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Separation Agreement: Things to Include to Protect Your Finances

Separation Agreement: Things to Include to Protect Your Finances

Introduction: the Separation Agreement

If you are separating out of a marriage or de-facto relationship, or getting a divorce, you should consider getting a separation agreement.  Other than Court, it is the only valid way of dividing relationship property once a relationship ends.   Some people do this process informally, however, this can result in arguments and Court down the line.

But going to court can be very costly. While the relationship is still on good terms, you might want to negotiate a separation agreement.

You might like to refresh your knowledge of what Relationship Property means before you continue reading this article. Essentially, your separation agreement allows you to dictate how your assets will be divided.  If you get a valid separation agreement, this will override the provisions of the Property (Relationships) Act 1976. But in order for it to be legally binding on both parties, the Separation Agreement must be:

  • In writing;
  • Signed by both parties;
  • Following independent legal advice; and
  • A lawyer has to sign and witnesses your signing. This lawyer also certifies that they explained the effect and implications of the agreement to you.
  • Similarly, your partner will also need an independent lawyer doing the same certification.

What you can expect in our Separation Agreement ‘template’:

Our CODR separation agreement includes aspects such as:

  • The date on which you agreed to separate
  • The maintenance of one spouse or partner by the other if appropriate
  • Arrangements for day-to-day care of or contact with children of the relationship
  • Debts or other hire-purchase collateral owned under both names
  • The Family home
  • Dividing up personal property

 

Things to include in your Separation Agreement

If you are married or in a civil union with your partner and you later decide to apply for a divorce, you can also use the separation agreement as evidence that you have been apart for 2 years. It is necessary to show that you’ve lived apart for two years before you can apply for a divorce.

Before you go ahead and purchase CODR’s Separation Agreement, here are some key things most couples think about when they get a separation agreement.

The Family Home

One of the main assets couples own is the home. You could also have jointly-owned chattels. Think about your family car, household furniture and other ‘big ticket’ items.

Regardless of who paid for the Family Home, it will usually be relationship property.

When you separate, you can sell the main Family Home. The sale will be divided in half and shared between you and your partner. Otherwise, one party may keep the house and buy the other  partner out. This might be desirable if you have children to consider.

In the Family Court, the judge guides their decision by general principles. You might like to think about these principles when dividing your own relationship property:

  • That since each partner has contributed equally to the relationship, the assets will be shared equally too i.e. split in half
  • The Court won’t look at who is ‘at fault’ for breaking up the relationship
  • Unpaid domestic work has equal value to economic work

However, your separation agreement does not have to divide your assets in this way. If you are purchasing a separation agreement and then seeking your partner’s approval, you can show them that you have thought about fair terms.

What about Separate Property?

But you and your partner may also have other assets which are not relationship property.

An example is other investment home(s) which are not the Family Home. This could be ‘separate property’ which does not come under the Relationship Property Act if it can be determined to not be relationship property. Separate property remains the property of the partner who owns it.

Situations can get complicated. For example, sometimes both partners own a home capable of becoming the family home. Generally, when relationship property is to be divided, the home of only one partner will be considered the main Family Home.

Separate property can include property one partner got while they were not living together as a couple. Or it can be property that a partner acquires from another such as an inheritance (unless this property gets mixed with relationship property). If you need legal advice on your individual circumstances, CODR can help you find Family Law experts.

Child-Care Arrangements

If you have children from your relationship to consider, our Separation Agreement, does allow you to detail what your day to day care and contact of your children will be, access and other major decisions regarding the upbringing of your child or children if they are still minors.

The court will only be concerned only with what is in the best interests of the children when they consider child-care arrangements.

Your own or your partner’s debt

You or your partner can be liable for any personal debts (even if they are solely in your partner’s name) if they are considered relationship debts. Relationship debt includes any joint debts or debt that is solely in your partner’s name if:

  • the debt was related to the relationship property. For example you used it to get a loan on a car you both used, or for a business you both benefited from;
  • the debt was for the benefit of both partners. For example rent, debt to buy furniture;
  • the debt is the result of the cost of bringing up any children you have together.

You can deal with how to divide up any joint debts or whether one party takes these debts over and provides an indemnity for that party not taking over the debt.

Think about your current credit card debts, any remaining hire purchases, student loans etc.  Your lawyer will ask for more information if there is not enough details in your separation agreement. We recommend you spend some time listing these out with your partner.

What about Kiwisaver?

If you have contributed to Kiwisaver after your relationship started, or another employment scheme such as the Police Superannuation or other government scheme, then you need to share this amount with your partner when you separate.

Generally, this will be split in half. Your certifying lawyer will need to see proof of the value of your Kiwisaver – unless it is only a small amount.

You can withdraw your Kiwisaver on the grounds of significant financial hardship and serious illness. Your Kiwisaver scheme manager will need to be reasonably satisfied that you or your partner is suffering or is likely to suffer significant financial hardship. Then you can make a significant financial hardship withdrawal. Significant financial hardship includes significant financial difficulties which can come up after separation.

Finally, is your agreement fair?

If you do have to go to court, it is likely that the judge will determine whether:

  • the agreement is fair;
  • you both worked on the agreement without pressure and entered into it freely;
  • it covers all your assets after full disclosure.

The extent to which a judge will stay with your agreement reflects the level of his acceptance of the above three points.

If one of you is in breach of the deed of separation and the other goes to court to enforce it, the judge can alter the terms of the agreement.

A separation agreement is useful in so many ways. It allows for certainty, it ensures your separate property stays your separate property, and probably most importantly, it helps to give parties closure.  

Buy your Separation Agreement Now

People are increasingly turning online to meet their everyday needs. Technology can make this a more satisfying, efficient and easier process. This is exactly the aim of CODR, an online dispute resolution platform and service.

CODR offers the following ‘DIY’ services and steps so that you can move on:

  1. Purchase our agreement. It will automatically generate your tailor-made agreement.
  2. Contact us to certify your document with our expert Family Lawyers.
  3. Go ahead and put the terms of your agreement into action if needed.

Things such as Family Trusts and businesses can make your situation more complicated.  Please talk to one of us at the CODR team about your situation.

If you have a dispute over relationship property, CODR can also help you resolve this if both parties are willing to negotiate or arbitrate. Otherwise you can consider what your options are with our Family Law experts. Please contact us on what your next steps may be.

 

Disclaimer: Any information we provide is general information. Please do not rely on the contents of this article as legal advice. CODR is not a law firm or a substitute for a law firm. 

4 Tips to Avoid Construction Disputes

Construction in New Zealand appears to be at an all-time high. This will no doubt have welcome consequences for increased infrastructure, but it can also mean increased construction disputes with little time to resolve them given project management timelines.

 

Although CODR provides avenues for resolution if matters do come to a head, preventative measures are almost always a better approach.

 

Here are some tips to prevent getting yourself involved in a construction-related dispute:

 

1. Put all discussions into writing

 

It’s very easy for things to go awry when there is nothing documenting the agreement between the parties or variations to that agreement. Things to look out for are usually small variations from discussions or oral communications which aren’t documented in the original contract. That’s why it’s important to capture everything in writing and any variations to the original agreement should also be documented, approved and signed off. 

 

Having an agreement which clearly sets out what happens when a partnership or business relationship breaks down can minimise the cost of resolving a dispute. For example, you may choose to include provisions in your construction agreement that makes mediation mandatory if there is a dispute during your build.

 

2. Keep everyone in the loop

 

One of the best ways to avoid conflict and misunderstanding is to ensure clients, contractors and other related parties know are fully informed at all times. This may include informing them regularly about any changes in costs, budgets and/or scheduling. This helps to establish a good working relationship with open lines of communication that can prevent litigation.

 

3. Act before it escalates

 

If you take steps to deal with a smaller issue when it arises, you can often prevent it developing into a major problem.  

 

4. Think about who you want to do business with

 

Before you start a construction project, do your due diligence on your potential counterparty.  Consider, in depth, whether they are the type of people you would want to work with before signing up to anything.

 

Disputes are a negative distraction that drain human resources and have a negative impact on profit margins.  Accordingly, it makes sense to employ an approach that minimises the chance of them arising.

DIY Relationship Property Disputes

“See you in court” might be very satisfying to say after a bitter break-up, however, this strategy may not serve you that well in the long term. 

 

We have written on the key aspects of relationship property disputes before and your options when you have a relationship property dispute. However, we are now offering a service where a couple can quickly and easily settle relationship property issues themselves after a relationship breakdown.

 

The mechanism is a separation agreement and it is what we recommend for all parties that are still on reasonably good terms with each other.  The other three forms of resolution – mediation, arbitration or the courts all take significantly more time and cost a lot more money.

 

After purchasing the separation agreement, a previously loaded set of questions obtains all the relevant information from you and inputs it into your agreement – creating it “automatically” and without the need for a lawyer to spend their time drafting it.

 

However, for a separation agreement to be enforceable, both parties must receive independent legal advice and have the agreement certified by their advising lawyers.  We also offer this certification process via CODR.

 

For an agreement, advice and certification from two lawyers, the cost is normally between $1500 – $1800 + GST (depending on the complexity of your particular agreement).

 

If it’s possible for you, we think a self-directed separation agreement should be your preferred option given its time, cost and stress savings.  If you have any questions, please don’t hesitate to call one of the team at CODR on 0800 263 700.

Before Mediation: 5 Ways to Help Solve a Dispute Yourself

We often see disputes where the parties do not want to go to court.  This could be because of the cost of the court process, or some other reason entirely.  In these cases, we often suggest mediation for the parties.  Mediation is frequently considered as a way to resolve a dispute that requires relatively low investment of time and money.  While this is the case, there are even steps you can take before mediation to resolve a dispute:

 

  1. Focus on emotions.

 

A study done by neuroscientist Antonio Damasio focused on people with damage in the part of the brain where emotions are generated.  They all seemed normal except for the fact that they could not feel emotions.  They also all had something else in common – they could not make decisions.  They could describe what needed to be done logically and rationally, however, they struggled to make even simple choices (such as what to eat).

 

In our experience, the resolution of disputes is almost always significantly impacted by emotional drivers.  Knowing this, ask yourself what could be responsible for leading you to this dispute.  Could one party feel their expertise hasn’t been recognised?  Or maybe one party feels their contribution hasn’t been given the respect it deserves?

 

Consider these questions and others and ask yourself how some of the damage can be undone.

 

  1. Be objective in your communication.

 

Attempt to express your feelings in a way that is clear, appropriate and professional. Also focus on “I” rather than “you” statements. This helps to reduce defensiveness. For example, “I am upset that my effort has not been recognised,” rather than “You are in the wrong because you haven’t noticed everything I’ve done.”

 

We believe in-person communication is best, closely followed by a phone call.  Tone is often hard to decipher in an email and this method of communication should be used with this in mind.

 

  1. Listen Actively.

 

People want to be heard.  And they want to know they’ve been heard.  While this is very difficult to do, when the other person is talking, don’t try and think of a sharp response – just listen to what they’re saying.  It’s subtle, but the other person will notice.

 

A technique to demonstrate that you’ve been listening is to briefly summarise what the person has been saying to you.  If there are any inaccuracies, the other person should correct you.  Keep going back and forth until you receive a “that’s right” in relation to one of your summaries.

 

  1. Take responsibility for your own actions and behaviour.

 

If you think you’ve been at fault (and you probably have in some way), admit it.  Appropriate concessions not only make you look reasonable overall, but it also makes you more credible on issues where you stand your ground.

 

  1. Think creatively.

 

A win-win situation can come from adding elements to the negotiation/dispute that you didn’t consider to be relevant.  This ties in with tip number 1 (focus on emotions), once you have established the emotional drivers, consider creatively how they can be met to satisfy the counterparty.

 

 

Hopefully, with these 5 steps, you can resolve your dispute without experiencing further time and money costs.

 

 

Disputes over Relationship Property – Your Options

What to do when a relationship property dispute arises

Property division between partners following the end of a relationship can become a complicated and drawn-out process. This is sometimes the case because parties may feel that filing Court proceedings against one another is the only way forward. Indeed, the NZ Family Court is designed to facilitate effective family dispute resolution, however, individuals can avoid the stress, cost and time associated with Court proceedings, by creating an enforceable property division contract of their own. This course of action can be facilitated by lawyers, mediators or arbitrators with special expertise in family law, even if agreement or good will between parties is lacking. This article provides some information on these out of court avenues. Note that the information provided here is intended as a guide only. If more information is required in relation to a personal property dispute, it may be that the team at CODR can help by providing more information.

 

The Family Court

The Family Court is empowered under the Property Relationships Act 1976 (the Act) to order division of relationship property in the event of a marriage, civil union or de facto relationship ending. For a brief account of how the Act requires the Courts to categorise, evaluate and divide property between individuals, see “Relationship Property – The Fundamentals”.

Filing an application with the Family Court may be appropriate if urgent steps need to be taken, as the Court can make interim orders that are immediately binding. The Family Court may also provide the most suitable forum if multiple and varying claims need to be dealt with. For instance, a relationship property dispute can be heard in the Family Court alongside a family protection claim or some other matter implicating a third party who may be unwilling to become involved in alternative forms of dispute resolution.

However, these scenarios aside, Court proceedings can be time-consuming and unsettling for all involved. Standard court procedure, as well as file backlogs can result in significant delay for parties. Further, so long as the dispute does not involve a vulnerable person or a minor younger than 18 years, accredited news media representatives are granted full access to proceedings.

Dealing with relationship property disputes through the Family Court can also become very costly, especially if evidence is lacking or a point of law arises which proves complex. Pursuant to the Family Courts Fees Regulations 2009, an upfront $700 filing fee must be paid for any application lodged. If the dispute is heard before a Judge, an additional $906 fee must be paid for every half-day. Legal fees also need to be added to the total cost of proceedings.

Finally, filing an application with the Family Court is sometimes not a viable option if considerable time has passed since the relationship in question ended. For those previously in a marriage or civil union, court proceedings must be filed within 12 months of its dissolution (this is usually taken to be the divorce date). For those previously in a de facto relationship, proceedings must be filed within three years from the point at which the relationship ended.

For the reasons stated above, dealing with a relationship property dispute in Court can be stressful, prolonged and costly. However, these shortfalls of the Court system can be avoided if parties choose to work through their relationship property dispute via alternative dispute resolution services.

 

Alternative dispute resolution services

Disagreements over relationship property are particularly well suited to out of court management. This is because the Act expressly allows for dispute resolution by contract. This means that so long as certain requirements are met (as set out in the article mentioned above), and so long as the contract adopted by the parties does not lead to outcomes that are or become seriously unjust, relationship property contracts are binding and enforceable.

 

Arbitration

Arbitration can provide a speedy and cost-effective way to resolve property disputes. Unbound by court protocol, arbitrators can speed up the dispute resolution process considerably. Further, arbitrator fee structures can be negotiated and fixed at the beginning of the dispute resolution process, and forum and service fees can be avoided or significantly discounted .

Arbitration also affords complete privacy to parties. The number of persons involved in the property dispute and contract formation process can be reduced if desired and the opinion of intimately affected third parties such as children or dependents can be integrated into proceedings flexibly. Further, parties can agree upon an arbitrator of their choice.

Another advantage of this kind of dispute resolution is the ability that the arbitrator has to gather information. Though a Judge in the Family Court can order discovery, request affidavits and make interlocutory orders, she is still bound by standard Court procedure. Alternatively, an arbitrator can arrange a one-off meeting, calling parties, lawyers, accountants and any other relevant parties as witnesses. This power, in practice, often leads to speedy and effective information collection, a crucial requirement for successful dispute resolution and contract formation.

 

Mediation

Mediation can also be an effective way to resolve relationship property disputes. Like arbitration, this avenue can offer parties a streamlined, confidential and cost-effective dispute resolution service. As stated above, simplified processes and agreed upon fee arrangements can result in significant cost reductions, and procedural flexibility can lead to thoughtful and effective outcomes.

Importantly however, the role of a mediator differs from that of an arbitrator. Whereas an arbitrator will hear submissions from both sides before arriving at a considered decision (thereby acting as decision-maker), a mediator facilitates and guides the parties to define issues, produce relevant information and arrive at a consensus. Mediation therefore can prove very effective if goodwill remains between the parties, or, even if not, if there is a will to achieve a timely and confidential settlement that the parties can live with.

 

Lawyers

It may be that a trained mediator or arbitrator is not necessary for two parties to arrive at agreement as to how their relationship property should be divided. In this case, the help of a lawyer on the part of both parties may be all that is required. This avenue may be the simplest and most cost-effective way forward, especially if both parties are largely in agreement as to how they wish to divide their property but need reassurance that their agreement will be enforceable. There are particular requirements that have to be met for such an agreement to be enforceable, including that each party have had independent legal advice before signing the agreement and that the lawyer certifies that he or she explained the effect and implications of the agreement to the party before signing. For more information see “Relationship Property – The Fundamentals”.

Because NZ Lawyers are required to follow certain standards of professional behaviour, any insight a lawyer gains into private family arrangements remains strictly confidential. Such standards also insist that fees charged by lawyers are reasonable and fair.

 

CODR

Negotiating an agreement which sets out how relationship property is to be divided between partners following the end of a relationship, with the help of arbitrators, mediators and lawyers is advantageous to the extent that much time, money and stress can be avoided. Indeed, the statutory regime encourages these options. If you are interested in engaging in any of the dispute resolution processes mentioned above, CODR’s online platform can be used to bring all parties together to arrive at the appropriate outcome confidentially, expertly and efficiently.

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.

Relationship Property – The Fundamentals

The Property (Relationships) Act 1976 (“The Act”) applies to partners seeking to divide their relationship property following the end of their marriage, civil union, or de facto relationship. This article provides a brief account of how the Act enables NZ Courts to categorise, value and divide property between individuals who have not been able to come to an agreement of their own.¹ Note that the information provided here is intended as a guide only. If more information is required in relation to a personal property dispute, the team at CODR may be able to help by providing more information.

 

What is the Property (Relationships) Act 1976?

The Act is a wide-ranging piece of legislation which sets out how property between partners is to be divided in the event of separation (by death or otherwise). The purpose of the Act is to provide the Family Court with a fair and objective framework to be used for the purpose of dividing relationship property between partners in disagreement. This framework is intended to recognise the equal and sometimes varying contributions made by both partners to the fruits of a past relationship, as well as to provide for the interests of children.

 

Who does the Act apply to?

The Act applies to all married couples, individuals in a civil union and people in a de facto relationship.

 

What is a de facto relationship?

A de facto relationship is a relationship between two individuals who “live together as a couple”. In judging whether a relationship is de facto or not the Court will have regard to:

  • The duration of the relationship;
  • The nature and extent of common residence;
  • Whether or not a sexual relationship exists;
  • The degree of financial dependence between the parties;
  • The kind of ownership, use and acquisition of property;
  • The degree of mutual commitment to a shared life;
  • The care and support of children;
  • The performance of household duties; and
  • The reputation and public aspects of the relationship.

Generally de facto relationships shorter than three years are not covered by the Act. The Court will only make orders concerning short de facto relationships if two specific requirements are met. First, the applicant must have either made:

  • a substantial contribution to the relationship; or
  • there must be a child of the relationship. For instance, a child of one of the partners, or even a child who was “a member of the family of the de facto partners”, at the time the couple ceased to live together.

Secondly, for a Court to make a ruling in relation to a short de facto relationship, the Court must be convinced that failing to do so would result in serious injustice, such that without Court intervention the resulting property arrangement would leave a contributing partner seriously disadvantaged.

Other kinds of de facto relationship not covered by the Act include:

  • Relationships ending before 1 February 2002; and
  • Relationships between people under 18 years.

 

What does the Act apply to?

The Act applies to any property owned by a partner.

“Property”, is broadly defined. Typical examples are the family home and chattels and businesses, but the term can also include, for example, rights or interests in relation to a trust, non-transferable licenses and insurance pay-outs. The value of the property in question is usually measured at the time of the Court hearing.

Also, an “owner” of property is also broadly defined as any person who is the beneficial owner of any property in law.

The Act is specifically worded to protect the rights of creditors. Therefore, any kind of agreement or transaction (involving relationship property) that intends to defeat the rights of a creditor, will be unsuccessful.

The way in which property owned by partners is to be divided (or the question of whether it is divided at all), depends on whether the property is classified by the Act as “relationship” or “separate” property.

 

What is the difference between relationship property and separate property?

The Act draws a distinction between relationship property and separate property. The term “relationship property” will usually include:

  • the family home, and family chattels (for instance family vehicles, furniture or other belongings used for family purposes) whenever acquired;
  • property owned jointly or in common by partners;
  • property acquired during the relationship, or in contemplation of the relationship and intended for common use or benefit (for instance, a wedding ring or engagement gifts);
  • sources of family income (such as family businesses or investments);
  • any increases in the value of relationship property, or any income derived from relationship property, or any proceeds from the sale of relationship property (for instance, the increased revenue of a family business, or income gained from the sale of a family car).

Property that is not relationship property is separate property. Separate property tends to include:

  • property acquired by gift, succession or survivorship (so long as it remains separate and is not mixed with relationship property);
  • property acquired as a beneficiary of a trust settled by a third party;
  • property acquired at a time when partners were not living together (for instance, after separation but before Court proceedings);
  • property acquired “out of” separate property, or the sale of separate property, or any increases in value of separate property (for instance, any income received from the sale of an inherited house).

Whether the property in question is classified by the Court as relationship property or separate property, will affect how the value of the property will (or will not be) divided.

 

How are these different kinds of property dealt with?

If property is classified as relationship property, partners are generally entitled to a half share of the property’s value. This general rule will only be departed from in certain limited circumstances, including if a relationship was of a short duration, or if failing to do so would result in an outcome that is repugnant to justice due to extraordinary circumstances.

On the other hand, if property is classified as separate property, it is not generally required to be shared with the non-owning partner. However, it is important to note that an increase in value of separate property can become relationship property if that increase was attributable to the “application of” relationship property, or the direct or indirect actions of the non-owning partner. For instance, a family business passed down from mother to daughter may be the separate property of the daughter. But if a partner becomes involved with the running of this business and increases its profits, the non-owning partner will have a claim to this increase in value under the Act.

 

Contracting out

The Act is an opt-out system. This means that if a couple have entered into an agreement which regulates the division of relationship property in the event of separation, this agreement is enforceable. In order to contract out of the PRA effectively, the following requirements (except in exceptional circumstances) must be met:

  • The agreement must be in writing and signed by both parties;
  • Each party to the agreement must have independent legal advice before signing the agreement;
  • The signature of each party to the agreement must be witnessed by a lawyer;
  • The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement; and
  • The consequences of the agreement must not be extremely favourable to one party at the expense of the other.

 

For more information on out of court avenues to creating a legally enforceable relationship property agreement, see “Disputes over Relationship Property – Your Options”.

 

¹ For more information on solving relationship property disputes out of court click here.

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.

Construction Disputes

Building a house can be an incredibly exciting time, however, it can also lead to disagreements or disputes.¹

The relationship between you and your builder/contractors is defined by the contract that you have both agreed to. Disputes may arise when the parties have different understandings about the terms of the contract, or when a part of the contract is not followed. Common causes of disputes are:

    • Different expectations between yourself and the builder about the quality of the materials and workmanship;
    • Changes to the build after obtaining consent, accepting the initial quote, or signing the contract; or
    • The build being late.

What protections do I have during the construction process?

There are several legal protections available to customers during the construction process. The primary source of protection is your contract, as any breach of the contract provides grounds for legal action. Also, various statutes exist that supplement the contract’s protections.

Building Act 2004

Under the Building Act, all residential building work is covered by implied warranties. These warranties apply automatically to building contracts of any cost (both written and oral), and cannot be excluded. They last for 10 years from the act that caused the loss / damage, and can be relied upon by future buyers. As provided by the Building Act, the implied warranties are:

  • All building work will be done properly, competently and according to the plans and specifications in your approved consent;
  • All the materials used will be suitable and, unless otherwise stated in the contract, new;
  • The building work will be consistent with the Building Act and the Building Code;
  • The building work will be carried out with reasonable care and skill, and completed within the time specified or a reasonable time if no time is stated;
  • The home will be suitable for occupation at the end of the work; and
  • If the contract states any particular outcome and the homeowner relies on the skill and judgement of the contractor to achieve it, the building work and the materials will be fit for purpose and be of a nature and quality suitable to achieve that result.²

Some contractors will augment the standards of the implied warranties. For example, builders associated with Master Build Services offer a ‘Master Build Guarantee’ that provides enhanced coverage.

The Building Act also provides a 12-month defect repair period. If any defects emerge in the building work within 12 months of the work’s completion, the builder has an obligation to fix them.

Consumer Guarantees Act 1993

The Consumer Guarantees Act applies to services in the building industry that are not covered by the Building Act’s implied warranties. It provides that:

  • Tradespeople work with reasonable skill and competence;
  • Tradespeople need to fix work that does not meet this standard at their own expense; and
  • The building owner can get another tradesperson to fix the work at the expense of the original tradesperson, where the original tradesperson cannot or will not fix the work within a reasonable timeframe.³

Fair Trading Act 1986

Although it is not often applicable, the Fair Trading Act may be relevant where a contractor has been misleading about their products or services.

Is there a specific form of dispute resolution I must follow?

Some building contracts contain dispute resolution clauses. The process provided in that clause must be followed if any dispute arises between the parties. Where no specific clause exists, the Construction Contracts Act 2002 implies a default dispute resolution process into the contract. This process requires:

1. A party considering a matter to be in dispute must serve notice on the other party advising them of the nature of the dispute.
2. The parties must use their best efforts to resolve any dispute through good faith negotiations.
3. If the dispute is not resolved within 10 working days, either party may serve written notice on the other party referring the dispute to mediation.
4. The parties must agree to a mediator. Where no agreement is reached within 5 working days, a mediator must be appointed by the President of the Arbitrators and Mediators Institute of New Zealand.
5. Each party must pay its own costs associated with the mediation.
6. Both parties must continue to perform their obligations under the contract as far as is practicable during the dispute resolution process.

The decision to refer the dispute to mediation under the default rules is optional, and parties are welcome to explore alternative dispute resolution methods.

What other dispute resolution options are available?

Disputes can be resolved in various ways, with different processes better suited to different disputes. Before pursuing any option, it can be useful to seek advice to better understand the dispute, particularly where a lot of money is at stake. This advice can be both technical (to understand the issue itself) and legal (to understand potential resolution options, and their costs).

Self-resolution

Self-resolution should always be attempted before escalating any dispute. It saves time and money, and preserves the relationship between the parties by resolving the dispute at an early stage. When attempting self-resolution, it is important to understand the specific facts that are at issue, to communicate with the other party in a constructive manner, and to record any agreement that is reached in writing.

Mediation

Mediation is where both parties attempt to reach an agreement with the help of a third-party mediator. It is inexpensive compared with other options, and shares many benefits with self-resolution of a dispute. However, it does not guarantee any resolution, and can only work where the parties are willing to cooperate. Legal advice may be useful prior to mediation. For more information on mediation, please see our article here.

Adjudication

Adjudication is a special process available to all building contracts under the Construction Contracts Act. An adjudicator will be selected by the parties who will make a binding decision (enforceable in court) on the merits of the case. Adjudication is a fast-tracked process, which resolves disputes quickly so that construction work can continue. In most cases, legal advice should be sought before pursuing adjudication.

Arbitration

Arbitration is essentially a private court process, where an arbitrator issues a binding decision (enforceable in court) on the party’s dispute. It is quicker and cheaper than a court proceeding, and it gives the parties some control over the process of the arbitration. For more information on arbitration, please see our article here.

Disputes Tribunal

If the amount at dispute is no more than $15,000 (or $20,000 if both parties agree) it can be heard by the Disputes Tribunal. The Tribunal is overseen by a trained referee who adjudicates the dispute and issues binding decisions (enforceable in court). It is appropriate for minor, non-technical disputes. Neither party can be represented by a lawyer in this forum, however, depending on your case it may be worthwhile to receive legal advice before your hearing.

Court

Taking a dispute to the District or High Court (the court will depend on the value of the dispute) should be considered a last resort. Trials are generally expensive and time-consuming. However, they can provide a well reasoned and legally enforceable decision on a dispute. Legal advice is necessary before pursuing a claim with the courts.

 

¹ This article primarily deals with disputes with your builder, however, disputes with other participants in the building process can also occur. If you have a dispute with an architect, local council or other party, please make an enquiry for more information on how to resolve that dispute.

 

² Implied warranties and defects. (2017, May 17). Building Performance, Retrieved from https://www.building.govt.nz/projects-and-consents/why-contracts-are-valuable/implied-warranties-and-defects/

 

³ Activate your consumer rights. (2016, March 21). Building Performance, Retrieved from https://www.building.govt.nz/resolving-problems/resolution-options/activate-your-consumer-rights/

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.

What is Mediation?

A mediation is a confidential negotiation facilitated by an independent and impartial third party (the mediator). Mediation is steadily growing in popularity as a dispute resolution process for the following reasons:

Cost
Preparation for a mediation is far less intensive than that for a court proceeding. Discovery (exchange of relevant documents between the parties) and preparation of evidence typically does not occur for a mediation. This means lawyers can spend less hours preparing for a mediation than for a court proceeding. Further, a mediation undertaken online saves on travel, venue and accommodation costs (that can escalate if the dispute is not resolved in the time contemplated).

Time
A case that is resolved through the New Zealand High Court typically takes 252 days.¹ The uncertainty over that period (that could have commercial impacts), combined with the stress of a looming proceeding can result in significant costs that are often hard to quantify. The advantage of a mediation is that the parties can decide the speed at which their dispute gets resolved. CODR partners with many AMINZ certified and nationally recognised experts that are available to mediate disputes at short notice.

Relationship Preservation
Unfortunately disputes can arise between parties that would like to preserve an ongoing relationship. For example between joint owners of property, commercial partners or parties part-way through a project. The court process is adversarial in nature and generally leads to a divided outcome as opposed to a solution all parties agree with. Mediation provides a process where a solution that all parties accept can be reached.

Confidentiality
The starting point is that all proceedings in a court are open to the public. This is why sensitive disputes are often mediated (or arbitrated). No one but the parties and the mediator are privy to the fact that the dispute even exists.

No obligation
While an agreement reached in mediation can be enforced, if the parties fail to reach agreement, they are not forced to continue with the process. This is opposed to a court process where once the case is started, parties either need to settle (find an acceptable agreement), or risk being bound by the Judge’s decision.

 

¹ “Nationally in the High Court in 2010 the cases resolved prior to being allocated a hearing date were disposed of in an aver-age of 252 days (1706 or 84% of cases), with the remaining cases that proceeded to the point in the legal process of being allocated hearing dates taking an average of 608 days to resolve (318 or 16% of cases).” Righarts, Saskia; Henaghan, Mark — “Delays in the New Zealand Civil Justice System? Opinion v fact” (2011) 12 Otago LR 455

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.

What is Arbitration?

An arbitration is a private dispute resolution process that has many similarities to a court proceeding. The parties present their cases to one or more arbitrators (usually an odd number to prevent a “tie”) who then impose a legally binding decision. Arbitration has many advantages over a typical court process, including:

Cost
While preparation for an arbitration is generally more extensive than a mediation, it is typically cheaper than preparation for a trial. Court proceedings often involve many fixtures (interlocutory applications) before the trial commences to determine ancillary matters. Arbitrations often dispense with such hearings. Additionally, discovery of documents can be highly targeted or even non-existent in an arbitration. Further, an arbitration undertaken online saves on travel, venue and accommodation costs (that can escalate if the dispute is not resolved in the time contemplated).

Judicial selection
When you take a case to court you cannot choose your Judge. However, you can choose your arbitrator(s). This is particularly beneficial when you have a dispute concerning highly technical subject matter. CODR partners with many AMINZ certified and nationally recognised experts with specialised knowledge that are available to arbitrate disputes at short notice.

Speed
The pace of an arbitration is generally set by the parties to the dispute, therefore an issue can be resolved much faster by arbitration than it can in a courtroom.

Confidentiality
By default, court proceedings are open to the public. As arbitrations can remain confidential it often leads to many commercially or personally sensitive matters being arbitrated (or mediated).

International concerns
Commerce is becoming increasingly international, and along with that comes cross-border disputes. Arbitration can help to circumvent jurisdictional issues as because of the New York Convention 1958, arbitration awards can be easier to enforce in other nations than court decisions.

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.

What is the CODR Process?

The CODR Process combines the best aspects of mediation and arbitration to form an enhanced dispute resolution procedure. The result is a process that preserves relationships as best as possible while providing fair, efficient and conclusive resolutions to disputes.

Generally, it is advantageous from both a relationship and cost point of view to resolve a dispute by mediation. However, parties can often be entrenched on particular issues and, for one reason or another, can be unwilling to move or meaningfully negotiate. This is the environment in which arbitration is superior to mediation. Arbitration can provide the decision making rigour of a court room while providing privacy and the benefits of time and cost efficiency. However, most disputes are multi-faceted and cannot easily be categorised as either being for mediation or arbitration. This is where the CODR process excels.

How does it happen?
The process starts by CODR assessing your dispute and suggesting an expert that is best suited to resolve it. In making this decision CODR takes into account the cost, expertise and availability of the expert to resolve your dispute in a timely manner. The expert is suggested to the parties, and failing agreement CODR can appoint one.

The issues in dispute are then identified and refined by the parties and the expert through digital communications, and digital forms. After refinement of the issues the expert along with the parties will decide on the time frames for their matter. A digital meeting will then be convened in which the parties will mediate the dispute. Any matters that cannot be resolved via mediation will be determined by the expert at a later date. In coming to their determination the expert may require information or evidence from the parties, and a timetable will be set for such material to be submitted. If a determination cannot be made “on the papers”, a hearing can occur and cross-examination can take place (at the expert’s direction). Once the last written submission is filed (if the case is decided “on the papers”), or the hearing concludes, the expert will deliver his determination in 30 days.

Even a seemingly straight-forward dispute can often have many dimensions that reveal themselves once the resolution procedure begins. If you are interested in finding out more, please make an enquiry, or call 0800 CODR 00.