ARL Academic Excellence Scholarship
Last December Paul Logan, Partner, ARL Lawyers, was delighted to present Hutt Valley High School student Thulacksha Thayarooban with the ARL Academic Excellence Scholarship.
Thulacksha was awarded the scholarship for excelling in a wide range of academic subjects and her extensive involvement in service work in the community. A great all round candidate!
The Scholarship will assist Thulacksha as she studies towards her LLB/BA degree this year. Congratulations Thulacksha! We wish you well in your studies.
ARL Lawyers are recruiting.
Our busy practice is growing and we are looking to employ more solicitors. If you are interested in working in a busy mid-sized law firm and have experience, drive and determination we would love to hear from you. For more information, visit our vacancies page on our website.
In 2015, the government introduced the “bright-line test”, in an attempt to tighten the property investment rules.
The bright-line test states that (subject to exemptions) any gain from disposing of residential land within two years of acquiring it will be taxable. The test only applies to residential land. Residential land is land that has a dwelling on it or could have a dwelling on it and does not include farms or business premises.
The bright-line test applies where a person’s “first interest” in residential land is acquired on or after 1 October 2015. Generally, a person acquires their “first interest” on the day they enter into an agreement to purchase residential land. The start and end dates may vary depending on the circumstances of each transaction.
For standard sales, the two-year bright-line period starts when title for the residential land is transferred to a person and ends when the person signs a contract to sell the land. In other situations, such as gifts, the date of “first interest” is the date the title is registered by the donor and the end date is when the donee acquires registered title.
In simple terms, when a person purchases their main home after 1 October 2015 and then sells it within two years, the income they receive for the sale is not taxable. A person can only have one main home to which the bright-line test does not apply. If a person has more than one home, it is the home that the person has the greatest connection with that is considered the main home for the purposes of the test. Factors to assess when determining what constitutes the main home include:
- How often a person uses the home
- Where their immediate family is
- Where their social and economic ties are
- Whether their personal property is in the home.
The test is based on actual use of the property and not just a person’s intention to use the property as the main home. This exemption cannot be applied on a proportionate basis. So if a house is used only partly as the main home, the exemption does not apply. Where the main home is held in a trust, the exemption is usually available. However, additional information is required to ensure trusts are not used to avoid tax.
A habitual seller cannot use the main home exemption. If a person has used the main home exemption more than twice in the previous two years at the time of selling their property, they are considered a habitual seller. A habitual seller also includes a person who regularly acquires and sells residential land.
Where property is inherited by a person as a beneficiary and they subsequently sell the property, the disposal will not be subject to tax under the bright-line test. Where property is transferred between partners or spouses under a property relationship agreement, there are no tax implications. However, if the property is subsequently sold, the bright-line test may apply.
There have been cases where tax obligations arose through the disposal of residential property which did not result in financial gain to the seller. Our Property Team are specialists in the legal and tax implications of buying and selling land. Contact Rebecca Dickie or Ian Avison for further information.
I have been named an executor of a will — what do I do now?
When a loved one passes away it can be a stressful time for the family. This can be made more difficult when the deceased has not left a Will. Where the deceased has left a Will they will have named their executor or executors (their representatives) in that Will.
The role of an executor is to administer the deceased’s estate. This may include settling outstanding debts owed by the deceased and distributing the deceased’s estate in accordance with the deceased’s Will.
Before an executor can administer the estate of the deceased, they must first obtain Probate.
What is “probate”?
Probate is a court order that determines the Will of the deceased is true and authentic. The executor(s) are appointed in this order. On the making of the order, the executor(s) have the legal authority to deal with the deceased’s estate.
How do I apply for probate?
The executor(s) named in a Will must make an application in writing to the Wellington High Court for probate. The application must be in a specific format, as prescribed by a set of rules called the High Court Rules.
An application for probate may be filed in one of two ways either by way of ‘probate in common form’ or by way of ‘probate in solemn form’.
An application for ‘probate in common form’ is usually made on a ‘without notice’ basis, where the application is made without notifying anyone else, on the basis that no one will contest the Will.
In the event that it is highly likely someone will contest the Will, an application for ‘probate in solemn form’ will need to be filed. In these circumstances, the relevant parties will be notified of the application and a trial at High Court will proceed. At this point, the parties will probably need legal advice.
What would I need to make an application for Probate?
The High Court application fee for obtaining Probate is currently $200.00. This is paid when the following documents are filed:
- The original Will (not a copy)
- An application for probate in common or solemn form
- A sworn statement (affidavit) from the executor(s) which includes the following information
- The person who made the Will has died
- They knew the deceased
- Where the deceased was living when they died
- Confirmation that the Will is the deceased’s last Will
How long does this process take?
If the Application has been drafted correctly in the prescribed from and filed satisfactorily with the Wellington High Court, it may take four to six weeks to process the application. However, it could take longer if the High Court is busy or the application is complicated.
This timeframe may also be drawn-out if the application has not been drafted correctly and/or the High Court raises issues with the application. Delays of this nature have the potential to cause a number of problems between the beneficiaries. It can affect an executor’s ability to administer the deceased’s estate, particularly if immediate action is required (which it often is).
The Companies Act 1993 (“the Act”) provides the framework that applies to directors’ duties and reckless trading. The Act prohibits a director from allowing the business to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors. Any director who fails to exercise necessary care or prudence may be found personally liable for reckless trading.
New Zealand’s largest award against a director for reckless trading was made out in the Lower v Traveller case. The High Court in this particular case (and subsequently the Court of Appeal) determined that the director was responsible for $8.4 million in damages.
Reckless trading refers to a director taking illegitimate business risks. In determining the legitimacy of such risks, an objective assessment is undertaken. This focuses on the way the business is done and whether the director’s methods have created a substantial risk of serious loss.
The courts have stipulated that a director’s ‘sober’ assessment of the ongoing character of the company and its likely future income prospects is required when a company hits troubled waters.
A two-pronged approach to determine a director’s liability has been adopted. Firstly, whether there should be liability and if required, what relief is appropriate.
Material factors to assess that a business risk is legitimate, include whether:
- The risk was fully understood by those whose funds were at risk
- The company was insolvent and continued to trade over an extended period
- The director’s conduct was normal, in its ordinary course of business
- The primary persons interested in the insolvent company are the creditors rather than the shareholders.
There are limitations to the Act. The courts have found that recklessness requires more than mere negligence. A director must either be willfully negligent or make a conscious decision to allow the business to be conducted in a manner that causes a substantial risk of serious loss to the company’s creditors. A director may also avoid liability where a director has the full support of the creditors and the creditors were fully aware of risks which were incidentally substantial.
One of the criticisms of reckless trading is that it does not allow for high-risk company trade where there are prospects of large profit margins. Some do not consider this point well founded, as arguably a risk of loss is reasonably balanced by a prospect of gain. It appears this point is yet to be decisively settled at common law. The wording of the Act does not leave room for a balancing exercise. However, the Courts have acknowledged certain academic articles which analyse the duties of directors under the Companies Act 1993, proposing their preparedness to apply such an assessment to balance risk and reward.
Our Business Solutions Team can answer any questions you have about reckless trading. Contact Ben Sheehan for further information.
The Office of the Ombudsman is an independent authority which handles complaints and investigates New Zealand’s government agencies.
Investigations are initiated following receipt of a complaint or on the Offices’ own initiative to address wider administrative issues.
The Office manages complaints from individuals about the decisions and administrative acts of government agencies including district health boards and local government. This includes official information complaints which arise where a request is made to a government agency. This may be a request for information and the applicant is not happy with the response, or the information is not provided within 20 days.
On receipt of a written complaint, the Office may either resolve it without further investigation or investigate further and form an opinion on whether or not the agency has acted unreasonably. Agencies are not required to implement the Offices’ recommendations but they are usually accepted.
The Office also provides guidance and training to agencies before they implement policies to mitigate future complaints against them by the public. Complaints relating to private individuals or decisions by tribunals and courts are amongst some areas that are outside the Offices’ jurisdiction.
The Office may refuse to investigate a complaint if alternative remedies are available, if the complaint is over a year old, if the complainant lacks standing, or if the complaint is made in bad faith.
The Office provides a valuable and vital public service. More information on the Office, its services and how to access them may be found at this address: http://www.ombudsman.parliament.nz