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Subdivision Intensive Paper

Lauren Semple recently presented a paper as part of the NZCLE Workshop on Subdivisions.  This paper considers the wider context of subdivision and land development and reflects on some of the tools, requirements and alternative processes which can influence the way projects take shape.  ..

Subdivision Intensive Paper

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Subdivision Intensive Paper

Subdivision Intensive Paper

Lauren Semple recently presented a paper as part of the NZCLE Workshop on Subdivisions.  This paper considers the wider context of subdivision and land development and reflects on some of the tools, requirements and alternative processes which can influence the way projects take shape.  


It first looks at a number of the alternative legislative schemes set up in recent years to fast track development (including subdivision), and considers some of the lessons from these examples which may usefully inform future legislation including the much touted but not yet here urban development authority approach.  It touches on the role of, and tools available to, local authorities under the Local Government Act in relation to subdivisions, including the use of development contributions and development agreements to service growth and asks whether our preoccupation with new tools might prevent us from effectively utilising the tools we already have.   
Download the paper here - https://app.box.com/s/58174muot1x5y7b53t8imgxd4d5l5frd


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Draft Otakaro Avon River Corridor Regeneration Plan released for public consultation

For the past two years Lauren Semple and Rachel Murdoch have been advising Regenerate Christchurch on the development of the Otakaro Avon River Corridor Regeneration Plan.  ..

Draft Otakaro Avon River Corridor Regeneration Plan released for public consultation

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Draft Otakaro Avon River Corridor Regeneration Plan released for public consultation

Draft Otakaro Avon River Corridor Regeneration Plan released for public consultation

For the past two years Lauren Semple and Rachel Murdoch have been advising Regenerate Christchurch on the development of the Otakaro Avon River Corridor Regeneration Plan. 


The Draft Plan was released for consultation on 14 November 2018 with submissions due by 5pm on 19 December 2018.  You can find a copy of the draft plan here - http://engage.regeneratechristchurch.nz/accessible-draft-oarc-regeneration-plan-homepage

 


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Greenwood Roche – Wellington Supreme Award 2018

We are pleased to continue to support the Property Council New Zealand Wellington Property People Awards which recognise and celebrate excellence in property in Wellington.  Wellington Partner, Doran Wyatt had the honour of presenting the Greenwood Roche Supreme Award as part of the event on 11 October 2018...

Greenwood Roche – Wellington Supreme Award 2018

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Greenwood Roche – Wellington Supreme Award 2018

Greenwood Roche – Wellington Supreme Award 2018

We are pleased to continue to support the Property Council New Zealand Wellington Property People Awards which recognise and celebrate excellence in property in Wellington.  Wellington Partner, Doran Wyatt had the honour of presenting the Greenwood Roche Supreme Award as part of the event on 11 October 2018.


Congratulations to McKee Fehl Constructors Ltd, this year’s winner of the Greenwood Roche Supreme Award, for the Press Hall 80 Willis Street / 22 Boulcott Street project.
 
What stood out for the judges was the ability of McKee Fehl to repurpose and modernise the Press Hall site.  The end result is an iconic development that adds vibrancy to Wellington but also respects the heritage of the original building.
 
The testimonials for this project summed it up:

  • “The concept of unlocking Press Hall, which was essentially buried in between Boulcott Street and Willis Street, was a clever idea.”
  • “The newly formed urban laneway leading to the food hall is activated by vibrant and diverse kiosks and a bar above, the veranda can now be occupied by people adding to the urban fabric of the street.”
  • “Never before have such old, run down, dark and dingy buildings been so substantially structurally modified, seismically upgraded and refurbished to create such an open, vibrant and modern workplace.”
In the judges’ words, “This feels like an iconic development with wide benefit for Wellington”.
 
Congratulations to Maurice Clark and the McKee Fehl team.


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New National Housing and Urban Development Authority

The Government has confirmed the introduction of a national Housing and Urban Development Authority (HUDA) equipped with the tools to by-pass standard legislative processes and streamline urban development projects.  The announcement follows numerous recommendations in various reports over the past decade and the release of the Urban Development Authorities: Discussion Document last year...

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New National Housing and Urban Development Authority

The Government has confirmed the introduction of a national Housing and Urban Development Authority (HUDA) equipped with the tools to by-pass standard legislative processes and streamline urban development projects.  The announcement follows numerous recommendations in various reports over the past decade and the release of the Urban Development Authorities: Discussion Document last year.


Eligible urban development projects will include the provision of new public, affordable and Kiwibuild housing, as well as transport links, commercial and industrial developments, infrastructure and supporting community facilities (schools, pools, open spaces and libraries). The HUDA will also absorb the function of Housing New Zealand as the landlord for public housing in New Zealand. 
 
Read more here: https://app.box.com/s/2kjey5enswm7x08itfis3knzokz67t8o


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Key changes introduced by the Land Transfer Act 2017

The Land Transfer Act 2017 (Act) came into force on Monday, 12 November 2018. It repealed the Land Transfer Act 1952 (Old Act), and is intended to modernise, simplify and consolidate the Old Act and its amendments. The Act also made amendments to the Property Law Act 2007 (PLA), including the introduction of covenants in gross, with effect from 12 November 2018. ..

Key changes introduced by the Land Transfer Act 2017

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Key changes introduced by the Land Transfer Act 2017

Key changes introduced by the Land Transfer Act 2017

The Land Transfer Act 2017 (Act) came into force on Monday, 12 November 2018. It repealed the Land Transfer Act 1952 (Old Act), and is intended to modernise, simplify and consolidate the Old Act and its amendments.

The Act also made amendments to the Property Law Act 2007 (PLA), including the introduction of covenants in gross, with effect from 12 November 2018.


In the main, the Act is not intended to change our land transfer laws substantially. However, some controversy exists regarding the right of an owner to reclaim title under the manifest injustice provisions, arguably eroding the principle of indefeasibility of title. Also, not all changes promoted during consultation have been adopted, such as placing more onus on mortgagees to verify the identify of their clients, separately defining encumbrances from mortgages, and permitting senior legal executives to certify and sign instruments in Landonline.
 
Some key changes are set out below.
 
New terminology
The Act includes new terminology aimed at modernising the language used. For example, a “certificate of title” and the clumsy “computer freehold/leasehold/interest register” has become the crisper “record of title”, and “registered proprietor” has become “registered owner”. There is also a concept of “replacement lease”, which is a renewed lease or a new lease in substitution for a prior lease between the same parties and relating to the same land.
 
Withholding information for a person’s safety
The Registrar-General of Land is able to refuse to provide a copy of an instrument or a record of title that identifies a person, or to include those details on the register in the first place, if the Register is satisfied that the information discloses or is likely to disclose the person’s location and prejudice their safety.
 
Caveats
There is now an express right for an owner of an estate or interest in land to lodge a caveat against their own title where there is a real risk of fraud.
 
Guaranteed title searches
Guaranteed searches back up the security of the land transfer system, by providing a right to compensation if a purchaser of an interest in a land transaction suffers loss due to the registration of a competing interest. Under the Old Act, the purchaser had to obtain a “guaranteed search” within 14 days before settling the transaction, and had to lodge the transaction documents within 2 months after settlement.
 
The Act updates these periods to reflect the electronic nature of land transactions by:

  • requiring that a guaranteed search of the title be obtained within 5 working days before (and including) the settlement date; and
  • reducing the period after settlement during which the transaction documents must be lodged at Land Information New Zealand (LINZ) to 20 working days.  
As with the Old Act, no compensation will be payable if the title search disclosed the competing interest.
 
Compensation
Compensation is payable by the Crown when loss occurs in certain circumstances (including, but not exclusively, under the “guaranteed search” situation). Under the Old Act, the calculation for compensation is based on the land value at the time the loss occurred. The Act shifts the date on which compensation is to be assessed to when the claimant “gained (or ought reasonably to have gained) knowledge of the loss”.
 
The Act confirms that the value of the lost estate or interest in land is the “market value”.
 
The High Court may adjust compensation where the amount determined by the prescribed calculation is inadequate or excessive, and may determine at which date the market value should be assessed which may include a revised assessment as at the day of the court judgment.
 
Cancellation of land transactions in cases of “manifest injustice”
The High Court will have limited discretion to order the alteration of titles to avoid “manifest injustice”, but only where compensation or other damages would not properly address the injustice. The High Court may cancel registration of a land transaction and restore title to a person who has been deprived of an estate or interest, or suffered loss, due to that registration. The Court must take into account how the land was acquired, the length of time the parties have owned or occupied the land, the nature of any improvements made, the special characteristics of the land and its significance, and any other relevant circumstances. However, the Court cannot make an order if the estate or interest has subsequently been transferred to a third person acting in good faith.
 
Fraud
Fraud is one of the main exceptions to the indefeasibility of an owner’s title to land. “Fraud”, as an exception to indefeasibility, is now defined as forgery or other dishonest conduct of an owner or agent of an owner in acquiring an estate or interest in land. It is worth noting that, for the purposes of a Court order cancelling a land transaction in the case of “manifest injustice”, the existence of forgery or other dishonest conduct will not itself constitute the required level of injustice.
 
Introduction of covenants in gross and what it means for encumbrances
Until commencement of the Act, it was not possible to register an instrument that contained covenants or promises given by a landowner “in gross” – i.e. in favour of another person, rather than benefiting another parcel of land. Traditionally, these covenants have been included in encumbrances, which are a form of mortgage used for securing a long term obligation to pay a rental (known as a “rent charge”). To reduce the widespread use of encumbrances, the PLA has been amended to allow covenants in gross to be noted on records of title. This has been long awaited and should provide a registration option which is more palatable especially to banks. It also allows affected owners to seek modification or cancellation of existing encumbrances and replace them with covenants in gross.
 
While encumbrances are commonly used as a mechanism to register covenants, they are also properly (but uncommonly) used to register rent charges, and encumbrances are still referred to in the parts of the Act governing mortgages. Encumbrances therefore remain a viable instrument. There are some benefits in using encumbrances over covenants, including exclusion of the covenant modification provisions in the PLA, but, where the real purpose is to require a landowner to do or refrain from doing something for the benefit of another person, a covenant in gross will generally be the appropriate instrument.
 
Registrar’s power to correct titles
The Act clarifies the circumstances in which the Registrar is able to correct titles. The Registrar’s power of correction is now limited to correcting an error made by the Registrar, correcting an error made by a person preparing a document or information for registration, recording a boundary change due to accretion or erosion and giving effect to a court order.
 
Overriding statutes
The Act repeals the Statutory Land Charges Registration Act 1928, with the Act dealing with the registration, priorities and release of relevant charges.
 
Regulations
The Land Transfer Regulations 2002 have also been revoked, with the Land Transfer Regulations 2018 (Regulations) replacing them.
 
One of the key changes made in the Regulations is to update the terms implied into certain classes of easements. These changes include:
  • altering the description of the affected land from “servient tenement” to “burdened land” and from “dominant tenement” to “benefited land”;
  • referring to the part of the burdened land subject to the easement as the “easement area”, in line with commonly-used wording;
  • updating and aligning the equipment that can be installed under the various types of easement;
  • removing unnecessary wording, such as replacing the class of easement previously called “telecommunications and computer media” with simply “telecommunications”;
  • requiring the owner of the burdened land to act reasonably when the grantee seeks to install easement facilities; and
  • adding an implied electricity conveyance right in order to operate equipment installed under the easement powers (eg. a water pump).  
The Regulations also update the core information required to be used in land transaction forms. LINZ has provided template forms, although these remain inconsistent with each other and do not always contain the required core information.
 
New requirements for authority and identity
In conjunction with the Act and the Regulations, LINZ has issued new guidelines for authority and identity and the New Zealand Law Society has issued new authority and instruction forms. The guidelines and forms include greater detail about how clients instruct lawyers and conveyancing practitioners to electronically certify and sign land transfer instruments and how those instructions are required to be confirmed to be valid. In conjunction with the extension of Anti-Money Laundering requirements to lawyers, lawyers now play a key role in confirming that land transactions are free of fraud and other illegal activity.

If you would like further information, please do not hesitate to contact any of our property lawyers. Contact details can be found here.


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Greenwood Roche Young Achiever of the Year Award 2018

We are pleased to continue to support the Property Council Southern Excellence Awards which recognise and celebrate excellence in property in the South Island.  Christchurch Partner, Ranui Calman had the honour of presenting the Greenwood Roche Young Achiever Award as part of the event on 5 October 2018...

Greenwood Roche Young Achiever of the Year Award 2018

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Greenwood Roche Young Achiever of the Year Award 2018

Greenwood Roche Young Achiever of the Year Award 2018

We are pleased to continue to support the Property Council Southern Excellence Awards which recognise and celebrate excellence in property in the South Island.  Christchurch Partner, Ranui Calman had the honour of presenting the Greenwood Roche Young Achiever Award as part of the event on 5 October 2018.


Congratulations to Nick Flack of Christchurch International Airport, this year’s winner of the Greenwood Roche Young Achiever Award.  Nick is the Asset Planning and Maintenance Manager at Christchurch International Airport, where he has achieved outstanding performance and has made a significant contribution to the planning, construction and on-going maintenance of the Airport’s infrastructure assets.  He has shown focus, dedication and commitment, as well as grit and determination when faced with difficult situations.  He models a collaborative work style that brings together the organisation to translate strategy into action and has the promise of being a future industry leader.

Nick is currently part of the Strategy Action Leadership Group, which is responsible for turning corporate strategy into action.  He has a passion for commercial, operational and master planning as well as for driving long lasting solutions.  He creates clarity of purpose for his teams, articulating the Airport’s property and asset vision and then translating that vision into projects and maintenance plans.

The judges commented on Nick’s determination and motivation to achieve his goals as evidenced by undertaking full time study to complete his Masters in Logistics and Supply Chain Management, whilst also working full time.  He has also been an active member in South Island Logistics Forums, organised personal mentors to help him achieve his goals and completed leadership training, which he has been able to put into practice as part of the Senior Leadership Team.  The work Nick has been involved in has made a significant contribution to the whole of the South Island and the judges were impressed by how Nick sees the big picture, is future focussed and pushes boundaries to achieve his goals.  Nick embodies what this award seeks to recognise and celebrate and is without a doubt a leader of the future.

Congratulations Nick, we look forward to working with you and seeing where your career develop.


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ILANZ Greenwood Roche Private Sector In-House Lawyer of the Year Award 2018

Greenwood Roche extends its warmest congratulations to Marise Winthrop, Corporate Counsel, Livestock Improvements Corporation (LIC).  The award recognises Marise’s significant contribution to both LIC and the legal profession...

ILANZ Greenwood Roche Private Sector In-House Lawyer of the Year Award 2018

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ILANZ Greenwood Roche Private Sector In-House Lawyer of the Year Award 2018

ILANZ Greenwood Roche Private Sector In-House Lawyer of the Year Award 2018

Greenwood Roche extends its warmest congratulations to Marise Winthrop, Corporate Counsel, Livestock Improvements Corporation (LIC).  The award recognises Marise’s significant contribution to both LIC and the legal profession.


Marise manages the legal and intellectual property teams at LIC providing strategic and tactical options on the creation and protection of LIC’s growing portfolio of IP assets.

Greenwood Roche is proud to continue its support of ILANZ and to continue working alongside many of its members, providing pragmatic solutions in the delivery of various projects and initiatives that its members undertake.  In her speech at the awards, Greenwood Roche Partner Ranui Calman highlighted the increasing need for in-house lawyers to be innovative in their thinking, processes and their solutions. 

Greenwood Roche again wishes to congratulates all nominees and award winners on their various achievements throughout the year.


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Digital Signatures and Storage - how and when they can be used?

From courier deliveries to agreements to purchase real estate, the emergence of digital signatures in commercial transactions has become increasingly prevalent over the past decade. The Contract and Commercial Law Act 2017 (Act) consolidated a number of commercial statutes (including the Electronic Transactions Act 2002). The Electronic Transactions Act 2002 aimed to facilitate the use of electronic technology by reducing uncertainty relating to its legal effect. The Act, by incorporating that same intention, promotes a more innovative commercial landscape by providing guidelines for the use of digital signatures and the digital storage of documents...

News & Insights

Digital Signatures and Storage - how and when they can be used?

From courier deliveries to agreements to purchase real estate, the emergence of digital signatures in commercial transactions has become increasingly prevalent over the past decade. The Contract and Commercial Law Act 2017 (Act) consolidated a number of commercial statutes (including the Electronic Transactions Act 2002). The Electronic Transactions Act 2002 aimed to facilitate the use of electronic technology by reducing uncertainty relating to its legal effect. The Act, by incorporating that same intention, promotes a more innovative commercial landscape by providing guidelines for the use of digital signatures and the digital storage of documents.


Digital Signatures

Digital signatures are a sub-category of the more general “electronic signature”. An electronic signature is any form of identification indicating acceptance in an electronic form. It may be a scanned version of a signature, the ticking of an “I Accept” option or a signature formed by a finger on a tablet or smartphone. In a New Zealand context, digital signatures are electronic signatures that generally comply with the Act. A digital signature’s compliance with the Act is authenticated by embedded software that provides assurances as to identification, reliability and of course, acceptance.

The Act provides that, subject to a few exceptions (such as affidavits, statutory declarations, powers of attorney, or wills) digital signatures are permitted under New Zealand law. The Act sanctions the general rule that any legislation requiring dealings to take place on paper will also be permitted to take place electronically, provided both parties agree and the dealings are not expressly excluded from the Act.

Section 226(1) of the Act states that a digital signature must:

  • adequately identify the signatory and adequately indicate the signatory’s approval of the information to which the signature relates; and
  • be as reliable as is appropriate given the purpose for which, and the circumstances in which, the signature is required.

To help provide certainty to users of digital signatures, the Act gives a rebuttable presumption of reliability if certain requirements are met. Section 228 provides that a digital signature will be presumed reliable if:

  • the means of creating the digital signature are linked to the signatory and to no other person;
  • the means of creating the digital signature were under the control of the signatory and no other person;
  • any alteration made to that information (or the digital signature itself) after the time of signing is detectable; and
  • the purpose of the signature is to provide assurance as to the integrity of the information to which it relates.
Essentially, a digital signature (as opposed to a mere electronic signature) will be presumed reliable as it generally meets these requirements.

Digital Storage

Continued technological innovations mean that many documents are never created in a paper form and many companies are looking to cut costs and increase convenience by storing information in digital, rather than physical form.

To cater for this, section 222 of the Act permits digital versions of documents as sufficient alternatives to originals where the digital version is “readily accessible so as to be usable for subsequent reference.”  Provided that a digital system reliably ensures that the integrity of the digital version is maintained, it may replace the original.

Where a document might be used for evidential purposes in a court, digital evidence is not barred.  However, it must meet the rules of evidence contained in the Evidence Act 2006 (EA) relating to hearsay and general reliability.

When retaining documents for use as evidence, clearly the objective must be to ensure that they are admissible. There is no restriction on the type of evidence a party may bring to prove its case in court, but there may be issues as to reliability. The definition of “document” in the EA is wide enough to encompass any form of digital document as it includes “information electronically recorded or stored, and information derived from that information.”

Under section 19 of the EA, a statement made in a business document is admissible in court, generally, if the person who made the statement is either unavailable to appear as a witness or the appearance would be significantly inconvenient due to cost or delay.

Conclusion
 
Digital signatures and digital storage provide an effective way for companies to save time and money in the digital age. Their trend of increased prevalence will surely only continue. It is important therefore, that parties have a good understanding of what constitutes a digital signature and when it may be appropriate. Likewise, parties need to understand the steps required to ensure digitally stored documents will withstand the test of time.  If you would like to know more, please contact Rowan Barbalich.
 


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When does a Director have Power to Bind a Company?

The customary authority of one director of a board of several, acting alone, is very limited:  there needs to be some evidence of customary authority..

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When does a Director have Power to Bind a Company?

The customary authority of one director of a board of several, acting alone, is very limited:  there needs to be some evidence of customary authority


The recent Court of Appeal decision in Bishop Warden Property Holdings Limited v Autumn Tree Limited,[1] upholding an earlier High Court finding,[2] has alarmed some in the legal and business community.

Contrary to some suggestions, the case is not authority at Court of Appeal level for the novel proposition that one director alone cannot bind a company to a contract.  Nor are its particular findings expected to change too much for most ordinary business contracting, as it appears to have been decided very much on its own facts.

The case is nonetheless significant in terms of company contracting.  It reaffirms existing law and the correct interpretation of section 18 of the Companies Act 1993.  It also sends a salutary reminder to those involved in negotiating and settling contracts as to the extent of a director’s authority and as to when care should be exercised in assuming actual or apparent authority.

Key facts

The case involved an application by Autumn Tree to remove a caveat from land it owned that was subject to an unconditional sale and purchase agreement with Bishop Warden.

Autumn Tree was a company formed solely for the purpose of owning and subdividing some residential land in Meadowbank, Auckland.  This was its sole property.  The company was owned by 3 shareholders, with a Mr Zhao holding 50%, Anna 30% and Tina 20%.  Tina was sole director, seemingly as nominee for all 3 shareholders.

Removal of the caveat depended on whether or not the Agreement was valid (ie. had been validly entered into).  It was accepted that if the Agreement wasn’t valid, Bishop Warden had no interest to support its caveat and the caveat should therefore be removed.

In the space of one afternoon, late on 3 August 2017, Mr Blomfield (representing Bishop Warden) and Tina negotiated a sale and purchase of the land, valued post-subdivision at some $3.35M, for $1.1M.  Tina had explained she wanted to exit the company and did not want to proceed with the subdivision.  Mr Blomfield alleged he believed at the time, based on a company search undertaken that morning, that Tina was the sole director of Autumn Tree.

Unbeknownst to Mr Blomfield, some sort of disagreement existed between the Autumn Tree shareholders as a result of which the Companies Office records were adjusted by Autumn Tree’s accountants on instruction from Mr Zhao.  The companies register showed a transfer of Tina’s shareholding in Autumn Tree to Anna being registered just before midday on 3 August, and Anna registered as a new director around 1 pm.  Tina’s removal as a director was not recorded until 5 August, but was effective from 3 August.

The legal issue

The legal argument centred around section 18(1) of the Companies Act and its codification of the common law “indoor management rule” and the doctrine of apparent authority.  Applied to the facts, the question was whether, as one of two directors, Tina had authority to bind Autumn Tree to the Agreement.

Section 18(1) and the indoor management rule

Section 18(1) is based on the proposition that a person dealing with a company is entitled to assume that the company’s internal requirements have been complied with and its officers are acting lawfully.  Otherwise, business interactions would be greatly complicated.

To this end, section 18(1) restricts the circumstances in which a company can assert against a person dealing with it that the company, or the person held out by it as acting on its behalf, lacked authority to enter into the relevant transaction.  The company cannot cite:

  1. non-compliance with the Companies Act or the Constitution;
  2. that someone named as a director on the Companies Office records is not a director, has not been duly appointed, or does not have authority to exercise a power which a director of such a company customarily has;
  3. that a person held out by it as a director, employee or agent has not been duly appointed or does not have authority to exercise a power which such persons customarily have in businesses of that type; or
  4. that a document issued on behalf of the company by a director, employee or agent with actual or usual authority to issue the document is not valid or genuine,
unless, in each case, unless the person has, or ought to have, by virtue of his or her position with or relationship to the company, knowledge of the relevant defect.

The courts’ decisions

Both the High Court and Court of Appeal found that at the time the Agreement was concluded (around 6 pm on 3 August), for all intents and purposes Autumn Tree was holding out both Tina and Anna to be directors.  This was what at the time was showing on the companies register and that amounted to “holding out”.  Mr Blomfield could not rely on his belief that Tina was the sole director, in reliance on his earlier search.

Bishop Warden was found to have failed to establish that Tina had actual authority.  The case therefore fell to be decided on the question of her apparent authority.  Section 18(1) did not assist Mr Blomfield in the circumstances, and Autumn Tree won on its claim that Tina lacked actual or apparent authority and the sale and purchase transaction was therefore invalid.

Both courts found that the position as to customary authority (in terms of section 18(1)(b) and (c)) varies significantly between the customary authority of a sole (or managing) director and that of a director who is one of a board of two or more directors.  The customary authority of one director of a board, acting alone, is very limited.

Citing ample respected academic and judicial authority, the courts noted that a director acting solely in that capacity must act as part of a board in order to bind the company.  Directors can act only collectively as a board.  The function of an individual director is to participate in board decisions.  Absent some express or implied representation made by the company, a director has no ostensible authority to bind it.  Moreover, it is not sufficient for the person claiming authority simply to assert it.  There has to be some representation or holding out by the company.

In this case, the courts held that one of two directors of a property development company, acting unilaterally, does not customarily have authority to enter into a significant property transaction.

It is all a question of what is customary, or usual, director authority for a company of the type in question.  Here, with a company owned by three distinct shareholders, whose sole purpose was to hold this one land asset, it would not be customary for one director acting alone to have authority to dispose of that asset.  Major transaction approval by shareholders would be required.  Moreover, found the High Court, Mr Blomfield was aware of sufficient suspicious circumstances (including the sale price at an obvious under-value) as to have deemed knowledge that Tina would lack authority to transact.  That he was operating under the possibly mistaken impression that Tina was the sole director was no excuse.

Helpfully, the Court of Appeal confirmed the effect of the proviso to section 18(1), reaffirming the High Court’s finding on the proviso in Equiticorp Industries Group Limited (in statutory management) v Attorney-General (No 47)[3].  The proviso creates two classes of knowledge which preclude reliance by the third party on section 18(1):  actual knowledge (including wilful blindness) and constructive knowledge.  Constructive knowledge will only be imputed where there is something in the third party’s position with or relationship with the company to justify it.  This has to be an on-going relationship, rather than that around a one-off transaction.

This limitation on the proviso’s effect means that more often than not, parties will be able to rely on the protection afforded by the indoor management rule as embodied in section 18(1).

Commentary and practical suggestions

The case reminds us of the need for caution, but at the same time we have to be able to go about business sensibly.

The key take-out for lawyers and clients is not that all manner of solicitors’ certificates, additional signatories, warranties and due diligence checks are required.  It will not be a case of requiring all directors, and only directors, of a company to sign contracts.  You will not be needing to vet the company’s corporate authorisation resolutions or delegations (though if you choose to, do correct them if deficient!).

The point is to be aware of the governance limitations as a matter of law (which are both sensible and well-established), consider each set of circumstances on its merits, ask sensible questions of clients, agents and advisors (including about corporate authorisation of the transaction and similar transactions, what is customary for this company and what delegations or powers of attorney are in place).  Undertake what should be regarded as basic housekeeping due diligence (for example, obtaining company searches and updating these just prior to signing, checking what the constitution says about signing of documents).  Check the signatures on the executed document.

Importantly, consider whether there is anything in the circumstances, or through your or the client’s relationship with the company, that means you may not be able to rely on the proviso to section 18:  might you be imputed with some actual or constructive knowledge of a defect in authority, by virtue of your relationship with the company?

Where the consequences of any invalidity are significant, you may want to insist on two directors signing, thus reducing any risk.

From the company’s perspective, as a matter of best practice make sure that transactional authorisations are in place, management are complying with corporate delegations and Companies Office records are up to date.

If you are dealing with a company that has only one sole director, relax.  That director is the board and the voice of the company.  You can rely on that person’s signature unless there is something in the circumstances, or some “holding out” by the company to the contrary.  Be wary nonetheless of the possible need for major transaction approval.
 
 
[1] [2018] NZCA 285
[2] Autumn Tree Limited v Bishop Warden Property Holdings Limited [2017] NZHC 2838
[3] [1998] 2 NZLR 481


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UDAs in New Zealand: Auckland’s Turn

The concept of urban development authorities as tools to expedite large scale urban development has been floated in New Zealand for over a decade.  The “housing crisis” has, however, injected new momentum into the conversation in recent times with both the previous and current government discussing proposed legislation to introduce urban development authorities.    ..

UDAs in New Zealand: Auckland’s Turn

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UDAs in New Zealand: Auckland’s Turn

UDAs in New Zealand: Auckland’s Turn

The concept of urban development authorities as tools to expedite large scale urban development has been floated in New Zealand for over a decade.  The “housing crisis” has, however, injected new momentum into the conversation in recent times with both the previous and current government discussing proposed legislation to introduce urban development authorities.   


Last week Minister for Housing and Urban Development Phil Twyford announced plans to establish an urban development authority in Auckland proposed for introduction by the end of this year or early next year.  The authority’s scope of powers and functions is not yet clear, however it seems likely they will include some ability to fast-track planning approval for projects.  The delivery of housing is clearly the focus for this new entity, but earlier comments from the Government indicate that urban development authorities could also deliver broader infrastructure and community projects in support of its housing focus.


While the proposed Auckland urban development authority will be the first of its kind under the new proposed legislation, it will by no means be the first or only entity empowered by special purpose legislation to fast-track development.  First touted by then Minister Gerry Brownlee as an “urban development authority”, Regenerate Christchurch is a statutory entity charged with and empowered to lead the regeneration of the Christchurch district.  While it does not have the full suite of “tools” that might be expected for an urban development authority (including land acquisition, securing funding, infrastructure development), it does have the ability to override local planning documents to expedite regeneration initiatives.


The experience of Regenerate Christchurch and CERA before it (which was given an even broader suite of powers to enable the expedited recovery of Christchurch) offers invaluable lessons to those who are charged with establishing the new urban development authority, and indeed, to those who are charged with leading it.  Tools granted by special legislation to fast track development can be very effective, both in terms of ease of delivery and in obtaining high quality outcomes.  The use of those tools can also enhance – rather than compromise – public engagement and iwi consultation on urban development projects.  This can, in turn, incentivise innovation and investment, particularly where development can be scaled.  However, as always with great power comes great responsibility.  The exercise of these powers is not without political risk.  As a result the successful use of this legislation will, as Auckland is about to find out, depend at least in part on both the political and public appetite for that risk.


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