Aztec Packaging Ltd v Malevris

[2012] NZHC 243

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-5803 [2012] NZHC 243

UNDER  Part 13 of the High Court Rules

IN THE MATTER OF     an application for summary Judgment

BETWEEN  AZTEC PACKAGING LIMITED Plaintiff

ANDVANESSA JEAN MALEVRIS Defendant

Hearing:         12 December 2011

Appearances: Danny Wu for Plaintiff

No appearance for Defendant

Judgment:      23 February 2012

RESERVED JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on

23 February 2012 at 11:00am

pursuant to Rule 11.5 of the High Court Rules

……………………………………………..

Registrar/Deputy Registrar

Solicitors:

David Rooke, P O Box 64 342 Botany Town Centre, Auckland 2142, for plaintiff

Email:   [email protected]

AZTEC PACKAGING LIMITED V MALEVRIS HC AK CIV-2011-404-5803 [23 February 2012]

[1]      This   application   for   summary   judgment   was   called   before   me   on

12 December 2011.   I adjourned the matter to 16 February 2012, because I had doubts  whether  this  court  has  jurisdiction  to  hear  the  causes  of  action  in  the plaintiff’s statement of claim.  The defendant had been served on 6 December 2011. Accordingly, she had not received the 15 working days notice required.  She has not taken any steps in the meantime.

[2]      The plaintiff filed a memorandum for the hearing on 16 February 2012.  The memorandum addressed the jurisdiction question.  I reserved my decision.

[3]      The plaintiff’s statement of claim says that the defendant worked for the plaintiff as senior office administrator from 30 January 2007 until 22 March 2011, the date of acceptance of her resignation.   As senior office administrator, she was responsible for accounts payable and receivable, wages and salaries, debt collection, overseas payments, PAYE, holiday and sickness records, and a number of other accounting and office duties.

[4]      The plaintiff discovered that the defendant had made unauthorised payments to herself during the course of her employment.  These totalled $24,883.31.  The first cause of action in the statement of claim is for money had and received.  The second cause of action is for breach of fiduciary duty.   If this court has jurisdiction, the plaintiff has shown that the defendant does not have a defence to the allegations in the first and second causes of action.

[5]      The jurisdiction question is whether the claims by the plaintiff are within the exclusive jurisdiction of the Employment Relations Authority under the Employment Relations Act 2000.  The Employment Relations Authority was established under s

156  of  the  Employment  Relations  Act.    Section  157  provides  the  role  of  the

Authority:

157     Role of Authority

(1)       The Authority is an investigative body that has the role of resolving employment relationship problems by establishing the facts and making a determination according to the substantial merits of the case, without regard to technicalities.

(2)      The Authority must, in carrying out its role,—

(a)      comply with the principles of natural justice; and

(b)      aim to promote good faith behaviour; and

(c)      support successful employment relationships; and

(d)      generally further the object of this Act.

(3)      The Authority must act as it thinks fit in equity and good conscience, but may not do anything that is inconsistent with—

(a)      this Act; or

(b)      any regulations made under this Act; or

(c)      the relevant employment agreement.

[6]      It is significant that the Authority is an investigative body that decides cases according to their substantial merits without regard to technicalities. It must act as it thinks fit in equity and good conscience, but may not do anything that is inconsistent with the act, regulations or a relevant employment agreement.

[7]      Proceedings before ordinary civil courts are adversarial.  While civil courts have an equitable jurisdiction,1 that jurisdiction is not the same as the direction to the Employment Relations Authority to act as it thinks fit in equity and good conscience. Parliament has required that the Employment Relations Authority adopt a distinctive approach to deciding cases that come before it.  Because it is required to adopt such a distinctive approach, it is not surprising to find that the Employment Relations Authority has an exclusive jurisdiction.   Without an exclusive jurisdiction, cases would be decided differently according to whether they were heard by the Authority or by a court.  Section 161 provides:

161     Jurisdiction

(1)      The Authority  has  exclusive  jurisdiction  to  make  determinations about employment relationship problems generally, including—

(a)      disputes about the interpretation, application, or operation of an employment agreement:

(b)      matters related to a breach of an employment agreement:

1 For the High Court, sections 16-17 Judicature Act 1908, for the District Court, section 34 District

Courts Act 1947.

(c)       matters about whether a person is an employee (not being matters arising on an application under section 6(5)):

(ca)     facilitating bargaining under sections 50A to 50I:

(cb)     fixing the provisions of a collective agreement under section

50J:

(cc)     determining whether an employer has complied with section

69AAE:

(d)       matters alleged to arise under section 68 because a party to an individual employment agreement has bargained unfairly:

(da)      investigating bargaining under section 69O and, if necessary, determining redundancy entitlements under that section:

(e)      personal grievances:

(f)       matters about whether the good faith obligations imposed by this Act (including those that apply where a union and an employer bargain for a collective agreement) have been complied with in a particular case:

(g)       matters about the recovery of wages or other money under section 131:

(h)       matters  about  whether  the  rules  of  a  union,  or  of  an incorporated  society  that  wishes  to  register  as  a  union, comply with the provisions of this Act:

(i)        matters about whether an incorporated society is entitled to register under this Act as a union or is entitled to continue to be so registered:

(j)        matters about whether a person is entitled to be a member of a union:

(k)       matters related to a failure by a union to comply with its rules:

(l)        any proceedings related to a strike or lockout (other than those founded on tort or seeking an injunction):

(m)     actions for the recovery of penalties—

(i)        under  this  Act  for  a  breach  of  an  employment agreement:

(ii)      under this Act for a breach of any provision of this Act (being a provision that provides for the penalty to be recovered in the Authority):

(iii)     under section 76 of the Holidays Act 2003:

(iv)     under section 10 of the Minimum Wage Act 1983:

(v)      under section 13 of the Wages Protection Act 1983: (n)     compliance orders under section 137:

(o)       objections under section 225 to demand notices:

(p)      orders for interim reinstatement under section 127: (q)      actions of the type referred to in section 228(1):

(r)       any other action (being an action that is not directly within the jurisdiction of the Court) arising from or related to the employment relationship or related to the interpretation of this Act (other than an action founded on tort):

(s)       determinations under such other powers and functions as are conferred on it by this or any other Act.

(2)       Except as provided in subsection (1)(ca), (cb), (d), (da), and (f), the Authority does not have jurisdiction to make a determination about any matter relating to—

(a)       bargaining; or

(b)       the fixing of new terms and conditions of employment.

(3)       Except as provided in this Act, no court has jurisdiction in relation to any matter that, under subsection (1), is within the exclusive jurisdiction of the Authority.

[8]      Under s 4(2), an employment relationship includes a relationship between an employer and employee employed by that employer   Under s 5, an “employment relationship problem” is defined:

5        Interpretation

In this Act, unless the context otherwise requires,—

employment relationship problem

includes  a  personal  grievance,  a  dispute,  and  any  other  problem

relating to or arising out of an employment relationship, but does not include any problem with the fixing of new terms and conditions of employment

[9]      After   providing   that   the   Authority   has   exclusive   jurisdiction   for determinations about employment relationships generally, s 161(1) lists, non- exhaustively, a number of matters included within the general exclusive jurisdiction. The following  are of particular importance in this case:

[a]      Disputes founded on the interpretation, implication or operation of an employment agreement.

[b]       Matters relating to the breach of an employment agreement.

[f]      Matters about whether the good faith obligations imposed by this Act (including those that apply where a union and an employer bargain for a collective agreement) have been complied with in a particular case.

[r]      Any other action (being an action that is not directly within the jurisdiction of the court) arising from or related to the employment relationship or related to the interpretation of this Act (other than an action founded on tort) ...

[10]     At first sight, the plaintiff’s claim is that it has lost money in circumstances where it had employed the defendant to handle its accounts, and in the course of carrying out her job, the defendant made unauthorised payments to herself, causing loss to the plaintiff.   The conduct complained of happened in the course of the defendant’s  employment  and  was  in  breach  of  the  terms  on  which  she  was employed.  The defendant’s misconduct went to the heart of her job.  On an ordinary reading, the facts of the case are clearly about an employment relationship problem within the opening words of s 161(1).

[11]     The plaintiff’s response is that while the defendant may have breached the employment agreement, it has not sued for breach of the employment agreement. The  plaintiff  claims  that  it  is  entitled  to  plead  its  way  around  the  exclusive jurisdiction provisions of the Employment Relations Act.  I do not accept that it is possible to get around the exclusive jurisdiction provision of s 161 by formulating the claim as an alternative cause of action which is alleged to lie outside the jurisdiction of the Employment Relations Authority.  This issue concerns the nature of concurrent causes of action.

[12]     The facts giving rise to an employment relationship problem may give rise to a variety of causes of action, which may fall under different heads of the law of obligations.  For example, the misuse of confidential information received from an employer in the course of employment might: be in breach of an express or implied term of the employment agreement, might be in breach of the statutory duty of good faith  in  s  4(1)  of  the  Employment  Relations  Act,  might  be  in  breach  of  an independent duty of confidence in equity, and might also be considered to be a form of tort.  Similarly, claims for breach of contract may give rise not only to claims for damages, but also for claims for restitution (as under s 9 of the Contractual Remedies Act).  A claim for negligence may give rise to causes of action in contract and in tort. Where there are concurrent causes of action available for one employment relationship problem, it cannot be the case that the Employment Relations Authority has jurisdiction only for some causes of action, but not for others.  If a given matter is  within  the exclusive jurisdiction  of the Employment  Relations  Authority,  the Authority has the jurisdiction to hear the matter, no matter how the cause of action is formulated.  To allow otherwise would defeat the Authority’s exclusive jurisdiction.

[13]     Suppose that one party to an employment dispute where concurrent causes of action may be available, brings a proceeding in a civil court, contending that that particular cause of action is outside s 161.  The other party to the dispute might then bring a counter proceeding within the Employment Relations Authority, relying on the cause of action within s 161.  Because civil courts and the Employment Relations Authority may decide cases differently, there is no assurance that the civil court and the Employment Relations Authority would reach the same decision, even though both parties rely on the same facts.   That risk of inconsistency requires that the jurisdiction  of the Employment  Relations  Authority is  not  to  be  determined  by reference to particular causes of action but instead by considering the underlying problem between the parties to determine whether it is an employment relationship problem within s 161.

[14]     In this case, the plaintiff’s plea of the breach of fiduciary duty is an attempt to plead an alternative to the good faith obligation under s 4 of the Act.  As the good faith obligation can be the subject of a claim under s 161(1)(f), the plaintiff is not

entitled to avoid the jurisdiction by reformulating the claim as one alleged to be in breach of fiduciary duty.

[15]     The claim for money had and received is a restitutionary claim, which is an alternative to a claim made for breach of contract, a matter within s 161(1)(b). Again, the plaintiff is not entitled to use a restitutionary claim as an attempt to plead around the exclusive jurisdiction provision of s 161.

[16]     More generally, s 161(1)(g) allows an employee to make a claim under the Employment Relations Authority for the recovery of wages or other money payable under an employment agreement.   If an employee has been overpaid, instead of underpaid, it would be odd if the Employment Relations Authority did not have jurisdiction to decide claims for overpayment as well as claims for underpayment.

In New Zealand Fire Service Commission v Warner,2  Chief Judge Colgan held that

the Employment Relations Authority had jurisdiction to hear a claim by an employer that it had overpaid an allowance to employees.  Although the claim was formulated as  one  in  restitution,  the  claim  was  held  to  have  arisen  in  the  employment relationship and to be an employment relationship problem.

[17]     In  this  case  the  defendant  overpaid  herself.    The  plaintiff  says  that  she disguised the payments by accounting for them for PAYE purposes.  In principle, the New Zealand Fire Service Commission case applies.   The fact that the defendant herself was responsible for the unauthorised payments and that she was dishonest, does not take the matter outside the jurisdiction of the Employment Relations Authority.

[18]     I note that there are a number of cases where the Employment Relations

Authority has taken jurisdiction in claims against employees for unauthorised expenditure or unauthorised use of an employer’s property:   Benchmark Building

2 New Zealand Fire Service Commission v Warner (2010) NZELC 93,633.

Supplies Ltd v Francis,3  Flight Centre v Lata,4  McLeod Personnel Ltd v White,5

Panel Holdings Ltd v Paki,6 and Raukura Hauora o Tainui Trust v Nathan.7

[19]     In Rolling Thunder Motor Co Ltd v Kennedy,8  the Employment Court held that the Employment Relations Authority had jurisdiction to hear a claim by an employee who used a Barter-Card for personal use.  The employee’s appeal to the Court of Appeal was unsuccessful.9   While the Court of Appeal commented that the Employment Court may not have used the correct test for the jurisdiction of the Employment Relations Authority, it did not grant leave for the decision to be appealed.

[20]     Under s 161(1)(r), the Employment Relations Authority has jurisdiction for any other action arising from, or related, to the employment relationship (other than an action founded on tort).   In Pain Management Systems (NZ) Ltd v McCallum, Panckhurst J said:10

[22] To my mind, the core concept which is determinative of the exclusive jurisdiction of the Authority is whether the determination which is required is indeed about an employment relationship problem.   In the words of the definition of that concept is the underlying problem – one relating to, or arising out of, an employment relationship. I think it is important to distinguish between a claim which may have its origins in an employment relationship on the one hand and a claim the essence of which is related to or arises from the employment relationship of the parties on the other.  Is the issue in a particular claim an employment relationship one, or is the subject matter of the claim for some right or interest which is not directly employment-related at all?  In this regard it may be necessary to distinguish between situations where the opportunity to breach the right or interest at stake arose in the context of the employment relationship as opposed to those where some employment right or interest is truly at stake.

[21]     Baragwanath and Courtney JJ followed that in BDM Grange Ltd v Parker.11

3 Benchmark Building Supplies Ltd v Francis ERA Auckland, AA232/02, 13 August 2002.

4 Flight Centre v Lata ERA Auckland, AA187/04, 28 May 2004.

5 McLeod Personnel Ltd v White ERA Christchurch, CA39/04, 5 April 2004.
6 Panel Holdings Ltd v Paki ERA Auckland, AA232/07, 3 August 2007.

7 Waukura Hauora o Tainui Trust v Nathan [2010] NZEmpC 156.
8 Rolling Thunder Motor Co Ltd v Kennedy [2010] NZEmpC 109.
9 Kennedy v Rolling Thunder Motor Co Ltd [2010] NZCA 582.
10 Pain Management Systems (NZ) Ltd v McCallum, HC Christchurch CP72/01, 14 August 2001.

11 BDM Grange Ltd v Parker [2006] 1 NZLR 353 at [66] and [74].

[22]     I follow the approach in these decisions.  The plaintiff’s claim is related to the employment relationship within s 161(1)(r).  It relates to the defendant’s breach of her obligations as a trusted employee to overpay herself in the course of her employment.  Employment rights and interests are truly at stake.

[23]     The plaintiff objects that when this matter was called in front of another Associate Judge, the jurisdiction point was not raised.  It also says that there have been   other   cases   where   employers   have   succeeded   in   summary   judgment applications in this court, in claims  for misappropriation against employees.    It referred in particular to McVeagh Fleming v Garnett.12  Another case is ASB Bank

Ltd v Versalko,13  where a bank sued its employee in this court for money had and

received and conversion for unauthorised diversion of payments by the employee. The jurisdiction point does not appear to have been raised in either of those cases. As the point was not raised, those cases are not authorities as to this Court’s jurisdiction to decide employment relationship problems.   As the issue goes to jurisdiction, the failure of a party to raise an issue is irrelevant.  This court can only act within its jurisdiction, even if the parties fail to raise the issue.

[24]     The plaintiff also objected that summary judgment was not available in the Employment Relations Authority.  That may be the case.  However, the absence of a summary judgment procedure in the Employment Relations Authority does not give this court jurisdiction.  No doubt those responsible for establishing the Employment Relations Authority had their reasons for not providing for summary judgment applications, given the inquisitorial nature of the Authority’s powers.

[25]     Overall, I am satisfied that the High Court does not have jurisdiction to hear this case, because it lies within the exclusive jurisdiction of the Employment Relations Authority.   I accordingly dismiss the application for summary judgment

and strike out the proceeding.

R M Bell

Associate Judge

12 McVeagh Fleming v Garnett [2011] NZHC 607.

13 ASB Bank Ltd v Versalko HC Auckland, CIV-2009-404-5449, 4 May 2010.