| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | CA 166/08 |
| Hearing date | 14 Aug 2008 |
| Determination date | 03 November 2008 |
| Member | H Doyle |
| Representation | L Penno ; P O'Boyle |
| Location | Christchurch |
| Parties | Hanna and Co Ltd v O'Boyle |
| Summary | BREACH OF CONTRACT - Applicant claimed respondent breached employment agreement (“EA”) when did not pay goodwill for clients he took over following resignation - Respondent claimed no obligation to pay goodwill as did not approach applicant’s clients; they approached him - Authority found dispute as to EA’s interpretation related to meaning of words “takes over” in relation to applicant’s clients - Found “takes over” meant succeed to management or ownership of or take control - Authority contrasted meaning of “takes over” with take - Found because EA used words “takes over” with respect to applicant’s clients was take over of control of clients from applicant which triggered application of EA and not how control obtained - Therefore EA did not solely apply to situations where respondent encouraged clients to come to him - Respondent claimed clause in EA not reasonable as no interest for applicant to protect, no consideration, and no time limit - Authority found applicant wished to preserve client base from influence someone in respondent’s position of associate would have over it - Authority found was valid factor supporting reasonableness of EA as accepted respondent would have reasonably significant influence over clients - Authority found inquiry into adequacy of consideration not necessary as good will clause not variation to existing employment agreement - Authority found good will clause unreasonable as no time limit - Found however, appropriate case to exercise discretion and modify clause by limiting time to three months after termination of EA - Found three month period combined with requirement for 13 week notice period gave sufficient time for applicant to take steps to minimise client loss - Respondent claimed applicant’s directors did not disagree with his interpretation of EA when put it to them - Applicant claimed did not respond as did not consider respondent’s work intentions definite and so chose not to enter into debate about interpretation of clause and sour employment relationship - Authority found would have been beneficial, and in keeping with good faith obligations, if applicant had responded to respondent - However, not satisfied respondent acted to his detriment in reliance on silence - Found respondent would still have taken over most clients who approached him - Found applicant’s silence could not be taken as amounting to unequivocal agreement to respondent’s interpretation or as misrepresentation so as to change or vary express provision in EA - Authority found goodwill percentage payable was 63 percent as percentage of previous years annual fees - Applicant to send respondent invoice for that amount - Applicant to provide information on how figure calculated - Leave reserved for applicant to return to Authority for determination as to amount payable - Interest awarded from date respondent received invoice until payment made - ARREARS OF WAGES - Counterclaim - Respondent claimed applicant failed to comply with obligation under EA and so respondent underpaid bonus for one financial year - Authority found respondent’s claim concerned way profit calculated for use in determining amount of bonus payment - Found that not matter for respondent under EA - Respondent claimed not paid pro rata bonus payment for months worked before resigned - Authority found no express or implied obligation for applicant to pay pro rata bonus payment if employment relationship terminated before bonus payment date - Counterclaims dismissed - Chartered accountant |
| Result | Application granted (Breach of contract) ; Goodwill payment (Quantum to be determined) ; Interest (8%) ; Application dismissed (Counterclaim) ; Costs reserved |
| Main Category | Breach of Contract |
| Statutes | ERA s135(5);ERA Second Schedule cl11;Holidays Act 2003 s14;Illegal Contracts Act 1970 s8 |
| Number of Pages | 10 |
| PDF File Link: | ca 166_08.pdf [pdf 42 KB] |