LawNews- Issue 15

NEWS May 19, 2023 Issue 15

Inside ■ COMPANIES

An amendment bill that fails to amend P06-07

■ OPINION

A primer for Kieran McAnulty P08-09

Covid blamed for prolonged probate

adls.org.nz

DELAYS

Contents 03-04 EXECUTORS PROTESTS COVID-19

Why granting probate is taking forever

LawNews is an official publication of Auckland District Law Society Inc. (ADLS).

Editor: Jenni McManus Publisher: ADLS

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EVENTS

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Cover: Alicia Llop / Getty Images

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May 19, 2023 Issue 15

TRUSTS AND ESTATES LAW

Protests and pandemic blamed for months-long delays in granting probate Employees didn’t get paid, the funeral directors didn’t get paid. Other business debts didn’t get paid because there was no one around to officially take over

Reweti Kohere Executors of wills are waiting up to four months for the High Court to grant probate. The backlog is being blamed on covid-19 lockdowns, exacerbated by sick staff and the temporary closure of Wellington’s registry during last year’s anti-vax protest at Parliament.

Prior to covid, the expectation was a wait-time of four to sixweeks and the prolonged delay is stalling many of the essential tasks the law obliges executors to fulfil.

To reduce the backlog, practitioners are suggesting digitally enhanced processes, the separation of simpler applications from more complex estates and raising the probate threshold from $15,000 to more than $100,000.

The Ministry of Justice doesn’t think long-term solutions are needed as it works to hire and onboard more staff to help process applications, says chief operating officer Carl Crafar. Although the ministry does not know how long it will take to work through the backlog, it expects improvements over the coming months.

The current three-month standard is “optimistic if you get everything right and there’s no complication”, says Bill Patterson, managing partner at Patterson Hopkins and convenor of the ADLS Trust Law committee. “If you don’t get everything right and [the courts] have to requisition, then it can be quite a lot longer.”

Centralised process

Bill Patterson

Not every executor needs the court’s approval to distribute an estate. Probate is necessary only where a deceased person held more than $15,000 in one particular asset, such as bank account funds, shares or life insurance policies. The process ensures the deceased and beneficiaries’ interests are protected against the risk of assets being misappropriated or abused by those not authorised to distribute them.

Probate applications have been funnelled through the High Court at Wellington since 2013 after the Ministry of Justice centralised the application process. Registrars in all main centres then help with granting probate. Before centralisation, applications were filed at and dealt with by the registry closest to where the deceased lived at the time of his or her death.

In concentrating expertise within one registry, Crafar says the ministry intended to drive consistency in the processing of applications, reduce the number requiring rework and improve the overall turnaround time.

Shorter wait times did eventuate – in 2016, the first issue of the Ministry of Justice’s Justice Matters newsletter claimed

centralisation had halved processing times, down from 31 days.

Crafar adds in the five years before covid, applications took between three to five weeks to process.

While organisations such as the Public Trust and Citizens Advice Bureau advise a four to six-week processing period, grants can take longer depending on the registry’s workload or the case’s complexity. The current processing timeframe, as of March 2023, is up to 10 weeks, Crafar says.

Ballooning wait time In Patterson’s experience, before covid, “you [would] get your grants [in] under a month”. However, wait times have since ballooned – in some cases taking up to 16 weeks, says Public Trust chief executive Glenys Talivai.

And the delays are having knock-on effects. Barrister Ray Ganda says executors “can’t move” without probate.

A recent case took more than three months for executors to receive probate, Ganda says. After the deceased’s death, the running of his hospitality business halted and it eventually had to close while the executors awaited court approval. The lag held up crucial tasks.

“Employees didn’t get paid, the funeral directors didn’t get paid. Other business debts didn’t get paid because there was no one around to officially take over,” Ganda explains. “While the executors were around to organise the funeral, they can’t deal with banks without probate, they can’t deal with transferring the title over to themselves as executors and they can’t sell the business because they’re not duly appointed.”

Protest and pandemic Patterson puts the worsening delays down to a backlog of applications that have piled up over the past few years. During the three-week anti-covid mandate protest in early 2022, Wellington registry staff couldn’t return to their offices opposite the parliamentary precinct because of the risk the protestors posed, he says.

While not all deceased people leave behind wills or estates, deaths have increased over the past three years.

In 2022, registered deaths increased 10.4% on the previous year to 38,573, attributed to covid-19 and an ageing population.

Four out of every five deaths in 2022 were of people aged 65 and older and 53% were of those aged over 80. In those age groups,

Continued on page 04 03

Continued from page 03

Glenys Talivai

covid poses an increased mortality risk.

In 2021, deaths rose 7.1% to just under 35,000. While 1,648 fewer people died in 2020 compared to the 34,261 deaths in 2019 – a reduction that StatsNZ said coincided with alert level restrictions – registered deaths from 2019 to 2022 have climbed 11%, continuing a general upward trend over the last decade.

Moreover, while covid-19 lockdowns blunted the worst of the pandemic’s impacts, registered deaths increased in the months where restrictions were eased.

For instance, after Auckland moved to alert level 1 in March 2021, following two stints at alert level 3 in February, deaths rose 9% in the subsequent five months. That included the first two months of winter, which is typically deadlier than other months because respiratory diseases and the flu tend to thrive in colder weather. Deaths decreased 10% between August and December 2021 – the last of the country’s major lockdowns.

Liberty and livelihoods

While the executors were around to organise the funeral, they can’t deal with banks without probate, they can’t deal with transferring the title over to themselves as executors and they can’t sell the business because they’re not duly appointed

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Omicron’s arrival at the end of 2021 marked a shift to the covid traffic light system, with the gradual easing of vaccine passes, mandates, isolation periods and other restrictions by September 2022. In August, monthly registered deaths peaked at 3,972, with all but three months of last year recording deaths in the 3,000 range. Throughout the pandemic, courts and tribunals were deemed essential services. As far as it was safely possible, the High Court continued to prioritise proceedings that related to New Zealanders’ liberty and livelihoods or matters where resolution was time-critical, such as “urgent” probate matters.

As covid protection protocols evolved, the court kept accepting probate applications. “General registrar work will be carried out to the extent possible,” said Chief High Court Judge Susan Thomas in April 2022.

Compounding the backlog were staff shortages due to illness during the omicron outbreak, Talivai says.

Patterson feels sorry for the Wellington registry. “They’re just hopelessly overwhelmed…Being a probate registrar is actually not an easy job. It’s a bloody complicated one,” he says. “This job isn’t for someone who hasn’t got a lot of experience.”

No estimate In addition to “other events which affected access” to the High Court at Wellington in 2022, Crafar confirms covid’s impact on staffing levels within the probate unit, with recent delays partially connected to the number of people available to process standard applications and do data-entry tasks.

The ministry is working to hire additional staff to pick up the slack, although the probate unit has members with the required experienced to progress complex applications, he says. Additional senior deputy registrars have been appointed and trained too.

Asked how long it will take to work through the backlog, Crafar says, “The ministry does not have an estimate on this.”

However, “with the additional staff coming onboard, the ministry is expecting to see wait times improve over the coming months”, with timeframes nearing pre-covid levels once the build-up has been addressed.

Solutions Besides suggesting probate could do with another review, Patterson thinks raising the threshold to $100,000 would help; at $15,000, the current value is “miles too low” and has been “screaming out” for a fix-up.

“If they freed up those numbers for very small estates, where you just had, say, two or three bank accounts and maybe a life policy or a small number of shares, if it’s $100,000, it doesn’t seem to me there’s any danger of anyone doing something wrong to allow [the grant of probate] to be done.”

Ganda says granting probate shouldn’t take too long where executors are duly named in a deceased’s will, the document has been sighted and affidavits and evidence have been provided.

But where people die without a will, it’s understandable the court will make further inquiries. “You have to satisfy the court the requirements under the Administration Act are met, and there are no sprogs around who shouldn’t be or people trying to become administrators. There’s a right to object, there is a lot of complication involved,” he says.

Talivai offers another solution: “The ability to complete some of these processes using digital technology could significantly speed things up,” she says. “We are aware the courts are looking to digitise more of their processes in general and are supportive of their work in this space.”

No digital solutions specific to probate are being worked on, but Crafar says the ministry and the judiciary are working to modernise the courts through a new digital case management system, Te Au Reka.

No merit The ministry doesn’t see any merit in expediting straightforward applications, with Crafar cautioning such a move might hinder access to justice.

“Currently, the only applications expedited are those where a grant must be made urgently. Often complex applications require additional work and take longer to process. Prioritising straightforward applications would simply delay complex applications further,” he says.

The $15,000 threshold is designed to allow executors to deal with small estates efficiently and inexpensively. And other good reasons exist: requiring probate helps prevent fraud and ensures estates are administered properly in according with a deceased’s wishes, Crafar says.

“It proves to everyone holding the deceased’s assets that the executor has the right to take the assets and administer the estate. An executor who does not have probate also does not get the same protection from liability and could become personally liable if other claims on the assets are upheld. These issues would need to be taken into account when considering whether the threshold should be increased.”

Crafar says the ministry has hit pause on reviewing succession law, including the Law Commission’s December 2021 recommendation to government to consider the monetary threshold, “due to other priorities in the Justice portfolio”. ■

May 19, 2023 Issue 15

Letter to the editor

Australians should be wary of scare stories comparing the Voice with New Zealand’s Waitangi Tribunal The ability to return land has almost never been used and is being progressively repealed across the country as treaty settlements are implemented in legislation Michael Belgrave

Scaremongering across the ditch

Far from expanding its jurisdiction, the tribunal’s powers have been steadily reduced in recent decades

Australian Senator Jacinta Nampijinpa Price’s recent claim that the Waitangi Tribunal has veto powers over Parliament was met with surprise in New Zealand, especially by members of the tribunal itself. That’s because it is just plain wrong.

As the debate around the Voice to Parliament ramps up across the ditch, we can probably expect similar claims to be made ahead of this year’s referendum. But the issue is so important to Australia’s future that such misinformation should not go unchallenged.

From an Australian perspective, New Zealand may appear ahead of the game in recognising indigenous voices constitutionally. But that has certainly not extended to granting a parliamentary power of veto to Māori.

The Waitangi Tribunal was originally established as a commission of inquiry in 1975, given the power only to make recommendations to government. And so it remains. The Crown alone appoints tribunal members and many are non-Māori.

As with all commissions of inquiry, it’s up to the government of the day to make a political decision about whether or not to

Photo: Fiona Goodall / Stringer / Getty Images

CONSTITUTIONAL LAW

implement those recommendations.

Deceptive and wrong Price’s claim echoed a February article and paper published by the Institute of Public Affairs, aimed at influencing the Voice referendum. Titled The New Zealand Māori voice to Parliament and what we can expect from Australia, it was written by the director of the institute’s legal rights program, John Storey.

The paper makes a number of assertions: the Waitangi Tribunal has a veto over the New Zealand Parliament’s power to pass certain legislation; the Waitangi Tribunal was established to hear land claims but its brief has expanded to include all aspects of public policy; and the Waitangi Tribunal “shows the Voice will create new indigenous rights”.

The last of the statements is deceptive and the others are completely wrong. The Waitangi Tribunal’s jurisdiction was largely set in stone by the New Zealand Parliament in 1975 when it was established.

Far from investigating land claims, it initially wasn’t able to examine any claims dating from before 1975. Parliament changed the tribunal’s jurisdiction in 1985, giving it retrospective powers back to 1840 (when the Treaty of Waitangi/te Tiriti o Waitangi was signed).

The tribunal then started hearing land claims. But in its first decade, it focused on fisheries, planning issues, the loss of Māori

Continued on page 11

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second was during the opening of the second concert when Barenboim Michael Belgrave’s piece in LawNews Issue 13 (5 May 2023) about gently reminded the packed Opera House of the moral duty owed to Australian Senator Jacinta Nampijinpa Price’s scare stories, comparing the Aborigines if Australia wanted to truly enter the ‘community of civilised Voice with New Zealand’s Waitangi Tribunal processes, has interest both nations’, a reminder that initially was met with stunned for Australian and New Zealand policy makers. silence.

That Australian Aborigines have been the subject During the When one flies into an Australian city on a Qantas of horrific treatment and continue to be severely opening of the flight, the arrival announcement recognises the disadvantaged in Australian society cannot be gainsaid. indigenous occupants of that land. Moves to lift up The Voice is a manifestation of moves for change and second concert, justice by Aborigines in their ancestral homeland. There Barenboim gently Aborigines require that policy makers, community groups and the Australian people work and work hard to have been voices crying in the wilderness about their reminded the effect real change. shocking plight for many decades, see for example John packed Opera Michael Belgrave is right to draw attention to the Pilger’s documentary Utopia and his other reporting at scare-mongering about the Treaty of Waitangi processes johnpilger.com.

House of the and settlements. Australians would benefit from hearing When my grandfather’s family emigrated from moral duty owed that while it is a work in progress, the initiative of Matt New South Wales to New Zealand in 1908 they came to Aborigines Rata in 1975 and the hard work that has followed to a place where hardship was present but work was has borne real fruit and that, despite some who may available. My mother returned to New South Wales in overreach and call for radical realignment of society the early 1980s and I stayed with her during the winter based on a ‘living instrument’ interpretation of the treaty, New Zealand of 1983, where I drove taxis to further enrich the taxi company. I learned society and race relations have improved out of sight and very much for the there were no paying fares in Redfern where the poverty of Aborigines was better since 1975. ■ shocking. Moving forward in time, when in 2018 my wife and I attended a concert given by the Berlin Staatskapelle orchestra under Daniel Warren Pyke Barenboim, two things reminded me of the continuing plight of Aborigines.

Barrister The first was the cultural display near the Opera House grounds; the Auckland

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COMPANY LAW

If you have a customer-facing business and you’re not talking about social responsibility or environmental responsibility, you’re actually putting your own business at risk

legislation should be a last resort, not a first resort to solve policy issues that we can deal with in other ways. So, education would have been a far more cost-effective way to improve the understanding of what’s well understood by experts.”

While the select committee has tried to improve the bill by amending Webb’s subsection, “the right thing to do would have been to stop the bill in its tracks”, Wallis says.

Jenni McManus

The ‘amendment’

An amendment bill that fails to amend. Even worse, an amendment bill that is opposed by five leading law firms, NZLS, MBIE and Parliament’s Legislative Design and Advisory Committee. Worse still, an amendment bill that failed to get a tick from the Economic Development, Science and Innovation select committee tasked with deciding whether the draft legislation should proceed through the House.

Nevertheless, the Companies (Directors’ Duties) Amendment Bill, in a form clarified and amended by the select committee, has a good chance of getting through its second reading, though without the support of the Opposition and a raft of legal experts.

Supporting the private member’s bill, the brainchild of MP Duncan Webb and drawn from the ballot before his promotion to Minister of Commerce and Consumer Affairs, are the trade unions, and several non-governmental organisations and charities which say they support its policy intentions.

Rather than trying to amend directors’ duties piecemeal, especially via legislation that fails to actually change the law, some of the law firms opposing Webb’s bill want the Law Commission to instigate a full-scale review of the 30-year-old Companies Act 1993, particularly the contentious sections around directors’ duties. There is no need to wait for the Supreme Court’s decision in Mainzeal, they say.

Poor process According to Chapman Tripp partner Roger Wallis, Webb’s bill is “a solution looking for a problem”.

“It’s poor legal process to put incoherent provisions into the Companies Act,” Wallis says. He notes Webb himself has made a submission, criticising the bill.

“I don’t see that very often. I think everyone agreed it was badly drafted because you don’t put things into the law that aren’t needed. I think the Legislation Advisory Committee says 06

Dr Duncan Webb

It’s poor legal process to put incoherent provisions into the Companies Act

The bill is contentious because, in the view of its opponents, it simply re-states the current law. It is virtue-signalling and a waste of parliamentary time and money. Even the select committee says the bill’s intentions could be achieved by non-legislative means such as guidance or training materials to educate directors.

Webb’s amendment focuses on s 131 of the Companies Act – the section mandating that directors must act in good faith and in what they believe are in the best interests of the company.

As with other directors’ duties, the wording of s 131 is principlesbased and broad and does not prescribe what directors may or may not take into account when determining what the best interests of the company might be.

Webb’s bill proposes a new subsection to s 131, making it clear that when a director is making decisions based on the best interests of the company, he or she may consider “recognised” environment, social and governance (ESG) issues. Ostensibly, the purpose is to clarify and make explicit what directors may take into account when making these determinations.

Webb’s detractors are quick to point out the ambiguity and confusion that might arise when there is no definition of “recognised” in the bill – an omission Webb himself concedes is an error. And they baulk at his words “for the avoidance of doubt” as, they claim, no doubt exists in the current law.

This view appears to have the backing of the Supreme Court.

In its recent decision Debut Homes v Cooper, the court confirmed that the best-interests test is subjective and acknowledges the business judgment of directors. The court noted it was “not well-equipped…. to second-guess the business decisions made by directors in what they honestly believe to be in the best interests of the company”.

Continued on page 07

Photo: Hagen Hopkins / Stringer / Getty Images

Directors’ duties amendment bill is ‘a solution looking for a problem’

May 19, 2023 Issue 15

Continued from page 06

climate change;

■ any movement away from a focus on corporate profits is

ClientEarth v Shell Roger Wallis

Andrew Bayly

Everyone agreed it was badly drafted because you don’t put things into the law that aren’t needed

On the issue of mandatory considerations and a possible increase in litigation risk that directors could face if Webb’s supporters get their way, MBIE cites the example of a recent case filed in the UK against Shell by ClientEarth (an environmental law charity).

It’s a derivative action taken by several large institutional investor shareholders, on behalf of the company itself, alleging breach of directors’ duties by the Shell board.

The plaintiffs claim a breach of s 172 of the UK Companies Act 2006, a section requiring directors to act in a way they consider will best promote the success of the company for the benefit of its members as a whole.

It’s the equivalent of New Zealand’s s 131 but the UK version includes a mandatory list of ESG factors the directors must consider. ClientEarth claims the board’s failure to adopt and implement a client strategy that aligns with the Paris Agreement is a breach of directors’ duties.

“This exemplifies how taking a mandatory approach could allow for litigation for breach of this duty,” MBIE says. “The [New Zealand] bill only clarifies what directors already can consider.

This may raise the likelihood of legal challenge, but the extent of the risk is difficult to quantify.”

Photo: Hagen Hopkins / Stringer / Getty Images

And, as Bell Gully puts it in a submission opposing the bill, “There is no New Zealand authority that holds that directors cannot consider wider stakeholder interests as part of their consideration of the best interests of the company.”

MBIE took no part in drafting the bill as private members’ bills are not part of its remit.

Nevertheless, it produced a report on the submissions, saying it did not support the bill and recommended it did not proceed – a recommendation, MBIE said, which was based on its understanding of the law and its consideration of other submissions made to the select committee.

MBIE says the bill’s problems include: ■ the law already allows for directors to consider ESG factors; ■ there is no clear problem that needs to be solved; ■ the bill would not change the law; ■ the wording will create uncertainty; ■ social reform should be made through targeted legislation; ■ negative effects on the economy; ■ the bill could lead to litigation against directors for not taking these matters into account; ■ as worded, the bill has no teeth as it provides no mechanism for holding directors to account; ■ a member’s bill is not an appropriate process for this type of change; ■ the proposed change does not align with Australian company law; ■ there are inconsistences with recent case law around directors’ duties; and ■ there is uncertainty as to whether the mandatory approach taken by the UK has been effective in changing directors’ behaviour.

“We believe that the bill as introduced could have unintended consequences. It could confuse directors about their responsibilities by listing specific ESG factors and giving the impression that these factors should be given more weight than others,” MBIE said.

“The reference to the principles of Te Tiriti o Waitangi could be an additional source of confusion, because the relationship between the Crown and Māori is governed by Te Tiriti, and this relationship does not typically include other individuals or private entities.”

Not surprisingly, those supporting the bill have a different view.

The say: ■ it is important for directors to be able to consider factors beyond corporate profits; ■ more action is needed in relation to the environment and

welcome; and ■ the bill is a step in the right direction but does not go far enough because it does not require directors to consider ESG factors.

Superfluous The bill is likely to come before the House for its second reading in the next few weeks.

National’s shadow Minister for Commerce and Consumer Affairs, Andrew Bayly, says the legislation simply isn’t necessary.

The National Party agrees with NZLS, Bayly says, which “strongly cautioned against ad-hoc changes to the directors’ duties regime”.

“Whilst we agree that there is benefit in corporate leaders taking into account ESG factors, we note that directors already have existing obligations under their fiduciary responsibilities…

If you have a customer-facing business and you’re not talking about social responsibility or environmental responsibility, you’re actually putting your own business at risk in many instances. So many directors already take those things into account and at the moment there’s nothing to preclude a director from having regard to those specific factors.” ■

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CONSTITUTIONAL LAW/OPINION

The treaty and the rule of law: a primer for Kieran McAnulty Because of our unique connection to the law and our fundamental obligation to uphold the rule of law, lawyers should be shouting the loudest in protest at this gross distortion of New Zealand’s constitution

elected representatives.

It is very simple to show McAnulty’s claim to be wrong. You don’t have to be a lawyer to see it, but because of our unique connection to the law and our fundamental obligation to uphold the rule of law, lawyers should be shouting the loudest in protest at this gross distortion of New Zealand’s constitution.

Principle of contradiction Photo: Hagen Hopkins / Stringer / Getty Images

Gary Judd KC

Kieran McAnulty

McAnulty’s claim is false, and a tawdry excuse for giving power and control to unelected people chosen because of the race they were born with

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In June 2021, Local Government Minister Nanaia Mahuta brought her three waters proposals to Cabinet which authorised her to prepare legislation to implement them.

After the papers and associated Cabinet decisions were publicly released, it quickly becoming obvious to all who considered them that the proposals were plainly contrary to democratic principles. But the government did not acknowledge this until 23 April 2023 when, interviewed by Jack Tame, new local government minister Kieran McAnulty finally did so.

McAnulty justified his position by asserting that departure from democratic principles is required by the Treaty of Waitangi.

This is an extraordinarily far-reaching and dangerous claim and, as I shall show, it is incorrect.

His statements were specifically directed at the three waters legislation, but his claim is potentially applicable to any part of the political, economic, social, cultural or any other field of public life in New Zealand.

This is manifested by the breadth of the treaty claims which keep expanding in scope, and by the government’s legislating and proposing anti-democratic structures in health, resource management, local government and so forth, as well as the three waters.

McAnulty’s claim has been submerged by a plethora of other political scandals, but it must become top of mind because it portends a constitutional shift to a form of governance where ancestry confers the right to rule over others, as it did in England until bloody struggles eventually succeeded in asserting the people’s right to choose their rulers.

Charles III’s kingship is the emaciated vestige of that discredited and superseded system. Because of what was put in place by the ‘glorious revolution’ of 1688-1689, he has no political power and must do what he is told by the people’s

The minister’s claim is wrong because it violates the principle of contradiction. The principle was first expressed by Aristotle: “A thing cannot at the same time be and not be”; “the same attribute cannot at the same time belong and not belong to the same subject in the same respect.” The positive affirmation of something necessarily excludes its negation.

The treaty cannot both bring political equality to New Zealand (as it did by bringing the rule of law) and at the same time deny it by requiring that some New Zealanders, distinguished from others only by their ancestry, be given special rights and powers. The treaty cannot both affirm the rule of law and at the same time affirm negation of its basis.

By political equality I mean equality of political power. That means no one is born with the right to exercise power over others; all are born with the same rights in that regard.

When we turn our minds to the rule of law, we understand that political equality is at its heart. That being so, it is obvious that departure from democratic principles is not required by the Treaty of Waitangi, for democracy is based on that same political equality. We could just stop there, but further considerations drive home the point.

New Zealand did not get democracy with the signing of the treaty. It became a British colony, governed by Britain, with day-to-day government in the hands of a governor appointed by the British government. Britain had to give us the right to govern ourselves and to do so through representatives chosen by the people through periodic elections. That was a gradual process not fully completed until the mid-20th century.

What we did get with the treaty, though, is the rule of law. As former Chief Justice, Dame Sian Elias pointed out in 2015: The rule of law can be imperceptibly eroded unthinkingly if it

Continued on page 09

May 19, 2023 Issue 15

When McAnulty said that departure from democratic principles is required by the Treaty of Waitangi, he was claiming that the treaty brought political inequality when it actually brought the opposite

NEW EDITION

Continued from page 10 is not valued by our society….The challenges for judging and for the rule of law in New Zealand in the 21st century are to ensure that access to independent courts and the rule of law continue to be valued as constitutional fundamentals by the community. That requires understanding of our constitutional and legal history. This is a year of anniversaries of importance to law. It is 175 years since the signing of the Treaty of Waitangi, by which constitutional government was established and the enacted and common law of England, arrived on these shores so far as appropriate to the circumstances of New Zealand (an important qualification).

With the Treaty, Magna Carta, 800 years old entered New Zealand law. These are points of reference we need to talk more about. It is not fanciful to see in Magna Carta ideas central to the rule of law and which have influenced our constitutional history ever since.

The treaty brought government by Britain to New Zealand and set the stage for the establishment of independent government which started to develop a few years later.

The important point is that the rule of law arrived with the treaty. In the same address to Otago University, Judgery and the rule of law, Dame Sian noted that the rule of law is one of the twin principles of New Zealand’s constitution. (The other is the sovereignty of Parliament.)

The most important aspect of the rule of law from a constitutional perspective is that it rests on the principle of political equality.

Political equality rejects the idea that some are born to rule.

As John Locke wrote at the time of the glorious revolution, “all the power and jurisdiction [of the people] is reciprocal, no one having more than another” except to the extent the community grants to some the power to make laws and to administer the

laws as guardians of the law.

Political equality is the foundation of the rule of law’s requirements that the law must rule and do so by rules which are the same for all, with the right to impose such rules belonging to the community which exercises it through the representatives it chooses (and replaces), according to settled constitutional law.

The treaty does not justify departure from the rule of law. The very idea would embody a contradiction and be absurd. It would be ridiculous to claim that the “solemn compact” which brought the rule of law to these shores also required rejection of the equality principle lying at its heart.

If the claim were correct, the treaty would both bring the rule here and by the very same document deprive it of its vital content and force.

The rule of law and democracy go hand in hand because political equality is the source of both. Over 2000 years ago in Athens, the birthplace of democracy, Aristotle said “those who are by nature equals must have the same natural right and worth [so] it is thought to be just that among equals everyone be ruled as well as rule, and therefore that any should have their turn. We thus arrive at law; for an order of succession implies law.”

Then follow the words which are frequently quoted as indicating the origin of the concept, “And the rule of the law, it is argued, is preferable to that of any individual.” Where individuals must govern, they must be “only guardians and ministers of the law”.

When the treaty brought the rule of law to New Zealand, it brought the principle of political equality. It did not bring political inequality. When McAnulty said that departure from democratic principles is required by the Treaty of Waitangi, he was claiming that the treaty brought political inequality when it actually brought the opposite.

That’s why McAnulty’s claim is false, and a tawdry excuse for giving power and control to unelected people chosen because of the race they were born with. ■

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Topics covered include: thresholds for means-testing; deprivation and gifting; notional income; applications by couples and singles, and the effect of death, divorce or separation, and new relationships; how far back gifting limits go; life interests; trust reversals; residential care loans; how debts are treated

for means-testing purposes; post-application windfalls or inheritances.

Price for ADLS members $72 plus GST* Price for non-members $80 plus GST* (* + Postage and packaging) To purchase this book, please visit adls.org.nz; alternatively, contact the ADLS bookstore by phone: (09) 306 5740, fax: (09) 306 5741 or email: thestore@adls.org.nz.

09

LITIGATION/CLASS ACTIONS

High-profile litigator urges govt to fix class action law From where I am sitting, I can see about 90% of the courts’ time is involved in pretrial procedural and ancillary matters that have almost nothing to do with the main dispute

Sally Lindsay Adina Thorn, the lawyer behind one of New Zealand’s biggest class actions, says the Law Commission’s year-old report recommending new class actions legislation appears to be gathering dust on a shelf in the Justice Minister’s office.

Thorn was a member of the commission’s expert advisory group looking at class actions and funding. At the same time, she was acting for more than 365 plaintiffs with about 1,000 leaky homes and commercial buildings who were seeking about $250 million compensation in a funded class action against the James Hardie Group of companies.

London-based Harbour Litigation Funding, the biggest privately-owned global litigation funder, pulled the plug mid-trial in August 2021 and settled with James Hardie for $1.25m – money that was being held by the court.

Although extremely disappointed and not able to communicate why Harbour withdrew its support, Thorn says the decision to settle was not made with the home owners, who opposed it.

She says the settlement should not have been permitted and if New Zealand had a code around litigation funding similar to that of Australia, it probably would not have happened.

“In most funding arrangements, the funder cannot pull out after the trial starts. Otherwise the plaintiffs are left with nothing as they cannot get another funder,” Thorn says.

She is surprised that there appears to be no action on the Law Commission’s 500-page report with 121 recommendations to improve access to justice and efficiency in funded litigations through new High Court rules and amendments to the Lawyers and Conveyancers Act 2006.

But there’s no relief in sight – at least, not in the short-tomedium term.

Justice Minister Kiri Allan says the government supports the recommendations but because of the technical nature of the issues and the need for legislative reform, advancing them will take time.

“Resourcing this work will be balanced against other government priorities.”

Opening the gates Third-party litigation funding is permitted in New Zealand.

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Although the common-law torts of maintenance (assisting a party in litigation without justification) and champerty (assisting in consideration of a share of the proceeds of the litigation) have not technically been abolished, the courts over the past few years have gradually accepted third-party funding.

But the lack of a definitive law around litigation funding and funders limits the number of class actions taken in New Zealand. This needs to be addressed, Thorn says.

A contentious issue is the level of control funders have over a class action. Thorn says it is not like defamation where, if the plaintiff is insured, the insurance company usually calls the shots. In class actions, the plaintiffs have the most say.

If the law around litigation funding were made more certain, Thorn says it would open the gates to more class actions to deal with “plenty of bad behaviour” she is aware of in the property and commercial sectors.

Economic and knowledge disparity The justice system assumes everybody is in a position to fight a court battle, which is “totally wrong”, Thorn says.

“We need to have a means for people to bring these disputes to court and one of those means is litigation funding. But the lack of law around it is a real disadvantage to plaintiffs.

“It means the defendants can keep raising issues with the funding in the courts, which is a long way from getting on with the dispute in front of them. Defendants call that ‘engaging in satellite litigation’. I call it a total waste of time and resources.”

Thorn says this satellite litigation is concerning. “From where I am sitting, I can see about 90% of the courts’ time is involved in pre-trial procedural and ancillary matters that have almost nothing to do with the main dispute.

“In Australia, where they are far more advanced with litigation funding, there is far less of it – and the cases seem to be going through at double the speed.”

There is no question that class action funding is needed, Thorn says, “but it is difficult because there is such an economic disparity between plaintiffs and the funder and usually a knowledge disparity as well”.

Equally, she acknowledges litigation funding is a hard and

Continued on page 11

May 19, 2023 Issue 15

Continued from page 10

difficult business.

“Obviously funders want to protect their investment.

Consumers want to understand the rules of the road, but at the moment the real lack of clarity is pro-defendant or anti-plaintiff.”

Adina Thorn

Separate court

It is a disgrace to New Zealand’s legal system that these cases involve so many satellite actions brought by defendants’ lawyers

Thorn says to make the “slow wind” through the courts of funded class actions easier, the introduction of a separate court, or a division or list of the existing court, would streamline matters.

She envisages something similar to the earthquake and leaky homes lists.

“Those lists worked. The rules of the road were clearer, the judges were all over it and there are many reasons why that process is better for everyone.

“We see the same types of issues in different courts now with different judges and it is far more efficient if these cases are in one list. Then these issues can be resolved once and much more quickly.

“The judiciary could introduce a list now. It does not need Parliament to legislate, which could take years or never happen.

Those specialist lists work. They would work for class actions, whether funded or not.”

New Zealand judges are also receptive to funded class actions, Thorn says. “The judges are helpful. It is just unfortunate they are dealing with similar issues in different courts or on different days.”

The James Hardie case was an example of that.

“It is a disgrace to New Zealand’s legal system that these cases involve so many satellite actions brought by defendants’ lawyers.”

Some of the James Hardie plaintiffs were elderly and just wanted their day in court, but died during the protracted litigation.

Effectively, she says, these people are being denied access to the courts because it is too expensive to launch a case on their own and the cost of expert witnesses can be “astronomical”.

“It is a really unfair world, but litigation is insanely complex and risky for those who are paying for it,” she says.

Most funded cases rely on experts and they are a significant cost component of the class action – many in the tens of thousands of dollars and some even in the hundreds of thousands.

On top of that, if the plaintiffs win a case, the funder usually takes 30% to 40% of the amount awarded. If they lose, then the funder has to pay the defendants.

While the amount the funder takes seems excessive, Thorn says funders need deep pockets and a huge appetite for risk.

“There is a massive cost of capital here.”

Few funders Litigation funders in New Zealand are thin on the ground compared with other jurisdictions. The UK Association of Litigation Funders has 21 members with total assets of £2.2 billion. There are many more across Europe.

In Australia, only four litigation funders and two other companies obtained litigation funding licences when they were introduced in 2021. The licence was introduced by the government to curtail the number of class actions filed, but the changing mix of class actions gave law firms options that don’t require external funding.

Thorn says the Australian scheme makes sense. “I’ve heard few complaints about it. It is a step in the right direction.”

Suing the Crown One area of major tension Thorn sees is the ability to sue the Crown and government entities – for example, for improperly taking land, causing land to flood or any kind of negligence or nuisance.

A group of Kiwifruit growers took a $450m funded class action against the Crown for what the growers alleged was actionable negligence in allowing the disease Psa into the country. The Crown settled for $40m, with $15m coming from its insurers.

Thorn asks whether the government really wants to allow these class actions to continue, especially when the defendant is the Crown. “My view is the reason this issue is habitual is because the government is not dealing with it as recommended in the Law Commission’s report.

Recommendations The Law Commission made 121 recommendations for reforming class actions and litigation funding.

Key recommendations include: ■ a new statute called the Class Actions Act as the principal source of law on class actions; ■ a requirement that cases require court approval to proceed as a class action, a process known as certification; ■ that both opt-in and opt-out class actions be permitted. An opt-in class action requires individuals to actively sign up to the class action to be a class member. In an opt-out class action, persons falling within the class definition are part of the class action unless they opt out by the required date; ■ additional court oversight to ensure the interests of class members are protected. For example, a settlement of a class action should be binding only if approved by the court; ■ that in funded class actions, a litigation funding agreement be enforceable only by a funder if it has been approved by the court. The court should not approve the litigation funding agreement unless it is satisfied the agreement is fair and reasonable and the representative plaintiff has received independent legal advice; and ■ a public class action fund which can provide funding for plaintiffs. ■ 11

COVID-19

Chief ombudsman takes swing at MBIE over seafarers’ lack of MIQ access I believe MBIE’s advice could have better suggested options to accommodate individual circumstances and put the fundamental human right of everyone to come home at the centre of its decision-making

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Rod Vaughan Chief Ombudsman Peter Boshier has taken a swipe at MBIE, and by extension the government, for denying New Zealand seafarers adequate access to the MIQ booking system during the covid-19 pandemic.

Hundreds of seafarers were stranded in countries all over the world, many for more than six months at a time, causing them and their families considerable distress.

In a recently-released report, Boshier says MBIE acted unreasonably in the advice it provided to the then Minister for Covid-19 Response Chris Hipkins because it: ■ did not sufficiently address the need for international cooperation for global trade, relevant International Maritime Organisation (IMO) and United Nations General Assembly resolutions, and the designation of seafarers as key workers; ■ did not specifically consider the New Zealand Bill of Rights Act 1990 implications for offshore seafarers as a particular class of New Zealanders; ■ did not sufficiently address the limitations of the emergency allocation process as a solution for offshore seafarers; and ■ drew an inappropriate comparison to other fly-in, fly-out workers.

Speaking to LawNews, master mariner Kevin Judkins described the findings as “absolutely damning against both MBIE and the advice given to it by Maritime New Zealand.

“Maritime New Zealand proved itself to be leaderless, rudderless and totally inept but at first glance appear to have largely escaped unscathed. I fully intend to ask for the resignation of the Director of Maritime New Zealand.”

Marine engineer Alan Pearman is also scathing of MBIE and Maritime New Zealand.

“The recently-released report from the Office of the Ombudsman is for me a bitter-sweet victory. How could MBIE, Maritime New Zealand and the minister get it so wrong, especially Maritime New Zealand which enforce the provisions of the Maritime Labour Convention (MLC) on behalf of the ILO.” The MLC, established in 2006, oversees the safety, security and welfare of seafarers “To blatantly ignore a request from the International Maritime Organisation, to which New Zealand is a signatory, shows systemic and institutional tunnel vision in the New Zealand

government. Thank goodness for people like Peter Boshier.”

Pearman says his experience of working outside New Zealand during the covid-19 pandemic and the “fiasco” of the MIQ lottery system left a lingering sour taste. It was “an inglorious end” to his 40-year career as a marine engineer, he said.

No exemptions LawNews first revealed the plight of stranded seafarers like Pearman in 2021.

As reported at the time, they came from diverse marine backgrounds: some working on passenger and cargo ships, others on offshore oil and gas support vessels, dive support craft, oil rigs, seismic survey vessels, subsea cable lay and repair ships, fishing vessels, hospital ships and superyachts.

The majority did not work overseas by choice as in most cases there were no equivalent jobs in New Zealand.

Pearman, who worked on construction vessels in the Australian and south east Asian oil and gas fields, was one such example. For nearly 40 years the Bay of Plenty resident enjoyed unrestricted repatriation back to New Zealand upon completion of his duties.

“The system worked well until 2021 when I found myself locked out of my home country and not even recognised as an essential worker,” he said.

“As a result of the New Zealand government ignoring its UN obligations, I have had less than four weeks at home in the past 16 months.”

During one overseas stranding, his wife was seriously injured in a car crash but despite her predicament he was not given an exemption to return to New Zealand on compassionate grounds.

“Shipping companies are very accommodating when a person needs repatriation on compassionate grounds but they struggle to understand the stance of the New Zealand government towards their seafarers,” he said at the time.

“I am saddened by the apparent lack of empathy in some of the decisions made by faceless bureaucrats. The MIQ lobby draw is ineffective and demeaning. Let’s hope it will soon be a thing of the past.”

Rubbing further salt into the wounds of seafarers like

Continued on page 13

May 19, 2023 Issue 15

Continued from page 12 Pearman and Judkins was the ease with which foreign seafarers were allowed to enter New Zealand during this period. Judkins was quick to point this out.

“The anomalous injustice of the current situation is that a foreign seafarer is able to enter New Zealand to join or disembark a vessel using the ‘maritime allocation’ corridor reserved for seafarers with MIQ but a New Zealand seafarer is denied similar access when signing off their vessel in a foreign port.

“Earlier this year [2021], MIQ created bunk space for 500 Russian and Ukrainian fishermen to enter the country en masse, thus proving that logistics are not an issue and, in turn, indicating that there are no practical reasons to not feed bunk space to returning New Zealand seafarers.”

Indefensible Judkins and Pearman were not alone in condemning the government’s treatment of New Zealand seafarers stranded overseas by the MIQ booking system It was also slammed as legally and morally indefensible by a leading academic lawyer who specialises in the law of the sea.

Dr Sofia Galani, Assistant Professor of Public International Law at Panteion University in Greece, said the government’s refusal to allocate a small number of rooms in MIQ for seafarers trying to come home raised concerns under international human rights law as it severely restricted their rights to enter their own country.

“By requiring New Zealand seafarers to enter a lottery for a place in the MIQ queue like other travellers who wish to enter the country, New Zealand has essentially failed to properly implement IMO Resolution MSC.473(ES.2).

“The vagaries of the shipping industry further disadvantage New Zealand seafarers compared to shore-based New Zealand nationals who wish to enter the country.

“For example, poor quality internet on board vessels causes the MIQ site to time out, seafarers often do not know which port or which date they are due to pay off and crew managers do not issue flight tickets until the day before a seafarer is due off the vessel or rig, meaning it is impossible to confirm a booked MIQ spot within the required 48-hour window.

“This has meant for hundreds of them that they are either stranded abroad unable to return home or are stuck home unable to take up employment opportunities out of fear that they will not be able to be repatriated once their employment contract ends.”

Galani said the government’s designation of seafarers as “key workers” was also meaningless and wholly undermined the aim of the IMO resolution.

“This practice also raises concerns under international human rights law as it severely restricts the right of New Zealand seafarers to enter their own country.

Inadequate advice Meanwhile, in his recently released report on the matter, Boshier says there are legitimate concerns about the advice given by MBIE to the Minister of Covid-19 Response Chris Hipkins about

the MIQ allocation system.

“In my view, MBIE acted unreasonably in providing this advice for a number of reasons.

“The fact offshore seafarers couldn’t access online vouchers on the same, equal basis as others had implications for their rights under the Bill of Rights Act, in particular the right to enter New Zealand.”

Boshier says MBIE didn’t make those implications clear to the minister. “I would have expected ministers to be advised about any specific Bill of Rights implications arising from a decision they are being asked to make.

“MBIE also failed to sufficiently address in its advice, the need for international co-operation on global trade, relevant resolutions made by the International Maritime Organisation and the United Nations General Assembly and the designation of seafarers as key workers. “An agency is expected to present all relevant information for consideration and not rely on a minister to request further information.

“In addition, the ministry did not sufficiently address the limitations of the offline emergency allocation process as a solution for offshore seafarers and drew an inappropriate comparison to other fly in, fly out workers.

“Offshore seafarers were in a particularly difficult position owing to the nature of their work. People who flew in and out for land-based work did not routinely need a short-notice booking in the same way that offshore seafarers did.”

Boshier says he accepts that implementing a more individualised allocation system would have been difficult and costly. “But I believe MBIE’s advice could have better suggested options to accommodate individual circumstances and put the fundamental human right of everyone to come home at the centre of its decision-making.

“It is vitally important that the decisions made and advice provided by our government agencies, especially where they involve unprecedented circumstances, always put the interests of all New Zealanders at heart.”

Boshier also recommended that MBIE apologises to the two seafarers whose complaints led to his report.

“In my view, common sense, consideration of the seafarers’ unique circumstances and a sense of humanity were needed in MBIE’s decision-making and subsequent advice around how the Managed Isolation Allocation System affected these men,” he said. “This had a direct and personal effect on both of the men at the centre of these complaints.”

Chief Executive of MBIE, Carolyn Tremain, has since apologised to the complainants for “the distress this matter has caused you and your colleagues.

“I acknowledge that many people found securing a space in MIQ very challenging and I accept that it was even more difficult in your circumstances due to the nature of seafaring work.

“Significant improvements have already been made to MIQ and related allocation systems. If there is a need to use the MIQ system again, the ombudsman has recommended MBIE should provide fresh advice to the minister on offshore seafarers.

“I have accepted this recommendation.” ■

Rubbing further salt into the wounds was the ease with which foreign seafarers were allowed to enter New Zealand during this period

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FEATURED CPD

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May 19, 2023 Issue 15

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Criminal and immigration law: where two worlds collide

Webinar 2 CPD hours Tuesday 30 May 4pm – 6pm Price from $140 + GST Presenters Jack Cheng; Elly Fleming; Yvanca Clarisse and Matt Stansfield

cpd@adls.org.nz

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adls.org.nz

May 19, 2023 Issue 15

WILL INQUIRIES Please refer to deeds clerk. Please check your records and advise ADLS if you hold a will or testamentary disposition for any of the following people. If you do not reply within three weeks it will be assumed you do not hold or have never held such a document.

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