New Zealand: Help Sheet for Businesses in Earthquake-Struck Canterbury

Download: Help sheet for businesses in earthquake struck Canterbury (PDF 249KB)

Chapman Tripp's Christchurch office has been working out of temporary accommodation in a hotel so we know first hand the issues the earthquake – and the energy-sapping after-shocks – have created for people and businesses.

It was in that spirit that we have put together this help sheet. It covers employment, insurance, leases and termination of contracts through the 'doctrine of frustration'. We hope that you will find it useful.


Material damage insurance

Most businesses will have material damage insurance to cover the physical damage to insured property from the earthquake.

Check your policy for your claims obligations. But as a general rule, you should notify your insurer of your claim as soon as possible and keep evidence of the damage until it is examined by your insurer.

If safety or clean-up work is necessary, check your insurer's requirements first, if practical to do so. Otherwise take lots of photographs. It may help to speed up the processing of your claim if you gather together information now about the damaged property - such as make and model details of damaged equipment, where it was purchased, where replacements can be obtained from and so on.

Business interruption insurance (B.I)

This insurance is normally sold as an add-on to material damage cover and provides income to replace the income the firm would have earned if the physical damage, insured by your material damage cover, had not occurred. The main element of the insurance is typically the firm's anticipated gross profit.

The calculation of B.I claims is notoriously complex and they are one of the most difficult claims to prove because of their theoretical nature. The firm and the insurer need to agree on what the firm's gross profits would have been if the loss had not happened. It will often be necessary for the firm to employ professional advisers to assist with a significant claim. This should be prepared in consultation with the insurer's appointed loss adjusters.

In addition to gross profits cover, the B.I insurance will often cover:

  • fixed costs incurred while the business remains closed
  • costs of leasing temporary premises
  • extra expenses to continue operations (to the extent they minimise the gross profit losses), and
  • claim preparation costs.

You will need to check your policy to determine the scope of your own coverage.

Key messages

Understand your policy coverage and how it will be adjusted. This is crucial to ensuring that you can maximise your entitlement.

Maintain control of the process.

Do not just accept the insurer's approach and timetable if you are not satisfied it is appropriate. This requires a proper understanding of your respective rights and obligations under the policy. Issues to be considered will include:

  • when and how operations will be resumed
  • whether advance funds are available or required
  • how the elements of the loss will be valued, and
  • what precisely is covered.

Collect and preserve all of the data that will be needed to calculate and prove your claim such as:

  • historical sales and costs data
  • information about recent business changes that may have improved business profitability (so this can be taken into account in assessing likely lost profits), and
  • accurate records of extra costs incurred as a result of the damage to your property.

Talk to your insurer and appointed loss adjuster to make sure that you agree the way forward. Later disagreements can be costly.

Keep in touch with your insurance broker. Consider employing your own professional loss consultant if you have a substantial claim. You will almost certainly need accounting advice. Legal advice may also be useful if there is uncertainty or disagreement about what may be covered.


Health and safety

Employers have duties under the Health and Safety in Employment Act to take all practicable steps to ensure the safety of their employees while at work. In many cases, experts (such as structural engineers, plumbers and electricians) will need to be called in to ensure the workplace is safe before staff return.


In most cases, employers will also have a duty to pay normal pay, even if the employees have been prevented from working, and irrespective of whether they are waged or salaried. The determining factor is whether they are ready and willing to work. If so, then (subject to the terms of the applicable employment agreements) they must be paid.

Wage subsidy scheme

Enterprises with 20 employees or fewer, which are unable to operate because of the earthquake, qualify for wage subsidies announced by the Government yesterday.

From Thursday 9 September, the Government will pay qualifying employers $350 (gross) per worker per week in the form of a lump sum. The employer may choose to top up this amount as they pass it on to their employees.

Payments will be backdated to the date of the earthquake and are expected to be made for at least the next 4 weeks.

Contact the Chamber of Commerce, which is organising the refunds with WINZ. The Chamber's focus will be on helping those in serious financial difficulty. Employers with insurance cover for loss of earnings will be expected to use this before accessing the wage scheme.

The Government has not ruled out extending the subsidy to larger employers (more than 20 employees) but considers they are in a better position to look after themselves.

If an employer is not financially able to continue to pay wages, the parties may agree to a temporary discontinuance of work during which wages need not be paid. However, the express agreement of the employees will be necessary. The key for employers in such situations will be open communication with their employees as to the state of the business and the employer's ability to continue to pay wages indefinitely.

Employers should also consider obtaining employees' consent to take annual leave. Where employees have accrued annual leave, and the parties have been unable to agree to when it shall be taken, employers can only require that annual leave is taken after providing 14 days' notice.

Employers may be able unilaterally to alter the hours of work of certain employees, such as those who work on a roster basis. This will depend on whether (and to what extent) the hours to be changed are a term of the employee's employment contract.

If certain working hours are expressly stated in the employment agreement (or have perhaps become implied terms of employment following what has happened in practice), the employee's consent will be required to change those hours. The only exceptions will be where the change in work hours is technical or inconsequential.

By contrast, where no particular or minimum hours are specified or implied, the employer may be able (following suitable consultation and notice) to alter the employees' hours of work.

While it cannot be used as a threat, in certain situations it may be appropriate for employers informally to advise that if agreement cannot be reached (for example, as to periods of unpaid leave or altered working hours), the employer may need to consider redundancy. As noted above, the key for employers is to be open and frank with employees about the extent to which the earthquake has affected the employer's business and ability to operate both in the short and medium term.

Landlords and tenants

The Property Law Act provides that if leased properties are damaged or destroyed by earthquake, the rent or outgoings will abate, in fair and just proportion to the extent of the destruction or damage, until the premises have been repaired and reinstated.

If the property is no longer habitable; no rent or outgoings will be payable until the landlord has reinstated the premises so that the tenant is able to re-occupy them.

Landlords often have insurance in place for loss of rent and may seek to recover loss of rental and outgoings from their insurers during any period that payments by the tenant are suspended or reduced.


The standard ADLS lease, which is extensively used for commercial leases, makes provision for termination of leases in the event of damage or destruction.

If the premises, or any part of the building of which the premises form a part is untenantable, the lease shall terminate. Also, the landlord has the right to terminate the lease if the landlord considers that the premises require demolition or reconstruction.

Where the property is damaged but still tenantable, the standard ADLS lease provides that the landlord shall with all reasonable speed, once consents have been obtained, expend the insurance money received towards repairing or reinstating the premises. Until reinstatement, the rent and outgoings shall be reduced by a fair and reasonable proportion having regard to the extent of the damage. However, if necessary consents cannot be obtained, or the insurance money received by the landlord is inadequate for the repair or reinstatement of the premises, the lease shall terminate.

Doctrine of frustration

Contracts can be terminated under the 'doctrine of frustration' in certain conditions, absolving the business from the need to perform the contractual obligation. The trigger must be an unforeseen event, not caused by either party's default and which has created such a change in the circumstances of the contract as to render its performance either impossible, or radically different from what was contracted for.

The doctrine is most often used in respect of commercial contracts, but the Employment Court recently applied it to an employment agreement. The Court stated that the doctrine is not to be invoked lightly, but should be applied where the facts of the case warrant the intervention of the law to avoid injustice.1 If it applies; it will terminate an employment contract even where employees are ready, willing and able to perform their employment obligations.

Force majeure

Contracts sometimes provide for what will happen in an event like an earthquake in a "force majeure clause". Typically the party attempting to rely on the clause will be required under the contract to first give notice to the other party.

Note also, that a force majeure clause may only relieve parties of their obligations to the extent that they have been affected by the earthquake. A contract could not be terminated, for example, if goods cannot be delivered on time due to damaged roads, but it would be satisfactory to deliver them at a later date.


The advice above is necessarily general and should not be relied upon except as a guide. For further information or more specific assistance, please contact the authors featured.

Our thanks to Matt Fogarty and Mihiata Pirini for their assistance with writing this Brief Counsel.

1. A Farmer v A Worker (2009) 9 NZELC 93, 132 para 40.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions