'Probate Lending' by David Horton and Andrea Cann Chandrasekher in (2016) 126
Yale Law Journal comments
One of the most controversial trends in American civil justice is litigation lending: corporations paying plaintiffs a lump sum in return for a stake in a pending lawsuit. Although causes of action were once inalienable, many jurisdictions have abandoned this bright-line prohibition, opening the door for businesses to invest in other parties’ claims. Although some courts, lawmakers, and scholars applaud litigation lenders for helping wronged individuals obtain relief, others accuse them of exploiting low-income plaintiffs and increasing court congestion.
This Article reveals that a similar phenomenon has quietly emerged in the probate system. Recently, companies have started to make “probate loans”: advancing funds to heirs or beneficiaries to be repaid from their interest in a court-supervised estate. The Article sheds light on this shadowy practice by empirically analyzing 594 probate administrations from a major California county. It finds that probate lending is a lucrative business. Nevertheless, it also concludes that some of the strongest rationales for banning the sale of causes of action — concerns about abusive transactions and the corrosive effect of outsiders on judicial processes — apply to transfers of inheritance rights. The Article thus suggests several ways to regulate this nascent industry.
They note
On December 28, 2007, Eva Bell died in Alameda County, California. She did
not create a trust, which meant that her assets should have passed through the courtsupervised
probate system to her children and grandchildren. But shortly after the
probate matter began, something happened that transformed the succession process.
Eva’s son assigned $26,100 of his expected payout from the estate to a company,
Advance Inheritance, in return for $15,000. In turn, by purchasing heirship rights,
Advance Inheritance acquired standing as an “interested person” in Eva’s probate
case. It capitalized on this privilege by successfully petitioning to become Eva’s
personal representative (the party responsible for managing her possessions). It
then evicted tenants from an apartment that Eva had owned, sold the building, and
paid itself thousands of dollars in fees from the estate.
Meanwhile, another firm, Inheritance Funding, entered into several contracts
with Eva’s other relatives, buying a $57,200 cut of the estate for a total of $39,000. The final such deal—in which one of Eva’s children sold $7,600 in inheritance rights for $5,000—came just three weeks before the probate ended, and was the equivalent of a loan with an annualized interest rate of almost 1,000%.
Firms like Advance Inheritance and Inheritance Funding lurk on the peripheries of one of the most divisive issues in American civil justice. For the last two decades, there has been a contentious debate over whether third parties should be allowed to purchase, invest in, or control legal claims. The ancient doctrine of champerty once barred strangers from obtaining an interest in pending cases. Likewise, although most rights are assignable — transferrable to others — medieval English judges refused to enforce assignments of complaints. Nevertheless, these rules have eroded over the centuries, blurring the line between causes of action and other forms of property, which can be freely divided, alienated, and pledged as collateral. Recently, venerable enterprises such as Credit Suisse and Allianz have poured money into other parties’ lawsuits, and sophisticated litigation-investment boutiques have emerged. These companies typically provide a lump sum payment to plaintiffs in exchange for a share of any future verdict or settlement. In dozens of articles in newspapers and law journals, this business model has been praised for opening the courthouse doors to low-income plaintiffs and condemned as a predatory lending practice that subsidizes vexatious litigation.
Yet despite the attention lavished on the litigation-finance industry, inheritance-purchasing companies have flown beneath the radar. No law review article has even mentioned the issue, and only one state statute expressly regulates the practice. To be sure, there are meaningful differences between assigning a pending civil claim and transferring inheritance rights. The former invites strangers into bare-knuckled adversarial proceedings, whereas the latter merely opens the door to the bureaucratic and normally non-contentious world of probate. But as Eva Bell’s estate illustrates, both transactions raise concerns about consumer exploitation and the disruptive effect of outsiders on the judicial process. And in any event, the chasm in our knowledge about probate lending is glaring. Because the death of the baby boom generation will funnel $52 trillion through the succession process in the next half-century — the largest wealth transfer in history — probate lenders will only become more entrenched and powerful.
This Article brings the probate lending industry into sharp relief. It does so by analyzing every estate administration stemming from deaths that occurred during a year in a major California county. This originally-collected dataset, which spans 594 cases, capitalizes on a state law that requires probate lenders to lodge their contracts with the court. Thus, it offers insight into a variety of issues that would normally be private, such as the frequency of loans, their terms, their effective interest rates, and whether estates with loans are more likely to degenerate into litigation than their counterparts.
This trove of empirical evidence yields three main conclusions. First, probate loans are more common than one might expect. There are seventy-seven such deals in the files. Although probate lending may be more prevalent in California than elsewhere, the fact that there are millions of probate matters throughout the nation each year suggests that there is a robust market for inheritance rights. Second, these transactions raise serious fairness concerns. Companies handed out a meager $808,500 in exchange for $1,378,785 in decedents’ property. Because these advances occurred, on average, 373 days before the lenders were repaid, the mean markup on the principal was a whopping 163% per year. Third, probate lenders are active litigants. They sought to remove or surcharge the decedent’s personal representative in nearly one-third of the matters in which they appeared. Thus, at least in this context, opening the courthouse door to third parties increases friction.
The Article then discusses the policy implications of these findings. It starts by considering whether probate loans are usurious. Usury statutes, the oldest form of consumer protection, prohibit creditors from charging excessive interest rates. Yet usury laws only govern advances that are “absolutely repayable.” Thus, most courts have exempted litigation loans from usury regulation, reasoning that firms will lose the money they have fronted if the plaintiff neither settles nor prevails at trial. We prove that probate loans involve no such contingency. Indeed, the probate lenders in our dataset recouped the principal 96% of the time. Even more remarkably, all the probate loans in our dataset that were repaid surpass California’s usury limit. Accordingly, these companies are violating the usury laws on a massive scale.
Next, the Article turns its attention to the Truth in Lending Act (“TILA”). The TILA, a federal statute, imposes strict liability upon creditors that violate its intricate disclosure mandates.” In the sole case involving probate loans, a federal court dismissed allegations that the TILA applied to an assignment of inheritance rights, reasoning that the statute does not cover “non-recourse advances.” But our data reveal that probate loans are not truly non-recourse. Indeed, lenders recover both the principal and interest in all but the most extraordinary circumstances. On top of this, we show that their disclosures routinely flout the TILA’s commands.
Finally, the Article analyzes whether probate loans violate the champerty doctrine. To be sure, unlike litigation loans, which often seek to facilitate claiming, probate loans are not usually made for the purpose of funding a lawsuit. Indeed, most estate administrations glide along without the heirs or beneficiaries filing a pleading or setting foot in court. Thus, at first blush, the presence of a third party among their ranks seems unlikely to affect the probate process. But when we excavate deeper, we find a surprisingly strong connection between loans and conflict. Our linear probability regression confirms that loans increase the odds of a contest far more than any other variable, including intestacies, holographic wills, and testators who disinherit family members. We therefore conclude that there is a stronger case for deeming probate loans to be champertous than one would think.
The Article contains three Parts. Part I surveys the rules that govern the sale of rights that are rooted in the legal system. It shows that the expansion in the market for civil claims has spilled over into the realm of decedents’ estates. Part II explains how we gathered our data and offers an overview of the probate lending industry. Part III uses insights from our study to outline ways in which courts and lawmakers can regulate probate lenders.
The New Zealand Law Commission's October 2015
Death, Burial and Cremation: a new law for contemporary New Zealand report states
In 2010, we were asked to undertake a first principles review of the Burial and Cremation Act 1964 (the Act). That Act provides a framework for the management of cemeteries, regulates the operation of crematoria (through regulations made under the Act) and provides a process for doctors to determine the cause of death when a person dies from natural causes.
2 Through an extensive consultation process on this project, we determined that the Act is now significantly deficient in a number of respects. Some of the problems we encountered simply reflect outdated legislation that is overly specific and difficult to understand. In some cases, the legislation has not kept pace with other legislative developments, such as the New Zealand Bill of Rights Act 1990, the Resource Management Act 1991 and the Local Government Act 2002. Other problems reflect general trends in society, particularly a growth in diversity from increasing immigration and the changing nature of family relationships.
3 Other key trends and problems in this sector include the following:
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Increasing use of cremation instead of burial (approximately 70 per cent of bodies are now cremated), which may reflect an increase in cremators privately operated by funeral homes.
Increasing demand for alternatives to traditional funeral arrangements and methods of disposing of deceased bodies, in particular: increasing demand for eco-options, such as eco-burial and biodegradable coffins; and increasing demand for “DIY funerals” – that is, where families engage funeral directors for only certain elements of a funeral and undertake other elements themselves. A number of cemeteries (particularly smaller rural cemeteries) are struggling to fulfil their basic management obligations, often due to a decline in volunteers.
A number of older cemeteries are facing significant costs in maintaining older style headstones and monuments.
Changes to the nature of funeral businesses, particularly in terms of offering a much wider range of services and a decline in smaller family-operated businesses.
4 Consequently, we recommend that the current Act should be repealed and replaced by new statutes. The recommendations we make in this Report for the new statutory provisions reflect the basic principles of:
.dignity of the deceased body; recognition of tikanga Māori; freedom of religion and belief; and legislative certainty and accessibility.
5 We have divided our review into four parts, reflected in the four substantive parts of this Report, which cover: death certification; cemeteries and crematoria; the funeral sector; and burial decisions.
DEATH CERTIFICATION
A new online process for determining the cause of death
6 We encountered overwhelming support for significant reform of the process for determining the cause of death and ensuring that appropriate deaths are referred to the coroner. The current process involves a plethora of paper documents, which often duplicate the required information and ask questions that are unnecessarily difficult for doctors to answer.
7 We recommend that the current documents should be combined into one online process managed by the Ministry of Health. The process should have sections covering: the verification of identity; the verification of death;
questions designed to help the doctor determine whether the death should be referred to the coroner;
the determination of the cause of death; hazards in the body; and
biographical and disposal details.
8 As much as possible, the questions should have pre-coded options to standardise responses and so reduce errors. The determination of the cause of death should be able to be sent directly from the online form to the Registrar-General of Births, Deaths and Marriages so that funeral directors will no longer be required to relay that information. Relevant parts of the form should be accessible to people who embalm, bury or cremate deceased bodies so they can check that the cause of death has first been determined.
Clarifying duties in relation to determining the cause of death
9 In addition to the problems with the forms completed by doctors after a death, we found a number of problems with the current statutory duties on doctors and funeral directors.
Extending the power to determine the cause of death to nurses
10 We received strong submissions from families and funeral directors about delays experienced in getting a doctor to certify that a death was from natural causes. The delays are caused by doctors being busy and prioritising treatment of sick patients, doctors being away, a lack of understanding by doctors of the complicated rules around when they must or must not certify the cause of death and perhaps a lack of understanding of the importance of the task of determining cause of death.
11 One of our recommendations to address this problem is that some nurses should have the power to determine the cause of death in some circumstances. This option will be particularly useful in rest homes and hospice facilities and in rural medical practices. However, we also recommend that there need to be controls around the competency of nurses to perform the task, together with support from experienced doctors.
Clarifying when the doctor must examine the body
12 The current rules around examining or viewing the body before determining the cause of death are inconsistent and often ignored. A doctor is only required to examine the body if he or she is not the doctor who attended the deceased person during their illness or if the body will be cremated. Also, we are told that doctors often only “view” the body, despite the Act requiring them to “examine” the body, because they consider that an examination will not elicit useful information and would be distressing for the bereaved family.
13 We recommend that it should be up to the attending doctor to decide whether he or she needs to examine the body in order to determine the cause of death. There will be many deaths that were expected, and examining the body is not warranted. However, if it is not the deceased person’s usual doctor who is determining the cause of death, that person should still be required to examine the body.
Clarify the timeframe and degree of certainty for determining the cause of death
14 We recommend that doctors should have a statutory duty to determine the cause of death to the best of their knowledge and belief.
15 We also make recommendations about timeframes and the degree of certainty required for cause of death certificates by doctors to help address the difficulty in getting doctors to attend to this task. Currently, the Act says that doctors must give their certificate immediately after learning of the death. That is clearly unworkable. In relation to the degree of certainty required, the current Act is very unclear. We have found that, while the antecedent and underlying causes of death can be accurately determined, the complication that actually caused the death will often be an educated opinion (or “best guess”).
16 We recommend that the new statute provides a new, more practical timeframe and clarifies the degree of certainty required of doctors. Our suggestion is that the doctor should be required to certify the cause of death to the best of the doctor’s knowledge and belief within 24 hours of learning of the death or as soon after that as is reasonably practicable.
Clarify when an alternative doctor may determine the cause of death
17 Currently, there are complicated rules as to when a doctor who was not the doctor attending the person during their illness may determine the cause of death. The result is that hospitals and other facilities often wait 24 hours for the attending doctor to return before the cause of death is determined. This is an unnecessary delay.
18 We recommend that the law should be pragmatic in this case and provide that an alternative doctor may determine the cause of death simply if the attending doctor is unavailable. However, in doing so, the alternative doctor must view the person’s medical notes and view the body.
Disposing and embalming bodies only after cause of death is determined
19 Currently, the Act states that a body may not be disposed of, nor may a person transfer the charge of the body, unless the cause of death has been determined. While we consider that the first requirement should be continued, the second requirement results in some problems. First, there are some complicated exceptions in the Act that are very difficult to understand. Second, waiting to move a body from the place of death until a doctor determines that the person died of natural causes can present practical issues, particularly when the person died in their home or in a rest home.
20 Instead, we consider that the second requirement should be repealed and replaced by a requirement that a body may not be embalmed unless the cause of death has been determined. In most cases, embalming a body is more likely to remove signs of the cause of death than moving the body from the place of death.
A national audit system
21 We found that there is likely to be a high rate of error in the determinations of cause of death in New Zealand, but the current system does very little to address this. Medical referees are currently charged with determining that cremation certification (including the cause of death) is accurate. However, they usually cannot do this confidently because they do not have access to the deceased person’s medical notes. There are currently no checks at all on the documentation when a person is buried. Also, there is no formal education for doctors certifying cause of death and no process for feedback to them on the quality of their determinations.
22 As a result, we recommend that the medical referee system should be abolished and replaced by a national audit system for cause of death determinations. Experienced medical practitioners should be appointed as “cause of death reviewers” to review a random sample of all deaths except deaths that have been referred to the coroner. Deaths that occur in hospitals could also be excluded to reduce the workload and cost if hospitals implement their own reviews of cause of death determinations. The purposes of these random sample reviews would be to:
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detect error in the determination of the cause of death;
detect deaths that should have been referred to the coroner; and
provide education and support to doctors who certify the cause of death.
23 In addition, cause of death reviewers should undertake targeted reviews designed to detect problems with certifying deaths with particular characteristics. For example, deaths occurring in a particular aged care facility could be reviewed if there was concern about a disproportionate prevalence of a particular cause of death or circumstance accompanying deaths.
24 The Ministry of Health should be responsible for this audit system, including for measuring rates of error in cause of death certification and using information gleaned from audits to educate certifying doctors.
CEMETERIES AND CREMATORIA
Unlawful burial and cremation
25 Currently, it is unlawful to bury a body in any land that is not a cemetery, a denominational burial ground, a private burial ground or a Māori burial ground if there is such a place within 32 kilometres of the place of death or place where the body has been taken for burial. We consider that the strong public interest in the controlled development of burial land requires the continuation of this requirement. However, the 32 kilometre exception should be replaced by a defence under which the defendant is not liable if he or she can show both that it was impractical to transport the body to an approved cemetery and the body was buried respectfully in another place.
26 The current prohibition on cremation elsewhere than in an approved crematorium should be continued but modernised to reflect the possibility of alternative methods of cremation or other means of disposing of bodies that may become popular in the future. We discuss outdoor cremations below.
Obligations on cemetery managers
27 We found that it is sometimes very difficult for cemetery managers to know what their statutory obligations are because the current rules are complicated and overly prescriptive. We recommend that the new statute replaces the current rules with a simple set of basic obligations that covers all managers of land in which bodies are buried, no matter what category of cemetery is in question. Those obligations should be to: ensure that cemetery land is not used for other purposes;
keep a record of every burial and forward that information regularly to the local authority; and
maintain the cemetery in a reasonable condition, having regard to how the cemetery is used by the community.
28 The first obligation, to ensure that cemetery land is not used for other purposes, will also require the manager to register the cemetery with the local authority, enter into a covenant with the local authority prohibiting the use of the land for any purpose that is inconsistent with the use of the land as cemetery and ensure that covenant is noted on the certificate of title. If the cemetery manager wishes to use the land for other purposes, the manager may apply to the local authority either to vary the covenant or for permission to disinter all of the bodies. What uses of the land are considered to be “inconsistent with cemetery use” should be determined by local authorities taking into account their own circumstances and the views of their communities.
What is cemetery land and who is the manager?
29 In order to avoid the need to determine which category of cemetery a particular cemetery falls into, we recommend that all land in which bodies are buried should be deemed to be a cemetery. However, urupā set aside as a reserve under the Te Ture Whenua Māori Act 1993 should be excluded because they are covered by that Act.
30 We also recommend that the owner of cemetery land should generally be deemed to be the manager and therefore under the obligations of cemetery managers described above. However, we recommend an exception to this rule to recognise the managers of existing trustee cemeteries (we suggest they be known as community cemeteries).
Powers in cemetery managers
31 The Act currently has a wide range of very prescriptive powers for cemetery managers. This approach should not be replicated in a new statute because it is hard to understand and unnecessary. Cemetery managers generally do not need specific powers to manage and maintain cemeteries. They only require specific statutory powers to do things that may override the rights of other people. On that basis, we recommend that the statute should provide a specific power in cemetery managers to maintain any grave, memorial, vault or tablet. This power should operate despite any bylaw or contractual provision giving the bereaved family duties and rights to maintain these things.
32 We also consider that cemetery managers should have specific powers to approve the disinterment of single graves. We discuss this further below.
Extra obligations on local authority cemetery managers
33 Most cemeteries are currently managed by local authorities, and that is likely to continue due to the large amount of land that must be tied up in perpetuity for cemeteries. In addition to the standard obligations on cemetery managers described above, we recommend that local authority cemetery managers should have some additional obligations in respect of those cemeteries as follows.
34 We described above that one of the key issues with the current law is that it does not adequately cater to the diverse needs of New Zealand’s increasingly culturally diverse population. In response to this problem, we recommend that local authority cemetery managers must consider applications from any group of people for separate burial areas within the cemetery. Currently, they are only required to consider applications from religious denominational groups.
35 We also recommend that local authority cemetery managers must create and maintain a cemetery policy that will provide certainty and transparency for the population it serves about policy choices it is making in relation to the management of cemeteries. Key amongst these policy choices is the level of maintenance to be provided for various cemeteries under its responsibility and the provision of separate burial areas for minority groups.
Local authorities’ role in relation to all cemeteries in its region
36 In addition to specific extra obligations on local authority cemetery managers, we consider that there is a public interest in local authorities having a number of duties in relation to all the cemeteries within its region.
37 Currently, local authorities have an obligation to provide cemeteries if there is otherwise insufficient provision for burial in its district. We recommend that this obligation should continue, but given the strong growth in cremation in recent decades and the high cost of land required to establish a cemetery, we recommend that the obligation should only require facilities for the disposal of bodies rather than cemeteries specifically.
38 We recommend below a new framework to describe who has the power and the duty to make post-death decisions, particularly about disposing of the body. Despite the clarity that this framework will bring, there will still be cases where there is no family member or other person to take responsibility for disposing of a deceased body. In these cases, we consider that there is a public interest in the local authority having a duty to dispose of the body. We expect that they should perform this task with the minimum of cost required to provide dignity to the body. Costs should be recoverable from the estate or, if that is insufficient, from the funeral grant from Work and Income New Zealand.
39 We propose above that all land in which bodies are buried should be subject to restrictions on the future inconsistent use of that land. However, our research found that there is no formal record of all cemeteries in New Zealand, so it could be difficult to know when land is cemetery land. We make a number of proposals to address this problem, but one proposal is that all cemetery land should be recorded on a central register or registers. We recommend that these registers should be kept by local authorities, rather than nationally, so that local authorities can provide oversight for cemeteries in their regions, can project demand for new cemeteries and can offer support to the managers of older cemeteries who may be failing to meet their obligations.
40 Currently, the power in the Act for health protection officers to inspect cemeteries is rarely exercised. This probably reflects the view that problems with cemeteries are not significant enough to warrant the expenditure of resources on regular inspections. We would agree with that conclusion. However, while a duty to inspect cannot be justified, a power to inspect is required for the rare occasions in which a local authority needs to take enforcement action against cemetery managers who are failing to fulfil the cemetery obligations.
41 Finally, we have described above that cemeteries should be maintained to at least a minimum standard. However, our research found that there are a number of small rural cemeteries run by community groups that may not be able to fulfil even this minimum requirement due to a lack of financial resources or volunteers. We recommend that, when such a cemetery fails, the local authority should be required to take over its management. The local authority could then decide on the level of maintenance required, but it should be open to it to decide to provide only a minimum level of maintenance.
Permission to disinter a body
42 We consider that providing dignity to deceased bodies and human remains requires that any interference with a body once it is buried should be done under strict controls. Consequently, it should continue to be an offence to disinter a body or remains without the appropriate consent.
43 Currently, a family wishing to disinter remains to relocate them to be closer to other family members must first obtain the permission of the Minister of Health. There are usually very limited health concerns in disinterment, and so we propose that applications for single disinterment should be simplified by requiring only the permission of the cemetery manager. When making those decisions, the cemetery manager must be satisfied that all interested relatives have been consulted and no objections have been expressed.
44 Sometimes, people wish to disinter multiple remains for the purpose of using the land for another purpose (a purpose that is inconsistent with burial). In those cases, we consider that the local authority should be the entity to provide permission unless the cemetery is a local authority cemetery, in which case, the permission should come from the Environment Court. We make recommendations for the matters that must be considered when making these decisions.
Approval of new cemeteries
45 Another key recommendation to address our finding that the current burial framework does not adequately cater to New Zealand’s increasingly diverse cultural needs is that the new statute should reduce the restrictions on the types of new cemeteries. Specifically, any person or group should be able to apply to the local authority to establish a cemetery. We envisage that this option may be taken up by people wishing to establish eco-burial grounds. Also, any person should be able to apply for burial on private land if the land in question is rural land and the cemetery is intended for the burial of no more than five bodies.
46 However, we also recognise that opening up the provision of cemeteries to private providers presents significant challenges for local authorities. In particular, it requires them to determine whether or not the land in question may be required for other purposes in the future, and if the cemeteries fail to fulfil their statutory obligations in the future, the local authority would be required to take over. Consequently, we also recommend that, in addition to relevant considerations under the Resource Management Act, a local authority should have powers to decline applications for other good reasons. In particular, it may consider: the relevant expertise and experience of the applicants;
the likely effect of the proposed cemetery on neighbours;
the likelihood that the cemetery can be maintained as cemetery land in perpetuity; and
the extent to which any risks raised by the proposed cemetery can be adequately mitigated.
Establishing new crematoria
47 There is currently a cumbersome process for establishing a crematorium under which, in addition to any resource consent, two approvals of the Minister of Health are required. We consider that the Minister’s approvals add very little to the process and should be abolished. It should be for local authorities to approve crematoria through the ordinary planning and resource consent processes.
Outdoor cremations
48 Continuing to have a mechanism to approve outdoor cremations is an important aspect of recognising the diversity of burial needs in New Zealand. However, we consider that this option should not be limited to religious denominations—rather, it should be the sincerity of the application that is relevant. It should be for local authorities to approve outdoor cremations, rather than the Ministry of Health, because this is largely a land use issue and the health concerns are small.
A duty to treat deceased bodies or remains with respect
49 Section 150(2) of the Crimes Act 1961 provides an offence of improperly or indecently interfering with or offering an indignity to any dead human body or human remains. We have found that there is a range of behaviour that is disrespectful to deceased bodies or remains, but that is not prosecuted under s 150(2), probably because the penalty for that offence is a maximum term of imprisonment of two years. Such behaviour includes treating a body in a way that is designed to cause cultural offence or the inappropriate storage of bodies.
50 We consider that the new statute should create a new duty in every person to treat any dead human body or human remains with respect. That duty should be supported by an offence punishable by a maximum fine of $10,000. This offence is designed to capture lower-level offending than is prosecuted under s 150(2) of the Crimes Act.
Disposing of the body in a reasonable time
51 There is currently a requirement in the Act to dispose of a body within a reasonable time. However, it is not necessarily clear on whom that obligation falls or what amounts to “a reasonable time”. We propose that the requirement should be continued, but the obligation should fall on the person who has the duty to dispose of the body. We describe below our proposals for clarifying where that duty should lie. Furthermore, the requirement should be to dispose of the body “without undue delay, taking into account the mourning needs of the bereaved and any ceremonies to be performed”. This timeframe should provide more clarity yet sufficient flexibility to accommodate the different cultural needs of the bereaved family.
THE FUNERAL SECTOR
52 Our consultation and research did not reveal evidence of widespread problems of abuses in the funeral services sector. On the contrary, the vast majority of those operating in this industry do so with integrity and to high standards. However, we did encounter concerns in a couple of areas that we consider justify new statutory provisions.
Enhancing the registration system
53 We found that consumers of funeral services often have an inaccurate expectation that the legislation provides assurances of high standards in this industry. That expectation, combined with our findings that these consumers can be particularly vulnerable due to their grief and that problems in this sector often cannot be put right or adequately compensated for, provides adequate justification for low-level regulation of this sector.
54 While the current system requires no prerequisite conditions to registration as a funeral director, we consider that, in future, the statute should require an applicant for registration to demonstrate the absence of certain serious convictions, the absence of other conditions that would make a person incompetent to provide funeral services and that the applicant is adequately qualified to provide funeral services.
Absence of convictions
55 After analysing a range of legislative registration schemes for other industries, we have formulated a list of offences that we consider will disqualify only people with serious and relevant offences and that requires a minimum amount of discretion by the registration authority. That list is: a conviction for an offence against section 150 of the Crimes Act;
a conviction for dishonesty (as defined in the Crimes Act) within the previous 10 years;
a conviction for an offence under Part 1 (relating to unfair conduct) or subparts 1 or 2 of Part 4 (relating to layby sales and uninvited direct sales) of the Fair Trading Act 1986 within the previous 10 years; or
a conviction resulting in the imposition of a term of imprisonment of three years or more; or
a conviction within the previous five years resulting in the imposition of a term of imprisonment of six months or more.
Absence of other disqualifying conditions
56 Similarly, we consider a person should be disqualified from registration as a funeral service provider if they: are under 18 years of age;
are an undischarged bankrupt or are subject to subpart 4 of Part 5 of the Insolvency Act 2006;
have already had their licence cancelled or suspended under the Act;
have been prohibited from being a director, promoter or manager of a company;
are subject to a property order under the Protection of Personal and Property Rights Act 1988;
are a person in respect of whom a personal order has been made under the Protection of Personal and Property Rights Act 1988;
are subject to a compulsory treatment order under the Mental Health (Compulsory Assessment and Treatment) Act 1992; or
have a conviction for an offence under the Burial and Cremation Act 1964 or the new statute.
Qualifications
57 Finally, a person should be able to demonstrate that they are adequately qualified for registration if they hold a relevant qualification prescribed by regulations or pass an examination that tests their knowledge of:
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the process of treating a body after death, including any health risks involved and how to deal with these;
legal obligations and how to fulfil these in practice; and
different cultural perspectives on how to put these matters into practice.
58 In addition, the statute should deem that people who have been providing the relevant funeral service for a period of five years are adequately qualified.
Who must be registered?
59 The aim of this enhanced registration process is to ensure that unsuitable people are not practising in the industry. Consequently, it should be the people providing funeral services that must be registered, not the businesses.
60 The funeral service industry generally operates on the basis that new entrants first gain employment with a funeral service business before going on later to gain qualifications. We consider that this system should be allowed to continue, provided that all unregistered people are supervised by a registered person.
61 Finally, we have given some thought to the range of funeral service providers that must be registered. First, it should cover people who provide funeral services as a business, not people who voluntarily provide these services. Second, it should cover funeral services that involve contact with or custody of a deceased body or involve contracting directly with the consumer. It should not cover the mere provision of accessories or equipment nor celebrant or organisational services without those additional elements.
Duties on funeral service providers
62 In addition to new restrictions on who may be registered to provide funeral services, we recommend that the new statute should impose a number of duties on the managers of funeral service businesses. It is appropriate that the managers of funeral businesses are responsible for these duties because the duties depend upon strong business processes that an individual employee may have limited ability to control. The duties are to ensure that: records are kept in respect of every human dead body in the funeral business’s custody; the identity of a body is maintained while it is in the custody of the business;
all unregistered employees are directly supervised; and
the business holds unclaimed or disputed ashes for at least 10 years.
Mandatory disclosure of component prices
63 Through our consultation, we encountered widespread concern about the communication of the costs of funeral services. Funeral directors generally advise on costs after meeting with consumers and discussing their needs. We heard complaints that the component prices of funeral packages were not itemised, that costs were added to the invoice without further discussion with the consumer and that the “professional services fee” contained costs for services that the consumer neither wanted nor asked for. These problems meant that consumers often felt that it was not clear what was included in the cost of a funeral; it was difficult to compare prices between funeral service providers; and it was difficult to negotiate for only some of the elements of a funeral package.
64 We consider that these problems and the vulnerable nature of consumers of funeral services warrant some legislative controls to provide more protection for those consumers. Specifically, funeral service providers should be required to publish and make available a price list of all the funeral goods and services it provides, including: a description and total price of funeral goods and services offered; a list of any service fees charged by the funeral service provider;
the maximum price that a funeral service provider charges for funeral goods and services; and
any particular items required by regulations made under the new statute.
65 Prior to entering an agreement for the supply of funeral goods or services, the funeral service provider should also be required to give the consumer a statement of the costs of the funeral. That statement of costs should set out: the cost of each of the goods and services to be supplied;
the cost of any disbursements;
the cost of any service fees;
if the goods and services to be supplied is a package, the description of each item in the package and a total cost of the package; and
how the consumer may make a complaint.
BURIAL DECISIONS
66 Currently, the rules covering the powers and duties to make decisions after a death as to how the body should be dealt with are found in the common law rather than statute. They have recently been clarified in the high-profile case of Takamore v Clarke. In that case, the Supreme Court said that:
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the executor (if one is appointed) has the duty to dispose of the body;
if no executor is appointed, the person who is the potential administrator of the estate (under the Administration Act 1969) has that duty;
when making the decisions, the decision-maker must take account of the views of those close to the deceased that are known or conveyed to him or her (including any cultural, religious or spiritual practices);
a decision may be challenged in the High Court;
the role of the Court under this jurisdiction is to determine what is appropriate (rather than whether the decision is reasonable); and
in making that determination, the Court must consider:
_ the nature and closeness of the deceased’s relationships to relevant family members and to any proposed location for burial;
_ tikanga in relation to burial practice as well as other important cultural, spiritual and religious values; and
_ any wishes expressed by the deceased person.
67 We consider that while this clarification of the common law brings some certainty to the law, in a number of key ways, it does not go far enough in reflecting public expectations as to how these decisions should be made in practice. Consequently, we recommend that there should be new statutory rules establishing who may make these decisions; how they should be made; and how they should be dealt with by the courts if recourse to the courts is sought. In making these recommendations, we aim to ensure that:
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the rules bring clarity and certainty to this issue;
the rules reflect public expectations of those decisions are made in practice;
any wishes expressed by the deceased are followed wherever practicable; and
a space is open for tikanga and other relevant cultural practices to operate as much as possible.
Compliance with the deceased’s wishes
68 It is not uncommon for a person to express to relatives or friends their wishes as to how their funeral should be conducted or how their body should be dealt with. Currently, the law does not recognise those wishes, so the person making the decisions can override them, even if they are unequivocal and reasonable. Of course, in practice, they will usually be taken into account and often complied with.
69 We have found that there is an increasing legal and philosophical acceptance that the wishes of the individual are important and must hold considerable weight. This reflects the importance given to individual autonomy. Consequently, we propose that if a person has expressed their wishes in writing, those wishes must be given effect to unless there is a compelling reason not to do so. Such reason might be that the wishes are unreasonable or impractical, including that there are insufficient funds in the estate to provide for them. If the wishes have been expressed but not in writing, they must be taken account of by the person making decisions, but they should not be binding, given the lack of certainty that may surround verbally expressed wishes.
Appointment of a deceased’s representative
70 Of course, what is considered to be a “compelling” reason not to follow the wishes of the deceased will depend upon the views of the person making the decisions. We do not consider that a tighter legal test is possible, given the vast range of circumstances that it will cover. For this reason, we propose that the new statute should enable people to appoint a trusted person as a “deceased’s representative” to make decisions about the funeral and dealing with their body after their death. A trusted appointed person is much more likely to prioritise the wishes of the deceased person when faced with countervailing considerations. By appointing a deceased’s representative, a person will have assurance that their wishes will be carried out.
71 A deceased’s representative should be appointed in writing and the person must consent to the role. In addition to having the right to make decisions about funeral arrangements, how the body should be disposed of and how any remains of the body should be dealt with, the deceased’s representative should have the right to custody of the body to facilitate those other decisions. He or she should also have the duty to dispose of the body within a reasonable time.
The role of the executor and a new framework for burial decisions
72 As we described, currently, if a person has a will and so has appointed an executor of that will, that person has the power and duty to make decisions about the body and about funeral arrangements if the family cannot agree, in addition to administering the deceased person’s property. We consider that this rule should continue (and be reflected in statute), but it should be subject to the overriding right of any deceased’s representative appointed by the deceased person before their death.
73 Under the proposed framework, if a person has both a deceased’s representative and an executor of their will, the deceased’s representative will make the decisions about the funeral and the body, leaving the executor to administer the estate. If no-one has been appointed to either of these roles, any member of the deceased person’s family should have the power to make the decisions. If a funeral director receives instructions from one family member, he or she may rely on those instructions unless the director has reason to believe that another person has been appointed as the deceased’s representative or executor or that there are challenges to the instructions.
74 If a person dies without appointing a decision-maker and there are no family members available to make the decisions, the statute should provide a power for any other person to make the decisions. If there is no-one stepping forward to arrange the funeral, the public interest requires that some public agency has a duty to provide for the disposal of the body in a reasonable timeframe. We consider that local authorities are best placed to do this. The costs should be minimal and should be covered by the estate or, if that is insufficient, the funeral grant from Work and Income New Zealand.
Jurisdiction of the court
75 While we consider that the proposals above increase certainty and decrease the likelihood of irreconcilable disputes by establishing a framework for who may make burial decisions and providing that any written wishes of the deceased person must be given effect to, there may still be disputes that need to be resolved by the courts.
76 Currently, only the High Court may resolve these types of disputes. We consider that the Family Court or the Māori Land Court may be better placed to resolve some types of burial disputes. For example, the Family Court has expertise in dealing with families in dispute who are likely to have an ongoing relationship after court proceedings. The Māori Land Court has expertise in dealing with burial disputes that involve consideration of tikanga.
77 For these reasons, we propose that a person may apply to the High Court, the Family Court or the Māori Land Court to resolve a burial dispute. Which court is chosen will depend upon the nature of the issue in dispute and other factors such as timing. However, the Family Court or the Māori Land Court may only hear the dispute if both parties agree to that jurisdiction. If they do not agree, only the High Court may resolve the issue.
78 In exercising this jurisdiction, a court must take account of a number of statutory considerations, including: the deceased’s wishes;
the views of members of the deceased’s family group;
relevant cultural considerations including tikanga Māori; and
the practicality, cost and timeliness of any proposed burial arrangements.
Leaving a space for tikanga to operate
79 One of the key questions of this review is how tikanga Māori should be given effect to in burial decisions. Tikanga prescribes a number of practices and decisions that must happen after the death, including that relatives must accompany the tūpāpaku (the body) to the marae or home and that visitors make a tono or challenge for the right to bury the body. Under tikanga, these rules apply to a deceased person irrespective of their expressed desire for that to happen.
80 The Supreme Court in Takamore v Clarke held that tikanga is a value that should be taken into account where relevant to the burial decision. It is clear to us also that tikanga must be expressly recognised in New Zealand law on burial. However, balancing the interests of tikanga alongside legal certainty and individual autonomy has been a key challenge of this review. We consider that the proposed recommendations for burial decisions provide a framework of laws that creates space for tikanga to apply as much as possible as follows:
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A person who wishes to ensure that decisions about their funeral and body are made in accordance with tikanga may appoint a trusted person as a deceased’s representative to ensure that happens. For example, they may appoint a kaumātua from their hapū.
Whoever makes decisions about the funeral and the body after a death, whether a deceased’s representative, the executor or the family, must take account of tikanga Māori when that is appropriate. This means that if the deceased person is Māori and tikanga considerations are raised in respect of those decisions, tikanga cannot be ignored.
If there is an irreconcilable dispute, the parties may apply to the Māori Land Court to determine the dispute. That Court is much better placed to determine issues involving tikanga than other courts. However, if the parties do not agree on the Māori Land Court, the matter must be heard in the High Court as is currently the case.
Whichever court is asked to determine a burial dispute (whether the High Court, the Family Court or the Māori Land Court), when making its decision, that court must take account of tikanga Māori or other cultural considerations
