S32 of the Receiverships Act – the jurisdiction of the Employment Relations Authority to determine receivers’ personal liability

Regretfully, New Zealand is seeing a number of companies going into receivership, with consequential losses of jobs.

Receivers have to decide within 14 days of their appointment whether they are going to continue to dismiss staff or re-employ them under new employment agreements which exclude their personal liability. If they fail to do either, the receivers will be personally liable for “payment of wages or salary that, during the receivership, accrue under a contract of employment relating to the property in receivership and entered into before the appointment of the receiver”. (Section 32 of the Receiverships Act 1993).

In order to dismiss staff so as to avoid personal liability, the receivers have to ensure that “notice of the termination of the contract is … lawfully given within 14 days after the date of appointment”

What is meant by “lawfully given”? This has been resolved to an extent by the Court of Appeal case of Weddel New Zealand (in receivership and liquidation) [1998] 1 NZLR 30, which made clear that the notice of termination need not comply with the terms of the employment agreement, only with the terms of the Receiverships Act.

What goes “given” mean though? What if the letter of termination is sent within 14 days but not received until after 14 days have expired? Does the receiver take on personal liability? An employee who has not been paid by the company in receivership may want to try to argue that the receiver is liable where, say, they are owed more than the $18,700 that is treated as a secured debt pursuant to the Receiverships Act and the company cannot pay that surplus.

In such a case, can the employee bring the case in the Employment Relations Authority against the receivers?

In a word, no. The High Court only has the jurisdiction to determine the issue. This is because assessing the potential liability of the receivers under s 32 of the Receiverships Act would not be a question about an “employment relationship problem”, as there is no “employment relationship” between the receivers and the Applicant. Therefore, as the Authority has exclusive jurisdiction to consider “employment relationship problems”, it cannot determine this issue.

This has recently been confirmed in the Christchurch ERA case of Corkran –v- Grant Thornton, as receivers of LivingSpace Properties Limited (in receivership and liquidation) CA 221A/10 5318854.

As for whether a letter of termination sent within 14 days but not received until after 14 days confers liability on the receivers, there does not appear to be any recorded NZ decision on the matter. If anyone knows of one, I’d be delighted to hear about it.