Staff Update

Everyone knows about the Consumer Guarantees Act 1993 (CGA), which provides a “consumer” with remedies if a business has failed to provide goods or services to a reasonable standard. But what happens if you are a business purchasing goods? The answer is not found in the Consumer Guarantees Act 1993; it is found in the Contract and Commercial Law Act 2017 (the CCLA). The CCLA implies seven conditions and/or warranties in a contract for the sale of goods: right to sell; conformity with description; fitness for purpose; merchantable quality; conformity with samples; rights of examination, and; acceptance. Not every breach of contract allows for rejection, but a trivial breach of a condition does. This means that a buyer can return goods supplied to a seller. Importantly, whether a term is a condition or a warranty depends on the construction of the sale of goods contract. An important implied condition is “fitness for purpose”. This means that goods must be reasonably fit for purpose. But, unlike the CGA, this condition will only apply where the buyer makes known to the seller the particular purpose for which the goods are required, and that the goods are of a description that it is in the course of the seller’s business to supply. What this means is that when a buyer of a vehicle makes known to the seller that they will be using a vehicle to tow a caravan, then there is an implied condition that the vehicle is fit for that purpose; towing a caravan. This was the case in Finch Motors v Quinn (No 2) [1980] 2 NZLR 519. Mr Quinn, the buyer, told the seller that he wanted a car for towing a boat on extended trips. The seller, Finch Motors, told Mr Quinn they had the ideal car for the job. Not long after the sale, Mr Quinn used his car to tow the boat when it overheated. This, the Court found, was a breach of the implied condition that goods are fit for purpose. There is also an implied condition that goods are of a “merchantable quality”. This is similar to “acceptable quality” under the CGA. The test for whether goods are of a “merchantable quality” is found in an old case, Taylor v Combiner Buyers [1924] NZLR 627. In that case, the Court asked the following question: Are the goods of such a quality and in such a state and condition as to be saleable in the market, as being goods of that description, to buyers who are fully aware of their quality, state, and condition, and who are buying them for the ordinary purposes for which goods so described are bought in that market? Unlike the CGA, the CCLA allows contracting parties to vary or exclude the implied conditions and/or warranties. This includes fitness for purpose and merchantable quality. To do this, the contract must be clear as to the conditions and/or warranties that it purports to vary or exclude. In Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 (HL), for example, the seller’s terms and conditions stated that there is “no warranty express or implied”. The Court found that this did not exclude implied conditions, only implied warranties. If the seller wanted to exclude the implied conditions, including fitness for purpose and merchantable quality, they had to do so expressly. Holland Beckett has experience advising buyers and sellers. This is a complex area of law and Holland Beckett is available to assist.

Recent high profile prosecutions under the Health & Safety at Work Act (HSWA) have highlighted limitations of standard insurance cover for corporate directors and officers. Specifically, where criminal prosecutions may result in extensive defence costs for targeted directors or officers.  Typical directors and officers (D&O) insurance will not cover defence costs where the prosecution is based on criminal liability, such as sections 48 and 49 of the HSWA, in the absence of acquittal. What D&O insurance is and what it typically covers New Zealand law places a high standard on a company’s decision makers, i.e.,  its board of directors and senior executives.  A company will typically place D&O insurance to mitigate the risk for such persons.  This covers a range of liabilities and includes compensation for legal claims and defence costs when acting in a governance or senior role. Companies can place D&O insurance for their directors and employees.  However, a company may only effect the insurance if its constitution expressly authorises it (see s 162 of the Companies Act). D&O insurance can include where a person is charged with a breach of director’s duties or an infringement of the Resource Management Act (RMA).  However, this insurance does not, and lawfully cannot, cover all liabilities. Gaps in cover and criminal liability A company cannot effect D&O insurance to cover defence costs where there is criminal liability if the insured is not acquitted.  This is explicit at s 162 of the Companies Act.  Absent other measures, this can leave a defendant  funding their own defence in relation to liability under the HSWA or the RMA. However, a director or employee may place their own insurance personally for defence costs in relation to criminal liability (which includes liability for collusion under the Commerce Act, offences under the RMA and offences under the HSWA).  Taking out personal defence cost cover is worth considering as many of these offences have strict liability, meaning, you can still be found liable for an accidental breach. If you are a director or executive employee of a company with exposure to liability under the RMA, HSWA, Commerce Act or any other statutes that have criminal liability, it might be a good time to consider personal cover.  Or, if you already have D&O insurance, reviewing what you are covered for already. If you would like to discuss anything in relation to D&O insurance, including understanding what your policy says or what cover you might want to consider, contact our Corporate and Finance team.

Lawyers are used to talking about historic cases by referring to the main parties to a proceeding.  Names like Crown v Brown and Collins v Smith are common place, even for important cases.  However, in the history of the law there are a handful of cases that are referred to with special names.  Some of these names are descriptive, like the so called Ship Money Case that in many ways triggered the English civil war, while others carry the name of an important participant.  This is the case with the example of Baigent’s case. Legal origins Baigent’s case was an important step in the development of New Zealand’s human right law.  It was the case that first recognised the Courts power to award compensation to people who had been the victim of government actions in breach of the New Zealand Bill of Rights Act 1990 (the Bill of Rights).  Its official description is Simpson v Attorney-General, but it has long been called “Baigent’s case”.  The Baigent of Baigent’s care was Mrs Baigent.  Although she had passed away by the time the Court of Appeal released its judgment in July 1994 it was her experience during an unlawful police search that lead the Court of Appeal to confirm that claims for damages for breaching the Bill of Rights were available in New Zealand. Mrs Baigent’s story has a simple beginning.  She was the victim not of a mistaken of identity but of a mistaken address.  A police officer, acting on a tip about a tinny house, mistakenly identified her address as the address of a suspected drug dealer.  A search warrant was issued for the address and the police went to search it.  When the police arrived at Mrs Baigent\'s home she was not there, but her son informed them that they had the wrong address.  He spoke to his sister (a Wellington lawyer) who also explained that the address belonged to Mrs Baigent.  Despite this the police were heard saying “we often get it wrong but while we are here we will have a look around anyway”, and this is exactly what they did.  The police searched the address and found nothing. The Court of Appeal was asked to answer the question of whether Mrs Baigent’s claim for compensation for the unlawful search should be struck out as having no proper legal basis.  Ultimately, the Court found that it was open to New Zealand Courts to give an award of damages for breaches of the Bill of Rights.  Although not required to make a decision in that particular case, President Cooke of the Court of Appeal suggested that an award of something less than $70,000.00 would probably be appropriate.  The Court was never required to decide the question as the matter was (it is understood) confidentially settled some time later.  Despite this, the case has become an important part of New Zealand’s Bill of Right jurisprudence. Baigent’s place Since Baigent’s case there have been dozens of claims for compensation after breaches of the Bill of Rights.  The breaches cover a wide variety of state actions.  Many relate to excessive use of force or degrading treatment by government agencies, like the police or the Department of Corrections.  Others relate to unlawful seizures and breaches of fair trail rights.  The awards that have been given for these claims vary.  The largest – for a criminal defendant who was sentenced to a long prison term for minor offending under the former three strikes law – was $450,000.00.  Other awards have tended to focus on emotional harm and often measure in the thousands or tens of thousands. Baigent’s case and what are often called “Baigent’s damages” are an important part of holding the government to account and upholding the Bill of Rights.  While a range of other remedies exist – for example, declarations that either a particular law does not comply with the Bill of Rights or that government actions have breached the Bills of Rights, and orders to reverse or stay decisions in breach of the Bill of Rights – many of these tools only prevent breaches from continuing.  In cases where the parties have suffered real harm, the availability of financial compensation is the only tool that really exists to remedy what has gone wrong. How we can help Holland Beckett has experience acting for claimants in Baigent’s damages cases resulting in both Court ordered compensation and confidential settlements.  Holland Beckett has also advised government bodies about compliance with the Bill of Rights to ensure damages claims cannot be made. This is a complex area of the law and Holland Beckett is available to assist both in advising people who feel their rights have been breached and agencies that want to ensure they comply with their legal obligations.