Foai v Air New Zealand Ltd
 NZEmpC 57
IN THE EMPLOYMENT COURT WELLINGTON
In The Matter of a challenge to a determination of the Employment Relations Authority
Johanne Greally, counsel for the plaintiff
Tim Cleary, counsel for the defendant
Challenge to Employment Relations Authority determination that employer was entitled to recover overpayment of salary “as a recoverable debt” — plaintiff worked as part-time service person before being appointed to new fixed term administration role — over 16 month period plaintiff was overpaid by $70,000 and had queried his wages on a number of occasions — overpayment not disputed — plaintiff maintained he received wages in good faith and altered his position in reliance on wages — defendant had not pleaded mistake but relied on it — whether mistake had to be pleaded — whether payments made under mistake — whether recoverable under action in restitution — whether plaintiff entitled to rely on defence under s94B Judicature Act 1908 (payments made under mistake of law not always recoverable) and equitable defence of alteration of position.
AirNZ was relying on a right to restitution for unjust enrichment. At the hearing before the Employment Court (“EC”), AirNZ indicated it was relying on mistake for its claim. This had not been pleaded.
Held: AirNZ sought to rely on mistake, but mistake was not pleaded. A statement of claim was defective if it did not specifically include a pleading supporting the mistake of fact allegation. It was open to doubt whether relief could be obtained in those circumstances ( ).
To succeed in an action to recover money that had been paid under a mistake of fact, AirNZ had to identify a payment made to F, a specific fact as to which AirNZ was mistaken in making the payment, and a causal relationship between that mistake of fact and the payment of the money ( ).
There was no evidence before the EC identifying a particular mistake of fact that contributed to the overpayment. There was no evidence of a suggested computer error and no AirNZ witnesses gave evidence of such a mistake. There was no evidence which would warrant even the drawing of an inference by the EC of a mistake of fact. This issue was of particular significance as not one or two incorrect payments occurred, but 40 incorrect payments spread over a 16 month period occurred (and in two of the cases there was an under payment rather than an overpayment).
It was also critical that on a number of occasions F had queried his pay with payroll and on at least one occasion over a year before the overpayments were formally detected, the payroll officer had specifically queried the pay position with F's managers. AirNZ was not able to establish that the overpayments were made as a mistake of fact and on that ground alone was therefore not able to claim restitution.
Even if unjust enrichment had been established, F was entitled to rely on an alteration of position defence. There was no suggestion that he was a wrongdoer. Further, a submission that he had acted in bad faith could not be sustained. Caution should be adopted before relying on the good faith requirements under the Employment Relations Act 2000 as a guide for assessing the good faith element in the common law defence of change of position ( ). F's bona fides could not be queried on the basis that he had never given his employer a copy of his pay slip when he queried it, as AirNZ had had access to the payroll itself. It was clear that AirNZ, in spite of assurances they would look into it, did not look into F's pay until relatively late. The obligation to be active and constructive in the employment relationship was a mutual one.
F was able to establish that he had changed his position. He had spent the overpayment on a holiday, renting his own home rather than living with his parents and had incurred a child support debt as a result of the overpayments. In all the circumstances, it would have been inequitable to require him to make restitution.
The statutory defence under s94B JA did not exclude the equitable defence under the common law, which was wider than s94B. In weighing the equities in this case, it was significant that AirNZ had provided only a brief employment contract that failed to specify F's pay or hourly rate. It was clear that F could not have checked the accuracy of his pay for himself. He was entitled to rely on AirNZ to get these figures right and he had a reasonable expectation that AirNZ would not misrepresent the amount of pay to which he was entitled. It would be inequitable to compel repayment.
Judgment for F.
JUDGMENT OF JUDGE A D Ford
During the course of a 16-month period between July 2007 and November 2008, the defendant (Air New Zealand) overpaid Mr Foai, who was then on its payroll, a total of $70,428.04. The company now seeks to recover the nett amount of the overpayment which equates to $42,635.40. It was successful in its claim before the Employment Relations Authority (the Authority) and Mr Foai has challenged that particular determination. Mr Foai does not, at this point in time, dispute the overpayment but he maintains that he received his wages in good faith and that he altered his position in reliance on the validity of the wages he was paid. He, therefore, seeks to rely upon the equitable defence of change of position and the statutory defence under s 94B of the Judicature Act 1908 in support of his contention that the defendant is not entitled to recover the overpayment of wages.
Mr Foai's employment with Air New Zealand was terminated in July 2009. Air New Zealand claimed that there had been a fundamental breakdown of trust and confidence in the employment relationship in four respects. Relevantly, one of its allegations was that Mr Foai had not been proactive enough in querying the overpayment. Mr Foai pursued a personal grievance in the Authority claiming that he had been unjustifiably dismissed. The Authority issued a determination 1 in relation to that grievance on 30 June 2010. There was no challenge to that determination and the claim relating to Mr Foai's dismissal, therefore, forms no part of the case before me. The parties accept that the only relevance of the Authority's determination dated 30 June 2010 is that, by agreement, it reserved making a determination on two of the issues that had been raised before it. One of those issues was Air New Zealand's claim in respect of the overpayment and the other was a claim by Mr Foai that Air New Zealand was required to pay to him the sum of $9,363.04 which it had withheld from his final pay and purported to offset against the overpayment.
Subsequently, the Authority was requested to revisit the two issues it had reserved making a determination on and in a further determination 2 dated 8 November 2010, it concluded that Air New Zealand was required to pay Mr Foai the sum withheld of $9,363.04 together with interest and Mr Foai was required to repay Air New Zealand the sum of $42,635.40 being the nett amount of the overpayment. Air New Zealand has accepted that it is required to pay the amount withheld of $9,363.04 but Mr Foai has challenged that part of the determination that dealt with the overpayment. In particular, he challenges the Authority's conclusions that Air New Zealand was not precluded from recovering the amount of the overpayment as “a recoverable debt” and its factual finding that while Mr Foai accepted his pay in good faith and did ask questions to check that he was being properly paid, “Air New Zealand had no knowledge of a problem.” Mr Foai told the Court that since his dismissal from Air New Zealand, he has had various casual and part-time jobs. Currently, he is working as a Court Security Officer with the Ministry of Justice.
Mr Foai commenced working for Air New Zealand Airport Services on 20 March 2002 as a casual loader/cleaner at Wellington Airport. Initially, he was not a member of the union but he later joined. His terms and conditions of employment were set out in an individual employment agreement dated 19 March 2002 which incorporated the terms and conditions of the Air New Zealand Ground Staff Collective Employment Agreement. He was employed on an “as required” basis to cover absences of permanent employees. He described his duties as being the loading and unloading of luggage and freight and the interior cleaning of aircraft.
As from 30 September 2002, Mr Foai's status changed from a casual worker to that of “Permanent Part-time Airline Serviceperson”. That position was confirmed in a letter dated 27 September 2002. His status under the new individual employment agreement which he signed on 21 October 2002 was shown as “Part time Airline Serviceperson”. He continued to be bound by the Ground Staff Collective Agreement. Mr Foai said in evidence that he remained a part-time employee until March 2007. During that period he worked under a roster which required him to work split shifts. He was living at Porirua at the time and he said that he found the split shift work frustrating because of the effects his irregular working hours were having on his young family. For that reason, he became anxious to secure a full-time position. He made four applications for full-time positions during the period he was employed on a part-time basis but on each occasion he was unsuccessful.
Mr Foai's change of status from casual worker to...
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