Lsg Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd

• Jurisdiction: New Zealand
• Judge: Elias CJ,McGrath,William Young,Glazebrook,Arnold JJ
• Judgment Date: 05 November 2014
• Neutral Citation: [2014] NZSC 158
• Docket Number: SC 103/2013
• Court: Supreme Court
• Date: 05 November 2014

BETWEEN

Lsg Sky Chefs New Zealand Limited

Appellant

and

Pacific Flight Catering Limited

First Respondent

Pri Flight Catering Limited

Second Respondent

[2014] NZSC 158

court:

Elias CJ, McGrath, William Young, Glazebrook and Arnold JJ

SC 103/2013

IN THE SUPREME COURT OF NEW ZEALAND

Appeal against a Court of Appeal decision that the appellant was not entitled to reimbursement for payments made to employees who had transferred to it under pt 6A Employment Relations Act (ERA) 2000 (Continuity of employment if employees' work affected by restructuring) — appellant had replaced respondent following appellant's successful tender for airline catering work — respondent's employees were entitle to transfer their employment to appellant as it was considered to be a restructuring under Pt 6A EA — appellant's payments discharged liabilities associated with accrued entitlements to annual holidays, alternative holidays and sick and bereavement leave — whether the payments made by the appellant were made for the use or benefit of the respondent.

counsel:

P G Skelton QC, A Borchardt and G M Pollak for Appellant

R B Stewart QC and K Goodall for Respondents

• A The appeal is dismissed.

• B The appellant is to pay the respondents costs of $25,000 and reasonable disbursements as fixed by the Registrar.

JUDGMENT OF THE COURT

REASONS

(Given by William Young J)

Introduction

1 The appellant, LSG Sky Chefs New Zealand Ltd (LSG), and the respondents, Pacific Flight Catering Ltd and PRI Flight Catering Ltd (together “Pacific”), are competitors. Both provide airline meals for passenger aircraft operating out of Auckland Airport. Following a tender process in late 2010, LSG replaced Pacific as the supplier of meals to Singapore Airlines. This took effect in February 2011.

2 For the purposes of pt 6A of the Employment Relations Act 2000, the replacement of Pacific by LSG was a “restructuring” with the result that the affected employees of Pacific were entitled to transfer their employment to LSG. Such transfers were required to be on the existing terms and conditions of their employment and LSG was required to recognise their accrued entitlements to annual holidays, alternative holidays and sick and bereavement leave.

3 LSG now seeks reimbursement from Pacific on the basis that that when it discharged the liabilities associated with those entitlements, its payments were to the use of Pacific and under compulsion of law.

4 In the High Court, Woolford J upheld LSG's claim 1 but Pacific's appeal to the Court of Appeal was successful. 2

Overview of our approach to the case

5 Halsbury's Laws of England sets out the elements that have to be established to support a claim for money paid to the use of another by compulsion of law. They are: 3

• (1) the claimant must have made an actual or virtual payment of money; neither the incurring of a liability nor the loss of goods can be treated as money paid;

• (2) the claimant must have been compelled, or compellable, to pay this money to a third party, or have been requested by the defendant to pay it;

• (3) the claimant must not officiously have intervened so as to expose himself to the liability to make the payment; and

• (4) the defendant must have been legally liable to pay the third party, though the reason for that liability need not be the same as the one which induced the claimant to pay the third party.

6 In the High Court and Court of Appeal, the case was addressed primarily on the basis that (a) this passage accurately states the law,4 (b) LSG can satisfy the first three elements just identified,5 and (c) accordingly the critical issue is whether Pacific continued to be liable in relation to the entitlements of the transferred employees after the transfer date.6 In this Court, however, Mr Skelton QC suggested that Pacific's liability to reimburse LSG did not necessarily depend upon Pacific having a continuing and post-transfer liability in relation to those entitlements.

7 LSG's claim has always been premised on the basis that the payments which it made were for the “use” or “benefit” of Pacific. This premise can only be made out if Pacific received a benefit from the payments. It could only have received such a benefit if the payments discharged continuing liabilities. That the discharge of an existing liability of the defendant is fundamental to the cause of action is consistent not only with the passage from Halsbury's Laws of England which we have just cited but also the discussion in the current edition of Goff and Jones: The Law of Unjust Enrichment. 7 It also conforms to the way in which the principles have been stated in cases in which recovery has been directed 8 and denied. 9

8 In the course of argument, members of the Court raised with Mr Skelton the suggestion that the focus of the claim should perhaps be on what happened at the point of transfer, at which time LSG relieved Pacific of its obligations in respect of the accrued entitlements of transferring employees. This, however, was not the way the case was pleaded or argued in the courts below and Mr Skelton disavowed any attempt to pursue such an argument before us. 10

9 It follows that we are of the view that LSG can only succeed if it can establish that Pacific's liabilities in respect of accrued entitlements persisted after transfer of its employees to LSG. As will become apparent, we consider that its liabilities did not continue post-transfer and for this reason, the appeal must be dismissed.

The entitlements in question

10 Under the Holidays Act 2003, an employee is entitled to not less than four weeks' paid annual holidays after each completed 12 months of continuous employment. 11 One of these weeks may be swapped for cash. 12 At termination of employment, an employer is entitled to be paid for any accrued but untaken holidays. 13 As well, an employee who works on a public holiday is entitled to an alternative holiday on another day and, on termination of employment, to be paid for any accrued entitlement to alternative holidays. 14

11 Under the same Act, an employee is entitled to five days' paid sick leave after six months' continuous employment. 15 There are similar entitlements to paid bereavement leave. 16 But in contradistinction to the position in relation to holiday and alternative holiday entitlements, at termination of employment, an employee is not entitled to be paid in relation to untaken sick or bereavement leave. 17

12 The statutory entitlements under the Holidays Act can be added to under collective or individual employment agreements and to some extent were in the case of Pacific's employees. The detail of this, however, is not material to the outcome of the case.

13 Pacific's payroll records recorded the value of the entitlements of employees in relation to holidays, alternative holidays and sick and bereavement leave.

Counsel, however, were not able to tell us whether these entitlements were expensed in respect of the period in which they accrued or rather were accounted for when paid

Part 6A of the Employment Relations Act

14 Part 6A was introduced into the Employment Relations Act in 2004 18 and subsequently amended in 2006. 19 Its purpose is to provide protection for employees working in specified service industries involving cleaning and food catering. 20 Contracts for the provision of such services tend to be short-term and regularly put out to tender. Contractors are thus susceptible to replacement (as Pacific was by LSG). In the absence of pt 6A, the employees of such contractors would have little job security. This is addressed by pt 6A, which provides that, where there is a transition from one contractor to another, employees of the previous contracting party (or old employer) may elect to transfer to the new contractor (or new employer) on their existing terms and conditions of employment. 21 When this happens, the new employer must recognise all existing accrued entitlements. 22

15 As explained, pt 6A was engaged by the termination of Pacific's contractual arrangement with Singapore Airlines and its replacement by LSG. Under ss 69F and 69I, employees of Pacific who had worked on the provision of food catering services to Singapore Airlines and were no longer required by Pacific were entitled to transfer to LSG.

16 The following provisions of the Act are particularly relevant as to how that transfer was to be effected and any associated rights and responsibilities:

69 I Employee may elect to transfer to new employer

• (1) An employee to whom this subpart applies may … elect to transfer to the new employer.

• (2) If an employee elects to transfer to the new employer, then to the extent that the employee's work is to be performed by the new employer, the employee—

  • (a) becomes an employee of the new employer on and from the specified date; and

  • (b) is employed on the same terms and conditions by the new employer as applied to the employee immediately before the specified date, including terms and conditions relating to whether the employee is employed full-time or part-time; and

  • (c) is not entitled to any redundancy entitlements under those terms and conditions of employment from his or her previous employer because of the transfer.

…

69J Employment of employee who elects to transfer to new employer treated as continuous

• (1) The employment of an employee who elects to transfer to a new employer is to be treated as continuous, including for the purpose of service-related entitlements whether legislative or otherwise.

• (2) To avoid doubt, and without limiting subsection (1),?

  • (a) in relation to an employee's entitlements under the Holidays Act 2003,?

    • (i) the period of employment of an employee with the employer that ends with the transfer must be treated as a period of employment with the new employer for the purpose of determining the employee's entitlement to annual...