Consumer law is changing in New Zealand and some of the changes
have already taken effect. In early December 2013, the long awaited Consumer
Law Reform Bill went through its final reading in Parliament and on 17
December 2013 was passed into law by way of six separate amendment Acts.
The law reform has been designed to update consumer law in New Zealand and
harmonise it with Australian law to further the Government’s agenda of a
single economic market. The widespread changes are intended to provide
stronger consumer protections in order to enable consumers to transact with
greater confidence and promote competition, innovation and growth.
What is changing?
The most significant changes are the amendments to the Fair Trading Act 1986
and Consumer Guarantees Act 1993. There are also changes to other enactments,
such as the Carriage of Goods Act, Weights and Measures Act, Secondhand
Dealers and Pawnbrokers Act as well as a new Auctioneers Act.
Consumer Guarantees Act 1993 (CGA) - the CGA protects consumers by
providing certain guarantees from suppliers and manufacturers when goods are
acquired. The amendments to the CGA introduce new guarantees for the delivery
of goods, as well as for the supply of electricity and gas. The CGA will also
be extended to cover goods ordered over the internet or by telephone, and
goods sold at auction or tender.
Fair Trading Act 1986 (FTA) - the FTA protects consumers by prohibiting
unfair conduct and trade practices. It provides for the disclosure of
information relating to goods and services, and promotes product safety. The
changes to the FTA introduce new restrictions relating to unfair contract
terms, unsubstantiated representations, extended warranties, unsolicited
goods, product safety and recalls, and internet sales and auctions. The
Commerce Commission has also been granted extended powers.
When do these changes take effect?
Some of the changes took effect from 18 December 2013. These include changes
to new product safety requirements and the increased powers of the Commerce
Commission. Changes to collateral credit contracts are also now in effect.
Most of the key changes however, only come into effect on 17 June 2014. The
six month delay is intended to give businesses the time to change their
practices. Changes that will come into effect at that time will include those
relating to unsubstantiated representations, extended warranties, unsolicited
goods, internet sales, and delivery guarantees. Further changes relating to
unfair contract terms will not come into force until March 2015.
Inside this edition
Reform – what does it mean for you?
Selling and buying goods internationally
Ensuring it’s a first house and not a P house
Changes to the Fencing of Swimming Pools Act 1987
Executors and Trustees – roles and responsibilities
The Harmful Digital Communications Bill
Trust Busting – case update
contract out of the FTA and CGA?
No, not if you are in the business of providing goods
or services to consumers. The amendments to the FTA and the CGA now make that
clear. The only exception to this rule, which the amendments to both Acts seek
to align, is where one business is contracting with another. To successfully
exclude the requirements both parties must be in trade, they must agree in
writing, and the exclusion must be fair and reasonable. What is fair and
reasonable in the circumstances will depend on a number of different factors.
What should you do now?
If you are a consumer you can learn more about the new protections the changes
will bring by speaking with your solicitor. The Commerce Commission and
Consumer Affairs websites can also be a useful source of information.
Individuals and businesses in trade are particularly advised to consult with
their solicitors before 17 June 2014 in order to assess the impact the changes
to the law may have on their current business practices. The changes are
widespread and significant, which is why the six month lead-in time has been
put in place.
Nations Convention on Contracts for the International Sale of Goods 1980 (‘CISG’)
was the end result of a lengthy process towards unifying international trade
law. The CISG became New Zealand law when the Sale of Goods (United Nations
Convention) Act 1994 came into force on 1 October 1995, and as such New
Zealand businesses dealing with international contracts should be aware of its
What is the CISG?
The CISG provides a universal framework to govern international contracts for
the sale of goods. Amongst other things, it sets out which contracts the CISG
applies to, rules around formation of such contracts, the obligations of the
buyer and seller, and remedies for breach of such contracts.
When does the CISG apply?
When two parties have their place of business in two different countries, and
both countries have ratified the CISG (“Contracting States”), the CISG will
govern operation of a contract for sale of goods between those parties. For
example, where a business based in New Zealand enters into a contract to sell
or buy goods with a business based in the USA the CISG would apply, as both
these countries are Contracting States.
The CISG may also apply where only one party is a Contracting State. In this
instance, the rules of private international law apply, which may lead to the
law of the Contracting State being applicable to the contract. For example,
because the CISG is domestic law in New Zealand, it would apply if New Zealand
law was found to be applicable under a contract between a business based in
New Zealand and a business based in a non-Contracting State.
When does the CISG not apply?
Some contracts for sale of goods are specifically excluded from the scope of
the CISG – for example, goods bought for personal, family or household use, or
at auction. Parties to a contract that would usually be subject to the CISG
can explicitly choose to exclude its application, or choose to deviate from
some of its terms.
When an issue arises that is not covered by the terms of the CISG, this
situation is to be dealt with either by the general principles of the CISG, or
where this is not possible, by the rules of private international law.
Why is the CISG relevant for New Zealand businesses?
Where a business based in New Zealand enters into a contract for the sale or
purchase of goods with an overseas based business, the CISG will often apply.
With this in mind, it is also important for businesses to note that while the
CISG is New Zealand domestic law, when it applies to a contract it changes the
‘usual’ New Zealand domestic law. For example, the CISG departs significantly
from usual New Zealand domestic law in respect of irrevocable offers.
In order to have peace of mind when entering into international contracts for
the sale of goods, it is important to consider firstly the law that applies to
your contract, and if the CISG applies. If it does, you will then need to
understand the effect it will have and how it can be tailored to meet your
As the use of
illicit drugs, in particularly methamphetamine (“meth”) grows in popularity,
so does the chance that you could purchase a property that was used as a
clandestine meth laboratory.
When meth is manufactured or used, a wide range of poisonous, explosive, and
extremely flammable chemicals are used. These chemicals, fumes and by-products
can be spilt on surfaces, carpets, curtains and ventilation systems, and
poured down drains contaminating the structure and fabric of the building.
Exposure to the chemicals found in meth labs can have various short-term and
long-term effects on the health of the occupants. As a result this impacts on
the value or marketability of a property to potential purchasers or tenants.
When a meth lab is discovered by police, a notification is usually provided to
the local council who in turn raise a requisition on the council’s Land
Information Memorandum (LIM) database. Under the Health Act 1956, a Cleansing
Order is issued by the council to the owner of the property and a validation
report plus other relevant information must be provided to the council before
the Cleansing Order can be discharged.
It is estimated that the proportion of meth labs found by the police is 5 to
10% of the total amount in operation at one time and that in 2009, 75% of meth
labs reported were located in rental properties. Therefore there is a strong
chance that many home owners have given into temptation and replaced the
carpet and repainted the walls in an attempt to hide the signs of meth use in
order to preserve the property’s value. This is a short-term fix and does not
resolve the issue as the highly toxic residues remain.
Caution must be raised, particularly if the purchaser has a view to tenanting
the property in the future, as it is a breach of a landlord’s obligations to
tenant a contaminated premises. Therefore if undetected the costs of
remediating the property may fall on the purchaser.
a prospective purchaser, there are a number of practical things that can be
done to reduce the risk that the property you are about to purchase was a meth
lab, which include:
* Find out whether the property has been used as a rental,
* Contact the local council and review the LIM report as part of pre-purchase
due diligence (however there may be a chance that the local council records
may not be up to date),
* Ask the vendor and real estate agent about the property’s history;
specifically asking whether they are aware of any meth related activity. Legal
remedies may be available where misrepresentation is proven,
* Ask the vendor if the property has been monitored for meth manufacture by a
third party agency (similar to an alarm system),
* Inspect the property for tell-tale marks. However, it is very hard to detect
when the property has new carpet and a fresh coat of paint,
* Contact the neighbours to inquire about the property’s history, and
* Get the property tested (prior to making an offer of purchase or as a
If you are a prospective purchaser and have concerns about a potential
property, it is our advice that you contact a property lawyer to discuss your
concerns in detail.
to the Fencing of Swimming Pools Act 1987 (‘the Act’), if passed, will give
owners more choice about how they restrict access to their pools, but rules
will be tightened generally and the inspection process unified.
The existing rules have been criticised as inconsistent and cumbersome. The
Act is implemented by local councils, and there are no strict guidelines for
how those councils should act. Some councils consider garden ponds and other
water hazards as a ‘pool’ to be fenced, while others do not. Only some
councils will provide a (costly) fencing exemption to spas that are otherwise
child-resistant, and some councils carry out regular compliance inspections
while others not at all.
The Act allows part of your house to form part of the pool fence; however, it
can be difficult for your council to consent to a door opening directly into
the pool area. Existing rules only allow this where your council is satisfied
that to do otherwise is impossible or unreasonable – leaving inconsistent
results with different councils and leaving owners with fewer choices on how
they can best restrict access to their pools.
The Ministry of Building and Construction has released consultation documents
and taken submissions on proposed changes to the Act, and has indicated that
existing laws will soon be updated. No clear timeframe has been provided for
the implementation of the proposed changes.
* All pools must be inspected by your council every five years. This ensures
all areas of the country are regularly inspecting pool fencing, and that each
council is working with the same standards and timeframes.
* Access to portable pools must be restricted if they contain more than 30
centimetres of water (reduced from the current 40 centimetres).
* Spas do not need to be fenced off if they are child-resistant (e.g. have
locked lids), and will not need regular inspection from your council. This
will mean spa owners will no longer need to apply for a costly exemption if
their spa has a full lockable child-resistant lid and they do not want a
* Rules around house doors opening directly into the pool area to be relaxed.
Doors must still be self-closing and be fitted with an adequate locking
device, but the proposed changes should allow more flexibility where the house
is intended to form part of the fence.
* Obligations to be placed on retailers to inform customers who purchase
swimming pools and spa pools of their obligations.
* Your council can inspect properties where it believes pools (including spa
pools) may be non-compliant and issue warning and infringement notices.
What do the proposed changes mean for you?
For most pool owners - not a lot. Existing fences that meet the current rules
will still meet the new proposed rules. Regular council inspections will
however become compulsory to ensure continued compliance with the Act.
For new pool owners, there will be more flexibility around how access to pools
can be restricted.
Finally, more portable pools than ever will need to be adequately fenced.
Portable pool owners will need to ensure that they comply with the proposed
changes, as councils will be able to issue infringement notices if they do
All of us should have a Will. Having a Will ensures that our
wishes regarding our property and how that property is treated after our death
is clearly set out for our loved ones. A key part of making a Will is to
consider who to appoint as our personal representative in our Will. Under the
Wills Act 2007 ‘personal representative’ means administrator, executor or
trustee. In this article the roles of executor and trustee will be outlined.
The executor’s role can be understood as the initial manager of the affairs of
the deceased. The executor has a duty to ensure the wishes of the will-maker
are carried out. These duties also include an obligation to attend to funeral
arrangements and payment, identify the estate property, ensure debts are paid,
apply for probate of the estate, and ensure specific gifts are made. The
duties of the executor are owed to the estate and to the beneficiaries, and
are fiduciary in nature. The executor owes duties of utmost good faith and
loyalty, and to act in a timely way in administering the estate.
Consequences of breaching the executor’s duties could be that the
beneficiaries of the Will take action in the High Court for breaches of
fiduciary duty, or apply to remove the person as executor.
The role of trustee is to administer any Trusts arising from the Will. Not all
Wills will create Trusts, but where a bequest creates a Trust, the trustee is
obliged to discharge their duties in acting as trustee under a Will. These
duties are imposed by various pieces of legislation, including the Trustee Act
1956. The duties are owed to the beneficiaries of the Trust, in other words
those that stand to benefit from the Trusts created under the Will. The duties
are onerous and far reaching and include the duty to comply with the terms of
the Trust, to invest prudently and in the best interests of the beneficiaries,
to keep complete and careful records and to report and provide information to
the beneficiaries and to treat all beneficiaries of the Trust fairly.
The beneficiaries of the Trust are entitled to rely on the trustees and that
the trustees are discharging their duties. The consequences of a trustee
breaching their duties could result in the beneficiaries applying to the court
for various remedies, including that the trustee be removed from the Trust. If
the trustee’s breach of duty results in a financial loss then the court may
make punitive awards against the trustee.
It is imperative that an executor and trustee understand their roles and the
difference between them, the duties that arise from the roles, and the
consequences that could arise from breaching those duties. It is always wise
to seek advice to ensure that one’s obligations are met.
The Harmful Digital Communications Bill
Charlotte Dawson’s untimely death has seen calls across the Tasman for
regulation against online bullying, pushing this issue into the limelight both
in Australia and New Zealand.
New Zealand is already working towards putting laws against online bullying in
place through the Harmful Digital Communications Bill (‘the Bill’). The Bill
was introduced to Parliament on 5 November 2013, with its first reading on 3
The Bill is the result of a 2012 Law Commission briefing for the Minister of
Justice in respect of harmful digital communications. The briefing included a
recommendation for a new criminal offence for anyone who posts or distributes
material that causes serious emotional distress or humiliation to another
person. It also included a recommendation that a Tribunal be established to
provide citizens harmed by digital communications with efficient and cheap
access to remedies.
The Bill is still in its early days, with a Parliamentary Report in respect of
submissions due on 3 June 2014.
Trust Busting – case
New Zealand Courts have been reluctant (although not unwilling) to dismiss a
Trust as a sham. Recent case law has affirmed this position with the High
Court refusing to find that a Trust was a sham (and therefore invalid), even
when the Settlor of that Trust insisted it was a sham and that it was only
established to delay triggering payment of GST in a commercial transaction.
The High Court observed that a sham exists where there is an intention to
conceal the true nature of a transaction. Here, the Court took the view that
although the Trust was prepared partly to deceive (to avoid GST), this does
not in itself prove that it is invalid. Not surprisingly, the Court went on to
say that because the GST payment was successfully avoided, the Trust must be
valid, because a Trust cannot be valid for one purpose but invalid for
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