| Restrictions | Includes non-publication order |
|---|---|
| Jurisdiction | Employment Relations Authority - Auckland |
| Reference No | [2014] NZERA Auckland 94 |
| Hearing date | 25 -30 Sep 2013;1 - 2 Oct 2013 |
| Determination date | 18 March 2014 |
| Member | R Arthur |
| Representation | T Stevens, R Cahn ; P Wicks |
| Parties | Nova Energy Ltd v Mitchell and Ors |
| Other Parties | National Energy Ltd, Mitchell |
| Summary | RESTRAINT OF TRADE - Applicant claimed first respondent (respondent") breached restraint of trade provision in exit agreement - Respondent used applicant's confidential information for own benefit and benefit of second respondent - Whether restraint valid and enforceable - Whether payments made to respondent consideration for restraint or entitlement under redundancy provision in parties' employment agreement ("EA") - Whether restraint more restrictive than necessary to protect confidential information - Whether unequal bargaining position - BREACH OF CONTRACT - Applicant sought damages for respondent's breach of confidentiality provisions in parties' EA - Loss of revenue due to respondent's use of applicant's confidential information not in dispute - Respondent claimed liability reduced by actions of applicant's manager ("B") - Whether B aware of respondent's activities and accepted activities on behalf of applicant - Whether actions of B broke chain of causation between respondent's breach of confidentiality and loss suffered by applicant - Whether applicant took sufficient and reasonable measures to mitigate loss - Whether applicant should have taken immediate action - Whether applicant should have used "right to match" provision in supply agreement to retain customers - Whether applicant's counter-campaign reasonable mitigation and respondent consequently liable for additional loss that resulted from campaign - JURISDICTION - Whether Authority had jurisdiction to hear a claim concerning alleged breach of fiduciary duty - JURISDICTION - RECOVERY OF MONIES - Whether Authority had jurisdiction to hear unjust enrichment claim - Applicant sought recovery of monies paid to applicant under exit agreement - PENALTY - Applicant sought penalty for respondent's breach of EA - Applicant sought penalty for respondent's breach of good faith - Duty not to mislead or deceive applicant - Applicant sought penalty against second and third respondents for aiding and abetting respondent's breach of employment agreement - Whether second and third respondents had same knowledge as respondent - Auckland manager / commercial and residential manager" |
| Abstract | AUTHORITY FOUND -;RESTRAINT OF TRADE: Authority ordered continued non publication of confidential information and non publication of B's name. Position held by respondent disestablished by restructuring. Applicant paid respondent redundancy entitlements on termination of employment and nothing more. No sufficient or adequate consideration for restraint. If Authority incorrect, restraint not valid or enforceable because more restrictive than necessary to protect applicant's legitimate proprietary interests and made for purpose contrary to public policy. No misuse of superior bargaining power by applicant but restraint invalid an unenforceable for above reasons. Restraint not valid or enforceable.;BREACH OF CONTRACT: B did not accept respondent's breach of confidentiality on behalf of applicant. B or any other manager did not have necessary knowledge of true nature of respondent's surreptitious breach of duty. Use of confidential information by respondent remained effective cause of loss throughout. Time taken by applicant to take action not unreasonable and did not result in failure to mitigate loss. Strict requirement to enforce right to match" would have been unreasonable in circumstances of applicant’s business and usual practice. Applicant did take some steps to assert "right to match". Steps appropriate to mitigate loss. Counter-campaign proportionate and additional costs incurred by applicant result of reasonable mitigation steps. Respondent liable for applicant's loss of revenue and loss incurred by applicant in mitigating effect of respondent's breaches. Respondent to pay applicant damages, quantum to be determined.;JURISDICTION: In certain circumstances Authority would have jurisdiction to investigate and determine claim relating to whether employee breached fiduciary obligations. Care required not to equate and confuse fiduciary obligations with duties of fidelity and good faith. Relationship between parties did not generate fiduciary obligations. No breach of fiduciary duty as employee. Whether duty owed in different capacity not within jurisdiction of Authority.;JURISDICTION - RECOVERY OF MONIES: Authority had jurisdiction to hear unjust enrichment claim but monies paid to respondent under exit agreement not unjust enrichment. Payments made to respondent what respondent entitled to receive due to redundancy. No recovery of monies.;PENALTY: Respondent acknowledged breach of confidentiality and breach of implied duty of fidelity. Respondent's actions deliberate and calculated. Breach of express term requiring respondent to return company property (including files and documents) and to not use confidential information for own advantage. Respondent's actions also breach of duty of good faith. Global approach appropriate when breaches from same actions. Any issue of double penalty to be dealt with by later determination on quantum. No distinction between knowledge of respondent and second respondent. Second respondent aided and abetted respondent's breaches. Penalties appropriate against respondent and second respondent, quantum to be determined. Third respondent did not have required knowledge or intention to aide and abet breach. No penalty against third respondent." |
| Result | Applications partially granted; Damages (quantum to be determined); Penalty (first respondent)(quantum to be determined) (second respondent)(quantum to be determined); No order for costs |
| Main Category | Breach of Contract |
| Statutes | ERA s4;ERA s4(1A)(a);ERA s63A(2);ERA s63A(4);ERA s134(1);ERA s134(2);ERA s161(1)(r);ERA s174;ERA Second Schedule cl10 |
| Cases Cited | Aarts v Barndos New Zealand [2013] NZEmpC 85; (2013) 10 NZELC 79-028;Allright v Canon New Zealand Ltd unreported, Couch J, 3 Dec 2008, AC 47/08;Aztec Packaging Ltd v Malevris [2012] NZHC 243; (2012) 10 NZELC 79-003;Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452;Bates v Gates [1986] 1 NZELC 95,269;Baguley v Coutts Cars Ltd [2000] 2 ERNZ 409;Borealis AB v George Trading SA [2010] EWHC 2789;Credit Consultants Debt Services NZ Limited v Wilson (No 3) [2007] ERNZ 252;Farmers' Holdings Ltd v Faber [2006] ERNZ 208;Fuel Espresso Limited v Hsieh [2007] NZCA 58;Hibernian Catholic Benefit Society v Hagai [2014] NZHC 24;Lonmar Global Risks Limited v West & Ors [2010] EWHC 2878;M A Watson Electrical Ltd v Kelling [1993] 1 ERNZ 9;Newick v Working In Ltd [2012] NZEmpC 156; (2012) 10 NZELC 79-015;New Zealand Fire Service Commission v Warner [2010] NZEmpC 90, (2010) 9 NZELC 93,633, [2010] ERNZ 290;University of Nottingham v Fishel [2000] ICR 1462;Nova Energy Ltd v Mitchell and Ors [2013] NZERA Auckland 180;Nova Energy Ltd v Mitchell and Ors [2013] NZERA Auckland 226;Nova Energy Ltd v Mitchell and Ors [2013] NZERA Auckland 420;Pain Management Systems (NZ) Ltd v McCallum unreported, Pankhurst J, 14 August 2001, CP 72/01;Property IQ NZ Ltd v Vicelich [2012] NZHC 2016;Regina v Rozeik [1996] 1 WLR 159;RPD Produce Holdings Ltd v Miller [2013] NZHC 705, (2013) 10 NZELR 521;The Auckland Gas Company Ltd and Anor v Mitchell and Ors [2012] NZERA Auckland 429 |
| Number of Pages | 42 |
| PDF File Link: | 2014_NZERA_Auckland_94.pdf [pdf 432 KB] |