Sarah Mason

A recent High Court decision dealing with the long tail of the tiny home boom throws up questions for secured and preferential creditors of companies going into liquidation, just as insolvency begins to spike. Suppliers and creditors of bespoke good manufacturers from tailors to engineering workshops, may need to re-evaluate their securities. Tiny Town Projects Limited was put into liquidation in November 2022. At the time, it had six custom-built tiny homes sitting in its workshop. These were between 40 and 95 per cent complete. A dispute emerged over who owned the partially completed cabins: the company or the customers who had already paid instalments towards the total purchase price. In a conventional analysis of the situation, Justice Venning began by looking at whether the customers had taken legal title to the cabins before the liquidation based on the individual contract in question. The Judge concluded that under the Contracts and Commercial Law Act 2017 and Personal Property Securities Act 1999 legal title remained with the company. Less conventionally, the Judge went on to say that the customers could instead claim an “equitable lien” over the homes to the extent they had already paid for them. An equitable lien is a well-established legal concept that deals with a range of situations where someone is owed or has paid money for goods in someone else’s possession. Here, the Judge finding that a lien existed meant the customers had a priority security claim for the return of their purchase money. Because of how the Personal Property Securities Act 1999 deals with liens, this meant the customers could recover their funds ahead of other secured and unsecured creditors. That included preferential creditors such as suppliers of raw materials used to build the cabins, including PSMI* holders with perfected interests recorded on the Personal Property Securities Register. Practically, with the limited assets available in that liquidation, as in many cases, this came at the expense of other creditors further back in the queue. The potential importance of this decision comes from how the Judge’s reasoning can be applied elsewhere. The Judge focused on two features of the contract between the company and the customers. These were that: it was very clear which tiny home was meant for each customer; and so long as the customers kept paying the purchase price instalments, the company was not allowed to sell the tiny home to anybody else. This will be a very common arrangement between bespoke goods manufacturers and their customers. Businesses as diverse as engineering workshops, tailors, boat-builders, and vintage car restorers and furniture makers would likely fall into a similar category. Even custom solutions fabricated by tradespeople like plumbers could be caught. It is unclear if the decision in this case will be followed by other Judges. But for the moment, the decision suggests trade suppliers and other creditors of anybody who is in a custom goods business should re-evaluate their security arrangements. This can include not only manufacturers, but importers and wholesalers of one-off and bespoke items (like antiquarians, bookdealers, and so on). The decision calls into question how useful retention of title arrangements may be if those goods become incorporated into partly completed bespoke goods that are unfinished at the time of the liquidation. That is a fairly commonplace arrangement. It also means perfected PMSIs* could be less effective than usually thought. How much this matters in practice will depend of course on what other assets the company may have available to satisfy its secured creditors. In the case of Tiny Town Projects Limited and similar businesses, which rely on building custom products as orders are received as a cashflow business, those may be limited. If the issues discussed in this article have given you reason for reflection, Holland Beckett Law’s dispute resolution and restructuring, turnaround and insolvency experts are here to help. We regularly act for liquidators, receivers, creditors, directors, and companies on the full range of insolvency, finance, company, and contract law matters. *A purchase money security interest (PMSI) is a security interest for goods or property sold or leased on the basis the vendor retains title in the property until payment is made. As this can survive the goods being incorporated into other products, this is commonly used for suppliers of raw materials.

On 7 December 2022, the High Court heard urgent arguments regarding a six month old baby (“Baby W”) who was in Starship Hospital and required heart surgery. The parents of Baby W were not consenting to the use of blood from people who had been vaccinated for COVID-19 in Baby W’s surgery, which required the use of donated blood products. The parents of Baby W wanted only non-vaccinated blood to be used in the surgery – a process called directed blood donation. Directed blood donations Directed blood donations are blood donations arranged by an individual, family or group of people for a particular person. Directed blood donations are not a practice that is supported by the New Zealand Blood Service (“NZBS”) due to there being no evidence that they lead to improved patient care. It is also thought that directed blood donations can increase the risk of acquiring transfusion associated infections (such as where a donor feels pressured to answer incorrectly to the pre-donation health survey in order to be allowed to donate blood for a specific person). The NZBS gave evidence in Court that there was no scientific evidence that there was any COVID-19 vaccine-related risk from blood donated by donors who were previously vaccinated with any COVID-19 vaccine approved for use in New Zealand. Other reasons against directed blood donation in these circumstances (and more widely) include: Baby W required rapid access to a full range of blood and plasma products to support the complex heart surgery; The introduction of unnecessary complexity into well-established blood collection and processing systems, translating to an increased risk of errors and possibility of inadequate blood product supply for the patient as some products, including those which Baby W was expected to require, are collected using specialised collection techniques from carefully qualified donors and are manufactured using regulated processes. Some products are even manufactured in Australia; COVID-19 vaccination (or infection) produces antibodies to the virus. There was no evidence of harm from antibodies to COVID-19 being present in blood and it was unlikely that any products of COVID-19 vaccines can end up in the blood stream. Should any such products have been in the donated blood, there was no evidence of harm from these products. Directed blood donations are also not recommended by international expert consensus guidelines, including in the United Kingdom, Australia and Canada. An instance where directed blood donations may be appropriate was said to include where a patient had a rare blood type, where no compatible volunteer donations were available. As discussed, this did not apply to Baby W’s circumstances. Guardianship Guardians need to agree on important matters such as whether medical treatment which is not routine in nature should occur. If the guardians cannot agree (for example, one guardian wants a child to be vaccinated and the other does not) then ultimately the Court can be asked to make a determination resolving the dispute between guardians.(for more information on this particular issue, see here). Sometimes parents agree but medical professionals disagree on the course of life saving treatment for a child. In this case, both parents were not consenting to the use of blood products from people who had received COVID-19 vaccination in completing heart surgery on Baby W but initially agreed that surgery needed to be completed. There were unvaccinated people that were prepared to give a directed blood donation. The Court has the ability to make an order appointing guardianship of a child under 18 years old to the Court or another named person for a specified period of time. Te Whatu Ora Health New Zealand applied to the Court for an order putting Baby W under the guardianship of the Court, so that the life saving surgery could go ahead using the NZBS available blood products (ie. blood from vaccinated and unvaccinated donors, without differentiation). The Judge took great care in their decision to acknowledge that the parents of Baby W wanted the best for their child and held genuine concerns, but ultimately agreed with expert evidence that blood donated by people who were vaccinated for COVID-19 was safe for use. The best interests of the child are the paramount consideration for the Court. Using blood from a donor of the parents’ choosing was not an available alternative, and this was not supported by doctors. Therefore, this was not a safe alternative in Baby W’s best interests. Baby W was put under Court guardianship to allow NZBS available blood products to be used for Baby W’s heart surgery effectively overruling the parents’ decision. The parents then withdrew their consent to the pre-surgery procedures and surgery generally, and the Court issued a further urgent minute widening the guardianship powers to include all necessary pre-surgery procedures and surgery generally. This is not the first, nor last time that the Court will exercise its powers to appoint the Court as guardian. Other examples of the Court intervening in this way include: For the purpose of obtaining a DNA sample to determine paternity of a child when one guardian refuses to consent to the sample being taken; Variously where religious beliefs meant that parents would not consent to a blood transfusion which was vital to a child, as well as for kidney or liver transplants which would require blood transfusion as a part of those procedures; When a baby’s mother carried hepatitis B but refused to consent to her baby receiving hepatitis B injections to stop them contracting the disease due to religious beliefs; When a nine year old’s father would not accept his child’s diagnosis of HIV, despite the child’s mother’s reason for death being recorded in part as caused by HIV. The child had also taken HIV medication for several years prior and there was serious risk to the child if the medication was not continued; and When a child’s safety is at serious risk in the care of either or both parents. Outcome An order enabling the surgery to proceed using NZBS blood products without delay was made as this was considered to be in the best interests of Baby W in the circumstances. It should be clarified that the Court intervened to the least extent possible in order to save Baby W’s life. This is a principle that the Court maintains to ensure that parents retain their guardianship rights for their children to the maximum extent possible in the child in questions’ best interests and welfare. The only act that the Court overruled the parents on, was the act of carrying out the surgery and the use of the blood products. Baby W was otherwise to remain under the parent’s guardianship once surgery was completed. The parents were informed at all reasonable times of the nature and progress of Baby W’s condition and treatment. If you find yourself facing an issue like this, the Family Law team at Holland Beckett Law would be happy to assist you in reaching resolution. The COVID Healthline is available for 24/7 advice and information in relation to COVID-19, including vaccination, on 0800 358 5453.

The Fair Pay Agreements Act 2022 came into effect on 1 December 2022. The Act creates a statutory framework for collective bargaining for Fair Pay Agreements (FPA) that provides for a mandatory, sector-wide collective bargaining regime. FPAs will also supplement collective bargaining between unions and employees, as well as bargaining for individual terms and conditions. We have outlined how FPAs will operate and the potential implications for businesses and employers. Why are Fair Pay Agreements being implemented?The Government has stated that the purpose of the legislation is to bring together employers and unions to bargain for minimum terms and conditions for all employees across an entire industry or occupation. How will the Fair Pay System work?Initiating the processThe FPA process will start if a union meets either the representation test, or the public interest test and initiates bargaining. The representation test means that 10 percent of a given occupation or sector, or 1000 workers (whichever is less) support initiating bargaining for the proposed FPA. The public interest test requires the relevant employees to receive low pay and: Have little bargaining power; or Have a lack of pay progression; or Not be adequately paid, taking into account factors such as working long or unsocial hours (for example, weekend or night shifts) or have contractual uncertainty (for example, performing short-term seasonal work or working on an intermittent or irregular basis). The union must identify who would be covered to establish that one of the above tests have been met. The union must also identify whether it is to be occupation or industry based. The union then applies to the Chief Executive of the Ministry of Business, Innovation and Employment (MBIE). MBIE must be satisfied that either the representation or public interest test has been met. MBIE can request further information and/or call for public submissions in making this determination. If a union is successful it must identify and notify all unions that represent affected employees, and affected employers, and publish a notice to that effect. All employees in the occupation or sector covered by the proposed FPA will be covered by the bargaining, as will their employers. Representation Both employers and employees will be represented throughout the process. For workers, this will likely be the union who initiated the bargaining process. For employers, this will largely depend on whether or not it is a public or private sector. All parties have a duty of good faith, as well as requirements to ensure Māori employees and employers are adequately represented. FPA termsParties must agree on the following employment terms: Start date and expiry date of the FPA which must be for a period of between three and five years; Who is covered by the FPA; The normal hours of work; Minimum base wage rates (including when and how they are adjusted); Overtime; Penalty rates; Any superannuation; and The process for varying an FPA. Parties must discuss, but are not required to include in the FPA, the following topics: Redundancy; Flexible working; The objectives of the FPA; Training and development; Leave entitlements; and Health and safety. Parties may also discuss and include any other employment-related topics they consider to be relevant. They can also allow exemptions for businesses that are in significant financial hardship, set regional differences, and other differential terms, so long as they comply with the Human Rights Act 1993 and minimum employment entitlements. If disputes arise during the bargaining process, parties can access the MBIE mediation service. In some circumstances they may also apply to the Employment Relations Authority (ERA) to have the terms of an FPA fixed through a Determination. Finalising FPAsOnce agreed between the parties, an FPA needs to be approved by the ERA who will carry out a compliance assessment. If approved, then it will be ratified and come into force through regulations or orders. All employers who fall within the coverage of the FPA will then be bound by it. This includes employers who did not participate in the bargaining process. What are the (potential) implications of the Fair Pay System for employers and business owners?Unlike current collective bargaining, under the Fair Pay System there is no opportunity for employers to opt out. Therefore, businesses may have less freedom to negotiate individual employment terms with their employees which could have a negative impact on small-to-medium-sized businesses. That employment terms will apply to all businesses operating in an industry or occupation regardless of their involvement in the bargaining process could lead to businesses feeling disengaged. It also remains to be seen how this will work in practice with multiple employers with competing interests. Independent contractors are not currently covered by FPAs but the Government has indicated this may change. There will be penalties for employers that attempt to avoid the FPA process by engaging workers as independent contractors when they are truly an employee. If you would like further information regarding the effect that the Fair Pay System may have on your business, please contact a member of our employment law team.