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Cyberbullying and other forms of online abuse are addressed by the Harmful Digital Communications Act in New Zealand

Cyberbullying and the law in NZ: Harmful Digital Communications Act

May, 2018

Bullying, harassment and abuse are sadly nothing new, and they’ve long gotten people on the wrong side of the law.

But the internet and other forms of digital communication have opened up all sorts of new opportunities for those negative forms of communication to rear their ugly heads in ways the law didn’t necessarily account for.

Which is why the law has grown and adapted. The Harmful Digital Communications Act 2015 (HDCA) aims to “deter, prevent, and mitigate harm caused to individuals by digital communications”, and “provide victims of harmful digital communications with a quick and efficient means of redress”.

Facebook threats: a recent example of the Harmful Digital Communications Act in action

A recent case in which a Southland man put up a “Want Dead not alive $10,000 reward” poster of a journalist on his Facebook page resulted in a charge of causing harm by posting digital communication being prosecuted in the Gore District Court.

The man admitted the charge, and Judge Alistair Garland had no hesitation in imposing a fine of $2000 and ordering a $2000 emotional harm payment to the victim. He also ordered that the man undergo intensive supervision for 18 months, in which he must attend a rehabilitative programme.

Judge Garland said the offending was serious and calculating. He said it was done to cause the victim harm, and did so by causing her “extreme stress”.

What are harmful digital communications?

So there are a couple of things we need to define there: “digital communications”, and “harmful digital communications”.

Digital communications cover a wide ambit:

Any form of electronic communication; and … includes any text message, writing, photograph, picture, recording, or other matter that is communicated electronically.

That includes all forms of social media, television, radio and mobile phone communication. So there are a lot of ways someone can cause harm via digital communication.

But what counts as that “harm”? According to the HDCA, it’s “serious emotional distress”. And the Act provides some communications principles which help define this. They state that a digital communication should not:

  • disclose sensitive personal facts about an individual
  • be threatening, intimidating, or menacing
  • be grossly offensive to a reasonable person in the position of the affected individual
  • be indecent or obscene
  • be used to harass an individual
  • make a false allegation
  • contain a matter that is published in breach of confidence
  • incite or encourage anyone to send a message to an individual for the purpose of causing harm to the individual
  • incite or encourage an individual to commit suicide
  • denigrate an individual by reason of his or her colour, race, ethnic or national origins, religion, gender, sexual orientation or disability.

Examples of harmful digital communication

Harmful Digital Communications

Some successful prosecutions under the HDCA have included:

  • A communication sent to a shared email account accessible by workmates, involving 11 photographs of the complainant in various stages of undress, including three photos of her exposed breasts and four photos in her underwear.
  • Photographs posted on Facebook showing the complainant naked wearing only an open dressing gown with her breasts and groin area clearly on display. Another was of her in a seated position with no top on and her breasts exposed.
  • Demeaning and insulting messages sent with a mobile phone.
  • Social media posts where they embarrassed the targeted person because all of their friends and family could view the photos and comments.
  • The use of Instagram where the communication was in the form of a number of hashtags and phrases which together amounted to threats of damage to property and personal injury.

How to make a complaint under the Harmful Digital Communications Act

Cyberbullying and other forms of online abuse are addressed by the Harmful Digital Communications Act in New Zealand

If you think a communication threatens your safety, then you should report it to the Police.

Otherwise, you should go to Netsafe, which is tasked with handing complaints under the HDCA. Their role is to:

  • receive and assess complaints about harm caused to individuals by digital communications
  • investigate complaints
  • use advice, negotiation, mediation, and persuasion (as appropriate) to resolve complaints

And as a first port of call, their staff can give you free and confidential advice about any harmful digital communication you think you might have received.

You can report any problems to Netsafe via an online form, by emailing help@netsafe.org.nz, or by calling 0508 NETSAFE (638 723). If you can, it’s important to keep records of what you’re complaining about—take screenshots, or save relevant URLs.

Depending on the situation, they might give you advice on how to stop the problem, they might try and get problematic content removed on your behalf, or they might arrange contact with the person you believe is responsible for the communication (but only with your consent).

If the problem can’t be solved there, or Netsafe recognises that there’s a clear breach of the HDCA, Netsafe will refer cases to the District Court. The Court can make an order to remove content, or impose penalties.

Members of the public need to go to Netsafe before going to the District Court. But the Police can apply directly to the Court when a communication threatens a person’s safety.

Criminal penalties

The HDCA creates a new criminal offence of causing harm by posting digital communication. It’s punishable by:

  • up to 2 years’ imprisonment or
  • a maximum fine of $50,000 for individuals and a fine of up to $200,000 for companies.

The Act also amended the Crimes Act, broadening the previous law against inciting someone to commit suicide. It is now an offence, regardless of whether or not the victim attempts to take their own life (previously, it was only an offence if the victim committed suicide or attempted to). If convicted, an offender may be sentenced to up to 3 years in prison.

Civil remedies

The District Court also has a broad range of civil remedies available. It can:

  • order that material be taken down
  • issue cease-and-desist orders
  • order publication of a correction, an apology or allow the complainant a right of reply
  • order the release of the identity of persons making anonymous communications
  • order name suppression for any parties.

Under this process, the court orders persons or companies take certain actions. Non-compliance with such orders constitutes an offence. Offenders may be sentenced to up to six months in prison or fined up to $5,000. Companies can be fined up to $20,000.

Budget 2018: tax impacts for business

May, 2018

The 2018 Budget is perhaps most notable for things it’s not doing, such as much towards helping first home buyers.

But there are a few tax developments which will impact businesses: increased backing for IRD to pursue company tax returns, GST collection from offshore suppliers of low-value goods, and tax incentives for research and development.

Boosts for IRD

While there are no new company taxes or increases to existing rates, the Government still expects to take in more from this area by increasing Inland Revenue’s operational budget.

The $31.3 million increase over four years is aimed at helping IRD pursue tax. $23.5 million of this is to help ensure companies file any outstanding tax returns, which is expected to bring in about $183.3 million. Businesses will need to ensure they’re on their toes more than ever when it comes to tax.

The Government is also tasking IRD with improving tax compliance in “specific industries”. There doesn’t appear to be much detail as to what these industries are, but we could speculate that they’re areas where PAYE has been lower than it ought to be, or the “gig and sharing” economies—services like Uber and Airbnb. Both of these were mentioned in the Tax Working Group’s Submissions Background Paper.

GST collection from overseas suppliers

GST on overseas merchants will bring in new sources of tax

Announced prior to the Budget, the Government will also require offshore suppliers of low-value goods to collect GST at the point of sale. Technically, GST has always been payable on these goods, but it wasn’t cost-effective for Customs to collect it on goods under $400.

Requiring offshore suppliers to collect it themselves will increase this take, expected to be $218 million over the next four years. It may also make things a little easier for local retailers, who until now were on an uneven playing field.

Tax incentives for R&D

Research and development tax incentives

Businesses will now be able to claim 12.5c in the dollar back for every dollar they spend on research and development, so long as they spend more than $100,000 on R&D a year.

$1 billion has been set aside over the next four years. The aim is to grow the country’s spend on R&D from 1.3 per cent of GDP to 2 per cent—though this will still be below the OECD average of 2.4 per cent.

We’ve long supported businesses with their intellectual property. We hope that this fund will promote further innovation and new ideas, and ultimately lead to a stronger economy. The test will be how effectively and appropriately money is supplied, and towards what kinds of R&D.

Saving to buy your first home is always a challenge. Unfortunately, Budget 2018 hasn't provided much for first home buyers.

Budget 2018: no changes for first home buyers

May, 2018

While Labour was vocal on the campaign trail about helping people into their first home, there’s not much for those people to get excited about in this year’s Budget.

Getting into your first home

There are no direct initiatives to help prospective first home buyers in Canterbury, though there are a few measures which will help some in other parts of the country, and others which might dampen rising costs in the years to come.

KiwiBuild

KiwiBuild aims to build 100,000 affordable homes for first home buyers in the next 10 years. The Budget revealed that the Government will put $234.4m towards building 6400 new homes over the next four years.

Unfortunately, KiwiBuild isn’t seeking proposals for developments in Canterbury, so it’s unlikely this will do much for first home buyers down this way.

That’s about all that’s come directly from the Budget. There are a few other initiatives announced recently which might work to dampen the property investment market, which will in turn make things a little easier for first home buyers—but it’s still not much in the way of help.

Foreign ownership restrictions

In December 2017 the Government introduced a bill to amend the Overseas Investment Act 2005, which would have the effect of preventing non-residents from buying existing residential property.

The Bill is currently at Select Committee stage, with a report expected back in June.

Should the Bill pass in its current form, this may reduce demand and competition for homes, leaving more opportunities for first home buyers here. But it’s far from a guarantee.

Extension of the bright-line test

The bright-line test is used to figure out if you need to pay tax on the sale of residential property.

Essentially, it’s about whether you bought a property with the intention of selling it quickly for a profit. If you bought a property between 1 October 2015 and 28 March 2018, you would need to pay tax on its sale if you sold within two years, unless:

  • it’s your main home
  • it was transferred to you as part of an inheritance
  • or it was transferred to you as an executor/administrator of a deceased estate.

That test isn’t changing much—but it is being extended. If you buy a property after 29 March 2018, the bright-line test is now for properties sold within five years.

That may dampen property speculation, and therefore again reduce competition for first-home buyers.

Ring-fencing losses on residential property

Finally, the Government is considering loss ring-fencing rules, which would prevent property investors from offsetting losses on property investments against other income.

The aim is to “level the playing field” between investors and home buyers. At the moment, investors can offset the cost of servicing their mortgages with reduced tax on their other income sources, which makes purchasing properties easier.

The Government expects that this will also reduce competition and potentially slow rising house prices.

Still uncertainty for first home buyers

Most of these initiatives look to dampen the housing market generally—but that will take time, and first home buyers in particular might feel reluctant to dive in until the effect of the changes are known. It’s not as certain as, say, National’s campaign promise to double the HomeStart grant.

But that doesn’t mean holding back is always a good idea. If you’ve been thinking of buying your first home, have a chat with us. We can help you consider your options, and figure out what your next steps should be.

And if you’re already planning on buying your home, then we’re only too happy to help you get in the door. Talk with us about getting all your legal needs sorted.

Talk with us about buying your first home

The 2018 Budget provides Christchurch with a few things, including an earthquake insurance tribunal and capital funding for major projects

Budget 2018: what’s in it for Christchurch?

May, 2018

This year’s Budget offered up few surprises overall. It was no different in the areas relating to Christchurch earthquake recovery. A number of new initiatives received funding, but most had already been announced in the past few months.

Still, we’re pleased to see that the coalition is following through with these promises. Christchurch needs Government backing if it’s to make real progress with its recovery, and with this Budget, we might finally see progress on getting remaining EQC and earthquake insurance claims sorted, and on the development of a new stadium.

EQC and earthquake insurance tribunal

The Budget allocates funding to a new insurance tribunal to help resolve outstanding EQC and earthquake insurance claims.

This and other initiatives in the area were already signaled in the past few months, but it’s good to see some concrete progress.

There needs to be. In January, the Government revealed that 3000 claims were still unresolved seven years on from the February 2011 earthquake. And as we said at the time of that revelation, that’s just not good enough.

We’ve helped many Christchurch residents with their claims, so we have a particularly keen interest in seeing how this new tribunal will help get things sorted. If you’re still battling with a claim, let us know.

EQC inquiry

$3.3 million total has been allocated to carry out a public inquiry into EQC performance.

Given the unprecedented nature of the situation in Christchurch, and residents’ many EQC woes, this seems a prudent move. It’s not just about holding EQC to account, it’s about making sure that in any future earthquakes, the process will be a lot smoother.

The inquiry’s terms of reference are yet to be announced, but Minister Responsible for the Earthquake Commission Megan Woods says they will be released “shortly”. We’ll follow updates with interest, and will keep you posted.

Christchurch investment

The Budget will allocate funding to Christchurch for capital projects

The Government will make $300 million available to speed up the Christchurch recovery: $298.5 million for an “acceleration fund”, plus operating funding of $1.5 million. This is in line with what Labour promised in August last year.

Christchurch City Council can apply for money from this fund to complete capital projects that aren’t already covered by the Cost Sharing Agreement with the Crown.

That might mean projects like a new stadium can finally get off the ground. That will be good news for the city generally, the sporting community, and central city businesses which have long anticipated such a development. Of course, it all depends on the City Council and the Government taking the next steps. Money alone won’t make it happen.

Dealing with EQC, earthquake insurance, or want advice on central city development? Get in touch with our experienced team.

Prenuptial agreements: Harry and Meghan aren’t getting one – should you?

April, 2018

Prenuptial agreements are becoming a more popular option for couples around the world—though they’re not always for everyone. As reported by Seven Sharp, Prince Harry and Meghan Markle have opted not to sign one.

Is that the right call? Well, it’s different for everyone of course—but what’s important is that they’ll have talked about it.

Because though prenuptial agreements sometimes have a bit of a stigma, they’re actually a really straightforward and commonsense move, and something that’s worth discussing early on. It’s one of those times where it’s good to make sure you’re on the same page.

How prenups work: a quick recap

In New Zealand, when a relationship ends (either through separation or death), all relationship property is generally divided equally. You can read up on more of this on our Relationship Property page.

But a prenuptial agreement allows you to create your own arrangements about what should happen to your relationship property should the relationship end in separation. You and your partner can decide:

  • what property is relationship property, and what is separate property
  • in what proportions some or all of your property should be split (other than the default 50-50)
  • who will get property that can’t be divided (such as a family pet)

Prenuptial agreements: they don’t come from a lack of confidence!

Prenups don’t come from a lack of confidence in a relationship. As in most engagements, the people who enter them usually intend their marriage to be for life, and believe it will be for life.

And luckily, most of them are. Most prenups are never put to the test.

But sometimes, usually years on, things change, or the unexpected happens. And when that happens, a prenup can be a real relief: not because you might end up with more assets than you would otherwise, but because it’s removed the prospect of uncertainty, conflict or drawn-out legal action.

Why you should talk about a prenuptial agreement

Certainty and giving your relationship the certainty it deserves

Prenups aren’t just in situations where one partner has significantly more assets than the other. They provide you certainty about your assets, and they give you the opportunity to consciously decide how you want to share your property with your partner. It’s you and your partner deciding; not just leaving it up to legislation made by people who don’t know your relationship.

Both you and your partner are on the same page about your property. You know what you have. And it’s a demonstration of respect for what each of you have earned.

Children from previous relationships

Coming into a relationship, you might have other people you have to look out for: such as children from a previous relationship.

The existence of those children doesn’t change the default position at law. Any relationship property will still be divided 50-50 between you and your new spouse should you split. That could include assets you might want to go to your children.

That’s not necessarily fair on those children, and it might also make it harder for you to care for them. A prenuptial agreement can help make assets and property are kept safe for them.

Dealing with property that might not be split easily

Not all property can be split 50-50 (for example, a family pet). Or you might want to agree in advance how you’d deal with the family home—for example, if one partner can buy the other out at a previously-agreed price. You can set out how all property is dealt with in a prenuptial agreement.

Reducing conflict if your relationship does end

The more things you agree on early in your partnership, the less you’ll have to deal with if things turn rocky. That makes for an easier and less stressful time for everyone involved.

Learning more about each other and getting any anxieties out of the way

You’re planning to spend the rest of your life together. It’s important that you can be open and transparent with each other about all your thoughts going into that. Any anxieties you might have before you marry are only going to grow over time, and chances are, your partner might have similar worries too. It’s good to get them out of the way.

So yes, talking about a prenup might make it less likely that you’ll ever actually have to use it.

Talking about a prenuptial agreement is an important step

How to bring up a prenup

Even though a prenuptial agreement should all be straightforward, it doesn’t always make it easy to bring up.

If you’re looking for a reason to do so, then this article can definitely serve as one. (“The lawyers said we should talk about it!” And we do say you should talk about it!)

But it’s also good to talk about it in the context of broader financial discussions, such as retirement and estate planning.

It’s not about what happens if you split: it’s about looking after each other. Before you marry, it’s important to consider things like wills, and figuring out retirement plans. A prenuptial agreement is just another part of that planning.

And remember: it’s something you might both be thinking about. So don’t stress!

Call on us for advice and help

Our relationship property experts David and Holly are here to help you through all stages of your discussions. They can guide you through prenuptial agreements, division of relationship property, care arrangements for children, and anything else you might need—all with sensitivity and the benefit of experience.

Get in touch with David and Holly for a no-pressure chat

 

Cryptopia problems? We want to get it sorted out for you

March, 2018

Cryptocurrency trading platform Cryptopia is alleged to have fallen short in its obligations to customers, holding on to deposits or failing to process trades. We think this could justify legal action—and possibly a class action lawsuit, given the number of people who may be affected.

So we want to hear from you if you’re a Cryptopia customer who’s at all concerned with the service you’ve received—or haven’t received.

A number of customers of Christchurch-based cryptocurrency trading platform Cryptopia have contacted us recently, concerned that Cryptopia is not handling their funds appropriately.

They say Cryptopia isn’t processing their deposits, allowing them to trade with deposits they’ve made, or allowing them to make withdrawals. Essentially, the customers are unable to access or use their funds.

For some, it’s been as many as 55 days without appropriate resolution. And considering the volatility of multicurrencies, that could add up to a lot of lost profit—or a loss in value.

It may be that this is just a side effect of Cryptopia’s rapid growth. In January, they claimed to have 1.4 million users worldwide, up from 30,000 users a year before. That’s a phenomenal growth rate for any company.

But whatever the reason, when people’s personal money is at stake, you have to take things seriously.

Some customers have made official complaints with authorities such as the FMA (Financial Markets Authority), but have yet to make much progress.

So we want to help.

We think what’s going on is unfair, at best. So we’re looking at the best way to get Cryptopia customers what they’re owed.

Because the amounts may not be huge in individual cases, we’re investigating the prospects for appropriate remedies such as a class action suit. That’s where a group of people affected by a wrongdoing come together to file proceedings collectively.

But before we go further, it’s really important we know how many people are affected, and to what extent.

We’re calling for any Cryptopia customer who feels concerned about the company’s actions or inaction to get in touch.

Getting in touch with us won’t:

  • put any obligation on you to take part in any action
  • cost you anything
  • affect any claims you might have against Cryptopia
  • reveal your identity to anyone else, unless you give us specific permission.

It’s just to help us understand how widespread a problem it is, so we know the best way to tackle it.

Assuming there is a legal wrong, a class action lawsuit could be a very good way to address it.

  • You don’t have to carry the burden of pursuing an action on your own.
  • There’s strength in numbers: a sizable class action suit gets more attention than one person.
  • The process is a lot more streamlined, and you’re more likely to see a positive result.
  • You know you’ll be getting a fair deal in relation to other people who’ve been affected.

We’re really interested in cryptocurrency and blockchain. We think it has a lot of potential, and we want to see it succeed.

And we want to see New Zealand-based companies operating in areas like Cryptopia succeed, too. But the only way for that to happen is if they’re encouraged to live up to their obligations. Otherwise, cryptocurrencies will develop a bad reputation. And so does New Zealand as a presence in the global cryptocurrency trade.

Let’s not let that happen. If you’ve had any issues with Cryptopia, please fill out the form below. Please include:

  • the specifics of your concerns
  • the approximate amount you have invested with Cryptopia.

It’s really important we hear from as many people as we can as soon as possible.

Even if you have a complaint in progress, please let us know. And if you know of anyone else with these kind of problems, please share this with them.


    Please select this to confirm you agree to direct contact from Canterbury Legal regarding this matter. We will not share your details with any third party unless you give us specific permission.

Smart Contracts: the way of the future for New Zealand business?

March, 2018

Smart contracts are a logical next step for business. Low-cost, transparent, efficient, and automatic? Why wouldn’t you sign up?

But as with any new technological development, it’s about using it wisely, so you or your business can reap the benefits—and avoid any speed bumps.

Smart contracts: the way of the future for New Zealand businesses?Think about how you carry out your business, and your personal finances. It’s probably a bit different from ten years ago, right? Even more so than 20 years ago.

Lots of things change, but the thing that’s probably had the biggest impact on the way you work is technology. The internet came along, and suddenly there was a world of information available at your fingertips, and new ways to do things faster and better. Email made written communication a lot easier and a lot faster (and began to take over our lives!). Smartphones were once a dream, then a novelty, and are now ubiquitous. Maybe you’re looking at one right now.

As with smartphones, the contracts of the future will be smart as well. Contracts that you can enter into that are transparent, conflict-free and guaranteed to be executed by all parties, with fewer middle persons.

It’s something you’re probably going to want to jump on at some point–or need to jump on. But it’s also important to understand the best way to use them, so you’re getting the best deal for you, and the deal you expect.

We’re afraid the dream of lawyer-free contracts isn’t coming true… at least not yet. But with a bit of expert guidance to get them going, and the peace-of-mind of having support there if they go wrong, you can enjoy a contract which is a lot more certain, and mostly manages to take care of itself.

What are smart contracts? How do smart contracts work?

Smart contracts are self-executing pieces of computer code that monitor and carry out the terms of a contract, agreed to by the parties to the contract.

They’re particularly useful when they involve digital assets, or real-world events that you can track automatically. Basically, it comes down to an “if-then” premise: if A happens, then do B. Or any combination thereof, to however many number of steps you like.

But unlike most traditional contracts, it’s entirely automatic. Each step is recorded on, and then the next step triggered by, a blockchain.

Because smart contracts, as they’re generally thought of today, are not-so-distant cousins of cryptocurrency. You’ve probably heard a lot about that recently–we even talked about cryptocurrency and Bitcoin.

Like Bitcoin transactions, smart contracts exist on a blockchain, such as one called Ethereum. Unlike Bitcoin, which is all about currency, Ethereum allows you to put any sort of agreement or code on the blockchain.

  1. The parties to the smart contract agree on the terms.
  2. The parties write the agreement into computer code.
  3. The parties put the code on the blockchain. Everyone can see the contract, but the parties’ identities are anonymous.
  4. When conditions prescribed by the parties are met, the smart contract carries itself out.

Those conditions in (4) could be a wide variety of things. For example, it could be as simple as a payment of money: once the money arrives in an account, the next step in the contract is automatically carried out without need for human intervention. Or maybe the contract only executes when a stock price rises above a certain amount. Or when cargo reaches a destination.

Benefits of smart contracts

Smart contracts are not suited for every transaction. But when they are right, they come with a number of benefits. The biggest benefits are their efficiency, certainty and transparency.

  • Immutability: Nobody can change a smart contract once the parties add it to the blockchain. This guarantees performance. Fraud is pretty much impossible.
  • Efficiency: Each step in the contract is triggered automatically. No human intervention required.
  • Transparency: Anybody can look at an agreement’s code. People can spot any errors, and there’s no way to hide anything not agreed to by the parties.

Potential smart contract examples

Property transactions

All information about a particular property that you wish to purchase could be stored on a blockchain as its digital identity. As this data cannot be changed, you, as well as your bank can rely on such information for your due diligence investigation and assessment of the property.

You yourself will have a digital identity on a blockchain that would be used by your bank to access your ability to borrow. Your whole financial history would be recorded there, and nobody can alter it. Your bank will know if you had defaulted on previous bank payments.

Smart Contract One: Once the bank approves your loan, you can enter into a smart contract with them for the loan.

Smart Contract Two: Once you suss out the terms of the purchase, you and the seller enter into a smart contract whereby once you pay the purchase price, the contract transfers the land title into your name.

Smart Contract Three: The seller could enter into another smart contract with his or her real estate agent, whereby as soon as you pay the seller the purchase price, the seller will pay to the broker his or her commission.

One action will set off a chain of actions which nothing can stop. Thus, the smart contract delivers the desired outcomes to all parties.

Automated orders and shipping

Smart Contract One: You enter into a contract with an Australian company to ship you goods every time your inventory (tracked electronically) falls below a certain number. The contract triggers a new order every time inventory hits that point. Your payment automatically goes into escrow. It only exits escrow and goes to the seller once the goods arrive on your property (either as reported by the shipping company, or a beacon attached to the container).

Smart Contract Two: The Australian seller enters into a contract with their shipping company. As soon as the goods arrive at your property, the shipping company receives their payment from the seller.

In both these cases, payment is guaranteed when the contract is fulfilled by each party. There’s no risk of you paying for goods that don’t arrive, or the seller not receiving payment for goods that do arrive.

Smart contracts: more efficient, but still need lawyers

Do smart contracts need lawyers?

Early on, a lot of the commentary about smart contracts was that they spelled an end to contract lawyers. That the automation meant people could just set up the contracts and then the blockchain would do the rest.

Now, this probably isn’t surprising coming from lawyers, but it is true: most smart contracts will still need a smart lawyer.

Smart contracts need to have the right terms

Just because it’s called “smart”, doesn’t make it so. The contract’s terms need to provide for what you want the contract to do. You need to account for any unforeseen implications. And you need to figure out how to handle any disputes.

Because one of the big benefits of smart contracts is also one of its weaknesses: once a smart contract starts, there’s no stopping it, and there’s no changing it. You need to make sure it’s absolutely perfect for your purposes before you commit to it.

Smart contracts need to be legal

And just because it’s called a “contract”, doesn’t make it so. Some things you might want to put into a contract simply aren’t legal, or can’t be enforced. That could get you into trouble later on (remember: the contract is public!), or you might not end up with what you want.

Smart contracts may still give rise to disputes

Smart contracts definitely cut down the risk of non-performance. But there’s still always the possibility something will go wrong along the way. Ideally, you’d have something written into the contract to account for that, and having an expert do that is the best way of ensuring things will work in your favour.

Smart contracts: the way of the future… but not for every transaction

Smart contracts still aren’t perfect for every kind of contract.

  • You can’t modify them once you commit to them. So if changing conditions require a change to your contract, you’ll have to end the existing one and create an entirely new one. If that’s likely to happen, and likely to happen often, smart contracts might not be right for you.
  • Smart contracts are based on clear transactions. That’s great for anything that can be measured or tracked precisely. But if it’s, say, a contract for services, it’s not so easy for a smart contract to monitor that. What if it’s based on work being done to a certain standard? In many cases, that’s a determination that can only be made by a human.

Smart contracts: the bottom line

We think there’s a lot of potential for smart contracts. They can make things more efficient, transparent and certain.

They’ll certainly become more and more prevalent. It’s not a matter of if, but a matter of when. Just as we saw phones become smart very quickly, we won’t have to wait long before smart contracts become a normal part of our lives.

But as with most things, they still require a measure of caution. And we’re making sure we’re up with the latest, so we can provide you the advice you need when deciding whether to enter one.

Of course, you might think, “I don’t need smart contracts”, or “they’re not for me”. With all the jargon, and the fact they’re still reasonably rare, that’s understandable.

Yet maybe one day long ago, you thought the same thing about a mobile phone.

And now you can’t live without the smart phone there in your pocket.

Get advice about how you can use smart contracts: talk with us today

Wills are an important way to make sure your family is looked after

What happens if I die without a will in New Zealand?

February, 2018

If you die without a will, your wishes may not be carried out how you likeWills are something every New Zealand adult should have. Wills allow you to say what you want to happen to your property after you die—even though you won’t be there to say it yourself.

And yet every year, thousands of New Zealanders die without a will. Estimates suggest that more than half of New Zealanders don’t have a will.

That’s a problem. Because even though your property will still get distributed if you die without a will, it may not be in the way you want.

Don’t have a will? We can help you make one today

If you die without a will, the Administration Act steps in

Dying without a will is known as “dying intestate”. In these situations, there’s a law (Administration Act) which decides how your property is distributed.

It describes a number of family situations you might have at your death (e.g. partner or spouse but no children or parents; partner or spouse and children but no parents; partner or spouse and parents but no children; children but no parent or spouse), and sets out the corresponding distribution of property. It also says what happens if you die without any family.

It may be that these default positions are what you’d want to happen. After all, the legislation is intended to try and provide a fair outcome for most situations. Your property won’t just disappear. It’s likely your family will get something.

But it may not be what you’d want. For example, you may want to ensure your children receive a larger portion than what is provided for by the law. Or you may wish for them to inherit particular pieces of property, such as a family heirloom.

Dying without a will also makes things more complicated and uncertain for your family and loved ones, which is particularly tough in a time of grief. The last thing you want is to think your family members were at odds because you didn’t leave clear instructions.

So while your property isn’t doomed if you die without a will, it’s much more certain and straightforward to make one

Even just a will with basic instructions can be a big help. And for most wills, it’s a pretty straightforward process. You list what you’re leaving behind, who it should go to, any instructions for your funeral, and who you’d like to carry out your wishes.

Make a will

If you don’t have a will, there’s no better time to start than today. We’ve helped a lot of people through the process of making a will, so you can be confident we’ll handle yours with skill, sensitivity, and care.

Enter your details below to take the first step, or get in touch with Grant or Eric. We’ll get you on the path today.

Bitcoin

Bitcoin: A good investment? Currency of the future? Or just a flash in the pan?

February, 2018

Bitcoin and other cryptocurrencies are growing as people jump on the bandwagon in New Zealand and elsewhere. But are they a good investment? What are the Bitcoin risks? Could they become part of our everyday currency? And what about Bitcoin tax in New Zealand? Canterbury Legal director Clive Cousins explores the implications.

Last Friday David Ballantyne and I attended the Reserve Bank lunch hosted by the Canterbury Employers’ Chamber of Commerce, where we received an off-the-record briefing from Acting Reserve Bank Governor Grant Spencer on the state of our economy, pinpointing developments affecting the financial system.

Much of the address focused on more of the same for the economy, with the Government‘s housing policy still taking a lot longer to implement and unlikely to impact in the current year.

But it was a question on cryptocurrencies that caught my interest, followed by a direct assurance that there were no plans in the short term to regulate them because of their limited effect on our financial stability.

It seems that from the Bank’s perspective, Bitcoin is far too small a player in the New Zealand economy to warrant consideration—let alone regulation—despite all the hype and media attention it receives.

Yet in December 2017, Bitcoin’s worldwide value was more than $5 billion greater than our GDP, after just 9 years of life.

There’s something more to Bitcoin. But does it have a future in our economy? And is it worth your attention?

Bitcoin

Bitcoin Basics

If you’re up to speed and understand the basics of Bitcoin feel free to skip this section. For people like me who are coming late to Bitcoin, here is a rundown.

The fundamental takeaways:

  1. Bitcoin is decentralised, and sits outside the control of banks or governments.
  2. Unlike traditional bank accounts, Bitcoin are kept in anonymous “wallets”. You can acquire, spend, and exchange Bitcoin without anyone ever knowing your identity.
  3. The value of Bitcoin is dictated only by supply and demand. There’s a limited number of Bitcoin, and they have utility—they can exchanged for goods and services, just like regular money.

So governments and banks may have some reservations about Bitcoin and other cryptocurrencies. They can’t regulate it, discover who has Bitcoin, or directly influence its value.

Need a bit more background? Read on…

Bitcoin is a virtual currency

Bitcoin is a type of cryptocurrency–a virtual currency. It has no physical form—it just sits as an entry in a digital ledger. But then, that’s also the case with most currency a bank holds. Only a small amount is actually kept in paper and coins.

The bigger difference between Bitcoin and traditional currency is the nature of that digital ledger. Traditional banks and central banks keep a centralised record of who has what amount of money. They also have influence over how much that money is worth, and how much of the currency is available.

Bitcoin is decentralised

All transactions since Bitcoin began in 2009 are stored in a constantly updated distributed electronic ledger called a blockchain, which is shared across computers of Bitcoin users around the world.

Each of those computers has a copy of the blockchain (the list of transactions). And existing blocks can only be changed if a majority of computers in the blockchain agree—so in practice, it’s impossible to tamper with the records.

Bitcoin is finite

There’s also a maximum possible total number of Bitcoins: 21 million. These slowly become available to Bitcoin users by a “mining” process. Every 10 minutes, Bitcoin groups pending transactions together into a new block, which becomes a mathematical puzzle. All computers on the chain start trying to solve the puzzle. The first one to succeed receives a Bitcoin reward, after a majority of computers confirm that the answer and the transactions are valid—and after a number of other blocks have been added to the chain, further confirming the validity of the transactions.

Bitcoin trading risks – is Bitcoin a good investment, or even an investment at all?

Spencer dismissed the risk of cryptocurrencies to New Zealand’s financial stability, saying Bitcoin and other cryptocurrencies are just “a bit of a sideshow.” Something akin to a punt at the races, or a trip to the casino.

That’s a popular view. A lot of detractors regard it as a speculative mania, similar to the Dutch Tulip Bubble of the 16th and 17th centuries. The newly-introduced and fashionable tulip was in heavy demand, driving prices up, before they dropped dramatically. In the same way, Bitcoin is now in demand, but the demand may not last.

A plausible risk. However, to date Bitcoin has so far proved to be a reasonable gamble. Prices fluctuate, but have generally trended up.

But is it even an investment? You can’t derive income from Bitcoin, unlike shares, deposit interest accounts, or property. Benefits only come from the value of Bitcoin itself increasing. And detractors have applied the “greater fool theory” to that. The “fool” acquires Bitcoin at foolishly expensive prices, with the hope that a greater fool will come along to buy them for even more.

There can’t be a guarantee that will happen, of course. However, the finite supply of Bitcoin does support a belief its value will continue to increase. There can only ever be 21 million Bitcoin, but the number of people interested in it—and its utility as a currency—can go up.

Its weaknesses follow as the flipside of that. Any increase in the supply or a sudden dumping of a significant number of Bitcoin, or a decrease in its perceived utility, would set the value tumbling.

What part could Bitcoin play as a currency in our economy?

Spencer’s remarks aren’t the Reserve Bank’s only comment on the matter. In a 44-page report released late last year, the Bank said crypto-currencies are “experimental in nature”, and there are “material risks” using them—in particular, their volatility.

But the Bank may still adopt aspects of the technology in the future. The report states “work is currently under-way to assess the future demand for New Zealand fiat currency and to consider whether it would be feasible for the Reserve Bank to replace the physical currency that currently circulates with a digital alternative”.

But Bitcoin wouldn’t be that digital alternative. The authors calculate that Bitcoin can only handle transactions at a rate 1/12 of that required to handle all transactions in New Zealand alone. A digital alternative would need all the security and scalability issues worked out.

The Bank concludes that even with the increasing use of cryptocurrencies “national currencies are likely to remain an important payment mechanism”, given that most jurisdictions require you pay tax in domestic fiat currency, and it’s difficult to use cryptocurrencies for credit.

Bitcoin and tax – how does IRD tax Bitcoin?

Tax and cryptocurrency is a little unclear in New Zealand, but Inland Revenue is starting to make that clearer by developing guidelines for the taxation of profits obtained in trading cryptocurrencies.  Ahead of this, they’ve advised that people could regard Bitcoin as like gold bullion for the purposes of taxation.

Per an IRD paper, proceeds from the disposal of gold, as with other personal property, would be taxed if it had been purchased “for the dominant purpose of disposal”. So if you were acquiring Bitcoin not to spend, but to make a profit by selling, you’d need to pay tax on your profits.

But you would also be able to deduct any expenses, such as the acquisition cost and expenditure related to the purchase such as foreign exchange charges.

It’s likely that losses would also be deductible. Per that same paper, “[j]ust as an increase in value will mean that the profits are taxed, if the gold has decreased in value, and is sold for less than it cost, that would result in a deductible loss”.

So is Bitcoin and cryptocurrency worth it?

There’s no right or wrong answer here. As with any possible investment, it’s up to you to weigh the possible risks and benefits. Certainly, people have made tidy profits from Bitcoin—particularly early adopters. But it remains extremely volatile, and its utility as a currency is still fairly low, as not many places will accept it in exchange for goods and services.

But it sounds like apart from IRD’s upcoming guidelines, there’ll be little further regulation on cryptocurrencies in New Zealand in the near future. That’s good and bad for the potential investor: good because it won’t impact on any profits; bad because it won’t result in any new protections.

It’s also unlikely cryptocurrency will become a dominant form of currency any time soon. People have made plenty of bad predictions about technology like that in the past—phones, computers, television. But as the Reserve Bank report shows, there are still some very real limitations on cryptocurrency. Until those are overcome, it won’t be feasible as a primary form of currency.

So we’d close as the Bank does: caveat emptor—buyer beware.

As Bitcoin and other cryptocurrencies are growing people jump on the bandwagon in New Zealand and elsewhere. But are they a good investment? What are the Bitcoin risks? Could they become part of our everyday currency? And what about Bitcoin tax in New Zealand?

  • This post is opinion intended to help you understand more about Bitcoin and cryptocurrency. It doesn’t constitute formal legal or financial advice. If you are interested in investing in Bitcoin or other cryptocurrencies, we recommend you talk with a financial professional.

Online contracts: how you can enforce them, and how they can be enforced against you

February, 2018

Click wrap agreementsYou might not realise it, but every day you’re on the internet, you’ll probably agree to an online contract, or use a service or website where you’re party to an existing online contract.

You might not actually read it, or sign it with your signature. But it is a contract nonetheless, and subject to the same conditions as any other contract—including the conditions that determine whether it is enforceable or not.

If it doesn’t meet those conditions, then it might not be enforceable. So as a business or consumer, it’s really important to understand how online contracts work—so you know how to make a good one, or to avoid being treated unfairly.

This is particularly important for businesses. If the court declares a term unfair and the business retains it in its contract, it’s liable to a fine of $200,000 for an individual, and $600,000 for a body corporate. A lot of money for words on a webpage—but all those words matter.

Types of online contracts

There are three distinct categories of online contracts.

  • “Clickwrap” contracts form part of programs supplied online and require that you click an “I accept” (or an equivalent) button to agree to their terms and conditions.
  • Browsewrap” contracts are attached to websites and allow you to use a website without clicking or otherwise acknowledging acceptance of the terms and conditions.
  • “Sign-in wrap” contracts are somewhere between “clickwrap” and “browsewrap”. While there is no “I accept” button, you will be presented with a link to view the terms and conditions (but it is usually not required to use the relevant website) and you are taken to accept them by continuing to use the website or service.  “Sign-in wrap” contracts may also provide that by registering or signing into an account you agree to the terms and conditions.

So a lot of these contracts aren’t even particularly obvious. Which brings us to the first potential problem with them.

The main issue of enforcing online contracts: notice

Whether an online contract’s terms and conditions are enforceable usually depends on whether the consumer received adequate notice of those terms and conditions. A good example of this is the Uber case, Meyer v Kalanick, from the United States.

The Uber Case: Meyer v Kalanick

The United States District Court refused to enforce Uber’s online terms of service.

But this decision was overturned on appeal to the US Circuit Court of Appeals. One of the Circuit Judges said smartphone users would find the disclosures reasonably conspicuous, even on smaller screens.

It wasn’t enough that Meyer did not follow the hyperlink to the terms and conditions page. One Judge said: “While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes”.

So, they held that Meyer did receive adequate notice of the terms and conditions of the online contract. This decision is not binding on any New Zealand court. However, it may provide guidance as to the approach that courts might take here.

Factors New Zealand courts are likely to consider when determining if an online contract is enforceable

New Zealand courts would likely consider the following questions when determining if an online contract is enforceable.

  • Were you required to click an “I accept” button before utilising the product or services?
  • Was the existence of the terms and conditions prominently displayed, regardless of whether an “I accept” process was involved?
  • Was it is clear to you what you were “accepting”?
  • Was the online acceptance process unduly complicated?
  • Were the terms and conditions set out in a way which you could readily understand?

If you’re a business drawing up an online contract, you should make sure you do all you can to meet this kind of standard of notice.

An “unfair” term in an online contract might be unenforceable

A New Zealand Court may also be called to consider whether or not the relevant term(s) sought to be enforced is “unfair”, in the context of the Fair Trading Act 1986’s unfair contract terms provisions. This applies to all “standard form” consumer contracts—contracts that are offered on a “take it or leave it” basis without any opportunity to negotiate. This can include online contracts.

What is an unfair term?

A term is unfair if three requirements are met:

  • the term must cause significant imbalance in the parties’ rights and obligations arising under the contract
  • the term is not reasonably necessary to protect the legitimate interests of the business
  • the term causes detriment (financial or otherwise) to the consumer if it were enforced.

But there’s a fairly big complication to having a contract term declared unfair in New Zealand.

Unlike in Australia, New Zealand consumers themselves cannot apply to the court to have a contract term declared unfair—only the Commerce Commission can. A New Zealand consumer can lodge a complaint with the Commerce Commission to try and get the process started, but the decision to litigate or not remains with the Commission.

The Grey List: terms that might be unfair, but still need to meet the requirements

The legislation provides a non-exhaustive “grey list” of potentially unfair terms. The grey list includes some terms that are seen frequently in online contracts (such as those which limit a business’s liability or allow it to unilaterally change the terms of the contract).

But a term won’t be automatically unfair just because it is on the grey list—it will still be subject to the three requirements referred to above.

Transparency

As part of its consideration, a court must take into account the extent to which the term is transparent. So the court needs to think about whether the term is:

  • clear and expressed in plain understandable language?
  • buried in the fine print or expressed in complicated technical jargon?
  • available to all parties affected it?

While a lack of transparency alone is not the sole indicator that a term is unfair, one-sided terms and conditions which are buried in a website may well be in difficulty.

Terms that cannot be declared unfair

The legislation also addresses terms that cannot be declared unfair. These include:

  • Terms that define the main subject matter of the contract
  • Terms that set out the price of the product or service being supplied
  • Terms required or permitted by other legislation.

Businesses must ensure their consumer contracts comply with the provisions

If you want your customers or website visitors to comply with any terms and conditions you set out, you should do all you can to make them obvious, transparent and fair – compliant with the Act’s provisions. And if you change them, you must think carefully about how you communicate those to new and existing customers.

We’re here to help if you’re:

  • a business trying to ensure your online contract is enforceable, and its provisions are fair in the context of the Fair Trading Act
  • a consumer who wants to know if an online contract is enforceable against them.

Give one of our experts, David or Holly, a call or email.

© 2018 | NZ Legal Ltd trading as Canterbury Legal