July, 2018 - Parry Field Lawyers

KiwiSaver is a superannuation scheme in New Zealand that is popular with many Kiwis not only for saving for retirement, but also for first home buyers saving for a deposit. But have you ever considered what happens if you pass away before you have withdrawn your KiwiSaver funds? What happens to the money in your KiwiSaver account when you die?

Where you have signed a Will, upon your death the full balance of your KiwiSaver will be paid to your estate. If the balance in your account is less than $15,000.00, it will be able to be paid automatically. If the balance is more than $15,000.00, however, probate (an order from the court allowing the distribution of your account funds) will need to be issued.

What happens if you don’t have a Will?

It is important to note that if you pass away without a Will (this is called “intestate”), the process will be more complicated and expensive. You should also be aware that without a Will, you cannot be assured that your assets will be distributed to those whom you intend. For more information on the importance of having a Will and what happens if you pass away intestate, see our article here.

Example:

Jane is in her early twenties and is saving up for a deposit for her first home. Jane currently has $16,000.00 in her KiwiSaver. She also has $12,000.00 in a savings account. She has never really considered signing a Will, and is planning to look into it once she has purchased her home and is all settled in. However, Jane is in a tragic car accident and is killed instantly. Because she passed away intestate, her assets were distributed in accordance with the Administration Act 1969. Several issues arose from Jane passing away without a Will that could have been avoided:

1. Jane had intended for her assets to be distributed to her niece upon her death. Because she had not expressly stated those wishes in a Will, her assets were instead distributed equally to her parents.

2. Secondly, because Jane’s assets exceeded the $15,000.00 threshold, her family had to apply to the court for probate. Because she had not signed a Will appointing an executor, her family also had to apply to the court for the appointment of an administrator – someone who is given authority by the court in the absence of a Will to deal with the estate. This was a costly process (both financially and time-wise) and caused a lot of stress for her family that could have been avoided if she had signed a Will.

How can we help you?

We would advise that you sign a Will if you are over 18 years old, even if you only have a few assets.

If you would like any assistance with drafting and signing a Will, reviewing your existing Will, or if you have any questions in relation the issues raised in this article, please feel free to get in touch. We have teams in our Riccarton, Rolleston and Hokitika offices that would be happy to assist you.

For more information, please feel free to contact Paul Owens – paulowens@parryfield.com or Luke Hayward – lukehayward@parryfield.com or give us a ring on 03 348 848

The purpose of the Credit Contracts and Consumer Finance Act 2003 (“CCCFA”) is to protect the interests of borrowers by placing obligations on creditors to be responsible lenders. It does this by providing general rules of credit contracts and by setting out disclosure requirements for consumer credit contracts. This article discusses these rules and requirements to help you understand your obligations as a lender, or your rights as a borrower.

Credit Contracts vs. Consumer Credit Contracts:

The CCCFA defines both general credit contracts and consumer credit contracts. A credit contract is defined in section 7 as a contract under which credit is or may be provided. On the other hand, a consumer credit contract is a loan taken out by a natural person who is going to use the funds for wholly or predominantly (more than 50% household or domestic use (this for example could be a mortgage for a house, but it does not include a loan for investment purposes). There must also be interest charges or credit fees and the creditor must carry on a business of providing credit or make practice of entering into credit contracts.
A consumer credit contract carries with it additional disclosure obligations that are imposed on the lender to ensure that the interests of the borrower are adequately protected.

A loan might fit under the class of a consumer credit contract, but it will definitely constitute a credit contract. It is generally presumed that where a party claims that a credit contract is a consumer credit contract, it will be just that. However, as set out in section 14 of the CCCFA, the borrower can make a declaration before entering into the contract stating that the credit is going to be used for business/investment purposes and that it is therefore not a consumer credit contract.

Responsibility of lenders:

The responsibilities of lenders are set out in section 9C of the CCCFA. These are not binding on the lender but it is strongly advised that they are complied with as they can be used as evidence to prove that the lender was a responsible one. Where applicable to the particular contract, the lender must at all times:

a. Exercise the care, diligence and skill of a responsible lender.

b. The lender must make reasonable inquiries in relation to the borrower before they enter into the agreement. In particular, they need to be satisfied that the credit provided will meet the borrower’s requirements, and that the borrower will not be subject to substantial hardship when they make payments under the agreement.

c. Assist the borrower in reaching an informed decision as to whether or not to enter into the agreement and to be reasonably aware of the full implications of entering into the agreement. This includes ensuring that any advertising is not likely to mislead and that the terms of the agreement are expressed to the borrower in a clear, concise and intelligible manner. The same goes for information provided after the contract is entered into, and any subsequent dealings, insurance contracts, and guarantees.

d. Treat the borrower and their property reasonably and in an ethical manner.

e. Ensure that the agreement is not oppressive.

f. Meet lender’s legal obligations under various other statutes including the Fair Trading Act 1986 and the Consumer Guarantees Act 1993.

The main thing is that lenders ensure that the credit contract is not harsh or oppressive, and that the borrowers are aware of any implications associated with the contract.

What should a credit contract (for example, a loan agreement) include to ensure compliance with the CCCFA?

What needs to be done in order to comply with the CCCFA largely depends on the nature of the particular credit contract. Ultimately though, the CCCFA is seeking to ensure that the borrower is properly protected and that the lender has been a responsible lender and has made sure that the borrower is fully informed as to the nature of the agreement and the implications of entering into it. Consumer credit contracts require an initial disclosure statement as well as continuing disclosure statements to be made at least every six months (where applicable).

Initial Disclosure Statements

A consumer credit contract needs to make key information available in a clear and concise manner to the borrower such as interest rates, default fees and the borrower’s right to relief or cancellation. It is essential that the implications of entering into a credit contract are made known to the customer.

Before a contract is entered into, the following information (in summary) must be disclosed to the consumer (where applicable to the contract), pursuant to schedule 1 of the CCCFA:

a. Full name and address of creditor;
b. Initial unpaid balance;
c. Subsequent advance;
d. Total advances;
e. Credit limit;
f. Annual interest rate;
g. Method of charging interest;
h. Total interest charges;
i. Interest free period;
j. Credit fees and charges;
k. Payments required;
l. Fully prepayment;
m. Security interest;
n. Disabling devices;
o. Default interest charges and default fees;
p. Debtor’s right to cancel;
q. Debtor’s right to apply for relief on grounds of unforeseen hardship;
r. Continuing disclosure statements;
s. Consent to electronic communications;
t. Dispute resolution and Registration under Financial Service Providers (Registration and Dispute Resolution) Act 2008.

This information needs to be disclosed in a way that is clear, concise and intelligible.

Continuing Disclosure Statements

Continuing disclosure statements must also be made pursuant to section 19 of the Act, insofar as they apply to the contract. These are summarised as follows:

a. The opening and closing dates of the period covered by the statement; and
b. The opening and closing unpaid balances; and
c. The date, amount, and a description of each advance during the statement period; and
d. The date and amount of each interest charge debited to the debtor’s account during the statement period; and
e. The date and amount paid by the debtor to the creditor, or credited to the debtor, during the statement period; and
f. The date, amount and a description of each fee or charge debited the debtor’s account during the statement period; and
g. The amount and the time for payment of the next payment that must be made by the debtor under the contract; and
h. The annual interest rate or rates during the statement period (expressed as a percentage or percentages); and
i. In the case of a credit card contract, a prescribed minimum repayment warning and other prescribed information in connection with payments under a credit card contract.

A continuing disclosure statement may not be required in certain situations, for example where interest charges or credit fees are not charged. The full list of exemptions is set out in section 21 of the CCCFA.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. If you have any questions arising out of the above, please feel free to get in touch. You can contact Kris Morrison – krismorrison@parryfield.com or Steven Moe – stevenmoe@parryfield.com or give us a ring on 03 348 8480

If you’ve ever wondered what the Personal Property Securities Register (“PPSR”) is, and what the benefits of registering security interests are, this article sets out the basics that you should know.

What is it?

The PPSR, which was established as a result of the Personal Properties Security Act 1999, is a New Zealand government website that registers information about security interests over personal property (other than land). This information can be recorded, altered and searched through the PPSR website.

Why do I need to know about it?

It is particularly important to be aware of the PPSR if you are giving a loan and want to be able to recover the debt if the debtor ever defaults. Utilising the PPSR and registering a security interest will give you a far better chance of recovering that debt.

You can also search the PPSR when you are purchasing a car to check if any security interests have been registered against, it to avoid any nasty surprises!

Example:

Jane, who owns Apple Construction Ltd., is selling a piece of equipment worth $5,000.00 with payment due in monthly instalments over a 2 year period. 6 months in to the 2 year period, the purchaser stops making payments altogether, and Jane wishes to recover the debts by repossessing the equipment.

Because Jane had not registered a financing statement on the PPSR, she is an unsecured creditor. This means that if there are secured creditors also seeking to recover debt, they will be given a higher priority over Jane. If Jane had registered a financing statement, she would be given a higher priority and would therefore be more likely to be able to recover the debt.

How do I register a security interest?

To register a security interest you will need to sign up as a user on the PPSR website – full instructions on registering an account are available on the website. You will then need to register the Secured Party Group.
Once you have registered as a user and have set up the Secured Party Group, you will be able to register a financing statement which records the security interest. To do this, you will need to supply: an expiry date, the debtor’s details, collateral details and the Secured Party Group details.

Your contract with the customer needs to have a clause allowing the security interest to be registered. We can help with that and provide other input on contracts to keep you safe.

For further information:

If you have any questions in relation to PPSR, registering or searching for security interests, please feel free to get in touch with Steven Moe at stevenmoe@parryfield.com or on 03 348 8480. We have teams in Riccarton, Rolleston and Hokitika who would be happy to assist you.

Thankyou is a social enterprise that recently launched in New Zealand. Jason Pemberton wrote an analysis of what they are doing here https://www.youthink.co.nz/thoughts/thankyou in response Steven Moe set out the following thoughts:

“You make a lot of great points. It is vital we rigorously think and thank you for promoting that!! It was great to catch up with you in person last week and debate this and other topics! I’ve just been reflecting and my own response that I hope adds value is to disagree a little by throwing in a sports analogy.

Traditional business is soccer and social enterprise is rugby. Soccer has certain rules that apply to it. To say that Richie McCaw would tackle better than the players on the field at the Soccer World Cup right now is accurate but would break the rules of that game and what is possible (…for now). What Thankyou New Zealand are trying to do I think is to start to bend/change the rules of the existing game by playing within it and introducing new ways (new rules) of playing imported from another source (where values exist in the game such as purpose trumping profit, SDGs are more than an unknown acronym, consumers think twice about their choice, there is real measurable impact through the nature of entities and who they employ, what they produce, rather than only how they use their profits). Thankyou are at the coal face of attempting to do this and it is really hard work – any new start-up is! Over time I would suspect Thankyou will evolve as more new rules are capable of being introduced into the game. So, I think they should be encouraged for what they are doing within the rules of the existing game because they are on the same team, attempting to do good.

My feeling is that if you were to pick any social enterprise business – anyone! – there will be flaws that are noticeable once you dig (relying too much on volunteers, sourcing of product, type of product, packaging, how profits used, lack of partnership, too much reliance on partnership to deliver on promises etc). This is still the early, early days (chapter 1, if you will) of social enterprise in New Zealand. We have the chance to help shape and mold and become world leading. So anyone who is pushing the boundaries and expanding the traditional rules of the game and raising the profile and promoting a new way of doing business – trying to be someone even I have heard of who am not a soccer fan – a Pele, Maradona, Ronaldo – and transcend the traditional rules – needs as much support as possible.

Maybe the environment isn’t the key goal right now and it is raising social awareness of other issues. We live in a consumer driven world and that will not change quickly but in encouraging a conscious choice about what they buy it may help people on the journey of moving along the spectrum towards a future where we have even dropped the term social enterprise because the outliers become the businesses who aren’t environmentally responsible, don’t treat their employees well, extract profits to bolster the bank accounts of the already wealthy etc. It is a journey to get there and have such a new conception so I applaud anyone willing to stand up and play the game a different way as it helps challenge the nature of the game itself.

Disclaimer: I interviewed Daniel Flynn for the ‘Seeds’ podcast have been doing so his story is one of the 48 in the last 9 months talking to social enterprises about their stories and trying to spread the word about people working to ‘change the rules of the game’. I was honestly impressed with the genuineness at the heart of the actions taken. At a personal level for him this was not a corporate marketing campaign he really is trying to introduce change to the system. As you note, it’s not a perfect model. But as you also note there are many positives not least of which is the inspiration to others (pebble in the pond + ripples) to maybe think a little differently about the ‘rules of the game’. Time to unleash Richie McCaw and change the game!?”

We have a team at Parry Field who work in the Social Enterprise/Start-up sector who would be more than happy to assist or answer any queries that you might have. We also have a book that might be of interest – more information on this can be found here.

Contacts:

Steven Moe – stevenmoe@parryfield.com

Kris Morrison – krismorrison@parryfield.com

Can it be fair for everyone?

Making sure everyone you care about gets a fair share of your property after you die is an issue most of us grapple with. This may also have additional complications when you have a blended family. It’s not always as easy as just writing your Will and specifying who gets what. There are several statutes that give family members and/or your new partner’s family, a right to contest your Will. The two main statutes are the Family Protection Act 1955 (FPA) and the Property (Relationships) Act 1976 (PRA).

Leaving it all to your partner?

A common way of structuring your affairs is to leave everything to your partner or spouse, knowing they will provide for your children as well as their own in their Will. These are often called ‘mirror Wills’. Unfortunately, this structure doesn’t always satisfy all the children involved, as we have seen in several recent court cases. You also run the risk of your partner or spouse changing their Will at a later date after you have died.

• Claims from the children: The FPA allows family members to make a claim against your estate if they believe they have not been properly provided for. This can happen even if your spouse has a ‘mirror Will’ which will leave the whole estate to your children as well as their own when they die. An example of this blended family situation is the Chambers case, which has recently received media attention. Lady Deborah Chambers QC was left everything by her husband, Sir Robert Chambers, on the understanding that when she died, her estate would be split into four parts, going equally to Sir Robert’s two sons and to Lady Deborah’s two daughters. One of Sir Robert’s sons successfully brought a claim against his father’s estate under the FPA, despite having his own lucrative income and not being in any financial need.

• Your spouse could change their Will: If your partner or spouse outlives you by some time, there is the possibility that they may change their Will as their circumstances change. They may remarry, have a new relationship, or more children may be brought into the family. This could mean that the portion of your estate that you envisioned being left to your biological children is now eroded by your partner leaving more to new partners or children than you had never anticipated.

Leaving it all to your children?

In light of these two options, it may be tempting to consider leaving your estate entirely to your children. Unfortunately, doing this can bring similar problems. Your partner could bring the same claim that your children could under the FPA or they could make an application under the PRA.

Property (Relationships) Act 1976

The PRA allows your partner to make an application to have your estate divided as relationship property, rather than in accordance with your Will. Under current law, you have a duty to provide for the partner you leave behind. If an application is made under the PRA, any relationship property is divided accordingly and the balance of the estate is distributed according to your wishes. Again, this may leave your loved ones with a different portion than you envisaged. You also need to know that jointly-owned property is automatically transferred to the survivor and does not form part of your estate.

Possible solutions

To find a solution that works best for your family and fits your wishes, do discuss this with us as one size definitely doesn’t fit all. Some options are:

• Contracting out agreements: you come to an agreement with your partner which overrides the PRA;

• Setting up trusts in your Will or before you die: if established correctly, trusts can be effective in defeating claims through the FPA and the PRA; and

• Life interest Wills: leaving your spouse an interest in your property during their lifetime, but that interest will expire on their death and the property will be distributed to your children. The above points merely brush over some issues in what is an incredibly murky and complex area of law. If you are in a blended family situation, let’s discuss the options in order to structure your affairs in a way that works best for you and your family.

How can we help?

We have dedicated teams based in our Riccarton, Hokitika and Rolleston offices who give advice on a variety of different asset protection, succession planning, family and relationship property matters. If you have any questions arising out of the issues raised in this article, please feel free to contact Nicole Murphy – nicolemurphy@parryfield.com or give us a call on (03) 348 8480.

What happens if you don’t have a Will?

Example:

How can we help you?

Credit Contracts vs. Consumer Credit Contracts:

Responsibility of lenders:

Initial Disclosure Statements

Continuing Disclosure Statements

What is it?

Why do I need to know about it?

Example:

How do I register a security interest?

Can it be fair for everyone?

Leaving it all to your partner?

Leaving it all to your children?

Property (Relationships) Act 1976

Possible solutions

How can we help?

Christchurch CBD

Christchurch

Rolleston

Hokitika