LawNews – Issue 33

THIS WEEK’S ARTICLES

Issue 33 25 Sep 2020

Why tourism will struggle without pandemic insurance P1

What will climatechange reporting mean for business?

P3

Construction contracts: getting payment schedules right p7

LawNews adls.org.nz

INSURANCE LAW/COVID-19

Covid-19: does travel insurance have a future?

By Diana Clement

New Zealand’s $27.5 billion tourism sector – our biggest export industry – has been brought to the brink of collapse as travel insurers and their lawyers try to rewrite existing pandemic exclusion clauses in a bid to restore trust with consumers.

Getting it right matters. Tourism makes a direct $16.2 billion (5.8%) contribution to our GDP, with a further $11.2b (4% of GDP) of indirect value being added by businesses supporting the tourism industry. Total annual tourism spending is $40.9b, of which $17.2b comes from international travellers.

As a result, travel insurance is about to undergo a qantam leap. But insurers may need to throw out the rulebook that says pandemics are a “known event” and therefore can’t be covered. This current re-writing of the rules is simply to make them “clearer”. The more cynical view, however, is that they’re trying to make it even harder for customers to claim next time.

It’s a Catch 22. Tourism cannot recover until tourists resume travelling. But that won’t happen unless insurers can buy insurance to cover the real risks they face. Meanwhile travel insurers’ cashflow has dwindled to almost nil, but many are too fearful to offer cover, or are stuck in an old pattern that is rapidly looking outdated.

Sorry mate, it’s a pandemic Common exclusions used to deny claims have been epidemic/pandemic clauses, government intervention and a disinclination to travel. As one

© Anna Om | Dreamstime.com

Some say the market, particularly for international travel, is unlikely to recover fully unless a solution is found. Thousands of Kiwis lost some or all of their holiday bookings thanks to Covid-19 and are now seriously out of pocket after insurers denied claims, even on policies bought in good faith before the WHO declared Covid-19 a global pandemic on 11 March.

Without pandemic insurance, people will be unlikely to book overseas travel

market-watcher puts it, insurers are grasping for any reasons to decline the claim.

Disinclination to travel cannot be used as the basis of a claim, says Andrew Horne, a partner at MinterEllisonRuddWatts. “You have travel insurance but you decide you don’t want to take that trip to Wuhan and its [wet] market because that doesn’t look like a great idea any more.

Insurers might argue there is nothing actually prohibiting your trip.”

If there is a specific epidemic or pandemic exclusion, declining a claim is straightforward. With many policies, the exclusion goes as far as a “likely” epidemic/pandemic or the “threat” of one.

There are a few subtleties, says Susan Taylor, a lawyer and the chief executive of Financial Servcies Complaints Ltd (FSCL), one of two dispute resolution services for travel insurance.

Continued on page 2

When the go-to insurer for many Kiwis, Southern Cross Travel Insurance, resumed domestic cover in September, Covid-19 cover was excluded. That ruled out the very things Kiwis are currently most worried about when booking travel

INSURANCE LAW/COVID-19

Covid-19: does travel insurance have a future?

Continued from page 1 In the absence of a pandemic clause, some insurers relied on the government intervention clause. “[One complainant] thought the policy was misleading to a consumer who might think that, in the absence of a specific pandemic exclusion, they would have cover for any loss arising from a pandemic,” Taylor says.

“Sorry mate, it’s a pandemic and we’re going to find a way out of your claim” doesn’t always work.

In some cases, the government interference exclusion has been invoked to decline claims when, in fact, the travel was abandoned because an airline made a commercial decision to cancel flights after customer demand collapsed.

Both FSCL and the Insurance & Financial Services Ombudsman scheme (IFSO) found in favour of some complainants.

Ombudsman and barrister Karen Stevens cites the case of “Maree” who changed her flights home when the Malaysian government announced it was about to close its borders due to Covid-19. Maree’s original flight ended up being cancelled.

The insurer argued that the border closure had indirectly interfered with its customer’s travel plans.

It also relied on a clause excluding claims for “any change of plans or disinclination to travel”, saying it had been Maree’s decision to return to New Zealand earlier than planned.

“We reviewed the wording of both exclusion clauses and applied normal legal principles of contractual interpretation,” says Stevens. “In Maree’s case, the Malaysian government’s decision to close its borders would not have stopped her from getting home as she was a New Zealander who was free to leave Malaysia.

“We felt that Maree’s change of plan was not a proximate cause in its own right, but was a consequence of the increasing risk of Covid-19 and the resulting travel disruption.”

Another issue arose where airlines offered credits instead of a refund, Taylor says. “The insurer would argue that is not a loss [as] they have a credit for future travel.” As some travellers have discovered, they might never be able to use the credit. “We have said the credit is not the same as a refund.” If, however, the insurance paid out, the person must forfeit his or her right to a credit. Otherwise the

Andrew Horne

Susan Taylor

Countries dependent on tourism are looking long and hard at how to get travellers and tourists moving again. Insurance innovation is one piece of that puzzle

only in 2020 have these clauses been put to the test. Policies that lacked pandemic exclusions before the start of this year almost certainly have them now.

traveller would be unjustly enriched.

Rescheduled travel proved problematic in some circumstances. One case investigated by the IFSO involved a man who took a credit last year for a cruise, rescheduling for this year. Unfortunately, he had used credit card insurance that covered him for the original cruise dates but didn’t automatically transfer to the new booking.

Rapid rewrite Travel insurance isn’t the only product in the gun.

Insurers and their lawyers the world over are also rewriting pandemic and related clauses in business interruption and other policies.

They had a dummy run with SARS in 2003, but

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2

Stevens says it’s only when the legal wording is tested that you can determine if it works. There were similar problems with household policies in the aftermath of the Christchurch earthquakes.

The rewriting began, says Horne, with insurance companies redrafting policies to avoid any possible lack of clarity on what constitutes an epidemic or pandemic and when the exclusion is triggged.

While some policies refer to ‘pandemic’, there is no real need to, he says. The word ‘epidemic’ suffices. “If you have a pandemic, you also have an epidemic,” he says. Words such as ‘epidemic’ and ‘pandemic’ have had no widely accepted legal definition until now, and these definitions are slowly creeping into policies.

The pandemic has also shone a light on the subtle differences between policies. “Allianz (for example) had a policy that excluded losses directly or indirectly from an epidemic,” says Horne. “I have seen policies that are triggered by notifiable disease.” Or they might refer to the broader infectious diseases.

Since Covid-19 broke out, some insurers have Continued on page 4

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LawNews Issue 33 | 25 Sep 2020

ENVIRONMENAL LAW

Real change on the cards with climate-risk reporting

By Simon Watt & Kate Redgewell

Through Climate Change Minister James Shaw, the government has announced a policy to introduce mandatory climate-risk reporting for the financial sector in New Zealand from 2023.

I​mplementation would rely on support of the n​​ew government and would be enacted through amendments to the Financial Markets Conduct Act 2013.

In conjunction with New Zealand’s net zero carbon target and first tranche of emissions budgets arising from the recent amendments to the Climate Change Response Act 2002, which focus on the mitigation and adaptation journey for New Zealand as a whole, this policy (if implemented by a new government) would drive real change.

Climate-risk reporting and disclosure aims to promote more informed business, investment, credit and insurance underwriting decisions. The financial sector is broadly defined in the proposed policy to capture all registered banks, credit unions, building societies, managers of investment schemes, all equity and debt issuers ​listed on NZX as well as licensed insurers and Crown financial institutions, each with total assets of more than $1 billion.

This covers 90% of assets under management in New Zealand within the disclosure system.

Requiring this group of entities to consider and report on climate-related risks promotes better long-term, sustainable, strategic business and investment decisions to mitigate against climate risks and, importantly, take up climate opportunities. It also enables stakeholders to better understand carbon-related assets, where such assets are concentrated and the exposure of those assets to climate-related risks.

Expected to follow the TCFD Taskforce Climate

Simon Watt

Kate Redgewell

This will be a relatively big shift for a number of organisations and it will take several years and a fundamental, conscious shift to embed

In practice, this means ​these entities would be ensuring their governance, strategies and operations are structured so they not only know but can respond to climate-related risks and opportunities.

Related Financial Disclosures Framework, the financial sector entities would be required to disclose on climate-related risks and opportunities associated with their organisation’s governance, strategy and risk management, and on the metrics and targets they are using to monitor and assess climate-related risks and opportunities.

While the framework is set up as a disclosure regime, as the TCFD Taskforce identified it is driving companies to understand the potential financial impact of climate-related risks and opportunities, and to consider longer-term strategies and the most efficient allocation of capital in light of the potential impacts of climate change.

This will be a relatively big shift for a number of organisations and it will take several years and a fundamental, conscious shift to embed.

Many organisations have already started this journey, appreciating the longer-term value for the organisation (both financially and reputationally), their stakeholders and the communities in which they operate.

While New Zealand would be the first country to introduce mandatory climate-related risk reporting for the financial sector, a number of other countries and jurisdictions are also working towards some form of climate-risk reporting for companies. This includes Australia, Canada, the United Kingdom, France, Japan and the European Union.

Simon Watt is a partner and Kate Redgewell a consultant at Bell Gully For more information, read here

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Continued from pages 1, 2 chosen to add extras to their existing lists of excluded events. “If you had only ‘epidemic’, you might extend that to include ‘infectious disease’ because what constitutes infectious disease is clearer than an epidemic.”

One issue that lawyers began to consider earlier this year was whether a disease qualified as an epidemic for insurance purposes even if it wasn’t currently an epidemic in New Zealand.

“Most lawyers [now] think it’s an epidemic if it’s an epidemic anywhere. It doesn’t have to be an epidemic in any particular place.”

“Another issue insurers have had to grapple with is whether when there are notifiable disease clauses, was the insured person covered before the disease was notified. I would expect insurers to tidy up any clauses that talk about notifiable diseases.”

Known risk Does insurance need a new paradigm for known risk?

Insurers’ default position is that Covid-19 is a known event and therefore can’t be covered. The reality is that only a small percentage of customers would need to claim, in the same way as only a few insured travellers every year will suffer from a serious event like a heart attack and end up in ICU. Likewise, there is an actuarial risk that a small percentage of travellers might catch Covid-19 and, of those, 1% to 2% might end up in hospital overseas. Even fewer will be in an ICU. AUT law lecturer Christopher Whitehead says the point of insurance is to pay a benefit if an uncertain event actually happens. “So if the customer catches Covid, that is uncertain. When [insurers] say ‘we can’t pay for this’, [what they really mean is] ‘we don’t want to’ or ‘if we do, it’s going to be too expensive’.”

Nice try Insurers are looking for ways to start selling policies again. But just because insurers issue new policies doesn’t mean they’ll be worth the paper they’re written on.

When the go-to insurer for many Kiwis, Southern Cross Travel Insurance (SCTI), resumed domestic cover in September, Covid-19 cover was excluded.

That ruled out the very things Kiwis are currently most worried about when booking travel: Covid-19related cancellation costs, curtailment, travel delay, missed connections and related additional expenses.

“The motivation to sell [junk insurance] could be simply a need to sell something rather than nothing,” Whitehead says, although not commenting directly or specifically about the SCTI policy. “To keep [companies] afloat. They are not products to serve an actual need.”

The customer isn’t always front and centre in the insurer’s mind, says Whitehead, who worked as inhouse counsel for insurance companies in France before becoming an academic. In the Nordic countries, the fair dealing concept of “Kulanse” means insurers go one step further than ex gratia 4

Karen Stevens

Christopher Whitehead

Most lawyers now think it’s an epidemic if it’s an epidemic anywhere. It doesn’t have to be an epidemic in any particular place

cover a “known event”. A change in thinking might well be forced upon them by markets and/or governments.

and as a result are held in high regard by the public.

Whitehead questions the oft-cited doctrine that people need to read the policy and ensure it meets their needs. “I don’t know how anybody could know what their needs are in advance,” he says.

“Comparing two policies is almost impossible. They can be very similar but you can write a whole thesis on how they are different.”

Likewise, travellers didn’t understand the government intervention clauses, says Stevens.

“I don’t know that many people would have anticipated something like that happening. Even if they had read the policy, they wouldn’t have understood what it meant.”

Whitehead adds that there is a failure by insurers to understand that customers don’t want the exclusion to be there in the first place. “They want their insurer to be there to help them when they need it.”

He says the issue is a lack of imagination by the insurers. “At the very least, the insurance industry should ask ‘can we actually do this?’ Do we think it’s important enough to stop doing what we’re used to doing and do things differently?’ That’s what innovation is.”

Innovation Countries dependent on tourism, tourism providers, economists, politicians and many more are looking long and hard at how to get travellers and tourists moving again. Insurance innovation is one piece of that puzzle.

Traditionally, insurers have argued that they can’t

Solutions are already starting to emerge. Emirates, for example, includes Covid-19 insurance in its ticket prices. Are Covid-19 and future epidemics/ pandemics the bogeymen they think?

Stevens says: “Insurers are thinking ‘can I offer something that will make sense?’ They have to work out a new way of earning income.”

LawNews posed a series of questions to the Insurance Council of New Zealand (ICNZ). We wanted to know why travellers should trust insurers, given the industry’s refusal to cover a large chunk of Covid-19-related claims. And because insurers are in the business of assessing and pricing risk, how did they get it so wrong in this instance (the council has previously stated the industry could not afford to cover Covid-related claims)? We wanted to know why they thought future travellers would buy policies with pandemic or epidemic exclusions. And we asked why insurers refused to honour claims from travellers who bought their policies in good faith before the pandemic broke out.

The council did not answer most of the questions on our list. But in a written statement it said insurers in New Zealand were looking at options.

“We understand the industry is looking at developing new travel products with limited cover for Covid-related costs. It is likely that these products would only be available for travel to certain countries, depending on the level of risk.

For example, because of the extent of the outbreak it’s unlikely travel to the US would be covered for the foreseeable future.”

SCTI is considering pandemic insurance as an option. Chief executive Jo McCauley says the rarity of the pandemic means it’s challenging to accurately price cover in contrast to events that happen on a more frequent basis, such as losing your luggage.

Taylor says in her opinon Covid cover is a relatively Continued on page 5

LawNews Issue 33 | 25 Sep 2020

Continued from pages 1, 2, 4 low risk for insurers unless the policyholder has underlying conditions.

Public-private partnerships The words “public-private partnership” are starting to be heard around the concept of Covid-19 insurance cover for travel and, more importantly for many economies, business interruption insurance as well.

In New Zealand we have ACC and EQC, which show it’s possible. “It’s a question of political will [and] industry will,” Whitehead says. France, the UK and other countries have working models of such partnerships in other areas of insurance.

According to the Chiangrai Times, the Thai insurance regulator has approved Covid-19 travel insurance coverage for foreigners entering Thailand, including those from high-risk countries.

The policy offers cover of approximately NZ$150,000 for death and medical treatment related to Covid-19.

Horne points to the UK’s Pool Re, the governmentbacked provider of terrorism reinsurance, that was set up in the wake of 9/11 and has been extended to cyber terrorism. Likewise, he says, Australia has

Emirates includes Covid-19 insurance in its ticket prices the state-backed Australian Reinsurance Pool Corporation for terrorism.

“The actuaries over in the UK have been thinking about how they could usefully extend that [to travel insurance]. There is no reason you couldn’t do that. It has worked for terrorism insurance [and] it could work for travel insurance. It could be Pandemic Re.” Cover at a price Whitehead points out that in other countries such as Canada, insurers cover pandemics. “Provided that the event such as a pandemic is actually random or uncertain, then the technique of insurance can actually cover it,” he says.

“The question is how much is it going to cost. If a product is too expensive it might be difficult to market. It might be legitimate to say, ‘we don’t want to cover this’. But saying ‘we can’t’ – I’m not sure

that’s accurate.”

Taylor says the insurers will have to come up with something. “But it is really just a little bit early yet to gauge the risk on an ongoing basis. Maybe they won’t offer any Covid-19 cover to people aged over 65/70 [for example] – the age group much more at risk of complications.”

Where to from here?

Whitehead argues that the regulators should take a more hands-on approach in New Zealand, as is happening in countries such as the UK. For example, standard policy forms would prevent some of the ‘ordeal by insurance’ that many Kiwis suffered in the wake of the Christchurch earthquakes. Insurers would have to price in risks they weren’t normally inclined to cover. “The FMA could say ‘you need to have Covid cover in it’,” he says. “The government and insurers can work together to make it happen.” Insurers would then compete on price and service.

Another option posed by several interviewees was that the insurers use excesses and claim caps to offer Covid-19 cover.

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5

US SUPREME COURT

This is why the fight over the Supreme Court could make the US presidential election even nastier

By Jared Mondschein

As the two sides in US politics begin jockeying for position following the passing of Supreme Court Justice Ruth Bader Ginsburg, the similarities to the 2016 presidential election are striking.

That year, the fierce battle between Hillary Clinton and Donald Trump was made all the more contentious because the Republican-controlled Senate refused to allow a vote on President Barack Obama’s nominee to replace Supreme Court Justice Antonin Scalia, who had died in February.

Republican Senate Majority Leader Mitch McConnell pledged instead to “let the American people decide” the fate of the Supreme Court vacancy. His gambit worked. Trump won the election and successfully appointed a conservative justice to the court, some 14 months after Scalia’s death.

In recent days, however, McConnell is saying something altogether different. He’s made clear the Trump administration will decide who Ginsburg’s replacement will be – not the American people on election day.

And Trump has also already announced he will nominate a woman to the court, signalling his intention to move quickly to replace Ginsburg, with just over 40 days left before the vote.

The impending fight guarantees an already rancorous race will become even more acrimonious, with long-lasting implications.

Read more: Can Trump and McConnell get through the 4 steps to seat a Supreme Court justice in just 6 weeks?

Why the Supreme Court is so important As the third branch of government in the US, the Supreme Court not only keeps the powers of the other two branches (the legislative and executive) in check, it makes landmark decisions that can fundamentally transform the country, such as its 1954 ruling that the segregation of public schools was unconstitutional.

With the Supreme Court now featuring three judges appointed by Democratic presidents and five appointments by Republicans, the potential replacement of the progressive Ginsburg by a conservative judge could have generational implications for issues like affordable health care and access to abortion.

The Supreme Court has even settled contested presidential elections in the past, and with legal challenges to the 2020 election already mounting, there’s every likelihood this could happen again.

Why Republicans are passionate about conservative judges Unlike American politicians, who are subject to 6

the ballot box and term limits, federal judges, including Supreme Court justices, serve lifetime appointments.

The importance of such judicial appointments to Republicans cannot be understated. Few, if any, issues are more sacrosanct to them.

A key reason for this is that demographics are not on their side. The US is gradually becoming more urban and non-white – two trends that favour the Democratic Party more than Republicans.

This could explain why McConnell, whose memoir is called The Long Game, has prioritised the appointments of conservative judges to federal benches. These judges would certainly outlast the seemingly inevitable decline of conservative political power.

Before Trump was elected in 2016, many Republicans questioned just how conservative he would be. In response, the Trump campaign made the unusual move of releasing a list of its intended candidates for the Supreme Court.

The list of established conservatives effectively quelled conservative concerns about the Trump candidacy. Indeed, exit polling in 2016 indicated 26% of Trump voters said Supreme Court nominees were the single most important factor in their decision to vote for him, compared to 18% of Clinton voters.

With Trump’s victory reliant on a combined margin of just under 80,000 votes across Michigan, Pennsylvania and Wisconsin, even the smallest of advantages – in this case, those deciding who to vote for based on the Supreme Court – could have had outsized importance.

Read more: Ruth Bader Ginsburg helped shape the modern era of women’s rights – even before she went on the Supreme Court Why Democrats are more passionate than ever Some have posited a Supreme Court vacancy may help Trump’s chances in this year’s election because it shifts the focus of the race away from the president’s mismanagement of the coronavirus crisis and the poor economy.

But this ignores how much the issue could also energise the left. Indeed, in the hour after the announcement of Ginsburg’s passing, Democrats raised US$6.2 million on the Democratic digital fundraising platform ActBlue – more money in a single hour than the website had ever seen. This record was broken the next hour when donors gave over $100,000 a minute on average to total $6.3 million.

Altogether, some $42 million was raised in less than a day by Democratic online donors.

In 2016, many Republicans said they held their noses and voted for Trump because they were worried about the Supreme Court. Four years later,

unenthusiastic Democrats may do the same with Joe Biden.

‘Nothing is off the table’ Constitutionally, McConnell and Trump face few barriers in their mission to confirm a conservative justice to take Ginsburg’s place. Even a “blue wave” on election day – in which Democrats take control of the Senate and the White House – couldn’t stop them because the winners are not sworn into office until January. This would ostensibly provide enough time for the Republican-led Senate to confirm a Trump nominee.

There is no doubt what McConnell and Trump are planning to do. The more pertinent question is whether 49 Republicans in the Senate will go along with them.

Even the most anti-Trump Republicans – like Senator Mitt Romney, who voted to impeach Trump earlier this year – have supported the president’s previous picks for the Supreme Court. (Only one Republican chose not to support Brett Kavanaugh following his contentious confirmation hearing.)

Read more: Republicans have used a ‘law and order’ message to win elections before. This is why Trump could do it again But amid deep political polarisation, the likes of which America has not seen for generations, some Republicans are asking themselves about the longterm impact of rushing through a Supreme Court justice – most notably, what doors this opens for Democrats if they gain power.

Senate Minority Leader Chuck Schumer has said “nothing is off the table” if Republicans try to fill Ginsburg’s seat before the outcome of the election.

Some Democrats, already frustrated by Republicans having nominated 15 of the last 19 Supreme Court justices despite Republicans having lost the popular vote in six of the last seven presidential elections, have already pledged to make fundamental shifts to the country if they win the power to do so.

This could include giving statehood to Democratic-leaning Puerto Rico and Washington DC, thereby almost assuredly giving the Democrats four more senators. Some Democrats have also proposed expanding the Supreme Court to dilute the conservative votes, an idea Biden has explicitly criticised in the past.

Regardless of the electoral outcome, the death of Ginsburg only further raises the stakes and the likelihood of unrest in an already contentious election. There is no winner in such an outcome.

Jared Mondschein is a senior fellow and senior advisor, US Studies Centre, at the University of Sydney This piece first appeared in The Conversation and is republished with permission

LawNews Issue 33 | 25 Sep 2020

CONSTRUCTION LAW

How to get construction payment schedules right

By Janine Stewart, Riaia Donald & Olivia Higgins

Our team acted for Spotless and was successful in arguing that Fletcher’s payment schedule was invalid due to a failure to explain how all deductions from the amount Spotless claimed for payment were calculated and to provide reasoning for such deductions.

Spotless’ suspension of the subcontract works pursuant to the CCA was therefore valid and Fletcher was ordered to pay the amount originally claimed by Spotless.

Background Spotless was engaged as the mechanical services subcontractor to Fletcher for the Commercial Bay project in Auckland. Spotless issued Fletcher with its monthly payment claims in the usual way.

The claim in question totalled $2.067 million, plus gst. Fletcher responded with a payment schedule (payment schedule #44) that, due to numerous deductions and contra-charges (including delay costs and liquidated damages) totalling more than $6m, showed Spotless owing Fletcher $4,058m, plus gst.

Spotless considered payment schedule #44 failed to meet the requirements of the CCA on the basis that Fletcher did not indicate how all deductions were calculated and/or provide reasoning for all deductions. It was therefore invalid.

On the basis that no valid payment schedule was issued, the amount Spotless claimed in its payment claim became due for payment. When Fletcher did not make that payment when required by the subcontract, Spotless notified Fletcher that it was suspending performance of the subcontract works in accordance with its statutory remedy under s 24A(1) of the CCA. Fletcher disputed that its payment schedule was invalid and sought a declaration from the High Court that Spotless therefore had no right to suspend the works under the CCA. The central issue in dispute was the validity of payment schedule #44 under s 21(3) of the CCA. Section 21(3) of the Act provides that if the scheduled amount is less than the claimed amount, a valid payment schedule must indicate how the scheduled amount was calculated and the reasons for the difference in the amount.

© Kiwimate | Dreamstime.com

A recent High Court case between Spotless Facility Services (NZ) Ltd (Spotless) and the Fletcher Construction Company Ltd (Fletcher) serves as a timely reminder for parties issuing payment schedules to ensure they comply with the requirements of s 21 of the Construction Contracts Act 2002 (the CCA).

Janine Stewart

Clearing the way for Commercial Bay

The case Spotless claimed payment schedule #44 failed to meet the requirements of the Act on the basis that there were numerous instances where Fletcher did not indicate how all deductions were calculated and/or provide reasoning for all deductions.

arose and how they were calculated, given that the charges were so substantial that they offset Spotless’ payment claim in its entirety.

Calculation of deductions Payment schedule #44 contained several deductions from amounts claimed by Spotless for completing the subcontract works (including variations). The court rejected Spotless’ claim that payment schedule #44 did not contain sufficient explanation about how the deductions were calculated.

The court found it was common practice between the parties to calculate payments as a percentage of the work under each item, so it would have been readily apparent to anyone familiar with the payment process that the amounts scheduled represented percentage deductions, even if a calculator was required to ascertain the precise percentage.

Reasoning for deductions Spotless took particular objection to the lack of supporting details accompanying the large contra charges that had been issued for the first time under payment schedule #44 – largely made up of delay costs totalling just over $2.5m.

The only information accompanying these deductions was the statement “refer to Aconex correspondence for breakdown of claim”. No Aconex document numbers were provided.

Spotless submitted that this level of detail cut across the purpose of the CCA to facilitate cashflow pursuant to a straightforward claimpayment schedule process.

The court held there was clearly no common understanding between the parties with respect to these charges. Fletcher had an obligation to indicate “with some clarity” how the charges

In respect of payments claimed for the subcontract works, payment schedule #44 included several deductions without providing any reasoning. While it should have been clear to Spotless that each of these was calculated as percentage deductions, they totalled $210,000 – a significant sum.

The court held that the absence of reasons for the deduction of this significant sum meant this part of payment schedule #44 did not comply with s 21(3) of the CCA as there was no way for Spotless to assess why the deductions had been made.

The combined value of the above items was more than half the total value claimed by Fletcher.

Consequently, the court was satisfied that payment schedule #44, taken as a whole, did not substantially comply with s 21(3) of the CCA. It was ruled to be invalid and Fletcher’s application was subsequently dismissed.

Key takeaways For principals and head contractors, this case serves as a timely reminder to ensure their payment schedules comply with the requirements of the Act by indicating how a deduction was calculated (reference to percentage completion is likely to be sufficient) and, in particular, by providing sufficient information to indicate the reasons for each deduction.

This is especially important where the relevant deduction is significant. Common payment practices between the parties will be relevant in determining the level of detail and explanation required to be included in payment schedules.

Janine Stewart is a partner, and Riaia Donald and Olivia Higgins are senior associates at MinterEllisonRuddWatts The Fletcher Construction Company Limited v Spotless Facility Services (NZ) Limited [2020] NZHC 1942 7

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Learning outcomes: • • • • •

Learn about strategies to improve and maintain law firm profitability.

Gain insight on the key areas to focus on to ensure current and ongoing success.

Receive expert marketing strategies and practical tips to help your firm stand out.

Learn about reputation marketing and the relevance of specialisation.

Learn how to create and/or boost your firm’s brand.

Leading in Law – Leading Yourself (Workshop 2) A series of three half-day workshops, this distilled leadership development programme provides participants with a range of practical leadership insights, behaviours and tools. Framed in contemporary leadership bestpractice, where the primary role of a leader is to empower people to perform and grow, this is an engaging, sometimes challenging, leadership development experience.

Places are limited. Register now to avoid disappointment.

Learning outcomes: • • • •

Gain an understanding of contemporary, real-world leadership.

Experience authentic personal growth.

Build your knowledge of a range of leadership techniques and tools, and how to use them.

Garner practical leadership development actions to implement during and after the programme.

 Wed, 14 Oct 12pm – 1.15pm

 Presenters Sam Bassett, Director, Moore Markhams, Chartered Accountants, Auckland Sharn Piper, Attain NZ Limited – Sales, Media & Marketing Alexandra Donaghy, Marketing and Creative Director, Attain NZ Limited

 Workshop CPD 4 hrs

 Thu, 15 Oct 9am – 1.15pm

 Facilitator Tony Gardner, Managing Director, Archetype Leadership & Teams

Excellence in Legal Writing

 Workshop

Legal writing is the “bread and butter” of a lawyer’s practice. Writing well is harder than it looks, though. For years, we’ve been told that we should “write like Katherine Mansfield”. But how? This workshop will introduce you to three simple hacks to improve your written work: writing concretely; writing actively; and writing less.

It builds on the work of linguistic experts, notably Helen Sword and Steven Pinker. But never fear: the words “subordinate clause” will not feature. We’ll also deploy a fourth tool – “point-first advocacy” – to structure arguments for maximum impact. This learn-by-doing workshop will help you achieve writing excellence.

CPD 2 hrs

Learning outcomes: • • • •

This session will cover how legal professionals can set up their own styles and templates in Microsoft Word to ensure consistent formatting of Word documents. We will look at headings, numbering and shortcuts to apply formatting.

Learning outcomes: Create custom styles including headings and numbering.

Apply styles and numbering via shortcut keys.

Store your firm’s styles and brand colours in a Word template.

Use templates to create documents with the correct styles.

Save autotext, table formatting and other elements in a template.

Brief look at customising headers and footers, including page numbering.

Expert Evidence in Health and Safety Cases In Person | Live Stream Expert evidence often plays a vital role in a wide range of litigation. In health and safety litigation, experts are regularly briefed by both parties due to the complex workplace contexts from which these cases arise. This seminar will explore the role of experts and expert witnesses in health and safety cases. Who are “experts”? What are the admissibility principles for expert opinion evidence? Why call expert evidence? When do you object to expert evidence? This seminar will explore these fundamental advocacy questions in the health and safety context.

Learning outcomes: • •

•

•

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2pm – 4.15pm

 Facilitator Andrea Ewing, Crown Counsel, Crown Law Office (Criminal Team)

Learn the hallmarks of crisp legal writing – concrete, active, brief; Understand the common traps that frustrate clear writing; Practice editing to write well; Develop your skills in “point-first” advocacy.

Microsoft Word Templates and Styles for Lawyers

• • • • • •

 Tue, 20 Oct

At a high-level, learn about protections for directors and companies put in place in response to Covid-19.

Learn how to identify early warning signs, so that you can offer a broader “trusted advisor” service, rather than just addressing the immediate issue.

Be aware of the various corporate restructuring tools, including informal restructuring, business debt hibernation, creditors’ compromise, voluntary administration, receivership and liquidation.

Gain an understanding of when and why each tool is applicable, with reference to real examples.

 Webinar CPD 1 hr

 Wed, 21 Oct 12pm – 1pm

 Presenter Carlene O’Meagher

Livestream

 Seminar CPD 2 hrs

 Wed, 28 Oct 4pm – 6.15pm

 Presenter Fletcher Pilditch, Barrister, Richmond Chambers Angus Everett, Senior Solicitor, Legal Group, WorkSafe

 Chair Her Honour Judge Jelas

LawNews Issue 33 | 25 Sep 2020

CPD in Brief Getting to know IPONZ and its Services In this session on the Intellectual Property Office of New Zealand (IPONZ) you will get to know about: • IPONZ as an organisation, and IP regimes in New Zealand (Trade Marks, Patents, Designs, Plant Variety Rights, Geographical Indications, Copyright).

• The IPONZ online case management facility and application processes for Trade Marks and Patents.

• How the IPONZ online case management facility is maintained, including: º How changes to the online system are considered. º When and how these changes are released. º How to subscribe for system updates via email.

Presenters: Dylan Packman, Senior Stakeholder Engagement Advisor, IPONZ; Sean Uy, Stakeholder Engagement Advisor, IPONZ

Burning Issues in Employment Law Forum 2020 This Guy Fawkes night, the Burning Issues Forum 2020 has it all – bon fires, camp fires and wild fires! – a veritable barbecued smorgasbord of the hottest and spiciest issues to emerge in these times of global challenge. First “The Covid Conundrum” – a blistering review of the Covid case law and a meaningful insight into the Covid challenges faced by employment lawyers and their clients. Next, a scorching commentary on recent judgments that are clearing the smoky blurred lines between employees and independent contractors and, last, come fireside as the Chief Judge illuminates the path towards meaningful access to justice in employment law.

Presenters: Her Honour Chief Judge Inglis; Garry Pollak, Solicitor; Rachael Judge, Senior Associate, Simpson Grierson Chair: Catherine Stewart, Barrister

Corporate Restructuring: Navigating Covid-19 Covid-19 has already had a dramatic impact on the tourism, accommodation, hospitality and retail sectors, but the broader economic impact of Covid-19 is yet to be felt by the wider economy. In this session, we will provide you with an overview of the restructuring tools available to corporates, so that you are aware of options should your clients call seeking advice to manage risk or distress. We will also touch on relief for directors and businesses and early warning signs to look for.

Presenters: Conor McElhinney, Partner, McGrathNicol; Laura O’Gorman, Barrister, Bankside Chambers

Family Law Conference 2020 In Person | Live Stream This conference will cover how to run a Relationship Property case from go to whoa. With a focus on the different stages you’ll have to navigate the presenters will guide you through the various issues you will have to consider.

We will cover the following aspects: How much is your client entitled to?; Trusts, Qualifying vs non-qualifying relationships, Pathways to resolution, Disclosure, Valuations, Drafting Agreements; What happens if it all breaks down?; Being sensible, pragmatic and frank with your client.

Presenters: Brian Carter, Barrister, Bastion Chambers; Alissa Bell, Partner, McVeagh Fleming; Sarah Bush, Partner, Inder Lynch Lawyers; Inger Blackford, Barrister, Trinity Chambers Chair: Lynda Kearns, Barrister, Bastion Chambers

 Webinar CPD 1.5 hrs

 Wed, 4 Nov 12pm – 1.30pm

 Forum CPD 2 hrs

 Thu, 5 Nov 4pm – 6pm

 Webinar CPD 1.25 hrs

 Tue, 17 Nov 4pm – 5.15pm

Livestream

 Seminar CPD 7 hrs

 Wed, 18 Nov 9am – 5pm

CPD Pricing Delivery Method

Member

Non-Member



Webinar (1 hour)

$80 + GST

$115 + GST

Webinar (1.25 hour)

$90 + GST

$130 + GST



Seminar (2 hour in person)

$130 + GST

$185 + GST

Seminar (2 hour live stream)

$130 + GST

$185 + GST

On Demand (1 hour recording)

$90 + GST

$130 + GST

On Demand (2 hour recording)

$145 + GST

$205 + GST

 

CPD On Demand Earn CPD hours by completing On Demand activities via your computer or smart device visit: adls.org.nz/cpd

For group bookings for webinars and seminars, contact cpd@adls.org.nz ADLS members and non-member lawyers who have registered their Airpoints™ membership with ADLS can earn Airpoints Dollars™ on eligible ADLS CPD purchases.

Terms and conditions apply.

Practice Management Tips: Increasing Profitability and Attracting New Clients Wednesday 14 October | Webinar | 1.25 CPD hours Visit adls.org.nz for more information.

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SOLICITOR – LITIGATION We are a boutique firm specialising in unit titles advice and dispute resolution looking for a solicitor of up to two years’ experience to work in our litigation team.

Please apply to Price Baker Berridge by email to yhart@pbb.co.nz for the attention of Clinton Baker.

WILL INQUIRIES LawNews The no-hassle way to source missing wills for $80.50 (GST Included) Email to: reception@adls.org.nz Post to: ADLS PO Box 58, Shortland Street, DX CP24001, Auckland 1140 Fax to: (09) 309 3726 For enquiries phone: (09) 303 5270

Wills TOLEASE LEASE TO

TO 1 Bowen Avenue, CBD Auckland 1 Bowen Avenue, CBD Auckland TO LEASE – LEASE 1 Bowen Avenue, CBD Auckland 1 Bowen Avenue, CBD Auckland

Located in the University of Auckland precinct, opposite and just below Northern Club. Open and sunny space with outlook over the city and park.

Suitable for legal or barristers’ chambers.

249.10 m², comprising 180.26m² main floor area; 40.41m² basement;

249.10 m², comprising 180.26m² main floor area; 40.41m² basement; 28.43m² 28.43m² toilets and area (more or less); 1 off street uncovered 2 amenity 2 carpark. toilets and amenity area (more or less); 1 off street uncovered carpark.

249.10 m², comprising 180.26m² main floor area; 40.41m² basement; 28.43m² 2 Located University of Auckland opposite and just below toilets and amenity area or less); 1 precinct offopposite street uncovered carpark.

Located inin University of (more Auckland precinct and just below Northern Northern Club.

Open and sunny space outlook over the city and Club.

Open and sunny space with outlook overwith the city and park.

Located park. in University of Auckland precinct opposite and just below Northern Club.

Open andlegal sunny space with outlook over the city and park.

Suitable forfor legal offices or barristers’ chambers Suitable offices or barristers’ chambers.

249.10m , comprising 180.26m main floor area; 40.41m2 basement; 28.43m toilets and amenity area (more or less); 1 off street uncovered carpark.

For more information phone: 021 943 979

For more information phone: 021 943 979

Suitable legal officesphone: or barristers’ For morefor information 021 943chambers 979 For more information phone: 021 943 979

This space could be yours

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.

Robert John Daniel BALDWIN, Late of 16 Tiki Place, Ruakaka, single, garbiologist, aged 54 (died 10’08’16) Graham Roy CARNIE, Late of 468 Pahi Road, Pahi 0571, divorced, retired, previously a motor trimmer, aged 74 (died 29’07’20) Renaye Kylie CLARKE, Late of 8 Glen Vista Place, Bayview, Auckland 0629, separated, legal secretary, aged 41 (died 04’08’20) Kevin James Ian HEWSON, Late of 11 Gunson Street, Freemans Bay, Auckland, aged 61 (died 10’09’20) Harvey William John Edmonds IRIMANA, Late of 39 Pukepoto Road, Kaitaia, truck driver, aged 52 (died 21’05’20) Divine Love LEATUAU, Late of Manurewa, Auckland, aged 43 (died 06’02’20) Lucy Ruhi NIKORA, Late of 33 Winsford Street, Manurewa, Auckland, de facto relationship, sickness beneficiary, aged 61 (died 07’08’20) Paul Thomas QUIGLEY, Late of 9B Kawaha Point Road, Fairy Springs, Rotorua 3015, unemployed, aged 50 (died 01’09’20)

LawNews reaches a discerning audience of nearly 6000 lawyers, judges, politicians and academics every week.

Charles Christian SMITH also known as Charles Karaitiana SMITH, Late of 293 Kennedy Road, Onekawa, Napier, never in a legal relationship, labourer, aged 54 (died 29’11’19) Lucky Tai UNASA, Late of 1 Glebe Street, Manurewa, Auckland, aged 33 (died 31’08’20)

Get your message in front of them.

Call our advertising executive, Darrell Denney, on 021 936 858 or email Darrell on Darrell.denney@adls.org.nz

Anna Quita WHAREHOKA, Late of 2/5 Corrella Road, Belmont, Auckland, single, ward clerk, aged 30 (died 02’08’20)

OUR INSOLVENCY ISSPECIALITY! Litigation support and expert and impartial advice on: » Restructures

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CHARTERED ACCOUNTANTS | INSOLVENCY & LITIGATION 10

LawNews Issue 33 | 25 Sep 2020

OFFICES AVAILABLE

Merger, Acquisition, Partnership Opportunity

Following some barristers leaving after Covid, Durham West Chambers has four offices available – two large, one small, and one mid-size.

Wonderful opportunity for a group of lawyers/barristers to move to a specialised chambers format.

The Chambers share a refurbished floor (with separate areas) with Hussey & Co., a boutique forensic and general accounting firm.

Long established medium size Auckland law firm soon to re-locate to new downtown premises is looking to expand.

There are shared meeting rooms (a formal boardroom and a less formal meeting room), and communal entrance and client waiting area.

This may be an opportunity for a sole practitioner or smaller firm in need of support or a succession plan.

Alternatively, it may suit a lawyer or group of lawyers at partnership or senior level with an established client base looking to re-locate.

Telephones, internet connection, printing and secretarial services also available and some furniture available.

No long-term commitment required.

The firm offers brand new modern premises, latest technology and support systems, an excellent work/ lifestyle balance and a high level of remuneration.

Cost depends on office size, circa $300 per week for the larger offices, $150 per week for the small and $225.00 per week for the mid-size (plus GST).

All enquiries will be treated in the strictest confidence.

Photographs of the Chambers can be viewed at www.hco.co.nz/gallery

Please reply to: Advertiser@adls.org.nz quoting reference:MA0920

Contact: Shane Hussey for further details shane@hco.co.nz tel. (09) 300 5481

Excellence in Legal Writing Auckland Workshop Tuesday 20 October | 2 CPD hours Venue: ADLS, Auckland City This workshop will introduce you to three simple hacks to improve your written work: writing concretely; writing actively; and writing less.

We’ll also deploy a fourth tool – “point-first advocacy” – to structure arguments for maximum impact. This learn-by-doing workshop will help you achieve writing excellence.

T 09 303 5278

E cpd@adls.org.nz

W adls.org.nz

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Junior Solicitor McElroys is looking to recruit a talented junior solicitor with 1-2 years’ PQE in research and civil litigation to join our close-knit team.

About us McElroys acts for global and national clients in a broad range of insurance, commercial, marine and employment disputes. McElroys has been at the forefront of litigation arising from the leaky building crisis, global financial crisis and Canterbury earthquake sequence.

We are proud of our track record, but actually McElroys’ success lies in the values our founding partners established when the firm first opened its doors for business. Attention to detail, going beyond what is required, keeping astride of new approaches and setting new standards have all contributed to a purposeful culture that sets itself apart by consistently delivering results that count.

The role You will work closely with our partners and senior lawyers undertaking research projects and assisting partners and senior lawyers manage civil, employment and insurance disputes, including claims against professionals and directors, and product and public liability claims.

Attributes we are looking for • Collaborative – the ability to work as part of a team and value the contributions of each other • Better – to continually strive to reach the highest standard and go beyond what is required • Expertise – to constantly challenge your understanding and deepen your knowledge • Straightforward – be clear, accurate and direct in ensuring the right course of action is taken If you wish to apply for this position, please email paul.sullivan@mcelroys.co.nz Applications should include a covering letter detailing relevant experience, CV and academic transcripts.

Recruiters – please contact us to discuss terms before submitting CVs.

COVID-19/CONSTITUTIONAL LAW

Lockdown legality appeal grounds revealed

By Jenni McManus

Details have been revealed on the grounds for an appeal against parts of a High Court decision about the legality of New Zealand’s Covid-19 lockdown.

The appellant, legal academic Dr Andrew Borrowdale, won the key plank of his claim against Director-General of Health Dr Ashley Bloomfield and Attorney-General David Parker – a declaration from a full bench of the High Court on August 19 that the first nine days of the level 4 lockdown were unlawful.

But he did not succeed in two further causes of action: that Bloomfield exceeded his powers, and therefore acted unlawfully, in making orders under s 70 of the Health Act 1956 to lock down the country in April.

Borrowdale is now seeking three declarations from the Court of Appeal: that Bloomfield exceeded his powers under s 70; that imposing the lockdown measures without lawful authority breached s 1 of the Bill of Rights 1688; and that Bloomfield’s delegation of powers to MBIE officials to decide which businesses were “essential” during lockdown was unlawful. He is also seeking costs.

There are several specific grounds of appeal:

That the High Court erred in law in its interpretation of s 70 of the Health Act by adopting an interpretation that wrongly upheld government policy decisions, orders and administrative measures on the basis that the Covid-19 emergency justified them. This, Borrowdale says, failed to give “proper regard” to protecting the rights of those affected by the restrictions.

That the High Court erred in finding that Bloomfield did not exceed his powers under s 70 of the Act. This included: the court’s failure to find that s 70 cannot be used to shut down the whole country; failure to find that the Act’s quarantine and isolation powers can be used only for individuals, not the population as a whole; a failure to find that the s 70 power to close premises “of any stated kind or description” does not allow the government to close all premises subject only to specific exceptions; and that the power to ban “congregations” of people does not allow exceptions for social distancing.

Borrowdale also says the court erred in law in finding the lockdown measures were prescribed by law from the time Bloomfield made his second order, nine days after lockdown began. This meant it also erred, in Borrowdale’s view, in finding the lockdown restrictions were not an unlawful limit on the rights affirmed by the New Zealand Bill of Rights Act 1990.

That the High Court erred in law by finding that Bloomfield did not unlawfully delegate to MBIE the power to determine which businesses were “essential”.

That the High Court erred in law by allowing the intervener (the New Zealand Law Society) to refer to historical documents that had not been properly adduced in evidence and by allowing discovery to take place on an informal basis without proper disclosure to the appellant.

Jim Farmer QC is now acting for Borrowdale.

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