BDM Grange Ltd v Parker & Ors

Baragwanath and Courtney JJ, High Court Auckland, CIV 2005-404-993, 19 July 2005

This case concerned the boundary between the respective jurisdictions of the High Court and the Employment Court/Employment Relations Authority to deal with claims for breach of confidence and for a breach of duty imposed on directors under s31 of the Companies Act.

The plaintiff was a distributor of fragrances and cosmetics on behalf of overseas principals. The first defendant (Parker) was a former employee (1997-2005) and managing director (February 1998 - December 2004). Following his resignation, the first defendant commenced as general manager of the second defendant in which he was a 15% shareholder. Until Parker’s departure, the plaintiff held exclusive rights to purchase and distribute the third defendant’s products in New Zealand. These distribution rights had now been taken over by the second defendant. In addition the second defendant had made arrangements to assume the exclusive right to purchase and distribute the products of a UK company which the plaintiff had formerly held until the first defendant’s departure.

Proceedings were issued in the High Court and an Anton Piller Order obtained and executed against the first defendant at his home. Also the plaintiff filed a “statement of problem” with the Employment Relations Authority (ERA). The first defendant applied to strike out the High Court proceedings as being vexatious and abuse of process since these were similar to factual allegations made in the ERA proceeding.

The key issue was whether the ERA (and on appeal the Employment Court) had exclusive jurisdiction over claims for breach of confidence, breach of duties under the Companies Act and for claims in tort having their origin in an employment contract. A full Court comprising Baragwanath and Courtney JJ affirmed that the High Court did indeed have jurisdiction over such claims. There was nothing in the Employment Relations Act to indicate that the existence of an employment relationship between the plaintiff and the first defendant was intended to draw into that statutory scheme duties under the Companies Act or breach of confidence claims. The breach of confidence claim in this case was brought against the first defendant in his capacity as a director of the plaintiff and was therefore not related to a breach of an employment agreement.

The Court drew a clear distinction as to jurisdiction. If a claim alleging breach of confidence is brought essentially to achieve performance or to seek relief for breach of an employment contract, it is properly to be construed as arising from the employment relationship and thus within the exclusive jurisdiction of the ERA and the Employment Court. But a claim for relief which in essence arises not out of the employment relationship but is to be characterised as a claim in equity is properly within the jurisdiction of the High Court [88]. The judges also indicated the ERA and Employment Court would not have jurisdiction where, after termination of the employment contract, there was misuse of confidential information obtained during the employment relationship without breach of duty at the time.

The Court also affirmed that there was nothing in the Employment Relations Act which conferred jurisdiction to grant Anton Piller Orders on the ERA.