The Sports Law Review: New Zealand

Organisation of sports clubs and sports governing bodies

i Organisational form

A range of legal entities are used by sports clubs, national sporting organisations (NSOs), and professional sports organisations and teams in New Zealand.

The most common legal entity in sport in New Zealand is the incorporated society. An incorporated society is a membership-based organisation provided for under the Incorporated Societies Act 1908. An incorporated society has its own legal identity, separate from its members, and the group must exist for some lawful purpose other than making a profit. The incorporated society must have in place rules that govern the operation of the entity. Decisions of an incorporated society may be amenable to judicial review in the court system, given that the actions of an incorporated society are undertaken pursuant to statutory powers provided for in the Incorporated Societies Act. Examples of sporting organisations incorporated in this manner include New Zealand Cricket, New Zealand Rugby and its member unions,4 and New Zealand Netball. In addition, players' associations have also traditionally been formed as incorporated societies in New Zealand, often registering as a union under New Zealand employment law. Examples of this include the New Zealand Rugby Players Association (NZRPA),5 the New Zealand Cricket Players Association6 and the New Zealand Netball Players Association.7

Historically, many sporting organisations have, in addition to being formed as an incorporated society, sought registration as a charity (currently under the Charities Act 2005). However, to obtain charitable status certain requirements need to be met, including the requirement that the organisation benefit the community as a whole (thereby excluding sporting organisations that are focused exclusively on elite level sport).8 Reform of this area of the law has been under discussion for some time, although concrete legal reform has failed to materialise. A change in government in late 2017 means the scope of future reform is now unclear. However, change is likely at some stage, and care should be taken to ensure compliance with current and future legal requirements in this area.

The limited liability company is a commonly used legal entity under New Zealand law (currently provided for by the Companies Act 1993). Less common in sport than the incorporated society (particularly with community or amateur sports organisations), the company nevertheless has significant benefits as a legal entity, particularly for sporting entities wishing to engage in trade with any desire to make a profit. The use of the company is often combined with partnership (or limited partnership) arrangements, particularly in the 'franchise' sporting sector. Examples of such an approach can be seen in professional rugby, where the Super Rugby franchises in New Zealand (Blues, Chiefs, Hurricanes, Crusaders and Highlanders) are all structured utilising company or partnership structures, or both.

ii Corporate governance

The Incorporated Societies Act and the Companies Act both prescribe procedural and organisational requirements for incorporated societies and companies, although New Zealand law is not particularly prescriptive regarding its governance requirements. For example, New Zealand registered companies can, as a matter of law, have sole directors. While some sectors have in place additional governance and regulatory requirements (most notably the finance sector), there is no law in New Zealand providing for mandatory governance arrangements in the sporting context.

There is, however, a push in New Zealand to see 'best practice' and 'good governance' models put in place in sporting organisations. This is driven largely by government policy and funding organisations, such as Sport New Zealand.9 Sport New Zealand has worked extensively to produce a range of resources for sports organisations in relation to matters of governance. Some resources, such as its Nine Steps to Effective Corporate Governance, provide broad guidance as to best practice for sports organisations' governance and management.10 In addition, specialist resources focus on areas such as health and safety,11 event risk management12 and sports integrity topics such as match-fixing.13 Sport New Zealand has also produced a template set of rules to establish a framework for sporting organisations set up as incorporated societies. In some cases, Sport New Zealand insist on sports organisations adopting best practices before government funding or assistance will be provided, at both the community and elite or high-performance levels (through Sport New Zealand's related organisation, High Performance Sport New Zealand).

iii Corporate liability

Directors and officers of sports organisations carry potential liability under general New Zealand law such as the Companies Act and the Crimes Act 1961. With the exception of recent amendments to the Crimes Act to confirm match-fixing or manipulation as a criminal offence, there are very few, if any, sporting-related offences under the general law. As a rule, sporting rules and regulations are a matter of private law rather than public law.

The area of health and safety is, however, an area worthy of specific mention. 2015 saw the passage through Parliament of the Health and Safety at Work Act 2015. This was the biggest reform of health and safety law in New Zealand in more than 20 years. It followed not only the Pike River Mine Disaster of 2010, but also the recognition of New Zealand's generally poor health and safety record in the workplace compared with similar countries in the Organisation for Economic Co-operation and Development. This was observed by the Independent Taskforce on Workplace Health and Safety, which was put in place by the government in June 2012 to report to the Minister of Labour on whether New Zealand's workplace health and safety system was fit for purpose. Its report to the Minister in April 2013 made it clear that it was not, and this led to legislative reform and the establishment of an independent regulator, WorkSafe New Zealand (which received an increase in funding).14

Directors and officers of entities owing duties under the Health and Safety at Work Act have specific duties of due diligence in relation to health and safety matters. These duties, new to New Zealand law, require directors and officers to take significant proactive steps to ensure health and safety is properly considered and implemented by their organisations. Significantly, a failure to comply with these obligations (as with other obligations under the Act) can result in individual criminal liability, and penalties including fines, imprisonment, or both. Under the legislation, it is illegal to put in place insurance or any other form of indemnity for fines, meaning that directors and officers will be personally liable for any fines should they commit a breach. Individuals can be fined up to NZ$600,000 or face up to five years' imprisonment.

The dispute resolution system

i Access to courts

New Zealand operates a parliamentary system in the Westminster tradition, with three divided branches of government (the Parliament, the executive and the judiciary). Unlike the United States, Canada and Australia, New Zealand has no written constitution. However, the Constitution Act 1986 does record many of New Zealand's constitutional arrangements.

New Zealand has a hierarchical and specialist court system. The main law courts are the District Court and the High Court, which have both criminal and civil law jurisdiction. In addition, the Environment and Employment courts sit with specialist jurisdiction. The Court of Appeal (which hears appeals from the High Court and the specialist courts, and some appeals from the District Court) sits as a superior appeal court. The final appeal court in New Zealand is the Supreme Court, which was established in 2004 to replace appeals to the Judicial Committee of the Privy Council based in London. In addition to the courts, there are various administrative tribunals under New Zealand law, including the Disputes Tribunal (which hears civil claims of up to NZ$30,000) and the Employment Relations Authority (a first instance tribunal for the hearing of employment-related claims).

Sports disputes can, and do, end up before any of New Zealand's courts or tribunals. Employment disputes may be heard in the Employment Relations Authority or the Employment Court. Matters related to planning and resource consents may be heard by the Environment Court (usually after first instance planning decisions or hearings at local government level). Commercial disputes alleging breach of contract, negligence or claims in equity will often be advanced in the District Court or High Court. One recent example is the High Court litigation between media outlets TVNZ and NZME, and pay-tv broadcaster Sky TV, with respect to 'fair use' by the media outlets of Sky TV's licensed sports content.15

Pure sports matters, however, such as selection disputes, doping or other integrity-related matters, or matters involving on-field or on-court disciplinary matters, are rarely heard in the court system, with such matters being heard within the sport's own disciplinary tribunals, or through the Sports Tribunal of New Zealand (the Tribunal), a statutory body set up to determine sports disputes. Notable exceptions usually take the form of applications to the High Court for the judicial review of decisions made by sporting bodies. Examples of such actions from the sports of rugby and horse racing include Finnigan v. NZ Rugby Football Union Inc [1985] 2 NZLR 159 and Cropp v. A Judicial Committee and ANOR SC 68/2007.

ii The Sports Tribunal of New Zealand

The Tribunal was established in 2003 to hear and determine 'certain' disputes in sport. Its membership comprises lawyers, doctors, former athletes and other notable individuals with experience in the sports industry. Its chair is required to be a lawyer (of senior standing), and is currently the former president of the Court of Appeal, Sir Bruce Robertson.

The Tribunal operates pursuant to the Sports Anti-Doping Act 2006, and hears and determines:

  1. anti-doping violations;
  2. appeals against decisions made by an NSO or the New Zealand Olympic Committee (NZOC) if the rules of the NSO or the NZOC allow for an appeal to the Tribunal;
  3. other 'sports-related' disputes that the parties agree to have referred to the Tribunal; and
  4. matters referred to the Tribunal by the Board of Sport New Zealand.

The Tribunal is government funded, and maintains a register of sports lawyers willing to assist athletes and sports organisations in disputes before the Tribunal on a pro bono or reduced-fee basis.16

Almost all sporting codes that are a signatory to the WADA Code submit the hearing of their anti-doping matters to the Tribunal. The most notable exception, at least in the New Zealand context, is rugby, which has its own anti-doping hearings consistent with the Code.

The Tribunal is seen as an alternative to the Court of Arbitration for Sport (CAS) for the resolution of sports disputes in New Zealand. That said, CAS is still utilised, either as an alternative to the New Zealand court system or the Tribunal, or on appeal from decisions of the Tribunal.

Organisation of sports events

i Contractual relationships

Contract law provides the legal foundation for many of the relationships present in relation to the conduct of sports events. The common law of contract (borrowing heavily from the United Kingdom and other Commonwealth jurisdictions) is supplemented by a range of statutes, including the Contract and Commercial Law Act 2017, the Consumer Guarantees Act 1993 and the Fair Trading Act 1986. In some cases, entities may have procedural requirements that must be met for entry into contracts: for example, for incorporated societies, a requirement to use a 'common seal'.

ii Accident compensation scheme

A significant feature of the New Zealand legal landscape is the accident compensation scheme (currently governed by the Accident Compensation Act 2001). The scheme, introduced in the 1970s, provides for a state-funded compensation and medical treatment scheme for all persons in New Zealand who suffer 'injury by accident'. A consequence of the scheme is that it generally bars legal action for personal injury.

The scheme has been eroded over time, and there are some exceptions to the bar against suing for personal injury. However, in general terms the prohibition remains, and this makes New Zealand quite unlike any other major legal jurisdiction in that people injured in accidents cannot sue those responsible.

This is significant in both event organiser and spectator relationships, and between event organisers or clubs and athletes participating in their events.

iii Potential liability for event organisers

Notwithstanding the existence of the accident compensation scheme, significant risk of personal and corporate liability stills exists under New Zealand law for event organisers. The risk of claims for alleged breaches of contract or for acts of negligence causing non-injury-related losses remains, and disputes in such regard are often proceeded with before the courts or using forms of alternative dispute resolution.

In addition, criminal liability can attach to the operation of an event should such an event breach the regulatory requirements for permits or consents, create risk of reckless endangerment, or otherwise promote, encourage or cause illegal activity (such as a breach of transport laws).

Finally, as noted above, reform in the health and safety area creates an increased and significant risk for event organisers should they fail to undertake appropriate due diligence, planning or execution of an event from a health and safety perspective.

Commercialisation of sports events

i Increasing value of 'sports rights'

Sport as a business is about the 'commercialisation' of sporting 'products' and 'rights' by sports organisations and those associated with them. As in other jurisdictions, New Zealand law allows for a range of participants in the sports sector to commercialise and profit from their sporting activity, depending upon the role they play.

Broadcast rights remain among the most valuable of sporting rights present in the New Zealand market, with the two major players being the long-standing pay-tv broadcaster Sky TV, and the relatively recent entrant into the market Spark Sport (an online content provider, backed by telecommunications company Spark (formerly Telecom New Zealand)). Unlike Australia, New Zealand has no legislation in place requiring sport to be made available on free-to-air television. In practice, state-owned broadcaster Television New Zealand, and private free-to-air broadcaster MediaWorks (which operates TV3), provide some free-to-air sports broadcasting. In addition, Prime TV (a free-to-air TV channel owned and operated by Sky TV) offers free-to-air coverage of sports, often as delayed coverage of events that Sky TV holds the principal broadcasting rights to.

The entry into the market of over-the-top broadcasting of sport in New Zealand has been a major disruptor in sports broadcasting in recent years. This started with some major sports broadcasting content, such as live English Premier League Football (EPL) and USPGA Golf, being only available in this format. Sommet Sports TV (SSTV) entered the New Zealand broadcast market for a brief period of time, with a free-to-air sports television service. SSTV's content drew largely on minority sports (e.g., the Australian Football League, surfing, bull-riding) or on alternative content for more mainstream sports (e.g., the German Bundesliga in football, the Caribbean Premier League in cricket). However, SSTV went into liquidation in December 2014 and ceased broadcasting. Spark Sport's entrance into the market has been revolutionary because of the scale at which it has been able to operate, obtaining rights for all FIA motorsport (including F1 and the WRC), international rugby (including the Rugby World Cup 2019 and European Rugby), and the EPL. In 2020, Spark Sport took legal rights to broadcast cricket from both New Zealand Cricket (NZC) and the English and Wales Cricket Board (ECB). Sky TV has recently retained its rights arrangements with New Zealand Rugby (NZR) (including in relation to the All Blacks), with a deal struck in late 2019, which now sees NZR take an ownership stake in Sky TV. The contractual landscape of sports broadcasting now sees Spark Sport and Sky as two entrenched, well-resourced players.

Outside broadcast rights, image rights, merchandising and sponsorship remain significant commercial commodities, although overall value is often limited by the relatively small nature of the New Zealand sporting market. Some New Zealand sporting brands, such as the All Blacks (rugby) and Team New Zealand (yachting), have significant global value, as evidenced by NZR's global sponsorship arrangements with Adidas and with insurance giant AIG and Team New Zealand's association with Emirates Airline. In 2016, NZR ceased its commercial relationship with Coca-Cola Amatil New Zealand Ltd (the local Coca-Cola affiliate) in favour of a relationship with Gatorade.17 While this may look like swapping one multinational beverage sponsor for another, the manner in which the Gatorade sponsorship was launched (with the All Blacks being 'welcomed' to 'the family', which included such international sports stars as Usain Bolt and Lionel Messi) indicated the increasing value of the All Blacks brand in overseas sporting markets.

At the athlete level, individual contractual arrangements for the use of image rights or for sponsorship are common. However, it is important to ensure that individual contractual arrangements do not interfere or conflict with overarching arrangements entered into by a club or NSO. In some sports, rules provide for dealing with such conflicts, and the employment arrangements between NZR and its players (represented by the NZRPA) is a good example of athletes permitted to personally endorse products or services to those that sponsor NZR.

ii Rights protection

New Zealand has strong laws relating to copyright, trademarks and other intellectual property, providing rights holders with significant legal protection against improper use. New Zealand law recognises automatic copyright protection for the creator of original works. In addition, application can be made for intellectual property protection for a range of other forms of intellectual property, including trademarks. While New Zealand law does not prohibit parallel importing of merchandise, the New Zealand Customs Service (the government agency responsible for policing New Zealand's borders) is tasked with intercepting and holding pirated and counterfeit goods, and interfaces with commercial entities with respect to this.

A significant development in New Zealand's rights protection landscape was the passage of the Major Events Management Act 2007 (MEMA). MEMA allows events designated as 'major events' to have special rights protections put in place to preserve the economic value for sponsors and commercial partners involved in the events. MEMA creates criminal offences for those who use protected words and emblems without authorisation, and creates clean zones around event venues where commercial entities that are not formally associated with the event cannot advertise. MEMA is a major tool for the avoidance of ambush marketing and for the protection of sports events' economic rights.18 Events that have operated with MEMA protection in New Zealand include the 2010 Rowing World Championships, Rugby World Cup 2011, FIFA U-17 World Cup 2015, International Cricket Council Cricket World Cup 2015 and the Rugby League World Cup 2017. New Zealand will host the women's edition of the Rugby World Cup in 2021 and the America's Cup in the same year, with both likely to be held under MEMA protections.

Sports and taxation

New Zealand has a variety of different taxation rules that are relevant to sporting organisations and athletes that carry out activities in New Zealand. Sporting organisations and athletes that are New Zealand tax residents will generally be required to pay New Zealand income tax on their worldwide income. An individual that is either present for more than 183 days in a 12-month period, or has a 'permanent place of abode' in New Zealand, will be tax resident in New Zealand. Sporting organisations will be tax resident where they are incorporated, have a head office or are centrally managed in New Zealand.

The rate of income tax applicable will depend on the particular characteristics of the sporting organisation or athlete. For most incorporated sporting organisations, a 28 per cent tax rate will apply. However, sporting organisations that are charities or non-profit bodies established to promote amateur sport may be tax exempt. Athletes are taxed at graduated income tax rates of between 10.5 and 33 per cent.

A New Zealand tax resident athlete could be either an employee or an independent contractor for tax purposes (or in some cases both). Where the athlete is an employee, their employer will be required to deduct any tax on any employment income they derive at source under New Zealand's pay-as-you-earn (PAYE) system. An independent contractor athlete will generally be required to pay tax on their income themselves, and must file an individual tax return each year.

Non-resident sporting organisations and athletes will generally only pay New Zealand tax on income that is deemed to have a New Zealand source. In most cases, the New Zealand party that makes payments to the non-resident organisation or athlete will be required to deduct the applicable tax out of payments to the non-resident sporting organisation or athlete at source under the PAYE rules. The applicable deduction rate will generally be 20 per cent and the deducted tax will generally be treated as a final tax from the perspective of the non-resident.

Most tax treaties entered into by the New Zealand government include Article 17 of the Organisation for Economic Co-operation and Development Model Tax Convention, which allows income from the activities of entertainers and sportspersons to be taxed in the country in which those activities are performed. A limited number of tax treaties include provisions that prevent Article 17 from applying to certain sporting events (e.g., league competitions in New Zealand's tax treaty with Australia). As a result of the complex nature of taxation laws, and the additional complications created by sport often being cross-border, it is strongly advised that specialist taxation advice is sought when structuring sports arrangements in or connected to New Zealand.

Specific sports issues

i Doping

Sports doping is not a criminal offence in New Zealand, although some of the substances used to dope might be regulated or prohibited under medicines or narcotics legislation. Relevant legislation includes the Medicines Act 1981 and the Misuse of Drugs Act 1975. New Zealand is a signatory to the WADA Code, and has a national anti-doping organisation in the form of Drug Free Sport New Zealand (DFSNZ).21 As noted earlier, proceedings against athletes and others for anti-doping rule violations are generally heard by the Tribunal, although some sports retain the operation of their own anti-doping tribunals.

ii Betting

New Zealand has a legal but highly regulated betting market. The New Zealand Racing Board (NZRB) is a statutory body (state-controlled) that regulates the racing industry, and manages all legal gambling on racing and sport.22 Betting is permitted on a range of sports, and legislation requires the NZRB to make payments to NSOs with respect to gambling on their sport (irrespective of whether the gambling is on New Zealand or foreign examples of the sport). This is a major source of funding for a number of New Zealand sports.

iii Manipulation

In 2014, Parliament passed an amendment to the Crimes Act confirming that any manipulation of the outcome of a sports event or any part of a sports event with the intent to influence a betting outcome would amount to a breach of the crime of obtaining by deception.

The Crimes Act (Match-Fixing) Amendment Act 2014 inserted a new Section 240A to the Crimes Act to specifically include instances of match- or spot-fixing in a sporting event as falling within the crime of obtaining by deception (Section 240) where the person involved intended to influence a betting outcome. The amendment does not, therefore, capture instances of match- or spot-fixing that are unrelated to gambling, and instead motivated by another purpose, or where the intent to influence a betting outcome cannot be made out. Anyone convicted under the law is liable to a term of imprisonment of up to seven years. As of the time of writing, no prosecutions have yet been taken under this legislation.

Outlook and conclusions

Covid-19 has created the most significant risk for legal matters in 2020 and beyond, as the cancellation and postponement of events has created issues in commercial matters, as well as sports-specific matters, such as selections. Anti-doping may also become significant, as a number of anti-doping control agencies and sports will have been unable to undertake anti-doping programmes throughout the covid-19 lockdown periods around the world, leading to non-compliance with anti-doping requirements ahead of major events such as the Olympics.

As with recent years, we remain convinced that integrity breaches remain a key risk for sports organisations in New Zealand and around the world. The potential for a doping, match-fixing or other corruption scandal to embroil an athlete or a sports organisation must remain of significant concern not only for athletes but for sports administrators and governors. If such a scandal does arise, it has the very real potential to cause irreparable reputational and financial harm to sports organisations and to the individuals involved. These risks are amplified in the covid-19 environment, with the logistical difficulties the virus creates, and the pressures put on organisations and athletes to maximise results when the opportunity to compete does arise.

A live issue in New Zealand sports at present is the question of athlete welfare, and how that is juxtaposed against the rigours and difficulties of high-performance sport. To what extent coaches' harsh treatment of athletes is an acceptable part of, and perhaps even requirement for, truly elite-level performances, and when that crosses the line into bullying and mistreatment, is a complex issue. A number of sports (such as hockey, cycling and football) have held formal inquiries into precisely this issue, and there are sure to be more issues arising in this space. Sport New Zealand is currently undertaking significant work on the issue of athlete welfare, with this issue very much front and centre. Globally, the focus on gymnastics has resulted in a new focus on this sport in New Zealand, and at the time of writing, it appears a large-scale investigation into that sport in New Zealand will shortly commence.

Maximising commercial revenue is also an ongoing issue for New Zealand sports, including in relation to the developing broadcast market. Major events, in the form of the women's edition of the Rugby World Cup and the America's Cup, both in 2021 are also firmly on the horizon. However, again, covid-19 may delay these events (ass it has already in respect of the Women's Cricket World Cup).

Any cases of sports corruption (whether flowing from the recent FIFA scandal or in relation to other sports) are likely to be closely investigated and prosecuted under existing anti-bribery and corruption laws, given the importance of sport in terms of New Zealand's economy and global image. However, a key question remains as to who would investigate and prosecute those matters. Currently, New Zealand has no overarching sports integrity body resourced and tasked with investigating matters of sports corruption other than the DFSNZ, which has as its ambit only anti-doping. This is something that is likely to be addressed in some way in the near future, although at present, matters of corruption at least appear to fall into the jurisdiction of the New Zealand Serious Fraud Office.

As sport becomes more valuable, commercial disputes are likely to increase, whether in relation to the disrupting and evolving broadcast market, or in relation to sponsorship or other commercial activity. Athlete power is also growing, and the development of athlete unions beyond the traditional powerhouses of cricket, rugby and netball remains a possibility. However, the hot topic of the moment remains integrity in sport. It is a topic that is as broad as it is significant, and it continues to be the touchstone for many of the leading developments in sports law and administration in New Zealand for now.

Footnotes

Footnotes

1 Aaron Lloyd is a partner at MinterEllisonRuddWatts. The author acknowledges the assistance of colleagues Sacha Oudyn and Charlene Cooper in preparing this chapter.

6 ibid.

7 ibid.

10 www.sportnz.org.nz/assets/Uploads/attachments/managing-sport/strong-organisations/
Nine-Steps-to-Effective-Governance-Building-High-Performing-Organisations.pdf.

19 Section 21, Human Rights Act.

20 World Rugby Handbook, Regulation 4.

23 Taken from 31 July.

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