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Content Creators: Copyright, Relationships and Risk

Wed, 15 Apr 2026 22:00:10 GMT

Copyright, Relationships and Risk: What the Supreme Court’s Decision Means for Creators

Copyright is valuable property - and it may be exposed

Copyright is not merely a personal right arising from creative effort. It is a form of property with real economic value. It can generate income through licensing, reproduction, royalties and merchandising, often long after the relationship in which it was created has ended.

The Supreme Court recognised that even where the creator retains legal ownership of copyright, the economic value associated with that copyright may still be subject to division. This can extend beyond income already earned and include unsold works, unpublished material and future earnings derived from exploitation of the copyright.

For many artists, this comes as an unwelcome surprise.

The risk to future income

One of the most significant implications of the decision is the exposure of future income. Copyright is inherently forward‑looking. Its value frequently lies in what may be earned years down the track, rather than what has already been realised.

Without a relationship property agreement, a former partner may have a claim to a share of that future value. This can lead to complex valuation disputes, pressure to commercialise works prematurely, or costly litigation over uncertain outcomes.

Creative control and reputational risk

Copyright disputes are not just about money. They can also affect how works are treated, valued and controlled. While moral rights remain with the author, relationship property disputes can still interfere with creative autonomy, particularly where works are unfinished, unpublished or closely tied to the creator’s reputation.

Once a dispute arises, creators are often forced into a defensive position, focused on limiting damage rather than protecting long‑term creative and commercial interests.

Why inaction is a risk

Many people assume these issues can be resolved amicably if a relationship ends. The Supreme Court’s decision highlights why that assumption is risky. Valuing copyright is complex, uncertain and expensive. Once separation occurs, goodwill often disappears and commercial realities take over.

By that stage, the opportunity to clearly protect creative assets has usually passed.

Protecting copyright through a relationship property agreement

A properly prepared relationship property agreement allows creators to proactively protect their copyright by clearly defining it as separate property. It can also address how income, future earnings and control will be treated, providing certainty and reducing the risk of dispute.

For artists and creatives, this is not about pessimism. It is about recognising that copyright is often their most valuable asset and taking sensible steps to protect it.

A clear message from the Supreme Court

The Supreme Court’s decision sends a clear message: copyright created during a relationship may be exposed if it is not protected. For anyone whose creative work has present or future commercial value, early legal advice and a well‑drafted relationship property agreement can be critical.

Protecting copyright is not just about ownership. It is about safeguarding income, reputation and creative freedom.

The Supreme Court’s decision in Alalääkkölä v Palmer has significant implications for artists, designers and other creators whose work is protected by copyright. While the case arose out of a relationship property dispute, its broader message is a cautionary one for creatives who assume their copyright will automatically be protected if a relationship ends.

The Court confirmed that copyright created during a relationship can be treated as relationship property under the Property (Relationships) Act 1976. For many creators, that finding exposes a risk that is often overlooked until it is too late.

A Practical Legal Guide for Selling Your Business in New Zealand

Mon, 09 Mar 2026 22:17:15 GMT

Selling a business is one of the biggest commercial decisions most owners will ever make. Whether you’re planning your exit, responding to an unexpected offer, or positioning your business for growth under new ownership, proper preparation is key to achieving maximum value while avoiding legal and financial risk.

This guide outlines the essential steps every New Zealand business owner should take before and during a sale and explains how tailored legal advice can protect you throughout the process.

1. Start With the Right Advisory Team

A successful business sale begins before any agreement is signed. Engaging a lawyer and accountant early allows you to minimise the risk of post‑sale disputes, identify legal or financial issues that could delay settlement, and present your business in a strong position to potential buyers. These professionals help ensure favourable sale terms, accurate financial information, and a smooth overall process. Even small business owners benefit from early advice, given the time, effort, and investment which has typically been involved in the business.

2. Preparing a Strong Agreement for Sale and Purchase

A well‑drafted Agreement for Sale and Purchase forms the foundation of your transaction. Your lawyer will ensure the agreement clearly defines what is being sold – such as assets, stock, intellectual property, contracts, and goodwill – and together with your accountant will ensure that the purchase price is allocated appropriately. They also ensure the warranties are workable, the terms reflect your intentions, and you are protected from future liability. Even if the purchaser’s lawyer prepares the agreement, your lawyer should always review it before you sign.

3. Employees: Managing Legal Obligations and Protecting the Business

Employee matters play a critical role in any business sale. Before going to market, you should confirm that every employee has a signed employment agreement, personnel files are up to date, and leave balances are accurate. It is equally important to understand which employees are likely to transfer to the purchaser and to meet any notice or consultation obligations. These matters can influence both the purchase price and settlement timeline. In some cases, a purchaser may ask you to remain in the business for a short period to support a smooth transition, and these arrangements must be clearly documented within the Agreement for Sale and Purchase.

4. Lease and Premises Considerations

If your business operates from leased premises, your lease must be properly documented before a sale proceeds. This includes ensuring there is a current Deed of Lease in place, confirming the remaining term, and understanding renewal rights. You will need landlord consent for an assignment of the lease, and in some situations, it may be beneficial to negotiate a surrender of the current lease and new lease for the purchaser to avoid ongoing personal guarantees. Landlords are likely to require information about the incoming purchaser to assess their suitability. Your lawyer will guide you through this process and help limit your future exposure.

5. Commercial Contracts and Supplier Agreements

During due diligence, purchasers expect clarity about key commercial relationships. This includes supplier contracts, customer agreements, equipment leases, and any other arrangements that may need to be assigned or novated. Your lawyer will help review these documents to confirm whether assignment is permitted and identify any restrictions, obligations, or notice requirements that could affect the sale.

6. Security Interests and the PPSR

Before settlement, any security interests registered against the business assets on the Personal Property Securities Register (PPSR) must be discharged. Your solicitor will identify relevant financing statements, work with lenders to arrange discharges, and ensure that the purchaser receives the assets free of encumbrances.

7. Protecting and Assigning Intellectual Property

Intellectual property – such as your brand, logo, domain names, website, and proprietary processes – often makes up a significant portion of a business's value. Your lawyer can assist in confirming ownership, advising on trade mark or other registrations before listing the business for sale, and preparing a Deed of Assignment of Intellectual Property to transfer these rights at settlement. Clear ownership increases buyer confidence and strengthens your negotiating position.

8. Restraint of Trade: Planning Your Future Activities

Most sale agreements include a restraint of trade clause designed to prevent you from competing with the purchaser for a defined period and within a specific area. Your lawyer will ensure that any restraint is reasonable, enforceable, and consistent with your future business or employment plans. A well‑balanced restraint protects both parties and helps maintain the value of the business after the sale.

9. What Happens at Settlement?

On settlement day, your lawyer coordinates the transfer of contracts, leases, intellectual property, and any other assets. They also ensure discharge of securities, and manage the transfer of funds. Larger transactions may involve a post‑settlement “wash‑up,” with funds temporarily held in trust until all calculations are complete. After settlement, you may also need to update your company name if the purchaser continues to trade under the existing name.

10. How Much Does It Cost to Sell a Business?

Legal fees vary depending on the nature and complexity of the transaction. Before providing an estimate, we take the time to understand your business, your objectives, and the specific circumstances of the proposed sale. This allows us to give clear, tailored advice and a fee estimate that reflects the work required, with no unexpected surprises.

Explaining Grants of Administration

Sun, 15 Feb 2026 23:25:24 GMT

Probate vs. Letters of Administration

When someone dies holding significant assets in their sole name such as land, bank accounts, Kiwisaver, and/or insurance policies each worth over $40,000.00, or shares and/or debentures worth over $15,000.00, a grant of administration must be obtained from the High Court in order to deal with those assets (e.g. sell the land, close the bank accounts, claim on insurance policies, etc.)

There are two types of grant of administration:

Probate; and
Letters of Administration.

Probate

Probate is required when someone dies with a will and they hold assets in their sole name over the prescribed thresholds noted above.

Obtaining probate is the process of making an application to the High Court to have the deceased’s will proved and accepted as their last will. A ‘grant of probate’ is the Court order which evidences this.

By obtaining a grant of probate, the executor named in the will is confirmed and granted the authority by Court order to deal with the estate. The executor is responsible for bringing in the assets of the estate, paying the estate’s debts and testamentary expenses, and then distributing the estate to the beneficiaries in accordance with the law and the terms of the will. This is known as administering the estate.

In some cases, the executor may be required to hold estate assets on trust for beneficiaries, for example if there is a minor beneficiary or a life interest.

Letters of Administration

Letters of Administration is required when someone dies intestate (without a will) and they hold assets in their sole name over the prescribed thresholds. This type of grant of administration is often mistaken to be a literal “letter” – unfortunately this is not the case.

Obtaining Letters of Administration is very similar to obtaining probate. An application to the High Court must be made to have someone appointed as the administrator of the estate, who is granted the authority to deal with the estate, again by Court order.

Additional steps such as advertising for a will and requesting a Status of Children search through Births Deaths and Marriages must also be completed before filing the application.

As there is no will which appoints an executor, the Administration Act prescribes a ‘priority order’ for those who are entitled to apply to the High Court to be appointed the administrator of the deceased’s estate (the terms ‘administrator’ and ‘executor’ are often used interchangeably).

The ‘grant of Letters of Administration’ is the Court order which sets out who the High Court has appointed as administrator of the estate, which will be the person who made the application. The appointed administrator has the same powers and responsibilities as an executor regarding the estate: to bring in the assets, pay the estate debts and testamentary expenses, and distribute the estate.

As to distribution of an intestate estate, the Administration Act dictates who is entitled to the assets of the estate and what they are entitled to (in lieu of instructions in a will). This may not be what the deceased would wish which highlights the importance of having a will in place.

Letters of Administration with Will Annexed

A hybrid between probate and Letters of Administration, Letters of Administration with Will Annexed is required when someone dies with a will and they hold assets over the prescribed thresholds, but the will cannot be proven to the High Court. The circumstances in which a will cannot be proven include:

The will does not appoint an executor.
An executor is appointed under the will but the executor has:
predeceased the will-maker;
survived the will-maker but has since died themselves before obtaining a grant of administration;
has renounced their right and title to probate of the will and there is no substitute executor appointed in the will;
is the former spouse or civil union partner of the will-maker whose appointment is void under section 19 of the Wills Act 2007; or
they are incapable of acting as an executor and they do not have a power of attorney in place.

If the above applies, the residuary beneficiaries named in the will have the first priority to apply to the High Court for appointment as administrator of the estate.

I think I need to obtain one of these grants. What should I do?

If you are an executor named in a will, or if a loved one has died without a will and you’d like to apply to be appointed the administrator of the estate, we strongly recommend you instruct a lawyer to assist you with this application.

Our estates team have extensive experience in preparing applications for probate and Letters of Administration and are happy to assist.

What is a contracting out agreement?

Fri, 06 Feb 2026 04:43:15 GMT

Most people think prenups are something celebrities sign before a whirlwind wedding. But in New Zealand, a contracting out agreement is far more common, far more practical and, for many couples, essential.

Under the Property (Relationships) Act 1976 (“Act”), the guiding principle is that all relationship property should be shared equally when a de facto relationship, civil union, or marriage ends. There are certain exceptions – as always. The only way to avoid the presumed 50/50 sharing regime is to contract out of the Act. That is exactly what a contracting out agreement does. If the agreement meets the legal requirements, it allows couples to decide for themselves how their assets and liabilities will be divided if the relationship ends through separation or death.

What happens if you don’t have one?

If you are in a qualifying relationship and don’t have a contracting out agreement in place, most of what you own or owe could be divided equally if you separate or if one partner dies. Think you are safe because the asset is in your sole name or was gifted to you? Think again. In certain circumstances these types of property could still be up for equal division.

Why you should seriously consider one

For many people, the primary motivation is protection. A contracting out agreement can ring fence specific assets so they remain your separate property, such as a home you purchased before the relationship or savings you built independently. It can also ensure you do not become responsible for your partner’s debt, such as a student loan or personal liabilities that you had no part in creating.

Just as importantly, a contracting out agreement sets clear expectations for how newly acquired assets and debts are owned and managed during the relationship and what will happen to those if the relationship ends. By defining everything upfront, the agreement can prevent confusion, conflict and costly disputes later.

When can you get a contracting out agreement?

A contracting out agreement can be put in place at almost any stage. Some couples arrange one at the very beginning of a relationship. Others do it after buying a home together, having children or blending finances. It is also possible to enter into one at the end of a relationship. However, the safest and cleanest approach is to get one as early as possible, ideally before the relationship becomes a qualifying relationship or before either partner acquires rights under the Act.

The “prenup” New Zealanders don’t realise they need

Want to know more?

If you would like to become a client of Smith and Partners to get advice about contracting out agreements, please contact Natalie Miller at natalie.miller@smithpartners.co.nz or phone 09 837 6843 or fill out the form below to set up an appointment.

We will require a retainer to be paid prior to your first meeting, and we cannot assist with legal aid matters. Please note that, in accordance with our obligations under the Lawyers and Conveyancers Act 2006 , we cannot provide legal advice unless you have become a client of Smith and Partners and have received our Terms & Conditions of Engagement and Info for Clients.

Do I need a lawyer to write my Will?

Fri, 06 Feb 2026 03:50:58 GMT

Writing your own Will or using a DIY Will Kit may seem like an easy and cost-effective option. However, while a homemade or online Will may appear to save money upfront, it will often cause major complications and costs in the long run. Learn why getting legal advice ensures your Will is valid, effective, and truly reflects your wishes.

What is a Will?

A Will is a legal document governed by strict rules under the Wills Act 2007 and is one of the most important documents you will ever sign. If any part of a Will is incorrect, unclear, or improperly signed, it could be challenged or even declared invalid.

Getting it right the first time ensures your family’s future is protected, your estate is distributed as you wish and the process is simple for those you leave behind.

Why a lawyer’s advice matters

A lawyer ensures that:

Your Will meets all legal requirements to be valid;
Executors and beneficiaries are correctly and fully named;
Your assets are clearly and lawfully distributed;
The Will can withstand potential claims under the Family Protection Act 1955, Law Reform (Testamentary Promises) Act 1949, or Property (Relationships) Act 1976.

Common DIY mistakes

We often see homemade Wills that:

Are incorrectly witnessed or signed;
Leave out full legal names;
Forget to appoint an executor;
Do not distribute the entire estate;
Contain crossed-out words, stains, or staple marks that delay Probate;
Are ambiguous or unclear; or
Use wording that changes the legal meaning entirely.

Even minor errors can require multiple affidavits, months of delay, and thousands in extra legal fees before your estate can be distributed.

FAQs

For help preparing your Will, contact us today at kimberley.brown@smithpartners.co.nz or call (09) 837 6847.

Kimberley is a Legal Executive in Smith and Partners’ Private Client team; she works under the supervision of Director, Carolyn Ranson , who has many years’ experience in both Estate Planning and Estate Litigation, ensuring your Will is prepared with the highest professional and legal standards.

Common Mistakes in a Will that Delay Estate Administration

Thu, 05 Feb 2026 02:50:51 GMT

Even a small error in your Will can cause significant delays and unnecessary expenses once it reaches the High Court for Probate.

Frequent causes of delay

Missing or incomplete witnessing – there must be at least two witnesses, and both must be present together when you sign.
Beneficiaries acting as witnesses – this invalidates any gifts made to that beneficiary.
Spelling mistakes, missing or incomplete names.
Ambiguous, contradictory or unclear provisions.
Unexplained staple marks, smudges, or changes.
Handwritten or “Will Kit” forms missing key clauses or provisions.

Each of these issues usually requires one or more affidavits to explain the problem – each affidavit costs money, adds weeks of delay, and increases stress for your executor and loved ones.

Examples:

Wrong witnesses
John’s Will was witnessed by his adult son and daughter-in-law, both also named in the Will as beneficiaries. The High Court accepted the Will only after affidavits were filed to confirm John’s intentions. However, the gift to his son was forfeited because he had acted as a witness.
Missing witness details
Margaret signed her Will correctly in front of two neighbours, but their names were not written on the document. When the Will went to the High Court for Probate, the court registrar required affidavits from both witnesses confirming when and how the Will was signed. One of the two neighbours had since moved. This delayed the grant by several weeks and added unnecessary legal costs.

The takeaway

A properly drafted and witnessed Will avoids delays, confusion, and unnecessary cost. Having your Will professionally prepared ensures the Probate process is simple and efficient when the time comes.

Our estate planning team can help you prepare a Will that is correctly drafted and properly signed, ensuring a smooth estate administration process when the time comes. Contact us today at kimberley.brown@smithpartners.co.nz or call (09) 837 6847.

Kimberley Brown is a Legal Executive in Smith and Partners’ Private Client team, supervised by Director, Carolyn Ranson . Kimberley assists clients with preparing Wills, Enduring Powers of Attorney, and other estate planning documents tailored to their needs.

Are you accidentally in a de facto relationship and what are the consequences?

Wed, 04 Feb 2026 04:30:07 GMT

Many people are surprised to learn that they may already be in a de facto relationship in the eyes of New Zealand law, even if they have never formally defined the relationship. This legal status can have significant consequences for how property, assets and liabilities are treated if the relationship ends.

Why does it matter?

It is important to understand whether you are in a de facto relationship or not because once a de facto relationship has lasted three years (or two years if there is a child of the relationship), relationship property is generally subject to equal sharing. Critically, the equal sharing regime usually includes the home the couple lives in, even if that property was acquired by one partner before the relationship began and/or is in their sole name.

What is a de facto relationship?

Under the Property (Relationships) Act 1976 (“the Act”), a de facto relationship exists when two people of any gender, who are both at least 18 and who are not married or in a civil union with each other, are living together as a couple. Although the term “living together” sounds simple, the law interprets it more broadly than many expect.

How the court decides if a de facto relationship exists

If there is uncertainty about whether a de facto relationship exists, or when it started, the Court considers a range of factors. These include the length of the relationship, whether the couple shares a home and a bedroom, whether the partners have a sexual relationship and how their financial affairs are arranged, including whether there is dependence or interdependence between them. The Court may also look at whether the partners own or use property together, whether they demonstrate a mutual commitment to a shared life, whether they care for children together, how household duties are divided and how their relationship is viewed by friends, family and the public.

No single factor is decisive. The Court has a wide discretion to weigh these circumstances and determine whether a de facto relationship exists based on the overall context.

De facto relationships of short duration

The Act can also apply to de facto relationships of short duration (i.e. less than three years). This may occur if the couple shares a child or if one partner has made a substantial contribution and the Court considers that a serious injustice would result. In these situations, property is divided according to each partner’s contributions rather than the equal sharing regime.

Polyamorous relationships

Although the Act defines a de facto relationship as being between two persons, the Supreme Court ruled in 2023 that polyamorous relationships can also fall within the framework of the Act. The Court confirmed that a polyamorous partnership may amount to a series of de facto relationships. In the case before the Court, three partners were involved in overlapping relationships, (two de facto relationships and one marriage) and their intermingling relationship property interests were subject to division under the Act.

Protect yourself – get a contracting out agreement

If you are in a de facto relationship, or think you may be in one, it is sensible to consider a contracting out agreement. This agreement can ring fence specific assets so they remain your separate property and can ensure you do not become responsible for your partner’s debt that you had no part in creating. It can also set out clear expectations as to how future property will be classified and how assets and liabilities will be divided if the relationship ends through separation or death.

If you would like to become a client of Smith and Partners to get family advice, please contact Natalie Miller at natalie.miller@smithpartners.co.nz or phone 09 837 6843 or fill out the form below to set up an appointment.

How to activate enduring power of attorney NZ

Mon, 02 Feb 2026 20:13:18 GMT

When a loved one can no longer make decisions for themselves, it is important that the person they have appointed in their Enduring Powers of Attorney (“EPOAs”) can step in quickly to act on their behalf. Before this can happen, the document(s) must be formally activated.

Key Terms used in EPOAs

Donor: The person who makes the EPOAs and, in doing so, gives or “donates” the power for another person to act on their behalf.
Attorney: The person (or people) appointed in the EPOA to act on the Donor’s behalf, also called the Donee.
Activation: The formal process required before the Attorney can rely on the document and begin acting under its authority.

Activating a Personal Care and Welfare EPOA

A Personal Care and Welfare EPOA can only be used by an Attorney if a doctor or medical specialist certifies that the Donor is mentally incapable.

A medical practitioner must provide a certificate confirming that the Donor is mentally incapable of making or understanding decisions about their own care and welfare, foreseeing the consequences of those decisions, or communicating their wishes.

Activating a Property EPOA

Property EPOAs may be drafted to take effect immediately, allowing the Attorney to assist with financial and property matters while the Donor still has mental capacity (for example, paying bills or managing accounts on their behalf). While the Donor retains capacity, the Attorney must act at the donor’s direction and provide information to them.

If the Donor later becomes mentally incapable of managing their property or financial affairs, the EPOA continues to operate without further activation. However, a registered medical practitioner must certify that the Donor lacks the relevant mental capacity. Once capacity is lost, the Attorney must act in the donor’s best interests in accordance with the statutory duties, rather than at the donor’s direction.

The Process: Step by step

Contact the law firm that holds the original EPOAs. They will review the documents, and advise:
The date the document(s) were signed; and
Whether the Donor’s capacity must be assessed by a specified type of medical practitioner, such as a geriatrician or neurologist.
Book the medical assessment with the chosen medical practitioner. The doctor must meet with the Donor alone. If it is determined that the Donor lacks capacity, the medical practitioner will complete and provide a Certificate of Mental Incapacity.
Provide the certificate to the lawyer. The law firm that holds the original EPOAs will record activation and provide certified copies of the document(s) to the Attorney.
Complete and sign a certificate confirming that the EPOA has not been revoked, and that the Attorney’s appointment has not been suspended.
Notify key parties by giving copies of the activated EPOAs.
For Personal Care and Welfare, this might include the Donor’s GP, specialists, and care providers and / or the hospital.
For Property, this might include banks and financial institutions, utilities providers, and, if a property transaction is underway, the law firm or conveyancer handling that transaction.

PPPR Orders – What happens if there is no EPOA

If there is no EPOA, the Family Court can appoint a Welfare Guardian and / or Property Manager under the Protection of Personal and Property Rights Act 1988 (sometimes referred to as the “PPPR Act”).

If a loved one is showing signs of memory loss or confusion and there are no EPOAs in place, you may need to apply for Family Court orders under the PPPR Act.

Need help?

When the time comes, we guide our clients and families through the process of activating those EPOAs – ensuring everything is completed correctly and with care.

Contact us at suzanne.sumner@smithpartners.co.nz or call (09) 837 6840. Suzanne Sumner is a Personal Assistant in Smith and Partners’ Private Client team, supervised by Director Carolyn Ranson . Together, they assist clients and families through the EPOA activation profess with empathy and professionalism.

How long do you have to deal with relationship property post separation?

Mon, 02 Feb 2026 04:22:08 GMT

When a relationship ends, sorting out property can feel like a big task, but knowing the rules and timeframes can make the process much smoother. The Property (Relationships) Act 1976 (“the Act”) sets clear guidelines to help ensure fairness and certainty.

There are two main ways to resolve relationship property matters: privately (by agreement) and through the Family Court. A private agreement often involves lawyers drafting a formal settlement agreement. Even when resolving matters privately, the principles of the Act still apply, and statutory entitlements and processes must be considered to ensure the agreement is legally valid and enforceable.

If agreement cannot be reached, either party can apply to the Family Court for orders dividing property under the Act. The Court will apply the statutory principles, including a presumed equal sharing of relationship property unless certain exceptions apply.

Understanding the time limits

The time limit for applying for the Court’s assistance to divide your property and resolve your relationship property issues differs depending on the nature of your relationship. If you and your partner were in a qualifying de facto relationship, you have 3 years from the date of separation. If you and your partner were married, you have 12 months from the date of your divorce (also called a dissolution).

These timeframes are designed to give both parties an opportunity to resolve matters without unnecessary delay. Acting within these limits helps avoid complications and keeps things moving forward.

It’s important to note that the above timeframes apply to Court applications only. Parties are still free to reach their own arrangements (outside of Court) beyond these timeframes.

What happens if you miss the deadline?

If you do not apply to Court within the relevant timeframe, you may lose the right to have the Court determine your relationship property division.

Section 33 of the Act allows the Court to grant leave (permission) to apply out of time, but only in limited circumstances. The Court will need to be satisfied that not granting leave would cause serious injustice. This can be a high threshold to meet, so it is much safer to act within the time limits.

Don’t leave it too late

If you’ve recently separated, it’s important to get advice early so you understand your rights and the timeframes that apply. If you would like to become a client of Smith and Partners to get advice about relationship property, please contact Natalie Miller at natalie.miller@smithpartners.co.nz or phone 09 837 6843 or fill out the form below to set up an appointment .

What are Enduring Powers of Attorney and do I need them?

Sat, 31 Jan 2026 17:18:07 GMT

Few people realise the importance of setting up Enduring Powers of Attorney. Enduring Powers of Attorney are essential for older people, however we recommend that people of all ages consider putting these valuable documents in place. After all, an accident and unexpected illnesses can occur at any time, and often happen when we least expect them.

What is an enduring power of attorney?

An Enduring Power of Attorney (“EPOA”) is a legal document whereby a person (the “donor”) appoints an agent (the “attorney”) and authorises them to do certain things on the donor’s behalf.

There are two kinds of enduring power of attorney:

property; and
personal care and welfare.

Having EPOAs in place gives you the peace of mind that the person or persons that you want to be managing your affairs if or when you lose capacity can do so without lengthy delays or court involvement. In the long run, these documents save you and your family a lot of money and ultimately a lot of unnecessary stress.

When should I have an Enduring Power of Attorney document prepared?

EPOAs are not just for the elderly. Over the years, we have acted for numerous clients in applying to the Court to be appointed welfare guardians or property managers for their young spouses, children and other relatives who have been in accidents or suddenly diagnosed with neurological disorders. People tend to think those things will never happen to them, or to their loved ones… but the truth is they can happen to anyone at any time.

It is essential that Enduring Powers of Attorney (“EPOAs”) are set up before they are needed. Once a person has been declared mentally incapable, their family will only be able to act on their behalf if EPOAs are in place. If there are no EPOAs, the only option available to their family is to apply to the Court for an order to act on the person’s behalf under the Protection of Personal & Property Rights Act. This is an expensive and time-consuming process and can ultimately result in a non-family member being appointed.

At Smith and Partners, we encourage all of our clients to have EPOAs prepared at the same time as they have Wills prepared. In fact, we think EPOAs are such an important aspect of Estate Planning that we offer these documents at a reduced price when they are prepared together with a Will.

When does an Enduring Power of Attorney come into effect? When can they be used?

EPOAs in relation to personal care and welfare can only be used when the donor has been declared “mentally incapable” – for example, if you enter the late stages of a neurological disorder such as dementia or Alzheimer’s, or if you suffer from a brain injury or coma. At this point, the EPOA will need to be activated or invoked.

EPOAs in relation to property can either come into effect immediately once they are signed or only once the donor is declared mentally incapable, at which point they will need to be activated or invoked. The donor elects at what point the power of attorney is to come into effect at the time the EPOA is drafted.

They are called “enduring” powers of attorney because the power granted by them endures through the donor’s mental incapacity. A common misconception is that they remain in effect after the donor’s death; this is not the case. When the donor dies, the EPOA is immediately revoked and the terms of the donor’s Will take effect.

You can read more about how to activate or invoke an EPOA by clicking here .

Why do I need an enduring power of attorney for property?

An EPOA in relation to property enables the attorney to deal with the donor’s personal property, including their bank accounts, investments, and any share or interest they have in real estate. This type of document can prove to be extremely valuable when a person is not capable of managing their own property or financial affairs.

Example:

Jane and Bob are married and own a house in their personal names, jointly. Bob has been declared mentally incapable and has been placed in a rest home. Jane wants to sell the house and buy a small one-bedroom unit for herself and then use the equity to pay for Bob’s rest home fees. Even though Jane and Bob are married, and she wants to act in the best interest of both herself and Bob, she will not be able to sell the property UNLESS Bob has EPOAs in place. This is because Bob no longer has the required mental capacity to sign a sale and purchase agreement.

Jane’s only option would be to apply to the Court to be appointed as Bob’s Property Manager. This is often a time consuming and stressful process, generally taking months and costing thousands of dollars in legal fees. If Bob had put a property EPOA in place appointing Jane while he still had mental capacity, Jane would be able to sign a sale and purchase agreement on his behalf once the EPOA had been activated. This would avoid any delays in selling their property, and would give Jane a clear path forward.

What if I don’t want the power of attorney to continue after I have lost capacity?

If you would like to give somebody a non-enduring power to act in relation to your financial affairs for a limited time, then a general (non-enduring) Power of Attorney and Deed of Delegation may be more appropriate. This type of appointment can be very helpful if you are likely to be physically absent when a document (such as a sale and purchase agreement or loan document) needs to be signed. Unlike the Enduring Power of Attorney, this power of appointment ends either at the end of the specified time frame or matter, or upon loss of mental capacity, as well as upon death.

Why do I need an enduring power of attorney for personal care and welfare?

Gone are the days when a person’s ‘next of kin’ can make decisions about their loved one’s personal care and welfare matters. Hospitals as well as the vast majority of rest homes now require a copy of a patient’s EPOA before any person can make decision on the donor’s behalf. Having an EPOA in place with respect to personal care and welfare allows your loved ones to make decisions on your behalf without any lengthy delays.

Example:

Jane now wants to move Bob from Rest Home A to Rest Home B because she feels that he is not getting adequate care at Rest Home A.

Bob does not have the mental capacity to make this decision for himself. If Jane has not been appointed as Bob’s attorney in an EPOA, she cannot make this decision for him. Again, Jane’s only option is to apply to the Court to be appointed as Bob’s ‘Welfare Guardian’, costing thousands of dollars, and often causing long delays.

Ensure that you and your family are protected by putting Enduring Powers of Attorney in place today.

Opportunities and challenges as the Disputes Tribunal’s Jurisdiction Increased to $60,000

Fri, 30 Jan 2026 02:22:15 GMT

The jurisdiction of the Disputes Tribunal doubled from $30,000 to $60,000 on 24 January 2026, causing significant changes for collecting medium sized debts. This increase is intended to improve access to justice and reduce the need for costly District Court litigation for medium sized disputes.

Before this reform, claimants with disputes between $30,000 and $60,000 faced a difficult choice: either pursue a costly and time consuming District Court proceeding or abandon part of their claim to fit within the former $30,000 Tribunal limit. The Tribunal’s increased jurisdiction means that claimants no longer need to trade value for accessibility, and many disputes that once required formal court action can now be resolved in a faster, more affordable and more pragmatic forum.

Other than the increase in the jurisdiction, and a new filing fee for claims over $30,000, nothing much has changed.

The Tribunal process itself remains the same. It is informal, inquisitorial, and aimed at substantial fairness rather than strict legal precedent.
Lawyers still cannot appear at hearings, although parties may seek legal advice beforehand.
Appeal rights are very restricted, and limited to procedural issues rather than legal errors.
Collecting undisputed debts is still outside the Tribunal’s role. In that case the appropriate approach will often be to apply to the District Court for orders for Summary Judgment.

What This Means for People and Businesses

The increased jurisdiction now allows many mid‑range disputes (between $30,000 and $60,000) to be heard in the Tribunal instead of the District Court. This allows faster hearing dates, reduced procedural delays, and lower costs for newly qualifying claims.

This change has some controversy. The Disputes Tribunal is very good at resolving smaller matters quickly and pragmatically without direct involvement from lawyers. However, larger disputes are now entering a forum where:

The Tribunal is required to have regard to the law but is not bound to give effect to strict legal rights or obligations, or to legal forms or technicalities. The law still matters in the Tribunal, but there is some flexibility - this makes outcomes unpredictable.
The absence of formal discovery of documents before hearing means that relevant evidence may not be disclosed.
The decision-makers don’t necessarily have legal backgrounds or education, and may make more errors than traditional Judges.
Parties who are not good at representing themselves may struggle to present their case effectively without the assistance of a lawyer at the hearing.
Tribunal decisions have very limited appeal rights, usually only on grounds of procedural unfairness not legal errors.

For smaller disputes these issues may be an acceptable trade-off to achieve a quick and cheap result. For disputes up to $60,000, where that amount is an enormous sum of money for many people and businesses, these issues may be a real concern.

Claims Filed Before 24 January 2026

If a claim has already been filed under the old $30,000 limit with the excess abandoned to fit under the limit, the claim cannot be:

amended later to add the abandoned amount; or
withdrawn and refiled after 24 January 2026 to include the abandoned amount up to the $60,000 limit.

How we can help

Preparing strong evidence, detailed submissions, and presenting a clear, well-structured narrative are crucial steps to ensure your case is understood and properly considered by the Tribunal. This process involves gathering all relevant documents, organising supporting facts, and anticipating possible challenges to your position. For higher-value disputes, these preparations can significantly impact the outcome, as mistakes or omissions may lead to unfavourable decisions or missed opportunities for resolution.

In larger disputes before the Tribunal it will be especially important to obtain legal advice before lodging your claim or defence. Lawyers can help identify the strengths and weaknesses of your case, ensure that your submissions address the key issues, and guide you through procedural requirements that might otherwise be overlooked. This support can prove invaluable in navigating the Tribunal’s flexible approach to evidence and procedure, helping you to avoid costly errors and giving your case the best chance of success.

If you are involved in a dispute of up to $60,000 and require assistance in preparing a strong Tribunal claim or response, we invite you to become a client of Smith and Partners.

For tailored legal advice specific to your situation, please contact Nathan Tetzlaff at nathan.tetzlaff@smithpartners.co.nz or phone 09 837 6844 , or complete the form below to arrange an appointment.

Incorporated Societies Act 2022: Updating Your Constitution for Reregistration

Thu, 11 Dec 2025 23:02:05 GMT

There are approximately 24,000 incorporated societies in New Zealand – and with the introduction of the Incorporated Societies Act 2022 to replace the 1908 Act, these societies must reregister by 5 April 2026.

The Incorporated Societies Act 2022 (“the 2022 Act”), sets out new legal requirements which must be covered in a societies’ constitution. With the reregistration due date approaching, societies should review (and if necessary update) their constitutions to ensure a smooth reregistration process and continued compliance under the 2022 Act.

Why Updating Your Constitution is Essential

The 2022 Act introduces several key changes that will impact how societies are governed and how they must operate. Some of these key changes are discussed further below.

One of the most significant requirements is that all incorporated societies must update their governing documents— their constitutions (the rules that govern a society) —to comply with the new legislation.

Under the previous Incorporated Societies Act 1908, many societies operated under outdated governance structures and rules that no longer reflected modern practices. The 2022 Act modernises governance and seeks to clarify rules so that they are transparent for their members.

The 2022 Act places duties on officers which are similar to those under the Companies Act 1993. It also includes disqualification standards for officers which are in line with the disqualification criteria under both the Companies Act 1993 and the Charities Act 2005.

Key Constitutional Changes Required Under the Incorporated Societies Act 2022

The 2022 Act introduces several new requirements for societies, which must be reflected in their constitutions. These key changes include:

Clear Purpose and Objectives

The 2022 Act requires that the constitution of an incorporated society clearly outlines the society’s purposes and objectives. Many societies Constitutions will already have an ‘objectives’ section, and this is a good chance to review these and ensure they still align with the purpose of the society.

The objectives of a society must not be for the financial gain of its members.

Membership Rules

A critical aspect of the 2022 Act is the introduction of specific membership rules. Under the 2022 Act, incorporated societies are required to have a minimum of 10 members. This is reduced from the previous requirement, but it must now be complied with on an ongoing basis. This ensures that the society is robust enough to carry out its functions and cannot be easily dissolved by a small group of individuals.

All members must also expressly provide consent to being members of the society.

The constitution must detail the criteria for membership, including how new members are admitted, how existing members can be removed, and what rights and obligations members have.

Governance Structure

The governance framework of a society is a key part of its constitution. The 2022 Act strengthens the governance responsibilities of officers, such as the board or committee members. The governing body must be comprised of at least three (3) individuals, who will be the officers of the society. The constitution must now clearly outline the roles and duties of these officers, including how they are appointed, their term of office and their powers.

The 2022 Act also requires that societies have a clear decision-making structure. This means detailing how decisions are made, how meetings are conducted, voting procedures, and how the society resolves disputes. A well-defined governance structure will ensure smoother operations and help prevent conflicts within the organisation.

A contact-person must be appointed, who will be responsible for communications with the Registrar of Incorporated Societies. It may be appropriate that the Secretary takes on this role.

Financial Management and Reporting

Financial transparency and accountability are at the heart of the 2022 Act. It includes stricter requirements for financial reporting, such as maintaining accurate records, preparing annual accounts, and ensuring the proper handling of funds. The reporting requirements vary whether the society is a small society or not (defined under section 103 of the 2022 Act). The constitution must address these requirements by outlining how the society will manage its finances and reporting obligations.

Societies should update their constitutions to include provisions for how financial statements will be prepared, who is responsible for approving them, and how financial audits will be conducted (if necessary).

Amendment of the Constitution

The 2022 Act includes provisions on how the constitution of a society can be amended. The constitution should set out the process for making amendments, such as the need for a resolution passed by a certain majority of members at a general meeting. This ensures that any changes to the society’s structure or governance are properly considered and agreed upon by the membership.

Having a clear process for constitutional amendments also helps prevent disputes and ensures that all members have a voice in shaping the direction of the society.

Dispute Resolution and Removal of Officers

The 2022 Act provides guidance on how disputes between members or between members and officers should be managed. Societies are encouraged to include provisions in their constitutions for resolving conflicts fairly and efficiently. This may include outlining procedures for mediation, arbitration, or other forms of dispute resolution.

The constitution should also include rules on the removal of officers or committee members, which can be necessary if an officer is not fulfilling their duties or their behaviours amount to misconduct. Having a clear and fair process for the removal of officers ensures that the society can function smoothly even in the face of challenges.

Steps to Update Your Constitution for Reregistration

Updating your constitution to comply with the 2022 Act involves several key steps:

Review Your Current Constitution

The first step is to carefully review your existing constitution. Look for any areas that may be outdated or do not align with the new provisions under the 2022 Act. Pay particular attention to the governance structure, membership rules, and financial management provisions. Make note of any areas that need to be updated and aspects which do not align with how the society currently operates or intends to operate going forward.

Consult with Stakeholders

Before making any changes, it’s important to consult with key stakeholders, such as the society’s members, officers, and legal advisors. Discuss the proposed changes and ensure that everyone understands the reasoning behind the updates. This consultation can help avoid misunderstandings and conflicts later in the process.

Amend the Constitution

Once you’ve identified the necessary changes, update the constitution to reflect the new requirements of the 2022 Act. Make sure that the updated document clearly outlines the society’s purposes, membership criteria, governance structure, financial obligations, and dispute resolution procedures. At this stage it is helpful to obtain legal advice, if you have not done so already.

Get Member Approval

The updated constitution must be approved by the society’s members. The existing Constitution of the society is likely to contain a procedure for amendments to the Constitution, which will need to be followed. This usually involves holding a special general meeting where the changes are presented and voted on. A majority vote is typically required for the amendments to pass. Make sure to provide members with a copy of the revised constitution in advance so they can review and consider the proposed changes.

Submit the Updated Constitution for Reregistration

Once the members have approved the updates, you can submit the revised constitution to the Incorporated Societies section of the New Zealand Companies Office as part of your reregistration application. Ensure that all required documentation is included and accurate to avoid delays in the process.

Conclusion

Updating your constitution in line with the 2022 Act is essential for ensuring your society’s continued legal standing and compliance. A well-crafted constitution not only ensures compliance but also strengthens the foundations of your society, making it more transparent, accountable, and effective in achieving its objectives.

As reregistration under the 2022 Act is a one-time process, now is the time for incorporated societies to reflect on their governance and make any changes necessary for continued success.

Cross-Lease Conversion

Sun, 12 Oct 2025 19:00:14 GMT

A cross lease title is a form of property ownership where multiple parties share ownership of a single piece of land, each holding a lease for their individual unit or dwelling. See What is a Cross Lease.

While practical in the past, cross leases can present challenges such as disputes between neighbours and restrictions on property modifications.

Converting a cross lease title to a freehold title offers several benefits. Firstly, it can potentially increase property value. Freehold properties are generally more desirable and can command higher market prices due to the exclusive ownership of the land.

Secondly, it simplifies ownership. With a freehold title, you have complete control over your property, eliminating the need for shared decisions with other cross-lease owners.
Freehold ownership provides freedom to develop. You can make modifications or improvements to your property without typically needing consent from neighbours (or co-owners). This flexibility can be particularly appealing for those looking to renovate or expand their homes.

Lastly, freehold properties are easier to deal with from a finance or sale point of view. Banks and buyers often prefer freehold titles due to the risks and complexities associated with cross leases and the potential for undocumented changes to the cross lease, which may render the title defective.

Why Estate Planning Matters – And How It Can Protect Your Family

Fri, 10 Oct 2025 02:24:42 GMT

Planning for the future isn’t just about saving money or buying property—it’s also about making sure your loved ones are looked after when you’re no longer around. That’s where estate planning comes in.

Estate planning is the process of deciding what happens to your assets—like your home, savings, and personal belongings—after you pass away. It also covers important decisions like who will care for your children, how your debts will be handled, and who will make medical choices for you if you’re unable to.

Without a clear plan, your family could face unnecessary stress, legal hurdles, and even conflict. But with a well-thought-out estate plan, you can make things easier for everyone and ensure your wishes are respected.

What Are the Benefits?

Here are some of the key reasons why estate planning is worth your time:

Financial Security for Your Family
You can make sure your loved ones are financially supported by naming beneficiaries and setting up trusts. This helps them maintain their lifestyle and meet future needs.
Avoiding Family Disputes
By clearly stating who gets what, you reduce the chance of disagreements or confusion. A written plan helps keep things peaceful during a difficult time.
Reducing Taxes
Smart planning can lower the amount of tax your family might have to pay. Tools like gifting, trusts, and donations can help preserve more of your wealth.
Protecting Your Children
If you have young children, you can name a guardian to care for them. This gives you peace of mind knowing they’ll be looked after by someone you trust.
Making Healthcare Decisions
Estate planning isn’t just about money—it also includes your health. You can set up documents that explain your medical preferences and name someone to make decisions if you’re unable to.
Leaving a Legacy
Your estate plan can reflect your values. Whether it’s supporting a charity, funding education, or passing down family traditions, you can make sure your legacy lives on.

Common Estate Planning Mistakes in New Zealand – And How to Avoid Them

Even with the best intentions, estate planning can go wrong if certain details are overlooked. Here are some of the most frequent mistakes people make in New Zealand—and how you can steer clear of them:

Not Having a Will at All
Many Kiwis pass away without a valid will, leaving their families to navigate a complex legal process. If you die intestate (without a will), your assets are distributed according to the law—not necessarily how you would have wanted.
Outdated Wills
Life changes—marriages, divorces, births, and deaths. If your will doesn’t reflect your current situation, it could cause confusion or disputes. Regularly reviewing and updating your will is essential.
Not Considering Relationship Property Laws
New Zealand’s relationship property laws can affect how your assets are divided, especially in blended families or de facto relationships. If your estate plan doesn’t account for these laws, your wishes may be challenged.
Failing to Appoint the Right Executor
Choosing someone trustworthy and capable to carry out your wishes is crucial. An executor who isn’t up to the task can delay the process or make costly mistakes.
Overlooking Digital Assets
From online banking to social media, digital assets are often forgotten. Make sure your estate plan includes instructions for accessing and managing these accounts.
Not Planning for Incapacity
Estate planning isn’t just about what happens after death. If you become unable to make decisions due to illness or injury, having Enduring Powers of Attorney (EPAs) in place ensures someone you trust can act on your behalf.
DIY Wills Without Legal Advice
While DIY will kits are available, they can lead to errors or omissions that make the will invalid. Getting professional legal advice ensures your documents are properly prepared and legally binding.

Final Thoughts

Estate planning might sound complicated, but it’s really about protecting the people you care about. With the right advice and a clear plan, you can make sure your wishes are followed and your family is supported.

Note: This article is for informational purposes only and does not constitute legal advice. For personalised guidance, please consult with our legal professionals.

Relationship Property: Is "what's mine" really mine?

Wed, 08 Oct 2025 23:59:36 GMT

When it comes to love and property, the lines between “yours,” “mine,” and “ours” can quickly blur. Under the relationship property regime, couples in qualifying relationships may find that even assets held in one partner’s name—or in a trust or company—could be subject to equal sharing. Understanding how relationship property is classified, and how to protect what’s truly yours, is essential to safeguarding your financial future.

Understanding your entitlements

If you and your partner are in a qualifying relationship (broadly speaking that is a marriage, civil union, or a de facto relationship of three years or more (or two years if there is a child of the relationship)), then it’s likely you’ll each have acquired rights to certain property owned jointly and/or separately. In some cases, the rights can extend to property owned by a third party (i.e. a company or a trust) provided one of you has a beneficial interest in that property. The exception is if you have entered into a contracting out agreement (commonly known as a “pre-nup”).
It is important to understand how the Property (Relationships) Act 1976 (“the Act”) classifies property so that if your relationship ends (through separation or death) you are across what assets/ liabilities are considered “separate property” and what assets/ liabilities are considered “relationship property”. There is a presumption that all “relationship property” will be shared, however that presumption is subject to certain exceptions.

Relationship property vs separate property

Under the Act, relationship property includes:

Assets acquired during the relationship;
Income;
Property used for the benefit of the relationship;
Joint bank accounts;
The family home, whenever acquired;
The family chattels (household goods and items used for family purposes) whenever acquired, including vehicles;
Kiwisaver and/or superannuation accumulated during the relationship;

In contrast, separate property is defined by the Act as:

Property owned before the relationship started (except the family home and family chattels);
Any increase in value from separate property;
Gifts or inheritances received during the relationship and kept separate (for example, pre-relationship savings kept in your own account or an inherited real property not used as the family home); and
Property clearly kept apart from joint or shared assets.

Can separate property become relationship property?

Yes. Separate property can lose its status as separate property and be deemed to be relationship property (in whole or in part) if:

It is mixed with relationship property;
It is used to improve or maintain relationship property;
Relationship property is used to improve it; and/or
It benefits the relationship in any way.

When this happens, that portion or property could be reclassified as relationship property and divided accordingly.

How do I protect my separate property from becoming relationship property?

It can be tall order trying to keep separate property separate whilst building a life together with your spouse or partner.

The best course for protecting your separate property is to enter into a contracting out agreement (i.e. a pre-nup) which sets out each party’s expectations to rights in property over the duration of the relationship. An agreement of this kind should clearly spell out what items of property are acknowledged to be the separate property of the parties, and what items of property are acknowledged to be relationship property (and equally shared). For a contracting out agreement to be enforceable, it must comply with certain requirements under the Act and be properly certified by a solicitor for each party.

In the absence of a contracting out agreement, another way to try to protect your separate property is to avoid intermingling your separate property assets with relationship property (and vice versa). Failing to do so could result in that separate property becoming relationship property. For example, if you use monies from an inheritance to renovate the family home, then those monies are unlikely to be recovered upon separation (unless ringfenced in a contracting out agreement). Alternatively, if you use your income to improve the value of a separate property asset (such as a collectible classic car owned prior to the relationship or a rental property owned by your trust) then that could give rise to a claim by your spouse to an interest in that asset or trust (unless ringfenced in a contracting out agreement).

What’s the takeaway?

The key to protecting your assets when you’re in a relationship is understanding and managing the classification of your property. It can be complicated where there are companies and /or trusts involved too.

If you want to safeguard your separate property or seek further clarity around how your property portfolio might be classified and whether it is at risk of the equal sharing regime, we recommend that you seek legal advice as early as possible to prevent costly disputes and protect your financial future.

Buyer beware? Not always

Fri, 12 Sep 2025 03:51:23 GMT

Lessons for Vendors following the High Court decision in Sole v Hutton

Selling a property with known leaks or other defects? Make sure you carefully disclose all issues during the sale process, otherwise you could be responsible for the entire repair bill, even though you didn’t create the defects.

This is what happened to the Huttons in Sole v Hutton [2025] NZHC 430 (7 March 2025)

The High Court Case

In this case, the purchasers of a Mount Maunganui apartment (the Soles) brought a claim against the vendors (the Huttons) for misrepresentation and breach of contractual warranty, for failing to tell them that the apartment was known to be a leaky building and needed significant repairs. This is despite this information being contained in Body Corporate meeting minutes that the Soles could have easily accessed and read as part of their due diligence, prior to committing to the purchase.

The Huttons warranted, in the standard terms of the Agreement for Sale and Purchase, that they had no knowledge of any facts that might give rise to liability under the Unit Titles Act (such as the requirement to contribute towards the cost of rectifying defects) or any proceedings involving the body corporate. They had also filled out a form with their real estate agent, declaring there were no known issues.

The reason the Huttons didn’t declare the weathertightness issues and building defects, even though they were at a Body Corporate meeting four years earlier where they were discussed? They had forgotten.

However, the High Court found that they did have knowledge of the building’s issues at the time of sale and that their failure to disclose this information constituted a breach of contractual warranty and misrepresentation. The Huttons were ordered to pay the Soles $926,806.48 in damages, representing the cost of repairs, reduced by 30% to account for betterment (i.e., improvements beyond mere restoration).

Why wasn’t anyone else found responsible?

You might wonder why the Huttons had to foot the entire bill, when they did not create the defects.

The apartment building in question was constructed in the 1990s, and the Council issued the Code Compliance Certificate in 1999. Various limitation periods apply, and the Soles were clearly out of time to claim against the Council or any building parties that caused the defects.

As this was a claim for breach of contract (rather than a claim for negligence), the Court was unable to give a deduction for the contributory negligence of the Soles, who could have discovered the defects themselves before committing to the purchase if they had read the Body Corporate minutes as part of their due diligence.

Lessons for Vendors

This decision highlights the courts’ willingness to hold vendors accountable for omissions, even if claimed to be due to forgetfulness, and reinforces the obligations of vendors to disclose known defects. Vendors cannot rely on purchasers having an obligation to carry out their own due diligence before committing to the purchase.

Notably since 2023 there has been more comprehensive disclosure for unit titles, via a pre-contract disclosure statement, to require vendors of unit title properties to turn their mind to these issues before agreements are signed.

If you are worried about what you need to disclose when you sell your property, or have concerns about the vendor warranties in the Agreement for Sale and Purchase, fill out the form below to become a client and make an appointment with a member of our Property Team.

Raising the Probate Threshold and Implications for Estate Planning

Fri, 05 Sep 2025 02:20:57 GMT

Families who have lost a loved one will soon find it easier and cheaper to manage their estate, thanks to a change in the law.

On 31 July 2025, Justice Minister Paul Goldsmith announced that the amount of money that can be released from a person’s estate without needing High Court approval will increase from $15,000 to $40,000. This change will take effect on 24 September 2025.

What Does This Mean?

Previously, even small estates had to go through the High Court process if the value was more than $15,000—often due to KiwiSaver balances. This could result in delays and legal costs that reduced the value of the estate.

With the new $40,000 threshold, banks, insurers, and KiwiSaver providers can release funds directly to family members without requiring court documents—saving time, stress, and money.

This will also reduce pressure on our High Court so this change will have a positive ‘knock on’ effect across the board.

Frequently Asked Questions (FAQ)

What is probate?

Probate is the legal process of proving a will in the High Court and getting a court order granting permission to distribute a person’s assets after they die.

Who can receive money without probate?

Executors, spouses, children, other relatives, or someone named in the will may be able to receive funds, depending on the situation.

Do I still need a will?

Yes! A will is essential to ensure your wishes are followed and to make things easier for your loved ones.

What if the estate is over $40,000?

Probate or letters of administration (if there is no will) will still be required for larger estates.

How long does probate take?

Once filed, most probate applications are granted by the High Court within 15 working days.

Tips for Estate Planning After the Threshold Change

Make a Will: Decide who inherits your assets and who will manage your estate.
Keep Your Will Updated: Review it after major life changes.
Talk to Your Family: Share your wishes to avoid confusion.
Consider Your KiwiSaver: Check provider rules and update beneficiary details.
Name Beneficiaries Where You Can: For insurance and superannuation.
Get Advice: Especially for complex estates or business interests.

We are experts in probate, estate matters, asset protection, and estate planning, including Will preparation. To obtain assistance complete the form below or email suzanne.sumner@smithpartners.co.nz and we will respond to you promptly with details on how you can become a client.

Resealing Probate - managing assets when a loved one passes away overseas

Thu, 28 Aug 2025 21:22:09 GMT

Need help with overseas estate administration in New Zealand?

Smith and Partners specialise in cross-border estate legal services for Commonwealth and non-Commonwealth countries.

We are experts at assisting overseas clients or their lawyers with the administration of estates that include assets located in New Zealand. Our dedicated estates team has extensive experience in cross-border estate matters, including resealing probate, ensuring that your legal affairs are handled with efficiency, clarity, and care.

Understanding Resealing Probate

When a person passes away overseas and their estate includes assets in New Zealand, it is often necessary to obtain a formal grant of administration from the country where they resided. This grant can then be recognised by the New Zealand High Court through a process known as “resealing,” or alternatively, a new application for Letters of Administration may be required.

Commonwealth Countries

If the deceased resided in a Commonwealth country, the original grant of probate or administration can be resealed by the New Zealand High Court, making it valid under New Zealand law. This allows the executor or administrator to manage the New Zealand assets without needing to start the process from scratch.

Non-Commonwealth Countries

For estates originating from non-Commonwealth countries, the process is more complex. The New Zealand High Court does not automatically recognise grants from these jurisdictions. In such cases, a new grant of administration must be obtained in New Zealand. The Will that was proved overseas is submitted to support the application.

How We Can Help?

Our team is highly experienced in obtaining both reseals and new grants of administration for clients from non-Commonwealth countries. We understand the legal nuances and logistical challenges involved in cross-border estate matters and are committed to guiding you through each step with precision and compassion.

If you need assistance with managing New Zealand assets in an overseas estate, contact our estates team to become a client by filling out the form below.

Debt Repayment Order: A lifeline for people struggling with unsecured debt

Thu, 14 Aug 2025 21:38:04 GMT

If you are an individual with a relatively modest levels of debt (under $50,000) and want to avoid being declared bankrupt, you can use a Debt Repayment Order (DRO) to manage your debt in a structured and affordable way.

What is a DRO?

It is a formal repayment plan for managing certain types of debt.

It is designed to support both individuals who are struggling to repay their debts as well as creditors seeking to recover what they’re owed.

Who is it for?

This tool is designed for individuals with up to $50,000 in unsecured debt that they can’t pay when due. However, it doesn’t include debts from child support, student loans, court fines, penalties, or reparation orders.

It could be especially helpful to you if you are juggling multiple debts with different due dates.

How does the DRO process work?

It is administered by the Official Assignee and is part of the broader insolvency system. If you apply, you will sign up with a DRO Supervisor who will work with you and your creditors.
Each payment you make will be shared among your creditors, so you won’t have to make tough choices about who to pay first. A typical plan will run for up to 3 years, but if justified by special circumstances, can run for up to 5 years.

Under a Debt Repayment Order you are protected from enforcement action by your creditors included in the DRO, providing some certainty and stability. Your debt would be easier to manage by having a single sum, giving you better visibility of what you owe. The sum can also be broken down into instalments that you are able to afford.

Any new debts won’t be included in the DRO, and you must keep making your scheduled payments.

This tool can help you avoid the stigma of bankruptcy; however, your name will be listed in the DRO Register on insolvency.govt.nz for the duration of the order.

Conclusion

If you’re feeling overwhelmed by debt but want to avoid the long-term consequences of bankruptcy, a Debt Repayment Order could offer a practical and manageable solution. It can help you regain control of your finances.

(Article by Senior Associate, Nathan Tetzlaff, and Law Clerk, Karolina Lepiesza)

If you are considering applying for a DRO we can help make sure this is the right option in your particular circumstances.

Kiwisaver on Separation - Yours, mine or Ours?

Fri, 25 Jul 2025 03:54:05 GMT

Investment funds held under a Kiwisaver Scheme (Kiwisaver) are generally subject to equal division when parties to a relationship separate.

This article canvasses when your KiwiSaver becomes relationship property, what portion of it is relationship property, how to divide your KiwiSaver when it can only be accessed in limited circumstances, and how to protect your KiwiSaver from becoming relationship property.

When will your KiwiSaver become relationship property?

If you are in a qualifying relationship, your KiwiSaver forms part of the relationship property pool and is subject to the presumption of equal sharing.

However, only the increase in value of your KiwiSaver from the start of the relationship to the date of separation counts as relationship property. Any KiwiSaver accrued prior to the commencement of the relationship is essentially “ring fenced” and will remain your separate property (unless you withdraw those funds and apply them to relationship property such as the family home).

What if your KiwiSaver position is not equal to your partner’s?

It is rare (but not unheard of) for parties to leave the relationship with equal KiwiSaver balances. This could be due to a range of factors including: the balances at the start of the relationship; disparity of incomes and contributions during the relationship; one party taking time out of paid employment to care for children; unemployment; illness; and/or early withdrawals. Alternatively, it could be that one party has opted into KiwiSaver, whilst the other party has no KiwiSaver or superannuation policy at all.

The effect of this disparity upon separation means that one party will usually need to compensate the other party to equalise their positions. This compensation should be recorded with the help of lawyers in a properly prepared and executed separation agreement pursuant to s21A of the Property (Relationships) Act 1976.

What forms of compensation are appropriate?

There are obvious impracticalities to dividing your KiwiSaver between you and your partner given the strict limitations around when you are entitled to access those funds. For this reason, often the parties will retain their own individual KiwiSaver in its entirety, and simply make a cash transfer or a transfer of other property (either relationship or separate) to equalise the parties’ positions.

If there is limited cash or relationship property available upon separation, or an unwillingness to dip into those resources to give effect to the equalisation, another option is for the parties to apply to the Family Court for an order that the funds be released from KiwiSaver to enable them to meet their obligations under the s21A agreement. An application of this kind is best made with the consent of both parties after the s21A agreement has been properly drafted and executed with the assistance of independent lawyers. However, success is not guaranteed.

How can you protect your KiwiSaver?

If you do not want your KiwiSaver to form part of your relationship property upon separation, your safest course is to enter into a contracting out agreement (i.e. a “pre-nup”) with your partner. This is best completed at the start of your relationship and prior to it becoming a qualifying relationship under the Act. A contracting out agreement can set out how the parties want their contributions to KiwiSaver (or superannuation fund) classified during the relationship, and divided upon separation.

Need help?

If you want to safeguard your KiwiSaver contributions during a relationship, or if you have separated and are looking to explore your options in terms of dividing your relationship property and/or equalising your positions – contact our Family Law team by filling out the form below or contact Natalie Miller on 09 837 6843 or at natalie.miller@smithpartners.co.nz today!

What is the purpose of an indemnity clause?

Fri, 18 Jul 2025 02:35:34 GMT

Ever wondered how businesses protect themselves from unexpected costs and liabilities? Enter the world of indemnities, a legal concept that, while not a household term, is largely responsible for risk management between commercial parties.

Put simply, an indemnity is a promise, typically a clause in a contract, to pay the other party money if specific acts or events happen.

For example, a business may require its suppliers to indemnify it against claims related to defective products. The indemnity means that if the products are defective and customers want refunds or replacements, the supplier is required to pay the business money. Likewise, insurance is an example of an indemnity agreement.

In this sense, the concept of “indemnity” can be described:

from the business’ perspective, as legal protection against liabilities that may arise; and
from the supplier’s perspective, as compensation paid to the other party (the business) to “make good” the loss they suffered.

Indemnity in action

The ideas of protection and compensation form the basis for how indemnity clauses operate in contracts, making them a key mechanism used by businesses to mitigate risk. Because of this crucial risk mitigating role, indemnity clauses are often important negotiation points in any commercial relationship.

Typically, if a business has suffered loss its main remedy involves a claim for damages where it must prove the other party breached the contract, caused the loss and the business mitigated its loss. These are often challenging arguments to successfully make.

However, indemnities offer broader coverage than a standard claim for damages, as such, indemnities:

may not require proof of fault, causation, mitigation or that the contract was breached, only that loss occurred;
often apply regardless of whether the loss was foreseeable; and
can be triggered by third party actions or by regulatory compliance.

While written indemnity clauses are not always required for a party to be obligated to indemnify the other, relying on a verbal or implied indemnity carries risk and is not recommended due to a lack of certainty and challenges with enforcement.

Although, on rare occasions the courts may find that the conduct between the parties gave rise to an obligation to indemnify because one party relied on the other’s conduct.

However, caution must be exercised when incorporating an indemnity, whether written or verbal, because misapplying the term carries its own risks.

Indemnity issues

Indemnity clauses are interpreted strictly by the courts, if not expressed precisely, the clause may be given a meaning contrary to what the parties believed they had agreed to.

If an indemnity clause is not written clearly, the courts are reluctant to enforce compensation when the loss:

occurred due to the indemnified party’s own negligence;
is consequential to the specified type of risk, such as a loss of opportunity, reputation or income; and
is caused by a third party not privy to the indemnity clause.

Additionally, if an indemnity clause is written clearly but is broader than the parties intended, the indemnifier may find themselves liable for more than they expected.

Therefore, it is crucial to ensure precise wording around:

the triggering events that give rise to indemnity;
the scope of loss the indemnity covers;
the exclusions for unwanted coverage and compensation limits to a set amount; and
the way the indemnity clause will interact with other terms in the contract.

Due to the risks associated with drafting and agreeing to an indemnity clause, it is important to receive legal advice to ensure that the clause is drafted appropriately.

When is it appropriate to use an indemnity clause?

It is appropriate to use an indemnity clause when:

Parties want to allocate responsibility for loss before it occurs; e.g. a subcontractor may indemnify the main contractor for damage they might cause on site.
Parties may be exposed to claims from a third party; e.g. a supplier may agree to indemnify a retailer for any product liability claims brought by customers.
One party is in a better position to mitigate the risk; e.g. an event organiser may indemnify a venue for crowd-related damage

An indemnity clause frequently seeks to compensate for situations such as a party’s own negligence, personal injury or death connected to the agreement (although claims for personal injury and death in New Zealand are generally covered by Accident Compensation legislation and therefore difficult to enforce separately), property damage, intellectual property infringements, associated legal expenses and other common risks associated with the relevant business activity.

Most parties want to mitigate as much of their own business risk as possible, but how an indemnity clause is worded depends on the negotiating power and position between the parties (as with any contract negotiation).

If you are dealing with an indemnity clause:

Seek expert legal advice and ensure that:

The clause is specific and unambiguous to reflect your intentions.
You are in the best position to negotiate the terms of the indemnity clause.
You have considered the risks when agreeing to the clause.
You understand how the clause will work in your business arrangement.

(Article by Bethany Sweeney, Solicitor and Daniel Crawford, Law Clerk).

Economic Disparity

Fri, 18 Jul 2025 02:34:48 GMT

We might be in the twenty first century, but the traditional roles of “homemaker” and “breadwinner” still exist in some relationships. That decision as to how couples structure their roles within a relationship can lead to significant consequences upon separation. This is particularly so if one party has taken time out of the workforce to do the lion’s share of domestic duties, raise the children, and/or support the other party’s career, whilst the other party has stayed in the workforce to provide for the family. In some cases, the effect of that division of functions within the relationship can lead to what’s called “economic disparity”.

What is economic disparity?

Economic disparity is the situation that arises when parties separate and one party leaves the relationship in a better financial position than the other party due to the division of functions within the relationship. This situation will ordinarily arise where parties have structured their relationship in the traditional sense with one party being the “homemaker” (taking care of the children and/or domestic duties) while the other party is the “breadwinner” (providing income for the family). In this type of scenario, the homemaker has taken time out of the workforce, while the breadwinner has continued to build up their career during the relationship creating a significant disparity between the couple’s respective earning potentials at separation.

Why do we care?

In New Zealand, the founding principles underpinning the division of property upon separation include: that all forms of contribution to the relationship (both financial and non-financial) are to be treated equally; and that a just division of relationship property must have regard to the economic advantages or disadvantages to the partners arising from the relationship or separation. In light of this, the Property (Relationships) Act 1976 (“the Act”) has a specific provision (section 15) which allows a party to seek compensation from the higher earning party to redress the disparity.

Who can apply for compensation?

Under section 15 of the Act, a claim is usually raised by the party who has been disadvantaged by the division of functions within the relationship. This is usually the party who has taken time out of the work force and put their career trajectory on hold while caring for the children and/or taking primary responsibility for the domestic duties of the relationship. Upon separation, this party may find themselves with a significantly lower earning potential and/or encounter difficulty re-entering the workforce, whilst the breadwinning party reaps the financial benefits of a career that has continued to grow and develop during the relationship.

When is economic disparity assessed?

It is assessed as at the date of separation.

How is economic disparity valued?

Valuing an economic disparity claim and be complex, timely, and somewhat costly. Where a settlement figure cannot be agreed on between the parties themselves, often expert evidence from an actuary will be required to look into the parties’ potential future incomes and/or lost opportunities.

Furthermore, the Courts have established three different methods to use when calculating the value of an economic disparity claim:

Enhancement method: This method requires an enquiry into how much the homemaker has enhanced the income and career of the breadwinner by taking responsibility for most of the domestic duties in the relationship.
Diminution method: This method compares the difference between what the homemaker would have earned after separation if they hadn’t sacrificed their career, with what they are projected to earn now that they have taken time out of the workforce.
Disparity method: This method is prescriptive and compares the likely annual income of both partners. It then multiplies that difference by the number of years that the disparity will likely continue for, then applies a discount to reflect life’s contingencies. Finally, the figure is halved to ensure the partners are sharing the disparity equally.

Whilst the disparity method is the most common (and practical), it will depend on the facts of each case as to which valuation method is most appropriate.

Need help?

If you’re confused about what, why, when, how, and who regarding economic disparity claims, you’re not alone. This is a complex area of relationship property law that requires expert advice from qualified lawyers and actuaries. It doesn’t always have to end up in Court though, and often parties can, with the assistance of experienced lawyers, negotiate a reasonable settlement.

If you’d like to talk through whether economic disparity may be a consideration following your separation, please contact our Family Law team by filling out the form below to set up an appointment or contact Natalie Miller at natalie.miller@smithpartners.co.nz or phone 09 837 6843 today.

What to do after a data breach in New Zealand

Mon, 30 Jun 2025 01:07:15 GMT

A practical guide to understanding your obligations under the Privacy Act 2020, responding to data breaches, and protecting your business from legal and reputational risk when personal information is compromised.

Understanding your legal obligation

Under the Privacy Act 2020, every New Zealand business, no matter how small, has a legal obligation to notify both the Privacy Commissioner and affected individuals if a breach of privacy obligations is reasonably likely to cause harm.

What many business owners don’t realise is that even a simple misdirected email or misplaced file could be enough to trigger this duty. For small to medium-sized businesses, where formal processes may not always be in place, the risk of mishandling a breach is high and the consequences can be serious. That’s where early legal guidance can make all the difference.

What is a notifiable breach?

The Privacy Act defines a notifiable privacy breach as one that is reasonably likely to cause serious harm or has caused serious harm to the individual(s) involved. This kind of breach can arise from a range of everyday incidents whether deliberate or accidental, including:

Emails sent to the wrong recipient containing personal details
Customer records being accessed by unauthorised staff
Lost or stolen devices containing unencrypted personal data
Hacked accounts or unauthorised access to cloud storage
Accidental public sharing of sensitive files

These types of breaches are more common than many businesses expect, and even when accidental, they may still meet the notifiable threshold.

How do you know if a breach is notifiable?

Determining whether a breach is notifiable requires a careful, case-by-case assessment. Under section 113 of the Privacy Act 2020, several factors must be considered, including:

The sensitivity of the information involved
The identity and intentions of the person who accessed or received the data
The likelihood of harm such as identity theft, financial loss, or reputational damage
The security safeguards in place at the time of the breach
The vulnerability of the affected individual(s)

You should thoroughly document your assessment, as the Privacy Commissioner may review it later, or it could be used in legal proceedings. A lawyer can help you work through the key considerations, apply them to your specific situation, and ensure your assessment is accurate, well-reasoned, and won’t leave your business legally exposed, especially in complex cases or where sensitive data is involved.

If in doubt, it is best to consult a lawyer early. This can help you determine whether the breach is notifiable and allow you to manage legal and reputational risks before they escalate.

What if the breach is notifiable?

If your business identifies a notifiable privacy breach, you must take two key steps:

Notify the Office of the Privacy Commissioner (OPC):

Complete the Notify Us form on the Office of the Privacy Commissioner’s website within 72 hours of becoming aware of the breach.
Include a clear summary of what happened, your assessment of the potential harm, and the steps your business has taken in response.

Notify the affected individuals:

Outline what happened
Advise them of any risks and what they can do to protect themselves
Explain what you are doing to address the issue and prevent future occurrences.

A poorly written notification can cause problems, especially if there’s a chance someone might later question your business’ procedure or seek compensation. Seeking legal advice before making your notification can help protect both your business and your reputation.

Take control of your privacy risk

The Privacy Act 2020 places a clear responsibility on businesses to respond to data breaches quickly, transparently, and carefully. The good news is you don’t have to navigate this alone.

When a privacy breach occurs, it’s often a high-pressure situation that requires swift and well-informed action. That’s why having a privacy breach response plan in place is so important. A well-prepared plan will guide your team through each step of the process, helping to minimise both legal risk, financial penalties and reputational damage.

An effective plan should set out:

The key response steps —how to contain the breach, assess the risk, notify the Privacy Commissioner and affected individuals (if required), and review what went wrong
Clear roles and responsibilities — who within your business is responsible for each part of the response
A framework for determining whether the breach meets the notification threshold under the Privacy Act
When to seek legal advice — to ensure your assessment, communications, and notifications are accurate, compliant, and protect your legal position

Having this structure in place before a breach happens ensures your team can act decisively and appropriately. Whether you’re building your first breach response plan, assessing whether an incident is notifiable, or preparing communications to affected individuals, getting legal advice at the right time can reduce stress, cost, and long-term consequences.

Restructures and Redundancies - An Overview

Thu, 19 Jun 2025 04:57:11 GMT

The words “restructure” and “redundancy” have featured regularly in media reports over the past two years in New Zealand. Many businesses and employees have gone through restructures and redundancies. The ongoing challenges of an economic downturn and uncertainty means that restructures and redundancies will continue to be considered by businesses as a way of managing costs, resources and efficiencies.

New Zealand’s employment legislation places strict duties on employers embarking on a restructure and redundancy process to ensure that a decision to disestablish a role/roles is lawful. The two main factors considered when assessing whether a redundancy is genuine are, substantive justification and procedural fairness.

We set out below a brief overview of the factors to consider when restructuring an organisation and making changes as a result.

Employee Rights

The starting point is that under New Zealand law, employees have significant rights designed to ensure they are treated fairly and reasonably, and that the power imbalance between employer and employee is not abused. Any action an employer intends to take that has the potential to affect an employee’s terms of employment and/or continuation of employment must be justifiable. This means that the employer must be able to demonstrate that it followed a fair process in arriving at its decision, and there is substantive justification for the decision.

Role rather than Person

In the context of restructures and redundancies, the starting point is that the focus must be on a role/roles rather than the employee. This is because the reason for a redundancy is that the employee’s role becomes surplus to the needs of the business due to the restructure. If there are other reasons driving the employer to use a restructure process to terminate an employee’s employment, such as poor performance, or behaviour-based concerns, the employer should use the relevant process to address such concerns.

Getting this wrong has the potential for a personal grievance claim on the basis of an unjustified dismissal.

Genuine Business Case & Rationale for Proposed Changes

The employer must have a genuine business reason for proposing change, and this must be clearly set out in writing in a Proposal document. The employer should be able to demonstrate the business case/reasons that led it to consider making changes, and the changes proposed. A Proposal document should be well drafted to ensure the employer discharges its duty of being able to show a genuine business case and the rationale for the proposed changes. It is best to do this with assistance from legal advisers.

Procedural Fairness

Apart from having a genuine business reason for the restructure and redundancy, an employer must also follow a fair process in arriving at its decision to disestablish a role. A fair process typically involves:

Refraining from pre-determining the outcome and engaging in consultation in good faith;
As part of the consultation process, providing potentially affected employees with the Proposal document and all relevant information, including their rights;
Inviting feedback from employees and considering this in good faith; and
Providing responses to the feedback, changing the proposal if necessary and obtaining further feedback; and
Making a decision following the above.

Redeployment

Often the decision to disestablish a role may not necessarily mean termination of employment. An employer should consider redeployment opportunities. This part of the process can be tricky, depending on the circumstances. This is because there may be situations where an employee will have to be offered a role, and others where an employee may be invited to apply for the role. Termination of employment may be the eventual outcome if there are no redeployment opportunities, the employee declines the offer of redeployment or is unsuccessful in their application for a role.

Risk Management

Restructures and redundancies are ridden with risks, often resulting in disputes. It is best for employers to manage these risks by taking advice from the outset and obtaining assistance with drafting relevant documents throughout the process. The overview above is generic. In practice, the manner in which restructures and redundancies are managed and carried out will vary from organisation to organisation, depending on their unique facts and circumstances.

Feel free to contact our team of experts if you are considering a restructure and redundancies, or if you are an employee involved in a restructure process and in need of advice and assistance.

The contents of this article is not legal advice. It is a summary overview only. For comprehensive legal advice, or to discuss this article, please contact our team at Smith and Partners Lawyers by completing the form below.

How can I enforce a promise made by somebody who is now deceased?

Tue, 10 Jun 2025 05:53:47 GMT

The Law Reform (Testamentary Promises) Act 1949 provides a legal framework for individuals to make claims against the estate of a deceased person based on promises made by the deceased to reward the claimant for services or work performed. This article summarises and analyses the key elements of a claim under the Act, discusses how courts assess the adequacy of testamentary provision, and highlights practical considerations for claimants, using a case study.

Key Elements of a Claim

There are four main elements to a claim under the Act:

Services Rendered: The claimant must have rendered services to, or performed work for, the deceased during their lifetime.
Promise to Reward: There must be an express or implied promise by the deceased to reward the claimant.
Nexus Between Services and Promise: A link must exist between the services rendered and the promise made.
Failure to Provide: The deceased must have failed to make the promised testamentary provision or otherwise remunerate the claimant.

Assessing Adequacy of Testamentary Provision

Courts consider several factors when determining whether the provision made in the will is sufficient to fulfil the promise:

The circumstances in which the promise was made.
The context and value of the services rendered.
The implied value of the promised reward.
The overall value of the estate.
Competing claims from other beneficiaries.
Any changes in circumstances or conduct of the claimant.

Practical Considerations for Claimants

Evidence: Claimants must provide credible evidence of both the services and the promise.
Establishing Nexus: Courts are more likely to infer a promise where services are extraordinary.
Adequacy of Provision: The claimant must show that the will does not adequately fulfil the promise.
Costs and Risks: Legal costs can be significant, and unsuccessful claims may result in liability for the estate’s and the other beneficiaries’ legal fees. Negotiating a settlement may be a prudent alternative.

Case Study

In the case study provided, the claimant was a neighbour (Amy) who received a $17,000 bequest and the right to select chattels. However, she had provided extensive support to the deceased over many years allowing him to continue to reside alone in his house in circumstances where he had no close family. Therefore, the adequacy of this provision was questionable. The size of the estate was considerable and there were no competing claims or beneficiaries. The residuary beneficiary, the Starship Foundation, contested the claim, especially given the lack of a specific promised amount. The case hinged on whether the bequest reasonably fulfilled the implied promise. The lack of certainty in the likely outcome, on both sides, resulted in a settlement to Amy of an increase of her bequest to $100,000.00.

As you can see how the Act applies is very fact specific. If you are in the position of having to defend such a claim or if you are considering bringing a claim yourself, contact our experts in Estate Litigation for advice on your situation.

Does Separation affect my Will?

Mon, 02 Jun 2025 22:04:37 GMT

If you have recently separated from your spouse or partner, reviewing your estate planning documents may not be top of mind. However, it is important to understand how separation affects your existing Will — and what steps you need to take to ensure your estate is distributed the way you intend.

Separation does not automatically update your Will

Under New Zealand law, separation — whether from a marriage or de facto relationship — does not revoke or change your existing Will. This means that your Will remains valid and legally binding in its current form, unless or until you formally revoke it. The best way to do this is by having a new Will prepared.

What happens if I die without updating my Will?

If you die without updating your Will after separating:

Your former partner will still inherit anything you left to them in your Will;
If they were appointed as executor and trustee, they still have the legal right to manage and administer your estate.
Any other terms that benefit them will remain in effect.

The end result is that your estate will be administered in a manner that no longer reflects your wishes.

Not yet divorced? Your Will still applies

Divorce will make any distribution to your ex spouse void but you cannot apply for a formal dissolution of marriage or civil union until you have been separated for at least two years. Many couples delay applying for a divorce long after separation. However, until your divorce is finalised through the Family Court, you are still considered legally married — and your Will still applies as if you were together.

What if you were never married?

The same applies if you and your former partner were in a de facto relationship; separation has no impact on your existing Will, which remains unchanged unless you take the proper steps to revoke it.

My partner and I are separating. What do I need to do?

After a relationship breakdown, it is important to:

Create a new Will to reflect your current wishes and remove your former partner from your Will (if desired).
Review any Enduring Powers of Attorney documents (EPOAs) especially if you do not want your former partner to remain your attorney for Property and / or Personal Care & Welfare matters.
Review Life Insurance Policy ownership or nominated beneficiaries.
Consider whether you need legal advice regarding the division of your relationship property, which may be formalised by way of a Relationship Property Agreement.

Protect your estate and your loved ones

To make sure your estate is handled the way you intend, we strongly recommend reviewing and updating your Will as soon as possible after separation. Leaving an outdated Will in place can lead to unnecessary disputes, delays, and stress for your family.

Need to update your Will after separation?

We understand there is a long list of practical and emotional matters to manage after separation. While updating your Will might not be top of your mind right now – it is one thing you can do to get some peace of mind.

Our team of expert Estate Planning lawyers and legal executives can guide you through your options and help you put the right documents in place.

Understanding Restraint of Trade provisions

Thu, 22 May 2025 01:36:22 GMT

A common issue which arises between an employer and employee (often former employee) is the enforceability of restraint of trade clauses in employment agreements.

What is a Restraint of Trade?

A restraint of trade in an employment agreement between an employer and an employee is a term which restricts / prevents an employee from working for a competitor (including themselves), or in their area of expertise or field. There are generally two types of restraints. One is a non-compete and the other, non-solicitation.

The purpose of a non-compete provision is to protect the previous employer’s business being affected as a result of an employee working for a competitor. A non-solicitation restriction often allows an employee to work for a competitor but restricts the employee from contacting clients of the former employer and getting them to become clients of the new employer. Sometimes a non-solicitation clause may also restrict the employee from getting former co-workers to join the new employer.

Restraint of trade provisions are tricky to enforce, and often the subject of disputes between employers and employees.

Enforcing Restraints of Trade

Generally, restraint of trade provisions will be enforceable if they are reasonable. Having terms that include restrictions in relation to a wide geographical area, and a long period of restraint will generally carry risks of being challenged and disputed. They have the potential to be found to be unenforceable.

The factors that are considered when assessing enforceability include the following:

Whether there is any legitimate proprietary interest capable of being protected. These include things such as information about clients and relationships with them, information about negotiated agreements with suppliers, or generally confidential information;
Whether the period of restraint is reasonable; and
If the geographical area covered by the restraint is reasonable, bearing in mind what would be relevant to the employer.

A mere non-compete clause will not be enough.

Current Trends & Protections

Employers are increasingly becoming stricter about enforcing restraint of trade provisions. There is more of an appetite to litigate any breaches of restraint of trade provisions by former employees. Employees on the other hand are also taking a firm approach to challenging enforceability. This is very likely due to the tough economic conditions in recent times.

Employers are encouraged to obtain legal advice when drafting employment agreements for new employees, to ensure any restraint of trade provisions are drafted in a manner that will ensure they are enforceable. Restraint of trade provisions can also be introduced as a varied term in employment agreements with existing employees, provided it is done following consultation in good faith. Seek advice on how this should be done first, before embarking on any changes.

Employees too should seek advice on any restraint of trade provisions in their employment agreements before agreeing to these.

Legal advice should also be sought regarding enforceability. Employees should do this before agreeing to any new work arrangement which carries the risk of potentially being in breach of a restraint of trade provision. Employers should do this sooner rather than later so that they understand their rights, any issues which arise, and take enforcement steps correctly as relevant to the circumstances.

At the date of this article there is an Employment Relations (Restraint of Trade) Amendment Bill in Parliament which proposes to set the criteria for when a restraint of trade provision will be of no effect. In essence, it proposes that a restraint of trade clause will have no effect unless the employee’s weekly earnings exceed the threshold weekly rate (3x the minimum wage), a proprietary interest is being protected and particulars are provided in the employment agreement, the employer pays the employee an amount equal to half of the employee’s weekly earnings for each week that the restraint of trade remains in effect, and the duration of the restraint is limited to 6 months.

Whether or not the proposed amendments become law remains to be seen.

Understanding Body Corporate Roles

Fri, 16 May 2025 03:31:35 GMT

As a first-time owner of an apartment or unit with a Body Corporate, it can be difficult to understand the roles of the different people involved. This article sets out the roles and respective responsibilities of the persons that make up the Body Corporate.

Body Corporate Member

A Body Corporate is made up of all the registered owners within the same building/complex. Upon your lawyer registering your name as the owner of a unit title property, you automatically become a Body Corporate member.

Body Corporate Chairperson

At each Annual General Meeting the Body Corporate must elect a chairperson.

The duties of the chairperson include the duty to prepare the agenda for each general meeting, to chair that meeting, to record resolutions, to keep financial accounts and to sign documents on behalf of the Body Corporate (among other things), however some of these may be delegated to the Body Corporate Committee and/or the Body Corporate Manager.

Body Corporate Committee

The Body Corporate Committee is a group of Body Corporate Members that are elected to handle any duties or powers on behalf of the Members. The Body Corporate Chairperson will also be the Chairperson of the Body Corporate Committee unless the Committee decides otherwise.

A Body Corporate can decide not to form a Committee in the following circumstances:

If there are nine or less units in the complex, the Body Corporate can decide not to have a committee, as long as 50% or more of the unit owners agree (ie by ordinary resolution).
If there are nine or more units in the complex, the Body Corporate can decide not to have a committee as long as 75% or more of the unit owners agree (ie by special resolution).

Body Corporate Manager

The Body Corporate Manager is usually a third party company contracted to handle the day to day tasks for the Body Corporate, though there may not be one if the Body Corporate is small.

The Body Corporate Manager provides the administration services for the Body Corporate and is the first contact person for anything related to the property as a whole including:

record keeping eg preparing notices, minutes from meetings and resolutions
financial services eg paying repair/maintenance invoices, payment of insurance premiums
confirming an insurance Policy is in place & dealing with any claims
providing disclosure as required for Pre Contract Disclosure Statements (PCDS) and Pre Settlement Disclosure Statements (PSDS)

Navigating Estate Litigation, Trusts, and Succession Law in New Zealand: Insights from the 2024 Supreme Court 'Alphabet' Decision

Mon, 28 Apr 2025 23:46:09 GMT

At Smith and Partners, we pride ourselves on staying abreast of pivotal legal developments that shape the landscape of estate litigation, trusts, and succession law in New Zealand. The 2024 Supreme Court decision in A, B and C v D and E Limited as Trustees of the Z Trust—commonly referred to as the ‘Alphabet’ case—serves as a landmark ruling with significant implications for fiduciary duties and estate planning.

Understanding the ‘Alphabet’ Case

In this case, the appellants—adult children of the deceased, Robert—challenged the transfer of his assets into a trust, which effectively excluded them from benefiting upon his death. They argued that Robert’s actions breached fiduciary duties owed to them, stemming from a history of abuse during their childhood.
The Supreme Court acknowledged that fiduciary duties exist between a parent and minor child but clarified that these duties generally cease once the child reaches adulthood or the caregiving relationship ends. The Court declined to extend these duties into adulthood based solely on past abuse, emphasizing that imposing such obligations without an ongoing relationship would “read equity backwards” and create legal uncertainty.

Implications for Estate Planning and Trusts

This decision underscores the importance of transparent and equitable estate planning. While the Court recognized the appellants’ hardships, it highlighted the limitations of current legislation in addressing such scenarios. Notably, the Family Protection Act 1955 lacks provisions to counteract asset transfers, such as to a Trust, intended to defeat potential claims, a gap the Law Commission has proposed to address in future reforms.

Our Expertise in Navigating Complex Estate Matters

Our firm specialises in guiding clients through the intricacies of estate litigation, trust disputes, and succession planning. We offer comprehensive services, including:

Estate Litigation: Representing clients in challenging wills and navigating disputes arising from estate distributions.
Trust Disputes: Advising on conflicts between trustees and beneficiaries, and addressing issues of trustee obligations and conduct.
Succession Planning: Crafting strategies to ensure fair and legally sound distribution of assets, minimising potential disputes.

Our team is committed to providing empathetic and cost-effective legal solutions, ensuring our clients’ rights and interests are protected.

Staying Ahead: Legislative Reforms on the Horizon

The ‘Alphabet’ case has spotlighted the need for legislative change to address asset transfers that undermine rightful/ethical claims. The Law Commission’s proposals aim to empower courts to recover assets transferred with the intent to defeat entitlements, signalling a future shift towards more robust protections for claimants.

Note: This article is for informational purposes only and does not constitute legal advice. For personalised guidance, please consult with our legal professionals

Contact Us

If you require assistance with estate/life planning, trust management, or potential disputes, our experienced team is here to help.

Defamation: What you need to know

Tue, 15 Apr 2025 04:26:15 GMT

Defamatory statements can spread quickly through social media and online platforms or physical media, causing damage to reputations, and financial losses. The Harmful Digital Communications Act 2015 provides some options for reducing harm online, but the ultimate remedy is still a claim for defamation.

What is defamation?

Defamation is a legal claim that arises when someone makes a false statement that harms another person’s reputation. Defamation can occur through written or spoken communication, online, electronically, in hardcopy, or in person. To successfully make a claim for defamation the plaintiff must prove three key elements:

The statement was published to at least one other person.
The statement referred to the plaintiff.
The statement was defamatory, meaning it would likely lower the plaintiff’s reputation in the eyes of a reasonable person.

Defamation is a ‘tort’, meaning that it was originally Judge-made law. These days the Defamation Act 1992 governs defamation and provides rules about liability, defences, and potential remedies, although common-law principles remain relevant to interpreting the law.

What are defences to defamation?

Not every harmful statement amounts to defamation. There are several defences available, including:

Truth : A statement is not defamatory if it is true or materially true.
Honest Opinion : If a statement is clearly an opinion rather than a statement of fact, and is based on true facts, it may be protected.
Privilege : Some statements are protected under absolute or qualified privilege. For example, statements made in Parliament or court proceedings are absolutely privileged, while media reports on public interest matters may have qualified privilege.

Who can make a defamation claim?

Individuals and organisations, including companies and charities, can bring defamation claims. A natural person can make a defamation claim without needing to prove actual financial losses. A body corporate such as a company, charity or incorporated society must be able to show that they have suffered (or are likely to suffer) financial harm.

Like any legal proceedings it is prudent to carefully consider whether it is in your best interests to file a defamation lawsuit. Lawsuits are costly and potentially risky, and filing a defamation claim (especially if you are a prominent or public figure) could bring more unwelcome attention than the original defamatory statements did, in a phenomenon known as the “Streisand effect”. This is where attempting to suppress or censor information unintentionally increases public interest and awareness of it. It is named after singer Barbra Streisand, who in 2003 tried to remove an aerial photo of her home from public records, only to draw more attention to it.

Public figures can face a higher threshold for proving defamation, as they may be required to show that the statement was made with actual malice or reckless disregard for the truth.

A defamation claim must generally be filed within two years of the defamatory publication, though the Court may allow an extension in limited circumstances.

There are certain mechanisms in the law to penalise use of a defamation claim unreasonably or in bad faith to try to suppress free speech (usually involving awards of costs against a misbehaving party). Despite that, the onus is still on the defendant to prove their defence, and New Zealand does not have an “anti-SLAPP” law. A SLAPP suit is a “strategic lawsuit against public participation” or a lawsuit that is brought to intimidate, silence, or retaliate against a person (usually in relation to matters of public interest). Other jurisdictions allow defendants to make anti-SLAPP claims early in a proceeding, forcing the plaintiff to justify why their claim should proceed. These help to protect free speech by dismissing claims that were brought for wrongful motives before the defendant incurs too many costs.

What are the Remedies for defamation?

For a natural person, defamation does not always require proof of financial loss. Damage to reputation may be presumed if the defamation is serious enough. Types of financial remedies include:

Economic harm: This can include lost business opportunities, employment termination, or decreased income;
Emotional distress: If the defamatory statement caused significant distress or humiliation the Court can direct a payment for this;
Special damages: These are quantifiable financial losses directly caused by the defamatory statement.
Punitive damages: A payment to punish the defendant and deter similar conduct, if they acted in flagrant disregard of the rights of the plaintiff.

Other forms of remedies that the Court can award are:

Injunctions: If defamatory statements continue to be published, the Court may issue an injunction to prevent further harm.
Correction Orders: The Court may recommend a correction or clarification to be published, ensuring that the public receives accurate information.
Declaration: The plaintiff may seek a declaration that they have been defamed.

Costs are typically awarded against the losing party; this is usually only a contribution to costs, not the plaintiff’s actual legal expenses. However there are some situations where it is presumed that actual legal expenses must be paid. This includes a situation where the plaintiff only requests a declaration that they have been defamed and costs, without seeking additional compensation, and succeeds.

On the other hand, if the plaintiff wins but claimed an amount of damages that the Court thinks was grossly excessive, the defendant may be awarded their actual legal expenses from the plaintiff. This discourages unrealistic claims.

Possible changes to the Defamation Act 1992?

There are no changes to the Defamation Act currently in progress, although various proposals have been floated in legal circles. Possible changes could include:

Anti-SLAPP provisions to make it easier for defendants to have claims dismissed if they are for wrongful motives, or would unduly harm free expression and public participation;
Adding a threshold so that the plaintiff needs to be able to prove some minimum level of harm (either financially or to reputation), such as “more than minor”, or “serious”;
Expanding remedies to include a Court-ordered apology;
A presumption that plaintiffs receive a suppression order to prevent their claim from backfiring by gaining further publicity;
Putting the burden of proof on the plaintiff to show that the defamatory claim was not true, or could not have been a reasonably held opinion, rather than requiring that the defendant shoulder the burden of proving these; or
Overhauling defamation law entirely to include Defamation, protection of Privacy, and the Harmful Digital Communications regime, into one combined and consistent piece of legislation.

Conclusion

Defamation law in New Zealand balances the protection of reputation with the right to freedom of expression, although it is often thought to favour plaintiffs more than defendants.

The ease of making public statements online – which may be read by thousands of people almost instantly – makes it very easy to defame someone and far harder to undo the damage done. Social media is rife with instances of defamation, yet most people don’t have the motivation or resources to pursue a lawsuit (or are satisfied with pragmatic remedies available via other sources such as the Harmful Digital Communications Act, and NetSafe). All it takes to risk a defamation claim is one heated comment against a person who is willing to take the matter further.

If you believe you have been defamed or are facing a defamation claim, seeking legal advice early is essential. Our experienced team can help you understand your rights and options.

Essential Updates in the New Edition of the Deed of Lease

Fri, 07 Mar 2025 03:51:37 GMT

The Law Association of New Zealand recently released the latest edition of their commonly used Deed of Lease for commercial premises and we outline some key changes to look out for, whether you are the Landlord or Tenant.

Rent Review Options

The new edition includes a new option of fixed rent adjustment dates, alongside the existing CPI rent review and market rent review. This option provides certainty for both parties compared to the irregularity which can arise from both market rent reviews and CPI increases. The fixed rent adjustment can be framed as either a percentage or a dollar amount increase.

New ratchet options have also been included in the First Schedule, which are relevant to CPI rent adjustments and market rent reviews. There are three options to choose from, briefly outlined below;

a soft ratchet which provides that the rent will not be less than the annual rent payable at the commencement date, unless the review is a renewal date in which case the annual rent will not be less than the rent payable at the start of the immediately preceding term of lease;
a hard ratchet which provides that the rent will not be less than the rent payable immediately prior to the relevant review; or
a softer ratchet which sets out that the annual rent payable will not be less than the rent payable at the commencement date of the initial lease.

There is also an option where caps on rent review, or specific amounts or percentages may be used.

Where no option is selected, the first soft ratchet option will be the default.

Renewal of Lease

The notice period now specifies that the Tenant must give the Landlord three (3) months notice where they wish to exercise a right of renewal, unless a different notice period is specified in the first schedule.

Outgoings

The new edition widens the parameters of what Landlord’s may charge, but also sets out that capital costs are not chargeable to the Tenant. This provides greater transparency and sets out clearer expectations for both parties.

The Second Schedule now requires the Landlord to provide budgeted outgoings to the Tenant every year for the following year (or as otherwise specified in writing).

Bank Guarantees and Rental Bonds

There is now specific drafting for bank guarantees and rental bonds (giving security to the Landlord that rent obligations can be met).

The Bank Guarantee or Rental Bond amounts will specify a dollar amount or a number of month’s rental – and provide more certainty for both parties that the terms are well drafted and reasonable.

Seismic Rating

A seismic rating clause has now been included, with an option to specify the seismic strength rating of the building. Tenants should ask their Landlord whether they have had an assessment on the building, and if so, request a copy of the report.

Health and Safety

Under the Health and Safety at Work Act 2015, both the Landlord and Tenant are defined as PCBU’s (person conducting a business or undertaking) and therefore have an overarching duty for people’s health and safety. The Landlord and Tenant must work together to provide an environment where risks are identified and eliminated, where possible. The requirement to co-operate and co-ordinate activities with other PCBU’s is legislated in section 34 of the Act, and those who fail to comply with this obligation may face a fine.

Overall, there are many new provisions which both Landlord’s and Tenant’s need to ensure they understand before entering into a Deed of Lease using the new edition. Talk to Chantal Laidler at Smith and Partners to ensure that your intentions are met at the outset of your Landlord-Tenant relationship.

What happens when family members can't agree about the family trust?

Mon, 24 Feb 2025 03:06:05 GMT

A dispute involving a family trust has received some publicity in the last year in lawyer’s seminars, articles and blogs. The case is Queenin v Queenin, and Smith and Partners have a particular interest in this case as Nathan Tetzlaff, who wrote the following article, was the lawyer who represented the successful party, the Queenin parents.

This case is a good example of how disputes can arise in relation to a family trust, the obligations of trustees, the rights of settlors, and how the Court may sort out a dispute.

Background

To maintain confidentiality this article only includes information that is in the Judgment. In summary:

The parents set up a trust to hold their assets – several properties, and the rental incomes generated from them. The key terms of the trust were that:

The trustees were the parents and one of their sons;
The main beneficiaries of the trust included the parents and all three of their children; and
The parents, as settlors of the trust, had the right to add and remove trustees.

The trust was used for many years but its management was relatively minimal. Annual accounts were prepared and expenses were reimbursed, but there was little in the way of formal authorisation or written resolutions for smaller management decisions. Despite being a trustee, after a short time the son didn’t have a day-to-day management role for the trust.

After taking legal advice from their accountant and previous lawyer about new trust regulations, the parents considered winding up the trust. The previous lawyer prepared documents for the trustees to sign winding up the trust, and distributing the properties and cash back to the parents. The parents had discussed this with their children earlier in general terms; unfortunately, the trustee son wasn’t consulted about the specifics or timing. He was contacted when the documents were ready for signing by the trustees.

The other children, who were not trustees, supported the plan. However the trustee son became reluctant. He demanded documents and information to assess the situation. Concerned about this sudden and unexpected step from him, and his refusal to agree with their plan, the parents moved the trust’s limited funds into their own account for safe keeping.

At this point the parents changed lawyers. They decided not to wind up the trust after all, but to remove their son as a trustee and appoint a company run by their accountant as third trustee. Using their power as settlors, they signed documents to remove their son as a trustee.

In response the now ex-trustee son filed a claim in the High Court. He requested orders that his removal was void and asked the Court to remove his parents as trustees instead. He claimed (among other things) that their lack of consultation with him and the movement of trust funds to their personal account were breaches of their obligations as trustees which justified their removal. He also asked for orders that his parents (not the trust) pay his legal expenses personally.

The Judge’s decision

The Judge put a lot of emphasis on the context, particularly that the parents had contributed all the trust assets. Although they were trustees and discretionary beneficiaries just like their son – and in theory no trustee or beneficiary has any more rights than any other – the Judge was careful to keep the context in mind. After all, the parents had built up their assets and all of the trust assets were due to them.

The Judge observed that the parents had discussed their intentions with their children, but also noted some lapses in their decision-making in the past, and in relation to the proposed winding up. He commented that communication from the parents’ previous law firm to their trustee son left a lot to be desired, and unnecessarily exacerbated the conflict. He was critical of closing the trust’s bank account.

Nonetheless, the Judge refused all of the son’s claims, upheld his removal as a trustee, and refused to remove the parents as trustees or appoint a professional trustee company. (Although the Judge did order that the trust could not be wound up and the beneficiaries could not be changed, unless the Court consented to that.)

The Judge ordered that the parties should each pay their own legal costs.

Key takeaways

The fact that the parents won without having to contribute to their son’s legal costs shows the importance that the Judge put on the purpose of the trust and the fact that the parents were the sole contributors to its assets.

The outcome provides important guidance for trust management and dispute resolution. Summarising paragraph 74 of the Judgment:

The obligations for trustees are more explicit under the new 2019 Trusts Act than they were previously;
However, a trustee appointed by the settlors in a small family trust must take into account the essential context, and the reason the trust was established in the first place; and
Settlor trustees, like the parents, can expect to enjoy the fruits of their labours. They don’t need to operate a trust as though they are just ordinary beneficiaries with no greater claim to the trust assets than the other beneficiaries.

This case has been quite controversial. Prominent lawyers (including at least one King’s Counsel) have correctly pointed out that when settlors of a Trust gift their assets to the Trust, they lose ordinary ownership rights to those assets. In most cases the settlors are discretionary beneficiaries of the Trust just like any other beneficiaries. Settlors can write a Memorandum of Wishes setting out how they would like the trustees to use the assets, however that is not binding on the trustees.

By putting so much focus on the settlors being the source of the Trust’s assets, the Judge in the Queenin case has favoured pragmatism over a pure, technical, understanding of trusts and property rights. Not all lawyers are happy with this, and it remains to be seen whether Judges in future cases are content to apply (or extend) this approach, or wind it back in favour of a more black and white view to property rights.

In the interim there are three broad lessons to learn from this case.

The first is Judicial Pragmatism . All the obligations of a trustee imposed by the trust deed and the law apply, but the law also gives Judges some flexibility. Where able, the Judge will consider all the context to reach a result that is appropriate and fair. In this decision the Judge decided strongly that the parents were entitled to control and benefit from the assets they put into the trust, even though their management of the trust was not perfect.

That has implications outside of trust law as well. Just because a law has technically been broken doesn’t necessarily mean that someone should go to Court about it. Judges have a measure of discretion in a range of situations, and most will try to ensure that the outcome of any dispute is just, fair and proportionate. A Judge will probably lack sympathy for a claimant who argues legal technicalities without being able to point to any real wrong or injustice that has happened as a result.

The next lesson is that Proper Trust Management Is Crucial . Trust decisions need to be documented and unanimously made. When they wanted to wind up the trust, the parents did the right thing by taking legal advice about their plans. Unfortunately, that advice from the previous law firm did not meet the legal requirements and this gave their trustee son a chance to cry foul, dragging the previous management lapses into the dispute as well. More careful management throughout, with more prudent legal advice, would have been very helpful for them. Smith and Partners were very happy to be able to resolve the situation to achieve this excellent result for our clients.

Finally, Effective Communication May Prevent Escalation . A badly worded email or a lack of communication can inflame a situation and make it far harder to resolve disputes amicably. Open and transparent discussions at an early stage, and possibly mediation, are options that might prevent a minor dispute from escalating into legal proceedings.

If you need assistance setting up or managing a trust, or if you have a trust dispute, we have the experience and expertise to offer high quality advice and representation.

Understanding Term Sheets and Non-Binding Offers

Sat, 25 Jan 2025 00:26:13 GMT

When it comes to buying or selling a business, two critical documents can often come into play: the term sheet and the non-binding offer. These documents are great tools that serve as the foundation for negotiations and set the stage for the final agreement. Understanding their roles, differences, and implications is essential for both buyers and sellers.

What is a Term Sheet?

A term sheet is a preliminary document that outlines the basic terms and conditions under which an investment will be made. It serves as a blueprint for the final agreement and helps both parties understand the key points of the deal before committing to a binding contract.

Key Components:

Valuation: The agreed-upon value of the business or a mechanism for calculating the value.
Investment Amount: The amount of money being invested or the purchase price.
Equity Structure: Details on the ownership percentages post-transaction.
Governance: Information on board composition and decision-making processes.
Conditions Precedent: Specific conditions that must be met before the transaction can proceed.

Term sheets are typically non-binding, meaning that while they outline the intentions of both parties, they do not legally oblige either party to proceed with the transaction. This non-binding nature allows for flexibility and further negotiation.

What is a Non-Binding Offer?

A non-binding offer is a document that expresses a party’s interest in buying or selling a business under certain conditions. Like the term sheet, it outlines the key terms of the proposed transaction but does not legally bind the parties to complete the deal.

Key Components:

Purchase Price: The proposed amount to be paid for the business.
Payment Terms: How and when the payment will be made.
 Due Diligence: The process and timeline for the buyer to investigate the business.

The non-binding offer serves as a starting point for negotiations and provides a framework for the due diligence process. It helps both parties to align their expectations and identify any potential deal-breakers early on.

Differences Between Term Sheets and Non-Binding Offers

While both term sheets and non-binding offers are used in business transactions, they serve slightly different purposes and contain distinct elements.

Purpose:

Term Sheet: Primarily used in share purchase scenarios to outline the terms of the investment.
Non-Binding Offer: Used in the context of buying or selling business assets (including as a going concern) to express interest and outline the basic terms of the proposed transaction.

Content:

Term Sheet: Focuses on the investment structure, governance, and conditions precedent.
Non-Binding Offer: Emphasizes the purchase price, payment terms, due diligence, and closing conditions.

Non-Binding Nature:

Both documents are generally non-binding, allowing for flexibility and further negotiation. However, they typically do contain certain binding provisions, such as confidentiality or exclusivity clauses that protect both parties interests – and often include provisions that determine at what point a legally binding agreement will occur.

Importance in Business Transactions

Both term sheets and non-binding offers play crucial roles in business transactions. They provide a clear framework for negotiations, help manage expectations, and identify potential issues early in the process. By outlining the key terms and conditions upfront, these documents can save time and reduce the risk of misunderstandings or disputes later on.

For buyers, these documents offer an opportunity to thoroughly evaluate the business and ensure that it meets their investment criteria. For sellers, they provide a chance to gauge the seriousness of potential buyers and secure favourable terms.

Smith and Partners’ commercial team are experienced in dealing with term sheets and non-binding offers and can advise on, help negotiate and draft these for you – to help smooth out the sale and purchase process.

Christmas Holiday 2024-2025 Employee Entitlements in NZ

Mon, 25 Nov 2024 00:00:52 GMT

The festive season can be a challenging time of year for employers as you try to grapple with the complexities of the Holidays Act and understand employee entitlements. We set out here the requirements specific to the 2024/2025 festive holidays.

Public Holidays during a Close Down Period

If a business has a close down period that includes public holidays (as can happen over the Christmas and New Year period where proper notice is provided to the employee) then the employee is entitled to be paid public holidays if those public holidays fall on days which would otherwise be working days for them.

Monday to Friday Workers

Christmas Day, Boxing Day, New Years Day and the day after New Years Day all fall on a weekday this year. Therefore, they will be observed on the day they fall. Monday to Friday employees will have those four days off and should receive full pay. Again, employees are entitled to be paid these public holidays even if the business is closed down over the period.
Your employee must be paid either their:

Relevant daily pay: the amounting they would have earned had they worked that day (including productivity/incentivising payments, overtime or cash value of their board/lodgings); or
Average daily pay (if the above does not apply): their gross earnings over the last 52 weeks divided by the number of whole/part days they would have worked on that public holiday.

It is preferable to pay employees their relevant daily pay.

Weekend Workers

As all of the public holidays fall on weekdays this holiday season, weekend workers will not be affected.

Working on a Public Holiday

If a worker works on a public holiday they should be paid time and a half and a day off in lieu.

Casual/On Call Workers

Casual/On Call Workers are entitled to receive payment for a public holiday if it would otherwise have been a working day. For example if an employee can show a pattern of working on Wednesdays, they would more than likely be entitled to be paid for Christmas Day and New Year’s Day. If they can show a pattern of working on Thursdays, the same goes for Boxing Day and the day after New Years Day.

Transferring the Observance of Public Holidays

Employers and employees can agree to transfer the observance of public holidays to another working day. Any request must be considered in good faith and any agreement must meet minimum statutory requirements.

If you would like to discuss any matters relating to holiday leave entitlements or any other employment related matter, please contact our highly experienced employment specialists to set up an appointment today.

Shareholder current accounts – risks and remedies

Sun, 07 Jul 2024 03:15:59 GMT

In an ideal world, owners of small privately held companies would always separate their business and personal expenses. In reality, this doesn’t always happen, and many owners may be unknowingly indebted to the very company they are utilising to insulate themselves from debt.

This article discusses the dangers involved when the line between personal spending and business spending becomes blurred; and the steps that you can take to restore this distinction; eliminating (or at least reducing) the associated financial risks.

Consider an owner of a construction company. On the on hand, the company itself will have many routine business expenses (fuel, replacing inventory, routine overheads such as insurance etc). Separately, the owner (in their individual capacity) will have personal expenses of their own. Certain expenses – for example the cost of a lunch – could arguably be attributed as either a business or personal expense (depending on the circumstances in which the cost was incurred).

With such an easy scope for overlap, it is easy to understand why many small business owners end up using company bank balances as an extension of their own personal finances.

Afterall, the whole point of owning a business is to earn money from it.

While making money is indeed the ultimate aim of going into business, the major advantage of owning a business through a company is to protect the business owner from the financial consequences of the business failing (so much as is possible). It is better for your company to enter liquidation then it is for you to be personally adjudicated bankrupt.

Unfortunately, taking a casual approach to company and personal spending can risk both occurring. Negating the advantage of running your business through a company and risking experiencing the worst of both worlds.

To guard against such a financially calamitous double whammy, the best course of action is to vigilantly respect the distinction between your company as a legal ‘person’ and yourself as an (actual) person. In practical terms, this means only taking money out of their business in the form of your wages/salary or by way of dividends (which are taken from the net profits of the company).

While the above represents what company owners should do in an ideal world, the reality is that most business owners will, from time to time, use company funds on a personal expense.

Understanding shareholder current accounts

Consider the example of a company owner regularly drawing money from an ATM using a company credit card. The company owner then takes that money and spends it on non-business related expenses over the course of a few weekends. Over time, the company owners acquires the habit of reaching for the company’s money in circumstances when they should be utilising the money that they personally own.

An observer might question whether this is even a problem. After all, the company owner owns the company and the company owns the money. Indeed even the author acknowledges that it is tempting to see the standard methods of drawing money from a company (salaries, dividends) as cumbersome bureaucratic hurdles keeping a person separated from ‘their’ hard-earned money.

As annoying and obstructive as observing these payment formalities may feel, deciding to ignore them changes the nature of a payment from a company to its owner entirely (even if the payment is not made to the owner directly, but simply on their behalf). Such payments are actually extensions of credit – individual loans that closely resemble bank overdrafts.

Taken together, the sum of all these individual loans are legally treated as being debited against the owner’s (notional) ‘shareholder’s current account’ (which functions like a form of overdraft).

The danger of unchecked shareholder current account debt

Unlike a bank overdraft, there is nothing (except the owner’s restraint and the availability of funds) to provide an upper limit on what can be drawn from a shareholder current account.

This can, in combination with other factors, result in the liquidation of the company. If liquidation occurs, the liquidator will scrutinise the shareholder’s current account and demand immediate repayment of any outstanding balance.If not repaid, court proceedings can be issued by the liquidator against an owner in respect of their shareholder current account. This can result in bankruptcy for the owner and personal sanctions for failed director duties. The legal separation of company and owner will afford no protection when years of shareholder current account drawings have been allowed to mount up unchecked.

Mitigating the risk

To mitigate this danger, owners should reflect on the possible consequences of cavalier company crediting and adjust their day-to-day business practices by keeping personal and business expenses strictly separate at all times. Straightforward examples would be to use separate business and personal debit cards as appropriate (leaving the company card at home on the weekend to reduce the chances of acting on temptation).

Effective management of shareholder current accounts is also vital for maintaining financial stability in closely held companies – especially in industries where profit margins can be thin and easily buffeted by unexpected adverse events. As a shareholder, the best course of action is to pay yourself last after expenses.

When personal and business expenses haven’t been separated – say for example if you are caught short at the supermarket or on a large personal expense – thought should be given to how overdrawn accounts might be resolved.

Where sufficient personal cash is unavailable to simply repay an overdrawn amount on the day, owners may instead work with their accountant (or legal adviser) to:

Declare a dividend that matches the overdrawn amount.
Issue a shareholder salary to offset the overdrawn amount.

The above methods are only available when the company is solvent and, before utilising either method, it is important that owners involve their professional advisors (particularly accountants) before taking these steps.

What are Shareholders’ options if a Director has breached their duties?

Wed, 22 May 2024 05:28:40 GMT

The day-to-day decisions of a company are in the hands of its director(s), who are required to act in the best interests of the shareholders and the company. But what happens if a shareholder alleges that a director has breached their duties?

Shareholders have a range of rights if a director has breached their duties. These include:

• derivative actions (stepping into the shoes of the company);
• a personal action against the director(s);
• seeking an order requiring the director to take or cease a particular action;
• a personal action against the company itself; or
• liquidation of the company.

If there are a number of shareholders with the same interests, the court can appoint a shareholder to represent them in court.

Derivative Actions

Ordinarily the director(s) would be in control of any litigation, however a “derivative action” is where the court gives a shareholder permission to bring a proceeding in the name of the company, or to intervene in a court case in which the company is already a part, instead of the director(s) being in control.

Courts will permit derivative actions only where they are satisfied that the company does not intend to bring or diligently continue to defend the case, or it is not in the interests of the company that the conduct of the case should be left to the director.

In making its decision the court will take into account the likelihood of the case succeeding, the costs of the case in relation to the relief sought, any action already taken by the company to obtain relief, along with the interests of the company in the case.

Personal Action Against Directors

Directors owe shareholders a range of duties directly:

• to properly supervise the company’s share register;
• to disclose the directors’ interests (to prevent conflicts of interest);
• to disclose share dealings; and
• other duties (such as not to inappropriately discriminate in relation to the authorisation of dividends as between one shareholder and another).

A shareholder may sue a director for a breach of a duty owed to them as a shareholder, to seek compensation for any loss suffered as a result.

Seeking an Order

There are certain duties that are not owed by a director to a shareholder, only to the company.
These duties include:

• the duty of directors to act in good faith and in the best interests of the company;
• to exercise the powers for a proper purpose;
• not to recklessly trade;
• not to agree to the company incurring certain obligations;
• adhering to the duty of care imposed on directors by the Companies Act; and
• Use of company information.

Where these are breached, the shareholder is entitled to apply for an order requiring a director to take any action that is required under the constitution of the company, or under the relevant law.

The order would only apply to the particular matters in dispute. This could be a good option where the shareholder doesn’t object to the director’s performance generally, except in relation to certain specific decisions the director has made.

Personal Action Against a Company

It may be more advantageous for a shareholder to sue the company rather than the director or directors. Examples include:

• A shareholder can sue a company for breach of duty owed to them as a shareholder. An example might be a failure to send disclosure documents required under the law relating to reorganisation of the company.
• A shareholder can seek relief against a company where they can show that conduct in relation to the company has been oppressive, unfairly discriminatory or unfairly prejudicial.

The usual remedy where there is oppression is an order that the company or the majority shareholder purchase the shareholder’s shares.

Liquidation

Shareholders, including minority shareholders, can take the extreme step of commencing liquidation proceedings, if the court if satisfied that it is just and equitable to do so.

This could include situations where:

• A shareholder has been expelled from office or excluded from participation in management, contrary to the understanding on which the company was formed;
• If there has been a justifiable loss of confidence in the ability of the management of the company to carry out its business in a proper manner;
• If there is deadlock in the management of the company; or
• The company is unable to carry out the business for which it was formed.

Shareholder disputes can range from a disagreement about a specific decision or action, all the way up to a fundamental disagreement that paralyses a company. We can offer advice about options for resolving a shareholder dispute that are as efficient as possible and have the greatest likelihood of success.

What is an Interlocutory Application?

Mon, 20 May 2024 01:12:09 GMT

Has your lawyer suggested an interlocutory application? Or have you been served with one?

An interlocutory application is an application for orders that are secondary to the main claim, and usually relate to the process/procedure of the case.

Interlocutory applications are dealt with as a preliminary matter before trial and can relate to a wide range of issues. Examples include:

An application to obtain more relevant documents or to limit the number of documents that must be exchanged if the parties cannot agree.
An application seeking an extension of time to the timetable before trial.
An application for an injunction – a court order that compels or prevents another party in the litigation from doing something.
An application for security for costs, if the plaintiff is an overseas company or there are concerns that they will be unable to pay costs if you are successful in your defence.

Their purpose is often to streamline the case so that the trial will be shorter, or preparation easier, or settlement more easily achieved. Judges can and do limit the scope of interlocutory applications if they consider they are encroaching on matters best left for the trial itself or are being used oppressively.

An interlocutory application can be a very useful way of getting to the heart of the dispute and thereby reduce costs, although care is needed in their use. They can be legally and factually complex, and if they require lengthy preparation then they may increase overall costs rather than reduce them.

While they can be filed with the Court without serving a copy on the other party or parties in the dispute, most interlocutory applications take place with both sides filing submissions and likely making oral argument in front of a Judge, either in a courtroom or sometimes via video link or telephone.

If you are served with an interlocutory application, you will almost certainly be given the right to reply (starting with a notice of opposition) to explain what is disputed and why, and to put any missing facts or documents before the Judge.

Interlocutory applications must be responded to quickly – a notice of opposition to an interlocutory application must be filed within ten working days after that application is served. Critically, any affidavit (sworn statement) must be filed and served with the notice of opposition. Unless the Judge directs otherwise, both sides must file an outline a few days before the hearing (the timing varies between courts).

For this reason, make sure you get in touch with your lawyer urgently if you are personally served with an interlocutory application.

Acting as An Executor Of A New Zealand Estate While Living Overseas

Fri, 15 Dec 2023 00:07:07 GMT

If you live overseas and you have been appointed as an executor of a New Zealand estate, you are able to fulfil the duties of an executor, but in many cases it increases the cost of obtaining Probate and of administering the estate.

If there are two or more named executors, the one(s) living overseas can renounce Probate (as long as they have not begun the process of administering the estate) and the remaining executor(s) can carry out the administration of the estate.

If you are the only executor, or if you do not wish to renounce Probate of the Will, the process of applying for Probate becomes more complicated. The process for, say an executor living in Australia would be:

Obtaining Probate

The solicitors in New Zealand who are acting for the estate will prepare the documents for applying for Probate

They will contact you and ask you to provide the name of your lawyer or a law firm in your area.

The New Zealand lawyers will send the Affidavit for Probate together with the original Will and the authorities that have been prepared (to pay accounts / liaise with IRD / release information / bring in assets i.e. close bank accounts etc) that will assist in administering the estate to the law firm in Australia along with specific bank / insurance forms, and ask that the solicitor contact you and attend on you to sign the affidavit, authorities and forms

The documents that are sent to Australia will need to be sent by International Courier (because among other things they contain the original Will) and the Australian solicitors will be asked to return the signed documents also by way of an International Courier.

The documentation will need to be amended to show that, instead of being witnessed by “A Solicitor of the High Court of New Zealand”, the overseas executor’s signature has been witnessed by “A Solicitor of the Supreme Court of __________________”. Under the Australian solicitor’s signature and title you will need to put the following phrase:

“a person authorised by the laws of Australia, or authorised by a Judge to administer the oath required for this affidavit”.

The New Zealand solicitor will need to send very specific instructions to the Australian solicitor in terms of how the documents will need to be signed and witnessed and to initial any amendments made to the documents.

The High Court requirements are extremely strict. If the documents are not signed / initialled exactly as requested then it may be necessary to send the documentation back to Australia to have it signed again (we have recently had an instance where the executor and solicitor had not initialled at the bottom of each page of the affidavit and we had to send it back to Australia to be initialled before we could file the application with the Court)

When the documents have been returned from overseas, if there are other executors who live in New Zealand we can get them in at that time to sign the Probate application documents and the authorities.

Once the Affidavit for Probate is fully signed by all the executor(s) the rest of the Probate documents can be signed and the application will be ready to be filed with the High Court at Wellington.

When Probate has been granted the authorities already signed by the executors can be used to close bank account(s) and bring in the other investments.

Transmitting property

If there is a property that is owned wholly or partially by the estate the documentation will need to be prepared to transmit the property, which will put the property into the names of the executor(s). This can only be completed after probate has been granted.

The documentation for transmitting the property is made up of some Authority & Instruction (“A&I”) forms and an Application for Transmission. A certified copy of the Probate document will need to be attached to the A&I forms prior to being signed by the executor(s), which is why the A&I forms / Transmission documents cannot be completed until Probate has been granted.

The transmission document contains a Statutory Declaration that needs to be signed in front of a lawyer or other person who is authorised to take an oath, so the A&I / Transmission documents will probably need to be sent back to the lawyer in Australia who took the affidavit to attend again on you as the executor to sign them.

Dealing with joint property

If there is a property that is held jointly with another person, the transmission document requires a certified copy of the Death Certificate to transmit the property to the joint property owner. In this case the property does not form part of the estate.

In the case of a jointly held property, if the joint property owner is the same person as the overseas based executor, you can attach a certified copy of the Death Certificate (once issued) to the A&I / Transmission paperwork and it can be sent along with the Affidavit for Probate and authorities, in which case all of the paperwork can be signed at the same time.

Executors in other countries

This example is for an executor or executors residing in Australia. With executors living in other countries the process would be similar but potentially more complicated and expensive (depending on the legal system of the particular country, and the distance from New Zealand).

For further advice on acting from overseas as the executor of a New Zealand based estate, please contact estate administration specialist, Alex Dunne through her personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840 .

Terminating A Commercial Lease: How Do I Get Out of a Commercial Lease in NZ?

Thu, 23 Nov 2023 03:00:32 GMT

Signing a commercial lease agreement is a significant step for any business. However, unforeseen circumstances can lead to the need for early lease termination. In this article, we’ll explore your options to exit a commercial lease.

Understanding Your Lease
Start by thoroughly reviewing your lease document (with your lawyer if necessary). It should contain essential information regarding any termination options available to you, notice periods, and penalties for early termination. A clear understanding of these terms is crucial, and you should have your lawyer explain anything you are not clear about. In most instances, for example under the commonly used ADLS form of lease, early termination by the tenant is not a standard option.

It cannot be stated too strongly the importance of maintaining a good working relationship with your landlord, particularly if you wish to negotiate an early termination of the lease. Generally, landlords are not obliged to provide an early release to their tenants and, having granted a lease for a fixed period of time, expect the tenant will perform their side of the agreement. Landlords can, and do, enforce the tenant’s (and if necessary, the guarantor’s) obligations e.g. the obligation to pay the rent until the end of the agreed term (which can be very costly to you as the tenant).

Mutual Agreement
The most straightforward way to exit a commercial lease is through mutual agreement between you and the landlord. If your landlord is willing to negotiate on termination (by you directly in the first instance, or by your lawyer if you are not successful), then terms can be documented in a deed of surrender. This document should outline the agreed-upon terms, including financial settlements (which might include things like re-letting fees or several months’ extra rent), any outstanding rent or outgoings payments, and property handover details.

Assigning or Subletting
Assigning or subletting your lease is another option. This involves transferring your lease to a new tenant who assumes your obligations. Depending on the terms of your lease and whether you have provided any personal guarantees or other security you may remain liable if the new tenant defaults, and in most cases landlord approval will be required. Depending on the circumstances you might engage a commercial real estate agent to help you find a suitable tenant.

Lease Break Clauses
In some limited circumstances commercial leases can include lease break clauses that set out conditions and procedures for early termination. These clauses are rare and may require specific notice periods, payment of a break fee, or other conditions – so seek legal advice early if you wish to explore this option.

Breach of Lease by Landlord
If your landlord breaches the lease agreement, such as failing to provide essential services or maintaining the property as agreed, you may have grounds for termination. Termination will not generally be the first option available to you to remedy a landlord breach so you should consult a lawyer to assess whether their actions constitute a breach and what remedies are available.

Conclusion
Exiting a commercial lease can be complex and needs to be approached methodically and with caution. Start by reviewing your lease agreement, and seek legal advice when necessary, to explore all available options. Negotiating with your landlord or finding a tenant to step into your shoes are often the preferred methods for early termination. Remember that each situation is unique – and to a certain extent will depend on the type of property involved.

Get specialist legal advice tailored to your circumstances to protect your rights and interests throughout the process.

What Is the Commerce Act? A Guide for Small Businesses

Thu, 02 Nov 2023 02:25:25 GMT

The Commerce Act 1986 (“the Act”) controls the way that all businesses trading within New Zealand operate. It prohibits anti-competitive behaviour and helps benefit consumers that purchase goods and services. The Act covers restrictive trade practices, mergers and acquisitions, price fixing, misuse of market power and actions that reduce competition in the market – and is enforced by the Commerce Commission

All businesses and professional associations in New Zealand are subject to the Act, so it’s important you understand the law and what your business needs to do to comply.

What is the purpose of the Commerce Act?

The Act states as its purpose

“The purpose of this Act is to promote competition in markets for the long-term benefit of consumers within New Zealand.”

Anti-competitive behaviour can limit consumer choice, prevent new entrants to the market, and result in artificially inflated prices for goods and services. The Act is designed to protect consumer choice by restricting and regulating anti-competitive behaviour.

It can act as protection for small to medium businesses by preventing large competitors from using their power to prevent entrance into the market, and it prevents your competitors from working together in ways that harm competition.

Who does the Commerce Act apply to?

Any company or individual selling products or services within New Zealand’s borders is subject to the Act. It applies regardless of where the business or individual is based – which means that companies and individuals selling services into New Zealand from overseas are still subject to the law.

Businesses (and company Directors) can be held liable for the behaviour of employees where training and compliance systems were not in place.

Intellectual property rights holders are also subject to the law, where the misuse of those intellectual property rights stifles competition in the market. This can be particularly relevant to franchisee rights and needs to be dealt with carefully.

Professional associations are also covered by the Act. While they can promote industry standards and best practices, they must avoid colluding to restrict competition or collectively fixing prices.

Individuals need to be aware of when selling goods they have made, or goods they have purchased and are on-selling crosses from being a private transaction, into being an activity that is covered by the rules of the Act.

What kinds of behaviour or activities are anti-completive according to the Commerce Act?

Small to medium business should avoid having discussions or agreements with competitors regarding pricing strategies. Where a business has employees that are involved with setting prices or developing sales strategies, the business should also make sure these employees are trained on what they can and can’t do regarding anti-competitive behaviour.

It can be easy for a business to be caught out by discussions that take place at industry events for example.

Collusive Practices & Cartel behaviour

Collusive behaviour is any form of secret or illegal cooperation or agreement between competitors to manipulate the market, restrict competition or gain an unfair advantage. All of the activities listed below are collusive practices under the Act.

Collusive behaviour becomes cartel behaviour when the competitors have entered into a more formal and explicit agreement to commit the anti-competitive behaviour. Both can incur significant penalties, however the penalties for cartel behaviour are particularly severe and more likely to draw the ire of the Commerce Commission.

Price Fixing

This is when you agree with one or more competitors to sell a product or service at a certain price.

Allocating Markets

This is when you agree with a competitor to create restrictions around who you sell to or what you sell.

These restrictions might be:

Geographic boundary lines (such as one competitor agreeing to only sell in South Auckland and one agreeing to only sell in West Auckland)
Sticking to only one particular industry or type of customer to sell to (for example one competitor agrees to go after only residential building customers and the other to only sell to commercial building customers)
Restricting your products and services (e.g., one competitor only sells cat toys, the other agrees to only sell dog toys)

Restricting output

This is when competitors agree to restrict the amount of a product they sell, creating artificially inflated demand, often leading to artificially inflated prices.

Bid rigging

This is when competitors join together and manipulate the bidding process to their advantage (or to one company’s advantage). The idea is to ensure that one particular party wins the bid at an artificially inflated price.

For example, four companies get together and bid on providing readymade meals to a hospital. The companies agree that three of the companies will provide bids to provide each meal at $8-12, and that the chosen “winner” will provide a bid at $7, when under natural circumstances some of those companies may have chosen to bid at a price of under $7.

Collusive tendering is a form of bid rigging

It covers any situation where competitors come together to agree what prices they will submit for contracts, tenders, or projects. Sometimes the competitors agree to divide contracts between each other, i.e., we agree that competitor A provides the best price for project X, and when project Y comes up, we agree that competitor B can provide the best price.

Group boycott

A group boycott is when two or more businesses or competitors agree to stop or refuse to deal with a particular individual, firm or supplier. The idea is to prevent the subject of the boycott from entering a market, or to prevent them from accessing the necessary goods and services they need for their business or trade. An example would be retailers coming together to agree to not stock a certain product, which may force the supplier to lower their price or agree to unfavourable supply terms.

Information Exchange

Information exchange is when competitors share confidential or proprietary information that is not publicly available, such as individual company strategies, pricing details, production costs, sales volumes, customer lists, or future business plans. Sharing this information can lead to coordinated behaviour and harm competition in the market.

Joint ventures or strategic alliances for anticompetitive purposes

Regular joint ventures and strategic alliances are not prevented by the Act, these business deals are generally considered normal practice. However, if the joint venture or strategic alliance is entered into with the intent to commit anti-competitive behaviour for example price fixing, allocating markets, etc., it could violate the Act.

Restrictive Trade Practices

Section 27 of the Act prohibits agreements or arrangements that substantially lessen competition in the market. SMEs should take particular care when entering into contracts or agreements that could restrict competition or hinder consumer choice.

Mergers and Acquisitions

Under the Act, the Commerce Commission has the authority to assess mergers and acquisitions to ensure they do not substantially lessen competition in the market. Most SME’s themselves would not meet the revenue or asset thresholds that would trigger the requirement for the Commerce Commission to approve the merger or acquisition.

However, where a small to medium business is being acquired by a large company, the thresholds may be met to require Commerce Commission consent to the transaction. We acted for a medium sized food distributor that was selling their business to a larger food distributor, and Commerce Commission consent was required as a condition of the sale (this can also be dealt with using a ‘no objection’ type of condition if it is not immediately apparent whether Commerce Commission consent is required or not).

Revenue Threshold:

If the combined value of the NZ revenue of the business purchasing and the NZ revenue of the business being purchased are over NZD 100 million, or the business purchasing produces more than NZD 200 million in revenue in New Zealand, then Commerce Commission approval may be required.

Asset Threshold:

If the combined value of the assets in New Zealand of the business purchasing and business being purchased are over NZD 100 million, or the business purchasing has more than NZD 200 million in assets in New Zealand, then Commerce Commission approval may be required.

Abuse of Market Power

Abuse of market power is sometimes known as monopolisation or misuse of market dominance. The Act does not specifically define what “substantial market power” is but is generally taken to be a significant degree of market influence that allows a business to act independently of competitive forces.

Essentially large companies are not allowed to use their size or market share to harm competition in the market or make things worse for consumers. Examples would be imposing unfair trading terms on suppliers, excluding competitors or exploiting consumers.

Holding a dominant position in the market is not illegal, but using that position to prevent competition, restrict new entrants, or harm consumers is a violation of the Act.

Few small to medium businesses in New Zealand wield “substantial market power’, but in limited geographies, or in small, niche markets they may fall foul of this law.

Enforcement and Penalties

The Commerce Commission is the regulatory body responsible for enforcing the Act. They have extensive investigative and enforcement powers, including the ability to conduct inquiries, seek information, and impose penalties for breaches of the Act.

Civil Penalties

Businesses found in breach of the Act may face substantial financial penalties. Fines can reach up to $10 million or three times the commercial gain derived from the breach, or 10% of annual turnover, whichever is greater.

Criminal Offenses

In certain cases, serious breaches of the Act may result in criminal charges, leading to fines and potential imprisonment for individuals involved.

Damages Claims

Businesses harmed by anti-competitive conduct can also pursue private damages claims against the offending parties, seeking compensation for losses suffered due to the breach.

Reputational Harm

Aside from the monetary and potential criminal penalties, Commerce Commission charges can bring significant reputational harm to both individuals and businesses. Commerce Commission investigations are published on their public website, and charges are often highlighted in the media.

Execeptions and Authorizations

Certain practices that may seem anti-competitive can be exempted under the Act if they fulfil specific criteria. SMEs should be aware of the exemptions available to them and the authorization process if their activities could potentially breach the Act but are deemed to be in the public interest.

Compliance and Mitigating Risks

Compliance with the Act is essential for SMEs to avoid costly penalties and reputational damage. To ensure compliance, businesses should:

Educate Employees: Ensure that all employees are aware of the Act’s key provisions and potential consequences of non-compliance.
Implement Compliance Programs: Develop and implement robust compliance programs that align with the Act and address potential risks.
Seek Legal Advice: When in doubt, seek legal advice to ensure that business practices and agreements are compliant with the Act.
Self-Assessment: Regularly assess business practices to identify and rectify any potential anti-competitive behaviours or practices.

Conclusion

For small to medium businesses in New Zealand, understanding the Commerce Act is of paramount importance to ensure compliance with competition law. By adhering to the Act’s provisions and promoting fair competition, SMEs can thrive in the New Zealand marketplace while upholding the principles of consumer welfare and market efficiency. Taking the necessary steps to comply with the Act will not only mitigate legal risks but also contribute to a healthier and more vibrant New Zealand business environment.

Smith and Partners can help you decipher the Act – in relation to your particular industry and circumstances – and then determine whether you are at risk of non-compliance and if relevant help you put steps in place to prevent that occurring. If you are the subject of a Commerce Commission investigation, we can advise you in relation to the process and can assist with responding to Commerce Commission enquiries and representation if necessary.

Don’t risk costly penalties, legal hassles, or reputational damage. Reach out to us now to assess your compliance, develop effective strategies, and navigate any Commerce Commission investigations with confidence. Your business’s success and legal peace of mind are just a call or message away.

Buying A Daycare or Early Childhood Education (ECE) Facility

Thu, 21 Sep 2023 04:21:35 GMT

What do you need to know before buying an early childhood education (“ECE”) business? Childcare centres are heavily regulated by the Government, and there are many key issues to consider before buying a daycare or ECE facility. Whether you are an entrepreneur looking to invest in the education sector or an experienced educator seeking to expand your business, understanding the legal aspects of this transaction is crucial.

So, what questions should you ask? And what provisions should be included in the sale and purchase agreement to protect your investment?

Employees

“Vulnerable Employees”

Depending on whether you are a seller or buyer, there are employment obligations and responsibilities to comply with, as in any business. An example is “vulnerable employees”, a defined class of employees under the Employment Relations Act 2000, that are often employed in ECE businesses. Any employee deemed to be a “vulnerable employee” has the right to choose to transfer to the purchaser on their existing terms and conditions, and their employment is treated as continuous.

This right needs to be factored into any Sale & Purchase Agreement. Purchasers should conduct further due diligence into the number of such employees, their salaries and accrued entitlements, existing employment contracts and employment histories.

Regular Employees

Employees that are not deemed “vulnerable” in accordance with the legislation can be offered employment at the sole discretion of the purchaser on terms and conditions determined by the purchaser. That means, you can decide whether to keep the current employees – but of course, it will be up to the employees to accept the terms and conditions you are offering.

The existing employment contracts will come to an end on settlement date, therefore, if you are intending to employ any of the existing employees, you will need to ensure they sign new employment contracts listing you/the new business name as the employer. These agreements need to be signed PRIOR to settlement. You should have the agreements drawn up by an experienced employment lawyer – or, if you are using the existing employment contracts, we recommend you have them reviewed to confirm they meet legal requirements and/or they offer you the necessary protections.

Building Inspection

You will need to obtain a building inspection report as part of the due diligence investigations to ensure the property is up to an acceptable standard. The building warrant of fitness should also be checked to see that it is current and for the correct kind of premises.

The agreement for sale and purchase should provide a warranty clause from the vendor that the premises are licensed as a pre-school pursuant to the Education (Early Childhood Services) Regulations 2008 or any other statutory provisions or regulations governing pre-schools and nurseries. Further, to protect you if the Ministry of Education (“MOE”) raises any concerns relating to the centre prior to settlement which requires a correction to make the centre compliant, the agreement should state that the vendor will make the necessary corrections at their cost.

Further considerations include local authority compliance (depending on the zoning), including any required land use consent to run a childcare centre and, any limitation of number of children should also be investigated.

Bulk funding

Apportionments in relation to MOE bulk funded payments need to be calculated as at settlement date, because MOE payments are made partially in arrears and partially in advance – and the settlement date will fall into one of those periods. It is not a simple exercise to apportion the MOE bulk funding. A provision should be inserted into the Agreement that the parties will act in good faith as soon as the MOE has supplied the bulk funding information so the parties can attend to a proper apportionment, with the amount to be paid immediately by one party to the other in accordance with the apportionment.

Consideration should also be given to retention of a certain amount of settlement funds by each party’s solicitor pending completion of the MOE funding for the period which covers the settlement date.

Trading Name

If the childcare centre’s trading name is being purchased, (and included in the goodwill figure of the purchase price), then provisions in the agreement need to be inserted to record the transfer of the ownership and the vendor’s obligation to change any registered company name.

Standard provisions should also be included signing over existing telephone and fax numbers for the business, restraint of trade, approval of lease or assignment of lease.

Competition / Restraints?

The agreements for sale and purchase should contain a non-competition restraint of trade provision, preventing the vendor from setting up another childcare centre, or working in the same or similar industry within a certain radius for a certain amount of time. Any restraint of trade needs to be reasonable to be enforceable.

The restraint of trade should also include a non-solicitation provision, preventing the previous owner/vendor from soliciting staff or parents for a reasonable period of time.

General Business due diligence

When completing due diligence for the purchase of the business, you will also need to consider:

Commercial leases, if not purchasing the premises.

Review the terms of the existing lease, as the lease will need to be assigned to you, with consent from the existing landlord. Alternatively, a new lease may need to be entered into.

Supply contracts

Whether the vendor has any supply contracts and if they are to be cancelled or transferred/assigned to the purchaser on settlement.

Financial viability of the business

You will need to ensure that sufficient working capital funds are available, as the first MOE funding payment may be months away (depending on settlement date) – you should get your accountant to check the business is sufficiently profitable.

Fire Safety Provisions

Checking fire safety provisions of the premises which includes ascertaining fire reports are up to date and have been submitted to Council.

Health and Safety, Licenses and Inspections

Ensure the facility meets health and safety standards to protect the well-being of children in your care and all necessary licenses and inspections are compliant and up to date.

Market Analysis

Research the local market to understand the demand for early childhood education services. Consider factors such as population growth, competition, and demographic trends that may affect your business.

Are you looking to buy a daycare or early childhood education facility?

Commercial law expert, Kristal Rogers has extensive experience advising on the sale and purchase of early childhood centres in New Zealand. To set up an appointment for further advice and assistance, contact Kristal by phone on 09 837 6896 or email Kristal.rogers@smithpartners.co.nz

Shared Driveways in NZ: Know Your Legal Rights and Avoid Property Disputes

Tue, 08 Aug 2023 05:00:07 GMT

Shared driveways are extremely common in New Zealand. Unfortunately, this places them in the centre of many property disputes . If you live on a property with a shared driveway or are looking to buy a property with a shared driveway, it is important to know your rights and obligations. There are many types of shared driveways in New Zealand, which are as follows.

Right of Way Easement

Shared driveways are often called ‘rights of way’. This name refers to the most commonly used method of forming a shared driveway, by granting a right of way easement. This right of way allows one property owner to pass over another property owner’s land. The rights and obligations of the affected property can be found by obtaining a copy of the registered easement certificate/instrument.

Most right of way easements refer to Schedule 5 of the Property Law Act 2007 (“the Act”) and the Land Transfer Regulations 2002 (“LTA”). These laws set out the implied rules and obligations. The LTA states that the cost of repair and maintenance must be shared equally. The Act states that each party must make ‘reasonable contributions’, this could mean whichever owner uses the driveway more should pay more towards its repair and maintenance.

For example, the owner of the rear property would pay more as they use a larger portion of the shared driveway. Both the Act and Schedule contain rules that prevent either owner from obstructing the right of way. When investigating a right of way, it is crucial to obtain the easement certificate/instrument as it may contain its own set of specific rules and obligations.

Cross-lease Titles

If you live on a cross-lease property with a shared driveway the Memorandum of Lease document should set out your rights and obligations. The driveway would most likely be defined as common area and usually, the lease documentation will say that the cost of repair and maintenance is equally shared.

Access Lots

In certain developments a separate Lot is allocated for a shared driveway. All the owners required to use this shared driveway will own a portion of the Lot with their own property. In most circumstances, the rights and obligations are covered by the Act and each owner must make ‘reasonable contributions’ to the repair and maintenance.

Unit Title – Body Corporate

Similar to a cross-lease in this case, shared driveways are referred to as common areas in a unit title development. The body corporate would be responsible for collecting levies from each owner which would ultimately contribute to the upkeep and maintenance of the shared driveway. The rules that govern the use of the shared driveway will be included in the body corporate rules.

Empower yourself with the right knowledge and guidance when it comes to shared driveways and property matters. Don’t let uncertainties linger, as addressing these issues promptly is crucial to safeguarding your property investment and maintaining peaceful coexistence with your neighbours.

Experienced property dispute lawyer, Nathan Tetzlaff , is here to help you navigate the legal intricacies and find swift resolutions. Whether you’re caught in a dispute or seeking clarity about your property’s rights and obligations, Nathan’s expertise is at your service.

Understanding Nuisance Law in New Zealand: Dealing with Neighbors' Interference and Protecting Your Property

Mon, 19 Jun 2023 02:43:36 GMT

As a landowner, it can be frustrating and concerning to see the actions of your neighbours affecting your property. One problem that can arise (and which is especially topical following the recent storms) is things on one property making their way to the neighbours’ and causing damage or creating a nuisance. Fortunately, the law provides remedies for landowners in these situations.

What is Nuisance?

First, it’s important to understand the legal concept of nuisance. Nuisance refers to any activity or condition that interferes with the use and enjoyment of one’s property. This can include anything from noise pollution to physical damage caused by debris or other materials. In order to establish a nuisance claim, the landowner must show that the interference is substantial and unreasonable, and that it has a significant impact on their use and enjoyment of the property.

Examples of nuisance

An extreme example is the mountains of forestry slash washed down rivers following Cyclone Gabrielle. Other examples include trees or small structures washed onto neighbouring properties. In some cases, if water flows from a neighbouring property (for example due to poor drainage) it may constitute a nuisance. If a landowner can show that emanations from a neighbour’s property have damaged or prevented their use of their property beyond what is reasonably tolerable, they may have a valid nuisance claim against their neighbour.

What is the process for making a nuisance claim?

In order to pursue a nuisance claim, the landowner must first notify the neighbour of the problem and request that they take action to prevent further damage. If the neighbour fails to address the issue, the landowner may then have grounds to file a lawsuit. The court will consider a number of factors in determining whether a nuisance exists, including the nature and extent of the interference, the character of the neighbourhood, and the landowner’s efforts to mitigate the problem.

If the court finds that a nuisance exists, it may order the neighbour to take specific actions to remedy the situation, such as properly containing the nuisance or removing it. In some cases, the court may also award damages to the landowner for any harm caused by the nuisance.

It’s worth noting that there are some limitations to nuisance law. For example, if the infringing emanation is permitted by law, the landowner may not have a valid nuisance claim. Additionally, if the landowner has contributed to the problem in some way (for example, by failing to maintain their own property), this may also affect their ability to pursue a claim.

Overall, if you’re a landowner who is experiencing damage or interference due to a neighbour’s forestry slash or other materials, it’s important to understand your legal rights and options. While pursuing a nuisance claim can be a time-consuming and potentially expensive process, it may be the best way to protect your property and ensure that your neighbour takes responsibility for their actions. If you’re considering pursuing a nuisance claim, it’s always a good idea to consult with an experienced lawyer who can guide you through the process and help you understand your options.

Don’t let nuisance issues jeopardize your property rights. Contact our expert disputes team today to take action and protect your property. Our dedicated team of legal professionals is ready to guide you through the process, assess your situation, and help you pursue the best course of action. Don’t wait – secure your peace of mind now. Reach out to us to set up an appointment and let us assist you in resolving your nuisance concerns effectively.

Selling residential property from a deceased estate

Fri, 17 Feb 2023 23:58:05 GMT

The complexity of selling residential property after the owner passes away depends on how the property was held – jointly or as tenants in common.

You will first need to request an updated title search to ascertain how the property is owned and find out whether there are any barriers to prevent a sale (i.e. caveat/notice of claim).

Jointly held property

If the property is owned jointly, which is often the case with married couples or if the property is owned by a trust, Transmission by Survivorship will need to be completed.

Any jointly held property does not form part of a deceased person’s estate, but still needs to be dealt with in a timely manner after the person has died. This is because if it isn’t done, it becomes a much more complicated process when the surviving property owner dies.

Your lawyer will complete an Authority & Instruction (“A&I”) form and an Application for Transmission (Survivorship), which must be signed by the surviving title holder in front of a solicitor, or other person authorised to take a Statutory Declaration. A certified copy of the Death Certificate will need to be attached to the A&I form along with a photocopy of a valid photo ID for each surviving title holder.

Once the transmission is registered, the survivor will own the property and will be the registered proprietor on the title. The property can then be sold, but as stated earlier it does not form part of the person’s estate.

Property held in deceased person’s name

If the property is held in the person’s sole name, or as to a certain share (ie as Tenants in Common) then the property forms part of the estate and Probate (if there is a Will) or Letters of Administration (if there is no Will) will be needed in order to transfer or sell the property.

Once the High Court has issued a grant of either Probate or Letters of Administration your lawyer can complete an A&I form and an Application for Transmission (Personal Representative). The personal representative is the executor(s) or administrator(s) named in the Probate or Letters of Administration document.

All named executors or administrators will need to sign the A&I form and the Application for Transmission in front of a solicitor, or other person authorised to take a Statutory Declaration. A photocopy of a valid photo ID for each executor or administrator will need to be attached to the documents. In this case, a certified copy of the Probate or Letters of Administration document will also need to be attached to the documents.

When the transmission is registered, the property will have effectively been put into the name of the estate. If the executor or administrator’s name is John Smith, the title will show that the property is held in the name John Smith “as Executor” or John Smith “as Administrator”. This step, called the transmission, must be done before any property can be transferred to one or more beneficiaries of the estate, or sold.

A notice of change of ownership will be sent to the local council and water provider. In many cases, the forwarding address of the executor or administrator will be care of the estate’s solicitors, meaning that all rates demands and water rates bills will go directly to the lawyers. If the solicitors are holding funds for the estate from the closure of bank accounts etc, they can make the rates and water rates payments directly.

It is important to make sure that the homeowner’s insurance remains current and that the insurers are advised if the property is unoccupied. The insurance company may require proof of who has authority to act on behalf of the estate (ie copy of the Probate or Letters of Administration document). In most cases your lawyer will be able to liaise with the insurance company on your behalf.

Sale of estate property

Once the transmission has been completed the executor/administrator can put the property onto the market to be sold.

It’s a good idea to consult your solicitors before signing an Agreement for Sale and Purchase, because there are particular clauses that can be inserted into the agreement that refer to the fact that, although the property is currently in your name as executor or administrator, you yourself did not previously own the property so you do not necessarily know about any alterations that may have been done to the property.

When you have an offer you can give your agreement to your lawyers, who will set up a sale file to do the conveyancing work.

As noted above, if the lawyers are holding funds for the estate from the closure of bank accounts etc, they can make payment of any bills related to selling the property, ie small renovations, cleaning and refurbishment costs, valuation services and advertising costs.

It is the estate’s responsibility to cancel the homeowner’s insurance, which your lawyer can arrange. Any over payment made for homeowner’s insurance will then be reimbursed to the estate.

Once settlement of the sale has been completed, the solicitors acting for the sale will usually transfer the proceeds of the sale over to the estate administration file, after which the proceeds can generally be paid out to the beneficiaries as part of the major distribution of estate funds.

Transferring property to estate beneficiaries

If the property is to be transferred to the sole beneficiary of an estate (or to all of the beneficiaries), this can be done by simply preparing A&I forms and arranging to have them signed, as was done with the transmission.

If there is more that one beneficiary and one of them wants to take the property as part (or all) of their entitlement from the estate, you may need to get a registered valuation of the property in order to come up with an agreed value.

In this case your lawyers will draw up a distribution statement showing how much is available for each beneficiary. This statement will show the value of the property to be transferred to one of the beneficiaries. The lawyers will usually arrange for all beneficiaries to agree to the distribution prior to making the distribution payments and transferring the property.

If the value of the property is greater than the amount of the inheritance due, the person receiving the property would need to pay an amount to the estate to make up the shortfall. He or she may need to take out a mortgage to come up with this amount, which is done in the same manner as if the property was being purchased outright.

If you have any questions regarding the transferring deceased estate property, or wish to seek advice regarding administering a deceased estate, please contact personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840 to set up an appointment with estates expert, Alex Dunne.

Death and Taxes - Estate Taxes in New Zealand » Smith and Partners Lawyers

Fri, 10 Feb 2023 00:06:17 GMT

They say there are two certainties in life – death and taxes. Unfortunately death does not necessarily mean the end of taxes. As executor or administrator you are responsible for ensuring that income tax returns are filed, and any money owed is paid. Bad advice on how to deal with estate-related taxes could leave you liable as executor.

In most cases final income tax returns will need to be filed for a deceased person (using the person’s individual IRD number they have had during their lifetime) from the 1st of April in the tax year that the person died until the date of death.

Income tax returns will then need to be filed for the person’s Estate from the date of the person’s death until the date that the Estate is distributed.

In terms of income tax, the Estate is considered to be a different entity from the individual and requires a new IRD number. We can apply for an Estate IRD number, or your accountant (or our accountants) can apply for one.

While the Estate must pay tax on any income earned, ‘death taxes’ or ‘death duties’ no longer exist in New Zealand tax law. (They were officially abolished in 1993) This means that there is no tax to be paid on inheritance by beneficiaries.

We usually attend to the preparation of income tax returns after the major distribution of Estate funds has been done, but we can apply for the Estate IRD number at any time once Probate has been granted.

Once the major distribution of Estate funds has been done (usually after the six month waiting period from the date of Probate) we often arrange with our accountants to prepare and file the final individual and Estate tax returns.

When preparing and completing final income tax returns for an estate, we recommend holding aside a small amount of estate funds (ie $5,000 to $10,000 depending on the size of the estate and the potential income tax liability) to cover any tax payments required by the IRD.

Once the interim distribution has been completed we take the amount retained for tax off investment so that no more income is earned and then we instruct the accountants to prepare the income tax returns.

When the prepared income tax returns have come back from the accountants we usually send them out to the Executor(s) / Administrator(s) for signing.

Once the income tax returns have been filed and all expenses (including any tax payable) have been paid and any expected income tax refunds have been received, we distribute the remaining balance (if any) to the Estate beneficiaries, which usually finalises all matters in relation to the Estate.

Occasionally some Estates do not require income tax returns, if the deceased person fits a specific set of criteria outlined by IRD. We can advise you on whether or not the Estate you act for fits this criteria, and if so, apply for the IRD to cease the person’s individual IRD number.

When choosing a law firm to administer an Estate, you should ensure that they have the knowledge to best advise you on how to deal with income tax liability – or you may find that as executor you are now liable for income tax payments and there is nothing left in the estate to pay it!

For expert advice on administering an estate, including advice on filing income tax returns, please contact Estate Administration specialist, Alex Dunne through her personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840

Property Damage Before Settlement

Fri, 03 Feb 2023 03:59:36 GMT

The fine print of the “standard” Agreement for Sale and Purchase (“Agreement”) outlines what legal rights both Vendors and Purchasers have in unforeseen circumstances.

The vendor remains responsible for property, chattels and fixtures until the purchaser takes possession on settlement day.

It is essential that vendors do not cancel their house insurance until the purchaser pays the balance of the purchase price owing on settlement day.

Clause 3.2 – Pre-settlement inspection

The pre settlement inspection clause allows the purchaser to enter the property once before settlement to check that the property and chattels are in the same condition as when the agreement was signed.

If the purchaser is unable to complete this inspection (e.g., living overseas, recovering from injury or illness), they can authorise a person to complete this in their place.

Should the purchaser identify any issues with the property that may give rise to a claim against the Vendor for compensation, they must give notice in writing BEFORE settlement day (e.g., no later than 4:59pm the day before settlement).

A dispute mechanism is set out in clause 10.

Clause 5 – Risk & Insurance

If there is an unconditional sale and purchase agreement in place, but the property transaction has not settled, and the property is destroyed or damaged either through circumstances beyond one’s control (e.g., natural disasters) or from someone (accidentally or intentional) then the vendor needs to inform the purchaser.

This disclosure is required to prevent a breach of agreement under the vendors warranties contained in the Agreement (clause 7).

The vendor should provide details of any insurance claim relating to the property (including landscaping) damage/destruction, especially if this could affect settlement.

If the property is untenantable on settlement date

If the property is untenantable (red and yellow stickered by the Council) then the purchaser has the following options :

1. Proceed with settlement (the purchaser should disclose all relevant information to their bank/insurance company first)

- if the vendors insurance claim has decided to pay, then a reduction should be made to the final amount for the sum equal to any insurance money received/to be received by the vendor in respect of the damage or destruction.
- No reduction will be given if the insurance company has agreed to reinstate for the benefit of the purchaser.

2.Cancel the agreement by serving written notice to the vendor. At which time the vendor must refund the deposit back to the purchaser in full. Neither party can claim against the other once cancelled.

The above does not include properties where the property is not untenantable

If the property is damaged but is still tenantable, the purchaser is required to complete settlement.

If there is damage (including landscaping and exterior damage) then a reduction can be given for reinstatement or repair being valued as what reasonable costs will be for the purchaser to do so after settlement.

If the parties cannot agree on the value for these costs then the dispute mechanism in clause 10 will apply.

Do you need advice on a sale or purchase of a property that has been damaged before settlement has been completed? Is the other side disputing how much the cost of remedies are?

What is a welfare guardian under the PPPR Act?

Mon, 14 Nov 2022 03:55:40 GMT

A welfare guardian is appointed by a Family Court Judge under the Protection of Personal and Property Rights Act 1988 (PPPR Act).

A welfare guardian is a person appointed to make decisions about the care and wellbeing of an individual who does not have the ‘capacity’ to make these types of decisions for themselves (this person is called the “subject person”), or to appoint an Attorney under an Enduring Power of Attorney. A welfare guardian is responsible for all decisions related to the personal care and welfare interests of the subject person, including in relation to housing and medical needs. They cannot make decisions related to property interests or financial assets

Who can be a appointed a welfare guardian?

Requirements for appointment include that the proposed welfare guardian must be over the age of 20 and must be an individual (i.e. cannot be a company, trustee or any organisation). A welfare guardian does not need to live in New Zealand, though it is preferred.

The proposed welfare guardian must file an application requesting appointment, and must satisfy the Family Court that:

the subject person wholly or partly lacks the necessary mental capacity to make and communicate welfare decisions for themselves (therefore appointment of a welfare guardian is necessary); and
the proposed welfare guardian is an appropriate person to carry out the responsibilities of the role, and will wholly act in the best interests of the subject person.

What is the role of the welfare guardian?

When making and carrying out decisions, a welfare guardian must:

Act in the best interest of the subject person;

Consult with the subject person (where possible), any jointly appointed guardians (where applicable), and any appropriate organisations to obtain advice in relation to the subject person’s care;
Consult the subject person’s property manager (if applicable);
Encourage the subject person to act in their own interest and develop capacity where possible; and
Integrate the subject person into the community

In contrast to a property manager , welfare guardians are not required to file any documents with the Court during their appointment.

If a welfare guardian acts in bad faith or without reasonable care, or enters into any type of arrangement or contract withholding the knowledge that they are in fact a welfare guardian acting for someone else and that they are acting in their capacity, the may be held personally liable for those actions.

Lawyer for the subject person

Once an application is filed with the Court, it will appoint a lawyer for subject person (“L4SP”) will be appointed to represent the interests of the subject person and speak to the Court on their behalf. Following their appointment, the L4SP will usually meet and speak with the subject person (where possible) and provide the Court with a report on their assessment of them, including whether the orders sought are appropriate, if there is any further medical evidence required, etc.

Opposition to applications

All interested parties (e.g. family members, a care facility where the subject person stays, or anyone the subject person lives with) must be notified of the application as it is filed. The Court arranges service of the application on the interested parties (with some exceptions) if consents have not already been provided by those parties as part of the application.

If an interested party does not think the proposed welfare guardian is suitable for the role, they may oppose the application for appointment.

The Court makes the final decision regarding appointment, on the terms it considers fair.

How long does a welfare guardian appointment last?

The duration of appointment is up to the Court to decide, though usually an initial appointment as welfare guardian is for 3 years from the date the Court’s order is made.

When an initial appointment is nearing expiry of its term, a welfare guardian can apply for review and re-appointment. Re-appointment as welfare guardian may be for a term of up to 5 years.

Are welfare guardians paid?

Welfare guardians are not entitled to payment for their services. However, reasonably incurred expenses (such as legal fees or medical expenses incurred on behalf of the subject person) are payable from the subject person’s funds.

I’m thinking of making an application – what should I do first?

You need to obtain a medical assessment for the person whom you wish to apply to be appointed the welfare guardian of. The medical assessment should address whether they have capacity (or not) to make their own decisions and communicate the same. A doctor or GP should have experience in this and know what is required.

If the doctor or GP determines the person has capacity, then they can instruct a lawyer to prepare Enduring Powers of Attorney.

If the assessment determines they do not have capacity (partially or wholly), you will need to make an application under the PPPR Act to be appointed welfare guardian.

Are you considering applying to be appointed as Welfare Guardian for someone? Our experts in PPPR Applications understand all the Court’s requirements for your application. Contact Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840 to schedule an appointment with Carolyn.

What information should executors take to their initial meeting with estate lawyers? » Smith and Partners Lawyers

Sun, 13 Nov 2022 23:51:04 GMT

The more information you can provide at this stage, the better. Executors may wish to discuss these matters with other family members, or conduct all the research on their own. You may not be able to find out all the information, in which case your solicitors will be able to complete searches for assets such as shares and life insurance policies.

Examples of the types of information on estate assets to take would be:

Bank statements including credit card statements
Information on any life insurance – this could be the original policy, policy renewal notice or a letter from the insurance company
Share certificates or statements from one or more of the share registries
Bonus Bond Certificates (or any information re the Bonus Bonds – preferably something with the Holder Number)
KiwiSaver account details
Information on any property held – copies of the Certificate of Title or rates demands if you have them, but if you don’t have any written information the solicitor will be able to do a title search as long as you have the address of the property

Your solicitors will need to know how estate assets are held as this affects how the estate will be administered. For instance, if the person held assets in his or her name worth $15,000.00 or more it will be necessary to make an application to the High Court for either Probate (if there is a Will) or Letters of Administration (if there is no Will) in order to administer the estate.

Any assets that are held jointly with another person can be transferred to that person with a certified copy of the Death Certificate. If all assets are either under the $15,000 threshold or held jointly (or in a trust), then it will not be necessary to apply to the High Court to obtain formal administration of the estate. If assets are held jointly, in many cases the family will be able to deal with bringing in the assets themselves. However, in the case of jointly held property you will need to use a law firm to transmit the property to the surviving property owner(s).

For more information on dealing with transmitting, transferring and selling property, please read the article “Selling residential property from a deceased estate”

Information on any debts of the estate, including:

Funeral account
Any other funeral related expenses (ie catering / head-stone)
Power / phone / Sky TV / rates and water rates bills
Information on any credit card debt or outstanding loans

Death certificate

In most cases your solicitors will need to see the original Death Certificate. You can bring the certificate in to them at the initial meeting or ask the funeral home to send it directly to them.

Other information / documents that may also be needed are:

Birth certificate
Marriage certificate
Drivers licence
Passport

Information on family members

Your solicitors will ask you about family members of the person that has passed away – all information regarding any spouse / de-facto partner (including, in some cases, ex-partners) and children (including any adopted children or step children who were dependant upon the deceased at the time of their passing) will need to be provided, as well as in some cases information regarding parents or siblings.

In cases of re-marriage, stepfamilies or blended families, the information you provide to your solicitors about family members often becomes even more crucial to issues related to the administration of the estate.

If you’re ready to set up a meeting with an estate lawyer, please contact her personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840 to be put in touch with author, Alex Dunne.

Buying A Tenanted Residential Property In NZ

Tue, 08 Nov 2022 03:56:18 GMT

Buying a residential property that is currently tenanted is slightly more complicated than buying property from someone who is living there and will move out on settlement day.

What are your intentions for the property?

Firstly, consider your intentions for the property. Do you or your family members want to live in the property? Do you want to keep the existing tenants? Or do you want to rent the property to someone else?

If you do not want to keep the current tenants in the property

You will need to ensure that the sale and purchase agreement provides for vacant possession. The words “Vacant possession” must be inserted in the Tenancies box on the front page of the Agreement for Sale and Purchase.

An important point to check is whether the Residential Tenancy is a periodic tenancy or a fixed term tenancy.

Fixed term tenancies

If the existing tenancy is fixed term, the landlord/vendor cannot give notice to the tenant to vacate early. A fixed term can only be terminated early if the tenant agrees to end the fixed term contract, and the tenant’s agreement is in writing.

However, if the tenants are on a fixed-term tenancy that was granted on or after 11 February 2021, the landlord can end the tenancy on expiry of the fixed-term (or later) with 90 days’ written notice, if the sale of the property has a requirement that the landlord gives the purchaser vacant possession.

Periodic tenancies

If the existing tenancy is periodic, then the vendor can terminate the tenancy by giving 90 days’ notice to the tenant stating that they are required under an unconditional agreement for the sale of the premises to give the purchaser vacant possession.

The notice to terminate must comply with the requirements of the Residential Tenancies Act, including that the notice is in writing, specifies the timeframe within which the tenant must vacate, provides the reason for termination, and is properly served on the tenant.

You should verify that there are at least 90 days between the unconditional date and the settlement date. If you are unsure, we recommend that you check the dates with your lawyer before signing the Agreement for Sale and Purchase.

If you have already signed the agreement and it is does not provide for vacant possession – you will need to either:

Ask the current owner to serve notice to terminate the tenancy (providing at least 90 days) on the tenant; or
Wait until settlement has been completed, after which time you can provide notice to the tenant to terminate the tenancy (in your role as the new landlord).

Acceptable reasons to end a tenancy

Note however that there are limited reasons which permit a landlord to terminate a tenancy. Acceptable reasons to terminate include if the owner requires the property for themselves or for a family member as a principal place of residence. In these instances, at least 63 days’ notice must be provided to the tenant.

Note again, if it is a fixed term tenancy, you will have to wait until the end of the fixed term tenancy to terminate (and only limited reasons), unless the tenant agrees to end the fixed term tenancy and vacate early. Often, the tenant may request payment from you in exchange for agreeing to end the fixed term before expiry of the term. The tenant is under no obligation to agree to cancel the contract early.

If you are using a KiwiSaver Withdrawal and/or the FirstHome Grant to purchase the property

If you are using KiwiSaver Withdrawal (link to KiwiSaver article) or the FirstHome Grant (link to article on First Home Grants) to assist you with your purchase, there are requirements for you to live in the property.

If you do not have vacant possession on settlement – the property may be classified as an investment property

All buyers, but particularly first home buyers should be aware that if the property is still tenanted on settlement day it may be classified as an investment property, even if the tenants are due to move out soon, or if you intend to give them notice.

This would mean that your mortgage/lending would be subject to the same rules as an investment property – which often requires are higher loan to value ratio (i.e. more equity/deposit). The rate for investment properties is usually 40% equity, to a 60% loan.

If you want to rent the property to someone else

You will need to ensure that the Agreement for sale and purchase provides for vacant possession. You can’t give notice to terminate for this reason.

If you want to keep the existing tenants:

If you want to keep the existing tenants your lawyer will ensure that the appropriate paperwork is completed prior to settling.

If you are taking over the existing tenant you do not need to enter into a new residential tenancy agreement, however the vendor must tell the tenant who the new owner is and when they will take over. You should also obtain a copy of the tenancy agreement from the vendor. Once the new owner takes over, they must tell the tenant their name, contact details and address for service, and how to pay rent including new bank account number. This is important as it will ensure future rentals payments are made to you.

Both the vendor and purchaser should sign a Change of Landlord Form, this will record the change in ownership with Tenancy Services and enable the bond to be transferred from the current owner to the new owner. This must be lodged with Tenancy Services within 10 working days of the change of ownership.

As the new landlord you must ensure that the property meets the requirements of the residential tenancies act, including that the property can be legally rented and that it complies with the mandatory healthy homes criteria . You cannot assume that the previous owner was already meeting their legal obligations as a landlord.

You will also need to ensure that you have the appropriate Landlord’s insurance in place.

Inheritance Law in NZ: Your Rights to Inheritance

Fri, 04 Nov 2022 03:45:59 GMT

If one of your parents has died leaving a Will that provides you with nothing, or little, you may consider bringing a claim for a portion / greater portion of the estate, assuming that there are enough assets in the estate to make a claim worthwhile.

If it turns out that your parent has transferred their assets out of their name during their lifetime or own everything jointly with their spouse, you may still be able to bring a claim in certain circumstances – see What Happens If All Of The Assets In My Parent’s Estate Goes To My Step-Parent? Can I Make A Claim? .

The Family Protection Act 1955

The Family Protection Act 1955 confirms that a moral duty is owed by a will-maker to certain classes of family members, including children and adult children (and in some circumstances spouses, de facto partners, grandchildren, and stepchildren).

What will be required to meet the obligations of the “moral duty” will vary depending on the particular circumstances, however the Court will often consider the following:

emotional support and recognition as belonging to the family;
size of the estate;
financial need;
medical status;
nature of the relationship with your parent;
contribution to your parent’s welfare;
contribution to your parent’s estate;
benefits or gifts received from your parent during their lifetime;
competing claims between family members;
change in circumstances after death.

Left out of your parent’s will entirely?

Generally speaking, if a child has been excluded entirely, the Court is extremely likely to intervene and make provision from the estate. However determining how much a Court is likely to award is largely dependent on the particular circumstances of the child and the family unit.

Unequal Inheritance

It should not be assumed that a Court will divide an estate equally amongst adult children as parents are not required to treat family members or their children equally. This means that unequal division of an estate among siblings does not provide a strong basis for bringing a claim alone and needs to be considered in light of the factors above.

Additionally, the Courts will only intervene to the minimum extent necessary to remedy the breach of moral duty and “right the wrong”. This is why proper advice and strong advocacy by an experienced lawyer can assist those considering bringing this type of claim against an estate.

Smith & Partners have considerable experience dealing with estate disputes and Family Protection Act claims, particularly involving adult children.

Have you been left out of your parent’s will? Time is of the essence when making an estate claim, contact Carolyn Ranson’s personal assistant, Suzanne Sumner by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840

Making A Claim Against A Step Parent For Your Parent’s Estate

Thu, 27 Oct 2022 03:49:25 GMT

What happens if all of the assets in my Parent’s estate goes to my step-parent? Can I make a claim?

The death of a parent is always a difficult time, even if it is expected. This is doubly so where you parent has re-partnered, and their partner is still living. In most situations, a child or children in this situation only has a claim against the estate of their own parent, not a stepparent. And, children have a limited time (usually 12 months after grant of probate of the Will) to bring such a claim. If they take comfort that they are named in their stepparent’s Will, there may be nothing to stop the step-parent changing it after their parent has died.

It is therefore important to obtain comprehensive legal advice about your rights and the timing involved so that you do not miss out.

Case Study 1

Bob and Cath have two children, Sam and Pam. Bob and Cath divorce after 15 years of marriage and Bob starts living with Shirley. Shirley has two children of her own, Ivy and Marigold.

Bob and Shirley mainly keep their assets separate but make ‘mirror’ or reciprocal Wills leaving everything to each other. Their Wills state that the survivor of them will leave their estate equally between Ivy, Marigold, Sam and Pam. This is a very common way to set up a Will. However, the Wills are not ‘mutual’ Wills which would bind each other.

After 22 years with Shirley, Bob dies. Pam asks for a copy of her father’s Will and Shirley provides her with it. Pam is satisfied to see that her Dad’s Will provides that after Shirley’s death the joint estate goes to all 4 children in equal shares. Pam assumes that Shirley’s Will is the same.

Pam and Sam understand that they could claim against their father’s estate (under the Family Protection Act ) but are content to wait until Shirley dies to receive their ‘inheritance’.

After 12 months (from grant of probate of Bob’s Will) the ability to bring the claim lapsed.

Shirley dies 5 years later. Pam and Sam wait to hear from Shirley’s lawyer. When they hear nothing, they contact Ivy who says they are not in Shirley’s Will. Shirley had changed her Will 2 years before her death leaving everything to Ivy and Marigold.

Pam and Sam have no claim against Shirley’s estate (because she is not their parent) even though it is made up of assets from their father’s estate. It is now too late to claim against Bob’s estate so Ivy and Marigold get everything and Sam and Pam get nothing.

Case Study 2

Earl and Merle have three children, Tim, Tom and Tammy. Earl dies and Merle remarries Sid. Sid has one son Fred. Sid and Merle are together for 15 years until Merle’s death.

When Tim, Tom and Tammy ask about their ‘inheritance’, Merle and Sid’s lawyer told them Merle did not have any assets in her estate as they had all gone to Sid ‘by survivorship’.

They find out that Sid and Merle had joint bank accounts and owned their family home as ‘joint tenants’. Merle owned nothing in her own name so her Will was irrelevant. Tim, Tom and Tammy were shocked to hear this as they understand that Sid could leave all his assets to Fred and leave nothing to them.

Tim, Tom and Tammy went to see their own lawyer (Tilly Travers) to get advice on what they could do. Tilly explained that they could request that the executor of their father’s Will make an application to the Court under the Property (Relationships) Act 1976 for half of the joint assets of Sid and Merle to be ‘bought back’ into Merle’s estate (which was her entitlement under that Act as there was no agreement in place which contracted out of that Act). This meant they could then bring a Family Protection Act claim against those assets.

An experienced estates litigator can advise you on the best way to protect your estate from a claim and on defending a claim against an estate, where you are the main beneficiary or the executor. They can also advise and assist on bringing a claim against an estate.

Have you been left out of a parent’s will or has their estate been left with no assets? Time is of the essence in making any claims in this situation, contact Suzanne Sumner, Personal Assistant to Estate Litigation expert Carolyn Ranson today to set up a confidential appointment to discuss your options. Phone 09 837 6840 or email suzanne.sumner@smithpartners.co.nz

Selling Trust Property

Wed, 26 Oct 2022 22:03:43 GMT

When trustees of a family trust decide to sell trust assets, there are a few more hoops to jump through than when it is just an individual selling property. To ensure the transaction goes smoothly, and to protect trustees’ liability, the following steps should be taken.

Do the trustees have the power to sell the property?

The first step trustees must take in considering whether to sell property held by a trust is to check the terms of the trust deed to see if there is a power of sale contained within the trust terms.

All the trustees must agree to sell the property – and properly document the transaction

All trustees must agree to the property being sold (including independent or professional trustees). A trustee resolution should be prepared documenting the decision to sell the property. This must be completed prior to a Sale & Purchase Agreement being signed.

The trust’s lawyer should be instructed to act on the property conveyance and the trust assets register should be updated following settlement of the sale.

Ensure the trust has an IRD number

If the trust does not already have an IRD number the trustees should apply for an IRD number to be able to sell the property.

Check if you need to get a valuation of the property

If the sale is a private transaction (i.e. not through a real estate agent), a registered valuation will be needed. The sale of any land or property should be valued in accordance with section 28 of the Trustee Act.

Check the tax implications

Trustees need to be aware of the “ Bright-line Test ” for residential property in New Zealand. The test will require income tax to be paid on any gains from the sale of the residential property that is bought and sold within the ‘bright-line’ period, except for the main family home and which can include properties held in trust (subject to certain qualifications).

Originally the time period related to property sold within two years of purchase, the time period was extended to five years in March 2018. In March 2021 the Government further extended the time period so that any property purchased on or after 27 March 2021 and then on-sold within ten years of purchase will be subject to the bright-line test.

It would be prudent to seek specialist tax advice if necessary.

Trustees should understand their legal obligations

Trustees would be liable in damages for breach of their duty of diligence and prudence if they were to sell a trust property for an excessively low price. However, the amount of the trustee’s liability is limited to the loss incurred as a result of the breach of trust and this will be the amount of damages awarded.

Ensure the Sale & Purchase Agreement is filled in correctly

As a trust is not a legal entity the vendor’s name is not the trust name but rather the names of the individual trustees, as trustees of the ABC Family Trust. The names of all trustees (as trustees of the ABC family trust) should appear on the vendor section of the Agreement for Sale & Purchase

Distributing the sale proceeds correctly

The trustees need to remember that the proceeds of the sale remain as trust funds, not funds of the settlor(s). Any distributions to beneficiaries need to be dealt with accordingly.

Who Can See or Request A Copy Of A Will? Smith and Partners Lawyers

Thu, 11 Aug 2022 00:58:45 GMT

A person’s Will is an extremely important document and it must be well looked after. Even a copy of a person’s last Will can only be released to authorised persons. In New Zealand, most original Wills are held for safekeeping, together with other important documents, in the “Deeds Room” of the law firm that prepared the will.

We often receive requests from people asking for a copy of their Will and sometimes for a copy of the Will of their spouse or some other person. Some people get upset to find out that they cannot simply uplift a copy of another person’s Will without us first having received the written consent of that person. Therefore, it seems that it would be helpful to understand who “owns” or has control of a person’s Will:

While alive, the person who wrote the Will, the “willmaker” (who used to be called the “testator”) owns the Will. Only he or she can authorise that a copy can be sent out or uplifted.
Once the willmaker dies, the executor or executors named in the will take control of the Will, and they are the only ones that can authorise that a copy can be sent out or uplifted.
If the Will is held by “Law Firm A” and the executors want “Law Firm B” to administer the estate, all of the named executors will need to sign an “Authority to Uplift” and send it to “Law Firm A” to have the Will sent to “Law Firm B”.
All Wills should clearly name the executors and state their places of residence and their occupations. If the occupation of one or more of the executors is “Solicitor”, it does not mean that the law firm where that solicitor practices law is also appointed to act as the lawyers for the estate.
The executors choose what law firm is to act as the solicitors for the estate. If there is more than one executor, the executors must agree on who is to act. If they can’t agree, it may be necessary to apply to the High Court for directions to remove the executors and appoint an organisation such as the Public Trust to act as the executors for the estate.
Even if it is stated in the Will that the estate is to be administered by a certain law firm, this is not binding. The executors are the ones who make the decision as to who Will act as the lawyers for the estate.
There is no official “reading of the Will” in New Zealand. What happens is that the executors can authorise that copies of the Will be sent to all beneficiaries so that they can each read what it says and what they are entitled to receive under the Will. Executors are not required to do this, and the solicitors administering the estate can only send a copy of the Will to the beneficiaries of the estate upon receiving instructions from the executor(s) to do so.
If you believe you are the beneficiary of a Will but are not an executor, it will be necessary to get the approval of the executor(s) for you to be given or sent a copy of the Will.
If all executors named in the will have either died or are unable or unwilling to act as executors (due to ill health or having moved overseas for example), it will be necessary to apply for Letters of Administration with Will Annexed. In this case the people who are the beneficiaries named in the will are the persons entitled to apply to be the administrators. The estate is then administered in accordance with the directions in the Will (rather than where there is no will, in which case Letters of Administration on Intestacy will need to be obtained and then the estate will be administered in accordance with the Administration Act).
Once Probate or Letters of Administration with Will Annexed have been granted, the document becomes a matter of public record and any person can undergo a “Probate Search” or “Letters of Administration Search”. Both of these documents contain a copy of the will, so once Probate or Letters of Administration have been granted by the High Court anyone can obtain a copy (there is a small fee for doing this).
If you don’t know who the executors are and you believe that you may be a beneficiary named in the Will, your best course of action would be to undergo a Probate Search. You would need to contact the registry of the High Court closest to the place where the person died with an approximate date of death. If there is no Probate held on record you may need to check again every month or so, as Probate of the Will may not yet have been granted. When you have drafted your Will, you should ensure that the executors you have named in the Will know that they are the executors. You should also inform the beneficiaries of the Will as to the names of the executors, and which law firm holds your Will or where the original of your Will is located. This will make it easier for your loved ones to organise the administration of your estate after you have passed away.

Enforcing a Judgment - Smith and Partners Lawyers

Mon, 25 Jul 2022 04:05:06 GMT

So you’ve had a big dispute, gone to Court, and the Court has issued a judgment in your favour. Fantastic! But… the other party doesn’t pay the amount that the Court has ordered them to pay. What now?

A lot of people don’t think beyond having a judgment saying what they’re owed. Contrary to what many people might believe, the Court does not automatically get involved in the process of squeezing money out of the people who owe you. This is the process of enforcement. The Court can help, but you still need to drive the process.

The steps involved are a little different depending on whether the money is owed by a company or an individual, and whether you think that they have the means to pay (or enough assets to cover the debt if these were sold).

Getting blood out of a stone

In the case of a person who simply doesn’t have the money available, for instance if they are on a benefit or are otherwise in poor financial circumstances, you may find that you are simply out of luck.

The old saying is that it’s not possible to squeeze blood out of a stone, and it’s not possible to get money from somebody that just doesn’t have it. Ideally, when you talk to your lawyer at the very beginning of the process you should discuss whether or not the person has the ability to pay if you win the case.

One option against a poor debtor is a financial assessment hearing. This is an application you can make to the Court to have the debtor examined by a Court registrar about their assets, income, budget, and means to pay the debt. The registrar can order that a reasonable regular payment be made. For a debtor with very little income this may not be a large amount, but it is at least something. If the debtor defaults on this payment, they can be held in contempt of Court.

Options against an individual with assets or means to pay

A financial assessment hearing may be useful in this case too.

When somebody is able to make payments, and it’s just a matter of putting enough pressure on them to do this, you could try issuing a bankruptcy notice. This is especially effective against people who are directors of companies, self-employed, or have a reputation to protect. Being bankrupt would be a significant problem for such people.

This is a good way to get payment from a person who may not have the money but may have access to it if pushed hard enough. (Perhaps from a trust, or from borrowing.)

Another option is to go after their assets directly. Providing that their assets aren’t hidden or protected, for example in a trust, you may be able to apply to the Court for a sale order. In the case of real-estate, you can obtain a charging order which prevents the property from being sold until payment has been made to you. Beyond that, the next step is to request an order from the Court allowing you to sell the real-estate to pay the debt.

Options against a company

You can apply for orders of sale or charging orders against a company’s property in the same way as you can against an individual’s property.

The most common and generally most effective way to obtain payment of a judgment against the company is to issue a statutory demand.

This is a formal notice requiring the company to pay an undisputed amount to you. If the company fails to make payment within 15 working days, then you can make an application to put the company into liquidation. Providing that the company is still trading or has assets, the shareholders of the company will generally want to avoid this outcome which gives you good leverage to obtain payment of the judgment. If the company is unwilling or unable to make payment, putting the company into liquidation gives the liquidators complete control of the company’s assets. They will sell the company’s business and property to pay off its creditors.

The risk with liquidation is that a judgment is an unsecured debt. A liquidator will pay secured debts first, then give equal preference to all the company’s unsecured creditors.

As an unsecured creditor in a liquidation, you probably won’t receive full payment of your judgment and may not receive anything (especially if there are a lot of other creditors). Putting a company into liquidation is a risk but has the advantage of appointing a neutral third party to make enquiries and make payments to the best of the company’s ability. Again, consider that it’s not possible to get blood out of a stone.

There are two main things to take away from the subject of enforcement:

Consider how you might enforce judgment at the very start of the process. While some people go to Court on principle, it’s always good to know how you’re going to get paid in the event that you win a case.
There are a range of different ways to enforce a judgment against different types of debtors, which have different advantages or disadvantages.

If you need assistance enforcing a judgment, please contact litigation executive, Mikayla Sagar by email on mikayla.sagar@smithpartners.co.nz or by phoning 09 837 6890 to schedule an appointment with Nathan.

KiwiSaver First Home Withdrawal: All your Questions Answered

Mon, 17 Jan 2022 17:28:21 GMT

Reviewed and updated June 2025

The KiwiSaver First Home Withdrawal scheme helps first home buyers purchase residential property in New Zealand. A KiwiSaver withdrawal can be a great way to make a first home purchase achievable, but it is important to understand what you can and can’t do with a KiwiSaver First Home Withdrawal, and how to ensure that everything goes smoothly. Below we answer your frequently asked questions.

Who can withdraw money from KiwiSaver to buy a house?

To be eligible for the KiwiSaver First Home Withdrawal Scheme you must:

be purchasing your first home;
have been a member of KiwiSaver for a minimum of three years;
have your KiwiSaver account with a KiwiSaver provider that allows saving withdrawals; and
intend to live in the property for at least six months.

We recommend that you contact your individual KiwiSaver provider and check their individual policy on withdrawals for first homes. The right to withdraw funds for a first home purchase is entirely at the discretion of your KiwiSaver provider, as their first obligation is to ensure that their members are saving for their retirements.

I have already owned a house, but I don’t own one now, can I withdraw my KiwiSaver to help buy a house?

If you have previously owned property, but no longer own any, and your finances are similar to that of a first home buyer, you may qualify to withdraw KiwiSaver funds towards buying a home.

However, if you have previously withdrawn funds from KiwiSaver to buy residential property, you will not be able to make a second withdrawal.

You will first need to apply to Kāinga Ora for a “Kiwisaver first-home withdrawal – determination for previous homeowner”. These applications take a minimum of 20 working days. You can do this yourself without the help of a lawyer – see further information and application form here.

If you are deemed to be in the same financial position as a first home buyer, you will receive a confirmation letter from Kāinga Ora that you are eligible for previous homeowner withdrawal.

Once you have received this confirmation, you will then need to contact your individual KiwiSaver provider and provide them with the confirmation letter to get pre-approval for the withdrawal. Ultimately it is your KiwiSaver provider that decides if you can withdraw or not.

Is there an income cap?

There are no restrictions on how much you earn, as long as you meet the other criteria.

How much can I spend on the house?

There is no limit on the purchase price of the house.

How much of my KiwiSaver can I use to buy a house?

If you are eligible for the KiwiSaver First Home Withdrawal, you can withdraw:

all of your contributions;
all of your employers’ contributions;
any interest that you’ve earned, and
any member tax credits;
minus $1,000.00 ($1,000.00 must remain in your KiwiSaver account after withdrawal).

You cannot withdraw funds transferred from an Australian Complying Superannuation scheme into your KiwiSaver account.

It is best practice to request pre-approval from your KiwiSaver provider and get an estimate of how much you can withdraw. Most mortgage brokers and banks will require this as part of your mortgage pre-approval process.

How do I apply to use my KiwiSaver to buy property?

To use your KiwiSaver to buy a house, you should contact your KiwiSaver provider to get a pre approval as soon as possible. As part of this process, your KiwiSaver provider should be able to provide you with an estimate of how much you can withdraw. It is important to note that pre approval does not speed up the official application process.

Once you have an agreement to buy your first home, you will need to:

fill in the application form provided by your specific KiwiSaver provider (this can be done with or without assistance from a lawyer);
sign a statutory declaration. Usually this is witnessed by your property lawyer, though a JP or person authorised to take declarations can also witness this;
attach certified copies of supporting documents to the application. You need to carefully check the requirements for verifying ID and proof of address on the KiwiSaver application form – if this is done incorrectly, it can hold up your application.

Your solicitor will have to provide a letter/solicitor’s certificate referring to the Agreement for sale and purchase and the due dates for the deposit and settlement. They will also provide an undertaking as to whether the agreement is conditional or unconditional.

We recommend that you get your property lawyer to submit the application. This allows them to ensure that the application is full and correct and means that your KiwiSaver provider contacts them directly with any issues.

Most KiwiSaver providers require at least 2 weeks (10 working days) from receiving your lawyer’s letter to process an application, so any settlement date for the purchase of your home will need to be at least 2 weeks from the date all conditions of your agreement are satisfied. Some KiwiSaver providers require 15 working days to process applications.

Due to the importance of these dates, it is vital that you contact your lawyer as soon as (if not before) you agree to buy a property.

If all goes well, your KiwiSaver provider will send your KiwiSaver money directly to your lawyer, who will use the funds as required to complete your deposit or purchase.

Can I use KiwiSaver for a house deposit?

When purchasing property there are two types of “deposit” – see our article https://smithpartners.co.nz/property-law/types-of-deposits-when-buying-a-house/. Kiwisaver funds have always been able to form part of your “bank deposit”, however you can now use KiwiSaver funds to pay the “purchase deposit” in certain circumstances:

the purchase is by a method other than an auction (you cannot use Kiwisaver as a deposit when purchasing by auction);
you must make it clear to the agent that your deposit is being paid from KiwiSaver funds and advise them that the following amendments must be made to the Agreement for sale and purchase, and the vendor will need to agree to these.
the Agreement must state that the deposit will be payable on the unconditional date, not on the signing of the Agreement.
the Agreement must state that the deposit is paid to the vendors solicitors (not the real estate agent), who will hold the funds in the solicitor’s trust account until settlement day (and cannot be released to the vendor earlier).

I’m not in KiwiSaver, but a different employer-based superannuation scheme, can I withdraw money to buy a house?

There are some non-KiwiSaver employer superannuation schemes that also allow for a first home withdrawal in a similar vein to KiwiSaver. Exempt employer schemes do not allow withdrawals.

As non-KiwiSaver schemes are not subject to the same requirements as KiwiSaver providers, it is imperative that you contact your individual provider to clarify:

that the provider allows for first home withdrawals;
that you meet their specific eligibility criteria for withdrawals;
how much you can withdraw;
what the conditions are (and application time frames).

Can I use my KiwiSaver to buy a house with my spouse/partner?

If your spouse/partner has not previously owned a home, you can both withdraw your KiwiSaver and pool that money together. You will each need to contact your KiwiSaver providers individually to get pre-approval and to submit applications for withdrawal.

If your spouse/partner has previously owned a home, only you can withdraw from your KiwiSaver to buy a house – if you meet the criteria. But the fact that your partner is already a homeowner does not affect your ability to withdraw your KiwiSaver.

It is important to note that if one of you is contributing more money, we suggest having a contracting out agreement that protects this person’s KiwiSaver money (or savings) if the relationship breaks down and/or if the property is sold for any reason: see https://smithpartners.co.nz/family-law/what-is-a-contracting-out-agreement/ ?

Can I use the KiwiSaver First Home Withdrawal to buy a house that is put in my family trust?

Many KiwiSaver providers do not allow you to withdraw KiwiSaver funds if the house is going to be owned by a trust, but some do.

You will need to check that the provider of your scheme allows this before signing the Agreement for sale and purchase.

The KiwiSaver providers that do allow you to withdraw funds to purchase a house that will be owned by a trust require the following:

you must be a trustee and beneficiary of the trust that will own the property;
you cannot be the beneficiary of another trust that owns property, where that property is your principal place of residence.
when you sign the Agreement for Sale and Purchase, the purchaser’s name must be written as “(Full Name of KiwiSaver/Purchaser) as Trustee of the (Name of Family Trust)” e.g. John Steve Brown as Trustee of the Brown Family Trust.
you must intend to live in the property as your principal place of residence.

Can I use my KiwiSaver to purchase property overseas?

No, the property you buy must be in New Zealand.

If I own a property overseas, can I use my KiwiSaver to purchase property in New Zealand?

No, you are considered a property owner no matter where the property you own is situated.

Can I make a KiwiSaver withdrawal to buy a house on Maori land?

Yes, withdrawals can be made to purchase a house on Maori land, provided:

you meet the other KiwiSaver withdrawal eligibility criteria;
you intend the house to be your principal place of residence; and
you provide additional documents stating you have a right to occupy the Maori Land eg. a licence to occupy or occupation order.

You should check directly with your KiwiSaver provider to discuss any specific requirements.

Can I use my KiwiSaver to buy an investment property?

You cannot use the KiwiSaver Withdrawal to purchase an investment property. You must intend to live in the property for at least six months.

Can I use my KiwiSaver to buy land/a section?

Yes, you can use your KiwiSaver to purchase land / a bare section, as long as you intend to build a house on it, which you intend to live in. There are no restrictions on when the house must be built.

You can also use your KiwiSaver towards a house and land package, as long as you make the Kiwisaver withdrawal before any transfer of the land into your name.

If you already own land, or are being gifted land, you cannot use your KiwiSaver to fund the cost of the build as you are deemed to be a property owner.

What can go wrong?

Applying to withdraw KiwiSaver funds (and the process of receiving those funds) takes time.

If not enough time is allowed for the finance condition, or from unconditional date to settlement date, this can cause big problems.

If the application has been filled out incorrectly, or does not include the correct supporting documentation, this can create extra delays in processing the application. The KiwiSaver providers take no liability for delays in processing applications.

If the funds have not arrived from the KiwiSaver provider in time for settlement, they cannot be used towards the purchase. You as the purchaser cannot get a loan from somewhere else to cover the shortfall (for settlement) and then use your KiwiSaver to repay that shortfall loan.

If you do choose to cover the shortfall and complete the sale on settlement day without the KiwiSaver funds, those funds will be locked away until you retire.

If the KiwiSaver funds don’t arrive in time your options are:

cover the shortfall in price and forfeit the ability to withdraw your KiwiSaver funds; or
delay settlement and pay daily penalty interest to the vendor until the money comes through; or
default on the Agreement (don’t buy the house) – and you will most likely have to pay the vendor damages.

How can I make things go smoothly?

Get pre-approval from your KiwiSaver provider as to how much money you can withdraw – this will prevent costly mistakes that can arise from assumptions as to how much you can withdraw.

In the Agreement for Sale and Purchase – allow at least 10-15 working days for the purchaser to finalise Finance conditions.

Allow at least 10 working days from the date the agreement goes unconditional until settlement date.

Submit your KiwiSaver Withdrawal application as soon as you can.

What is a Right of Way?

Thu, 28 Oct 2021 22:15:20 GMT

A right of way is best described as an easement that allows the owner of one property the right to pass and repass over a specified area of another person’s property. This access may be by foot, machinery, or vehicles and can also extend to domestic or, for rural property, farm animals. Right of ways are commonly used for driveways.

A right of way easement is listed on the certificate of title of the affected properties. For example, “Subject to a right of way over part marked A on Deposited Plan 12345 specified in Easement Certificate 678910” with the easement instrument listing who benefits from and who has the burden from the right of way.

Due to Auckland’s constant growth and an increasing demand for housing, right of ways are likely to become a lot more common, along with the property disputes attached to them. Because of this, it is important to understand your rights and obligations and how or when they may apply.

Legislation – Which laws cover right of ways?

Right of way legislation is found under Schedule 5 of both the Land Transfer Regulations 2018 and the Property Law Act 2007. There are certain implied rights and obligations associated with right of ways and it is important to make sure you understand how they apply to your easement.

Disputes over right of ways

Right of way disputes can arise from disagreements over who should cover or fix damage done to a right of way. Disputes also arise if one neighbour is obstructing the right of way, preventing access.

Costs for repairs and maintenance

The Land Transfer Regulations assert that costs in relation to a right of way such as maintenance and general repairs are to be equally shared between all parties who utilise the right of way. The Property Law Act is more general in its wording, stating that each party must make a ‘reasonable contribution’ to these costs. If damage is caused by the acts of a single party, both pieces of legislation assert that the party responsible for the damage is solely liable for the costs of repair. It is important to review your title, easement instrument and the nature of any dispute to determine how the Act or Regulations may apply.

Buying a Property with Family or Friends - do you need a Property Sharing Agreement?

Mon, 04 Oct 2021 03:00:47 GMT

Reviewed and updated March 2025

Whether it is your first home or your fourth, it is increasingly common for people to buy property together with family or friends.

For those that are not married and not in a relationship (in which case you need specialist relationship property advice, see: What is a Contracting Out Agreement ?), group purchases can be easily achieved, and we always recommend that a property sharing agreement (“PSA”) is drawn up to establish the ownership and ongoing management of the property.

Without a PSA, there is a risk that co-owners will have different understandings about each parties’ rights and obligations, causing disputes down the track. If one co-owner defaults on their obligations, then without a PSA, the other owner(s) may be left to pick up the pieces.

What is a property sharing agreement?

A property sharing agreement is the governing document between the co-owners. It usually deals with the following issues:

In what shares the property is owned
What contributions each party made to the purchase of the property
Who is paying the mortgage and other outgoings
How maintenance and improvements to the property will be dealt with and paid for
Who will live in the property and on what terms
What happens when one party wishes to sell
Death of a co-owner
Resolving disputes

Forms of ownership – what goes on the property title ?

There are two forms of ownership, either joint tenants or tenants in common .

When you are purchasing with friends or family members, your ownership would usually be as tenants in common, where you specify what percentage or share of the property is owned by each party on the title. In the event of the death of one of the owners, their share of the property forms part of their estate – and is distributed according to their will or the Administration Act if there is no will .

The shares can be determined by you, once you know who is contributing what to the purchase of the property.

For example, if there are three people buying the property and contributing to the purchase equally, they would usually be tenants in common with a 1/3 share each.

What happens if one person contributes more than another?

Generally, your ownership shares will reflect the contribution you have made. However we draft each PSA specifically to fit the arrangements you have chosen.

What about paying the mortgage, other outgoings, maintenance or improvements?

A PSA will set out each co-owners’ obligation to pay the mortgage and other outgoings. Usually the amount of mortgage and outgoings that you pay will be proportionate to your ownership share. Again, bespoke arrangements can be implemented.

It is important to realise that the bank will treat you all as jointly and severally liable for the mortgage, so without a PSA in place, if your co-owner were to default on their share of the mortgage repayments, the bank will chase you for their share. A PSA would usually include the requirement that each co-owner indemnifies the others for any mortgage default, and allow you to recover any losses out of the defaulting co-owners share if the property is sold.

What happens if only one party is going to live in the house?

If one party is going to live in the property, then the other parties would want to be paid some form of rent. In most cases, the parties would obtain a rental valuation and the party living in the property would pay this (less their ownership share percentage). Again, this is completely up to the co-owners to agree on.

What happens if one party wants to sell later on?

A PSA will always have a process setting out what happens if one party wants to sell or a co-owner passes away. This usually gives other co-owners the option to buy that share. If another co-owner does not wish to buy or isn’t able to buy, then the property would be sold with the funds distributed in accordance with the co-owners’ shares.

Resolving Disputes

Having a PSA in place will avoid most disputes between co-owners. Conversely, without a PSA there are many opportunities for disputes to occur given the high level of co-operation required between co-owners.

Independent Advice

We can draft a PSA to reflect whatever arrangements you and your fellow co-owners make. However, if your interests are not the same (you have different rights and obligations under the PSA, or one co-owner appears to benefit more than another), then some or all co-owners may need to get independent advice on whether the PSA is in their interests.

For assistance with a property sharing agreement, complete the form below or contact Marie Hansen by email marie.hansen@smithpartners.co.nz

Limitation Periods For Legal Claims in NZ

Tue, 14 Sep 2021 01:23:33 GMT

If you have a legal claim against someone, the law requires that you take legal steps to pursue it within a certain period. If you don’t, that claim cannot proceed. This is known as the limitation period.

The purpose of limitation periods is to prevent a situation where somebody has a claim against them held over their head indefinitely. This also promotes the prompt application of justice.

Limitation periods apply to both criminal proceedings and civil proceedings. There are very few wrong-doings which do not have a limitation period. The most notable crime where there is no limitation period is murder.

Civil Claims

In civil claims the obligation is on the wronged person to take steps to enforce their rights against the wrongdoer. The government does not typically get involved. It is important for people to know what limitation periods might apply, and how to avoid having these expire before you seek justice.

In a civil claim, the expiry of a limitation period is a defence if the claim is filed in court after the limitation period expires. Filing the claim within the limitation period is acceptable, even if the claim is not resolved before that period expires. Often, claims will be filed in court a week or even a day before the expiry of a limitation period just to prevent the loss of the claim. This can act as a strong incentive on a person to get around to pursuing their rights.

Extensions

Some limitation periods may be extended in certain circumstances. The Limitation Act refers to a “late knowledge date”. For example, if a person was reasonably not aware that the wrongdoer had done the act, was not aware that the act had caused loss to them, or did not know who the wrongdoer was, then the late knowledge date provision may apply. This can extend the limitation period for a certain amount of time, although a long-stop may apply. The long-stop is a maximum limitation period, and even the late knowledge extension cannot extend the claim beyond the long-stop date.

Different types of claims have different limitation periods

There are quite a few different limitation periods for civil claims. The below is not an exhaustive list but gives you an indication of the types of limitation periods that exist.

Money claims

For money claims (such as breach of contract or damages for negligent losses) the ordinary limitation period is 6 years from when the cause of action arose. This is usually, but not necessarily, the date that the person did the thing which cause the loss, such as breaching the contract. The late knowledge extension is 3 years, with a 15 year long-stop.

Defamation

For a defamation claim the limitation period is much shorter. Defamation has a 2 year limitation from the time that the defamatory statements were made, with a 2 year possible late knowledge extension.

Recovery of goods and enforcement of judgment

For recovery of goods or enforcement of a judgment the limitation period is 6 years from when the goods were taken, or the judgment was made.

Construction and building

In construction, the limitation period is 6 years with a possible late knowledge extension of 3 years. There is a reasonably short long-stop of 10 years.

Limitation periods have had a lot of impact in the construction industry. This is because a construction project may take several years, and it may be difficult to notice that construction has not been done properly until years after that. As a result of this, claims are often filed in Court at or near the expiry of the limitation period. Also, it may not be entirely clear when the limitation period started from.

Consider a situation where:

A builder negligently lays the foundations of a building in February 2010;
The building is only completed, and council consent granted, in February 2011; and
The owners only move into the building in 2012;
The owners notice some shifting and cracking in the walls and door frames in January 2019;
After having an expert assess the shifting and cracking and finding out about the builder’s negligence, the owners file a case in court in January 2021.

In that case the owners have filed the proceedings outside of the usual six-year limitation period. They would need to argue that the 3-year late knowledge extension applies to them and would have to show that they should not reasonably have discovered the builder’s negligence earlier.

However, the 10 year long-stop would be a problem for them. The owners might argue that they are within a 10 year period from when the building was completed, but the builder might argue that the 10 year period should start running from when he did the work. On a timeline where the green bar is when a claim can be filed, and the red bar is when it is outside the limitation period, the situation looks like this:

These issues have been discussed in various Court cases, and the current state of the law is that both the limitation period and long-stop start running at the point the liable person does the work, not from the point that the total project is completed. In this hypothetical case the owners may still have a claim against the council for issuing a building consent for a negligently constructed building, as the claim was filed within 10 years from the date that the council building consent was granted.

Limitation periods can have enormous significance and may not always be straightforward. If you think you have a legal claim, we recommend that you talk to us a soon as possible to avoid any risk of a limitation period expiring and your claim being out of time.

Passing Off: Dealing with IP Copycats in Business

Mon, 30 Aug 2021 15:18:55 GMT

There is nothing worse than somebody else benefitting from your business’ success by riding on your coat-tails, infringing your infringing on your intellectual property and confusing customers that their products or services are the same as yours. The legal solution to these copycats is to make a claim against them of passing off and a breach of the Fair Trading Act 1986 (FTA).

A claim of passing off and a breach of the Fair Trading Act are invariably used in conjunction in look-a-like situations where one business tries to pass itself or its products off as the business or product of a rival.

To prove passing off a business needs to show that:

a distinguishing feature or combination of features of the business’ goods or services has acquired a goodwill or reputation in the market so that its business is known and recognised by that feature or combination of features; and
the other party has done something (either intentionally or unintentionally) to lead consumers to believe its goods or services are the goods or services of the business. This is called a misrepresentation; and
that the business has suffered or is likely to suffer damage as a result of the defendant’s misrepresentation.

The misrepresentation doesn’t have to be an express statement made by the defendant. It can be implied from the use of names, marks or product ‘get-up’ that are sufficiently similar to cause confusion in the minds of the public.

The Court’s decision in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd is an excellent example in terms of explaining the workings of passing off. In 1985 Klissers sold and marketed its (world famous in New Zealand) Vogel’s range in polythene bags with checks of different colour and size or both and with the bags tied at one end to produce ponytail effect (yes, in 1985 the ‘ponytail’ was new). A rival bakery started selling its bread in polythene bags also featuring checks and tied with a ponytail. The Court decided that the rival was indeed trying to pass its ‘milk and honey’ loaf off as Klissers’ by adopting similarly distinctive packaging and issued an interim injunction (an order requiring the rival to cease its actions).

Likewise in Big Blak Saks New Zealand Ltd v D & A Marketing Ltd the plaintiff claimed rights in the packaging and overall presentation of a range of rubbish bags. While Big Blak Saks did not have a registered trade mark for the appearance of the product it was able to persuade the High Court that it had a reputation and goodwill in the overall appearance of the goods and that the appearance of the defendant’s products was a misrepresentation calculated to pass off the defendant’s product as that of Big Blak Saks causing it loss of sales. Those factors were sufficient to enable it to obtain an interim injunction to prevent the competitor marketing and selling look-a-like products.

Compared to passing off, a breach of the FTA is a more agile option for claimants. Under the FTA there is no requirement for your business to prove damage has occurred which means that rival traders can bring an action under the FTA even though they have suffered no loss.

Obviously neither of these claims is to be made lightly, but if you have genuine concerns that your business is suffering at the hands of a copycat who is benefitting from your hard work you should contact a commercial and/or intellectual property lawyer to see about putting a stop to it.

Family Trusts - To Amend, To Wind Up or Not Wind Up

Tue, 18 Aug 2020 04:16:14 GMT

History of Family Trusts in New Zealand since the early 90s

Family trusts in New Zealand have undergone huge changes since the current wave of family trusts was initiated in the early 90s.

In 1991 Government introduced what it called a “Residential Care Subsidy” for those people who were over 65 and about to go into permanent care in a rest home or hospital. Prior to that time, permanent hospitalisation or rest home care for the elderly was free of charge.

The Residential Care Subsidy is asset tested. In other words, if an applicant’s assets are greater than a threshold as designated by WINZ from time to time, then the applicant is obliged to pay for their own rest home or hospital care.

The post war generation protested against this new law because they had been guaranteed by the Government of the day, after the Second World War, that they would receive free hospital treatment from cradle to the grave.

It was Law 101 to circumvent the Residential Care Subsidy threshold. All a person had to do was to form a discretionary family trust and transfer their assets by way of sale to the family trust. The sale price became a loan owing by the family trust to the person establishing the trust and that loan was gifted away at $27,000 per person. The $27,000 figure was the maximum amount that could be gifted in any rolling 12 month period without paying gift tax, which was a significant tax imposed during the period up to 2010 when it was abolished. By having their assets in a Trust those assets are deemed at law to be the property of the Trust and not the person who established the Trust, with the result that such a person qualified for the Residential Care Subsidy by virtue of having little or no significant assets in their own name.

As a result of the asset testing for the Residential Care Subsidy, literally thousands of trusts were established in New Zealand, the main purpose for which was to protect the family assets from the impact of not receiving the Residential Care Subsidy and in fact, having the Government pay for the rest home care of the persons establishing the Trust.

Another motivating factor for the establishment of discretionary family trusts in the 90s was the election of the Labour Government in 1999. That Government imposed a tax surcharge of 6 cents in the dollar for every dollar earnt over $80,000 per year. Under $80,000 per year the top rate of tax was 33 cents in the dollar.

The maximum tax rate payable by trustees on behalf of a trust was 33 cents. It then became a tax saving measure to form a family trust and transfer a person’s income producing assets (properties, shares, investments) into the family trust so that the income from those assets was taxed at the maximum rate of 33 cents in the dollar.

In 2005, New Zealand First held the balance of power after the 2005 election. New Zealand First had been elected on a promise to the elderly (the Grey Power) that they would amend the law relating to rest home subsidies so that people no longer had to form trusts. As with many political promises, a compromise had to be reached between the aspirations of New Zealand First and the more working class philosophy of the Labour Government which was that the so called “well off” should be paying for their own hospital and rest home care. The compromise that emerged from the 2005 election was a two-fold test.

For a husband and wife or couple, they could elect to have their house and modest savings (approximately $80,000 a year increasing at the rate of inflation) exempted from the asset testing threshold or they could have a single threshold of approximately $180,000 (increasing at the rate of inflation each year) all assets counted. ^[1]

Unfortunately the legislation that introduced the New Zealand First compromise was badly drafted and resulted in litigation. After years of going through the Courts, the legislation was clarified by the Court of Appeal in 2013 when it ruled effectively, that WINZ had the right to have their own gifting rules, which rules were different from those which the Inland Revenue Department abolished in 2010. The Court of Appeal ruled that the effect of the legislation was that the gifting rules for WINZ permitted maximum gifting to a family trust of $27,000 per couple ($13,500 per person) or $27,000 for a person who was not married or in a permanent relationship. This Court of Appeal ruling was backdated.

The effect of the Court of Appeal ruling was that for all couples the amount that they had gifted was halved for the purposes of qualifying for the Residential Care Subsidy. By way of an example, if a couple had gifted $500,000 to their trust by way of gifts at the rate of $54,000 per year, $250,000 of that gifting was ruled as ineligible for the Residential Care Subsidy threshold and as a result, if one of that couple was admitted to a rest home or hospital for permanent care, then they would not qualify for the subsidy.

No doubt emboldened by their victory in the Court of Appeal, WINZ then focussed their sights on what they called, income deprivation.

The theory behind income deprivation is that if the income from a trust (bank interest, dividends from shares etc) that would otherwise be paid to a beneficiary resident in a rest home or hospital is diverted to other members of their family, or accumulated and not paid to the beneficiary in care, that income is deemed to be deprived from that beneficiary and the beneficiary’s rest home subsidy will be reduced by virtue of the amount of the deprived income. In other words, if one is successful in obtaining a rest home subsidy using the asset test, then that subsidy may well be reduced using the income deprivation rules.

As a result of the difficulties with achieving the required asset threshold to be successful with a Residential Care Subsidy application, most people who set up their trusts in the early part of this century when we had a spike in property values, will not qualify for the Residential Care Subsidy. Further, the current political thinking in terms of income tax is to have a “level playing field” (the income tax surcharge was removed in 2009) so that the motivation to set up or maintain discretionary family trusts has waned, to the point that activity in this area is virtually at a trickle.

Another movement in the law has discouraged the use of trusts.

The significant wealth of many family trusts has meant that when family relationships have broken up, sophisticated lawyers have attacked family trusts in the Courts on behalf of spouses who would otherwise be disadvantaged in a matrimonial property or relationship property case.

Some of the matrimonial/relationship property legislation has been fertile for legal argument with the result that some aggrieved spouses have been able to claim considerable amounts from family trusts, in circumstances where, at first blush, it was thought that they did not have a claim.

Another major impact on trusts has been the increasing numbers of retirees among the “baby boomers” – the sons and daughters of those who returned from World War II, who comprised the main generation that was encouraged to establish family trusts. This generation of people is now retiring and are saying to themselves:

“We no longer are facing the risks of being in business and accordingly we no longer need a Trust to protect our assets;”
“We no longer qualify for a rest home subsidy;”
“The cost of maintaining our trust in annual accounting and legal fees is significant;” and
“Our position is such that we should wind up our trust.”

Compliance costs and the disclosure regime as set out in the Trusts Act 2019

Two other issues have impacted on discretionary family trusts.

Anti-money laundering legislation

In 2018 the anti-money laundering legislation ^[2] was progressively introduced to the clients of lawyers, accountants and real estate agents.

Trusts are captured structures under the anti-money laundering legislation with the result that every time trustees involve themselves in matters legal, accounting or the sale of real estate, anti-money laundering due diligence and risk assessment has to be completed. This comes at a cost.

Disclosure regime under the Trusts Act 2019

The Trusts Act 2019 represents an effort by the Government to set out in legislation the law relating to the administration of discretionary family trusts. The Act clarifies the obligation of trustees to give beneficiaries basic trust information. Under the Act and from 1 January 2021, trustees must advise all beneficiaries of the fact that those persons are beneficiaries of the trust. The beneficiaries must also receive the name and contact details of the trustees and the occurrence of and details of each appointment, removal and retirement of trustees as they occur. The beneficiaries must also be advised that they have the right to request a copy of the terms of the trust or trust information.

Trust information under the Act means any information regarding the terms of the trust, the administration of the trust or the trust property, and such information as it is reasonably necessary for the beneficiary to have, to enable the trust to be enforced. Trust information does not include the reasons for trustees’ decisions.

Most family trusts are run, in the first instance, for the benefit of the people that set the trust up.

For example, the vast number of discretionary family trusts are set up by husbands and wives and/or partners who, with the help of independent trustees, run the trust for their benefit while they are alive, and on the basis that their children or other beneficiaries will benefit from the trust upon the death of both of the settlors. The settlors in this example never intended that their children be involved until after their death. The issue of having to disclose trust information to children and grandchildren is yet another handbrake on the formation and maintenance of discretionary family trusts. Solicitors are being asked to become innovative in their drafting of trust deeds (and amending existing trust deeds) so as to severely restrict the categories of beneficiaries to whom disclosure is required.

Case by case basis

The decisions to wind up a trust or to amend a trust deed can only be made on a case by case basis because the circumstances of each trust and the families that established the trust are different in every case.

It is most important that experienced legal advice be sought in respect of the winding up or amendment of a trust.

The partners of Smith and Partners have been involved with trust advice for almost 50 years. It is most important that if you have a discretionary family trust or are thinking about forming a discretionary family trust that you have the correct advice. The lawyers at Smith and Partners are able to give you that advice. Smith and Partners welcomes your phone call or email to enable an appointment with one of our lawyers.

[1] The writer has been unable to confirm the exact figures for the two threshold options introduced by the Government in the first decade of the Millennium, so that the figures in paragraph 10 are approximate only.

[2] The banking and finance industry was subject to the anti-money laundering legislation for several years prior to 2018.

Who owns the plans when building a new home?

Thu, 20 Feb 2020 03:34:00 GMT

Building a new home is an exciting prospect, although not without its share of stress and uncertainty. Not the least of which, particularly if you are building in Auckland, is the cost associated with building. A particularly tricky issue arises when the new homeowner, having worked closely with one builder to design their dream home, takes those plans and receives a considerably cheaper quote to build that home from another builder.

The question to resolve is “who owns the copyright in the plans?”, whether it is the builder or the new homeowner. Under the Copyright Act 1994, plans are considered an “artistic work” capable of having copyright protection, however, determining who is the owner of the copyright in those “artistic works” will depend heavily on the specific facts.

Building a house from copyrighted plans can be considered to be an act of copying, and potentially a breach of copyright in terms of the Act. Accordingly, each of the three parties has a different issue they must resolve if the new homeowner chooses to build with the second builder. Enforcing or defending a breach of copyright in these circumstances is not a straightforward process and is potentially expensive and time-consuming so it is essential to understand your position if you are one of the parties.

The new homeowner’s position:

The risk for the new homeowner is, having contracted with the first builder to design the plans whether building their new home with the second builder will be a breach of copyright. This will be a question of who is considered to be the owner of the copyright and will depend heavily on the terms of any agreement between the first builder and the new homeowner in relation to the plans. Has a fee been paid? Is there any sort of exclusivity agreement in place regarding use of those plans, or any agreement as to who owns the copyright?

The first builder’s position:

Obviously, every builder would prefer that the new homeowner established a great relationship with them and went ahead and built with them. Realistically, however, this is not possible in all circumstances. Therefore, the first builder needs to ensure they have properly retained the copyright in all plans designed for new clients. This is not as straightforward as printing the © symbol on the drawings, which is simply an indication of a claim to copyright not a guarantee that it is enforceable. Alternatively, they need to ensure they have systems and processes in place, and contracts that reinforce them, to enable them to be reimbursed for the work involved in producing the plans for the clients and the lost opportunity to build the house.

The second builder’s position:

The risk to the second builder is being included as a party in legal action for a breach of copyright – along with the new homeowner, or as the party most likely to be able to pay any damages awarded. This can be avoided by understanding your legal position, and the position of any new client bringing plans to you, so that your agreement with the new client has sufficient indemnities included to mitigate the risk. The better you understand this issue the better you are able to help homeowners and you can take on building those homes secure in your understanding of both the homeowner’s and your own rights.

We have worked with both builders and home owners facing this position and we can help you understand your position, put good building contracts in place and if necessary, help enforce your rights.

Challenging a New Zealand Will or Estate from Overseas

Sun, 16 Feb 2020 22:58:54 GMT

Are you a New Zealander living overseas wanting to know if (and if so how) you can make a claim against a Will?

New Zealand law provides a number of ways a Will can be challenged. We discuss these in our article What are grounds for challenging or contesting a will? But what do you do if you are living overseas and you don’t know the first place to start? This is where a lawyer experienced in estate litigation and negotiation can assist.

We can advise you on the law, your chances of success and your options. We can negotiate on your behalf to seek to achieve a successful outcome without the cost or stress of going to Court. We will guide you every step of the way with cost effective, honest and strategic advice. We can do this all by telephone, skype call and by email – we don’t have to be in the same room with you.

Read our case study below to see how it all works:

Case Study

What was the situation?

Carol* (not her real name*) is a New Zealander who is living in Australia. She contacted us because she had been left out of her mother’s Will. Carol’s mother died in New Zealand and owned a property and had money in a bank account.

Carol had been estranged from her mother for about ten years and had always had a difficult relationship – the reasons were complicated. But Carol felt that she should still be recognised in the Will. Carol’s mother Betty* had left all of her estate to her two other children, John and Bev, half each. John supported Carol’s belief that she should receive some inheritance, but Bev did not. Both John and Bev were executors of the Will, but Carol was not. Bev did not want to give Carol any information about the Will, but John showed Carol a copy of the Will.

What did we do?

We talked to Carol about the costs that would be involved for us to review her case and advise her of her options. She decided to instruct us on that basis.

We advised Carol that even though she was estranged from her mother, she still had grounds to contest the will which included, in this case, a claim under the Family Protection Act 1955. After obtaining the background information and discussing various potential outcomes, we drafted a letter for Carol to review.

The letter set out the legal argument supporting Carol’s claim, the specific facts which supported that argument and it contained an offer to settle the matter without further litigation. Carol approved the letter and it was sent to the lawyers acting for the executors of Betty’s Estate.

As John and Bev were both executors and beneficiaries, they had to seek independent legal advice in their capacities as beneficiaries of the Estate.

There was further without prejudice (off the record) correspondence with John and Bev’s lawyer and the parties eventually agreed on a settlement.

What was the outcome?

Through negotiations we were able to secure Carol a settlement by way of a percentage of her mother’s estate without going to Court. This saved Carol money in legal fees and prevented the ongoing stress of a long drawn out court battle.

While sometimes going to Court is inevitable, we believe most cases can be settled before it reaches that stage.

Because we spent time in our letters/negotiations explaining to Bev and John (through their lawyer) why Carol felt she was entitled to be recognised in her mother’s Will (supported by legal argument and precedent), we were able to achieve a satisfactory outcome.

While Bev had been reluctant to share the estate with Bev to start with, in the end a compromise was reached which formed a platform for them to begin to repair their own relationship.

If you would like advice on any matters relating to estate litigation or any other estate related matter, please contact our estates litigation specialists on 09 836 0939 or email partners@smithpartners.co.nz .

Assisting a Client to Contest a New Zealand Will or Estate from Overseas

Sun, 16 Feb 2020 01:40:33 GMT

Are you a law firm based outside of New Zealand acting for a client who may be entitled to make a claim against a New Zealand estate?

If you act for a New Zealander living overseas, or for a client who has a relative in New Zealand who has died, we can assist.

New Zealand law provides a number of ways a Will can be challenged.

The facts of each case are crucial to how the law will apply.

At Smith and Partners we regularly act for overseas law firms to provide advice on New Zealand law and to negotiate and provide other litigation and administrative services to assist you to provide your client with strong legal advice and services in New Zealand.

We can advise you (or your client) on New Zealand law, your client’s chances of success and their options going forward. We can negotiate on your client’s behalf to seek to achieve a successful outcome without the cost or stress of court proceedings.

We can guide you and your client every step of the way with cost effective, pragmatic and strategic advice. We can do all this by telephone, Skype call and by email. While sometimes court proceedings are inevitable, we believe most cases can be settled before it reaches that stage.

Read our case study below to see an example of this process in practise:

Case Study

What was the situation?

A law firm in Canada contacted Smith and Partners because they had a Canadian client whose parents were divorced and whose father had been living in New Zealand for many years with his new wife. The client had recently become aware that her father had died and understood that he might own property and have other investments in New Zealand.

The client contacted the law firm in Canada to see whether they could help her find confirm this information and to see whether she had been left anything in her father’s Will. She also instructed them to advise whether, if she had not been provided for in her father’s Will, she might be entitled to bring a claim against his estate and what costs and processes would be involved.

What did we do?

Smith and Partners was able to take full instructions from the Canadian law firm as to the background and details of the father in New Zealand. We conducted property and other searches to establish that the father owned a property in Howick, Auckland. We were also able to determine the law firm which was acting for the father’s estate and from that law firm, was able to obtain a copy of the father’s Will.

It transpired that the father had left all his estate to his new wife. Smith and Partners was able to provide advice to the Canadian law firm regarding the potential claims that the client might have against her father’s estate, the chances of success and the likely outcome. The Canadian law firm instructed Smith and Partners to prepare a letter based on the background facts which, supported by legal argument and precedent, set out the case for the client’s claim against the estate. The letter also set out a without prejudice offer.

What was the outcome?

Through negotiation Smith and Partners was able to secure a settlement for the client in the form of a percentage of her father’s estate, without going to court. This saved the client money and legal fees and prevented the ongoing stress and cost of a long, drawn out court battle.

As well as litigation matters, Smith and Partners is able to act in administration matters on behalf of overseas clients where there are New Zealand assets to be dealt with including applying for probate, resealing overseas probate in New Zealand or applying for letters of administration where there is no New Zealand Will.

If you would like advice on any matters relating to estate litigation or any other estate related matter, please contact our estates litigation specialists on 09 836 0939 or by email partners@smithpartners.co.nz .

The Tort of Negligence NZ

Sun, 22 Dec 2019 19:50:30 GMT

Legal disputes generally fall into one of three main categories:

Breach of contract
Breach of law
A tort.

Torts are a type of obligation created by judges.

The most common and well-known tort is the tort of negligence. If a builder does a bad job you might have a claim against them for negligence. If somebody drives into your car causing damage, that’s another claim for negligence.

There can be different types of breaches coming from the same situation. In the builder example above, the builder might be in breach of their contract with you as well as being negligent. In that case if you sued them, you would claim for breach of contract and breach of tort, although you couldn’t get compensation for both.

General Principles of Negligence

The tort of negligence has developed over time, but the key principles were established in a very famous English case called Donoghue v Stevenson. In that case a person fell ill after drinking from a bottle that turned out to have a dead snail in it. The elements of negligence established in that case are:

One person has a duty to another person;
That person breaches their duty;
The second person suffers some kind of harm or loss as a result.

In the Donoghue case the duty was to make sure that the manufacturer didn’t allow snails or any other noxious substance to make their way into their products. The breach was allowing the snail to get into the bottle unnoticed. The loss was the illness suffered by Donoghue, and their medical bills.

Any situation where a person has a duty can give rise to negligence if that duty is breached. The duty does not have to be expressly agreed, although it can be.

Duties can arise from all sorts of situations. It’s up to the court to decide whether a particular situation results in a duty. Some examples of duties are:

The duty on person on an e-scooter to watch out not to ride into pedestrians on the footpath;
The duty on a tradesman to do their job to an ordinary competent standard;
The duty on an accountant to give correct tax advice; and
The duty on a farmer to ensure that their cattle do not eat a neighbour’s crops.

Compensation

If a person has committed the tort of negligence the victim can claim financial compensation for the losses that they have suffered. This could include the cost of hiring somebody else to repair defective building work, or replacing property which has been damaged by negligence.

Because of ACC, it is NOT possible to claim for a personal injury covered by ACC even when this is caused by negligence. In the case of an e-scooter rider who bumps into someone because they were speeding and not paying attention, they wouldn’t be liable for that person’s medical bills, but could be liable to pay for the phone that they dropped and was broken in the crash.

A person’s losses can include more than just the cost of putting the negligent work right. Indirect losses might also be claimed. In the example of a negligent builder, if the house could not be inhabited while the work was being fixed then the homeowner might be entitled to claim the costs of finding alternative accommodation for that period.

What can be claimed and what can’t be claimed depends on whether there is enough causation between the loss and the negligent conduct. This generally depends on what losses are reasonably foreseeable from the negligent conduct.

Using the example of a negligent driver who causes a car crash, it is reasonably foreseeable that driving negligently could cause property damage to another person’s car so this amount would be claimable. However, if the person they crashed into was made late for an important meeting and wasn’t able to close a significant deal as result, they probably could NOT make a claim for the loss of that deal. That loss is too indirect and is not be reasonably foreseeable by the negligent driver.

Punitive Damages

In some cases, the court will award punitive damages. This is an amount over and above the victim’s actual losses. Punitive damages are a penalty on the negligent person to punish them for their negligence in extreme or particularly serious situations. This is only awarded in rare cases and the amounts of punitive damages are not as large as in some other countries (such as the United States).

Privacy Law in New Zealand

Tue, 26 Nov 2019 03:16:57 GMT

Privacy law is one situation where employers and business owners can find themselves in a lot of trouble unexpectedly quickly.

Privacy can be the perfect storm because:

The law is complicated,
Easy to break, and
Easy for someone to complain about.

The Office of the Privacy Commissioner was created by the law to investigate privacy breaches, undertake prosecutions where appropriate, and generally provide education and other resources relating to privacy.

Somebody whose privacy has been breached does not need to prepare legal proceedings or hire a lawyer to ma ke a claim for them. They can simply contact the Privacy Commissioner who can do all the heavy-lifting.

Almost every person and business is covered by the Privacy Act, and should be particularly careful to ensure that they comply with its requirements. These requirements are fairly numerous and detailed, but not especially hard to meet providing that you exercise a little care and prior attention.

The requirements of the Privacy Act are too many and too detailed to discuss in this summary. However we can advise that:
Any information that you collect or otherwise hold about an individual is covered by the Privacy Act.
There are rules around how that information can be collected, how it must be stored or disposed of, what it can be used for, who it can be disclosed to, and when the person it’s about can have access to that information or request that it be corrected.
Any breaches of these requirements may be a breach of the person’s privacy and could lead to them making a complaint against you to the Privacy Commissioner.

A complaint to the Privacy Commissioner is only the first step. If the Privacy Commissioner thinks that the situation is bad enough or if the individual is not satisfied with the result of the investigation, a claim may be made in the Human Rights Review Tribunal.

This should be concerning to you for a number of reasons; the two biggest reasons are that:

Defending a complaint in the privacy commission will be time consuming and stressful for you;
If you have legal representation (which is highly recommended) this will be a cost to you; and
If nothing else, responding to a complaint will take you away from your core business; and
If a complaint goes to the Tribunal there is a risk that an award of compensation could be made against you if you are found to have breached the person’s privacy.

One common mistake

There are a lot of ways that you could breach the Privacy Act. One of the most common is by failing to respond to a request for information within the time limit.

If somebody requests access to their information you are required to provide copies of that information as soon as possible, but at least within 20 working days off the request.

If you don’t, this is something that could be the subject of a privacy complaint. While this is not necessarily terribly serious it does put you at a disadvantage and mean that you are in the position of having to explain yourself to a government agency.

Conclusion

Keeping ahead of privacy law is partly understanding your obligations, partly taking advance steps to ensure that you have privacy policies and procedures in place for your business, and partly responding to information requests or complaints in an appropriate way.

If you require assistance with any of these or have been contacted by the Privacy Commissioner about a complaint, we would be happy to consult with you to ensure that your business is not at risk.

What Can You Do If Someone Posts A Bad Online Review

Fri, 15 Nov 2019 03:13:31 GMT

The internet started off as the wild west – largely unregulated, where free speech reigns and anonymous content is the norm.

This is slowly changing, but people still behave online in ways that they wouldn’t do in person. An example of this online review culture. People don’t think twice about venting with a bad review that might not be justified or might even be malicious.

Review websites

Websites like Yelp specialise in allowing people to review restaurants and other services. Google also allows people to review businesses, and those reviews can become prominent to anyone searching for that business’ name.

These review sites rely on the reviewers being honest and sane, which isn’t always the case. Bad reviews can arise from some perceived failure or slight, a customer who is delusional or impossible to satisfy, or from a competitor.

These kinds of reviews are easy to deal with because review websites generally have policies and procedures in place to moderate obvious troll reviews or provide your business with a right of reply. Internet users are also moderately savvy about reviews and probably won’t be put off by a couple of unexplained one-star reviews.

If you have received negative feedback on a reviewing website you can find out whether there is a right of reply policy, and whether the website has a complaints procedure you could use.

Other harassment

But what about someone going after your business online in other ways? The internet gives anyone a voice on platforms such as Facebook, LinkedIn, Reddit or private blogs. What can you do if someone posts untrue or biased information about you or your business?

Defamation

The law of defamation is one option to consider. A statement is defamatory when it is “published” to a third party (which includes being posted online), and it tends to harm your reputation.

It is a defence to defamation to prove that the statement or post was true, or was an honest opinion based on true facts. This would protect someone who was critical of a meal they received at your restaurant if that was just a matter of their personal preference; this won’t protect somebody who lies and says that they saw cockroaches in the kitchen.

Defamation proceedings are costly so these are usually only useful for wealthy individuals, or businesses where the defamatory statement could cause severe financial harm. Still, the threat of a defamation claim coming from a lawyer might be enough to cause someone to change their behaviour.

The Harmful Digital Communications Act (HDCA)

An alternative and more accessible option comes from the Harmful Digital Communications Act “(HDCA”). This is a law intended to prevent harassment and bullying via digital communications. It applies to internet posts, text or voicemail messages, and potentially even phone calls. It lists 10 communication principles, stating that a digital communication should not:

Disclose sensitive personal facts about an individual;
Be threatening, intimidating, or menacing;
Be grossly offensive to a reasonable person in the position of the affected individual;
Be indecent or obscene;
Be used to harass an individual;
Make a false allegation;
Contain a matter that is published in breach of confidence;
Incite or encourage anyone to send a message to an individual for the purpose of causing harm to the individual;
Incite or encourage an individual to commit suicide; or
Denigrate an individual by reason of colour, race, ethnic or national origins, religion, gender, sexual orientation or disability.

A malicious statement posted online about you or your business could breach principles 5 or 6.

The HDCA has established the government organisation NetSafe. Their website explains their role:

“Netsafe has the responsibility to help resolve reports related to alleged breaches of the 10 communication principles. We are not an enforcement agency, but we do have a high resolution rate. Some of the things we can do include:

liaise with website hosts, ISPs and other content hosts (both here and overseas) and request them to takedown or moderate posts that are clearly offensive
use advise, negotiation, mediation and persuasion (as appropriate) to resolve complaints
inform people about their options if they wish to apply to the District Court”

If NetSafe aren’t successful, the HDCA allows you to take a claim to court. Other than in principle 6 the HDCA does not draw an absolute distinction between true statements and lies, although this is a factor considered by the Court. That gets around one of the limitations of defamation law where something is not defamatory if it is technically true.

In severe cases it’s possible for the Court to award fines and/ or a prison sentence, and it has done this in a couple of cases of revenge porn.

In the case of bad reviews the Court has a range of options, including to order that a website:

Take down content;
Post a correction;
Allow a right of reply; or
Supply the identity of the person who has posted anonymously.

The Court can also order name suppression to prevent the victim from being re-victimised by reporting of the hearing.

But is it worth fighting?

When an individual is being actively harassed or bullied it may be necessary take to take steps to defend their reputation and their health & well-being.

In the case of a business the situation may be less clear cut. Negative reviews by disgruntled, delusional or malicious people are a fact of life in business. Is it worth your time and energy to fight that?

Consider the “Streisand effect”, where fighting against something may backfire by calling more attention to the original allegations. Sometimes the available remedies risk causing more problems than they solve.

We can help you assess whether you have a valid case to complain about defamation or whether you could go to Court under the HDCA. We can also help you assess the costs and risks of these steps, so you can decide whether a fight might be more trouble than it’s worth.

Trespass Notices in NZ

Tue, 05 Nov 2019 03:14:30 GMT

Anyone who occupies a property can issue a trespass notice against anyone else who might visit the property without lawful business being there.

Who can issue a trespass notice?

To issue a trespass notice it is not necessary to own the property; a renter can trespass people from their rented property.

How do you issue or serve a trespass notice?

To trespass someone from your property you only need to warn them to stay off. This can be done verbally or in writing. Once they have received notice, a person commits an offence if they remain on your property or come back to it within two years (without a lawful reason).

How do trespass notices work?

If somebody does trespass on your property you or the police can bring a case against them. If they are convicted, the maximum penalty (depending on the type of trespass) is a fine of $1,000, or 3 months’ imprisonment. These maximum penalties would only ever be imposed in the most serious cases and imprisonment almost never.

For most people the value of a trespass order is not the option of going to court and getting a conviction, but rather the fact that the police can be involved to enforce a trespass order in some cases.

NZ Police trespass notices

While trespass orders can be verbal, the police have a form for a trespass order that you may fill out, and the police may be prepared to deliver this to the trespasser. The police will keep a copy of this trespass order on file and can refer to it if needed. This means that if you call the police to complain about a person trespassing, they will have a record of the trespass notice. The process of removing the person will probably be easier for you as the police will take care of it. Because of this we generally recommend that a trespass notice is prepared in writing and registered with the police.

Real estate agents’ key role in vacant possession and smooth settlements - Smith and Partners

Sat, 19 Oct 2019 20:37:13 GMT

Real estate agents, vendors, lawyers and even tenants all have a role to play in ensuring purchasers can take possession of houses without fuss on settlement day.

Vendors generally know they have to provide vacant possession on settlement day, and most do. Vacant possession can’t be achieved in perhaps two percent of the cases we handle, but it causes major stress for all parties.

If the purchaser can’t take vacant possession they are not obliged to settle on the agreed day, and this may result in significant financial loss for the vendor.

Identifying and resolving any potential issues before settlement day is a lot easier, cheaper and less stressful than trying to sort things out afterwards.

Common problems

The common problems that arise are:

chattels that don’t work as they did when first seen;
owners still in the house;
tenants who have not moved out; and
rubbish still on the property (and other issues of tidiness and cleanliness).

The agent’s role

There is no legal obligation on the part of the agent to ensure the property is vacant on settlement day. However communication and good management by the agent can do a lot to avoid bad outcomes. And when the deal goes through smoothly that reflects well on you as the agent.

The key for agents is to be alert to possible danger signals and facilitate communication between all parties.

For instance, relationship breakups leading to the sale of property can easily cause problems, particularly if the breakup isn’t amicable, or if the parties aren’t communicating much.

Agents can help this process by:

making sure that the vendors are well aware of their obligations to leave the property by the due date.
checking that the vendors have given any tenants notice, and that this runs out on or before settlement date.
ensuring that the vendors know that they have an obligation to leave the property in a tidy state and with the chattels in proper working order.
advising lawyers about any potential problems that may arise, well before settlement date

Recent experiences

Where there are tenants in a property, it’s up to the vendor to give the tenants the 42 days’ notice they are entitled to, and to make sure the tenants have gone by settlement day.

We had a case recently where notice wasn’t given. The tenants were still on the property on settlement day and the purchasers couldn’t move in.

Settlement was delayed and the vendors had to compensate the purchasers for the cost of the delay. It was upsetting all round.

In another case where Smith Partners were acting for the vendor, there were old cars and machinery to be removed.  This problem was exacerbated by a relationship split where one party was preventing the other from entering the property to remove the items.  This resulted in the property settling 10 days late, and the vendor incurring penalty interest during that period.

Further protection for purchasers

If vacant possession is identified as a potential issue prior to signing the sale and purchase agreement, additional clauses can be added for further clarification and protection.

For example, if there are old cars on the property and it is not possible to remove them before settlement date, some money can be held back from the settlement.

A deadline for removal can be agreed, and the money paid when the cars are removed. If that doesn’t happen, the agreement can provide that the money held back can be used to pay for the removal, and the balance can then paid over.

What Happens if a Vendor Dies Before Settlement? - Smith and Partners

Sat, 19 Oct 2019 20:27:45 GMT

The consequences of a vendor dying after a sale and purchase agreement has been signed, but before the settlement date depends on how the property was held. Settlement cannot be completed if the property is still held in the name of a deceased vendor/owner.

Property held as joint tenants

If the property is held as joint tenants with another property owner (a common occurrence where the property is held by a husband and wife) then the process is relatively straightforward. In that situation, the surviving vendor can use the death certificate for the deceased vendor to transmit the property into the surviving vendor’s name. This can usually be achieved in a relatively short time frame, and the timing of settlement may not be delayed.

Sole Vendors and Property held as tenants in common

If a sole vendor, or a vendor that owns a share in a property, dies before signing any transfer documentation, the executors must obtain Probate of the deceased’s last will before the property can be transmitted to the executors of the estate. Unfortunately this process can take a few weeks. If the deceased vendor did not have a valid will, then letters of administration will have to be granted before the property can be transmitted to the administrators. This is a much longer process and will definitely delay settlement.

Options to deal with the delay – Occupation Licences

One way to keep all parties happy is for the executors of the estate and the purchaser to enter into an occupation licence which will enable the purchaser to occupy the property as a licensee until Probate is granted by the High Court. This may not work for every situation and therefore each party should seek legal advice before entering into the occupation licence.

Financial consequences of delay

If the settlement date passes without settlement occurring the purchaser can issue a 12 working day notice to settle. If this date also passes without settlement occurring, the purchaser can sue the vendor’s estate for specific performance, or cancel the agreement and pursue the vendor’s estate to recover any losses suffered.

What about incapacitated vendors?

Another point to note is that if you know your vendor client is ailing or ill ensure that they have an enduring power of attorney in relation to property in place, so that any documentation can be signed under power of attorney if your vendor is incapacitated and cannot sign transfer documentation themselves.

Getting Names Correct on a Residential Property Agreement for Sale & Purchase

Fri, 18 Oct 2019 02:52:26 GMT

As property professionals, you understand the need to get all of the details on an agreement for sale and purchase as accurate as possible. The task of ensuring that the names of the parties involved is correct turns out to be a little tricky when your clients don’t give you the correct information. Most clients don’t realise the legal ramifications and often don’t fully understand the correct way to identify the names of the individuals or entity when buying or selling as a trust or company.

Why is it so important to get it right?

The worst case scenario if the names on the agreement do not match the title or do not reflect the entity that is selling or purchasing is that the agreement may not be legally binding on the parties.

A common scenario if names do not match, either by error on the original title registration, or error on the agreement or identification is that the lawyers either have to enter into additional correspondence with each other or draft an extra document (a statutory declaration) to clarify and/or rectify the same. This takes more time (both for us and for the client) and can cause added stress and extra costs for the clients.

Incorrect names on the agreement can also cause issues if your client is applying for a bank loan to assist with the purchase. Banks will often ask for copies of the agreement for sale and purchase and will extract the names of the borrower from the contract. Again if incorrect, this can cause time to be wasted on the rectification and the clients having to rush around last minute if the error is not picked up well in advance of settlement.

Below is a small checklist of things that you can do that will assist both you as agents and us lawyers (as well as providing the clients with that extra little bit of added value). Your clients will appreciate that you are attempting to foresee potential problems and prevent those problems turning into real issues arising during the transaction:

Personal names

Vendor

Obtain a title search and ensure you have recorded the names exactly as they are on the title
Check the vendor’s drivers license or passport to ensure the names on the ID also exactly match the title
Double check with the client that the property is held in their personal capacities and not for example in a partnership or as trustees of a trust

Purchaser

Ask who the client intends to be the final purchaser of the property (i.e. who do they want to end up on the title? Is it them personally or is it a trust or a company?)
Wherever possible, record the intended final purchasers on the agreement as this will mean that an extra deed of nomination document will not be required (we understand in some cases, not all final purchasers may be available at time of signing an agreement or that the entity may not be formed yet). Having one person sign an agreement with a view to nominating another entity or person at a later stage has posed problems in the past.
Always check that the name as written on the agreement matches the purchaser’s photo identification.

Companies

Where the vendor or purchaser is a company

Obtain a Companies Office search and write the name of the company exactly how it is recorded on the Companies Office register (“the register”).
Directors must sign documents on a company’s behalf and the general rule of thumb is if there are two or more directors of the company then at least two directors must sign to bind the company. If the company only has one director, then that one can validly bind the company.
You should check that the names on the director’s photo identification exactly match the register. If it does not there are two solutions – have them update the details on the register or get their lawyer to draft a statutory declaration confirming that the director as named on the register and the person in the photo identification are one and the same person.
Another thing you should check is that any directors have authority to enter into the contract. If there are more than two directors, you should at least ask for confirmation that all other directors of the company have also approved entry into the agreement.
Remember, some clients don’t know who the directors of their companies are so it is best to rule out any ambiguity and just obtain a Companies Office search in every case.

Trusts (and these are slightly different)

Trusts are not technically legal entities in that the trust itself cannot hold or own property. The trustees hold the property on behalf of the trust (or more correctly on behalf of the beneficiaries of the trust).

Trusts are usually (but not always) set up with an independent and sometimes corporate trustee (a corporate trustee is just a trustee that is a company), for example the trustees of a trust might be John Doe, Jane Doe and Smith & Partners Trustee Co. Limited. This is all you would see on the title of the property. The words “Doe Family Trust” do not appear on the title.

Despite the fact the trust name does not appear on the title, the details on the agreement should go and above and beyond what is recorded on the title. If you know it is a trust and you know the name of the trust then you should list the vendor or purchaser as the case may be as: “John Doe, Jane Doe and Smith & Partners Trustee Co. Limited (as trustees of the Doe Family Trust”).

This may seem like overkill but it makes the paper trail far easier to follow years down the track. Some clients have separate mirror trusts with the exact same trustees – e.g. the Jane Doe Trust and the John Doe Trust which is why it can be crucial to specify the name of the trust that is entering in to the contract.

Sometimes the clients do not have an independent trustee at all, so if you did not record that they were buying the property as trustees of a trust, then the whole transaction could proceed and the property could be mistakenly thought to be held in the clients’ personal names. This can cause major accounting issues.

You should:

Ask for a copy of the Trust Deed and any variations (especially any documents recording a change in trustees)
Check that the clients’ identification match the names as listed on the title and the trust deed itself.
If there is a corporate trustee, you should go through the process for companies set out above as well – get a Companies Office search and check the directors (to see who can bind the company) etc.
ALL trustees of a trust must sign the agreement and it is not binding until all trustees sign or until all trustees ratify entry into the agreement.

What happens when special conditions are in conflict with general conditions? - Smith and Partners

Sat, 12 Oct 2019 11:48:21 GMT

Drafters of Agreements for Sale & Purchase Beware!

The decision of Justice Venning in the case Y V Properties Limited v Doh Young Choi & Ors highlights the need to ensure that when solicitors and real estate agents draft special clauses in agreements for sale and purchase of property, that those clauses do not conflict with general conditions.

Most real estate agents and lawyers use the Auckland District Law Society standard form of Agreement for Sale and Purchase.

Clause 9.3 of the current Auckland District Law Society form of agreement provides that if the agreement is conditional upon the purchaser obtaining a building report, the date for satisfaction of the condition is 10 working days after the date of the agreement.

In the Y V Properties decision a special clause had been inserted by way of the agreement being conditional on the purchaser carrying out a due diligence investigation of the property. The date for satisfaction of the due diligence condition in the special terms of sale was 20 working days from the date of the agreement.

The learned Judge held that because both the building condition clause and the due diligence clause required essentially the same considerations – a report on the condition on the building on the one hand and an investigation into the soundness and structural quality on the other – that the clauses were in conflict because both clauses provided for the same enquiry.

Accordingly, clause 1.4(3) of the general conditions applied. The effect of this clause is that if there is a conflict between the general conditions of sale and the special conditions of sale, then the special conditions must apply.

Justice Venning found that the vendor could not cancel the agreement 10 workings days after signing the agreement for want of satisfaction of the builder’s report clause. Instead the vendor had to wait until the expiry of the 20 working days in the special conditions of sale. In the intervening period, the defendant had made the contract unconditional.

The lesson to be learnt from the judgment in Y V Properties Limited is that if the agreement is going to contain a special due diligence clause, then that clause will prevail over the standard builder’s report clause to the extent that both clauses cover the same investigation and the builder’s report option on the front page of the agreement should be deleted. The same may also be said of the LIM report condition.

If the requirement of a LIM is going to be included in a special due diligence clause then the LIM report option on the front page of the agreement should also be deleted.

Drafting better clauses - Smith and Partners

Wed, 17 Oct 2018 20:05:24 GMT

The standard sale and purchase agreement designed by the Real Estate Institute of New Zealand (REINZ) and the New Zealand Law Society (NZLS) is a wonderful thing, but sometimes it doesn’t cover the special conditions that purchasers (or vendors) want. And when time is of the essence for getting the sale through, often Real Estate agents are required to draft a new clause for the agreement.

Legal drafting requires a special kind of language and careful consideration of the purpose of the clause. What are you trying to achieve with the clause?

Clarity

It is imperative that the language you use is clear. Clear drafting will achieve accuracy and the clear understanding of each party’s intentions. To achieve clarity, it is important to clearly identify the objectives of the parties. Once the objectives are clearly ascertained, keep the writing short, simple and straight forward. Too often the language used is padding and waffle – be sure of the words you use and how you put them together. Read it out loud to yourself or to someone else and ask them if it’s clear.

Certainty

Even if the language you use is clear, it must also create certainty to avoid the drafting being considered ambiguous or allowing for different interpretations. One of the most common hiccups we see is the use of “days”, as in the purchaser has 3 days to satisfy a condition. Is this meant to be normal days or working days? Were weekends meant to be counted?

Plain language

To achieve clarity and certainty, it is best practice to use plain language. It doesn’t have to sound fancy or formal. Gone are the times when one sentence took up a whole page containing archaic language. For example, consider which of the following is clearer and easier to understand:

“If for any reason, the parties are unable to reach agreement as to the form of the proposed agreements for sale and purchase, the conditions imposed therein, the plans for development of the land or any other matter relating to other proposed development, this agreement may, at the expiry of six weeks from the date of execution, be voided by either party giving written notice to the other whereupon this agreement shall be at an end. “

“If the parties cannot agree about the sale agreements or the development plans, each party may elect to end this agreement after six weeks by giving the other party written notice. “

Which is easier to understand?

Benefit

Who is to receive the benefit of the clause? For example, with the standard building report clause in the agreement, it benefits the purchaser, enabling the purchaser to cancel if they receive an unsatisfactory report. As you are the vendor’s agent, you always need to consider the vendor’s best option. What if the vendor wanted to have the ability of being able to remedy the defects (ie similar to the LIM condition)?

Dates

It is really important to double check the dates contained in the agreement. It is becoming common that dates do not match up, fall on non working days and in some cases, leave little or no time between satisfying the condition and settling the transaction. If the purchaser is arranging finance, lawyers generally need a week between the unconditional date and settlement. If they’re using KiwiSaver funds, they’ll need about 3 weeks.

Intention/objectives of the parties

It is important to be clear about what the parties are trying to achieve and to make sure there isn’t any ambiguity enabling one party to use that to their advantage. Do not use abbreviations or short cut any sentences.

Non-satisfaction of the condition

Consider what happens if the clause is not satisfied or if the time elapses. Does the agreement fall over automatically or do the provisions contained in clause 8 of the general terms of sale apply? Don’t be afraid to specifically state what happens.

Breach of the condition

Consider if the conditions are essential (going to the heart of the contract enabling the agreement to be cancelled) or are warranties, meaning that the non-defaulting party only has a right to claim for damages.

If the condition is a warranty, consider mechanisms to resolve the breach such as retention of funds etc. Obviously, a clause like this also needs careful drafting.

In addition to the Agreement for Sale & Purchase, there is also a suite of additional clauses prepared by NZLS and REINZ that you can use. Alternatively, we are always happy to answer any questions you may have about drafting clauses.

If you would like to discuss the wording of a specific clause, or any matters related to buying and selling residential property, please contact Property Partner , Wade Hansen on 09 837 6885 or at wade.hansen@smithpartners.co.nz

Is Smith And Partners Trustee Co. A Trustee Of Your Trust?

Wed, 20 Jun 2018 23:52:04 GMT

If so, there are some important changes to our procedures that you need to know about.

From 1 July 2018, Smith and Partners’ trustee companies will be subject to the rules and procedures in the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“AML Act”).

The purpose of the AML Act is primarily to prevent proceeds of crime being laundered through lawyer’s trust accounts.

In order to prevent this, the New Zealand Government now imposes a number of new obligations on all trustee companies.

To ensure we are compliant with our new AML obligations, and to discharge our obligations as trustee, we will no longer be able to sign documentation as your trustee without you making an appointment.

At your scheduled appointment time, we will sit down with you to discuss your trust’s circumstances and to fully understand the nature and purpose of the documentation that needs to be signed, before we can sign the same.

If Smith and Partners is not currently undertaking any other work for you, then we will need to open a file. This will require us to collect identity information from you, including taking a copy of your ID and proof of address. These increased requirements for ID verification apply to all clients who open new files from 1 July 2018, regardless of how long you have been a client of Smith and Partners. You will be advised of what you need to bring with you when you make the appointment.

The time spent with you to understand and sign the documentation will attract a fee, as set out in our Terms and Conditions of Engagement.

If you are unsure whether you need Smith and Partners trustee company to continue to be a trustee of your trust, please contact us to discuss whether our continued involvement is necessary.

Agreeing To Adjust Your Boundary With Your Neighbour

Sun, 28 Jan 2018 18:24:02 GMT

A legal boundary adjustment is classified as a subdivision by the Resource Management Act. This means that you will need to:

engage a surveyor;
apply for a resource consent which is lodged with Council;
get a skilled property law expert to assist you to complete the legal documents for the change of the legal titles ; and
work with the surveyor to have everything ready at the same time for the surveyor to deposit the plan and the lawyer to lodge the legal documents for the issue of new title(s).

Why would you adjust your boundary?

There are various reasons for people to want to adjust their boundary. Sometimes fences or driveways are incorrectly built over boundary areas, and it is cheaper to come to an arrangement with your neighbour to purchase or sell that small amount of land (or just agree to do it for no fee)

Other reasons might be:

Purchasing land from a neighbour to create room for a driveway enabling them to put in a second dwelling (and subdivide)
The existing boundary is obscure and can be corrected

Consent from both parties

When you are adjusting a boundary, one property is “giving up” or “selling” some of their land to the other property. The first step is to talk to your neighbour and come to an agreement. Both parties must agree to sign all documents and do all things for this to happen.

You are not able to just deal with your part of the property and the neighbour deal with their part of the property at separate times. The boundary adjustments need to happen together. That is why it is important that everyone agrees, otherwise it cannot be done.

We have had two occasions where the agreement was reached a while ago and in the meantime the neighbour sold the property however the boundary adjustment had not been completed. This does not make things so straight forward for the remaining neighbour. However so long as everyone knows what is happening and are agreeable to that and it is in writing (including who is paying for what) then the process can still go ahead.

The surveyor’s role

The surveyor is usually the first point of call to survey the properties and prepare the plan.

Cost of the surveyor can be agreed upon to be paid according to the arrangement with the neighbour. The surveyor will prepare the resource consent application and a scheme plan to be submitted to the Council. The surveyor corresponds with the Council on your behalf in relation to the resource consent approval process.

Once the recourse consent is granted, any conditions that are required by the Council must be fulfilled then a Land Transfer survey plan is prepared to peg the new boundaries. A Land Transfer dataset (plans and other required documents) will be prepared for approval by Land Information New Zealand (LINZ).

The property lawyer’s role

There are also legal costs for documents to be prepared for the new titles to issue with the new boundary areas. The most efficient way is that the parties agree on one lawyer to do the work and pay a half share each, or if it is to benefit one party and not the other, then agreement may be reached that one party pays for all the legal costs.

If you or your neighbour has a mortgage then the lawyers have to contact them to obtain consent to the boundary adjustment.

Once the resource consent has been approved and the surveyor has prepared a draft plan this is the time the lawyers should receive copies of these documents. This is so the lawyers can check the requirements and prepare the legal documents needed, at the same that any conditions are being fulfilled and the surveyors are preparing their dataset plan.

The lawyer’s preparation of the legal documents includes draft documents for signing by both parties to adjust the areas for the titles (usually by way of a transfer of the area being adjusted), sending copies of the surveyor’s documents and legal documents to your bank and/or the neighbour’s bank. The bank has to agree to the adjustment because the security they have is being affected. There is usually a consent fee that needs to be paid to the bank. This can be accounted to the party who has the mortgage (unless one party is paying all costs).

The bank consent usually involves a partial or full discharge of the existing mortgage and registering a new mortgage over the new title. This is because part (or all in some cases) of the land affected by the mortgage is to be discharged (i.e. the part being transferred to the adjoining owner).

Once bank requirements are fulfilled, the surveyor is ready to deposit the plan and the legal documents have been signed by all parties, the surveyor will “deposit the plan” into LINZ for approval and the lawyers will lodge the legal documents to meet up with the plan in LINZ for the boundary adjustment to be processed and new titles to be issued.

What is a Cash Out Clause?

Wed, 24 Jan 2018 07:22:40 GMT

A “cash out” or “escape clause” is inserted in an agreement for sale and purchase to enable the vendor to give notice to the purchaser that they have another signed contract, this second contract is called a back-up contract.

When notice is given to the first purchaser they then have a required amount of days (usually 3 or 5 working days) to declare the contract unconditional or it will be cancelled after the expiry of the time period.

An example of an escape clause is:

“If before this agreement becomes unconditional the vendor receives an unconditional offer from a third party to purchase the property, then the vendor may serve on the purchaser a notice requiring the purchaser to advise within 3 working days after service of the notice whether all conditions for the benefit of the purchaser have been satisfied or waived and the agreement is unconditional in all respects. If the purchaser does not notify the vendor within 3 working days this agreement is terminated and at an end and the deposit shall be refunded to the purchaser.”

Cash out clauses when you are selling

If you are selling and the purchaser requires long condition times, for example they need to sell their existing home first, we recommend an escape clause (cash out clause) be inserted into the agreement.

If you accept a back-up offer you can give the first purchaser notice to go unconditional without having to wait until the conditions are due under the first contract, which could be some time.

However, we do not recommend giving notice to the first purchaser under the escape clause unless your back-up offer is unconditional in all respects. This will ensure that you will sell to at least one of the purchasing parties.

Cash out clauses when you are the purchaser

If you are purchasing and your vendor wants to insert an escape clause into the contract we recommend having the time frame for you to have to declare the contract unconditional under the clause as long as possible.

Usually the standard time period is 3 working days, if the vendor agrees it would be better for it to be between 5 – 7 working days. This will give you longer to satisfy the conditions you have remaining, or you are trying to sell it will give you time to look into bridging finance or find a buyer.

Have your lawyer check the drafting of the escape clause if you agree to have one inserted into an agreement. The lawyer should ensure that the drafting gives you the longest possible time for satisfying the condition, i.e. the vendor can only give notice if the back up agreement is unconditional and make it 5 – 7 working days rather than 3.

Why you NEED to review your Contracting Out Agreement

Mon, 06 Nov 2017 10:17:09 GMT

Article reviewed and updated March 2025

Contracting out agreements, otherwise known by their widespread American connotation as “prenups”, are increasingly popular and are becoming a “must have” for parties when entering into a relationship. But too many couples are using a set-it-and-forget-it approach. A correctly executed contracting out agreement can start to lose it’s certainty over the passage of time if it is not reviewed regularly.

Why are they so popular?

The Property Relationships Act 1976 (‘the Act”) dictates that most assets/liabilities in a qualifying relationship are to be divided 50/50 if that couple were to separate – subject to exceptions.

A contracting out agreement “contracts out” of the 50/50 sharing regime and allows the parties to define how their assets/liabilities should be divided in the event of separation or death. Effectively, couples can come to any arrangement they like rather than the standard 50/50 split having regard to their own sense of fairness and justice.

The number of couples (both young and old, first relationships, or second) entering into prenups has increased exponentially over recent years, with many partners looking to ringfence certain assets or liabilities in the event of a separation.

It is difficult to pinpoint the driving force behind this increase, although some say it is due to newer generations taking a more pragmatic approach to relationships – viewing coupledom as an economic contract rather than a binding of love.

The need for a “fair” agreement

To be enforceable, the contracting out agreement must meet certain requirements under the Act, including being fair. Fairness does not amount to equality, but is rather measured against the parties’ individual circumstances at the time that the agreement was entered into.

A contracting out agreement can subsequently be set aside if, having regard to all the circumstances, the Court is satisfied that giving effect to the agreement would cause serious injustice. The Court must have regard to:

the provisions of the agreement;
the length of time since the agreement was made;
whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made;
whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties);
the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement;
any other matters that the court considers relevant.

It is important to seek legal guidance from a qualified solicitor when negotiating and executing your contracting out agreement to ensure that it has the best chance of being upheld in the face of a future challenge. Amongst other things, the agreement should set out all the circumstances considered when determining how property is to be owned/divided upon separation, and why the parties consider the arrangement is fair (particularly in cases where there is unequal sharing).

Regular reviews help ensure the agreement stays “fair”

It doesn’t stop there. Contracting out agreements should be treated as a living document. The reason being that these types of agreements can become unfair over time if they are not regularly reviewed and updated to align with the parties’ particular circumstances as they enter different phases of their lives and relationship. For example, in the event of children, marriage, serious illness, periods of unemployment, etc. On occasion, contracting out agreements can contain in-built mechanisms for property rights to change upon important events occurring.

The key takeaway here is that if a contracting out agreement is not regularly reviewed and updated, it becomes vulnerable to challenges. This is especially so when the contracting out agreement favours one party more than the other. Regular reviews also help couples to be able to rely on the certainty of their arrangements.

For example: if a couple were together for twenty years and upon separation their prenup (entered into 20 years prior) stipulated one partner was to receive a car while the other was to receive the family home, it could potentially be overturned if it were deemed to be seriously unjust. However, if the prenup has been continuously reviewed, the reasons for the arrangements have been clearly set out, and the parties have indicated their consent to this ongoing arrangement at each review, then the prenup is more likely to stand up to a challenge as to fairness.

If you are looking for guidance on a new or existing contracting out agreement, contact our family law expert Natalie Miller by phone on 09 8376843 or email natalie.miller@smithpartners.co.nz to set up an appointment or complete the below form today.

Enforcing a Building Disputes Tribunal Determination

Thu, 26 Oct 2017 23:24:37 GMT

Once you have received the Determination by an Adjudicator in the Building Disputes Tribunal, it is possible to obtain entry of that Determination as a Judgment in the District Court.

An application is filed in accordance with the District Court Rules and served on the Defendant.

The Defendant has five (5) working days within which to oppose entry of the determination as a Judgment but they are only permitted to do so if the Defendant can establish:

that the amount payable under the determination has been paid in full to the Plaintiff;
that the contract to which the determination relates is not a construction contract which the Construction Contacts Act applies; or
that a condition imposed by the Adjudicator in his or her determination has not been met.

If the Defendant does not take any steps to oppose the entry of the Determination as a Judgment within the permitted time, or the grounds for opposition do not fall into any of the above categories, the District Court must enter the Determination as a Judgment.

Once the Determination is entered as a Judgment, the Plaintiff can then enforce the Judgment in accordance with the District Court Rules by means of either an Order for Financial Assessment, Attachment Order or a Distress Warrant.

If you would like further advice as to how to enforce an Adjudicator’s determination or to find out more about the process of Adjudication, please complete the form below or contact our debt collection team today to set up an appointment. Phone 09 836 0939 or by email on partners@smithpartners.co.nz

Responsibilities & Obligations Of Commercial Property Landlords » Smith and Partners Lawyers

Mon, 24 Oct 2016 09:42:26 GMT

The obligations of a landlord of commercial property are usually set out in the Deed of Lease between the Landlord and Tenant. There are also obligations implied by statute law

Assuming the Deed of Lease is in the usual form used by Lawyers, the most common obligations for a landlord are as follows:

Maintenance and Repairs

The Landlord is usually obliged to keep and maintain the premises (including building services) in good order and repair and weatherproof. This however does not normally extend to the interior or breakages and minor repairs. If the repairs are of a minor nature and the Landlord completes them, the Landlord may be able to recover the costs for these from the Tenant.

Building Act

Usually the Landlord is required to comply with the Building Act and Building Code and must supply to the Local Authority a Building Warrant of Fitness, if required. The costs of having to provide a Warrant of Fitness are recoverable by the Landlord from the Tenant.

Health and Safety

Under the Health and Safety at Work Act, a class or people known as PCBUs (Person Conducting a Business or Undertaking) have the primary duty to ensure the health and safety of workers and others affected by the work they carry out. It is clear that Landlords will also be considered as PCBUs to ensure that the Landlord must reasonably do all things it can to manage the health and safety of workers on the property. Landlords also need to ensure the coordinate health and safety plans with building tenants when work (repairs, maintenance, etc) is carried out in an occupied building.

Insurance

The Landlord must insure the premises, the costs of which again are recoverable from the tenant. Note that the Landlord cannot recover loses from the Tenant where the Landlord is required under the lease to insure against such risks or the Landlords insurance cover does not extend to such risks.

Quiet Enjoyment

It is a fundamental obligation of Landlords to allow the Tenant to hold and enjoy the premises without any interruption by the Landlord. It does not mean that the premises may not be subject to noise, but rather the Tenant must have the right and full benefit of the premises without interference from the Landlord.

Assignments of Lease

If the tenant wishes to assign the lease to someone else, the Landlord must act reasonably when considering an assignment of lease . They cannot unreasonably withhold their consent nor impose further obligations that are unreasonable.

There may be other obligations that they landlord may be subject to and like all terms of the lease, these and the above obligations are negotiable. It is therefore important to consult your lawyer prior to entering into any formal lease of your property.

Understanding Riparian Rights and the Queen's Chain in New Zealand » Smith and Partners Lawyers

Wed, 30 Sep 2015 11:58:39 GMT

The terms “Riparian Rights” and “The Queens Chain” are often referred to in marketing material and the media. However, the meaning of these terms, and the rights to which they refer, can be a source of confusion.

In response to the growing number of inquiries regarding these terms from our clients and from industry professionals, including real estate agents, we thought an article which deals with this area would be useful.

When Governor Hobson was surveying New Zealand he had strict instructions from Queen Victoria to set aside strips of land to provide particular sites for “roads, quays, recreation and amusement and for promoting health”. This led to early surveyors reserving land (but not all land) for these purposes alongside waterways, including rivers, lakes and sea boundaries.

However, it was not until 1892 that the Crown passed legislation requiring a strip of land (made up of a chain) to be reserved adjoining the high water mark for any Crown sales made after that date.

The term “chain” refers to an early surveyor’s tool called a chain which was made up 100 links (being 66 feet or 20 metres).

Currently, the law generally provides that where any subdivision divides land into lots under 4 acres the council can require an esplanade reserve (a 20 metre Queen’s chain strip) as part of the resource consent for any land adjoining rivers, lakes and beaches.

This means that the Queen’s chain now refers to the marginal strips and esplanade reserves, which normally are 20 metres wide, adjoining many lakes, rivers and the foreshore.

There are still however, a large amount of land ownership whereby there is no reserve or Queen’s chain and the land ownership continues right down to the water. It is these types of land ownership which can be said to contain riparian rights.

This usually relates to the high tide mark, but some titles may extend to the low water mark, particularly if the land is Maori land.

Riparian rights allow unimpeded access to that mark (whether high or low tide mark), however those rights are limited by any council bylaws which would apply and also the Resource Management Act. For example, the building of a jetty or small wharf on privately owned land which extends out into the water will require council consent regardless of whether or not riparian rights exist.

If you wish to seek advice regarding purchasing property with riparian rights, or advice on your rights as a land owner, please contact our property team on 09 837 0939 or email partners@smithpartners.co.nz to set up an appointment with an experienced property lawyer

The Building Amendment Act 2013 – what builders and on-sellers need to know

Mon, 22 Jun 2015 05:57:30 GMT

The Building Amendment Act 2013 has now been fully implemented. The purpose of the amendments is to increase consumer protection and certainty.

The Act moves reliance (and liability) away from council and places the onus on residential builders and on-sellers . The result for builders is an increase in their obligations and an associated increase in risk and liability.
Having the right contracts in place to protect the builder’s business will now be essential. These contracts will be the most useful tools in a builder’s toolbox.

Requirements for builders

As from 1 January 2015, builders must:

Provide prescribed pre-contract disclosure information and a prescribed checklist to their client before entering into the contract, where the contract price is $30,000 or over (including GST), or where client requests it (even if under $30,000).
Provide a written building contract , with certain prescribed terms, where the contract price is $30,000 or over (including GST). Certain terms are deemed to apply even if they are not in the contract.
Provide certain post contract information which includes information about (and copies of) insurances, guarantees and warranties relating to the works, and maintenance requirements.

What building contracts must contain

Minimum requirements for the building contract are that it must be in writing, must be dated and it must contain all of the following:

Description of the building work including materials and products used.
The person carrying out the supervision of the building work.
Expected start dates and completion dates.
Contract price and payment method.
Process for varying the contract.
Dispute resolution processes and process for any delays.
How defects will be remedied, including reference to Building Act implied warranties.
Acknowledgement that the contractor has supplied, and the client has received the disclosure information and the check list.

Penalties

The onus is on the building contractor to make sure all the new obligations are met.

If the project is over $30,000, the builder may be subject to a fine of up to $500 for:

Not providing pre-contract disclosure; or
Not providing a written contract; or
Not complying with the written contract.

In addition, the builder could be subject to a fine of up to $20,000 for knowingly making a false or misleading statement or omission during disclosure process.

Warranties

The implied warranties have not changed under the amendment act, but the remedies/penalties for breaching those warranties have increased.

The remedies depend on whether or not the breach can be remedied, and whether or not it is substantial. The home owner (or subsequent homeowner) has 10 years to bring a claim.

Once a home owner notifies the building contractor of a defect, it is deemed that a defect exists (and is capable of being remedied) unless the contrary is proven. The builder must remedy the defect within one year of building work being completed.

There are a number of defences available to builders including, for example, where the defect is caused by someone over whom building contractor has no control or by a failure to carry out normal maintenance.

Subcontractors

Importantly, subcontractors are specifically excluded from the implied warranties provisions.

This may result in the head building contractor being liable for a subcontractor’s work, with no means of recovering that sum from the subcontractor.

Having the right contracts in place

Follow these links to download the pre-contract disclosure information form and the checklist form from www.building.govt.nz.

Standard generic building contracts can be long winded and confusing. An experienced commercial lawyer can draft the required written contract and subcontracts, tailored for the builder’s particular circumstances, so that it reduces the risk to the business as much as possible.

If you would like to discuss any matters relating to The Building Amendment Act 2013, or any other business law related matter, please contact the personal assistant to our business specialists, Suzanne Sumner or by email on suzanne.sumner@smithpartners.co.nz or by phoning 09 837 6840 .

Who has the power to add or remove trustees?

Fri, 19 Dec 2014 10:19:32 GMT

What happens to this power when I die?

Most people with a discretionary family trusts realise that a trustee’s role is to make decisions regarding the trust and generally to carry out the administration of the trust. This includes an “unfettered discretion” (trustees do not have to disclose reasons for their decisions) as to the distribution of trust fund to beneficiaries. Having the appropriate trustees in control of the trust (and the trust assets) is integral to the success of the trust.

But Who Selects The Trustees?

The settlor (generally the person(s) who set up the trust) will appoint the initial trustees when they set up the trust. Most commonly the settlor will appoint themselves (husband & wife) as trustees along with an independent trustee (a non-beneficiary) or a corporate trustee.

The “Power To Hire And Fire” Trustees

The power of appointment and removal of trustees is usually held by the settlor or appointor of the trust and gives that person(s) the right to hire and fire trustees. It is important to check your trust deed to see who holds the power of appointment and removal of trustees, and any limits that it may set out. ( Learn more about how to remove a trustee)

Why Is There A Power Of Appointment (and Removal) of Trustees?

The Power of Appointment is included in Trust Deeds to ensure that there are always sufficient trustees available to administer the property of the Trust in accordance with the terms of the Trust Deed.
A power of appointment can be used:

To remove a trustee if the settlor believes that they are not acting in accordance with the settlor’s wishes or intentions of setting up the Trust. The removal of such a trustee must be done in good faith and in the best interests of the beneficiaries;
To remove a trustee who is ill or no longer has mental capacity to carry out their responsibilities as a trustee of the;
To add trustees, such as adult children, or to appoint new trustees on the retirement of existing trustees.

Can I (Settlor) Pass on this Power of Appointment on Death?

If the person holding the power of appointment dies without determining the power of appointment, the Trustee Act 1956 sets out that executor/trustee of the settlor’s Will is automatically vested with the power of appointment. It is essential that consideration be given as to who is to have the power of appointment on the death of a settlor. It is common to include a clause in your Will stating who the power of appointment will vest in on your death.

Buying unsubdivided land without a Title

Fri, 12 Dec 2014 06:10:20 GMT

Richard and Sally are a couple looking to buy their first property in Auckland. The only problem is that house prices are reaching record highs and many houses are way beyond their budget. But all is not lost. Areas of land in the outskirts of Auckland are being “unlocked” and subdivided into sections to enable the likes of Richard and Sally to purchase their land and build their home. Richard and Sally are excited about this prospect but they don’t know much about “buying off the plans”.

What is “buying off the plans”?

Buying off the plans in this situation means that Richard and Sally are purchasing a section for which title (ownership papers) has not issued yet. They are entering into a contract with the land subdivider (developer), which will usually be in a unique form as it will contain comprehensive terms and conditions.

What can go wrong?

The main issue is that invariably you are buying something which may currently be a paddock with some sheep grazing in it. You don’t know what the end result will be like, when it will be completed and what your total costs will be to buy the land and build your home.

What you need to know

1. Ensure that you do your homework (due diligence) so that you will have a clear idea as to what you will ultimately own. Further, you will need to ascertain exactly what you can build on the land and how much this will cost you so that you can budget for it accordingly.

2. What stage is the developer at in creating the sections? Do they have resource consent and do you know what the terms of the consent are that will affect your land and what restrictions will be placed on your land by council? For example, will there be any drainage easements running through your section and are there specific engineering requirements you will need to comply with.

3. Will the developer be imposing land covenants on the section? This will restrict what you can and can’t do with the land, what you can and can’t build on the land and so forth.

4. How much deposit will you be required to pay and when will you require it to be paid? Obviously, this is money out of your pocket and you might not receive any interest on your deposit. Further, ensure that the deposit is held by a stakeholder until your title issues to ensure that your deposit will not be lost if something happens with the developer.

5. How long will title take to issue? Sometimes land developers encounter delays whether they be financial or something out of their control (weather). Accordingly you may wish to have the opportunity to exit from the agreement in the event that a title has not issued by a certain date (known as a sunset date).

How we can help you

At Smith and Partners we have the experience to be able to give you an overview of your proposed purchase and assisting you with any negotiations with the vendor. You may also be interested in a similar article from our website in relation to building contracts .

Deed of Distribution

Thu, 07 Aug 2014 10:22:51 GMT

What is a deed of distribution?

An irrevocable Deed of Distribution is a deed binding on the trustees requiring them to distribute all or part of the trust assets to named beneficiaries. The date of distribution usually coincides with the death of the settlor. The date must be within 80 years of the trust’s establishment.

If I don’t have one what happens to my trust assets?

For a discretionary family trust the trust will be administered by the trustees who have complete discretion as to how capital and income is distributed among beneficiaries (within the powers set out in the Trust Deed). Or if you have a Memorandum of Wishes , then the trustees will be guided by that, although it is not legally binding.

The main situation where a settlor enters into a Deed of Distribution

Terminal illness – A Deed of Distribution gives the settlor of a trust certainty as to distribution and a peace of mind of to whom and how, trust assets are to be distributed on the death of the settlor.

Who can write a deed of distribution?

A Deed of Distribution can only be written by the settlor and the trustees and must be done with the help of your solicitor.

What sorts of things can I include?

A Deed of Distribution can set out what, where, when and to whom distributions can be made. It states a date when this will happen.
A Deed of Distribution can be for all of the trust assets, or for only a portion of the trust assets leaving the remainder to be distributed by the trustees who have complete discretion.
A list of assets owned by the trust at the time the Deed of Distribution is executed is required in identifying what is to be distributed.

Are they legally binding?

Yes — provided that it is an irrevocable Deed of Distribution and a Deed of Distribution is permitted by the trust deed. A Deed of Distribution is binding on the trustees and even if the circumstances of the beneficiaries named in the trust deed may have subsequently changed.So you will need to be quite certain as to the distribution before entering into a Deed of Distribution.

Are there any requirements?

A Settlor and the Trustees can only create a Deed of Distribution if the Trust Deed specifically allows for a Deed of Distribution.When preparing a Deed of Distribution the Trustees need to record that they have considered the interests of the Trust’s beneficiaries. And that in having done so, the Trustees have decided to exercise their power under the Trust Deed to distribute the Trust Assets.

Who can see my deed of distribution?

Because a Deed of Distribution is normally only used in circumstances where the Settlor has a terminal illness, the existence of the Deed of Distribution and its contents are normally only disclosed to the Trust’s beneficiaries on the death of the Settlor.

Memorandum of Wishes

Thu, 01 May 2014 10:24:32 GMT

A Memorandum of Wishes is a document in which the settlor (person who creates the trust) sets out for the trustees of a trust how they want the trust managed particularly after death.
It’s often referred to as “ruling from the grave!”

Why do I need one, I have a Will?

A Will generally deals with all your property in your personal name, whereas a Memorandum of Wishes deals with your trust property.

If I don’t have one what happens to my trust property?

Without a Memorandum of Wishes, the trustees left after you pass away have no clear guidance on how you want the trust managed.

In a Will, the executor or trustee must carry out your instructions. They have no power to exercise any discretion as to any distributions or beneficiaries.

On the other hand, trustees of a trust, have complete discretion as to how capital and income from the trust fund are distributed among beneficiaries (within the powers set out in the Trust Deed).

Trustees also have complete discretion as to the use of trust assets, for example allowing a beneficiary to live in a property owned by the trust.

Who can write a memorandum of wishes?

The settlor of the trust (the person who creates the trust) can prepare a Memorandum of Wishes. The settlor can do this on their own or with the help and advice of a solicitor.

What sorts of things can I include?

As settlor a Memorandum of Wishes lets you make a clear statement of your intentions for setting up the trust.

You can provide guidance on how you want the trust managed including:

Trust distribution date;
Trust asset management;
Distribution of Trust income and capital;
Trustees use of discretionary powers; and
Beneficiaries and any special circumstances – special needs children, tertiary education, funding for school experience travel etc.

Are they legally binding?

No! By law trustees must have complete discretion BUT prudent trustees are unlikely to ignore a settlor wishes.

Because it’s not legally binding, this means it can be easily reviewed and updated to reflect any change in your circumstances.

If you wish to make any intended distributions legally binding, you should explore the option of a Deed of Distribution which is binding on the trustees.

Are there any requirements?

A Memorandum of Wishes should be signed and dated. There is no requirement for the document to be witnessed but it can be.

Who can see my memorandum of wishes?

Only those people who you choose to show, as it is a confidential document, (provided this wish is recorded in your Memorandum of Wishes).

There is a presumption that all other trust information is to be provided to beneficiaries by the trustees.
We recommend that you share your Memorandum of Wishes with the other trustees, keep it safe with your lawyer in their deeds store room, and review and update it on a regular basis where necessary.

What happens when there is no power of attorney in place for an incapacitated person?

Wed, 16 Oct 2013 09:57:45 GMT

Article reviewed and updated 26 June 2025

When a person loses mental capacity due to conditions like dementia, intellectual disability, or an accident and has not appointed anyone to have authority to act under an Enduring Power of Attorney for either Property or for Personal Care and Welfare (EPOAs), their affairs cannot be managed by family members. In such cases, an application must be made to the Family Court under the Protection of Personal and Property Rights Act 1988 (PPPR Act).

Legal Process

Who applies?

A family member or another interested party must apply to the Family Court to be appointed as a:

Welfare Guardian (for personal care and welfare decisions)
Property Manager (for financial and property matters)

Court Involvement:

The Court appoints a lawyer for the incapacitated person to represent their views. The process involves affidavits, medical assessments, and can be stressful and time-consuming.

Example Scenario

Mary has been diagnosed as having Alzheimer’s and has no EPOAs in place. She can no longer cope on her own at home and her house must be sold and she has been assessed as requiring rest home care:

Her daughter Sarah cannot legally make decisions regarding, or arrange for, her care or sell her house to fund the residential care.
Sarah must apply to the Court to be appointed as both welfare guardian and property manager

Responsibilities of Appointees

Welfare Guardians make decisions about:

Living arrangements
Daily care
Medical treatment

Property Managers handle:

Bank accounts
Bill payments
Asset sales (e.g., selling a house, if explicitly authorised)

Who Can Apply?

While immediate family are typical applicants, non-family members may also apply if they have a legitimate interest in the person’s welfare. The Court prioritises the best interests of the incapacitated person.

Next Steps

If you suspect a family member is losing capacity:

Obtain a medical assessment to confirm their ability to make decisions.
If they still have capacity, arrange for EPOAs to be put in place immediately.
If not, begin the PPPR Act application process with assistance from us – contact Carolyn Ranson by completing the form below or contact Carolyn Ranson at carolyn.ranson@smithpartners.co.nz

Understanding The Building Report Clause

Thu, 20 Jun 2013 06:37:14 GMT

The Auckland District Law Society “ADLS” produces the standard agreements that most, if not all real estate agents and lawyers use for the sale and purchase of residential property.

In 2012, the ADLS published a new (9 ^th ) edition with some significant changes such as the inclusion of a standard building report clause which the purchaser can choose to include by circling “Yes” at the appropriate place on the front page. This new clause affects both vendors and purchasers.

The clause states:

“9.3 If the purchaser has indicated on the front page of this agreement that a building report is required, this agreement is conditional upon the purchaser obtaining at the purchaser’s cost on or before the tenth working day after the date of this agreement a report on the condition of the buildings and any other improvements on the property that is satisfactory to the purchaser, on the basis of an objective assessment. The report must be prepared in good faith by a suitably-qualified building inspector in accordance with accepted principles and methods. Subject to the rights of any tenants of the property, the vendor shall allow the building inspector to inspect the property at all reasonable times upon reasonable notice for the purposes of preparation of the report. The building inspector may not carry out any invasive testing in the course of inspection without the vendor’s prior written consent. If the purchaser avoids this agreement for non-fulfilment of this condition pursuant to subclause 9.8(5), the purchaser must provide the vendor immediately upon request with a copy of the building inspector’s report.”

Prior to this clause being inserted in the standard ADLS agreement, you may have seen agents and lawyers drafting building report clauses into the further terms of the agreement. As they were specifically drafted, they were usually tailored to each situation.

Ability for vendor to rectify defects
Prior to this edition coming out, it was common to insert a clause where the purchaser had to notify the vendor of the defects and then the vendor had the opportunity to fix them first, before the purchaser was allowed to cancel the agreement. The clause included in the 9 ^th edition is different. There is no opportunity for the vendor to fix the defects. This new clause gives the purchaser the option of cancelling immediately if the purchaser finds the report unsatisfactory, even if the defects highlighted are minor.

Written report required

The clause may sound like it’s heavily weighted in favour of the purchaser, but there are some requirements placed on the purchaser if they wish to cancel using this clause. For example, the clause provides that the purchaser must obtain a written report. The reasoning behind this is if the purchaser wants to cancel, the vendor can request a copy of the report and see exactly what the problems are. This benefits the vendor for future agreements, so such problems can be advertised from the outset, or remedied.

Suitably qualified builder

The clause states that a suitably qualified builder must complete the report so you can’t just get your handyman mate to look through the property if they are not a qualified builder.

Ability to cancel – objective test

The clause also states that the purchaser must decide whether the report is unsatisfactory on an objective assessment – that is, would any reasonable purchaser, on reading that report, have found it unsatisfactory? The answer must be yes to cancel validly.

Of course if, as purchaser, you do find it unsatisfactory, you can still try to negotiate with the vendor to perhaps obtain a reduced purchase price, or request that the defects raised in the report are fixed. The vendor is not obliged, however, to enter into negotiations if they do not wish to.

Whether you are a vendor or a purchaser you will have to assess the clause from your perspective. If you are a vendor, are you happy for the purchaser to be able to cancel straight away OR do you want to be given the opportunity to rectify any defects first?

If you are a purchaser, are you happy to instruct and pay for a qualified builder to prepare a written report OR do you want your handyman mate to be able to have a look through for you.

If you want the latter in both cases, you will need to delete the standard building report clause at 9.3 and ask your lawyer to draft you a new clause the contemplates your specific needs for insertion into the further terms. It is best if you do this before you are making or accepting an offer. Remember in each case, the party on the other side (i.e. the vendor if you are a purchaser) will have to agree and accept any changes you make to the agreement.

Whether you are buying or selling, as with all contracts, it is best to get your lawyer to check and explain the agreement to you to ensure you understand what you are signing and that your interests are protected.

How do I remove a trustee of my family trust?

Wed, 12 Jun 2013 10:34:37 GMT

We often hear that people think that a trustee of a family trust can simply be removed from the trust if the other trustees vote and agree on the matter. This is not the case.

To complete the removal of a trustee, the process must not only be followed correctly, but steps must also be taken to ensure that the removed trustee is taken off the title of any property owned by the trust and that the removed trustee is released from all liability under the trust (for example if the trust has signed a guarantee in favour of a bank).

It is not widely appreciated, that all trust property is held in the names of the trustees (and NOT in the name of the trust). This means that a change of trustee requires a transfer of trust properties from the retiring trustee to the new trustee.How a trustee can be validly removed depends on the wording of the trust deed itself.

Power of appointment and removal of trustees

Standard discretionary family trust deeds often give the power of appointment and removal to the settlors – these are the people that originally set up the trust.

If a settlor wants to exercise that power, they can sign a deed (together with any other continuing trustees and any new trustee(s) if appointed). Once the deed is executed, that deed can then be used as the base document to effect the removal of that trustee from the title of any property owned by the trust. Other documents are also required to transfer property, including an authority and instruction form signed by all trustees – including the trustee who is being removed.

If a person who has the power of appointment and removal dies, that power can be transferred in their Will. So if you have the power of appointment and removal of a trustee, you should make sure your Will contemplates who you will transfer that power to. If you don’t specify, then this power automatically transfers to the executors of your Will.

The Court’s power of appointment and removal of trustees

If there is a dispute over the appointment or removal of a trustee, then it is necessary to make an application to the Court under the Trustee Act 1956 to resolve the dispute. Any Court application is going to be very time consuming, expensive and in the end, may not result in the outcome that the applicant wants.

Court considerations before removing trustees

It has been held (in the case of Wallace v Naknok ) that the Court has an inherent jurisdiction to remove trustees if the welfare of the beneficiaries and the welfare of the trust property requires the removal. This test has a very high threshold and if the threshold is not met, the trustee subject to the removal application may simply be allowed to remain as a trustee.

The exercise of the power of appointment and removal of trustees must be done for proper purposes. For example, a settlor cannot exercise the power of appointment in such a fashion as to advance the settlors’ financial interests over and above those of the other beneficiaries. On the other hand, solicitors or accountants are often professional or independent trustees and it is usual that a change in solicitor or accountant may result in change of trustee to the new solicitor or accountant.

Death of a Trustee

If a trustee dies when there is no power of appointment and removal, the assets of the trust automatically transmit by survivorship to the remaining trustees. If the death of the trustee causes the number of trustees to drop below the minimum required by the trust deed, a new trustee can be appointed if the trust deed provides a mechanism for appointing a new trustee in this situation. If there is no mechanism for appointing a new trustee in the deed, then an application must be made to the Court, in this case to appoint a new trustee.

We recommend that you review your existing trust documentation to ensure that the power of appointment and removal of trustees is properly provided for.

Council Disputes - What to do if a LIM is faulty

Wed, 17 Apr 2013 12:37:38 GMT

The details contained in a LIM (Land Information Memorandum) report often have a significant impact on whether or not you purchase a property. A LIM contains information about protected trees and buildings, building and resource management compliance issues, land use consents, subdivision consents, building permits/consents, land features such as flooding and storm water, environmental protection issues, soil contamination, land stability and other general information. All of these things affect what you are able to do with the property once purchased, and therefore impact on the value of the property.

But what happens if it turns out that the LIM was not entirely accurate? If the Council has omitted pertinent details from the LIM that affects the value of your property, then you may be able to sue the council which issued the LIM, and recover the value of your losses.

The issue was considered in a recent Supreme Court decision Altimarloch Joint Venture Limited v Marlborough District Council & Ors (Unreported ). The Supreme Court reaffirmed the decision of the Court of Appeal that a local Government Council can be held liable for negligent misstatements made in a LIM.

The Court concluded that while the Council could not be held liable for information provided over the counter, it could be held liable for information provided in a LIM.

In the Altimarloch case, the purchasers had relied on the LIM to ascertain whether the water rights attached to the land. The purchasers needed a certain amount of water to be able to erect a winery business on the property. The water rights disclosed on the LIM had previously been sold but the Council had not updated their records. The value of the land was detrimentally affected by the loss of these water rights.

In this particular case, the Council was not called upon to contribute to the losses suffered by the purchasers as the purchasers had been able to recover the losses from the vendors. However, the Supreme Court concluded that the Council could be liable from negligently issuing a LIM. Therefore if the plaintiffs’ losses had not been recoverable from the vendors, then the Council would have had to pay.

The Altimarloch case has created a huge interest among Councils which may lead to Councils making more effort to ensure that the correct information is provided in a LIM report.

Smith & Partners have acted successfully for several clients to bring cases against Council where there have been issues arising out of errors or misstatements in LIM reports.

To discuss your options in property disputes , please contact our property disputes team by phone on 09 836 0939 or email partners@smithpartners.co.nz

Would your trust survive a legal challenge?

Tue, 09 Apr 2013 10:37:19 GMT

Recent high profile legal cases (for example the case involving the Financial Markets Authority and Mark Hotchin) and the abolition of gift duty highlight the need for higher standards of trust management to ensure that the legitimacy of your trust will not be challenged. Further, the New Zealand Law Commission has commenced a full scale review of trust laws with a result that there may be radical changes.

The main purpose of a family trust is to protect your assets for future family use. In order to ensure that your assets with remain protected; you should regularly review your trust management.

When you take time to review your trust, you should ensure it achieves the necessary legal goals. Some of these goals are as follows.

Ownership

It is important to ensure that a trust relationship is formed and ownership of the trust assets (including control) have passed to the trustees. Is there a clear intention to create a trust and has effective control been passed to the trustees? From the documentation prepared, does it show that the trustees appointed have the power of dealing with the trust assets in the best interests of the beneficiaries?

The fiduciary relationship

A fiduciary relationship is at the heart of a trust whereby there must exist trustees who look after trust property for people (i.e the beneficiaries) other than the person who created the trust. All trustees must act selflessly and must act in the best interests of the beneficiaries of the trust. It is crucial that the decision making of the trustees must be for the benefit of those other people. In other words the trustees cannot simply act in their own best interests, or in the best interests of the settlor (the person who set up the trust). Proper administration of the trust is also vital, involving annual meetings to review the state of the trust and obviously recording any decisions that the trustees make.

Transfer of Property

In order to protect assets, those assets must be transferred to the trustees to hold on trust for the beneficiaries. It is important however that the transfer of such property has been completed, and has been done properly.

For example, has the family home been transferred to the trustees’ names and is there a gifting programme in place?

Distributions

Distributions are the passing of trust assets to the beneficiaries. To avoid challenge to your trust, the trustees need to be extremely careful when undertaking distributions to beneficiaries to ensure that they are made within the powers of the trustees and that a proper decision making process is followed. Although trustees are not required to give reasons for their decisions, the beneficiaries have the right to hold the trustees to account and to review relevant trust documentation.

Solvency at the time of gifting

Now that gift duty has been abolished, people can transfer property to your trust without undergoing the prolonged gifting program. Regardless of whether you are undertaking an annual gifting programme, or are making a “super gift”, all trustees need to ensure that the person or entity making the gift to the trust is considered to be legally solvent at the time. Being legally solvent means that the person making the gift should still be able to cover all their debts and liabilities at the time, even after making the gift.

Any gifts made within two years of a person being declared bankrupt will be declared void. In addition any gifts made within 5 years of a person being declared bankrupt will be open to scrutiny – and it must be proven that the bankrupt person was solvent at the time of making the gifts. The person making the gift must not being making the gift in order to defraud creditors.

It is a good idea for the person making the gift to sign a declaration of solvency at the time that they make each gift.

In light of the abolition of gift duty and the examination of trusts in respect of relationship property and creditor claims, trusts will come under increasing scrutiny to ensure that they are valid and being administered properly. It is therefore important to review your trust and ensure that it satisfies the above goals and that the trustees are educated to ensure that the trust is indeed managed as a trust for the benefit of the beneficiaries.

If you think your family trust could do with a review to check that it would stand up to a legal challenge, contact trust lawyer, Wade Hansen by phone on 09 836 6885 or email wade.hansen@smithpartners.co.nz

Gifting to Family Trusts or Family Members – The Dangers of Subsequent Bankruptcy

Wed, 11 Jul 2012 10:39:58 GMT

Family trusts can be an excellent way to protect your assets in the event of future bankruptcy or business liquidation. However the law prevents people from knowingly defrauding their creditors through the use of family trusts. To ensure that the assets you have gifted to a family trust are not reclaimed by creditors through court action.

Section 54 of the Insolvency Act 2006 provides that any gifts made within 2 years of bankruptcy are void. Further, any gift made within 5 years of a bankruptcy must be made in circumstances where the bankrupt was not insolvent at the time of making the gift.

Section 60 provides that if a person transfers property to another person (this includes a trust) with the intention of defrauding creditors, then that transfer of property is void.

Recent Case – The Official Assignee v T

A recent case – The Official Assignee v T discussed both Section 54 and Section 60 of the Insolvency Act 2006 and the Court of Appeal reached a robust decision in respect of the rules contained within those sections.

The brief facts of the case were that T setup a family trust and transferred her home to that trust. Over the years she entered into a gifting programme and gifted $27,000.00 a year to the trust by way of reduction of the debt incurred by the trust in purchasing the property off T. The issues were:

– Was T fraudulent in setting up the trust because she knew that she was in financial trouble at the time of establishing the trust and wanted to defraud her creditors (Section 60)?; and/or
– When did T become insolvent in terms of the look back rules set out in Section 54?

Initial High Court Ruling

The Judge in the first instance latched onto the belief that T knew that she was in a financially difficult position when she set up the trust and deliberately set up the trust to defraud her creditors. Further, the Judge found that during the 5 years prior to T’s adjudication of bankruptcy, that she was unable to pay her debts as they fell due (in other words she was insolvent) and that accordingly all of the gifting that she had done to her family trust was void. This meant that the trustees of the family trust had to pay to the official assignee the many thousands of dollars in the gifts that T had made to the trust over the years.

Final Court of Appeal Ruling

The Court of Appeal reversed the High Court ruling. The Court of Appeal found that T’s actions in setting up the trust and establishing a gifting programme were no more than the same actions of many hundreds of thousands of New Zealanders who have set up trusts. The Court of Appeal found that the High Court Judge was wrong in determining that T knew she was in financial strife at this time of setting up the trust. The Court of Appeal also reversed the Judge’s findings on the issue of when T became insolvent. They found that during the 5 year period prior to bankruptcy there were only circumstances of ill health and lack of organisation of T’s affairs that prevented payment of her debts as they fell due, and that she was, in fact, able to pay all of them.

Needless to say T’s trustees can now heave a sigh of relief in that they do not have to refund all of the money that was gifted by T to the trust during the gifting period save for a couple of small gifts that were made to the trust in the 2 years immediately preceeding the bankruptcy.

This case will also be a relief to many law practitioners and their clients, as it confirms the law as it is generally understood to be.

Lessons Learned

The lesson to be learnt however, is that with the abolition of gift duty on 1 October 2011 and the ability of persons to make so called ‘super gifts’ of large amounts of money or significant assets to their family trusts or other family members, that they first consider the position of creditors and the solvency test before making the gift. Prior to gifting they must be satisfied that they are:

not setting up the trust to defraud creditors; and
that after making the gift to the trust their personal assets will still exceed personal liabilities (i.e. assets held outside the trust exceed liabilities owed outside the trust) and that they are able to pay their debts as they fall due.

It is best practice that people establishing family trusts or gifting to family trusts should sign a declaration of solvency at the time that they make each gift.

When can a contracting out agreement be set aside?

Thu, 31 May 2012 10:02:54 GMT

Article updated June 2024

One of the key considerations for setting aside a contracting out agreement (“COA”) is whether that COA is, or has become, seriously unjust. When considering whether a serious injustice has occurred, the Court needs to carefully balance the rights of the parties to make their own choices about their property pool using a properly constructed COA, with the overall outcome of that COA on the parties at the end of their relationship.

The irony underpinning most COA’s is that people don’t ordinarily enter relationships with the intention of separating. The concept of determining your rights, sometimes before those rights have even crystalised, can be a challenging and emotional task. Having a properly prepared COA can hopefully avoid a drawn-out dispute about property upon separation, and potentially save you thousands of dollars in legal fees.

The Property (Relationships) Act 1976

The Property (Relationships) Act 1976 (“ Act ”) sets out how the property of a qualifying relationship is to be divided upon separation or death. However, not everyone wants their property to be classified and divided in accordance with the Act. While each relationship turns on its own facts, in some cases, depending on how the parties have structured their affairs, the resulting division under the Act can be unintended or seem unfair.

Helpfully, section 21 of the Act allows parties to make their own agreement at any stage of a relationship as to the status, ownership, and division of their property. This is called a COA and it is designed to reflect the parties’ actual intentions measured against their individual sense of fairness.

When can a COA be set aside?

The usual reasons for setting aside a COA are:

Where the compulsory formalities under the Act have not been met. To be enforceable, the COA must be in writing, signed, each party must have received independent legal advice before signing the COA, and each party’s signature must be witnessed by a lawyer who has certified that they have explained the effect and implications of the COA to their client;
Where there has been some form of duress, undue influence, unconscionable bargain, mistake, or misrepresentation that has occurred in the process of negotiating and executing the COA; and/or
Where giving effect to the COA would cause a serious injustice (i.e. if the COA is seriously unjust in itself, or if, due to the passing of time or a change in circumstances, the COA has become seriously unjust).

This article focuses on the third point above – serious injustice.

What does “serious injustice” mean?

We have seen a steady rise in the number of claimants looking to set aside a COA. This is sometimes because they think they will get a bigger share of the property pool under the Act rather than the COA and so will try their luck, or because they consider the COA is now incredibly unfair.

However, the Courts are frequently affirming the right to contract out of the Act as a fundamental cornerstone of section 21 and will not readily set aside correctly constructed COAs unless a proper case for doing so exists.

The mere fact that a COA results in an unequal division of property compared with what a claimant would have received under the Act is not enough. The Courts have recognised that the very purpose of a COA is to differ from the Act.

The threshold for establishing a serious injustice is high. In deciding whether giving effect to a COA would case a serious injustice, the Court must consider:

the provisions of the COA;
the length of time since it was made;
whether it was unfair or unreasonable in light of all the circumstances at the time it was made;
whether it has become unfair or unreasonable in light of any changes in circumstances since it was made (regardless if those changes were foreseeable or not to the parties);
the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the COA in the first place; and
any other matters that the Court considers relevant.

How to protect your interests under a COA

Instructing a lawyer who specialises in relationship property to prepare or advise on your COA is critical. The legal framework against which your COA must be prepared, and within which your rights need to be assessed can be complex. An experienced relationship property lawyer will be able to provide competent advice and drafting to ensure your assets are protected in the way that is carefully tailored to your individual circumstances, balanced against the risks of having the COA set aside in future.

If you already have a COA in place, then it’s equally important to regularly review and adjust your COA so that it reflects your individual circumstances and intentions as the course of your relationship and property pool changes over time. This will greatly reduce the possibility of one party seeking to overturn the COA due to serious injustice if the relationship ends, and reduce the likelihood of the COA actually being overturned by the Court.

Do you need to protect your assets? Would you like us to help you prepare or review a COA?

If you would like to become a client of Smith and Partners and get help with your contracting out agreement , please contact Relationship Property expert Natalie Miller on 09 837 6843 or email natalie.miller@smithpartners.co.nz to set up an appointment to discuss your contracting out agreement.

We will require a retainer to be paid prior to your first meeting, and we cannot assist with legal aid matters.

Please note that in accordance with our obligations under the Lawyers and Conveyancers Act 2006, we cannot provide legal advice unless you have become a client of Smith and Partners and have received our Terms & Conditions of Engagement and Info for Clients.

What is a "Flats Plan"?

Mon, 16 Apr 2012 06:51:46 GMT

A flats plan is a plan attached to the cross lease title which shows the outline of the buildings on the land, allocates the building a “flat” or “area” number (e.g. Flat 1 or Area 1), and identifies the “exclusive use” area related to that flat or area. The exclusive use area is for the use of that particular flat owner to the exclusion of all other flat owners and is marked with a letter. The flats plan also shows any “common area” which is an area shared by all or some of the owners of the fee simple land and is usually a driveway or accessway.

Who Can Contest A Will or Make An Estate Claim

Thu, 05 Apr 2012 13:00:21 GMT

The death of a family member or someone close to you is an emotional time. Feelings can be further exacerbated if you discover that your inheritance is not what you expected. New Zealand law lays out who must be provided for by a deceased estate, regardless of what is written in a will. Many wills are subject to claims because these people have not been properly provided for by the estate.

There are three types of claims that can be made on an estate.

Family Protection Claim

This is a claim that is made under the Family Protection Act 1955. The claim can be made by a spouse, de facto partner, child or grandchild of the deceased. Step-children can also be included if they were being financially supported by the deceased. Any person or persons in that class can claim that the deceased had a moral duty to provide for them adequately which they failed to do. This can be, for example, by leaving out a child altogether or not providing adequately for a partner.

A Family Protection claim can be made up to one year from the grant of Probate or Letters of Administration.

Testamentary Promises

This is a claim that is made under the Law Reform (Testamentary Promises) Act 1949. This claim can be made on an estate from any party. The claim is based on a promise the deceased person made to the claimant that they would provide for them in a will. It is an essential part of a testamentary promises claim that the claimant relied on that promise and performed services in respect of that promise. An example of a testamentary promise claim could be if a neighbour had been told if they looked after a person they would be left something. The neighbour would then have to provide the services such as house cleaning or checking up on the person in anticipation of being remembered in the will.

Services have to amount to more than services for natural love and affection before they can be considered. A Testamentary Promises claim can be made up to one year from the grant of Probate or Letters of Administration.

Property (Relationship) Act (1976) (PRA)

This is a claim that is made under the Property (Relationships) Act (1976). This claim is made by a spouse or de facto partner of the deceased. In cases where people have been in a de facto relationship for more than three years there is a presumption that property would be shared equally as though the parties had been married.

A party must elect to make a Property Relationships claim within six months of grant of Probate or Letters of Administration or, if Probate is not required, within six months of the date of death. The time limit can be extended by the Court if distribution of the estate has not been made.

Once an election has been made, i.e., to make a claim under the Property (Relationships) Act (1976), or to take under the will (meaning to take what was left in the will), it is irrevocable. If no election is made the claimant is deemed to have elected to take under the will. In the event that a claim under the Property (Relationships) Act (1976) is made, this must be dealt with before any distribution of the estate.

Time Limits

Although a Family Protection claim or Testamentary Promises claim can be made up to one year after Probate or Letters of Administration is granted, the executor or administrator can distribute the estate after six months from the date of grant if they are unaware of any claim. Prior to the six months, the executor or administrator will be personally liable for any distribution made. After six months, a claimant can follow the proceeds to the beneficiary but the executor or administrator is no longer personally liable.

A skilled estate litigator can ascertain if you have a viable claim and help you understand what would be involved in making a claim against the estate.

In accordance with our obligations under the Lawyers and Conveyancers Act 2006, we cannot provide legal advice unless you have become a client of Smith and Partners and have received our Terms & Conditions of Engagement and Info for Clients.

If you would like advice on any matters regarding challenging or contesting an estate, please contact Suzanne Sumner, Personal Assistant to estate litigation expert, Carolyn Ranson to find out how you can become a client of Smith and Partners and to set up an appointment to discuss your estate litigation matter with Carolyn.

Finance considerations when purchasing a residential property » Smith and Partners Lawyers

Tue, 13 Mar 2012 07:00:42 GMT

So, you have entered into an agreement to purchase a house – congratulations! You may have included a finance condition in the agreement or you may have already had finance pre-approved by your bank.

There are many things to think about when you are arranging your finance including:

Who is the purchaser going to be?

It could be a:
a) Family Trust;
b) Company; or
c) You personally

Who the purchasing entity will be will need to be taken into consideration by the bank when approving your finance.

Family Trust

Typically, if you have a family trust, and the family trust is going to own the property, the bank may be lending you the money personally, but as the trust holds the asset, the bank will require the trust to guarantee the loan and that guarantee will be supported by a mortgage over the property the trust is purchasing.

Company

If the property is going to be purchased by a company (including a Look Through Company (formerly an LAQC) there are generally two ways to structure the loan and security:

The bank loans the company the money to complete the purchase, in which case the bank may require the directors of that company to personally guarantee the loan.

The bank is loaning you the money personally, but as the company holds the asset the bank will require the company to guarantee the loan and that guarantee would be supported by a mortgage over the property the company is purchasing.

Also, if a company is going to be either the purchaser or provide the security, the bank could require what is called a General Security Agreement (“GSA”) over all or some of the assets of that company. A GSA is a security over personal property (not land) including motor vehicles, boats, plant and equipment, all present and after acquired personal property.

Personal names:

If the property is going to be purchased in your personal names, then typically the bank would lend the money to you personally and the bank’s security would be a mortgage over the property.

The above is a brief summary only and not exhaustive. There can be more structures that could be considered.

In summary things to consider when purchasing a residential property:

Who is the purchaser?
a) Family Trust;
b) Company; or
c) You personally

Depending on the purchaser entity the bank may require:

a) Loan agreement;
b) Loan agreement and guarantee;
c) Loan agreement and guarantee and General Security Agreement.

As each structure has different advantages and disadvantages from a legal, tax and asset protection perspective (not exhaustive) an experienced property lawyer can help you understand the implications of each structure before you decide who the purchasing entity will be.

Pitfalls of Residential Property Purchases – Essential clauses for your Agreement » Smith and Partners Lawyers

Wed, 02 Nov 2011 07:05:43 GMT

Buying a house is a momentous occasion, and after all those weeks (or months) of searching for the right place it’s important that you don’t spoil all that work by signing a standard sale & purchase agreement without ensuring you, the purchaser, are protected.

The best way to avoid a lot of problems when buying residential property is to take any agreement for sale and purchase to your lawyer before signing it.

Once you sign an agreement for sale and purchase, it is a legally binding contract and can be enforced in the Courts. You cannot get out of it simply because you have a change of mind. Even if you discover something wrong with the property the agreement will be binding – unless you have the right and correctly worded clauses written into the agreement prior to signing. This is why it is so important to talk to your lawyer first.

Sometimes you need to ‘make an offer’ and there may not be time for you to take the agreement to a solicitor before you sign it. In that circumstance, you can ask the real estate agent to insert a Purchaser’s Solicitor’s Approval Clause .

This clause should be drafted to allow your lawyer at least 2 working days to peruse the form and content of the agreement and determine whether or not they approve it. This gives your lawyer the opportunity to suggest additional clauses or amendments that help protect you as Purchaser. – The bottom line is that you can cancel the agreement if your lawyer does not approve it. Please note though, that your lawyer will not be able to give you any advice as to the purchase price and whether or not you are getting good value for your investment.

The following are clauses that I recommend always be included in every agreement for sale and purchase:

Finance Clause – This should be inserted even if you already have pre-approval from your Bank. Your lawyer should insist upon written confirmation of finance from your Bank before satisfying this condition.

If, for any reason, there is a delay with your purchase funds coming from your Bank which in turn delays settlement, you may be charged default interest by the Vendor. If you have written confirmation from the Bank and the delay is caused by an error on the Bank’s part, they are more likely to cover those default interest costs.

Builder’s Report Clause – It is important to ensure that this clause is comprehensive and sets out exactly what is to happen if the report identifies defects with the property. For example, once you raise the defects with the Vendor, they have a certain time period to decide whether they will rectify the defects (at their cost) or refuse. If they refuse then you can either cancel the agreement or you can choose to waive the condition and accept the property with the defects. While builder’s reports can be used to identify things such as broken door handles and clogged spouting, it is imperative that they be used to determine whether or not the property is structurally sound, weather-tight and free of moisture. These major issues have the potential to cost you thousands of dollars to rectify.

LIM Report – A LIM report contains information held by Council on the property. The main thing to look for in a LIM report is that the dwelling, garage, alterations, fireplace (installed after the house was built) and any spa or swimming pool have either a Code Compliance Certificate or a Certificate of Acceptance issued. If these are not present on the LIM report, and you have identified that a LIM Report is required in the box on the front page (making a LIM Report a condition of the agreement), you can ask the Vendor to rectify this at their cost. As with the Builder’s Report Clause, the Vendor can refuse, at which point you can either cancel the agreement or waive the condition and accept the property with knowledge of the defects.

If you choose to accept the property and the Council finds out, they could compel you, as owner, to obtain the appropriate certificate or remove the unauthorised or non-compliant works. Even if the Council doesn’t find out about the works, they could cause you problems when you on-sell the property by discouraging future purchasers.

A well drafted agreement for sale and purchase which includes the above clauses provides you as the Purchaser more protection. Without these clauses, even if you find problems with the property, the contract will still be binding and you may not be able to pass the costs of rectification on to the Vendor. Your lawyer can identify and reduce these and other possible areas of risk that arise when signing a legally binding agreement.

Communication with your lawyer is paramount and if that communication can start before the agreement is signed, the transaction will be smoother for all parties involved.

smithandpartnerslawyers

Content Creators: Copyright, Relationships and Risk

Copyright, Relationships and Risk: What the Supreme Court’s Decision Means for Creators

Copyright is valuable property - and it may be exposed

The risk to future income

Creative control and reputational risk

Why inaction is a risk

Protecting copyright through a relationship property agreement

A clear message from the Supreme Court

A Practical Legal Guide for Selling Your Business in New Zealand

1. Start With the Right Advisory Team

2. Preparing a Strong Agreement for Sale and Purchase

3. Employees: Managing Legal Obligations and Protecting the Business

4. Lease and Premises Considerations

5. Commercial Contracts and Supplier Agreements

6. Security Interests and the PPSR

7. Protecting and Assigning Intellectual Property

8. Restraint of Trade: Planning Your Future Activities

9. What Happens at Settlement?

10. How Much Does It Cost to Sell a Business?

Explaining Grants of Administration

Probate vs. Letters of Administration

Probate

Letters of Administration

Letters of Administration with Will Annexed

I think I need to obtain one of these grants. What should I do?

What is a contracting out agreement?

What happens if you don’t have one?

Why you should seriously consider one

When can you get a contracting out agreement?

The “prenup” New Zealanders don’t realise they need ﻿

Want to know more?

Do I need a lawyer to write my Will?

What is a Will?

Why a lawyer’s advice matters

Common DIY mistakes

FAQs

Common Mistakes in a Will that Delay Estate Administration

Even a small error in your Will can cause significant delays and unnecessary expenses once it reaches the High Court for Probate.

Frequent causes of delay

The takeaway

Are you accidentally in a de facto relationship and what are the consequences?

Why does it matter?

What is a de facto relationship?

How the court decides if a de facto relationship exists

De facto relationships of short duration

Polyamorous relationships

Protect yourself – get a contracting out agreement

How to activate enduring power of attorney NZ

When a loved one can no longer make decisions for themselves, it is important that the person they have appointed in their Enduring Powers of Attorney (“EPOAs”) can step in quickly to act on their behalf. Before this can happen, the document(s) must be formally activated.

Key Terms used in EPOAs

Activating a Personal Care and Welfare EPOA

Activating a Property EPOA

The Process: Step by step

PPPR Orders – What happens if there is no EPOA

Need help?

How long do you have to deal with relationship property post separation?

Understanding the time limits

What happens if you miss the deadline?

Don’t leave it too late

What are Enduring Powers of Attorney and do I need them?

What is an enduring power of attorney?

When should I have an Enduring Power of Attorney document prepared?

When does an Enduring Power of Attorney come into effect? When can they be used?

Why do I need an enduring power of attorney for property?

What if I don’t want the power of attorney to continue after I have lost capacity?

Why do I need an enduring power of attorney for personal care and welfare?

Opportunities and challenges as the Disputes Tribunal’s Jurisdiction Increased to $60,000

The jurisdiction of the Disputes Tribunal doubled from $30,000 to $60,000 on 24 January 2026, causing significant changes for collecting medium sized debts. This increase is intended to improve access to justice and reduce the need for costly District Court litigation for medium sized disputes.

What This Means for People and Businesses

Claims Filed Before 24 January 2026

How we can help

Incorporated Societies Act 2022: Updating Your Constitution for Reregistration

Why Updating Your Constitution is Essential

Key Constitutional Changes Required Under the Incorporated Societies Act 2022

Clear Purpose and Objectives

Membership Rules

Governance Structure

Financial Management and Reporting

Amendment of the Constitution

The “prenup” New Zealanders don’t realise they need