Aviation Workers United Inc v Chief Executive of the Ministry of Business, Innovation and Employment
[2023] NZHC 1463
•13 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-802
[2023] NZHC 1463
UNDER Section 14(2) of the Crown Proceedings Act 1950 BETWEEN
AVIATION WORKERS UNITED INC
First Plaintiff
ELLA VEVE
Second PlaintiffSEPASITIANO ATONIO
Third PlaintiffTHOMAS HARRY D’CRUZ
Fourth Plaintiff continued: .../2
AND
THE CHIEF EXECUTIVE OF THE MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT
Defendant
Hearing: 1 June 2023 Appearances:
M O’Brien for the plaintiffs
W Aldred and K Fitzgibbon for the defendant
Judgment:
13 June 2023
JUDGMENT OF GORDON J
This judgment was delivered by me
on 13 June 2023 at 2.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel: M O’Brien, Barrister, Auckland
Halliwells Lawyers Ltd, Hawera W Aldred, Barrister, Wellington
Crown Law, Wellington K Fitzgibbon, Barrister, Wellington
AVIATION WORKERS UNITED INC v CHIEF EXECUTIVE OF THE MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2023] NZHC 1463 [13 June 2023]
…/2
PING XUE
Fifth Plaintiff
IRENE FONG
Sixth Plaintiff
ERLAN RUSLIANTO
Seventh Plaintiff
MANDEEP KAUR
Eighth Plaintiff
LAFELE LAOA
Ninth Plaintiff
ZHAOKE LI
Tenth Plaintiff
PHIMCHAI SAE-KHOO
Eleventh Plaintiff
DENDAO SAE-KHOO
Twelfth Plaintiff
MALIA TUAMOHELOA
Thirteenth Plaintiff
SHUANG GOODGER
Fourteenth Plaintiff
ALANA WANG
Fifteenth Plaintiff
NARAYAN MESTRY
Sixteenth Plaintiff
ZHAOKE LI
Seventeenth Plaintiff
ANTHONY RUPS MIRANDA SUTHARSHINI
Eighteenth Plaintiff
JEFF CHAK FAI YEW
Nineteenth Plaintiff
MAYUR SAVANI
Twentieth Plaintiff
AMANDEEP SINGH
Twenty-first Plaintiff
DANH KEO
Twenty-second Plaintiff
ASHIF ALI JFRAZ
Twenty-third Plaintiff
BHAJMAN HUNDAL
Twenty-fourth Plaintiff
IULIANA HUNT
Twenty-fifth Plaintiff
TERAI KAMANA
Twenty-sixth Plaintiff
PALAKSH KOTIN
Twenty-seventh Plaintiff
ROSALINA LEAENA
Twenty-eighth Plaintiff
JUDY LEE
Twenty-ninth Plaintiff
RUTH SALU LEPUPA
Thirtieth Plaintiff
VALUESE LEPUPA
Thirty-first Plaintiff
LI-O LIAO
Thirty-second Plaintiff
SUNNY MALHOTRA
Thirty-third Plaintiff
DIVYANG MANIYA
Thirty-fourth Plaintiff
JOHN MATSUOKA
Thirty-fifth Plaintiff
ARTI MONPARA
Thirty-sixth Plaintiff
SELLIAH NESUM
Thirty-seventh Plaintiff
BAXTER PEPE
Thirty-eighth Plaintiff
HIEU TRAN
Thirty-ninth Plaintiff
SUPAWITH PRIWON
Fortieth Plaintiff
MAINE SAMUELA
Forty-first Plaintiff
RU SAMUELA
Forty-second Plaintiff
SUKHJEET KAUR SANDHU
Forty-third Plaintiff
MANDEEP SAREEN
Forty-fourth Plaintiff
INDIKA SEDARA DESAPRIYA
Forty-fifth Plaintiff
DEEPAK SEHGAL
Forty-sixth Plaintiff
ANA SILIPULE
Forty-seventh Plaintiff
MATHEW SIMANU
Forty-eighth Plaintiff
HARJOT SINGH
Forty-ninth Plaintiff
WILKIE SMITH
Fiftieth Plaintiff
JHAI TALAGI-AHOLIMA
Fifty-first Plaintiff
NAAMA TASESA
Fifty-second Plaintiff
ILENE UNE
Fifty-third Plaintiff
AMRITPAL SINGH UPPAL
Fifty-fourth Plaintiff
NAVEEN VASHISHT
Fifty-fifth Plaintiff
JAMES VITAL
Fifty-sixth Plaintiff
HUIPING WU
Fifty-seventh Plaintiff
YING LIANG ZHAN
Fifty-eighth Plaintiff
YEFENG ZHENG
Fifty-ninth Plaintiff
AKHIR ZULKIFLIE
Sixtieth Plaintiff
JASPREET KUMAR
Sixty-first Plaintiff
JAMES PAYNE
Sixty-second Plaintiff
TELESIA SIONE
Sixty-third Plaintiff
HENNASEOSNI SEALIIMALIETOA
Sixty-fourth Plaintiff
ELENA MASYUK
Sixty-fifth Plaintiff
TARAMATI PATEL
Sixty-sixth Plaintiff
[1] This is a decision on an application for an interim injunction by the first plaintiff, Aviation Workers United Inc (the Union), and sixty-five current and former employees1 of Gate Gourmet New Zealand Ltd (Gate) which provides airline flight catering services to various airlines.
[2] The plaintiffs seek orders that the defendant, the Chief Executive of the Ministry of Business, Innovation and Employment (Chief Executive) will instruct the Labour Inspectorate that it will not, in any way, advise Gate that:
(a)Gate has complied with the Enforceable Undertaking dated 20 October 2022; or
(b)Gate has rectified its breaches of the Holidays Act 2003 as outlined in the Enforceable Undertaking; or
(c)Gate has otherwise completed its obligations under the Enforceable Undertaking; or
(d)Gate is no longer bound by the Enforceable Undertaking.
[3]The Chief Executive opposes the application.
Background
[4] In 2019, Varsha Mistry, a Principal Labour Inspector2 employed by the Ministry of Business, Innovation and Employment (MBIE),3 carried out an investigation into Gate after Gate came to the attention of the Labour Inspectorate in May 2019 following a complaint by the Union. The Union’s complaint raised a number of issues about Gate, most of which pertained to individual contractual entitlements rather than minimum employment standards, and were therefore outside Ms Mistry’s jurisdiction as a Labour Inspector. However, some of the allegations did
1 The proceeding lists sixty-six individual plaintiffs but it appears that the tenth and seventeenth plaintiffs are the same person.
2 Ms Mistry was promoted to Principal Labour Inspector in April 2023 but at the time of the investigation, was a Labour Inspector.
3 Under the Employment Relations Act 2000, s 223, the Chief Executive has the power to designate employees of MBIE as Labour Inspectors and provide them with a warrant of designation.
relate to alleged breaches of minimum standards, primarily those in the Holidays Act 2003.4
[5] Ms Mistry commenced her investigation promptly in June 2019 and completed it in November 2019. She concluded that Gate had breached a number of minimum employment standards:
(a)section 16 of the Holidays Act – entitlement to four weeks paid annual holidays;
(b)section 22 of the Holidays Act – calculation of annual holiday pay if annual holidays taken in advance;
(c)section 28 of the Holidays Act – when annual holiday pay may be paid with employee’s pay;
(d)section 49 of the Holidays Act – payment if employee does not work on public holiday;
(e)section 61 of the Holidays Act – alternative holiday may be exchanged for payment; and
(f)section 65(2)(a)(ii) of the Employment Relations Act 2000 – form and content of individual employment agreement.
[6] Ms Mistry decided that the most appropriate way to address the breaches she had identified was to enter into an enforceable undertaking5 with Gate.
[7] An enforceable undertaking is a written undertaking entered into between a Labour Inspector and an employer, whereby an employer undertakes that it will, by a
4 Under the Employment Relations Act, s 223A, the functions of a Labour Inspector include: determining whether the provisions of the relevant Acts (which include among others – the Employment Relations Act 2000, the Holidays Act 2003, the Minimum Wage Act 1983, and the Wages Protection Act 1983) have been complied with; taking all reasonable steps to ensure that the relevant Acts are complied with; monitoring and enforcing compliance with employment standards; and performing any other functions conferred by or under the relevant Acts.
5 Employment Relations Act, s 223B.
specified date, rectify a breach of any provision, pay money owed to an employee under legislation, or take any other action the Labour Inspector determines is appropriate.
[8] If an employer fails to comply with the terms of an enforceable undertaking, the Labour Inspector can seek compliance orders and penalty orders in the Employment Relations Authority.6
[9] In summary, between 2020 and 2022 Gate entered into three separate enforceable undertakings with Ms Mistry as follows:
(a)an enforceable undertaking dated 8 October 2020 whereby Gate was to calculate the arrears owed to its current and past employees (2020 EU);
(b)a second enforceable undertaking dated 18 October 2021 providing for the calculation of arrears owed (2021 EU); and
(c)a third enforceable undertaking dated 18 October 2022 which sets out a remediation process for the identified arrears (2022 EU). Under that process Gate must pay all current employees and use reasonable endeavours to contact and pay former employees owed arrears. The final deadline for completion of these actions under the 2022 EU and for Gate to supply Ms Mistry with evidence of compliance was 28 April 2023.
[10]I refer to each of those undertakings in further detail below.
2020 EU
[11] In the audit undertaken by Ms Mistry only a very small sample of the employee base was reviewed. It is apparent that Ms Mistry considered there were likely to be wider issues, as indicated by cl 1.3 of the 2020 EU which is as follows:
Given the scope of the Employment Relations Act 2000 and the Holidays Act 2003, there is a possibility that the employees selected may not be indicative
6 Employment Relations Act, s 223C.
of the entire workforce. It is probable that due to the small sample size of employees reviewed, the payroll issues identified do not cover all issues in the end-to-end payroll system and with all employees.
[12] I set out the above clause because in the affidavit evidence for the plaintiffs and in the plaintiffs’ submissions, there is a suggestion of bias on Ms Mistry’s part towards the employer. This is but one example which indicates otherwise.
[13] Ms Mistry says the purpose of the 2020 EU was to require Gate to review its records for all current and past employees from 14 June 2013 onwards (that date being the date of Gate’s incorporation in New Zealand) in order to establish the arrears owed arising from the Holidays Act breaches referred to above.
[14] The start date for the review encompassing the entirety of the period from when Gate was first incorporated in New Zealand further acts to contradict a suggestion of bias in favour of the employer.
[15] There are a number of acknowledgements by Gate in the 2020 EU including that:
(a)the undertaking was given willingly by Gate;
(b)Gate had been advised by the Labour Inspector that it could not offset overpayments against underpayments and that any deductions to an employee’s pay needed to comply with the Wages Protection Act 1983;7
(c)in the event the 2020 EU was not fully met, certain enforcement actions could occur;8
(d)the 2020 EU did not affect the Labour Inspector’s power to investigate future conduct of the employer; and
7 A copy of the Labour Inspector’s Position Statement – “Accounting for Overpayments through Holidays Act Re-calculations” is attached as Appendix A to the 2020 EU.
8 A compliance order sought in the Employment Relations Authority under s 137 of the Employment Relations Act; enforcement under ss 223C and 141 of the Employment Relations Act; and action in the Employment Court.
(e)the 2020 EU did not prevent an affected employee or their representative from taking their own action if the Labour Inspector chose not to enforce or seek remedies to the extent that the legislation allowed them to do so.
[16] It was a condition of the 2020 EU that within 60 days of its completion, Gate would agree to enter into a subsequent enforceable undertaking which would encompass a remedial plan for payment of the identified arrears for current and past employees.
[17] The completion date for the 2020 EU was 16 April 2021 but with provision for the Labour Inspector to agree to a process of renegotiating the completion date if Gate provided “significant and reasonable grounds for failure to meet that date”.
[18] Ms Mistry granted an extension and notified Gate on 8 March 2021 with the new deadline for completion of the 2020 EU becoming 16 October 2021.
[19] Ms Mistry said the six month extension was granted following discussions with her manager. She says she was satisfied that there were significant and reasonable grounds to grant an extension given the complexity of the calculations involved. Ms Mistry says in her experience, it is difficult to accurately estimate at the outset the amount of time that it will take to perform large-scale payroll reviews and calculations. She says it is not unusual for extensions to be granted in those circumstances and is why the terms of the 2020 EU expressly included provision for an extension.
[20] Ms Mistry further says, at that point, Gate had been co-operative with her investigation and enforcement action to date. Her view was that it was better to allow Gate the time it needed to complete the review and calculation of arrears accurately, rather than to rush things and risk mistakes being made.
[21] Ms Mistry refers to the statement by John Matsuoka, the President of the Union, in his first affidavit of 28 April 2023 where he asserts Ms Mistry intentionally failed to provide the Union with an opportunity to be heard on the decision to extend the completion date. Ms Mistry acknowledges she did not consult with the Union
before deciding to grant an extension but says the reasons for that were that the Union was not a party to the 2020 EU, and she did not consider that the Union’s input was necessary on this particular matter as the issue was with Gate’s resourcing and the volume and complexity of work involved.
[22] In July 2021 Gate requested a second extension to complete the review and calculation undertakings in the 2020 EU. Ms Mistry says Gate had recently engaged a third-party payroll specialist, Integrity1, to assist Gate with its compliance and Integrity1 needed further time to complete the review and calculations. Ms Mistry says the fact that Gate had instructed a third party to manage the review and calculations process, and was paying for this, demonstrated to her that Gate was serious about complying with the 2020 EU. She, therefore, decided a further extension was justified.
[23] Ms Mistry disagrees that she did not seek feedback from the Union in relation to this extension. In support of this, Ms Mistry annexes correspondence she and her colleagues had with the Union giving them time to provide feedback on the proposed 2021 EU, specifically in relation to the financial guarantee the Labour Inspectorate would seek from Gate.
2021 EU
[24] As a consequence of the decision to grant a second extension, Ms Mistry entered into a second enforceable undertaking with Gate. The 2021 EU came into force on 18 October 2021. It was a continuation of the 2020 EU in that it repeated the requirement that Gate was to review records for all current and past employees from 14 June 2013 and was to calculate the arrears owed for its identified breaches of the Holidays Act. The date by which Gate was required to complete its calculations and provide evidence of compliance was 31 March 2022.
[25]A change from the 2020 EU was that the 2021 EU required Gate to transfer
$575,000 to be held on trust by the Labour Inspectorate for the benefit of the employees’ owed arrears. The Labour Inspectorate was to hold those funds on trust and would release the funds back to Gate once a subsequent enforceable undertaking containing a remedial plan for the payment of arrears had been agreed. Ms Mistry
says the purpose of requiring a financial commitment from Gate was to alleviate concerns raised with her by the Union regarding Gate’s solvency.
[26] Ms Mistry says the Labour Inspectorate initially looked at securing $100,000 from Gate, but following concerns raised by the Union, it was raised to $575,000. That amount was the estimate provided by Integrity1 for the total arrears owed by Gate.
[27] Ms Mistry says on Friday 15 October 2021, Gate paid $575,000 to the Labour Inspectorate trust account.
[28] Then, on 31 March 2022, Gate provided her with evidence that it had completed its review and calculations. In accordance with cl 3.2.4 of the 2021 EU, Ms Mistry requested a random sample of employees and reviewed the actual calculations of those employees’ leave entitlements. Ms Mistry says following some discussions with Gate about the calculations they had applied, and some subsequent adjustments, the Labour Inspectorate was satisfied that the arrears had been calculated correctly.
2022 EU
[29] The 2022 EU was signed on 18 October 2022 and remains in force. Its purpose is to provide for remediation of the arrears calculated in the 2020 and 2021 EUs. Following completion of the 2021 EU, it was established that Gate owed approximately $985,480.59 in arrears to 45 current employees and 315 former employees.
[30] The 2022 EU does not specify how many employees must be paid for the undertakings to be met. Gate is required to provide evidence of payments made within the prescribed timeframes and must also provide evidence to demonstrate it has used “reasonable endeavours” to contact past employees.
[31] On 9 December 2022, the Labour Inspectorate released the $575,000 that was being held on trust to Gate for the sole purpose of enabling Gate to pay the identified arrears.
Payment
[32] Clause 3.1.3 of 2022 EU required that Gate pay arrears to the following persons by 16 December 2022:
(a)current employees of Gate, listed in Appendix B to the 2022 EU; and
(b)former employees of Gate, listed in Appendix C to the 2022 EU, where Gate had received that past employee’s information by 30 November 2022.
[33] Clause 3.3 provided that Gate was to provide evidence of compliance to Ms Mistry by 20 December 2022.
[34] Gate paid outstanding arrears to all current employees by 16 December 2022. That is not disputed by the plaintiffs. Gate also paid ten former employees in the first tranche and paid all Union members, including former employees in advance of the first tranche deadline.
[35] Clause 3.1.4 of the 2022 EU provided that where Gate received information from past employees specified in Appendix C after 30 November 2022, it was to pay arrears on 20 February 2023, 20 March 2023 and 20 April 2023.
[36] Clause 3.4 provided that Gate was to provide evidence of compliance to Ms Mistry by 28 April 2023. This included evidence of arrears payments for a selection of employees Ms Mistry would randomly select; evidence showing that reasonable endeavours had been made to contact past employees; and in the event that an employee had agreed to a deduction of their arrears to account for an overpayment, evidence of the employee’s written consent.
[37] For the period up to 20 March 2022 (which counsel referred to as the primary period) Gate has paid arrears to:
(a)all current Gate employees;
(b)all Union members, both current and former employees; and
(c)some non-Union member former employees.
[38] Mr O’Brien, counsel for the plaintiffs, raises issues regarding “wash up” payments for current employees (for the period after 20 March 2022) and whether there have been excessive PAYE deductions or proper deduction of overpayments to ex-employees who are members of the Union. He also raises those latter two issues in relation to ex-employees who are not Union members. I will address these issues in due course.
Next steps
[39] Ms Mistry says she is in the process of reviewing the information Gate has provided to her in order to make a decision on whether Gate has complied with the 2022 EU. Ms Mistry says the question she is still reviewing is whether Gate has made reasonable endeavours to contact past employees who have not yet been paid the arrears owing to them. She says as part of this process she is also weighing up the various concerns the Union has raised with her.
[40] Ms Mistry says she has received a significant volume of information from Gate which she is presently working through and she is also waiting for further information that she subsequently requested.
[41] Therefore, Ms Mistry says she has not yet made a decision about whether Gate has used reasonable endeavours to contact former employees, or whether it has complied with the terms of the 2022 EU. She says she anticipates seeking further information from Gate and possibly from the Union or other parties, over the course of her decision-making process.
[42] Ms Mistry disagrees with the statement by Mr Matsuoka that she can draw a conclusion on Gate’s compliance with the 2022 EU solely from the number of current and former employees paid. She notes that the 2022 EU does not specify the number of employees who must be paid for compliance to be achieved. The requirement is that Gate must use “reasonable endeavours”. Having said that, Ms Mistry notes that
the number of employees who have not been paid will be an important consideration in her decision-making process regarding whether Gate has used reasonable endeavours, as will the amounts of money those unpaid employees are owed.
[43] Ms Mistry says that once she makes a decision about the sufficiency of Gate’s compliance, there are various options open to her including:
(a)accepting that the 2022 EU has been complied with and completed, meaning Gate would no longer be monitored by the Labour Inspectorate;
(b)asking Gate to agree to an extension of the 2022 EU or to enter into a new enforceable undertaking if she is not satisfied with Gate’s compliance; and
(c)taking enforcement action against Gate for failing to comply with the 2022 EU, specifically by seeking compliance and penalty orders against Gate in the Employment Relations Authority.
[44] Ms Mistry says that the plaintiffs’ application for an interim injunction appears to be predicated on an assumption that she will make her decision without consulting the Union and that she has already decided to discharge Gate from the 2022 EU. Ms Mistry says both of those assumptions are untrue. She says she is not in a position to make a decision about Gate’s compliance or to speculate as to what her decision is likely to be until she has closely considered all the relevant materials including any further information she requests. She says she is aware of the concerns the Union has expressed to her during the process; she will consider them as she makes her decision, and she intends to consult with the Union before she makes a final decision.
[45] Ms Mistry does not anticipate she will be in a position to make a decision until June 2023 at the earliest.
Preliminary issue – further evidence
[46] The Chief Executive sought leave to file a second affidavit from Ms Mistry affirmed on 26 May 2023 and an affidavit of Graeme Emery, the Employment Specialist Manager for Gate, sworn on 26 May 2023. The admission of that evidence was not opposed by the plaintiffs. It is accordingly admitted.
[47] The plaintiffs sought leave to file two supplementary reply affidavits of Mr Matsuoka sworn on 22 May 2023 and 29 May 2023. The admission of the 22 May 2023 affidavit was opposed by the Chief Executive. Ms Aldred, counsel for the Chief Executive, submits that the supplementary evidence in the 22 May 2023 affidavit is not relevant to the proceedings and ought not to be admitted because it relates solely to a non-party. However, in the event that the Court decides to admit that affidavit, it is responded to in Ms Mistry’s second affidavit.
[48] In his 22 May 2023 affidavit, Mr Matsuoka says that a former employee of Gate, Mary-Beth Lim, made contact with the Union on 8 May 2023 as a Union member had reached out to her. He says that Mrs Lim had no knowledge of the remediation process and had not received any payments from Gate. He annexes relevant correspondence. Mr Matsuoka says the Union is particularly concerned that Gate made no attempts to contact Mrs Lim despite her being listed in Appendix B (which was in fact the list of current employees).
[49] In response, Ms Mistry says in her affidavit of 26 May 2023 that on 19 December 2022 she asked Gate to provide her with evidence of reasonable efforts made to contact past employees. She says on 20 December 2022, she was provided with a copy of the statistics from Gate’s email campaign to former employees of Gate. She annexes relevant documents. She says the documents show that Mrs Lim received an email from Gate notifying her of the remediation process and that Mrs Lim opened the email once. Ms Mistry further notes that the email address recorded in the email statistics provided by Gate is the same email address Mrs Lim used to contact the Union (as is apparent from the exhibit to Mr Matsuoka’s affidavit of 22 May 2023).
[50] I accept the submission on behalf of the Chief Executive that the evidence in Mr Matsuoka’s 22 May 2023 affidavit is not relevant because it relates solely to a non-
party. It is accordingly not admitted. If I am incorrect in that decision and the evidence should have been admitted, the allegations Mr Matsuoka makes are answered by Ms Mistry, who provides evidence that Gate did, in fact, make email contact with the former employee, Mrs Lim.
The statement of claim
[51] The plaintiffs plead that in exercising the Labour Inspector’s power to enforce compliance with employment standards, each Labour Inspector is under a (novel) duty of care owed to those employees who are victims of an employer’s failure to comply with employment standards. It is pleaded that the duty of care includes ensuring that the Labour Inspector uses their best endeavours:
(a)to ensure compliance with the terms of any applicable enforceable undertaking;
(b)to attempt to achieve compliance by defaulting employers; and
(c)that employees, or former employees, who have been underpaid, are paid any outstanding amounts.
[52] In the first cause of action, the plaintiffs plead that the Labour Inspector failed to take reasonable steps to ensure that Gate has a Holidays Act–compliant payroll system and to ensure they pay “wash up” arrears (being arrears arising after 20 March 2022, namely after the primary period over which arrears have been calculated).
[53] In the second cause of action, the plaintiffs plead that the Labour Inspector failed to take reasonable steps to ensure that Gate complied with the requirement to act in a good faith manner in the remediation process by keeping employees or their representatives informed during the remediation process.
[54] In the third cause of action, the plaintiffs plead that the Labour Inspector failed to take reasonable steps to include the plaintiffs in the investigation and remediation process.
[55] In the fourth cause of action, the plaintiffs plead that the Labour Inspector failed to take reasonable steps to ensure that Gate complied with the payment obligation in terms of the 2022 EU.
Plaintiffs’ submissions
[56] Mr O’Brien first focuses on the Court’s approach in determining whether a novel duty of care is owed by a defendant. With that context, he makes submissions under the conventional headings for an interim injunction: whether there is a serious question to be tried; balance of convenience; and overall interests of justice.
[57] Mr O’Brien submits the Labour Inspector performs a range of duties aimed at general monitoring of employment standards and employers. He says that having established Gate to be in breach of obligations owed to its employees under the Holidays Act, the Labour Inspector chose to take enforcement action for the benefit of the employees. Mr O’Brien submits that having assumed control over enforcement, it is fair and reasonable to expect the Labour Inspector to exercise reasonable skill and care in carrying out that enforcement action.
[58] He submits it was reasonably foreseeable that if the Labour Inspector did not use reasonable skill and care in carrying out the enforcement actions, and Gate was thereby able to avoid paying the arrears owed to the identified employees, the identified employees would suffer harm. He further submits that there are no policy considerations that would mean a duty of care should not be imposed. He submits, in fact, policy considerations support the plaintiffs’ position that a duty of care is owed. Accordingly, there is a serious question to be tried.
[59] In terms of the balance of convenience, Mr O’Brien submits damages would not be an adequate remedy. He says the plaintiffs seek only to preserve the status quo pending a substantive hearing on whether the Labour Inspectorate has carried out its enforcement action with reasonable skill and care. Mr O’Brien also submits the enforcement of minimum standards by the Labour Inspector is a matter of considerable public interest.
[60] Mr O’Brien further submits there is a valid concern that if Gate is released from its obligations under the 2022 EU, there is a real likelihood that it might be insolvent by the time the substantive claim is heard.
[61] Mr O’Brien says that granting the interim injunction would cause no prejudice to the Labour Inspectorate. The Labour Inspector would still be able to seek a compliance order and penalties against Gate in the Employment Court or negotiate further compliance by Gate. The only action being prevented is releasing Gate from the 2022 EU and associated obligations which would prejudice the plaintiffs.
[62] In terms of the impact on innocent third parties, Mr O’Brien submits Gate is not an innocent third party. It has admitted breaches of the Holidays Act. Mr O’Brien also says that Gate has deliberately failed to either contact former employees or make reasonable attempts to contact former employees about the remediation process such that it has a 93 per cent failure rate.
[63] Mr O’Brien says drawing all those threads together, the overall justice supports the granting of an injunction.
Defendant’s submissions
[64] Ms Aldred says that it will be argued at a later stage that none of the pleaded duties are arguable, applying the principles governing the recognition of new duties of care.9 But Ms Aldred puts that issue aside for present purposes because she submits it is clear that none of the pleaded causes of action can succeed as no loss is alleged by any of the plaintiffs sufficient to ground an action in negligence. Given that loss suffered is an essential ingredient of negligence, the failure to identify loss in this case means there is no serious question to be tried for any of the four causes of action.
[65] Ms Aldred further submits that it is clear on the plaintiffs’ own pleading that if they were to succeed in the substantive proceeding, damages are the appropriate remedy. Damages are the sole remedy sought in relation to the first, second and third causes of action and the primary remedy sought in the fourth cause of action.
9 North Shore City Council v Attorney-General (The Grange) [2012] NZSC 49, [2012] 3 NZLR 341.
Ms Aldred submits that the plaintiffs have failed to identify any basis as to why the primary remedy they have sought is insufficient or the apparent “irremediable prejudice they will suffer.”
[66] Further, Ms Aldred submits that if granted, the orders sought by the plaintiffs would not achieve the plaintiffs’ objectives, namely preservation of the ability of the Labour Inspector or the Union to sue Gate and recover the arrears owed. Ms Aldred submits the Labour Inspector’s ability to later proceed against Gate would not be adversely affected even if she were to make the decision to release Gate from the 2022 EU. The orders sought will not have any effect on Gate’s financial position.
[67] Finally, Ms Aldred submits the plaintiffs can proceed directly against Gate for the sums they are owed. They have, in fact, done so in the Employment Relations Authority where they filed a Statement of Problem on 20 February 2023.
Legal principles – interim injunctions
[68] The High Court has power to grant interim injunctions under the High Court Rules 2016 and in the exercise of its inherent jurisdiction.10
[69]Rule 7.53 of the High Court Rules provides:
7.53 Application for injunction
(1)An application for an interlocutory injunction may be made by a party before or after the commencement of the hearing of a proceeding, whether or not an injunction is claimed in the party’s statement of claim, counterclaim, or third party notice.
(2)The plaintiff may not make an application for an interlocutory injunction before the commencement of the proceeding except in case of urgency, and any injunction granted before the commencement of the proceeding—
(a)must provide for the commencement of the proceeding; and
(b)may be granted on any further terms that the Judge thinks just.
10 The inherent jurisdiction of the High Court is recognised in s 12 of the Senior Courts Act 2016.
[70]As the Court of Appeal said in Commerce Commission v Viagogo AG:11
[30] The principles that govern the grant of interim injunctions under r 7.53 and the court’s inherent jurisdiction are well settled. The court will usually adopt a two-stage approach. The first inquiry is whether there is a serious question to be tried. If that threshold is met, the court moves on to consider whether the balance of convenience favours granting or refusing relief. But as this Court observed in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd , considerations are marshalled under these (non-exhaustive) heads as “an aid to determining, as regards the grant or refusal of an interim injunction, where overall justice lies. In every case the Judge has finally to stand back and ask himself that question.”
[71] When the Court assesses whether there is a serious question to be tried, it is insufficient for a plaintiff to say only that there is a tenable cause of action from a legal perspective and a conflict of evidence on the facts.12 A plaintiff seeking interlocutory relief must adduce sufficiently precise factual information to satisfy the Court that there is a real prospect of succeeding in the claim at trial.13 In its analysis, the Court must consider the claim’s substantive relief which is said to underpin the need for an interim injunction.14
[72] The main consideration at the balance of convenience stage is typically the extent to which damages are an appropriate remedy for the plaintiff such that an interim injunction is unnecessary to preserve the plaintiffs’ interests:15
… the court should first consider whether, if the plaintiff were to succeed at trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage.
[73] The third step of the overall justice assessment is “essentially a check on the position that has been reached following the analysis of the earlier issues of serious
11 Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 (footnotes omitted).
12 Ansell v New Zealand Insurance Finance Ltd HC Wellington A434/83, 30 November 1983 at 6.
13 Re Lord Cable (dec’d) [1977] 1 WLR 7 (Ch) at 19.
14 Maniapoto v Maniapoto Māori Trust Board [2022] NZHC 455 at [43].
15 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 408.
question to be tried and balance of convenience”.16 As was said in Commerce Commissioner v Viagogo AG:17
[31] As Lord Hoffmann said in delivering the advice of the Privy Council in National Commercial Bank Jamaica Ltd v Olint Corp Ltd :
The purpose of such an injunction is to improve the chances of the court being able to do justice after a determination of the merits at the trial. …
The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other.
Is there a serious question to be tried?
[74] Without intending any disrespect to Mr O’Brien’s careful submissions on the issue, I do not consider it is necessary to embark on a consideration of the alleged novel duty of care for the reasons set out below.
[75] I start with the following principles. “Damage is the gist of the tort of negligence. Without damage there is no tort”.18 “As damage, howsoever defined, is an essential element of liability, a cause of action in negligence does not accrue until actual damage occurs.”19
[76]The references to loss or damage in the statement of claim are:
First cause of action:
Damage was caused to the second to twenty first plaintiffs by Gate Gourmet’s failure to have a payroll system that complied with the Holidays Act 2003, and the Labour Inspector’s failure to take reasonable steps to enforce compliance with the Holidays Act 2003.
Second cause of action
The Labour Inspector’s breach of its duty of care caused damage to the AWU as the AWU was unable to properly represent its members’ interests during the remediation process.
16 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90 at [47].
17 Commerce Commission v Viagogo AG, above n 11 (footnote omitted).
18 Michael A. Jones “Negligence” in Clerk and Lindsell on Torts (23rd ed, Sweet & Maxwell, London, 2020) 423 at [7-05].
19 Margaret Beazley “Damage” in Carolyn Sappideen and Prue Vines (eds) Fleming’s The Law of Torts (10th ed, Thomson Reuters, Sydney, 2011) 225 at [9.10].
Third cause of action
The Labour Inspector’s breach of this duty of care caused each of the plaintiffs damage in that they were not given the opportunity to participate in the investigation or remediation processes, or have their concerns considered by the Labour Inspector.
Fourth cause of action
A significant number of ex-employees have suffered damage as they have not been made aware of the remediation process and the arrears owed to them.
[77] For each of these allegations of damage suffered, the nature of the damage is unclear. They are simply bland pleadings. The type of loss is not specified. In relation to the Union, it is not apparent what sort of damage it has allegedly suffered. Its role is to advocate for the employees as it has done. But the alleged loss cannot be discerned. Further, as Ms Aldred points out in relation to the allegation in the fourth cause of action that ex-employees have not been made aware of the remediation process and arrears owed to them, that allegation can only relate to persons other than the plaintiffs. However, any allegation of damage to a non-party is irrelevant to the claim by the plaintiffs in negligence as the plaintiffs have no authority to claim damages on behalf of non-parties.
[78] As regards allegations of unlawful deductions of overpayments, there is no positive allegation of such unlawful deductions. That issue is simply mentioned in the prayer for relief. As well, there is no pleading as to which plaintiffs are said to be owed money and the amount owed.
[79] Further, in the statement of claim it is pleaded that the second to twenty-first plaintiffs have not been paid “wash up” arrears. However, as Ms Aldred notes, while there is an acknowledgement by Gate in the 2022 EU to pay wash up arrears, there is no deadline in that EU by which wash up arrears are required to be paid. The actions in the 2022 EU to rectify breaches required payment of the arrears calculated in the 2020 and 2021 EUs.
[80] In Maniapoto v Maniapoto Māori Trust Board,20 when considering an interim injunction, albeit in a different context, Gault J said:
[43] However, even if breach of fiduciary duty can be made out at trial, it is necessary to identify what the substantive relief might be in order to consider the question of interim relief, not least because of the issue of Parliamentary privilege. The serious question to be tried needs to extend to the claimed substantive relief underpinning the need for an interim injunction.
[44] Several difficulties arise. As Mr Tennet acknowledged, the relief sought at trial will need to be refined. That has not yet occurred, and the current pleading is not a solid platform on which to seek interim relief. …
[81] What is said by Gault J at [43] of that judgment is equally applicable here. There is a failure to properly plead loss and damage and to specify the link to that alleged loss. Stepping away from the pleadings, even the evidence does not provide the Court with a good understanding of any loss an individual plaintiff is said to have suffered.
[82] In conclusion, it is not possible to discern from the pleadings what loss is said to have arisen from the alleged breaches. Allegations of damage without more are not sufficient to ground a claim. For that reason, there cannot be a finding that there is a serious question to be tried.
Balance of convenience
[83] In the first, second and third causes of action, damages payable by the defendant and costs are the only remedies sought. Damages and costs are the primary relief sought in the fourth cause of action.
[84] Accordingly, on the plaintiffs’ own pleading they say the appropriate remedy for their claims is damages.
[85]The alternative prayers for relief in the fourth cause of action are:
(a)an order directing the Labour Inspector to bring proceedings against Gate within seven days, in the name of each ex-employee who has not
20 Maniapoto v Maniapoto Māori Trust Board, above n 14.
been paid the arrears owed, or who has had overpayments deducted from arrears payments, to recover those sums; or
(b)an order directing the Labour Inspector to co-operate with the Union or a major accounting firm to allow the Union to recover the arrears and deductions referred to above.
[86] It is doubtful whether the Court would consider making an order as in (a) above, fettering the Labour Inspector’s discretion to proceed. In terms of the second alternative, the Union is entitled in any event to bring an action on behalf of the plaintiffs. Even so, these are simply alternatives pleaded to the primary remedy of damages.
[87] Mr O’Brien submits that interim relief is necessary because if the order is not made and the Labour Inspector determines that Gate has complied with the EUs, this would undermine any subsequent action by the Labour Inspector to recover the relevant arrears. Mr O’Brien refers to concerns about Gate’s solvency.
[88] Addressing that submission, as Ms Aldred notes first, the claim in the substantive proceeding is for an award of damages against the Chief Executive and not Gate. In other words, Gate’s financial position is not relevant. But in any event, the refusal of injunctive relief does not prejudice any future recovery action by the Labour Inspector. For example, she has a power under s 228 of the Employment Relations Act to commence actions on behalf of employees to recover money owed under the Holidays Act. That power is independent of the regime for enforceable undertakings.
[89] Further, as I have set out in the background summary, there is no evidence that the Labour Inspector will find that Gate has completed the steps required of it under the three EUs. Ms Mistry has not yet made her decision. In the event she determines that Gate has complied with what is required of it under the EUs, that would not prevent the Labour Inspector from taking further action in response to a future complaint.
[90] As to the submissions made on behalf of the plaintiffs regarding Gate’s solvency, to date, Gate has complied with the financial requirements placed on it by the Labour Inspector. She requested Gate to pay $575,000 to be held on trust while the arrears were calculated in 2022. Gate complied with that request.
[91] There is also the issue of whether there would be any utility in the orders sought. The plaintiffs do not need the order sought to preserve their positions. They have rights which enable them to bring claims against the employer directly21 if they say that they have sustained losses (currently unspecified) in relation to the calculation or payment of their entitlements under the Holidays Act. In his affidavit, Mr Emery says that 22 of the named plaintiffs have filed proceedings against Gate in the Employment Relations Authority. The remedies sought in the Statement of Problem annexed to Mr Emery’s affidavit include:
(a)a declaration that Gate has breached the 2022 EU and ss 16, 56 and 81 of the Holidays Act;
(b)an urgent compliance order requiring Gate to comply with cl 3.1.3 of the 2022 EU and credit leave balances to the applicants;
(c)an urgent compliance order requiring Gate to provide the Union with a full list of all Union members and their annual leave credits within three days;
(d)an urgent compliance order requiring Gate to provide the Union with the calculations for accrued annual leave for all Union members within three days;
(e)a compliance order requiring Gate to have a payroll system that is compliant with the Holidays Act within 30 days; and
21 Holidays Act 2003, ss 74 and 76.
(f)awards for some applicants in amounts of at least $2,000 and for others in amounts of at least $10,000 for humiliation, loss of dignity, and injury to feelings as a result of the unjustified disadvantage.
[92] Finally, on the balance of convenience, I do not accept it is correct to say as Mr O’Brien does, that the Chief Executive will not suffer any prejudice if interim relief were to be granted. The relief would constrain the Labour Inspector from continuing the remediation process that is underway.
[93] Accordingly, for all the above reasons, even if there were a serious question to be tried, the balance of convenience weighs in favour of the Chief Executive.
Overall interests of justice
[94] In all the circumstances I do not consider it is wrong to say, as Ms Aldred does, what the plaintiffs are effectively seeking is an order, unconnected to the relief sought in the substantive claim, that the Labour Inspector may continue with her statutory process provided she does not reach a decision that is unacceptable to the plaintiffs.
[95]Relief of that sort would not serve the interests of justice.
Result
[96]The application for interim orders is refused.
Timetable directions
[97] Ms Aldred notes that the statement of defence was due for filing on 6 June 2023. However, she submits that the statement of claim suffers from serious defects including:
(a)(as already referred to above) a failure to identify the nature of the loss each plaintiff is alleged to have suffered;
(b)an apparent claim for relief that would require payment of moneys that have been accepted by the Chief Executive as payable to all employees
and former employees affected by the EUs notwithstanding that only a subset of those persons are parties to this proceeding; and
(c)the statement of claim pleads a large amount of evidence and is prolix in nature.
[98] Ms Aldred submits that the defendant considers the claim as pleaded is susceptible to strike-out but suggests that a prudent course at this stage in the proceeding is to request further particulars and to allow the plaintiffs a reasonable opportunity to respond.
[99] The plaintiffs consent to the timetable orders proposed.22 I agree that is the appropriate course and make the following timetable directions:
(a)the defendant is to request further particulars of claim by 23 June 2023;
(b)the plaintiffs’ response to the request for further particulars is to be provided by 21 July 2023;
(c)the defendant is to respond to the statement of claim either by filing a statement of defence or an application for strike-out/summary judgment by 11 August 2023; and
(d)a telephone conference with the Court is to be scheduled at the earliest date available after 11 August 2023 to timetable next steps (to be fixed by the Registrar in consultation with counsel).
Costs
[100] I did not hear from the parties on costs. Costs are therefore reserved. If costs can be agreed, a joint memorandum is to be filed within 20 working days of the date of this judgment. If costs cannot be agreed, counsel for the Chief Executive is to file
22 The dates proposed and agreed to were predicated on orders being made at the hearing. Given the orders are made in this judgment rather than at the hearing, I add one week to each of the dates proposed.
and serve a memorandum within five working days of the date for the joint memorandum. Counsel for the plaintiffs is to file and serve the plaintiffs’ memorandum within five working days of service of the Chief Executive’s memorandum on the plaintiffs.
[101] Costs memoranda are not to exceed four pages (excluding attachments). I will determine costs on the papers.
Gordon J
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