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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

Commercial, Property, Your Own Business
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Update on construction contracts retention regime

In our Spring 2021 edition, we discussed the proposed changes to the retention money regime for construction contracts in light of the introduction of the Construction Contracts (Retention Money) Amendment Bill.  The legislation was passed on 5 April 2023 and it comes into force on 5 October 2023. In brief, the Act will require contractors to place retentions in a trust account with a registered bank in New Zealand (or other accepted form) and keep it separate from other money or assets.

All construction contracts entered into or renewed from that date onwards will be subject to the new requirements.

For more information about how the new legislation will work, please be in touch.

 

New obligations for businesses offering Buy Now Pay Later

The government recently announced it will introduce new regulations to extend the consumer protections in the Credit Contracts and Consumer Finance Act 2003 (CCCFA) to apply to Buy Now Pay Later (BNPL) schemes.  BNPL provides consumers with interest-free credit to buy goods and services and pay for them later. Consumer advocates have raised concerns that BNPL is ‘easy money’, which leads to vulnerable consumers taking on more debt than they can afford to pay back.

The CCCFA imposes certain obligations on lenders to protect borrowers. It does not, however, currently apply to BNPL.  While the new regulations are not yet finalised, it is expected that obligations for businesses offering BNPL will include:

  • Only charging reasonable default fees
  • Varying repayments on request when a consumer suffers unforeseen hardship
  • Offering financial mentoring services to consumers who miss payments, and
  • Being a member of an external dispute resolution scheme.

The new regulations are expected to be introduced to Parliament later this year.

 

Large businesses may need to disclose payment practices

The Business Payment Practices Bill is currently being considered by Parliament and, if passed, will require large businesses to publicly report on their payment practices.  As currently drafted, the proposed legislation will require businesses with more than $33 million (including GST) in revenue for two or more consecutive accounting periods to report six-monthly on their payment practices on both a public register and on their own websites.  Information required to be disclosed will include time taken to pay invoices and the proportion of invoices paid in full. If businesses do not comply with the reporting requirements, they could face fines of up to $500,000.

The purpose of the Bill is to improve transparency for business-to-business payment practices and provide small businesses with information to help with making decisions when engaging with large businesses. The Bill also encourages large businesses to improve their payment practices given its transparent nature.

The Bill is currently awaiting its second reading so there may be some changes before being passed into law. We will keep you up to date with its progress.

 

Are your T&Cs unfair?

The Commerce Commission has filed proceedings in the High Court against holiday home company Bachcare Limited. It alleges that some of Bachcare’s contract terms with consumers are unfair under the Fair Trading Act 1986 (FTA).

The Bachcare contract terms in question are:

  • Regardless of how far in advance a guest cancels their booking the guest may lose up to 100% of the amount paid
  • Service fees are deducted regardless of whether the booking is cancelled by Bachcare or the guest, and
  • Where a booking is cancelled due to an uncontrollable event, such as an extreme weather event, and is unable to be re-scheduled, a guest could lose 100% of the amount paid.

Since 2022, the unfair contract terms regime has applied to contracts between businesses that have a trading relationship with an annual value of $250,000 or less (known as ‘small trade contracts’). The Commerce Commission appears to be increasing enforcement efforts now the regime has been in force for some time.

If you have not already done so, now is a good time to review your consumer terms and conditions, and small trade contracts to ensure they comply with the FTA.

Please contact us if you need help with unfair contract terms.

 

 

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