Contract and Commercial Law Bill

In order to make a Thursday afternoon more exciting, I call the Hon Christopher Finlayson.

I move, That the Contract and Commercial Law Bill be now read a second time. Mr Robertson and I do not agree on very much, but I think he and I would agree that this is a really exciting day for Parliament, because this is the first time—

💬 Grant Robertson: I can confirm that.

—excellent—that we are going to be dealing with the second and third readings of a revision bill, which is what makes it so truly exciting.

What does this bill do? It enacts, in an up-to-date and accessible form, some of our most important contract and commercial legislation—and Mr O’Rourke, I see, has a sense of excitement, as well. It represents the near-completion of a major statute revision exercise. The bill is, as I said, the first on the Government’s triennial statute revision programme that was presented to Parliament in December 2014. The Law Commission has noted that the statute book of New Zealand is the most important part of our legal infrastructure and our statutes need to be user-friendly. The commission recommended revision as a tool to tidy and modernise the statute book, and the Legislation Act 2012 accepted that recommendation.

So what does this first revision bill do? It combines and revises six Acts containing general contract rules, and five commercial Acts containing contract rules that apply to transactions in special contexts, such as to the sale or carriage of goods in commercial settings. The oldest Acts—as Mr Faafoi knows—go back to 1908, and the most recent was enacted in 2002.

Part 5 of the Mercantile Law Act 1908 is about unpaid vendors of warehoused goods, and is hopelessly out of date. It was excluded because revising it could imply it is still relevant. The Government has subsequently reviewed this part, and the Customs and Excise Bill, introduced late last year, is going to repeal it. I see a huge sigh of relief on the part of my good friend Mr Robertson.

Contracts play a central role in our society. They are fundamental to property rights and obligations and to how those rights and obligations are lawfully structured and changed. The statutes being revised apply to commercial parties but also to dealings between people who are not necessarily in trade. Combining the contracts statutes with related commercial ones is going to make them more accessible, more consistent, and easier to update and reform in the future. It is very, very important that these rules are clearly expressed.

The bill addresses a number of minor inconsistencies, anomalies, and discrepancies, which are not unusual in Acts that have been enacted over the course of almost a century.

💬 Hon Clayton Cosgrove: This just brings back stage one Law for me.

The future is before you. The bill reduces inconsistency and overlap across the statutes, arranges provisions in a logical order, and changes language, format, and punctuation to achieve a clear, consistent, gender-neutral—very important—and modern style of expression. It uses current drafting style and format to better express the spirit and the meaning of the law and it removes spent provisions. So—

💬 Grant Robertson: What about Oxford commas?

Oxford commas and split infinitives are out. By combining these rules and making them easier to understand, the bill will allow people and businesses to easily find and follow the rules that affect them, and this is going to help reduce regulatory costs.

The bill does not change the substance of the law. The only changes to the effect of the law that are permitted in a revision bill under section 31 of the Legislation Act are minor changes to clarify Parliament’s intent or reconcile inconsistencies, and these are set out in the second schedule. The explanatory note of the bill identifies general terms as required under the Legislation Act 2012—the minor inconsistencies, the anomalies, the discrepancies, and the omissions that were identified during the revision work—and schedule 3 contains a comparative table of the old and new provisions, and this is going to help people to update documents.

Before introduction, four lawyers appointed under the Legislation Act certified that the statutory revision powers had been appropriately applied and that the bill does not change the substantive law. The certifiers were a retired High Court judge, the then president of the Law Commission, the Solicitor-General, and the Chief Parliamentary Counsel. I presented their revision certificate to the House on the bill’s introduction, and an exposure draft of the bill was made available.

Exposure drafts are actually very good things and should be used more, so that people have more of an opportunity to come to grips with legislation before it is introduced, because I see that the former president of the Law Commission was saying something to a select committee today about the time for submissions. The problem is that you introduce a bill, it is sent off to a select committee, and having 4 or 5 weeks to come to grips with complex legislation may not be enough.

Some submitters expressed caution about changing statutory language that supports well-established judicial interpretation. Frankly, I think it is a theoretical risk, which needs to be balanced against the significant benefits already mentioned and the risks of leaving the legislation in an inconsistent and outdated form. There are some people who never want change to anything because they fear that precedents may be lost. Well, I just say to them, man up and get over it.

💬 Hon David Parker: School ties and the like.

Ha, ha! Select committee scrutiny has provided another check on any inadvertent change to the law being carried forward. Parliament’s Standing Orders Committee noted in 2011 and 2014 that revision bills are limited to restating the existing law and clarifying its intent, so any substantive policy amendments at the select committee would be out of scope.

So, as I say, this is the first revision bill. I think the Justice and Electoral Committee did a really good job on it. It received only two submissions, but that was probably not unexpected, and, in view of the public consultation on the exposure draft, the submitters expressed a concern about the content of the bill. One considered the bill should be split into a contract bill and a commercial bill. The other supported having a contract bill, but thought that the sale of goods provisions and the carriage of goods provision should be in separate bills. But the committee rejected that, and I am pleased it did.

So I actually think it lays a good foundation for future reform. Some of this legislation is going to need to be updated in the reasonably near future, but it is all in one place and it can be looked at in a sensible and coherent manner, and we are really doing a good job as a Parliament on tidying up the statute book.

The committee, sensibly, recommended moving the only remaining substantive provision of the Wages Protection and Contractors’ Liens Act Repeal Act of 1987—

💬 Chris Bishop: Oh, that’s a cracker.

—into the bill. That is going to make it easier to find and understand—I say to Mr Bishop—and the 1987 Act can be repealed.

Also, as part of the judicature modernisation work, section 90 of the Judicature Act 1908 is being transferred to the Contractual Remedies Act 1979, as new section 4A, and this will take effect on 1 March. The section provides that the equitable law rule on contractual stipulations such as time prevails over the common law rule. This affects remedies that are available when such stipulations are breached—for example, cancellation may be available at common law, but not under the law of equity. The committee could see a potential problem with the provision being inserted in the part of the bill that revises only the Contractual Remedies Act, and it noted this may confine the application of a rule in a way that would change the law. As this is certainly not the intention, the committee recommended that section 90 of the Judicature Act 1908, as revised, be added to the contract legislation in the bill as a separate new subpart.

What the Government is going to do now is consider the committee’s helpful comments that the revision bill process could be improved to allow for greater practical revision. The committee was unable to recommend that a reference in the bill to newspaper advertisements be changed to include online advertisements, as it was advised that this would have been outside the bill’s scope.

💬 Hon Clayton Cosgrove: The “Nuk Korako clause”.

The “Nuk Korako clause”. But I am very grateful to the committee—I do not particularly understand that interjection, but I will take it as a benign interjection. I want to thank the committee for its careful and thorough work.

This is the first revision bill, as I said. I, frankly, would like to see a revision of all the legislation—and I am sure Mr Assistant Speaker would, as well—dealing with Parliament. There are 15 statutes that could be collapsed into one, but when you are looking at a practical revision, there is some work that would need to be done on that. I think we need a Parliament Act. The ACC Act is a dog’s breakfast. The Companies Act of 1993 is a mess. There is a lot of work that could be done to make—

💬 Chris Bishop: Copyright.

The Copyright Act, the Education Act 1989, and all the other ones—

The ASSISTANT SPEAKER (Hon Trevor Mallard): 1965.

1965. So there is a lot that can be done. Look, we disagree on a lot of things in this House, but tidying up the statute book, making it more user-friendly so that people do not have to go off to lawyers and pay exorbitant rates per hour to get an interpretation of something—I know I am speaking against the profession, but, frankly, I think it is a very good thing.

So I think my time is up and I will sit down.

The ASSISTANT SPEAKER (Hon Trevor Mallard): I forgot the bells completely. Yes, the member’s time is up.

I just kept on talking when I looked up and saw the clock was on zero, so I knew I was probably out of time, but there were never any bells. I do not blame you, Mr Assistant Speaker, but there are others I cast an evil eye at.

Oh no, it was so interesting.

Can I agree with the Attorney-General that this is good legislation, and that it is timely to consolidate these various Acts of Parliament into one piece of legislation that makes it easier for people to follow, and to update some of the language.

I want to just talk about two issues, and I do so to emphasise the importance of the subject matter of the legislation. The Attorney-General has already made reference to the change that was made at the Justice and Electoral Committee that inserts a new Subpart 7 in Part 2 of the bill, which relates to stipulations as to time not necessarily being of the essence.

What this means, in practice, is that if we did not do this and you had agreed to buy a car, for example, tomorrow and you said “Oh, look, I’m going to come along and buy that car tomorrow.”—or someone might have an agreement to sell a car tomorrow. If you did not turn up tomorrow, on Friday, then it would be permissible for someone to rely upon—even though, at the time you entered the agreement, no one thought that it really mattered whether you picked the car up on the Wednesday or the Thursday or the Friday or the Saturday. If you did not have this provision, the person who was selling you the car could just say: “Oh, you didn’t turn up on the day; I sold it to someone else. Even though I’ve already agreed to sell it to you on the Friday, because you didn’t turn up on the Friday, I’m going to cancel the contract on the Friday and it’s all over.”

Well, that is unfair, if in the circumstance people actually really were not worried whether you were picking the car up on the Friday or the Saturday. So the law intervenes in that situation and says that for you to be able to bring a contract to an end on a particular day, time has to be of the essence. That ensures fairness, so that if I had an agreement to buy a car on the Friday and I did not turn up on the Friday, the person who was selling it to me would somehow have to either wait for a reasonable period of time or somehow make it clear that, to them, time was of the essence. Unless it was clear in my contract with the person selling the car to me that time was of the essence, they would actually have to give me a bit of notice before they could declare the whole thing over.

That provision is more important in respect of land transactions, where sometimes—more often—things do go wrong. The mortgage might not come through on the day because the signature that was put on it does not quite meet the bank’s rules, or it does not get a certificate from the solicitor to support all the documentation so it is not willing to advance the funds until that is all tied up, or you might be selling on the same day that you are buying and your sale does not go through quite as planned and therefore you are not in a position to get the money from the sale to pay for your purchase—that is an obvious example of where you should have a bit of time to fix things up, rather than just calling it off instantly. There are generally provisions that govern that in contracts for the sale of land, and, in respect of the general rule, if you do not have a provision in your contract, having this particular provision sitting in the Contractual Remedies Act probably fixes that anyway.

But the point that was made to the select committee was that we also needed to protect people in respect of the sale of goods, and arguably as it was in the Contractual Remedies Act, rather than of more general application. The preservation of this very old equitable rule going back to the 1800s, originating in the United Kingdom and no doubt applying in most of the Commonwealth jurisdictions and even the United States and other countries like us around the world—that particular rule would have been lost in respect of contracts for the sale of goods. That would have resulted in unfairness—unfairness on occasions when people are buying or selling goods. So it is for that reason that the committee has recommended that this particular provision be lifted out of the Contractual Remedies Act and actually be of more general effect, including in its application for the sale of goods.

The other thing I wanted to raise was something that does go to substance that is not fixed by this legislation. The Attorney-General said that he recognised that there are matters of substance that the Government would like to fix, and I think he was probably referring to matters that were slightly less substantial than this. But I still do not like a change that was made to the law in respect of reservation of title clauses, which was made some years ago. The issue was raised for me by the change that is made to the bill in respect of liens.

Liens over goods are pretty simple things. You know, when you have something that is left with you for repair—it might be a watch, it might be a vacuum cleaner, it might be a car—if the person does not ever turn up and pay for the repair that they gave the good to you for, you can exercise a lien. You can keep that good until they pay, and if they do not pay you can, through a mechanism that is set out in the law, sell it, and deduct what is owed to you for the repairs and refund the balance to them. That is a good self-help remedy for small business people who are repairing goods.

The equivalent in respect of people who are supplying goods, as opposed to repairing goods, was that until probably about 10 years ago—I do not know; something like that—you could actually, when you sold a good, if you were clear at the time you did it, say: “I’m not giving you title to the good that I’m supplying you until I’ve been paid.” They were called reservation of title clauses. They were reserving title to the seller of the good until they were paid. Those clauses were effective at law. They were sometimes called Romalpa clauses after the original English case that recognised those interests, and they were a very effective remedy for small businesses to protect themselves against not being paid.

These were very, very important for a small business that might sell—I do not know, it might supply their main line of product to one particular business, and if that business goes broke and does not pay them, it can make their business bankrupt. The banking industry managed to convince a prior Parliament in New Zealand that those were wrong—that those reservation of title clauses, which had been recognised in New Zealand for quite a while and in other jurisdictions around the world, should only ever be valid if you had registered a security interest under the Personal Property Securities Act, I think it is, in New Zealand. So if you had not registered in the Companies Office, or whoever it is that maintains that register—some arm of the Government—that interest in advance or at the same time as you provided those goods, you could not rely up on your retention of title clause.

The effect of that in practice has been that we have preferred the interests of large banks, because if title is then thought to have passed to that person who received those goods—even though they have not paid for them—they are then covered by the bank debenture. So the mortgage that the bank has over the business then gets the benefit of the value of those goods rather than the small business that provided those goods to the company or the person, even though they have not been paid. I think that is just unfair, and that is why I thought that the courts of equity in the UK and the New Zealand courts were right to actually say that if you supply a good with a reservation of title clause that is clearly part of your contract at the time the contract is formed—you cannot retrospectively do it; at the time the contract is formed—if you retain title and you are not paid, so long as that good has not been incorporated in a fixture, and obviously if it is a window and it is now in a house it is no longer a chattel, it is part of a fixture. There were disputes like that that were generally sorted out very practically, I think, in the event of a liquidation of a company or a bankruptcy of an individual.

But it was a self-help remedy for small businesses, and the effect of that change in the law in New Zealand was that we actually made it bigger for the big boys who have got the debenture over the company or the general chattel security over a business or an individual, and we, in effect, did the small businessman or the small businesswoman in the eye, because, despite the fact that they said “Well, you can’t get title to this until you’ve paid for it.”, we, effectively, ruled most of those instruments out by creating a bureaucratic process around them.

I rise to take a very short call in support of the Contract and Commercial Law Bill, and I am sad to be taking a short call, because I was riding on the wave of excitement after the Hon Christopher Finlayson’s contribution about revision bills. I feel like a first-year politician speaking on a statutes amendment bill—it is so exciting. It is a truncated process about simplifying and making law more accessible to the layperson, making it more readable, and tidying up the law, but not making any policy changes. So it is fantastic when we can come together as a Parliament—

💬 Chris Bishop: Pretty much sums it up.

—pretty much sums it up—and make things more efficient, and is that not why we are here?

With that, I just want to end with thanking the two submitters who took part in this process—Dr Barber and Rae Nield—who took the time to submit on this revision bill and talk about the process and about the merits of the proposed bill. It really is a special person who gets passionate about efficiency. It is a good thing. It is a very good thing. We should be doing more of it, as the Hon Christopher Finlayson said, and, as I understand, we have two more to go.

So that is great. It is fantastic. I am pleased to be on the select committee that will no doubt hear those bills—hopefully, fingers crossed—because we are passionate about efficiency, and with that I commend this bill to the House.

It is with somewhat slightly less enthusiasm than the previous speaker, Sarah Dowie, that I rise to support the bill. I endorse the Attorney-General’s words, as he gave probably one of the best impressions of Rumpole of the Bailey that I have seen for many, many years. I do agree with the Attorney-General that, hopefully, the modernisation of language will indeed cut down the quantum of lawyers’ bills. I am told that the Attorney-General, in a past life, had an extremely high charge-out rate in respect of his eminent counsel.

💬 Chris Bishop: Not as high as yours.

Oh no, no. I could never compete with the Attorney-General. But I want to make reference—just very briefly, as the Attorney-General did—to clause 339B(1), which, the Justice and Electoral Committee noted, refers to providing notice in the newspaper ads. Although this is arguably outdated, the committee, because of the restriction on the scope of the bill, was unable to amend it.

It reminds me of a similar provision that I think was placed in a statutes amendment bill, for efficiency: the infamous “Nuk Korako clause” in respect of newspaper advertising. The Attorney-General looks quizzically at me because he is not familiar with it, so I will elucidate briefly. The “Nuk Korako clause”, you may recall, was where the Christchurch Airport was unable to advertise online regarding lost luggage. Mr Korako had a sort of blinding shot of brilliance—we called him Halley’s Comet; it happens once every 75 years. Mr Korako had this sort of blinding flash of brilliance, and decided to put up a particular bill dealing with this issue—

💬 Hon Member: 339B.

—clause 339B reminds me of it—and, subsequently, I think it was dealt with in a statutes amendment bill.

I wonder whether the Attorney-General, as we go through this, might turn his mind as to whether those sorts of issues could be dealt with in a similar revised fashion through a piece of legislation like this, so that we could not waste Parliament’s time. I think that the charge-out rate for this place per hour may be similar to the Attorney-General’s charge-out rate, but both are very, very expensive, I am told.

I do hope that this bill assists those people who are trying, as we all do—non-lawyers amongst us, myself included—to wade through legislation. And I hope Mr Korako may wish to take a call and reflect on how he could have dealt with his issues far more efficiently, perhaps, through a process like this.

I am pleased to take a call just to reassure the House of the Greens’ continued support for this important piece of legislation. I had the undoubted privilege of sitting on the Justice and Electoral Committee, which toiled its way through this bill. My recall is that the decision that I should be responsible for this bill was made in my absence, which is a good reason to make sure one does not miss meetings, I believe.

The purpose of this revision bill, of course, is to make language more modern and accessible. The Greens as a modern and accessible political party is always going to support that aspiration. I have to say that the process of working through this was character building. My abiding memory of the select committee process is the undoubted enthusiasm for the task that our colleague Mr Bishop displayed. It was inspiring, his commitment to getting every word right. It is certainly something that will stay with me for a very long time.

In a more serious vein, some of us enjoyed this morning—“enjoyed”, I think, is a fair word—an exposition from none other than Sir Geoffrey Palmer about the importance of making sure that legislation coming through this House is technically correct. I think it was timely and it was interesting, and I think he is dead right. There is a place for ensuring—clearly, this is the place—that legislation is correct, technically accurate, and fit for purpose in every way, and I guess this process is in part contributing to that, to make sure that people can make sense of legislation.

Finally, I would just reflect also on the point made by Mr Cosgrove—the comment made by the committee that there might be a space to very gently expand the scope of revision bills—about a very dated reference to a requirement to advertise a particular matter in a newspaper, which is not really appropriate in the modern age. I mean, it is not a bad thing, but it is insufficient. So, arguably, there would be scope for something a little broader when revision bills are put up where there is broad and complete agreement between all parties that a particular minor change might be made to a bill. Perhaps we can look at that another day but for the moment we are happy to support this bill and to see it pass through the House.

I am not quite as deeply excited by this bill as the Attorney-General was, but I am pleased by it. I think it is a very worthwhile piece of legislation because it does consolidate and update 11 Acts, and it certainly needed to be done.

I would just like to say this: very early in my career, some decades ago now, I worked for the Public Trust Office in my first year as a lawyer. At that time it was spearheading the plain-English movement for the legal system. It was something that really did need to be done, because even lawyers did not understand some of the terminology that was being used and was insisted on and was found in statutes and contracts and in all sorts of other places. So that was a very valuable thing to happen, and I was excited and very enthusiastic about that. I was allowed to write plain English into documents, and that was great. It was a very good thing to happen, and it caught on like wildfire. In New Zealand we have now had plain English for some time as the way in which we treat the English language in legal instruments.

So I think that was a big leap forward. This is not quite such a big leap forward, I think, but it is still worthwhile. It is the first revision bill, and I wonder why it has taken so long. It was first introduced in December 2014—it seems to have taken ages to get back to the House. I also wonder why we are not seeing so many others of these revision bills coming back. I hope that the 3-year statute revision programme is going to be a bit more productive in the future, and if it is, I think New Zealand First will be happy to support that, as well.

I just wanted to say, concerning the Justice and Electoral Committee’s work, that I think it did treat this very seriously and did look through it well. I cannot say that I read every word of the bill.

💬 Chris Bishop: Oh!

I cannot say that I did that, and I do not think anyone else could say that they did that either, but we did, in fact, consider it properly. We understood it, and I do think it is the sort of quality of legislation that, as we heard today, is perhaps not present in some other legislation. So for that reason alone, it is a very worthwhile bill.

But the committee did produce two changes, and one resulted in us being able to get rid of the Wages Protection and Contractors’ Liens Act Repeal Act, which was on its last legs and had just one provision left in it, and that is now in this legislation. It also added section 90 of the Judicature Act 1908, re-enacted as new Subpart 7 in Part 2 of the bill. So they were two amendments that were worthwhile, as well.

As I have said, New Zealand First is very keen on seeing these revision bills go ahead. We hope this will be only the beginning of many others. I know that there is a very long list of things to do. We do need to get on with it as a Parliament, because law does tend to get outdated, as I said. Way back in my early career, just that one move of introducing plain English had a big effect and was well worthwhile. So are these revision bills. I hope there are many more to come. New Zealand First will be voting in support.

I rise to take a short call. We support this bill, as my colleague David Clendon has said. It is good that we are making law more accessible and readable. We are sending the right message about Parliament—that we are hip, we are modern, and we are really precise. “Hip” means that we are passionate about this revision bill dealing with inconsistencies, anomalies, discrepancies, and omissions—and all sorts of lawyers’ in-jokes—“modern” means we are introducing the term “information technology” into the 1908 Act on mercantile law, “precise” means we are correcting a mistake in the Contractual Mistakes Act 1977, and I am not even going to mention the Frustrated Contracts Act.

So I agree with my Green Party colleague David Clendon that this should be the start of a broader clean-up of our statutes. There is work going on in other committees to improve our legislation, which we fully support. Making simple, readable, and accessible law would be a great aim. Law for non-lawyers and laws that members of the public can actually understand—bring it on. Thank you.

Bill read a second time.