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In April 2013, EQC released two guides for settlement of earthquake land claims (flat land and hill properties), together with sample Land Settlement Packs. The Guides note that they are a summary of EQC’s obligations and that the provisions of the EQC Act 1993 will be “applied by EQC at all times.” 

This article looks at what cover the EQC Act actually provides for “land damage” and what qualifies as “land damage”. In Part II to come, we will look at what are EQC’s obligations/rights in respect of settling land claims.

1. What general cover is provided under the EQC Act for earthquake related land damage?

2. Is EQC responsible for covering all areas of a property where there is land damage?

3. What level of “insurance” cover does EQC provide for land damage?

4. What qualifies as “physical loss or damage”?

5. What types of “physical loss or damage” does EQC cover?

1. What general cover is provided under the EQC Act for earthquake related land damage? 

The EQC Act provides that, where a home is insured against “natural disaster damage”, the land on which the home is situated is insured against:

  • any “physical loss or damage” to the land occurring as a direct result of a natural disaster (such as an earthquake); and
  • Any “physical loss or damage” to the land occurring as a direct result of measures taken under property authority to avoid the spreading of, or otherwise reduce the consequences of, any natural disaster (e.g. land works necessary to redirect flood run-off).

2. Is EQC responsible for covering all areas of a property where there is land damage?

No, EQC only covers damage to the following areas of land:

a) the land under the house;

b) all land within 8m (extending outwards) of the house or outbuildings such as any garage (but excluding artificial surfaces such as asphalt or concrete);

c) the main access way to the house (excluding coverings such as asphalt or concrete) from the boundary of the land (so long as that access way is situated within 60m of the house);

d) the land supporting the main access way;

e) bridges and culverts situated within the above areas; and

f) retaining walls and their support systems within 60m of the house which are necessary for the support or protection of certain specified areas of land (e.g. the house or garage).

EQC does not cover certain things that are on the land, such as trees, plants, lawn, paving and driveways.

3. What level of “insurance” cover does EQC provide for land damage?

Qualifying properties are insured for an amount equal to the lowest of the value of:

a) a parcel of land that is the minimum lot size under your district plan.

i. In Christchurch, if your property is zoned as Living Zone 1, the minimum lot size is 450m2.

ii. If your property is in Christchurch’s Living Zone 2, the minimum lot size is 330m2.

b) An area of land of 4000 m2; or

c) The area of land that is actually physically lost or damaged.

These values are the maximum amounts EQC could be liable to pay, rather than what you will automatically receive from EQC.

In the case of bridges and culvert and retaining walls, EQC is only liable to pay up to the “indemnity value”of that property (e.g. this is often described as the property’s “market value” at the date of the loss or the property’s value allowing for its age and condition immediately before the loss or damage happened).

EQC advises that payment of claims for land (where EQC considers its maximum liability has been reached) will be based on a professional valuation.

In each case, EQC’s excess is deducted off each land claim (if the claim is $5,000 or less, EQC will deduct an excess of $500. If the claim is more than $5,000, EQC will deduct 10% of the claim up to a maximum of $5,000 per claim).

4. What qualifies as “physical loss or damage” in the context of “natural disaster damage”?

This is not defined in the EQC Act.

In the case of Earthquake Commission v Insurance Council of New Zealand Incorporated & Orrs [2014] NZHC 3138, the Court held that, for land damage to qualify as “natural disaster damage” for the purposes of the EQC Act, there must be:

  • a physical change or loss to the land that has occurred or is imminent as a direct result of the earthquake.  Put another way, some type of disturbance or loss to the physical integrity of the land; and
  • which adversely affects the uses or amenities that could otherwise be associated with the land (i.e. building on it/habitating on it).

5. What types of “physical loss or damage” does EQC cover?

This is again not specified in the Act. EQC has however identified nine types of land damage on the flat residential land in Canterbury. Seven are said to be apparent from looking at the land:

  • Cracking caused by the sideways movement of land, often towards water;
  • Cracking caused by backwards and forwards ground movement;
  • Undulating land (e.g. uneven settlement of the land, often as a result of sand and silt being pushed up or settlement of liquefied soils below the ground);
  • Ponding (due to lowering of the land in areas which results in water “ponding” in places where previously it did not);
  • Localised settlement resulting in drainage issues (e.g. drains flowing the wrong way due to land settlement;
  • Groundwater springs (new springs flowing over the ground where previously they did not); and
  • Pushed up sand and silt, either under a house or over a large area.

Two further types are not necessarily visible but have increased the future vulnerability of the land to liquefaction or flooding:

  • increased liquefaction risk (the ground surface has subsided closer to the water table than previously, reducing the ground crust thickness and therefore increasing the risk of liquefaction occurring); and
  • increased flooding vulnerability (the ground surface has again subsided making it more at risk of flooding if the land is situated near a water way).

In the case of Earthquake Commission v Insurance Council of New Zealand (referred to above) however the Court held that “circumstances where one or more earthquakes have caused physical changes to the land only and such changes have caused the residential building to reduce in height and adversely affected the uses and amenities that could otherwise be associated with the residential building by increasing its vulnerability to flooding events does not include “Natural disaster damage” (emphasis ours).

EQC advises that it assesses Increased RIsk of Flood/Liquefaction utilising drilling data, aerial laser levels taken after each major earthquake/aftershock which record changes in land elevation, and Water Table Levels.

In the Port Hills, EQC has identified other types of damage such as:

    • Debris material (e.g. rock fall and cliff collapse) being deposited on the land where this materially affects the physical use of the land;
    • Land cracking/bulging/undulations and loss of land as a result of land moving vertically and/or horizontally downslope where the land no longer occupies the space it did before the earthquakes, where this materially affects the physical use of the land.
    • Land damage as a result of impacts from rock fall and cliff collapse.

This post provides a general outline of what the EQC Act provides for “land damage” and what qualifies as“land damage”. In Part II to come, we will look at what are EQC’s obligations/rights in respect of settling land claims.

If we can assist in any way with your land claim, please don’t hesitate to contact Paul Cowey atpaulcowey@parryfield.com.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

Most of us are used to living in an environment where there is a certain amount of noise. However, there are also times when noise can become excessive and interfere with the peace, comfort and convenience of other people.

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Most businesses in New Zealand are small, closely held companies. Often, their directors and shareholders are the same and they also work for the business. This means the lines between acting as director, shareholder, or manager get very blurred.

The Companies Act 1993 imposes a number of obligations on shareholders to ensure that directors/shareholders act appropriately in their different roles.Parry Field Lawyers provide legal advice on a range of commercial matters including company management and the rights and obligations of shareholders.

 

Shareholders hold the power behind the throne

The directors of a company make the day to day decisions.  Section 104 of the Companies Act 1993 (Act) restricts shareholder power, and the exercising of it, to the annual meetings and special meetings of shareholders (or a resolution in place of an actual meeting, which is often the preferred option).  It must be remembered that a director may be linked to another entity which is a shareholder in the company, such as where a director is trustee and/or beneficiary of a family trust, holding shares in the company. In that situation, the role of independent trustees in those trusts becomes important in ensuring that the interests of the shareholders are met and that the shareholders do not simply rubber stamp the directors wishes.

Shareholder power

The Act prescribes that certain powers must be exercised only by the shareholders of a company. These powers include adopting, altering or revoking a constitution (s32), altering shareholder rights (s119), approving a major financial transaction (s129), appointing and removing directors (s153), approving an amalgamation (s221) and putting the company into liquidation (s241).  While the appointing and removing of directors is usually done by an ordinary shareholders resolution (simple majority vote) the other powers require a shareholders resolution to be passed by a majority of 75% (or higher if required by the company’s constitution) of those shareholders entitled to vote, and voting on the decision.

Sometimes all or nothing

There are instances where unanimous resolutions from shareholders may circumvent the requirements of the Act.  Under s107 of the Act shareholders acting unanimously may authorise a dividend, approve a discount scheme, allow a company to acquire or redeem its own shares, provide financial assistance to purchase its own shares and sign off on benefits, guarantees, remuneration packages and the like for the company’s directors.  These unanimous resolutions however, do not override the requirement for the solvency test to be met by the company, and for the related directors solvency certificate under s108.

Role at meetings

Annual meetings are the most usual ones for shareholders to turn their minds to.  Business carried out in such a meeting may be limited to receiving and adopting financial reports, election of directors, appointment of auditors, any other business requiring a special resolution and general business.

Special meetings can be called at any time to discuss a specific resolution provided the calling procedure has been adhered to.

In signing a resolution in lieu of a meeting each shareholder must ensure that all the requirements are included in the resolution and all matters to be resolved are clearly stated – if there is any doubt seek clarification, have it rectified or have the actual meeting.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance, please contact Tim Rankin at Parry Field Lawyers (348-8480) timrankin@parryfield.com