Legal Newsletter March 2016

Health and Safety Reform

The Health and Safety at Work Act 2015 (“Act”) comes into force on 4 April 2016.  The Act is based on the Australian Model Work Health and Safety Act 2011.  The Act creates new classes of duty holders, new corresponding duties, and increases penalties and other regulatory mechanisms available to WorkSafe New Zealand and other safety regulators.  By way of brief overview:

  • The Act creates a new duty holder: the “person conducting a business or undertaking” (“PCBU”).  The Act does not define the terms “business” or “undertaking”, however, commentary indicates that “business” or “undertaking” will more often be a legal entity such as a company and an individual who is a sole trader or is self-employed.  In addition to the PCBU, ‘officers’, ‘workers’ and ‘other persons’ owe certain duties.
  • The Act excludes certain persons from its application; for example, an occupier of a home to the extent that the occupier employs or engages another person solely to do residential work.
  • The duties of PCBUs are set out at subpart 2 of the Act.  There is the primary duty of care and a number of other duties that apply in specific situations.  In addition, subpart 3 of the Act provides the duties of officers, workers and other persons. 
  • The Act shifts the focus of safety duties away from geographical locations to the conduct of working so that the PCBU owes a duty to a worker in a workplace.

The Act provides that none of its duties may be transferred to another person, and negates any attempt to contract out of, limit, modify or transfer any duties.  A term in a contract or an agreement that attempts to contract out of the Act will not make the contract illegal but the term will have no effect. 

Finally, the Act creates three tiers of offending in relation to the three major classes of duty holders: PCBU, officer and worker and expressly prohibits indemnification of a person’s liability to pay a fine or infringement fee.

Interaction of the Illegal Contracts Act and Commercial Restraints of Trade

Cascading restraint of trade clauses are popular in Australian agreements and have been recognised by the Australian Courts to be effective.  Contrastingly, section 8 of the Illegal Contracts Act 1970 (“Act”) and the general approach of the New Zealand Courts appear to make cascading clauses in New Zealand agreements unnecessary and potentially void for uncertainty.

A cascading restraint of trade clause is a clause that provides a list of alternatives that are capable of existing independently.  This means that part of a clause that is considered unreasonable, for example with respect to scope or duration, can be deleted and the next alternative will be applied and enforced.

In New Zealand, the basic rule of law is that an unreasonable restraint of trade is void.  However to reduce the harshness of this basic rule of law, section 8 of the Act gives the Court a modifying power.  This power enables the Court to modify a restraint of trade provision to make it enforceable, for example, by restricting the area or the period of the restraint, only if this could be achieved by deleting words.  This means that drafters of agreements do not have to complicate matters by drafting cascading clauses.  The approach of drafters in New Zealand, therefore, is or should be to insert a simple restraint of trade that is as wide as the drafter considers can reasonably be justified. 

Contrastingly, in Australia, cascading clauses are popular because, except for New South Wales, there is no equivalent of section 8 of the Act.  The rules of common law apply which means that if a simple restraint of trade clause is held to be unreasonably wide in scope, the clause will be entirely unenforceable.  Accordingly, drafters of agreements rely on cascading clauses which are recognised by Australian Courts to be effective.

 

 

If you would like further information on any issue raised in this update please contact:

Brian Joyce, Principal

DDI: 09 965 2660

Email: brian.joyce@clendons-ns.co.nz

 

Krystle Gardner, Associate

DDI: 09 965 2662

Email: krystle.gardner@clendons-ns.co.nz

 

Disclaimer

Further advice should be taken before relying on the contents of this summary. Clendons North Shore Accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material in this summary.