Introduction
We’ve all seen the headlines about growing Chinese investment around the world and New Zealand is certainly no exception. Although you may already have been in business for years and have a great deal of experience, if you want to be truly successful with a Chinese counterparty then there are some key cultural differences which you should take on board. With that in mind we have set out some points to be aware of when you’re dealing with Chinese investors. Read more
The Consumer Law Reform Bill (“the Bill”) contains significant changes to New Zealand consumer laws, and will affect a wide range of businesses. At this stage it looks like it will come into force in or about October 2013, although some sections will have a transition period of 6 months or more before they become effective.
Regulation of the relationship between businesses and consumers in New Zealand is currently largely dictated by the Fair Trading Act 1986 (“the FTA”) and the Consumer Guarantees Act 1993 (“the CGA”). The Bill will strengthen and update both of those Acts, among others, and will align them more closely with Australian consumer law.
The changes will affect the relationship between businesses and consumers and the relationship between businesses and businesses. This article discusses some of the more substantial amendments and what you should do to prepare for these changes.
Unfair Contractual Terms
A significant number of proceedings brought by consumers (or the Commerce Commission) against businesses, have been for breach of section 9 of the Fair Trading Act which stipulates a person shall not, in trade, engage in conduct that is misleading or deceptive, or likely to mislead or deceive.
The Consumer Law Reform Bill introduces a further restriction; that a person, in trade, must not include an unfair contract term in a standard form consumer contract, or rely on or enforce such a term.
A contract is presumed to be standard form until proved otherwise. Factors which will point to a standard form contract include:
The bill gives examples of unfair contract terms, which include:
To limit the risk of uncertainty to consumer contracts the unfair terms provisions are only enforceable by the Commerce Commission. The Commerce Commission can apply to a Court for a declaration that a term is unfair, and if successful, that term will not be able to be enforced or relied upon.
The unfair contract provisions will come into force 15 months after the Bill receives Royal assent to allow businesses time to prepare.
How can you Prepare for the Changes
The Commerce Commission has stated that they expect all businesses to comply with the new provisions by the date the new law comes into force, so make changes to affected contracts sooner rather than later.
Unsubstantiated Representation
The Bill will make it an offence under the FTA for a person, in trade, to make an unsubstantiated representation.
An unsubstantiated misrepresentation is a claim made about a good or service without any reasonable basis,irrespective of whether it is true or not.
Currently the onus is on the Commerce Commission to prove that a claim made by a trader is false. Under the Bill the trader will have to make sure that they have good grounds for making any claims about their products.
The law does not apply to representations that a reasonable person would not expect to be substantiated, such as “puffery” (i.e. ‘Red Bull gives you wings. In determining whether a representation is substantiated the Court will consider industry standards.
The degree of evidence required is likely to be a factual issue. Considerations such as how specific the representation is, the type of product (is it potentially dangerous), and the accessibility to evidence (can the consumer easily test the representation themselves) are relevant in similar Australian law.
How can you Prepare for the Changes
Contracting out of the Fair Trading Act and Consumer Guarantees Act
Under the Bill parties will not be able to contract out of the FTA or the CGA, except in some situations when both parties are in trade. In those circumstances it must be fair and reasonable that the parties are bound by the contracting out provision.
In determining what is “fair and reasonable” the Court will take into account various circumstances including:
How can you Prepare for the Changes
Extending the Consumer Guarantees Act – Auctions and Guarantee of Delivery
Under the Bill consumers will be able to rely upon the CGA when purchasing of goods by way of auction, including online, such as through Trade Me. Further, those supplying goods, whether by auction or otherwise, will be liable for loss or damage to goods in transit. Delivery to the consumer will also need to occur within a reasonable time (if no specific time is agreed).
How can you Prepare for the Changes
Should you need any assistance with this, or with any other commercial matter, please contact Kris Morrison or Tim Rankin at Parry Field Lawyers (348-8480).
You may have hired a worker as a contractor or have begun working as a contractor, but the Courts may see the relationship differently to you. Instead, the Court may decide that the relationship was rather one of employer-employee. This can have significant implications, as outlined below.
In deciding this issue, the Court has to consider the “real” nature of the relationship. To this end, the Court:
• Must consider all relevant matters, including any matters that indicate the intention of the parties; and
• Are not to treat as a determining matter any statement made by the parties that describes their relationship (e.g. if the contract describes one party as a contractor).
So what is the distinction between an employee and a contractor?
The distinction usually lies in whether the person is performing the services as a person in business on his/her “own account. If they are in business on their “own account”, they will usually be an independent contractor.
The Courts have developed a variety of tests over the years to assist in assessing the relationship. Examples of these include:
• What degree of control does the employer have over the work done and the way in which it is performed? The more control an employer has, the more likely it is to be an employment relationship.
For example, if the worker is required to work set hours, is not able to sub-contract the work out to anyone else, is unable to work for other competing businesses, is required to follow workplace rules and is closely monitored, this is may suggest that the “contractor” is actually an employee.
• Is the person a fundamental part of the business – are they “part and parcel of the organisation” or do they merely have an ancillary role?
The more integral to the business, the more likely you are to be an employee.
• Was the person performing the services on his/her own account or as part of the business?
For example, if the worker is providing his/her own tools/equipment, is invoicing the organisation, is able to hire his/her own labour and is responsible for his/her own tax and ACC payments, this may suggest that the worker is a contractor.
Why should this distinction be of a concern for me?
If you engage a worker as a contractor but then, later, that worker is held to be an employee, the following flow-on effects could occur:
• You or your organisation/company could become liable for backdated holiday pay and sick pay from the commencement of the services;
• The tax position will be reassessed. You may become liable for tax.
• The worker will be able to follow all of the processes contained in the Employment Relations Act 2000 including bringing a personal grievance against you/your organisation.
Vice versa, if you are performing work as a “contractor” but fail to see how your situation is any different to a regular employee, you may be missing out on employment entitlements which you are legally entitled to such as holiday pay/leave, sick pay, bereavement leave, kiwi-saver contributions and minimum wage entitlements. You may also believe that you are prevented from bringing a personal grievance against your “employer”.
If you are intending to take on a new worker and wish him/her to be a contractor, at a minimum you should ensure the following:
• That there is a “contact for services” contract in place (we can draft an appropriate document for you);
• That the person is invoicing you/your company for the services provided and payment is made on receipt of an invoice. The person will need to be responsible for their own tax and ACC payments;
• That you do not exercise too much control over the services and how they are being provided e.g. make sure there is flexibility in terms of when the services are to be performed and allow the person to undertake other work (even if it for a competing business);
• That the person provides his/her own equipment/tools (where appropriate).
If you are currently contracted as a “contractor” and are unsure whether in fact you should be classified as an employee, we recommend that you raise this with the business you work for and/or contact us for further advice.
Should you need any assistance with this, or with any other Employment matter, please contact Hannah Carey at Parry Field Lawyers (348-8480).
Set out below is our joint submission with Christchurch law firm Helmores to the Inland Revenue Department on the officials’ issues paper “Allowing a zero percent tax rate for investors investing in a PIE“.
You may have seen the term Portfolio Investment Entity or PIE used in the local newspapers and wondered what it was all about. In this article we explain the reason for the provisions, and what they to do.
GST is a hazardous tax, not only for taxpayers, but also for the Government. Unlike income tax, the Government has a commitment to refunding GST, and this part of the GST mechanism leaves the tax open to manipulation. The hazard is greatest where the assets sold are largest. The domestic reverse charge mechanism will to an extent reduce the risk the Government faces from being ripped off through the GST system.
In the recent Court of Appeal decision Commissioner of Inland Revenue v Penny and Hooper [2010] NZCA 231 (4 June 2010) it was held that Mr Penny and Mr Hooper entered into a tax avoidance agreement when structuring their affairs in such a way as to avoid paying tax at 39% on the majority of their income. The surgeons have now decided to appeal the case, but if not successful it will have significant implications for a broad sector of the New Zealand public. Read more
What are the transitional rules for moving to the 15% GST rate in New Zealand from 1 October 2010 if you account for GST on a payments basis? The transition rules applying to those on a payments basis are arguably the most complex part of the change to the GST rate. This article helps explain these specific aspects of the transitional rules.
Most readers will know of the changes to the QC and LAQC regimes foreshadowed in the May 2010 Budget. The details announced in the the Budget were very brief.
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