Lsg Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd

JurisdictionNew Zealand
CourtSupreme Court
JudgeElias CJ,McGrath,William Young,Glazebrook,Arnold JJ
Judgment Date05 November 2014
Neutral Citation[2014] NZSC 158
Docket NumberSC 103/2013
Date05 November 2014

[2014] NZSC 158

IN THE SUPREME COURT OF NEW ZEALAND

court:

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

SC 103/2013

BETWEEN
Lsg Sky Chefs New Zealand Limited
Appellant
and
Pacific Flight Catering Limited
First Respondent
Pri Flight Catering Limited
Second Respondent
counsel:

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

R B Stewart QC and K Goodall for Respondents

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.

The issue was: whether the payments made by LSG were made for the use or benefit of Pacific.

Held: LSG's premise that the payments were made for the “use” or “benefit” of Pacific could 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. The discharge of an existing liability of the defendant was fundamental to the cause of action. LSG could only succeed if it could establish that Pacific's liabilities in respect of accrued entitlements persisted after transfer of its employees to LSG.

The applicable provisions were s69I (Employee may elect to transfer to new employer) and s 69J (Employment of employee who elects to transfer to new employer treated as continuous) ERA. Section 69J(2)(a)(iii) did not specifically address bereavement leave. But given that s69J(2) was only for the avoidance of doubt and illustrated the intended operation of s 69J(1), bereavement leave should be dealt with on the same basis as sick leave and the entitlement of a transferring employee to bereavement leave fell to be determined on the basis of continuous service.

The critical features of the scheme of the legislation were as follows:

(a) Employees of Pacific who were affected by the restructuring were not required to transfer to LSG. It was their choice to do so which served to release Pacific from liability in respect of the entitlements in question.

(b) The transferring employees became the employees of LSG on the transfer date on the same terms and conditions as applied immediately before that date (that is, under their employment agreements with Pacific).

(c) The transferring employees had no redundancy entitlements as against Pacific.

(d) For the purpose of service-related entitlements, the transferring employee's employment with LSG was to be treated as continuous and, at least in the context of entitlements under the Holidays Act 2003 (HA), as encompassing the period of employment with Pacific which ended at the transfer date, as if that period of employment had been with LSG. LSG was thus required to recognise entitlements to sick and bereavement leave, annual holidays not taken and alternative holidays not taken or paid for.

(e) Pacific was prohibited from paying transferring employees for untaken holidays. The purpose of the prohibition was presumably to ensure that transferring employees retained the ability to take annual holidays. Its corollary was that Pacific's transferring employees were not entitled to payment from Pacific for untaken holidays. Instead, they were required to look to LSG for the honouring of their entitlements.

The overall effect of the legislative scheme made it clear that LSG was substituted for Pacific and left no room for residual liability on the part of Pacific for the HA entitlements which LSG was required to recognise.

This result was consistent with the disclosure regime. At the time of the tender process, it would have been open to LSG to utilise the provisions of subpart 2 pt 6A ERA (Disclosure of costs relating to transfer of employees under proposed restructuring) to obtain disclosure of “employee transfer costs information”. The expression “employee transfer costs information” suggested that liability would be transferred from the old employer to the new. So too was the inclusion in the definition of the phrase “service-related entitlements” (which had to include annual holidays, alternative holidays, and sick and bereavement leave) which was also indicative of an understanding that associated liability would be transferred from the old to the new employer. There would not be much point in providing for a disclosure regime as to service-related entitlements unless a new contractor would be responsible for them.

While the absence of a reimbursement obligation might appear to be to the advantage of an incumbent contractor in a tendering process, it was limited and could be off-set in part by the benefit to a new contractor of being able to take on experienced workers with any required security clearances.

The payments which LSG made therefore did not discharge any residual indebtedness of Pacific.

The claim for reimbursement faced other difficulties in relation to sick and bereavement leave entitlements. Because an employee was not entitled to be paid for untaken sick and bereavement leave, it was particularly difficult to see how Pacific could sensibly be seen to have been under any continuing obligation after the transfer date (and thus termination of the employment agreements) in respect of such leave.

Appeal dismissed.

JUDGMENT OF THE COURT
  • 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.

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 UnjustEnrichment. 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...

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7 cases
  • Shabeena Shareen Nisha (Nisha Alim) v LSG Sky Chefs New Zealand Ltd NZEmpC Auckland
    • New Zealand
    • Employment Court
    • 29 Julio 2015
    ...Ltd v LSG Sky Chefs New Zealand Ltd [2013] NZCA 386 , [2014] 2 NZLR 1. 4 LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2014] NZSC 158 5 At [8] (HC). 6Blank v Canada (Minister of Justice) [2006] 2 SCR 319, 2006 SCC 39. 7 At [37]. 8 At [37], [36]. 9Snorkel Elevating Work Plat......
  • Sn v Mn
    • New Zealand
    • High Court
    • 14 Diciembre 2017
    ...dismissal of LSG’s appeal did not affect the matters referred to above. See LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2014] NZSC 158, [2016] 1 NZLR Wholesale Distributors Ltd v Songle Supermarket Ltd, above n 6. [14] In that case, Moore J had declined WDL’s application fo......
  • Nisha v LSG Sky Chefs New Zealand Ltd
    • New Zealand
    • 15 Mayo 2015
    ...Catering Ltd v LSG Sky Chefs New Zealand Ltd [2013] NZCA 386, [2014] NZLR 1. LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2014] NZSC 158. have been reprehensible, but we do not see it as having any bearing on issues before us in the present appeal. [18] The defendant’s chall......
  • Nisha v LSG Sky Chefs New Zealand Ltd
    • New Zealand
    • 1 Enero 2015
    ...at the end of this judgment about how that issue is to be determined. 4 LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2014] NZSC 158. [15] Similarly, the plaintiff’s application for leave to seek the recall of the Interlocutory Judgment (No 7) deals with matters begun before ......
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