COVID-19 - Parry Field Lawyers

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:

Does the signature adequately identify you?
Does it indicate your approval of the information in the document?
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.

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.

The law recognises that in certain events which are beyond the control of a party that it is not fair for that party to have to continue to comply with the contract. In light of COVID-19 it is prudent to consider if the pandemic might be a trigger for this in your contracts.

The first step is to check what the contract actually says. It won’t apply if there is no such provision in the contract. Normally it will be called a “Force Majeure” clause. The courts will generally have a high standard if a party wants to rely on this as a grounds to not fulfill the contract. The sort of factors which will be relevant are:

How are the events described? Is it generic or specific? In this particular case it will be relevant to see if there is any reference to “disease” or better, epidemics? If there is a reference to an “Act of God” then that might arguably cover this too. The most important thing is to check the specific words.
Even if there is an event, does that mean that the performance cannot be done? Just because something costs more doesn’t make it impossible – it may be that you still have to comply. Again, the context is key.
A party needs to be in control – one of the things I have seen is some arguments that a “strike” should be a force majeure event – if it is listed then it may be, but typically the management can control a strike occurring, or not. So, it might not qualify as a force majeure event. When it comes to COVID-19 again it may be that a party has no control.
The last factor relates to mitigation. A party should take steps to ensure that the contract is complied with (ie they are mitigating and stopping the impact, if they can).The key point here is perhaps that the wording of the contract needs to be reviewed. If there is no such clause then it might be possible for the doctrine of frustration to apply – this is where an event makes performance impossible compared to what had been agreed. Again, context is key.The other thing to look for in contracts would be a “material adverse change” clause – these can apply where an event occurs that means the contract is affected. You should also review any termination clauses just to see what they provide for eg 30 days written notice?Start by reviewing your contracts and consider your current situation and what the next few weeks and months will hold. If you would like to discuss your contract and situation then we would be happy to do so.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. For any questions, feel free to contact Steven Moe stevenmoe@parryfield.com or Kris Morrison krismorrison@parryfield.com at Parry Field Lawyers.

Uncertain times require stong leadership from company directors. We are each adjusting to a new normal of video conferences replacing meetings and realising how much time we previously wasted on travel. But there are also immediate and difficult questions which directors of companies are faced with as the implications of a nationwide lock down continues. In this article we want to ask some of those hard questions so that you can proactively begin to prepare for the coming weeks and months.

Do Director duties apply still?

Yes, these continue even in difficult times. They are outlined in detail in this article but the key ones relate to acting in good faith and in the best interests of the company (section 131) and acting with the care, diligence and skill of a reasonable director (section 137) taking into account:

the nature of the company;
the nature of the decision;
the position of the director; and
the nature of responsibilities undertaken by him/her.

The other duty which will be getting a lot more attention, if there is the impact on the economy predicted, is section 135 around reckless trading. A director must not agree to, 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. This duty is aimed at preventing conduct by the directors which could jeopardise the company’s solvency. Unlike the best interests duty, the directors’ personal opinion as to the company’s ability to continue trading is irrelevant. Instead, a Court is likely to ask: “Was there something in the financial position of the company which would have alerted an ordinary prudent director to the real possibility that continuing to carry on the business of the company would cause serious loss to the creditors?”. In the context of COVID-19 this is going to become a lot more relevant to consider.

Key considerations

As well as making sure you are complying with Director Duties it is important to think widely about all the stakeholders of the company rather than just the shareholders. This includes employees, suppliers, customers – how are each of these groups impacted and what is the flow on effect on the company? You might want to have an action plan regarding:

Employees: How are they doing? Is clear messaging going out about the status? How can you help reduce stress and anxiety through eg zoom catchups?
Wage subsidy: Will there be a 30% predicted drop in revenue? If so, explore the subsidy described here.
Leases: Have you got one? Read this article if so as now may be the time to contact your landlord.
Bank funding: Talk early with your funder and ensure you know what the position is in relation to any loans you have. Are there any other funding sources to be exploring?
Shareholders: Is it worth considering raising some more capital from them (depends on unique context of your company as to whether that is an option but extra liquidity might not hurt).
Contracts: Do any of them have force majeure clauses in them – for your benefit, or not – that might mean these get paused? What impact will that have on your revenue? Have a read of this article for more on this.
Overseas suppliers/customers: Is there someone overseas that may have issues continuing due to the shut down that will flow on to impact you?Having considered all these factors does it impact on the viability of the company? Is there a risk of later realising that the company was trading recklessly? Can it continue to enter into new obligations if there is uncertainty about future revenue? Is there some external advice required to make good decisions?

Conclusion

The point of this article and these questions is not to inspire fear it is to get directors thinking about the actual position of their company in light of many complex factors at work right now. Directors should be asking questions of management – perhaps requesting more frequent updates and meetings – and documenting what their decisions are in minutes so there is a record of what they decide. We will get through this and strong leadership from Company directors will be vital for organisations to cross the bridge and get to the other side of the crisis.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. For any questions, feel free to contact Steven Moe stevenmoe@parryfield.com or Kris Morrison krismorrison@parryfield.com

We are aware that a number of employers are unsure at this time about what they need to pay employees and whether they should apply for the Government Subsidy or not.

The Government is regularly clarifying aspects of the Subsidy and the below is our current understanding of how it may apply as at 27 March 2020.

Do employees still have to be paid?

As a general rule, where employees are, apart from the shutdown, otherwise willing and able to work, employees are entitled to be paid by their employer. This will be informed by the following however and the terms of each employee’s employment agreement.

What are some possible relevant clauses in the employment agreement?

Check to see what the agreement says on such things as unpaid leave, special leave, annual leave, what happens in a pandemic, reducing hours, varying agreements, or, in a worst case scenario, redundancy.
Remember however that, any proposed changes to such things as the employees’ usual hours of work or pay, regardless of what the employment agreement says, should be discussed with employees in advance (i.e. consultation, listening to their feedback/suggestions), rather than simply presented to employees. Any agreed variation should also be recorded in writing between the employer and employee.
The duty of “good faith” continues to apply, even in these difficult circumstances. In layman terms, “good faith” simply reflects the “golden rule” and means treating your employees like you would like to be treated (or how you might like a member of your family to be treated by their employer).

The Government subsidy – general information

See our earlier article here on applying for the Subsidy.
Where employees will not actually be physically working or will work for less than their usual hours, say from home, the short-fall, up to 80%, should be recorded as special paid leave.
So, if an employee is not working at all, the 80% will be recorded fully as special paid leave. If the employee is working half their usual hours, half will be recorded as usual wages/salary and the other half, up to 80%, would be recorded as special paid leave.
The Government Subsidy must then be used by the employer towards their 80% contribution (or any additional wage payments the employer decides to make to employees).
The balance – 20% – will need to be discussed and agreed with employees and could be a mixture/combination of unpaid leave, annual leave, sick leave or additional special paid leave. If agreement cannot be reached on employees taking annual leave, the employer can direct employees to use annual leave but only on 14 days’ notice.
The advice we have received on taxation of the Subsidy is that:
- the wage subsidy payment will not be subject to GST;
- the wage subsidy paid to the employer will not be taxable;
- the wage subsidy paid to the employee, by the employer, will not be deductible; and
- the wage subsidy is taxable to employees, being included as part of their normal wages and therefore being subject to their usual PAYE, Student Loan, Kiwisaver deductions, etc.

“What are Best Efforts?”

What about if I’m unsure if I can pay staff 80% of the usual wages for 12 weeks or whether I might ultimately have to make employees’ redundant?

The terms of the subsidy refer to employers making “best efforts” to retain staff and pay staff at least 80% of their normal income for the subsidised period (in order to qualify for the subsidy).
As at 27 March 2020, the Government has clarified that, if an employer has made “best efforts” but cannot pay staff 80% of their usual salary/wages, an employer may still claim the Subsidy but must pass on the whole of the subsidy to their employees.
An employer will still need to be prepared to demonstrate the steps it took, prior to that time, to avoid that situation. In other words, what evidence do you have of your “best efforts.” This could include:
Seeking third party financial assistance, such as from a bank or landlord or suppliers (i.e. further funding, mortgage holidays, interest free terms, deferred payments, staggered payments etc);
Seeking advice from the Chamber of Commerce, a relevant industry association or your accountant; and
Discussing with staff about whether they would be prepared to take their annual leave or sick leave entitlement to top up the Government Subsidy or accept reduced paid hours/unpaid leave. This could include only being paid the amount of the Government Subsidy, if necessary.
MSD will have the ability to check applications and verify information at a later date, including an employer’s declaration at the time of application that they will make “best efforts” to retain staff and pay at least the 80% cap.

What about in a worst case scenario and I need to look at making employees redundant?

As at 27 March 2020, the Government has clarified that, in order to claim the Subsidy, employers must keep employees in employment for the period of the Subsidy (even if they are only passing on the Subsidy to employees to keep them in employment).
It remains unclear what will happen if an employer claims the Subsidy but then makes an employee(s) redundant but it is possible (but not yet confirmed) that employers may need to repay the Subsidy relating to those employees, or at least, relating to the period of time after the employee’s employment ended.
Employers will also need to again be prepared to demonstrate what steps they took to retain staff prior to that time.
If a redundancy is undertaken, employers should again check the terms of their employment agreement to see what it provides regarding redundancy. For example, it may define when an employee will be considered redundant, the process that must be followed, what notice must be paid out, and whether any redundancy compensation is payable. The terms of the agreement will need to be followed.
A fair process, carried out in “good faith” will again be required, although consultation will need to be done by email, telephone or applications such as “zoom” and relevant timeframes for consultation and decision making may be able to be reduced.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Hannah Carey – hannahcarey@parryfield.com or any of the team should you need assistance.

As we are in the midst of an uncertain time there are lots of different questions and things to consider. For business owners, how can COVID-19 impact your commercial leases?

If you have such a lease, the impact of COVID-19 depends what it says – so it is worth checking your agreement with the Landlord. If you have a recent ADLS version Deed of Lease (which is industry standard) then there is a definition of “Emergency” which includes an epidemic. Clause 27.5 then has provision about access to the property in an emergency that refers to “a fair proportion of the rent and outgoings shall cease to be payable…” in some circumstances where you are unable to access the premises as a consequence of the emergency. Use that clause as the basis to talk with your Landlord in the coming weeks.

As a side note, if you only ever signed an Agreement to Lease, don’t panic that it doesn’t have that clause, as the Deed of Lease provisions are deemed to be incorporated into the Agreement to Lease as well (if it is an ADLS form) – see clause 4 of the ADLS Agreement to Lease form.

At this time we want to support businesses who have questions about what they should do next and we will be posting comments on issues we see arising from time to time.

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, please feel free to contact Steven Moe – stevenmoe@parryfield.com, Kris Morrison – krismorrison@parryfield.com or Paul Owens – paulowens@parryfield.com at Parry Field Lawyers.

The Government will support employers if you face laying off staff or reducing their hours because of COVID-19. But you must meet certain criteria to be eligible – described here.

How much?

The amount involved is paid at a flat rate of $585.80 to a person working 20 hours or more per week and $350.00 to a person working less than 20 hours per week. That is a payment of $7,029.60 for a full time employee and $4,200 for a part time employee.

Criteria to apply?

First, check 2019 revenue against 2020 revenue. Has there been a 30% actual or predicted decline? If so, then you need to confirm:

– the decline is due to the impact of COVID19;
– you will make best efforts to retain staff and pay them (at least 80% of their usual pay). This should be over the – 12 weeks subsidy period;
– you have taken active steps to mitigate lost revenue eg consulting with your bank or advisors; and
– Staff provide consent for details (names, contacts, IRD numbers) to be provided to MSD.

It is worth emphasising that a predicted drop of income will suffice, so employers should put together a list of factors supporting a predicted drop. That could include the obvious, such as staff not being able to work at all but also, where staff can work remotely, not all staff being able to work for 8 hours a day due to technical constraints or clients being in non essential industries.

Other steps to take

We suggest that you document last years revenue vs this year. If you’ve existed for less than a year choose a reasonable month last year to compare with. MSD have noted that they have power to investigate later and it seems likely that some will abuse the system – so best to document both what revenue was and is predicted to be, as well as a list of what steps were taken to mitigate impact.

This article is not a subsitute for legal advice and you should contact your lawyer about your specific situation. If you require any assistance with this, please feel free to contact Hannah Carey – hannahcarey@parryfield.com or Steven Moe – stevenmoe@parryfield.com at Parry Field Lawyers.

We live in unprecedented times. In this short guide we have set out key issues which we think Businesses in New Zealand should be focussed on.

We will update this article as we have further information and expand it more.

Key Information

We recommend looking at this site for the latest Government announcements on COVID-19.

Government support

The government has confirmed that this wage scheme and leave scheme apply to businesses (this includes registered charities, non-government organisations, incorporated societies and other entities). These groups can apply if they meet the qualification criteria. We found that this information was the best to refer to but this summary from Deloitte is helpful as well.

Contracts

Consider seeing what they say about “Force Majeure” events – things outside of your control – there may be provisions which help to delay provision of services or goods at this time. Is some renegotiation needed around the terms? Price? Timing?

Governance

We suggest this is a great chance to look back at your purposes and ensure that they are being followed. Why not also check policies and other rules? We also suggest you ask questions as a governing body to ensure that everyone understands the finances and budgets – how will they be affected? Finally, if you are making important decisions then record them in minutes of meetings. It may be that due to physical distancing you will need to adjust how you have meetings – we use Zoom.

Leases

If you have a commercial lease have a look and see if there is an “Emergencies” clause. If you have such a lease it depends what it says – so it is worth checking your agreement with the Landlord. If you have a recent ADLS version Deed of Lease (which is industry standard) then there is a definition of “Emergency” which includes an epidemic. Clause 27.5 then has provision about access to the property in an emergency – see the screen shot – that refers to “a fair proportion of the rent and outgoings shall cease to be payable…” in some circumstances where you are unable to access the premises as a consequence of the emergency. Use that clause as the basis to talk with your Landlord in the coming weeks.
As a side note, if you only ever signed an Agreement to Lease, don’t panic that it doesn’t have that clause, as the Deed of Lease provisions are deemed to be incorporated into the Agreement to Lease as well (if it is an ADLS form) – see clause 4 of the ADLS Agreement to Lease form.

Other issues

Here are some articles from our website that may be worth a look as well on the topics of good governance, electronic signatures, relief against forfeiture, employer issues, director duties and liquidations.

Questions?

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. For any questions, feel free to contact Steven Moe stevenmoe@parryfield.com or Kris Morrison krismorrison@parryfield.com

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