John Matsuoka v LSG Sky Chefs New Zealand Ltd

• Jurisdiction: New Zealand
• Judge: B S Travis
• Judgment Date: 18 May 2011
• Court: Employment Court
• Docket Number: ARC 19/11
• Date: 18 May 2011

In the Matter of proceedings removed

Between

John Matsuoka

Plaintiff

and

LSG Sky Chefs New Zealand Limited

Defendant

and

Service and Food Workers Union

Intervener

[2011] NZEmpC 44

ARC 19/11

IN THE EMPLOYMENT COURT AUCKLAND

Determination of questions of law removed to Employment Court — whether plaintiff entitled to transfer his employment to another contractor taking over airport food catering-work previously forming part of his employment — whether a “vulnerable worker” test applied in determining whether an employee eligible for transfer after restructuring under Part 6A Employment Relations Act (“the Act”)(continuity of employment if employees' work affected by restructuring) — whether employees not directly involved in preparation of food working in “food catering services” as defined under the Act and eligible for transfer.

Counsel:

Rob Towner, counsel for plaintiff

Garry Pollak, counsel for defendant

Timothy Oldfield, counsel for intervener

JUDGMENT OF JUDGE B S Travis

1 The plaintiff claims to be legally entitled to transfer from his previous employment to new employment with the defendant (LSG) which has recently obtained a catering contract to service Singapore Airlines (SQ) at the expense of a previous contractor. The plaintiff claims to be so entitled by virtue of the provisions of subpart 1 of Part 6A of the Employment Relations Act 2000 (the Act) which have not yet been the subject of authoritative determination by the Court. 1

2 LSG and the intervener, the Service and Food Workers Union Nga Ringa Tota Inc (SFWU), both assert that subpart 1 was intended to provide protection for

vulnerable employees employed in a labour intensive sector in low paid work. The defendant contends that by virtue of the plaintiff's management responsibilities, the nature of his work and his substantial remuneration package, he was not a vulnerable employee intended to be afforded the protection of subpart 1 of the Act

The proceedings

3 The matter was removed to the Court by the Employment Relations Authority on 11 March 2011 2 on the basis of seven questions of law which had not previously been before either the Authority or the Court. The matter was accorded urgency by the Chief Judge and was heard over four days on the basis of the pleadings filed in the Authority which disclose the following.

4 The plaintiff claims that LSG has breached s 69I of the Act by refusing to accept him as its employee in the position he was employed in prior to the loss of the SQ contract. He also claims that he was unjustifiably disadvantaged by the actions of LSG and seeks a declaration, compliance orders, compensation in relation to his alleged personal grievance, damages, penalties for LSG's alleged breaches of contract and an order that LSG pays arrears of wages, interest and costs.

5 LSG's reply alleges: the plaintiff has an entirely different type of employment agreement to those employees who have transferred to LSG; the plaintiff's employer was not the contracting party that lost the SQ contract; the plaintiff's conditions of employment were commensurate with a manager's employment terms and not those of a senior ground steward or a ground steward and, therefore, the plaintiff is not an employee entitled to elect to transfer to LSG. It also alleges that as a result of a particular shareholding that the plaintiff held and his personal relationships with the directors, he is and would remain, a direct competitor of LSG and would have a serious and obvious conflict of interest should he be able, by law, to transfer to LSG. It also alleges that the plaintiff in communications with it, misrepresented his role, that LSG has lost trust and confidence in him as a prospective employee and is not willing to employ him. Not all of these matters were pursued by LSG in its final submissions and it has been agreed by counsel that the issues of misrepresentation

and conflict of interest will not be dealt with in this judgment. As the case developed LSG also claimed that ground stewards and senior ground stewards were not within the class of persons afforded protection by subpart 1

6 It was agreed by counsel that the Court in this judgment would determine whether the plaintiff had a statutory right to transfer to LSG and, if there was such a right, whether this was to be full time or part time employment. The other remedies sought by the plaintiff and the defendant's claims to be able to decline to employ the plaintiff or justifiably dismiss him on grounds independent of subpart 1, are reserved for further consideration if necessary.

Factual findings

7 The hearing proceeded by way of cross-examination of deponents of affidavits although not all the deponents were required for cross-examination and not all of their evidence was subjected to questioning. As Mr Towner submitted, the commentary to High Court Rule 9.73 states that where the evidence of deponents has not been challenged generally it is to be accepted, particularly where bad faith or untruthfulness are alleged. 3 My factual findings proceed on that basis.

8 There are a number of corporate entities with which the plaintiff and other witnesses in this hearing were involved. At the time of the hearing the plaintiff held 27,730 shares in a company called Pacific Rim Investments Ltd (Pacific Rim). The major shareholders were Terry Hay (322,600 shares), David Lawrence Nathan (285,740 shares) and William Drake (147,525). The total shareholding was 1,057,500 and I was informed that the plaintiff's shareholding amounted to 2.6 percent. A subsequent affidavit from the plaintiff states he has now sold his shareholding in Pacific Rim.

9 Pacific Rim was an investment company which initially invested in the rights to distribute American brands of food and then provided the negotiation of the purchase of P&O Catering which was involved in food catering for airlines at Auckland Airport. This was done through a company called PRI Flight Catering

Ltd, (PRI) which was incorporated on 21 December 1995. Of a total shareholding of 102,600 shares in PRI, Pacific Rim held 88,353 shares. The plaintiff's evidence was that as PRI stands for “Pacific Rim Investments” it might have been seen as a short term investor in food catering services so the principal backing shareholders, Messrs Hay, Nathan and Hill incorporated Pacific Flight Catering Ltd (PFC) on 22 May 1996. This company has one share which is held by PRI

10 The plaintiff produced an individual employment contract dated 29 April 1996 which showed that he was employed by PRI as a projects manager based at Auckland. The plaintiff had a gross annual salary of $60,000 and other benefits.

11 Under the 1996 agreement the plaintiff's line of responsibility was to Mr Hay as managing director. Mr Hay was married to the plaintiff's wife's sister. Mr Hay had been a friend of the plaintiff since the early 1980s when they were both living in Hawaii, where the plaintiff grew up. Mr Hay's wife died in 2001 but the plaintiff and Mr Hay have remained friends to the present day.

12 The plaintiff's evidence was that he initially had a wide range of responsibilities in relation to vehicles and the maintenance of equipment as the project manager. He would obtain quotations, talk to contractors over the phone, arrange for the sale of equipment, look after the trucks and do all the extra jobs that needed to be done in relation to the equipment and materials necessary to service the airlines.

13 The evidence satisfies me that the contractual arrangements to provide food catering services to SQ, Cathay Pacific (CP), Malaysian Airlines, Thai Airways, Air Tahiti Niu, Air Pacific and China Airlines were entered into by PFC, not PRI. The SQ contract with PFC ran from 1 October 2005 until 22 February 2011. It was by far the largest contract involving approximately 40 percent of PFC's resources.

14 PRI is the company which operates the business of providing flight catering services and PFC is merely the trademark name of the business which appears on all signage and is how the business was referred to in the trade. PFC is not registered for GST nor for PAYE purposes. PRI is so registered and the invoices that were sent to SQ, in the name of PFC, show PRI's GST number. Although not independently supported by documentation it appears that PRI has the relevant bank accounts, pays all the employees involved in the flight catering business and PFC is merely there for name protection purposes. According to the uncontested evidence of Gerda Gorgner, the human resources manager and acting general manager at PFC, SQ, because it was not aware of the existence of PRI, put PFC's name in the catering contract. I find that PRI operated the catering business for the PFC contracts and issued the invoices and accounted for GST and PAYE.

15 The plaintiff entered into a written employment agreement with PRI on 1 October 2005. The plaintiff was said to be employed “as Senior Ground Steward” with “special duties at PRI Flight Catering LTD, Auckland, subject to the terms and conditions expressed in this Agreement”. The plaintiff's main line of responsibility was again to the managing director and his key responsibilities were set out as follows:

• — Advise Duty managers on truck usage patterns

• — Assist with training staff

• — Ensure standards of service delivery are always maintained with all airlines, but especially with Singapore Airlines

• — Report non compliance issues of crew serving Singapore Airlines to the Managing Director (this will be treated confidentially)

• — Ensure safety of operations working environment and instruct staff on safety procedures as required

• — Identify strengths and weaknesses in staff and recommend specific training requirements. Help to conduct staff evaluations.

• — Provide colleague support at all times

• — Monitor work practices to ensure that correct procedures are followed at...