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Eastern Bay Independent Industrial Workers Union Inc. v ABB Ltd
AC 41/08
Heard: 14 Aug 2008 - 10 Sep 2008 (3 days) Whakatane Auckland
Judgment Date: 26 Sep 2008
Court/Authority: Colgan CJ
Appearances: L Yukich ; G Service, R Barnes, AM McInally
DE NOVO CHALLENGE TO DETERMINATION OF EMPLOYMENT RELATIONS AUTHORITY - Collective bargaining - Passing on - Good faith - Prohibition on preference - Some of defendant's employee's members of plaintiff, others of another union ("EPMU") - Each union had collective agreement with defendant resulting from separate collective bargaining - Whether clause regarding payment of bargaining fee an agreement to agree and void for uncertainty - Whether defendant breached cl 1.5 in collective agreement ("ca") that prohibited automatic passing on - Whether defendant breached various good faiths obligations - Whether payment of "relationship premium" to EPMU members an unlawful preference under s9 Employment Relations Act 2000 ("ERA") - HELD - Clause 1.5 not void for uncertainty or otherwise unenforceable - Passing on not automatic - No breaches of good faith - Defendant gave unlawful preference to members of EPMU and therefore breached s9 - Remedies reserved - Challenge granted in part - Pulp mill workers
This was a partially successful de novo challenge to a determination of the Employment Relations Authority which held that the defendant did not automatically pass on terms and conditions to another union in breach of a collective agreement, did not breach obligations of good faith but did give an unlawful preference to the members of another union in breach of s9 of the Employment Relations Act 2000.
Some of the defendant's employees were members of the plaintiff, others of the New Zealand Amalgamated Engineering, Printing and Manufacturing Union Inc ("EPMU"). Each union had a separate collective agreement ("ca") with the defendant.
Clause 1.5 of the ca between the parties stated that unless agreed otherwise by the plaintiff any benefit conferred on the plaintiff's members agreed at collective bargaining and provided in the ca would not be passed on "automatically" to any employees not covered by the ca without the remittance of a bargaining fee or to the members of any union not party to the ca without the plaintiff's agreement. It did not specify how the fee would be calculated or when it would be paid.
Under s161(2) of the Employment Relations Act 2000 ("ERA") the Authority does not have jurisdiction to make a determination about any matter relating to bargaining or the fixing of new terms and conditions of employment. In Vaughan v Canterbury Spinners Ltd (cited below) the Court of Appeal held that the question was whether the disputed provision created rights which were legally enforceable and, if so, what those rights were. Mere agreements to agree incapable of creating contractual rights would preclude the intervention of the Authority or the Court.
Clause 1.5 pre-dated ss59B and 59C ERA which define the circumstances in which passing on terms and conditions reached in collective bargaining with one union to another would amount to a breach of good faith.
In December 2006, the EPMU claimed in bargaining with the defendant, without specifics, all the provisions that the defendant had agreed with the plaintiff in their bargaining. The collective agreement between the EPMU and the defendant contained provisions that were specific to the plaintiff. The defendant did not consult with the plaintiff regarding the separate collective agreements containing similar or identical terms and conditions.
During bargaining, the defendant suggested that a potential impasse could be avoided by either dispensing with the lead negotiators for both parties or progressing negotiations without them. The defendant also conveyed proposed terms of settlement to one of the plaintiff's negotiators, who was an employee of the defendant, directly rather than the plaintiff's lead negotiator, Mr Yukich (Y). The defendant's approach to bargaining, through its lead negotiator Mr Teesdale (T), was not to make any of its own claims but to respond to the plaintiff's claims.
The terms of settlement concluded between the defendant and the EPMU included a provision for the payment to EPMU members of a "relationship premium" of $4,000 before tax.
The plaintiff submitted that (i) the defendant passed on terms and conditions to EPMU members in breach of cl1.5 of the ca; (ii) irrespective of whether the defendant breached the terms of cl1.5, the defendant's failure to consult with the plaintiff about its intention to pass on was nevertheless a breach of its good faith obligations and cited cl 3.19 of the Code of Good Faith in Collective Bargaining; (iii) the defendant's attempts to displace Y as lead negotiator and to bargain directly with its members were breaches of good faith under s32 ERA; (iv) the defendant's failure to disclose any claims during bargaining was a breach of its good faith obligations under s4 ERA; and (v) the "relationship premium" that the defendant paid to EPMU members breached the prohibition on preference in s9 ERA.
The defendant submitted that cl1.5 was no more than an agreement to agree and therefore was void for uncertainty. In the alternative, the defendant submitted that cl 1.5 did not apply to the facts of the case. The defendant also claimed that the "relationship premium" was not an unlawful preference but rather the payment reflected the better relationship between the defendant and the EPMU. The defendant relied on the exceptions in ss9(2) and 9(3) ERA.
Held
(1) The obligation to pay a bargaining fee in this case was analogous to the expressed obligation in Vaughan (cited below) to negotiate and to make an offer of redundancy compensation. Clause 1.5 clearly required the payment of a bargaining fee. The plaintiff had an established right in law to such a fee if the other conditions in the clause were met. If there was a dispute between the parties, for example, about how such a fee was calculated or when it was payable, this was properly a matter of dispute resolution by them with the assistance of mediation in the first instance, but with the Employment Relations Authority having the power to settle such questions if the parties could not do so themselves. Clause 1.5 was not void for uncertainty or otherwise unenforceable under s161. (paras 18-19)
(2) Clause 1.5 was somewhat confusingly and incompletely drafted. When analysed, the provision is not a prohibition on passing on but, rather, a prohibition upon "automatic" passing on. The Court concluded that "automatic" in this sense means as a matter of course, without conscious or deliberate consideration, or, more particularly, absent a request to pass on. Automatic passing on does not necessarily mean doing so in the absence of the plaintiff's consent because clause 1.5 addressed expressly the giving of consent by the plaintiff to passing on. "Automatic" passing on of terms and conditions, settled by one union, to the members of another in a separate ca, was intended to mean that the defendant would simply offer these terms in bargaining with the second union because they had been settled with the first. However, passing on would not be "automatic" if, for example, the second union claimed these conditions for its members or even if the defendant proposed them to the second union in the course of bargaining in a trade off against other claims and in an attempt to attain a settlement with the second union. (paras 24-25, 27, 29)
(3) The Court found the defendant did pass on a number of the terms and conditions of the plaintiff's ca to the EMPU. That was because the EPMU both asked specifically for the same provisions as the plaintiff had settled and because these were substantially provided by the defendant, albeit as part of a compromise or trade-off against other claims in the bargaining. Some of the plaintiff's provisions had marginal relevance to the EPMU or its members. Their undiscriminating inclusion in the EPMU's ca tends to confirm that these terms were passed on. More difficult to determine, however, was whether such passing on was "automatic". Because terms and conditions have been passed on, it did not necessarily follow that they have been passed on automatically. The Court concluded that passing on by the defendant of the plaintiff's terms and conditions to the EPMU was not automatic as that concept was intended by clause 1.5. They were bargained over with the EPMU and agreed to by the defendant as part of a compromise in negotiations whereby the employer successfully resisted other claims made against it by the EPMU. (paras 34-35)
(4) Passing on not having been automatic, no obligation on the defendant arose to pay a bargaining fee to the plaintiff. Nor was the defendant obliged to obtain the agreement of the plaintiff to passing on because it was not automatic. (para 36)
(5) Any of the contents of the statutory code of good faith in collective bargaining, including clause 3.19 relied on, is only an element in a broader consideration of whether the parties acted in good faith towards each other. As against a generic standard developed as a guideline, the Court must consider also the particular provisions agreed upon by the parties dealing with the same subject matter. If these are in conflict, the specific provision settled by the parties must trump the more general guideline promulgated by the Minister. (para 42)
(6) The Court concluded that the parties elected to create their own arrangements for passing on that also dealt with consultation and agreement but only in certain circumstances. Where passing on was "automatic", then the parties agreed upon a predominant arrangement that did not require consultation or agreement. So the defendant's failure to consult with the plaintiff and/or to obtain its agreement to the passing on was not in bad faith as having been in breach of clause 3.19 of the Code. (para 44)
(7) The Court did not think it can be said that by failing to consult with the plaintiff or obtain its agreement about passing on, the defendant misled or deceived, or acted in a way that was likely to mislead or deceive, the plaintiff. It would only have done so had it intended to pass on automatically, or had in fact passed on automatically, without communicating this to the plaintiff. It is unreasonable to expect an employer to inform a union, with which it had an employment relationship, of all its intentions in dealing with another union in a separate employment relationship. (para 48)
(8) Considered in the round, the Court concluded that the defendant did not breach s32 by proposing Y's removal as lead negotiator. Even if one could isolate artificially one part of a defendant proposal to re-invigorate the bargaining, this was not to undermine either the plaintiff or the bargaining. (para 53)
(9) Although the defendant may have been in difficulty had it sought to bypass the plaintiff's negotiators and bargain directly with individual union members, the Court found that did not occur. The proposals were sent to an employee who was, nevertheless, a member of the plaintiff's bargaining team and whom the Court inferred would have been very unlikely to have been influenced individually by the receipt of new proposals. Nor is there any suggestion that these were intended to be, or were, disseminated to other plaintiff members at the site who were not part of the bargaining team. The Court did not accept either the bargaining or the plaintiff was undermined in breach of s32 by these actions of the employer. Nor was there any breach of s4. (para 55)
(10) The defendant's strategy was to consider the claims made by the plaintiff and to respond to these subsequently, not only issue by issue but comprehensively as a package. It was neither misleading nor deceptive, nor conduct likely to so result, that the defendant approached bargaining in this way. It was true that the defendant had no claims to make in the bargaining at the outset in the same way as the plaintiff had specific claims for changes to the current ca to advantage its members. That this may be an unusual approach by an employer to collective bargaining, either generally or in the case of these parties, does not make the employer's denial of the existence of claims by it, bad faith behaviour under s4. It would be entirely artificial for an employer having no affirmative claims in bargaining and so advising the union at the outset, to subsequently only agree to or reject the union's claims. Bargaining generally, and collective employment bargaining in particular, is a process of negotiation and compromise and not one in which a respondent to proposed change must categorise that response as an affirmative proposal from the outset. (paras 59- 60)
(11) The employer's conduct in these negotiations was not in breach of s4. Nor was this conduct by the employer in breach of the parties' s32 bargaining process arrangement. Even if it had been, the plaintiff could not have established a case for a penalty as claimed against the defendant. Section 4A sets the bar for a penalty at a very high level and none of the defendant's conduct impugned by the plaintiff would have met the tests of being deliberate, serious and sustained or with the intention of undermining the bargaining or an agreement or the employment relationship. (para 61)
(12) The Court was satisfied that the label "relationship premium" was a convenient name for an additional payment the defendant was prepared to make to the EPMU employees to settle bargaining with that union. The history of the negotiations tended to confirm this analysis. The Court found, by direct evidence and inference, that the defendant's proposal to the EPMU to identify the "relationship premium" as such was a strategy to immunise such a discriminatory lump sum payment from challenge by the plaintiff as would almost inevitably have been issued as it had in this proceeding. It followed that simply by naming a provision a "relationship premium" or the like, the onus of establishing an otherwise apparently discriminatory payment in breach of s9, cannot be discharged. (paras 65-66, 70, 72)
(13) Reflecting its real substance rather than the convenient label given to it, the "relationship premium" contravened s9(1)(b) of the Act. It was an arrangement between persons (the EPMU and the defendant) conferring on persons (EPMU members) because they are members of the EPMU, a preference in relation to terms or conditions of employment. That was in the sense that it provided for a payment based solely on membership of one union as opposed to that of another. (para 73)
(14) The real question was whether the payment was, nevertheless, saved by subs (2) or subs (3) of s9. Subsection (2) provided that a preference will not be unlawful simply because terms and conditions were different from those of another employee employed by the same employer. While the Court found that they were, there was more than simply that difference behind the so-called relationship premium. Although not permitted by law to influence overtly to which union its employees belonged, or whether they belonged to any, the plaintiff would prefer EPMU membership to plaintiff membership because of the more problematic employment relationship it had experienced with the plaintiff including in collective bargaining. Subsection (2) did not assist the defendant's justification of the payments. Nor was subs (3) engaged because the EPMU's ca did not contain the relationship premium as a term. The Court was satisfied that the payment to EPMU members of the so-called relationship premium as result of the settlement of the terms and conditions of their ca was an unlawful preference. (paras 74-76)
(15) The only statutory remedy for breach of s9 might be thought to be the recovery of a penalty against the person in breach, in this case the defendant and perhaps also arguably the EPMU which may be a party to the plaintiff's breach. It was, however, not open to the plaintiff to have those parties penalised: refer s133(1)(b) and, by way of contrast, s9 and s11, the former of which, at issue in this case, cannot be the subject of a penalty whereas the latter, although contained in the same part of the ERA 2000, can be. The Court proposed to reserve question of remedy to enable the three parties to confer in the first instance with a view to settling appropriate remedies between them. (paras 78, 80)
Result: Challenge granted in part ; Remedies reserved ; Costs reserved
Statutes considered: Code of Good Faith in Collective Bargaining (August 2005) cl 3.19
ECA s46
ERA s4
ERA s4(1)(b)
ERA s4(2)(b)
ERA s4(4)(b)
ERA s4A
ERA s9
ERA s9(1)
ERA s9(1)(b)
ERA s9(2)
ERA s9(3)
ERA s11
ERA s32
ERA s35(1)
ERA s35(3)
ERA s39
ERA s50
ERA s59B
ERA s59C
ERA s133(1)(b)
ERA s161
ERA s161(2)
Labour Relations Act 1987
Words and phrases: Automatic ; Automatic passing on
Cases referred to in judgment: Canterbury Spinners Ltd v Vaughan [2002] 1 ERNZ 255; [2003] 1 NZLR 176
National Union of Public Employees (Inc) v Asure New Zealand Limited [2004] 2
ERNZ 487
Timbercraft Industries Ltd v Otago and Southland Federated Furniture etc IUOW
[1990] 2 NZILR 626 (CA)
Vaughan v Canterbury Spinners Ltd [2001] ERNZ 399
Waikato District Health Board & Others v New Zealand Public Service Association
Inc [2008] ERNZ 80
Lou Yukich advocate for plaintiff (Eastern Bay Independent Industrial Workers Union Inc)
Pages: 6
[975431]
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Witcombe v Clerk of the House of Representatives
WC 17/08
Heard: 14 Nov 2008 - 15 Nov 2008 (2 days) Wellington
Judgment Date: 26 Sep 2008
Court/Authority: Colgan CJ
Appearances: GC Davenport ; PJ Gunn
PROCEEDINGS REMOVED FROM EMPLOYMENT RELATIONS AUTHORITY - Preliminary issue - Legal professional privilege - Parliamentary privilege - Plaintiff employed as officer in defendant's staff - Defendant asked Clerk-Assistant to begin investigation into plaintiff's conduct - Two preliminary draft reports sent to defendant's legal advisors - Soon thereafter plaintiff resigned and raised personal grievance for unjustified constructive dismissal - Whether content of draft employment investigation reports subject to legal professional and/or litigation privilege - Whether parliamentary privilege precluded consideration by Court of issues and evidence in present proceedings - HELD - Legal professional privilege extended to the copies sent to the defendant's legal advisors but not to originals or copies - Parliamentary privilege belongs to Parliament - Parliamentary privilege a constitutional principle that transcends rules of evidence - Plaintiff not entitled to rely on defendant's statements to select committee - Orders accordingly - Parliamentary officer
This judgment determined preliminary issues of privilege in proceedings removed from the Employment Relations Authority. The Court held that litigation privilege did not apply, legal professional privilege extended to original copies of draft reports sent to the defendant's legal advisors and that parliamentary privilege precluded the plaintiff from relying on statements that the defendant made to a select committee.
The defendant was an officer of Parliament whose functions and powers were established under the Clerk of the House of Representatives Act 1988 ("the CHR Act"). Under the CHR Act, the plaintiff, as part of the defendant's staff, was an officer of the House of Representatives and could be removed from his employment in the defendant's office. The CHR Act required the defendant to operate a personnel policy that complied with the principle of being a good employer by following as closely as possible, subject to the CHR Act, sections 56 and 58 of the State Sector Act 1988.
In April 2002, the committee clerk of the Finance and Expenditure Select Committee ("the FESC") sought comment from employees in the defendant's office about the contents of a questionnaire that the FESC intended to prepare and circulate. The plaintiff made proposals which were appended to the FESC's report to the House.
The defendant also made statements to the FESC which he discussed outside of Parliament.
The defendant asked his Clerk-Assistant, Mr Beattie (B), to begin an investigation into two allegations of misconduct against the plaintiff. The first was that the plaintiff attended improperly a prime ministerial press conference. The second was that the proposals appended to the FESC report was submitted improperly.
By September 2002, both parties were receiving legal advice. The plaintiff's solicitors indicated, on two occasions, an intention to commence legal proceedings due to their concern about the process by which the defendant was investigating the allegations. The defendant advised the plaintiff's solicitors of the process to be followed which the plaintiff accepted, reserving his right to issue proceedings.
On 17 September 2002, B sent a first preliminary draft of his report to his legal advisors at the Crown Law Office. The following day, B sent a revised second preliminary draft with instructions to disregard the first preliminary draft. On 19 September 2002, the plaintiff's solicitors told the Crown Law Office that they considered that the plaintiff's employment was at an end, that he had been dismissed constructively and that he intended to commence a personal grievance claim. On 24 September 2002, the defendant advised B to discontinue the investigation.
The plaintiff submitted that the first and second preliminary drafts should be disclosed. The defendant submitted that the first and second preliminary drafts could not be disclosed due to legal professional privilege, solicitor/client privilege and litigation privilege.
The defendant pleaded parliamentary privilege in relation to certain parts of the amended statement of claim. The defendant submitted that parliamentary privilege precluded the plaintiff from calling certain witnesses and leading certain evidence regarding what the defendant said before the FESC and the process by which the Chair of the FESC prepared its report. The defendant argued that to do so would call into question proceedings of Parliament. The plaintiff submitted that the defendant bore the onus of persuading the Court of the application and extent of parliamentary privilege because he had sought to invoke it. The plaintiff further submitted that the defendant had effectively repeated some of his statements to the FESC outside Parliament.
Due to the fact that the parties were officers of Parliament and as a result had an employment relationship different from most others, the Court considered whether the plaintiff had legal recourse to the statutory mechanisms for the resolution of employment disputes.
Held
(1) Parliament must be taken to have legislated expressly for employment obligations such as protecting the defendant's employees from unjustified dismissal. But it must also be taken to have intended that the statutory mechanisms for challenging such events in employment, including in the courts, would be as available to employees of the defendant as they are to other employees whose employment is not subject to the CHR Act. So the initial presumption must be that an employee of the defendant, such as the plaintiff, is entitled to the rights and protections afforded by those legislative provisions including the right to challenge the employer's acts or omissions affecting the employee's employment and that the defendant is to justify employment disadvantages or dismissals if called upon to do so. (paras 14-15)
(2) The procedures by which Parliament may allow aggrieved persons to be heard and be given remedies where such persons are affected adversely by things said or done under parliamentary privilege, extends to employees of the defendant. (para 18)
(3) The first test of legal professional privilege (litigation pending or reasonably contemplated) was met in the present case. On several occasions before 17 September 2002, the plaintiff's solicitors had threatened proceedings in the Employment Relations Authority. The spectre of pending litigation was present or was certainly reasonably contemplated by the defendant when B sent the first preliminary draft report to the Crown Law Office for legal advice on 17 September 2002. (para 32)
(4) The second necessary test was, however, more difficult for the defendant to satisfy if there was to be litigation privilege. The "dominant purpose" for which the first and second preliminary draft reports were prepared by B was not for litigation pending or even contemplated. Rather, the predominant purpose in preparing those reports was to record B's investigations and to report to the defendant to enable him to make decisions about the plaintiff's employment including, potentially, whether it was to continue. The obtaining of legal advice about litigation that had been threatened by the plaintiff's solicitors or that might even have been pending was, at best, a secondary purpose of the first and second preliminary reports prepared by B. (para 33)
(5) It was only after that investigative process had begun, and steps undertaken in it that upset the plaintiff, that there was a threat of litigation. The Court concluded that B's report, initially in the form of a draft or drafts, was not prepared in response to litigation, actually or reasonably anticipated. The dominant purpose of the report was not to assist the defendant's position in litigation but, rather, to record an investigation into allegations of misconduct. It followed that the defendant cannot assert litigation privilege in respect of the first and second versions of the preliminary draft. (para 37-39)
(6) The Court accepted that the B's preliminary draft report sent to the Crown Law Office was a communication on which advice was sought about what should prudently and sensibly be done in the relevant legal context and that any advice so given should be protected by legal professional privilege. There was no question that the advice of Crown counsel to B was privileged. (para 50)
(7) The Court concluded that the defendant was entitled to claim legal professional privilege in respect of both preliminary draft reports that were sent to the Crown Law Office on 17 and 18 September 2002. Privilege did not extend, however, to the originals or other copies of these documents that were retained by the defendant or otherwise not sent to its legal advisers. Following the reasoning in the materially analogous cases of Auag Resources Ltd & Anor v Amax Gold Mines New Zealand Ltd & Ors (cited below) and Simunovich Fisheries Ltd v Television New Zealand Ltd (No 5) (cited below), the documents were not prepared for the purpose of obtaining legal advice. The privilege that the Court found attaches to the copies sent to Crown Law would ensure that such advice as was provided to the defendant was protected from disclosure. (para 68)
(8) Parliamentary privilege is not like an affirmative defence that should be established by the proponent of it, or like an allegation of disputed fact that should be proven on the balance of probabilities by its maker. Parliamentary privilege is a pervasive principle of law that demands recognition and compliance by courts were it is identified (including by the Court itself) as being in issue. The Court did not agree that there is an evidential onus on the defendant to establish to a standard that the privilege applies and, by implication, failing which, the plaintiff's case is untrammelled. That was not least because the privilege is Parliament's, not the defendant's or indeed that of any other officer or the House including the Speaker. As the texts and cases illustrate, the privilege is that of the House and even the Privileges Committee that hears breach of privilege questions, reports ultimately to the House that determines question of privilege. (para 72)
(9) Determining and applying parliamentary privilege is not simply an evidence admissibility exercise that is in the Court's discretion and, because of s189(2) of the Employment Relations Act 2000, may be determined differently than in the ordinary courts in civil proceedings. The application of parliamentary privilege is a institutional principle that transcends the rules of evidence of particular courts. It is a principle applicable to court proceedings generally and in respect of which the Court considered there are no special statutory exemptions for the Employment Court. (para 74)
(10) The defendant's dealings with the plaintiff (and others of his employees), and the plaintiff's dealings with the defendant, are not per se subject to parliamentary privilege. The privilege is engaged when the Court is invited to examine and rule on questions that are properly the province of Parliament in its extended definition. In this case, that was principally in the form of the activities of the FESC of Parliament. The actions, omissions, and statements of and to the FESC cannot be examined critically and second-guessed by the Court. They may, however, form the background to things said or done by others outside the bubble of parliamentary privilege. Not only are there rights in law to be respected by parliamentary privilege but so, too, there are obligations. Interactions not having a real connection with the operation of the Legislature will not be subject to the privilege. (paras 172-173)
(11) The plaintiff is not entitled to rely on the truth or otherwise of statements made by the defendant to the FESC. If, however, such statements were subsequently affirmed or effectively repeated, whether in correspondence or orally and even if by reference to their original making to the Committee, and if such subsequent affirmation or repetition was in circumstances that were not privileged, then the plaintiff may rely upon these. This principle extends to the activities of B. The plaintiff is not entitled to rely upon what he says is the incorrectness of the FESC's conclusion that reports made to it were submissions. That is an issue determined by the Committee and is protected from reconsideration or contradiction by the Court. Paragraph 30 of the amended statement of claim must now be amended accordingly and the defendant must thereafter plead to it. (paras 177-178)
Result: Orders accordingly ; Costs reserved
Statutes considered: Bill of Rights 1688 art 9
Clerk of the House of Representatives Act 1988 s3
Clerk of the House of Representatives Act 1988 s18
Clerk of the House of Representatives Act 1988 s23
Clerk of the House of Representatives Act 1988 s24
Clerk of the House of Representatives Act 1988 s25
Employment Court Regulations 2000 r44(3)(a)
ERA s123(1)(ca)
ERA s189
Imperial Laws Application Act 1988
Legislature Act 1908 s242
Parliamentary Privileges Act 1987 s16(2)
State Sector Act 1988 s56
State Sector Act 1988 s58
Cases referred to in judgment: A v United Kingdom (2002) 36 EHRR 917
Auag Resources Ltd & Anor v Amax Gold Mines New Zealand Ltd & Ors HC,
Auckland, CL59/93, 17 June 1994
Awatere Huata v Prebble [2004] 3 NZLR 382
B v Auckland District Law Society [2004] 1 NZLR 326
Balabel v Air India [1988] Ch 317; [1988] 2 All ER 246
Canada (House of Commons) v Vaid (2002) 222 DLR (4th) 339
Canada (House of Commons) v Vaid [2005] 1 SCR 667
Duraphos International (NZ) Limited & Ravensdown Fertiliser Co-operative Limited
v GE Tregenza Limited HC, Timaru, CP 78/88, 26 June 1989
Commissioner of Inland Revenue v West-Walker [1954] NZLR 191
Equiticorp Finance Group Ltd v Collett (1991) 3 PRNZ 509
General Accident Fire & Life Assurance Corporation Ltd v Elite Apparel Ltd [1987] 1
NZLR 129
Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart [1985] 1 NZLR
596 (CA)
Jennings v Buchanan [2005] 2 NZLR 577
Kupe Group v Seamar Holdints Ltd [1993] 3 NZLR 209
Kupe Group v Seamar Holdints Ltd HC, Auckland, CP 2826/88, 18 July 1995
New Brunswick Broadcasting Co v Nova Scotia (Speaker of the House of Assembly)
(1993) 100 DLR (4th) 212
New South Wales Branch of the Australian Medical Association v Minister for Health
and Community Services (1992) 26 NSWLR 114
Pepper v Hart [1993] AC 593
Prebble v Television New Zealand [1994] 3 NZLR 1
Queen v Speaker, House of Representatives [2004] NZAR 585
Re Ouellet (No 1) (1976) 67 DLR (3d) 73
Saunders v Commissioner Australian Federal Police (1998) 160 ALR 469
Simunovich Fisheries Ltd v Television New Zealand Ltd (No 5) HC, Auckland, CIV-
2004-404-3903, 10 July 2007
Southwark and Vauxhall Water Company v Quick (1878) 3 QBD 315
Stockdale v Hansard (1839) 9 Ad&E1, 112 ER 1112
Three Rivers District Council and others v Governor and Company of the Bank of
England (No 6) [2005] 1 AC 610
Pages: 6
[975432]
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PGG Wrightson Ltd v Jary
CC 14/08
Heard: 5 Aug 2008, Christchurch
Judgment Date: 10 Oct 2008
Court/Authority: Colgan CJ, Shaw, Couch JJ
Appearances: DP Robinson ; KG Reid, J Costigan
POINT OF LAW CHALLENGE TO DETERMINATION OF EMPLOYMENT RELATIONS AUTHORITY - Preliminary issue - Defendant employed by company purchased as going concern by plaintiff - Defendant declined employment with plaintiff and therefore made redundant - Defendant's individual employment agreement contained restraint of trade - Whether benefit of restraint of trade in individual employment agreement can be assigned by employer and enforced against employee by a third party - If enforceable whether Employment Court had jurisdiction - HELD - The Court declined to express a view whether plaintiff entitled to enforce covenant in restraint of trade against defendant - Employment Relations Authority had jurisdiction to determine matter and Court had jurisdiction to decide challenge - Part 6A of Employment Relations Act 2000 not applicable - Questions answered
This was a point of law challenge to a determination of the Employment Relations Authority which declined to rule on whether the benefit of a restraint of trade provision in an individual employment agreement could be assigned, held that the employment institutions have jurisdiction to determine such a matter, and held that Part 6A of the Employment Relations Act 2000 had no application.
The defendant was employed by Woodhams Wool Store Limited ("Woodhams") from 1981 until 5 June 2008 when he was made redundant. The defendant and Woodhams were parties to an individual employment agreement ("IEA"). The IEA contained a restraint of trade clause. In May 2008, Woodhams entered into an agreement to sell the whole of its business as a going concern to the plaintiff.
Under the agreement for sale of the business, the plaintiff was required to offer employment to most of the employees of Woodhams, however, the defendant did not accept the plaintiff's offer. The defendant was therefore made redundant.
The parties agreed to ask the Court to answer the following questions: (i) on the agreed facts of this matter, was the benefit of the covenant in the restraint of trade contained in the IEA assignable to the purchaser of the business and enforceable by that purchaser when the vendor of the business had made the employee bound by the restraint redundant? (ii) if it is enforceable at the suit of the assignee, does the Employment Court have jurisdiction?
The plaintiff submitted that any benefit which is part of the goodwill of a business will be assignable unless there is an express agreement to the contrary.
The defendant submitted that no right or benefit arising out of an employment agreement was assignable unless it could be established that the parties to the agreement intended it to be assignable. The defendant further submitted that Subpart
3 of Part 6A of the Employment Relations Act 2000 ("ERA") changed the climate of employment law generally because it affected the rights and obligations of persons involved in the restructuring of a business in favour of the defendant. The IEA did not contain an employee protection provision as s69OJ ERA required which in the defendant's submission invalidated any attempt to transfer all or any part of the IEA including the restraint of trade provision.
Held
(1) Both counsel provided the Court with thoughtful submissions and referred the Court to a number of decided cases. The Court considered these and the several other decided cases cited to it. The Court also had regard to the numerous texts which dealt with the subject of assignment and to academic articles as well as many of the decided cases referred to in that literature. Having regard to all of these authorities, the Court was unable to discern a common thread of sufficient strength and clarity to be stated as a principle of general application to the issue in this case. The only truly common factor was that the decisions depended significantly on the particular facts of each case. (paras 12-14, 16)
(2) A general principle applicable to the assignment of proprietary rights was that the assignee cannot exercise a greater right than that which would otherwise have been exercisable by the assignor. Thus, the extent to which the plaintiff could enforce the benefit of the covenant against the defendant in reliance on the assignment was limited to the extent to which Woodhams could have done so but for the assignment. Woodhams' rights arose out of the employment agreement and were therefore part of the employment relationship. It followed that, to use the words of the High Court in the BDM Grange case, the essential character of the claim by the plaintiff is to be found in the employment relationship which previously existed between the defendant and Woodhams. The Court concluded that the Authority had jurisdiction to determine this matter and that, as a consequence, the Court has jurisdiction to decide the challenge to the Authority's determination (paras 24-25)
(3) While it appeared that Subpart 3 of Part 6A of the Act applied to the sale by Woodhams of its business and the subsequent dismissal of the defendant on grounds of redundancy, the consequences which flowed from that were specifically defined in the Act. There was no indication in the Act that Part 6A was intended to modify other aspects of the common law, such as those at issue in this case, and the Court saw no reason for such an effect to be inferred. (para 26)
(4) To the extent that Subpart 3 of Part 6A was concerned with terms and conditions of employment, it did so in the context of employees who chose to transfer to a new employer. The defendant chose not to transfer to the plaintiff, the new employer in this case. Secondly, the plaintiff's claim was based on an assignment of the obligations it was alleged the defendant owed under his existing employment agreement with Woodhams. It was therefore unconnected with the consequences of the restructuring which made Subpart 3 of Part 6A applicable. (para 27)
Result: Orders accordingly ; Costs reserved
Statutes considered: ERA s5
ERA s161
ERA s69OJ
ERA Part 6A, Subpart 3
Cases referred to in judgment: BDM Grange Ltd v Parker [2005] ERNZ 343
Conference of the Methodist Church of New Zealand v Gray [1996] 1 ERNZ 48
Gardner v Cooper HC, Auckland, CP 1360/90, 24 October 1990
Medic Corporation Ltd v Barrett [1992] 3 ERNZ 523
Post Haste Couriers Ltd v Casey HC, Invercargill, CP 83/89, 24 October 1989
Waikato Rugby Union (Inc) v New Zealand Rugby Football Union (Inc) [2002] 1
ERNZ 752
Williams v Masters (1912) 31 NZLR 1148
Pages: 3
[975461]
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