Hibernian Catholic Benefit Society v Hagai
[2014] NZHC 24
•30 January 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2013-485-8328 [2014] NZHC 24
BETWEEN THE HIBERNIAN CATHOLIC BENEFIT SOCIETY
Plaintiff
ANDSUSAN TERRI HAGAI Defendant
Hearing: 9 December 2013
Appearances: J R Sumner for Plaintiff
Judgment: 30 January 2014
JUDGMENT OF ASSOCIATE JUDGE BELL
This judgment was delivered by me on 30 January 2014 at 10:00 am
pursuant to Rule 11.5 of the High Court Rules.
...................................
Registrar/Deputy Registrar
Solicitors:
Ford Sumner, Wellington, for Plaintiff
THE HIBERNIAN CATHOLIC BENEFIT SOCIETY v HAGAI [2014] NZHC 24 [30 January 2014]
[1] The Hibernian Catholic Benefit Society sues Susan Hagai for $574,000 that she stole while she worked for the society between May 2007 and June 2010 as an administration and accounting officer. Its case is that in the course of her employment she used her knowledge and control of the accounting systems and funds of the society to divert funds into bank accounts of her husband and herself. Mrs Hagai admitted the thefts, was prosecuted and on conviction was sent to prison. The sentencing court did not order reparation. The society seeks compensation in this proceeding. It has applied for summary judgment. Mrs Hagai has not opposed.
[2] When the application was called on 9 December 2013 I queried whether the proceeding was within the jurisdiction of this court because of the exclusive jurisdiction provisions of the Employment Relations Act 2000. The society has filed submissions. I held in Aztec Packaging Ltd v Malevris that a claim for monetary relief for employee embezzlement was within the exclusive jurisdiction of the Employment Relations Authority.1 The society relies on later decisions, PropertyIQ NZ Ltd v Vicelich and RPD Produce Holdings Ltd v Miller, to say that the matter is outside the authority’s jurisdiction.2 As it is more on point, I will deal only with RPD Produce Holdings Ltd v Miller.
[3] The jurisdiction question needs to be answered before the court can address the substantive merits of the society’s claim.3 All the same, if this court does have jurisdiction, in the absence of any opposition from Mrs Hagai I am satisfied that she has no defence to it. I would enter judgment against her.
Jurisdiction of the Employment Relations Authority
[4] The High Court has a general jurisdiction to hear civil cases, whether those cases would historically have been heard in common law, chancery, probate or
1 Aztec Packaging Ltd v Malevris [2012] NZHC 243, (2012) 10 NZELC 79,003.
2 PropertyIQ NZ Ltd v Vicelich [2012] NZHC 2016; RPD Produce Holdings Ltd v Miller [2013] NZHC 705.
3 Advanced Cardiovascular Systems Inc v Universal Specialties Ltd [1997] 1 NZLR 186 (CA).
admiralty courts in England.4 It can hear claims for any amounts. Its general civil jurisdiction may be reduced under statutes giving exclusive jurisdiction to other courts or tribunals. One of those tribunals is the Employment Relations Authority.
[5] The Employment Relations Authority was established under s 156 of the
Employment Relations Act. Section 157 states 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,5 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
4 Judicature Act 1908 s 16; Supreme Court Act 1882 s 16 and Supreme Court Act 1860 ss 4-6.
5 For the High Court, Judicature Act 1908 s16; for the District Court, District Courts Act 1947 s 34.
approach to deciding cases that come before it. It is therefore not surprising to find that the authority has an exclusive jurisdiction. Without one, cases may be decided differently according to whether they are heard by the authority or by a court.
[8] 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:
(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.
[9] It might be thought that the conferral of exclusive jurisdiction in s 161(1) would be enough to show that no court should deal with any of the matters in that subsection, but s 161(3) goes on to make that expressly clear.
[10] 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.
[11] The definition is wide enough to cover a range of claims that those in an employment relationship might wish to make against others in the relationship. There may be penumbral areas where it is difficult to tell whether a problem relates to or arises out of an employment relationship. But at this stage it can be noted that a claim that one party to an employment relationship should pay a sum to another party to the relationship on account of a liability incurred in the context of that relationship comes comfortably within the meaning of employment relationship problem under s 5 and is therefore within the jurisdiction of the authority under s 161.
[12] Section 161(1) lists non-exhaustively a number of matters included within the exclusive jurisdiction. Some of these are matters which are peculiar to employment law and are expressly referred to elsewhere in the Employment Relations Act. In these cases the authority is required to apply specific statutory provisions. Examples are s 161(1) (ca), (cb), (cc), (d), (da), (e), (h), (i), (j), (k), (m), (n), (o) and (p). Because these are express statutory employment law provisions, no question usually arises of some other body (except the Employment Court) hearing these cases. They do not tend to raise jurisdiction questions. On the other hand there are other matters in s 161(1) which are not tied to special provisions in the Employment Relations Act. For those matters the authority will apply the law that would otherwise be followed if the case were instead to be heard in a civil court. Although that law is employment law, it will also draw from the general law. That is the body of statute law, common law, equity and custom that the courts of ordinary
jurisdiction apply. Provisions in s 161(1) under which the authority may decide general law include:
(a) disputes about the interpretation, application, or operation of an employment agreement
(b) matters related to a breach of an employment agreement
(c) matters about whether a person is an employee (not being matters arising on an application under section 6(5)): ...
(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 ...
(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):
[13] I have included (f) and (g), which each deal with other provisions of the Employment Relations Act, because general law matters are likely to arise under them more than occasionally. In particular, good faith obligations under (f) draw on equitable principles. It is in those areas where the authority will apply general law more than occasionally that the question of competing jurisdiction is more likely to arise. To establish on which side of the line a case falls requires an inquiry whether the case involves a determination about an employment relationship problem or whether it falls within one of the particular heads listed in s 161(1). If the case is outside both, a court may hear it.
[14] In cases where it decides matters under the general law, the authority has the same tools as are available to the ordinary courts.6 Subject to s 157(3), the authority applies the same substantive law and gives the same relief. That is recognised in
s 162:
6 BDM Grange Ltd v Parker [2006] 1 NZLR 353 (HC) at [63]-[64] citing X v Y Ltd and NZ Stock Exchange [1992] 1 ERNZ 863 and Hobday v Timaru Girls’ High School Board of Trustees [1993] 2 ERNZ 146 (CA).
162 Application of law relating to contracts
Subject to sections 163 and 164, the Authority may, in any matter related to an employment agreement, make any order that the High Court or a District Court may make under any enactment or rule of law relating to contracts, including—
(a) the Contracts (Privity) Act 1982:
(b) the Contractual Mistakes Act 1977: (c) the Contractual Remedies Act 1979: (d) the Fair Trading Act 1986:
(e) the Frustrated Contracts Act 1944: (f) the Illegal Contracts Act 1970:
(g) the Minors’ Contracts Act 1969.
[15] The section addresses a drafting difficulty that the named statutes conferred order-making powers only on courts, but not on tribunals or arbitrators.7 Section 162 would not be required unless the Authority could decide matters under those statutes.
[16] The exclusive jurisdiction of the authority to decide only some cases applying general law – those involving employment relationship problems – can create inconvenience in litigation where claims include employment relationship problems but also extend beyond them. If claims are to be made against two defendants, but one was in an employment relationship with the plaintiff and the other was not, one claim may have to be made in the Authority and the other in a court. This is not a jurisdiction void, as Keane J called it in Transnet NZ Ltd v
Dulhunty Power (NZ) Ltd, but a split jurisdiction.8 Similarly a defendant sued in an
ordinary court will not be able to join an employee as a third party if the claim against the employee is an employment relationship problem. Likewise a company may have claims against an executive director both for breach of duty as director and breach of an employment agreement. The ordinary courts hear the claim against the
director;9 the authority hears the claim against the employee. Inconvenience of this
7 For some of these statutes, the drafting difficulty has since been addressed. See Contracts (Privity) Amendment Act 2002 s 3, Contractual Mistakes Amendment Act 2002 s 3, Contractual Remedies Amendment Act 2002 s 3, Frustrated Contracts Amendment Act 2002 s 3 and Illegal Contracts Amendment Act 2002 s 3.
8 Transnet NZ Ltd v Dulhunty Power (NZ) Ltd [2007] ERNZ 379 (HC) at [24].
9 BDM Grange Ltd v Parker.
sort is the inevitable outcome of legislation that confers exclusive jurisdiction on a tribunal to hear only some matters under the general law. Parliament has made the policy decision that the benefits of a specialist tribunal to decide employment relationship problems outweigh any inconvenience arising out of an exclusive jurisdiction. The courts are required to apply the policy set out in the statute notwithstanding any inconvenience in a particular case. The courts cannot undermine it by allowing claims for employment relationship problems to be heard both inside and outside the authority.
[17] The definition of employment relationship problem is broad and is not framed in the technical language of causes of action. “Problem” is not generally used in a legal context to refer to some contested matter. No doubt “problem” takes its colour from “personal grievance” and “dispute” but even so, it is capable of being applied broadly. “Relating to or arising out of an employment relationship” applies more widely than “founded on”, which is typically used to refer to particular causes
of action.10 No doubt the non-technical language reflects that much of the
authority’s jurisdiction is outside the traditional causes of action of the general law. It also points to a wish to avoid the authority’s jurisdiction being tied to particular causes of action.
[18] The breadth of the language and the fact that “employment relationship problem” is not tied to particular causes of action allows for concurrent causes of action, a concept familiar to the general law. The facts of a case may give rise to more than one cause of action. The present case illustrates the point. The statement of claim does not expressly state any particular cause of action. On the pleaded facts the society’s claim could be put as one for breach of contract, for money had and received, for breach of fiduciary duty in equity or breach of the obligation of good faith under the Employment Relations Act. However the cause of action is framed,
the case is about an employment relationship problem.
10 For example, Limitation Act 1950 s 4(1)(a) refers to “actions founded on simple contract or on tort” and Employment Contracts Act 1991 s 109(1)(g) refers to “any action founded on an employment contract” and (l) to “any proceedings founded on tort...” See also “founded on tort” in Employment Relations Act s 161(1)(l) and (r).
[19] Sometimes alternative causes of action are used in attempts to outflank s 161. The danger of allowing concurrent causes of action to be run in a civil court is that there may be inconsistent decisions in the civil court and in the authority. An employee sued in the civil court could apply to the authority to make a decision on the same matter, relying on its exclusive jurisdiction. Concurrent proceedings could be run in a civil court only if the matters in the civil court are not an employment relationship problem. BDM Grange Ltd v Parker illustrates the point. The employer was able to keep its claim in this court only because it dropped its claims against the
defendant as employee and amended to include claims against him as director.11
That case shows that it is necessary to look to the substance of what is in issue, not to the particular cause of action. Pankhurst J’s dictum in Pain Management Systems (NZ) Ltd v McCallum is helpful guidance in this:12
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 some right or interest which is not directly employment related at all?
The authority’s jurisdiction in this case and the society’s submission
[20] There may be cases where the demarcation between an employment relationship problem and a case outside is hard to decide, but this case is not a difficult one. Mrs Hagai stole the society’s money while she was at work and has not paid it back. That is not only within the general wording of an employment relationship problem, but it also comes within three of the specific heads in s 161(1). A claim against her for breach of contract under s 161(1)(b) can be put a number of ways but at the very least she failed to keep proper account of funds under her control, something she was employed to do. As to s 161(1)(f), taking the society’s
money when she had been trusted to look after it was a gross breach of fiduciary
11 See [85]-[86].
12 Pain Management Systems (NZ) Ltd v McCallum HC Christchurch CP 72/01, 14 August 2001 at
[22].
duty and comes within the good faith obligations under s 4.13 The power under s
161(1)(r) to hear any other action “arising from or related to the employment relationship or related to the interpretation of this Act” covers two causes of action: a claim in equity for breach of fiduciary duty (as an alternate and concurrent claim to the breach of the good faith obligation under s 161(1)(f)) and a claim for money had
and received.14 The availability of a restitutionary claim for money had and received
does not take the case outside an employment relationship problem: the availability of the claim follows from Mrs Hagai’s inability to justify taking the money, something that arises out of the employment relationship.
[21] Against that, the society says that its claim can be heard in this court. It says that its case is founded in equity, namely in Mrs Hagai’s breach of fiduciary duty. Equitable claims are excluded under s 161(1)(r) and equity must prevail over the common law.
[22] To make out its case of breach of fiduciary duty, the society says that its relationship with Mrs Hagai was such that it relied on her to perform her role loyally and honestly. There was a degree of dependency and imposition of trust and confidence in Mrs Hagai which in turn gave rise to equitable obligations to the society including an obligation not to profit at its expense. A duty of loyalty arises when the circumstances of the parties’ relationship are such that one person is entitled to rely on the other party not to act in a way that is contrary to the principal’s interests. In misappropriating the society’s funds Mrs Hagai breached the fiduciary duty and caused the society loss. For my part that is an acceptable account of a claim for breach of fiduciary duty.
[23] From there the society submits that while there was an employment relationship, the employment merely provided the context and opportunity to take advantage of the society’s dependency and trust. The authority cannot consider
claims in equity, because they do not spring from the contract of employment.
13 Under s 4(1A)(a) the duty of good faith is wider than but includes the implied mutual obligations of trust and confidence.
14 In New Zealand Fire Service Commission v Warner [2010] NZEmpC 90, the Employment Court held that the Authority had jurisdiction to hear claims in restitution for overpayment under s 161(1)(g).
Fiduciary obligations can co-exist with contractual relations and can be the basis for an independent claim outside the authority’s jurisdiction. In this case the employment contract is extraneous to Mrs Hagai’s conduct in misappropriating the society’s funds. The case is outside s 161 because the section must be interpreted strictly and it does not apply to claims in equity. Parliament could not have intended to deprive litigants of access to the court’s equitable jurisdiction under s 161 without saying so. The society’s submission put particular stress on RPD Produce Holdings Ltd v Miller.
Response to the society’s submission
[24] The society’s submission did not refer to s 161(3), which makes it quite clear that matters within the jurisdiction of the authority cannot be heard by a court. That meets any objection that Parliament has not made it sufficiently clear that it intended to transfer jurisdiction to decide certain matters of general law from the courts to the authority when they involved employment relationship problems.
[25] The submission that equity prevails over the common law is based on s 99 of the Judicature Act 1908. No doubt the authority would apply the appropriate rule of equity if a case required it to consider a conflict between common law and equity, but s 99 does not count against the transfer of a general law jurisdiction to the authority to decide employment relationship problems.
[26] The submission did not address the jurisdiction of the authority under s 161(1)(f) to decide whether the good faith obligations imposed by the Employment Relations Act have been complied with. Those obligations encompass the breach of fiduciary duty the society relies on. These parts of s 4 show that:
Good faith employment relations
4Parties to employment relationship to deal with each other in good faith
(1) The parties to an employment relationship specified in subsection (2) (a) must deal with each other in good faith; and
(b) without limiting paragraph (a), must not, whether directly or indirectly, do anything—
(i) to mislead or deceive each other; or
(ii) that is likely to mislead or deceive each other. (1A) The duty of good faith in subsection (1)—
(a) is wider in scope than the implied mutual obligations of trust and confidence; ... ...
(4) The duty of good faith in subsection (1) applies to the following matters:
(bb) any matter arising under or in relation to an individual employment agreement while the agreement is in force:
(5) The matters specified in subsection (4) are examples and do not limit subsection (1).
[27] The judgment in BDM Grange Ltd v Parker recognised that, when addressing the claim that the employer could make against the defendant as employee:15
Insofar as Mr Parker was acting qua employee his conduct was in breach of his duty of good faith owed to his employer under s 4 of the Authority [sic]. The ERA places that duty at the heart of an employment relationship; it follows that breach of that duty must “relate to” such relationship. Secreting information for the purpose of taking improper advantage of it in the future would breach both that provision and a term of his contract implied at common law.
[28] If the statutory duty of good faith covers and goes beyond fiduciary obligations at equity, and the statutory duty is at the heart of the employment relationship and is expressly within the jurisdiction of the authority, it does not make sense to say that the authority loses jurisdiction if the claim is pleaded in equity instead. Such a concurrent pleading does not take the case outside an employment relationship problem.
[29] The society’s argument that the authority does not have any jurisdiction in equity is curious. Save for s 161(1)(l), there are no express words in s 161 to say that the authority’s general law jurisdiction falls short of deciding questions of equity. In this country, courts deciding questions of general law apply both common law and equity. In conferring a general law jurisdiction on the authority and taking it
away from the ordinary courts, Parliament must have intended the authority to have
15 At [87]. The defendant was alleged to have breached his duty of fidelity by misusing confidential information he had obtained in his employment.
the same power to apply common law and equity. So the authority can apply equity in hearing an application to rectify a written employment agreement or to set aside an employment agreement as an unconscionable bargain or for undue influence. Similarly where the statutory duty of good faith under s 4 overlaps a fiduciary obligation in equity, the authority will be guided by and will apply equitable principles. Simply because an employment relationship problem raises a question of equity does not take the problem outside the authority’s jurisdiction.
[30] The claim that the authority does not have a jurisdiction in equity seems to derive from two passages in BDM Grange Ltd v Parker.16
[31] The first passage says:
We do not deduce from that policy that the jurisdiction of the Authority (and the right of rehearing by the Employment Court) was intended to extend beyond claims arising directly within the employment relationship into causes of action such as claims in tort and in equity. The general language of s 161 “to make determinations about employment relationships generally” and to deal with “any . . . action that is not directly within the jurisdiction of the Court arising from or related to the employment relationship” is both capable of an extensive meaning and must be given due weight. But s 5 of the Interpretation Act focuses not only on the text but on the purpose of the Act. [Emphasis added]
[32] To put this passage into context, the judgment was making the point that the Employment Relations Act is generally directed towards conduct that arises from the obligations imposed by the act or under the employment agreement. It is concerned with the rights and obligations of employers and employees in those capacities. For this case it is not necessary to address the exclusion of tort claims under s 161(1)(r).
[33] The purpose which the judgment attributes to the Employment Relations Act does not require that claims in equity be excluded from the jurisdiction of the authority. With respect, the judgment overlooks that one part of equity is its concurrent jurisdiction – rules of equity may apply in matters to which the common law also applies. After all, s 99 of the Judicature Act is required to resolve conflicts
between the common law and equity. Contract law, including the law relating to
16 At [51] and [88].
employment agreements, is based on both common law and equity. A claim relating to an employment agreement may require rules in equity to be applied.
[34] Further, an employment relationship may give rise to obligations of trust and confidence, which may give rise to claims in equity for breach of fiduciary duty. Even though the statutory duty of good faith may overlap the equitable obligation, that does not oust the jurisdiction of the authority to apply equity in such cases. There is no reason why the authority should not hear a case involving an employment relationship problem, even if the authority applies equity. Section
161(1)(r) allows it to hear such a claim.
[35] The second passage says:
In performing a careful conflict of jurisdictions analysis there may be noted the sharp antithesis between s 162 (conferring extensive contract jurisdiction) and s 100 (which by conferring only narrow injunction power suggests the exclusion of significant equity jurisdiction). The contrast indicates that, insofar as a claim alleging breach of confidence is brought essentially to achieve performance or to seek relief for breach of the employment contract, it is properly to be construed as arising from the employment relationship and thus within the exclusive jurisdiction of the Authority and the Employment Court. However, a claim for relief which in essence arises not out of the employment relationship, but is to be characterised as substantially, say, a claim in equity (or, if the cause of action is as Meagher considers sui generis, for breach of confidence simpliciter) is properly within the jurisdiction of the High Court. [Emphasis added]
With respect, the reference to s 100 does not give grounds for generally cutting back the authority’s equitable jurisdiction. Section 100 is in Part 8 of the Employment Relations Act, which deals with strikes and lockouts. It confers on the Employment Court exclusive jurisdiction to hear applications for injunctions against strikes, lockouts and pickets. It makes it very clear that other courts are not to handle such injunction applications. Here it is:
100 Jurisdiction of court in relation to injunctions
(1) The court has full and exclusive jurisdiction to hear and determine any proceedings issued for the grant of an injunction—
(a) to stop a strike or lockout that is occurring or to prevent a threatened strike or lockout; or
(b) to stop any picketing related to a strike or lockout or to prevent any threatened picketing related to a strike or lockout.
(2) No other court has jurisdiction to hear and determine any action or proceedings seeking the grant of an injunction—
(a) to stop a strike or lockout that is occurring or to prevent a threatened strike or lockout; or
(b) to stop any picketing related to a strike or lockout or to prevent any threatened picketing related to a strike or lockout.
(3) Where any action or proceedings seeking the grant of an injunction to stop a strike or lockout or to prevent a threatened strike or lockout are commenced in the court, and the court is satisfied that participation in the strike or lockout is lawful under section 83 or section 84,—
(a) the court must dismiss that action or those proceedings; and
(b) no proceedings seeking the grant of an injunction to stop that strike or lockout or to prevent that threatened strike or lockout may be commenced in the District Court or the High Court.
[36] While the authority can hear proceedings related to a strike or lockout, it cannot deal with proceedings founded on tort or seeking an injunction – s 161(1)(l). But the conferral of an exclusive jurisdiction on the Employment Court to grant injunctions for strikes, lockouts and pickets says nothing about the authority’s jurisdiction to decide questions of equity in other cases. The authority’s equitable jurisdiction is cut back only to the extent required under s 161(1)(l).
[37] The second part of this passage from BDM Grange Ltd v Parker recognises that some claims for breach of confidence, arguably an equitable obligation, may be within the authority’s jurisdiction but in other cases they may be outside. Generally decisions have held that misuse of confidential information during the course of employment is within the jurisdiction of the authority, but misuse of information (received during employment) after employment has come to an end is outside: see Pain Management Systems (NZ) Ltd v McCallum, Transnet NZ Ltd v Dulhunty Power (NZ) Ltd and PropertyIQ NZ Ltd v Vicelich. The passage from BDM Grange Ltd v Parker can be read as consistent with that approach. As such it is directed at
whether the matter is an employment relationship problem or not. It does not
determine that claims in equity are generally outside the authority’s jurisdiction.
[38] Section 161(1)(r) does not support the society’s case. It applies in other cases arising from or related to the employment relationship, other than cases within the Employment Court’s jurisdiction. As this case is within s 161(1)(b) for breach of contract and (f) for breach of a good faith obligation, (r) applies only if the claim is considered as one for money had and received or for breach of fiduciary duty in equity. As these are both claims arising directly out of an employment relationship, (r) allows the authority to hear them.
[39] The society’s submission relied heavily on RPD Produce Holdings Ltd v Miller. In that case an employer sued two former employees. It alleged that the first employee had overpaid himself by $263,240.34. It did not allege any wrongdoing or breach of contract on the part of the second employee. The employer alleged breach of fiduciary duty by the first employee, but no breaches of the employment agreement. The employer required the first employee to account for the
$263,240.34, claimed an institutional constructive trust in a property owned by both former employees and alternatively asked the court to impose a remedial constructive trust over the property in its favour. On an objection as to jurisdiction, the court held that the proceeding was outside the jurisdiction of the authority.
[40] It needs to be recognised that that is one of those inconvenient cases, because the employer’s claim involved tracing and sought proprietary relief against a property owned by two people. The employer had an employment relationship problem with only one of them. There is no reason why the authority cannot give a proprietary remedy in an employment relationship problem – it is after all part of the general law. The difficulty was that the employer had only a tracing claim against the second former employee. In my view this was a split jurisdiction case, but the difficulty was not insurmountable. The claim in this court could have been stayed (with the employer’s interest protected by a caveat over the property), while the authority decided the merits of the contested claim for overpayment.
[41] The basis for the court’s decision can be seen here:17
In PropertyIQ, I applied the reasoning and principles to be drawn from Pain Management and BDM Grange Ltd. I consider that the same applies here. When I apply the principles identified in Pain Management, I find as follows: first, the determination required here is not about an employment relationship problem; instead it is about someone who is alleged to have taken advantage of another’s dependency on him in order to enjoy a secret and dishonest profit. Claims of this type arise in a multiplicity of circumstances; they do not hinge on there being an employment relationship. Secondly, the underlying problem as alleged does not involve some employment right or interest; instead the employment relationship merely provided the opportunity for Mr Miller to take advantage of the plaintiff’s dependency and trust. Thirdly, the rights and interests of the plaintiff are not derived from the contract of employment, but exist independently of it. Fourthly, as was recognised in BDM Grange Ltd, when the nature of the relief sought is in equity, that is a pointer away from characterising the claim as within the exclusive jurisdiction of the Employment Relations Authority.
[42] I respectfully disagree with each of these reasons:
(a) The allegation of breach of fiduciary duty goes to the heart of the employment relationship, as BDM Grange Ltd v Parker recognised. It is squarely within s 161(1)(f). It unmistakeably raises an employment relationship problem. It is beside the point that breaches of fiduciary duty can arise in other circumstances. What counts is that when they arise in an employment relationship, the authority rules on them. The employment relationship is more than an incidental background factor.
(b)The case did involve employment rights and interests. The employer had rights and interests in seeing that the employee paid himself no more than his contract entitled him to. The allegedly overpaid employee claimed that he was entitled to what he received. That would require an inquiry into the terms of the employment agreement. The fact that the employee allegedly abused the trust placed in him
goes to the heart of the employment relationship.
17 At [32].
(c) The rights the employer relied on were based on the employment relationship – not only on the terms of the agreement but also on the obligation of good faith, enforceable in the authority under s 161(1)(f) and (r).
(d)The fact that the employer chose to plead its claim in equity rather than in reliance on the statutory obligation of good faith did not take the case out of the authority’s jurisdiction.
[43] RPD Produce Holdings Ltd v Miller is the strongest case the society can cite in its favour. The judgment declined to follow my decision in Aztec Packaging Ltd v Malevris. It is obviously unsatisfactory that there should be inconsistent decisions in this court on a matter of jurisdiction, but I am not persuaded that I should depart from my earlier decision. Notwithstanding the society’s submission, I am not satisfied that this case falls outside the jurisdiction of the Employment Relations Authority under s 161 of the Employment Relations Act.
Outcome
[44] For the above reasons, I find that this court does not have jurisdiction to hear
the society’s claim. I dismiss the application for summary judgment.
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R M Bell
Associate Judge
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