New Zealand has passed a law called the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“the AML/CFT law” for short). The purpose of the law reflects New Zealand’s commitment to the international initiative to counter the impact that criminal activity has on people and economies within the global community.

Recent changes to the AML/CFT Act mean that from 1 July 2018 lawyers must comply with its requirements. Lawyers must do a number of things to help combat money laundering and terrorist financing, and to help Police bring the criminals who do it to justice. The AML/CFT law does this because the services law firms and other professionals offer may be attractive to those involved in criminal activity.

The law says that law firms and other professionals must assess the risk they may face from the actions of money launderers and people who finance terrorism and must identify potentially suspicious activity.

To make that assessment, lawyers must obtain and verify information from prospective and existing clients about a range of things. This is part of what the AML/CFT law calls “customer due diligence”.

Customer Due Diligence Requirements

Customer due diligence requires a law firm to undertake certain background checks before providing services to clients or customers. Lawyers must take reasonable steps to make sure the information they receive from clients is correct, and so they need to ask for documents that show this.
We will need to obtain and verify certain information from you to meet these legal requirements. This information includes:

your full name; and
your date of birth; and
your address.

To confirm these details, documents such as your driver’s licence or your birth certificate, and documents that show your address – such as a current bank statement – will be required.
If you are seeing us about company or trust business, we will need information about the company or trust including the people associated with it (such as directors and shareholders, trustees and beneficiaries).

We may also need to ask you for further information. We will need to ask you about the nature and purpose of the proposed work you are asking us to do for you. Information confirming the source of funds for a transaction may also be necessary to meet the legal requirements.

If you cannot provide the Required Information

If we are not able to obtain the required information from you, it is likely we will not be able to act for you. Because the law applies to everyone, we need to ask for the information even if you have been a client of ours for a long time.

Before we start working for you, we will let you know what information we need, and what documents you need to show us and let us photocopy.

Please contact the lawyer who will be undertaking your work, if you have any queries or concerns.

The European Union (EU) will soon have new rules that are likely to affect the privacy policies of businesses around the world. They relate to the collection of data from citizens of EU countries, and so can affect businesses even as far away as New Zealand. The EU General Data Protection Regulation (known as the GDPR – more info here) has now come into force as of 25 May 2018.

There are three key ways that it could affect your business which you should be thinking through now.

1. Assessing to what extent it will affect you

To answer this you need to think through questions like this:

do you market to and target EU residents via website? Just having it accessible to them may not be enough – do you actively target EU residents to help those in the EU order tours or trips via your website such as offering the website in languages of the EU (beyond English)?
what “personal” data do you collect about users/customers e.g. names, gender, dates of birth, phone, credit card information, addresses, emails etc.
do you transfer data to the EU for example to any agents who act on your behalf there or do you have an “EU representative” or any physical presence at all?
does anyone else store your data on servers offshore or is it all in New Zealand?

2. Reviewing your documents

In light of the answers above, the key one to review is your privacy policy and it is important to check what it says and if it needs updating to reflect best practice. In addition, it is good to look at any consent forms (or places clients click) to check that they are widely enough drafted to give consent to use of their information.

When looking at your privacy policy some key questions to ask are:
What exactly is being collected?
Which entity is collecting the data?
What is the basis for receiving and for processing the data?
Whether or not the data will be shared with third parties?
How long will the data be stored for?
How is the information collected going to be used?
What rights does the person who submitted the information have to e.g. access it – and how?
What the process for a complaint is?

3. Documenting how you comply

This is both an internal record but also could be used if you were ever asked to show how you are complying. It would document the above two points clearly to explain how compliance with the new rules is ensured.

You may want to also designate a person or group to lead the effort within the business. A “Data Protection Officer” could help lead the way in this regard. They may want to prepare a “Data Protection Policy” which can also be used to educate the businesses’ senior decision makers about the GDPR’s new risk-based compliance approach, and the potential effects of non-compliance.

We are able to assist companies with a review of their privacy policies in light of the changes in the EU. While it may seem amazing that a jurisdiction so far away could impact us this is likely to be an increasing trend as we move into even more of a global economy where countries and regions look to protect the data of their citizens. This focus is highlighted by reports of the improper use of data by companies harvesting that information to use in elections. If your answers to any of the questions above indicate a link with the EU then now is the time to take action.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Steven Moe stevenmoe@parryfield.com at Parry Field Lawyers (348-8480)

If you are in start-up mode then you have plenty to think about – so when it comes to setting up your Company you may be wondering what is essential and what is not? In this article we talk about a Constitution and explain what it is and the role it can play for your Company.

To set up a Company the key things you need are a Shareholder and Director (needs to be NZ resident or a director in an Australian company). A Constitution is not legally essential in order to set up a Company but they are very common. This is because they can alter the ‘default’ position under the Companies Act. Without a Constitution the Companies Act provisions apply to your new venture. That may be fine in some simple situations where there is only one shareholder and director but in the usual scenario of multiple people involved it can pay to be specific and customise how you want the rules to apply.

It is worth remembering that because a Constitution is a public document it also allows for transparency in case someone wants to look it up on the Companies Office website (as opposed to a Shareholders’ Agreement which is a private document). More on the Shareholders’ Agreement and what that is another time.

So turning to what a Constitution would typically cover, they deal with how the Company will run in relation to matters such as:

• Setting out clearly the purpose of the Company;
• Information regarding the Shares such as how they are issued and transferred and whether there are any restrictions on selling or transferring shares;
• About distributions and when dividends will be paid and the process;
• Regarding Directors such as the number of directors, how they are appointed and how they resign or are removed;
• Meetings and what will make up quorums of the Board or Shareholder meetings; and
• What happens if the Company is wound up and ceases to trade.

While it may seem like having a Constitution is not necessary if you will be the sole Director and sole Shareholder it is important to think long term – how about in 2 years when you want to bring in an investor? It is likely that having a framework to show that covers off the key points about how the Company operates will be helpful. We would be happy to talk through some of the issues involved as we deal with start-ups most days of the week.

Recently we prepared a guide called “The Start-ups Legal Toolkit” which is a free ebook – contact us if you would like a copy. We also have resources on our “Innovate” website with templates and articles and guides there.

Contacts: Steven Moe – stevenmoe@parryfield.com and Kris Morrison – krismorrison@parryfield.com

We have all come across disclaimers of some sort. Whether a ‘use at own risk’, ‘don’t try this at home’ or ‘check with your doctor/lawyer before acting upon this information’, the concept isn’t new to us. Yet how much can we really rely on these? At what point can people disclaim their own liability, and when do they have to take responsibility for their actions and advice?

Where do you start?

A core starting point begins with section 9 of the Fair Trading Act 1986 which disallows anyone in trade, from engaging in conduct which is misleading or deceptive or likely to mislead or deceive. If someone can show that they merely passed on the information, with no reason to believe that it was misleading or deceptive, then such a disclaimer may be relied upon.

What are some examples?

In the case of Goldsboro v Walker, Mr Oborn wished to buy a motel. He was initially declined but he tried again, but named his mother-in-law as the purchaser, and forged her signature. His solicitor, Mr Fleming, sent the agreement to the solicitors, but Mr Oborn never completed the purchase. In the Court of Appeal, Mr Oborn was found to be in breach of section 9 as he was not merely passing on the information, but represented that he was acting for the mother-in-law. It did not matter that he thought the assertion to be true.

What if you just “convey” information?

This is where the concept of passing over information comes into play. The case law suggests that if someone clearly communicates that the information they are giving has not been assessed by them, but is merely passed on, they can exclude their liability.

The Supreme Court in Red Eagle Corporation Ltd has emphasised that unless it is clear that the information has been passed on from another source, the conveyor takes the risk that the information will be understood to be personal knowledge. Informing the recipient gives them the opportunity to seek further advice and information.

Conveyors should be careful not to get involved in the information if they wish to keep the safety of the disclaimer. In Watson v Gilbert, despite putting a disclaimer in the financial information, the defendant was held to be more than a mere provider of information as he introduced the plaintiff to the investment programme and encouraged the investment.

What does that mean for us?

If you are receiving information that comes with a disclaimer, you will generally have to accept that they have distanced themselves from liability. It will be your responsibility to do further research. However if they haven’t clearly explained that the information they are giving to you has been sourced from elsewhere, and that they haven’t been involved with it i.e. edited/added to the words, included the words in their own pamphlets etc., then you may be able to consider it as personal knowledge. If the information turns out to be incorrect, then you may be able to make a claim against them.

It is also worth keeping in mind that there may be specific rules that apply to you based on the type of industry you are in. For example, Real Estate Agents are subject to rules around their conduct and it is difficult for them exclude those professional duties. If you are uncertain about what applies and what you can exclude by way of a disclaimer then we would be happy to discuss with you to clarify.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Steven Moe at Parry Field Lawyers (348-8480) stevenmoe@parryfield.com

Relief Against Forfeiture

Under section 261 of the Property Law Act 2007 (“PLA”), where a party has received notice of refusal to renew a lease, they may apply to the Court for relief under section 264 of the PLA. Applications must be made within 3 months of the lessee receiving notice of the refusal to renew the lease.

Section 264 of the PLA allows the Court to make an order which extends or renews the lease. The Court may also require the lessor to enter into a new lease with the lessee. Expenses, damages and compensation may also be awarded by the Court in respect of the above orders.

If the lessor has already leased the premises to someone else, or made a disposition which an order under section 264 would prejudice, the Court may still make an order under section 264; however, it may also choose to cancel or postpone the new estate or interest belonging to the third party, and assess and order damages or compensation. This may be payable by either the lessor or the lessee individually, or by them both jointly.

When considering whether to grant a renewal of the lease, the Court will take 7 factors into account:

Reasons for the failure to give notice – e.g. whether the failure to renew was inadvertent;
Whether the cause of the default was due to any action of the landlord;
The lessee’s conduct, in particular whether it has complied with all conditions/covenants and has been a good tenant;
The prejudice to the lessee if the relief is not granted;
The prejudice to the lessor if the relief is not granted;
The lessor’s motivation for the refusal to renew and understanding of the lessee’s intentions; and
The interests of third parties and how they might be affected by any order.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation.

Contact Kris Morrison at krismorrison@parryfield.com

What is Copyright?

Copyright is the set of legal rights given to the creator/owner of an original work. It prevents other people from doing certain restricted acts in relation to a copyright work without the permission of the copyright owner. These restricted acts include (among others) the right to:

Copy the work;
Issue copies of the work to the public by sale or otherwise;
Perform, play or show the work in public;
Communicate the work to the public;
Adapt the work; and
Do any of the above in relation to any adaptation of the work.

There is no requirement to assert or register copyright in New Zealand. Copyright recognition in New Zealand arises automatically in various kinds of works if:

The work is original; and
The author is domiciled in New Zealand or in a prescribed foreign country or is a citizen or resident of New Zealand or of a prescribed foreign country

Who Owns Copyright?

The Crown is the first owner of any copyright in work made by a person employed or engaged by the Crown under a contract of service, a contract of apprenticeship, or a contract for services.
Subject to Crown ownership, and unless otherwise agreed, in most cases the author is the first owner of the copyright in a literary work.

However, unless otherwise agreed:

if an employee makes a literary or artistic work in the course of employment, the employer owns the copyright; and
if a person commissions and pays or agrees to pay for the taking of a photograph or the making of a computer program, painting, drawing, diagram, map, chart, plan, engraving, model, sculpture, film, or sound recording, and the work is made in pursuance of that commission, the commissioning person owns the copyright.

Attribution

The author of a literary, dramatic, musical, or artistic work that is a copyright work has the right to be identified as the author of the work whenever the work is published or communicated to the public (section 94). The right to be identified as the author is not infringed unless the author has asserted the right be identified as author (section 96).

Use of Third Party Content

Where a third party owns copyright in content, you will not be entitled to copy or adapt that content or a substantial part of it without the permission of the copyright owner or unless the copying or adaptation can be justified under an exception.

What is a Substantial Part?

What constitutes a substantial part of a copyright work is a question of ‘fact and degree’. The quality or importance of what has been taken is much more significant than the quantity. Copying a part of a copyright work that by itself has no originality will not normally be copying a substantial part of the copyright work.
Copyright protection is not focused on originality of ideas but on originality of expression. The importance of the copied part to the original copyright work as a whole is assessed to determine whether it forms a substantial part of the original copyright work.
Originality tends to lie in the detail with which the basic idea is presented. The greater the originality, the greater the protection that copyright law will afford it.

Objective Similarity

Even if another copyright work has been copied, the copyright won’t necessarily have been infringed unless the copy is objectively similar to the original. It is possible to take underlying ideas and concepts that are expressed in a copyright work and express those ideas in a significantly different way which therefore does not infringe copyright.

There is limited clear case law, though, on what counts as objective similarity. In one case, the Judge said ‘a copy is a copy if it looks like a copy’.

Causal Connection

It is also necessary to show that the infringing work was actually copied directly or indirectly from the original copyright work.

Altered Copying

Taking the ideas expressed in a copyright work and expressing those ideas in a different words and in a different format may produce new content that is not causally connected with or objectively similar to the original work.
However, copyright will still be infringed if the altered copy has ‘incorporated a substantial part of the independent skill, labour etc. contributed by the original author in creating the copyright work’.

Fair Use Exceptions

There are a number of fair dealing and other exceptions under New Zealand’s Copyright Act 1994.

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you.

Kris Morrison – krismorrison@parryfield.com

There was an interesting interview on the weekend NBR business show with agritech futurist Dr Rosie Bosworth.

She had a warning about New Zealand being complacent regarding the food industry. In particular, that there could be disruption from new technology in synthetic food. She thinks that if it is ignored then this could impact New Zealand in the future and the economy could suffer if it is reliant on traditional food production like it is now.

This is a link to an earlier article she wrote on this topic:

Her conclusion is worth repeating here: “Yes, it will be painful to watch the sun setting over one of our treasured economic mainstays forming the very essence of our rural – even cultural identity. But what will be more painful for New Zealand is if we allow denial of the rapidly changing technologically led agricultural and food paradigm, and our nostalgia for pasture-based farming to paralyze our future economic progress. Despite the many palpable warning signs, it’s time to start thinking seriously about Plan B for New Zealand’s road ahead. Otherwise becoming the Detroit of Agriculture could fast become New Zealand’s nightmarish reality.”

Will be interesting to watch this space in the coming years!

Clean Water Package Controversy

The government recently announced its Clean Water Package. The release has caused considerable controversy, largely around the proposed target of 90% of rivers and lakes being ‘swimmable’ by 2040 and, in particular, the E.coli guidelines for swimmable rivers being 540 E.coli per 100mls.

The Green Party and Labour Party were vociferous in their criticism of the government’s announcement largely because the amount of E.coli that can be present in swimmable water has doubled.As well, Forest and Bird advised the Minister for the Environment, Dr Nick Smith and the Minister for Primary Industries, Nathan Guy that it was withdrawing from the Land and Water Forum. Forest and Bird is a very influential pressure group in this arena; it took legal action in relation to the proposed Ruataniwha Dam and that matter is still being litigated.

The Land and Water Forum brings together groups of stakeholders such as industry groups, electricity generators, environmental and recreational bodies, iwi, scientists and other organisations with a stake in fresh water and land management. The purpose of the forum is to try to develop a common direction for fresh water management and provide advice to the government on this issue. There are 67 non-government participants, and 13 central and local government partners that include local authorities and various government departments.
The issue of fresh water standards for waterways is highly political and is likely to remain this way in the foreseeable future.

Where to from here for farmers?

Where does this government announcement leave farmers? Is their position any different from that set out in our article in the Autumn 2016 issue of Rural eSpeaking which covered the Resource Legislation Amendment Bill 2015 which, when (or if), enacted will give the government power to prescribe regulations to fence waterways?
In answer to the questions posed above, the release of the Clean Water Package doesn’t change the position of farmers at all. Sheep and cattle have been identified as major contributors to the level of E.coli in rivers and streams, and any attempt to control levels of that bacteria will involve keeping animals out of those waterways as far as possible.

The government’s tinkering with the definition of ‘swimmable’ will have little effect on the need to keep animals as far as possible away from our streams and rivers.
As much as anything, the current furore over the government’s package shows that the issue remains highly political – particularly with 2017 being an election year. There are well-funded and high-powered pressure groups involved; farmers cannot expect any relaxation in the fencing proposals that are currently on the table.
Interestingly enough shortly after the Clean Water Package was announced, the Environmental Defence Society released a report entitled ‘Last Line of Defence: Compliance, monitoring and enforcement of New Zealand’s environmental law.’

Local authority compliance

One of the areas that the report examined was resourcing, as well as the technical capacity, for local authorities’ compliance functions. While the report noted that regional authorities have been demonstrating increasing technical capacity for their compliance function, there is still a concern that there is political influence on decision-making, including the allocation of resources.
Clearly, monitoring compliance with the fencing of rivers and streams is going to impose a considerable burden upon our regional and unitary authorities.
In the meantime, however, we will keep you informed on the debate around the Clean Water Package.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Paul Owens at Parry Field Lawyers (348-8480) paulowens@parryfield.com

In an increasingly online world we are sharing and disclosing more and more online and that information is being held digitally. There are frequent examples in the news of leaks and data breaches. This article looks at this issue in detail and examines what the legal requirements are in this area. Understanding what to do when there are data breaches is vital in these times when it is an increasingly common event.

So you’ve had a Data Breach. What are you legally required to do?

On 1 December 2020, the new Privacy Act came into force. One of the significant changes is the requirement to report serious breaches to the Privacy Commissioner and the affected individuals.

What is a privacy breach?

A privacy breach is defined as:

unauthorised or accidental access to, or disclosure, alteration, loss or destruction of, the personal information; or
an action that prevents the agency from accessing the information on either a temporary or permanent basis.

When do I have to report a privacy breach?

A privacy breach becomes notifiable when it is reasonable to believe that the breach has caused serious harm to those affected, or is likely to do so.

How do I assess whether a privacy breach will cause serious harm?

When assessing the seriousness of a privacy breach, you will need to consider the following:

any action you have taken to reduce the risk of harm following the breach;
• whether the personal information is sensitive in nature (e.g. financial/health information);
• the nature of the harm that may be caused to affected individuals;
• who obtained or may obtain personal information as a result of the breach (if known);
• whether the personal information is protected by a security measure (e.g. was the information encrypted?); and
• any other relevant matters.

How do I report the privacy breach?

As soon as practicable after becoming aware of the privacy breach, you must notify the Privacy Commissioner. You can do so at the Privacy Commissioner’s ‘NotifyUs’ page here.

You must also notify the affected individuals as soon as practicable after becoming aware, unless an exception applies.

What are the Exceptions?

You do not need to disclose the breach if disclosure would prejudice the security or defence of New Zealand, prejudice maintenance of the law, endanger the safety of a person or reveal a trade secret.

You may delay notification if you believe disclosure would risk the security of the personal information and those risks outweigh the benefits of informing the affected individuals. As soon as the grounds for delay no longer pose a risk, you must inform the affected individuals of the breach.

Even if you rely on an exception, you must always notify the Privacy Commissioners of the breach as soon as practicable.

What happens if I don’t comply?

Failure to notify the Privacy Commissioner of a notifiable privacy breach may result in a fine of up to $10,000 or the issue of a public compliance notice.

How can I prepare?

You should use this opportunity to make sure your privacy policy will comply with the Act. You should also consider the following:

Make sure you have internal procedures in place to deal with how you become aware of a privacy breach;
Assess the personal information you hold, the reason you collect it, where it is stored and who has access to it;
Make sure your staff are aware of the new requirements.

This article is not a substitute for legal advice and you should contact your lawyer about your specific situation. If you think your privacy policy is insufficient (or non-existent!), we would strongly encourage you to get in touch with us. Contact Steven Moe at stevenMoe@parryfield.com

New Zealand has a similar takeovers regime to that in other Commonwealth jurisdictions like Australia and England. There are specific rules which govern when a takeover offer will need to be made and the process around doing so. This article sets out the key thresholds involved and points to be aware of if an acquisition in New Zealand is being considered.

Where are the rules set out?

Takeovers are governed by the Takeovers Code which became law 15 years ago. The purpose is to make sure that the acquirer of shares in a company complies with certain rules when certain thresholds are met. This means that shareholders are informed where there is a potential change of control of the company they own shares in.

Which companies do the rules apply to?

The rules only apply to certain “Code Companies” which are only New Zealand registered companies that:

have (or recently have had) listed shares that trade on the NZX; or
have 50 or more shareholders who hold voting rights as well as 50 or more share parcels.

What are the key thresholds?

The fundamental threshold is 20% because acquisitions of shares which will take a shareholding above 20% are caught by the Takeovers Code. In measuring this the percentage held by associates is also examined. Such acquisitions must be done in compliance with the rules.

A takeover offer can either be a partial or full takeover offer. Full takeover offers mean the offeror has to receive a minimum level of acceptance of the offer. So if the offeror does not reach more than 50% then the entire takeover fails.

This is in contrast to a partial takeover offer where the offeror makes an offer for only some of the shares. Whether it is successful will depend on the level that is sought – if for more than 50% then the acceptances need to be above that level. If for less than 50% then shareholders vote for or against the offer – so the offer needs to get to the percentage specified and also be approved by a majority of the shareholders. As this indicates, these rules are more complex than a full takeover.

The following are also important percentages to be aware of:

50% shareholding: As mentioned above, this is important in the context of a takeover to determine what rules apply;
5% creep: is permitted each year over a 12 month period for Shareholders who already own more than 50%; and
90% threshold: compulsory acquisition of shares is permitted above this level because they have become a dominant owner.

Conclusion

This short summary of some of the key points regarding takeovers in New Zealand is brief and the specific circumstances of any situation will need to be examined. If you have a target in mind then it would pay to discuss the context of that particular proposal with your advisers to obtain input on the best approach to adopt as one size will not fit every situation.

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