Tracplus Global Limited v Deaker
[2023] NZHC 3573
•7 December 2023
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2023-442-36
[2023] NZHC 3573
BETWEEN TRACPLUS GLOBAL LIMITED
Applicant
AND
SHAWN DEAKER
First Respondent
V2TRACK (2022) LIMITED
Second Respondent
Hearing: 29 November 2023 Counsel:
P J Napier and P J Shanahan-Pinker for Applicant
T Smith and O C Gascoigne for First and Second Respondents
Judgment:
7 December 2023
JUDGMENT OF RADICH J
[1] This decision applies the principles established by the Supreme Court in FMV v TZB: if a problem that relates to or arises out of an employment relationship can be framed within the terms of s 161 of the Employment Relations Act 2000 – which defines the jurisdiction of the Employment Relations Authority – then the Authority will have exclusive jurisdiction to determine it and it cannot be considered by this Court.1
[2] TracPlus is concerned about inadvertent access that Mr Deaker and the two directors of V2Track (2022) Limited may have to confidential documents on its
1 FMV v TZB [2021] NZSC 102. The extent of the limited exclusions from the terms of s 16(1)(l)(r) is discussed later in this decision.
TRACPLUS GLOBAL LIMITED v DEAKER [2023] NZHC 3573 [7 December 2023]
Google Drive by reason of their former employment relationships with TracPlus Global Limited.
[3] For the reasons I go on to give, the problem that arises can be framed within the terms of s 161 and, as a consequence, this Court does not have jurisdiction to consider the case.
The context and the issues
[4] The hearing, during which the arguments addressed in this decision were heard, was scheduled for the purpose of determining TracPlus’s application for interim relief. TracPlus seeks interim orders restraining Mr Deaker and V2Track from accessing or using its confidential information.
[5]On 27 November 2023, I issued a minute in the following terms:
I have been assigned to hear this case on Wednesday. I ask that counsel address a preliminary jurisdictional issue – either in advance, or at the commencement, of the hearing.
In FMV v TZB [2021] 1 NZLR 466, a majority of the Supreme Court (Winkelmann CJ, William Young, O’Regan and Williams JJ) held that employment relationship problems that could be framed in terms of any of the examples in s 161(1)(a)–(qd) of the Employment Relations Act 2000 must be framed as such and may not be brought in any jurisdiction other than the Employment Relations Authority: at [94] and [127] per Winkelmann CJ, O’Regan and Williams JJ; at [171] per William Young J. And see the examples given at [99] to [101].
As a result, does the High Court have jurisdiction in this proceeding?
[6] It was agreed at the beginning of the hearing that the time that was available would be used to address the jurisdictional issues and that, if the Court was satisfied that it had jurisdiction in the case, then it would deal with the applicant’s application for interim relief on the papers.2
[7] There are two jurisdictional issues. The first is overriding in the sense that the answer to it will provide a complete answer on the Court’s jurisdiction. The second is
2 Submissions on the jurisdictional issues were filed by the parties and were addressed orally at the hearing.
subsidiary. It acts as a form of cross-check against the consequences of an affirmative answer to the first issue.
[8]The issues are these:
(a)Does, in terms of s 161, the problem raised by TracPlus relate to or arise out of an employment relationship?
(b)Does it matter that the plaintiff now chooses to frame causes of action solely in tort?
The factual background and the applicant’s claims
[9] The factual allegations, and the nature of the claims made as a result of them, have changed progressively as multiple rounds of affidavits have made things clearer to the parties.3
[10] All that matters for the purposes of this decision is to capture where matters now stand.
[11] TracPlus is a technology company. It provides tracking software. Mr Deaker was employed by TracPlus, essentially in business development roles, from November 2013 to February 2021.
[12] Mr Deaker left TracPlus to join Flightcell International Limited, a company that provided hardware to TracPlus and with which TracPlus was in a close commercial relationship. He is now employed by V2Track.
[13] Kylan Diprose and Bevan Diprose were employed by TracPlus between May 2020 and December 2021. TracPlus had, in May 2020, purchased their business (then operated through V2Track Limited). In December 2021, TracPlus sold the business
3 The applicant’s evidence was filed, the respondents filed evidence in response, the applicant filed evidence in reply, the respondents filed rejoinder evidence, the applicant evidence in response, the respondents filed evidence in reply, and the applicant then filed further evidence.
back to them, through V2Track (2020) Limited, the second respondent. Kylan Diprose and Bevan Diprose are its sole directors.
[14] By virtue of their former employment relationships with TracPlus, Mr Deaker and Kylan and Bevan Diprose had access to documents and information on TracPlus’s Google Drive and on other internal TracPlus platforms.4 Concerns have arisen on TracPlus’s part following recent occasions on which it is alleged that there has been unauthorised access to documents on its Google Drive.
[15] In Mr Deaker’s case, the position would appear to be that, when he was employed at Flightcell International, a TracPlus employee provided him with access to the TracPlus Google Drive, through Mr Deaker’s personal email, for the purpose of having him assist TracPlus by reviewing a particular document. Then, in June 2023, TracPlus’s systems show access to confidential documents on its Google Drive having been obtained through Mr Deaker’s personal email account. Evidence (including expert evidence) for V2Track is to the effect that any access at that time was unknowing and inadvertent, likely in the course of Mr Deaker cleaning up unwanted files that had been shared with him previously. However, TracPlus remains concerned about access to its documents by Mr Deaker.
[16] TracPlus’s systems show, also, that in June 2023 access was obtained to documents on its Google Drive through Kylan Diprose’s email address. Mr Diprose says that the access was unknown and unintended. It may have, it is said, been opened by Mr Diprose through his cellphone, thinking it was a V2Track document, given the way in which information is presented through the Google Drive app on a cellphone. Through evidence for TracPlus (including expert evidence), the claim to access having been inadvertent is challenged.
[17] TracPlus has now taken steps to ensure that access rights to its Google Drive and other internal platforms, having been granted previously to Mr Deaker, Kylan Diprose and Bevan Diprose, have been removed. However, it remains concerned
4 The platforms and systems in question in the case are Google Drive, TracPlus’s filesharing platform, Gmail, its email platform, Notion, its internal documentation platform, Slack, its internal communication platform, Ask Nicely, its net promoter score system and, GitHub, its source code repository.
about access being otherwise obtained and about the use of information that may have been obtained previously. For their parts, Mr Deaker and V2Track remain concerned about the prospect of further inadvertent access on their parts in the event that steps taken by TracPlus to revoke access rights have not been sufficient.
[18]In its amended statement of claim, TracPlus advances:
(a)a cause of action against Mr Deaker for a breach of the confidentiality provisions in his employment agreement with TracPlus;
(b)a cause of action against Mr Deaker for breach of confidence and against V2Track in vicarious liability;
(c)causes of action against V2Track for the torts of inducing breach of contract and causing loss by unlawful means through allegations about their use of TracPlus’s confidential information.
[19] As a result of the exchange of evidence having whittled the relevant allegations down, and following the jurisdictional issues having been raised, TracPlus has signalled an intention to amend the claims it makes in the proceeding. It would no longer proceed against Mr Deaker under his employment contract. Rather, it would proceed for a breach of confidence in circumstances in which the breach occurred, it is said, after his employment with TracPlus had ended, as described in [15] above. And the case against V2Track would no longer include a claim of vicarious liability as a result of Mr Deaker’s alleged breaches of his employment agreement or of his alleged breach of contract. Rather, it would be limited to the torts referred to above.
[20] The parties have different views on whether the Court has jurisdiction to consider those claims.
Section 161 of the Employment Relations Act 2000
[21] Section 161 is a long provision. There are over 50 paragraphs and subparagraphs within subs (1). I set out those parts of the provision that are, or have the potential to be, relevant in this case:
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:
…
(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):
…
(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.
…
[22] The term “employment relationship problem”, which is used in the opening words of subs (1), is defined in s 5 of the Act:
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
[23]Accordingly, as the Supreme Court put it, s 161(1) effectively reads:5
The Authority has exclusive jurisdiction to make determinations about any problems relating to or arising out of employment relationships, generally …
[24] The import of the provision was the subject of the Supreme Court’s decision in FMV.
FMV v TZB
[25] FMV was employed by TZB. Having resigned, she brought proceedings against TZB in the Authority and in the High Court. In the Authority proceeding, she alleged bullying, discrimination, negligence and breach of her employment contract.
5 FMV v TZB, above n 1, at [22].
In the High Court proceeding, she alleged negligence in failing to provide a safe place of work and related issues. The issue was whether, in light of s 161, the High Court had jurisdiction to consider her claim.
[26] A majority of the Supreme Court6 found that the High Court claim reflected employment relationship problems. Irrespective of the way in which they were pleaded, the allegations were grounded in the employment relationship and the Authority had sole jurisdiction as a consequence. As was said in the reasons of Winkelmann CJ, O’Regan and Williams JJ, the Authority has exclusive jurisdiction to make determinations about “problems generally”, not specific causes of action.7 “Problem” is not defined separately but it is used in the Act, intentionally, in a non- technical sense. “It just means a difficulty or a controversy to be resolved”.8
[27] The point was made that the addition of the modifier “generally” in s 161(1) serves to underscore the intention to create a comprehensive jurisdictional class without defined or technical distinctions at the boundaries. It is an approach that ensures that legal form does not distract the decision-maker from focusing on the factual substance of the difficulty confronting the parties.9
[28] Earlier authorities were examined in which courts had declined to strike out proceedings which, although relating to or arising out of employment relationships, were pleaded through categories of claim such as property, equity or tort.10 It was said that “it would defeat the purpose of the specialist scheme to base the Authority’s exclusive jurisdiction on the form of the claimant’s pleading, thereby permitting parties to plead their way around that very exclusivity.”11
[29] The reasons of Winkelmann CJ, O’Regan and Williams JJ were summarised in the following way:12
6 Winkelmann CJ, William Young, O’Regan and Williams JJ.
7 At [60], per Winkelmann CJ, O’Regan and Williams JJ.
8 At [61], per Winkelmann CJ, O’Regan and Williams JJ.
9 At [61] and [92], per Winkelmann CJ, O’Regan and Williams JJ.
10 At [77]–[91], per Winkelmann CJ, O’Regan and Williams JJ.
11 At [80], per Winkelmann CJ, O’Regan and Williams JJ.
12 (Footnotes omitted).
[94] To be clear, given the test is factual, it will not matter whether other causes of action may also arise from the controversy between the parties. That a controversy can also be pleaded without reliance on what is described (with unhelpful circularity) as an “employment right or interest” does not itself take it outside the scope of “employment relationship problem”. All that matters is whether the controversy arose during the course of the employment relationship and in the work context. This necessarily means that if a controversy can be framed in terms of one or more of the examples in s 161(1)(a)–(qd), it must be brought in the Authority as an employment relationship problem. If it does not fit within any of those examples, it will then be a question of 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 the catch-all in paragraph (r).
[30] The decision makes it clear that “post-employment” obligations entered into during the course of the employment relationship are logically aspects of the employment relationship and can give rise to employment relationship problems within the exclusive jurisdiction of the Authority. Problems with restraints of trade are given as an example.13
[31] Moreover, it was said that it was not suggested that only parties to employment relationships can have employment relationship problems, or bring or defend proceedings in the Authority. The important element, it was emphasised, is the nature of the problem, not the identity of the parties.14
[32] What then of the bracketed words, in s 161(1)(r) “(other than an action founded on tort)”? They are not, as was emphasised, a general tort carve-out. As Winkelman CJ, O’Regan and Williams JJ observed, in practical terms, many employment relationship problems will give rise to tort-based claims, as was the case in FMV. A foundational objective of the Act, it was found, is to channel employment problems into the employment institutions “because of their intended levelling effect”.15 To interpret para (r) as if its effect is to allow any employment-related tort claim to be brought elsewhere would, it was said, be to undermine both the express intention of Parliament in relation to s 161 and the intent of pt 10 of the Act.
[33]Winkelmann CJ, O’Regan and Williams JJ went on to say:16
13 At [99]–[101].
14 At [104].
15 At [126].
16 (Footnotes omitted).
[127] The meaning consistent with the legislative intent, therefore, is that, as a starting point, employment relationship problems that can be framed as any of the examples in s 161(1)(a)–(qd) must be framed that way and cannot be brought in any other jurisdiction. Only where an employment relationship problem cannot be framed in any way except as a tort claim does the exception in s 161(1)(r) apply. This is, in any event, the most sensible construction of the text of the provision. It recognises that the tort exception sits inside s 161(1)(r) and so should only affect the subclass (“any other action”) in that clause. There is no good textual or purposive reason to treat it as if it modifies the other 28 examples in s 161(1).
[34] Accordingly, if it is possible to frame a problem relating to or arising out of an employment relationship in some way other than as a tort claim, the tort carve-out will not apply. William Young J made the same point, coming at the issue on the basis that para (r) operates as a catch-all which means that, with the exception of the carve-out, the jurisdiction of the Authority is as wide as it would be if the chapeau at the head of s 161(1) (“The Authority has jurisdiction to make determinations about employment relationship problems generally …”) is construed as a standalone and general grant of jurisdiction.17 The tort carve-out will only apply to the catch-all that para (r) provides.
[35] Do, then, the problems that the applicant raises, however now described, fall within the terms of s 161? For the reasons I go on to give, I believe that they do.
Does, in terms of s 161, the problem relate to or arise out of an employment relationship?
[36] Mr Napier, for TracPlus, says that the issues no longer arise out of the employment relationship at all. It is said for TracPlus that the affidavit evidence filed by the parties has now established that:
(a)TracPlus’s claim against Mr Deaker is for breach of confidence in circumstances where the breach occurred after his employment with TracPlus had ended;
(b)Mr Deaker’s access to confidential information took place outside of the employment relationship context;
17 At [171].
(c)TracPlus no longer relies, and cannot now rely, upon the breach of the employment agreement as the confidential information in question was not provided to Mr Deaker when he was employed by TracPlus; and
(d)TracPlus’s proceeding against both Mr Deaker and V2Track now relies solely on tortious claims.
[37] However, in my view Mr Smith, for Mr Deaker and V2Track, is right to say that TracPlus’s complaints all stem from the fact that, by virtue of the former employment relationships, Mr Deaker, Kylan Diprose and Bevan Diprose have access to documents and information which they could misuse on behalf of V2Track. (It is not established that they have misused anything to which they have had access. The jurisdictional issues here are considered only at a conceptual level.)
[38] In addition, it is said, Mr Deaker has access through his personal email account as a result of access given to him, by a TracPlus employee, to the Google Drive of TracPlus after Mr Deaker had left the company but while he was with Flightcell. As mentioned earlier, Flightcell was in a close commercial relationship with TracPlus. It provided hardware to TracPlus and the two companies worked collaboratively. Mr Deaker was contacted by TracPlus at that time, it is said, because he had been an employee and was familiar with the documents that were to be shared with him through the Google Drive.
[39] Accordingly, the “problem” is that, as a result of their former employment, documents and data have been shared with Mr Deaker and with Kylan and Bevan Diprose, albeit in each case in an unsolicited way. TracPlus’s concern is about Mr Deaker and Kylan and Bevan Diprose having the potential to misuse that information.
[40] Mr Smith emphasises the confidentiality clause in the employment agreement between TracPlus and Mr Deaker. It is said that the terms of the former employment contract between TracPlus and Kylan and Bevan Diprose are in essentially the same terms, although that is not in evidence.
[41] The clause in question provides, amongst other things, that the employee’s obligations of confidence relate to “all confidential information which may come to the employee’s knowledge, either directly or indirectly, during or by virtue of the employee’s employment with the employer”. The clause may be engaged in this case directly or indirectly through the former employment relationships with TracPlus. As is said for Mr Deaker and V2Track, had Mr Deaker and Kylan and Bevan Diprose not been given access to the platforms in question during or arising out of their earlier employment relationships, this proceeding would not have been brought.
[42] In any event, similar obligations to refrain from disclosing or using confidential information obtained in the course of employment may arise independently.18 Obligations of this kind survive the termination of an employment agreement and are implied into all employment agreements that are silent on the point.19
[43] Obligations of this type are likely to be relevant on the facts here, as they now stand. Moreover, there is the potential for the broader but conceptually separate good faith obligations in the Act to be applied. Those obligations are addressed in s 4 and fall within the Authority’s jurisdiction through s 161(1)(f). However, as this point was not addressed in any way during the hearing, I express no concluded view on it.
[44] I do not believe that there is any tenable way around the conclusion that, on the facts of the case, the problems arise out of the former employment relationships. They could be expressed in one or more different ways within the terms of s 161. They could be expressed as a breach of the confidentiality provisions in the employment agreements, as aiding and abetting breaches of those provisions, or, if the employment agreements between TracPlus and either Kylan or Bevan Diprose did not contain a confidentiality clause, as a breach of an implied term prohibiting disclosure of confidential information obtained in the course of the employment relationship.
18 Robb v Green [1895] 2 QB 315 (CA) at 317; New Zealand Needle Manufacturers Ltd v Taylor
[1975] 2 NZLR 33 (SC).
19 Wessex Dairies Ltd v Smith [1935] 2 KB 80 (CA). See also New Zealand Needle Manufacturers Ltd v Taylor, above n 18; and AB Consolidated Ltd v Europe Strength Food Pty Ltd [1978] 2 NZLR 515 (CA).
[45] Furthermore, as the Supreme Court said, post-employment obligations entered into during the course of the relationship are logically aspects of the employment relationship.20
[46] TracPlus eschews causes of action such as these but on the facts they are possible. The controversy can be framed in those ways and each of them falls within s 161(1) of the Act.
[47] The way in which the case is pleaded now falls squarely within the terms of s 161. Even although the case needs re-pleading, the distilled factual background remains within the parameters of s 161 – whether through the introductory words to the provision (the chapeau), through the related catch-all in para (r) or through paras (a), (b) or (f).
Does it matter that the plaintiff chooses to frame causes of action solely in tort?
[48] As explained in [19], TracPlus says that its claims will now be founded solely in tort. The tortious claims, it is said, are not connected with the former employment relationships. They are concerned only, it is said, with breaches that occurred after those employment relationships ended.
[49] Reliance is placed upon the terms of para [97] of FMV. There, Winkelmann CJ, O’Regan and Williams JJ gave an example of an employee stealing from an employer. It was said that the fact that the employee is subject also to the separate obligation not to steal that is sourced in the Crimes Act 1960 has no bearing on whether the problem is an employment relationship problem as well. The Court went on to say that, on the other hand, had the employee resigned and stolen from their former employer after the termination of their contract, that would not be an employment relationship problem because the theft was not in an employment context and there would no longer be any relevant expectation sourced in the employment relationship.
20 FMB v TZB, above n 1, at [99] and [101].
[50] But the position is different here. The case is not concerned with theft in the sense that was being discussed by the Court in that paragraph – theft of physical property. It is concerned with access to information, given as a result of employment relationships, which is alleged to have been used after the relationship ended. The reason for the former employees having the information – rightly or wrongly and intentionally or unintentionally – was because they were, when given the information, employees.
[51] The fact that the applicants are endeavouring now to reconstruct causes of action in the ways described does not change the underlying facts. Neither does the fact that a claim is brought against V2Track. Kylan and Bevan Diprose are the only two directors of V2Track and the relevant relationships fall to be analysed in employment terms.
[52] While it may be that the outcome that I find to be unavoidable here means that further steps are required on TracPlus’s part to re-plead in the Authority, as the majority said in FMV, “that is inevitable given the Act’s firm line on the Authority’s monopoly over employment relationship problems”.21
Result
[53] For the reasons I have given, the Employment Relations Authority has exclusive jurisdiction to determine the matters that are the subject of this proceeding. Accordingly, this Court has no jurisdiction to take any further steps.
[54] On 5 December 2023, the parties filed a joint memorandum. It attached a draft set of final orders which, by consent, the Court was asked to make in the event that it found that it had jurisdiction to do so. Given the findings that have been made, this Court does not have jurisdiction to make those orders.
[55] I will leave it to the parties at this stage to determine how in a procedural sense they wish to take matters from here. It seems to me that, effectively, the case has proceeded through the determination of a separate question under subpart 4 of pt 10
21 At [108].
of the High Court Rules and that, unless TracPlus wishes to discontinue the proceeding, an order may be made dismissing the proceeding under r 10.19.
[56] I ask the parties to address that point in the first instance through a joint memorandum to be filed within five working days of the date of this decision.
[57] In the draft orders that were submitted by consent, a sequential exchange of submissions on costs, and of submissions in reply, was proposed. I am content to proceed on that basis. However, given the time of the year and the direction given in [56], I adjust the timings proposed in order to accommodate the holiday period.
[58]Accordingly:
(a)The parties are to file and serve submissions on costs by 5 pm on Friday, 2 February 2024. The submissions are to be limited to five pages in length, including schedules.
(b)The parties may file and serve any submissions in reply within five working days after the last set of submissions referred to in (a) above have been filed. The submissions are to be limited to three pages in length.
Radich J
Solicitors:
K3 Legal, Auckland for Applicant
Mallett Partners, Wellington for First and Second Respondents
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