New Zealand Basing Ltd v Brown

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeHarrison J
Judgment Date04 November 2016
Neutral Citation[2016] NZCA 525
Date04 November 2016
Docket NumberCA12/2015

[2016] NZCA 525

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Harrison, Miller and Winkelmann JJ

CA12/2015

BETWEEN
New Zealand Basing Limited
Appellant
and
David Brown
First Respondent

and

Glen Sycamore
Second Respondent
Counsel:

A H Waalkens QC and M G Lawlor for Appellant

G M Pollak and HIK White for Respondents

Appeal under s214 Employment Relations Act 2000 (“ERA”) (appeals on questions of law) against an Employment Court (“EC”) decision which declared that the age discrimination provisions of the ERA applied to the pilots' employment by the appellant and it would be discriminatory under the Human Rights Act 1993 to require each of them to retire from employment on the ground of age — the appellant was a wholly owned subsidiary of Cathay Pacific, a Hong Kong-based international airline — most pilots were based in Hong Kong but others were based in various other countries including New Zealand — the appellant entered into contracts of employment with a number of New Zealand-based pilots including the two respondents — the contract provided that the respondents were to retire on reaching the age of 55 years and Hong Kong law applied — consideration of Lawson v Serco Ltd, Botham v Ministry of Defence and Crofts v Veta Ltd— if the ERA applied, whether it overrode the parties' agreement that the law of Hong Kong applied to their contract to employment — if the ERA did not apply, would the application of the law of Hong Kong to the contract of employment be contrary to public policy.

The issues were: if the ERA applied, whether it overrode the parties' agreement that the law of Hong Kong applied to their contract to employment; if the ERA did not apply, would the application of the law of Hong Kong to the contract of employment be contrary to public policy.

Held: Overriding statutes fell into a category of enactments which must be applied regardless of the normal rules of the conflict of laws. However, in attributing an overriding effect to s238 ERA, and therefore declaring that the ERA took effect as an overriding mandatory statute, the EC had fallen into two material errors. The first related to the reversal of the proper conflicts methodology through undue reliance on Lord Hoffman's reasoning in Crofts and the second to the misreading of Parliamentary intent.

The Judge had inverted the settled approach to contracts in conflicts jurisprudence: the courts must proceed from an assumption that the choice of the parties would govern their rights and obligations. The Judge erred in treating the prohibition in s238 ERA on contracting out of the ERA as the starting point and deserving of a “broad interpretation” such that it precluded private bargaining parties from electing to govern their relationship by a connected foreign system.

Crofts was distinguishable due to NZ's different statutory context. By virtue of s204(1) UK Act (law governing employment) was an example of overriding legislation which governed the employment relationship notwithstanding that the law of another country would otherwise apply. That was a recognised exception to the general principle of private international law that a domestic statute affecting a contract only applied to a contract governed by that system of law. Without an overriding provision of this nature in NZ, the parties' choice of law must prevail.

In a conflict of laws setting, s238 ERA applied where parties have purported to elect expressly as the proper law of their contract of employment a foreign system with little or no connection to the New Zealand contract. There was no suggestion that those qualifying features applied to the pilots' contracts. Section 238 ERA could not be read as expressing Parliament's intention that it would apply to displace or override settled rules of private international law.

There were ample connections with Hong Kong law and the pilots received an income tax advantage and other employment benefits. In circumstances where the majority of the employees' services were performed outside the territorial limits of the competing jurisdictions, it reflected the parties' consensus that the laws of the foreign jurisdiction should govern all aspects of the employment relationship. Parliament had not intended that the ERA should prevail in such a situation.

The statutory prohibition against an enforced retirement provision below the age of 65 years did not reflect an absolute value that must trump transnational contracting. The pilots were seeking to retain the advantages of a favourable income tax rate available by virtue of their employment in Hong Kong and the application of its taxation legislation, while arguing that Hong Kong law should be disregarded for the purposes of a claim of unfair dismissal. The EC erred in finding that it would be contrary to public policy to enforce the parties' choice of the proper law. The pilots' attempt to circumvent a bona fide and legal choice of law clashed with the fundamentals of private international law.

JUDGMENT OF THE COURT
  • A The appeal is allowed.

  • B The respondents must pay the appellant costs for a standard appeal on a 2B basis and usual disbursements.

REASONS OF THE COURT

(Given by Harrison J)

Contents

Introduction

[1]

Background

[6]

The employment issues

[17]

Employment Court decision

[24]

Choice of law principles

[30]

First question: the Employment Relations Act 2000

[31]

Transnational employment

[31]

The Employment Court's approach

[33]

The proper law of the contracts

[34]

Overriding statutes

[36]

Distinguishing Crofts

[41]

Parliamentary intent

[56]

Second question: the public policy exception

[60]

The Employment Court's approach

[60]

Principles

[64]

Our analysis

[70]

Result

[84]

Introduction
1

Cathay Pacific is a Hong Kong-based international airline, employing about 3,000 pilots worldwide. Most pilots are based in Hong Kong but others are based in the United Kingdom, Germany, Canada, the United States of America, Australia and New Zealand. Through a wholly owned Hong Kong subsidiary, New Zealand Basing Ltd (NZBL), the airline entered into contracts of employment with a number of New Zealand-based pilots including Messrs David Brown and Glen Sycamore.

2

Two terms of the contracts are particularly relevant. One obliged Messrs Brown and Sycamore to retire from service with Cathay Pacific on reaching the age of 55 years. The other provided for Hong Kong law to apply to the pilots' conditions of service.

3

In determining an application for relief by Messrs Brown and Sycamore, the Employment Court declared that (a) the age discrimination provisions of New Zealand's Employment Relations Act 2000 (the ERA) apply to the pilots' employment by NZBL; and (b) it would be discriminatory under the Human Rights Act 1993 to require each of them to retire from employment on the ground of age. 1

4

NZBL appeals with leave on these two questions of law pursuant to s 214 of the ERA: 2

  • (a) If the ERA applies, does it override the parties' agreement that the law of Hong Kong applies to their contract to employment?

  • (b) If the ERA does not apply, would the application of the law of Hong Kong to the contract of employment be contrary to public policy?

5

The threshold issue underlying both questions is, as their terms recognise, whether the ERA applies to the contracts of employment. Our answer to that issue will largely determine the result of NZBL's appeal.

Background
6

Messrs Brown and Sycamore joined Cathay Pacific as pilots in the early 1990s. They were based originally in Hong Kong but in the mid 1990s they relocated to the Australasian base in Sydney which allowed them to reside in Auckland. Following that change they were employed along with other New Zealand-based crew by Veta Ltd, a Cathay Pacific subsidiary incorporated in Hong Kong.

7

In about 2001 Cathay Pacific formed NZBL to avoid a potential tax issue arising from Veta's participation in the airline's employment arrangements. The new structure separated New Zealand from the Australasian base and created Auckland as a permanent base. The pilots resigned from Veta and accepted formal offers from NZBL on the same terms of employment as those applying previously.

8

With effect from 1 July 2002 and 1 September 2002 respectively, Messrs Brown and Sycamore entered into identical new contracts of employment with NZBL incorporating “NZB Conditions of Service 2002” (CoS02). Materially, the contracts were subject to and incorporated a letter of offer from NZBL to the pilots including this provision:

This employment contract is governed by and shall be construed in accordance with the laws of Hong Kong and the parties hereto shall submit to the non-exclusive jurisdiction of the courts of Hong Kong.

The contracts themselves provided: 3

2. Application of Law

2.2. These Conditions of Service, which form part of the contract of employment between the Company and the Officer, will in all cases and in all respects be interpreted in accordance with the law as set out in the various applicable ordinances of the Hong Kong Special Administrative Region (Hong Kong SAR).

35. Retirement

35.1. The normal retirement age is fifty five (55) years of age. An officer will be deemed to have reached normal Retirement Age on the day on which the Officer reached his/her fifty fifth (55th) birthday.

9

Global legal developments provide a necessary backdrop to NZBL's present employment arrangements. In 2003 five London-based pilots employed by Veta and related entities filed originating applications against Cathay Pacific in the London South Employment Tribunal. The pilots complained that the airline had unfairly dismissed them on reaching the age of 55 years. At issue was the territorial scope of the Employment Relations Act 1996 (UK) (the UK...

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