In deciding this issue, the Court has to consider the “real” nature of the relationship. To this end, the Court:

• Must consider all relevant matters, including any matters that indicate the intention of the parties; and

• Are not to treat as a determining matter any statement made by the parties that describes their relationship (e.g. if the contract describes one party as a contractor).

So what is the distinction between an employee and a contractor?

The distinction usually lies in whether the person is performing the services as a person in business on his/her “own account. If they are in business on their “own account”, they will usually be an independent contractor.

The Courts have developed a variety of tests over the years to assist in assessing the relationship. Examples of these include:

• What degree of control does the employer have over the work done and the way in which it is performed? The more control an employer has, the more likely it is to be an employment relationship.

For example, if the worker is required to work set hours, is not able to sub-contract the work out to anyone else, is unable to work for other competing businesses, is required to follow workplace rules and is closely monitored, this is may suggest that the “contractor” is actually an employee.

• Is the person a fundamental part of the business – are they “part and parcel of the organisation” or do they merely have an ancillary role?

The more integral to the business, the more likely you are to be an employee.

• Was the person performing the services on his/her own account or as part of the business?

For example, if the worker is providing his/her own tools/equipment, is invoicing the organisation, is able to hire his/her own labour and is responsible for his/her own tax and ACC payments, this may suggest that the worker is a contractor.

Why should this distinction be of a concern for me?

If you engage a worker as a contractor but then, later, that worker is held to be an employee, the following flow-on effects could occur:

• You or your organisation/company could become liable for backdated holiday pay and sick pay from the commencement of the services;

• The tax position will be reassessed. You may become liable for tax.

• The worker will be able to follow all of the processes contained in the Employment Relations Act 2000 including bringing a personal grievance against you/your organisation.

Vice versa, if you are performing work as a “contractor” but fail to see how your situation is any different to a regular employee, you may be missing out on employment entitlements which you are legally entitled to such as holiday pay/leave, sick pay, bereavement leave, kiwi-saver contributions and minimum wage entitlements. You may also believe that you are prevented from bringing a personal grievance against your “employer”.

If you are intending to take on a new worker and wish him/her to be a contractor, at a minimum you should ensure the following:

• That there is a “contact for services” contract in place (we can draft an appropriate document for you);

• That the person is invoicing you/your company for the services provided and payment is made on receipt of an invoice. The person will need to be responsible for their own tax and ACC payments;

• That you do not exercise too much control over the services and how they are being provided e.g. make sure there is flexibility in terms of when the services are to be performed and allow the person to undertake other work (even if it for a competing business);

• That the person provides his/her own equipment/tools (where appropriate).

If you are currently contracted as a “contractor” and are unsure whether in fact you should be classified as an employee, we recommend that you raise this with the business you work for and/or contact us for further advice.

Should you need any assistance with this, or with any other Employment matter, please contact Lois Flanagan or Christy Corlett at Parry Field Lawyers (348-8480).

If you have:

1) Transferred “relationship property” to a trust;
2) Since the beginning of your marriage or de facto relationship; and
3) that transfer has defeated the claim of your partner i.e. they cannot claim an interest in it because it is now owned by a trust rather than their partner

then the Court can require you to compensate your partner or order the trust to pay income to him/her.

One of the key pitfalls to be aware of is that a family home is always classified as relationship property. So, if you decide to protect your home and transfer it to a trust after you are already living together with your partner in the property, this may be too late. The home has already become the family home and your partner may have an entitlement under this scenario.

Transferring property in order to defeat your partner’s claim

This is a broader test than the previous one. If there has been a transfer of property made (it is not restricted to trusts) in order to defeat any person’s relationship property claim, then the Court can overturn this transfer.

The property need not be relationship property at the time it is transferred to the trust. What is needed is:

• That the home would have been relationship property on separation if it had not been transferred into a trust. Therefore, a transfer shortly prior to the beginning of a de facto relationship or marriage may even satisfy the test, as long as the intention requirement (below) is met; and

• When you transferred your home to a trust, you must have had knowledge of the consequences of that transfer i.e. that you might be depriving your partner (or soon to be partner) of a share of an asset which they may have an entitlement to. You do not need to have a conscious desire to remove that asset from the Court or your partner.

Your trust is declared a “sham”

The Court can declare a trust to be a sham if there is evidence that the settlor (the person who effectively set up the trust) never really intended the trust to take effect.

This is a hard test to prove as most people do not set out with this intention. However, the following factors could assist with a sham trust argument:

- The home has been transferred to the trust at less than full market value;
- The settlor continues to treat the trust property as his own;
- There are no trustee meetings;
- The other trustees are rarely consulted;
- No occupational rent is paid to the trust if the home is used by the settlor (though the trust might receive occupational rent by way of the settlor meeting trust debts, such as a mortgage);
- The trust bank account is rarely used; or
- The settlor does not ever turn his/her mind to the interests of other beneficiaries.

If the Court declares the trust to be a sham, it does not exist. The property in the trust will be treated as the settlor’s own property, which in turn can potentially be categorised as relationship property.

Illusory trust

An illusory trust is when a trust is declared to not exist because the settlor is able to control the trust entirely for his/her benefit. In particular, there is no way for the beneficiaries to hold the trustees accountable. Under the trust deed, the trustee (who in this case will also be a settlor and beneficiary) may have unrestricted powers, even though this may be contrary to the interests of other beneficiaries.

If the Court declares that the trust is illusory, it will have the same effect as a sham trust. The property will return to the ownership of the person who settled the trust.
The way to ensure that this argument is never raised is to consult with your lawyer about trustee powers at the time when the trust is being formed to ensure that they are balanced and reasonable.

Constructive trust

Finally, a Court can declare a “constructive trust” over a trust asset if:

1) Your partner has made a contribution (in more than a minor way) to maintaining and enhancing the property;

2) At the time, you both expected that your partner would share in the property and this expectation is reasonable; and

3) The contribution must greatly outweigh the benefits received. i.e. the contributions your partner made (money, time, labour etc) need to exceed the benefit of occupying the property.

This argument is more likely to be raised where the parties have lived in the trust property on a long term basis and the partner has made significant contributions during this period.
If a constructive trust is declared, the Court may grant the applicant an ownership interest by declaring that the trust holds the property on trust for the applicant in such shares as it determines. When assessing what share of the property your partner may be entitled to, the nature and value of the contributions will need to be considered.

What can you do to prevent the likelihood of any of these grounds of attack being successful?

The best protection that you can have against attack is to enter into a property agreement within the first 3 years of your relationship, declaring that your interest in the trust and its assets are your separate property.

Other measures include:

- Consulting with your lawyer about the desired purposes of the trust, trustees, beneficiaries and terms of the trust prior to formation;
- Ensuring that your home is transferred to a trust prior to commencing a relationship (if at all possible);
- Understanding and carrying out your trustee duties with diligence – e.g. ensure that meetings are had and minutes taken, use the trust bank account for the payment of outgoings, have financial accounts prepared;
- Consider whether you and your partner should be paying occupational rent to the trust when occupying trust property;
- Do not allow your partner to make any major contributions to the property e.g. provide finance or labour for extensive renovations, unless there is legal documentation in place to record the arrangement;
- Consider renting out the property to someone else rather than living in it together.

Should you need any assistance with this, or with any other Family matter, please contact Lois Flanagan or Christy Corlett at Parry Field Lawyers (348-8480).

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

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

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

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

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

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

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

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

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

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

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

a) the land under the house;

b) all land within 8m (extending outwards) of the house or outbuildings, such as any garage;

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

d) the land supporting the main access way;

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

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

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

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

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

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

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

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

 b) An area of land of 4000 m2; or

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

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

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

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

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

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

This is not defined in the EQC Act. The Flat Land Guide states that there is land damage where the land has been “materially physically changed as a direct result of the earthquake and that change has materially affected the physical use of the land”.

This is consistent with a number of English cases which have held (in a variety of contexts) that “physical damage” refers to a harmful (i.e. less useful/less valuable) physical change/alteration in the state of the property. Similarly, “physical loss” usually means total destruction as a result of physical damage. In other words, if there is/was no evident physical change to your land or there is a physical change but not one that is negative (e.g. your land now sits above the flood plane), “physical damage” is less likely to be established.

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

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

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

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

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

EQC advises that it assesses these risks utilising drilling data, aerial laser levels taken after each major earthquake/aftershock which record changes in land elevation, and Water Table levels.

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

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

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

If we can assist in any way with your land claim, please don’t hesitate to contact Hannah Carey or Paul Cowey at hannahcarey@parryfield.com or paulcowey@parryfield.com.

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

A recent case – Allan v Mobile Shop Limited & Anor [[2012] NZERA Auckland 430; 30/11/2012; R Larmer] – has now confirmed the importance of also ensuring a prospective employee is given a real and reasonable opportunity to obtain legal advice on their employment agreement, including the trial period, prior to signing the agreement. If an employer does not, they may not be able to rely on the trial period, even if they have met all other pre-requisites.

The Facts

In the case, the employee claimed he was unjustifiably dismissed from his employment. One of the employer’s arguments was that the employee was prevented from raising a personal grievance due to the 90 day trial period in his employment agreement.

The employee was offered employment but it was not until approximately 2 week’s later that an employment agreement was signed. He then signed the agreement within 20 minutes of receiving it from the employer and was not advised of his right to seek independent legal advice. He started work the next day. His employment was later terminated on the grounds of poor performance.

The Outcome

The Employment Relations Authority considered that the dismissal was procedurally and substantively unjustified for a variety of reasons. Despite there being a trial period in the employment agreement that complied with the Employment Relations Act 2000, the Authority decided that the lack of time given to the employee to seek independent legal advice on the terms of the agreement prior to signing it meant that the trial period clause should be struck out of the agreement.

The Authority confirmed that there is an obligation on an employer to provide a reasonable opportunity for an employee to take independent advice, even if the employee freely wants to sign the agreement immediately and without taking advice. In addition, starting work the day after signing an agreement suggested that there had not been a “real” opportunity to take independent advice/negotiate any terms.

The lessons to take away

If you want to protect your right to rely on a 90 day trial period when employing a new employee make sure:

• You give them a copy of their employment agreement containing the trial period at the time they are offered employment.

• They have a sufficient amount of time after that to take independent advice on the agreement/negotiate its terms with you, if they so choose. In other words, make sure the agreement is not given to them just before they are due to start work!

• They don’t just sign the agreement immediately, even if they want to. You may need to insist that they take the agreement away, unsigned, to be returned at a later date.

Should you need any assistance with this, or with any other Employment matters, please contact Lois Flanagan or Christy Corlett at Parry Field Lawyers (348-8480).

In Blackmore v Honick, the employee was offered employment in writing and accepted such in writing (by email). The written offer set out a number of the terms of employment and stated that a written contract, containing those terms, would be provided to the employee after he accepted the position. No mention was made of a trial period. He subsequently resigned from his previous employment and commenced work with the employer. At that time (shortly after he started work) he was presented with an employment agreement containing the trial period which he signed. Some time later but before the end of the 90 day trial period, the employer terminated his employment in reliance on the trial period.

The Employment Court subsequently held the employer could not rely on the trial period when dismissing the employee as the employee was already an employee when he signed the agreement.* The Court stated that, in the context of a trial period, an employment relationship begins as soon as an employee is offered and accepts employment. As the employee had accepted the job offer prior to signing the employment agreement, he was not bound by the trial period contained in it.

The Court held further that, in general, in order for employees to be regarded as not having been previously employed by an employer, the trial period must be agreed in writing before the employee begins work. More particularly, trial periods in employment agreements must be provided to prospective employees at the same time as, and as part of, making an offer of employment to the proposed employee in order for an employer to rely on them.

The further moral of the story therefore is if you, as an employer, want to safeguard your ability to rely on a 90 day trial period, make sure that any offer of employment to a new employee is accompanied by something in writing (preferably the employment agreement) setting out the inclusion in the offer of a 90 day trial period, and its scope/terms.

Should you need any assistance with this, or with any other Employment matters, please contact Lois Flanagan or Christy Corlett at Parry Field Lawyers (348-8480).

* The Employment Relations Act provides that a 90 day trial period can only apply in respect to new employees.

For an employer to rely on a trial period however, recent case law suggests that either:

• The employee must have signed an employment agreement containing the trial period before their first day of work; or
• The employee must have at least been advised of the trial period, in a written employment agreement and orally, before commencing work and agreed to it.

The case of Smith v Stokes Valley Pharmacy is an example of the first proviso. The employee had been employed by the previous owner of the pharmacy until the business was sold and transferred to a new employer. The new employer interviewed the employee, advised her orally that she had “got the job” and gave her a draft agreement. That draft agreement, which the employee took home, contained a 90-day trial provision. The employee started work the day before she signed the employment agreement. After some issues in her employment, the employee was dismissed, some 70 days into the 90-day period.

The Court held that the employee was not prevented from bringing a personal grievance for unjustified dismissal on several grounds. The included the finding that the employee was not a new employee when she signed up to the agreement and the 90-day trial period, as she had started work for the new employer the day before. The trial period must start “at the beginning of the employee’s employment”.

Simmons v Collins Stainless Steel Fabricators Ltd is an example of the second proviso and was decided after Smith v Stokes Valley. Here the Court held that the employee was prevented from bringing a personal grievance for unjustified dismissal. This was even though they signed their employment agreement containing the trial period (which they had been given a copy of before starting work) after they started work. The Court held that the difference here was that the employee had been told before starting work that his employment was subject to a 90-day trial period, and he had agreed to it.

The moral of the story is – if you, as an employer, want to rely on a 90 day trial period, make sure any new employee signs their employment agreement containing the trial period before starting work. Although you may still be protected if an employee did not sign an agreement within this timeframe, it appears you would still need to ensure (at the very least) that you have proof that a written agreement containing the trial period was given to the employee, that the trial period was expressly brought to their attention and that they agreed to it, all before they began work.

Should you need any assistance with this, or with any other Employment matters, please contact Lois Flanagan or Christy Corlett at Parry Field Lawyers (348-8480).