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New Zealand’s Specialist
Project Lawyers

There is a marked difference

in the way Greenwood Roche operates. From the outset we have focused on clearly defined specialist areas, retaining highly respected legal experts in each field. We then take that further; ensuring clients have direct and regular access to the most senior partners and lawyers, in a cost efficient manner.

Close contact with experts and clear cost advantages

We advise on a range of significant public and private sector projects. To ensure our specialists are always where they’re needed, we operate as one office with hubs in Auckland, Wellington & Christchurch.

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Recent Projects

Projects

Northern Interceptor and North Harbour No. 2 Pipeline Projects

Greenwood Roche is assisting Watercare with these two strategic pipeline projects...

Recent Projects


Northern Interceptor and North Harbour No. 2 Pipeline Projects

Greenwood Roche is assisting Watercare with these two strategic pipeline projects designed to enable Watercare to keep up with the proposed growth in the northwest of Auckland.


These two projects are estimated to cost Watercare $800 million. The Northern Interceptor wastewater project will be constructed in various stages with construction to begin soon on stage one to service the growth areas in Massey North, Whenuapai, Hobsonville, Kumeu, Huapai and Riverhead. The North Harbour No.2 watermain will service the new Albany reservoir and will replace the existing watermain which cannot be maintained without disrupting local water supplies.

Hadleigh Yonge is leading Greenwood Roche’s team which is advising Watercare on all aspects of these projects, including providing strategic advice, negotiating and acquiring property rights, and advising and dealing with issues relating to compensation.


Specialist expertise

Key lawyers involved

Similar projects
Watercare’s North Shore Trunk Sewer 8

Recent Projects


Watercare’s North Shore Trunk Sewer 8

Watercare Services Limited is responsible for providing water and wastewater services to the greater Auckland region and is undertaking a number of projects to increase its infrastructure network.


Greenwood Roche is advising Watercare on the construction of a significant new wastewater pipeline in the Northcote area. The project affects a number of properties including private and various forms of public land.  Our work has included the acquisition of property rights to enter and construct the works, and issues relating to compensation.


Specialist expertise

Key lawyers involved

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Waipa Networks’ new transmission line

Recent Projects


Waipa Networks’ new transmission line

Waipa Networks has identified the need to construct a new 110kV transmission line to increase the security and reliability of electricity supply to Te Awamutu and the surrounding areas.


We are advising Waipa Networks on this project. Our work has included strategic advice, acquisition of land property rights, Maori land issues, and advice on compulsory acquisition rights and compensation entitlements.


Specialist expertise

Key lawyers involved

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Aratiatia hydroelectric plant refurbishment

Greenwood Roche has assisted Mighty River Power with the procurement and negotiation...

Aratiatia hydroelectric plant refurbishment

Recent Projects

Aratiatia hydroelectric plant refurbishment

Aratiatia hydroelectric plant refurbishment

Greenwood Roche has assisted Mighty River Power with the procurement and negotiation of contracts for its plant refurbishment project at Aratiatia


Austria-based Andritz was awarded the contract to provide work on three generating units at the 78-MW Aratiatia hydroelectric station.

The Greenwood Roche team for this project comprised partner Barry Walker and special counsel Adrian Doherty.  Barry and Adrian are experienced international construction project lawyers, comfortable using a variety of international standard documents, including FIDIC, to assist in smooth cross-border negotiations.


Specialist expertise

Key lawyers involved

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Mitre 10 Support Centre

Greenwood Roche assisted Mitre 10 with its new head office project in Auckland...

Recent Projects


Mitre 10 Support Centre

Greenwood Roche assisted Mitre 10 with its new head office project in Auckland


Greenwood Roche acted for Mitre 10 in respect of the procurement and engagement of the contractor and consultant team for its new head office and support centre in Albany.

The facility will comprise approximately 7,000 m² at 65-67 Corinthian Drive, Albany, Auckland. It is being developed by Mitre 10 itself and is due for completion in late 2016.

The Greenwood Roche team for the project included partner Barry Walker and special counsel Adrian Doherty.


Specialist expertise

Key lawyers involved

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Bid to Purchase Rimu, Kauri and Manutahi Oil and Gas Assets

UK listed oil and gas explorer Mosman Oil & Gas was successful in striking a deal...

Bid to Purchase Rimu, Kauri and Manutahi Oil and Gas Assets

Recent Projects


Bid to Purchase Rimu, Kauri and Manutahi Oil and Gas Assets

UK listed oil and gas explorer Mosman Oil & Gas was successful in striking a deal with Origin Energy to purchase the Taranaki Rimu, Kauri and Manutahi (RKM) petroleum fields and associated petroleum production infrastructure.


Alas, with oil prices falling below US$40 per barrel for a sustained period, Mosman and its joint venture partners were forced to cancel the sale and purchase agreement.  Reportedly, the assets may still be available for purchase.
Partner Brigid McArthur and solicitors Susan Baas and Kurt McRedmond worked with Mosman on its acquisition project, including on its due diligence, sale and purchase negotiations and applications for New Zealand Petroleum & Minerals and Overseas Investment Office consents.


Specialist expertise

Key lawyers involved

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Establishment of CarboNZero Certified Ecotricity Limited Partnership

Ecotricity is New Zealand’s only “carboNZero” certified, 100% renewable electricity...

Establishment of CarboNZero Certified Ecotricity Limited Partnership

Recent Projects


Establishment of CarboNZero Certified Ecotricity Limited Partnership

Ecotricity is New Zealand’s only “carboNZero” certified, 100% renewable electricity retailer. This means that it sources electricity only from sustainable and renewable sources, such as hydro and wind.



Partner Brigid McArthur recently acted for Ecotricity Limited on the establishment of the joint venture, by way of limited partnership, with Pioneer Generation Limited.  Pioneer owns and operates some significant renewable generation projects in the South Island.  The Ecotricity Limited Partnership is also investing in electric vehicles and associated infrastructure.
Together, Ecotricity and Pioneer are championing the case for investment in renewables and we congratulate them on their venture.  They are at the forefront of what is a growing trend away from conventional fossil fuel based technologies.  Your support can be enhanced by visiting the Ecotricity website and checking the deals on offer.  www.ecotricity.co.nz


Key lawyers involved

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New National Head Office for Ministry of Education

Greenwood Roche represented the Ministry of Education on the redevelopment and 15...

New National Head Office for Ministry of Education

Recent Projects

New National Head Office for Ministry of Education

New National Head Office for Ministry of Education

Greenwood Roche represented the Ministry of Education on the redevelopment and 15 year lease of the Ministry’s new national head office at 33 Bowen Street, Wellington.


At approximately 13,100m2, the Bowen Street transaction was a full building lease and one of the largest commercial office leasing deals in New Zealand for the year. Greenwood Roche assisted the Ministry on all aspects of the negotiation and documents for the transaction, which included substantial refurbishment works, a seismic upgrade for the building and an integrated fitout.

The Greenwood Roche team for the deal were partner Jeannie Warnock and principal Doran Wyatt, both based in Wellington.
 


Specialist expertise

Key lawyers involved

Similar projects
Ministry of Business, Innovation and Employment – New National Office Redevelopment

Recent Projects

Ministry of Business, Innovation and Employment – New National Office Redevelopment

Ministry of Business, Innovation and Employment – New National Office Redevelopment

At over 20,000m2 of space, the redevelopment of a landmark Wellington building has provided the New Zealand Government’s largest Ministry with a substantial new National Office.


Greenwood Roche has successfully assisted the Ministry for Business, Innovation and Employment in the redevelopment and lease of MBIE’s new National Office premises in Wellington.
 
Greenwood Roche has continued to provide advice to MBIE throughout the course of the redevelopment, including assisting with the sale of the building to an NZX-listed property investment company during the project.
 
MBIE’s new National Office is one of a number of substantial redevelopment projects within Wellington on which Greenwood Roche has acted.


Specialist expertise

Key lawyers involved

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New National Head Office for Transpower

Recent Projects


New National Head Office for Transpower

Greenwood Roche represented Transpower New Zealand Limited in relation to the redevelopment and lease of Transpower’s future national head office at Boulcott Street, Wellington.


Transpower plans, builds, maintains and operates New Zealand’s high voltage electricity transmission network. The new premises will house around 500 staff and the 24/7 control room for the National Grid.  At approximately 8,400m2, the Boulcott Street transaction is one of the largest commercial office leasing deals in New Zealand this year.

The Greenwood Roche team included partner John Greenwood and principal Doran Wyatt, both based in the firm’s Wellington office.


Specialist expertise

Key lawyers involved

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Redevelopment of 56 The Terrace, Wellington

Recent Projects


Redevelopment of 56 The Terrace, Wellington

Kiwi Income Property Trust, one of the country’s largest listed property investors, is undertaking a $67 million redevelopment of its property at 56 The Terrace, Wellington, for lease by the Ministry of Social Development.


We are advising Kiwi Income Property Trust on this project. Our work has included advising on the development agreement and the 18 year deed of lease with the Crown and preparing and advising on the construction contract for the development works.


Specialist expertise

Key lawyers involved

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New Co-located Processing facility in Palmerston North

Recent Projects


New Co-located Processing facility in Palmerston North

New Zealand Post has recently commenced operations at its new Manawatu Co-located Processing Facility.


Comprising over 7,000 square metres including a mail processing warehouse, staging interchange areas, and associated office accommodation (and a combined investment of over $10 million), the facility houses NZ Post’s mail processing functions for the entire lower North Island.

The facility is situated in the heart of Palmerston North’s main industrial area, and is strategically convenient to all major transport systems in the city (including the airport, state highways and rail network).

Greenwood Roche assisted NZ Post on the development, construction and leasing aspects of the facility. The development agreement provided for delivery of tenant works as a variation to the landlord's main contract and early engagement of the Main Contractor on a fixed margin open book basis. Both features enabled the project to be completed seamlessly to a tight schedule while maintaining the appropriate distribution of risk and responsibility between the parties.
 


Specialist expertise

Key lawyers involved

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Watercare’s new head office

Recent Projects

Watercare’s new head office

Watercare’s new head office

Watercare Services Limited is responsible for providing water and wastewater services to the greater Auckland region, and employs a large number of people across many different teams.


We acted for Watercare in relation to its new head office premises located in Newmarket, Auckland. This was a significant project, involving the negotiation of a comprehensive redevelopment agreement and subsequent deed of lease, and further extensive advice in relation to Watercare’s ability to terminate its existing tenancies at that time.


Specialist expertise

Key lawyers involved

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New Co-located Processing facility in Palmerston North

New Zealand Post has recently commenced operations at its new Manawatu Co-located...

Recent Projects


New Co-located Processing facility in Palmerston North

New Zealand Post has recently commenced operations at its new Manawatu Co-located Processing Facility.


Comprising over 7,000 square metres including a mail processing warehouse, staging interchange areas, and associated office accommodation (and a combined investment of over $10 million), the facility houses NZ Post’s mail processing functions for the entire lower North Island.

The facility is situated in the heart of Palmerston North’s main industrial area, and is strategically convenient to all major transport systems in the city (including the airport, state highways and rail network).

Greenwood Roche assisted NZ Post on the development, construction and leasing aspects of the facility. The development agreement provided for delivery of tenant works as a variation to the landlord's main contract and early engagement of the Main Contractor on a fixed margin open book basis. Both features enabled the project to be completed seamlessly to a tight schedule while maintaining the appropriate distribution of risk and responsibility between the parties.
 


Specialist expertise

Key lawyers involved

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New National Head Office for Transpower

Greenwood Roche represented Transpower New Zealand Limited in relation to the redevelopment...

Recent Projects


New National Head Office for Transpower

Greenwood Roche represented Transpower New Zealand Limited in relation to the redevelopment and lease of Transpower’s future national head office at Boulcott Street, Wellington.


Transpower plans, builds, maintains and operates New Zealand’s high voltage electricity transmission network. The new premises will house around 500 staff and the 24/7 control room for the National Grid.  At approximately 8,400m2, the Boulcott Street transaction is one of the largest commercial office leasing deals in New Zealand this year.

The Greenwood Roche team included partner John Greenwood and principal Doran Wyatt, both based in the firm’s Wellington office.


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Key lawyers involved

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News & Insights

Insights

Deductibility of Project Expenditure: the Ruling in Trustpower v Commissioner of Inland Revenue

The Supreme Court has released the final word on a three-year battle between the Commissioner...

Deductibility of Project Expenditure: the Ruling in Trustpower v Commissioner of Inland Revenue

News & Insights

Deductibility of Project Expenditure: the Ruling in Trustpower v Commissioner of Inland Revenue

Deductibility of Project Expenditure: the Ruling in Trustpower v Commissioner of Inland Revenue

The Supreme Court has released the final word on a three-year battle between the Commissioner of Inland Revenue and Trustpower over the tax treatment of $17.7m of expenditure incurred in obtaining resource consents for four potential energy generation projects in the South Island: feasibility expenditure on capital projects will not generally be deductible unless it can be classed as early stage.       
 


In the Trustpower case, most of the expenditure related to consultancy costs for the land use consents, which included extensive project viability assessments (including assessments of environmental effects).  The expenditure was therefore referred to as “feasibility” expenditure.  The projects were part of Trustpower’s development “pipeline” which generally contains approximately 200 projects at various stages of development.

Trustpower was initially successful in the High Court but lost in the Court of Appeal after the Commissioner appealed.  Much of the case turned on the historically contested capital/revenue distinction under the Income Tax Act 2007.  Briefly, the established principles are that: (a) there is a distinction between the cost of creating, acquiring or enlarging the permanent means of production and the cost of earning that income or performing income earning operations; (b) there must be a “sufficient relationship” between expenditure and either income or capital; and (c) “[i]t is the object of any given payment that will be determinative”.  While simple in theory, these principles can be difficult to apply in practice.

The Supreme Court found in favour of the Commissioner.  Viewed in the context of the facts at issue, its decision is a sound one.  The Court summarised its reasons in the following way: “The expenditure on obtaining resource consents in this case was directly related to specific projects that would be on capital account if they came to fruition.  The projects could not proceed without resource consents.  Obtaining the consents thus represented tangible progress towards their completion.  The expenditure is thus on capital account and not deductible”.

This decision is consistent with the conventional approach to the capital/revenue distinction, which distinguishes between the cost of creating, acquiring or enlarging the permanent means of production and the cost of earning that income or performing income-earning activities.

The judgment does, however, give rise to two larger questions.  The first is how the Supreme Court’s comments on deductibility of feasibility expenditure will be applied by businesses in future.  Unsurprisingly, the Court rejected the Interpretation Statement’s reliance on the “commitment” approach to determining the application of the capital limitation (s DA 2 of the Income Tax Act 2007) on the basis that it would lead to differential tax treatment for similarly placed taxpayers, unnecessary indeterminacy, undue subjectivity and practical problems. 

The Court did, however, find that expenditure associated with early stage feasibility assessments may be deductible as a normal incident of business.  The Court cited with approval the following passage from a Canadian case called Bowater Power Co Ltd v Minister of National Revenue:


I do not … feel that merely because the expenditure was made for the purpose of determining whether to bring into existence a capital asset, it should always be considered as a capital expenditure and, therefore, not deductible.  In distinguishing between a capital payment and a payment on current account, regard must always be had to the business and commercial realities of the matter.  While the hydroelectric development, once it becomes a business or commercial [reality] is a capital asset of the business giving rise to it, whatever reasonable means were taken to find out whether it should be created or not may still result from the current operations of the business as part of the every day concern of its officers in conducting the operations of the company in a business-like way.  I can, indeed, see no difference in principle between all of these cases.
Taxpayers concerned about the effect of the Trustpower case on deductibility of feasibility expenditure should take some comfort from penultimate sentence above as well as the nod towards business and commercial reality.  The Supreme Court remarked further that there may be situations “in which a judgment call may have to be made in relation to the feasibility assessments which are so preliminary in nature that they cannot sensibly be seen as directed to the acquisition of an asset of enduring character”.  This does not, however, extend to “external costs incurred in respects which do, or were intended to, materially advance the capital project in question”.  

Ultimately, it will be a question of degree but the point remains that the Supreme Court has left the door open for early stage feasibility expenditure to be deducted.  To take an example from Trustpower itself, the Commissioner allowed deductions of $2.6m for preliminary investigative expenditure incurred prior to the pursuit of specific resource consents.  The remarks in Bowater suggest that the line may be drawn at the point where a project moves from exploration to implementation.  Quite when that point is reached, though, may be hard to say.  Surely preliminary feasibility studies, market research, proving up of resources and concept plans would pass the test, but more committed work such as procurement and tendering or (as here) expenditure linked to a resource consent application, will not be.

The ability of Inland Revenue and taxpayers to apply the Supreme Court’s approach substantially informs the second question, which is whether to place general deductibility of business-related black hole expenditure back on the legislative table.  At present, legislators have opted for ad-hoc, piecemeal reform.  Under this approach, Parliament has created specific carve-outs for certain expenditure.  For example, s DB 19 allows a deduction for expenditure incurred in respect of obtaining resource consents which lapse or are surrendered.  Given the importance of feasibility expenditure to the survival and competitiveness of New Zealand businesses, now may be the time to begin compiling data on the extent to which black hole expenditure occurs, or the extent to which the possibility of black hole expenditure is influencing companies’ investment decisions. 

On a final note, the treatment of the Interpretation Statement is somewhat concerning for businesses.  The Supreme Court placed no weight on the Statement, preferring instead to determine the case “by reference to the general law”.  The Court’s position in this regard is constitutionally correct as the Interpretation Statement is a creature of the Inland Revenue Department rather than a legislative instrument.  On the other hand, the Interpretation Statement is designed to provide practical guidance that taxpayers can responsibly rely on.  Clearly it did not perform that role in this case.  This begs the question, what is the reliability of other Inland Revenue Statements?
 


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Greenwood Roche Lawyer, Yvonne Lipski has been “Highly Commended” for her entry in the 2016 Society of Construction Law Essay Prize

Yvonne’s...

News & Insights

Greenwood Roche Lawyer, Yvonne Lipski has been “Highly Commended” for her entry in the 2016 Society of Construction Law Essay Prize

Yvonne’s essay, entitled "MORE HOLES THAN A HĪNAKI: Why the new retentions legislation is doomed to fail", discussed the many complications with the recent amendments to the Construction Contracts Act 2002 – due to commence in April 2017 - which introduce the concept of a statutory trust over retention amounts in construction contracts.   The industry currently anticipates that regulations and/or further amendments will be needed to make the legislation workable.


We all congratulate Yvonne on this great achievement.

For further commentary on the amendments to the Construction Contracts Act, download the article.


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Rolling out the amendments to the Construction Contracts Act: Progress so far

Greenwood Roche has been following the progress of the recent changes to the Construction...

News & Insights

Rolling out the amendments to the Construction Contracts Act: Progress so far

Greenwood Roche has been following the progress of the recent changes to the Construction Contracts Act 2002 (Act) by the Construction Contracts Amendment Act 2015 (Amendments).  The Amendments have been rolled out in stages, with the earliest (and least significant) already in effect.


  DATE AMENDMENTS
(A) 1 December 2015 Payment Claims and Payment Schedules
(B) 1 December 2015 Adjudication Procedure
(C) 1 September 2016 Application to Design, Engineering & Quantity Surveying contracts 
(D) 31 March 2017 (*) Retentions to be held on Trust

(*) subject to further possible Regulations

Below we summarise the Amendments to date, with commentary on those still to take effect. Please do not hesitate to contact us if you have any questions regarding the Act or the Amendments.

(A) 1 December 2015 changes: Payment Claims and Payment Schedules

In relation to payment procedures:

  1. Payment Claims (other than those served on residential occupiers) must be accompanied by an outline of the process for responding to the payment claim and an explanation of the consequences of not responding;
  2. Payment Claims must state (not just indicate) the claimed amount and the due date for payment;
  3. Payment Schedules the response by the Principal must state (not just indicate) the scheduled amount that the Principal considers is due to the Contractor/Consultant; and
  4. failure to comply with these requirements may result in the invalidity of the payment claim and/or the payment schedule.

(B) 1 December 2015 changes: Adjudication Procedure

In relation to adjudication:

  1. Determinations by Adjudicators in respect of all rights and obligations of the parties may be enforced by the Court by an application by a party applying to have the Determination entered into judgment. This is different from the previous position where only payment claims were to be adjudicated and enforced. The Respondent now has five (previously 15) working days to object to the entry of the Determination as a judgement, but only on limited grounds (the newest being: where the Respondent cannot comply with the Determination due to a change in circumstances beyond its control);
  2. Notices of Adjudication must be accompanied by a new form that includes a statement informing the Respondent of its rights and obligations;
  3. to reduce the risk of ‘ambush claims’, Respondents may request additional time to respond to a Notice of Adjudication and the Adjudicator must grant this request if the Adjudicator considers it necessary having regard to the size or complexity of the claim or because the Notice of Adjudication has been served with undue haste; and
  4. in addition, there have been some changes to timeframes as well as new opportunities for each party to formally respond to each other before serving a notice on the Adjudicator.

(C) 1 September 2016 changes: Design, Engineering & Quantity Surveying Contracts

  1. The next series of Amendments are due to come into force on 1 September 2016, affecting only those contracts entered into after this date. These amendments will see the Act and Amendments extended to cover contracts for design, engineering or quantity surveying in relation to construction work (collectively referred to as “related services” in the Amendments). This is a significant change which will potentially require Consultants to review the way they engage with Principals (and vice versa), their methods of payment and their insurance positions. This follows the position in England and Wales which has always seen most Consultants’ appointments as falling within the original Housing Grants, Construction and Regeneration Act 1996. ​
  2. In New Zealand, Consultants have voiced concern that the Act’s fast-track dispute resolution procedure is not appropriate for complex engineering disputes, although this amendment generally follows the regimes in Australia, England, Wales and Scotland and so may not be controversial to parties with international presence in those jurisdictions. International experience with similar regimes indicates that parties involved in more complex disputes will often seek to use more traditional (slower) dispute resolution regimes such as mediation, arbitration or litigation.

(D) 31 March 2017 changes: Retentions to be held on Trust

  1. This Amendment seeks to end the perceived industry practice of using retention money as working capital by requiring all retention money to be held on trust for both parties to the contract. In theory, the trust requirement should keep retention money out of the hands of receivers and liquidators in the event of receivership or insolvency of the head contractor – an issue that has gained increasing attention since the collapse of Mainzeal in 2014.
  2. Varying solutions to the question of retention money protection has been offered worldwide, from the use of project bank accounts in the United Kingdom, to an outright ban on the use of retention money in some parts of the United States.
  3. The issue of retention money to be held on trust has never been addressed in England and Wales and so this is a distinct approach for New Zealand.
  4. New Zealand has chosen a model based on the approach recently adopted in New South Wales. However, the New Zealand regime radically departs from the NSW regulations in a number of ways:
    1. Materiality threshold: The retention rules in NSW only apply to construction contracts greater than AUD$20 million, though the NSW government has foreshadowed lowering the threshold following a review of the effect of the regime on the industry. New Zealand legislation will apply to contracts where retention money is greater than a “de minimus” amount, to be defined by the Regulations. Early indications from MBIE suggest this threshold will be set low enough to capture almost all commercial contracts, meaning the legislative consequences of the trust regime will be far wider in New Zealand than across the Tasman.
    2. Retention money may be co-mingled with other funds: Co-mingling is not only problematic at a legal level (whether a trust can even exist if funds are mixed), but also at a practical level. Regardless of this legislative permission, we expect Principals and Head Contractors will keep retention money separate - if only to comply with the accounting requirement (records must be available for inspection by payees at all reasonable times and without charge).
    3. Retention money may include “liquid assets”: Liquid assets add significant uncertainty to the legislation – do “liquid assets” include publically traded shares? Plant? Vehicles? Practically speaking, we believe (in the absence of clarification) retention money will need to be held in cash.
    4. Retention money must be held at all levels (not ‘net’ amounts): Holding retention money on trust sterilises those funds, which is compounded by the fact that the Amendments will require retention money to be held both by the Principal and the Head Contractor. In larger projects, the inclusion of sub-subcontractors adds more intermediary parties which increase the cumulative total of money that is “tied up”. The pressure this places on cashflow may be alleviated by negotiating an alterative security arrangement as between the Principal and the Head Contractor. We advise these parties to consider different security arrangements such as retention bonds. Alternatively, the Principal and the Head Contractor may wish to use staged milestone payments or another payment structure which will not be subject to the trust requirement (but still comply with the payment requirements of the Act).
    5. The legislation will be applied retrospectively: The amendments are due to come into force on 31 March 2017 and will apply to all existing and new contracts. Whilst in theory, Principals and Head Contractors should already have retention money earmarked in anticipation of completion, more likely, many will need to secure additional capital or drawdown earlier to ensure retention money held on trust by the commencement of the legislation (rather than sourcing them later when the return of retention money is actually due). Again, this will place pressure on cashflow and Principals and Head Contractors should prepare for this change as early as possible, although implementation of the legislation may be delayed pending resolution of some of the above issues.

It is anticipated that the retention regime will require further clarification in New Zealand before it is truly workable (whether through Regulations or further amendments).

 


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New Zealand Overseas Investment Update

We provide here a brief update on some developments with regard to New Zealand’s...

New Zealand Overseas Investment Update

News & Insights

New Zealand Overseas Investment Update

We provide here a brief update on some developments with regard to New Zealand’s overseas investment regime.
 


First, a significant fees increase was recently announced, effective on and from 4 July 2016.  Fees are now better tailored to the particular type of application and are as follows:
 

  • For a significant business assets decision, a fee of NZ$32,000:
  • For a combined land and significant business assets decision, a fee of NZ$54,000:
  • For a variation of a consent or the conditions of consent (interpreted to include an extension for compliance or reporting), a fee (involving a clear cross-subsidy) of NZ$13,000:
  • For an exemption from the Act and Regulations, a fee of NZ$25,500.
For a sensitive land decision, fees of between NZ$22,500 and NZ$49,000, depending on the residence of the overseas person and its directors and (more importantly) on the type of sensitive land involved. Whilst still well below Australian Foreign Investment Review Board fees, these are very large increases.  The increases are designed to fund improved functions within the Overseas Investment Office, improved screening and decision-making processes and increased enforcement and monitoring functions – at least that is the plan.  The OIO acknowledges an element of cross-subsidy, but for now there does not seem to be huge complaint about the increases given the upside of improved functionality within the Office.
 
Secondly, a package of policy and operational changes has been announced, largely in response to recent negative publicity.  We attended yesterday the first of a series of Investment Workshops run jointly by the OIO, Treasury and New Zealand Trade & Enterprise.  In opening the session, the Minister for Land Information stressed the underlying policy premise that it is a privilege for overseas persons to own New Zealand land, and that in order to do so they have to pass the hurdles imposed by the Act, and subsequently honour the commitments made as part of the consent process.  This is no rubber stamp exercise and the OIO is swelling its ranks and improving its systems and consent processes to meet the challenge.
 
The key messages are:
 
  • This Government is not planning any changes to the Overseas Investment Act or its Regulations, whether to relax the rules or to address better the counterfactual analysis of benefit to New Zealand imposed by the High Court in the Crafar Farms decision.  Indeed, it is widely acknowledged as likely political suicide for any political party to try to reduce the hurdles presented by the Overseas Investment Act.
  • Instead, the focus is on speeding up the initial screening process, aiming at a 20% improvement in the meeting of screening and processing time targets.  Better communication with applicants is promised, assisting with transaction management and deadlines.  The OIO wishes to be more customer-centric.  In principle/conditional consents up-front can be sought for a significant business assets acquisition.
  • In addition, the OIO will adopt a risk-based approach, where high value or particularly sensitive acquisitions will receive greater scrutiny, as well as stricter monitoring.
  • The OIO is prepared to prioritise processing of applications, where real urgency applies.  If you have a transaction deadline, talk to them about that.
  • Providing a good quality, thorough business plan for the investment is critical to enable to OIO to assess benefit.  This is often particularly challenging for applicants at the early investment stage.
  • Equally important is a very rigorous counterfactual analysis, for each of the benefit factors claimed (that is, what would the position be with, and without, this particular overseas investment).  The OIO appreciates the difficulty of this analysis, with the degree of crystal ball gazing involved, and apparently struggles with it as much as do applicants.
  • Applicants are encouraged to discuss their application with the OIO informally, to guide benefit and counterfactual claims.
  • We have urged the OIO to be less compliance-focussed and readier to make sound defensible judgment calls, particularly on benefits and the counterfactual (picking up on their desire to be more customer-centric).  It seems they fully intend to do so.
  •  A new Ministerial directive letter and new Regulations will be available in a few months’ time, including to implement the proposed new TPPA threshold.  We will be scrutinising these as they are developed.
Thirdly, several new exemptions are to be made available, in the following areas (not requiring legislative change):
 
  • Leasehold land will be exempted from the open market advertising requirement, provided the lease is under 20 years’ duration (including rights of renewal).  Consent will still be required, however;
  • Subsequent renewals of a previously consented leasehold interest will be exempted if the total term is less than 20 years, if the substantive ownership and size of the property in question are unchanged;
  • International M&A transactions which incidentally involve what may be a small area of land that is not particularly sensitive (the “tail wagging to dog” situation where, embarrassingly to us, it is the New Zealand OIO that is holding up the obtaining of regulatory approvals on a much larger international transaction) – it seems the exemption will be targeted at transactions involving urban land of less than 5 hectares that is only classified as sensitive because it adjoins other sensitive land, and where the value of the transaction does not exceed $100 million.  This will be a useful exemption for some overseas transactions although the limitation on the land classification means it won’t always apply, and the maintenance of the $100 million threshold means that OIO consent will still be required as it is a “significant business assets” acquisition;
  • Public Works Act vesting of land, where the land is only sensitive because it adjoins other sensitive land;
  • Transactions involving an overseas custodian holding shares on behalf of investors, although this will not apply to allow overseas persons to acquire more than a 25% interest through the custodian.  This particular exemption responds to the growing trend towards portfolio investing and because some custodians themselves are overseas-owned.
Unfortunately, a sixth exemption proposed by Treasury officials was rejected by Ministers.  This was to exempt from the OIO consent requirement the purchase of land for a proposed residential property development by an overseas person, provided resource and building consents are obtained and the land is developed for residential use within three years of acquisition.  This would have been a very interesting exemption, responding squarely to issues around urban land use and the Auckland housing situation in particular. However, it would have been a very wide use of the regulation-making power, and would have been riddled with vexed issues, for example, the definition of a “developer” and whether the development would need to be fully residential or could be mixed use.  Further, it is not clear how the ultimate ownership of the properties within the development could be controlled – a part of the very reason for the rejection.
 
In response to questioning, the Treasury and the OIO did indicate that they could be open to a wider set of exemptions.  Please let us know if you are interested in any further exemption.  We propose in any event to offer our assistance in tailoring these exemptions and will be participating in the consultation process.
 
We will provide updates on these developments as the draft new exemptions and the Ministerial directive letter are available.
 


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Waipa Networks completes its new 110kV Transmission Line

With the help of Greenwood Roche, Waipa Networks will complete construction of its new...

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Waipa Networks completes its new 110kV Transmission Line

With the help of Greenwood Roche, Waipa Networks will complete construction of its new 110 kV transmission line between Te Awamutu and Hangatiki in the coming weeks. The $20 million project will be completed on time and on budget.


The transmission line is 36 kilometres long and affects a wide range of properties including farm land, commercial land and land owned by three different Councils.

Whilst there was wide spread support within the community for the project, significant negotiation was still necessary with a number of the affected landowners. Greenwood Roche lead much of these negotiations and we are pleased and very satisfied that we were able to help Waipa Networks deliver such a successful and important project.


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Victoria Business School

Greenwood Roche has been pleased to participate again in Victoria University’s...

Victoria Business School

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Victoria Business School


Greenwood Roche has been pleased to participate again in Victoria University’s Business School annual Excellence Awards, with its Award for Commercial Law going to star graduate Siobhan Bassett.  Our support for the Business School focusses on rewarding top graduates, explicitly recognising their talent and hard work, and implicitly recognising the excellence of the Business School itself.  We look forward to seeing the new generation of business leader successors take their place in the New Zealand economic landscape.
 



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Proposed National Policy Statement on Urban Development Capacity

Housing Crisis or Housing Challenge – whatever one calls it, it is clear that the...

Proposed National Policy Statement on Urban Development Capacity

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Proposed National Policy Statement on Urban Development Capacity

Housing Crisis or Housing Challenge – whatever one calls it, it is clear that the Government is under pressure to respond in some way to the increasing demand for housing in a number of locations throughout New Zealand. Part of that response is the first draft of the proposed National Policy Statement on Urban Development Capacity (pNPS) released yesterday (2 June 2016). It is not yet operative but has simply been released for consultation.

The pNPS aims to provide direction to decision makers under the Resource Management Act 1991 (RMA) on urban planning, with a particular focus on ensuring that planning enables development through providing sufficient development capacity for housing and businesses, both in the short (3 years), medium (10 years) and longer term (30 years).


What you need to know

An NPS has teeth.  It is what is known as a “higher order” document.  It sits above regional and city plans and by virtue of section 55 of the RMA, local authorities are required to amend their planning documents to include specific objectives or policies where directed to do so by the NPS, together with making all other amendments in their plans required to give effect to the NPS.  In this way, an NPS can stand on its own (by publishing in the Gazette).  However, in the case of this particular pNPS, accompanying amendments to the RMA are also proposed.  As part of the Resource Legislation Amendment Bill 2015, it is proposed to include references to “development capacity” to strengthen the effect of the pNPS.

The language in the pNPS is, at times, strongly directive, which, if retained, will make it difficult for local authorities to fudge compliance with it as a higher order document.  As currently drafted, it will require almost all local authorities and regional councils to make changes to their planning documents as well as significantly increasing their monitoring and research functions in respect of household and business land demand.  The direction for local authorities to ensure/enable sufficient development capacity is supplemented by the requirement for local authorities to maintain and update accurate data to inform and support how it achieves those targets.

The pNPS uses four categories of objectives and policies to “enable urban development” and “reduce the barriers to increasing housing supply”.  The four categories and the focus of their application are set out in further detail here.
The first category sets out the outcomes for decision making by all local authorities.  These generally relate to and supplement a requirement on local authorities to provide at all times sufficient residential and business development capacity in the short (3 years), medium (10 years) and long terms (30 years).  The terms in bold are defined quite comprehensively, with “development capacity” incorporating the term “demand” which is also defined.  Demand refers to the short, medium and long term, having particular regard to:

• Total numbers of dwellings required to meet projected household growth;
• Demand for different types of dwellings;
• Demand for different locations within the urban area; and
• The demand for different price points.

The reference to demand relating to different price points will be of interest given the significant media attention recently towards the lack of housing and particularly affordable housing for the most vulnerable.  While there is no explicit direction in the pNPS relating to the provision of affordable housing, the Government contemplates that the pNPS will result in the reduction of consenting barriers and the subsequent increase of housing supply to assist in driving down the price of housing (in conjunction with other measures). 

The second category relates to evidence and monitoring to support decision making and the third category contains directions relating to co-ordination of evidence and implementation between local authorities and infrastructure providers.  The four category is responsive planning.  Some of the strongest language is used in the fourth category with the objectives being to ensure that planning decisions enable urban development and ensure that in the short and medium terms, local authorities adapt and respond to market activity.  The policies require local authorities to consider specific measures at their disposal under the RMA to address development capacity where a short-fall is anticipated by the assessments the local authorities are required to carry out.  While the choice of which mechanism the local authorities use is ultimately theirs, the pNPS requires active consideration, in some instances, of specific mechanisms under the RMA.

The pNPS also adopts a tiered approach to the application of the policies in the four categories, depending on whether the local authority has a Medium Growth Urban Area or a High Growth Urban Area within their jurisdiction.  These urban areas are defined by reference to Statistics New Zealand data included in the pNPS.  The tiered approach ensures that the centres experiencing te highest levels of growth are subject to the more stringent requirements under the pNPS particularly in relation to target setting and responsive planning.  Currently there are 5 urban areas which would qualify as High Growth Urban Areas – Auckland, Tauranga, Hamilton, Christchurch and Queenstown. 

The Government is proposing a package of non-statutory guidance to assist local authorities in implementing the pNPS.  The requirement to provide development capacity to meet demand in 3, 10 and 30 years time, and to enable competitive operation of the land and development markets are two examples of the more challenging aspects of this pNPS which will require further clarification.  There will undoubtedly be instances where increasing development capacity in high growth areas facing high demand will not be possible (i.e. constraint on land because of existing development), or at least, incapable of being addressed under the RMA. It must be remembered that neither central government nor local government have particularly large landholdings in the high growth area and as such providing sufficient land depends heavily on the private sector.  If holders of rural land are not interested in conversion to business or residential it is difficult to see whether the courts will be prepared to uphold rezoning of their land anyway   In those instances, there is a question of whether local authorities and decision makers will be able to comply with the pNPS

The Government has consistently flagged its intentions to develop and use National Policy Statements to address some of the broader concerns with the RMA.  This pNPS, as currently drafted, will provide the development community with a strong tool to challenge Council decisions to refuse applications for new housing developments or the intensification of existing developments.  The quality of the information gathered and used by the local authorities to make decisions as required under the pNPS and how local authorities are responding to short-falls in development capacity will likely also be subject to challenge.

The pNPS is scheduled to become operative in October 2016.  A number of requirements to develop a more comprehensive evidence base and setting minimum targets must be implemented within three years of the pNPS becoming operative.  Consultation on the pNPS is now open with submissions closing at 5:00pm on Friday 15 July 2016

This is a significant document – perhaps one of the most significant National Policy Statements to have been issued under the RMA.  If you have any further queries on it, or would like assistance in making a submission, please do not hesitate to contact us.


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From Recovery to Regeneration: Greater Christchurch Regeneration Act 2016

At midnight on 18 April 2016, the Canterbury Earthquake Recovery Act 2011 (CER Act) expired...

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From Recovery to Regeneration: Greater Christchurch Regeneration Act 2016

At midnight on 18 April 2016, the Canterbury Earthquake Recovery Act 2011 (CER Act) expired, making way for a new phase of the rebuild of Greater Christchurch following the 2010/2011 earthquakes.


The Greater Christchurch Regeneration Act 2016 (Act) became fully operative on 19 April 2016.  The Act is the primary legislation responsible for transitioning the rebuild from a phase of recovery to regeneration.

The summary below provides a snapshot of the major elements of the Act.  For further information, please follow the link below or contact one of our team.

Recovery to Regeneration

• Area of Application
One of the Act’s first significant departures from the CER Act is a revised geographical area of application.  As demonstrated in the map below Greater Christchurch is now significantly smaller than the area defined in the CER Act. 



 • Recovery to Regeneration
“Recovery” under the CER Act attracted a wide definition allowing CERA to assist in projects beyond the physical rebuild and redevelopment of the region. 
Under the new Act, “regeneration” has a distinctly narrower focus being almost inextricably tied to the practical function of rebuilding, “urban renewal” (which is also defined by reference to rebuilding), and development. “Restoration and enhancement” is still included in the definition of regeneration but it attracts a lesser focus.  The new phase is targeted, reflecting the evolution (and consequently, reduction) of the role of central government in assisting with less physically tangible forms of recovery.  The Act does not signal the end of those forms, but rather shifts the emphasis toward the more physically tangible “regeneration”.  

• Section 11
Subject to the above, many of the powers in the CER Act have been carried over to the new Act, including the ability for the appropriate individual to:

• carry out or commission works including the erection, replacement, demolition of all or part of any building on private or public land, with or without the consent of the owners;
• erect and use temporary buildings on any land (including private land) without building or resource consent, or the consent of the owner;
• prohibit access to any specified area, close or stop roads;
• direct owners to act for the benefit of adjoining owners;
• acquire land (either by agreement or compulsory acquisition);
• subdivide, amalgamate land;
• hold, mortgage and lease land acquired under this Act or the CER Act; or
• compensate for actual loss where land is compulsorily acquired.

Section 11 of the Act requires that the exercise of many of these powers must be in accordance with at least one of the purposes set out in section 3.  Similar to the CER Act, section 11(2) requires that a Minister or chief executive may only exercise or claim a power, right or privilege under the Act, where he or she reasonably considers it necessary. 

However, section 11 does not apply to, or has limited application in respect of, certain exercises of power.  These powers relate to the commissioning of works, erection of temporary buildings and the purchase (though not compulsory acquisition), amalgamation or disposal of land. 

This is a potentially significant shift from the position in the CER Act where the purposes of the Act had to be met for each exercise of power, and the Minister or chief executive had to reasonably consider that the exercise of power was necessary.  Arguably, excluding the application of section 11 enables the exercise of these specific powers by the chief executive or the Minister without reference to either of those requirements.

Although the courts are unlikely to look favourably on any overtly indiscriminate use of these quite extensive powers, arguably one of the major tools in keeping a check on the use of these powers has been quite substantially altered by the new Act 

• Status of Recovery Plans
The following Recovery Plans have been included in Act:

• Central City Recovery Plan;
• Land Use Recovery Plan;
• Residential Red Zone Offer Recovery Plan;
• Lyttelton Port Recovery Plan.
• From its notification in the Gazette, the Waimakariri Residential Red Zone Recovery Plan.

Because Recovery Plans are explicitly defined in the Act, and their functions are also clearly set out (i.e. Councils cannot act inconsistently with them when making certain decisions, they can be amended or revoked), they continue in effect in so far as they are described by the Act.

• Recognition of local leadership
The extent of the central government’s role (and consequently the role of local leadership) in the planning and implementation of the rebuild, has been an ongoing source of tension, particularly in the last couple of years.  One of the key functions of the Act is to recognise and provide opportunities for local leadership to contribute to decision-making under the Act.  This is principally in the form of governance of the new Regenerate Christchurch entity and by virtue of being a “proponent” for the purposes of proposing; developing or amending a Regeneration Plan or making changes to RMA documents.

Under section 42, the Minister to suspend, amend or revoke an RMA document, plan or policy under the Local Government Act 2002, a regional land transport plan, management plans under the Conservation Act 1987 and the Reserves Act 1987, or a bylaw made under any Act.  As with many of the powers in the Act, the powers afforded to the Minister in section 42 are almost entirely carried over from the CER Act. 
The major omission is that the Minister may no longer modify resource consents.  In addition, in our view, section 42(1) indicates that the Minister may not exercise a power under section 42 unless the exercise of such power has been proposed by a proponent. This is a significant shift. 

 Regenerate Christchurch
As set out previously, Regenerate Christchurch is the new entity established under the Act to:
• lead regeneration in the area of Christchurch district;
• engage and advocate effectively with communities, stakeholders and decision makers to achieve its purpose; and
• work collaboratively with others in achieving regeneration.
The diagram below gives a overview of the intended relationship between Regenerate Christchurch and the other key regeneration entities.




• What’s Missing
Two powers under the CER Act are missing, namely, the ability for the Governor General to make Orders in Council, and the power of the chief executive to delegate his or her powers to any employee or person seconded to CERA.  Both of these powers were utilised widely under the CER Act.  Their removal is a further indication that the rebuild is entering a phase where Crown-led actions are not required to the extent and/or frequency they once were.

• Repeal and Survival
As well as the repeal of the CER Act, almost all of the Orders in Councils made under section 71 of the CER Act, the Recovery Strategy and the Transition Recovery Plan are revoked by the Act. 

Those that continue in force as specified in Schedule 7 of the Act are amended in the manner specified in that Schedule.  Those Orders in Council are the:

• Canterbury Earthquake (Christchurch Replacement District Plan) Order 2014;
• Canterbury Earthquake (Earthquake Commission Act) Order 2012;
• Canterbury Earthquake (Historic Places Act) Order 2011;
• Canterbury Earthquake (Local Government Act 2002 – Retaining Walls) Order 2013;
• Canterbury Earthquake (Rating) Order 2012;
• Canterbury Earthquake (Reserves Legislation) Order (No 2) 2011;
• Canterbury Earthquake (Resource Management Act – Burwood Resource Recovery Park) Order 2011; and
• Canterbury Earthquake (Resource Management Act Permitted Activities) Order 2011.


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