LSG SKY CHEFS NEW ZEALAND LIMITED v PRASAD [2018] NZCA 256

LSG SKY CHEFS NEW ZEALAND LIMITED v PRASAD [2018] NZCA 256 [16 July 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA2/2018[2018] NZCA 256BETWEEN LSG SKY CHEFS NEW ZEALANDLIMITEDApplicantAND KAMLESH PRASADFirst RespondentLIUTOFAGA TULAISecond RespondentSOLUTIONS PERSONNEL LIMITEDAND BLUE COLLAR LIMITEDThird RespondentsHearing: 11 June 2018Court: French, Cooper and Brown JJCounsel: P G Skelton QC for ApplicantP Cranney for First and Second RespondentsP F Wicks QC for Third RespondentsJudgment: 16 July 2018 at 11.30 amJUDGMENT OF THE COURTA The application for an extension of time to apply for leave to appeal isgranted.B The application for leave to appeal is declined.C The applicant is ordered to pay one set of costs to the respondents for astandard application with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by French J)Introduction[1] LSG Sky Chefs New Zealand Ltd (LSG Sky Chefs) seeks leave under s 214(2)of the Employment Relations Act 2000 (the Act) to appeal a decision of theEmployment Court. The decision concerned a labour hire arrangement.The Employment Court ruled that for the purposes of the definition of "employee"under the Act,1 there was a contract of service between LSG Sky Chefs and the firstand second respondents.2[2] Section 214(2) of the Act provides that an application for leave to appeal mustbe filed within 28 days of the decision sought to be appealed. LSG Sky Chefs filed itsappeal 37 days after the Employment Court had delivered its decision. It was thereforeout of time.3 The section does however also empower this Court to grant an extensionof time. We readily do so in this case. The delay was short and was due to anunderstandable error regarding the computation of the 28 days over the Christmasvacation.[3] The application for an extension of time is accordingly granted and we nowturn to address the merits of the application for leave to appeal.Background[4] The third respondents Solutions Personnel Ltd and Blue Collar Ltd (Solutions)are labour hire companies. LSG Sky Chefs contracted with them for the provision oflarge numbers of workers, including the two respondents Mr Prasad and Ms Tulai, towork in its in-flight catering business.1 Employment Relations Act 2000, s 6.2 Prasad v LSG Sky Chefs New Zealand Ltd [2017] NZEmpC 150, (2017) 15 NZELR 178[EmpC judgment].3 The applicant sought to argue otherwise by reference to the Employment Court regulations butthose regulations cannot govern procedure in this Court. See Employment Court Regulations2000, regs 74A and 74B.[5] When Mr Prasad and Ms Tulai signed up with Solutions they each signed adocument which purported to be an independent contractor agreement between themand Solutions. They were paid by Solutions for the work they did for LSG Sky Chefs.Solutions was in turn paid by LSG Sky Chefs for the hours Mr Prasad and Ms Tulaiworked. Both were engaged full time working for LSG Sky Chefs, one of them forfour years, the other for two years. There were no written agreements between themand LSG Sky Chefs.[6] In the proceedings before the Employment Court, the key issue was whetherMs Tulai and Mr Prasad were as they contended the employees of LSG Sky Chefs.For its part, LSG Sky Chefs argued the two were independent contractors, and if notindependent contractors, they were Solutions' employees.[7] In support of its arguments, LSG Sky Chefs relied on an earlier decision of theEmployment Court in McDonald v Ontrack Infrastructure Ltd (Ontrack) and inparticular on statements made in that case to the effect that before a contract of servicecan be held to exist, the common law requirements of offer, acceptance, contractualintention, consideration and certainty must all be satisfied.4The decision of the Employment Court[8] The Employment Court described the arrangement at issue as a triangular,labour hire relationship involving as it did an end user and an intermediary.5[9] The Court went on to say that although the work arrangement differed fromthe traditional bilateral employer–employee model, the definition of "employee"contained in s 6 of the Act still applied and drove the analysis rather than the commonlaw relating to contract formation.6 The Court considered that if Ontrack could beinterpreted as suggesting otherwise (which the Court did not accept) then the Courtrespectfully disagreed with it.74 McDonald v Ontrack Infrastructure Ltd [2010] NZEmpC 132, [2010] ERNZ 223 at [36][Ontrack].5 EmpC judgment, above n 2, at [31].6 At [18]–[20] and [31].7 At [22] and [31].[10] Section 6 provides:6 Meaning of employee(1) In this Act, unless the context otherwise requires, employee—(a) means any person of any age employed by an employer to doany work for hire or reward under a contract of service; and(2) In deciding for the purposes of subsection (1)(a) whether a person isemployed by another person under a contract of service, the court orthe Authority (as the case may be) must determine the real nature ofthe relationship between them.(3) For the purposes of subsection (2), the court or the Authority–(a) must consider all relevant matters, including any matters thatindicate the intention of the persons; and(b) is not to treat as a determining matter any statement by thepersons that describes the nature of their relationship.[11] In the view of the Court, s 6, as interpreted by the Supreme Court in Bryson vThree-Foot Six Ltd,8 required it to assess whether Mr Prasad and Ms Tulai were incontracts of service with LSG Sky Chefs having regard to all relevant matters.9Relevant matters included the written and oral terms of any agreement, the way therelationship operated in practice and any features of control and integration. It wasthe real nature of the relationship that was determinative.10[12] The Court noted the absence of documentation between LSG Sky Chefs andthe two workers. This it said pointed away from a contract of service as did the natureand existence of documentation existing between LSG Sky Chefs and Solutions.However, the Court considered that the written material was out of step with the realnature of the relationship as it operated in practice and therefore did not assist inassessing how to characterise the relationship.118 Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [32].9 EmpC judgment, above n 2, at [36]–[38].10 At [41].11 At [60].[13] The Court then traversed the evidence regarding how the relationship operatedin practice including evidence as to application forms, job interviews, inductionprocesses, the wearing of LSG Sky Chefs uniforms, time sheet recording, patterns ofwork, communications regarding additional hours and promulgation of rosters.It concluded the evidence showed that two factors operated in tandem. First, LSG SkyChefs provided Mr Prasad and Ms Tulai with a regular stream of work which the twoworkers expected and which LSG Sky Chefs expected them to be available to perform.Secondly, there was continuity of relationship over an extended period of time. Bothfactors individually and in combination, the Court said, pointed towards a contract ofservice.12[14] Turning to control and integration, the Court found on the evidence that LSGSky Chefs exercised significant direction and control over Mr Prasad's and Ms Tulai'sday to day work. That coupled with the extent to which they were integrated into LSGSky Chefs' business pointed firmly, the Court said, towards an employmentrelationship.13[15] Finally, the Court applied the fundamental test, finding it was fanciful tosuggest that either Mr Prasad or Ms Tulai was in business on their own account.They did not issue invoices or hold business records, and the expectation was that theypersonally would undertake the work.14 The Court also found that neither of them hadany understanding of the purported contract documents Solutions had asked them tosign.15[16] The Court concluded that each of the respondents worked for LSG Sky Chefsunder a contract of service and made declarations accordingly.1612 At [77].13 At [78]–[80].14 At [85]–[89].15 At [50]–[51].16 At [100].The application for leave[17] LSG Sky Chefs seeks leave to appeal on three questions of law:(a) Did the Employment Court err in finding that the applicant employedeach of the first and second respondents under a contract of service bymisdirecting itself as to the correct interpretation and application of s 6of the Act?(b) Did the Employment Court err in its interpretation and application ofs 6 by failing to apply the approach identified in Ontrack whichinvolves determining:17(i) whether there is any contract express or implied between theparties; and(ii) if so whether the contract is a contract of service?(c) Did the Employment Court misapply the s 6(2) inquiry (as to the realnature of the relationship) by not applying common law principles ofcontract formation to determine whether there was a contractualrelationship between the applicant and each of the first and secondrespondents?[18] On behalf of LSG Sky Chefs, Mr Skelton QC submitted that the reasoning ofthe Employment Court represented a significant departure from established legalprinciples.[19] The orthodox (and in his view correct) approach required a two stage analysis.The Court must first ask itself whether there was an intention to create contractualrelations. And then only if satisfied of the existence of a contractual relationshipshould it consider what type of contract it was — contract of service or contract forservices — by applying the established tests such as the integration and control test.17 Ontrack, above n 4.Where the Employment Court had gone wrong was to reason backwards. It had gonestraight to stage two without considering whether a contract had come into existencein the first place and if so when.[20] Mr Skelton argued that the implications of the decision for the labour hireindustry as a whole were significant and required appellate guidance.Analysis[21] Under s 214(3) of the Act, this Court may only grant leave to appeal if thequestion of law raised by the proposed appeal is one that by reason of its general orpublic importance or for any other reason ought to be submitted to this Court fordecision.[22] In our view, the proposed appeal does not satisfy those criteria. We say thatfor the following reasons.[23] We are not persuaded that the Employment Court has purported to lay downany far reaching new principles or that its reasoning is capable of being described asaberrant. As Mr Skelton acknowledged, it is well established that the existence of acontract may be inferred by conduct. In such cases, the Court will look at the totalityof the dealings and determine whether those dealings should be regarded as havingresulted in a contract coming into existence.18[24] In our assessment that is all the Employment Court has done in this case asindeed it was enjoined to do by s 6. Significantly, after an extensive review of theevidence, the Employment Court expressed its conclusion in terms that reflect entirelyorthodox reasoning:19[97] We are satisfied that the evidence discloses the requisite mutuality ofobligations between LSG and each of the plaintiffs. LSG plainly expectedthat the plaintiffs would turn up to work each day it rostered them on, unlessa prior arrangement had been made with it; the plaintiffs plainly expected thatwhen they did show up to work they would be given work by LSG; both18 Jeremy Finn "The phenomena of agreement" in Jeremy Finn, Stephen Todd and Matthew BarberBurrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis,Wellington, 2018) 37 at 42.19 EmpC judgment, above n 2.parties understood that the plaintiffs would personally do the work; and eachof the plaintiffs received payment for the work they did for LSG from LSG,albeit via Solutions. While Mr Prasad later signed a self-styled employmentagreement with Blue Collar we are satisfied that nothing substantivelychanged in reality.[98] A labour-hire agreement does not represent an impenetrable shield toa claim that the "host" is engaging the worker under a contract of service.Much will depend on the particular facts of the individual case and an analysisof the real nature of the relationship, including how it operated in practice.[25] As the Court recognised, the inquiry mandated by s 6 is an intensely factualone. Each case must turn on its own facts. As indeed did this one. We agree withthe respondents that on the facts before the Employment Court it would have beensurprising had the Court reached any other conclusion than the one it did.Outcome[26] The application for an extension of time to apply for leave to appeal is granted.[27] The application for leave to appeal is declined.[28] As regards costs, Mr Skelton accepted that if the application were declined,then the respondents were entitled to costs. We agree and therefore order the applicantto pay one set of costs to the respondents for a standard application and usualdisbursements.Solicitors:Douglas Erickson, Auckland for ApplicantOakley Moran, Wellington for First and Second RespondentsRussell McVeagh, Auckland for Third Respondents