Porteous v National Mutual Life Association of Australasia
[2018] NZHC 2056
•13 August 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-000217
[2018] NZHC 2056
IN THE MATTER OF The Declaratory Judgments Act 1908; the
Consumer Guarantees Act 1993 and the Fair Trading Act 1986
BETWEEN
EMMA EAGLEN PORTEOUS
Plaintiff
AND
THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA AND AMP LIFE LIMITED
First Defendant
AND
LATITUDE FINANCIAL SERVICES LIMITED
Second Defendant
AND
MARSH LIMITED
Third Defendant
Hearing: 25 July 2018 Appearances:
S A Grant for the Plaintiff
J A Wilson for the Second Defendant
Judgment:
13 August 2018
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by me on
13.08.18 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
E E PORTEOUS v THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA AND AMP LIFE LTD, LATITUDE FINANCIAL SERVICES LTD and MARSH LTD[2018] NZHC 2056 [13 August 2018]
Introduction
[1] The plaintiff, Mrs Emma Porteous, is the executor of her deceased husband’s estate. He was formerly an employee of the second defendant, Latitude Financial Services Limited (Latitude).
[2] At issue in these proceedings, is an insurance policy described as the “AMP Workplace Protection Plan”. It provided group cover for employees of Latitude in the event of their death or Total and Permanent Disablement (TPD). Mrs Porteous contends that the first defendant (AMP) were obliged to pay her husband under the policy for a TPD contracted whilst he was employed.
[3] Latitude seeks to strike out the fifth cause of action described in the statement of claim as a breach of the employment contract. The plaintiff claims that Latitude breached an implied term of the employment contract to keep Mr Porteous advised of limitation for the policy and the consequences of termination. Latitude says that this cause of action is subject to the exclusive jurisdiction of the Employment Relations Authority under s 161 of the Employment Relations Act 2000 (the ERA 2000).
[4] The critical issue I must determine is whether the fifth cause of action directly and essentially concerns an employment relationship problem in terms of the ERA 2000. If the answer is yes, then this Court has no jurisdiction.
Relevant legal principles
[5] High Court Rule 15.1 makes provision for orders striking out all or part of a pleading. In this case Latitude invokes r 15.1(1)(a), that the pleading discloses no reasonably arguable cause of action.
[6] I adopt the following as principles applicable to the consideration of this application:1
1 Attorney-General v Prince [1998] 1 NZLR 262 (CA).
(a)The Court is to assume that the facts pleaded are true (unless they are entirely speculative and without foundation).
(b)The cause of action must be clearly untenable in the sense that the Court can be certain that it cannot succeed.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, even if requiring extensive argument.
(e)The Court should be slow to rule on novel categories of duty of care at the strike out stage.
[7] Where a defect in a pleading challenged as disclosing no reasonably arguable cause of action for defence can be cured by amendment, which the party is willing to make, the Court will almost always permit amendment rather than striking the pleading out.2
The statutory framework
[8]Latitude relies in particular on ss 161(1)(a), (b), and (r) of the ERA 2000:
(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; […]
(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).
[9]Subsection 161(3) provides:
2 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316.
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.
[10] The leading appellate authority on the interpretation of s 161 is the decision of Court of Appeal in J P Morgan Chase Bank NA v Lewis.3 That case concerned a claim for breach of a settlement agreement. The Court of Appeal concluded that the settlement agreement, which set out the conditions for termination of the employment relationship, operated independently from the employment agreement. Therefore, the claim was not subject to s 161 of the Act.
[11] In doing so, the Court of Appeal disagreed with an earlier decision of the High Court that a liability incurred in the context of an employment relationship is an employment relationship problem.4 The Court of Appeal stated at [95]:
We do not agree with this reasoning. It effectively treats all issues that arise between employer and employee as exclusively within the Authority’s jurisdiction because of the existence of that relationship. We do not think that can have been Parliament’s intention when it passed the Act. In accordance with the definition in s 5 an “employee relationship problem”, must relate to or arise out of an employment relationship. We consider this means that the problem must be one that directly and essentially concerns the employment relationship.
[12] The Court of Appeal referred with approval to the decision of the Full Court of the High Court in BDM Grange Ltd v Parker, from which it cited the following passage:5
[…] We express our essential agreement, at greater length, with the analysis of Panckhurst J [in Pain Management Systems] that “relating to” in the definition of “employment relationship problem” must be read in a limited way to mean any cause of action, the essential character to which is to be found entirely within the employment relationship itself. This would not encompass claims arising from tortious conduct even if arising between an employer and employee, since the relationship merely provides the factual setting for the cause of action; the duty arises independently.
3 J P Morgan Chase Bank NA v Lewis [2015] 3 NZLR 618 (CA).
4 The Hibernian Catholic Benefit Society v Hagai (2014) 11 NZELR 534.
5 BDM Grange v Parker [2006] 1 NZLR 353 (HC) at [66]
[13] In RPD Produce Holdings Ltd v Miller6, Duffy J distilled the relevant principles of Pain Management and BDM Grange7 into three questions:
(a)Is the determination about an employment relationship problem?
(b)Does the underlying problem alleged involve some employment right or interest?
(c)Are the rights and interests of the plaintiffs derived from the conflict of employment or did they arise independently of it?
The opposition to the strike out
[14] Mrs Porteous says that the gist of the fifth cause of action does not directly or essentially concern the employment relationship between Latitude and Mr Porteous. It is said that the right or interest in respect of which the implied term is pleaded was not an employment right. Rather, it was a benefit collateral to or incidental to the employment relationship.
[15] Mrs Porteous also says that the benefit at issue was not directly concerned with the employment relationship. It had nothing to do with Mr Porteous’ core employment rights or duties such as his day-to-day responsibilities and/or the general duties of his employer to him in relation to his employment. Ms Grant on behalf of the plaintiff described the benefit in dispute as a non-service term, and the breach of the obligation to advise Mr Porteous occurred after the employment relationship had come to an end. One of the principal objects of the ERA Act 2000, namely the building of productive employment relationships (s 3), is not engaged here.
6 RPD Produce Holdings Ltd v Miller [2013] NZHC 705, adopted by Brewer J in FMV v TSB [2018] NZHC 1131.
7 BDM Grange Ltd v Parker, above n 5.
Analysis and decision
[16] The starting point is to identify the nature of the problem, the ‘gist” of the dispute and ask whether it is truly an employment relationship problem that must be dealt with in the Employment Relations Authority8.
[17] It is important to observe that the fifth cause of action is based on an alleged implied term of the employment contract (paragraph 53 of the statement of claim). The term is allegedly implied for the matters pleaded in paragraph 54. This includes the allegation that Latitude took out the policy on behalf of its employees and it advised other employees of the consequences of loss of policy cover arising from termination of employment. At paragraph 55 the plaintiff alleges that Latitude has breached the implied terms and contractual damages are sought.
[18] I find that the gist of the dispute in the fifth cause of action is truly an employment relationship problem. I also find that all three of the principles identified by Duffy J in RPD Product Holdings Ltd v Miller9 are satisfied.
[19] I agree with the submission of Mr Wilson that the fifth cause of action involves the interpretation and application of the employment contract. Accordingly, s 161(1)(a) of the Act is engaged. Any judicial authority determining the fifth cause of action would need to decide what the terms of the employment contract were, including the implied terms – and if there was implied term of the kind alleged, what would those terms require of Latitude, as the employer.
[20] In relation to the issue of implied terms, Ms Grant disavowed any reliance on the employer’s general obligations of good faith in employment law. However, in my view, any judicial assessment of this issue would inevitably require consideration of those kinds of obligations. I am also of the view that in substance the implied obligations as pleaded, are based on general good faith obligations of an employer. It is an obvious claim to make.
8 EcoStore Co Ltd v Worth [2017] NZHC 1480 at [22].
9 RPD Product Holdings Ltd v Miller, above n 6.
[21] Ms Grant submitted that where a party asserts that a term should be implied into an agreement, the exercise that the Court must perform is not one of interpretation. The implication of contract terms involves the different and altogether more ambitious undertaking; the interpolation of terms to deal with matters for which the parties themselves have made no provision.10
[22] Ms Grant emphasised that the implication of contract terms is a highly technical and difficult exercise for which this Court is best suited to determine. However, I find that the distinction drawn is not a helpful one in terms of addressing the scope of s 161(1)(a) of the ERA Act 2000. That section refers to interpretation, application or operation of an employment agreement. Many claims before the Employment Relations Authority are based on implied term arguments, and as a matter of statutory interpretation, properly fall within s 161.
[23] I also find that the underlying problem as alleged involves an employment right or interest. I reject the submission of Ms Grant for the benefit here can properly be described as a benefit that is collateral to or incidental to the employment relationship. The distinction that Ms Grant sought to draw, for the purposes of the definition of employment agreement in s 5, between a non-service benefit and a service benefit, is not in my view a valid one. The logical extension of the plaintiff’s argument is that any benefit incidentally gained through employment relationships, for example company cars, are within the jurisdiction of the general courts rather than the Employment Relations Authority. In my view that would be contrary to the clear intention of Parliament as expressed in s 161. The jurisdiction of the Employment Relations Tribunal is not confined to core contractual provisions like hours of work and salary; it clearly extends to other terms and conditions.
[24] I find that the rights and interest of the plaintiff in the fifth cause of action are derived from the contract of employment. They do not arise independently of it. The implied obligations at issue are obligations the plaintiff seeks to imply into a contract of employment. The only legal relationship between Mr Porteous and Latitude, and the focus of the fifth cause of action, was the contract of employment. I acknowledge
10 Marks and Spencer Plc v BNP Paribas Securities Services Trust [2015] UKSC 72 at [29].
that the plaintiff contends that similar obligations were owed by his employer in tort, but that is the subject of a separate cause of action, outside the scope of this strike out application.
[25] I accept that there are elements of the claim that are not entirely within the employment relationship. This includes the involvement of third parties, namely the insurer who provided the policy and the broker who arranged it. The claim does also involve the contract between the employer and the insurer. However, while these matters may be of greater relevance and prominence in some of the other causes of action pleaded, they do not remove the fifth cause of action from the scope of an employment relationship problem.
[26] Likewise, the contention by Ms Grant that the alleged breach of the implied terms took place after the employment relationship had been terminated, does not yet remove the fifth claim from the scope of an employment relationship problem. The obligations as pleaded are sourced in the employment contract. As pleaded, the implied terms continue beyond termination. The fact that the breach of those terms occurred subsequent to termination, is not material.
[27] Ms Grant submitted that the objective intention of conferring the benefit of the policy on Mr Porteous was to induce him to sign an employment contract. It was argued that the inducement was not part of the employment relationship, but rather a device intended to encourage loyalty to the company. I find, however, that such a distinction is not a valid one. An employee’s obligations of loyalty are quintessentially a core aspect of an employment relationship and the benefit of the policy in this case was in my view part of Mr Porteous’ terms and conditions of employment; it was part of his employment package. Furthermore, I do not see that in this case the general object in s 3 of the ERA 2000, namely the building of productive employment relationships, assists the plaintiff. In many unjustified dismissal cases before the Employment Relations Authority, the parties accept that the employment relationship is at an end and the focus is on a remedy other than reinstatement.
[28] In conclusion, I find that the fifth cause of action directly and essentially concerns the employment relationship between Latitude and the plaintiff. It
accordingly falls within the exclusive jurisdiction of the Employment Relations Authority.
[29] I do not see how the proposed amendment to the pleading can assist the plaintiff: i.e. that the agreement in relation to the policy was actually a collateral contract rather than part of the employment contract. Ms Grant did not pursue the point with any real vigour and did not have the proposed amendment formulated.
[30] This Court has no jurisdiction to determine the fifth cause of action and accordingly it must be struck out.
[31] I acknowledge that the outcome is far from satisfactory and that it would make real sense for all of the claims of the plaintiff to be heard together in the one forum. This is particularly so where the plaintiff has pleaded concurrent duties in tort and contract and the tort claim will be heard and determined in this Court. However, despite the strength of the policy reasons underlying the plaintiff’s submissions, I find that I cannot read down s 161 in such a way so as to conclude that this Court has jurisdiction. That would be to reshape rather than to clarify Parliamentary intent. This is an issue that might perhaps require some legislative amendment so that for cases of this kind, this Court has the power to grant an exception to the exclusive jurisdiction principle.
Result
[32] The fifth cause of action in the statement of claim dated 12 February 2018, and entitled Breach of Employment Contract - Latitude, is struck out.
[33]Costs are reserved.
Associate Judge P J Andrew
3
1