Labour Inspector, Ministry of Business, Innovation and Employment v Civic City Ltd NZEmpC Auckland
| Jurisdiction | New Zealand |
| Judge | G L COLGAN |
| Judgment Date | 23 October 2013 |
| Court | Employment Court |
| Docket Number | ARC 83/13 |
| Date | 23 October 2013 |
In the Matter of an application for a freezing and ancillary orders
and
and
[2013] NZEmpC 196
ARC 83/13
IN THE EMPLOYMENT COURT AUCKLAND
Reasons for granting freezing order without notice to respondents under s190 Employment Relations Act 2000 (powers to grant freezing order) — respondent companies ordered to pay applicant sums totalling $200,000 — evidence that sole shareholder and director was arranging sale of businesses and had left to return to Jordan — whether the applicant had met the requirements for issue of the orders — whether s65ZC Public Finance Act 1989 (not lawful for any person to give a guarantee or indemnity on behalf of or in the name of the Crown) precluded the applicant from giving an undertaking as to damages — whether the fact that the application was made by a Crown officer constituted special circumstances for waiving the requirement of an undertaking.
Sarah Blick, counsel for applicant
These are the reasons for granting, without notice to the respondents, the freezing orders which are attached to this judgment.
By a determination dated 28 August 2013 1 the Employment Relations Authority directed the three respondents to pay to the applicant sums totalling more than $200,000, plus interest, together with costs which have still not been determined.
The Labour Inspector is representing the interests of 11 employees who worked for one or more of the three respondent companies and who claimed that they had been underpaid. The detail of those claims and the Authority's determination can be ascertained from the latter.
On 25 September 2013 the respondents, as plaintiffs in ARC 77/13, filed a challenge to parts of the Authority's determination but have elected to proceed other than by hearing de novo. The time for the Labour Inspector to file and serve a statement of defence is still running.
On the afternoon of 17 October 2013 the Labour Inspector filed an application for a freezing and associated orders which were referred to a Judge and considered immediately. The Court identified, by Minute issued later that day, a number of issues on which it required more information by affidavit and/or memorandum. This additional information was provided to the Court yesterday.
The Court is empowered to make a freezing order by s 190 of the Employment Relations Act 2000. Under subs (3) the Court has the same powers as the High Court in such matters. This means that, in practice, the Court follows closely the practice and procedure of the High Court set out in r 32 of the High Court Rules, and I have done so in this case.
The relevant facts established by affidavit evidence filed by the applicant include the following.
Before the Employment Relations Authority's investigation meeting, the respondents acknowledged some holiday pay liabilities due to the 11 affected employees and a sum of a little more than $2,000 was paid in to the Authority at that stage.
Each of the respondent companies, which operated liquor stores in central Auckland, had a business bank account, two with the ANZ Bank and one with the BNZ. These were trading accounts through which passed funds including to suppliers, employees, landlords and, it appears, insurers. The bank statements for these accounts also recorded deposits which appeared to be shop takings.
Each of the three respondent companies is a separate legal entity although they were incorporated at different times. When the proceeding was before the Authority, the sole director of, and shareholder in, each of the companies was Mr Ala'a Bader.
It has recently come to the Labour Inspector's notice that Symonds Liquor, situated at 83 Wakefield Street, Auckland, and operated by Rum Limited, has been sold. The statutory liquor licence appears to have been transferred to a company called Beerapu Limited which is owned by Beerapu Venu Mohan Reddy.
Another of the respondents, 123J Limited, has recently changed its trading name from “Sky Liquor” to “City Liquor Stop” although the liquor licence remains also in the name of Mr Bader. This business operates at 16 Pitt Street, Auckland.
The Labour Inspector's evidence is that on 8 October 2013 she interviewed Mr Reddy who is effectively the new owner and operator of Symonds Liquor which he told the Labour Inspector he purchased in July 2013. The sale of the Symonds Liquor business was not publicly advertised: rather, Mr Bader's agent made direct contact with Mr Reddy. The Symonds Liquor business appears to have been sold by Rum Limited to Beerapu Limited for a sum, including the value of stock on hand, that exceeds the amounts due by the respondents under the Authority's determination. The Labour Inspector has been unable to persuade Mr Reddy to affirm this evidence by affidavit but the Court has now been provided with a copy of the agreement for sale and purchase. Pertinently for the purpose of this application, the Labour Inspector deposes that Mr Reddy told her that Mr Bader's agent said that the Symonds Liquor business was being sold because Mr Bader wished to send the proceeds of sale to family members in Jordan.
The Labour Inspector deposes to the retention by Rum Limited of a motor vehicle, a 1997 Toyota Hiace van, registered number DNG818. No further information about this vehicle, including its value or whether title to it is encumbered, is provided.
The applicant has adduced evidence which appears to show that Mr Bader departed from New Zealand for Thailand on 21 September 2013. Only the first destination of an outwards flight is shown. The Labour Inspector's investigations reveal that Mr Bader has not returned to New Zealand since that time. Similar evidence discloses that Mr Bader's wife departed from New Zealand on 2 July 2013 and has not returned. Both Mr Bader and his wife are citizens of the Hashemite Kingdom of Jordan.
A Labour Inspector called recently at the respondents' registered office which is a residential address in the suburb of Ponsonby. Although this property appeared to be unoccupied, a letter of demand was delivered to a person who identified himself as Ala'a Bader who arrived at the address. Without more, this leaves open a number of possibilities including that this person was not Mr Bader, that Mr Bader has recently returned to New Zealand, and there may be other explanations.
On 17 July 2013 a new company, of which Mr Bader is the sole director, was incorporated. This is Isiah Trustee Limited whose shares are owned by Mr Bader and his wife. Also incorporated on the same day, 17 July 2013, is another company of which Mr Bader is the sole director. This company, Pinnacles Trading Limited, has its registered office at 16 Pitt Street, Auckland, which is the same address at which 123J Limited operated and still operates Sky Liquor (although now trading as City Liquor Stop). The Labour Inspector does not know of the circumstances in which those two companies were incorporated but points out that they both came into being at the same time which coincided with the sale of Symonds Liquor before the Authority issued its determination.
So far as the Labour Inspector knows, the assets of the respondent companies are their leases, liquor and food licences, goodwill, equipment and fittings, and stock in trade. The Labour Inspector's concern is that any sale of these businesses and the dissipation of the proceeds of sale would result in the loss of any chance of recovery of the amounts owing in minimum wages and holiday pay to the ex-employees, not to mention the penalties which are payable in part to the Crown and in part to those complainants.
There are four circumstances of which the Court must be satisfied before making a without notice freezing order.
The first is that the applicant has a sound arguable case against the respondents. This is to be stronger than the arguable case necessary for an interlocutory injunction but need not be so strong as to entitle the applicant to a summary judgment if the proceeding were in another court. 2
The Labour Inspector has obtained a determination in her favour on the merits in the Employment Relations Authority. Although there is a challenge to aspects of this determination by the respondents, the existence of a challenge does not operate as a stay of proceedings and the fact of a challenge alone has little significance. What may be ascertained, however, from the Authority's determination and the respondents' statement of claim on the challenge, is the apparent strength of their cases. Both in the Authority and in this Court, the respondents are represented by counsel including, now, a barrister experienced in...
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