Intergroup Limited v Pipe Vision NZ Limited
[2024] NZHC 159
•13 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2993
[2024] NZHC 159
BETWEEN INTERGROUP LIMITED
Plaintiff
AND
PIPE VISION NZ LIMITED
Defendant
Hearing: 7 February 2024 Appearances:
B D Gustafson for Plaintiff
C E Harris and A Davison for Defendant
Judgment:
13 February 2024
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 13 February 2024 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules 2016.
……………………………… Registrar/Deputy Registrar
-
Solicitors: Speakman Law, Auckland
Jackson Russell, Auckland
INTERGROUP LTD v PIPE VISION NZ LTD [2024] NZHC 159 [13 February 2024]
The issue
[1] InterGroup Ltd brings claims against Pipe Vision NZ Ltd in the High Court. Pipe Vision protests this Court’s jurisdiction. It says InterGroup’s claim is within the exclusive jurisdiction of the Employment Relations Authority, applying the Supreme Court decision in FMV v TZB.1 I agree, for the reasons outlined below.
The underlying dispute
[2] InterGroup and Pipe Vision are competitors in the pipe cleaning and hydro-excavation industry. Until 29 July 2023, Mr Troy Andersen was employed by InterGroup in Cromwell as a “driver/operator” of specialised equipment InterGroup uses. His employment contract included a 12-month non-compete restraint and a non-solicitation restraint. On 25 September 2023, Mr Andersen started working for Pipe Vision as the Lower South Island Regional Manager of its new office in Cromwell. InterGroup claims that Pipe Vision induced or caused Mr Andersen to breach the restraints causing it to lose air excavation business in Cromwell.
[3] InterGroup’s proceedings against Pipe Vision claim in tort for inducing breach of contract and interference with contractual relations. InterGroup seeks an interim injunction in substance enforcing the restraints. The orders sought would preclude Pipe Vision using Mr Andersen for work in Cromwell until further order of the Court. Mr Andersen and his partner live in Cromwell. Mr Andersen is not a party to the proceeding.
[4] Due to how the matter was case-managed, I heard both the protest application and the interim injunction application sequentially. I did so on the basis that if the protest succeeded, I would not give any judgment on the interim injunction application.
[5] On the merits of the claim, Pipe Vision says that the restraints are unreasonable and therefore unenforceable. It says the restraints protect no legitimate interest given the nature of Mr Andersen’s role. If the restraints are enforceable at all, Pipe Vision
1 FMV v TZB [2021] NZSC 102, [2021] 1 NZLR 466 [FMV]. Footnote references to paragraph numbers are to paragraphs in FMV unless otherwise stated.
says no more than a two-month restraint is justified. It denies that Mr Andersen is in breach if and to the extent the restraints are enforceable. Pipe Vision also says it did not induce any breach nor unlawfully interfere and rejects that any breach is the cause of loss of business.
[6] Although a number of affidavits were filed, the key facts relevant to the protest are as outlined above.
Approach to s 161 of the Employment Relations Act 2000
[7] By s 161 of the Employment Relations Act 2000 the Authority has exclusive jurisdiction to “make determinations about employment relationship problems generally, including” a list of examples. Among the examples, are:
(a)disputes about the interpretation, application, or operation of an employment agreement:
(b)matters related to a breach of an employment agreement:
…
[8] Importing the definition of “employment relationship problem” from s 5, the opening words2 in s 161(1) effectively read:3
The Authority has exclusive jurisdiction to make determinations about any problems relating to or arising out of employment relationships, generally …
[9] The approach I am to take to the Authority’s exclusive jurisdiction is as outlined below, summarising the Supreme Court majority judgment in FMV.4 I will refer to this as the Majority Judgment or Majority.5
[10] “Problem” in s 161 is used in a non-technical sense, meaning a difficulty or controversy to be resolved.6 “Problem” is a factual category, not a legal one,
2 The Supreme Court referred to this as the “chapeau,” adopting William Young J’s descriptor: FMV, above n 1, at [66]–[67] per Williams J and at [149] per William Young J.
3 At [22].
4 The majority judgment is given by Williams J, with whom Winkelmann CJ and O’Regan J agreed.
5 This is to distinguish it from William Young J’s separate judgment, who preferred a different approach but joined with the majority in dismissing the appeal. Glazebrook J would have upheld the appeal for reasons given in her separate dissenting judgment.
6 At [61].
encompassing all legal forms such as property, tort or equity.7 Accordingly, whether a problem relates to or arises out of the employment relationship is simply one of fact.8 Approached as a factual issue, whether a problem is within the Authority’s exclusive jurisdiction may be a question of judgement or degree.9
[11] If a controversy can be framed in terms of one or more of the examples in s 161 it must be brought in the Authority as an employment relationship problem. If it does not fit within any of the examples, then the question will be whether the problem nevertheless relates to or arises out of an employment relationship in terms of the open-textured introductory language of s 161(1) and a catch-all in s 161(1) (r).10 If the controversy arises during the course of the employment relationship and in a work context it will be an employment relationship problem.11
[12] While the parties must always be able to point to an employment relationship, the “work context in the course of the employment relationship” does not cover all relevant situations.12 So, for example, the Majority identified “post-employment” obligations entered during the course of the relationship and in the work context as aspects of the employment relationship even if entry into them has the effect of ending the relationship.13 The Majority specifically referred to problems with restraints of trade as within s 161 whether such obligations arise from the employment contract or a severance agreement. 14 The Majority noted that the former is expressly covered by s 161(1)(a) and (b).
[13] The Majority went on to consider the situation of: “Directors and other split proceedings”.15 Some allegations against a director who is also an employee may
7 At [92]. A pleaded claim is not itself a “problem”. Rather the question is whether a claim reflects a problem that relates to or arises from an employment relationship (at [95]).
8 At [75].
9 At [93].
10 At [94]. The “catch-all” is “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)”
11 At [93]–[94].
12 At [99]. The “employment relationship” is larger than the employment contract, both in content and scope.
13 At [99]. The Court’s particular focus was JP Morgan Chase Bank NA v Lewis [2015] NZCA 255, [2015] 3 NZLR 618 where obligations were entered into under a settlement agreement.
14 At [101].
15 At [102].
relate to their capacity as director and others as an employee. Only the latter are employment relationship problems, giving rise to proceedings that may need to be split between the Authority and the Court. The Majority continued:16
[103] …[S]plit proceedings will also be likely in multiple defendant cases where only one or some of the defendants are employees.17 BDM Grange18 and Global Kiwi NZ Ltd v Fannin19 are two examples of this occurring. Claims against the employee that arise from employment relationship problems will need to be brought in the Authority, while claims against third parties will generally belong in the High Court.
[14]The Majority then cautioned:
[104] To be clear, we do not suggest that only parties to employment relationships can have employment relationship problems, or bring or defend proceedings in the Authority. The important element is the nature of the problem, not the identity of the parties.
[15] Waikato Rugby Union (Inc) v New Zealand Rugby Football Union (Inc) was given as an example, where the dispute was over which union a player should represent.20 The Majority considered that this was appropriately seen as an employment relationship problem because it was a disagreement over the New Zealand Rugby Football Union’s employment agreement with the player.21
[16] In FMV the appellant had brought parallel proceedings in the Authority and the High Court in relation to prejudice she says she suffered at work.22 The High Court claim pleaded breaches by the employer of duties of care to provide a safe and healthy work environment.23 The claim in the Authority alleged bullying, discrimination and breach of contract.24 Applying the approach it had articulated, the Majority held that the allegations in the High Court identified an employment relationship problem: the factual allegations were entirely grounded in the employment relationship and completely reliant on the work context. The problem was therefore within the
16 At [103].
17 Hibernian Catholic Benefit Society v Hagai [2014] NZHC 24, (2014) 11 NZELR 534 at [16].
18 BDM Grange Ltd v Parker [2006] 1 NZLR 353 (HC).
19 Global Kiwi NZ Ltd v Fannin [2014] NZHC 656.
20 Waikato Rugby Union (Inc) v New Zealand Rugby Football Union (Inc) [2002] 1 ERNZ 752 (EmpC).
21 At [52].
22 FMV, above n 1, at [3].
23 At [11]–[12].
24 At [9]–[10].
exclusive jurisdiction of the Authority and the High Court claim was correctly struck out.25
[17] As William Young J put it in his separate judgment in FMV, the Majority has taken a “universalist” approach to s 161. It directs that the jurisdiction issue be determined on the basis of a factual assessment focusing on the wording of s 161 without gloss.26 The Majority’s approach requires a court to consider as a matter of fact the intensity of the connection of the dispute to an employment relationship envisaged by the expressions “arising out of” or “relating to” in the definition of “employment relationship problem”.27
[18] This differs from the “essential character” approach which had been the feature of the previous case law.28 It also differs from the approach preferred by William Young J. At least in marginal cases, William Young J considered the Majority’s “literal” approach as an inadequate mechanism for determining jurisdiction.29 He would approach s 161 by assessing whether the conclusion that a matter is within the exclusive jurisdiction is consistent with the legislative purpose.30 That would be based on a legal assessment of matters such as the scope of the remedial powers of the Authority and Employment Court.31 William Young J referred to cases in which there are parties other than those to the employment relationship as posing particular jurisdictional difficulties, not sensibly to be determined by reference to the definition of “employment relationship problem”.32
[19] I have summarised these aspects of William Young J’s judgment because in my view they underline the approach the Majority directs me to take in contrast to his. In my view there is little room on the current facts in the “without gloss” approach of the
25 At [27]. The Majority went on to hold that the High Court claim was not excluded from the Authority’s jurisdiction by the catch-all in s 161(1)(r) (at [134]). I do not consider the catch-all further as InterGroup made no argument founded upon it.
26 At [176] per William Young J.
27 See William Young J’s characterization of the Majority Judgment at [199].
28 For example, Pain Management Systems (NZ) Ltd v McCallum HC Christchurch CP72/01, 14 August 2001.
29 At [198].
30 At [199].
31 And see [222] per Glazebrook J.
32 At [200].
Majority for InterGroup’s contention that this is a matter outside the Authority’s exclusive jurisdiction.
Decision
[20] Pipe Vision submits that on the facts this is plainly a matter “about” the interpretation, application or operation of the restraints and therefore within s 161(1)(a). It is “grounded” (to use the Majority’s word in FMV)33 in the question of whether these restraints are reasonable and enforceable. Alternatively, it is a dispute arising out of the employment relationship and hence within the opening words of s 161. The fact that the defendant is a third party to the employment relationship does not undermine that conclusion given the connection that exists between the claims and InterGroup’s employment relationship with Mr Andersen. I agree.
[21] It is correct that the factual allegations also engage conduct by Pipe Vision of inducing or causing interference with the contract (albeit that the only facts pleaded are that Pipe Vision employed Mr Andersen and knew he had been employed by InterGroup). The losses alleged are said to be business losses caused by that conduct. I accept that the involvement of a third party is relevant to the degree of connection. But viewed as a question of fact and degree applying the words of s 161(1)(a), the claims are squarely within s 161. While the dispute involves a third party, it is a dispute arising out of Mr Andersen’s employment relationship with InterGroup. This is accentuated by the fact that the interim injunction sought by InterGroup would preclude Mr Andersen continuing to work in Cromwell because on its face that is within the scope of his non-compete restraint.
[22] InterGroup’s submissions seize on paragraph [103] of the Majority Judgment I set out at [13] above and more specifically the fact that BDM Grange and Global Kiwi NZ Ltd were named as examples of split proceedings. The argument runs that:
(a)BDM Grange included claims against the new employer in the High Court for inducing breach of the employment contract.
33 At [110].
(b)The claim against Pipe Vision is for inducing breach of the employment contract (the restraints).
(c)Therefore, the Supreme Court clearly contemplates that in the present situation Pipe Vision can be sued in the High Court.
[23] This submission plucks the examples from the Majority Judgment as driving the conclusion that the present matter is outside the exclusive jurisdiction, without grounding the argument in the approach articulated by the Majority.
[24] The claims here are within the exclusive jurisdiction applying that approach. But even if I give primacy to the Majority’s examples, this would not compel the conclusion for which InterGroup contends:
(a)In BDM Grange the new employer was not only accused of inducing breaches by Mr Parker (the ex-employee) of his employment agreement or the Employment Relations Act. It was alleged to have induced breaches of other statutory obligations, being Mr Parker’s obligations as director. The effect of FMV is that the claims against Mr Parker as director and against the new employer and its holding company for inducing breaches of those statutory duties would remain outside the exclusive jurisdiction of the Authority. BDM Grange is an example of a split proceeding, notwithstanding that the claims for inducing breach of the employment contract are within the exclusive jurisdiction of the Authority.
(b)The facts of the other example, Global Kiwi NZ Ltd , do not assist InterGroup either. The claims against the third party there were in passing off and under the Fair Trading Act 1986 for use of the plaintiff’s trading name. The plaintiff alleged the ex-employee had also breached directors’ duties and fiduciary duties owed as a director. There were other claims against the ex-employee for misconduct regarding accounting, not accounting to the plaintiff, and misappropriating company assets. Applying the approach in FMV, the latter claims
regarding the ex-employee’s conduct as an employee would likely be within the exclusive jurisdiction of the Authority. The claims as to use of the trading name and against the ex-employee in his capacity as a director would not be. This also provides an example of split proceedings involving the third party.
[25] I pressed Mr Gustafson to place the present facts within the FMV approach. He submitted that the “problem” here is about Pipe Vision’s conduct. He says this is not a matter about interpretation or application of the restraint or about its breach but about Pipe Vision’s actions. Earlier, I outlined the factual allegations and the dispute about the enforceability and scope of the restraints. On the current facts it is artificial to characterise the claim as a problem about Pipe Vision’s conduct; or to say that the third party aspect overwhelms the connection with Mr Andersen’s employment relationship with InterGroup.
[26] There is a further consideration. Section 161(1)(m) explicitly includes as an “employment relationship problem” an action for the recovery of penalties which, by s 134(2) includes penalties for inciting or instigating a breach of an employment agreement. As William Young J observed, this is a provision that envisages parties to a dispute before the Authority involving other than employers and employees.34
[27] In considering the reach of the jurisdiction to settlement agreements, the Majority in FMV referred to the fact that s 161(1)(n) gives the Authority exclusive jurisdiction over compliance orders including to enforce a settlement agreement if countersigned by an authorised mediator.35 The Majority said that this demonstrated that issues of compliance with settlement agreements generally are employment relationship problems, including agreements that are not countersigned. That is because of the beginning words of s 161(1), which are cast in inclusive language.36
[28] Applying equivalent reasoning, the fact that by s 161(1) an employment relationship problem includes an action for penalties for instigating breach of the
34 At [202].
35 At [100].
36 At [100].
employment agreement, inferentially means that a dispute about instigation of a breach of an employment agreement is also an employment relationship problem.
[29] Last but by no means least, my conclusion on the protest is consistent with the recent decision of Radich J in TracPlus Global Ltd v Deaker.37 In that case, the Judge applied FMV to conclude that s 161 gave the Authority exclusive jurisdiction to determine an injunction proceeding involving causes of action in tort against a new employer for inducing a breach of confidentiality by former employees. Similar issues arose in that case to the present proceeding, notably the fact that the plaintiff advanced causes of action in tort against the new employer for inducing a breach of contract and causing loss by unlawful means.38
[30] For completeness, by its opposition to the protest, InterGroup asserted that by certain steps taken, Pipe Vison had waived or submitted to jurisdiction. This argument was rightly abandoned by InterGroup at the hearing. A party cannot by waiver or submission confer on the High Court jurisdiction where, as here, it is vested by statute in another judicial body.39
Result
[31]I uphold the protest to jurisdiction and dismiss the proceeding.
[32] The parties are to file a joint memorandum on costs within 14 days, or if costs cannot be agreed:
(a)Pipe Vision is to file a memorandum on costs within 14 days.
(b)InterGroup is to file a memorandum in response within a further 14 days.
Anderson J
37 TracPlus Global Ltd v Deaker [2023] NZHC 3573.
38 At [18(c)].
39 Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corporation [1981] QB 368 at 375-376; Internet Traders Limited v Williams [2015] NZHC 1809 at [11].
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