Winter 2011 In a Seashell: The Marine and Coastal Area (Takutai Moana) Act 201

In summary, the Act:

• applies to the area formerly known as the foreshore and seabed, which will be known in the future as the marine and coastal area,
• creates a common space in the marine and coastal area (the common marine and coastal area) which allows the interests and rights of all New Zealanders in the marine and coastal area to be recognised in law,
• does not affect existing private titles in the marine and coastal area,
• guarantees and, in some cases, extends existing rights for navigation, ports, fishing and aquaculture,
• provides tests for applicant groups to meet to demonstrate customary marine title in areas where they have had exclusive use and occupation since 1840 without substantial interruption.

This recognition will include the right to apply to the High Court (or negotiate an out-of-court settlement with the Crown) to seek customary marine title for areas with which groups such as iwi and hapu have a longstanding and exclusive history of use and occupation.

Similar to private (fee simple) title, customary marine title gives rights to: permit activities requiring a resource consent, some conservation activities, protection of wahi tapu, ownership of taonga tuturu (Maori objects) found in that space, and ownership of non-Crown minerals. It also gives the customary title holder the right to create a planning document setting out objectives and policies for the area.

Groups such as iwi, hapu and whanau may also be able to gain recognition and protection for longstanding customary rights which continue to be exercised. Their association with the common marine and coastal area in their rohe (home territory of a specific iwi) will also be recognised through a right to participate in conservation processes which formalise existing best practice in coastal management.

Sleeping on the Job

Spam Spam, Spam!

Changes to Property Owners’ Insurance

Snippets

New Partner

Our associate Sarah Jury became a partner of McLeods Lawyers at the beginning of this year.  We congratulate Sarah and wish her well.  Sarah’s specialities include family law and employment issues.

Many of us now have a growing collection of “digital assets” – personal information we have created and stored online as text and photos on social media websites, emails, blog posts and even avatars in online games.  Few of us have considered what will happen to our online information after we die.

Many wills note what should happen to a person’s “tangible” personal papers, letter and photographs.  If they are not mentioned in the will or if a person dies without a will, the executor makes this decision.  A problem could arise if someone dies leaving a collection of digital assets which are password protected or unknown to friends and relatives.

We recommend that if you are making a will, or reviewing your current will, you should consider what will happen to your digital assets.  The following simple check list is intended to identify key considerations and can be used for a discussion with your lawyer:

• Identify your “digital assets”.  What online accounts and information do you have stored?  Which ones are important to you or your family and friends?
• What do you want to happen to each of these assets after your death?
• Email:  should anyone have access to your email after your death? Do you want your email contacts notified of your death?
• Social media sites:  Do you want someone to notify your online friends of your death?  Do you want your profile removed?
• Other online sites:  Do you have photos or other personal information stored and which are not accessible anywhere else?  What do you want to happen to these?
• If you want your accounts to be accessible after your death, you might consider recording your details (passwords, login, location) in a safe place.  Note that providers of some services, such as internet banking, do not permit you to record some details.  Check the wording of the agreements you have.

You should check with your particular web service provider as to the terms of your access agreement in the case of your/or your loved one’s death.

For up to date advice on a new will, see Graeme McLelland (09) 407 0179 or Sue Wooldridge (09) 407 0174.

New Zealanders are considered generous people with approximately 1.3 million Kiwis regularly donating their time, money, goods and services to charities and other non-profit organisations. Our hearts go out to all affected by the Christchurch earthquake.  New Zealand is a village.  In an effort to further encourage and reward charitable giving the Tax Act 2007 increased thresholds for tax deductions and protocols have been implemented that make philanthropic endeavours easier and more convenient.

Deduction Incentives

Individuals All individuals who donate to charities will be able to claim a 33.33% tax rebate on cash donations. Previously, deductions for charitable donations could not exceed $630 regardless of the amount.

For example, Jack donates $3000 to charities and non-profit organisations in a year. His taxable income for the year is $35,000. Previously, Jack would only be entitled to a deduction of $630. The recent change now means that Jack is entitled to a rebate claim of $1000 being 33.33% of the $3000 donations.

Individuals are also able to donate direct from their pay to their chosen IRD approved charitable organisation(s). In doing so, individuals receive immediate tax credits which decrease their PAYE. Payroll giving is only possible where that service is offered by the employer, and is limited to employers who electronically file their monthly PAYE schedule.

Companies

All companies, even those with five shareholders or fewer, are eligible for tax deductions when they donate to approved charitable organisations. Previously, companies could only claim a rebate for up to 5% of their revenue. The 5% limit on deductions has now been removed and companies are entitled to deductions limited only by the company’s net income.

For example, in the 2008/2009 year ABC Ltd made charitable donations amounting to $10,000. Its income before taking into account the donations was $100,000. Previously, the deduction entitlement for the company would have been $5000.  From 2009 the company is entitled to a $10,000 tax deduction, which also reduces its taxable income to $90,000.

Maori Authorities

Incentives for Maori Authorities are much the same as that of companies. These authorities will be able to claim deductions for cash donations made to charitable organisations limited only by the amount of their net income.

Conclusion

Charitable and non-profit organisations play a crucial role in our communities and it is hoped that these changes will encourage and reinforce our culture of giving. The incentives place New Zealand on par with other OECD countries such as Australia and the United Kingdom in terms of tax relief provisions for charitable donations. The Government estimates that donations will increase by $300 million a year from 2009, which will make up for the $16.2 million of lost revenue due to the law change. Deductions currently apply only to financial donations and do not extend to donations of goods or services.

If your charitable organisation needs advice or information, contact Sarah Jury 407 0176 or Graeme McLelland 407 0179.

In our last newsletter we highlighted the need for insurance cover for risks of all kinds following the September 2010 earthquake in Canterbury.  This message has been underscored following the latest devastating Christchurch earthquake, major recent flooding in many parts of New Zealand and Australia, cyclone Yasi in Far North Queensland and bushfires in Perth.  These natural disasters have destroyed many properties and in light of this here are some key points to keep in mind if you are a tenant, landlord or home-owner.

Residential Tenancies

The Residential Tenancies Act 1986 allows both the landlord and tenant to terminate the tenancy following a natural disaster where a home has been so damaged that it becomes uninhabitable, no rent is payable until the home is reinstated so that the tenant can re-occupy it. Alternatively, the landlord or tenant may wish to terminate the tenancy. If a tenant wishes to terminate the tenancy, the landlord must be given at least two days notice. Where a landlord wishes to terminate the tenancy, the tenant must be given at least seven days notice. In situations where the home is partially damaged, the rent may be proportionately reduced or either party may apply to the Tenancy Tribunal for an order terminating the tenancy.

Commercial Leases

The Auckland District Law Society (ADLS) lease, the most commonly used commercial lease, allows for the termination of the lease following a natural disaster.  Where the damage renders a property uninhabitable, the lease is terminated immediately. Where the damage is partial, rent is reduced and the landlord must use insurance proceeds to repair damage as quickly as possible. If a building consent is unobtainable or the insurance payment is inadequate to allow restoration, the lease is terminated. If the premises are uninhabitable and require demolition or reconstruction, the landlord may cancel the lease giving the tenant 20 working days notice.

If there is no formal lease, the Property Law Act 2007 provides similar remedies in the case of specified natural disasters. Landlords may be able to recover rental losses through their insurance providers if they are covered for loss of rent and outgoings.

Residential Property

If an earthquake or specified natural disaster occurs, homes, personal possessions and land are automatically covered by the Earthquake Commission (EQC) provided home-owners have pre-existing private and fire insurance policies. The EQC provides cover for:

• damage caused to homes (up to $100,000);
• loss of most personal possessions (max $20,000); and
• loss of land value (based on a professional valuation.)

Any value over and above these amounts may be covered under existing private insurance policies. Claims to the EQC need to be made within 30 days of the damage occurring but claim periods may be extended to three months in certain circumstances.

Make sure your risks as a property owner or tenant are adequately insured; see Sue Wooldridge (09) 407 0174 or Sarah Jury (09) 407 0176.

Changes to the Holidays Act 2003

If a business has an annual ‘shutdown’ period and a public holiday (such as Christmas) falls on a day that an employee would normally work, the employee is entitled to be paid for the public holiday even though it occurs when the business is closed.

As of April 2011:

• employees will be able to exchange up to one week of annual holiday for cash provided their employer agrees to the request,
• employees will be able to transfer the observance of a public holiday to another predetermined working day with the employer’s consent,
• for employees who have irregular hours and/or pay, the payment for sick leave, bereavement leave, public holidays and alternative holidays will be based on the average gross earnings for the previous 52 weeks or whatever lesser period the employee has been employed,
• employers will be able to request proof of sickness within the first three days of an employee being away on sick leave. Employers are to cover reasonable costs, such as doctor’s fees.

A guide to the changes will be available at www.dol.govt.nz before April 2011.

 

Email Disclaimers

Email disclaimers have become the norm for many businesses and organisations. But are they legally binding?

The Electronic Transactions Act 2002, Section 8, validates all electronically transmitted data/information and gives it the same standing as a written document. Arguably there is no reason, in theory, why a properly constructed email disclaimer could not be legally enforceable.

To increase the likelihood of legal enforceability, the disclaimer must be worded appropriately and must be practical in the sense that it is ‘sufficiently drawn to the attention of the recipient’.  The text size, font and placement/format of the disclaimer in the email are relevant. Placing a disclaimer at the top of an email rather than at the bottom will enhance its effect.

Disclaimers are unlikely to have legal force unless they contain confidentiality obligations. The inclusion of confidentiality and legally privileged clauses is strongly recommended as it gives the disclaimer more weight by placing the reader ‘on-notice’. In situations where sensitive information is sent to the wrong recipient, a court order may be sought, requiring the recipient to delete the email and/or prohibiting publication.

All information in this newsletter is to the best of the authors’ knowledge true and accurate.  No liability is assumed by the authors or publishers for any losses suffered by any person relying directly or indirectly upon this newsletter.  It is recommended that clients should consult a senior representative of the firm before acting on this information.

They Say Good News Travels…

The summer promises some positive news for the Bay of Islands and mid north.  In addition to the World Cup events later in 2011, it is anticipated that the first stages of the coast to coast cycle way will be opened by late February 2011.  The Otiria – Kawakawa and Kaikohe – Okaihau sections are “on track” and the district has high hopes that the cycle way will increase tourism, as well as benefiting the community through jobs and local use of the facility.

Also on the visitor front, 26 cruise ship visits are programmed for the season October 2010 to February 2011.

The Canadian World Cup team is considering using the facilities available at Kerikeri and Kawakawa.  World Cup road shows will be held at the Haruru Falls Resort on 8 December, and have already taken place in Kerikeri at the Kerikeri Sports Complex on 24 November.

The Government’s proposed changes to the Employment Relations Act 2000 (‘ERA’) include extending the 90 day trial period to all employers, rather than just those with fewer than 20 employees.  A trial period allows an employer to dismiss an employee within the 90 day trial period without fear of a claim from the employee of unjustified dismissal.

The first decision on the interpretation of the 90 day law, Smith v Stokes Valley Pharmacy (2009) Limited, demonstrates that an employer must comply strictly with the provisions of the legislation.

In this case, Heather Smith was working in the Stokes Valley Pharmacy when it was sold.  Heather was offered a job with the new employer and on 1 October 2009 commenced work for them.  On 2 October 2009, she signed a new employment agreement which contained a 90 day trial period.  The new employer quickly became dissatisfied with Heather’s performance, and relying on the trial period provisions, terminated her employment in December 2009.

Heather commenced proceedings and, despite the existence of the trial period, the Employment Court found that Heather could make a claim for unjustified dismissal.

Under s67A of the ERA, trial periods can only apply to a person who has not previously been employed by the employer.  When Heather signed her employment agreement on 2 October she had already commenced work, even if it was only for a day, and so she was no longer a ‘new employee’.  The employer argued that Heather had, by her conduct, accepted the terms and conditions of the draft employment agreement as it was provided to her on 29 September 2009.  The Court rejected this argument and held that the agreement must be signed and, until it was signed, it remained a draft that could be amended.  The result was that the trial period was void and Heather could claim unjustified dismissal.

This decision also discussed the requirement of good faith in relation to trial periods.  It was found that an employer is not obliged to notify an employee, who is employed under a trial period, of the employer’s intention to dismiss them. Once dismissed, if an employee requests an explanation for the dismissal, good faith requires that they must be given one.

It was also found that if an employer claims reliance on a trial period, the employment agreement must be terminated lawfully and in accordance with s67B (1) of the ERA, which requires notice to be given.  While there is nothing in the ERA determining the length or form of this notice, in this case Heather’s contract required 4 weeks notice.  The court found that the two weeks notice period given was deficient and the agreement was not lawfully terminated.

This decision highlights the need for compliance with procedures and with the provisions of the ERA.

Citizens Advice Bureau NZ (CABNZ) launched a new website in September giving the public direct online access to a database of approximately 40,000 service providers, community organisations, clubs and societies, as well as access to legal information across a wide range of subject areas.  Kerikeri and the Bay of Islands is well served by an active group of CAB volunteers based in the Proctor Library building, but answers to those practical questions and conundrums may also be found at www.cab.org.nz.

Have you recently married, remarried, or had your marriage dissolved?  If so you may need to urgently review your will.  Marriage or remarriage automatically revokes an existing will, unless it was expressly made in contemplation of that marriage.  If you have separated or your marriage has been dissolved, there is no similar cancellation of an existing will.  To ensure your former spouse or partner does not benefit, a new will is the only way to provide for new beneficiaries and to remove a beneficiary who is no longer that “special person“.

The consequences of the September earthquake in Canterbury will continue to be felt long after the physical reconstruction has been completed.  The emotional toll will remain and only diminish over a long period of time.

One of the important factors in reducing the personal consequences of tragedy is financial security and we encourage all our clients to review their insurance arrangements.  New businesses are particularly vulnerable because they may not have an earnings history on which to base an insurance claim, despite having insurance in place.  Some insurers are now providing tailor made policies

offering better protection to new businesses.  This includes business earnings protection and income replacement insurance for individual owners working in their businesses.

One of the issues highlighted by the earthquake has been the inability of businesses to trade, not because they suffered crippling damage themselves, but because damage to neighbouring buildings or infrastructure resulted in those streets becoming “no go” areas.

Professional advice about insurance and the meaning of policies can help dispel misunderstandings and confusion about your cover.  Don’t wait until it’s too late!

DNA Collection

From 6 September 2010 the Criminal Investigation (Bodily Samples) Amendment Act 2009 extended police powers, giving them the authority to take DNA samples from individuals who are arrested.  Previously, samples could only be taken with the individual’s consent, or where there was a court order, or police-issued compulsion notice, or the person had already been convicted of an offence.

These new powers are being implemented in two stages:

1)         From 6 September 2010 the police can take DNA samples from individuals who have committed indictable offences, such as those punishable by more than 7 years imprisonment.

2)         At a date yet to be set, these powers will then be extended to include individuals accused of any imprisonable offence.

Justice Minister Hon. Simon Power believes the key benefit will be the ability to solve “cold cases” and identify some of the 8,000 unidentified DNA samples.  It is predicted that stage 1 will result in 4,000 more samples a year and 2,800 links to the crime scene database.

Safeguards have been put in place.  The police have developed guidelines, individuals will be penalised for misusing DNA, and if someone is not convicted DNA samples will be destroyed rather than stored.

Government Response to Canterbury Earthquake

Parliament moved quickly to pass the Canterbury Earthquake Response and Recovery Act 2010 (‘the Act’), which received Royal Assent on 14 September 2010 just 10 days after the earthquake struck. The Act will remain in force until 1 April 2012.

The Act grants the Government wide powers to make Orders in Council (‘Orders’) to relax or suspend provisions in any enactment that:

• may divert resources away from the effort to respond to the earthquake, or
• may not be reasonably capable of being complied with as a result of the earthquake.

The Orders may be used to temporarily override almost any law and are likely to be used to authorise such matters as the destruction of buildings, regulate drainage and sanitation, and modify or extend town planning provisions.  Unlike previous earthquake legislation, the Act does not specifically state what financial assistance the Government will provide and it does not create a right to compensation.  Instead it establishes a Recovery Commission that will provide advice to the relevant Minister on Orders in Council and the prioritisation of resources and how funds should be allocated.

The Act has been strongly criticised because of the lack of checks and balances on government and ministerial powers.

Critics claim it is one more piece of legislation in a trend toward overriding usual constitutional safeguards.  The Major Events Management Act 2007, passed with the need for urgency on world cup projects in mind is another Act criticised for a lack of accountability in its process and decision making.

All information in this newsletter is to the best of the authors’ knowledge true and accurate.  No liability is assumed by the authors, or publishers for any losses suffered by any person relying directly or indirectly upon this newsletter.  It is recommended that clients should consult a senior representative of the firm before acting upon this information.

Twenty years later and suffering health problems, Murray and Tuohy asked the Court to make an order under Section 129B of the Property Law Act 1952 requiring their immediate neighbours to provide access over their property by a right of way easement, on the basis that Murray and Tuohy’s land was landlocked.

The Court of Appeal said that the approach in Section 129B cases is well settled and involves three stages (briefly) stated as:

• deciding whether the claimant’s land is landlocked within the meaning of the section;
• if yes, determining how the discretion given to the Court by the section should be exercised; and
• if the Court decides to grant access to the landlocked land, to determine the terms of access.

Under section 129B(1)(a) a “piece of land is landlocked if there is no reasonable access to it”.  It was Murray and Tuohy’s case that, taking into account modern day community expectations and standards, a residential property without vehicular access does not enjoy “reasonable access” and is therefore landlocked.

In the Court of Appeal, Justice Gendall, who delivered the reasons of the Court, stated “we cannot accept that it is necessarily the case that under modern day community standards vehicular access onto the site of a residential property is necessary for it to enjoy reasonable access”.

Further into the judgment Justice Gendall stated “obviously, if people cannot get onto their property it has no reasonable access.  If they can access it from a public roadway or walkway through a suitable pedestrian route then such access may be reasonable, depending on the circumstances”.  In this case there was evidence from the respondents that this was typical of access to properties in Wellington’s hilly suburbs.

The Court of Appeal considered, having regard to contemporary standards, the present access was reasonable and that vehicular access was primarily a matter of convenience for Murray and Tuohy.  As a result, their application for access over the neighbour’s land was declined.

Contact Graeme McLelland on (09) 407 0179 or Sue Wooldridge on (09) 407 0174 for information and advice on land related issues.

While companies provide limited liability and are considered a separate legal entity, directors may become personally liable if they breach their duties.  These duties have become increasingly important in light of the recent financial downturn.  When there is financial uncertainty, directors are more likely to make decisions for which they could be held liable.

Under the Securities Act directors face fines of up to $500,000 in civil proceedings, and up to five years imprisonment or fines of up to $300,000 in criminal proceedings.  Directors need to be aware of their obligations to the company.

Duties under the Companies Act 1993

The key duties, found in Part 8 of the Companies Act 1993 sections 131-137, include the following:

• The duty to act in good faith and in the best interests of the company.
• The duty to use directors’ powers for the purpose for which they were conferred and not for any ulterior motive.
• The duty to act in accordance with the obligations under the Companies Act 1993 and the company’s constitution.
• A director must not agree to cause or allow the company’s business to be conducted in a manner likely to create a substantial risk of serious loss. To determine this, the Court will look at what an ‘ordinary prudent director’ would have done in the circumstances.
• The duty not to take on any obligations unless it is believed on reasonable grounds that the company will be able to perform those obligations when required to do so, and
• The duty to use the reasonable care, diligence and skill a reasonable director would exercise in the circumstances.

Recent Director Liability Cases

Directors must actively ensure that they are meeting their obligations. The recent case FXHT Fund Managers Ltd v Oberholster held that directors who are not actively engaged in the company or ‘sleeping directors’ can be liable. In this case the inactive director was held liable for a breach of his duty of care even though it was his co-director who defrauded investors. Initially he was not aware of his co-director’s dealings, but as soon as he became aware he reported the matter to the authorities; however he was still held liable.

Similarly, in Lewis v Mason and Meltzor the directors relied on a manager and did not exercise sufficient control over the company’s financial position or the day to day running of the company. It was found that reliance on a manager does not excuse a director from liability and the directors were ordered to contribute to the Company’s debts.

Summary

The above cases show the need for directors to take positive steps to discharge their obligations under the Companies Act, and be proactive directors who are aware of and adhere to the duties imposed on them.

If you would like advice and information on safe practices for directors, please contact Sarah Jury on (09) 407 0176 or Graeme McLelland on (09) 407 0179.

As from 1 July 2010, amendments to the Domestic Violence Act 1995 enable the police to issue on-the-spot ‘Police Safety Orders’ (‘PSO’).

Under this new regime, a qualified constable may issue a PSO where the parties are in a domestic relationship, and where police have reasonable grounds to believe that family violence has occurred or may occur but there is insufficient evidence to make an arrest.

In issuing a PSO the constable must consider whether domestic violence is or has been taking place, the hardship the PSO may cause to any party, and any other matters the constable considers relevant.

The PSO may last for up to 5 days and provides the victim with immediate protection. It is hoped that the order will provide a way of filling the gap between an incident occurring and the issuing of a Temporary Protection Order.

An important element of the PSO is that it does not require the consent of the victim. As a result victims who are too scared or intimidated to act will have interim protection while taking further steps to secure their ongoing safety, such as an application to the Family Court.

The person bound by the PSO order must:

• vacate the premises for up to 5 days,
• surrender all firearms and their firearm licence for the period of the PSO,
• not threaten, assault, intimidate or harass the protected person or encourage anyone else to do so, and
• not contact the protected person.

The PSO also protects any children who live with the protected person, and suspends any parenting orders or access or care agreements which benefit the person bound by the order.

The conditions under a PSO are similar to those under a Court ordered protection order. However, unlike a protection order, the protected person under a PSO cannot consent to residing with the person bound by the PSO.

If the PSO is breached, the offender can be taken into custody and must appear before the Court which may then:

• direct the Police to issue a further PSO,
• release the person without further order, or
• issue a Temporary Protection Order if the protected person does not object.

These orders have the potential to assist victims to escape domestic violence, especially as a victim’s consent is not needed for an order to be made.

For advice on relationship issues, phone Sarah Jury on (09) 407 0176.

 

All information in this newsletter is to the best of the authors’ knowledge true and accurate.  No liability is assumed by the authors or publishers for any losses suffered by any person relying directly or indirectly upon this newsletter.  It is recommended that clients should consult a senior representative of the firm before acting on this information.

Winter 2010 The Unpublished Electoral Roll

With local body elections later this year and the parliamentary election next year, work is underway on the electoral rolls to ensure they are correct and up to date.  The electoral rolls are an important source of public information about an individual’s identifying information such as whereabouts, occupation and their full name. If you are 18 years or older and are eligible to vote, then you must enrol, although it is not compulsory to vote. There are many reasons why eligible voters may not wish their details to appear in a public roll, and the unpublished roll is designed to allow those who are eligible to vote, but whose personal safety may be compromised by public notification of their whereabouts, to register and vote. To qualify for enrolment on the unpublished roll, voters must apply and supply evidence to support the claim that safety is an issue.  Satisfactory evidence includes: 

• a copy of a Family Court protection order
• a copy of a restraining order under the Harassment Act 1997
• a statutory declaration by a police officer stating your personal safety or that of your family may be prejudiced by publication in the roll
• a letter from someone with personal knowledge of your circumstances stating the personal safety of you or your family may be at risk if publication on the roll proceeds.  An acceptable letter writer may be your employer, lawyer or justice of the peace.

Voters registered on the unpublished roll must still keep the registrar informed of any change of name, address and occupation. You may remain on the unpublished roll for as long as there is a need, but you will be asked from time to time to confirm that your circumstances are unchanged. The electoral rolls (both published and unpublished) are maintained by the Registrar of Electors, who can be contacted at 0800 367656.  Further information is available at www.elections.org.nz.  We also have brochures on the unpublished roll, supplied by the registrar, available at reception.

Criminal Recovery (Proceeds) Act 2009

The Criminal Proceeds (Recovery) Act 2009 came into effect in December 2009.  The objective of the Act is to “provide a legislative framework for the confiscation of property from persons who have engaged in or profited from criminal activity”.  The underlying premise is that a person should not be allowed to benefit from criminal activity.  It is reported that since the Act’s introduction the police have seized $11 million of the identified $36 million worth of assets that they believe have been obtained through criminal activity. The Act has repealed the Proceeds of Crime Act 1991, and introduced a new civil forfeiture regime similar to those introduced in the last decade in Australia, Canada, Ireland and the UK.  Under the new Act, the Serious Fraud Office may now apply to the High Court to freeze a person’s assets and then apply for a forfeiture order to seize the frozen money or assets. The Crown must prove, on the balance of probabilities, that the person has benefited from significant criminal activity, whether the offending has been proven in Court or not.  Unless the person can prove the assets in question have been acquired legitimately, they will be forfeited. The Act allows criminal gangs to be stripped of their assets and the profits of their criminal activities.  The recovered proceeds are then returned to the Crown for use in funding anti-P initiatives, expanding police and customs initiatives to combat gangs and providing additional drug treatment programmes.  The police say this will be a major step in assisting them to dismantle organised crime, will act as a disincentive to criminals and will disrupt their ability to finance future illegal activity.

New Tax Rates

Interest earned on client funds in our trust account is subject to Resident Withholding Tax.  Please let us know if your tax rate has changed as a result of the budget tax announcements.

 

Three Strikes Law

While there is consensus over the fact that there is too much serious crime in New Zealand, debate has raged over whether the ‘three strikes’ legislation is the correct way forward. The legislation lists over 36 offences which are qualifying offences and count as a strike against the offender: 

• Strike one occurs when the offender commits the first qualifying offence. The offender will receive the standard sentence and a first warning.
• Strike two occurs if the offender commits another qualifying offence. The offender must serve the sentence without parole and will receive a second warning.
• Strike three occurs if the offender commits a third qualifying offence. The offender must be sentenced to the maximum sentence for that offence with no parole.

For murder and manslaughter the maximum sentence will be life imprisonment.  For aggravated robbery, kidnapping, and attempted murder the maximum sentence will be 14 years, and for sexual violation 20 years.  For the second and third strikes these sentences will be served without eligibility for parole.  Preventative detention will still be available if a longer sentence is required. Supporters argue the new law will improve public safety by locking up offenders for a longer period and improve public confidence in the justice system.  It is also said the new law will relieve victims of the stress of attending parole hearings, and the anxiety and uncertainty of not knowing when offenders will be released on parole. Critics argue that the ‘three strikes’ law will take away judicial discretion and ignore factors which should be considered when assessing sentencing such as premeditation, an early guilty plea, and an offender who is remorseful.  Dr Richard Ekins, Senior Lecturer at Auckland University’s Faculty of Law, has highlighted instances where inconsistencies may occur:

• Two men who commit an unpremeditated aggravated street robbery would ordinarily receive a sentence of 18 months to 3 years.  If one of the men has previously had two strikes then he has to be sentenced to 14 years in prison – the maximum penalty for aggravated robbery.
• An armed robber, with no prior convictions, may brutally assault a victim while his accomplice, with two previous strikes, may be merely the getaway driver.  In sentencing, the judge will have no discretion with the getaway driver – he will receive the maximum sentence with no parole while the armed robber may comparatively be punished less severely.

No doubt there will be ongoing debate about the merits and efficacy of the ‘three strikes’ law into the future. Watch this space for updates.

Snippets

What is a Franchise Agreement?

Franchising is a business model in which one business (the franchisor) allows a separately owned business (the franchisee) to use the systems, brand name and other intellectual property rights of the franchisor in return for regular payments.  The franchisee benefits from a proven and tested business model.  According to Franchise Information New Zealand around 80% of franchised businesses still operate after 5 years, compared with only 20% of independently started businesses.  The franchisor, on the other hand, expands the business without providing the capital and taking on the risk.

The association between the parties is symbiotic.  The franchisee relies on the franchisor and the other franchisees to maintain the reputation of the brand.  The relationship is based on the franchise agreement which sets out the terms on which the franchise is to operate, including:

• fees to be paid, both upfront and ongoing
• duration of the agreement and renewal rights
• intended territory or market
• dispute resolution procedure, and
• rules relating to the on-sale of the franchise

To assist the franchisee and to ensure consistent quality of service amongst franchisees, there is usually a franchise manual which sets out operational standards and procedures.  This manual contains the business model, with most agreements requiring strict adherence to it.

Fundamentally, franchise agreements should be approached like any other contract and must clearly reflect the arrangement between the parties.  Manyfranchise agreements, particularly for large well known brands, are non-negotiable, but prospective franchisees should be prepared to refuse to sign contracts which contain onerous and one-sided terms.

There are a number of common pitfalls in franchise agreements.  For example, the franchisee needs an exclusive territory within which the franchisor may not grant any other franchise licences.  Clauses allowing reduction of this territory by the franchisor are common and should be considered carefully.  Also, the franchisor should identify measures to protect the intellectual property rights being paid for.  The exact method of calculating the royalties needs to be specified as well as penalties for late payments.  Clauses which allow for early termination are very common and need to be clearly understood as they often involve a penalty payment.  Agreements limiting the liability of the franchisor to the franchisee are also cause for concern, particularly when related to obligations for marketing, training, and disclosure statements in the negotiation phase.

There is no specific franchise legislation to protect franchisees, however around half of franchisors abide by a self regulating code of conduct which aims to “promote high standards of franchise conduct” and does offer some protection against unreasonable and unfair conduct on the part of the franchisor.  A good franchise arrangement will provide the franchisee with many benefits and often provide inexperienced business owners with a supportive base to develop expertise and commercial skills.

For further information contact Graeme McLelland on (09) 407 0179 or Sue Wooldridge on (09) 407 0174.

Germany’s Federal Court of Justice held earlier this month that a son in law had to repay a NZ$40,000.00 gift from his parents in law to buy a house, following the couple’s separation.  The son in law kept the house following the end of the marriage.

The Court decided that the gift was based on a contract in which one of the terms was that the parents in law’s child (the wife) live in the house.

This will not give any comfort to New Zealand parents in law who are distressed to see one half (or more) of their financial support walk off with the son or daughter in law when a relationship collapses.  Unless the gift is protected by a formal agreement (preferably a relationship property agreement between the young couple) there is no “clawback” for the parents in law’s generosity.

For further information about relationship or separate property, or family matters generally, contact Sarah Jury on (09) 407 0176.

The Kerikeri branch of Business and Professional Women annually makes a study grant and is calling for applications from women who normally reside in the Bay of Islands and who are wanting professional or technical education at a tertiary level.

For application forms and further information, contact Julia Giacomelli at julia.giocomelli@gmail.com

 

Small (or even medium sized) business owners are sometimes daunted by the process and cost of searching out information and advice to help develop their businesses, and to take them to the next stage in terms of their potential.  Statistics New Zealand website “Business Helper” (www.stats.govt.nz/methods_and_services/guide-and-tutorials/user-guides) may be what you are looking for.  Statistics New Zealand collects and analyses data which can help businesses with:

• marketing
• monitoring economic trends
• benchmarking financial performance
• industry analysis
• inflation information

The information available is useful for those wanting to analyse sector trends, identify potential markets and seek out niches for development.  The “Business Toolbox” page on the website www.stats.govt.nz/businesstoolbox includes “Market Mapper” allowing analysis on an area by area basis, by age, sex, income or family type, and “Industry Profile”, identifying the number of businesses of a particular type in a district, new and ceased businesses over the last five years, survival rates for businesses, worker turnover and average earnings.

The Statistics NZ website also has links to helpful resources on http://business.govt.nz/ and business mentors www.businessmentor.org.nz.

If you have a business plan you want to develop, or even if you just have a good idea and want a second opinion, we can point you in the right direction with a one off consultation.

If you would like more information contact Graeme McLelland on (09) 407 0179 or Sue Wooldridge on (09) 407 0174 for an appointment.

How much information should beneficiaries under a trust be given, and what information are they entitled to?  In many trusts the settlors and trustees are Mum and Dad and the beneficiaries are the children.  Usually the children are kept informed and advised of the assets in the trust and the question of what information should be disclosed to the beneficiaries is often not an issue.

Questions may arise as beneficiaries get older or where communication between trustees and beneficiaries is limited or has broken down.  The beneficiaries may become suspicious of the actions of the trustees and demand financial statements and other financial information from the trustees.  This is more likely to occur where trustee parents may be losing mental capacity due to age related dementia.

Trustees are not legally required to show beneficiaries all trust documents, although in many cases trustees will, for example, supply a copy of the trust deed, information and explanation as to investments, financial statements and accounts of the trust.

Historically, it was thought that a beneficiary under a fixed trust (“fixed beneficiary”) had an entitlement to view trust documents and information, and a beneficiary under a discretionary trust (“discretionary beneficiary”) did not.  Under a fixed trust the number of beneficiaries and the share they will receive are defined.  This is more common in a trust established under a will.  Under a discretionary trust (which includes most family trusts) the trustees may use their discretion as to who will be a beneficiary and what share a beneficiary will receive.  The reasoning is that a fixed beneficiary has an entitlement to trust property, whereas a discretionary beneficiary merely has the right to be considered as a beneficiary.

In Schmidt v Rosewood Trust Ltd the Privy Council held that a beneficiary’s entitlement to seek disclosure of trust documents is based on the Courts’ inherent jurisdiction to administer trusts rather than whether the beneficiary is a fixed beneficiary or a discretionary beneficiary.  Both fixed and discretionary beneficiaries can apply to the Court for disclosure of Trust documentation.

Where a beneficiary applies to the Court for disclosure of a Trust’s documents, the Courts will, in exercising their discretion, balance the interests of trustees, beneficiaries and third parties.  The beneficiaries do not have an absolute right to information.  The Court will consider the nature of the information and the interests of all the beneficiaries.

Information which the Courts have in the past provided to beneficiaries include:

• copies of the trust deed
  • financial accounts and statements of the trust
  • any deeds of variation of trust deed, and deeds of retirement and appointment of trustees
  • valuations of assets of the trust, and
  • legal opinions related to beneficiaries rights and the interpretation of a trust deed’s provisions

In exercising their discretion, the Courts will consider such factors as issues of personal and commercial confidentiality and sensitivity, whether limitations need to be placed on the use of the documents provided, whether some documents should be withheld in full or in part, and what impact the disclosure will have on the trustees, the beneficiaries or third parties.

There will no doubt be times when a trustee will refuse a beneficiaries’ request for trust information.  This decision is more likely to be respected and accepted where the trustee and beneficiary have developed a history of communication and respect.  As trustee, if you are unsure as to what type of trust information you need to disclose to the beneficiaries, we recommend you seek legal advice beforehand.

For advice about all aspects of trusts, contact Sue Wooldridge on (09) 407 0174 or Graeme McLelland on (09) 407 0179.

All information in this newsletter is to the best of the authors’ knowledge true and accurate. No liability is assumed by the authors or publishers for any losses suffered by any person relying directly or indirectly upon this newsletter. It is recommended that clients should consult a senior representative of the firm before acting on this information.

The Partial Defence of Provocation

The debate over whether the partial defence of provocation should be abolished has gained significant attention since the Clayton Weatherston trial.  Many people believe that the defence should no longer be available.

The partial defence of provocation is predominantly set out in section 169 of the Crimes Act 1961 and effectively reduces a charge of murder to manslaughter.  In order for an accused to successfully argue provocation, he or she must prove:

• that the provocation in the circumstances of the case was sufficient to deprive a reasonable person of the power of self-control, and
• that the provocation did in fact deprive the offender of the power of self-control and so induced him or her to commit the act of homicide.

Provocation is a high test to satisfy and, although it is often raised, few offenders are successful.  Critics of the partial defence argue that it is an archaic and outdated notion about violence.  They claim the defence rewards a lack of self-control in offenders who intentionally take another person’s life.  Historically, the rationale for the defence of provocation was to avoid a mandatory sentence for murder (originally capital punishment and later life imprisonment) in cases where factors arising from the circumstances of the case may reduce the offender’s sentence.  However, life imprisonment for murder is no longer mandatory by virtue of the Sentencing Act 2002, which begs the question, is the defence of provocation still necessary?

Many argue that claims of provocation can be taken into account by a judge during sentencing and have no place in the actual trial, which determines guilt or innocence.  Once an offender has been convicted, a sentencing hearing is held where he or she presents mitigating factors (such as provocation) which may reduce the sentence.

In addition, the defence provides the offender with an opportunity to attack and tarnish their victim’s character.  The resulting experience can be very traumatic for the victim’s family and friends.  The dead victim cannot rebut the claims.

Not everyone, however, agrees that the defence of provocation should be abolished.  Some argue that removing the defence would be interfering with the basic concepts of criminal law.

Parliament has already taken steps to remove the partial defence of provocation from the statute book.  The Crimes (Provocation Repeal) Amendment Bill 2009 (“the Bill”) was introduced to Parliament on 4 August 2009 and had its first reading on 18 August 2009.  The Bill will effectively repeal sections 169 and 170 of the Crimes Act and abolish the defence of provocation in New Zealand.

It is clear that there is a lot of support from both Parliament and the general public for the change.

We were pleased to again be involved this year in sponsorship of the Rotary Junior Speech Challenge.  This is an annual event organised by the Kerikeri Rotary Club which encourages year 5 and 6 pupils to develop public speaking skills at an early age.  Pictured are Owen Smith of Rotary and Sue Wooldridge with the successful children from Kerikeri Primary and Springbank Schools.

The duties of a trustee need not be onerous, but a failure to carry out those duties may, in a worst case scenario, result in a claim against a trustee by a beneficiary who has suffered a loss as a result of your actions or failure to carry out your duties.

The list below, while not exhaustive, sets out some of the most important trustee duties.

The duty of efficient management

• Whether you are an original, substitute or additional trustee, you must first become familiar with, and abide by, the terms and conditions of the trust deed.
• Know the extent of the assets and liabilities of the trust and make sure that these are properly held in the name of the trustees.
• Ensure that the trust is managed and administered properly and that the trustees meet to discuss and agree on issues.  Do not be a rubber stamp of the settlor’s wishes.  Ensure minutes of these meetings and all resolutions are recorded.
• Make sure that the administration costs of the trust are kept to reasonable levels.

The duty to keep and render accounts to beneficiaries

• Make sure that a clear audit and paper trail is kept of all decisions and transactions.  This will involve secure storage of the trust deed, minutes of meetings and resolutions, financial accounts, correspondence and other trust documents.
• If the beneficiaries request information, the trustees have a duty to make certain information available, such as the trust deed.  The extent to which information must be disclosed may depend on the deed.

The duty to act personally

• Carry out your trustee duties personally.
• You may instruct an agent to carry out your decisions but you must make your own decisions and not be dictated to by other trustees, the settlors or beneficiaries.
• Trustee resolutions must be unanimous.

The duty of loyalty

• Always act in the best interests of both present and future beneficiaries and be impartial between beneficiaries.
• Avoid conflicts of interest.
• Do not benefit or profit from your position as trustee unless authorised to do so.
• You must always protect the interests of the beneficiaries.

In all things, a trustee’s standard of care is measured against that of an ordinary prudent business person managing the affairs of others.  Of course a higher standard is required if the trustee is a professional person such as a lawyer or accountant.

The management of trusts often come under scrutiny and all of the benefits of having a trust may be lost if the trust records and procedures do not meet the required standard.  There is an increasing trend in relationship property cases to try to overturn trusts or set aside trustee decisions.  It is important to keep a clear audit and paper trail and to bear the above trustee duties in mind.  It is also important to insist that you, as a trustee, are kept up to date with all of the trust’s affairs.  If in doubt do not hesitate to ask for professional financial or legal advice, at the trust’s cost.  Talk to Graeme McLelland on 407 0179 or Sue Wooldridge on 407 0174 if you would like more information on your role as a trustee.

Land Information New Zealand (“LINZ”) is updating its records so that all current Maori land is identified clearly.  Historically, it has been difficult for LINZ to maintain its records so that all Maori land is identified as such, following Maori Land Court orders being issued.  The Maori Land Court can make orders converting general land to Maori land.  When this has

happened in the past, LINZ has not had a system in place to update its records.  However, with the introduction of the electronic land transfer system, when Maori Land Court orders are made, the land will be flagged as Maori land.  Check with Lisa Baker on 407 0175 or Simone Scully on 407 0177 as some of this is available online.

McLeods supports and sponsors the work of the Waimate North Landcare Trust in preserving the special environment of the Waitangi River catchment. Santa came early to the Trust with the relocation to within its area of 11 kiwi with the co-operation from local forestry owners.  It is a vote of confidence in the Trust’s work that it is able to provide a haven for this recently recognised Northland sub-species of North Island brown kiwi.

Our receptionist, Anna Edwards, left us early this year to study at Southland Polytech and is back to help us out over the summer.  We have a position available in the new year when Anna returns to study.  If you are interested, please contact Yvonne Burgham on 407 0171.

Disputes Tribunal

From 1 August 2009, the limit of claims which can be made in the Disputes Tribunal has been increased to $15,000.00 or $20,000.00 if both parties agree.  Please contact us for more information.

All information in this newsletter is to the best of the authors’ knowledge true and accurate.  No liability is assumed by the authors, or publishers for any losses suffered by any person relying directly or indirectly upon this newsletter.  It is recommended that clients should consult a senior representative of the firm before acting upon this information.