Copyright @AnthonyDotNet http://www.patterson.co.nz Thu, 17 November 2016 08:57:10 Thu, 17 November 2016 08:57:10 Chris Patterson http://www.patterson.co.nz/news/2016/november/17/the-harmful-digital-communications-act-2015-an-alternative-to-defamation-proceedings/ There are differences between what constitutes a defamatory statement and harmful communication. However, in many cases a communication/statement will fall within both definitions and the victim will have an option as to which head they wish to a claim under.   In order to apply for civil enforcement under the HDCA, there must be a serious, threatened or repeated breach of any one of the HDCA principles via digital communication.  That breach must also have caused, or be likely to cause, harm to an individual.   Harm is defined as serious emotional distress.  Digital communication is defined as any form of electronic communication and includes text messages, writing, photographs, recordings, posts on social media or any other matter communicated electronically.  Of these two elements, the existence of a digital communication is unlikely to be disputed.  The existence of harm, however, may require some judicial interpretation.     The HDCA intends to promote fast and cost effective resolution of issues arising out of harmful digital communications.  It does so via an established Approved Agency through which all civil actions must first proceed before the matter proceeds through the District Courts.   The Approved Agency investigates complaints, determines whether the communication is actionable under the HDCA, and provides negotiation and mediation services to assist resolution.  If resolution cannot be achieved, the matter is then referred to the District Court.    The disadvantage of proceeding under the HDCA is no ability to claim damages and/or financial losses resulting out of harmful communications. The advantage is that claims will be dealt with and resolved quickly.  For this reason, if an applicant requires a harmful digital communication be removed as soon as possible to stop further negative effects on his or her reputation, the HDCA should provide that remedy in a timely manner.    A further advantage for applicants under the HDCA is that the defences of truth and honest opinion are not available, making it easier to obtain an order for removal of the communication.   The Court may take truth into account as a factor before it makes any orders under the HDCA.  Truth, however, is not an absolute defence as it is in defamation proceedings.  The lack of these defences could potentially result in an imbalance between the applicant’s rights and the communicator’s right to freedom of speech.   This is addressed because the Approved Authority and/or District Court are required to take the New Zealand Bill of Rights Act 1990 into account and balance the respective rights of the parties. http://www.patterson.co.nz/news/2016/november/17/the-harmful-digital-communications-act-2015-an-alternative-to-defamation-proceedings/ http://www.patterson.co.nz/news/2016/november/17/the-harmful-digital-communications-act-2015-an-alternative-to-defamation-proceedings/ Thu, 17 November 2016 08:57:10 http://www.patterson.co.nz/news/2016/november/02/considering-employee-wage-deductions/ Typically, it is sufficient for an employer to obtain the employee’s consent to deductions (including future deductions) by the insertion of a clause in the employee’s individual employment agreement (provided those deductions fall within the scope of what is agreed).  However, there are two legal points which an employer must consider.  First, Jonas v Menefy Trucking Limited [2013] provides that prior consent does not waive the requirement for an employer to act in good faith pursuant to the Employment Relations Act 2000 (“ ERA ”).  In particular, the employer must remain active, constructive, responsive and communicative, which includes consulting with an employee prior to deductions being made.  An employer may therefore, despite its compliance with the WPA, be in breach of the ERA for failure to comply with its good faith obligations in relation to the deduction. Second, there has also been a recent amendment to the WPA in which section 5A requires any deduction to be reasonable.  Again, this is regardless of consent already being given.  The scope of section 5A has not yet been tested by the Courts, and so it is difficult, at this time, to determine what would be considered reasonable.  In this regard, deductions which arise from clauses contained in an employment agreement are typically those which come about because the employee has caused loss to the employer by way of damage to a third party.  If the employee is responsible for the loss, particularly due to some fault on his or her part, any deduction for that loss would likely be considered reasonable.  However, in circumstances where an employment agreement contains a deduction clause which in effect operates as a penalty, (for example, failure to work out a notice period), and for which the employer cannot point to having suffered any actual loss, such clauses may not survive the reasonableness test.  When deductions are made to an employee’s wage, employers, and indeed the employee, should consider firstly, whether a deduction clause made pursuant to an employment agreement will comply with section 5A, and secondly whether, in making the deduction, good faith obligations are met. http://www.patterson.co.nz/news/2016/november/02/considering-employee-wage-deductions/ http://www.patterson.co.nz/news/2016/november/02/considering-employee-wage-deductions/ Wed, 02 November 2016 11:35:03 Chris Patterson http://www.patterson.co.nz/news/2015/december/09/payments-by-insolvent-companies-the-curse-of-the-voidable-transaction/ The commercial world can produce some odd and outright unfair results and outcomes.  A trader who provides an acceptable good or service is entitled to be paid the agreed price.  Receipt of payment concludes the bargain and the wheels of commerce move forward.  However, that all assumes the solvency of the company making the payment.  The assumption is, in most cases, practically if not actually impossible to confirm. So what happens when a payment is received from a company that is subsequently placed into liquidation?  The trader who received the money, which as a matter of law is by that stage the trader’s money, may be forced to pay an equivalent sum back to the company which has been placed into liquidation.  This not only seems, on the face of it, unfair, but it can also cause the trader (and others who have dealt with the liquidated company) to themselves become insolvent. So why does the law allow this to happen? Section 292 of the Companies Act 1993 provides that payments made by an insolvent company to any of its creditors within two years of the company going into liquidation are “voidable” if, by way of that payment, the creditor received more than they would have received (if the payment had not been made) as a creditor in the liquidation of the company.   If a payment is void, then the creditor is obliged to repay the payment to the company’s liquidators so as to increase the total amount available to the liquidators to distribute to the company’s creditors (and to meet the liquidators costs). Two recent rulings of the Supreme Court and Court of Appeal have significantly altered the manner in which the Courts will interpret and apply section 292 (and its related section 296).  In the process the Courts have greatly reduced liquidators’ ability to claw back payments made to creditors. The rationale behind section 292 is that fairness requires that, when a company has become insolvent, all of its creditors should share equally (in proportion to the amounts they are owed) in such funds, as are available to the company.   To that end, if any creditors have in the lead-up to the liquidation been paid a greater proportion of what they are owed, than the other creditors are likely to receive in the liquidation, the payments should be clawed back into the liquidation so that the total pool of money can then be divided equally between the creditors in proportion to the amounts they are owed. Section 296 does provide a defence to such claw-back, but that defence is only available to a creditor in specific limited circumstances. In practice, the goal of equal treatment of creditors is one which has, likely, never been achieved and will never be achieved.   This is because, in order to achieve such equal treatment, all preferential payments made by a company in the two years prior to its liquidation would need to be clawed-back into the company.    In practice it is invariably neither cost effect nor affordable for liquidators to undertake the multitude of legal proceedings that would be required to claw back every preferential payment.   Instead liquidators have tended to cherry-pick, and seek to recover, only those payments where: the amount involved is very large, so as to justify the costs of legal proceedings; or the amount involved is so small that a creditor is unlikely to choose to (or unlikely to be able to afford to) take legal steps to oppose the claw back of the payment(s). Arguably the use of section 292 in such a selective manner causes as much, if not more, unfairness and hardship for creditors than section 292 was meant to address.   Equally arguable is the proposition that section 292’s primary use in practice is as a means for liquidators to obtain funds to meet their own costs, rather than to materially increase the funds available to the insolvent company’s creditors. Those problematic aspects of section 292’s operation have been exacerbated, until recently, by the manner in which the Courts have interpreted and applied sections 292 and 296: The Peak Indebtedness Rule Under section 292 where a creditor has had a “continuing business relationship” with the company (for example “running account”) all of the transactions taking place as part of that relationship are required to be consolidated and considered as one combined transaction.  I.e. the value of the goods and services supplied by a creditor are required to be set off against the amounts paid by the company to the creditor, and if the company has paid more than the value of the goods and services supplied, that difference is voidable. Section 292 expressly requires all of the transactions to be considered as one consolidated transaction.  Liquidators had since the late 1990’s successfully argued (and the Courts had agreed) that liquidators could nominate any point of time they chose (so long as it was within the two year period prior to the company’s liquidation).  Once a liquidator made the point in time nomination, only the transactions from that point onward were considered as a consolidated whole for the purposes of section 292.  This has meant, for example, that liquidators could nominate a starting point for the consolidated transaction just after a creditor had made a large supply to the company, so that the value of that supply would not be included in the single consolidated transaction, but any subsequent payment by the company in respect of the supply would. In short, liquidators could choose as a starting point, the point of time at which the company owed the creditor the greatest amount, and on this basis argue that any reduction in the amount owing, from that point of time onward, should be voidable.  This was known as the “peak indebtedness” rule. Section 296 Under section 296 a creditor cannot be ordered to repay a payment they have received if they can prove that, when receiving the payment, they had no knowledge of (or grounds to know) the company was insolvent, and they “gave value” for the payment. Again, since the late 1990s liquidators had successfully argued (and the Courts had agreed) that “giving value” for a payment required that the value be given at the same time as the payment was made or after the payment was made, but not before.   In other words, if (as is the norm) a creditor supplied goods and invoiced the company for later payment, the creditor could never rely on section 296.  Conversely, if the creditor obtained payment immediately upon delivery, or obtained payment in advance of delivery, the creditor could rely on section 296, but only if they could show that they had no knowledge of (or cause to suspect) the company’s insolvency.     In practice this approach meant that very few, if any, creditors could rely on the defence contained in section 296. Fortunately, the law has not remained static and two recent rulings in the Supreme Court and Court of Appeal have sought to significantly alter the playing field by providing some relief for creditors. Fences & Kerbs v Farrell  [2015] NZSC 7 In February the Supreme Court reassessed the application of section 296, and in particular whether the provision by a creditor of goods and/or services prior to receiving payment should be sufficient to allow a creditor to avail themselves of the defence in section 296.    The Court held that such prior supply was sufficient. The situation has consequently now changed from it being very rare for creditors to be able to avail themselves of section 296, to being very commonplace.   Now, so long as creditors have actually supplied the goods and/or services they were paid for, and so long as they did not know (or have cause to suspect) the company’s financial difficulties, they will have a defence to any claw back under section 292. This very much returns the legal position to that which prevailed up until the mid-late 1990’s, where it was only rare payments that would be able to be voided, and in particular those where the creditor was tainted with knowledge that they were being preferred ahead of other creditors. Timberworld Limited v Levin & Ors  [2015] NZCA 111 The Court of Appeal has in April held that the peak indebtedness rule is not good law, and has no proper basis on the wording of the statute. While not expressly determined by the Court of Appeal, it now appears that all transactions forming part of a continuing business relationship must be considered, at least as far back as the period two years prior to the commencement of liquidation (i.e. the period within which transactions are potentially vulnerable to being voided under section 292).  This is not a perfect solution, in that there will still be many instances where a creditor’s supplies, and the subsequent payments, straddle that two year cut-off mark.     However, this ruling does as with the change to the manner in which section 296 is interpreted, greatly reduce creditors’ exposure to claw back payments under section 292. http://www.patterson.co.nz/news/2015/december/09/payments-by-insolvent-companies-the-curse-of-the-voidable-transaction/ http://www.patterson.co.nz/news/2015/december/09/payments-by-insolvent-companies-the-curse-of-the-voidable-transaction/ Wed, 09 December 2015 16:40:06 Chris Patterson http://www.patterson.co.nz/news/2015/december/02/introducing-the-harmful-digital-communications-act-2015/ With 24/7 Internet access now the norm rather than a novelty, people are spending more of their time online. Unfortunately, some people use the Web to bully or harass others, whether it’s schoolchildren teasing a classmate or an anonymous troll ripping into a celebrity on Twitter. Bullying has definitely made the leap in the digital age, creating new issues for the law to respond to. Existing legal tools used to address cyber-bullying include the torts of defamation and harassment. However these remedies are expensive and time-consuming to acquire. A new tool available to victims of cyber-bullying is the Harmful Digital Communications Act 2015 (HDCA). The Act aims to “mitigate harm caused to individuals by digital communications; and provide victims of harmful digital communications with a quick … means of redress”. This post explains how the HDCA achieves its purpose and discusses its implications for individuals and content hosts. Bullying has definitely made the leap in the digital age, creating new issues for the law to respond to. Existing legal tools used to address cyber-bullying include the torts of defamation and harassment. However these remedies are expensive and time-consuming to acquire. A new tool available to victims of cyber-bullying is the Harmful Digital Communications Act 2015 (HDCA). The Act aims to “mitigate harm caused to individuals by digital communications; and provide victims of harmful digital communications with a quick … means of redress”. This post explains how the HDCA achieves its purpose and discusses its implications for individuals and content hosts. This post explains how the HDCA achieves its purpose and discusses its implications for individuals and content hosts. Three avenues of redress If an individual has suffered or will suffer “serious emotional distress” from “any form of electronic communication”, they eventually will have three avenues of redress. The first avenue will be for the affected individual to lay a complaint with the Approved Agency. However this part of the Act is not yet in force but should be active by July 2017 or earlier. The government is using this time to decide who will fill this role. The Approved Agency is tasked with managing and resolving complaints as well as providing education on online safety. After assessing the complaint, the Approved Agency will “use advice, negotiation, mediation, and persuasion (as appropriate) to resolve complaints”. The second avenue will be for the affected individual to apply for an order from the District Court. Again, this part of the Act is not yet in force but should be active by July 2017 or earlier. An individual can only apply for a court order if the Approved Agency has “had a reasonable opportunity to assess the complaint and decide what action (if any) to take”. Even if this requirement is met, the District Court can still refer the complaint back to the Approved Agency. If the Court hears the complaint, it must be satisfied that “there has been a threatened serious breach, a serious breach, or a repeated breach” of the “communications principles” set out in the HDCA. These principles are central to the Act because they set out the boundaries for acceptable digital communications. If the Court finds that there has been a serious breach of the communications principles, it can issue a broad range of orders including a takedown order or an order requiring the defendant to refrain from the conduct in question. The HDCA also creates two new criminal offences. It is an offence to fail to comply with an order made by the Court and it is an offence to post a digital communication with the intent of causing harm to the victim. The penalties for both offences include fines and imprisonment. The third and final avenue available to the affected individual is to approach the online content host (eg. a blogging website) to remove the harmful communication from their website. This part of the Act is currently in force. When the Approved Agency is chosen, it will be able to take this action on behalf of an individual. Within 48 hours of receiving the complaint from the affected individual, the host must notify the author of the communications in question of the complaint. If the author cannot be contacted, the host must remove the content within 48 hours. If the author can be contacted, then the author has a further 48 hours to submit a counter-notice. In the counter-notice, the author can permit or prohibit the host from communications in question. The host must inform the complainant if the author refuses to allow the communications to be removed. If the host follows this process, it is rendered immune to any civil or criminal proceedings arising from the hosting of the harmful content. The HDCA also creates two new criminal offences. It is an offence to fail to comply with an order made by the Court and it is an offence to post a digital communication with the intent of causing harm to the victim. The penalties for both offences include fines and imprisonment. The third and final avenue available to the affected individual is to approach the online content host (eg. a blogging website) to remove the harmful communication from their website. This part of the Act is currently in force. When the Approved Agency is chosen, it will be able to take this action on behalf of an individual. Within 48 hours of receiving the complaint from the affected individual, the host must notify the author of the communications in question of the complaint. If the author cannot be contacted, the host must remove the content within 48 hours. If the author can be contacted, then the author has a further 48 hours to submit a counter-notice. In the counter-notice, the author can permit or prohibit the host from communications in question. The host must inform the complainant if the author refuses to allow the communications to be removed. If the host follows this process, it is rendered immune to any civil or criminal proceedings arising from the hosting of the harmful content. Implications for the future The HDCA aims to provide individuals affected by harmful or offensive online communications with legal remedies that are easier to access, require less time to take effect and help to address the source of the problem (ie. the harmful or offensive online communication). The HDCA also provides certainty and protection for website hosts, who in the past have been sued for defamation after hosting harmful or offensive online communication.However, the HDCA’s broad wording and somewhat invasive remedies have led some to claim that the Act infringes upon the right to free speech. Whether there is any substance to these claims will be seen when the courts apply the Act to a particular set of facts. It is noted that the Court, when considering whether to make an order, must consider the purpose and content of the communications in question. It will be interesting to see whether the HDCA will be an effective tool for addressing the harm caused by cyber-bullying and similar misuses of online communication. Watch this space. http://www.patterson.co.nz/news/2015/december/02/introducing-the-harmful-digital-communications-act-2015/ http://www.patterson.co.nz/news/2015/december/02/introducing-the-harmful-digital-communications-act-2015/ Wed, 02 December 2015 14:40:13 Chris Patterson http://www.patterson.co.nz/news/2015/november/24/former-russian-billionaire-has-some-trust-issues/ Once known as “Putin’s Banker”, Sergei Pugachev, a former Russian Billionaire, will be content following the recent High Court decision of Kea Trust Company Limited v Pugachev . Pugachev was the co-founder of Russia’s Mezhprombank, which previously had billions of dollars worth of assets under its control.   He once boasted in a Financial Times interview that he was personally behind President Vladimir Putin’s rise to power, however he fell out of favour with the Russian Government and they subsequently seized his giant business empire.   November 2010 saw a Moscow Court declare Mezhprombank insolvent and Russian authorities later beginning a criminal investigation into the bank.  He recently eluded the reach of Russian authorities and some alleged death threats in London by escaping to the balmy weather and sinuous urban promenade of Nice, which is quite agreeable as far as exiles go.  Although, he now claims he is broke or at least by his own standards, “I’m down to my last $70m”. The Court appointed liquidators of his failed bank, the Russian State Corporation Deposit Insurance Agency.  It is alleged Pugachev carried out a scheme designed to extract money from the bank, after it received recapitalisation loans from the Russian central bank. Pugachev denied the allegations and fought a worldwide freezing order, which was placed over his assets last year by a UK Court. When Pugachev disclosed details of US$70 million (NZD$110.3 million) of assets to the liquidators to comply with this freezing order, he revealed he was a beneficiary of five New Zealand-based trusts. The trustees of these entities were Kiwi firms directed by Auckland lawyers Bill Patterson and Robyn Hopkins. Subsequent documents apparently signed by Pugachev purported to remove those trustees and replace them with four other local companies. Pugachev, according to the judge, saw Dozortseva's removal as an "unwarranted and impulsive course of action" by Patterson and as a result he had lost confidence in the lawyer's ability to act appropriately as a director of the original trustees. The original trustees applied to the New Zealand Court seeking a direction on whether they were validly removed and if so, whether trust assets could be transferred to their replacements without breaching the worldwide freezing order. The crucial question before the Court was whether powers conferred on a protector (in this case Mr. Pugachev) should be regarded as fiduciary in nature. While “protectors” are not a common feature of New Zealand trusts, they are not entirely unheard of.   A protector might be described as a hybrid of a trustee and an appointor.  This is a fairly inelegant statement of the term, but hopefully it gets the idea across. In  Kea  the Declaration of Trust gave the protector the power to “remove any existing trustee with or without cause.” In this case the protector had lost faith in the trustee and the Court found that in removing the trustee, the protector “cannot be regarded as having been exercised for an improper purpose. If the Protector had been a third party at arm’s length from the Pugachev family who had diverted trust assets for his or her own benefit, the position would undoubtedly be different.” Justice Heath said exercising the power to remove trustees and appoint others, in circumstances where there has been a loss of trust and confidence in those responsible for directing the original trustees, cannot be regarded as having been done for an improper purpose. If the Protector had been a third party at arm’s length from the Pugachev family who had diverted trust assets for his or her own benefit, the position would undoubtedly be different.” Justice Heath said exercising the power to remove trustees and appoint others, in circumstances where there has been a loss of trust and confidence in those responsible for directing the original trustees, cannot be regarded as having been done for an improper purpose. Kea Trust Company Limited v Pugachev,  while turning on its own facts, provides some useful guidance as to the role of protector and the extent of fiduciary obligations a protector can owe. http://www.patterson.co.nz/news/2015/november/24/former-russian-billionaire-has-some-trust-issues/ http://www.patterson.co.nz/news/2015/november/24/former-russian-billionaire-has-some-trust-issues/ Tue, 24 November 2015 14:03:17 Chris Patterson http://www.patterson.co.nz/news/2015/november/19/restraint-of-trade-consider-the-consideration/ It is an unspoken truth that an employee can be at the same time an employer’s biggest asset and greatest potential threat. This is particularly true in the recent Employment Relations Authority decision of Nova Energy Ltd v Mitchell. Michael Mitchell was a former employee of Auckland Gas Company, a subsidiary of Todd Energy, before it amalgamated with Nova in 2013. Mr. Mitchell worked for Auckland Gas for a total of nine years before he decided to leave the company, however before he quit he uploaded Nova's client list and rates, described as a "kit book" to set up a gas brokerage, onto a USB drive. He kept that information once his employment ended. He then went on to set up a competing business, National Energy Limited, and used the information from Nova to identify certain Nova customers, particularly those paying high margins, without a recent contract or near the end of their contract. Consequently, Nova Energy asserted that Mitchell had breached his duty of fidelity, good faith and the restraint of trade clause pursuant to his exit agreement. In the employment law context, restraints of trade are specific clauses in employment agreements under which employees agree not to do something that they would otherwise be free to do after they leave their job, such as running a similar or competitive business. Whilst no restraint of trade clause was included in his original employment agreement, Nova believed that Mr Mitchell was subject to a valid and enforceable restraint of trade that he agreed to from the last day of his employment. However the Authority found that because this was a variation to Mitchell’s existing terms of employment; fresh consideration (a benefit conferred to Mr. Mitchell) was required for the new restraint term to be valid and enforceable. Nevertheless, that was not fatal to the Nova because a contract of employment cannot be equated with an ordinary commercial contract.  It is a special relationship under which workers and employers have mutual obligations of confidence, Nevertheless, that was not fatal to the Nova because a contract of employment cannot be equated with an ordinary commercial contract.  It is a special relationship under which workers and employers have mutual obligations of confidence, trust and fair dealing. Thus in the absence of any post termination restrictions, Nova brought claims against Mr. Mitchell for breach of the common law duties of good faith and fidelity that that are implicit in any employment agreement in New Zealand. The duty of good faith in section 4 of the Employment Relations Act 2000 requires employers and employees to deal with each other in good faith and not to "whether directly or indirectly, do anything … to mislead or deceive each other". Mitchell subsequently admitted he had breached obligations in his employment agreement and the implied common law duties, by taking Nova’s confidential information before his employment ended and then using it for the benefit of himself. Consequently, the Employment Relations Authority has ordered Michael Mitchell to pay Nova Energy annual damages over $1 million for a period of seven years. This case provides a useful reminder of how implied terms can be used to protect an employer’s business, especially where employees are engaged in http://www.patterson.co.nz/news/2015/november/19/restraint-of-trade-consider-the-consideration/ http://www.patterson.co.nz/news/2015/november/19/restraint-of-trade-consider-the-consideration/ Thu, 19 November 2015 12:41:18 Chris Patterson http://www.patterson.co.nz/news/2015/november/12/are-my-computer-files-mine-the-curious-case-of-dixon-v-r/ Background It is no secret that the law has struggled to keep up with the ever-quickening pace of technological change. The recent Supreme Court decision of Dixon v R is another example of how the courts are trying to reconcile laws designed for the real world with the digital world. During the 2011 Rugby World Cup, the English rugby team visited the Altitude Bar in Queenstown, where Jonathan Dixon worked as a bouncer. One of the players, Mike Tindall, was observed interacting with a woman at the bar. Mr. Dixon asked the bar’s receptionist for video footage of Mr. Tindall interacting with the woman, which had been captured by the bar’s CCTV system. Mr. Dixon copied the footage to his USB drive and tried to sell it to overseas media organisations. When his sales efforts were unsuccessful, Mr. Dixon posted the footage on YouTube. Mr. Dixon’s actions resulted in a complaint to the Police, who charged him with the offence of accessing a computer system and dishonestly obtaining property (ie. the CCTV footage) under the Crimes Act 1961, s249(1)(a). In the Invercargill District Court, Mr. Dixon was convicted of accessing a computer system and dishonestly obtaining property and was sentenced to four months’ community detention and 300 hours of community work. Mr. Dixon appealed his conviction and sentence on the grounds that the footage was not property. The Court of Appeal held that a digital file does not fall within the statutory definition of property and substituted a conviction for accessing a computer and obtaining a benefit. The Court went on to dismiss Mr. Dixon’s appeal against his sentence. The Supreme Court granted Mr. Dixon leave to appeal the Court of Appeal’s decision. The Supreme Court’s Reasoning The Court commenced by emphasising that information itself cannot be property. It then reviewed the new definitions of ‘property’ and ‘document’ which had been introduced in the Crimes Amendment Act 2003. It held that digital files fall within the definition of ‘document’ for a number of reasons: The Court approved the Court of Appeal’s observation in R v Misic that a document was not to be identified by the medium on which it exists (eg. papyrus, clay tablet, paper) but rather by whether there is “a material record of information”. The Court considered that Parliament had stored data in mind when it drafted the computer crime provisions introduced in the Crimes Amendment Act 2003. The Court also found that a digital file possesses a number of characteristics associated with property; it is capable of being owned, transferred and has a material presence because it takes up space on a storage device. The Court looked at the approach overseas, where the United States courts have accepted that software and electronic records are property. Conversely, the English courts have agreed in principle that digital files are intangible property but have held that they cannot be tangible property. The Court concluded that the Court of Appeal had erred by determining that digital files cannot be property. Its decision was based on the similarities between real documents and digital files as well as precedent supporting the conclusion that digital files share the features of property. As a result, the Court reinstated Mr. Dixon’s original conviction for accessing a computer system and dishonestly obtaining property. Implications of the Decision In some ways, the Supreme Court’s decision helps to resolve some of the issues raised by the Court of Appeal’s decision. If person “A” takes a piece of paper containing confidential information, they can be convicted of theft because they have deprived person “B” of the piece of paper, not because they have taken the information on the paper (since information does not fall within the definition of ‘property’). Similarly, if person “A” takes a digital file from person “B”, they have deprived person “B” of their property. Therefore, the Supreme Court has aligned the legal position on this issue in the real world and the digital world. However this decision raises a number of important questions, which are discussed by Professor Andrew Geddis of the University of Otago Faculty of Law. The Court’s decision has a number of implications for people receiving digital files that have been improperly obtained. For example, if person “A” steals a digital file containing a movie and gives it to person “B”, could person “B” be charged with receiving stolen property under s246 of the Crimes Act? It is also worth noting that the Court made its decision in a hearing where the appellant (Dixon) was not represented by counsel, who would have presented opposing arguments to the Crown’s (and ultimately the Court’s) approach to the central issue in this case. While the Court reached the correct outcome on the facts, it is suggested that this case shows the weaknesses of applying legal thinking developed in the real world to the novel issues raised by the digital world. Ultimately, the law and the legal profession need to understand the nuances of the digital world before we can deal with its unique issues in a fair and consistent manner. References: 1. [2015] NZSC 147: https://www.courtsofnz.govt.nz/front-page/cases/jonathan-dixon-v-r-1 2. Refer http://www.legislation.govt.nz/act/public/1961/0043/latest/DLM330422.html 3. R v Dixon DC Invercargill CRI-2011-059-1122, 18 April 2013 4. Dixon v R [2014] NZCA 329, [2014] 3 NZLR 504 5. R v Misic [2001] 3 NZLR 1 (CA) at [31] 6. Crimes Act 1961, ss248-252:  http://www.legislation.govt.nz/act/public/1961/0043/latest/DLM330415.html 7. Andrew Geddis “Dixon v R: An easy case that raises hard questions” (20 October 2015):  http://www.pundit.co.nz/content/dixon-v-r-an-easy-case-that-raises-hard-questions 8.Refer to the comments in Prof. Geddis’ blog post and the transcript of the hearing in the Supreme Court: https://www.courtsofnz.govt.nz/from/transcripts/supreme-court-transcripts-2015/SC82_2014JonathanDixonvTheQueen.pdf http://www.patterson.co.nz/news/2015/november/12/are-my-computer-files-mine-the-curious-case-of-dixon-v-r/ http://www.patterson.co.nz/news/2015/november/12/are-my-computer-files-mine-the-curious-case-of-dixon-v-r/ Thu, 12 November 2015 14:25:32 Chris Patterson http://www.patterson.co.nz/news/2015/january/16/facebook-defamation-man-awarded-131k-after-estranged-wifes-domestic-violence-post/ In Australia a woman has been ordered to pay her estranged husband A$12,500 after she accused him, on Facebook, of subjecting her to years of abuse. Although she defended the defamation claim by arguing truth, the Court found that at best, she had only established that there was an incident during a holiday in 2010 which led to her husband to apologise to her. As such, the Court found that the woman had indeed defamed her estranged husband – an experienced educator – and that he was entitled to public vindication of the allegations. The woman deleted her post after six weeks and that was a factor for the Court in determining the quantum of damages payable. Interest and costs were also payable on top of the award. There is no reason why the same facts could not succeed in a claim for defamation in New Zealand. The Courts are more and more willing to intervene when it comes to defamation via social media. It will be interesting to see how the Courts deal with the enormous propensity for the repeated publication of defamatory statements on line when it comes to assessing damages. In the Australian case, the fact that the comments were read by a limited audience (presumably the Facebook friends of the woman) was also a factor the Court took into consideration when dealing with the issue of the appropriate quantum of damages. One could imagine that if it was a Twitter feed that spread, the damages would be greater (the Chris Cairns case springs to mind). The Harmful Digital Communications Bill, if passed, will provide another avenue for victims of such postings. The government Bill is intended to address the harm that can be created by misuse of the internet and creates both civil and criminal offences along with an agency to monitor and investigate complaints. If not resolved then, the victim can make an application to the District Court which will have the power to order take downs, retractions, apologies and corrections. Orders can also be sought against website hosts and internet service providers. The Bill is expected to be back before Parliament for its second reading this year. http://www.patterson.co.nz/news/2015/january/16/facebook-defamation-man-awarded-131k-after-estranged-wifes-domestic-violence-post/ http://www.patterson.co.nz/news/2015/january/16/facebook-defamation-man-awarded-131k-after-estranged-wifes-domestic-violence-post/ Fri, 16 January 2015 12:29:41 Chris Patterson http://www.patterson.co.nz/news/2014/december/18/significant-employment-law-changes/ Some significant changes are to be made to the Employment Relations Act 2000 (“the Act”) which will come into effect on 6 March 2015. The changes target six key areas of the Act with the aim of promoting the concepts of flexibility and choice, the balance of fairness between employers and employees, and a reduction in regulation and compliance costs. A brief overview of each of the six areas of change is detailed below. Flexible Work - The key changes under flexible work arrangements are said to better reflect today’s modern lifestyles, with the aim of enabling employees to find the right work-life balance. The changes include extending the right to ask for flexible work arrangements to all employees (as opposed to just caregivers); allowing employees to request flexible work arrangements from the first day of their employment (rather than waiting six months), allowing employees to make a number of requests in any year, and reducing the timeframe in which the employer must respond to one month (from three months). Rest and Meal Breaks – Key changes under rest and meal breaks are to make them more flexible. Employees will still be entitled to rest and meal breaks. The key is that such breaks must be “reasonable” and parties should negotiate in good faith when breaks should be taken and the duration of them. However, in the event that no agreement can be reached, employers will have the ability to decide when breaks are to be taken. Further, when breaks cannot reasonably be provided by employers (for example, due to business needs), employees will have the right to be compensated for the lack of a break. Continuity of Employment – Part 6A – The changes aim to give more certainty and clarity to employers under Part 6A of the Act (which relates to transferring employees to a new employer after a merger/acquisition), while keeping key benefits for affected employees. Key changes include exempting SMEs (businesses with less than 20 employees) from compliance with Part 6A; governing the transfer of information from the original employer to the incoming employer, and protecting incoming employers from unjustified increases in employee costs and terms of employment. Good Faith – The changes clarify the information that employees are entitled to receive in situations where their employment may be adversely effected by a decision of the employer (e.g. restructuring/redundancy and disciplinary situations). In such situations, employers must give the potentially affected employee relevant confidential information about that particular employee. An employer does not have to give the affected employee information about any other employee, if doing so would involve an unnecessary disclosure in respect to that other employee. However, employees in disciplinary situations should still know the identity of their accuser unless there is good reason to keep this information confidential. Collective Bargaining – The changes to collective bargaining aim to increase choice and flexibility, and improve fairness and balance between parties. The key changes include allowing employers to opt out of multi-employer bargaining, removing the 30-day rule requiring new non-union employees to be on the same terms and conditions of employment as any relevant collective agreement, requiring written notice in advance of any proposed strikes or lockouts, allowing employers to proportionately reduce pay as a response to partial strikes, and, in situations where agreement cannot be reached, allowing parties to ask the Employment Relations Authority to declare that bargaining has ended. Employment Relations Authority (ERA) – The changes amend the way in which the ERA must give determinations (decisions), requiring that, whenever practical, an oral determination must be provided at the conclusion of a hearing, with a written record of that determination being issued within one month. The ERA can only delay its determinations if there is good reason to do so, e.g. further evidence or submissions are to be provided. Any delayed determination must be delivered within three months after the later of the hearing date or the additional evidence/submissions are provided. http://www.patterson.co.nz/news/2014/december/18/significant-employment-law-changes/ http://www.patterson.co.nz/news/2014/december/18/significant-employment-law-changes/ Thu, 18 December 2014 17:10:25 Chris Patterson http://www.patterson.co.nz/news/2014/august/20/so-you-think-your-assets-are-safe-in-a-trust/ The Court of Appeal has recently confirmed that there is no reason in principle why a constructive trust cannot be imposed on property owned by a trust – Murrell v Hamilton & Ors [2014] NZCA 377. Murrell and Hamilton were in a de facto relationship for 8 years.  Two years after their relationship started they moved into a house under construction by a company operated by Hamilton who was himself a builder.  The property was owned by Hamilton’s family trust (“the Trust”).  For the following three years, the property was completed and landscaped.  Murrell assisted with the completion of the house.  After it was complete, the couple moved out and the property was rented.  It was later sold.  About a year after its sale the couple separated. Murrell then brought a constructive trust claim against the Trust.  She said she had assisted with the completion of the house over the three-year period because Hamilton had made statements to the effect that she would share in profit of their joint efforts.  Hamilton adamantly denied that. The High Court found that Murrell had made contributions to the property and that she did so in circumstances where she held a reasonable expectation that she would enjoy an interest in the property.  The Court also found that it would be unconscionable of a reasonable person in Hamilton’s shoes to deny the existence of that interest.  However, the High Court found that the interest was not enforceable against the Trust (the key finding).  This was because (a) the property had been owned throughout by the Trust; and (b) that there was no basis for the view that both trustees of the Trust had stimulated Morrell’s expectations of a share in the property such that it would be unconscionable of them to deny her claim. However, the Court of Appeal overturned the High Court’s key finding.  It saw no reason in principle why a constructive trust claim should not succeed in respect of property owned by a trust.  On the facts of the case, it found that as Hamilton’s actions were effectively treated as the actions of all trustees of the family trust (and binding on it), it would be unconscionable for the trustees to deny Murrell’s claim based on the stimulation, by Hamilton, of Murrell’s expectation vis-à-vis the trust.   The Court of Appeal was at pains to point out that allowing Murrell’s claim would not alienate Trust property – rather it meant that part of the value of the Trust property which should not accrue to it, did not accrue to it.  It was also at pains to record that it did not find the Trust to be a sham or the “alter ego” of Hamilton – it was a valid Trust and was to be treated as such. Morrell was entitled to a 15% share of the net sale profits of the property and the rental income arising from it. This decision just goes to show no matter how the title to assets might be held, if the Court thinks that the effect of the legal title will be unjust (here the Trust keeping entirely the sale proceeds of the house Morrell worked on), it will find a way to go behind the legal ownership to avoid what it perceives to be any unjust enrichment. By Chris Patterson, 2014 http://www.patterson.co.nz/news/2014/august/20/so-you-think-your-assets-are-safe-in-a-trust/ http://www.patterson.co.nz/news/2014/august/20/so-you-think-your-assets-are-safe-in-a-trust/ Wed, 20 August 2014 16:14:44 Chris Patterson http://www.patterson.co.nz/news/2014/august/11/unsubstantiated-representations/ Advertisers make a lot of claims in advertising material. They might say that their product or service is better, cheaper or provides other benefits that similar products or services do not. Consumers often don’t have the time to research whether these claims are true, and even if they buy the product (or service) they might still be unable to assess whether the representation is true, especially if buying one product meant not buying the other (so there is no basis to compare). In response to this, Parliament has made it illegal, under the Fair Trading Act, to make these sorts of representations without any reasonable basis for doing so. Any claim that a business makes about its products or the goods and services it offers, must be based on reasonable grounds. This applies whether the claim is express or implied. An express claim is one that is literally stated – such as “All products half price” or “Studies show that …”. An example of an implied claim or statement might be “Available to you at factory prices” (implying that the product is available “at wholesale”), or “Eco-protect dishwashing liquid” as the implication is that the dishwashing liquid is friendly on the environment. Reasonable grounds means information provided about the product or service by a reputable supplier or manufacturer, information held by the business making the claim and any other reasonable source (e.g. scientific journals). If a representation is unsubstantiated and not made on reasonable grounds, but was still true, that may still constitute a breach of the Fair Trading Act. So, before advertising goods or services for sale, a business must take reasonable steps to verify what they are saying about their goods or services. These changes are important, as Parliament has widened the scope of the Fair Trading Act (and the Consumer Guarantees Act) to capture statements made and products/services bought and sold online. Particularly affected will be people and businesses that sell via Trademe accounts. As from 1 June 2014, the Fair Trading Act requires anyone who is “in trade” for the purposes of the Act (generally where the vendor did not initially purchase the goods for their own personal use), to make this clear to consumers, when offering goods or services for sale online and Trademe accounts are now starting to declare “vendor is in trade” where relevant. This confirms to consumers that they will be covered by the Fair Trading Act and the Consumer Guarantees Act when trading with that seller. By Chris Patterson, 2014 http://www.patterson.co.nz/news/2014/august/11/unsubstantiated-representations/ http://www.patterson.co.nz/news/2014/august/11/unsubstantiated-representations/ Mon, 11 August 2014 16:03:36 Chris Patterson http://www.patterson.co.nz/news/2014/july/03/did-you-know/ Several years ago the Electronic Transactions Act came into force heralding in a bright new future.  A future where individuals and businesses would be able to dispense with the use of paper and be more environmentally unfriendly by recording their agreements electronically.  Rightly or wrongly, my team and I always took the view that you could use email to complete an agreement and that the agreement was binding once an acceptance email was received.  Others disagreed with us. Not as an example of we told you so but Electronic Transactions (Contract Formation) Amendment Act has recently confirmed that we were right all along.  The Amendment Act clarifies when the acceptance of an offer occurs by email. Now, acceptance of an offer by electronic communication will be effective from when it is received, unless the parties agree otherwise or another Act provides differently. So now that is cleared up we can get back to arguing about other important matters including whether an offer can be withdrawn by other electronic means such as instant messaging. By Chris Patterson, 2014 http://www.patterson.co.nz/news/2014/july/03/did-you-know/ http://www.patterson.co.nz/news/2014/july/03/did-you-know/ Thu, 03 July 2014 12:20:07 Chris Patterson http://www.patterson.co.nz/news/2014/july/03/a-right-to-be-forgotten/ So far 2014 has been a year where of some of my new clients have come to me and my team seeking help to be forgotten.  Well not completely but rather just the negative references to them on the internet.  The immediate question is whether there is such a thing as a right to be forgotten? Or to have certain things about your past forgotten?  As with most issues in cyberspace my team and I are often forced to shoehorn old laws into providing some form of remedy.  We also occasionally have to rely on rights extending well beyond the common understanding of those rights.  The great thing about the common law is that it evolves.  The downside is that evolution is usually quite some time behind developments in technology. On the other side of the world the European Court of Justice has been quite progressive and has recently ordered Google to remove links that are deemed to be “inadequate, irrelevant or no longer relevant.” To date, Google has largely been able to avoid liability for postings that appear on Google searches by reason of its general argument that it is simply a search engine and doesn’t have any responsibility for those postings.  This decision changes that – well, in the EU in any event. It all arose after a Spanish national found that searches on his name revealed a 1998 newspaper article on his financial problems.  He argued that the information was well in the past – he had paid off his debts and it was now years later – essentially that he had the right for this information  to be forgotten (no argument that it was not in any way not true or correct).  The European Court agreed and decided that search engines did have a duty to make sure data deemed “inadequate, irrelevant or no longer relevant” did not appear. This raises huge issues on who decides what is inadequate, irrelevant or no longer relevant.  Prior to this decision, one would have thought information about past financial problems may well guide how likely an individual will likely suffer financial problems in the future and therefore still have relevancy (credit check anyone?).  Watch this space for developments. In New Zealand, our Privacy Act does not currently recognise “data processors” such as Google as the EU directive does.  But it is coming up for an overhaul.  And, given that the internet effectively creates an international community changes in the EU are likely to impact on legislative and decision makers here.  In that regard the Justice and Electoral Committee released its report on the Harmful Digital Communications Bill recommending that it be passed with some amendments.   The Bill is intended to address the harm that can be created by misuse of the internet and creates offences along with an agency to monitor and investigate complaints.  I can imagine that it will be a very busy agency. In the meantime, the only clear right to be forgotten is contained in our “clean slate” legislation which is designed to allow those with less serious criminal convictions who have been conviction free for at least seven years to put their past behind them. For those who wish other things to be forgotten, there is always the ability to ask the original website to voluntarily remove information that is “stale” – and more so when that stale picture does not reflect what actually happened way back when or when it causes current prejudice.  If removed the corresponding Google search result will soon forget you or “that incident” over time or if you can’t wait for that, you can ask Google to remove it more quickly by reason of the original website having removed it.  Finally, there are some practical solutions that can be used in addition to some legal mechanisms to help people be forgotten on the internet. By Chris Patterson, 2014 http://www.patterson.co.nz/news/2014/july/03/a-right-to-be-forgotten/ http://www.patterson.co.nz/news/2014/july/03/a-right-to-be-forgotten/ Thu, 03 July 2014 12:17:55 Chris Patterson http://www.patterson.co.nz/news/2014/june/19/failed-finance-company-settlements-secrets-revealed/ I have to be a little careful with this blog.  My motivation for going to digital print on this topic is altruistic. Recently, the mainstream media have once again reported that yet another settlement has been reached by the receivers of a failed finance company (this time Strategic Finance) with the investors having no input and simply being left to accept the outcome.  The investors, as reported by the media, complain that they have not been consulted with and have no idea how or why the receivers have settled the claims of the company, with the settlement resulting in 5 cents in the dollar for the investors. Below are some general observations: Secured creditors have, in certain circumstances, the right to take over certain aspects of the management of a company via one or sometimes two insolvency practitioners who they appoint as receivers to the company; The receivers have a relationship with their appointers (the secured creditor(s)) which they want to maintain and strengthen; The receivers take their fees from what they recover from the company but underwritten (i.e. guaranteed) by their appointer; The secured creditors’ interest is in recovering the debt owed to them, and will in many (but not all) respects have priority, ahead of other creditors, to any money recovered.    The secured creditor has little real incentive to fight to recover more than is owed to them; The receivers’ primary commercial interest is to keep their appointer satisfied.  Receivers do owe a legal duty to have regard to the interests of other creditors, but it can be very difficult (and prohibitively expensive) for other creditors to prove to the Courts that a receiver could have, and should have, recovered more; The receivers interest is to keep their appointer satisfied; The receivers are in the business of providing insolvency services and like other professionals often charge by the hour as opposed to by the value; and Investors in failed finance companies are not secured creditors.   Aspects of the above might be regarded, by some, as controversial.  The additional general observations below may also be regarded as controversial: Investors are not aware that receivers do owe duties of good faith towards unsecured creditors; Receivers are not the only party who can claim against a company and\or its directors; Investors do not know their rights or more importantly the pathway towards maximising their entitlement to recover their losses; Company directors and receivers have no interest in raising the awareness of investors that they (the investors) have a right to pursue the company and\or its directors to recover the losses suffered by the investors. I would expect a failed finance company investor to say “Chris thanks for the above and now that we are aware a pathway exists, how do we go down that pathway?”  I like to keep things simple. So in simple terms this is what you do in respect of the first pathway (there is actually two): File a proof of debt with the liquidator failed finance company (all of them are in liquidation).  A proof of debt form can be obtained by emailing the liquidator who has an obligation to provide one; Once the proof of debt is accepted then the investor is officially a creditor; As a creditor, a claim can be filed against the director(s) of the failed company pursuant to section 301 of the Companies Act 1993.  Section 301 is a great but little known and used section. In short s 301 gives every creditor the right to seek an order that the director(s) pay money into the company due to their shortcomings; and The director will either take no steps and face bankruptcy or defend the claim (unlikely if they have already settled with the receiver) or settle. Someone, perhaps the lawyers acting for the defendant director(s), might point out that any money paid by a director or his\her insurer will end up going to the secured creditors, so why would an unsecured creditor bother?  Well, the answer is simply that a receiver would be in breach of their obligation of good faith if they failed to agree with the unsecured creditors, to allow them to keep all or some of any recovery obtained from their claim against the director(s), given that the receiver had already reached a settlement with the director(s). A receiver who has settled with the director(s) no longer has any interest in pursuing the directors. A receiver, in those circumstances, cannot, as a matter of good faith stand in the way of the unsecured creditors seeking to recover some of their losses or simply seeking the satisfaction of bankrupting the individuals responsible for the loss of their (the investors) hard earned money. It can be an arguable line between incompetence and theft. The law must provide a remedy to all wrongs. Otherwise, why should we be surprised when the victims take matters into their own hands? What has surprised me is how forgiving the investing public has been towards a number of company directors. Mark Byers springs to mind. The reason for the apathy of investors might, in part, be due to the State being willing to underwrite some of those losses via the Retail Deposit Guarantee Scheme.  Not that Blue Chip was part of the tax payer paid scheme that allowed those who were chasing high returns to keep both the interest payments they received but also to be reimbursed for their investments when it all went sour.   Another reason is ignorance.  This blog seeks to overcome that reason, in part. There must be more than a few company directors breathing easy knowing that:  Investors are ignorant of their rights; The State has failed to educate investors of their rights and has been selective as to how and who has been prosecuted; Directors who are potential defendants are not going to advise investors of their rights; and Civil claims are time barred six (6) years after an investor has become aware that they have suffered a loss. The failure of a large number of New Zealand’s second tier financial institutions wiped several billion out of our economy. Some might say that investors got what they deserved.  However, when the State intervened it resulted in tax payers money being used to help clean up the mess.  Money, which could have been used to save lives through hospitals or to educate our children and grandchildren.  Have all of those responsible paid their fair share?  I do not think so.  Has the insolvency industry or the State held them fully accountable?  Ask the investors who have lost their life savings. By Chris Patterson, 2014 http://www.patterson.co.nz/news/2014/june/19/failed-finance-company-settlements-secrets-revealed/ http://www.patterson.co.nz/news/2014/june/19/failed-finance-company-settlements-secrets-revealed/ Thu, 19 June 2014 15:20:51 Chris Patterson http://www.patterson.co.nz/news/2013/november/13/the-achilles-heel-that-bit-the-liquidator-in-the-arse/ Liquidators occupy an important position within the economy.  A large number of companies fail each year, leaving hundreds of millions of dollars left owing to creditors.  Creditors rely, to varying degrees, on the integrity and honesty of liquidators to perform their statutory function to gather in the assets of the liquidated company and then distribute them as per the priorities set out in the Sixth Schedule of the Companies Act.  The Act and its regulations prescribe certain duties and obligations on liquidators.  A key obligation, in short, is to pass money from the company to its creditors. Court appointed liquidators are officers of the Court. Liquidations and receiverships can be quite lucrative work for insolvency practitioners.  It is not unheard of for an insolvency practitioner’s fees to exceed a million dollars, although I do accept that does not occur often. It surprises some people that almost anyone can be appointed a liquidator.  While many insolvency practitioners do have some background in accounting there is no legal requirement for them to do so.  In fact, there is no requirement in law that a liquidator can count or even be able to read.  Liquidators are required to produce 6 monthly reports.  It might be implied that they are required to read their own reports before producing them.  A fraud conviction has not stood in the way of at least one insolvency practitioner being able to make himself available for appointments. On the whole, New Zealand is served very well by a number of very capable and able insolvency practitioners.  Unfortunately, a few do tend to bring the insolvency industry into disrepute.  Not the least being Patrick Norris.  Patrick Norris was convicted in October 2013 of an offence under section 220 of the Crimes Act 1961 (Theft by a person in a special relationship).  He had been appointed as the replacement liquidator of Astra Enterprises Ltd (“Astra”).  Astra’s previous liquidator resigned due to other commitments.  Patrick Norris on his appointment requested that Astra’s funds, being $80,960.51, which were held by the previous liquidator be paid into his account.  He received the funds.  Astra had three unsecured creditors totalling approximately $65,000.  Evidence was given that the liquidation should have been straight forward.  On the face of it all, all of the creditors should have been paid out their full debt. The Companies Office became involved in the Astra liquidation during March 2011 following a tip off from one of Patrick Norris’ employees.  On 28 March 2011 the Companies Office inspectors arrived at Patrick Norris’ office.  The inspectors requested the Astra file and related bank statements.  Patrick Norris told them to come back later that day.  After the investigators left there was “a panic and flurry of activity that took place … involving the recreation of invoices for the work Mr Norris said he had done on the Astra liquidation”.  When the investigators returned they took away what they understood was Patrick Norris’ complete file in relation to Astra, including bank statements.  Mr Norris told them that the missing $80,960.51 had been spent on his fees.  However, that was a lie. His business account to which the Astra funds were deposited was in overdraft.  He also used the money to pay his personal and his business debts unrelated to the Astra liquidation. The Court of Appeal this week dismissed Patrick Norris’ appeal against conviction. For good measure the Court of Appeal corrected an error in the sentence and increased the amount of reparation that Patrick Norris was required to pay Astra.  The Court of Appeal capped that amount to only $40,000 because “reparation for the full amount may result in reparation being payable for an unreasonable period.” Patrick Norris is paying reparation at the rate of $100 per week. Evidence was given that Patrick Norris knew what he was doing was wrong prior to the involvement of the Companies Office.  He told one of his staff that he “was always worried that Astra would be” his “Achilles’ heel”.  He told another member of staff, that one liquidation file that “could bite him in the arse” was the Astra file.  It is helpful that Patrick Norris’ conduct has been revealed.  Unfortunately, there is nothing currently stopping him accepting future appointments as a liquidator after the passage of five years from the date of his conviction. Last month the Insolvency Practitioners Bill had its second reading.  The Bill purports to address some of the concerns and lack of confidence in the insolvency industry.  I strongly doubt the Bill, when it is enacted, is going to achieve much. Insolvency practitioners will continue to be able to operate without any minimum qualifications.  Creditors will still have good reason to be concerned as long as the less reputable insolvency practitioners continue to be able to accept appointments. By Chris Patterson, 2013 http://www.patterson.co.nz/news/2013/november/13/the-achilles-heel-that-bit-the-liquidator-in-the-arse/ http://www.patterson.co.nz/news/2013/november/13/the-achilles-heel-that-bit-the-liquidator-in-the-arse/ Wed, 13 November 2013 16:55:24 Chris Patterson http://www.patterson.co.nz/news/2013/october/01/update-some-secrets-allowed-for-financially-assisted-plaintiff/ On 19 September 2012, following the decision of the New Zealand Court of Appeal in Contractors Bonding Ltd v Godfrey Waterhouse [2012] NZCA 399, I posted a blog about disclosure required by plaintiffs in cases funded by a litigation funder in New Zealand. Now, on appeal in Godfrey Waterhouse and Anor v Contractors Bonding Limited SC 66/2012, the Supreme Court of New Zealand has re-examined the extent of disclosure required of a plaintiff who is receiving funding for its proceedings from a litigation funder. The scope of disclosure which will automatically be required by a plaintiff has been reduced by the Supreme Court, with the Supreme Court nonetheless going on to hold that, in certain contexts, disclosure of non-privileged terms of any funding agreement will have to be made. The Supreme Court held that, in every instance where there is litigation funder involved who: (a) has no previous interest in the proceedings; and (b) whose remuneration is tied to the success of the proceedings; and/or (c) who has some material control over the conduct of the proceedings; the plaintiff has to disclose: (i) the identity and location of the litigation funder; and (ii) whether the funder is subject to the jurisdiction of the New Zealand Courts. Nothing further will need to be disclosed unless the defendant, subsequently during the proceedings, brings an application relating to matters that cannot properly be determined without disclosure of the terms of the funding agreement. Three examples of such applications were identified, and discussed at length, by the Supreme Court. First, an application for security for costs. The purpose of such applications are to allow a defendant to seek some protection against the risk that on the conclusion of the proceedings the plaintiff will, if unsuccessful in its claims, not be in a position to pay any contribution towards the defendant’s legal costs. Whether or not the funding agreement extended to providing funding to the plaintiff to meet any costs award made against the plaintiff would be of some relevance in the determination of such an application for security for costs. It is highly probable that any disclosure ordered of the terms of the funding agreement, in the context of an application for security for costs, would be limited to requiring disclosure of any terms relevant to the issue of whether or not the litigation funder was contractually obliged to pay the plaintiff in respect of any costs award made against it. Second, an application for an award of costs against the third party. Such applications are generally only brought when the plaintiff has already failed to pay costs which have been awarded against it, and the defendant considers that in reality, the proceedings were brought materially for the benefit of (and have been controlled by) a third party who, in all fairness, should bear the costs as though they were truly a party to the proceedings. In New Zealand, such costs have long been able to be awarded against third parties, - see Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39. It is likely in such an application, that most of the non-privileged terms in the litigation funding agreement will be required to be disclosed because the determination of such an application will require consideration of (a) the extent of control the litigation funder was able to (and did) exercise; and (b) the extent to which the litigation funder had a financial interest in the proceedings. However, such applications are unlikely to have a great prospect of success until costs orders have already been made, and defaulted on, by the plaintiff. Accordingly, such an application (and near-full disclosure of the litigation funding agreement) will generally occur post trial. Furthermore, it remains possible that the Courts might, if/when faced with such an application, first require disclosure of the litigation funding agreement solely to it (rather than to the defendant) so that it can assess materiality and whether ordering disclosure to the defendant would result in a prejudice to the plaintiff. Thirdly, an application which asserts that the litigation funding comprises some form of abuse of process. While the Supreme Court held that the categories of conduct comprising an abuse of process are not closed, it also clearly struggled to identify any grounds upon which litigation funding might comprise an abuse of process. The Supreme Court did not consider it needed to determine whether the torts of maintenance and champerty remained valid, but it clearly indicated that it believed that the involvement of a litigation funder would generally give rise to no greater risk of abuse of process than with any plaintiff. Furthermore, the Supreme Court also clearly expressed its view that, because the Courts had sufficient powers to sanction third parties such as litigation funders (for example with awards of costs), there was no need for any form of judicial presumption that the mere involvement of a litigation funder, regardless of the extent of its control of the proceedings or prospective share of any damages recoupled in the proceedings, gave rise to an abuse of process. The Supreme Court did identify that, as a rather technical issue, some litigation funding agreements might be so comprehensive as to effectively comprise assignments of the plaintiff’s causes of action, and that some causes of action (in particular tortious causes of action) cannot be assigned under New Zealand law. The Supreme Court considered that that might, in some cases, provide a basis for an application alleging an abuse of process. If such an application was brought, it would conceivably require the disclosure of most if not all of the contents of the litigation funding agreement. In summary, the Supreme Court has clearly signaled that, so long as it is disclosed that there is litigation funding in place and so long as the litigation funder is subject to the New Zealand Courts, the involvement of a litigation funder should not usually (due to the Court’s ability to sanction/bind third parties) involve any more risks than those that the Courts and defendants face with any given plaintiff. The onus is on the defendant, who wishes to have disclosure of the terms of a litigation funding agreement, to demonstrate a need for such disclosure in the context of one of the types of interlocutory applications discussed above. http://www.patterson.co.nz/news/2013/october/01/update-some-secrets-allowed-for-financially-assisted-plaintiff/ http://www.patterson.co.nz/news/2013/october/01/update-some-secrets-allowed-for-financially-assisted-plaintiff/ Tue, 01 October 2013 11:25:03 Chris Patterson http://www.patterson.co.nz/news/2013/september/16/facebook-page-owners-liable-for-defamatory-postings-made-on-page-by-third-parties/ The High Court has recently held that a Facebook member was prima facie liable for the defamatory postings made on his page by third parties. In Wishart v Murray [2013] NZHC 540 (19 March 2013), which was an application for strike-out of the proceedings brought by Wishart, the Court had to decide whether Murray, as the creator the page called ‘ Boycott the Macsyna King Book ’, was a publisher of statements made on third parties on the page. Counsel for Murray argued that he could not be considered to be the publisher as he had no actual knowledge of the statements. Justice Courtney rejected this and held that a host of a Facebook page, such as Murray, will be regarded as a publisher of defamatory statements made in comments by anonymous users in two circumstances: • If they know of the defamatory statement and fail to remove it within a reasonable time in circumstances that give rise to an inference they are taking responsibility for it; or • Where they do not know of the defamatory posting but ought, in the circumstances, to know that postings are being made that are likely to be defamatory. In my view, this is entirely what the Defamation Act 1992 was designed to do. Accordingly, those who create social media pages, especially those that push topical or emotional issues that might lead to defamatory statements being made, need to be particularly mindful of what they are creating when they set up a page and then be mindful and responsive in monitoring it. If they fail to remove defamatory statements within a reasonable time, they may be considered responsible for them and subsequently be found accountable to those whose reputation has suffered as a result. Watch this space for the substantive decision! http://www.patterson.co.nz/news/2013/september/16/facebook-page-owners-liable-for-defamatory-postings-made-on-page-by-third-parties/ http://www.patterson.co.nz/news/2013/september/16/facebook-page-owners-liable-for-defamatory-postings-made-on-page-by-third-parties/ Mon, 16 September 2013 11:07:46 Chris Patterson http://www.patterson.co.nz/news/2013/august/09/dishonest-insurance-broker-not-covered-under-professional-indemnity-policy/ An insurance broker who negligently failed to place insurance cover for clients affected by the Christchurch earthquake has been told that he cannot rely on his professional indemnity policy to pay for his clients’ losses. The broker, Mr Jackson, was engaged by Mr and Mrs Marchand to arrange insurance cover for their home and contents, motor vehicles and medical practice.  Mr Jackson placed business interruption insurance cover for the medical practice but, despite having obtained a quote that the Marchands had confirmed was satisfactory to them, failed to arrange the other insurance policies.  To make matters worse, when Mrs Marchand contacted Mr Jackson in mid-2009 and early 2010, having wondered why she had not received insurance premium invoices, Mr Marchand assured her that the insurance policies were in place.  Mr Jackson even covered Mrs Marchand’s insurance claim for a pair of spectacles out of his own pocket (unknown to the Marchands, who thought it was being covered by the insurer). After the first Christchurch earthquake on 4 September 2010, Mr Jackson tried to arrange insurance cover for the Marchands.  He back-dated the application form to 30 August 2010. The Marchands successfully sued Mr Jackson to recover their losses arising from the Christchurch earthquakes and the absence of suitable insurance cover.  Mr Jackson joined his professional indemnity insurer, IAG New Zealand Ltd, to the proceedings, claiming that his failure to arrange the Marchands’ policies was covered by his own professional indemnity policy. The IAG policy contained an exclusion clause that Mr Jackson would not be insured for civil liability in connection with any dishonest, fraudulent, criminal or malicious acts or omissions.  The crucial issues for the Court to determine were whether Mr Jackson had acted dishonestly and, if so, whether his dishonest conduct was connected to his civil liability to the Marchands. In a summary judgment hearing held separately from the trial of the Marchands’ claim against Mr Jackson, the High Court decided that it could not determine IAG’s application for removal from the proceedings without the evidence about Mr Jackson’s dishonest conduct (if any) being tested at a trial.  IAG appealed to the Court of Appeal. The Court of Appeal decided that, based on the affidavit evidence alone, Mr Jackson’s conduct had been dishonest.  This is because the test for dishonesty involves an objective standard - it does not matter whether Mr Jackson thought he was acting honestly by meaning to place the insurance cover timeously, nor does it matter whether Mr Jackson had intended to deceive. On the second issue, the Court reasoned that “in connection with” entails a causal or consequential relationship, so that it was necessary for IAG to establish that Mr Jackson’s dishonest conduct had given rise to his civil liability to the Marchands.  The High Court Judge had found that if Mr Jackson had not hidden the truth from the Marchands, they would have secured insurance cover before the earthquakes.  The Court of Appeal considered that finding sufficient to establish the necessary connection between Mr Jackson’s dishonesty and his liability to the Marchands.  Accordingly, cover under IAG’s policy is excluded.  It is likely that Mr Jackson will also have to pay some of IAG’s costs incurred in the proceedings. It is easy to feel a degree of sympathy for Mr Jackson, whose performance at work may have been affected by health issues (affidavit evidence to that effect was provided by a consultant psychiatrist).  However, the Court’s reasoning in this case seems sound.  A subjective standard of dishonesty would be a difficult concept to apply evenly, and would increase the significance of evidence as to parties’ credibility.  The net result would be a haziness around the standards of conduct that insurers and other contacting parties are entitled to expect from those they insure / deal with. http://www.patterson.co.nz/news/2013/august/09/dishonest-insurance-broker-not-covered-under-professional-indemnity-policy/ http://www.patterson.co.nz/news/2013/august/09/dishonest-insurance-broker-not-covered-under-professional-indemnity-policy/ Fri, 09 August 2013 10:02:47 Chris Patterson http://www.patterson.co.nz/news/2013/march/21/employers-with-no-assets/ The December 2012 decision of the Employment Court (“ the Court ”) in Hutton v Provencocadmus Ltd (in receivership) should encourage all employees to look at who their employer is, and what assets their employer holds. By way of background to the Hutton decision, two separate groups of companies, the Provenco Group and the Cadmus Group, merged to produce a single group of related companies – the Provencocadmus Group (“ the PC Group ”).  The structure of the PC Group included a holding company, PCL, and a number of trading subsidiaries.  PCL had no assets other than shares of the trading subsidiaries.  The majority of the individuals who provided services to the PC Group were employed by PCL.  At the time of the merger, each of the employees of the Provenco Group and the Cadmus Group were provided with a copy of a proposed new employment agreement identifying PCL as the employer (“ the PCL IEA ”).  After the merger, the employees provided services across the PC Group, and one of the PC Group’s trading companies, PPL, performed the payroll function for PCL’s employees. PCL was placed in receivership roughly a year after the merger.  The employees of PCL were advised of PCL’s receivership and their employment relationships’ with PCL were terminated.  The employees were advised of their preferential claims entitlements [1] but were subsequently advised that as PCL had no inventory or accounts receivable against which the preferential claims could be paid, there were no funds available for distribution to the employees. A group of 112 PCL employees brought a claim in the Employment Relations Authority (“ the Authority ”) contending that they were employed jointly by PCL and a number of the trading companies which they provided services too (who had assets out of which the employees’ preferential claims could be paid).  The claim was unsuccessful, the Authority ultimately determining that the employer was PCL alone. The employees challenged the Authority’s determination in the Court, arguing that their employer was jointly PCL and PPL.  The employees’ basis for their argument was that they performed services for PPL (as well as a number of other trading companies) and PPL performed the payroll function for them, including paying their salaries/wages, deducting PAYE, paying PAYE to the IRD, and paying ACC levies. While the Court accepted that it is possible to have joint employers, in Hutton the Court ultimately found that PCL was the sole employer. The Court’s finding was predominantly based on the following: PCL was named on the employment agreement as the employer (very clearly, and in multiple locations within the employment agreement), and PCL had control of the employees.  Despite PPL performing payroll services for and receiving services from the employees, it was not itself meeting the costs of the employees’ services (costs were apportioned across the PC Group), nor did it have any practical or legal control of the employees in terms of making decisions about hiring, disciplinary matters, remuneration or termination of employment. The Court found that it is “ open to those controlling businesses to select which company should be the employer, provided that the selection is consistent with the financial and administrative organisation of the business and is not otherwise a sham. ” The important outcome of Hutton for all employees is the Court’s confirmation that a group of companies may be set up with one company (with no independently held assets), established solely to employ one or more employees who provide services to the group.  Provided there has been no intention to deprive the employee(s) of benefits, the employee(s) cannot successfully claim that they were jointly employed by members of the group.  The end result may be that, where the employer company is placed in receivership or otherwise wound up, employees will be stuck with the asset position of the employer company, leaving the employees with unfilled preferential claims. [1] In accordance with s 312 and Schedule 7 of the Companies Act 1993, which provide that when a company is in liquidation or receivership, the liquidator/receiver must pay out of the assets of the company, in priority to the claims of other secured and non-secured creditors, money owed to employees by way of wages, holiday pay, redundancy compensation etc. http://www.patterson.co.nz/news/2013/march/21/employers-with-no-assets/ http://www.patterson.co.nz/news/2013/march/21/employers-with-no-assets/ Thu, 21 March 2013 13:45:25 Chris Patterson http://www.patterson.co.nz/news/2013/march/21/the-impact-of-employees-actions-outside-of-work-on-their-right-to-continued-employment/ The recent Employment Relations Authority (“ Authority ”) determination of Hallwright v Forsyth Barr Ltd serves as a timely reminder to all employees that what they do (or don’t do) outside of their working hours can have an impact on their right to continued employment. Hallwright, an employee of Forsyth Barr Limited (“ FBL ”), was involved in a “road-rage” incident (“ incident ”) in September 2010 in which he inadvertently drove over a fellow road user (causing injury) after an altercation. Hallwright’s actions were not carried out in the course of his employment and there was nothing in his actions capable of identifying either the nature of his employment or his employer. However, in the significant media attention which followed the incident, information about his employer and his senior position within FBL’s organisation was published. Also published was incorrect information about Hallwright’s intention at the time of the incident. As a result of the incident Hallwright was charged with causing grievous bodily harm. Hallwright did not initially inform FBL that he was either involved in the incident, or that he had been charged. When FBL was made aware of the above, Hallwright protested his innocence and indicated that the change would be strongly defended. Taking the stance of “innocent until proven guilty”, FBL initially chose to be supportive of Hallwright, and did not draw to his attention the potentially serious implications the incident could have on his continued employment. Some 18 months later Hallwright was convicted of the charge of causing grievous bodily harm. Almost immediately Hallwright was invited to a series of meetings with FBL to discuss his future employment. As a result of his conviction, FBL considered that Hallwright’s actions amounted to “ conduct bringing [FBL] into disrepute ” and “ activity that [was] likely to compromise [Hallwright’s] ability to carry out [Hallwright’s] duties ”. FBL was also concerned about its reputation as there had been extensive media coverage of the incident displaying both Hallwright, and consequently FBL, in a negative light. The negative media coverage resulted in a number of queries from the public as to how FBL could employ someone like Hallwright. FBL ultimately found that Hallwright’s actions had brought FBL into disrepute, damaged FBL’s reputation, and compromised Hallwright’s ability to carry out his duties; on that basis Hallwright was dismissed. The Authority found that in all the circumstances, including the high public profile of FBL, the seniority of Hallwright’s position within FBL, and the nature of the work Hallwright performed (which required both integrity and an element of public confidence in Hallwright) a fair and reasonable employer could have reached the conclusions that FBL reached, and Hallwright’s dismissal was justified. This was despite FBL not being able to provide any evidence of damage to its reputation, and the fact that Hallwright had continued to carry out his normal duties between the date of the incident and the date of his dismissal – some 20 months. While this decision turns on the circumstances of FBL and Hallwright, and not all employers could justifiably dismiss an employee for their involvement in such an incident, it is a reminder to all employees that their conduct outside of their workplace can have an impact on their continued employment. http://www.patterson.co.nz/news/2013/march/21/the-impact-of-employees-actions-outside-of-work-on-their-right-to-continued-employment/ http://www.patterson.co.nz/news/2013/march/21/the-impact-of-employees-actions-outside-of-work-on-their-right-to-continued-employment/ Thu, 21 March 2013 13:32:16 Chris Patterson http://www.patterson.co.nz/news/2013/february/22/oscar-pistorius-a-tragic-case-of-mistaken-identity/ I have no experience or knowledge of South African criminal law.  However, I am not going to let that stand in the way of blogging about Oscar Pistorius’ application for bail. A common sense approach to considering Pistorius’ bail application might suggest that he is at least guilty of manslaughter (the unintentional killing of his girlfriend Reeva Steenkamp).  Pistorius’ affidavit in support of his application does tend to leave the reader justifiably somewhat sceptical as to whether he accidentally shot (several times) to death Steenkamp who he was living with at the time.  Pistorius either murdered Steenkamp or is quite possibly the most reckless and dangerous professional sportsman in living history. Regrettably, New Zealand has had its own string of genuinely fatal cases of mistaken identity.  It seems that no matter how many times hunters are told to identify their target (not just part of a target) and are sent to jail it does not stop them from shooting either their hunting mates or even someone brushing their teeth in a Department of Conservation campground.  Just to point out the obvious difference, Pistorius was not in thick bush hunting where you would not reasonably expect to come across someone other than yourself, he was not walking around during daylight hours, he did not sight his target or even shoot at what he thought he was looking at.  Rather, he has sworn an affidavit deposing that: He woke up during the early hours of 14 February 2013 (Valentine’s Day for the non-romantics); He went to his balcony to bring a fan inside; While walking around in his and Steenkamp’s bedroom in “pitch dark[ness]” he heard a noise and realised someone was in their toilet; He got his 9 mm Parabellum (not exactly a small gun) which he kept loaded under his bed; He noticed that the toilet door was closed; He “screamed words to the effect for him/them to get out of my house and for Reeva to phone the police.”; He then “fired shots at the toilet door”; He was “too scared to switch on the light”; He walked back to the bed, realised that Steenkamp was not there which was “when it dawned on me that it could have been Reeva who was in the toilet.” You will know what happened next unless you are living in an igloo without access to recent media reports. Perhaps it is just me but if you truly believed there was a modest (because the door was closed) but albeit dangerous intruder using your toilet would you really over look warning your girlfriend before retrieving your loaded 9 mm Parabellum from under the bed she was sleeping in?  Of course, I was not there and people do behave differently when they are “filled with horror and fear [when an] intruder [is] inside [your] toilet”.  But surely in pitch darkness, emptying a 9 mm gun into a toilet door, the same toilet you share with your girlfriend, the girlfriend who you did not check whether they were in the bed where you got your gun from, does tend to sound just a little bit suspicious. I will leave it to you to form your own views regarding the merits of Pistorius’ bail application and his now disclosed defence.  His affidavit can be found at: http://www.pod702.co.za/Eyewitnessnews/docs/130219oscar_papers.pdf http://www.patterson.co.nz/news/2013/february/22/oscar-pistorius-a-tragic-case-of-mistaken-identity/ http://www.patterson.co.nz/news/2013/february/22/oscar-pistorius-a-tragic-case-of-mistaken-identity/ Fri, 22 February 2013 11:18:06 Chris Patterson http://www.patterson.co.nz/news/2013/february/12/bridgecorp-directors-insured-for-funding-defence-of-claims/ In its recent decision in Steigrad v BFSL Ltd & Ors CA674/2011 the Court of Appeal threw a life-line to Peter Steigrad and other directors of the collapsed Bridgecorp group of companies.  The directors concerned are facing claims by the Bridgecorp companies for alleged breaches of duties owed by the directors to the companies.  As the companies are in liquidation, Bridgecorp’s claims are brought on behalf of creditors, including those who invested in Bridgecorp. As with most litigation, and especially complex litigation of this nature, the costs of defending Bridgecorp’s claims is significant. The directors have relied upon directors’ liability insurance policies held by Bridgecorp to financially assist their defences of the claims. A dispute arose because Bridgecorp asserted that section 9(1) of the Law Reform Act 1936 creates a charge in Bridgecorp’s favour over the insurance monies available under the policies. Section 9(1) enables a claimant who has been wronged by a liable party to claim directly against an insurance policy held by the liable party, but only where the policy provides cover for the particular liability in question. This is so even though the extent of the allegedly liable party’s liability is yet to be determined, so that the claim operates as a “charge” on the available insurance monies until a Court decision or agreement between the parties. The High Court had endorsed Bridgecorp’s charge over the directors’ liability insurance monies, meaning that the directors could not continue to rely on those funds for reimbursement of their defence costs. The Court of Appeal overturned the High Court’s decision and, in doing so, brought clarity to the effect of section 9(1) on the Bridgecorp situation and others like it. The Court arrived at its decision for two main reasons: firstly, that section 9(1) does not apply to defence costs; and secondly, that section 9(1) is not intended to interfere with contractual rights and obligations regarding insurance cover. Dealing with the first reason in respect of Mr Steigrad’s appeal, the Court found that the policy includes an obligation on the insurer to pay Mr Steigrad’s defence costs when it has not declined his claim for liability cover. Mr Steigrad’s liability to pay defence costs arises independently of the outcome of the claim against him. It is not, therefore, an amount which is or may become payable in respect of Mr Steigrad’s liability to Bridgecorp. In other words, section 9(1) does not create a charge in Bridgecorp’s favour over monies which are lawfully (contractually) payable to Mr Steigrad. The Court’s second reason is equally compelling – the wording of section 9(1) is not such that it suspends the performance of contractual rights and obligations relating to a separate liability. This decision might be hard to stomach for investors in Bridgecorp and other failed finance companies because, after all, Bridgecorp’s claims are brought to recover as much as possible for investors/creditors in the liquidations of the various companies. However, it is difficult to fault the Court of Appeal’s reasoning when considering the purpose and wording of section 9(1), especially in the context that the claims against the directors have not yet been proved. http://www.patterson.co.nz/news/2013/february/12/bridgecorp-directors-insured-for-funding-defence-of-claims/ http://www.patterson.co.nz/news/2013/february/12/bridgecorp-directors-insured-for-funding-defence-of-claims/ Tue, 12 February 2013 14:06:57 Chris Patterson http://www.patterson.co.nz/news/2012/december/24/perjury-a-serious-offence/ Perjury, although seemingly an outdated and minor offence, is still taken very seriously by courts to act as a deterrent for undermining the judicial process. In a recent decision of the High Court ( R v Kendall ) Justice Toogood found three misleading statements set out in an affidavit to warrant a term of three years imprisonment as a starting point.  In that case Kendall was prosecuted for bringing proceedings against his ex-wife claiming he had subleased a property to his ex-wife’s business and that it owed $72,000 in rent.  His Honour’s reasons for the three year sentence were: The way the Kendall approached the first case required his ex-wife to instruct a solicitor and incur over $33,000 in legal fees; Kendall made the statements in order to cause financial harm and emotional distress to his ex-wife; Kendall repeated two of the false statements in a second affidavit sworn some five months later, leading His Honour to believe it was a deliberate campaign of destruction and not an impulsive decision. It was argued by counsel for Kendall that, because the false affidavits were sworn in civil proceedings, the offending was at the lower end of the scale.  However, Court found the important point was the deliberate misuse of the legal system to inflict harm. The Court regarded the significance of the proceeding in which the perjury occurred as being irrelevant. Ultimately the sentence of three years imprisonment was reduced due to personal circumstances.  A six month reduction was allowed in acknowledgement of Kendall’s 40 years of service in the Fire Service, together with a further six month reduction by reason of a reparation payment of $25,000. An offender’s age and health is also deemed relevant as to whether or not prison time or home detention is appropriate, and it was found that Kendall would suffer considerable hardship (i.e. more hardship than that of a young person of good health) if he was sentenced to imprisonment.  Because of the reductions, the maximum home detention sentence of twelve months, and the fact that Kendall had already served three months of the sentence in prison (which His Honour deemed equivalent to four to five months of home detention), he was sentenced to seven months home detention and a reparation payment of $25,000. While the reduction in sentence may seem to be yet another soft approach by the judiciary, ultimately Kendall’s false statements were a revenge act against an ex-partner. http://www.patterson.co.nz/news/2012/december/24/perjury-a-serious-offence/ http://www.patterson.co.nz/news/2012/december/24/perjury-a-serious-offence/ Mon, 24 December 2012 15:09:27 Chris Patterson http://www.patterson.co.nz/news/2012/december/18/minimum-redundancy-entitlements-for-all-employees-by-law/ Last month, (November 2012), a Member’s Bill was introduced into Parliament by Labour’s Sue Moroney which seeks to introduce minimum redundancy entitlements for all employees, the Employment Relations (Statutory Minimum Redundancy Entitlements) Amendment Bill . In addition to providing minimum redundancy entitlements, the Bill also provides a definition of redundancy, which, if enacted will be a legislative first for New Zealand.  The definition is in relation to the part of the Employment Relations Act 2000 that the Bill proposes to amend only, and is as follows (at clause 4): “[ R ] edundancy means the substantial disappearance of the work performed by an employee, by reason of the restructuring, downsizing, going into receivership or administration, or cessation of operations of the employer.” If the Bill is enacted, redundancy entitlements will only be available to employees who have a minimum of one calendar years’ service with a single employer.  The minimum redundancy entitlements proposed in the Bill are: notice of dismissal of at least four weeks; and compensation for redundancy in the amount of four weeks’ remuneration for the first full year of the employee’s continuous employment with the employer; and further compensation for redundancy in the amount of two weeks remuneration for each subsequent full or partial year of the employee’s continuous employment with the employer, up to a maximum entitlement of 26 weeks’ remuneration. Note that the maximum entitlement of 26 weeks’ remuneration relates only to point 3 above, and as such, the actual maximum entitlement employees’ will be entitled to should the Bill be enacted is 30 weeks (although it would take 14 years of continuous service to achieve that). The Bill is based on the recommendations of the Public Advisory Group on Restructuring and Redundancy 2008 report.  The report concluded with the recommendation of statutory minimum redundancy compensation and a minimum notice period, which the Bill seeks to provide. This Bill is only at a very early stage, there are no supplementary order papers relating to it at this stage and a quick Google search shows that it hasn’t even been picked up by the media.   Of course it is not the first time that such a Bill has been introduced to Parliament.  There was an almost identical Bill in 2009 introduced by Labour’s Darien Fenton which was negatived at its first reading in May 2010.   Based on the Government in power at present, the dismal failure of the 2009 Bill and the lack of attention this Bill has received – I would be rather surprised if it gets very far through the House. http://www.patterson.co.nz/news/2012/december/18/minimum-redundancy-entitlements-for-all-employees-by-law/ http://www.patterson.co.nz/news/2012/december/18/minimum-redundancy-entitlements-for-all-employees-by-law/ Tue, 18 December 2012 17:06:15 Chris Patterson http://www.patterson.co.nz/news/2012/november/06/greg-king-and-the-acceptance-of-opprobrium/ I have posted a previous blog supporting our system of justice. It is not a perfect system. Rather, it is the best system that we have been able to develop during the past 350 years. Justice in New Zealand is primarily delivered via our Courts. The Courts hear both criminal and civil claims. The criminal justice system can often be a world away from regulated and relatively private contest of a civil dispute. The passing of Greg King, one of New Zealand’s higher profile criminal barristers, drew a few comments from Sir Bob Jones which were reported in the New Zealand Herald yesterday morning. Specifically, the Herald reported that Sir Bob Jones was of the view that Greg King “accepted opprobrium was part of his job”. I am not so sure if that is correct. However, Sir Bob Jones personally knew Greg King. I cannot claim the same for my part. What I can say is that the comment is concerning for two reasons. First, defence counsel play a critical and essential role in our criminal justice system. The system can only work when guilt is established after it has been properly tested. Good defence counsel ensures that all relevant evidence is properly put to the test. Good defence counsel are just as responsible as good prosecution counsel to make sure that the guilty are found to be exactly that, guilty. The only way we as a society can have faith that our prisons, which costs our country over $90k per annum per prisoner (not an insignificant amount), are full of those who deserve to be there is because, in part, of good defence counsel. Good defence counsel should be applauded for the part they undertake. Whereas the incompetent should be regarded as an opprobrium of legal profession when they fail to ensure that justice is properly administered. Greg King should never have accepted such behaviour. I doubt he would have been an advocate for a return to the justice of the mob which is really the mind set of those who direct their contempt towards defence counsel. The second concern is possibly based on a poor use of a descriptive term. I would be surprised if Greg King regarded himself as having a “job”. My impression of him was that he had answered a strong call to the bar to which he excelled and possibly, at times, over committed himself to his own detriment. I understand that he undertook periods of work beyond what most would regard as being healthy or well balanced. I am sure the reasons behind his motives were of the best intentions. I would be surprised if he saw his commitment and the sacrifices he made on behalf of his family and himself were just because it was a requirement of the “job”. In my experience there are two types of lawyers, being those who are following a calling and those who undertake it as a job. My outside perspective was that Greg King fell into the former. Should Greg King have accepted opprobrium as being part of his job? I think not. http://www.patterson.co.nz/news/2012/november/06/greg-king-and-the-acceptance-of-opprobrium/ http://www.patterson.co.nz/news/2012/november/06/greg-king-and-the-acceptance-of-opprobrium/ Tue, 06 November 2012 16:57:21 Chris Patterson http://www.patterson.co.nz/news/2012/october/15/councils-exposed-to-commercial-buildings-claims/ The Supreme Court, in what has become commonly known as the Spencer on Byron case, has allowed an appeal by the owners of the Spencer on Byron hotel, Takapuna, in their leaky building claim against the former North Shore City Council (now part of Auckland Council). In the High Court and Court of Appeal the Council had successfully argued that it should not owe a duty of care to owners of commercial buildings (or buildings containing a mixture of both commercial and residential components) in respect of the Council’s building inspection and certification roles. The Council’s luck ran out in the Supreme Court, which confirmed that there is no legal basis on which to distinguish between residential and commercial building owners in leaky/defective building claims against local authorities. Both categories of owners are generally reliant on local authorities to take reasonable care that buildings are constructed in accordance with the Building Code. The Supreme Court’s decision is restricted to work done by local authorities while the Building Act 1991 was in force. It seems unlikely, however, that the outcome will be any different in respect of work done under the current Building Act 2004. The Supreme Court did not face the task of deciding whether the Council had in fact been negligent – that will be a matter for trial in the High Court. But the owners are over the first (and probably the highest) hurdle in establishing that the Council is liable for at least some of the defects in the Spencer on Byron building. The impact of this decision will be significant. Local authorities are now clearly exposed to leaky/defective commercial buildings claims arising from building inspections carried out within the last 10 years. http://www.patterson.co.nz/news/2012/october/15/councils-exposed-to-commercial-buildings-claims/ http://www.patterson.co.nz/news/2012/october/15/councils-exposed-to-commercial-buildings-claims/ Mon, 15 October 2012 09:50:23 Chris Patterson http://www.patterson.co.nz/news/2012/october/03/the-cost-of-setting-up-in-competition-with-your-employer/ The recent decision of the Employment Court in the Rooney Earthmoving case should serve as a sharp reminder of the consequences of engaging in trade competition in breach of your obligations as an employee. In short, three employees of Rooney Earthmoving Limited (“REL”) decided to leave their employment and establish a company BMW Contracting Limited (“BMW”) in direct competition.  None of the employees had a restraint of trade clause in their employment agreement.  However, the Employment Court found that each of the three employees had breached the contractual duty they owed to REL to act in good faith and with fidelity and not to mislead or deceive REL.  In particular the Court found the three had breached their duties by various actions including acting in concert to solicit clients for BMW while still employed by REL; acting in concert to solicit staff for BMW while still employed by REL; removing REL’s confidential information for the benefit of BMW; and obtaining REL’s client list for use by BMW. After finding the three liable for various contractual breaches the Court recently awarded them liable as a whole for the losses reasonably flowing from the breaches, amounting to just over $4million dollars.  The Court was satisfied that the period of losses should cover a 3-year period as there was no compelling factor to explain REL’s losses over that three year period other than the unlawful head start that BMW was given as a result of the breaches. Such a finding likely negated any profit made by BMW in that 3 year period. The Court’s decision is a useful one in closely examining precisely the obligations of good faith.  Interestingly the Court rejected the argument put forward on behalf of REL that the employees had also breached their obligation of good faith by failing to disclose their own or their fellow employee’s intention to leave and compete.  The Court found that to impose such an obligation would be to undermine the freedom of movement of employees and be contrary to the authorities which allow preparatory competitive steps to be taken, provided that these are not in breach of the obligation not to compete or to damage the employer, while the employee is still under a the duty of fidelity, trust and confidence. http://www.patterson.co.nz/news/2012/october/03/the-cost-of-setting-up-in-competition-with-your-employer/ http://www.patterson.co.nz/news/2012/october/03/the-cost-of-setting-up-in-competition-with-your-employer/ Wed, 03 October 2012 17:05:00 Chris Patterson http://www.patterson.co.nz/news/2012/september/19/no-secrets-allowed-for-financially-assisted-plaintiff/ Litigation funding has started to appear more regularly as a feature of modern civil litigation, especially in relation to class action (multiple plaintiff) cases. One of Australia’s litigation funders, IMF (Australia) Limited, is publicly listed on the ASX. Litigation funding companies are not new to New Zealand but the growth rate of such companies here has been slower than it has overseas. The New Zealand Court of Appeal in Contractors Bonding Ltd v Godfrey Waterhouse [2012] NZCA 399 has recently observed that New Zealand is less eager than some overseas jurisdictions to depart from the position that, in principle, funding someone else’s law suit is unlawful. That said, there have been significant reforms to this principle over the years so that in some situations NZ courts will allow plaintiffs to be financially assisted. The rationale for allowing litigation funding is that prospective plaintiffs should not be denied access to justice simply because they cannot afford to litigate. In the Contractors Bonding case, Mr Waterhouse, a former director of an American company (now struck off), is being financially assisted in his law suit against a New Zealand based company, Contractors Bonding Ltd, which he holds responsible for the failure of his American company. Mr Waterhouse disclosed the existence of a litigation funding agreement to Contractors Bonding but refused to disclose a copy of the agreement itself. The High Court ordered production of the agreement to the Court, but not to Contractors Bonding. The High Court Judge decided that the funding agreement contained nothing which the Court ought to be concerned about or that ought to be disclosed to Contractors Bonding. The Court of Appeal took a different approach. It decided that disclosure of the key features of litigation funding arrangements is the best way to ensure there is no abuse of process. Examples of such abuses are where a financially assisted plaintiff is able to conduct its case in an oppressive way because it can readily access funds, or where the litigation funder is effectively a puppet master, pulling too many strings from behind the scenes. Another legitimate concern is that some funding arrangements do not provide for a defendant’s costs to be paid by the litigation funder if the plaintiff’s claim fails, potentially leaving a defendant high and dry for its costs even though the claim against it was misconceived. The Court decided that the key features of the funding arrangement to be disclosed were the funder’s identity, location and willingness to be bound by decisions of New Zealand Courts, the terms on which funding can be withdrawn and the consequences of withdrawal. So it seems that plaintiffs relying on financial assistance must be prepared to satisfy the Court and the other parties that their funding arrangements are acceptable. It might be difficult to balance the competing interests of mandatory disclosure of litigation funding arrangements with the rules of legal privilege. It will be interesting to see whether these concepts clash in the future, and if so, which one will prevail and why. As for the future of litigation funding, my own view is that a measured approach is required to strike the balance between providing access to justice and at the same time avoiding abuses of the legal process. http://www.patterson.co.nz/news/2012/september/19/no-secrets-allowed-for-financially-assisted-plaintiff/ http://www.patterson.co.nz/news/2012/september/19/no-secrets-allowed-for-financially-assisted-plaintiff/ Wed, 19 September 2012 08:52:04 Chris Patterson http://www.patterson.co.nz/news/2012/september/11/the-likelihood-of-david-bain-compensated-for-wrongful-conviction-and-imprisonment/ On Monday, 20 June 1994 at 7:10 AM I was still asleep in my cold central Dunedin flat, which was not unusual as my law lectures did not start until 11 AM that morning.  A relatively short 6 kilometre drive away was David Bain who had just made a 111 emergency call.  He was unable to tell the emergency operator which service he needed.  He then told the Telecom operator that his mother, father and all of his family were dead. 25 minutes later the police arrived at 65 Every Street, Anderson Bay to find David Bain still on the phone to the operator.  He told the police that his parents and siblings were dead. The police then searched the house to find his mother, father, two sisters and brother had all be shot in the head.  The police also found a .22 rifle next to David Bain’s father, Robin Bain.  Later that morning the police believed they had found a suicide note in the form of a message which had been typed on the family computer which read “SORRY YOU ARE THE ONLY ONE WHO DESERVED TO STAY”. On Friday, 24 June 1994 the police arrested David Bain and charged him with five counts of murder. To sum up the next 15 years, David Bain was found guilty on all five counts after a three week trial.  David Bain was then sentenced to a mandatory life term of imprisonment with 16 year minimum non parole period.  David Bain unsuccessfully appealed his convictions in the Court of Appeal.  He pursued an unsuccessful petition for leave to appeal to the Privy Council.  The Court of Appeal lifts a suppression order relating to the evidence of Dean Cottle which was not presented during the trial which related to allegation that David Bain’s oldest sister, Laniet had told him that she was having an incestuous affair with her father that she was about to disclose to the family.  A former All Black, Joe Karam becomes interested in David Bain’s case.  The police investigation is cleared by the Police Complaints Authority.  David Bain petitions the Governor General for a pardon.  The then Justice Minister refers four aspects of the case to the Court of Appeal.  The Court of Appeal determines that a retrial is not required. Michael Reed QC and Hull Cull QC join David’s legal team replacing Colin Withnall QC and Kelvin Marks .  David obtains leave and successfully appeals that decision in the Privy Council who quashes his convictions and ordered a retrial.  David Bain is found not guilty by a jury of all five charges of murder.  Joe Karam lodges a claim for compensation on behalf of David with the former Minister of Justice, Simon Power.   Simon Power appoints retired Canadian Supreme Court Judge Justice Ian Binnie to provide Cabinet with advice on Mr Bain’s claim. We have now arrived in September 2012 and so has Justice Binnie’s report which is in the hands of the Minister of Justice Hon Judith Collins.  I should step back to 1998 when Cabinet adopted a set of guidelines which stipulated the categories of eligible claimants for compensation as being limited to those who had their convictions quashed on appeal without order of retrial, or who have received a free pardon.  However, the key requirement to be eligible for compensation from the Crown is that the claimant must, on the balance of probabilities, establish their innocence. David was acquitted following a retrial so technically he does not fall into the category of eligible claimants.  The guidelines do provide the Cabinet with a discretion.  Claimants must first satisfy Cabinet that their claim is based on extraordinary circumstances.  I make no comment about that aspect. Here is a simplistic explanation as to the difference between the criminal standard of proof and the civil balance of probabilities.   i.e. Judges and juries are not psychic.    The best system we have devised is that in Criminal proceedings the issue is not whether or not the defendant is innocent, but rather whether or not guilt has been proven to be so overwhelmingly likely that the jury is left with no reasonable doubt that the defendant did not commit the crime.   Whereas, in civil proceedings, the Court (and sometimes jury) is tasked with determining what probably happened, - i.e. in this case whether the most likely probable explanation for the evidence is that it was, or was not, David Bain who killed his parents.    Why is the civil standard used to assess whether compensation should be paid?  It is because the focus of the inquiry is not on whether or not David Bain is innocent, but instead on whether or not the evidence against David Bain was ever strong enough to pass even the lower threshold of the civil standard (the balance of probabilities)   i.e. if the Crown was never even going to be able to prove that David Bain probably killed his family, then the Crown should never have brought Criminal proceedings in which it would need to establish beyond all reasonable doubt that David Bain killed his family, and nor should any jury have ever held that the Crown had proved beyond reasonable doubt that David Bain did kill his family.   A finding that David Bain did not, on the balance of probabilities, kill his family is not a finding that he is innocent, but is a finding that the prosecution against him should probably never have been brought, and that the jury should not (if they had all the currently available evidence before them) have ever delivered guilty verdicts. The factor that interests me at the moment is whether David could ever establish on the balance of probabilities that he is innocent.  It is an extremely long way from raising a reasonable doubt as to ones’ guilt to arriving at a finding of innocence on the balance of probabilities.  Although, it has been done.  David Dougherty was wrongly convicted of rape in 1993.  He was acquitted after being imprisoned for three years as a result of DNA evidence that was not available during his trial.  The police successfully prosecuted the actual offender. The Dougherty situation was relatively straight forward. I think I am on safe ground to state that the Bain family were killed by either David or his father Robin.  There has never been any credible suggestion of an unidentified killer as having murdered the Bain family.  Likewise, it has never been argued that they both took part in the killings.  The jury in the retrial are the only ones who actually know why they concluded that a reasonable doubt existed as to whether the killer was David. Our adversarial system of trial by jury is not perfect.  The system more geared to protecting the innocent from wrongful conviction as opposed to ensuring that the guilty do not escape conviction.  I do not see anything wrong with a degree of imbalance.  Good reasons exist to keep a system that has served us well long before the rule of law arrived in New Zealand. The gulf between guilt beyond a reasonable doubt and innocence on the balance of probabilities in the Bain case is, unlike the Dougherty claim, far from straight forward. I have suggested on more than one occasion that if you take piece of paper and draw a line down the middle, write David on the top of the left column and Robin on the top of right column then start listing down all of the evidence that tends to suggest the identity of the killer.  It is important to allocate some degree of weight to each piece of evidence as every piece is not necessarily equally probative.  Once finished, stand back and consider what is revealed before you.  The first striking fact that you will notice is that you will have run out of paper in terms of the David column.  The second fact is that the relative weighting results between the two looks closer to the game score of a match between the All Blacks and Finland. I see David’s prospects of being awarded compensation based on a finding that he was, on the balance of probabilities, innocent as being as likely as Finland winning the 2015 Rugby World Cup.  If I am wrong then the New Zealand tax payer may find that the financial cost of the killing of the Bains may not have ended at the conclusion of the retrial.  I do not know exactly how many millions of tax payer dollars were spent by the prosecution and defence teams alone over the past 15 years.  It is anyone’s guess the costs incurred by the police, the Ministry of Justice, the corrections service and every other tax payer paid individual and organisation that became tied up in determining whether David was guilty or not. There is of course the impact on friends and family of those who were killed. Some believe that David is not innocent.  It is possible that David’s compensation claim, if it fails, may not be the last act in the tragedy that is the killing of the Bains.  The estates of the victims have not exercised their legal rights, if any.  Although, it is very rare but this whole saga is extremely unusual, the estates could consider pursuing David for the wrongful  death of his family if the limitation difficulties could be overcome.  I am not sure what the advantage would be to the estate(s) in having a Court find David guilty for the wrongful death of one or all of his immediate family. No doubt the Hon Judith Collins will give us some indication as to Cabinet’s reaction to Justice Ian Binnie’s report at some point in the future.  Like any judge his ability to determine what he believes are the essential facts and how they should be treated will have been limited by the information and argument placed before him.  One thing is for certain Joe Karam is unlikely to have focused on the evidence that tended to suggest that David was the killer.  It would be interesting if Joe Karam put the claim for compensation that he prepared and put forward for David in the public domain. Of more interest would be the opposing argument. http://www.patterson.co.nz/news/2012/september/11/the-likelihood-of-david-bain-compensated-for-wrongful-conviction-and-imprisonment/ http://www.patterson.co.nz/news/2012/september/11/the-likelihood-of-david-bain-compensated-for-wrongful-conviction-and-imprisonment/ Tue, 11 September 2012 13:17:11 Chris Patterson http://www.patterson.co.nz/news/2012/august/15/bankrupt-s-outstanding-claim-comes-back-to-haunt-family-business/ Generally speaking, when an insolvent person is declared bankrupt all of their assets, including any claims that they may have against someone else, become the property of the Official Assignee (“OA”) for administration of the bankrupt’s estate. In a recent appeal case ( Glynbrook 2001 Ors v The Official Assignee for New Zealand and Anor [2012] NZCA 289) the Court of Appeal upheld the OA’s decision to give back to a former bankrupt, Mr Lawrence, the right to sue some of his family members and their farming companies.  Mr Lawrence wished to sue them claiming they had oppressed him as majority shareholders in the farming companies in which he had an interest prior to his bankruptcy. The family members were opposed to the OA giving the right to sue them back to Mr Lawrence.  They raised four arguments: that there had not been a meeting of Mr Lawrence’s creditors to approve the assignment; that Mr Lawrence was not a bona fide purchaser of the right to sue; that Mr Lawrence did not pay anything to the OA for the right to sue; and finally that the OA’s decision to assign the right to sue back to Mr Lawrence lacked merit. The Court decided that the OA was not obliged to hold a meeting of creditors; that Mr Lawrence did acquire good title to the right to sue; that Mr Lawrence had paid for the assignment by agreeing to pay to the OA a portion of any sum received through the law suit; and that the OA’s decision to assign the claim back to Mr Lawrence was a sound one.  The Court also decided that the family members did not have standing to bring the appeal (because they did not meet certain criteria under the Insolvency Act). This decision shows that a claim or potential claim by a formerly bankrupt party is not necessarily extinguished upon bankruptcy.  Such a claim might come back to haunt defendants later on. http://www.patterson.co.nz/news/2012/august/15/bankrupt-s-outstanding-claim-comes-back-to-haunt-family-business/ http://www.patterson.co.nz/news/2012/august/15/bankrupt-s-outstanding-claim-comes-back-to-haunt-family-business/ Wed, 15 August 2012 14:54:21 Chris Patterson http://www.patterson.co.nz/news/2012/august/15/social-media-an-employers-worst-nightmare/ Further to a previous blog about managing digital assets with staff (posted by Nicola on 21 November 2011) employers must be extra vigilant about employees’ use of social medial – both while at work and outside of working hours. Social media is ever more frequently being used by people to express both positive and negative events that happen in their lives. Unless people are very careful with their privacy settings, a seemingly innocuous comment about an employer, colleague or client can be an announcement to the ‘world at large’ and cause significant damage to the employer’s reputation. Courts in New Zealand, just like rest of the world, are seeing an increase in the number of cases involving employees who have vented gripes about work on social media sites, resulting in their employment relationships being terminated. Regardless of whether such comments are made during work hours or not (and keeping in mind that even employees who are not provided with access to computers or whose computer access is restricted to work related websites only, can access social media during work hours provided they have a smart phone), if the comments might damage the employer’s business in some way, may adversely affect working relationships of employees, or undermine the trust and confidence required between an employer and an employee, they can provide a legitimate reason to terminate the employment relationship. However, employers who become aware that an employee is making disparaging remarks about their employment on a social networking site, must be careful to investigate the issue properly. A number of well-known New Zealanders, including John Key, have become the victims of twitter parodies; employers must ensure that it is actually the employee in question who is making the remarks before they go too far down the disciplinary track. As always, it is better to have a fence at the top of the cliff rather than an ambulance at the bottom. In order to reduce the risk of employees bringing the employer into disrepute on social media sites, we recommend having a clear and comprehensive social medial / social networking policy. The possible outcomes of making negative comments about the employer, its staff or its customers should be highlighted to all employees at the outset, as you will find in most cases where employees have negatively discussed their employer on a social networking site they simply have not considered the possible consequences – including the potential number of viewers. http://www.patterson.co.nz/news/2012/august/15/social-media-an-employers-worst-nightmare/ http://www.patterson.co.nz/news/2012/august/15/social-media-an-employers-worst-nightmare/ Wed, 15 August 2012 14:22:29 http://www.patterson.co.nz/news/2012/february/21/not-all-allegations-of-fraud-stick/ It’s good to have greater clarification from the Court of Appeal about the circumstances in which a disposition to a trust can be seen as an attempt to defraud creditors. Dispositions to a trust can be challenged by a creditor or a spouse in circumstances where relationship property needs to be resolved. In Taylor & Others v Official Assignee [2011] NZCA 630 (9 December 20110) Mrs Taylor appealed to the Court of Appeal against the finding that five dispositions made by her in relation to her family trust were fraudulent under section 60 of the Property Law Act as dispositions made with intent to defraud creditors. The Court of Appeal confirmed earlier case law that the crucial question in all cases is one of intent such that any “circumstances of secrecy” should be examined. The Court then went on to examine the precise circumstances surrounding the establishment of the trust and each particular transaction in question. It found that none of the dispositions on appeal were caught by the Property Law Act. The reasons for this included the finding that the trust had been set up legitimately on the advice of Mr and Mrs Taylor’s lawyer, and some years before the dispositions in question; the subsequent gifting was initiated by the same lawyers; the gifting regime was open and transparent with the IRD; and Mrs Taylor’s debt levels with the IRD at the time of the relevant gifting were not of concern. In conclusion, the Court could not find an intention to defraud. The Court found that the lower Court had erred by looking at what Mrs Taylor ultimately did (i.e. placed assets outside of the pool available to creditors) and reasoned that she must always have intended to so act rather than properly assessing the circumstances of each transaction. Effect does not equate to intention. The effect of this decision on the trust in question was substantial. By it, the Trust was not obliged to pay the Official Assignee anything – previously, it was required to pay $227,000, plus interest. The decision shows that when dispositions are challenged, the circumstances of each disposition must be analysed to see whether it was a disposition implemented with intent to defraud creditors, or whether it was implemented for perfectly understandable and legitimate reasons. Only dispositions falling into the earlier category will be set aside. http://www.patterson.co.nz/news/2012/february/21/not-all-allegations-of-fraud-stick/ http://www.patterson.co.nz/news/2012/february/21/not-all-allegations-of-fraud-stick/ Tue, 21 February 2012 11:43:55 Chris Patterson http://www.patterson.co.nz/news/2012/february/13/new-discovery-obligations-for-litigants/ With the New Year has come new obligations on parties when providing discovery (the listing and exchange of documents) in High Court proceedings. Where it is often that a change in the rules may only affect lawyers, the changes recently made in relation to discovery have a significant impact on the litigants themselves. When initially filing proceedings in the High Court a litigant must now provide to the other side a copy of the documents referred to in the claim, together with all documents that were used by themselves and the solicitor to the prepare the claim. This requires parties to ‘front load’ the preparation of evidence and documentation resulting in a large amount of time and cost to be expended even before proceedings are filed. Further, parties are also required to exchange documents that may be considered to be adverse to their claim, and a conscious attempt must be made by litigants to preserve all documentation held by them once litigation is in contemplation. A higher obligation on litigants is therefore imposed to ensure that documents (physical, electronic, or otherwise), are well kept. Another requirement of the High Court is the full cooperation of the parties when deciding what documents should be discovered and how they should be exchanged. Agreement needs to be reached early on in the proceedings, and again this is an exercise that could prove costly before any substantive issues are even addressed. Litigants need to remember that taking an aggressive stance on a small discovery point may mean that the Court are required to intervene, resulting in further cost and a delay in proceedings. Due to the arbitrary nature of litigation this cannot always be helped, and judicial intervention may be required to resolve differences, even if both parties are being completely reasonable in their discovery requests. The new rules are designed to reduce the overall cost of litigation by allowing each party to have a better view of the strength of their evidence and arguments early on in proceedings. Cooperation and agreement appears to be the key, although ironically, in many cases, if the parties were able to cooperate the issuing of proceedings would not eventuate. http://www.patterson.co.nz/news/2012/february/13/new-discovery-obligations-for-litigants/ http://www.patterson.co.nz/news/2012/february/13/new-discovery-obligations-for-litigants/ Mon, 13 February 2012 11:14:19 Chris Patterson http://www.patterson.co.nz/news/2012/january/26/working-days/ This time of year is full of landmines for lawyers- and not just the back to work blues. Court processes work to strict deadlines set down by either the Court, the legislation or the Court rules.   Sometimes they don’t always say the same thing.  I have had a client this week who caught the sharp end of that stick. My client was served with an application to place the company into liquidation during the Christmas and New Year holidays.  After receiving that application, certain steps need to be taken by certain times i.e. 10 working days. Unfortunately, at this time of year, calculating the working day timeframes is complicated by contradicting legislation as to the duration of the Christmas holidays.  The Companies Act section 2 (and the Interpretation Act 1999 section 29) provide that working days start running from close of business on Tuesday 3 January 2012.  The Interpretation Act specifically states that this applies unless a specific enactment provides otherwise.  The Companies Act contains no such provision except to say “unless the context otherwise requires”.  The High Court Rules definition of “working day” in Rule 1.3 states that working days start running from close of business 15 January 2012, giving the client and the lawyer almost another two weeks leeway.  But which one applies when? This comical situation was judicially considered by Master Venning in In McLellans Ltd v Lee (liquidator of A J De Reus Ltd) 21/4/98, Master Venning, HC Invercargill CP2/98.  Master Venning (now His Honour Justice Venning of the High Court of Auckland) held that the term “working day”, used in s 294 in relation to the period within which notice objecting to a liquidator’s notice setting aside a transaction must be served on a liquidator, is to be defined in accordance with the Companies Act 1993 definition. The Court did not accept an argument that the term should be defined in accordance with a conflicting definition in the High Court Rules. Given this precedent, it is important to consider the matter carefully and err on the side of caution as often as possible.  It is my opinion that where steps are provided for in the High Court Rules, they are subject to the High Court Rules working day definition, where they are provided for in the Companies Act, they are subject to the Companies Act.  The problem with that is, as my client discovered this week, that at this time of year, on one file and about one subject matter, the sand can begin running through the hour glass on 4 January, when other steps still have until 16 January until the time even starts running! This is clearly an area in need of a tidy up by our legislators! http://www.patterson.co.nz/news/2012/january/26/working-days/ http://www.patterson.co.nz/news/2012/january/26/working-days/ Thu, 26 January 2012 10:14:25 Chris Patterson http://www.patterson.co.nz/news/2012/january/23/global-economic-crime/ PriceWaterhouseCoopers (“PwC”) have released their Global Economic Crime survey results. It appears that, despite being the 3rd best country in the world to live in (2010 United Nations Human Development Report), and rated by Transparency International’s 2011 Corruption Perceptions Index as the least corrupt, nearly half of all New Zealanders reported that they were the victim of at least one instance of economic crime (49.5% up from 42% in 2009), including two people who reportedly lost more than US$5 million! Obviously, New Zealand is going downhill. Could that be because 21% of New Zealand organisations report that they simply gave the fraudster a warning or is it because of the lack of a whistleblower hotline in New Zealand? Transparency International has been lobbying for New Zealand to stop resting on its laurels for some time now, and from the PwC report it appears it may be right - we may all fall victims to economic crime at one time or another. What can you do about it if you are the victim of fraud or corruption? Depending on the circumstances, you can report it to the Serious Fraud Office, file a civil suit against the fraudster yourself, or contact your local Police station. I recently had a client who had invested over NZ$1 million in what turned out to be a “ponzi” scheme run by a fraudster - someone who my client considered a mate and who was well known in the community. He offered his “friends” a chance to invest in the same great investment schemes that were providing him with new BMWs and fishing trips to exotic locales. When his investors started asking for their money back, however, he had to find someone else to give him money to cover it, as he had never invested the money anywhere, but had instead used it to support his lifestyle. On behalf of my client, I commenced proceedings against the fraudster and successfully settled the matter including payment to my client of monies invested. My client is very happy to have his money back! See the full text of the PwC NZ country report here: www.pwc.com/nz/fraudsurvey http://www.patterson.co.nz/news/2012/january/23/global-economic-crime/ http://www.patterson.co.nz/news/2012/january/23/global-economic-crime/ Mon, 23 January 2012 09:30:58 Chris Patterson http://www.patterson.co.nz/news/2011/november/21/managing-digital-assets-with-staff/ I have recently come across an interesting report relating to an employer having to sue a former employee in an attempt to take back their Twitter followers. The employer Phonedog (@Phonedog) operates a news site. Phonedog issued proceedings in the United States Federal Court claiming misappropriation of trade secrets, interference with economic advantage and conversion after one of its former employees failed to comply with its request that he surrender a Twitter account. The full article can be found at: http://socialmediagovernance.com/blog/team-building/brand-sues-employee-for-taking-followers-when-he-left-the-company/ My team and I resolved a case earlier in the year involving an employee's Skype account. The employee had a pre existing Skype account. She joined the company (our client) as an account manager. She built an extensive business client list with the knowledge and consent of her employer during the course of her employment. She also used Skype extensively to further the interests of her employer, again with her employer’s knowledge and consent. When the employment relationship came to an end our client wanted her to give it access to her skype account. She refused the request. Neither I nor anyone in my team drafted the employment agreement and it provided no assistance to our client. The implied obligations likewise provided little assistance. We were able to secure an agreed resolution to the satisfaction of our client. However, it was a near miss situation and one which could possibly have been avoided by not just having an appropriate contractual provision to rely upon, but also by adopting an appropriate digital assets policy. http://www.patterson.co.nz/news/2011/november/21/managing-digital-assets-with-staff/ http://www.patterson.co.nz/news/2011/november/21/managing-digital-assets-with-staff/ Mon, 21 November 2011 11:22:00 Chris Patterson http://www.patterson.co.nz/news/2011/october/12/the-rena/ As I write this the Country’s news media are obsessed with the environmental fallout from the grounding of the Rena. While the reporting appears to mainly be focussed on the Government’s management of the response to the immediate environmental threat, there is increasing public concern as to whether the owner of the Rena will be able to be held responsible for the environmental damage and clean-up costs resulting from the grounding. The public needs reassurance as, while the “owner”, Costamare Inc, is a well-established (and hugely profitable) Greek company, it appears that Costamare “owns” the Rena through a subsidiary company, the Rena itself is flagged in Liberia, the Rena was crewed by a master and crew from the Philippines, and the Rena has recently been cited for various safety violations. Such factors are admittedly the norm rather than the exception in the international shipping industry, but that does not make them any more palatable to the public. It is undeniable that “flags of convenience” such as that of Liberia are used for the express purpose of minimising taxes and avoiding the operation of various international maritime treaties which Liberia (and similar states) have not ratified. The choice of a Philippine master and crew is not in itself sinister - the Philippines is one if the world’s great producers of seafarers. Nonetheless, it is undeniably the case that Philippine crews have generally been treated and paid worse than crews from more developed countries. Furthermore, the crew can, in practice, often act as a form of legal insulation whereby ship owners can attempt to shift responsibility and liability (whether civil or criminal) onto the master and crew while themselves avoiding liability. Nonetheless in this particular case there is no reason to doubt that the Government will not only be able to make a reasonable recovery of the cleanup costs from Costamare Inc or its subsidiary, and (if it chooses) obtain a successful prosecution. The grounding occurred within New Zealand’s territorial waters, meaning that the Rena’s master and owner are subject not only to substantial penalties under the Maritime Transport and Resource Management Acts, but also have a legal liability to compensate the Government in relation to clean-up costs. While to date only the master of the Rena has been charged under the Maritime Transport Act, further charges are likely against both the master and owner of the Rena, and the issue of compensation for cleanup costs will in all likelihood be resolved behind closed doors. While flags of convenience, the use of holding companies and the like may be useful and invoked, to attempt to avoid liability where the grounding occurs in international waters or where, frankly, the shipper does not care about the damage to its reputation, such stratagems are legally and practically of limited use in circumstances such as these. In practical terms Costamare Inc is simply too well established, and the grounding relatively minor, for it to risk damaging its ability to continue trading in New Zealand by attempting to avoid responsibility for the consequences of the grounding. What is likely to be highly contested, and likely to occupy the Courts for some time (although not necessarily New Zealand Courts) is the issue of who has liability to the owners of the cargo on board the Rena, and how much those cargo owners are entitled to receive for their losses. It appears that more than 70 containers have already been lost overseas. No doubt some of the containers will already have suffered water damage, others will have lost refrigeration, and there may be considerable losses resulting simply from the delay that will be caused in the intact cargo reaching its final destination. In particular under the international “Hague Visby Rules” (incorporated into New Zealand law by the Maritime Transport Act 1994) while ship owners are liable for damage resulting from events within their direct power or control (or breach of certain express obligations placed on the ship owner), the owner is not responsible for damage arising from an “act, neglect or default of the master, mariner, pilot… in the navigation or management of the ship”. It was the master who navigated the Rena onto the reef. One could reasonably expect a vehement denial from the Rena’s owner that it had any responsibility for the master’s actions. Whether such an argument would succeed is wholly unclear, given the allegations that have surfaced that the Rena was equipped with outdated and/or inadequate maritime charts. The Hague Visby Rules also codify a limitation on a the maximum liability of the ship owner, which will be available to the ship-owner unless the ship owner has been guilty of intentional or reckless conduct which has led to the loss. Again, whether this limitation of liability is available often comes down to an analysis of whether a grounding was caused solely by the actions of the ship’s master and crew, or whether the ship owner was also somehow complicit in the circumstances surrounding the grounding. So, do not be surprised if that, long after the environmental consequences of the grounding have been addressed and paid for, this matter is still being litigated between the cargo owners and the owners of the Rena, or if the only person found to have civil liability to the cargo-owners is ultimately the master of the Rena. http://www.patterson.co.nz/news/2011/october/12/the-rena/ http://www.patterson.co.nz/news/2011/october/12/the-rena/ Wed, 12 October 2011 12:10:33 Chris Patterson http://www.patterson.co.nz/news/2011/september/09/preventing-ambush-marketing-at-the-rugby-world-cup/ With the biggest sporting event in New Zealand’s recent history opening today it only seems appropriate to mention some of the legal issues surrounding it. The Major Events Management Act came into force in 2007, just before the last Rugby World Cup began in France. Broadly, the purpose of the Act is to ensure that major events run smoothly with a focus on preventing unauthorised commercial exploitation at the expense of either a major event organiser or sponsor. Section 8 of the Act authorises the Governor General, on recommendation from the Economic Development Minister (EDM), to allocate an event emblem as well as ‘major event words’. The EDM will then take into account the extent and the period during which these need protection. During the ‘protection period’ of the event, any representation made suggesting that a product, service, brand or person is associated with the major event is prohibited by section 10. Sections 16-24 outline the regulations concerning ‘clean zones’ and ‘clean transport routes’ (also allocated by the EDM), meaning the event area, its surroundings all other areas which are necessary for the activity to occur. Unauthorised street trading and advertising are prohibited with these zones, as well as advertising from outside of the zones, which is clearly visible from within. So, let’s hope we’ve got the systems in place for a World Cup without any hitches. It will be interesting to see whether or not any disputes arise. But with all that said and done, go All Blacks! http://www.patterson.co.nz/news/2011/september/09/preventing-ambush-marketing-at-the-rugby-world-cup/ http://www.patterson.co.nz/news/2011/september/09/preventing-ambush-marketing-at-the-rugby-world-cup/ Fri, 09 September 2011 11:48:22 Chris Patterson http://www.patterson.co.nz/news/2011/september/01/life-without-internet-access/ This morning the Copyright (Infringing File Sharing) Amendment Act 2011 (the “IFS”) came into effect. It seems like a life time ago that Napster arrived, had several million users and then was wiped out with litigation. So what is the IFS intending to do? Well it now makes it illegal (actually it always has been) to share (upload or download) copyrighted material (such as movies and songs) without the authorisation of the copyright holder (such as the movie studio or recording artist). Generally, statutes such as the IFS tend to prescribe the consequences of not complying. The consequences are possibly irrelevant if you have too much money and do not want the advantages of having internet access. I suspect anyone who is illegally downloading movies probably does not fit into that category. How the law is going to practically operate is this: You download an unauthorised copy of say “The Kings Speech” from somewhere like “Pirate Bay”, the copyright owner or their agent identifies that you have done so (they have the technology which enables them to do that) and sends an “evidential packet” (basically the details of their allegation against you) to your internet Service Provider (“ISP”), your ISP then sends you an infringement notice, after you have received three infringement notices the copyright holder can apply to the Copyright Tribunal for the person who is named on your internet account (which depending on who is paying the account could be you, your partner, your parents etc.) to be fined up to $15,000. The IFS does provide, in the future, for the ability of the District Court to order that the account holder’s account be cancelled. A fairly extreme remedy but no different from, say, a Mall Owner issuing a shoplifter with a trespass notice. There are bound to be a few unintended consequences. Let's take the example of the babysitter who gets onto YouTube and unknowingly accesses (downloads) some copyrighted material without authorisation. Bang potential infringement notice number one may be on its way. The big area of concern for me is workplaces. I have been harping on for years (actually 15 years now) that any employer who provides unrestricted internet access to their staff is either very trusting or very naïve. The studies have all shown that a small minority of staff with unrestricted internet access will access copyrighted material without authorisation. Having a good internet policy, monitoring and enforcing it will help in many cases. Once the District Court has the power to remove internet access it might just be those steps that save a business from returning to the fax machine and snail mail. http://www.patterson.co.nz/news/2011/september/01/life-without-internet-access/ http://www.patterson.co.nz/news/2011/september/01/life-without-internet-access/ Thu, 01 September 2011 20:22:32 Chris Patterson http://www.patterson.co.nz/news/2011/august/25/getting-the-creditors-compromise-right/ A case I’ve been working on recently emphasised how important it is to be aware of your rights as a creditor when faced with an insolvent debtor. Part 5, subpart 2 of the Insolvency Act 2006 governs the procedure to be used by those who wish to avoid bankruptcy by obtaining approval from their creditors to receive a return less than what they are entitled to, but generally more than what they would receive if the debtor went into bankruptcy. To kick off the process, the insolvent has to make an accurate and not misleading statement of his/her affairs and a proposal on how his/her debts can be paid to all his/her creditors (“the proposal”). The person nominated by the insolvent to look after his/her affairs, the trustee, then has to hold a meeting of all creditors so that they can vote on the proposal. A proposal will only pass if a majority of creditors in number AND 75% in value, of those creditors who vote at the meeting approve it. The proposal can be a serious compromise to what is actually owed. I know of proposals approved as low as $0.01 return for each dollar owed. It is also very apparent that the nominated trustee only needs to be satisfied, based on the information provided by the insolvent, that the creditors are doing better than they would do if the debtor went into bankruptcy. The process is extremely process-driven, and realistically, the trustee doesn’t have to dig too deep into the information supplied by the debtor if none of the creditors kick up a fuss. Related parties are even able to vote at a creditors meeting. This may mean that the friendly related party holds the casting vote (in number) and depending on how much is owed in relation to others, could even hold 75% of the vote by value. If the proposal is approved, the trustee is then obliged to make an application to the High Court for approval of the proposal. If you remain of the view that the proposal should not be approved then you have the right to oppose the application, however a hugely important consideration for the Court will be the view of the majority of the creditors as expressed at that creditors meeting. As such, to some extent, the horse has already bolted unless you can provide some compelling reasons for the Court to intervene and oppose that majority view. As such, it is crucial as a creditor to ensure you get accurate information about the assets and liabilities held and who the debts are actually owed to. Unless you have reliable intelligence on the likely view of the other creditors to the proposal such that your vote is likely to make no difference whatsoever, my advice to all those who are owed money is to attend the creditors meeting and share as much information with the other creditors as possible in order to ensure you have accurate information, and only then vote. http://www.patterson.co.nz/news/2011/august/25/getting-the-creditors-compromise-right/ http://www.patterson.co.nz/news/2011/august/25/getting-the-creditors-compromise-right/ Thu, 25 August 2011 11:21:11 Chris Patterson http://www.patterson.co.nz/news/2011/august/17/illegality-and-the-duty-of-care/ I have been thinking about illegality and the duty of care in leaky home cases.  Territorial Authorities (the certifying local Council) always, in my experience, cross claim against the other respondents such as the architect, builder, plasterer, roofer etc.  The TA usually seeks pursuant to the Law Reform Act an order that a particular (if not all) respondent indemnity them to the extent to which that particular respondent contributed to the losses suffered by the owner.  I have yet to come across a case where a respondent has asserted as a positive defence, against such cross claim, that their liability should be excluded or certainly reduced as a result of the TA acting illegally in the first place.  You have to keep in mind that the first unlawful act that occurs is usually the TA granting building consent.  Applying the classic‘but for’ argument, none of the respondents would be facing a claim from an owner if the TA had acted lawfully in the first place i.e. declined to grant building consent or refused to certify compliance with the Building Act and Code.  Anyway, food for thought for any respondent counsel who might wish to try that argument on. http://www.patterson.co.nz/news/2011/august/17/illegality-and-the-duty-of-care/ http://www.patterson.co.nz/news/2011/august/17/illegality-and-the-duty-of-care/ Wed, 17 August 2011 11:04:03 Chris Patterson http://www.patterson.co.nz/news/2011/august/16/attempted-settlement-as-a-pre-litigation-requirement/ I have been watching with interest the moves taking place across the Tasman in imposing, as a prerequisite to the filing of claim, that “genuine” or “reasonable steps” be taken to settle the claim.  The NZ District Court Rules heralded in a fundamental change in approach towards forcing parties to identify the issues in dispute and consider settlement.  The reason for the change was purportedly due to the District Court recognising that most civil cases settle.  There is no surprise there.  Going back to what the Australians are up to; no Federal claim (putting aside the political issues at individual state level regarding commencement of these obligations) will be accepted for filing unless the litigant has taken “genuine” or “reasonable (in NSW) steps” to clarify or narrow the issues in dispute and/or engaged in alternative dispute resolution (ADR) and has completed and filed a Genuine Steps Statement (GSS) or in NSW a Dispute Resolution Statement.  The litigant’s lawyers must also have informed the litigants of the genuine or reasonable steps requirements including advising on ADR.  Genuine steps is defined as being a sincere and genuine attempt to resolve the dispute, having regard to the person’s circumstances and the nature of the circumstances of the dispute.  The GSS must: list the issues in dispute and the date upon which they arose, list out in a tabular form each of the steps taken to resolve the dispute, list any steps taken by the respondent that the applicant claims were no genuine and the basis upon which the applicant has formed that view and identify and provide the details of any referral to ADR and issues what were resolved by ADR.  District Court claims in New Zealand do not go as far as requiring a “genuine” or reasonable steps” approach to be taken first.  However, I suspect that if the intent of the District Court Rules is to be met (forcing litigants to try and resolve their own disputes) then such an approach is probably the next logical step.  Whether such a step would be reasonable might be another matter altogether. http://www.patterson.co.nz/news/2011/august/16/attempted-settlement-as-a-pre-litigation-requirement/ http://www.patterson.co.nz/news/2011/august/16/attempted-settlement-as-a-pre-litigation-requirement/ Tue, 16 August 2011 11:01:48 Chris Patterson http://www.patterson.co.nz/news/2011/august/15/litigation-funding/ Litigation Funding in New Zealand is far from a developed industry.  I say this when comparing it to the growing litigation funding industry that exists in Australia.  IMF is a publically listed company on the ASX ( www.imf.com.au ).  IMF describes itself as “… providing funding of legal claims and other related services, in Australia and in other jurisdictions, where the claim size is over AUD $2million. ”  The Australian High Court has in recent years cast aside many of the reservations that stemmed from the tort of champerty and maintenance.  England abolished the tort many decades ago.  Our Court of Appeal has questioned whether the tort is still law.  However, for reasons that I certainly do not agree with, the New Zealand Law Commission have expressed, albeit 10 years ago, a view that it should be retained.    I recently had reason to review the High Court of Australia’s decisions in the Fostif and Jeffery & Katauskas cases.  The High Court in both cases approved, in general terms, the use of commercial funding by non-parties to the proceedings. So what are the policy arguments for supporting commercial funding?  Access to justice has to be the number one benefit of commercial funding.  It has become somewhat trendy to assert that civil litigation in New Zealand is in crisis due to cost.  It is hard to reconcile the policy considerations which underpin the introduction of the new District Court Rules i.e. to lower costs for litigants by recognising that the large majority of disputes are resolved by way of a settlement.  The war of paper and associated delays that the new Rules have created seem somewhat inconsistent with such an objective.  Getting back to access to justice, it is hard to argue against allowing a plaintiff to pursue a genuine claim albeit with the assistance of third party funding.  Why should a liable defendant avoid their responsibilities simply because a plaintiff does not have their own resources to achieve a just outcome?  In many cases the impecuniosity of the plaintiff may have been caused by the defendant’s actions. The main advocated concern of litigation funding is that the funder is immune from the risks of any adverse costs awarded.  There are two simple answers to this.  The first is that an order for security for costs goes a long way towards removing the concern.  Secondly, a defendant can always seek costs against a non-party litigation funder.  However, such an order can only be obtained from the High Court pursuant to its inherent jurisdiction. There are a number of, in my opinion, minor concerns regarding litigation funding.  I see no real prejudice for a defendant if the funding has some say in the way in which the litigation is run by a plaintiff.  Commercial insurers direct and control defendants’ cases without creating any abuse of process issues.  The High Court has always been able to regulate and deal with any abuse of process issues that may arise out of any specific cases, with an award of costs being the main tool used. http://www.patterson.co.nz/news/2011/august/15/litigation-funding/ http://www.patterson.co.nz/news/2011/august/15/litigation-funding/ Mon, 15 August 2011 10:59:32 Chris Patterson http://www.patterson.co.nz/news/2011/august/08/giving-the-privacy-commissioner-some-teeth-and-a-tech-upgrade/ I have just read over all 210 pages of the Law Commission’s (“LC”) latest report, which is a review of the Privacy Act (“PA”). The review is timely as the PA is entering the twilight of its teenage years.  It came to life well before most people had even heard of the internet and certainly well before email and even Facebook were ordinary parts of most New Zealanders’ days.  The LC has made 136 recommendations.  Not a small number and enough to recommend a new PA be enacted. The three areas of the report that I was particularly interested in concerned the powers of the Privacy Commissioner (“PC”), the ability of agencies (collectors of private information) to refuse access to information and the effect of technology. At the moment the PC is somewhat of a toothless beast, reliant on the Director of Human Rights Proceedings making a decision to take a case to the Human Rights Review Tribunal (“HRRT”).  The LC has recommended that the PC be given the power to take a case straight to the HRRT.  I have a few problems with such a recommendation.  The PC has wider and sometimes conflicting interests.  I prefer the DHRP acting as a gate keeper on whether to tie up tax payers’ money in litigation.  However, I might be persuaded to change my view if the PC was first required to take all reasonable steps to resolve any matter before launching the matter into a full scale fight. Another recommendation of the LC is to empower the PC to issue compliance notices which, if not complied with, will amount to an offence.  That is certainly one way of giving the PC some teeth which have the potential to be very sharp ones for that matter.  The final recommendation that interested me was giving the PC the power to require audits of agencies.  I won’t ask how much this will cost each year as I know who will most likely end up paying for the privilege.  The extent of the recommended audit powers is wide ranging and is backed up with recommendations for new offenses such as destroying personal information and misleading an agency through impersonation.  I wonder how much impersonation actually does occur. I often receive questions from agencies about whether they can refuse a privacy request.  I think the LC has correctly identified a couple of key problem areas.  I agree entirely with the LC’s recommendation that agencies be entitled to refuse a request if there was a significant likelihood of serious harassment of an individual or if the request relates to a victim (or the victim’s family) of an alleged offence. The final area I wanted to comment on, which is of particular interest to me, is the effect of technology on maintaining privacy rights.  I remember helping out a young engaged couple 10 years ago with what was a distasteful chain of events.  Jane (not her real name) had a one night stand with a co-worker.  Both participants were heavily inebriated and the co-worker decided to capture parts of the night on video and with a SLR camera.  Jane vaguely remembers the use of the cameras.  She caught up with the co-worker the following Monday over coffee and asked him for an assurance that any footage had been destroyed, which he gave. Jane left the company a few months later and went on her OE.  Five years later Jane was happily engaged and having Sunday dinner with her fiancé and her father.  Her father then tells them that he has received an anonymous letter in the mail which included several URLs which referred to Jane’s name in the URL string.  Her fiancé happened to have his laptop with him and they all decided to have a look at the websites, which featured the video and photos from the night five years earlier. They were referred to me by a senior counsel who in his own words said “I do not know anything about the internet”.  The current PA really did not provide Jane with any help whatsoever despite the fact that explicit photographs and footage of her were being displayed on the internet with the apparent intention to cause her humiliation and distress.  Section 56 of the PA excludes the application of the privacy principles “in respect of the collection of personal information by an agency that is an individual or where that personal information is collected or held principally for the purposes of that individual’s personal or household affairs.” Professor Paul Roth has questioned the meaning of “personal affairs”.  He is one of NZ’s leading experts on privacy matters and quite possibly the funniest academic I have ever met.  Funny and academic do not usually go hand in hand but I think it would be unfair to call that an oxymoron.  Unfortunately, the LC does not think that “personal affairs” needs any clarification.  The LC’s answer, which I am ok about, is to propose an amendment to section 56 so that it does not apply where the agency has engaged in misleading conduct such as asserting directly or by implication that the individual has consented to the collection and use of the information and where the information has been unlawfully obtained.  The LC thinks that the later will be helpful in providing a civil remedy “for intimate covert filming”. The LC commented on some of the technology issues by saying that “the issues concerning section 56 do not result only from the development of the internet, but the internet does create new problems when information about personal, family or household affairs is made available to a much wider audience. It could be argued that making the information more widely available via the internet takes it out of the domestic sphere. However, this is by no means clear: increasingly, websites are becoming the modern equivalents of diaries or family photo albums.”  The LC’s preferred solution was an option “to amend section 56 so that it does not apply when the collection, use or disclosure of personal information results in identifiable harm to another individual.”  Not a bad idea as far as I am concerned. The LC, on this topic, finally recommended the introduction of a “highly offensive test based on that used in the tort of invasion of privacy”.   Some may remember the key facts of the Hosking v Runting case,  where the Court of Appeal held that “highly offensive” publicity would involve “very personal and private matters”, and would be “determined objectively, by reference to its extent and nature, to be offensive by causing real hurt or harm.” My only concern is that it places the threshold at a very high level to overcome.  Not too many people have the level of resources that were expended in the Hosking case. Ok so you might be wondering what happened to Jane.  Well we obtained, without notice to the co-worker, an injunction requiring him to take the sites down and to allow us to search his house and work for evidence.  He was dismissed by his employer.  Jane, as far as I am aware, is happily married with children and hopefully never has to think about that part of her life.  Perhaps the lesson is that the law can provide certain rules that should be followed but it does not stop someone using the internet to cause significant harm if they are committed to do so. http://www.patterson.co.nz/news/2011/august/08/giving-the-privacy-commissioner-some-teeth-and-a-tech-upgrade/ http://www.patterson.co.nz/news/2011/august/08/giving-the-privacy-commissioner-some-teeth-and-a-tech-upgrade/ Mon, 08 August 2011 11:32:01 Chris Patterson http://www.patterson.co.nz/news/2011/august/01/joint-tenancy-vs-tenancy-in-common/ I was recently catching up with a friend of mine who is about to buy a house with her boyfriend. She wanted to know what was meant by a joint tenancy, and whether or not this was the best approach for her to take. Co-ownership of land is by no means uncommon, however although the differences between forms of co-ownership are marked, they are still not something widely appreciated by property owners. A joint tenancy means that both co-owners own all of the land. It arises where land or an interest in land is conveyed to two or more people. Section 61 of the Land Transfer Act states that there is a presumption of joint tenancy where two or more owners of land are jointly registered. The presumption of joint tenancy can be displaced if words of severance are used in the transfer of land, resulting in a tenancy in common. Words of severance can be as simple as ‘equally’, ‘to be divided between’ or ‘to A one third and to B two thirds’. Under a tenancy in common, each person has the right of possession of the whole of the land, but they only own their distinct share. For example, if a piece of land was conveyed equally to two people (which it does not have to be), then both of those people could possess the land, but each of them would only own 50%. Now, this difference may seem trivial on paper, but the choice between these two options could affect who will inherit your property when you die, or even what your fellow co-owner is able to do with your land. Joint tenancy holds a right of survivorship, so for example, if a husband and wife held a joint tenancy over their land and the husband was to die, then his interest would automatically vest in the wife. Tenancy in common, on the other hand, has no right of survivorship; if one of the owners dies, their share of the property will pass to whoever the deceased provided for in their will. People who possess land under a tenancy in common can deal with their separate share of the land as they see fit, e.g. take out a mortgage or even transfer their share, whereas under a joint tenancy neither owner can mortgage their interest without agreement from the other owner. It pays to keep this in mind when purchasing property with someone under a tenancy in common – what will happen if you fall out with each other? The conversation with my friend struck me as one of those circumstances where a basic knowledge of the law can be really useful in everyday situations. She hasn’t decided which option she prefers yet, but at least she’s aware what the options mean. http://www.patterson.co.nz/news/2011/august/01/joint-tenancy-vs-tenancy-in-common/ http://www.patterson.co.nz/news/2011/august/01/joint-tenancy-vs-tenancy-in-common/ Mon, 01 August 2011 16:17:49 Chris Patterson http://www.patterson.co.nz/news/2011/august/01/judicial-creativity/ The extent to which judges should, could and do make the law, rather than Parliament, is a debate that has existed since the formation of modern law. On recently reading the decision of Justice Thomas in the Brooker v Police case, I was struck by his Honour’s creativity and brilliant interpretation of the New Zealand Bill of Rights Act. Brooker v Police was a case where a man sat outside a police officer’s home and sang songs of protest against certain actions of the officer. He was charged with disorderly behaviour and convicted. The man appealed and the matter tracked all the way through the appellate courts to the Supreme Court. The majority of the Supreme Court decided to allow the appeal and quash the conviction. Justice Thomas was in the minority. However, his judgment was convincingly written, and read a fundamental right of privacy into the Bill of Rights. While the other members of the Court looked to the parameters of reasonable limits on the Freedom of Expression under section 5 of the Bill of Rights, Thomas J found that it was not a competition or balancing act between the right of freedom of expression and justifiable limitations but rather between the right to freedom of expression and the right to privacy. It was, in my view, a brilliant interpretation of the statute in a completely different light to the rest of the Court. It certainly got me thinking about the many different methods of interpretation - law is sometimes about thinking completely out of the box in order to argue for the outcome your client wants. And as far as the extent to which judges do this? I recently heard an anecdote relating to Lord Cooke’s law making prowess. He would make a one line throw away comment in one judgment and no one would think anything of it. In a second judgment, he would refer back to that one line and say “as this Court found in the case of x...” and by the third case, it was law. Apparently someone has sat down, analysed all the large volumes of judgments he has written and penned article on it - if anyone comes across it, let me know as I would love to get my hands on a copy. http://www.patterson.co.nz/news/2011/august/01/judicial-creativity/ http://www.patterson.co.nz/news/2011/august/01/judicial-creativity/ Mon, 01 August 2011 16:04:26 Chris Patterson http://www.patterson.co.nz/news/2011/july/30/petricevic-s-family-trust-scuttles-aid-application/ I thought I would read over Justice Wylie’s decision rejecting Rod Petricevic’s attempt to secure criminal legal aid in respect to the Serious Fraud Office’s charges laid against him under the Crimes Act. The charges relate to Rod Petricevic’s involvement in various Bridgecorp transactions.  Bridgecorp Limited is a failed finance company of which he was the managing director and major shareholder. The background facts relating to his family trust (known as the R M Petricevic Family Trust) could, in part (certainly not in relation to value of its assets), apply to the large majority of trusts that I have come across in the last 14 years. Rod Petricevic was the settlor of his own trust, he and his wife Mary were the only trustees (presumably until he was declared bankrupt) and he had the power to appoint or remove any trustee.  He did, however, limit the beneficiaries to his wife, children and any grandchildren or great grandchildren that Mary and he may have.  He and Mary, as trustees, were given the standard directions to hold the trust fund and any income until the date of distribution and to pay or apply the capital or income from time to time as they saw fit.  Interestingly, Rod Petricevic was not named as a beneficiary.  However, I suspect he would not be left out in respect of any distributions to his wife Mary.  In the past, Rod Petricevic had received reasonably large advances (exceeding $3.8 million) from the trust, all presumably sanctioned by Mary. Rod Petricevic’s application for legal aid disclosed that his trust had a net income of $44,371, $447,202 in its bank account and equity “of some $5.2 million” as at 31 March 2009.  The Legal Services Agency (“LSA”) determined that his trust had sufficient assets to fund his defence and therefore declined his aid application.  The Legal Aid Review Panel likewise determined that Rod Petricevic had a substantial interest in the trust’s assets through his wife and therefore had sufficient assets to fund his defence.  As a side note the trust had engaged a Queen’s Counsel so it was not averse to incurring a few legal fees of its own. Rod Petricevic’s main argument in the High Court was that his wife, as a beneficiary, merely had an expectation of receiving a benefit from the trust rather than holding a specific resource.  It did not take much for Justice Wylie to conclude that Mary’s expectations of receiving a benefit from the trust could be regarded as one of her resources.  He noted that all she needed was Rod Petricevic’s support as her co-trustee for her to receive a payment from the trust. Justice Wylie ran through the relevant legislation which makes it clear that a spouse’s resources are to be taken into consideration by the LSA.  In short, Justice Wylie held, what I would have thought was blatantly obvious “that Mrs Petricevic has access to the trust’s assets at Mr Petricevic’s discretion … [therefore] the trust assets can properly be described as one of her resources … if they are her resources, then equally, they must also be treated as Mr Petricevic’s resources.” The intention of the relevant legislation is to combine spouses’ resources to determine whether someone can meet their own legal costs.  To me it makes perfect sense to do so.  I am fairly sure that when they married they agreed to support each other for better for worse, in richer or for poorer (assuming I have the standard marriage vows right).  The trust had treated Rod Petricevic well in the past and presumably the same would apply for Mary.  Why would Mary suddenly want to turn her back on Rod Petricevic in his hour of need?  I guess that question will be answered on the 5 th of September when his trial is scheduled to commence.  I wonder if any of his creditors will click that the trust is liable to come under attack as one of his assets. http://www.patterson.co.nz/news/2011/july/30/petricevic-s-family-trust-scuttles-aid-application/ http://www.patterson.co.nz/news/2011/july/30/petricevic-s-family-trust-scuttles-aid-application/ Sat, 30 July 2011 15:54:22 Chris Patterson http://www.patterson.co.nz/news/2011/july/29/leaky-homes-cash-not-to-sue/ Well today is day one of the Government's leaky home cash not to sue package. I would love the package to work, however, as long as each responsible council remains solvent I suspect claimants will continue to prefer litigation as opposed to taking up the package. I cannot see Auckland Council, for example, falling over anytime soon. The Government has got the package half right.  The Government really needed to go the whole distance and provide a comprehensive rescue package.  Unfortunately, we are going to need an ACC approach if the Government, the councils and owners want to see an end to leaky home litigation led by owners.  I cannot see the beginning of a mass exodus of leaky home lawyers occurring today. Certainly not to the extent of the flood of personal injury lawyers from New Zealand to Australia in the late 1970s. I guess there might be a few groups who would arrange a suitable farewell party at the airport. http://www.patterson.co.nz/news/2011/july/29/leaky-homes-cash-not-to-sue/ http://www.patterson.co.nz/news/2011/july/29/leaky-homes-cash-not-to-sue/ Fri, 29 July 2011 09:00:09 Chris Patterson http://www.patterson.co.nz/news/2011/june/28/official-assignee-keeps-up-the-fight/ Occasionally you come across cases which take on a life of their own.  I have been enjoying following a fight between the Official Assignee (“the OA”) in one corner and Anne Menzies (“Ann i e”) and Simon Palmer as trustees of the Kahurangi Trust (“the Trust”) in the other corner.  The background to the dispute is that Keith Bainbridge (“Keith”), who through his company, Bainbridge Development & Construction Ltd (“BDC”) developed a property at Shelley Beach Road, Herne Bay which turned out to be a leaky building. With bankruptcy looming Keith entered into a property relationship agreement (“the Mat Prop Agreement”) with his wife, Anne.  Keith was owed just over $1mil by his company BDC.  The relevant deal between Keith and Anne, under the Mat Prop Agreement, was that Ann i e would pocket $682k in cash and Keith would retain a debt of some $366k.  No prizes figuring out who between the two of them got the better deal.  It was highly unlikely Keith was ever going to see the money given his pending bankruptcy so it is hard to imagine that he was particularly worried about any unequal division. On 22 June 2005, Keith was adjudicated bankrupt.  Enter the OA.  The OA determined that a number of transactions involving the Trust (which was Keith and Anne’s family trust) did not pass the smell test.  The OA alleged that Keith had placed a number of assets beyond the reach of his creditors by transferring them to the Trust at undervalue.  The OA issued voidable transaction notices and then when the notices had gone unanswered, the OA issued proceedings against the Trust. The notices related to Keith having sold two Shelly Beach Road properties to the Trust under their real value, various gifts of debts that Keith made to the Trust and the Mat Pro Agreement. The Trust failed to take any steps to prevent the OA obtaining judgment against it for just over $2.1mil.  However, at some point the Trust must have woken up to the fact that it was now facing judgment- probably after being served with the default judgment the OA had received on 28 July 2009.   Now that the OA had the Trust’s (Ann i e Menzie and Simon Palmer (Keith’s solicitor)) full attention, the Trust went on the offensive.  During August 2010, the Trust had the default judgment set aside and had its time to challenge the notices extended – round 1 to the Trust. Good fights never end with just one round.  Round two started in February 2011 when the Court upheld a caveat that the OA placed on the Trust’s property (Summit Drive, in Mt Albert) and ordered that the trust pay the OA almost $8k in costs. The Trust was down but decided to come out fighting by filing a number of counterclaims against the OA including claiming misfeasance in public office in seven respects.  The Trust claimed that the OA failed to properly investigate Keith’s affairs, that it should never obtained judgment against it as it would cause hardship, that it had ulterior motives and that it failed to take legal advice on relevant law.  Probably not the best strategy to allege some sort of incompetence against public servants who are spending someone else’s (tax payer’s in this instance) money to hurt you.  The OA decided to take the relatively rare step of seeking to knock out the counterclaims by way of a counterclaim defendant’s application for summary judgment.  The Court granted summary judgment in favour of the OA describing the counterclaims as being “spoiling counterclaims”. Annie unfortunately, for her, did not escape without copping a bit of justified criticism from the Court – Round three to the OA. Now when defendants are down and especially when they are really down, it is not uncommon to start filing a raft of interlocutory applications.  The trust was quick off the bat and started off with seeking further and better discovery. Just to really make a point the Trust’s SC on 4 April 2001 requested (could be differently described but I will adopt the Court’s summary) that Associate Judge Bell recuse himself from the case for apparent bias.  The Court quickly dismissed the request but did, on 5 May 2011, grant some additional discovery to the Trust.   Round Four-possibly evenly split. Round five (I have put this in this order due to the timing of when the Court’s decision was handed down) was the Trust’s attempt to join Keith as a party.  The Court rightly could not see any basis of a claim by Annie against Keith. Personally, I would have thought that Keith had done more than enough for Annie.  The Trust provided no reason for why they wanted Keith joined.  In my experience, if you want a Court to do something, providing a reason or two to justify what you are after is generally a good idea.  The Court could not think of any reason why Keith should be joined so the Trust’s application was dismissed.  Round Five to the OA. Watch this space.  I suspect that the OA is not going to get its $2.1mil without having to deal with a few more interesting (if that is the way to put it) arguments from Annie.  Hopefully, Keith’s creditor (it appears there is only one) will get their money in due course. http://www.patterson.co.nz/news/2011/june/28/official-assignee-keeps-up-the-fight/ http://www.patterson.co.nz/news/2011/june/28/official-assignee-keeps-up-the-fight/ Tue, 28 June 2011 13:18:31