Charitable trusts have a long history of supporting those in need. Yet those in charge of decisions about how to use funds should be cautious to ensure that any giving does not create a private gain or financial benefit to an individual. Failure to give in accordance with the permitted charitable purposes can mean a charity may lose its registered status.

To illustrate this it is good to look at a practical example. In 2014, the Charities Registration Board determined that the New Zealand Affordable Art Trust no longer qualified for registration as a charitable entity. The Board found that the Trust’s primary purpose was to promote the private interests of artists. This was outside the scope of charity as it conferred private benefits on artists which were more than incidental to any charitable purpose.

The Trust submitted that its support of artists fell under the ‘relief of poverty’ charitable purpose. This argument was rejected as the Trust chose to assist artists based on criteria such as originality, technique and development, rather than the relative wealth or poverty of the artist. The Board did acknowledge that the Trust helped to advance education in the arts for the general public, however this was not the main focus of the Trust.

A similar approach has been found in the courts. In Commissioners of Inland Revenue v White, Fox J held:

The promotion or advancement of industry (including a particular industry such as agriculture) or of commerce is a charitable object provided that the purpose is the advancement of the benefit of the public at large and not merely the promotion of the interest of those engaged in the manufacture and sale of their particular products. The charitable nature of the object of promoting a particular industry depends upon the existence of a benefit to the public from the promotion of the object.

At the risk of providing too much detail, Lord Simonds, when considering the question of whether an element of public benefit is necessary to achieve charitable status in Oppenheim v Tobacco Securities Trust Co Ltd said:

My Lords, once more your Lordships have to consider the difficult subject of charitable trusts … It is a clearly established principle of the law of charity that a trust is not charitable unless it is directed to the public benefit. This is sometimes stated in the proposition that it must benefit the community or a section of the community. Negatively it is said that a trust is not charitable if it confers only private benefits. In the recent case of Gilmour v Coats [1949] AC 448 this principle was reasserted. It is easy to state and has been stated in a variety of ways, the earliest statement that I can find being in Jones v Williams (1767) 2 Amb 651, in which Lord Hardwicke, LC, is briefly reported as follows: ‘Definition of charity: a gift to a general public use, which extends to the poor as well as to the rich …’With a single exception, to which I shall refer, this applies to all charities. We are apt now to classify them by reference to Lord MacNaughten’s division in Income Tax Commissioners v Pemsel [1891] AC 531, and, as I have elsewhere pointed out, it was at one time suggested that the element of public benefit was not essential except for charities falling within the fourth class, ‘other purposes beneficial to the community’. This is certainly wrong except in the anomalous case of trusts for the relief of poverty with which I must specifically deal. In the case of trusts for educational purposes the condition of public benefit must be satisfied. The difficulty lies in determining what is sufficient to satisfy the test, and there is little to help your Lordships to solve it.

What does this mean for charities?

Charitable trusts should ensure that any benefit they bestow are intended to create a benefit for the public. While a private benefit incidental to a charitable public benefit may be allowed, this should not be the primary focus if a trust wishes to maintain its charitable status.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We would be happy to assist you in your journey. Please feel free to contact Steven Moe at stevenmoe@parryfield.com should you require assistance.

If a former Prime Minister of New Zealand is involved in a case then you know it is going to attract interest.  Dame Jenny Shipley was the Chair of the Board of Mainzeal and it was found that the directors had breached their duties – what happened, and most important, what can we learn from this?

As a director of a company you must act honestly, in the best interests of the company, and with reasonable care at all times. You must not act or agree to the company acting in a manner that is likely to breach the Companies Act 1993, other legislation or your company’s constitution.  The outcome of the Mainzeal case comes as a timely reminder to company directors of their duties and obligations.

Founded in 1968, Mainzeal was one of the leading construction companies in New Zealand, responsible for projects such as the ASB Sports Centre in Wellington and Spark Arena in Auckland, just to name a few. However, the construction industry was sent into shock when Mainzeal collapsed and was placed into liquidation in February 2013. Unbeknown to many, Mainzeal had been struggling financially for a number of years. So much so, that Mainzeal’s liquidators brought proceedings against the former Mainzeal directors, claiming they had breached their duties under section 135 of the Companies Act 1993.

What Happened?

The details are summarised at the start of the case: “In 1995, an investment consortium with a focus on investments in China acquired a majority shareholding in Mainzeal’s then holding company. This investment consortium was associated with the first defendant, Mr Richard Yan.  The company group came to be known as the Richina Pacific group.  In 2004, the group established a new independent board for Mainzeal with the third defendant, Rt Hon Dame Jennifer Shipley, as Chairperson.  It operated for nearly 10 years under this board until the company collapsed in February 2013.  Its collapse left a deficiency on liquidation to unsecured creditors of approximately $110 million.  The unpaid creditors were sub-contractors ($45.4 million), construction contract claimants ($43.8 million), employees not covered by statutory preferences ($12 million), and other general creditors ($9.5 million).  Mainzeal’s secured creditor, BNZ, was fully paid out.”

Were the directors reckless?

The crux of the claim came under section 135 of the Companies Act . This section specifies that a director of a company must not—

  • agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or
  • cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

Ultimately, the court had to consider if Mainzeal’s directors had been reckless in continuing to trade while Mainzeal’s balance sheet was in deficit, thus placing the company’s creditors at a substantial risk of serious loss?

Mainzeal had been trading as insolvent from as early as 2005, when Richina Pacific group extracted considerable funds from Mainzeal by the way of loans for investment in China. However, Mainzeal continued to operate as a going concern, as Richina Pacific provided letters of support for when Mainzeal’s accounts were audited. The directors were also given assurances by email and in meetings that support would be provided by the parent group if it was needed.  These representations  of financial support  were relied on by the directors – but they should have done more.  It is important to note that the promise to provide financial support when necessary was never formalised or legally binding (eg loan agreements or guarantees).

The ability for Richina Pacific to provide financial assistance when needed was also limited due to stringent foreign exchange controls exercised by the Chinese governmental authorities. Therefore, this made it extremely difficult to take money back out in China, once it had been taken from Mainzeal.

Mainzeal continued to trade, largely relying on funds that were owed to sub-contractors.  It must have been a difficult balancing act to work out how long to continue trading in those difficult circumstances.   Ultimately,  Mainzeal was unable to pay its debts and was placed into liquidation on 28 February 2013.

Looking at the case there are some fascinating exchanges by email between the Directors and representatives of the parent company.  For example, Dame Jenny Shipley wrote:

“While I note your desire to run a central treasury function for the NZ interests it is unreasonable to ask Mainzeal Directors to approve the associated related party transfers without the clear understanding if we are liable for these decisions and the associated obligation or of other persons or Directors are legally responsible. We are not informed as to the purpose of these transfers and would not need to be so if we had a clear indication from those responsible for the group that the request had been approved…”

So the directors were asking some questions – which is always good.  But they relied too much on answers like this one that came in reply to these comments above:

“Again, there are no independence issues here as it is ultimately the shareholders who are on the hook for everything. Mainzeal is no in way compromised and Richina has always supported it to the full extent even during its more dire situations…”

Another experienced director, Sir Paul Collins, wrote: “I would have to say I’m at my wits end.  I joined the board under the impression Mainzeal was solvent … I accepted all your representations re support and more recently redomiciling in NZ later this year and taking out the BNZ. As you will well appreciate I have dealt with a lot of bad news stories over the years and have found that matters can be worked through when you have all the cards on the table. I don’t have that confidence here. …”

What should the directors have been doing?  Asking questions – like they did.  What they failed to do was getting the answers documented in binding legal agreements.

The court found that the directors had breached their duties under section 135:

Whilst all the factors I address below are relevant, there are three key considerations that cumulatively lead me to conclude the duties in s 135 were breached:

  • Mainzeal was trading while balance sheet insolvent because the intercompany debt was not in reality recoverable.

(b) There was no assurance of group support on which the directors could reasonably rely if adverse circumstances arose.

  • Mainzeal’s financial trading performance was generally poor and prone to significant one-off loses, which meant it had to rely on a strong capital base or equivalent backing to avoid collapse.”

It was held that those were the three key elements in establishing that there had been a breach by the directors.  The Court then went on to confirm:

“The policy of trading while insolvent is the source of the directors’ breach of duties, however, such a policy would not have been fatal if Mainzeal had either a strong financial trading position or reliable group support. It had neither.”

As the directors had been found in breach of section 135, the court awarded $36 million in damages.  A large sum of money for anyone.  The Court found that three directors, Dame Jenny Shipley, Mr Peter Gomm and Mr Clive Tilby had acted honestly and in good faith, therefore each were held liable for up to $6 million jointly with Mr Yan.

This did not go unchallenged. The court left the door open for the parties, if they believed there had been a miscalculation in the amount of damages awarded. Both the liquidators and former directors believed there had been, however both parties had their cases dismissed. An appeal and cross-appeal were filed by the liquidators and former directors.

In 2021 the Court of Appeal found that the directors had breached s 135 of the Act, which exposed the company’s creditors to a substantial risk of serious loss. However, that loss did not materialise and the court therefore no compensation should be payable by the directors.

The court also found the directors had breached s 136 of the Act when they entered into four significant construction contracts. The matter was remitted to the High Court to determine the compensation payable. The former directors are seeking to overturn the decision and the matter is currently before the Supreme Court.

What can we learn: What should the directors have done?

There were a number of red flags for the directors throughout the years. With the benefit of hindsight, there are some important lessons that can be taken from this case:

  • It’s really simple, but ask questions. Understand the answers and document them well.  If someone says there is support, get it in writing.
  • If you are questioning the information you are receiving from others or it makes you feel uncomfortable, seek independent advice from a professional.
  • When relying on assurances from others, ensure these are in writing and legally binding.
  • Understand your duties as director. Ensure it is clear to whom your legal duties lie with. This is particularly important if your company is part of group of companies.
  • If you are facing financial difficulty, continue to review the situation and be extra-vigilant.
  • If you have been provided of assurances of financial support, ensure such assurances are clear – ask questions.

Examples of questions could include: How much financial support is available? Are the finances readily available and if not, how long will it take? What are the barriers that need to be overcome?  How can we ensure we can legally rely on these assurances?

A recent United Kingdom case of interest

The Supreme Court of the United Kingdom ruled for the first time in October 2022 on what triggers the directors’ duty to have regard for creditors’ interests ahead of shareholders interests (that is the company). The case is BTI 2014 LLC v Sequana SA and others.

 Conclusion

The final outcome of Mainzeal is outstanding. However, what can be taken away from this case is the importance of the obligations and duties directors have to a company and creditors.   The case really emphasised the care that is required, especially if a company is in financial difficulty.  It also highlighted, if ever in doubt, seek independent advice, as it is better to be safe than sorry.  Also, ask questions and document the answers so there is a clear trail.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation.

Please feel free to contact Steven Moe at stevenmoe@parryfield.com or Kris Morrison at krismorrison@parryfield.com should you require assistance.

Some of the hardest hit by the current Covid-19 crisis are small and medium sized businesses.  The Government has confirmed that they can now apply to their bank for a loan under the Business Finance Guarantee Scheme (the Scheme), set up by the Government in an effort to protect jobs and support the economy during the Covid-19 pandemic.

The Scheme works alongside the Wage Subsidy Scheme which is already available to businesses. The Scheme’s purpose is to help businesses with cash flow and operating expenses in the aftermath of the Covid-19 pandemic.

Not all businesses are eligible for the scheme, however if you are a business with an annual revenue of between $250,000.00 and $80 million you can apply to your bank for a loan of up to $500,000.00 for up to three years. The bank will determine your eligibility and determine the amount available to borrow. Applications under the Scheme are now open and are available until 30 September 2020, or until all available funds, being $6.25 billion, have been exhausted.

Applications under the Scheme can be made through your bank’s website and a standard lending process will be followed through the bank’s credit assessment process to determine eligibility. In addition, banks will take into consideration your circumstances due to the Covid-19 pandemic. The interest rate and other terms of the loan will be determined by the bank under their normal lending criteria.  Of course a basic question needs to be asked – does your business need more debt or can it survive without taking that on?

This is important to think through because all this really means is that the process is similar to getting a normal loan from the bank – the difference being the Government has agreed to guarantee 80% of the risk in relation to each loan with the remaining 20% to be guaranteed by the bank. If a business defaults on their loan under the Scheme, banks will follow normal enforcement procedures and it is likely that as a part of the loan process and terms the bank will have obtained personal guarantees (usually from company directors) or other security (for example a General Security Agreement over the assets of the Company) that they can enforce before relying on the Government guarantee of the loan. The guarantee provided by the Government is essentially a protection for banks who might not otherwise provide loans to companies and not as a protection for the businesses who are the ones that actually take out the loans.

For more information regarding this scheme you can refer to your bank’s website. Participating banks are ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac.  If you’d like to talk through your current position and options then you can always contact us.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. We would be happy to assist you in your journey. Please feel free to contact Luke Hayward at lukehayward@parryfield.com or Emma Piercey (nee Garlick) at emmapiercey@parryfield.com.

A few weeks ago not many of us had even used Zoom video conferencing – today it has become a daily way of checking in with colleagues or clients, or holding large scale meetings, even virtual Friday drinks.  In fact it has gone from 10 million users in a day to 200 million.  But from a legal perspective is there anything we should be aware of and what is the best practise when it comes to keeping our communications secure?

Here we are going to talk about some of the recent incidents and explain some of the features of Zoom that might help.  We also want to consider the recording function on Zoom – does that mean you can just record anything?  We will finish off with some other things we have noticed when using Zoom – including privacy considerations.

Recent incidents involving Zoombombing

Zoombombing is where someone uninvited joins a call and disrupts the meeting.  With a lot more use there are a lot more things being reported.  In Singapore some online classes were Zoombombed recently.  In the US a small community – where everyone pretty much knows each other – held an event due to the lockdown, and had people join it and share inappropriate images.  When the people were kicked out of the meeting they came back in posing with names of legitimate people from the community, and continued posting so the meetings had to shut down.

It seems likely that this will increase in future – and if you have a larger meeting then it is more likely the invite has been forwarded on to others who might take advantage of the platform provided by your meeting.

So what are some strategies to keep communication safe?

There are a few things you could try doing – some within the app itself and others are just common sense.  These include:

  • Set a password – while this adds an extra administrative task for those joining the call, it is also an extra level of protection as you can require people to enter a password.
  • Have a waiting room – if you do this then you can see who wants to join the call, and it allows an extra way to vet people before they join. Particularly if there is some reason to worry someone might come uninvited it is worth considering.
  • Keep your ID secret – When sending out information just send the unique meeting ID without also including your personal meeting ID, that will help to stop people trying to log into another room of yours at other times.
  • Other tools – it is possible to mute everyone, disable screen sharing by others apart from the host, or lock out some people – have a play around with the settings.
  • Use another platform? Remember when Skype was first introduced?  It was the original Zoom and still is there, providing another way to hold video calls with people.  Other ways we see being used include Whatsapp and Facebook Messenger.  While we haven’t used these we know that Google Hangouts and Microsoft Teams are also good.  If you are worried and the calls are with one other person mainly then those might be options to consider. Of course, similar privacy and security considerations will apply no matter which platform is chosen.

It is important to implement such strategies, especially if you are discussing the personal information of others. In the current situation, many workplaces are trying to maintain the approach of business as usual as much as possible through the use of Zoom. Therefore, you need to be mindful when discussing personal information of clients or customers, even if this occurs in an internal meeting, that you adhere to Privacy Principle 5 in the Privacy Act 2020. This principle is designed to protect personal information from unauthorised use or disclosure.

Generally the zoombombing happens when there is a widely shared link for the public to attend and learn more about a topic – those are easy prey.  If you are having a small meeting or are confident that the links are going to a limited number of people then this is less likely to be an issue.

What about recording?

Just because you can record doesn’t mean you should if you don’t have consent.  Obtain that at the start of each call if you are going to record.  In New Zealand, the Privacy Commissioner has put out this briefing on “can I record someone without telling them” here.   The basic principle is simple: get consent.

Privacy principle 3 in the Privacy Act 2020 is the most relevant and provides, among other things: “If an agency collects personal information directly from the individual concerned, the agency shall take such steps (if any) as are, in the circumstances, reasonable to ensure that the individual concerned is aware of …the fact that the information is being collected; and the purpose for which the information is being collected; and the intended recipients of the information …”

The Zoom privacy policy notes this about recording: “Your meetings are yours. We do not monitor them or even store them after your meeting is done unless we are requested to record and store them by the meeting host. We alert participants via both audio and video when they join meetings if the host is recording a meeting, and participants have the option to leave the meeting.” 

The key principle here is simple: Let people know that you are recording and get their consent.

Privacy & Security

While the technical side can be confusing, Zoom provide guidance on how they encrypt things here.   It is also worth taking a look at their privacy policy here.   It’s always fascinating to get past the corporate language to read the actual wording – the nuts and bolts – of how they operate.  Some of the key things are:

  • They don’t sell personal data and only collect user data needed to provide the services;
  • They do not monitor meetings but do allow users to record them; and
  • They have a separate policy that applies to children and younger users;

It’s interesting to read in some of the detail of what features there are – for example there is an attention tracker: “This feature … places a small clock icon next to a participant’s name to indicate only to the host when Zoom is not the active window on the participant’s computer for more than 30 seconds, when the host is sharing their screen.”

The CEO of Zoom published this post recently and committed to openness and transparency and they do seem to have taken a number of steps.  Part of that said: “Transparency has always been a core part of our culture. I am committed to being open and honest with you about areas where we are strengthening our platform and areas where users can take steps of their own to best use and protect themselves on the platform.”

Virtual Backgrounds

When we think about privacy one other way is to make use of the virtual background feature of Zoom – that stops people seeing your private space. Remember if things get recorded then screen shots and recordings can stick around for a long time.  Virtual backgrounds help.  You can choose images provided by Zoom or create custom ones.  It can be a useful tool to know how to use.

How to change Zoom background on your desktop app:

  1. In the Zoom app, click your profile in the top right corner, and click icon (settings).
  2. A menu will appear to the left, click ‘Virtual Background’.
  3. Default background options provided by Zoom will appear. You can choose one of those by clicking on it (ensure ‘I have Green Screen’ is unticked).
  4. Alternatively, you can upload your own photo. Click the + icon next to where it says ‘Choose Virtual Background’. A box will appear allowing you to upload a photo from your computer. Click on the one you want, and it will appear alongside the other pictures as an option for you to choose from.

How to change Zoom background on your mobile app:

  1. You need to be in the meeting to change your background.
  2. Click on ‘More’ in the bottom right hand corner, then click on ‘Virtual Background’.
  3. Default options are provided, or you have the option of uploading your own picture from your Camera Roll.

The ability to change backgrounds in Zoom has seen many get creative in order to lighten the mood in these uncertain times. Whether you want to hide the mess that lurks behind you, or you would just like to pretend for the next while you are on that tropical vacation that you never got the chance to take.  You might even want to be in a scene of your favourite TV show!  The options are truly endless. Why not bring a bit of excitement to meetings, and keep your colleagues guessing by changing up your Zoom background every time?

Conclusion

This crisis has introduced many new things and accelerated the adoption and use of certain technology like Zoom.  While that move is likely to be permanent and in person meetings may reduce – why travel from Christchurch to Auckland for a meeting if it can be done simply from home?  It does pay to be aware of the different features that make holding your meetings more secure and also ensure you do not fall on the wrong side of the law when it comes to recording them.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact Steven Moe at stevenmoe@parryfield.com or Kris Morrison at krismorrison@parryfield.com should you require assistance.

The role of the Notary Public in New Zealand could not be better described than as follows:

A notary public (sometimes called a notary or a public notary) in New Zealand is a lawyer authorised by the Archbishop of Canterbury in England to officially witness signatures on legal documents, collect sworn statements, administer oaths and certify the authenticity of legal documents usually for use overseas.

The primary task of a Notary Public in New Zealand is therefore to “officially witness signatures on legal documents … ”. Best practice has in the past demanded a physical appearance by the person before a Notary Public witnessing the signing of a legal document. The appearer (“applicant”) must also identify themselves to the Notary, providing evidence by documents and circumstances sufficient to satisfy the Notary that the applicant is who she/he claims to be. Such evidence has been demanded by notaries since 2750 BC. ii How, though, is this service performed in crises such as we are now experiencing, during which personal contact is not possible? Before examining some newly minted suggestions about possible methods to allow continuance of notary work from the Notary Society, a few general observations may be of interest regarding witnessing and identification.

Witnessing Signatures : Identification: The Problem of Fraud

To officially witness signatures and identify people who appear before you may at first sight appear to be a simple task. However things are not always simple. The person appearing before a Notary may not be who they appear to be, even in New Zealand.

They called him “The Doctor”. Based in Bangkok, for years hunted the man “revered among Bangkok’s criminal underworld for producing the most sophisticated forged travel documents on the market for just $2,000-$3,000.” Hidden in a secret compartment were 173 passports from France, Israel, New Zealand, Iran and Syria, and a cache of electronic chips, moulds for visa stamps, ribbons, inks and specialist printing equipment.

Therefore the Notary will take care to identify the person appearing before her or him, by asking for several forms of identification, and scrutinising documents in great detail, even to the point of using a magnifying glass or UV light. One flaw to look for is a slight shadow at the edge of the photograph, which may not be ascertainable on a valid passport.

In Australia documents establishing identity for notarial purposes have been attributed points, with Passports, Citizenship Certificates, and Firearm Licences at the higher end 70 points, Rates Notices and Utility Accounts at 20 points, and Motoring Association Cards and Taxation Assessment Notices at 10 points.

Covid-19 Crisis and Notarial Service

Given the mandatory isolation requirements and restrictions on movement resulting from the Government’s Covid-19 virus Alert Level 4, and the consequences of the Epidemic Preparedness (Covid-19) Notice 2020 issued by the Prime Minister of New Zealand on 25 March 2020, and given that notarial services are not in the category of being considered “essential”, it is not currently possible for a notary to lawfully be present with the applicant when asked to witness a signature on the document.

One method may to meet an applicant by audio-visual link and describe in the Notarial Certificate which system (Skype or Zoom) was used.

The Notary may then ask the applicant to scan and email complete copies of the document(s) together with copies of identification such as the photograph page of their passport, driver licence or other form of identification.

The applicant must then identify themselves by name and hold up to the camera the photograph and personal identification page from passport and driver licence, and these, of course, must match. If the Notary knows the applicant very well this may not be necessary.

As well, each page of the document to be signed must be held up to the camera, and also match.

As New Zealand Notaries may only practice within New Zealand, the Notary may request additional evidence, if this is in doubt (for example, the applicant could hold in sight a local newspaper dated the same day as the appointment or walk outside and point the device’s camera at parked cars with NZ number plates).

The applicant must then place the document down on a desk in view of the camera and the Notary must witness the applicant signing the jurat page and initialling each preceding page, holding each page of the signed and initialled document up to the camera.

The Notary will qualify the Notarial Certificate with the rider that she/he had seen the applicant sign, as far as it was possible to do so by following these procedures.

After the signed and scanned document is printed and notarised, the Notary (or the applicant) should arrange a courier service for the transfer of the hard copy to either the Te Tari Taiwhenua: (Department of Internal Affairs), or back to the applicant as applicable (subject to any Governmental restriction on the use of courier services).

Ken Lord at Parry Field Lawyers is a Notary Public and would be delighted to assist with your witnessing requirements.

Implications of the Covid-19 lockdown

In property transactions, each party must sign an Authority and Instruction form allowing their respective lawyers the ability to make changes to a property’s title on their behalf. Physical signatures on these documents must typically be witnessed by a lawyer or Justice of the Peace. However, in response to the Covid-19 situation, interim guidelines issued by Land Information New Zealand (LINZ) record that Authority and Instruction forms can be signed by means of an electronic signature — until at least these guidelines are revoked. Alternatively, wet-ink physical signatures will need to be witnessed over a video link.

The Government has also made a temporary law change to modify the requirements of witnessing and signing wills and enduring power of attorneys (EPAs). These changes allow wills and EPAs to be signed and witnessed using audio-visual links (for example Zoom, Facetime and Skype etc). For further guidance on how these documents can be witnessed and signed,  it is explained here for wills and explained here for EPAs.

In terms of statutory declarations and affidavits, it appears that these may be administered electronically — however, physical signatures would still be required. As above, signatures in these cases need to be witnessed over a reliable video link .

It is still understood that powers of attorney and enduring powers of attorney (and presumably Wills and the like) cannot be signed electronically.

If anything is not clear here then we would be happy to discuss with you — as usual individual circumstances usually mean that the context is important to consider.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact Steven Moe at stevenmoe@parryfield.com should you require assistance.

Are physical signatures necessary when executing legal documents?

Not always. The rules are found in the Contract and Commercial Law Act 2017 (CCLA). The core principle is that a signature must be RELIABLE in order to have any legal effect. In determining whether the signature you have provided is reliable, the questions are:

  1. Does the signature adequately identify you?
  2. Does it indicate your approval of the information in the document?
  3. Given the nature of the transaction, is the means by which your signature was provided (physical or electronic) appropriate?

An electronic method must satisfy the first two aspects above in order to be recognised as an “electronic signature” in New Zealand. Generally, an electronic signature is presumed to be reliable provided:

1.  The means of creating the electronic signature is:

(a)            linked only to the signatory;

(b)           under the control of the signatory alone; and

2.  Any alterations to either the signature or the information in the document, is detectable.

However, this presumption may be overturned if the electronic signature is held not to be ‘as reliable as is appropriate’ given the purpose and circumstances in which the signature is being required.  This is very much a fact-specific determination that will depend on the context of each situation. It is suggested that the following factors be considered:

  • the size of the transaction (i.e. the level of risk e.g. documents involving large sums);
  • how often you transact with the other party concerned; and
  • whether the other party (and yourself) often enters into the sort of agreement represented by the document.

Practical examples of these principles

Below are some case law examples that help illustrate the standard:

Wilfred v Lexington Legal Ltd

An electronic signature (in the form of an email from a client to their lawyer signing “best regards — Harmon”) sufficed as being a reliable for the purposes of entering into a contract for legal services.

Company Net Ltd v Registrar of Companies

Original signatures were required by the Registrar of Companies in relation to company incorporation documents — albeit in this case, there were issues of identifiability that caused concern. The companies office makes clear that they do accept electronic signatures for most documents.

See: https://companies-register.companiesoffice.govt.nz/help-centre/managing-your-online-account/filing-documents-with-electronic-signatures/

Welsh v Gatchell

Agreements for sale and purchases of land can be signed electronically. Notice to the other party about electronic signatures is already provided in the standard terms of the Auckland District Law Society document which is commonly used for these types of transactions.

Consequently, although electronic signatures will generally be considered reliable, where there is a lot riding on a particular document (i.e. a sizeable transaction as opposed to a mere box ticking activity), it appears prudent to require physical signatures. Where physical signatures pose significant inconvenience and you wish to sign electronically, we advise that you give express notice to the other party that an electronic signature will bind all parties to the contents of the document, and that you expressly specify the form of electronic signature required.

What documents can be signed electronically?

As noted above, documents can be signed electronically as long as the signatory is identifiable and the signature is reliable. However, there are two main caveats to this:

Legal Requirement

Where there is a legal requirement on you to give information to a person (thus requiring your signature), you must obtain that person’s consent to receiving the information through means of electronic signature.

Documents of Integrity

Electronic signatures have no effect on documents that concern “matters of integrity” such as:

  • Documents relating to citizenship, elections, fish and game, civil aviation, corrections, credit contracts and consumer finance, disabled persons community welfare, fisheries, medicine regulations, misuse of drugs, passports, and court procedural documents;
  • Documents that relate to affidavits, statutory declarations, documents given on oath or affirmation (although there are some short term changes due to Covid-19 which we discuss below);
  • Powers of attorney and enduring powers of attorney, Wills, codicils and the like;
  • Negotiable instruments;
  • Bills of lading;
  • Warrants to enter, search or seize; and
  • Fair Trading Act 1986 provisions in relation to consumer standards information on goods or services, and products or safety standards.

Is it sufficient to provide electronic pdf versions of the signed documents or are originals always required?

The inclusion of a counterparts clause in documents allows parties to exchange pdf copies of signed agreements through email or fax. The party last to sign the document effects a binding contract upon their provision of the signed document to the other party/parties. It is common practice for physical signatures to be exchanged in this manner i.e. physical signature presented in electronic form/through electronic means will suffice.

The absence of a counterparts clause in the document itself however means that wet-ink physical signatures will be required. A signature may be deemed unreliable where it is performed in a manner that wasn’t agreed to between the parties as evidenced in the document.

Provision of the originally signed documents is also required when executing deeds. Section 10 of the Property Law Act 2007 requires a signed deed to be delivered in order to take effect. Delivery is commonly understood as being the physical handing over of documents either in person or through post. If the intention is to effect delivery otherwise, we advise that this be made clear in the document itself by recording that the deed shall be deemed delivered upon transmission of a scanned copy of the original executed document by one party to the other.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation.  Please feel free to contact Steven Moe at stevenmoe@parryfield.com should you require assistance.

With a large number of businesses not currently operating as they usually would due to Covid-19, many employers are wondering what they need to pay their employees for the upcoming statutory holidays.

This article considers two scenarios (1) where non-essential employees have been working from home over the lockdown period (albeit potentially in a reduced capacity) or (2) not working at all.

In general, employers are still required to pay their employees for statutory holidays that fall on a day that would have “otherwise been a working day” for the employee or if the employee has otherwise agreed to work on that statutory holiday (even if it not a usual working day for that employee).

However, as result of the Covid-19 lockdown, some employees are not able to work at all, giving rise to uncertainty about whether or not the upcoming statutory holidays would have “otherwise been a working day” for the employee or not.  The Holidays Act does not cover off this situation.

The advice below is of a general nature so, if you are considering not paying your employees for the upcoming public holidays, we strongly recommend that you obtain legal advice specific to your situation before doing so.  We are very happy to help if need be.

Non-essential employees working from home over Covid-19 who do not work on a statutory holiday

If an employee would have worked on a Friday or Monday (but for Good Friday or Easter Monday, for example), then that employee is entitled to be paid for that statutory holiday.  This includes an employee who has been working from home over the lockdown period, albeit potentially in a reduced capacity.

In that case, employers must pay their employees not less than:

(a)  The employee’s “relevant daily pay”; or

(b)  The employee’s “Average daily pay” for that day.

These words have specific meanings under the Holidays Act.  However, in general terms, “relevant daily pay” is the amount of pay that your employee would have received had the employee worked on the Friday (Good Friday) or the Monday (Easter Monday).  It can include things like overtime, bonuses and the like, if your employee would have usually received those things as part of their pay.

Consequently, if you have agreed with your employees that, over Covid-19, their pay or hours of work will reduce, then their “relevant daily pay” will reflect those new agreed hours/days of work (making sure you still comply with Minimum Wage obligations).

Likewise, if you have applied for the Government Wage subsidy, and have agreed with your employees that you will only pay them the relevant subsidy amount each day, then that would be their “relevant daily pay” (again making sure you comply with Minimum Wage obligations).

However, if there has been no change to the employee’s pay, you will simply pay the employee their usual daily pay.

If you are able to work out “relevant daily pay”, then this will be the amount you pay your employees.  If it is not possible/practicable to do so or the employee’s daily pay varies at the moment, then you would use “average daily pay”.

The employee’s average daily pay is calculated using this formula:

            a/b

where—

a.  is the employee’s gross earnings for the 52 calendar weeks before the end of the pay period immediately before the calculation is made; and

b. is the number of whole or part days during which the employee earned those gross earnings, including any day on which the employee was on a paid holiday or paid leave; but excluding any other day on which the employee did not actually work.

Non-essential employee working from home over Covid-19 who do work on a statutory holiday

If, however, your employee actually works on the statutory holidays (so long as that is agreed as per their employment agreement), then they are entitled to be paid:

Time and a half, calculated at the greater of

  • the portion of your employee’srelevant daily pay” or “average daily pay” (less any penal rates) that relates to the time actually worked on the day plus half that amount again; or
  • the portion of your employee’s“relevant daily pay” that relates to the time actually worked on the day.

If this would ‘otherwise be a working day’ for your employee, then they are also entitled to an alternative holiday.

Non-essential employee not working from home over Covid-19

The situation is less clear where a non-essential employee has not been working from over the Covid-19 lockdown (because it is not possible/practicable to carry out their usual duties from home due to the nature of their work).

The Holidays Act provides however that, where it is not clear whether a day would otherwise have been a working day, the employer and employee must attempt to reach agreement on this, taking into account such things as:

  • What the employment agreement says – does it cover off what will happen in the event of a pandemic?

Some agreements provide that, in the event of a pandemic resulting in a shutdown, the employer will neither provide work nor pay the employee over that time and the employee will not be required to work.

  • What is the employee’s usual work pattern, i.e. would they usually have worked that day, but for Covid-19, or does the employee generally only work for the employer when there is available work?
  • Whether the employee usually works pursuant to a roster system and what that roster would have provided but for Covid-19.

If agreement cannot be reached, a Labour Inspector can be asked to decide the matter but we anticipate that will be unlikely to occur before the upcoming statutory holidays.

Ideally employers and employee will work hard to try and reach agreement as to how employees in these situations will be paid for the statutory holidays, taking into account both the circumstances of the employer and the employee.    However, while, again, specific advice should be sought on your circumstances, our present view is that, if you have obtained the Government’ Wage subsidy, at a minimum that amount should at least be passed onto employees.  This is based on our current understanding of the Wage Subsidy, which may change if the Government provides further guidance.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Our team is experienced with employment law. We would be happy to assist you in your journey. Please feel free to contact Hannah Carey at hannahcarey@parryfield.com or any of the team, should you require assistance.

The role of the Notary Public in New Zealand could be no better described than as appears on the New Zealand Society of Notaries website see here.

A notary public (sometimes called a notary or a public notary) in New Zealand is a lawyer authorised by the Archbishop of Canterbury in England to officially witness signatures on legal documents, collect sworn statements, administer oaths and certify the authenticity of legal documents usually for use overseas.

Witnessing Signature : Identification

To officially witness signatures may at first sight appear to be a simple task.  However things are not always simple.  The person appearing before a Notary may not be who they appear to be, even in New Zealand.

They called him “The Doctor”.  Based in Bangkok, for years hunted a man “revered among Bangkok’s criminal underworld for producing the most sophisticated forged travel documents on the market for just $2,000-$3,000” (see article here for more information). 

Hidden in a secret compartment were 173 passports from France, Israel, New Zealand, Iran and Syria, and a cache of electronic chips, moulds for visa stamps, ribbons, inks and specialist printing equipment.

Therefore the Notary will take care to identify the person appearing before her or him, by asking for several forms of identification, and scrutinising documents in great detail, even to the point of using a magnifying glass or UV light.  One flaw to look for is a slight shadow at the edge of the photograph, which will not be there on a valid passport.

In Australia documents establishing identity for notarial purposes have been attributed points, with Passports, Citizenship Certificates, and Firearm Licences at the higher end 70 points, Rates Notices and Utility Accounts at 20 points, and Motoring Association Cards and Taxation Assessment Notices at 10 points.

Ken Lord at Parry Field Lawyers is a Notary Public and would be delighted to assist with your witnessing requirements.