LawNews - Issue 34

THIS WEEK’S ARTICLES

Issue 34 2 Oct 2020

Technology & law: Special feature pages 3-7

Is business interruption insurance a lost cause? P1

Aussies ease lending rules – will NZ follow suit? P9

LawNews adls.org.nz

COVID-19/INSURANCE

Is business interruption insurance a lost cause?

By Diana Clement

Business has had it rough in 2020.

Two lockdowns, tourists, students, and foreign workers locked out, skyrocketing unemployment and plummeting growth – and an economic reality New Zealanders couldn’t have comprehended a year ago.

Business interruption insurance is designed primarily to cover losses in conjunction with a material damage policy. So, if your plant or machinery aren’t damaged by an event such as fire, earthquake or flooding, you don’t have any cover.

Most New Zealand polices are watertight on that front, says AUT law lecturer and former in-house insurance counsel Christopher Whitehead. “The typical product here prevents recovery at two levels. First it covers only business interruption as a result of physical loss or damage to the premises.

Even if you get past that threshold, [Covid-19] is a notifiable disease [exclusion].”

Most BI policies sold in New Zealand specifically exclude all losses caused by any animal or human disease notifiable under the Health Act 1956 and the Biosecurity Act 1993, points out Insurance & Financial Services ombudsman Karen Stevens. The exclusions were added after the Sars outbreak in the early 2000s.

“It takes any question away,” she says. “As soon as you see that kind of exclusion in a BI policy, there is not going to be that kind of argument that Covid-19 might be covered under another provision.”

It’s déjà vu for New Zealand businesses that have been through earthquakes in recent years.

In Christchurch many came a cropper because the cordon, rather than earthquake damage, was

© Volodymyr Melnyk | Dreamstime.com

But you would think owners whose businesses were impacted by Covid-19 could claim on their business interruption (BI) policies. Yeah nah, it’s a pandemic, say the insurers.

If insurers can’t offer cover at an affordable price, do we have market failure?

deemed by insurers to be the trigger of their losses. That meant no pay-out.

The earthquakes did throw BI cover into sharp focus and some insurers began to add prevention of access and disease extensions to their policies.

They’re expensive, and very few businesses have taken them out, says Richard Shehean, head of corporate and sales at insurance broker Marsh.

De facto BI cover In a sense, the wage subsidy and other government Covid-19 schemes for business have offered de facto BI cover. That has been helpful in terms of managing cashflow, says BusinessNZ’s chief executive Kirk Hope.

In the United Kingdom, Australia and elsewhere, policy wordings are being put under the microscope.

All eyes and ears of insurers and their legal counsel

Welcome to the seventh annual special Technology & Law edition, put together by ADLS’ Technology & Law committee. have been on a test case in England where the regulator, the Financial Conduct Authority (FCA) took the landmark case on behalf of policyholders in respect of sample policy wordings from 21 BI policies issued by eight insurers.

The aim was to test three common clauses and clarify key issues of contractual uncertainty. These clauses related to: disease; prevention of access/public authority; and Continued on page 2

COVID-19/INSURANCE

Is business interruption insurance a lost cause?

Christopher Whitehead

Karen Stevens

Richard Shehean

Continued from page 1 hybrid disease and prevention.

“Second, there will be a number of New Zealand policies that include similar prevention-of-access or public authority extensions to those in the FCA test case. To that extent it will be a useful case for insureds and insurers to be across, as it will almost certainly be appealed to the UK Supreme Court.

Zealand, write Bell Gully partner David Friar and senior associate Sam Hiebendaal. They note that with some policies there is an extension providing cover for disease, but a general policy exclusion excluding pandemics. In that instance the two clauses need reconciling.

“The one caveat being, of course, that this is a whopper of a decision relating to thousands of policyholders and the court has already provided a mechanism to the parties to leapfrog to the Supreme Court. So, all the lawyers involved seem to accept this is likely not going to be the end of the story.”

“In many cases, the policy will expressly provide that the exclusion prevails in the event of a conflict, they say. “In a number of policies we have reviewed, the Health Act exclusion has taken precedence over extensions that would otherwise potentially provide cover.”

The English High Court found largely in favour of the FCA and the outcome of the case will affect as many as 370,000 UK businesses. Read more.

A 160-page judgment in mid-September found that most of the disease clauses triggered the cover, as did some of the denial of access clauses.

The judgment was relatively narrow in its focus, says Nick Frith, partner, dispute resolution and litigation, at MinterEllisonRuddWatts. “It wasn’t looking at general pandemic cover. It was looking only at extension cover.”

The UK insurers relied heavily in court on so-called ‘Orient Express’ exclusions. The same case was also used in New Zealand after the Christchurch earthquakes to deny many businesses BI pay-outs.

The argument, says Frith, was that Hurricane Katrina damaged the Orient Express hotel, but also destroyed the city around it. “[The Orient Express’ insurers] said you couldn’t satisfy the ‘but for’ test of causation because regardless of the damage to the hotel, you would have suffered this interruption because of the destruction to the wider area.” As a result, the trends clause in the policy meant the cover was adjusted down to nothing.

The FCA case is relevant to New Zealand for two reasons, Frith says. “The first is that English authority is still persuasive to New Zealand courts in interpreting these kinds of conditions.

The lucky ones There have been notable exceptions. Frith points to a policy held by 1500 preschool centres that held cover arranged by broker Crombie Lockwood.

Under their Child Proof scheme policies, they were covered for up to 25% of annual turnover, capped at $250,000 per site.

Shehean adds some businesses will have notified their insurers of a business interruption claim but will not yet have been paid because their insurer was awaiting the outcome of the FCA test case.

Events businesses may also have had cover for pandemics, says Frith. At least, until now. “It’s a pretty narrow risk for the insurer. It is a particular event and a number of people attending,” he says.

Catch 22 Specific disease cover is not common in New

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Editor: Jenni McManus

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Friar and Hiebendaal say the English court held that this general exclusion for epidemics and disease could not reasonably be interpreted to cut down more specific cover for disease that had been provided by an extension; the policy could not give with one hand and take away with the other.

Frith says there have been some “interesting arguments” about BI cover discussed in legal circles here in New Zealand.

“One I read being touted was that if you had, say, a hotel and somebody with Covid had stayed there and left a residue of the virus on elements of the hotel, that might constitute [material] damage because it was a physical change to the hotel.

“It was a potential way to shoehorn a Covid claim into a physical loss. But I think it was a bit of a Continued on page 8

All mail to: ADLS, Level 4, Chancery Chambers, 2 Chancery Street, Auckland 1010 PO Box 58, Shortland Street DX CP24001, Auckland 1140, adls.org.nz LawNews is published weekly (with the exception of a small period over the Christmas holiday break) and is available free of charge to members of ADLS, and available by subscription to non-members for $140 (plus GST) per year. To subscribe, please email reception@adls.org.nz.

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LawNews Issue 34 | 2 Oct 2020

SPECIAL FEATURE: TECHNOLOGY & LAW

How to protect your firm from cyberattacks

By Lloyd Gallagher

Smishing An emerging attack has been named ‘smishing’. As we move away from traditional email systems and into new apps and tools due to security concerns and ease of access, attempts to infiltrate these communications are evolving quickly.

During the pandemic, law firms have seen a dramatic rise in cyberattacks that threaten data privacy, integrity and security.

Just like phishing, smishing attacks target textbased communications in platforms such as WhatsApp, Slack, LinkedIn, Facebook and Signal.

Lawyers have become a rich target for scammers, viruses and ransomware attacks that have cost them millions of dollars. In an article published in May 2020. David Thomas argued that “every law firm needs to worry about data security” after he reported the law firm of Lady Gaga got hacked.

With Covid-19 and work-from-home activities, these attacks will continue to increase. Users, firms, managers and IT professionals must look carefully at their procedures and activities to protect against the new and ever-increasing range of cyberattacks.

Remaining vigilant and staying focused is the way to beat them. If you cannot confirm beyond a reasonable doubt, take no action on that request, SMS, phone call or other myriad forms of attacks.

The fears surrounding Covid-19 are high, with conspiracy theories running rampant and cyberattackers counting on stress, distraction and reduced vigilance against intrusions. People are falling for their tricks and the problem is exacerbated by ad hoc short-term fixes that have left these firms vulnerable to attack.

Here are some tips to help firms protect themselves.

Email threats As always, email is the first area to come under threat.

In a recent attack, hackers used a trusted alias to get around anti-relay protection and send emails to customers as though they were a legitimate sender.

In this exploit they forged the ‘from’ header as: myspark@spark.co.nz <fakeuser@anotherdomain. com> Using this technique, the affected mail server saw the ‘from’ sender as legitimate and sent the email through. It included an attachment that was infected with a particularly brutal trojan. Users would click on it and infect their machines, which then launched an attack on other users in the same way, as well as including itself into a DDoS (Distributed Denial of Service) attack.

The level of sophistication was not limited to just the header. The email was crafted from Spark’s own email from some two years previously, making it look legitimate. Users could be excused for not spotting it as a fake straight-off as many did not think to look closely at the ‘from’ address.

The lesson is four-fold: Do not open an attachment unless you have verified and virus-checked it, even if it is a Word document; Always check the header ‘from’ address to

Lloyd Gallagher

confirm it appears legitimate; If you can, go to your known accounting site and check the information rather than relying on the convenience of an attachment; and

If you think you have been attacked, immediately disconnect your computer’s ethernet cable from the network. Then disconnect your internet (pull the cable out and turn off your router), reboot, scan and clean, reboot and repeat until you are sure it’s clean.

At the same time, contact your IT department immediately to confirm nothing else has been infected.

In this way you can mitigate the potential harm. By disconnecting your machine from the network, you can mitigate the spread internally.

IoT (Internet of Things) attacks This form of attack is also increasing.

Internet-connected devices are everywhere, from video doorbells and locks, virtual assistants, smart cameras, multifunction printers and scanners to home security systems. They offer hackers an access point for infiltrating your network from afar if it is not properly secured. Many users fail to change the default passwords, and often share the device access with others.

Home security products provider Ring (an Amazon company) was hit by a class-action lawsuit in the US for reports of multiple hacking incidents on its security cameras (The worst and weirdest IoT hacks of all time).

Hackers last year took over a smart home in Milwaukee by compromising the connected devices.

The attackers played disturbing music from the video system at high volume while talking to the residents via a camera in the kitchen. They also changed the room temperature to 90 degrees Fahrenheit by exploiting the thermostat. Read more.

When adding a new smart device to your network, research the product’s security and always change the default password.

When people are using apps on their phones, they often operate under the assumption it is secure and become less wary. But smartphone security has limitations and cannot directly protect against smishing.

Smishing, like SMS itself, works cross-platform and puts all forms of mobile device users at particular risk. While mobile technology developers push a good reputation for security, no mobile operating system can by itself protect you from phishingstyle attacks.

This is increased by the lack of conscious verification when you use your smartphone on the go, as you are often distracted or in a hurry. This means you’re more likely to get caught with your guard down and respond without thinking when you receive a message asking for bank information or to redeem a coupon.

This is where smishing is particularly dangerous as device apps are only as good as the security provided by the developer. If you inadvertently give your information in a non-bank-approved app, there may be little recourse to recovery or insurance.

Our advice is to take extra precautions against smishing attacks.

You should regard urgent security alerts and you-must-act-now coupon redemptions, offers or deals as warning signs of a potential hacking attempt.

Financial institutions and merchants will generally not send you a text message asking you to update your account information or confirm your ATM card code. If you get a message that seems to be from your bank or a merchant you do business with, and it asks you to click on something in the message, it is likely fraud. Call your bank or merchant directly and confirm/notify them of the attempt.

Never click a reply link or phone number in a message you’re not sure about.

Look for suspicious numbers that don’t look like real mobile phone numbers, like “5000”. As Network World notes, these numbers link to email-to-text services, which are sometimes used by scam artists to avoid providing their actual phone numbers.

Don’t store your credit card or banking information on your smartphone. If the

Continued on page 10 3

SPECIAL FEATURE: TECHNOLOGY & LAW

What Covid reveals about overseeing govt technology

By James Ting-Edwards

or other apps built with privacy in mind such as Rippl, to comply with the legal requirement to keep records for contact tracing. If all the data stayed on a user’s device when he or she scanned, was the retailer “keeping records”?

A range of technology options are being touted to boost our response to Covid-19, including wearable devices, temperature sensors and smartphone apps. But how do we know which are most helpful and how should we ensure they deserve our trust?

Some are keen to see more uses of modern technology, looking to examples overseas and advocating the benefits of applying our fabled Kiwi ingenuity.

In several countries, governments have created or adopted smartphone apps to assist with recording and tracing close contacts of infected people.

Some adopted the joint protocol from Apple and Google for exposure notifications. Based on Bluetooth radio signals, this protocol was designed to record and send anonymous encrypted signals between devices to allow later notification of potential close contacts, while sharing minimal personal data with other people or with health authorities. Read more. This protocol was announced in April but some countries wanted to move more quickly or design their own system.

In April, Australia’s government launched the CovidSafe app, which records other nearby devices running the app to support later tracing of potentially infected people. An earlier LawNews article raised concerns about the language used to promote the app, as well as whether enough had been done to uphold transparency, protect privacy, and keep data safe (see The Covid-19 app: can privacy survive the pandemic? Read more).

In Australia, technical experts criticised both the core design and the lack of transparency in the development process. As initially designed, the basic functionality of sending and receiving radio signals would not work on a locked iPhone. Though the software code was published, which is good for transparency, security researchers found it difficult to report bugs or put forward their solutions.

One big positive of CovidSafe was the clear legal framework for data, with an initial determination under Australia’s Biosecurity Act to limit the use of collected data to contact tracing only, and a promise of legislation with the same effect.

Overall, the main problem might be the over-selling of the ap’s functionality – for example, the claim by Australian Prime Minister Scott Morrison that using the app is like putting on sunscreen, which implies a level of protection from getting infected.

When the New Zealand government launched its Covid Tracer app in May, it was described as a digital diary. It allows people to record visits to places by scanning a QR code, or manually with later updates. The main advantages are that the 4

Seeing opportunities or problems, some people pushed particular technology solutions such as the CovidCard, a proposal for a small device that would send and receive Bluetooth radio signals to record nearby contacts.

James Ting-Edwards

When our government proposes new laws affecting everyone, we have established ways to offer transparency and democratic accountability for their impacts app supports the work of public health workers doing manual contact tracing, in a way that keeps data private while being transparent to people using it.

When people record a visit in the app, it is clear what information they are recording, and it remains on the device up until the app user chooses to share it with health workers. People can opt to receive alert notifications if they have been to a place where another person recorded a visit and then later tested positive for Covid-19.

The main disadvantage of NZ’s Covid Tracer has been a lack of clarity and coordination, which initially led to low usage of the app, even if people downloaded it.

In May, when New Zealand first moved back to level 2 after a period of more stringent movement restrictions, businesses were legally required to keep records for contact tracing, including a name, contact details, and initially a residential address as well. Some businesses adopted new apps, or extensions of existing retail software to record these details.

Most used paper forms, a technology with its own privacy risks. Without a single, clear or mandated solution, a multitude of apps, paper registers and incompatible QR codes were in use. Adding to the confusion, it was at best unclear whether business could rely on people using the Covid Tracer app,

Vigorous advocacy, combined with the appeal of a solution that might work for people without smartphones, gained formal trials and lots of attention. But others were less positive about the $100 million price tag, risks of low battery life and effectiveness, and the challenges that might arise with a solution that could not be updated over time.

Updates and refinements over time have been vital to the use of technology in New Zealand’s Covid-19 response. One unsung success has been the massive upscaling in our testing capacity, which went from a cumulative total of 23,000 tests to the end of March to capacity for 23,000 tests per day during the August outbreak, and tests of gene sequencing to link cases by virus genetics.

Updates have also been key to the eventual uptake of Covid Tracer. With law changes requiring businesses to show compatible QR codes, and new app features, it has now reached more than two million downloads and an average of around one sign-in per user per day.

The need for speed to address the challenges of a pandemic holds lessons for how we think more broadly about technology and law.

When our government proposes new laws affecting everyone, we have established ways to offer transparency and democratic accountability for their impacts. When our government puts forward new uses of technology with equal or greater impacts, we have the same need for transparency and accountability, but no established way to deliver this.

The best approaches I’m aware of are the new Algorithm Charter from StatsNZ, which government agencies can opt to join, and the social licence model developed by the government’s Data Futures Partnership in 2016. Both involve dialogue with affected communities, particularly people who may be most impacted or generally excluded from discussions about law and technology.

As examples such as the New Zealand Police considering automated facial recognition show, technology will keep offering new tools to governments and others. That makes it more important that we talk about which ones we want to use, and how we want to govern their use.

James Ting-Edwards is a senior policy adviser at InternetNZ

LawNews Issue 34 | 2 Oct 2020

SPECIAL FEATURE: TECHNOLOGY & LAW

Video streaming legislation already outdated

By Arran Hunt

It has been half a decade since Netflix launched in New Zealand and the market for subscriptionbased, on-demand streaming services is now congested.

While few questions have been raised about the self-classifications used Arran Hunt by these services, the controversial French film Cuties being the most recent example, the growth in streaming services prompted Parliament to review the way services are rating their own content.

On 6 August 2020, the Films, Videos, and Publications Classification (Commercial Video on-Demand) Amendment Act 2020 passed into law.

However, with most commentary being based on the need to protect younger viewers, the legislation appears to be already out-of-date when looking at how younger generations stream content.

In this article we look at how this new Act applies to streaming services.

Commercial video on-demand is referred to as CVoD throughout the Act, an abbreviation that looks familiar but is an unfortunate coincidence.

Live streaming by individuals is a rapidlygrowing market, with the most popular content providers regularly attracting hundreds of thousands of viewers Alphabet is, however, a specified CVoD provider and, as such, its YouTube service may be looking to follow the requirements of the Act. Facebook, with its Facebook Watch platform, is not included.

The next issue is the definition of what is excluded from the Act. Live streaming by individuals is a rapidly-growing market, with the most popular content providers regularly attracting hundreds of thousands of viewers.

Such content can often be viewed as a recording. Similarly, other individuals upload videos to streaming websites such as YouTube and, in return, receive an income through a 60% share of the advertising revenue generated by their video.

Section 8 would seek to exclude such content from the Act by stating it would not cover “any video on-demand content made available by a specified CVoD provider that was uploaded by a user to the provider’s platform, and that was not commissioned by the provider.”

There is no definition of what is considered to be ‘commissioned’. Before its Continued on page 14

The base requirement from s 4 of the Act is that CVoD services, which are provided for a fee or other consideration, set their own self-rating system. This will be reviewed yearly at the provider’s cost.

The term ‘other consideration’ presents the first issue. The Act was drafted to include CVoD providers where a subscription fee is waived because the service is part of a deal or a promotion, often bundled with other services. It does not include circumstances where the streaming service is provided as part of a pay-TV package: this is on the assumption that the material being shown would already be classified at the time it was broadcast.

No other form of consideration was provided for, such as in exchange for personal information and the opportunity to advertise to the viewer.

With companies such as Alphabet Inc (Google’s parent company) and Facebook Inc producing shows and providing them without cost to consumers, we believe they should have been included as they are receiving a benefit from providing such shows.

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SPECIAL FEATURE: TECHNOLOGY & LAW

Covid puts pressure on copyright law

By Melanie Johnson

At the same time as libraries were navigating ways of effectively introducing social distancing measures and keeping borrowed items free from the virus, the increase in demand for off-site service delivery demonstrated the vital place of libraries in communities, whether in person or virtually.

Covid-19 and the closure of schools, libraries and universities produced a sudden and dramatic shift to the virtual world. A major challenge was copyright and licensing.

Nevertheless, the move online comes at a cost.

Most university libraries’ budgets were blown when buying e-books with site licences. Where no site licences were available, librarians working from home managed by interloaning electronic copies from other libraries.

The Copyright Act 1994 has not kept pace with the expansion of the virtual environment and licensing is too limited to meet the complex needs of users.

Without the ability to visit a library and borrow or read the physical copies of books, digitising and making copies of works protected by copyright available to users was possible only through exceptions or licensing.

Law firm libraries For most large law firms, working from home in a virtual office was a smooth transition as most had site licences in place with large “libraries” of electronic textbooks and journals. Some lawyers took home books they knew they might need as “comfort, security-blanket books”.

Smaller law firms and sole practice lawyers had to rely on the NZ Law Society Libraries’ services. Like other libraries, they were closed and seemingly did not have ready offsite access to all their electronic holdings. This meant they had difficulty in providing everything their clients needed.

Normally this is not a problem as any lawyer can visit the NZLS Libraries and use any of the databases onsite. In a future Covid world where not everyone will be willing or able to go into the physical libraries for that purpose, better offsite access to electronic resources for their staff and lawyers is needed.

Public libraries The digital collections of most libraries continued to be available remotely but one important activity, story time for children, was not possible. While covered under an exception in the Copyright Act, this did not extend to recording and making the reading available online.

New Zealand authors and publishers and the cross-sector organisation, the Coalition for Books, through Copyright Licensing New Zealand (CLNZ), offered schools and libraries a licence to enable this to continue in the virtual space. It was hugely popular despite the limited range of titles available under the licence.

Having no access to the library, librarians were limited to what they had at home or friends and neighbours could leave in a box at the bottom of the drive.

Christchurch City Library, in collaboration with Age Concern and with permission from Collins Publishers, also provided readings for vulnerable older adults living alone or in rest homes.

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Melanie Johnson

While copyright law has largely stood still, educational institutions have had to rely on licences to make content available Education-sector libraries For tertiary institutions and schools, the challenges were different. Libraries must cater for more than 50% of students who do not buy textbooks.

University libraries have policies in place which privilege the purchase of electronic texts with site licences. Not all textbook publishers are willing to provide site licences and limit sales of e-texts to individual students.

There was a mad scramble to purchase electronic texts in February when students from China were unable to enter New Zealand. But with more than 1,000 textbooks at one university alone available only as hard copies, universities turned to CLNZ. CLNZ granted universities a licence to copy up to 50% of a book which was extended to all students when we went into lockdown. This was a big leap from the 10% allowed under the existing licence and not an easy decision for CLNZ. But it was made easier by the fact that New Zealand universities use e-reporting software so all content digitised under the licence is checked for compliance with the licence and usage is recorded automatically.

A big rethink Even before Covid-19, the perception of a library or classroom as a boundaried physical space was becoming redundant. The virus has forced libraries to rethink the physical space and how they work.

This allowed staff to scan and digitise copies of the textbooks they had and upload them directly into the e-reporting software. Sourcing content for court bundles was managed with some lateral thinking and substitutes. With some publishers and book shops closed and no option to buy, librarians around the world were helping each other with interloans.

The difficulty of making hard copy collections available to users in the virtual space remains and needs creative solutions such as controlled digital lending.

Limitations of licensing While copyright law has largely stood still, educational institutions have had to rely on licences to make content available. The recent experiences of tertiary education libraries have highlighted the limitations of licensing to address both the current crisis and the future of digital service delivery.

It’s an evolving and complex situation but one that has expedited the need for revamping the system.

Libraries have softened the digital divide by providing access to content both electronically and in physical formats.

This pandemic has prompted us to rethink everything we have taken for granted. Neither exceptions nor licensing can rectify the situation but the solution clearly lies in the hands of the institutions which license this content or seek to use it.

We should ask why we are paying to access content that has been created by our own members or is free of copyright, such as court judgments and legislation.

While the open access movement is growing, it is a long and slow progression and system changes are needed to support it. It is time for the law profession to push for change. A start would be ensuring all court judgments are freely available to everyone as was the intent when Parliament granted them copyright-free status.

Melanie Johnson is a solicitor working at the University of Auckland with responsibility for managing copyright

LawNews Issue 34 | 2 Oct 2020

SPECIAL FEATURE: TECHNOLOGY & LAW

Who might have access to your personal information?

By Richard Anstice

because it relies on users reading the fine print.

The onus is on the user to see buried in the fine print something like “your sensitive personal information will end up in Kazakhstan, Mozambique and the People’s Republic of China and btw their privacy laws are a bit patchy”.

Many agencies in New Zealand want to send personal information overseas – for Cloud storage, to pass data to their service suppliers or to store data in the global data systems of large organisations.

Items (3) and (4) are problematic because the control on export to problem jurisdictions becomes the subjective “reasonable” assessment of isolated firms and agencies in New Zealand. Who is bestplaced to assess the reasonableness of foreign privacy controls, a specialist regulator or a plumber in Te Awamutu?

They’re seeking to capture the apparent costsavings of using overseas IT services. But every time you give personal information to an agency, whether it’s reregistering your car, or buying something online, there is a large chance that some or all your information will come to rest on a computer in another country.

Secure, private personal information is important.

It protects against criminal activity, against foreign espionage and against overseas law enforcement that we consider contrary to our fundamental human rights.

If we believe privacy is necessary to maintain civil society, then when an agency decides to send data offshore, we should ask what standard of care is required. How much work should a New Zealand agency do to make sure that when data passes overseas, it is subject to reasonable protection?

On 1 December 2020, the new Privacy Act 2020 comes into effect, including a new Information Privacy Principle 12 (IPP 12) that is specifically focused on disclosure of personal information outside New Zealand.

Globally, the gold standard for rules to protect personal information internationally is the EU’s GDPR (General Data Protection Regulation). This is fast becoming a de facto standard in international trade – a customary standard like the Incoterms for goods or Lloyds’ standard contracts for shipping.

There’s nothing magical in the GDPR. It’s not a perfect law. it’s not important that it’s “European”.

In fact, the source of these rules and norms is irrelevant. Rather, it just happens to be that for global information transfer in the year 2020, the most useful shared standard is the GDPR. New Zealand’s new Privacy Act does not closely match the global approach. Instead, the Act provides fewer controls for data export. It’s worth looking at how our rules stack up against the GDPR and against our own views on the extra care needed before our personal information gets sent to other jurisdictions.

In the New Zealand Act, the default rule in IPP 12 is that before a NZ agency can disclose personal information outside the country, one of the following four prerequisites must be satisfied: (1) The GDPR way: Disclosure must be to a country prescribed in regulations as acceptable to receive personal information or disclosure must be subject to a binding scheme prescribed by regulations. In the

Richard Anstice

For New Zealand firms operating internationally, there is a clear need to look beyond the Privacy Act 2020 and adopt international standards for data protection

GDPR these are the only options for exporting data, which means there is central control to limit flows of personal information to countries with particularly bad records for respecting privacy.

So, even when acting in good faith, small agencies in New Zealand will have limited resources to examine the ‘reasonableness’ of overseas privacy controls amid complex international data flows.

Their reasonable views, in good faith, will provide little control over whether data ends up in insecure or problematic jurisdictions.

In the absence of good faith, for New Zealand agencies that consciously attempt to make data available to overseas intelligence, law enforcement or criminal agencies, it seems distinctly possible that they can lawfully send data offshore knowing it would be used for these purposes without breaching the Privacy Act 2020.

This risk is compounded by s 23 of the new Act which provides that collection, use or disclosure of personal information does not breach the information privacy principles if it is required by local law.

Once disclosure has lawfully passed overseas per IPP 12, there is no consequence when data ends up in the hands of authorities, even when there was a likelihood from the start that authorities could use Kiwis’ personal information to target political dissidents, or ethnic or religious minorities.

However, the New Zealand Act also includes some easier options for lawful disclosure overseas.

Disclosure outside NZ is also permitted if:

These threats are growing rapidly. The consequences make headlines regularly. It is not a hidden problem. It is surprising that in passing a new Act in 2020, Parliament has chosen to deliver watered-down protections compared to global standards.

(2) The disclosing agency obtains consent of the information-host that specifically acknowledges the possibility of limited privacy protection in the overseas jurisdiction.

This is also a commercial problem for NZ businesses. For New Zealand firms operating internationally, there is a clear need to look beyond the Privacy Act 2020 and adopt international standards for data protection.

(3) The disclosing agency reasonably believes the recipient agency is subject to the Act (for example, because the recipient does business in New Zealand to an extent to make it a “New Zealand Agency” that has direct obligations under the Act).

Many firms will have to build their compliance around the GDPR or similar rules so they have the contracts and audit systems in place to ensure they can demonstrate secure handling of personal information to globally-accepted standards.

(4) The disclosing agency reasonably believes the recipient’s country has comparable privacy laws.

These are quite lax. Option (2) is problematic

The Privacy Act is not a code. Beyond compliance, many firms in New Zealand have obligations to NZ clients to deliver services with reasonable care and skill, both in contract and under consumerprotection laws.

Continued on page 14 7

Kirk Hope

Nick Frith

Continued from pages 1, 2 stretch. Also, I would have thought you would be in the waiting period anyway.”

Business protection Business needs insurance at an affordable price, says Hope. “Our default position [is] you would hope the market would be able to provide that to New Zealand businesses at an affordable price.

The last thing you want is for businesses not to be able to protect themselves against a wide range of risks.

“I am not bagging the insurance providers because generally they continue to provide product into New Zealand. The question has to be if risks like this aren’t going to be covered and we are going to see more of them, we will need options for businesses to protect themselves.”

Nothing is stopping insurers covering the next pandemic, says Stevens.

“I did read there was cover for BI for pandemic. It was an extension. At the end of the day, nobody wanted it because it was too expensive. That’s what happens. If businesses don’t buy the cover, it gets taken away.”

Caps and excesses Whitehead argues that excesses and annual caps can help insurers manage tricky situations such as the Twin Towers attacks, Christchurch earthquakes and Covid-19.

“I tell my students [to] put a cap on how much you will pay for a calendar year. Don’t rely on wording that requires interpretation to limit your losses. You are better off sticking with figures. Say ‘right we will pay ... a maximum of $1 million per year’.

“Covid-19 has been a moment of reckoning for insurance companies’ PR machines. Taking such an approach would help the reputation of insurance companies,” he says.

Standardisation and excesses Whitehead argues in favour of standardised policies with insurers competing on service and other aspects.

Too often insurers don’t know what’s in their policies and need to do a stocktake when an event such as Covid-19 comes along, he says.

The actuaries and the lawyers don’t work closely 8

David Friar

enough together when policies are drafted. Their diseases clauses had not been tested, as the FCA case showed, he says.

“Insurance companies have so many different policies that something like this happens and they have to do a survey of their policies. That’s the problem with insurance. When things get tough, you have to go back and see what you have actually written. Nasty surprises come up.

“If everyone is selling the same policy, it’s not a question of what’s in the policy. We just have to go onto our website to find out.”

Whose job?

If insurers can’t offer the cover at an affordable price, then we have a market failure, says Hope.

So, there may be a case for intervention from government if future pandemics and other events such as climate change are uninsurable.

Stevens says most New Zealanders would expect it’s the government’s role to ensure New Zealand has a sustainable future.

Sam Hiebendaal

exclude liability for loss arising concurrently or in sequence with the threat or fear of a communicable disease. That could be similar to the Orient Express example where you have unconnected but concurrent loss but this time it’s under an express clause.

“Some of these new clauses are designed to exclude loss that arises during a pandemic or when there is fear of a pandemic, even if the loss in question has nothing to do with the disease. It will be interesting to see if insureds look to s 11 of the Insurance Law Reform Act 1977 to resist the application of such clauses in New Zealand,” Frith says.

“For example, in Auckland we certainly had a resurgence [of Covid-19]. In the rest of the country there was no evidence of cases but restrictions were imposed to a greater or lesser degree. So, [there was] fear of the transmission of the virus.

The London market has sought to exclude that risk on the rationale that pandemic loss is so huge and effectively unquantifiable.”

Examples exist here with EQC, and abroad. After 9/11, the UK and Australian governments drew that logical conclusion and stepped in to reinsure terrorism risks through Pool Re and the Australian Reinsurance Pool Corporation, Frith says.

The clauses in question were produced by the London Market Association but some have been adopted by other underwriters including Delta Property Insurance in New Zealand and extend to “perhaps unexpected” types of cover, such as property damage and cyber policies.

“That is a viable option [for future pandemic cover] because it’s like a proxy for the wage subsidy, but more expansive in the sense the government is acknowledging that it’s putting these restrictions in place.

Contractual interpretations It’s hard trying to sell the interest factor to noninsurance lawyers, Frith says. But the FCA case considers contractual interpretation points of interest to a wider legal audience.

“The risk is going to be the frequency or the likely frequency if that can be quantified from an actuarial perspective. Major events don’t usually affect whole regions for long periods of time like these lockdowns can. These are issues to be worked through.”

“So, to the extent that we get some jurisprudence around the interpretation of these [policies], that ought to be generally interesting.”

Shehean says it would need to be a Treasury-level reinsurance-type approach. “That is just drawing a logical conclusion.” A Treasury spokesman told LawNews it was not something the department was looking into currently.

Cover tightening Frith says the London market has added very broad communicable disease exclusions to BI policies. “Some are so broadly drawn that they

He says the Canterbury earthquakes thrust New Zealand to the forefront of insurance jurisprudence.

“I suspect the pandemic, and in particular the FCA case, are likely to result in more interesting jurisprudence from an insurance interpretation perspective.

“My understanding from the commentaries is that a couple of class actions have at least been commenced or about to be commenced in Australia so it will be interesting to see how the litigation market responds to the FCA decision and whatever follows.”

LawNews Issue 34 | 2 Oct 2020

BANKING/FINANCE

Aussies ease lending rules – will NZ follow suit?

By Richard Massey

“We can’t have a world in which, if a borrower can’t repay the loan, it’s always the bank’s fault.” This sentiment, expressed by the Governor of the Reserve Bank of Australia last month, underpins major regulatory changes announced across the Tasman late last week.

In summary, the Australian consumer credit framework will be considerably simplified to ensure consumers and small businesses can get timely access to credit. At the same time, new restrictions on payday lending and consumer leases will provide greater protection for the most vulnerable borrowers.

The proposed changes, due to take effect early next year, will enable a considerably more flexible approach to lending than currently applies in New Zealand and highlights by comparison the detailed and prescriptive regime envisaged under our proposed responsible lending regulations.

The Australian proposals note the particular importance of access to credit in the current Covid-19 climate and describe a clear relationship between credit flows and economic recovery.

Those factors are similarly applicable in New Zealand. However, major reforms to New Zealand’s Credit Contracts and Consumer Finance Act 2003 were enacted in December last year (though most of the major changes will not take effect until October 2021). Those changes – which are summarised here – include new and enhanced responsible lending requirements, such as new obligations to make inquiries into the affordability and suitability of loans before making any “material changes” to the loan (i.e., beyond those inquiries made at the commencement of the lending). In addition, the Ministry of Business, Innovation and Employment is considering new regulations which would add further complexity to the processes lenders must follow when issuing new loans, or making material changes to existing loans.

Richard Massey

information provided by borrowers, unless there are reasonable grounds to suspect it is unreliable. The need for extensive verification procedures, which can often account for half the loan application process, will diminish. Borrowers will also be made more accountable for providing accurate information to inform lending decisions.

In that light, it is worth remembering that the introduction of responsible lending obligations in 2015 was intended in part to align New Zealand’s consumer credit law with Australia. As Australia now seeks to wind back the resulting restrictions on the flow of credit, it remains to be seen whether the New Zealand government will do likewise.

Authorised deposit-taking institutions (ADIs) such as banks, building societies and credit unions, will no longer be regulated by the Australian Securities and Investments Commission (ASIC). They will continue to be subject to lending standards set by the Australian Prudential Regulation Authority.

Proposed changes The proposed Australian changes (outlined here) are intended to address various defects with the current framework under the National Consumer Credit Protection Act 2009 (NCCPA).

Where a proportion of an application for credit is for a business purpose, irrespective of the proportion, the new framework will not apply. The Treasury has separately explained: “Our changes will make it very clear that the prudential framework that’s in place is not to apply to small business lending. We want small business to access lending.”

Specifically, the changes are aimed at easing the application of the “responsible lending obligations” which require creditors to make inquiries about the suitability and affordability of loan products before extending credit.

The government paper notes that: The principles underpinning responsible lending obligations have been implemented in a way that is no longer fit for purpose and which risks slowing economic recovery;

The one-size-fits-all and prescriptive nature of responsible lending obligations is “burdensome and unnecessary”, leading to delays in credit approvals and increasing borrowing costs; and

Small-amount credit contracts (for example, payday loans) and consumer leases will remain subject to existing responsible lending obligations. New protections will also apply, including that:

Total payments under consumer leases will be capped at the base price of the goods, permitted delivery fees and permitted installation fees, multiplied by 4% per month (up to a maximum of 48 months).

Borrowers who receive 50% or more of their net income through social security payments must not be permitted to devote more than 10% of their net income to repayments on small-amount credit contracts.

Borrowers bear limited responsibility for providing incorrect or misleading information to lenders.

Debt management firms representing consumers must hold a credit licence and meet a ‘fit and proper person’ test.

To address this, two key changes are proposed:

The reforms will be implemented through changes to the NCCPA. The key changes will commence from March 2021, subject to the passing of legislation and a prior consultation phase.

Alleviating restrictions on mainstream lenders:

In assessing creditworthiness, lenders will be allowed to rely on the

Richard Massey is a senior associate at Bell Gully 9

Continued from page 3

information isn’t there, thieves can’t steal it even if they do slip malware onto your phone or access the data through a mistaken click.

Refuse to take the bait – simply don’t respond.

Report all smishing attacks when you see them to Netsafe, the affected provider and your carrier.

Like email phishing, smishing is a crime of trickery.

It depends on fooling the victim into cooperating by clicking a link or providing information. The simplest protection against these attacks is to do nothing. So long as you don’t respond, a malicious text cannot do anything.

Zoom attacks The increase in remote work and virtual meeting platforms has seen exploit attacks emerge to try and intercept these communications platforms for advantage.

One such exploit was coined “Zoom-bombing” and involved bad actors gaining access to a Zoom meeting and posting pornographic, racist or other inappropriate content for everyone on the call to see. Zoom has been quick to respond to these attacks, and it is important to use the lobby tools to secure your conference rooms.

Enforcement threats and pressure Enforcement threats, tax debt, pay-now-to-avoid-

If you think you have been attacked, immediately disconnect your computers ethernet cable from the network

Radmin access and support assistance Finally, it’s important to remind everyone of the remote administration and support scam.

prosecution demands are nothing new. They can come from SMS, email, phone calls, Facebook and other online media. Threatened consequences can include financial penalties, costly litigation and loss of reputation and, more recently, we have seen threats of action due to a data breach that will result in prosecution for release of personal data.

As we work from home, users have become more susceptible to these attacks. When they activate the remote access, the hacker enters the system and installs malware that will be activated immediately or sometime in the future. This scam has been widely used to install ransomware.

This scam is executed by a phone call, email, or SMS that pushes the receiver to contact or activate the remote desktop feature of Windows so “Microsoft” or some other support organisation can fix an error they claim they are having reported to them.

To help avoid this scam, firms should deploy an IT policy that requires an authentication action to confirm the IT department has requested the action to be taken.

All these scams take the same approach: threats of prosecution if you do not pay now. As we work more from home, it has become more difficult to immediately spot them. We are not used to getting business calls at home and may inadvertently fall victim to these types of attacks.

This authentication method should be random in nature and require a specific two-factor step or some other secure activity to confirm the action requested.

No government enforcement agency will approach you in this way. Legislation requires that notice of action is served and it is imperative that new members of your firm, secretaries and others are told not to respond or engage with these forms of attacks. No action is the best action.

Lloyd Gallagher is the founder and managing partner of consultants Gallagher & Co. He is the convenor of ADLS’ Technology & Law committee

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LawNews Issue 34 | 2 Oct 2020

Briefs Battle looms over judge’s confirmation

Uber back on the road

The confirmation process for President Trump’s pick to replace the late Ruth Bader Ginsberg on the US Supreme Court is in full swing as more than a dozen senators prepare to quiz Judge Amy Coney Barrett in private meetings and their staffs begin a deep scrub of her record on and off the bench, reports The New York Times.

Judge Barrett’s confirmation would give the conservatives a 6:3 majority on the bench.

On issues such as abortion, gun rights, discrimination and immigration, her opinions reflect the views on her mentor, the late Antonin Scalia, a former Chief Justice of the Supreme Court. The Democrats, who oppose Trump’s move to replace Justice Bader Ginsberg before the US presidential elections next month, are focusing most of their efforts on Judge Barrett’s views on the Affordable Care Act which delivers health care to millions of low-income, uninsured Americans.

The senate’s Judiciary Committee is preparing for four days of nationally-televised confirmation hearings, scheduled to begin in four weeks.

A London judge has restored Uber’s transport licence, allowing the US rider-share company to resume operations in one of its busiest global markets. Regulators had threatened to ban its 45,000 London drivers from the road because of safety concerns. The judge said he was satisfied Uber was “doing what a reasonable business in this sector could be expected to do, perhaps even more”.

New spending Australian Prime Minister Scott Morrison has signaled new spending in next week’s federal Budget, designed to lift demand rather than increase household savings. Morrison said the spending would be “temporary, targeted and proportionate”. Australia’s deficit for the 2019-20 year was a record $A$85.3 billion – the highest since 2009-10 when the deficit blew out to A$54.5 billion as the Rudd government pumped money into the economy to help Australia weather the GFC. Treasurer Josh Frydenberg has over the past week announced a raft of significant economic measures, including changes to insolvency law, a new fiscal strategy and an overhaul of bank lending (see also page 9). This year’s deficit is expected to top A$200 billion.

Uneven recession In its weekly economic update, the ASB says it’s unlikely consumer demand will recover to the extent seen after our first Covid-19 lockdown.

The bank said it suspected the economic divide would widen between households most exposed to the recession (hospitality and tourism) and those left relatively unscathed.

Job losses are mounting, ASB said, and unemployment is set to escalate to more than 7% as government support measures wind down. This, along with stagnating wage growth, suggest households might knuckle down and reduce spending to essentials, thus deepening the downturn. The border closure has delivered an estimated hit to GDP of between 3% and 5%.

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LawNews Issue 34 | 2 Oct 2020

CPD in Brief Getting to know IPONZ and its Services In this session on the Intellectual Property Office of New Zealand (IPONZ) you will get to know about: • IPONZ as an organisation, and IP regimes in New Zealand (Trade Marks, Patents, Designs, Plant Variety Rights, Geographical Indications, Copyright).

• The IPONZ online case management facility and application processes for Trade Marks and Patents.

• How the IPONZ online case management facility is maintained, including: º How changes to the online system are considered. º When and how these changes are released. º How to subscribe for system updates via email.

Presenters: Dylan Packman, Senior Stakeholder Engagement Advisor, IPONZ; Sean Uy, Stakeholder Engagement Advisor, IPONZ

Burning Issues in Employment Law Forum 2020 This Guy Fawkes night, the Burning Issues Forum 2020 has it all – bon fires, camp fires and wild fires! – a veritable barbecued smorgasbord of the hottest and spiciest issues to emerge in these times of global challenge. First “The Covid Conundrum” – a blistering review of the Covid case law and a meaningful insight into the Covid challenges faced by employment lawyers and their clients. Next, a scorching commentary on recent judgments that are clearing the smoky blurred lines between employees and independent contractors and, last, come fireside as the Chief Judge illuminates the path towards meaningful access to justice in employment law.

Presenters: Her Honour Chief Judge Inglis; Garry Pollak, Solicitor; Rachael Judge, Senior Associate, Simpson Grierson Chair: Catherine Stewart, Barrister

Fairness in the Consumer and Commercial Sphere: An Update In recent times, we have heard a lot about being kind. In relation to consumer and commercial law, fairness may be kindness’ cousin. How does this translate to the consumer and commercial sphere? In this seminar, the presenters will provide an update and refresher on key areas which affect or will affect some consumer and commercial relationships, such as fair trading, (un)fair contract terms, and (un)conscionability.

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Expert Evidence in Health and Safety Cases Wednesday 28 October | Seminar & live stream | 2 CPD hours Visit adls.org.nz for more information.

13

NEW BOOK

The Promise of Law: essays marking the retirement of Dame Sian Elias as Chief Justice of New Zealand

Continued from page 5 closure, Microsoft’s Mixer platform had exclusive deals with several content providers, requiring them to produce stream content, initially live and then provided on-demand, for that platform. Other individuals have similar deals with Facebook, YouTube and Twitch.

We believe this would then classify the uploads as being commissioned and therefore within the material covered by the Act.

Editors: Simon Mount QC and Max Harris

Some of those services, such as Twitch, provide for members to pay a monthly subscription to the video maker so the requirement for payment under s 4 may be met. Websites like Patreon or OnlyFans will restrict streaming content only to those who have paid to access it but would fall under the requirements only if it were deemed commissioned.

A powerhouse of national and international contributors honours the 20-year tenure of retired Chief Justice Dame Sian Elias.

Such material is often targeted at young adults and may not be suitable for children. This would create an issue under s 46DA, which looks at how ratings must be determined, including a requirement to state who is likely to access the material.

Nine significant topics are covered:

We are unsure as to why the rating should depend on who may have access, rather than the actual content of the material. For a service such as Twitch, which (in relative terms) is reasonably strict with its enforcement of guidelines but still provides a service largely aimed at adults, compliance may mean making all videos R18 by default.

Law and power on the frontier Common law constitutionalism Where to for indigenous rights and reconciliation Environmental justice and climate change

The supervisory jurisdiction and administrative justice

While such legislation can go only so far, it appears to be a missed opportunity.

The Act appears to have attempted to solve one problem that arguably may not exist in an attempt to protect the young, while not looking to cover modern streaming that the young are more likely to watch without adult supervision.

Criminal law

Arran Hunt is a partner at Stace Hammond

Topics in private law

The Act also fails to consider other short-form streaming video platforms, such as TikTok. This has become one of the sources of online controversy in the past few years due to trends that can be not only offensive, but also encourage harmful and/or anti-social behaviour.

Human rights Judging Price for non-members: $73.91 plus GST* Price for ADLS members: $66.52 plus GST* (* + Postage and packaging) To purchase this book, please visit adls.org.nz; alternatively, contact the ADLS bookstore by phone: (09) 306 5740, fax: (09) 306 5741 or email: thestore@adls.org.nz.

The physical bookstore is currently closed

Continued from page 7 To the extent that a firm’s business includes holding personal information, then their services include an information management service that must be carried out with due care and skill. Given the well-known risks of data loss to criminal activity and law enforcement in many overseas jurisdictions, a high standard of care is usually needed before a Kiwi firm exports personal information.

Given the limits in IPP 12 described earlier, it seems that in many situations reasonable care and skill will require oversight of data export more extensive than is required by the Act. Because of the limits in the Privacy Act 2020, wise firms in New Zealand will use the GDPR as a guide to add to their controls for exporting personal information so they continue to be compliant with all applicable laws, including New Zealand statute and contract law.

Richard Anstice is a consultant at Gallagher & Co

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LawNews Issue 34 | 2 Oct 2020

WILL INQUIRIES LawNews

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Following some barristers leaving after Covid, Durham West Chambers has four offices available â&#x20AC;&#x201C; two large, one small, and one mid-size.

Wonderful opportunity for a group of lawyers/barristers to move to a specialised chambers format.

The Chambers share a refurbished floor (with separate areas) with Hussey & Co., a boutique forensic and general accounting firm.

Long established medium size Auckland law firm soon to re-locate to new downtown premises is looking to expand.

There are shared meeting rooms (a formal boardroom and a less formal meeting room), and communal entrance and client waiting area.

No long-term commitment required.

This may be an opportunity for a sole practitioner or smaller firm in need of support or a succession plan.

Alternatively, it may suit a lawyer or group of lawyers at partnership or senior level with an established client base looking to re-locate.

Cost depends on office size, circa $300 per week for the larger offices, $150 per week for the small and $225.00 per week for the mid-size (plus GST).

The firm offers brand new modern premises, latest technology and support systems, an excellent work/ lifestyle balance and a high level of remuneration.

Photographs of the Chambers can be viewed at www.hco.co.nz/gallery

All enquiries will be treated in the strictest confidence.

Telephones, internet connection, printing and secretarial services also available and some furniture available.

Please reply to: Advertiser@adls.org.nz quoting reference:MA0920

Contact: Shane Hussey for further details shane@hco.co.nz tel. (09) 300 5481

Burning Issues in Employment Law Forum 2020 Thursday 5 November | 2 CPD hours Venue: Simpson Grierson, Auckland City This Guy Fawkes night, the Burning Issues Forum 2020 has it all â&#x20AC;&#x201C; bon fires, camp fires and wild fires!

A veritable barbecued smorgasbord of the hottest and spiciest issues to emerge in these times of global challenge.

Places are limited, register now to secure your place.

T 09 303 5278

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E cpd@adls.org.nz

W adls.org.nz