IN THE EMPLOYMENT COURT AUCKLAND [2016] NZEmpC 32 EMPC 141/2015. Plaintiff. STEPHEN MARR HAIR DESIGN NEWMARKET LIMITED Defendant

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1 IN THE EMPLOYMENT COURT AUCKLAND IN THE MATTER OF BETWEEN AND [2016] NZEmpC 32 EMPC 141/2015 a challenge to determinations of the Employment Relations Authority MOBEEN BHIKOO Plaintiff STEPHEN MARR HAIR DESIGN NEWMARKET LIMITED Defendant Hearing: 2 and 3 February 2016 (Heard at Auckland) Appearances: P Pa'u and J Lewis, advocates for plaintiff P Wicks QC, counsel for defendant Judgment: 6 April 2016 JUDGMENT OF JUDGE M E PERKINS Introduction [1] The plaintiff, Mr Bhikoo, commenced employment with Stephen Marr Hair Design Newmarket Limited (SMHD) in In 2007 he became a shareholder of SMHD with the shares being owned by a trust set up for that purpose. Mr Bhikoo was appointed a director of SMHD and this was confirmed by a shareholders and directors agreement dated 15 June 2007 (the agreement). [2] Mr Bhikoo was also an employee of SMHD and was employed as the manager of the hairdressing salon operated by SMHD in Newmarket. Subsequently, Mr Bhikoo also acquired shares in a similar business operated by SMHD in Takapuna. MOBEEN BHIKOO v STEPHEN MARR HAIR DESIGN NEWMARKET LIMITED NZEmpC AUCKLAND [2016] NZEmpC 32 [6 April 2016]

2 [3] The agreement contained a non-competition clause restraining Mr Bhikoo from competing with SMHD during his time as a shareholder or director of SMHD or for a period of 12 months thereafter. The restraint applied in a radius of ten kilometres from any Stephen Marr branded business. The restraint could be waived by consent of SMHD. The restraint also meant that Mr Bhikoo could not be employed by any competing business during that period. [4] Disputes arose between Mr Bhikoo and his fellow directors and shareholders in SMHD, Stephen Marr Irvine and his wife Lucy Vincent. These disputes culminated in an attempt to have Mr Bhikoo dismissed or replaced as a director. This attempt followed an indication from Mr Bhikoo that in view of the disputes, he had decided to leave the business. An angry altercation between Mr Bhikoo and Mr Irvine occurred at the premises of the hair salon in Newmarket. The following day, Mr Bhikoo made statements to employees at the premises which Mr Irvine and Ms Vincent regarded as objectionable. Following a disciplinary investigation, Mr Bhikoo was dismissed from employment. He unsuccessfully brought a personal grievance claim in the Employment Relations Authority (the Authority). This was accompanied by claims relating to the enforceability or otherwise of the restraint of trade and penalties. These claims were also unsuccessful. The Authority delivered its determination on 8 May and a subsequent costs determination was issued dated 23 June [5] Mr Bhikoo challenged the Authority s determinations seeking a hearing de novo. The remedies he sought were: (a) A finding that he was unjustifiably dismissed and compensation for humiliation, loss of dignity and injury to feelings in the sum of $15,000 as a result of the termination of employment. (b) Loss of wages from the date of termination of his employment until the date of the decision of the Court. 1 Bhikoo v Stephen Marr Hair Design Newmarket Ltd [2015] NZERA Auckland Bhikoo v Stephen Marr Hair Design Newmarket Ltd [2015] NZERA Auckland 183.

3 (c) A penalty of $5,000 for failure to provide Mr Bhikoo with a written employment agreement. (d) A penalty of $10,000 for breach of good faith with half the penalty being paid to Mr Bhikoo. (e) A declaration that the terms of the restraint of trade are unenforceable. (f) Costs. [6] By the time that the matter proceeded to a hearing, Mr Bhikoo had indicated that he withdrew the application seeking a declaration as to the terms of the restraint of trade. Apart from the application made to the Authority in respect of the restraint of trade, Mr Bhikoo has made no other claim in any other jurisdiction to have the restraint of trade set aside or modified. The Authority in its determination held that as the agreement contained an arbitration clause, the parties were bound to refer any dispute in respect of the clause to arbitration. Following termination of Mr Bhikoo s employment, he did not act in breach of the non-competition clause either in his capacity as a director/shareholder of SMHD or as a former employee. [7] There was disputed evidence in the Court hearing that Mr Bhikoo was supplied with an intended written agreement prior to commencement of employment. However, during the course of the hearing of the challenge, SMHD was unable to provide in evidence any intended written employment agreement supplied to Mr Bhikoo prior to his employment commencing. It was not in dispute that SMHD did not hold in its records an executed employment agreement for Mr Bhikoo after employment commenced. Events leading to Mr Bhikoo s dismissal [8] As a result of the deteriorating relationship between Mr Bhikoo, Mr Irvine and Ms Vincent, Mr Bhikoo notified that he intended to sever his relationship with SMHD. This was a matter of some regret for Ms Vincent in particular. Both she and Mr Irvine wrote to Mr Bhikoo on 19 March 2014, dealing with matters which would

4 be required to achieve a managed departure. In that letter the restraint of trade provisions were iterated. Previous disagreements were referred to, but the letter expressed the hope that while the transition was taking place and while they needed to continue to work together, they could be civil to each other. [9] Following that letter, however, Mr Irvine, clearly acting on legal advice, served a notice on Mr Bhikoo dated 20 March 2014, advising that a shareholders meeting was to be convened for the purpose of removing Mr Bhikoo as a director. Mr Irvine perhaps unwisely chose to serve the notice on Mr Bhikoo at the hair salon in Newmarket while Mr Bhikoo was working with a client there. Mr Bhikoo reacted badly to this. The timing on Mr Irvine s part was bound to be provocative; nevertheless, Mr Bhikoo s reaction was unjustifiable and unreasonable. Because he had indicated that he would be leaving the company and his position of employment, it was not unreasonable for the remaining directors to have him removed at that point. There was probably a more discreet way of achieving that than the method adopted by Mr Irvine. However, there was no reason for Mr Bhikoo to act in the way he did. [10] Service of the notice had been preceded by an exchange between Mr Irvine and Mr Bhikoo. On 19 March 2014 Mr Irvine ed Mr Bhikoo advising that he would give Mr Bhikoo a letter, which would give some clarity on the company s position. Therefore, service of the notice could not have been totally unexpected by Mr Bhikoo. Mr Irvine s , by not disclosing the true purpose of the letter, was a little misleading nevertheless. [11] When Mr Bhikoo read the letter notifying the shareholders meeting, he began yelling in front of staff, customers and an employee from the laundry supplier to the business. He went to the outside of the salon and made a telephone call which appeared to be to his lawyer and within earshot of those inside. He spoke mockingly of Mr Irvine. When he returned to the salon he continued shouting and called Mr Irvine a thief. Mr Bhikoo admitted later that he called Mr Irvine a thief but denied an allegation by a member of staff that he also used profane language.

5 [12] Mr Bhikoo then left the workplace, despite there being a customer in the salon waiting for her appointment. This required her colour appointment to be completed by another stylist. Mr Bhikoo maintained in evidence at the Court hearing that he had completed that customer s appointment before he left. He denied yelling and shouting. This is in conflict with evidence of other employees and witnesses placed before Ms Vincent. Customers due to arrive later in the day had to have their appointments either rescheduled or cancelled. [13] The following day Mr Bhikoo returned to the salon and held a staff meeting at which he apologised for his outburst the previous day. He informed the staff that he was leaving the business. It was alleged that he again used profane and disparaging language towards the company and fellow directors and advised that he was going to open his own salon. Mr Bhikoo again denies that he used foul language on this occasion. [14] While Mr Bhikoo s shareholding was held in the name of his private trust and he was a director of SMHD, when these events occurred he was acting in his capacity as manager of the Newmarket salon. He was therefore acting as an employee when he behaved in the way he did. Mr Irvine wrote to Mr Bhikoo on 21 March 2014 initiating a disciplinary process. The letter advised that disciplinary action including dismissal might be taken. Mr Bhikoo was advised to seek advice and he was also stood down on pay while the process continued. [15] Mr Bhikoo took legal advice and in correspondence between solicitors for both the company and Mr Bhikoo, issues of jurisdiction and who should be the decision maker in the process were discussed. It was agreed that Mr Irvine, as a primary participant in the altercation at the salon, should stand aside. There was also correspondence encouraging Mr Bhikoo in the meantime to return to work at the salon but this never eventuated. The company decided by formal resolution that Ms Vincent, who did not play any part in the events at the salon, would carry out the disciplinary process and be the decision maker. This remained objectionable to Mr Bhikoo and on legal advice he refused to participate in the process. In the circumstances and particularly having regard to Mr Bhikoo s obligations under the

6 Employment Relations Act 2000 (the Act) to be responsive and communicative, the refusal to participate in the disciplinary process carried considerable risk for him. [16] Ms Vincent commenced her investigation, which involved recovering and viewing the CCTV footage from the salon and obtaining witness statements. The investigation was put on hold as a result of an attempt by the parties to resolve their differences, including those relating to the agreement. Private mediation was conducted without success. The disciplinary process then resumed in May, and in a letter dated 16 May 2014 from the SMHD lawyers to Mr Bhikoo s lawyers, the allegations of misconduct which were to be the subject of continuing investigation were outlined together with relevant documentation. The allegations which were made against Mr Bhikoo were as follows: (a) Aggressive and obstructive conduct to the operational management of SMHD. (b) Disclosure of confidential and commercially sensitive information about SMHD to third parties. (c) Aggressive and abusive behaviour towards Mr Irvine in the Newmarket salon on 20 March The behaviour was alleged to be for an extended period in front of staff, customers and a long standing trade service provider to SMHD. (d) Walking out of the salon leaving a customer waiting and without making arrangements for customers for the rest of the day on 20 March (e) Announcing on 21 March 2014 to a group of staff at the salon that he would be leaving and starting his own salon. (f) Making comments to customers bringing the reputation of SMHD into disrepute, resulting in antagonistic and abusive telephone calls being received at the salon.

7 (g) Misuse of the company credit and petrol cards. [17] Mr Bhikoo failed to attend the disciplinary meeting scheduled for 20 May 2014 and Ms Vincent therefore carried out her investigation in his absence. She set out her findings in writing, which were then forwarded to Mr Bhikoo s lawyers. This was done in order to provide Mr Bhikoo with an opportunity to attend a further disciplinary meeting on Wednesday 28 May 2014 so that he might provide comments and be heard on Ms Vincent s findings. [18] In respect of the first allegation that Mr Bhikoo s conduct towards his fellow directors had been aggressive and obstructive to the operational management of SMHD, Ms Vincent decided that the allegation should be withdrawn and no finding was therefore required to be made by her. [19] As to the allegation of disclosure of confidential and commercially sensitive information about SMHD to third parties, Ms Vincent found that she could not conclude that Mr Bhikoo had disclosed any confidential and commercially sensitive information about SMHD to third parties. Therefore, the allegation was not established. [20] Insofar as the two allegations as to the incidents on 20 March 2014 were concerned, Ms Vincent found that the allegations were established and in view of Mr Bhikoo s senior role in the company, she held that his behaviour amounted to serious misconduct. In reaching her decision, she decided to have no regard to any of the accounts of the incident from Mr Irvine. However, there was in fact no reason for her to disregard the eye-witness accounts of Mr Irvine; but it showed that she went to some lengths to be fair in her inquiry. Nevertheless, having viewed the CCTV footage, and considered the written statements of a senior staff member and a supplier who were present, she was left in no doubt as to what had transpired in that incident. She indicated in her oral evidence that she had also carried out interviews with other staff members before making her decisions. [21] In relation to the meeting on the following day with staff, Ms Vincent held that Mr Bhikoo s announcement that he was leaving the management of the

8 company to open up his own salon and his making of disparaging comments about the directors and how the company was being run were established. She held that this behaviour amounted to misconduct rather than serious misconduct. [22] In respect of the allegation that Mr Bhikoo had made disparaging comments to customers bringing the reputation of the company into disrepute, Ms Vincent held that any statements that had been subsequently made by customers, which were antagonistic and abusive, were not as a result of anything Mr Bhikoo had said to them. She held that this allegation had not been established. [23] Insofar as the misuse of the company credit and petrol cards was concerned, Ms Vincent s initial finding was that Mr Bhikoo s use of the cards was unauthorised and amounted to dishonesty and serious misconduct. However, following information belatedly put forward by Mr Bhikoo s solicitors, she made further investigations into the matter. She then withdrew her finding that the use of the cards was dishonest and downgraded her assessment of the behaviour from serious misconduct to misconduct. Mr Bhikoo s use of the cards that Ms Vincent found particularly objectionable was their use after he had been stood down from employment. However, from the evidence before her it was established that the accounts staff at SMHD were aware of Mr Bhikoo s use of the cards and following regular auditing procedures Mr Bhikoo reimbursed the company; this appears to have been a standard arrangement. There was a counter-allegation that Mr Irvine and Ms Vincent used credit cards for personal expenditure but this also appears to have been the standard arrangement and their personal expenditure was debited on a regular basis from their drawings accounts. [24] Once Mr Bhikoo was notified of the findings and given a further opportunity to attend a meeting and be heard on the findings, his lawyers responded with some comments. They again made it plain that Mr Bhikoo would not participate in the process in view of his objections to Ms Vincent being the decision maker. A personal grievance was raised in the letter from Mr Bhikoo s lawyers that he had been unjustifiably disadvantaged by the disciplinary procedure which was adopted by SMHD.

9 [25] Ms Vincent notified Mr Bhikoo in a letter dated 30 May 2014 that in view of the findings and his declining to attend any further meetings he was dismissed. While it was a summary dismissal, the company made a payment of a further month s salary beyond the termination date. [26] As a result of notification of the dismissal Mr Bhikoo raised a further personal grievance. Principles and conclusions [27] Whether the dismissal was justified is to be determined on the basis of s 103A of the Act. The test is whether the employer s actions, and how the employer acted were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred. [28] Sub-sections (3), (4) and (5) of s 103A prescribe matters of a procedural nature which the employer is required to follow. These are not exclusive. If defects occur which are of a minor nature and did not result in the employee being treated unfairly, they will not render dismissal unjustifiable. [29] In the present case Ms Vincent carried out a careful investigation into the circumstances surrounding Mr Bhikoo s behaviour. She viewed the CCTV footage but also had regard to corroborating evidence available from staff members present, one of whom was close by to both Mr Irvine and Mr Bhikoo and was able to view the entire sequence of events of 20 March In addition Ms Vincent had a statement from the representative of the laundry supplier who was in the salon when the events occurred. Similarly, she had statements from staff members who attended the meeting the following day. [30] I am of the view that Ms Vincent set out to and did conduct a fair inquiry for the following reasons. First, she decided to disregard her husband s version of events and rely on the other evidence available. She did not have to disregard his statements but the fact she did showed the conscientious way she set about her task. Secondly, she found more than one of the allegations not proven or insufficient to be

10 taken into account as disciplinary matters. Thirdly, she gave Mr Bhikoo the opportunity to participate in each stage of the disciplinary process opportunities he declined. Fourthly, she considered the seriousness of each of the three allegations held to be established and whether they justified the serious consequence of dismissal. Finally, she properly downgraded her findings on one of the matters following representations which Mr Bhikoo chose to direct his lawyers to make on his behalf. [31] While the assertion was made against her that she was in such a position of bias that she should not have been the decision maker, the manner in which she conducted her inquiry and her clearly conscientious efforts to be fair proved the true position to be otherwise. It is difficult to see who else, apart from Ms Vincent, could have appropriately carried out the inquiry and made the decision following that. Mr Irvine was probably too closely attached to and involved in the events giving rise to the disciplinary action. In any event it appears to have been agreed at the outset that he would not be the decision maker. Mr Bhikoo was not only an employee but also a director and shareholder of the employer company. Ms Vincent and Mr Bhikoo as fellow directors were of similar status. An employee more junior to Mr Bhikoo would not have been suitable. In addition, and so that there could be no suggestion Ms Vincent might profit from Mr Bhikoo s dismissal, she and Mr Irvine undertook that they would not rely on and enforce a clause in the agreement providing that Mr Bhikoo s shares would be transferred to them in the event of his dismissal. [32] The test comes back to a consideration under s103a of the Act. If the employer s decision maker was so involved in the events leading to the grievance that their objectivity was fettered as to render them completely partial then that person may not be the appropriate person to decide the outcome of the disciplinary process on the grounds that it would not be what a fair and reasonable employer could have done in all the circumstances at the time that dismissal or action occurred. Ms Vincent was not in such a position or of such an attitude. Whether or not a particular person within the employer s organisation should appropriately carry out the disciplinary process will be a matter for the judgement of the employer in each case and will depend upon the circumstances prevailing. For example in a smaller organisation or where there is only one person in the role of employer there

11 may be no alternative but for the person who has been involved in the events leading to the grievance to also make the decision on the outcome. [33] There was no reason, therefore, why Ms Vincent should not have been the one to carry out the investigation and make the decision as to whether or not Mr Bhikoo would be dismissed. There will always be an involvement of the decision maker employer in such a situation. The Court has emphasised in previous decisions that there is no requirement on an employer in carrying out disciplinary functions to be independent in the way a person acting in a judicial capacity would be required to be. 3 Having regard to these authorities, in other circumstances it might have even been acceptable for Mr Irvine to be the decision maker. However, in this case his wife was available to take on the role and she was the most appropriate person to do so. In this case Ms Vincent was not personally involved in the circumstances complained of. While she chose to disregard the evidence presented by her husband, she had regard to the CCTV footage and she also had corroboration from witnesses present for what was observed on the CCTV. The concerns as to use of CCTV footage expressed in Harris v The Warehouse Ltd 4 do not apply in the present case. [34] The issue that therefore arises in the present case was whether Mr Bhikoo s behaviour in respect of the first two grounds for dismissal entitled Ms Vincent to find it amounted to serious misconduct; and whether the grounds in combination justified her reaching a decision to dismiss him. The third ground was held to be misconduct. The fourth ground was also downgraded to misconduct following further information received from Mr Bhikoo s lawyers. While there could be some mitigating circumstances in respect of that fourth issue (for instance his arrangement with the accountant) in combination it was an aggravating feature, particularly as the use related to expenditure after he was stood down on gardening leave. [35] Mr Wicks, counsel for the defendant, in his closing submissions referred to the Court of Appeal s judgment in BP Oil NZ Ltd v Northern Industrial District Distribution Workers Union. 5 That case and decisions of the Employment Court and 3 Yan v Commissioner of Inland Revenue [2015] NZEmpC 36 [2015] NZCA 401 at [12]; Keepa v Go Bus Transport Ltd [2015] NZEmpC 180 at [31]. 4 Harris v The Warehouse Ltd [2014] NZEmpC 188 at [113]-[117]. 5 BP Oil NZ Ltd v Northern Industrial District Distribution Workers Union [1989] 3 NZLR 580 (CA).

12 its predecessor Courts on the question of serious misconduct are the subject of a useful discussion in Brookers Personal Grievances. 6 The authors state that the starting point is indeed the Court of Appeal s judgment in BP Oil which in turn followed Cyril Leonard & Co v Simo Securities Trust Ltd where the justification for summary dismissal at common law was said to require grave conduct: 7. as for instance conduct such as would deeply impair the basic confidence that it is essential should exist between the parties; in each case it is a matter of degree whether the act complained of is of the requisite gravity. [36] Cooke P stated in BP Oil that where there is misconduct of a sufficient gravity to warrant dismissal at common law that is not necessarily decisive of whether the dismissal is justifiable in terms of the New Zealand legislation. He stated: 8 The question is essentially what it was open to a reasonable and fair employer to do in the particular circumstances. Thus it is necessarily a question of fact and degree. [37] Pertinent to the present case is the (Brookers) discussion of STAMS v The Pad & Paper Co Ltd, 9 where the writers consider that the Labour Court in that case had accepted that a dismissal for misconduct will be difficult to challenge where the employee has been given an adequate opportunity to state their case, and the employer has formed an honest opinion after weighing up the evidence available at the time without bias or predetermination. The writers note that an employer in carrying out this function is not required to run a court of law. [38] In W & H Newspapers Ltd v Oram the Court of Appeal reformulated the serious misconduct test (which was virtually the same as that now contained in s 103A of the Act) as follows: 10 The [C]ourt has to be satisfied that the decision to dismiss was one which a reasonable and fair employer could have taken. Bearing in mind that there may be more than one correct response open to a fair and reasonable employer, we prefer to express this in terms of could rather than would, 6 P Churchman and M Foley Brookers Personal Grievances (looseleaf ed, Thomson Reuters) at [3.1.02]. 7 Cyril Leonard & Co v Simo Securities Trust Ltd [1972] 1 WLR 80 (CA) at [89]. 8 BP Oil NZ Ltd, above n 5, at STAMS v The Pad & Paper Co Ltd (1990) ERNZ Sel Cas 1040 (LC). 10 W & H Newspapers Ltd v Oram [2001] 3 NZLR 29 [2000] 2 ERNZ 448 (CA) at [31]-[32].

13 used in the formulation expressed in [Northern Distribution Union v BP Oil New Zealand Ltd]([1992] 3 ERNZ 483 at 487). [32] The burden on the employer is not that of proving to the [C]ourt the employee s serious misconduct, but of showing that a full and fair investigation disclosed conduct capable of being regarded as serious misconduct.[ ] [39] Mr Bhikoo s behaviour was sufficient to seriously undermine the trust and confidence which an employer would need to have in its employee. The behaviour occurred against the background of the dispute over the shareholding. It was in the context where Mr Bhikoo had already indicated that he was leaving the company. The company was vulnerable in such an instance where the shareholder and director was leaving and threatening to set up in opposition in a highly competitive industry. Mr Bhikoo knew this and his comments in front of staff and customers falsely accusing the founder of the business of dishonesty, could, in such circumstances, be regarded by Ms Vincent as serious misconduct. Mr Bhikoo was acting in his capacity as a senior employee indeed manager of one of the main salons of the company. He was in a position where he had to act responsibly and set an example. He failed to do so. Ms Vincent was justified in reaching the decision she did on the evidence before her. Mr Bhikoo compounded his difficulty by refusing to participate in the disciplinary process. If he had participated in a good faith manner, it is possible that he could have saved his employment. As it was he removed any prospect of avoiding dismissal by refusing to participate. In doing that he also breached his obligations of good faith under s 4 of the Act which required him to be responsive and communicative. He simply refused to engage when the more sensible approach would have been to participate in the disciplinary process reserving his position, if that is what he wanted, in respect of his concerns over Ms Vincent s entitlement to be the decision maker. [40] There was a belated attempt by Mr Bhikoo through his solicitors to provide some explanations at the same time as submitting the first personal grievance. However, the primary stance he took was that he would not participate in the process on the ground Ms Vincent was not independent. The provision of these explanations in a somewhat half-hearted and belated way could be no substitute for his primary obligation which was to be responsive and communicative. This required him to

14 attend and meet face to face with Ms Vincent and proffer his explanations and submissions personally to her as she had requested. [41] In view of the fact that Mr Bhikoo then chose not to participate in the disciplinary process, he can hardly complain now, as he has through his advocate, that: (a) He was not given the reasonable opportunity to respond to the matters raised against him; (b) the defendant had not considered his explanations when in fact he really didn t make any; and (c) the investigation which was carried out was not sufficient. [42] There has also been some criticism of the number of witness statements upon which Ms Vincent relied. The written reports of the employee and the supplier would be sufficient on their own. However, Ms Vincent undertook further inquiries including the viewing of the CCTV footage. Quite apart from this, Mr Bhikoo admitted his behaviour was unacceptable and apologised to staff the following day. The problem was that he did not similarly apologise to his employer and he compounded his previous attack on Mr Irvine the following day by disparaging his fellow directors in front of staff and asserting that he was going to set up business in opposition to the company. [43] These parties had previously been through quite an elaborate process of mediation in respect of their commercial dispute. Ms Vincent, who by this time was separated from her husband, patently had some sympathy for Mr Bhikoo s position. If he had participated in the inquiry, he may well have been able to persuade Ms Vincent as well as Mr Irvine that it was not his intention to undermine the position of the employer and that the events occurred when he was emotionally distraught such that an apology and a mediated resolution would suffice as an alternative to dismissal. Such an outcome would have been a possibility arising out of the good faith obligations helpfully contained in the Act for the purposes of resolving

15 employment disputes of the very kind which occurred in this case. Mr Bhikoo never presented his position in this way and by refusing to participate removed that possibility, leaving Ms Vincent to reach a decision on what was before her. [44] I am of the view that Mr Bhikoo s behaviour would have reasonably led Ms Irvine and Mr Vincent to lose trust and confidence in Mr Bhikoo s ability to continue managing the Newmarket salon. This would have been compounded by the insight they had into Mr Bhikoo s nature as a result of the shareholder dispute which was continuing to fester. In the face of Mr Bhikoo s breach of good faith by his refusal to participate in the disciplinary process, the decision to dismiss him was, in all the circumstances which prevailed at the time, a decision which a fair and reasonable employer could have taken. [45] Mr Bhikoo has sought penalties in respect of the failure to provide him with a written employment agreement and for breach of good faith. In view of my findings in respect of the disciplinary process, Mr Bhikoo cannot possibly succeed with his allegations that there was a breach of good faith on the part of the defendant company in the way it conducted the disciplinary process. Indeed quite the contrary is the case. It was Mr Bhikoo himself who breached his obligations of good faith to the company by refusing to communicate, co-operate and properly engage as he was required to do. [46] Mr Bhikoo faces several difficulties with his claim for a penalty in respect of the failure to provide him with a written employment agreement. Paragraph 4(c) of his amended statement of claim states: I did not have an employment agreement and seek a penalty against the Defendant. [47] Paragraph 6 of the amended statement of claim contains the remedies which Mr Bhikoo seeks. Paragraph 6(d) states: Penalty against the Defendant because I do not have an employment agreement - $5000. [48] It appears from the determination of the Authority that Mr Bhikoo s claim for a penalty in this respect was presented in the same way. The Authority determined

16 that the claim was prevented by a limitation. However, there are other difficulties standing in the way of Mr Bhikoo s penalty claim in respect of any failure to provide him with a written employment agreement. [49] There are two possible avenues for Mr Bhikoo to claim a penalty in respect of a failure on SMHD s part to comply with the requirements of the Act to provide an employment agreement and retain a signed copy of the agreement during the term of Mr Bhikoo s employment. The first is section 64(1) of the Act which requires SMHD to have retained a signed copy of Mr Bhikoo s individual employment agreement so long as s 63A of the Act applies. Mr Bhikoo s pleaded claim to a penalty appears to rely upon this section and assumes therefore that s 63A did apply. Assuming s 63A did apply, the entitlement to prosecute for such a penalty under s 64 rests only with the Labour Inspector and not Mr Bhikoo. 11 Even then, such a prosecution may only be commenced after the Labour Inspector has given SMHD written notice of the breach and provided it with seven working days for the breach to be remedied. 12 No evidence of these steps having been taken was provided in the present case. I have concluded therefore that Mr Bhikoo was not entitled personally to claim a penalty for breach of s 64; and this also applied to his claim for a penalty in the Authority proceedings. [50] While it was not pleaded or argued by Mr Bhikoo, Mr Wicks in his closing submissions, considered the possibility that Mr Bhikoo may be pursuing the second possible avenue by claiming a penalty for breach of s 63A of the Act. Mr Wicks argued that if Mr Bhikoo was claiming a penalty for breach of SMHD s failure under s 63A(2)(a) of the Act to provide Mr Bhikoo with a copy of an intended employment agreement before employment commenced, then Mr Bhikoo would be out of time to claim such a penalty under s 135(5) of the Act. [51] Mr Bhikoo would have been able to prosecute personally for a penalty under s 63A(3) of the Act for a breach of the provisions of s 63A(2)(a) if the requirement to provide a copy of the intended employment agreement was in fact a requirement resting on SMHD. For the reasons later discussed this is the subject of some debate. 11 Employment Relations Act 2000, s 64(4). 12 Section 64(5).

17 However, I accept Mr Wicks argument on limitation. Under s 135(5) of the Act, an action for recovery of a penalty must be commenced within 12 months after the earlier of the date when the cause of action first became known to the person bringing the action, or the date when the cause of action should reasonably have become known to that person. There was disputed evidence as to whether Mr Bhikoo was in fact provided with an intended employment agreement at the time prior to commencement of his employment, but if he was not, he was well aware of that fact once he commenced employment. The time limit for an action for the recovery of a penalty for breach of s 63A(2)(a) of the Act would have started to run at that time, being many years before the action for a recovery of a penalty was itself commenced in the Authority. It may well be that on a continuing basis Mr Bhikoo may have had the right to claim a penalty for the failure of the defendant to procure and retain a signed employment agreement in its records. However, as already discussed, no such action has been commenced by a Labour Inspector and there is no evidence of the preliminary conditions necessary to such a prosecution being commenced having been met. [52] Even if limitation does not prevent Mr Bhikoo claiming the penalty, his claim in any event could not have succeeded on the limited evidence presented. A further impediment to a claim under s 63A of the Act relates to the scheme contained in that section for the bargaining for an individual employment agreement which applies only when bargaining for terms and conditions of employment arise in the situations set out in s 63A(1). Section 63A(1)(e), which is the only provision relevant to Mr Bhikoo s position, now relates to bargaining for terms and conditions of any individual employment agreement, including any variations to that agreement, but that was not the form of that statutory provision at the time of commencement of Mr Bhikoo s employment and up to and including the date of his dismissal. Section 63A(1)(e) now reads: 13 in relation to terms and conditions of an individual employment agreement including any variations to that agreement 13 Amended on 6 March 2015, by section 19(2) of the Employment Relations Amendment Act 2014 (2014 No 61).

18 At the time of Mr Bhikoo s employment the subsection read as follows: in relation to terms and conditions of an individual employment agreement for an employee if no collective agreement covers the work done, or to be done, by the employee. [53] A breach of the requirement under then s 63A(2) for SMHD to provide Mr Bhikoo with a copy of the intended agreement would only arise, therefore, if no collective agreement covered the work which was being done by him during the course of his employment. While that might have been the position, no evidence was adduced during the course of the hearing as to whether or not Mr Bhikoo was indeed covered by a collective agreement. In circumstances where Mr Bhikoo is possibly claiming a penalty for breach of SMHD s failure to provide him with a copy of any intended agreement, there is simply insufficient evidence upon which I could find that there had been a breach of s 63A to found such a penalty. [54] In summary therefore, if Mr Bhikoo s penalty claim is based on an allegation that SMHD failed to procure and retain a signed copy of Mr Bhikoo s employment agreement, which appears to be the way it is pleaded, then the ability to commence such an action rests only with the Labour Inspector and not Mr Bhikoo. In any event, such an action would be in reliance upon s 64 of the Act. This is turn would require proof that one or more of the criteria in s 63A(1) apply. Mr Bhikoo failed to establish that in his evidence. Alternatively, if Mr Bhikoo s claim to a penalty is based upon an allegation that SMHD failed to provide Mr Bhikoo with a copy of the intended agreement at the commencement of his employment, then the similar difficulties he faces are: (a) Such a breach is not specifically pleaded, nor was it dealt with appropriately in the evidence. (b) Commencement of the action for a penalty was not commenced within time. (c) The same difficulty that exists in respect of an action for a penalty under s 64 also arises in that evidence was not provided to establish that Mr Bhikoo was not covered by a collective agreement; and therefore that

19 SMHD was then under a duty at the commencement of Mr Bhikoo s employment to provide him with a copy of any intended agreement. (d) Any claim for a penalty for a breach of s 63A(2) does not appear to have been commenced in the Authority. It would have to be commenced as a new action for penalty as only the Authority has jurisdiction to hear such a claim ab initio. It cannot be raised for the first time in the challenge before the Court. [55] Finally, even if Mr Bhikoo was able to surmount all of these difficulties including the substantial jurisdictional and limitation issues, there is no evidence that this employer blatantly and continuously disregarded its statutory obligations towards Mr Bhikoo or any other of its employees. Indeed Mr Bhikoo would be unlikely to allege such blatant disregard, in view of the fact that he was himself a proprietor of the business. Being a senior manager, certainly in respect of the Newmarket salon, the obligation to comply with the provisions relating to providing and retaining written employment agreements for the staff rested primarily with him. If there was a breach in this case, it would not be of such a serious or blatant nature as to warrant the imposition of a penalty. Disposition [56] In view of these findings Mr Bhikoo s challenge to the substantive determination of the Authority is dismissed. Costs [57] The issue of costs will be reserved. Any final decision on costs in respect of the challenge will also need to consider the costs award made by the Authority, as that determination is also the subject of Mr Bhikoo s challenge. The defendant will have 14 days in which to provide submissions to the Court by way of memorandum on costs and Mr Bhikoo will then have a further 14 days thereafter to respond by way of memorandum. The Court will then make its decision on costs. In assessing reasonable costs, it would be of assistance to the Court if the parties representatives

20 also had regard to the Court s present pilot scale on costs available from the Court s website even though these proceedings were commenced before the pilot scale was implemented. A calculation using that scale could be attached to the memoranda on costs. Judgment signed at 4.15 pm on 6 April 2016 M E Perkins Judge