Newsletter Spring 2017 2017-09-05T17:35:29+00:00

ARL News

Our team is growing!

We are excited to announce the appointment of three new solicitors — Nisha Dahya, Associate, who has joined the Family Law team and Nicki Hopkinson and Michelle Beeby who have both joined the Personal Planning and Business Solutions Team. Check out their profiles here.

We are also thrilled to welcome Sonya Harper to our conveyancing team. Sonya is a registered Legal Executive with 24 years’ experience. Born in Christchurch, Sonya refers to herself as a mainlander but has lived in many towns across the length of New Zealand. Her background is Estates Administration but she is enjoying the challenge of conveyancing.

Left to right: Nisha Dahya, Nicki Hopkinson, Sonya Harper and Michelle Beeby

 

ARL staff support Foster Hope New Zealand

At a recent morning tea put on by Neos, we presented them with a box of clothes, toys and pyjamas donated by the ARL staff. This gift is going to Foster Hope New Zealand, an organisation supported by June Matthews, Neos Operational Manager and Foster Hope Wellington Coordinator, and the Neos staff.

Left: Sarah Morrison with June Matthews and the donated boxes of goodies for Foster Hope New Zealand.

 

 

Cloud Storage

The idea of cloud storage has become more pertinent over recent years given the exponential advancement of technology. Businesses are endeavouring to have ‘paper-less’ environments with the view to creating more efficient and tidier storage systems.

Types of cloud storage

There are many different cloud storage models and each carries different risks. These include, but are not limited to:

  • Private cloud where the cloud infrastructure provides for the exclusive use by a single organisation e.g. Cisco.
  • Community cloud for use by a specific community of organisations that share the same mission e.g. Google Apps.
  • Public cloud for open use by the public. It is typically owned and operated by a government department or a business e.g. Amazon.

Both the private and community clouds may be owned and managed by an organisation, a third party or mixture of both and exist on or off premises.

Benefits of cloud storage

Some of the benefits of investing in cloud storage include:

  • Reliable backup storage
  • More storage capacity
  • Flexibility, economies of scale
  • More efficient professional services
  • Reduced IT costs, fewer hardware write-offs, better quality servers
  • Reduced risk of losing physical files during natural disasters — as occurred in the Christchurch earthquakes.

Risks of cloud storage

Client confidentiality is a core concept. For example, within the legal industry, a lawyer has a duty to protect and to hold in strict confidence all information concerning a client’s business and affairs under the Lawyers and Conveyancers Act 2006 and the Privacy Act 1993.

This is one of the major factors that make businesses reluctant to implement cloud storage systems. There have been several unfortunate instances where private information has been disclosed. Potentially, a cloud storage provider could have access to client information or even sell stored information to unauthorised persons.

With cloud storage having no geographical boundaries, the relevant and applicable legal jurisdiction can become blurred, particularly in the context of overseas third-party cloud storage providers. Cloud storage providers may require ownership of the stored data to protect their interests and may provide information to government agencies when requested.

So, when engaging services of cloud storage providers, carefully consider the terms and conditions of any agreement. Also, a cloud storage provider would need to be capable of customising software for, by way of example, the legal industry, and adapting to its changes. Local cloud storage providers may have the flexibility to provide this. However, they may not offer the same technology and financial security as overseas cloud providers.

 Methods to mitigate cloud storage risks

Even with all the necessary precautions in place, breaches may still occur. However, there are ways to mitigate the risks associated with cloud storage. Examples include:

  • Implementing the necessary agreements for acceptable service levels and remedies for noncompliance.
  • Conducting due diligence of service providers.
  • Creating strict restrictions and security on access to information.
  • Enforcing terms for the transfer of data, knowing where the data will be stored and the privacy laws applicable.
  • Backup systems for damage control must be established and highly confidential information could be stored in a different manner to low-risk information.

The Corporate Veil

The Companies Act 1993 states that a company is a legal personality in its own right and is separate from its shareholders. This is a principle known as the Salomon principle and provides that a company is essentially regarded as a legal person with rights and duties separate from its directors, shareholders, employees and agents. This means a company can be sued in its own name and own assets separately from its shareholders.

The ‘corporate veil’ has the company on one side of it and its directors and shareholders on the other and liability does not pass through.

 Lifting the corporate veil

The corporate veil can be lifted by the courts if its presence would create a substantial injustice. This is the process used to look behind the corporate façade and identify the true nature of a transaction. It can be lifted in several circumstances. For example, where a subsidiary company is in liquidation in the context of a group of companies as illustrated in Steel & Tube Holdings Ltd v Lewis Holdings Ltd. The subsidiary company was placed into liquidation and the plaintiff sought the debt owed from the group of companies, rather than the subsidiary as a separate entity. The Court of Appeal agreed with this approach as the subsidiary was not run as a separate legal entity.

Some of the factors the Court considered were that the directors of the subsidiary managed it as officers of the parent company and did not hold separate board meetings. Technically, the subsidiary was a separate legal entity but it was not managed as such, so the Court lifted the corporate veil to pool the assets of the related companies.

The courts may not always apply this approach to groups of companies but this case identifies the importance of ensuring each entity within a group of companies is managed as a separate legal entity.

 Piercing the corporate veil

The Court may ‘pierce’ the corporate veil and remove the protection of the Salomon principle to prohibit fraud, as occurred in Gilford Motor Co Ltd v Horne where a managing director agreed not to engage with his former employer’s customers but proceeded to do so through a newly-formed company. The Court pierced the corporate veil to reveal the sham transactions occurring behind the façade of the company.

Generally, the Court is reluctant to pierce the corporate veil to protect creditors in the absence of fraud. However, where reckless trading takes place by directors, the Act allows for the veil to be pierced.

If you want to know more about the Corporate Veil and how it might affect you,  contact Ian Avison – Partner.

Domestic Violence Victims Protection Bill

Domestic violence (DV) is a significant issue in New Zealand. In 2016, the New Zealand Police investigated 118,910 incidents of family violence – approximately one DV incident every five minutes. The most recent parliamentary debate on the issue has resulted in The Domestic Violence – Victims’ Protection Bill (Bill) which aims to offer greater protection to victims of DV in an employment context. The Bill aims to:

  1. Reduce the stigma attached to being a victim
  2. Reduce the abuse of victims in the workplace
  3. Require employers to adhere to more understanding practices.

The Bill proposes to assist victims by introducing a definition of ‘a victim of domestic violence’ and amending several different pieces of employment legislation to better cater to the needs of victims.

The Bill defines a victim as a person who suffers or provides care to an individual in their immediate family who suffers DV, and who can produce a ‘domestic violence document’ (DVD) that provides evidence that a person falls within the definition of a victim – for example, a Police report or criminal proceedings.

The proposed changes to employment legislation are:

  1. DV leave. Amending the Holiday Act 2003 by introducing 10 days within a 12 month period paid ‘domestic violence leave’ for victims.
  2. Flexible working for victims. Amending the Employment Relations Act 2000 so that victims can request flexible working arrangements such as working from a different location or unusual hours. Employees who make this request will need to have been employed by the same employer for at least six months and have not made a flexible working request for at least 12 months.
  3. Health and Safety Requirements. Amending the definition of ‘hazard’ to include situations arising from DV. This would require persons conducting a business or undertaking to have a policy for dealing with hazards that arise in the workplace due to DV and to take reasonable and practicable steps to provide health and safety representatives with training to support workers who are victims.
  4. Prohibited grounds of discrimination: introducing being a victim as a prohibited ground of discrimination under the Human Rights Act 1993 and the Employment Relations Act 2000.

Where many New Zealand businesses are going beyond the current legislation to provide support to victims, some are not. This Bill, if passed into law, will recognise DV as a workplace hazard and will require New Zealand businesses to implement new workplace policies. So, with the report from Parliament due on 8 September 2017, this is one space to watch.

If you wish to discuss any Family Law matters or issues relating to domestic violence, contact Sarah Morrison or Nisha Dahya. They are our family law experts.

 Personal Lending Guarantees – Enforceability

A Guarantor is a person who gives a promise to repay the debt of a borrower.  By agreeing to pay a debt, the Guarantor has made a guarantee to the institution or person lending the funds. Frequently, when someone gives a guarantee they are also giving an indemnity. An indemnity is a contractual promise to accept liability for any loss by the lender that is accumulated in the process of the recovery of a debt.

There are different types of guarantees: unlimited, limited, unsecured or secured. An unlimited guarantee generally gives the lender an ability to demand the Guarantor repays all monies owing, whereas a limited guarantee has an agreed amount payable by the Guarantor. An unsecured guarantee is not attached to any asset of the Guarantor.  In contrast, a secured guarantee grants security over a specific asset owned by the Guarantor, e.g., their house.

Personal guarantees are becoming more common in the parent-child scenario. However, the parents sometimes underestimate the extent of the risk they assume when signing a guarantee. Regularly, the guaranteed loan represents a large portion of the parents’ assets and may have significant consequences on the parents’ current and future living standards if the lender demands payment of the debt. It is important to note that a personal guarantee is not for a specific timeframe. Therefore, the Guarantor may be liable for any current loans, future financing or credit card debts.

Guarantees are legally binding documents and are enforceable through the Courts. Extinguishing the obligations under a guarantee can be difficult as the parties must adhere to the terms and conditions of the guarantee. Guarantors may request the lender to release them from their liability under the guarantee. However, it is the lenders’ decision to release a Guarantor from their obligations under the guarantee.

In New Zealand, lenders who offer guarantees must also adhere to the responsible lending laws of the Credit Contracts and Consumer Finance Act 2003. These state that lenders must ensure a borrower or a Guarantor can make repayments towards the debt without suffering substantial hardship.

This legislation was applied to the case of a pensioner who agreed to guarantee his son’s loan of $2,000. His son defaulted on the weekly payments immediately. The lender demanded the repayments from the pensioner which would have left a residue of $25.25 of his pension payment per week.

The case was heard by Financial Services Complaints Limited which found that the pensioner was not a suitable Guarantor and the lender had breached their duties under the responsible lending laws. The judgment resulted in the lender discharging the pensioner’s liability under the guarantee.

While guarantees are frequently enforceable, there is an expectation that lenders will act responsibly when assessing the viability of a Guarantor. We would recommend that before becoming a Guarantor you:

  1. Receive independent legal advice
  2. Make sure you understand the wording of the written guarantee
  3. Be aware that the lender does not have to pursue the borrower ‘to the ends of the earth’ before turning to the Guarantor for repayment of the debt
  4. Engage in a limited guarantee to try and minimise any potential risk.

If you would like some advice on becoming a Guarantor, contact Jason Taylor.

Quirky Commonwealth Laws

Legislation does not always keep up with society, so archaic but quirky laws of the Commonwealth remain on the statute books as shown in the examples below.

United Kingdom:
a) Under the Metropolitan Police Act 1839, it is illegal to beat or shake any carpet or rug in the street. However, beating or shaking a doormat is allowed before 8 am
b) Under the Salmon Act 1986, it is illegal to handle salmon in suspicious circumstances.

Australia:
a) The Summary Offences Act 1966 states that it is an offence to fly a kite or play a game in a public place “to the annoyance of another person”
b) The Marketing of Potatoes Act 1946 states that it is illegal for a distributor of potatoes to be in possession of more than 50kg of potatoes that are sourced from a person or organisation other than the Potato Marketing Corporation.