NEWS Oct 1, 2021 Issue 34
Inside ■ COVID-19
Exorbitant fines put rule of law at risk P04-05
■ RENT CUTS
Good news for tenants but are they fair? P10-11
How beneficiaries can
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TAKE CONTROL OF TRUSTS
Contents 03 TRUSTEES BENEFICIARIES CORPORATE
Circumventing Webb: how beneficiaries can seize control of trusts LawNews is an official publication of Auckland District Law Society Inc. (ADLS).
04-05 COVID-19 INFRINGEMENT ENFORCEMENT
Covid infringement fees: unreasonable and irrational?
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06-07 COVID-19 PANDEMIC VACCINATION
Why is this lockdown so much harder?
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Good news for commercial tenants in govt’s planned rent reduction
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Oct 1 2021 Issue 34
TRUST LAW
How a beneficiary can take control of a trust
Pty Limited v Scaffidi [2012] HCA 48. The deed of trust in that case provided that “[i]f… any individual appointor is a beneficiary that individual shall not be eligible to be appointed as a trustee”. A corporate trustee was appointed as the sole trustee of the trust and a beneficiary was its sole director and shareholder. The trial judge said that the deed of settlement The trust deed expressly excluded a requirement for there to “draws a clear distinction between individuals and be an independent trustee if the sole trustee of the trust was corporations [and] recognises that a corporation may be a trustee… and contains no actual or implicit a company prohibition upon a corporation, even if controlled by a beneficiary, from being such a trustee. Because the corporation is distinctly and legally separate from the individual, I do not consider that the The most significant clause in the prohibition in the Deed of Settlement Anthony Grant trust deed which led to this decision against an individual beneficiary being read: a trustee prohibits the appointment of In the Webb decision last year, the Privy Council [the corporate trustee]…” [19] held that the powers a man had in a trust were “so “It is expressly declared a The judge also found “that there was extensive that in equity he can be regarded as having corporate trustee may exercise all no evidentiary basis for concluding that rights which were tantamount to ownership”. the powers and discretions vested [the corporate trustee] would jeopardise in that trustee… notwithstanding The committee said the man had powers enabling the welfare of the trust fund or the such exercise may in any way him to be the trust’s sole beneficiary. This was not interests of the beneficiaries”. If the directly or indirectly benefit any lawful and the ‘trust’ was not a trust at all. Its assets Anthony Grant trustee did so, “there are ample avenues beneficiary who has any interest were to be treated as his own property. of redress available to any aggrieved (contingent or otherwise) in that The decision of Downs J in Legler v Formannoij beneficiary to challenge or review the actions of the trustee whether as director, officer, shareholder or [2021] NZHC 1271 suggests there may be a way trustee”. [20] otherwise howsoever.” around the Webb decision. It involves using a sole Many people who are familiar with the litigation The clause purported to expressly authorise a corporate trustee of which a beneficiary is its sole costs in New Zealand and the years that can be taken beneficiary to be the sole director of a corporate director. to resolve such a dispute would disagree with that trustee. In the Legler decision, a woman who was an reasoning. existing trustee appointed a corporate trustee of The disappointed beneficiaries also contended The lesson to be taken from this case is simple. which she was its sole director to be the sole trustee of the woman had committed a fraud on a power by With the increased difficulty in recruiting competent the trust and this structure was approved by the court. appointing the corporate trustee for the purpose people to act as trustees, it is likely that the use of The trust deed expressly of benefitting herself. This It is likely that the use of corporate trustees where a family member is its sole excluded a requirement for argument failed on the facts. director will become a common feature of trusts in there to be an independent The judge was satisfied that corporate trustees where New Zealand as the prospect of the sole director/ trustee if the sole trustee of the woman “wanted to act a family member is its beneficiary being able to have complete access to the the trust was a company. lawfully, and was acting on sole director will become trust’s assets is very appealing. About four months legal advice”. She “was a Some people may hesitate to rely on a decision after the corporate trustee careful, fair-minded witness. a common feature of of a judge in the High Court and prefer to wait until was appointed, it removed She impressed as sincere.” trusts in New Zealand there have been challenges to the reasoning in a various beneficiaries and [58] He said, “I am not higher court. However, the fact that Downs J relied on distributed all of the trust’s persuaded [she] appointed a unanimous decision of the High Court of Australia is assets to the director of the [the corporate trustee] to significant. corporate trustee in her capacity as a beneficiary. benefit herself or that this was one of her purposes A higher Court in New Zealand will be reluctant to The woman could take all the trust’s assets by in appointing that trustee.” She had been “informed say the reasoning of five judges of the highest court in resigning her personal trusteeship and appointing a of her fiduciary obligations and sought information Australia was fundamentally wrong and misconceived, corporate trustee of which she was its sole director relevant to their discharge”. [59] given the rich tradition of Australian competency in and then distributing the assets to herself. the laws concerning trusts and equity. Some disappointed beneficiaries issued Australian decision Anthony Grant is an Auckland barrister, proceedings in which they claimed the woman’s actions Downs J was influenced by the unanimous decision constituted a fraud on a power. This claim was rejected. of the High Court of Australia in Montevento Holdings specialising in trusts and estates ■ 03
COVID-19
Covid infringement hikes put rule of law
at risk
Unreasonable or irrational legal liabilities risk of undermining the rule of law
On the same day I sit down to write this, protests about lockdown restrictions and vaccine mandates have, for a second day in a row, erupted in violence in Melbourne. It appears that state premiers of our close neighbour, Australia, may be losing touch with segments of their populations. A salutary reminder, perhaps, that legal obligations derive their legitimacy not simply from being promulgated through proper process but also by being perceived as proportionate responses to the purposes they aim to achieve. Unreasonable or irrational legal liabilities risk undermining the rule of law. While not seeking to read anything into the timing, on the same day as these protests in Melbourne Jacinda Ardern announced that our government will be increasing on-thespot infringement fees for non-compliance with orders issued under the Covic-19 Public Health Response Act 2020, from $300 to $4000. Given Labour’s significant majority, the amendment giving effect to these increases will almost certainly be passed in November. If you are silly enough to dispute such an infringement notice in court (or if the infringement is filed in court rather than simply served on you by way of notice), then the maximum fine that can be imposed trebles to a whopping $12,000 if you are found liable. You might have thought that with such exorbitant fines involved, you’d also be looking at a criminal conviction. You would be wrong. Infringements are what you incur when you park illegally. They are effective from the moment an enforcement officer issues them. An enforcement officer (most likely police in the case of Covid orders) may issue an infringement notice if the officer believes on reasonable grounds that the person is committing, or has committed, an infringement offence. An enforcement officer needn’t even speak to you. The first you might know of your obligation to pay the Crown $4,000 for an alleged breach of an order might be a couple of weeks later when it turns up in your letterbox. 04
Photo: Lakeview_Images / Getty Images
Nathan Batts
Whether you intended to breach a rule, or even knew that you had, is entirely irrelevant. An enforcement agency does not need to prove an infringement against you unless you go to the trouble of formally disputing it in court. If you do nothing about the infringement notice and do not pay the $4,000 in full by its due date, then it is referred to the Ministry of Justice for enforcement, at which point it is treated as a fine. Recent media attention has focussed on Aucklanders travelling out of alert level 4 to places like Queenstown. Whatever you think about that, it is worth observing that infringement offences under the current alert level order are rather more extensive than such cross-country escapades. Infringements include: ■ failure to display a QR code ($12,000 fee for a company);
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If you are silly enough to dispute such infringement notice in court …. then the maximum fine that can be imposed trebles to a whopping $12,000 if you are found liable
Oct 1 2021 Issue 34
Continued from page 04
■ failure to wear a face covering when required; ■ failure to physically distance (2m) at alert levels 3 and 4; ■ exercising somewhere not ‘readily accessible’ from your home during alert levels 3 or 4; and
■ swimming, surfing or tramping at alert level 4.
Reasonable and proportionate?
The first you might know of your obligation to pay the Crown $4000 for an alleged breach of an order might be a couple of weeks later when it turns up in your letterbox
At the media briefing where news of the fee and fine amendments was delivered, the Prime Minster said she thought the general public would probably be of a view ‘that when you are putting people at risk, you need to have an infringement regime that reflects the seriousness of some of that rule-breaking’. Opinions will no doubt vary, but one might think that noncompliance with the above examples at least do not warrant a $4,000 price tag. For some context, travelling at double the speed limit (100km/hour in a 50km/hr zone) carries an infringement fee of $630. So at alert level 4, in a rush to stock up on toilet paper, you might travel at 100km/hr through residential streets to get to the supermarket in time. You are potentially liable for a $630 infringement fee for the speeding, but it’s essential travel so you’d be safe in terms of the Covid order. On the other hand, come November, a trip down to an empty local beach on a hot afternoon for a paddle in the shallows at alert level 4 might see you $4,000 poorer. A statement issued by Chris Hipkins, the Covid-19 Response Minister, confirmed that an example of an infringement offence would include failure to wear a face covering in places where it is mandatory. On this point, and whatever might be said now about the merits of mask-wearing, it is worth bearing in mind that official advice from the government in the early months of the pandemic was that wearing masks if you were healthy was not necessary. Clearly the government’s position on that has changed markedly. But in the space of 18 months we have gone from a practice that was not even recommended to one that you are legally obliged to comply with on pain of a $4,000 fine. Another example of the sort of conduct that would attract the $4,000 fee would be taking part in a peaceful protest at alert levels 3 or 4 (known as an unlawful outdoor gathering under the order). During the same media briefing, the Prime Minister was careful to distance the government from the enforcement of these increased fees and fines. The government has just set up the framework. “The prosecution decisions are not ultimately made by us,” she said. “Where they’re used and how they’re used, what fines are awarded, that sits out of our
hands,” the Prime Minster was careful to emphasise. That is all true and appropriate. However, this reality highlights a further significant concern about the level of infringement fee soon to be in force. An enforcement officer tasked with issuing infringements has no discretion as to the level of fee he or she can impose, based on the perceived seriousness of the breach. It’s $4,000. Period. As an infringement, anything from an unwitting error to a sustained and intentional breach will attract the same $4,000 fee. Police officers tasked with issuing these infringements will, one hopes, be acutely aware of the potentially devastating effect liability to pay such a fee could have on many New Zealanders. Placing such a burden on frontline policing staff is unlikely to be a productive exercise and may well result in the unprincipled exercise of police discretion to avoid imposing this fee. The proposed amendment bill does allow for the enactment of regulations that identify infringement fees less than the $4,000 default, and that prescribe different penalties for different infringement offences. How and if such regulations are utilised to mitigate the effects of the default $4,000 fee is, of course, yet to be seen. The Prime Minister’s media statement certainly did not indicate that the government was contemplating lesser infringement fees.
Paying the price One centrally important question is who is most likely to bear the brunt of the financial burden of these colossal infringement fees. Well, we can pretty confidently say who it won’t be – the wealthy Aucklanders escaping level 4 lockdown to holiday homes in Queenstown. Yes, the very people whose actions presumably solidified the government’s resolve to drastically increase the legal consequences of non-compliance. Instead, the people most likely to be on the receiving end of these fees are those most unable to pay – those for whom lockdowns have probably already been financially ruinous. We know, for example, that Māori, who make up only 16.5% of the total population, are significantly overrepresented in the criminal justice system. Based on this reality, we can probably assume that liability for these increased fees will rest disproportionately on Māori, at least. This is not simply speculation. Again, we can look to our neighbours. The Victorian and New South Wales governments in Australia were early adopters of very high monetary penalties for Covid restrictions rule-breakers. This hasn’t worked well for them.
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COVID-19/POLITICS
Why lockdown is so much harder this time The ‘illth’ of a nation was everything that hurt it, held it back, sapped its energy and weakened its well Chris Trotter Chris Trotter New Zealand’s 18-month struggle against Covid-19 has been a battle between wealth and illth. Illth? The word was coined by the 19th century English scholar and art critic, John Ruskin. He was looking for a way of expressing the opposite of wealth which, scholar that he was, he understood to mean much more than riches. Derived from the Old English ‘weal’, from which we get the word ‘well’, it originally spoke to what we would today call ‘well-being’. Illth, Ruskin hoped, would serve as the antonym of wealth. If the former were composed of goods and services, the latter represented harms and hinderances. The illth of a nation was everything that hurt it, held it back, sapped its energy and weakened its will. Ruskin’s new word didn’t catch on. But, as the rather eccentric American science-fiction writer and all-round seer John Michael Greer argued recently, it is a word enormously helpful to gaining a proper understanding of what is happening in societies afflicted by Covid-19. Illth, Greer suggests, is what economists were, until very recently, trained to ignore. A successful timber industry created wealth – which economists were only too happy to measure – but it also created illth. The bare hillsides and choked rivers, the loss of habitat for wild creatures, the coarsening of the human spirit that the ugliness of deliberate destruction inevitably entails. Illth is always there, balancing the scales of human experience: our very own dark matter. New Zealand’s first case of Covid-19 was confirmed by the Ministry of Health on 28 February 2020. Its arrival boosted this country’s illth in ways not seen since the deadly influenza pandemic of 1918-19. There was panic buying, scuffles in the supermarket aisles and a growing sense of dread as Covid-19’s deadly potential manifested itself across the planet. That fear was not lessened by the fact that the outbreaks we saw on our television screens were not culturally quarantined in faraway Africa or Asia; they were happening in Milan and New York City. People like us were dying in their thousands. 06
The roll-out of the Pfizer vaccine has been too slow, too haphazardly organised, too poorly promoted to those population groups who need it the most
Fortunately for New Zealanders, they were led by a Prime Minister who thrived on illth. Conspicuously unsuccessful at generating wealth in its purely economic sense, Jacinda Ardern and her government had become objects of derision for their failure to deliver on just about every promise they had made to the electorate. Mention child poverty and voters would shake their heads sadly. Mention climate change and voters would snort. Mention Kiwibuild and voters would burst out laughing. But when, on 15 March 2019, a stone-cold terrorist gunned down 51 Muslim worshippers in their Christchurch mosques, Ardern’s response astonished and inspired the world. When a volcanic island exploded, killing 22 tourists, the Prime Minister’s empathy calmed a shocked and sorrowing nation. ‘Jacinda’ was really good at dealing with illth and now she had illth to deal with on an unprecedented scale. Covid-19 was to be the making of Labour’s leader. Her handling of the pandemic’s illth would earn her 51% of the party vote in the 2020 general election and the envious admiration of a Covid-ravaged planet. Sadly, the Prime Minister’s ability to spin pure political gold out of the grey skeins of sickness and enforced isolation was not universally shared by either her Cabinet colleagues or the agencies of state charged with doing their bidding. There were many mis-steps by the Ministry of Health: scarcely credible bungling by District Health Boards; black slapstick comedy at managed isolation and quarantine facilities; hair-raising tales of bureaucratic mendacity and inefficiencies and shamefully under-reported instances of working-class hardship and beneficiaries driven to the edge of despair and beyond. Illth had its thumb on the scales of the nation’s fortunes and was pushing down hard. It had reckoned without the woman standing on the other side of the scales. Whether by luck or skill or a serendipitous mixture of the two, Ardern’s political decisions pressed back against the sheer weight of the illth bearing down on the community and the balance shifted. The lockdowns she ordered, her by-now almost mythical decision to ‘go hard and go early’, worked. On paper, level 4 lockdown looked like illth on steroids; four-fifths of the entire nation confined to their homes and ordered to stay there. Shops and business shut. Factories closed, construction sites empty. An eerie stillness in the empty streets
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Oct 1 2021 Issue 34
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of the nation’s largest cities. The end of the world.
Short and sharp Except it wasn’t. Through the murk of illth, the ‘weal’ of the nation broke through as New Zealanders rose to meet the challenge. They rediscovered the meaning of family, they took control of their own skill and knowledge, they read. They baked, they learned how to Zoom. And, just as she had done in the midst of the unspeakable horror of the Christchurch mosque shootings, Jacinda somehow gathered into herself the true essence of New Zealanders and reflected it back upon them. She made it possible for them to look at their prime minister and see a ’team of five million’. The political magic didn’t work on everyone. For some, the illth of the nation seemed to be increasing with terrifying speed. Whole industries were dying, thousands of jobs were disappearing and, with every passing day, the nation’s indebtedness was rising. Teddy-bears in windows buttered no parsnips – not in the long-term. New Zealand remained a tiny trading nation at the bottom of the world – a world with which it would sooner or later (but not too much later) have to be fully reconnected, or die. It was former Australian Prime Minister Paul Keating who famously quipped: “A soufflé doesn’t rise twice.” Jacinda Ardern had won her first great battle with Covid-19. New Zealanders had been free to enjoy life – almost as normal – for more days than any other nation in the OECD. Her lockdowns, short and sharp, had stamped the virus out. But illth never sleeps. In August 2021, New Zealand was forced to confront the altogether more daunting Delta variant of Covid-19. Could Jacinda rise to the occasion a second time?
Woefully unprepared Delta has descended upon a nation woefully unprepared to meet the much greater challenges presented by its arrival. The roll-out of the Pfizer vaccine has been too slow, too haphazardly organised, too poorly promoted to those population groups who need it the most. But now, under attack from a mutant virus notorious for its ability to spread rapidly and relentlessly, even under strict lockdown conditions, vaccinating upwards of 90% of the population is the only viable policy. New Zealand’s elimination strategy, which Ardern made the envy of the world, is
Jacinda Ardern and her government had become objects of derision for their failure to deliver on just about every promise they had made to the electorate
no longer enough. Illth is in the foreground now. The chilling examples of Delta’s potential for disaster are clearly visible across the Tasman. The voices of those unable to focus on anything other than the economic and social damage caused by Covid are growing louder – amplified, it must be said, by a news media consumed by the seductive power of illth. Taken together, these negative influences are testing the team of five million’s once invincible faith in Ardern’s elixir of success. If lockdowns no longer work, and not enough people are getting the doublejab, what then? Opposition parties have been among the most pathetic of Covid-19’s victims. Against a governing party which refuses to make the illth of the nation its primary focus, it is extremely difficult to make headway. Certainly, New Zealand’s National Party has not proven equal to the challenge: ravaged internally, slumping in the polls, two leaders down (and the third looking none too clever) it has been overwhelmed by the illth it sought to turn against its Labour opponents. That could change, however, if Labour’s leader proves unable to summon a second time the political magic she relied upon to carry her through the first Covid war. New Zealanders are frightened by Delta’s tenacity, its refusal to lie down and die. Even worse, they are tired. If Jacinda’s team of five million were gungho volunteers in the first Covid war, they are weary conscripts in the second. More than anything, now, they want General Ardern to bring the fighting to an end. There’s an opening here, for an Opposition politician of grit and optimism, to offer New Zealand a new and less costly way of ending the Covid war. Not by surrendering to the gloomy forces of illth, but by convincing the nation that there’s a way of keeping them in check. Perhaps, in the long term, it’s the only realistic promise that can be given. If 90% of New Zealanders can agree to be vaccinated, build their resilience, hold their nerve and learn to live with Covid-19, then there’s every chance of keeping weal and woe, sickness and health, wealth and illth and life and death in some sort of equilibrium. Humankind has long dreamed of banishing the harms and hinderances of this world altogether. It might as well attempt to abolish its own shadow. Chris Trotter is a political writer and commentator of more than 30 years’ experience. He is the editor of the Bowalley Road blog. ■ 07
CRIMINAL LAW
Sarah Kelly New anti-money laundering regulation designed to clarity uncertainty and reduce the compliance burden came into effect on 9 July this year. Law firms which are reporting entities should be aware of these changes and take steps to ensure they are compliant. In some cases, they may be able to relax certain requirements of their compliance programs. In nearly all cases, they will need to review and update them to ensure they remain current. These changes are generally positive and reflect the risk-based approach of the New Zealand AML/ CFT regime. Most reduce the compliance burden in certain situations where the risk of money laundering and terrorist financing is virtually non-existent – for example, the administration of an estate, the payment of non-refundable third-party disbursements or the liquidation of an insolvent company. The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act 2009 establishes the AML/CFT framework in New Zealand. Six sets of AML/CFT regulations also sit alongside the Act. Outlined below are the changes we consider to be most applicable to law firms that are reporting entities. A full summary of the changes can be found here.
Audits Previously, the default timeframe for AML/CFT audits was two years. This has now been extended to every three years. The Department of Internal Affairs (DIA), as the supervisor for law firms, may request that a firm undertakes a more frequent audit if it is perceived to be higher risk or a less frequent audit of four years if it is perceived to be lower risk. If your law firm was due to have an AML/CFT audit on or before 9 July 2021 then the law states that the two-year timeframe applies to this audit. However, on 3 December 2020 the DIA issued guidance that, in relation to those reporting entities it supervises, if audits were due between January 2021 and July 2021 no adverse compliance action will be taken if 08
of low-risk transactions to third parties: ■ payments to government departments, the New Zealand police or local authorities; ■ payments to a barrister; and ■ payments to any other third party that carries out business in New Zealand where the payment relates to the provision of that business, and where the value of the transaction (or series of transactions) is less than $1,000.
Nominee directors, shareholders and general partners
the reporting entity did not complete an audit by the original deadline. This is conditional on the reporting entity completing its audit within the new three-year deadline. For law firms, this means three years from the date of the last audit or the date they became a reporting entity, whichever is earlier.
Exemption for liquidators The regulations confirm that a liquidator’s customer for AML/CFT purposes is the company that is in liquidation. A new regulation also exempts liquidators appointed by the High Court under s 241(2)(c) of the Companies Act 1993 from some customer due diligence (CDD) requirements. Law firms appointed by the High Court to act as liquidators will not have to conduct initial CDD on the liquidated company. However, existing CDD requirements in relation to payments to beneficial owners, wire transfers, prescribed transaction reports and suspicious activity reports continue. This has clarified an area of considerable uncertainty for insolvency practitioners.
Disbursements Law firms are no longer captured by the Act (and will therefore have no AML/CFT obligations) when they receive funds from clients to pay the following types
When law firms deal with clients that are companies, limited partnerships and overseas limited partnerships, there are increased AML/CFT obligations. In such a case, the law firm will need to obtain the following information: ■ in relation to its company clients, whether there are any nominee director relationships or nominee shareholder relationships; and ■ in relation to its limited partnership clients, whether there are any nominee general partners. If a law firm determines that such a nominee relationship exists, the law firm must then conduct enhanced CDD on the company, limited partnership or overseas limited partnership. This has always been a requirement where a law firm provided services that are captured by the Act to a company with nominee shareholders. It is a new requirement in relation to nominee directors and nominee general partners. A law firm is required to take reasonable steps to verify the existence and name of any nominee director, nominee shareholder or nominee general partner so it is satisfied it knows this information. In terms of the necessary level of verification, the law makes it clear that reporting entities are not required to verify this information on the basis of documents, data or information issued by a reliable and independent source (as is normally required for identity verification). A transitional compliance period, from 9 July 2021
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Photo: LazingBee / Getty Images
Govt updates anti-money laundering rules
These changes are generally positive and reflect the risk-based approach of the NZ regime
Oct 1 2021
Photo: SusanadelCampoPhoto / Getty Images
Issue 34
CASE NOTE
Court upholds $24m award against kiwifruit grower and co The appellants succeeded on only a narrow liability point, which did not alter quantum
Sacha Jugum Plant Variety Rights Act 1987 – dispute over golden kiwifruit exclusive rights and licence agreements – appeal against factual, evidential and jurisdictional matters together with award, calculation and quantum of damages – applicable principles – factual background – causation – weighing of hearsay and credibility – admissibility – opinion evidence – principles of damages – extent of available remedies – comparative statutory frameworks – precedent – appeal allowed to the extent that damages payable are reduced [see case for details of parties and liability], and appeal is otherwise dismissed
Gao v Zespri Group Limited [2021] NZCA 442 (Kós P, Brown and Goddard JJ) Zespri holds exclusive rights to sell reproductive material of, and to propagate for commercial production, certain varieties of golden kiwifruit under the Plant Variety Rights Act 1987. Haoyu Gao and a related company (Smiling Face Ltd) grew golden kiwifruit on an orchard in New Zealand under a licence granted by Zespri. Zespri alleged Gao sold and then exported two of the varieties of golden kiwifruit to China from 2012 onwards, purported to license those varieties for the whole of China, and engaged in conduct that allegedly breached Zespri’s exclusive rights.
Zespri commenced High Court proceedings in relation to the dispute and was awarded damages, payable by Gao, his wife Xia Xue and the related company. These damages were calculated as being $14.894 million payable to Zespri by Gao and the company, and damages of $10.829m being jointly payable to Zespri by Gao and Xue. Gao, Xue and the related company [together, Gao] now appeal the High Court judgment, arguing that the court made several errors in determining factual matters, admissibility of evidence, the award of damages and the applicability of the Plant Variety Act 1987 “extra-territorially”[see paragraph 41 of the judgment for the detailed grounds of appeal]. Applicable principles – jurisdiction, including the relevance of Gao entering into a ‘false licence agreement’ in China – detailed discussion of the factual background and the issue of ‘causation’ as a legal concept, particularly in regard to whether the kiwifruit varieties would have reached China but for Gao’s actions – assessment of the size of the kiwifruit orchards in question [which is relevant to the calculation of damages] – statutory interpretation, including the interpretation of Zespri’s ‘exclusive rights’ and rights that can be granted to certain plant varieties [including kiwifruit] – canvassing of evidential and factual findings, particularly in relation to the admissibility of hearsay and opinion evidence – consideration of the evidence of Zespri’s private investigators who travelled to China to investigate industry rumours about golden kiwifruit varieties being grown there, and the admissibility of this evidence as lay-opinion evidence – assessment of adverse credibility findings in relation to Gao – detailed analysis of the principles, award, calculation and quantum of damages in this context, with reference to the Copyright Act 1994 and extent of similarities between the two statutory regimes – full discussion of precedent, particularly in relation to damages Held: “The appellants succeeded only on a narrow liability point, which did not alter quantum, and separately on a narrow quantum point” – the High Court award for compensation is quashed – substituted orders that Gao is to pay damages to Zespri in the sum of $12,081,150 and that the related company is to pay damages to Zespri in the sum of $12,081,150 – appeal allowed to that extent. Sacha Jugum is a senior solicitor at Brookfields and editor of The Bulletin ■ 09
Photo: AndrewJohnson / Getty Images
payable when there is an ‘epidemic’ and the tenant is ‘unable to gain access to all or any part of the leased premises to fully conduct their operations from all or any part of the leased premises, because of reasons of health or safety related to the epidemic’. There are a number of issues that landlords and tenants will need to consider if the statutory amendments are passed into law.
Will the proposed new clause apply to leases with existing rent abatement provisions?
PROPERTY LAW
Good news for tenants in proposed Covid rent reduction With one limited exception, the proposed new clause gives no guidance as to what is to be taken into account when trying to decide what constitutes a ‘fair proportion’
10
Jane Holland, Morgan Powell & Justin Maloney Many commercial leases allow for an abatement of rent because of restrictions put in place to combat Covid-19. One example is clause 27.5 of the ADLS lease. But what about leases without such a clause? The government has announced a proposed new law that would imply a similar term into these leases.
Background The government-ordered lockdowns resulting from Covid-19 have significantly impacted both tenants and landlords. During last year’s lockdown, the government proposed statutory amendments to insert a new contractual term into existing leases, which would give tenants the right to claim rent relief. We discussed those proposed amendments in our earlier update. The government did not proceed with the proposed amendments last year, apparently as a result of a disagreement between the two coalition parties, Labour and New Zealand First. With a new lockdown this year, the government has again announced proposed statutory amendments to leases. However, they differ significantly from last year’s proposal and appear to more closely align with clause 27.5 of the ADLS lease. In particular, the proposed new clause provides that a ‘fair proportion’ of rent and outgoings will cease to be
One of the concerning features of last year’s proposal was that it would also apply to leases with existing rent abatement provisions, such as clause 27.5. That is no longer the case. Instead, the proposed new clause will apply only to leases without an existing ‘no access in an emergency’ clause. In our view, this means tenants and landlords using the current ADLS lease will be unaffected by the proposed amendment.
Will the proposed new clause benefit all ten ants? Last year’s proposed clause would have applied only to a ‘qualifying tenant’ (that is, a New Zealand-based tenant with fewer than 20 fulltime employees) and where the tenant’s business had suffered a ‘material loss of revenue’ because of ‘restrictions put in place to combat Covid-19’. By contrast, this year’s proposal contains no such qualifications. It is not limited to small, New Zealand-based tenants nor to tenants operating certain types of business. So it is implied in both office and retail leases, for instance.
Will the proposed new clause apply where lan dlords and tenants have already agreed an abatement? Several landlords and tenants may have already agreed on an abatement of rent and outgoings, whether or not there is an existing ‘no access in an emergency’ clause in their lease. The proposed new clause will not apply if a rent variation agreement has been entered into where at least part of the reason for the variation was an inability to access the premises because of the epidemic. However, that agreement must be entered into before the proposed new law comes into force.
What period does the proposed new clause apply to? The proposed new law is unclear as to the period for which rent and outgoings may be abated. The key date in the draft
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Oct 1 2021 Issue 34
Continued from page 10
bill is 28 September 2021, although the government has said it would welcome submissions on this date. The proposed new clause would apply in respect of a rental period ‘all or any of which’ is in the period starting on 28 September 2021. In cases where rent is by calendar month, that suggests the proposed new clause would apply for September’s rent and outgoings, but not for August. However, that is not entirely clear. The new law will not apply to previous periods of lockdown that have occurred in New Zealand.
What triggered the new clause?
The proposed change leaves landlords with existing leases locked into a new clause that they never agreed to
The proposed new clause will apply when there is an ‘epidemic’ (which is currently the case), and the tenant is ‘unable to gain access to all or any part of the leased premises to fully conduct their operations from all or any part of the leased premises, because of reasons of health or safety related to the epidemic’. This language is close to that used in clause 27.5, but not identical. It is unclear why the government has chosen to use different language and whether that simply reflects a different drafting style, or whether the proposed new clause was intended to be more beneficial to a tenant.
If the proposed new clause applies, how much abatement is the tenant entitled to? The proposed new clause provides that a ‘fair proportion’ of rent and outgoings will cease to be payable, and this amount ‘will be agreed’ by the landlord and tenant. However, with one limited exception, the proposed new clause gives no guidance as to what is to be taken into account when trying to decide what constitutes a ‘fair proportion’. This is the same language used in clause 27.5 of the ADLS standard form lease. However, that language has caused significant debate as to what factors must be taken into account in assessing the rent abatement. We have discussed that in our earlier update here. The government’s proposals last year set out several factors to be taken into account in assessing a ‘fair proportion’, including the impact on the tenant’s business, the landlord’s mortgage obligations, the parties’ respective profits in recent years and the parties’ ability to survive financially. None of these factors is repeated in this year’s proposed new clause which instead leaves a ‘fair’ abatement for landlords and tenants to work out.
Have the courts given any guidance on what is ‘fair’? We do not have any guidance from the courts as to how to assess fairness, as the ADLS lease containing clause 27.5
requires the parties to submit any dispute to arbitration, which is a private dispute resolution process. Although the meaning of clause 27.5 has been considered in arbitrations, those decisions are not publicly available. The same requirement will also apply to the proposed new clause. It will require all disputes to be resolved by arbitration.
Can landlords and tenants contract out of the proposed new clause? The proposed new clause is being inserted into Schedule 3 of the Property Law Act. That schedule sets out the clauses implied into leases. As the Property Law Act allows parties to contract out of those implied provisions, the proposed new clause can also be excluded by agreement between the parties. However, the proposed statutory amendments also provide that the proposed new clause cannot be excluded by a lease provision that excludes the Schedule 3 conditions if that agreement was entered into before 28 September 2021. In other words, parties can contract out of the proposed new clause only if they agree to do so after 28 September 2021.
Comment When it proposed to amend the Property Law Act last year, the government acknowledged its proposal went ‘against the legal principle of sanctity of contract’. This was because, as the government observed, the proposal ‘would add contractual terms and obligations to leases that the parties did not mutually agree’. The same observation applies to the new proposed amendments. While parties are free to exclude the implied clause from new leases, the proposed change leaves landlords with existing leases locked into a new clause that they never agreed to. While landlords will be frustrated by the proposals, tenants are likely to welcome them, particularly in circumstances where they have been impacted by the lockdown and unable to negotiate an outcome with their landlord. It is, however, surprising that the government has not taken the opportunity to give more guidance as to what is meant by a ‘fair’ reduction in rent and outgoings, given the number of disputes that have arisen under similar clauses in existing leases. The government says the proposed amendments will go through a ‘short select committee’ process, with the government specifically inviting submissions about when the rent abatement provisions should become effective. It remains to be seen if the government will make any changes after that process. Jane Holland is a partner at Bell Gully; Morgan Powell is a senior associate and Justin Maloney is an associate at the same firm ■ 11
FEATURED CPD
FINAL NOTICE
COVID-19 IMPACT CONSTRUCTION
The construction landscape amid Covid-19 Live Stream 2 CPD hrs Tuesday 5 October 4pm – 6pm Presenters Geoff Hardy, partner, Martelli McKegg and Shanti Frater, partner, Simpson Grierson
The impact of Covid-19 on the construction industry landscape is significant. Pandemic restrictions and precautions have seen, and will continue to see, serious and long-lasting implications for current and future construction projects. This seminar outlines the impact of the global pandemic and pandemic-related restrictions on both residential and commercial construction projects, and addresses the various contractual, legal and commercial issues and challenges that have arisen as a result.
FIND OUT MORE
Navigating defective building litigation
In Person | Live Stream 2 CPD hrs Tuesday 19 October 4pm – 6.15pm Presenters Andrew Hough; Michael Thornton; Shyrelle Mitchell and Kiri Harkess Chair Geoff Hardy, partner, Martelli McKegg
LIABILITY CLAIM DEFECTS
IN PERSON
New Zealand’s building boom over the decades has generated a multitude of claims over poor workmanship. Buildings that remain unrepaired, or are the subject of faulty remedial work, nevertheless continue to be bought and sold. This seminar provides a guide to navigating defective building disputes (from the perspectives of both counsel for plaintiff and defendant) having regard to current issues, and in the context of recent and key case law. LIVE STREAM
Medically assisted dying DEATH CAPACITY PROCESS
In Person | Live Stream 2 CPD hrs Wednesday 20 October 2pm – 4pm Presenters Grant Illingworth QC; Richard McLeod; Dr Jeanne Snelling and Dr Jane Casey IN PERSON
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The End of Life Choice Act 2019 comes into force on 6 November 2021. Hear from our panel of lawyers, academics and a psychogeriatrician who will unpack the Act and the corresponding process, offer insights into its implementation, consider capacity and other clinical challenges, and outline some of the uncertainties, red flags and thorny issues. Chair Professor Kate Diesfeld, Professor of Law, AUT and Chair, AUT Ethics Committee
LIVE STREAM
Oct 1 2021 Issue 34
adls.org.nz/cpd
Limitation: a map for the minefield
Webinar 1.25 CPD hrs Tuesday 26 October 1pm – 2.15pm Presenters Philippa Fee, partner, Fee Langstone and Tim Rainey, barrister, FortyEight Shortland
cpd@adls.org.nz
09 303 5278
This webinar will provide a map for the limitation minefield: discussing the key aspects of limitation law from the Limitation Act 2010 and elsewhere, which can trip up even the most seasoned litigators.
LEGISLATION APPLICATION ISSUES
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Understanding the overseas investment rules REFORMS NATIONAL SECURITY INTERACTION
Webinar 1.5 hrs Thursday 28 October 1pm – 2.30pm Presenters Pedro Morgan – lead advisor; Paul Wrigley – manager, Monitoring and Intelligence and Andre Baldock – senior investigator (All from the Overseas Investment Office)
Leading your career Wellington
This session will cover: An overview of the overseas investment regime and the reforms. The national security and public order notification regime. How legal professionals can interact with the Overseas Investment Office and the regime. It will be of interest to property lawyers, commercial lawyers, general practitioners and immigration lawyers and advisors.
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Workshop 8 hrs Thursday 28 October 8.45am – 5pm Facilitators Miriam Dean QC and Liz Riversdale, Catapult
LEADERSHIP CONFIDENCE REPUTATION
Exclusively for women Lawyers with 6+ years’ PQE. Take charge of your career and realise your underlying potential. This practical, interactive one-day workshop, led by one of New Zealand’s top QCs and one of New Zealand’s senior leadership experts, will arm you with resources, self-confidence and focus to apply immediately to your role and to enhance your future career.
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CPD IN BRIEF
‘Court’ by forensics
Valuation disputes in family property cases
Workshop 4 hrs Saturday 30 October 9am – 1.15pm Presenters Tom Coyle, managing director, Forensic Insight Ltd and Allie Coyle, director, Forensic Insight Ltd
Webinar 1 hr Wednesday 3 November 12pm – 1pm Presenter Marnus Beylefeld, director, Sapere Forensic & Valuation Chair Brian Carter, barrister, Bastion Chambers
Forensics never goes away. It’s everywhere and every contact leaves a trace. This workshop will take you behind the scenes as a crime scene investigator, so you get a greater understanding of what type of evidence is preserved from the scene and used effectively in court. Understand the importance of chain of evidence and get an insight into how to deal with expert forensic witnesses. Numbers strictly limited FIND OUT MORE
Presented by an expert in valuation, litigation support and forensic accounting, and with commentary from a family law barrister, this webinar will provide insights into basic valuation theory, principles and methodologies, and its application to family property law.
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Burning Issues Forum 2021
Forum 2 hrs Tuesday 9 November 4pm – 6pm Presenters Philip Skelton QC; Mere King; Liz Coats; Shelley Kopu and Rosemary Wooders
Cast aside your scarf and hat and warm yourself at the boiling vat that is the Burning Issues Forum 2021. Come see the flickering fangs of orange torch the scorching cauldron’s bottom! Legislation, reinstatement, tikanga and name suppression are some of the scalding hot topics that will be served, crackling and steaming, at this, our annual inferno. Chair Rachael Judge, senior associate, Simpson Grierson
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Towards sustainability: the role of the law firm
In Person | Live Stream 2 hrs Tuesday 16 November 4pm – 6.15pm Presenters Debra Dorrington; Garth Sinclair; Nicole Xanthopol; Mary Heath and Hugo Miller
A thriving, resilient, safe and ultimately sustainable world is an enticing prospect. It’s also an imperative. What responsibilities do lawyers and law firms have to help bring about that future? This session is aimed at all legal professionals, particularly partners/principals, directors and practice/office managers in small to medium sized firms, and barristers.
IN PERSON
LIVE STREAM
Class and Funded Litigation: Knowing your Professional Obligations Wednesday 17 November | Seminar | 2 CPD hours Visit adls.org.nz for more information. 14
Oct 1 2021 Issue 34
Continued from page 05
On 15 September 2021, an open letter with more than 100 signatories was delivered to NSW Premier, Gladys Berejiklian. Signatories included heads of community law centres and the NSW Aboriginal Legal Service. The letter is headed A call to address unjust Covid-19 fines. One of the primary motivations for the letter was concerns ‘about the impact of Covid-19 fines on vulnerable people and communities in NSW’. The letter observes that as a result of excessive fines, people experiencing disadvantage already and suffering from the economic impact of Covid-19 risk being plunged further into debt.
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until 29 April 2022, applies in relation to the obligation to conduct CDD on nominee directors and nominee general partners. While law firms and other reporting entities should ensure compliance with this obligation from 9 July 2021, the DIA can exercise discretion as to how it responds to non-compliance and whether noncompliance will attract any adverse consequences during this transitional period.
Law firms acting as executors or administrators of estates A new exemption applies to services provided while carrying out the role of executor or administrator of an estate. When a law firm is acting in such a capacity, it will no longer have to conduct CDD and will be
The letter calls on the NSW government to ‘reduce the use of policing and fines to ensure compliance with public health orders and invest more heavily in non-punitive approaches’. It calls specifically for a reduction in the excessive levels of the fines. The letter continues: These new public health orders have been introduced and amended at a rapid pace. Their legal elements are complex and difficult to understand. This has inevitably resulted in confusion among some members of the public about their rights and responsibilities... Sound familiar? In terms of the impact on the fines on the criminally over-represented Aboriginal community, the letter states:
The excessive use of fines against Aboriginal and Torres Strait Islander people and communities in NSW also has the potential to further entrench disadvantage and exacerbate negative relationships between Aboriginal communities and the police. The letter concludes with the rather blunt statement that ‘we cannot fine our way out of the pandemic’. Our government would do well to heed this warning. All the signals are that the proposed fees and fine hikes will be counter-productive and do more damage than good. ■
exempt from all AML/CFT obligations in relation to those services, except those relating to suspicious activity reporting and record keeping.
another reporting entity, the law firm is exempt from all CDD requirements and is required to comply only with the suspicious activity reporting and associated record keeping obligations.
Law firms providing services to executors or administrators of estates Where a law firm provides services to an executor or administrator of an estate (but is not acting in that capacity itself) and the services are captured by the Act, then the law firm is exempt from the requirements to verify the source of wealth/source of funds if conducting enhanced CDD on the executor/ administrator and is not prohibited from establishing a business relationship with the executor/administrator if CDD cannot be conducted. Where a law firm provides services to an executor or administrator of an estate, such services are captured by the Act and the executor/administrator is
Nathan Batts is a senior associate at Haigh Lyon Lawyers ■
Acting as trustee of a family trust Previously, in some circumstances, a lawyer acting as a trustee of a family trust was not a reporting entity. This regulation has been revoked. Now, where a law firm provides services in its capacity as a trustee of a family trust and these services are captured by the Act, the firm will always be subject to the requirements of the Act, including the CDD requirements. ■ Sarah Kelly is an associate at Dentons Kensington Swan ■
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WILL INQUIRIES
Briefs Tax rule clarified Six months after announcing a raft of tax law changes affecting both homeowners and property investors, the government this week said owners of new builds will be exempt for 20 years from the rules preventing investors from deducting mortgage interest as an expense when paying tax. The 20 years begins on the date the property’s code compliance certificate is issued although the exemption will apply only to properties which receive their certificate after 27 March 2021 – the date the new rules were announced. The initial purchaser and any subsequent purchasers are entitled to the exemption. The exemption also applies to prefabricated houses and conversions of existing s dwellings into multiple dwellings. Since the changes were announced in March, property owners have been urging the government to clarify its definition of a ‘new build’. The rule change is set out in a Supplementary Order Paper connected to a tax bill that has just had its first reading. The government hasn’t ruled out further changes as the bill passes through the select committee process. Both National and Act say they will reverse the changes if they become the government. n
Cruickshanks Solicitors Privy Council Agents • • • • • •
Probate and resealing Property (Relationships) Act 1976 agreements Agency litigation Sole representative of overseas office, inter company transfers and work permits generally Property UK and European investment China network connections and representation
10 Bentinck Street, London W1U 2EW Tel: (0044) 020-7487 4468 • Fax: (0044) 020-7487 5466 • Email: john@lawco.co.uk www.cruickshanks.co.uk • www.lawco.co.uk
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. LawNEWS: The no-hassle way to source missing wills for $80.50 (GST Included) reception@adls.org.nz DX CP24001, Auckland 1140
ADLS, PO Box 58, Shortland Street, Fax: (09) 309 3726
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BROWN David John
NIKORA John Hone
• Late of 118 Fernhill Way, Oteha, Auckland 0632 • Widowed • Retired • Aged 80 / Died 18’09’21
• Late of the Republic of Ireland, • Formerly of New Zealand • Married • Company Employee • Aged 59 / Died 21’06’21
DYKE Warren George
THORNTON Dennis
• Late of 191 Morningside Road, Morningside, Whangarei 0110 • In a de facto relationship • Storeman • Aged 55 / Died 18’09’17
• Late of 12 Rahui Road, Greenhithe, Auckland 0632 • Single • Retired Public Servant • Aged 79 / Died 13’09’21
MUSGROVE Rosemary Joy
TUPOU Alexander Ngawini
• Late of Auckland • Aged 78 / Died 31’07’21
• Late of Rotorua • Social Worker • Aged 53 / Died 24’08’21
Harmans presents an exciting opportunity for a talented and ambitious litigation lawyer with approximately 6 years' post-admission experience. For more details visit us at: https://www.harmans.co.nz/about-us/current-vacancies-careers
P 03 3797 835 A 79-81 Cashel St, Central City, Christchurch 8011
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www.harmans.co.nz
Oct 1 2021 Issue 34
Commerical/Property Lawyers wanted
Chancery Chambers office for rent
After a change of scene? Come and work with us in lovely Wanaka!
Three office spaces are available in the heritage Chancery Chambers building on the corner of Chancery and O’Connell Streets.
We’re a law firm that empowers its people. Our flexible working environment is fluid, genuine, respectful, relaxed and our people come first.
Who are we?
We are astute legal strategists, problem-solvers and powerful advocates for our clients, pioneering a modern take on legal support.
12.27sqm net located on the fifth floor, internal facing. ■
The work we do is diverse and challenging. We get to work with some of the most interesting and successful people across the country and abroad. Community spirit is important to us. We actively support local arts and sporting events, and donate our time, expertise, and money to great causes.
21.16sqm net located on the fifth floor, consisting of two smaller adjoining offices, internal facing. ■
Who are you?
An associate or senior level lawyer with experience in commercial and/or property law looking to take the next step in your career.
33.71sqm net located on the third floor of the O’Connell Street side of building. ■
What's in it for you? The opportunity to grow with a firm that will support you and have your back, and we’ll help you build your personal brand too. We offer a competitive salary and relocation allowance will be considered for the right candidates.
Opex includes reception to greet clients/receive couriers, kitchen facilities, copy room access and use of shared meeting rooms. Please contact Krystal Marshall on (09) 303 5277 or krystal.marshall@adls.org.nz for more information
Applications close 10 October 2021 Forward your CV to hiring@aspiringlaw.co.nz or call Janice Hughes on 03 443 0911
Competition Law Update Thursday 18 November | 4.00pm - 6.15pm Focussing on restrictive trade practices, cartels, monopolisation, mergers and acquisitions, dealings with the Commerce Commission, and compliance programmes, our panel will use case studies to update you on law changes together with recent cases and examples, so you and your clients can proceed with best practice.
T 09 303 5278
E cpd@adls.org.nz
W adls.org.nz/cpd
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Bookstore A convenient, one-stop-shop for all your legal resources ADLS members, including student members, receive a 10% discount
Visit the online bookstore:
adls.org.nz/bookstore Phone:
09 303 5270 Email:
thestore@adls.org.nz
The ADLS Bookstore couriers nationwide. Or, browse in person at: The ADLS Bookstore Ground Floor Chancery Chambers 2 Chancery Street Auckland CBD
Evidence Law Update for Civil and Criminal Lawyers Wednesday 1 December | 4.00pm - 6.15pm Presented by two of the co-authors of the 2018 text Mahoney on Evidence: Act & Analysis, this seminar will focus on the current application of key sections of the Evidence Act 2006 in both the civil and criminal law jurisdictions.
T 09 303 5278
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E cpd@adls.org.nz
W adls.org.nz/cpd