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Credit Consultants Debt Services NZ Limited v Wilson and anor WC 12A/07 [2007] NZEmpC 39 (5 April 2007)

Last Updated: 29 May 2007

IN THE EMPLOYMENT COURT
WELLINGTON

WC 12A/07
WRC 9/07

IN THE MATTER OF proceedings removed from the Employment Relations Authority

BETWEEN CREDIT CONSULTANTS DEBT SERVICES NZ LIMITED
Plaintiff

AND DAVID WILSON
First Defendant

AND EC CREDIT CONTROL LIMITED
Second Defendant

Hearing: 28 March 2007

(Heard at Wellington)

Court: Chief Judge GL Colgan
Judge BS Travis
Judge CM Shaw

Appearances: Les Taylor and Megan Richards, Counsel for Plaintiff
Tanya Kennedy and MJ Brewer, Counsel for Defendants

Judgment: 5 April 2007

JUDGMENT OF THE FULL COURT

[1] The preliminary jurisdictional questions in this case removed for hearing at first instance by the Employment Relations Authority and yet to be heard on its merits include:

 whether the Employment Relations Authority and the Employment Court, either derivatively or originally, can entertain the causes of action against the second defendant;
 Whether the Employment Relations Authority and the Employment Court (derivatively or originally) can grant injunctive relief (interlocutory and permanent) to enforce contractual constraints in economic activity and to enforce other contractual obligations.

Background

[2] David Wilson was formerly employed by Credit Consultants Debt Services NZ Limited ("CCDS"). Their employment agreement entered into in December 2001 included a covenant purporting to restrain Mr Wilson from competing with CCDS. The agreement also prohibited Mr Wilson from misusing confidential information gleaned in his role with CCDS. The agreement also purported to prohibit Mr Wilson from soliciting staff, customers or potential customers of CCDS during and following his employment. Mr Wilson was CCDS’s general manager for central and southern regions in New Zealand. This role was disestablished by CCDS and he was dismissed by reason of redundancy. He subsequently took up employment with the second defendant, EC Credit Control Limited ("ECCC"), a company that is in commercial competition with CCDS.
[3] In proceedings brought originally in the Employment Relations Authority CCDS claimed breaches by Mr Wilson of the contractual terms restraining him from competing with it, prohibiting misuse of confidential information and prohibiting solicitation of staff and customers. CCDS claimed that ECCC incited, instigated, aided or abetted those alleged breaches by Mr Wilson. More particularly, CCDS alleges against ECCC that it has employed and continues to employ Mr Wilson, it has advertised this fact, it has allowed Mr Wilson to make use of the plaintiff’s confidential information for ECCC’s own benefit, and has allowed him to solicit, endeavour to entice away or discourage clients from remaining as clients of CDDS for ECCC’s own benefit.
[4] As a result of these impugned actions by both defendants, the plaintiff claims it has suffered loss and will continue to do so while the breaches continue.
[5] The relief claimed by the plaintiff against both defendants included interlocutory, interim and permanent injunctions. The interlocutory injunctive relief was intended to restrain further breaches until the merits of the claim could be heard. The interim injunctive relief was directed against Mr Wilson for the period until 22 June 2007 when the restraints in the employment agreement that were time limited, expired. Permanent injunctive relief was sought in respect of misuse of confidential information. Other relief sought included a compliance order against Mr Wilson requiring him to comply with the provisions of his employment agreement, damages for loss of business attributable to the defendants’ actions, and penalties against both defendants under s134 of the Employment Relations Act 2000, in the case of Mr Wilson for breaches of his employment agreement and, in the case of ECCC, for inciting, aiding or abetting his breaches.
[6] The Employment Relations Authority agreed to remove the proceeding to the Court for hearing at first instance. The Authority concluded that an important question of law was likely to arise in the matter other than incidentally, the test for removal under s178(2)(a). This was said to be: "... in regard to injunctive relief and the Authority’s jurisdiction on restraint of trade provisions and compliance".
[7] The Authority added:

Also at the very least the jurisdiction for any injunctive relief rests in the Employment Court (applying Axiom Rolle PRP Valuations Services Ltd v Kapadia 4 August 2006 Colgan CJ, Travis and Shaw JJ, AC 43/06). The cause of action to resolve the matter lies at the heart of this matter. If the matter had been filed in the Court then any contemporaneous application filed in respect of a claim for breach and compliance and penalties in the Authority would involved overlapping proceedings in the Court and the Authority in the same matter.

[8] A full Court was convened to deal with these preliminary questions but the substantive case will be heard by a single judge starting on 16 April. To address the immediate situation before trial, and by agreement of the parties, Judge BS Travis considered the plaintiff’s application for interlocutory injunctive relief on the papers, and gave a decision (WC 12/07) on 16 March 2007. The Judge restrained Mr Wilson from soliciting CCDS’s clients and employees, misusing confidential information, and required him within a short period to return to the plaintiff all business cards of its clients or prospective clients removed by him and/or copies of any lists made up from those cards. Although he had doubts about the plaintiff’s entitlement to interim injunctive relief against ECCC in this Court, the Judge accepted the second defendant’s undertakings, recorded these, but declined to make any injunctive orders against it.
[9] Although we deal with them briefly for the benefit of other litigants in similar circumstances, there is no dispute that the causes of action against the first defendant for penalty, compliance and damages for breach of contract, and penalty against the second defendant, may be properly brought in the Employment Relations Authority and, where appropriate, removed to the Court. The problematic areas are the extent to which the causes of action for compliance and damages against the second defendant may be brought to the Employment Relations Authority and the Court and whether they can grant injunctive relief against the first and/or second defendants.

Compliance orders against first defendant

[10] Section 137(1)(a) allows the Employment Relations Authority or the Court on removal of proceedings to make an order requiring Mr Wilson to comply with his employment agreement. The Authority must be satisfied that he has not observed or complied with any provision of the agreement. There is no power for the Authority to make an interlocutory compliance order in the same way that interlocutory injunctive relief may be granted by courts having the jurisdiction to do so to preserve a position pending a substantive hearing. The Authority may investigate the complaint of breach and if it finds a breach, must specify a time within which a compliance order is to be obeyed: s137(3). Compliance orders by the Employment Relations Authority are enforceable in the Employment Court under s138(6).

Compliance orders against second defendant

[11] If the plaintiff were to seek a compliance order against the second defendant as its counsel told us they were considering, we would conclude that the Employment Relations Authority is not empowered to make such an order against a former employee’s new employer or other legal entity requiring that person to comply with the employment agreement between the former employer and the former employee. Section 137, which sets out the circumstances in which a compliance order may be made, does not encompass this situation. A new employer or legal entity in the circumstances of ECCC in this case cannot be said, under subs (1), to have not observed or complied with any provision of Mr Wilson’s employment agreement with CCDS.

Penalty against first defendant

[12] It is common ground, which we endorse, that it is open to the plaintiff to claim a penalty against Mr Wilson under s134(1) for breach or breaches of his employment agreement.

Penalty against second defendant

[13] It is also common ground, which we also endorse, that s134(2) permits CCDS to bring an action for a penalty against ECCC for inciting, instigating, aiding or abetting Mr Wilson’s alleged breach of his employment agreement.
[14] The Authority, or the Court on removal, may direct the whole or any part of a penalty imposed be paid to another person rather than the statutory default provision of payment to the Crown. However, even if the maximum penalty is imposed for each breach to which a person such as ECCC is a party, this may bear no real relationship to the financial losses sustained by a person, such as the plaintiff, attributable to the breaches. It is also notoriously difficult to establish specific losses of such intangible elements as customer goodwill. This in turn is often the rationale for the imposition of injunctive relief in appropriate cases. If injunctive relief in support of causes of action in tort, equity, or otherwise than in contract is unavailable in the Employment Relations Authority or the Employment Court, it is available in courts of competent jurisdiction.

Damages for breach of contract by first defendant

[15] CCDS may bring proceedings against its former employee, Mr Wilson, for damages for his breach or breaches of the employment agreement. Section 161(1)(b) gives the Authority exclusive jurisdiction to make determinations about employment relationship problems including "matters related to a breach of an employment agreement". Contract damages are the standard remedy for breach of an employment agreement. Contract damages are able to be claimed and awarded under a rule of law relating to contracts: s162.

Damages for breach of contract by second defendant

[16] The plaintiff’s statement of problem removed from the Authority (no statement of claim has yet been filed in this Court) claims damages from the second defendant but does not link this to a cause of action between the parties. The plaintiff cannot claim damages against the second defendant in the Employment Relations Authority or in the Employment Court because it does not have a cause of action in breach of an employment agreement against ECCC. It was not a party to that agreement or indeed in any contractual relationship with the plaintiff. Any claim for damages against ECCC would be in tort or in equity but would not be founded on the employment agreement. Parliament has not altered the law in this regard since the judgment of the Court of Appeal under the Employment Contracts Act 1991 in Conference of the Methodist Church of New Zealand v Gray^[1]. That position has been confirmed recently by the High Court in BDM Grange Ltd v Parker^[2]. Any claim for damages by CCDS against ECCC would have to be brought in the courts of ordinary jurisdiction and pursuant to a cause of action that is not justiciable in either the Employment Relations Authority or this Court.

Interim and final injunctions against the first and second defendant

[17] This is the nub of the case at this stage. The question is whether the Employment Relations Authority and this Court (whether derivatively upon removal from the Authority or at first instance) can grant injunctive orders against either or both defendants.
[18] There are three separately identifiable forms of injunction that are claimed. Different decisions may apply to at least two of them. The first are interlocutory injunctions. Such injunctions are intended to deal with the immediate position between parties until a court can determine the merits of their substantive litigation. Judge Travis made interlocutory injunctive orders.
[19] The second form of injunctive order claimed is an interim injunction. This is an injunction that is to last for a specified period but no longer. Interim injunctions in this case are sought in respect of the specified periods of restraint upon economic activity by the first defendant in his employment agreement with the plaintiff. Such injunctions, although final, would also be interim because they would operate only from the time of their making until 22 June 2007.
[20] The third type of injunction sought is a permanent injunction, that is a substantive or final injunction of indefinite duration. Such an injunction is sought in this case, and often granted in circumstances where the Court is satisfied that it is appropriate to restrain the misuse of confidential information where the value of that information may remain indefinitely.
[21] We must decide whether the Employment Relations Authority or this Court is able to grant injunctive relief in principle and, if so, whether it should do so to prevent conduct for which Parliament has provided expressly a statutory penalty and for a compliance order. If, as we have concluded, a claim for damages against the second defendant can only be brought in the courts of ordinary jurisdiction, does the Employment Relations Authority or the Employment Court nevertheless have the power to restrain by injunction, anticipated or repeated breaches of the employment agreement by the first defendant as a principal, and the second defendant as a party?
[22] There are a number of issues which require further investigation and research. The plaintiff opens its substantive case at a priority fixture on 16 April 2007 and because of the time constraints we do not have time to deal properly with all of these questions in this judgment. We have however, been able to reach a firm decision on the Employment Relations Authority’s power (and therefore also this Court’s power on removal under s190) to grant injunctions under s162 of the Employment Relations Act 2000. As counsel have requested that we give them guidance on this issue before the substantive trial begins, this judgment deals with this disputed question. We reserve the question of the Court’s original jurisdiction, that is other than its derivative jurisdiction under s190 on a matter removed to it under s178, for a later judgment between these parties that we will deliver.

The history of injunctions in employment institutions

[23] Before the Labour Relations Act 1987, compliance with employment contracts and employment law was dealt with largely in the High Court and District Courts by common law claims. The remedies included injunctions and damages. The enactment of the Labour Relations Act 1987 saw the introduction of the remedy of compliance orders into specialist employment law for the first time. Section 207 empowered the Labour Court to enforce compliance with legislative requirements, union rules or any award or (collective) agreement. The Labour Court concluded that compliance orders could not be made on ex parte application^[3]. A compliance order would not be granted where there was a genuine dispute about the interpretation, operation or application of an award or agreement^[4]. There could be no such thing as an interlocutory compliance order to prevent anticipated unlawful conduct.^[5]
[24] The 1987 Act also gave power to the Labour Court for the first time to issue injunctions in industrial matters. This power had formerly resided in the High Court.
[25] Under the Employment Contracts Act 1991, the Employment Court assumed the power to hear and grant applications for interlocutory and final injunctive relief other than in cases of strikes or lockouts. This power was derived principally from s104(1)(h) of the Employment Contracts Act which provided:

104. Jurisdiction of Court -...

(h) Subject to subsection (2) of this section, to make in any proceedings founded on or relating to an employment contract any order that the High Court or a District Court may make under any enactment or rule of law relating to contracts:

[26] There was a limitation on the operation of that provision in subsection (2):

(2) Where the Court has under subsection (1)(h) of this section the power to make an order cancelling or varying a contract or any term of a contract, it shall, notwithstanding anything in subsection (1)(h) of this section, make such an order only if satisfied beyond a reasonable doubt that such an order should be made and that any other remedy would be inappropriate or inadequate.

[27] The Employment Contracts Act gave the Court the express jurisdiction to hear and determine any action founded on an employment contract: s104(1)(g). This transferred to the Employment Court the whole of the jurisdiction of the ordinary courts in relation to contracts of employment. A survey of cases on s104(1)(h) shows that this subsection was intended to transfer to the Employment Court the power to grant all the remedies available to the ordinary Courts in relation to contracts of employment. In X v Y Ltd and NZ Stock Exchange^[6], a case concerning interim reinstatement, it was held that the Court needed and was intended to have at its command all the tools previously possessed by the courts of ordinary jurisdiction. This authority was relied on in other cases for the power to make injunctions to enforce restraints of trade^[7] and where damages^[8] were claimed.
[28] In 1993 in Hobday v Timaru Girls’ High School Board of Trustees^[9], the Court of Appeal agreed with the reasoning in the NZ Stock Exchange case that the wording of s104(1)(h) was wide enough to encompass the High Court’s powers to make intelocutory injunctions relating to contracts. In Hobday, Casey J concluded:

In X v Y Ltd and NZ Stock Exchange [1992] 1 ERNZ 863, the full Court of the Employment Court concluded that s 104(1)(h) above conferred jurisdiction to grant an injunction requiring interim reinstatement of an employee who had been summarily dismissed, pending determination of his personal grievance arising therefrom. In response to a submission by counsel for the employer that the High Court's ability to grant interim injunctions to preserve a party's position did not fall within the scope of "any enactment or rule of law relating to contracts", the Court said at p 871:
"s 104(1)(h) cannot be read in isolation nor can certain words in this subsection be minutely and technically examined when consideration is given to such a fundamental issue as jurisdiction. It was the plain intention of Parliament by enacting ss 3 and 4 of the Act as well as s 104(1)(g) and (h) to transfer the whole of the jurisdiction of the ordinary Courts in relation to contracts of employment to the Employment Court. This Court's task is to make the new regime work. For it to be able to do so the Court needs and was intended to have at its command all the tools previously possessed by the Courts of ordinary jurisdiction. . . . If Mr Gray is right in his submission for the first defendant it would be necessary for a plaintiff such as X to go to the High Court for such interim relief as is sought in these proceedings and to thereafter go to the Employment Tribunal or the Employment Court for substantive relief. We do not think that that is what Parliament can have intended in its enactment of the Employment Contracts Act 1991 and its use of such phrases as `exclusive jurisdiction to hear and determine any proceedings founded on an employment contract' in s 3. We agree that the words of s 104(1)(h) give effect in plain language to that legislative intention and we do not accept Mr Gray's argument that mention of injunctions in some parts of the Act should be taken to exclude that remedy from other parts. Such an argument fails to address the purposes of the Act, including the promotion of an effective labour market and the vesting of all powers in one set of specialist institutions. Although under another legislative regime, we note that in NZ Baking Trades IUOW v General Foods Corporation (NZ) [1985] 2 NZLR 110, 118, Cooke P held: ‘Injunctions – interim or final – are a standard remedy for actionable interference with contractual rights’."
We entirely agree with the reasoning and conclusion reached there by the Court, which were relied on by Judge Palmer in the present case; and we are not persuaded otherwise by Mr Couch's painstaking analysis of the Act, including the adoption of arguments which were so effectively rejected in X v Y. Indeed, it would be an extraordinary situation if something so fundamental as the preservation of the position of an employee complaining of unjustified dismissal could not be preserved pending resolution of his or her personal grievance, when the Act provides for reinstatement as a remedy. Because it is virtually impossible to have immediate adjudication by Courts or tribunals, protection of the status quo is generally available in other areas of litigation or dispute resolution. It cannot have been the [ 1993(2) ERNZ 146, 163] intention of the Legislature to deny this remedy to employees involved with the new procedures under the Employment Contracts Act; to do so would be quite inconsistent with its emphasis on mediation and settlement.
We agree with the Employment Court that the wording of s104(1)(h) is wide enough to encompass the High Court's powers to make interim injunctions relating to contracts, and the jurisdiction to do so accords with the wording of s76(d) quoted above, which includes among the objects of the Employment Court that of overseeing the role of the Tribunal, and a recognition that the parties to employment contracts may require its assistance from time to time.

[29] We are not aware of any case in which the Court’s reliance on s104(1)(h) to grant injunctive remedies was challenged in the Court of Appeal although it was held that the subsection did not provide a basis for cause of action jurisdiction in tort where there was an allegation of unlawful interference with an employment contract^[10].
[30] The position on the repeal of the 1991 Act was that pursuant to s104(1)(h) the Court had been exercising the remedial power to issue injunctions to deal with breaches of employment contracts, a process which had been endorsed by the Court of Appeal.

Section 162

[31] This is at the heart of the case. It states:

162 Application of law relating to contracts

Subject to sections 163 and 164, the Authority may, in any matter related to an employment agreement, make any order that the High Court or a District Court may make under any enactment or rule of law relating to contracts, including--
(a) the Contracts (Privity) Act 1982:
(b) the Contractual Mistakes Act 1977:
(c) the Contractual Remedies Act 1979:
(d) the Fair Trading Act 1986:
(e) the Frustrated Contracts Act 1944:
(f) the Illegal Contracts Act 1970:
(g) the Minors' Contracts Act 1969.

[32] Section 162 was the successor to s104(1)(h), although for the Authority at first instance instead of the Employment Court.
[33] Mr Taylor for the plaintiff says that this section gives the Authority the power to award interlocutory, interim, and permanent injunctive relief for breaches of restraints of trade, confidentiality, and non-solicitation provisions in employment agreements. He submitted that by using the wide phraseology in s162 the legislature has used a shorthand method in the widest possible terms ("any order that the High Court ... may make ...") to express the intention that in relation to matters within the exclusive jurisdiction of the Authority and/or the Employment Court, they will have wide powers to make orders in the same manner and to the same extent as the High Court or a District Court.

[34] Until the recent full Court judgment in Axiom Rolle PRP Valuations Services Ltd v Kapadia^[11] the Employment Court and the Authority followed a decision in Jerram v Franklin Veterinary Services (1977) Ltd^[12] in which Judge Colgan held that what the Authority could do substantively, it must also necessarily be able to do on an interlocutory basis, including granting an interlocutory injunction in relation to breach of a restraint provision.
[35] However, recent decisions of the Employment Court have cast some doubt upon the Authority’s jurisdiction to order injunctive relief except in interim reinstatement cases: see, for example, Greenlea Premier Meats Ltd v New Zealand Meat & Related Trade Union Inc^[13].
[36] In Axiom Rolle the full Court concluded that s162 did not give the Authority power to issue Anton Piller orders:

[55] Section 162 does not give the Authority this power. The High Court’s power to issue Anton Piller orders is not to make an order that it may make "under any enactment or rule of law relating to contracts". Anton Piller orders are not an interlocutory tool derived from a rule of law relating to contracts. Although such orders can be made by the High Court in contract cases, they originated from and include other causes of action including, for example, copyright. As BDM Grange confirms, the scheme of the Employment Relations Act 2000 is not such as to give the Employment Relations Authority jurisdiction in causes of action other than (employment) contract and, in a limited sense in relation to the Court, in tort.

[37] We maintain this view noting the additional reason given in Axiom Rolle that an Anton Piller order is not an order that either the District Court or the High Court can give. The District Court is expressly excluded from giving such orders and for the reasons given in Axiom Rolle we were satisfied that only a High Court Judge has the inherent jurisdiction to do so and not the High Court generally. Associate Justices of the High Court have (expressly) no such powers.
[38] However, In Axiom Rolle we went further and made the following obiter dicta observation:

[70] This is the power that allows the Court to grant injunctions restraining persons from breaching employment agreements or employment laws. Although not expressly provided for as in cases of strikes and lockouts, reg 6 permits recourse in appropriate cases to r238 of the High Court Rules 1985, the High Court’s broad power to issue injunctions. The Employment Relations Authority has no power to prevent a breach of, or otherwise require compliance with, an employment agreement or employment law except by a statutory compliance order. The Authority is, however, required to investigate that employment relationship problem and determine a breach before it can issue a compliance order. Especially in circumstances of great urgency, that investigative process may not be swift enough to restrain what would otherwise be irreparable harm. It is a principle of long standing that there is no such remedy as an interim compliance order. Where urgent injunctive relief is appropriate in the employment field, it is the Court that is empowered, not the Authority.

[39] As the Court has now had the benefit of comprehensive submissions on this point and as the previous observations were obiter dicta, we are prepared to revisit the issue.
[40] For the defendants, Mrs Kennedy relied on Axiom Rolle for the authority that the Employment Relations Authority has no power to grant injunctions. However, Mr Taylor argued that the obiter observations were not correct. In essence his submission was that when the Employment Relations Act 2000 was enacted, Parliament carved out the powers to grant injunctions which had previously been exercised by the Employment Court by s104(1)(h) of the Employment Contracts Act 1991 and conferred them on the Authority. We accept that submission which is supported by the meaning of the words and phrases in s162 in the context of the Act and the legislative and case histories.
[41] Beginning with the words of the section we find that, like s104(1)(h) its predecessor, s162 is a remedial section and does not confer substantive jurisdiction^[14]. Section 162 differs from s104(1)(h) to the extent that it has included a list of contractual enactments which were not made explicit under the Employment Contracts Act as well as, of course, being applicable to the Employment Relations Authority in the first instance.
[42] We find that the inclusion of this list of statutes was Parliament’s response to a number of cases where the Employment Court had held that the former Employment Tribunal did not have the power to make orders under these enactments^[15]. We conclude that these contractual statutes were added to s162 to clarify that the transfer of the remedial powers from the Employment Court to the Employment Relations Authority was to ensure that the Authority had the powers to make appropriate orders under these enactments.
[43] The next question is whether the remedy of injunction comes from an enactment or rule of law relating to contracts. While historically injunctions have been used by the courts of equity, the distinction between equitable and legal remedies has long been blurred if not completely extinguished. In TV3 Network Ltd v Eveready New Zealand Ltd^[16] (a case in which the Court of Appeal found that the High Court had the power to issue an injunction to restrain publication of defamatory material) Cooke P said:

Especially since the mingling of law and equity, which is accepted in New Zealand, the remedy of injunction should be available whenever required by justice. To impose jurisdictional limits, as distinct from identifying factors which on practical grounds will tell against the discretionary grant of a remedy, would be a backward step. It would be inconsistent with the past approach of this Court: see for example Thomas Borthwick & Sons (Australasia) Ltd v South Otago Freezing Co Ltd [1978] 1 NZLR 538, where an injunction was upheld although having the effect of requiring the performance of a long term commercial contract entailing cooperation between the parties.

[44] There is therefore no reason why an injunction cannot be granted to preserve contractual rights, including rights in the law of (employment) contracts.
[45] The words "relating to contracts" in s162 are not to be read down. The dictionary definition of "related" is associated, linked, allied, joint, accompanying, collected, affiliated, etc^[17]. Similar words have been referred to in a number of cases. In New Zealand Public Service Association v Design Power New Zealand Ltd^[18] this Court held that "related to" meant "significantly referrable to" and in BDM Grange Ltd v Parker & Ors^[19] the High Court found that "relating to" was likely to bear a wide meaning.
[46] We find that as an injunction is a form of relief which may be granted in order to preserve rights under a contract, it is a rule of law relating to contracts.
[47] We conclude, therefore, that by expressly conferring on the Authority the power to make any order that the High Court or a District Court may make under any enactment or rule of law relating to contracts, the Authority is empowered to grant injunctions both under rules of law relating to contracts and under enactments.

Parliamentary materials

[48] While we find that the words of s162 make it clear that it was intended to give the Authority powers to grant injunctive relief, we have confirmed our view by reference to the Parliamentary materials relating to s162.
[49] After the Employment Relations Bill was introduced to the House by the Minister of Labour, it was referred to the Employment and Accident Insurance Legislation Select Committee for consideration. The committee received submissions including on those clauses dealing with the proposed jurisdiction and powers of both the Authority and the Court. As the Department of Labour’s Report to the Select Committee of June 2000 ("the report"), which summarised those submissions, confirms, the committee received detailed and considered representations from academic and practising lawyers and professional organisations addressing directly the respective jurisdictions and powers of the Authority and the Court.
[50] The report, dealing with what was then clause 172 (jurisdiction of the Authority), said:

The Authority will be adequately resourced, and the Members adequately trained to deal with all matters within its jurisdiction, including those matters previously within the Court’s jurisdiction.
The Authority has already been given the jurisdiction to make any orders that the High Court or District Court can make relating to contract law (clause 173) which gives the Authority the power to award a range of remedies, including other interim relief. As well, compliance orders can operate in an interim context.

[51] It must be doubtful whether that last remark was correct in law: all previous case law on materially analogous powers confirmed that there could be no such order as an interim compliance order.
[52] Dealing with clause 197 (jurisdiction of the Court), the report addressed the suggestion that the Employment Court should have the jurisdiction to hear penalty actions, interim relief applications and injunctions. It stated:

It is consistent with this policy approach that the Authority has jurisdiction to hear penalty actions and applications for interim relief, and injunctions in the first instance.

[53] The report appeared to consider that such powers were to be given to the Employment Relations Authority.
[54] The committee in its report did not comment on or recommend any changes in relation to these matters.
[55] Hansard discloses that on 9 August 2000, when the House, as a Committee of the Whole, debated the Employment Relations Bill returned from the Select Committee, the then Opposition spokespersons on industrial relations expressed concerns that the Bill as it was worded could allow unqualified Authority Members to make High Court and District Court orders including injunctions for restraint of trade. The response of the then Minister of Labour, the Honourable Margaret Wilson, was:

I would just like to clarify a matter that seems to have taken some hold in the legal profession, that the authority will grant injunctions. It will not, in fact, do that but it will issue compliance orders. That will reassure those who have had some concerns about that.

[56] That remark was made in the context of a discussion of the legislation’s enforcement mechanisms including penalties and compliance orders. It appears to reinforce the narrower rather than the more expansive interpretation that we applied to s162 in Axiom Rolle and against which Mr Taylor for the plaintiff has argued in this proceeding.
[57] In the same debate, however, the Opposition spokespersons reiterated their criticism that the jurisdictional powers of the Authority appeared to be wide enough to deal with restraints of trade including injunctions. In response, the Minister did not deal directly with the issue of injunctions and appears to have told the House that the Authority’s jurisdiction would be extensive. Finally, after Opposition questioning of the respective intended powers of the Employment Relations Authority and the Employment Court, the Minister advised the House that the Authority would be able to make orders under the particular pieces of contract legislation nominated and added:

One of the criticisms was that [the Authority] did not have authority to be able to make decisions that were dependent on that legislation. We have listened to the practitioners in this area, who requested an extension of the jurisdiction so that only one hearing would be required.

[58] The question is what the words of s162 mean in the light of legislative purpose. We find that notwithstanding some apparent conflicts between the Minister’s statements and the Select Committees, the intention was to give the Authority power to grant injunctions.

Other considerations

[59] We have considered whether the express inclusion in the Employment Relations Act 2000 of the remedies of interim reinstatement in s127 which requires the Authority to apply the law relating to interim injunction when considering interim reinstatement; and compliance (s137) and penalties (s133) provide an exhaustive code of the remedies and powers able to exercised by the Authority. We do not consider this to be so. The power to order interim reinstatement is another example of an express legislative response to previous case law which found that the Authority’s predecessor, the Employment Tribunal, did not have the power to make interim orders of reinstatement. The power to make compliance orders does not give the Authority the power to make interim orders before it has considered whether any person has not observed or complied with an employment agreement or other statutory obligations.

Interlocutory injunctive relief to support claim for penalties?

[60] The final issue that we need to decide before the case goes to trial is the entitlement of the plaintiff to interlocutory injunctive relief where the substantive remedy claimed is only a penalty for breach of an employment agreement. Although that position is very unlikely to arise as between an employer and a former employee (CCDS and Mr Wilson in this case), it may do so where, as here, the only justiciable claim against a subsequent employer (ECCC) in the Employment Relations Authority or the Employment Court is a claim for a penalty for being a party to the ex-employee’s breach.
[61] Mr Taylor for the plaintiff argued that it is open to CCDS to obtain an interlocutory injunction restraining ECCC from further breaches (as a party) of the employment agreement until the Authority or the Court can determine the substantive claim for a penalty.
[62] As we have already noted, the plaintiff can have no cause of action in contract against ECCC because of the absence of privity between the two companies. Mr Taylor relied on one judgment of the High Court that confirms that in very exceptional cases a person may be restrained by injunction from further unlawful activity the ultimate penalty for which will be a statutory fine. That is Land Transport Safety Authority v McNeil^[20]. While accepting the principles expounded in that judgment, based as it was on Australian authority, we do not consider the circumstances of this case to be so exceptional as to warrant interlocutory injunctive relief pending a hearing of a claim for penalty for breach as a party.
[63] There is, however, a more fundamental difficulty for the plaintiff on this question. When asked to identify the substantive cause of action that would be related to such interlocutory relief, counsel submitted that it would be a claim for breach of statutory duty and, in particular, of s134. That section does not, however, constitute a statutory obligation to not breach employment agreements. Rather, it provides for a statutory penalty for what the common law considers to be breach of contract (employment agreement). Finally, even if it could be said that there was a substantive cause of action open to the second defendant as claimed, its remedy could only be in tort for the civil wrong of breach of statutory duty. As this Court has determined in AC Neilsen (NZ) Ltd v Pappafloratos^[21], a civil proceeding for a breach of statutory duty (a tort) is not justiciable in the Employment Court and, we would conclude also, not in the Employment Relations Authority.
[64] This final conclusion is somewhat academic since it is clear that if CCDS seeks more than a penalty against ECCC, it will have to issue proceedings against that other company in the courts of ordinary jurisdiction.

Conclusion

[65] We initially thought that it was unlikely that Parliament would have intended to give a lay tribunal powerful coercive tools of injunction, at least not expressly. That assumption lay behind our comments in Axiom Rolle to this effect. Detailed analysis following persuasive legal submissions has persuaded us that Parliament did indeed intend the Authority to have such powers that elsewhere are given, usually expressly, to Judges. To use the colloquial analogy that has sometimes been applied to arguments about the Employment Relations Authority’s jurisdiction and powers, Parliament did intend to open a "one stop shop" in which any employment product or service could be purchased conveniently and at low cost. Whether it had also provided that this "one stop shop" shall be a monopoly, and in particular whether the Employment Court still has original powers to grant the same injunctive relief, will be addressed in our next judgment as it does not require an urgent answer.
[66] Having regard to the meaning of the words in s162, the case law of its predecessor s104(1)(h) of the Employment Contracts Act, its legislative history, and the scheme of the Employment Relations Act 2000, we have concluded that the words in s162 mean that the Employment Relations Authority has the power to grant interlocutory, interim and permanent injunctions in cases before it within its jurisdiction as conferred by s161.
[67] Our final judgment will issue in due course but not before the conclusion of the hearing in the substantive case. Any other matters including costs can be dealt with then.

GL Colgan
Chief Judge
for the full Court

Judgment signed at 4.30 pm on Thursday 5 April 2007

^[1] [1996] 1 ERNZ 48
^[2] [2005] 1 ERNZ 343
^[3] NZ Harbours IUOW & Ors v Auckland Harbour Board [1988] NZILR 154
^[4] NZ Air Line Pilots Assn IUOW v Labour Court and Air NZ Ltd [1988] NZCA 105; [1988] NZILR 1677
^[5] NZ Air Line Pilots Assn IUOW v Air New Zealand Ltd [1987] NZILR 685
^[6] [1992] 1 ERNZ 863
^[7] Hurford v International Insurance Brokers [1992] 2 ERNZ 449
^[8] Turner v Ogilvy & Mather [1992] 3 ERNZ 94
^[9] [1993] 2 ERNZ 146
^[10] Conference of the Methodist Church of New Zealand v Gray [1996] 1 ERNZ 48; Medic Corp v Barrett [1992] 2 ERNZ 1048
^[11] [2006] NZEmpC 73; (2006) 3 NZELR 390
^[12] [2001] NZEmpC 79; [2001] ERNZ 157
^[13] unreported, Chief Judge Colgan, 8 May 2006, AC 27/06
^[14] Medic Corp v Barrett [1992] 2 ERNZ 1048; Diamond Advertising v Brunton [1993] 1 NZLR 168; Sears v A-G [1995] 2 ERNZ 121; and Dillon v Chep Handling Systems Ltd [1995] 2 ERNZ 282
^[15] Bongard v Universal Business Directories Ltd [1995] 1 ERNZ 393; Dillon v Chep Handling Systems Ltd [1995] 2 ERNZ 282; Watkins v Bacica [1996] 1 ERNZ 594; Nitsceh v Classic Air Ltd unreported, Colgan J, 5 February 1996, WEC 4/96; Anstiss v Works Civil Construction Ltd [1996] 2 ERNZ 649; Evans v Amatel Holdings Ltd unreported, Travis J, 29 July 1997, AEC 82/97; Grove v Archibald unreported, Travis J, 29 July 1997, WEC 39/97
^[16] [1993] 3 NZLR 435 at 438
^[17] Collins English Dictionary and Thesaurus, 4^th edition, 2006
^[18] [1992] 1 ERNZ 669
^[19] [2005] 1 ERNZ 343
^[20] [1998] 1 NZLR 622
^[21] [2003] 1 ERNZ 363

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[2]	David Wilson was formerly employed by Credit Consultants Debt Services NZ Limited ("CCDS"). Their employment agreement entered into in December 2001 included a covenant purporting to restrain Mr Wilson from competing with CCDS. The agreement also prohibited Mr Wilson from misusing confidential information gleaned in his role with CCDS. The agreement also purported to prohibit Mr Wilson from soliciting staff, customers or potential customers of CCDS during and following his employment. Mr Wilson was CCDS’s general manager for central and southern regions in New Zealand. This role was disestablished by CCDS and he was dismissed by reason of redundancy. He subsequently took up employment with the second defendant, EC Credit Control Limited ("ECCC"), a company that is in commercial competition with CCDS.
[3]	In proceedings brought originally in the Employment Relations Authority CCDS claimed breaches by Mr Wilson of the contractual terms restraining him from competing with it, prohibiting misuse of confidential information and prohibiting solicitation of staff and customers. CCDS claimed that ECCC incited, instigated, aided or abetted those alleged breaches by Mr Wilson. More particularly, CCDS alleges against ECCC that it has employed and continues to employ Mr Wilson, it has advertised this fact, it has allowed Mr Wilson to make use of the plaintiff’s confidential information for ECCC’s own benefit, and has allowed him to solicit, endeavour to entice away or discourage clients from remaining as clients of CDDS for ECCC’s own benefit.
[4]	As a result of these impugned actions by both defendants, the plaintiff claims it has suffered loss and will continue to do so while the breaches continue.
[5]	The relief claimed by the plaintiff against both defendants included interlocutory, interim and permanent injunctions. The interlocutory injunctive relief was intended to restrain further breaches until the merits of the claim could be heard. The interim injunctive relief was directed against Mr Wilson for the period until 22 June 2007 when the restraints in the employment agreement that were time limited, expired. Permanent injunctive relief was sought in respect of misuse of confidential information. Other relief sought included a compliance order against Mr Wilson requiring him to comply with the provisions of his employment agreement, damages for loss of business attributable to the defendants’ actions, and penalties against both defendants under s134 of the Employment Relations Act 2000, in the case of Mr Wilson for breaches of his employment agreement and, in the case of ECCC, for inciting, aiding or abetting his breaches.
[6]	The Employment Relations Authority agreed to remove the proceeding to the Court for hearing at first instance. The Authority concluded that an important question of law was likely to arise in the matter other than incidentally, the test for removal under s178(2)(a). This was said to be: "... in regard to injunctive relief and the Authority’s jurisdiction on restraint of trade provisions and compliance".
[7]	The Authority added:

[17]	This is the nub of the case at this stage. The question is whether the Employment Relations Authority and this Court (whether derivatively upon removal from the Authority or at first instance) can grant injunctive orders against either or both defendants.
[18]	There are three separately identifiable forms of injunction that are claimed. Different decisions may apply to at least two of them. The first are interlocutory injunctions. Such injunctions are intended to deal with the immediate position between parties until a court can determine the merits of their substantive litigation. Judge Travis made interlocutory injunctive orders.
[19]	The second form of injunctive order claimed is an interim injunction. This is an injunction that is to last for a specified period but no longer. Interim injunctions in this case are sought in respect of the specified periods of restraint upon economic activity by the first defendant in his employment agreement with the plaintiff. Such injunctions, although final, would also be interim because they would operate only from the time of their making until 22 June 2007.
[20]	The third type of injunction sought is a permanent injunction, that is a substantive or final injunction of indefinite duration. Such an injunction is sought in this case, and often granted in circumstances where the Court is satisfied that it is appropriate to restrain the misuse of confidential information where the value of that information may remain indefinitely.
[21]	We must decide whether the Employment Relations Authority or this Court is able to grant injunctive relief in principle and, if so, whether it should do so to prevent conduct for which Parliament has provided expressly a statutory penalty and for a compliance order. If, as we have concluded, a claim for damages against the second defendant can only be brought in the courts of ordinary jurisdiction, does the Employment Relations Authority or the Employment Court nevertheless have the power to restrain by injunction, anticipated or repeated breaches of the employment agreement by the first defendant as a principal, and the second defendant as a party?
[22]	There are a number of issues which require further investigation and research. The plaintiff opens its substantive case at a priority fixture on 16 April 2007 and because of the time constraints we do not have time to deal properly with all of these questions in this judgment. We have however, been able to reach a firm decision on the Employment Relations Authority’s power (and therefore also this Court’s power on removal under s190) to grant injunctions under s162 of the Employment Relations Act 2000. As counsel have requested that we give them guidance on this issue before the substantive trial begins, this judgment deals with this disputed question. We reserve the question of the Court’s original jurisdiction, that is other than its derivative jurisdiction under s190 on a matter removed to it under s178, for a later judgment between these parties that we will deliver.

[23]	Before the Labour Relations Act 1987, compliance with employment contracts and employment law was dealt with largely in the High Court and District Courts by common law claims. The remedies included injunctions and damages. The enactment of the Labour Relations Act 1987 saw the introduction of the remedy of compliance orders into specialist employment law for the first time. Section 207 empowered the Labour Court to enforce compliance with legislative requirements, union rules or any award or (collective) agreement. The Labour Court concluded that compliance orders could not be made on ex parte application^[3]. A compliance order would not be granted where there was a genuine dispute about the interpretation, operation or application of an award or agreement^[4]. There could be no such thing as an interlocutory compliance order to prevent anticipated unlawful conduct.^[5]
[24]	The 1987 Act also gave power to the Labour Court for the first time to issue injunctions in industrial matters. This power had formerly resided in the High Court.
[25]	Under the Employment Contracts Act 1991, the Employment Court assumed the power to hear and grant applications for interlocutory and final injunctive relief other than in cases of strikes or lockouts. This power was derived principally from s104(1)(h) of the Employment Contracts Act which provided:

[29]	We are not aware of any case in which the Court’s reliance on s104(1)(h) to grant injunctive remedies was challenged in the Court of Appeal although it was held that the subsection did not provide a basis for cause of action jurisdiction in tort where there was an allegation of unlawful interference with an employment contract^[10].
[30]	The position on the repeal of the 1991 Act was that pursuant to s104(1)(h) the Court had been exercising the remedial power to issue injunctions to deal with breaches of employment contracts, a process which had been endorsed by the Court of Appeal.

[34]	Until the recent full Court judgment in Axiom Rolle PRP Valuations Services Ltd v Kapadia^[11] the Employment Court and the Authority followed a decision in Jerram v Franklin Veterinary Services (1977) Ltd^[12] in which Judge Colgan held that what the Authority could do substantively, it must also necessarily be able to do on an interlocutory basis, including granting an interlocutory injunction in relation to breach of a restraint provision.
[35]	However, recent decisions of the Employment Court have cast some doubt upon the Authority’s jurisdiction to order injunctive relief except in interim reinstatement cases: see, for example, Greenlea Premier Meats Ltd v New Zealand Meat & Related Trade Union Inc^[13].
[36]	In Axiom Rolle the full Court concluded that s162 did not give the Authority power to issue Anton Piller orders:

[39]	As the Court has now had the benefit of comprehensive submissions on this point and as the previous observations were obiter dicta, we are prepared to revisit the issue.
[40]	For the defendants, Mrs Kennedy relied on Axiom Rolle for the authority that the Employment Relations Authority has no power to grant injunctions. However, Mr Taylor argued that the obiter observations were not correct. In essence his submission was that when the Employment Relations Act 2000 was enacted, Parliament carved out the powers to grant injunctions which had previously been exercised by the Employment Court by s104(1)(h) of the Employment Contracts Act 1991 and conferred them on the Authority. We accept that submission which is supported by the meaning of the words and phrases in s162 in the context of the Act and the legislative and case histories.
[41]	Beginning with the words of the section we find that, like s104(1)(h) its predecessor, s162 is a remedial section and does not confer substantive jurisdiction^[14]. Section 162 differs from s104(1)(h) to the extent that it has included a list of contractual enactments which were not made explicit under the Employment Contracts Act as well as, of course, being applicable to the Employment Relations Authority in the first instance.
[42]	We find that the inclusion of this list of statutes was Parliament’s response to a number of cases where the Employment Court had held that the former Employment Tribunal did not have the power to make orders under these enactments^[15]. We conclude that these contractual statutes were added to s162 to clarify that the transfer of the remedial powers from the Employment Court to the Employment Relations Authority was to ensure that the Authority had the powers to make appropriate orders under these enactments.
[43]	The next question is whether the remedy of injunction comes from an enactment or rule of law relating to contracts. While historically injunctions have been used by the courts of equity, the distinction between equitable and legal remedies has long been blurred if not completely extinguished. In TV3 Network Ltd v Eveready New Zealand Ltd^[16] (a case in which the Court of Appeal found that the High Court had the power to issue an injunction to restrain publication of defamatory material) Cooke P said:

[44]	There is therefore no reason why an injunction cannot be granted to preserve contractual rights, including rights in the law of (employment) contracts.
[45]	The words "relating to contracts" in s162 are not to be read down. The dictionary definition of "related" is associated, linked, allied, joint, accompanying, collected, affiliated, etc^[17]. Similar words have been referred to in a number of cases. In New Zealand Public Service Association v Design Power New Zealand Ltd^[18] this Court held that "related to" meant "significantly referrable to" and in BDM Grange Ltd v Parker & Ors^[19] the High Court found that "relating to" was likely to bear a wide meaning.
[46]	We find that as an injunction is a form of relief which may be granted in order to preserve rights under a contract, it is a rule of law relating to contracts.
[47]	We conclude, therefore, that by expressly conferring on the Authority the power to make any order that the High Court or a District Court may make under any enactment or rule of law relating to contracts, the Authority is empowered to grant injunctions both under rules of law relating to contracts and under enactments.

[48]	While we find that the words of s162 make it clear that it was intended to give the Authority powers to grant injunctive relief, we have confirmed our view by reference to the Parliamentary materials relating to s162.
[49]	After the Employment Relations Bill was introduced to the House by the Minister of Labour, it was referred to the Employment and Accident Insurance Legislation Select Committee for consideration. The committee received submissions including on those clauses dealing with the proposed jurisdiction and powers of both the Authority and the Court. As the Department of Labour’s Report to the Select Committee of June 2000 ("the report"), which summarised those submissions, confirms, the committee received detailed and considered representations from academic and practising lawyers and professional organisations addressing directly the respective jurisdictions and powers of the Authority and the Court.
[50]	The report, dealing with what was then clause 172 (jurisdiction of the Authority), said:

[51]	It must be doubtful whether that last remark was correct in law: all previous case law on materially analogous powers confirmed that there could be no such order as an interim compliance order.
[52]	Dealing with clause 197 (jurisdiction of the Court), the report addressed the suggestion that the Employment Court should have the jurisdiction to hear penalty actions, interim relief applications and injunctions. It stated:

[53]	The report appeared to consider that such powers were to be given to the Employment Relations Authority.
[54]	The committee in its report did not comment on or recommend any changes in relation to these matters.
[55]	Hansard discloses that on 9 August 2000, when the House, as a Committee of the Whole, debated the Employment Relations Bill returned from the Select Committee, the then Opposition spokespersons on industrial relations expressed concerns that the Bill as it was worded could allow unqualified Authority Members to make High Court and District Court orders including injunctions for restraint of trade. The response of the then Minister of Labour, the Honourable Margaret Wilson, was:

[60]	The final issue that we need to decide before the case goes to trial is the entitlement of the plaintiff to interlocutory injunctive relief where the substantive remedy claimed is only a penalty for breach of an employment agreement. Although that position is very unlikely to arise as between an employer and a former employee (CCDS and Mr Wilson in this case), it may do so where, as here, the only justiciable claim against a subsequent employer (ECCC) in the Employment Relations Authority or the Employment Court is a claim for a penalty for being a party to the ex-employee’s breach.
[61]	Mr Taylor for the plaintiff argued that it is open to CCDS to obtain an interlocutory injunction restraining ECCC from further breaches (as a party) of the employment agreement until the Authority or the Court can determine the substantive claim for a penalty.
[62]	As we have already noted, the plaintiff can have no cause of action in contract against ECCC because of the absence of privity between the two companies. Mr Taylor relied on one judgment of the High Court that confirms that in very exceptional cases a person may be restrained by injunction from further unlawful activity the ultimate penalty for which will be a statutory fine. That is Land Transport Safety Authority v McNeil^[20]. While accepting the principles expounded in that judgment, based as it was on Australian authority, we do not consider the circumstances of this case to be so exceptional as to warrant interlocutory injunctive relief pending a hearing of a claim for penalty for breach as a party.
[63]	There is, however, a more fundamental difficulty for the plaintiff on this question. When asked to identify the substantive cause of action that would be related to such interlocutory relief, counsel submitted that it would be a claim for breach of statutory duty and, in particular, of s134. That section does not, however, constitute a statutory obligation to not breach employment agreements. Rather, it provides for a statutory penalty for what the common law considers to be breach of contract (employment agreement). Finally, even if it could be said that there was a substantive cause of action open to the second defendant as claimed, its remedy could only be in tort for the civil wrong of breach of statutory duty. As this Court has determined in AC Neilsen (NZ) Ltd v Pappafloratos^[21], a civil proceeding for a breach of statutory duty (a tort) is not justiciable in the Employment Court and, we would conclude also, not in the Employment Relations Authority.
[64]	This final conclusion is somewhat academic since it is clear that if CCDS seeks more than a penalty against ECCC, it will have to issue proceedings against that other company in the courts of ordinary jurisdiction.

[65]	We initially thought that it was unlikely that Parliament would have intended to give a lay tribunal powerful coercive tools of injunction, at least not expressly. That assumption lay behind our comments in Axiom Rolle to this effect. Detailed analysis following persuasive legal submissions has persuaded us that Parliament did indeed intend the Authority to have such powers that elsewhere are given, usually expressly, to Judges. To use the colloquial analogy that has sometimes been applied to arguments about the Employment Relations Authority’s jurisdiction and powers, Parliament did intend to open a "one stop shop" in which any employment product or service could be purchased conveniently and at low cost. Whether it had also provided that this "one stop shop" shall be a monopoly, and in particular whether the Employment Court still has original powers to grant the same injunctive relief, will be addressed in our next judgment as it does not require an urgent answer.
[66]	Having regard to the meaning of the words in s162, the case law of its predecessor s104(1)(h) of the Employment Contracts Act, its legislative history, and the scheme of the Employment Relations Act 2000, we have concluded that the words in s162 mean that the Employment Relations Authority has the power to grant interlocutory, interim and permanent injunctions in cases before it within its jurisdiction as conferred by s161.
[67]	Our final judgment will issue in due course but not before the conclusion of the hearing in the substantive case. Any other matters including costs can be dealt with then.