Alan Mayne v Polychem Marketing Ltd

 
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[2012] NZEmpC 60

IN THE EMPLOYMENT COURT AUCKLAND

ARC 68/11

In the matter of a challenge to a determination of the employment relations authority

And in the matter of a preliminary question of jurisdiction

Between
Alan Mayne
Plaintiff
and
Polychem Marketing Limited
Defendant
Counsel::

Chris Patterson and Andrea Halloran, counsel for plaintiff

John Hannan and Lauren Simpson, counsel for defendant

Challenge to Employment Relations Authority determination raising a preliminary question of jurisdiction — plaintiff employee in 1981 of company sold to defendant in 1982 — terms of sale that employees to be taken on terms and conditions of employment no less favourable than those with company — company had agreed to provide “healthcare cover” to all its employees and to continue to pay for those healthcare benefits after those employees retired from employment with it — plaintiff retired in 1990 — defendant continued to pay plaintiff's healthcare costs under its healthcare scheme until 2009 — alleged breach of employment contract — whether the Employment Court had jurisdiction to determine claim if plaintiff had ceased to be an employee before the Employment Contracts Act 1991 came into force.

At issue was whether the Employment Court (“EC”) had jurisdiction to determine M's claim if M had ceased to be an employee of PML before the Employment Contract Act 1991 came into effect.

Held: PML was not able to establish an absence of jurisdiction. M's claim was founded on contract — the claim being that in 2009, when PML ceased to provide healthcare benefits to him, PML was contractually obliged to continue to do so. There was no statutory impediment to the Authority investigating and determining a claim of breach of an employment contract which was said to have occurred at that time. Legislative transitional provisions did not factor into the issue.

Employment agreements or contracts could continue to have legal effect, at least in part, following the expiry the employee performing work for the employer and being paid for the work performed. Both express and implied obligations could continue in force, be enforced and otherwise be the subject of proceedings for breach of contract, after most or even all of the other elements of the contract had expired (for example, a restraint of trade).

Where a corporate employer continued in existence after the end of employment, such an obligation would continue, notwithstanding the fact that shares in that entity had been sold and bought by others. The same position applied where the assets of a business were purchased and employment contract obligations and liabilities were assumed by a new corporate identity. It would be a matter in each case of proving a chain of liability from the original employer to the person said to have the liability and to have breached the contract.

There was nothing in principle to prevent parties to an employment relationship contracting that one element of the reward to the employee for work performed would be the delayed provision of benefits including after the retirement, resignation, or even dismissal of the employee. The obligation remained enforceable against the employing legal entity for so long as it continued to exist, or on a successor that adopted the liability. The ability to enforce the obligation was not dependent on the existence of an operating employment contract or agreement at the time the legislation came into force.

If M could establish that he was an employee of PML or otherwise entitled to employment contractual benefits from it, and that, those contractual benefits continued to accrue to him after his resignation, the EC had the jurisdiction to determine M's claim.

Jurisdiction established.

INTERLOCUTORY JUDGMENT OF CHIEF JUDGE GL COLGAN
1

This challenge to a determination 1 of the Employment Relations Authority raises a preliminary jurisdictional point concerning whether the Authority was, and this Court is now, empowered to determine the plaintiff's claims. Polychem Marketing Limited (PML) says that the Authority was, and the Court is, not so empowered for the following reasons.

2

First, the defendant says that the plaintiff was never its employee. Rather, it says that the plaintiff was a director of the company but resigned from that role in 1990. Alternatively, the defendant says that even if the plaintiff was once its employee, he ceased to have that status at the latest by 31 December 1990 or perhaps

even as long ago as 1986 when he ceased to perform any duties for the defendant. In these circumstances, the defendant says that there was no employment agreement or contract between the parties immediately before the Employment Relations Act 2000 (the Act) came into effect. It follows, the defendant says, that the transitional provisions of s 242 of the Act do not apply to the circumstances of Mr Mayne's claim. PML says that, in these circumstances, neither the Authority nor this Court on a challenge had or has jurisdiction to consider these claims.
3

Some of the relevant allegations in the plaintiff's amended statement of claim are admitted, although some are denied. For the purpose of determining whether the Court has (and the Authority had) jurisdiction to enter upon the merits of Mr Mayne's claims, I will assume that those allegations of fact in the amended statement of claim which are denied, will be capable of proof by the plaintiff. That is the conventional way in which the Court determines an application to strike out a proceeding for lack of jurisdiction.

4

The following is the statement of the issues for decision that was agreed between the lawyers:

If the plaintiff was ever an employee of the defendant, but ceased to be an employee before the coming into effect of the Employment Contracts Act 1991, does the Court have jurisdiction to determine, and if appropriate provide a remedy in relation to, the plaintiff's claim that his alleged employment contract with the defendant included an obligation to provide on-going health care and insurance cover to him after he retired?

5

Materially, the plaintiff's claim is as follows.

6

In 1981, Mr Mayne was both the sole shareholder in, and (as its managing director) an employee of, a company known as Polychem NZ Limited (PNZL). In that year, PNZL agreed, as a matter of contract, to provide what is described as “healthcare cover” to all its employees (including Mr Mayne) and to continue to pay for these healthcare benefits after those employees retired from employment with it.

7

In May 1982, PNZL sold its assets and goodwill to the defendant (PML). Under the terms of sale, PNZL employees were taken on by PML on terms and conditions of employment including that these would be no less favourable than those which they had enjoyed with PNZL and that PML would meet any and all obligations then owed by PNZL to its employees, both current and former.

8

PML continued to pay for Mr Mayne's healthcare benefits as part of its company healthcare scheme.

9

In mid-1986, the defendant's shares in PML were sold to English China Clay PCL Limited (ECCL). Among the terms of this sale of shares was that PML's employment obligations to its employees would continue unchanged. In particular, it is said by the plaintiff that an oral condition of this sale was that the defendant's operations would remain the same and, amongst other things, it would continue to meet any and all of its employment obligations including those to former employees under its healthcare scheme. The plaintiff says that following this sale of shares, the defendant continued to provide and pay for the plaintiff's healthcare costs. Despite this change in shareholding, PML continued in existence as the same legal entity and as Mr Mayne's employer.

10

In 1990, Mr...

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