| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | CA 81/07 |
| Hearing date | 2 Apr 2007 - 3 Apr 2007 (2 days) |
| Determination date | 19 July 2007 |
| Member | P Cheyne |
| Representation | D Lester, K Castiglione ; D Sim |
| Location | Wanaka |
| Parties | Infinity Investment Group Ltd v Walker & Ors |
| Other Parties | McKenzie & Grant as Trustees of Pinot Trust & Walker (Second respondent) |
| Summary | BREACH OF CONTRACT – RECOVERY OF MONIES – First and second respondents trustees of first respondent’s family trust – Trustee property was land transferred by applicant – Applicant granted loan to trustees, secured by mortgage over land – Second respondent (“W”) covenantor under loan agreement – W argued transactions with family trust and also part of employment agreement (“EA”) with applicant – Provision in W’s EA to receive free house section subject to pro rata claw back provision – Different provision in loan agreement providing for repayment of principal sum on cessation of borrower’s or covenantor’s employment – Applicant sought to recover principal and interest under loan agreement when W made redundant – Respondents sought stay or order dismissing proceedings on basis matter an employment relationship problem within Authority’s exclusive jurisdiction – W argued no money owed by first and second respondents under EA – Also argued entitled to discharge of mortgage as no debt to secure – Authority assessed conflicting evidence about whether any agreed variation to terms of employment in EA – Free house section made part of employment arrangements with senior staff – Authority preferred respondent’s CEO (“R”) evidence that unaware of fringe benefit tax issues created by offer of free house section – When applicant’s CFO (“H”) asked to consider implementing free house section had to consider fringe benefit tax liability that would arise on transfer of sections – Authority found that respondent delegated responsibility to resolve tax issue to W and H – Tax consequences inevitable if free house section provided as originally promised – H proposed applicant provide affected staff with interest free loan up to 10 years to cover section purchase price – New proposal meant applicant only liable for fringe benefit tax on interest free loan and employees provided with benefit of increased capital value in sections over 10 year period – H argued new proposal to replace rather than supplement existing contractual entitlements – Affected staff negotiated different arrangements – W and applicant agreed that transfer, loan and mortgage would be between applicant and trustees of W’s family trust – No reference made to EA – H’s evidence accepted that did not prepare variations to W’s EA at time of land transactions because assumed conveyancing documents would have that effect – Applicant and W entered record of settlement in respect of employment relationship except for issue regarding purchase by loan to and mortgage from W and trustees – Not disputed applicant had not performed promise of free house section in EA – Applicant claimed loan agreement, transfer and mortgage reflected oral agreement to substitute those arrangements for original promise and therefore applicant able to enforce obligations under those arrangements since employment now ended – W argued loan agreement, transfer and mortgage stood alongside but subject to express terms in EA – W argued claw back provision in EA not operational because dismissed for redundancy – Also argued no agreement to vary EA because no meeting of minds on whether gift of free house section remained – Authority found applicant entitled to repayment of principal and interest in accordance with loan agreement since W’s employment terminated – Issue for determination whether free house section in EA remained in force given loan, mortgage and land transaction – Authority found W and applicant agreed to substitute free house section in EA with transfer, loan and mortgage arrangements as documented – Fundamental inconsistency between arrangements meant both could not be operative – W did not reject proposed variation when open to do so – W knew was substituting one set of rights and obligations for another when agreed to variation and executed documents – Authority did not accept W’s evidence that applicant would remit or amortise part of loan – Authority concluded W’s employment with applicant gave access to investment opportunities that could have been more valuable than amount of loan – W prepared to forego part of right to free house section with view to maintaining relationship with applicant – Applicant’s claim that variation lacked consideration rejected – Authority found consideration of lesser value than original promise but consideration provided nonetheless – Authority determined no terms of employment relationship between W and applicant that prevented applicant from enforcing rights under loan agreement – Orders accordingly – Costs reserved |
| Result | Orders accordingly ; Costs reserved |
| Main Category | Dispute |
| Cases Cited | United Food & Chemical Workers Union of NZ v Talley [1992] 3 ERNZ 423 |
| Number of Pages | 10 |
| PDF File Link: | ca 81_07.pdf [pdf 37 KB] |