PREMIER EVENTS GROUP Ltd v MALCOLM JAMES BEATTIE NZEmpC AK

• Jurisdiction: New Zealand
• Judge: Gl Colgan
• Judgment Date: 21 February 2012
• Court: Employment Court
• Docket Number: ARC 22/11
• Date: 21 February 2012

In the Matter of Proceedings Removed from the Employment Relations Authority

And in the Matter of an application to strike out affirmative defences

BETWEEN

Premier Events Group Limited

First plaintiff

and

Ba Partners Limited (In Liquidation and Receivership)

Second Plaintiff

and

Malcolm James Beattie

First Defendant

and

Anthony Joseph Regan

Second Defendant

and

Patricia Panapa

Third Defendant

[2012] NZEmpC 26

ARC 22/11

IN THE EMPLOYMENT COURT AUCKLAND

Application to strike out affirmative defences — parties were engaged in multiple proceedings against each other — second plaintiff (“2P”) alleged second defendant (“2D”) had been a director of 2P and had inappropriately diverted company funds — in affirmative defences 2D alleged that 2P had breached contract, employment and company obligations owed to 2D — 2P in receivership and argued s248 Companies Act 1993 (effect of commencement of liquidation) prohibited that claims for relief — if 2D's claims amounted to set-off then s248 would not apply (and so the defences would stand) — whether 2D's counterclaims amounted to set-offs.

Counsel:

Erin Davies and Cathryn Curran-Tietjens, counsel for second plaintiff in support

John Eichelbaum, counsel for defendants to oppose

INTERLOCUTORY JUDGMENT OF CHIEF JUDGE Gl Colgan

1 This interlocutory judgment decides the second plaintiff's application to strike out several of the second defendant's affirmative defences before trial.

2 The second plaintiff has a high threshold to surmount before Anthony Regan's pleadings will be struck out. The second plaintiff is required to satisfy the Court that the impugned defences are not justiciable, that is that the law does not recognise them as defences which may be pleaded to the claims. These are the same rules that apply to the striking out of any cause of action or pleading, more usually in the case of a statement of claim but, as here, where a defence is advanced.

3 To determine whether the impugned defences will fail, even if the facts supporting them are established by the second defendant, it is necessary to understand the nature of the proceeding in which they arise and of the second plaintiff's claims against Mr Regan.

Litigation history

4 What are now multiple proceedings, where a number of parties are suing each other, began life in May 2010 in the Employment Relations Authority where the first defendant Malcolm Beattie issued proceedings against what is now the first plaintiff, Premier Events Group Limited (Premier Events). There are also concurrent proceedings between the same parties, in different capacities, in the High Court.

5 So far as Mr Regan and BA Partners Limited (BA Partners) are concerned, Mr Regan issued proceedings 1 in the Employment Relations Authority on 23 June 2010 against Robert Gill (BA Partners Limited's Chief Executive Officer), BA Partners, and Premier Events for lost wages and distress compensation under's 123(1)(c)(i) of the Employment Relations Act 2000 (the Act). Mr Regan filed an amended statement of problem in the Authority on 31 August 2010 which expanded his claims to include compensation for losses for removal of a business opportunity with an organisation known as Cartan. On 15 October 2010, Mr Regan filed a second amended statement of problem against the same parties (including BA Partners) although the claims appear to be substantially the same. A third amended statement of problem was filed by Mr Regan in the Authority on 17 January 2011 which discontinued his claims against Mr Gill personally. A fourth amended statement of problem was lodged by Mr Regan in the Authority on 4 February 2011

which included the previously claimed relief and sought additional compensation for asset stripping of companies under's 123(1)(c)(ii) of the Act

6 In separate proceedings 2 in the Employment Relations Authority, Premier Events and BA Partners issued proceedings against Messrs Beattie and Regan and Ms Panapa on 13 July 2010. These claims included for breach of contractual restraints of trade, breaches of confidentiality, breaches of obligations not to solicit customers, breaches of obligations to inform the second plaintiffs of all matters arising out of employment, breaches of good faith, and for penalties against Messrs Beattie and Regan. Additional causes of action against Mr Regan included damaging the second plaintiffs' goodwill, breaches of his duty of fidelity, breaches of his obligation to deliver up documents at the end of his employment, breaches of his duty not to offer employment to BA Partners' employees, and a claim that Mr Regan diverted unlawfully the sum of $52,693 to a solicitor's trust account and had refused to return this money, the property of BA Partners.

7 Mr Regan's defence to these claims against him was set out in his statement in reply filed in the Authority on 27 July 2010 and included that his restraint of trade had expired and that he was authorised to receive and was paid justifiably the sum of $52,693 for holiday pay and salary in arrears.

8 To complete the picture, on 14 March 2011, Premier Events and BA Partners applied for the removal of all three Authority proceedings to this Court for hearing at first instance. Those proceedings were removed by determination 3 of the Employment Relations Authority on 29 March 2011.

The pleadings

9 The operative statement of claim is the second plaintiff's amended statement of claim filed on 22 November 2011. It alleges that Mr Regan was a director of it from 29 August 2003 to 31 March 2010 and that he was employed by it as Group Chief Operating Officer from 14 November 2003. It also asserts that among its

shareholders were the second defendant, Jennifer Regan, and Bart Cleverley (jointly), having 20 per cent of the company's share capital

10 A difficulty with the strike-out application is that the second plaintiff has not pleaded any terms (express or implied) of the employment agreement which it alleges it had with Mr Regan and the existence of which he has denied (barely) in the defendants' relevant statement of defence filed on 1 December 2011. The amended statement of claim makes allegations against Mr Regan of “diverting” funds from its bank account into that of a third party, claims that this payment was not authorised, and says that Mr Regan used the diverted funds for his personal benefit.

11 Although I drew to the parties' attention this deficiency in the second plaintiff's pleadings in a minute of 26 January 2012 so that the second plaintiff has had an opportunity to seek leave to file and serve a further amended statement of claim (the case having been set down for a hearing), its claim against Mr Regan remains incomplete. However, he has chosen to plead to it, including by the impugned statement of defence filed on 1 December 2011. For the purpose of this application, I am prepared to assume that the second plaintiff will identify terms or conditions of its employment agreement with Mr Regan that it says he has breached.

12 The affirmative defences advanced by Mr Regan include, first, that the second plaintiff, “participated in an unfair/bad faith asset stripping scheme between June 2009 and December 2010” and that, before 30 June 2010, the second plaintiff “stripped out a contract with NZ Netball which derived income of $334,000 per annum to a fresh company Brand Advantage Measurement & Consulting Limited for consideration of Nil”. Mr Regan alleges that the second plaintiff advised creditors that it had insufficient funds to pay them whereas the sum of $150,000 in client revenues were misappropriated from the second plaintiff by Mr Gill between March and June 2010 and, in addition, “more than $344,000 in the 12 month period to March 2011”. Mr Regan says that the second plaintiff thereby “wronged creditors and shareholders by paying them 0.55 cents in the dollar (in the case of creditors) and nothing in respect of shareholders”.

13 No relief is claimed by Mr Regan for these alleged misconducts by the second plaintiff, nor is it possible to see how any could be available in these proceedings. They are also said to be advanced as background facts to be relied on by Mr Regan later in his pleading.

14 The second defendant then says that the sum alleged by the second plaintiff to have been improperly paid to Mr Regan constituted monies due and owing to him for salary and holiday pay and was paid in accordance with properly kept company records in the ordinary course of business. In other words, Mr Regan says that he was entitled contractually to the monies that he received.

15 Next, described as “Second set-off defence: breach of duty of good faith”, Mr Regan says that the second plaintiff owed him a duty of good faith under's 4 of the Act but acted in breach of that in a number of specified ways. These include:

• •attempting to bully him into signing minutes of meetings which did not occur;

• •attempting to bully him into signing minutes of meetings which would have ratified unlawful dealings designed to disadvantage business partners/employees had he acceded to such demands;

• •attempting or actually entering into major transactions without calling necessary shareholders' meetings;

• •attempting to or entering into major transactions without obtaining required special resolutions;

• •failing to give notice of company meetings;

• •engaging in the backdating of documents in order to disadvantage him and others;

• •participating in an unfair/bad faith asset stripping scheme involving particularised assets; and

• •making unlawful deductions from his salary.

16 The remedies for these alleged breaches of good faith include orders that the second plaintiff's conduct has been unconscionable and that his employment contract has been repudiated and is unenforceable, for “Penalties under ss 134(1) and 189 [sic]”, and costs and disbursements.

17 Described as “Third set-off defence; breach of...