Oldco Pti Ltd v Houston

• Jurisdiction: New Zealand
• Judge: B S Travis
• Judgment Date: 17 December 2010
• Court: Employment Court
• Docket Number: ARC 43/07
• Date: 17 December 2010

IN THE MATTER of Proceedings removed from the Employment Relations Authority

AND IN THE MATTER OF an application for further and better Particulars

AND IN THE MATTER OF an Application for Security for Costs

AND IN THE MATTER OF an Application for Stay

BETWEEN

Oldco Pti Ltd

Plaintiff

and

Philip Eric Houston

Defendant

[2010] NZEMPC 161

ARC 43/07

ARC 27/09

IN THE EMPLOYMENT COURT AUCKLAND

Application by defendant for orders requiring the plaintiff to provide better particulars of its claim, security for costs, and for the substantive claim to be stayed pending payment of security for costs and amounts previously awarded to the defendant by the Employment Relations Authority and Employment Court — whether the defendant's applications were barred owing to previously — made applications — what was the relevance of the plaintiff's insolvency — whether the Court had jurisdiction to order proceedings to be stayed conditional upon payment into Court — and what was the correct approach to seeking further particulars close to trial.

Counsel:

Tony Drake and Mark Donovan, counsel for plaintiff

Penny Swarbrick and Karen Jones, counsel for defendant

INTERLOCUTORY JUDGMENT OF JUDGE B S Travis

1 At this hearing the defendant, Mr Houston, sought three orders against the plaintiff company (Oldco).

• a) that it be required to provide better particulars of its claim;

• b) that it be required to pay security for costs before its claim could be allowed to proceed; and

• c) that the substantive proceedings lodged by the plaintiff under ARC 27/09 be stayed pending payment by the plaintiff of;

  • i) the sums payable by the Authority including costs and the costs awarded by this Court under AC 18A/06;

  • ii) any amount ordered by the Court as security for costs.

2 AH these applications were opposed by Oldco.

Further particulars

3 Ms Swarbrick observed that Mr Houston was facing a substantial claim for damages from Oldco which were filed first in the Employment Relations Authority in August 2008, together with an application for removal. She submitted there has therefore been no discussion between the parties as to the matters alleged and that Mr Houston had not had the opportunity to properly understand either the basis of the claim, or the information that Oldco was relying on to bring it. She said the claim had been raised for the first time four years after Mr Houston's dismissal.

4 Ms Swarbrick also claimed there had been considerable difficulties in obtaining discovery from Oldco. There have been several requests for particulars and a considerable amount of additional material has been filed by Oldco which has been included in a consolidated statement of claim filed on 1 September 2010. The consolidated statement of claim now includes Oldco's election to challenge the substantive determination of the Employment Relations Authority which found Mr Houston had been unjustifiably dismissed, two costs determinations, a claim for damages of 10 million dollars, a claim for allegedly missing funds of $1.3 million, the refund of wrongly paid expenses in excess of $224,000 and other miscellaneous claims and penalties which, all together, allegedly total just under $12 million (the damages claim).

5 Mr Drake, for Oldco, noted that there is no procedure in the Employment Relations Act 2000 or the Employment Court Regulations 2000 for ordering further particulars and the Court has used the mechanism provided under relevant High Court rules to deal with such applications. He cited Whaanga v Cityline (New Zealand) Ltd, 1 where Chief Judge Goddard stated:

The primary purpose of particulars is to inform the Court and the opposite party of the nature of the case being pleaded, while a secondary purpose is to set boundaries on that case and to avoid surprise at the hearing.

6 Mr Drake contended Mr Houston's application sought evidence of the facts of the plaintiff's claim, which was contrary to regulation 11 of the Regulations which requires the facts, but not the evidence of the facts, upon which the claim is based, to be pleaded.

7 I have considered the pleadings and in particular the consolidated statement of claim and accept Mr Drake's submission that it does comply with regulation 11.

8 What was particularly being sought by Mr Houston were details of items of expenditure spent on certain overseas trips allegedly paid to Mr Houston which are now being claimed back by Oldco, on the basis that they were not legitimate business expenses and not payable to him as contractual entitlements. A list of those expenses is annexed to the consolidated statement of claim. To plead how it is said each item was expended and for what purpose would result in an extremely prolix statement of claim. What would assist Mr Houston and the Judge having to determine the issues is a statement of the criteria used by Oldco for determining what expenses were personal to Mr Houston and should therefore be refunded. Rather than requiring the consolidated statement of claim to be repleaded at this late stage, the liability trial having been set down to commence on 21 February 2011 for six days, I suggested the following approach to counsel. The basis for categorising the expenses should emerge from the exchange of briefs of evidence, a process upon which the parties have now agreed. If it does not become clear from Oldco's

briefs of evidence what criteria was used and Mr Houston is thereby disadvantaged, I reserve leave for him to reapply for further particulars, using the application presently before the Court and bringing it up to date on any alleged deficiency in the briefs of evidence to be filed. The present application for particulars is therefore adjourned awaiting the exchange of briefs

Security for Costs

9 There was no issue between counsel that the Court has the jurisdiction to order security for costs. Regulation 6 of the Regulations allows the Court to embody the High Court Rules which in this case would be r 5.45. The jurisdiction to order security has been confirmed in a number of cases. Both counsel cited MacKenzie v Bayleys Real Estate Ltd 2 and the broad discretion the Court has in this area. There was no issue that Oldco will be unable to pay Mr Houston's costs if Oldco is unsuccessful in its consolidated proceedings.

10 Mr Drake noted that the Employment Court has shown a reluctance to grant security for costs, citing Evolution E-business Ltd v Smith, 3 except where the parties are domiciled beyond the jurisdiction of the Court. He submitted ordering security can have the effect of preventing parties presenting their cases on the merits. This had been particularly so in cases where impecunious grievants were exercising the statutory right of challenge from determinations of the Employment Relations Authority. This was partly because it was arguable that their impecuniosity resulted from the consequences of their treatment by their former employers: See for example Chief Executive of Ministry of Justice, formerly the Department for Courts v Purcell. 4 Chief Judge Colgan acknowledged in the Smith case that this principle should apply equally to any party. Mr Drake contended that Oldco's admitted impecuniosity was caused by Mr Houston's conduct as Group Chief Executive Officer, a matter to which I will return.

Application for stay

11 On 28 October 2010 Mr Houston applied for a stay of Oldco's proceedings on the following grounds: They were an abuse of process of the Court; Oldco had made no attempt to pay any of the monies it had been ordered to pay by the

Authority and the Court; it had failed to comply with the compliance order made by the Court on 25 August 2008; it had pursued an entirely unmeritorious challenge; it had made or opposed many interlocutory applications and it had filed its claim for damages four years after the termination of the employment relationship. Mr Houston acknowledged that he had previously sought an application for stay that Judge Couch decided on 25 August 2008. 5 Judge Couch declined the application on the basis that it would not be a proper exercise of the Court's discretion to grant a stay in circumstances where other procedures for enforcing the orders were available to Mr Houston and he had not availed himself of them. The new application pointed out that Mr Houston had since availed himself of those procedures but his attempt to liquidate Oldco had been dismissed in the High Court

12 It was common ground that if Mr Houston's succeeds in defending Oldco's challenge and its various damages claims he will not because of Oldco's impecuniosity, recover any of the sums ordered in his favour by the Authority or the Court but will have to expend considerable funds to defend himself. Oldco is being funded by the ANZ bank which has also commenced proceedings against Mr Houston in the High Court on personal guarantees of loans of some 20 million dollars.

13 The stay application was made in reliance on s 189(1) of the Act which allows the Court, for the purpose of supporting successful employment relationships and promoting good faith behaviour, to determine matters before it and to make such decisions or orders not inconsistent with the Act or any other applicable employment agreement or the particular individual employment agreement, as in equity and good conscience it thinks fit. It was also made in reliance on s 187(l)(m) which confers jurisdiction on the Court to exercise such other functions and powers as are conferred by it on this or any other Act. Ms Swarbrick cited reg 6(2)(b) which requires the Court to dispose of cases before it in such manner as will best promote the objects of the Act and the ends of justice. By analogy she also invoked s 180 which refers to the Court's jurisdiction to order a stay of proceedings on a determination of the Authority. Ms Swarbrick relied on r 15.1 of the High Court Rules which enables the High Court to...