first phase focuses on the modernisation and simplification of the Act to better reflect a more evolved business and technological landscape.

Specific proposed changes include:

Providing a process for reducing the share capital of a company that does not require court approval
Amending the definition of ‘major transaction’ to exclude transactions relating to the capital structure of a company and clarify that a series of related transactions are captured by the definition
Adding additional types of transactions that can be approved by unanimous shareholder consent
Allowing companies to mingle unclaimed dividends with other funds after two years
Assigning unique identifiers to directors to prevent ‘phoenixing’ (where a new company is registered to take over an insolvent or unsuccessful one), and
Allowing directors and shareholders to have their residential addresses removed from the Companies Register, resolving safety and privacy concerns.

Further insolvency law amendments are also being proposed, including extended claw back periods, preference for long service leave and greater honouring of gift cards.

Phase Two: The second phase will involve a Law Commission review of directors’ duties and related issues such as director liability, sanctions and enforcement.

The bill introducing Phase One is expected to be introduced in early 2025 and Phase Two will closely follow.

Siouxsie Wiles employment decision

In July, the Employment Court ruled that the University of Auckland had breached its health and safety, and good faith obligations to Associate Professor Siouxsie Wiles.^[1]

Dr Wiles was prominent in the media during the Covid pandemic, communicating complex Covid information in an understandable way to the public. Dr Wiles received harassment and abuse, both online and offline, from those who disagreed with her. She sought help from the university, but was told that it was not part of her academic duties and that she should minimise further public statements until a security audit had been completed.

Although the university was commended for the actions it did take, ultimately, those actions were insufficient. The Employment Court was critical of the university’s delay in responding to safety concerns and the university’s misplaced focus on Dr Wiles’ outside activities. The court found that the onus was on the university to obtain the right health and safety advice, and proactively put a plan in place. By failing to do so, the university was not acting in good faith and was breaching its contractual obligations to be a good employer.

This ruling serves as a good reminder that employers, especially those in the public sector or that engage with the public, should consider health and safety risks in relation to employees’ work-related activities, including where those activities pose a risk of harassment. Employers may also be responsible for work related activities occurring outside of an employee’s work premises and normal working hours.

New bill to improve consumer data rights

Parliament is currently considering the Customer and Product Data Bill – a bill designed to increase consumer control over their data. It is currently with the select committee. If passed, the legislation will create an obligation for businesses that possess customer data to provide, on request, that data to those customers and certain third parties.

The bill will help consumers access their data to compare services and change providers, making it easier for new or smaller businesses in an industry to compete with the ‘big players.’ The bill introduces hefty fines for non-compliance, including a fine of up to $50,000 for failing to respond to a data request and a fine of up to $5 million for making an unauthorised data request. Initially, the bill will only apply to the banking, electricity, and telecommunications sectors.

Changes to insurance industry coming

The Contracts of Insurance Bill, that awaits its second reading, will make significant changes to the rights of policyholders and insurers to promote confidence in the insurance market and ensure that insurers operate fairly. The bill proposes several changes to insurance contracts legislation, including:

Disclosure duties: The bill draws a distinction between consumer policyholders (where the insurance contract is for personal, domestic or household purposes) and non-consumer policyholders. Consumer policyholders will have a duty to take reasonable care not to make a misrepresentation to the insurer.
Non-consumer policyholders will have a duty to make a fair representation of the risk. This shifts the burden on insurers to ask the right questions to reveal all the information they need
Unfair contract terms: The bill removes the existing exception for standard form insurance contracts from the unfair contract term provisions in the Fair Trading Act 1986. In other words, the unfair contract terms regime will apply more widely to insurance contracts, meaning insurers must make sure that the provisions of their insurance contracts are fair.
There are still some exceptions in insurance contracts that will not be subject to the unfair contract terms regime, including event, subject or risk insured, sum insured, the basis for settling claims, excess, and exclusions or limited liability in certain circumstances, and
Proportionate remedies: Insurers will no longer be able to avoid an insurance contract for any failure or misrepresentation of a policyholder. Instead, insurers will have proportionate remedies based on how it would have responded if it had known the relevant information, such as reducing the amount paid on a claim.

Uber appeal dismissed: drivers are employees

In 2022, the Employment Court made a landmark ruling against Uber when it found four Uber drivers were employees and not independent contractors.^[2] Uber appealed the decision, and the Court of Appeal issued its decision in August.^[3] The Court of Appeal criticised the Employment Court’s approach, stating that the first step should be to look at the parties’ agreement governing the relationship, rather than whether the individual is vulnerable or suffering from an imbalance of power. Ultimately, however, the focus should still be on the parties’ mutual rights and obligations, interpreted objectively.

Despite these criticisms, the Court of Appeal still dismissed the appeal affirming the finding that Uber drivers are employees. This means Uber must provide the drivers with employee benefits, including minimum wage, leave entitlements and holiday pay.

The decision only applies to the four Uber drivers, but it has implications for all businesses that engage contractors, particularly for those operating in the gig economy. It is a timely reminder for businesses that rely on contractor workforces to ensure their contracts accurately reflect the nature of the relationship with their workers.

The Workplace Relations and Safety Minister Brooke van Velden has indicated that the coalition government intends to amend the Employment Relations Act in 2025 to increase certainty and clarity for contractors and businesses regarding employment status of workers. The changes will provide a four part gateway test which, if met, would mean a worker is a contractor. More information on the government’s announcement can be found here.

If you would like to know more about how any of the items in Business briefs may affect you and your business, please don’t hesitate to contact us.

^[1] Wiles v University of Auckland [2024] NZEmpC 123.

^[2] E Tū Inc v Rasier OperaAons BV [2022] NZEmpC 192.

^[3] Rasier OperaAons BV v E Tū Inc [2024] NZCA 403.

Embracing Tikanga Māori in your commercial contracts

September 25, 2024

Commercial, Employment, Your Own Business

Seeking ways to respect and incorporate differences into business practices

In recent years, there has been a growing recognition of the importance of incorporating – and (more importantly) the desire to incorporate – Tikanga Māori into commercial contracts.

To some extent, this shift is due to the growing appreciation that contracts should not only be robust and enforceable, but also culturally inclusive and reflective of our collective New Zealand heritage. Many people, however, particularly those not brought up in Te Ao Māori (the Māori culture), can find this daunting and maybe a little scary.

What is Tikanga Māori?

Tikanga Māori refers to Māori customs, values and practices. The word ‘Tikanga’ comes from the word ‘tika’ that means ‘correct’ or ‘right’; essentially, it is the ‘right way’ to do things.

In the context of commercial contracts, Tikanga can cover a range of concepts, from the way you manage relationships, to how you carry out your obligations. However, Tikanga is not a one-size-fits-all concept; its meaning and application can vary depending on the region, the iwi (tribe) and the parties involved.

For non-Māori businesspeople who are used to clear, documented processes, this can be challenging, especially if you are worried about putting a foot wrong. Integrating Tikanga into commercial contracts, however, generally just involves the careful blending of Māori and Pākehā perspectives to create agreements that are long-term, community-focused and ethically grounded. Tikanga acknowledges the differences between Māori and Pākehā approaches but also actively seeks ways to respect and incorporate these differences into commercial practices.

Why incorporate Tikanga Māori?

There are several reasons we should consider incorporating Tikanga Māori elements into our contracts. These include:

Relationships: As Tikanga Māori places a high priority on relationships, emphasising trust, mutual respect and reciprocity, incorporating these values into contracts can help to strengthen the bonds between businesses and Māori partners, which can ensure longer-term, sustainable partnerships
Cultural competence and respect: Incorporating Tikanga Māori into contracts can help to show your business’ commitment to understand and respect Māori culture. This may not only enhance your reputation, but also help build trust within Māori communities and stakeholders
Enhanced dispute resolution: Tikanga Māori offers alternative dispute resolution methods, focused more on restoring harmony and balance than penalising/default mechanisms. This can lead to more agreeable and lasting solutions if there is disagreement, and
Alignment with Te Tiriti o Waitangi: One of the aims of Te Tiriti o Waitangi (Treaty of Waitangi) is to preserve the partnership between Māori and the Crown. Incorporating Tikanga Māori into contracts may help to demonstrate your commitment in upholding these values.

Looking ahead

If any of the above resonates with you, consider doing some of the following in your business:

Think longer time frames: In Te Ao Māori (the Māori worldview), time is often considered in generations rather than years. Māori organisations frequently plan with a longer-term perspective, focusing on the wellbeing of future generations rather than immediate short-term gains. This longer-term approach means that your contracts should ideally consider the broader implications, looking beyond the immediate benefits and considering longer-term issues such as community goals and sustainability, and
Focus on relationships: We tend to concentrate on our own individual obligations and financial outcomes when negotiating contracts. In a Tikanga Māori approach, however, the focus is more on relationships — both between the parties and with the wider community. This means that contracts should seek to prioritise, among other things, mutual respect, collective responsibility and the ongoing relationship between the parties.

You could consider including provisions that acknowledge the importance of whakapapa (genealogy) and manaakitanga (hospitality and respect), seeking to ensure that the contract strengthens, rather than undermines, relationships:

Consult with experts: Engage with Māori advisors, legal professionals or kaumātua (elders) while preparing your contracts. Their insights can ensure that the incorporation of Tikanga Māori is both authentic and appropriate in the context
Use Te Reo Māori: Where relevant and appropriate, consider including Te Reo Māori (Māori language) as part of the contract – whether as bilingual clauses or simply incorporating Te Reo Māori alongside the English words – as we have done in this article, and
Tweak your disputes clauses: Standard commercial contracts often include formal arbitration or court processes as dispute resolution mechanisms. Māori dispute resolution, however, leans more towards consensus and the restoration of harmony, as well as the concept of kanohi ki te kanohi (face-to-face) discussions rather than battling it out through lawyers or email. Incorporating these processes into contracts can help ensure that disputes are resolved in a manner consistent with Tikanga.

Using Tikanga Māori principles is advantageous

Incorporating Tikanga Māori principles into commercial contracts is a growing practice in this country. Doing so can result in agreements that are not only legally robust, but also culturally inclusive and ethically grounded. This approach can be beneficial to all parties, enhancing the relationship and supporting longer-term, sustainable partnerships.

Whaowhia te kete mātauranga:

Fill the basket with knowledge.

Voidable transactions

September 25, 2024

Commercial, Your Own Business

Liquidator can claw back payments

The number of companies going into liquidation in New Zealand is on the rise after a Covid lull. According to Centrix,^[1] 642 companies were placed into liquidation during the second quarter of 2024. This represents a year-on-year increase of 19%.

Most people in business know there is a substantial risk of not being paid by a company that goes into liquidation unless they have a secured debt. However, a payment made by a company before it goes into liquidation may also be at risk.

The liquidator can ‘claw back’ a payment made by the company to a creditor up to six months before the company was placed into liquidation by its shareholders or liquidation proceedings were filed in the High Court.^[2] The liquidator may claw back the payment if it was made at a time when the company could not pay its debts, and the payment enabled the creditor to receive more than they would have received in the liquidation. Such a payment is known as a ‘voidable transaction.’

Pari passu rule

If a company has insufficient assets to meet all its debts, its available assets should be divided between its creditors in proportion to the debts they are owed. This is known as the pari passu rule.

There are several limits on the liquidator’s power to unwind voidable transactions. These are intended to strike a balance between upholding the pari passu rule and the conflicting objective of encouraging businesses to continue to trade out of their difficulties when facing financial problems.

Running account exception

The running account exception is one significant limitation on the liquidator’s power to claw back voidable transactions. It requires the liquidator to consider the net effect of a series of transactions between a creditor and the company, and to treat this as a single transaction.

In practice, if a company has a trading account with your business before it goes into liquidation, then any amount your business receives during the six months prior to liquidation that exceeds the value of any goods or services supplied during this period may be treated as a voidable transaction. For example, suppose your business supplies $10,000 worth of goods to a company during the six months before it is placed into liquidation, and you receive payments totalling $15,000 during the same period. Of that $15,000, $5,000 of the money you received went towards the debt that existed before the start of the six-month period. In that case, it is possible that a payment of $5,000 to your business was a voidable transaction, but the rest is safe.

The effect of the running account exception is that your business can keep any payment received for any goods or services supplied during the six months before liquidation.

Section 296 defence

This section^[3] contains a ‘good faith’ defence available to creditors facing a claim to repay a voidable transaction. This statutory defence has three elements that must be satisfied:

The creditor must have acted in good faith
There was no reason for them to suspect the company was insolvent, and
They gave something of value for the payment or changed their position due to the payment. The value does not have to be provided at the same time as the payment.

The claw back procedure

The Companies Act sets out the procedure a liquidator must follow when seeking to claw back a payment.

If the liquidator cannot resolve the issues through correspondence with the creditors, the liquidator may issue a formal notice to set aside the transaction. The recipient has 20 working days to respond to the notice. If they do not respond, the payment automatically becomes a voidable transaction at the end of this period and must be paid back. If the recipient does respond, then the liquidator may still apply to the court to set aside the payment.

It is difficult to fully protect your business from claw backs for voidable transactions. One option is to seek a security or personal guarantee at the start of any trading relationship. You should talk with us before continuing to trade with a company you suspect may have financial difficulties,

or if you are contacted by liquidators seeking to claw back a payment.

^[1] Centrix August 2024 Credit Indicator Report.

^[2] Section 292, Companies Act 1993.

^[3] Section 296, Companies Act 1993.

Calf Grazing: ensuring welfare and legal compliance beyond the farm

September 17, 2024

Fiona Jack

Rural, Your Own Business

With calving season coming to an end, many farmers will soon be sending their calves off to grazing. However, this does not mark the end of your responsibility for their welfare. As the owner, you remain fully accountable for the care of your animals, even while they are under the grazier’s supervision. While day-to-day care may be delegated, it’s crucial to carry out regular checks to ensure your animals are receiving proper attention. Relying solely on weight records or reports isn’t enough. We recommend attending weigh-ins or arranging for a local vet to perform Body Condition Scoring (BCS) to ensure adequate oversight. The cost of these measures is a valuable investment in correctly raised cattle.

Equally important is ensuring that your grazing contract clearly defines each party’s responsibilities and that these align with the Animal Welfare Act and relevant Codes of Welfare. If you’re unsure whether your contract offers sufficient protection, our farming team at Edmonds Judd can review or draft a contract that ensures compliance with your legal obligations.

If you’d like to discuss your responsibilities or receive a copy of the applicable Code of Welfare to go over with your grazier, contact our team.

Fiona Jack, Senior Associate (rural specialist)

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

August 29, 2024

Edmonds Judd

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.

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