LawNews - Issue 37

NEWS Oct 22, 2021 Issue 37

Inside ■ PROPERTY

Agreements need strong covid clauses P03-06

■ TRUST LAW

How the govt is hammering trusts P07

Bad covid clauses nobble

adls.org.nz

PROPERTY SETTLEMENTS

Contents 03-06 COVID-19 SETTLEMENT LITIGATION

Horror stories from clients with bad covid clauses

07 TAX CONSULTATION DISCLOSURE

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

The real reason behind the govt’s crackdown on trusts

Editor: Jenni McManus Publisher: ADLS

08 OBLIGATION FEES CONSUMERS

Editorial and contributor enquiries to: Jenni McManus 021 971 598 Jenni.Mcmanus@adls.org.nz Advertising enquiries to: Darrell Denney 021 936 858 Darrell.Denney@adls.org.nz

High expectations: what the Moola settlement reveals about lending and consumer responsibility

09 HEALTH FAILURE BUREAUCRACY

Letter to the editor: another response to Warren Pyke

All mail to: ADLS, Level 4, Chancery Chambers, 2 Chancery Street, Auckland 1010 PO Box 58, Shortland Street DX CP24001, Auckland 1140, adls.org.nz

03

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10-11 FEATURED CPD

Photo: sorbetto / Getty Images

12 CPD IN BRIEF

A punitive new disclosure regime is proposed for trusts.

Submissions close soon.

©COPYRIGHT and DISCLAIMER Material from this publication must not be reproduced in whole or part without permission. The views and opinions expressed in this publication are those of the authors and, unless stated, may not reflect the opinions or views of ADLS or its members.

Responsibility for such views and for the correctness of the information within their articles lies with the authors.

Cover: Ngampol Thongsai / EyeEm / Getty Images

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Oct 22 2021 Issue 37

COVID-19/PROPERTY

Bad covid clauses create havoc with property settlements Lawyers do need to consider their clients’ situations very carefully, especially if the property is not in the same alert level as one or both of the parties or if there is also an on-sale or purchase in a different region Diana Clement

Iva Wright

Tim Jones

Lawyers were taken largely by surprise during the first lockdown, he says. They had to be pragmatic and do their best to encourage their clients to be kind but the problems have not Property buyers and sellers are at risk of losing tens of been resolved and many covid clauses currently in circulation thousands of dollars thanks to inadequate covid clauses in their are not fit for purpose. sale and purchase agreements.

Even semi-standard clauses from the Real Estate Institute Even worse, there is no legal requirement for agreements of New Zealand (REINZ), published after the first lockdown in to contain covid clauses – although they are ‘strongly March/April 2020 and in the New Zealand Law recommended’ by REINZ – and some contain Society’s property law section in mid-2020, no covid clauses at all. Most of the issues have The purchaser often don’t marry up in part because they have arisen around settlement and the conditions may be been amended by individual lawyers. under which this can be delayed without threatening the As a result, buyers have found themselves penalty because of covid-related restrictions agent because unable to settle because pre-settlement on movement.

At present, there is no standard and they didn’t put a inspections or valuations are required by the bank in order to secure finance. Or the vendor universally accepted covid clause in sale and covid clause in has bought another property but is unable to purchase agreements. So real estate firms their agreement settle because the purchasers of his property and their lawyers are drafting their own and have not settled. Or covid alert levels mean the amending them to suit individual clients’ and it does vendors have been unable to move. needs. As a result, there are multiple covid ultimately land To complicate matters further, the clauses in the market, which may or may not at the feet of the properties, the purchasers and the vendor align when people are buying and selling in a might be in three different regions and at lawyers chain of transactions where the settlement of different alert levels, meaning they can’t cross one deal is contingent on another. provincial boundaries to do inspections.

But help is at hand. ADLS and REINZ are in “If covid puts the parties in a position where conditions the final stages of producing a standard covid clause. But it is still cannot be met, the contract goes into what I call ‘running up and several weeks away from being published as an addendum and down on the spot’,” Wood says. it will be even longer before it forms part of the standard ADLS/ “The other overriding issue in a lot of these things - and it REINZ Sale and Purchase of Real Estate Agreement. comes from common law – is an obligation to settle. It’s also a Many buyers and sellers found themselves without covid specific provision in the agreement that you must settle. The clauses when the latest lockdown was announced on August 17. contract can only be cancelled if essential terms can’t be met.”

Others in property chains have found that the covid clauses on the sale don’t marry up with the purchase, says Auckland barrister Des Wood, a member of the ADLS Property Disputes Continued on page 04 committee.

03

Continued from page 03

delay settlement.

In the 2020 lockdowns, where both parties were willing, lawyers were able to wait until alert levels dropped to the point In limbo where travel associated with settlement could occur and the settlements could proceed.

Come lockdown on 17 August 2021, many buyers and sellers More complicated settlements have arisen in the latest who hadn’t sought legal advice found themselves with no covid lockdown and it will only get worse, says Wright. “Covid clause in their agreements, says property lawyer Iva Wright, restrictions and clauses are a real issue, with infection rates director at Cockcroft d’Young Moorhouse Limited Lawyers. going up and alert levels changing at a short notice – a minefield As with the first lockdown, many faced incredibly stressful for the unaware. Their wording has been situations that they had to suck up, she says. growing in size with every lockdown as new Even when most the country (bar Auckland Why should situations crop up.” and Northland) moved to level 3 on 31 August, the settlement Some clauses are now borderline unfair, she and then to level 2 on September 7, many says. “For example, why should the settlement buyers and sellers whose properties were in be deferred be deferred just because the other side’s different alert levels were stuck in a potentially just because lawyer is inconvenienced or not set up for costly limbo-land. the other remote settlements?

Buyers, especially those in a chain of sale side’s lawyer is “Or taking advantage for nefarious and purchase agreements, have been forced purposes, such as developers taking advantage to find bridging finance to enable settlement. inconvenienced of the fact that the buyers of new properties Those who cannot settle on due date face or not set up cannot inspect and, if they don’t, they forfeit hefty late-settlement penalties and risk losing for remote the right to seek compensation for defects their deposit or facing litigation. which they find only after they move in.

One vendor who spoke with LawNews settlements?

“In other words, many of these covid faced the prospect of expensive bridging clauses now go beyond what is needed to finance because the covid clause in her remedy the immediate difficulty.” agreement allowed the Auckland-based purchasers to delay settlement until they could legally cross Horror stories the regional border into the level 2 area where the property is located to do a pre-settlement inspection. Prior to the sale, and More examples are arising. Lawyer Rob Moore, of Moore Law, when Auckland was at level 1, the vendor conditionally bought says he had a client who was leaving Whanganui for Australia. another property. While that agreement had a covid clause, the The client had sold his Whanganui property and had an settlement provisions did not mirror those in the agreement for unconditional agreement on a property in Australia that didn’t the property she had sold and allowed for covid-related delays contain a covid clause. in only limited circumstances. The only way of fixing this was “The Whanganui settlement was delayed under the level 4 to renegotiate the covid clause so it aligned with the vendor’s restrictions in the agreement,” Moore says. “He was due to settle earlier agreement. But if the other side digs in and refuses to cotwo days into level 4. We were supposed to be transferring the operate, as sometimes happens, the result can be disastrous. funds directly to his Australian lawyer but couldn’t as we couldn’t Barrister Tim Jones, convenor of the ADLS Documents and settle. The Australian lawyer had to beg to have settlement Precedents sub-committee working on the new covid clause, extended and [my client] was charged penalty interest. Actually, cites the example of a first-home buyer featured in The New it then got even more complex as he couldn’t fly out when the Zealand Herald who couldn’t get finance because lockdown had prevented her from getting the valuation needed for the bank to Continued on page 05 approve her loan. In that case the vendor eventually agreed to In theory, if the buyer has an unconditional contract and can’t settle, they lose their deposit.

Rob Moore

Joanna Pidgeon

James Wilson

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Oct 22 2021 Issue 37

Photo: Rafael Ben-Ari / Getty Images

Continued from page 04

house was due to sell. But he was part of a chain, so we had to sort the settlement dates and he needed to fly his cats to Australia as well and we needed to sort it with the pet travel service.”

It was stressful for the client who was staring down the barrel of a huge loss. And it was also very stressful for the lawyers involved, Moore says.

Many lawyers and agents have struggled, says Jones. “The purchaser may be threatening the agent because they didn’t put a covid clause in their agreement and it does ultimately land at the feet of the lawyers.” settlement and/or work around the issues.

ADLS past president and director at Pidgeon Judd, Joanna Both Jones and Pidgeon say, however, that there have been Pidgeon, says one of the big issues has been off-the-plan examples of vendors, in particular, who have not been tolerant of contracts that were signed long before the spread of covid-19. the other party’s plight.

Builds can take several years and as a result there were no covid “Generally, it is where the vendors are being bloody-minded,” clauses in the contracts. says Jones. “Sometimes it’s impossible to find a solution unless Pidgeon has been consulted by other lawyers and has had a one party relents.” client of her own who was facing the situation of being unable to settle thanks to lockdown. “[Buyers] may have got preapproval of finance when they first signed up. But if they [have] low equity, Litigation inevitable a bank will require a valuation before they can settle. If there is Unfortunately there is no force majeure clause in the standard no freedom of movement, how can you get a sale and purchase agreement to free both valuer in there?” parties from liability or obligation because The question Developers or building companies are often of an extraordinary event such as pandemic, paying interest at developer lending rates, earthquake, or war. There is, however, a is ‘was it Pidgeon says. “In that situation, I encourage provision in the current agreement to set aside foreseeable by [developer clients] to share the costs and not a sum to be held pending resolution of any the agent at the charge penalty interest.” Paying more is not dispute. time that there always possible for first-home buyers who are It is inevitable, says Jones, that there will be maxed out, she says. “It’s nobody’s fault.” would be a covid litigation. “It’s just human nature. There will be The human toll on clients has been huge, people who have their contracts cancelled and lockdown?’

Wright says. Property purchases are stressful they have lost their $75,000 deposit.” at the best of times.

Buyers may be angry at their agents for not One of her clients had sold and was living including covid clauses, although they will need temporarily in a hotel at $300 a night until her new property to sue the seller, he says. “If the vendors are sued, they could settled. Then lockdown struck and the seller’s body corporate bring in the agent as a third party. The question is really ‘was it refused to allow the keys of her new property to be handed foreseeable by the agent at the time that there would be a covid over. The client found herself paying ongoing hotel bills that she lockdown?’ More likely one of the parties will complain to the couldn’t afford. She may endeavour to recover her costs from the REA (Real Estate Authority) over a breach of duty or failing to vendor, Wright says. The client had to get special permission to act competently as they should.” move during level 4 to cheaper accommodation.

In most cases, lawyers have been pragmatic and kind, Wood Continued on page 06 says. Working together, both sides have managed to delay 05

One of the issues for buyers, sellers, lawyers and agents is that they have been working with multiple different clauses since the first lockdown. As a matter of expediency, the New Zealand Law Society’s Property Law Section issued a clause in mid-2020, says Jones.

REINZ’s clause, dating from last year, has been updated several times since, says REINZ general counsel Melisa Beight.

Various real estate agencies have had their own drafted. Over and above that, individual lawyers have tweaked clauses to suit themselves or their clients and sometimes this tweaking is done by real estate agents without reference to lawyers. The result can be clauses that are meaningless, unenforceable and may put vendor, who can do a Facetime inspection with the purchaser, is nonetheless unable to move out. But it might work if tenants can the client at risk. help where the new owner is taking over the tenancy.

The proliferation of covid clauses has led to major issues for The new ADLS/REINZ clause will not cover all eventualities, buyers and sellers. Jones hopes the publication of a standard says Pidgeon. It will sometimes need to be covid clause within the ADLS/REINZ sale and modified. It covers only settlement and not purchase agreement will largely solve this If covid puts issues relating to fulfilling conditions or preproblem. An addendum will be published later the parties in a settlement inspections. “Lawyers do need to this month or early in November which should position where consider their clients’ situations very carefully, improve the situation. The updated agreement, conditions especially if the property is not in the same when published, will include the covid clause alert level as one or both of the parties or if as standard. ADLS has not yet announced cannot be met, there is an on-sale or purchase in a different whether the new draft will become the 11th the contract region. edition. goes into what I “The clause doesn’t cover the situation of “The new clause draws on the [NZLS] different alert levels. You will need to add that Property Law Section and the REINZ clauses,” call ‘running up he says. The clause received a final proofread and down on the to the clause. It’s like putting together pieces of a jigsaw.” last Friday and now needs final approval from spot’ Finally, there is a major issue around delay ADLS and REINZ. when it comes to doing geotech reports and “One of the problems with an addendum other investigations that are often part of the is the [lawyer] drafting an agreement has to pre-settlement due diligence process. remember to put it in. In the fullness of time, we will release a And even with a standard covid clause, the backlog in new edition and the [other clauses] will become redundant.” property valuations means many buyers are still unable to secure Over time, covid clauses have moved away from referencing finance and settle. particular lockdown levels and focus instead on the ability James Wilson, head of customer experience at Valocity, says for free movement. The new ADLS/REINZ clause takes that immediately after the level 4 lockdown ended in Auckland, there approach, says Jones, and it doesn’t identify any particular was a backlog of seven to 10 working days for a valuation. That conditions that need be satisfied. “We decided not to cherry had reduced by Friday of last week to five to six working days. pick.”

Lawyers and mortgage brokers need to ensure that sufficient Every situation is different. For example, some buyers might working days have been included to enable a valuation to be be able to do a pre-settlement inspection via Facetime or done, Wilson says. ■ other video apps, Pidgeon says. That might not help if a third party cannot visit the property on the buyer’s behalf or if the 06

Photo: alexsl / Getty Images

Continued from page 05

Oct 22 2021 Issue 37

TRUSTS/TAX

Govt ups the ante against trustees and beneficiaries The real reason for wanting to get so much information about trusts appears to be a wish on behalf of the present government to tax people associated with trusts in ways they have never been taxed before Anthony Grant Last December, the government enacted powers giving the IRD the right to acquire a huge amount of information about trusts.

In response, the IRD published an Official Information Issues Paper a few days ago. The public has been invited to make submissions on it by 15 November 2021 – a deadline so tight it suggests the IRD doesn’t want many submissions.

The IRD has also issued a 46-page ‘operational statement’ entitled Reporting requirements for domestic trusts and the deadline for comment on this paper is 30 November 2021.

The explanations the IRD has given for wanting huge amounts of information about trusts that are recorded in these reports is: ■ to gain insight as to whether the top personal tax rate of 39% is working effectively; and ■ to provide better information to understand and monitor the use of structures and entities by trustees.

The real reason for wanting to get so much information about trusts appears to be a wish on behalf of the present government to tax people associated with trusts in ways they have never been taxed before.

The IRD says its records indicate that about 180,000 domestic trusts report assessable income each year. Many of the people associated with these 180,000 trusts will be affected by the proposed disclosure requirements.

These are some of the changes the IRD wants to implement: ■ It wants trustees to prepare annual profit and loss statements and statements of financial position.

■ It wants to know who has settled assets on trusts.

■ It wants to know who has received benefits from trusts.

■ It wants ‘financial information relating to non-business activity’ of trusts.

Anthony Grant

The notion that all this information is required to ‘gain insight into whether the top personal tax rate of 39% is working effectively’ is absurd

■ It wants to know the amount and nature of each settlement that is made on a trust ‘at less than market value’.

■ It wants details of ‘minor services that are incidental to the activities of the trust’ which the trust hasn’t paid for.

■ It wants ‘the name, date of birth, tax residence, tax file number, taxpayer identification number of each settlor who makes a settlement on the trust’ (you will see in a moment that the term ‘settlor’ is given a much wider meaning than is used for that term in the Trusts Act 2019).

■ It wants the same details ‘of each person having a power under the Trust to appoint or dismiss a trustee, to add or remove a beneficiary, or to amend the trust deed’.

■ It wants a trust’s accounts to record ‘all (interest and non interest bearing) loans to persons associated with the trust…”

■ It wants the value of real estate assets to be given in a trust’s annual financial statements.

■ It wants the market value of buildings owned by a trust to be recorded in a trust’s annual financial statements.

■ It wants the list of a trust’s liabilities to include ‘all (interest and non-interest bearing) loans from persons associated with the trust…’

■ The annual statement of financial position is to record the trust’s equity in three components – the owners’ equity, drawings and current account year-end balances.

■ If services are provided to a trust at less than market value, the difference is to be deemed as interest on a beneficiary’s current account.

■ If trust property (eg, a house) is ‘enjoyed by the beneficiary… for less than market value’, the sum is to be recorded as a drawing in favour of the beneficiary.

■ If services are provided to the trust at less than market value, the value of the services is to be recorded as a settlement on the trust.

■ A ‘settlor’ of a trust is to be deemed to include ‘a person who at any time provides, for less than market value, services to the trust for the benefit of the trust that are more than incidental to the operation of the trust’.

■ ‘Any beneficiary who is owed an amount by the trust that exceeds $25,000 at the end of the income year and is not

Continued on page 13 07

FINANCIAL SERVICES

Lending responsibility to consumers: insights from the Moola settlement Moola agreed to credit or refund the affected customers the difference between the fee charged and a reasonable fee as calculated by the commission, involving repayment to customers of approximately $2.8 million

Alix Boberg & Olivia Woolford A recent Commerce Commission settlement has provided helpful insights into the commission’s view of responsible lending obligations, and offers timely guidance to lenders who are updating and enhancing their responsible lending processes in anticipation of the more prescriptive regulations coming into force on 1 December 2021.

Alix Boberg

Olivia Woolford

08

Breach of obligations On 6 October 2021, the Commerce Commission announced it had entered into a settlement with Moola.co.nz Limited, an online short-term high-cost lender, after Moola admitted breaches of its responsible lending obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCFA).

Moola provides high-cost short-term personal loans of up to $5,000 through the moola.co.nz and needcashtoday.co.nz websites.

After an investigation by the Commerce Commission, Moola admitted it failed to comply with its responsible lending obligations for loans to 50 borrowers between 6 June 2015 and 30 November 2017.

In particular, Moola admitted it failed to make reasonable inquiries of borrowers as part of its suitability and affordability assessments, failed to responsibly advertise its provision of credit and failed to treat borrowers reasonably and ethically when breaches of loan agreements occurred.

These are all breaches of the CCCFA, the legislation governing those who lend money to consumers in New Zealand.

The terms of settlement shed light on the commission’s view of the standard required of lenders under the current CCCFA. This will continue to remain relevant, even after new responsible lending regulations come into force on 1 December 2021.

The admitted breaches include that: ■ No loan purpose obtained if borrowers selected “other” purpose from drop-down menu.

During the loan application process, Moola did not offer borrowers the opportunity to give a full description of the reason for their loan. Borrowers were required to select the purpose of their loan from a finite list of options via a drop-down menu. Where borrowers indicated the purpose of their loan was ‘other’, Moola did not follow up or obtain more information. Moola admitted that contrary to its obligations under the CCCFA, it did not consider the borrower’s purpose in obtaining a loan.

■ Lesser loan amounts approved and advanced without consideration of suitability.

Moola approved loans for less than the amount sought by prospective borrowers and transferred the loan money to those borrowers without inquiring whether the lesser amount would meet the borrower’s requirements and objectives.

■ Sole reliance on bank transaction data to determine loan affordability.

Moola relied solely on bank transaction data provided by prospective borrowers in order to fulfil its affordability assessment which were required to determine whether a borrower could afford to make loan repayments without suffering substantial hardship. It did not check whether the borrower had additional sources of income not deposited into the bank account or other regular expenses not paid out of that account. This led to instances of Moola not accurately identifying and categorising a borrower’s income and

Continued on page 13

Oct 22 2021 Issue 37

NEWS Oct 8, 2021 Issue 35

Letters to

Inside ■ COVID-19

The tyranny of experts P03-05

■ RENT RELIEF

ADLS challenges Justice Minister Kris Faafoi

A pandemic

OF EXPERTS

P13

the editor

adls.org.nz

How the govt and Ministry of Health have failed New Zealanders The letters in LawNews issue 36 critical of Warren Pyke’s An epidemic of experts: time for the tyranny to end prompt me to make some observations.

Although, contrary to its own claims, the government did not ‘go early’ in its 2020 response to the pandemic, its failure to act when warning signs started sneaking out of Wuhan was not much different to many other governments. My article about this was published by NBR on 12 May 2020.

To its credit, when it acted, the government did ‘go hard’. But its failure to take advantage of the respite the successful lockdowns had afforded the country and to prepare for the future is inexcusable. In this, its major mistake was to rely on the Ministry of Health and, in particular, the directorgeneral who was given superstar status, the pre-eminent ‘expert’.

This mistake was at least in part a consequence of a profoundly important governance failure. A group of cabinet ministers with adequate governance expertise would have received advice from all relevant officials/ advisers, interrogated them to test and, if necessary, challenge their advice, send them away and then decide, taking responsibility and accepting accountability for their decisions.

Instead, Dr Bloomfield was given oracle status and, according to recent revelations from the Prime Minister, has been participating in the decisionmaking process instead of being an advisor whose advice may or may not be accepted and about whom ministers could have free and frank discussion in his absence before making their decisions.

My experience of the Ministry of Health, intermittently over decades, casts it as the worst type of bureaucracy, displaying protectiveness of

itself and a sublime belief in its own omniscience and superiority, secrecy, ineffectiveness, inefficiency and the use of power as a substitute for enterprise and innovative thinking.

The most recent example of the last characteristic is the pernicious attempt to obtain statutory power to expropriate not just the goods but also the services of testing laboratories (forcing them to work for the government) in the amending covid legislation, before a select committee as I write this.

It is not surprising, therefore, that the ministry’s preparations during 2020 and earlier 2021 have been characterised by shocking neglect.

Cabinet has not had what it takes to insist upon disaster contingency planning with the result that all the good work done last year has been squandered and, today, New Zealanders are being subjected to the loss of freedoms Warren Pyke wrote about. He is in the excellent company of Lord Sumption who has been outspoken about the destruction of liberty in the UK. The ministry’s disaster contingency planning failure now is a continuation of its neglect since the passage of the Epidemic Preparedness Act 2006. As I discussed in my NBR article, it is characteristic of New Zealand bureaucracies that they give themselves power, often do not do anything or are ineffective in the implementation of what they have been empowered to do and then seek more power as the answer to the problems their own hubris and neglect have caused or contributed.

Gary Judd QC Auckland ■

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FEATURED CPD

Burning Issues Forum 2021 LEGISLATION JURISDICTION COVID-19

Forum 2 hrs Tuesday 9 November 4pm – 6pm Presenters Tim Clarke, partner, Bell Gully; Gillian Service, partner, MinterEllisonRuddWatts; Bronwen Newcombe, director, Davenports Law and Shelley Kopu, principal, Shelley Kopu Law

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Limitation: a map for the minefield LEGISLATION APPLICATION ISSUES

FINAL NOTICE

Webinar 1.25 CPD hrs Tuesday 26 October 1pm – 2.15pm Presenters Philippa Fee, partner, Fee Langstone and Tim Rainey, barrister, FortyEight Shortland

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REFORMS NATIONAL SECURITY INTERACTION

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Understanding the overseas investment rules Webinar 1.5 hrs Thursday 28 October 1pm – 2.30pm Presenters Pedro Morgan – lead advisor; Paul Wrigley – manager, Monitoring and Intelligence; Andre Baldock – senior investigator and Sherlene Ho – senior solicitor (All from the Overseas Investment Office)

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.

FIND OUT MORE

Oct 22 2021 Issue 37

adls.org.nz/cpd

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Workshop 4 hrs Saturday 19 February 9am – 1.15pm Presenters Tom Coyle, managing director, Forensic Insight Ltd and Allie Coyle, director, Forensic Insight Ltd

cpd@adls.org.nz

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Valuation disputes in family property cases VALUATION PRINCIPLES METHODOLOGY

Webinar 1 hr Wednesday 3 November 12pm – 1pm Presenter Marnus Beylefeld, director, Sapere Forensic & Valuation Chair Brian Carter, barrister, Bastion Chambers

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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Fitness to stand trial: a practical guide PROCESS PRACTICE PERSPECTIVES

Live Stream 2 hrs Thursday 11 November 4pm – 6.15pm Presenters Judge Claire Ryan; Ish Jayanandan; Dr Jeremy Skipworth; Sally Kedge and Dr Kelly Howard Commentator Justice Collins Chair Marie Dyhrberg QC

A practical guide to approaching fitness issues: Can you determine when fitness to plead might need to be considered? If you think it might be an issue, do you know what to do and what reports to get? How does the psychiatric report relate to the communication assistant assessment? Do you always need to do both? Which do you do first? What do you do with the reports?

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CPD IN BRIEF

Towards sustainability: the role of the law firm

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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?

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Class and funded litigation

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The rapid growth in class and funded litigation has exposed a range of professional responsibility issues and challenges not encountered in regular litigation. This seminar is intended to help lawyers navigate this difficult and potentially perilous field, identifying and avoiding professional issues before they become a problem.

IN PERSON

Competition law update

Evidence law update

In Person | Live Stream 2 CPD hrs Thursday 18 November 4pm – 6.15pm Presenters Alan Lear; Kim Francis; Matthew Sumpter; Sarah Keene; Ben Hamlin Chair Dr Mark Berry, barrister

Live Stream 2 CPD hrs Wednesday 1 December 4pm – 6.15pm Presenters Scott Optican, Associate Professor, University of Auckland and Jack Oliver-Hood, barrister

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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.

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Visit adls.org.nz for more information.

LIVE STREAM

Oct 22 2021 Issue 37

Continued from page 07

The notion that all this information is required to ‘gain insight into whether the top personal tax rate of 39% is working effectively’ is absurd.

The information can be wanted only because the IRD and the present government want to tax people who lend money to trusts at less than market rates, people who get benefits from trusts, people who provide services to trust assets and people who have powers in relation to trusts, as they have never been taxed before.

Readers are encouraged to obtain the IRD’s operational statement (quote reference EDO235) and send feedback to public.consultation@ird.govt.nz before 15 November 2021. ■

paid interest at the prescribed or market rate’ is deemed to be a settlor.

■ A distribution from a trust will be deemed to have been made ‘in relation to non-cash distributions such as the provision of services, interest-free loans, or the use of assets by the beneficiaries at no cost’.

■ If a trust-owned rental property is made available to a beneficiary, the trustees must record as a beneficiary distribution at the market rent of the property or the distribution at cost.

■ When a debt is forgiven due to natural love and affection, the sum involved is to ‘constitute a distribution to the beneficiary’.

Anthony Grant is an Auckland barrister specialising in trusts and estates ■

Continued from page 08

expenses. Moola admitted a breach of its obligation to ensure loans were affordable.

■ Advertising encouraged repeat and unsustainable borrowing on last day of loan.

Moola engaged in direct advertising through text messages and emails offering additional loans to current borrowers, including communications sent on the day the borrower’s last payment was due and encouraging them to reapply.

Its advertising did not warn borrowers that high-cost credit agreements should not be used for long-term or regular borrowing and encouraged borrowing without regard to suitability.

■ Moola treated borrowers unreasonably and unethically once in default.

When a borrower defaulted on a repayment, Moola attempted to telephone the borrower up to three times per day for 10 working days, in addition to sending daily emails and text messages. If the borrower did not respond, Moola sent daily emails and texts to the borrower for up to 50 days, advising them that their repayment had been dishonoured and that payment was due.

Consequences of breaches In addition to admitting breaches of its responsible lending obligations, Moola has agreed with the commission to refund the interest and fees paid by affected borrowers on their loans.

Moola has also given undertakings to the commission: ■ To implement enhanced responsible lending policies in advance of the more prescriptive requirements coming into force from 1 December 2021; ■ Not to advertise their high-cost credit agreements without prominent risk warnings as to their suitability only for short-

term borrowing needs; and ■ Not to advertise high-cost consumer credit directly to borrowers in default or those who have entered two or more loans with Moola within the preceding 90 days.

Second settlement Moola had also entered in a settlement agreement with the commission earlier in 2021, where it admitted to charging borrowers unreasonable default, establishment and processing fees between February 2016 and July 2017 (also breaches of the CCCFA).

Moola agreed to credit or refund the affected customers the difference between the fee charged and a reasonable fee as calculated by the commission, involving repayment to customers of approximately $2.8 million.

The future After successive delays in implementation, from 1 December 2021 lenders will be required to comply with new prescriptive requirements when advertising to borrowers and when making inquiries as to the suitability and affordability of loans.

The commission has not signalled any grace period for enforcement of the new responsible lending regulations.

Rather, the messaging from Anna Rawlings, Commerce Commission Chair, is that lenders should be familiar with the new requirements and ensure they have processes in place to assist them to comply, once in force. ■

Moola’s advertising did not warn borrowers that high-cost credit agreements should not be used for long term or regular borrowing and encouraged borrowing without regard to suitability

Alix Boberg is a senior associate at Bell Gully and Olivia Woolford is a lawyer at the same firm. Bell Gully partner Sophie East and senior associate Richard Massey also contributed to this article. ■ 13

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Briefs

Apology and correction Due to a production error, the lead story (page 3) in last week’s LawNews (15 October) carried an incorrect byline. The story, Key criminal case underlines need to reform ‘three-strikes’ law, was written

by Jonathon Jones, the Equal Justice Project representative on the ADLS Criminal Law committee. A corrected version of issue 36 is now available on the ADLS website. We apologise for the error.

Lets talk! Have Covid-19 lockdowns made you rethink your plans to retire or move away from the practice of law? Do you have a loyal client base that you want to place in good hands? If so, we should talk. We are a small Auckland CBD practice. We do litigation, commercial, property and trust work. We would like to expand our client base. We are open to different arrangements to achieve this, at whatever pace suits you. If this sounds like you, please email us on letstalktoday5@gmail.com.

All replies will be treated with absolute confidentiality.

An end to tax havens?

Nearly 140 countries have agreed to the most sweeping overhaul of global tax rules in a century with an agreement that sets out a global minimum corporate tax rate of 15%.

The move is designed to curb tax The move is by multinationals and is designed to curb avoidance expected to raise an extra $US150 tax avoidance by billion annually. The agreement aims to prevent companies from multinationals exploiting low jurisdictions by and is expected establishing their operations in to raise an extra countries such as Ireland. It also $US150 billion tries to address the challenges posed by technology companies annually which register their intellectual property that drives their profits anywhere in the world. The implementation target is 2023.

WILL INQUIRIES

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

LawNEWS: The no-hassle way to source missing wills for $80.50 (GST Included) reception@adls.org.nz

ADLS, PO Box 58, Shortland Street,

DX CP24001, Auckland 1140

Fax: (09) 309 3726

( 09) 303 5270

Bad behaviour Parents in China whose young children exhibit ‘very bad behaviour’ or commit crimes could be punished under proposed new laws. A draft of the family education promotion law reveals that guardians will be reprimanded and ordered to go through family education guidance programs if prosecutors uncover bad or criminal behaviour in children under their care, CNN reports. The Chinese government has also cracked down on online gaming in youngsters, deeming it to be a form of ‘spiritual opium’.

BELLEN Felix Anthony Ho • Late of 6 Ronald Algie Place, St John’s, Meadowbank, Auckland • Motor mechanic • Aged 52 / Died 28’01’21

• Late of 3 Aldo Place, Clover Park, Auckland • Registered nurse • Aged 64 / Died 29’12’19

Trump sues

PINEAHA Paki Gene

XIN Qiang

• Late of 2 Scotts Field Drive, Takanini, Auckland • In a de facto relationship • Truck driver • Aged 52 / Died 28’06’21

• Late of Unit 209, 19 Rawene Road, Birkenhead, Auckland • De facto • Restaurant owner • Aged 31 / Died 07’10’21

In a bid to block the House select committee investigation into the January 6 insurrection and to keep records from his presidency secret, former US president Donald Trump has filed a lawsuit claiming executive privilege. The committee is investigating Trump’s actions before and during the siege of the Capitol and the court action is his latest attempt to squash subpoenas from the Democrat-controlled House. Meanwhile, a House panel has recommended charging Steve Bannon, a former Trump aide, with contempt for refusing to comply with a subpoena in the Capitol riots inquiry. ■

14

TALANOA Tupou Uluiki (a.k.a TALANOA, Tupou)

Oct 22 2021 Issue 37

SUBSTANTIAL SUBURBAN SOLE PRACTICE

Chancery Chambers office for rent

FOR SALE

Three office spaces are available in the heritage Chancery Chambers building on the corner of Chancery and O’Connell Streets.

• Highly profitable practice with exceptional turnover.

12.27sqm net located on the fifth floor, internal facing.

• Substantial Will, Estates and Trust base.

• Established for 50 years.

■

• Excellent residential and commercial conveyancing.

21.16sqm net located on the fifth floor, consisting of two smaller adjoining offices, internal facing.

■

• Strong relationship property and matrimonial practice.

• Principal plus two long-standing senior associates.

33.71sqm net located on the third floor of the O’Connell Street side of building.

■

• This would be a tremendous opportunity for a savvy practitioner to escape the risks, hassles and burdens of a city corporate firm.

• Possible flexible financial assistance to correct buyer.

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

• Principal available to work for appropriate time to assist to maximise transition.

Apply in confidence to stu@rccgroup.nz

Burning Issues Forum 2021 Tuesday 9 November | 4.00pm - 6.00pm Cast aside your scarf and hat and warm yourself at the boiling vat that is the Burning Issues Forum 2021. Attend and see the flickering fangs of orange torch the scorching cauldron’s bottom!

Given the continuing uncertainty with COVID-19, this year’s Burning Issues Forum will be livestreamed.

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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

Leading Your Career — Exclusively for Women Lawyers with 6+ years’ PQE Thursday 3 February | 8.45am - 5.00pm Facilitated by Miriam Dean QC and Liz Riversdale.

Take charge of your career and realise your underlying potential.

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