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Conference of the Methodist Church of New Zealand v Gray CA130/95 [1996] NZCA 60; [1996] 2 NZLR 554; [1996] 1 ERNZ 48; (1996) 5 NZELC 98,396; (1996) 9 PRNZ 235 (24 April 1996)

Last Updated: 13 February 2014

_{IN THE COURT OF APPEAL OF NEW ZEALAND C.A.
130/95}

BETWEEN THE CONFERENCE OF THE METHODIST CHURCH OF

NEW ZEALAND carrying on the business of a church at Christchurch and elsewhere in New Zealand

_Appellant

A N D ROBIN JOHN GENGE GRAY of

Nelson, Hospital Chaplain

_Respondent

Coram: Cooke P. (7.2.96.) McKay J.

Thomas J.

Hearing: 7, 8 and 9 February 1996

Counsel: D.G. Smith and Rachel J. Scott for Appellant

Raylee P. Harley for Respondent

Judgment: 24 April 1996

_____________________________________________________________________ JUDGMENT OF LORD COOKE OF THORNDON

_____________________________________________________________________

This is an appeal on questions of law by the Conference of the Methodist Church (the Church), under the Employment Contracts Act 1991, from the judgment of Chief Judge Goddard in the Employment Court delivered on 31 May 1995 and reported in [1995] 1 E.R.N.Z. 672. The appeal is against only that part of the judgment which holds the Church liable to the respondent, Mr Gray, for inducing a breach by his employers, the Nelson Methodist Presbyterian Hospital Chaplaincy Committee (the Chaplaincy Committee) of the contract of employment between them and Mr Gray, and awarding against the Church $35,500 damages for that tort. In the Employment Court the Chaplaincy Committee was named as the first defendant and the Church as the second defendant.

The original notice of appeal was confined to alleged error of law and was apparently intended to be under s.135 of the Act. During the hearing in this Court leave was granted to amend

the notice to extend the grounds to include alleged errors in fact and law in the event that the judgment is to be treated as given under s.73. Section 132 gives a right of appeal, extending (unlike s.135) to questions of fact, to any party to any proceedings before the Court under s.73. Counsel for the respondent was emphatic, however, that the case had never been presented to the Employment Court as being under s.73. In the event, as will be seen, I think it sufficient to deal with the ground of error of law.

The respondent, an ordained Methodist Minister and a Presbyter in Full Connexion, had been in charge of a parish in Timaru. Over a period of some three years a degree of sexual relationship, since admitted by him, existed between him and a woman parishioner, who was under his pastoral care. After he had left Timaru and entered as from 1 September 1992 into a contract of service as a hospital chaplain with the Chaplaincy Committee, the woman made to the Church a complaint of sexual abuse against him. Between the parties this was resolved by mediation and agreed written terms of settlement, the mediator being appointed by the Church. Subsequently the President of the Church on the advice of the Pastoral Committee of the Church decided on 29 August

1994 that it was not appropriate for the respondent to continue in Ministry as Presbyter in Full Connexion with the Church or to engage in any form of Ministry involving pastoral care or professional counselling on behalf of the Church. His name was removed from the list. Next day two representatives of the Church went to Nelson and informed the Chaplaincy Committee of this decision. The Chaplaincy Committee also learnt that an appeal by the respondent to the Conference of the Church was or might be pending.

The Chaplaincy Committee, while recognising and indeed insisting that the Church had no authority to dismiss the respondent from the hospital position, took interim action. In the Chief Judge's words '... it decided to place the plaintiff on leave with pay and allowances for one month, while it worked out the implications of the actions of the Methodist Church'. The Chief Judge held that the requirements of natural justice had not been complied with by the Church - an issue not now before us - but exonerated the Church from an allegation of inducing a breach of contract in the

nature of a lockout at that stage. (The relevance of the expression 'lockout' I must deal with later.) He said:

In this case the real motive for suspending the plaintiff in the first place was not to get him to agree to anything but to enable the position to be clarified as to his status. While, as I have held, the first defendant was not entitled to suspend him for this purpose on the basis of incorrect information that the plaintiff's status was in doubt, it cannot be taken to have done so with a view to extracting some concession from the plaintiff. This cause of action based upon an alleged lockout consisting of the suspension therefore fails and must be dismissed.

The description 'suspending the plaintiff in the first place' must refer to the Chief Judge's earlier statement in his judgment that placing the plaintiff on leave, without seeking his consent or views, was in effect suspension.

On or about 8 November 1994 a special committee of the Church reported to the Conference to the effect that the earlier decision should be confirmed. Again this appeal is not concerned with that issue. What this appeal is concerned with is a further finding made by the Chief Judge relating to the suspension by the Chaplaincy Committee of the plaintiff (with pay and some but not full allowances) from early October 1994 to the date of the Employment Court judgment. As a result of that judgment the plaintiff was reinstated by the Chaplaincy Committee, but a memorandum from his counsel dated 16 February 1994 informs us that on 31 January 1996 he was given three months notice of termination of his contract. The further finding that is in issue is best conveyed by quoting the passage in the Chief Judge's judgment immediately following the one already quoted:

The position changed later. The first defendant gave him, if not an ultimatum, a choice between courses of action each of which involved a variation of his employment contract and, when he failed to accept either, unilaterally imposed one, but in the meantime refused or failed to take him back when requested. At this point, it becomes virtually impossible to separate the fact of continued suspension from the demand that the plaintiff should accept a new deal of a very poor hand. To reinstate the plaintiff to full duties would have relieved him from the pressure of making a Hobson's choice; to keep that pressure on, the first defendant was able to tighten the screws by setting its face against reinstatement, inviting the plaintiff to get an order from the Court. I am satisfied that there was a lockout at this point and that it was unlawful because the problem between

the parties was a dispute about the interpretation, operation, or application of their employment contract (not a personal grievance as pleaded, but the Court is not free to overlook illegality of any kind). The first defendant should have used other remedies to resolve the dispute without interrupting the employment. The disputes procedure in the contract is far more suited to the resolution of the difficulty that faced the first defendant than unilateral action by it as the party physically in a position to impose it.

The choice to which that passage refers was between two alternative proposals conveyed by the Chaplaincy Committee's solicitors to the respondent's solicitors by letter dated 3 October 1994

1. that he resign as from 1 October on payment of six months' salary

(to be funded equally by the Methodist Church and by the committee); or

2. that he be suspended for a period of three months from 1 October on salary plus housing allowance pending resolution of his standing as a minister of the Methodist Church, the position to be reviewed after three months.

The letter from the Chaplaincy Committee's solicitors requested a decision by the respondent by 14 October 1994. No decision being forthcoming, the Chaplaincy Committee's solicitors wrote again on 28 October 1994 to the effect that the Committee had resolved that the second alternative should apply. It is plain from several passages in the judgment that the Chief Judge saw the proffer of alternatives and the subsequently unilateral decision to adopt the second as 'a demand for variation of the employment contract by means of an agreement that would permit the first defendant to do what currently it had no right to do'.

In considering that view of the history of the matter, it is of some importance to note that other references in the judgment suggest quite strongly, and unsurprisingly, that the Chief Judge probably regarded Mr H.D. Kirton, retired District Public Trustee, chairperson of the Chaplaincy Committee, as a reliable witness. With great respect to the Chief Judge, our attention was not drawn to, nor I have come upon, anything in the evidence of Mr Kirton or any other witness providing even a scintilla of support for the theory that the motives of the Chaplaincy Committee changed. On the contrary, the Chief Judge himself rightly said '... there is no difficulty in contemplating the implication into the contract of a term, provided it is of certain scope, to the effect that the plaintiff must remain

an ordained minister who has not been forbidden to officiate by the proper body or bodies of the church on a permanent or long term basis'. The evidence is overwhelming that, not only in August but at all times subsequently, the doubt about the status of the plaintiff or its consequences was the sole substantial reason why the Chaplaincy Committee gave him leave or suspended him from chaplaincy service. A suggestion that to any significant extent they were motivated otherwise would be quite artificial.

In appeals on questions of law '... it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarized by saying that the court should take that course if it appears that the commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained'. Edwards v. Bairstow [1955] UKHL 3; [1956] A.C. 14, 29, per Viscount Simonds. No further authority is required for such an elementary proposition. For this reason I think, fortified by the understanding that the other members of this Court hold the same view, that the finding of changed motives on the part of the Chaplaincy Committee and the consequent finding of lockout (within the meaning of the Employment Contracts Act) from a date in October cannot stand. A fortiori the same result must follow if the appeal is treated under s.132 as being on facts material for the purposes of s.73 as well as on law, but in the event it is sufficient to dispose of the appeal on law only and under s.135.

The Statutory Provisions

Against that background it is necessary to turn to the relevant provisions of the Employment Contracts Act 1991. By s.3(1), subject to the provisions of that Act, the Employment Tribunal and the Court have exclusive jurisdiction to hear and determine any proceedings founded on an employment contract. Correspondingly, by s.4, and again subject to the provisions of the Act, proceedings brought by any party to an employment contract and founded on that contract are to be determined before the Court or the Tribunal or both. The phrase 'subject to the provisions of this

Act' allows for (inter alia) rights of appeal to the Court of Appeal. More importantly for present purposes, an action for the tort of inducing breach of contract is not in the natural and ordinary meaning of words, or in standard legal classification, an action founded on the contract. Proof of a breach of contract is an essential ingredient in establishing the tort, but it is on the alleged tort that the action is founded. There is nothing in the Act to give any wider or unusual meaning to the expression

'founded on'. Accordingly any jurisdiction of the Court in tort must be derived from some provision other than ss.3 and 4.

Section 73 is such a provision. It enacts -

73. Jurisdiction of Court in relation to torts - (1) Where a strike or lockout is threatened or is occurring or has occurred and as a result proceedings are issued against any party to the strike or lockout and such proceedings are founded on any of the following torts, namely -

(a) Conspiracy; or

(b) Intimidation; or

(d) Interference by unlawful means with trade, business or employment, -

the Court shall have full and exclusive jurisdiction to hear and determine such proceedings.

(2) No court (other than the Court) shall have jurisdiction to hear and determine any action or proceedings founded on a tort specified in subsection (1) of this section and resulting from a strike or lockout.

(3) Where any action or proceedings founded on a tort specified in subsection (1) of this section is commenced in the Court, and the Court is satisfied that the action or proceedings resulted from participation in a strike or lockout that is lawful under section 64 of this Act, the Court shall dismiss that action or those proceedings, and no proceeding founded on such a tort and resulting from that strike or lockout shall be commenced in the High Court.

Section 73 gives the Employment Court full and exclusive jurisdiction to hear and determine proceedings founded on the tort of inducement of breach of contract if, but only if, a strike or lockout is threatened or is occurring or has occurred and as a result the proceedings are issued against any party to the strike or lockout. In New Zealand Labourers Union v. Fletcher Challenge Ltd [1988] 1 N.Z.L.R. 520 the Court of Appeal held under the Labour Relations Act 1987 that such preliminary issues as whether there was a strike and whether as a result proceedings founded on any

of the listed torts had been issued against a party to it were the subject of concurrent jurisdiction. They could be determined by the High Court in its general jurisdiction or by the then Labour Court, but in a case where serious questions of labour law were to be tried it would usually be preferable for the Labour Court jurisdiction to be resorted to. The same must apply to the Employment Court under the Act of 1991.

But, while the New Zealand Labourers Union case established that the specialist Court had concurrent and normally preferable jurisdiction over these preliminary issues, the judgment expressly pointed out that there were rights of appeal therefrom to the Court of Appeal: see pp. 523 and 524.

It was unnecessary in that case and is again unnecessary in the present case to discuss how far, if at all, the specialist Court's determination of such preliminary issues is open to judicial review as distinct from appeal, in the light of the unusually wide privative provisions of s.104(5) and (6) of the 1991 Act. That subject has been considered in New Zealand Rail Ltd v. Employment Court [1995] 3 N.Z.L.R. 179, where the limitations on judicial review are stressed. For completeness it may be added that by virtue of s.131 any judicial review proceedings would have to be brought in the Court of Appeal.

In the present case it is on appeal that we are considering the Employment Court judgment. So considering it, one must note that the threat or occurrence of a strike or lockout is one essential condition of the Employment Court's jurisdiction under s.73. The statutory definition of

'lockout' is in s.62 -

62. Definition of lockout - (1) In this Act the term 'lockout' means the act of an employer -

(a) In closing the employer's place of business, or suspending or discontinuing the employer's business or any branch thereof; or

(b) In discontinuing the employment of any employees, whether wholly or partially; or

(d) In refusing or failing to engage employees for any work for which the employer usually employs employees -

with a view to compelling any employees, or to aid another employer in compelling any employees, to accept terms of employment or comply with any demands made by the employer.

(2) In this Act the expression 'to lockout' means to become a party to a lockout.

So far as is relevant to the present case, it will be seen that, to give jurisdiction, the act or acts must have been committed with a view to compelling any employees to accept terms of employment or comply with any demands made by the employer. As to 'employees', I am disposed to think, and will assume for the purposes of this judgment, that there is nothing in s.62 or elsewhere in the Employment Contracts Act sufficient to exclude the ordinary rule laid down in s.4 of the Acts Interpretation Act 1924 that words importing the plural number include the singular number.

But, as already indicated, I am unable to accept that it is a substantially accurate description of the motives of the Chaplaincy Committee in putting alternative proposals to the respondent and later in adopting one of them (suspension on pay and housing allowance, subject to review after three months) to say that they meant to compel him to accept terms of employment or comply with any demands made by them. In my opinion the only reasonable interpretation of the evidence is that they were in doubt about the effect of the complaint that had been made against him on his standing with the Church; and that they were trying to resolve the difficulty fairly and practicably on at least a temporary basis.

On that view it is unreal to try to force the facts to fit s.62, and the Employment Court did not have jurisdiction under s.73. There may be other reasons against the existence of such jurisdiction. To take only one example, I am not clear that the Church had an intent to procure the Chaplaincy Committee to commit a breach of their contract with the respondent. By the written contract they had the right of termination on three months notice. Failing an agreed settlement with him, which the Church may well have both hoped for and sought to bring about, the Committee could have exercised that power. It is enough, however, to rule out s.73 on the ground that the Chaplaincy Committee did not have a motive falling within s.62.

Let it be repeated that on behalf of the respondent counsel has maintained that the case was never put to the Employment Court under s.73. During the later stages of the argument in this Court, when difficulties under s.104 (to be discussed shortly) were made clear to her, his counsel, Mrs Harley, sought to support the judgment in the alternative under s.73. She did so both orally and in a subsequent memorandum for which leave was given. Perhaps this was an argument of despair. At all events, as already explained, with all respect for counsel I found it unconvincing.

In fairness to the learned Chief Judge it must be recorded that counsel for the Church raised no jurisdictional challenge in the Employment Court. Mr Smith told us that he had in mind Medic Corporation Ltd v. Barrett [1992] 3 E.R.N.Z. 523 (also to be discussed shortly). It would have been better if he had reserved the right to challenge on appeal what was said in that case, instead of apparently accepting the jurisdiction; but perhaps this is wisdom after the event. Jurisdiction cannot be given by consent. The correctness of Medic was open to argument in this Court, although the omission to take the point in the Employment Court has a bearing on costs.

The omission has had another consequence. In the judgment now under appeal the Chief Judge, although obviously conscious that the question of jurisdiction called for some consideration (see [1995] 1 E.R.N.Z. at 698), dealt with it very briefly, referring to Medic as the first of a long series of cases, noting that no challenge to the Court's jurisdiction was mounted by the Church, and summarising Medic and the later cases as settling that 'The Court has jurisdiction to entertain an action based on this tort [inducement of breach of contract] only in two situations:

1. where there has been a strike [this is presumably a general reference to s.73], and

2. where the action is concerned with or related to an employment contract'.

The second proposition is based on s.104(1)(h) and possibly other provisions in s.104, so it is now desirable to set out all the possibly relevant provisions of that section -

104. Jurisdiction of Court - (1) The Court shall have jurisdiction -

...

(f) To hear and determine any question connected with any employment contract which arises in the course of any proceedings properly brought before the Court:

(g) To hear and determine any action founded on an employment contract:

(h) Subject to subsection (2) of this section, to make in any proceedings founded on or relating to an employment contract any order that the High Court or a District Court may make under any enactment or rule of law relating to contracts:

...

(l) To hear and determine any proceedings founded on tort and of a kind specified in section 73 of this Act:

(m) To hear and determine any application for an injunction of a type specified in section 74 of this Act:

...

(3) In all matters before it (other than any matter before it under section 57 or section 73 or section 74 or section 105 of this Act or a matter requiring the exercise of a power under subsection (1)(h) of this section), the Court shall have full and exclusive jurisdiction to determine them in such manner and to make such decisions or orders, not inconsistent with this or any other Act or with any applicable collective employment contract, as in equity and good conscience it thinks fit.

...

In Medic Chief Judge Goddard delivered orally an early judgment, stressing that it was required by the urgency of the case. The action was against two former employees of the plaintiff company and, as third defendant, a company incorporated by them. Judgment was given against all three defendants for damages for the wrongful use of confidential information. The action failed on claims against the first two defendants of breaches of covenants in restraint of trade, and on a claim against the third defendant for inducement of breach of contract: neither causation nor additional damage was found established on this cause of action. The oral reasons for judgment do not seem entirely consistent as to the meaning of 'founded on' (contrast p.530 of the report with p.532). I have already dealt with that question. In reliance on authorities cited by him, the Chief Judge placed a wide meaning on 'relating to' in s.104(1)(h). Beyond doubt that expression does have a wide meaning. Nevertheless para. (h) is concerned with the kind of orders that the Employment Court may make. In itself it is not the source of jurisdiction to hear and determine any proceedings 'relating to' an employment contract. The same is to be said of paragraphs (f), (g) and (i).

Paragraph (l) refers back to s.73, a convenient technique in a compendious statement of the Court's jurisdiction. It does not purport to extend the scope of s.73. Rather, it reinforces the limitations in s.73 by including the words 'and of a kind specified in section 73 of this Act'. No other provision in s.104 confers jurisdiction to hear and determine any proceedings founded on tort. Paragraph (m) corresponds to s.74 which, as to injunctions to prevent strikes or lockouts, is complementary to s.73.

The foregoing conclusion accords with the legislative history. In New Zealand Baking Trades Union v. General Foods Corporation [1985] 2 N.Z.L.R. 110 it was pointed out in this Court that the Arbitration Court had no jurisdiction to deal with a common law action in tort for inducing breach of contract. In New Zealand Labourers Union v. Fletcher Challenge Ltd (supra) it was noted that the 1987 Act had introduced some major changes, notably ss.242 and 243 which with immaterial differences correspond to ss.73 and 74 of the present Act. The important point is that the legislature has definitively prescribed the jurisdiction of the Employment Court over proceedings for inducement of breach of contract by the specific provisions in that regard. There is no sound basis for any suggestion that in some way s.104 was intended to give a wider jurisdiction over such proceedings. And, if that had been intended, wide rights of appeal corresponding to those conferred by s.132 would surely have been added or the scope of s.132 extended.

The conclusion is inevitable that as to jurisdiction over inducement of breach of contract Medic and the cases following it have gone too far. As against the third defendant in Medic the same may apply to the cause of action for misuse of confidential information; but it is perhaps better to leave that point until a case requiring its determination arises.

As Mrs Harley emphasised, a considerable line of Employment Court decisions have followed Medic, but all the cases are of course of very recent years and the question has never been

taken to this Court previously. Hence it could not be right to say that the jurisdiction claimed in those cases is well settled.

In the judgments of McKay and Thomas JJ. in this case, which I have had the advantage of reading in draft, there are more detailed accounts of the facts and some additional reasons are given for rejecting the view that the Employment Court had jurisdiction over the claim for inducement of breach of contract. I am in general agreement with my brothers on these further matters.

It may be suggested by some that the result which the Employment Contracts Act causes this Court to reach as to the limited nature of the Employment Court's tort jurisdiction is inconvenient. But the extent to which the specialist Court should be given a jurisdiction carved out from that hitherto confined to the general Courts is a question of policy for the legislature. I do not propose to intrude an opinion one way or the other on that question.

In summary, then, I conclude (i) that under the Employment Contracts Act 1991 the only jurisdiction of the Employment Court over proceedings founded on the tort of inducement of breach of contract is that conferred by s.73; (ii) that the present case does not fall within s.73 as there was no lockout within the meaning of the Act.

For these reasons I would allow the appeal and pursuant to s.135(3) reverse the decision of the Employment Court on the cause of action against the Church founded on alleged inducement of breach of contract. The award of damages and any costs orders reflecting it should be set aside (with leave reserved to apply to the Court of Appeal on any question of apportionment) and the proceeding should be dismissed for want of jurisdiction insofar as it relates to that alleged tort. By reason of the belated raising of the jurisdiction point by the Church, I would make no substituted order for costs in either Court.

There should be an order prohibiting any report of the name of the complainant to the Church or of any particulars likely to lead to disclosure of her identity. It will be seen that neither her name nor any such particulars are given in the present judgments.

The Court being unanimous, the case will be disposed of accordingly.

Solicitors:

Cairns Slane, Auckland, for Appellant

Fell and Harley, Nelson, for Respondent

_{IN THE COURT OF APPEAL OF NEW ZEALAND
C.A.130/95}

BETWEEN THE CONFERENCE OF THE METHODIST CHURCH OF NEW ZEALAND

_Appellant

_{AND ROBIN JOHN GENGE GRAY}

_Respondent

Coram: Cooke P (7.2.96) McKay J

Thomas J

_{Hearing:7, 8 and 9 February 1996}

Counsel: D G Smith and R J Scott for Appellant

R P Harley for Respondent

_{Judgment: 24 April 1996}

____________________________________________________________________

JUDGMENT OF McKAY J

____________________________________________________________________

This appeal from a judgment of the Employment Court raises a number of important questions as to the jurisdiction of that Court. Before identifying the issues it is necessary to describe briefly the factual background which led to the proceedings.

The appellant, Mr Gray, was on 3 November 1984 entered on the List of Presbyters in Full Connexion with the Conference of the Methodist Church of New Zealand. The following day he was duly ordained as a fully accredited minister. For a period of some years he was “stationed” by the Methodist Church in parish work in Timaru. He then applied to the Nelson Methodist Presbyterian Hospital Chaplaincy Committee for a hospital chaplaincy at Nelson, and was duly appointed by the Committee and took up his duties with it on 1 September 1992. He signed an employment contract with the Committee. The contract included an acknowledgment by him that he remained subject to

the rules of his Church relating to discipline. It also stated as one of the conditions of his employment that he was expected to maintain his denominational links and participate in the life of his Church to the extent his employment allowed. The Employment Court found that there was an underlying assumption in several provisions of the contract that the chaplain would be in a position to fulfil liturgal functions, such as administering the last rites and conducting funeral obsequies and marriage ceremonies.

The Methodist Church received in March 1994 a complaint against Mr Gray from a female parishioner in Timaru. The complaint was of a long running sexual relationship, which she complained had been damaging and hurtful. The relationship had arisen while he was in a pastoral relationship with the woman, he being a married man. He at no time sought to deny the relationship, although stressing that it never progressed to intercourse. The officials of the Church proceeded to deal with the complaint under new sexual harassment procedures which were in the course of being introduced but had not yet been finally adopted by the Church. They notified him of the fact of the complaint, but not the detail, and obtained his agreement to submit to mediation under the new procedures. A mediation followed, and resulted in a settlement between Mr Gray and the complainant. As part of the settlement certain admissions were made by Mr Gray, who also agreed to pay monetary compensation and to take counselling in the area of professional breach issues. The settlement was recorded in writing and signed by the parties and by those assisting them. It recorded an agreement as to confidentiality, but that there could be disclosure to the Central Complaints Committee.

The Chief Judge was critical of the way in which the Church, without any investigation into the complaint, had offered Mr Gray the opportunity to resolve the matter by mediation with the complainant, with the implication that that would be the end of the matter. Instead, the result of the mediation was reported to church officials, and by them to the pastoral committee. The Methodist Conference is the governing body of the Church, and the President of the Conference is empowered to act when the Conference is not in session. On 29 August 1994 the President, acting on the advice of the Pastoral Committee, removed Mr Gray’s name from the List of Presbyters in Full Connexion with

the Conference. The basis, as conveyed to Mr Gray by two members of the Pastoral Committee and confirmed by letter from the Secretary on 1 September, was that it was not appropriate for a Presbyter in Full Connexion to continue in that status where over a number of years he had “breached professional boundaries in the area of sexual harassment/abuse”. The Pastoral Committee considered there was no distinction between a parish context and a chaplaincy context, and that it was not appropriate to allow Mr Gray to exercise any form of ministry as a Presbyter in Full Connexion with the Methodist Church.

Mr Gray was invited by the Church to resign from his position as a presbyter, although he had been removed in any event from that position, and from his position as chaplain, but he did not do so. The Church also called on and wrote to the Chaplaincy Committee to advise it of the Church’s decision.

The Chaplaincy Committee reacted cautiously. Its chairman had been advised that if Mr Gray did not resign as a presbyter, his authority as a Methodist minister would be withdrawn. He would have the right to appeal to the Conference, but the Conference would be expected to act on the recommendation of the Committee which had made the decision. The chairman called a meeting of the Chaplaincy Committee, which was attended by Mr Gray’s solicitor, Mr Harley. Mr Harley told the Committee that Mr Gray’s position as chaplain had been terminated, and proceedings were being initiated against the Committee for wrongful dismissal, claiming reinstatement and damages of

$60,000 to $200,000. The Committee took the view that it had not dismissed Mr Gray, and that if the Methodist representatives had purported to dismiss him from the chaplaincy then they had acted without authority. They conveyed these views by a letter written by their solicitor to Mr Harley on

8 September. They expressed concern that if Mr Gray was no longer a minister of the Methodist Church, he would no longer be able to fulfil all his functions as a chaplain. It seemed to the Committee, at least in the medium to long term, that he could not continue unless he was a minister of the Methodist Church or of another Church. In the meantime, the letter said the Committee had granted him a month’s leave with pay, “due to his understandable upset about recent events”.

The Chaplaincy Committee met again on 30 September, and instructed its solicitor to convey to Mr Gray two proposals in the alternative:

“1. That he resign as from 1 October 1994 on payment of six months’ salary which would be funded by three months’ contribution from the Methodist Church and three months’ salary from the Committee as his employer; or

2. That Mr Gray be suspended for a period of three months from

1 October 1994 on salary (plus housing allowance) pending resolution of the question of his standing as a Minister of the Methodist Church, the position to be reviewed after three months.”

The solicitor’s letter, sent on 3 October, requested a decision by 14 October. No reply was received to these proposals. The Chaplaincy Committee met on 28 October and resolved to apply the second alternative. This was conveyed through the respective solicitors by letter the same day. Mr Gray was informed that he was suspended from his employment by the Committee for three months from 1 October on salary plus housing allowance, “pending resolution of the question of his standing as a Minister of the Methodist Church, the position to be reviewed three months from

1 October”. The suspension on full pay was later extended, and eventually continued until his reinstatement following the judgment of the Employment Court on 31 May 1995.

There were meetings and correspondence between Mr Gray and the Methodist Church, including an unsuccessful application by Mr Gray to the Methodist Conference to overturn the earlier decision and reinstate him to the List of Presbyters in Full Connexion. These events do not bear on the issues in the present appeal.

The Proceedings

The present proceedings were issued by Mr Gray in November 1995. The causes of action originally pleaded were reduced to six by an amended statement of claim filed during the ten day hearing in the Employment Court. The Chaplaincy Committee was named as first defendant, and the Conference of the Methodist Church of New Zealand as second defendant. Employment contracts were alleged to exist between Mr Gray and each of the defendants. The causes of action were as follows:

1. Breach of employment contract by the Church.

Inducement by the Church of breach by the Chaplaincy Committee of its employment contract.

3. Breach by the Church of an implied term in its employment contract.

4. Breach by the Chaplaincy Committee of the employment contract.

5. Unlawful lockout by the Chaplaincy Committee.

6. Review of the Church’s decision removing him from the List of Presbyters in

Full Connexion.

The Employment Court held that Mr Gray was not at the relevant time employed by the Church, but was employed exclusively by the Chaplaincy Committee. It dismissed the first, third and sixth causes of action. It found against the Chaplaincy Committee on the fourth and fifth causes of action, awarding damages of $7,000 and $250 respectively, and declaring that the suspension was unlawful and should end. It found against the Church on the second cause of action, inducement of breach of contract by the Chaplaincy Committee, and awarded damages totalling $35,500.

The Chaplaincy Committee accepted the judgment, and reinstated Mr Gray in his employment. It has presumably paid the damages awarded against it. The Church has appealed from the judgment against it on the second cause of action, inducement of breach of contract. There has been no cross appeal by Mr Gray, and no attempt to support the judgment on other grounds than those found by the Chief Judge.

Jurisdiction

The Church’s Notice of Motion on Appeal is on the ground that the judgment is erroneous in law. It was filed in reliance on section 135. That section enables an appeal on the ground of error in law from any decision of the Court, other than a decision on the construction of any individual or

collective employment contract. Mr Smith, counsel for the Church, gave notice shortly before the hearing in this Court that he would apply to amend the notice of motion on appeal and the grounds of appeal to enable the appeal to be dealt with also under section 132. That section gives a general right of appeal, on both fact and law, from an order of the Employment Court in proceedings under section 73 of the Act. Mr Smith contended that the Employment Court’s jurisdiction in relation to a breach of an employment contract could only arise under section 73. He also contended, as his first ground of appeal, that the conditions required by section 73 were not satisfied in this case, so that the judgment against the Church had been given without jurisdiction.

Mrs Harley, for the respondent, submitted that the Church was not now entitled to raise this point, because it had accepted jurisdiction at earlier stages of the proceedings. In its judgment, now reported in [1995] 1 ERNZ 672, the Employment Court recorded at 679 that Mr Gray’s cause of action against the Church in tort was “not assailed by any doubts of a jurisdictional nature”, and at

709 that in respect of this cause of action “no challenge to the Court’s jurisdiction was mounted by the second defendant”, i.e. the Church. However, the parties cannot by waiver or consent confer on the Employment Court a wider jurisdiction than it has by statute. The Church cannot be precluded from raising the issue in this Court, although its earlier acquiescence may be relevant on the question of costs.

The Employment Court took the view (at 709) that it had jurisdiction to entertain an action based on the tort of breach of contract only in two situations: (1) where there has been a strike; and (2) where the action is concerned with or is related to an employment contract. It regarded this point as being now well settled, and referred to its decision in Medic Corp Ltd v Barrett [1992] 3 ERNZ

523 “as the first of the cases saying so in what is now a long series”. In that case no question of jurisdiction was raised by counsel, and the claim for inducement of breach of contract was considered and dismissed.

Mrs Harley, in this Court, initially disclaimed any reliance on section 73. She relied instead on section 3(1) and section 104(f), (g) and (h), but not (l). She informed us that she had at no stage of the proceedings before the Employment Court sought to rely on section 73. She submitted that the case did not come before the Employment Court under section 73 either by the pleadings, the conduct of the case, the submissions or the judgment. Her argument was that the claim for inducement of breach of contract did not fall within section 73, so that the right of appeal was only the limited right conferred by section 135. Faced with the difficulties of establishing jurisdiction under other provisions of the Act, she later argued as an alternative that section 73 would in fact apply.

Section 3(1) gives the Court exclusive jurisdiction to hear and determine proceedings “founded on an employment contract”. It was argued that these words are wide enough to cover a claim in tort against a third party for inducing a breach of the contract, as the existence of the contract and its breach are essential elements in the cause of action. In one sense a claim may be said to be “founded on” all of the essential elements of the cause of action. In their context in section 3(1), however, the more natural meaning is that the words “founded on an employment contract” refer to proceedings against the other party to the contract. They clearly cover proceedings for the interpretation of such a contract, or for rectification of the contract, or for damages for breach of the contract. They would cover claims under the Contractual Mistakes Act 1977 and the Contractual Remedies Act 1979. A claim in tort for inducement of breach of contract is founded on the tortious act, not on the breach itself. The existence of the contract is an essential prerequisite, and the fact of breach must be proved, but it is the defendant’s act of inducement that is more aptly described as the “foundation” of the claim.

Section 104 purports to be a comprehensive section setting out the extent of the Employment Court’s jurisdiction. Not only does it state that jurisdiction in the series of paragraphs in subsection (1), but these expressly include the power to hear and determine matters and to make orders where authority is given under other sections of the Act. There are specific paragraphs

referring to sections 94, 56, 57, 73, 74 and 105. The paragraphs relied upon by Mrs Harley were the following:

“The Court shall have jurisdiction -

...

(f) To hear and determine any question connected with any employment contract which arises in the course of any proceedings properly brought before the Court:

(g) To hear and determine any action founded on an employment contract:

Paragraph (f) clearly confers no more than an incidental power. It can arise only “in the course of proceedings properly before the Court”, so that the jurisdiction for the proceedings must be found elsewhere. Where, for example, there are proceedings brought for moneys alleged to be payable under an employment contract, the validity and terms of the contract may be in issue, and there may be questions of agency or of the extent of an agent’s authority which arise and have to be determined. Paragraph (f) is not so broad as to permit such a proceeding to include as an additional cause of action some quite different claim, for example a claim for defamation.

Paragraph (g) gives jurisdiction in claims “founded on” an employment contract. For the reasons given in regard to section 3(1), I do not regard these words, in their context, as covering every claim in which the existence of the contract is an element of the cause of action, in the sense that it is a fact which it is necessary for the plaintiff to establish. An action for inducement of breach is founded on the tort, not on the contract, although the contract is a necessary element in it. The expression “founded on” is used also in section 73, where the context is “founded upon any of the following torts”. This tends to support what I think is the ordinary meaning of the words.

Paragraph (h) is limited to remedies. Where there is a proceeding “founded on or related to an employment contract” the Employment Court may make any order which the High Court or a District Court may make in respect of other contracts. This would include orders by way of

declaration, injunction, judicial review or prerogative writ, and such orders as can be made under the Contractual Mistakes Act 1977 and the Contractual Remedies Act 1979. The jurisdiction for the substantive cause of action must be found elsewhere. If the proceedings are “founded on” an employment contract, they will come within paragraph (g). They will be “related to” an employment contract if, for example, they seek to restrain a strike or a lockout under section 74 and section 104(1)(m), or if they seek review of a decision of an employer under section 105 and section 104(1)(n).

Section 104(3) provides that, with certain exceptions, the Court has full and exclusive jurisdiction to determine matters before it “in such manner” and to make such orders “as in equity and good conscience it thinks fit”. This also deals with the “manner” of determination and with the remedies available. It does not enlarge the basic jurisdiction. Subsection (5) is a privative provision, under which decisions of the Employment Court are not open to challenge other than by appeal except on the ground of lack of jurisdiction, which by subsection (6) is narrowly defined. The challenge in the present case is clearly within this definition. It is contended that the Employment Court had “no entitlement to enter upon the inquiry” as to the claim in tort for damages for inducement of breach of contract.

I conclude, therefore, that the finding that the Church had been guilty of inducement of breach of contract, and the award of damages against it, were outside the jurisdiction of the Employment Court under any of these provisions. They will be outside the jurisdiction unless they can be brought within section 73, and hence within section 104(1)(l):

“To hear and determine any proceedings founded on tort and of a kind specified in section 73 of this Act.”

Jurisdiction: Section 73

Section 73 provides:

“(1) Where a strike or lockout is threatened or is occurring or has occurred and as a result proceedings are issued against any party to the strike or lockout and such proceedings are founded on any of the following torts, namely, -

(a) Conspiracy; or

(b) Intimidation; or

(d) Interference by unlawful means with trade, business, or employment - the Court shall have full and exclusive jurisdiction to hear and determine such

proceedings.

(3) ...”

The subsection gives “full and exclusive” jurisdiction to the Employment Court in claims for inducement of breach of contract in certain cases. The section applies only where a strike or lockout is threatened or is occurring or has occurred. There must be proceedings issued against a party to the strike or lockout. The proceedings must be founded on one of the specified torts, in this case inducement of breach of contract. Subsection (2) then provides that no other court is to have jurisdiction to hear and determine proceedings founded on any of the specified torts and resulting from a strike or lockout.

In her alternative argument, Mrs Harley relied on the finding of the Employment Court that the Committee had unlawfully “locked out” Mr Gray. The term “lockout” is defined in section 62, as follows:

“In this Act the term “lockout” means the act of an employer -

(a) In closing the employer’s place of business, or suspending or discontinuing the employer’s business or any branch thereof; or

(b) In discontinuing the employment of any employees, whether wholly or partially; or

(d) In refusing or failing to engage employees for any work for which the employer usually employs employees -

with a view to compelling any employees, or to aid another employer in compelling any employees, to accept terms of employment or comply with any demands made by the employer.

(2) In this Act the expression “to lockout” means to become a party to a lockout.”

As the Employment Court pointed out at 699, there are two elements. The first is the factual element, action of a kind described in the paragraphs (a) to (d). The second is the mental element, that the action is with a view to compelling employees to accept the employer’s terms or to comply with the employer’s demands. The Employment Court’s findings were expressed at 700 as follows:

“In this case the real motive for suspending the plaintiff in the first place was not to get him to agree to anything but to enable the position to be clarified as to his status. While, as I have held, the first defendant was not entitled to suspend him for this purpose on the basis of incorrect information that the plaintiff’s status was in doubt, it cannot be taken to have done so with a view to extracting some concession from the plaintiff. The cause of action based upon an alleged lockout consisting of the suspension therefore fails and must be dismissed.

The position changed later. The first defendant gave him, if not an ultimatum, a choice between courses of action each of which involved a variation of his employment contract and, when he failed to accept either, unilaterally imposed one, but in the meantime refused or failed to take him back when requested. At this point, it becomes virtually impossible to separate the fact of continued suspension from the demand that the plaintiff should accept a new deal of a very poor hand. To reinstate the plaintiff to full duties would have relieved him from the pressure of making a Hobson’s choice; to keep that pressure on, the first defendant was able to tighten the screws by setting its face against reinstatement, inviting the plaintiff to get an order from the Court. I am satisfied that there was a lockout at this point and that it was unlawful because the problem between the parties was a dispute about the interpretation, operation, or application of their employment contract ... .”

The Court thus found a lockout in early October 1994. The judgment records at 689 that at the meeting on 30 September 1994 the Committee resolved to convey to Mr Gray two proposals in the alternative:

“(1) That he resign as from 1 October on payment of 6 months’ salary (to be funded equally by the Methodist Church and by the committee); or

(2) That he be suspended for a period of 3 months from 1 October on salary plus housing allowance pending resolution of his standing as a minister of the Methodist Church, the position to be reviewed after 3 months.”

These were conveyed through the respective solicitors by the letter of 3 October, and following Mr Gray’s failure to make a specific reply the Committee on 28 October resolved to implement the second alternative. No doubt the letter is capable of being regarded as a “demand” of the employer for the purposes of section 72. A discontinuance of the employment, even only partially, with a view to compel his acceptance of one or other of the alternatives would thus be a lockout. The implementation of the second alternative could, I think, be regarded as a partial discontinuance of the employment. But it cannot be said to have been with a view to compelling Mr Gray’s acceptance of either of the “demands” made by the letter of 3 October. By implementing the second proposal, the suspension, the Committee made Mr Gray’s acceptance irrelevant. It was a unilateral act, taken apparently in good faith to protect Mr Gray’s position until he could clarify his position with the Church, but certainly not taken with a view to compelling him to agree to it. It took its effect from the Committee’s decision, and did not depend on his agreement.

There was, therefore, no factual basis for the Employment Court’s finding that there was in this case a lockout by the Committee of Mr Gray. It is unnecessary, therefore, to consider the difficult question whether there can be a “lockout” for the purposes of section 62 where only one employee is involved. Nor need we be concerned whether the suspension “related to a dispute”, so as to make any lockout “unlawful” under section 63; nor whether the Committee’s action in suspending Mr Gray was justified on the grounds of safety or health of hospital patients under section 71, so as to be “lawful” by virtue of section 64. The Committee has not appealed the judgment against it, and it is sufficient in this appeal to hold that there was no lockout, and accordingly no basis under section 73 for the Employment Court to have jurisdiction over the claim against the Church for inducement of breach of contract.

If I had reached the contrary view on the question of lockout, Mr Gray would still have had to show that the proceedings were not only founded on the tort of inducement, but were issued “against any party to the strike or lockout”. The section appears designed to cover such situations as a “black ban”. In such cases, for example, transport workers may go on strike in order to compel a manufacturer to give way to demands made by his own employees. The manufacturer may bring an

action against the parties to the strike for inducing the breach by the manufacturer’s own employees of their employment contracts. Mrs Harley sought to overcome this difficulty by contending that by its actions the Church had become a party to the lockout by the Committee, just as, she submitted, a trade union may by its actions become a party to a strike. It is unnecessary for me to decide this question, as in my view there was no lockout in this case.

For the same reason, it is unnecessary for me to consider the further arguments raised by Mr Smith on behalf of the Church, namely that the suspension of Mr Gray by the Committee was not in the circumstances of this case a breach of contract by the Committee, and that if there was a breach of contract by the Committee, then it was not induced by the Church. It is likewise unnecessary for me to deal with Mr Smith’s arguments as to damages.

I would accordingly allow the appeal, on the ground that the Employment Court lacked jurisdiction to hear and determine the claim against the Church for inducement of breach of contract. As the challenge to jurisdiction was not raised before the Employment Court, I would make no order as to costs. I would continue the order made by the Employment Court at the commencement of the hearing prohibiting the publication of the name of the complainant or of any other details capable of leading to her identification.

The result will leave it open to Mr Gray, if he chooses, to bring fresh proceedings in tort in the High Court or District Court. He may feel encouraged to do so by some of the criticisms of the Church and of the Committee expressed in the judgment of the Employment Court. I should make it clear that I do not share the critical views expressed in that judgment. Certainly the Church was wrong in not following the old procedures which were still in force at the relevant time, but its officers appear to have acted in good faith in the view they took of Mr Gray’s behaviour and of his suitability to continue as a minister, and in the actions they took. The Committee, as his employer, appears to have had not unreasonable concerns, but to have acted as fairly as possible by suspending Mr Gray on full pay pending clarification of his position with the Church. The various other issues

which I have not found it necessary to deal with in this judgment will all require careful consideration by Mr Gray’s advisers if he is to contemplate further proceedings.

Solicitors

Cairns Slane, Auckland, for Appellant

Fell & Harley, Nelson, for Respondent

_{IN THE COURT OF APPEAL OF NEW ZEALAND CA
130/95}

BETWEEN THE CONFERENCE OF THE METHODIST CHURCH OF NEW ZEALAND

_Appellant

A N D

_{R J G GRAY}

_Respondent

Coram: Cooke P (7.2.96) McKay J Thomas J

Hearing: 7, 8 and 9 February 1996

Counsel: D G Smith and R Scott for Appellant

Raylee P Harley for Respondent

_{Judgment: 24 April 1996}

_{JUDGMENT OF THOMAS J}

The questions in issue

Mr Gray brought proceedings in the Employment Court against his employer, the Nelson Methodist Presbyterian Hospital Chaplaincy Committee for, among other causes, breach of his contract of employment and damages for unlawful lockout. The Chaplaincy Committee was sued as first defendant. At the same time Mr Gray sued The Conference of the Methodist Church of New Zealand as the second defendant for inducement of breach of contract. He substantially succeeded against both the Committee and the Church. His Honour, Chief Judge Goddard, awarded Mr Gray

$7,000 for breach of contract and $250 for unlawful lockout. He awarded damages of

$35,500 against the Methodist Church for inducement of breach of contract.

Only the Methodist Church has appealed. Its appeal raises important questions relating to the jurisdiction of the Employment Court.

The first question is whether the Employment Court had jurisdiction to hear the tortious claim against the Church under s 73 or s 104(1)(l) of the Employment Contracts Act 1991. This question raises a number of further issues; whether the Chief Judge's finding that there was a lockout can be supported on the facts; whether the Church can be said to be a "party" to any unlawful lockout for the purposes of s 73; and whether there can be a lockout against a single employee. These issues require an examination of the scope and true meaning of ss 73 and 104(1)(l).

The second issue is whether, if the Employment Court does not have jurisdiction to hear and determine Mr Gray's claim against the Methodist Church under s 73 or s 104(1)(l), it can exercise jurisdiction to do so under paragraphs (f), (g) or (h) of s

104(1). The importance of this question is manifest as the Employment Court has asserted this jurisdiction in a series of cases since 1992.

Underlying the questions of interpretation which are in issue is a fundamental question of legislative policy. It is the extent to which, in enacting s 73 of the Employment Contracts Act, Parliament intended to vest the Employment Court with jurisdiction in tort which had, prior to the enactment of s 242 of the earlier Labour Relations Act

1987, been within the exclusive jurisdiction of the High Court.

These questions can be resolved pursuant to an appeal under s 135 of the Act.

First, however, it is necessary to traverse the facts. I propose to do so at some length, referring where necessary to the primary documents and the direct evidence in order to provide an objective account of the facts. This course is essential as the Chief Judge's factual findings cannot be sustained in material respects.

The background facts

Mr Gray was entered on the list of Presbyters in connection with The Conference of the Methodist Church of New Zealand on 3 November 1984. He was ordained as a minister the following day. In 1988 he was appointed to a parish ministry in Timaru. He remained there for four years.

Mr Gray was then appointed to a hospital chaplaincy in Nelson. As from 1 September

1992 his employer became the Chaplaincy Committee. Mr Gray completed a contract of employment with the Committee and, although there was no express provision on the point in the contract, it was understood that he would remain an ordained minister while carrying out his duties as a chaplain. Indeed, the Chief Judge ultimately held that there was an implied term in the contract to this effect, and that finding is not in issue in this appeal. The finding recognises the fact that, although employed by the Chaplaincy Committee, Mr Gray carried out his chaplaincy work as an ordained minister of the Methodist Church.

In March 1994, the Church received a complaint from a woman parishioner in Timaru. She charged Mr Gray with sexual harassment. The Church properly treated the complaint seriously. By letter dated 12 April 1994, and at the request of a sexual harassment/abuse procedures committee of the Church, a member wrote to Mr Gray advising him that the parishioner had complained she had experienced a sexual relationship with Mr Gray over a three and a half year period. This experience, she

had alleged, had been hurtful and damaging to her. The writer indicated that the parishioner had said that she would like to deal with the matter in a way which was helpful and healing to Mr Gray as well as herself. Mediation was then suggested under the Church's sexual harassment/abuse procedures, it apparently not being appreciated by the committee that these procedures were not yet in force.

Mr Gray agreed to the mediation, however, and a meeting was held on 2 May 1994. It resulted in a "settlement" which was reduced to writing. Although Mr Gray was to later complain about the procedure which was followed, he acknowledged "ownership" of the hurt that he had caused the parishioner arising out of "the breach of professional boundaries". He agreed to write a letter of apology to the parishioner and to continue his participation in boundary and other professional courses which addressed issues of "professional breach". He also agreed to pay compensation to the parishioner of

$5,000. The signed document was duly provided to representatives of the Church, who in turn reported to the pastoral committee of the Church.

Mr Gray was then advised that the pastoral committee would, after certain information had been received, consider whether disciplinary measures should be taken against him. Consideration also would be given to whether Mr Gray would remain on the list of Presbyters in Full Connection of the Methodist Church. At all times the Church focused, not on the sexual activity as such, but on the fact that Mr Gray had infringed the appropriate professional boundaries between a minister and a parishioner in the course of his ministry.

Mr Gray's own attitude can be recounted at this point. He does not deny that he had a relationship with the parishioner for a period of up to 18 months, commencing in 1989. He admits that the relationship included a physical involvement of a sexual nature, but he denies that sexual intercourse ever took place. He also denies that the relationship

was abusive of the parishioner. He regards himself as competent and claims that the counselling and supervision which he has since received has made him fully aware of the need to exercise greater restraint in maintaining appropriate and professional boundaries between himself and those who seek his support. In his later affidavit to the Court, Mr Gray claims that it is he, and not the parishioner, who is the victim. He says that she manipulated and controlled him to such an extent that he was unable to disengage himself from the relationship with her.

On 29 August 1994 the President of the Methodist Church, in the name of The Conference of the Church, removed Mr Gray's name from the list of Presbyters in Full Connection. Mr Gray had no advance notice of this move. The next day, however, two members of the Church met with both the Chaplaincy Committee and Mr Gray.

The representatives of the Church advised the members of the Chaplaincy Committee that Mr Gray had been removed from the list of Presbyters in Full Connection. They said that they were meeting with Mr Gray that night to require him to resign as a Presbyter and that, if he did not resign, his authority as a minister would be withdrawn. The members of the Chaplaincy Committee were told that the reason for this action against Mr Gray was misconduct of a sexual nature. It was their expectation that this action against Mr Gray would immediately have some consequence or influence upon his ability to continue as a hospital chaplain. The Chaplaincy Committee was informed (erroneously, as it has now been held) that Mr Gray's right of appeal was to the Methodist Conference, and that the Conference could be expected to act on the recommendation of the committee.

The representatives of the Church then saw Mr Gray. They requested his resignation from both the ministry and the chaplaincy, adding that his removal from the list did not

depend upon him resigning. But Mr Gray declined to resign from either the ministry or the chaplaincy.

Consequent upon these meetings, the general secretary of the Church wrote to both

Mr Gray and the Chaplaincy Committee. The letter to Mr Gray is dated 1 September

1994. After briefly reiterating what had occurred since the receipt of the parishioner's complaint, the secretary advised him that the pastoral committee had affirmed his acknowledgment that it was inappropriate to continue in a parish ministry. The Committee had asked representatives of the Church to meet with him to consider the implications for his work as a hospital chaplain "recognising that in the hospital setting there are care giver/care receiver relationships equivalent to those in the Parish situation". It is then stated:

"It [the pastoral committee] ... directed their attention to the central question: Is it appropriate for a Presbyter in Full Connection, who over a number of years has breached professional boundaries in the area of sexual harassment/abuse, to continue as a Presbyter in Full Connection? After careful discussion, the Committee reached two conclusions: firstly that there is no distinction which it can draw between ministry in a Parish context, a Chaplaincy context, or indeed any other context; secondly that it is not appropriate for the Methodist Church to allow you to exercise any form of Ministry as a Presbyter in Full Connection with the Methodist Church."

The secretary sought to correct and clarify one aspect of the earlier meeting held with

Mr Gray:

"Dr Cant and Rev'd Telford indicated to you that your removal from the list of Presbyters in Full Connection is not dependent upon a formal letter of resignation. That is correct as the formal date of your removal was August 30th, 1994. If they indicated to you that your appointment as Chaplain ceases at the same date this is incorrect. The decision rests with you and the Hospital Chaplaincy Committee. The Church has informed the Chaplaincy Committee of its decision and drawn its attention to the Clause in your Contract which indicates that you are subject to the regulations and discipline of your denomination. It has also informed the Chaplaincy Committee that (sic) the nature of the events which have resulted in our decision."

Later, the secretary added:

"It is for the Chaplaincy Committee as the employer to resolve issues regarding your continued employment, not the Methodist Church."

The letter concludes with advice as to the financial provisions communicated to

Mr Gray at the meeting:

"The Methodist Church has not been employing you, but because you have been a Presbyter in Full Connection with the Church and had you been in a Methodist Appointment there would have been an ex gratia payment upon cessation of employment, accordingly the Church, without admitting any liability to pay anything is prepared to offer to the Hospital Chaplaincy Committee as your employer, up to 3 months stipend without allowances, for payment to you. This would take effect from September 10th, or such other date as may be determined when your letters of resignation are received."

The secretary's letter to the Chaplaincy Committee followed the next day. He recorded that the Church had procedures for dealing with complaints relating to sexual harassment or abuse and that the pastoral committee had received the report relating to the complaint against Mr Gray. He then stated:

"The complaint related to a sexual relationship between Robin [Mr Gray] as Parish Minister and the Complainant who was under his pastoral care. These took place over a three year period and were considered to be high level rather than low level."

Reference was made to the mediation without giving any detail. The Chaplaincy Committee was advised that the pastoral committee had decided that it was not appropriate for Mr Gray to continue in the ministry as a Presbyter or to engage in any form of ministry involving pastoral care or professional counselling on behalf of the Church. The secretary then added that, in his letter to Mr Gray, he had clarified the situation should he not resign; that is, that as far as the Church was concerned the decision had been made. In the event that no letter of resignation was received, the Committee would need to make its own decision regarding Mr Gray's continued

employment. The secretary suggested that, if the Committee decided to continue Mr Gray's employment, it would need to recognise that he was no longer a Methodist minister in good standing and that a new contract would need to be completed as a result.

The Chaplaincy Committee was further advised that, had Mr Gray been employed by the Church, an ex gratia payment would have been made to him on the cessation of his employment. Accordingly, without admitting any liability to pay anything, the Church indicated that it was prepared to offer the Chaplaincy Committee, as Mr Gray's employer, up to three months stipend without allowances for payment to Mr Gray if his employment was terminated and he was not re-employed by the Committee in some other guise.

A meeting took place on 31 August between Mr Gray and his solicitor on the one hand, and the chairman of the Chaplaincy Committee, a Mr Kirton, and another member of the committee on the other. Mr Kirton's account of the meeting was accepted as correct by Mr Gray's counsel in this appeal, Ms Harley. Mr Gray's solicitor told the representatives of the Committee that Mr Gray had not resigned and claimed that his position as Chaplain had been terminated. He said that Mr Gray would issue proceedings against the Committee in the Employment Court for wrongful dismissal against the members individually, and he mentioned damages amounting to

$200,000 as being the figure which would be awarded. Mr Kirton advised the solicitor that the Committee had not dismissed Mr Gray and that, if the Methodist Church wanted to dismiss him from the Chaplaincy, they did so without the Committee's authority or, indeed, any authority.

The Chaplaincy Committee met on 2 September 1994 in committee. Mr Kirton reports that the Committee decided that it would be "fairest and best for all concerned"

for Mr Gray to be placed on leave. It would provide "a breathing space" for everyone while Mr Gray's status as a minister was resolved. The following resolution was then passed in open meeting:

"1(a) That Robin be placed on leave with pay and allowances for one month initially while the Committee works out the implications of the actions of the Methodist Church of New Zealand ..."

The Committee's action was prompted by an understandable concern about the allegations of sexual misconduct. It had no direct information about the allegations. Nor did it have any means of ascertaining whether the charges were in fact true. While making no determination whether it considered the allegations well-founded or not, therefore, it considered that it had to take note of the fact that those allegations had resulted in the Methodist Church terminating Mr Gray's authority as a minister. It was also conscious that "high level" sexual allegations had been made against a Chaplain in a counselling role. It felt that it had no alternative but to take the allegations seriously. The Committee then reached the view that there could be no question of Mr Gray remaining a chaplain if he were not a minister. He had been employed as a chaplain on the basis that he was a minister and this basis had been confirmed by the Committee's legal adviser. Accordingly, although Mr Gray had initially been granted leave, he was now suspended on full pay, the "breathing space" again being to allow him to sort out the question of his status. Mr Kirton thought the only way Mr Gray could do this was by resolving the issue with the Methodist Church, a matter outside the control of the Committee.

In the result, the Committee's solicitor sent a letter dated 8 September 1994 to Mr Gray's solicitor. After reiterating the events which had led to Mr Gray's authority as a Methodist minister being withdrawn, the solicitors confirmed that the Church had no authority, either actual or ostensible, to dismiss Mr Gray from his employment, the employer being the Chaplaincy Committee. It is then recorded:

"Further, no members of the Committee either singly or in a body took any steps to request or enforce Mr Gray's resignation. So far as the Committee is concerned, he has not been dismissed nor has he resigned. At the moment, due to his understandable upset about recent events, he has been granted a month's leave with pay."

The solicitors went on to say that the members of the Committee who saw Mr Gray and his solicitor on 31 August did not appreciate threats of huge claims for damages in the Employment Court. Such threats, it was said, did not help the situation.

On behalf of their client, the solicitors then expressed the Chaplaincy Committee's concern in these terms:

"The Committee's concern is that (and we think that this is accepted) if Mr Gray is not a minister of the Methodist Church, he will no longer be able to fulfil all his functions as a chaplain as set out in the job description, the service contract and the leaflet "Personal Policies for Hospital Chaplains. As Mr Gray was employed as chaplain as a minister of the Methodist Church and it seems to us that, at least in the medium to long-term, he cannot continue unless he is a minister of that or another Church."

By a letter of the same date, the Committee's solicitors advised the Methodist Church that Mr Gray was on a month's leave with pay and confirmed that the question was basically a matter between Mr Gray and the Church.

On 30 September, the Chaplaincy Committee met again with the general secretary of the Church in attendance. The meeting resolved to instruct its solicitors to convey two alternative proposals to Mr Gray: one, that he resign as from 1 October on payment of six months salary and, two, that he be suspended for a period of three months from

1 October on full salary pending resolution of his standing as a minister of the Church, the position to be reviewed after three months.

The solicitor's letter, sent to Mr Gray's solicitors, followed on 3 October 1994. The solicitors confirmed their advice that it was a fundamental term of Mr Gray's employment that he remain a minister of the Church. This opinion is then supported by

a number of persuasive references. Towards the end of the letter the solicitors conveyed the Committee's proposals in these terms:

"It therefore must be said that because Mr Gray is (for whatever reason) no longer a Minister of his Church, he is in breach of that fundamental term of his employment. The Committee therefore makes the following proposals to Mr Gray, in the alternative:-

(1) That he resign as from 1 October 1994 on payment of six months' salary which would be funded by three months' contribution from the Methodist Church and three months salary from the Committee as his employer; or

(2) That Mr Gray be suspended for a period of three months from 1 October 1994 on salary (plus housing allowance) pending resolution of the question of his standing as a minister of the Methodist Church, the position to be reviewed after three months."

Ms Harley responded briefly on 5 October. She advised that Mr Gray was dealing with the wrongful removal of his name from the list of Presbyters as a matter of urgency and would advise progress in that regard by 14 October. She added that it was not accepted that Mr Gray was in breach of his service agreement.

On 3 November Ms Harley again wrote to the Chaplaincy Committee's solicitors and cryptically asked them to advise their authority for the suspension of Mr Gray. The Committee's solicitors replied at greater length, reiterating largely what had already been said in their letter of 3 October. They added, as might be expected, that it would be foolish and, indeed, irresponsible of the Committee to ignore the reason for the action of the Church. They affirmed that the Committee was not in any way prejudging the ultimate outcome, but considered that Mr Gray would appreciate that a chaplain in a counselling role is in a very delicate position. They recorded the Church's advice in its letter to the Committee of 2 September that the pastoral committee had decided that it was not appropriate for Mr Gray to continue as a minister or engage in any form of ministry involving pastoral care or professional counselling on behalf of

the Church. They advised that, if the Committee had been satisfied that the allegations of improper sexual conduct were true, it would have been justified in dismissing Mr Gray without notice, but that it was because he had denied the allegations and sought reinstatement as a minister that the Committee decided that suspension on salary was "the most appropriate and fair course to all concerned - Mr Gray, the Committee itself and the patients." The solicitors concluded by recording the Committee's understanding that Mr Gray intended to appeal to The Methodist Conference and advised that it looked forward to receiving a report on the result of that appeal in due course.

Later in the month, on 25 November 1994, Mr Gray's solicitors wrote once more asking that the Chaplaincy Committee consider reinstating Mr Gray pending the resolution of his status as a Presbyter in Full Connection. It is clear that there had already been many oral communications between the solicitors and that this request for Mr Gray to be reinstated simply repeated what had been said on a number of occasions. The solicitors noted the argument that it was a fundamental term of Mr Gray's employment that he remain a minister of the Church and advised that Mr Gray was doing everything humanly possible to satisfy that "proviso". They reiterated their view that it was wrong for the Committee to suspend Mr Gray before his standing was finally determined.

This letter was discussed with the Chaplaincy Committee and, at a meeting held on

7 December, the Committee resolved that Mr Gray's suspension on full salary be continued for a further month, that is, until the end of January, when the Committee would meet and make a decision about the future. On 27 January the Committee met again and resolved to extend Mr Gray's suspension on full salary for a further month pending a decision on Mr Gray's application to the Employment Court. Finally, on 16

February the Committee resolved to extend Mr Gray's suspension on full salary to 30

April or the date of the judgment of the Employment Court, whichever might be the earlier.

Mr Gray took steps to be reinstated as a minister. He lodged a notice of motion with The Conference of the Methodist Church to reconsider his removal from the list of Presbyters in Full Connection, and applied to have his name reinstated on the list. The notice of motion alleged that the complaint of sexual harassment/abuse was without merit and that, as an employee of the Church, he had himself been sexually harassed by the parishioner. He complained that the sexual harassment/abuse procedures had not been followed correctly. He also complained that the mediation has not been properly conducted and had been misused as a disciplinary proceeding. The motion was considered by a special committee of detail which then reported to the Full Conference recommending that the Conference agree to confirm Mr Gray's removal from Full Connection with the Methodist Church. The Conference adopted the report.

The present proceedings then ensued.

The proceedings and the Chief Judge's decision

The proceedings were commenced in the Employment Court on 18 November 1994 and gave rise to ten causes of action. For present purposes, however, it will suffice to reiterate that Mr Gray claimed damages from the Chaplaincy Committee for various breaches of contract and for unlawful lockout, and damages from the Church for inducement of breach of contract.

The Chief Judge held that, although it was an implied term of the contract of employment that Mr Gray was to remain an ordained minister during his chaplaincy, the Committee was not entitled to suspend him pending an investigation into the

complaint against him, at least without giving him an opportunity to be heard in advance. The Judge held that the Committee was not entitled to act on the mere statement of the Church's agents that Mr Gray could not conduct ministry. It had, he said, to find out whether their statement was accurate. Apart from the damages of

$7,500 the Chief Judge therefore made a declaration that the suspension was unlawful and should end.

In considering the claim for damages for unlawful lockout the Chief Judge referred to the two elements, one "factual" and the other "mental", required to constitute a lockout under s 62 of the Employment Contracts Act. The factual element, he said, consists of the act of discontinuing employment or breaching a contract or otherwise behaving in a way listed in s 62; the mental element is undertaking such action with a view to compelling employees to accept terms of employment or comply with any demands made by the employer. The Chief Judge acknowledged that, when employees are locked out, the intention usually is that the employment will continue but on different terms. He recognised that a lockout with a view to inducing an employee to resign is not so much a lockout as a dismissal. In this case, however, the Chief Judge held that, while the motive for the initial suspension was not to get Mr Gray's agreement to anything, but to enable his status to be clarified, the situation changed when the Chaplaincy Committee gave him a choice between two courses of action. Each of these alternatives, the Chief Judge held, involved a variation of Mr Gray's employment contract, and the fact that, when he failed to accept either alternative, it unilaterally imposed one of them, while at the same time refusing to take him back when requested to do so, amounted to a lockout. Damages were awarded of $250.

In awarding damages of $35,500 against the Church for inducement of breach of contract, the Chief Judge relied primarily on the early actions of the Church in seeking Mr Gray's resignation and the terms of the Church's letter to the Chaplaincy

Committee of 2 September 1994. He held that the Employment Court has jurisdiction to consider a claim in tort in two situations; where there has been a strike or a lockout, or where the action is concerned with or related to an employment contract. He claimed that this jurisdiction is now well-settled and referred to Medic Corp v Barrett [1992] 3 ERNZ 523 as being the first in a long series of cases in which the Employment Court has asserted this jurisdiction.

I turn now to that jurisdictional issue. In her comprehensive submission, Ms Harley emphasised that, when she was before the Employment Court, she had contended that the Court had jurisdiction to hear and determine Mr Gray's tortious claim against the Church under s 104(1)(f), (g) and (h). Mr Gray's claim had been prosecuted accordingly. In this Court Ms Harley again advanced these provisions as the basis for the Employment Court's jurisdiction but she hesitantly submitted, as an alternative argument, that jurisdiction existed under s 73 and/or s 104(1)(l). It is, however, convenient to deal with the provisions in the reverse order to that which Ms Harley preferred.

Jurisdiction under s 73?

Subsection (1) of s 73, reads as follows:

73. Jurisdiction of Court in relation to torts (1) Where a strike or lockout is threatened or is occurring or has occurred and as a result proceedings are issued against any party to the strike or lockout and such proceedings are founded on any of the following torts, namely,

(a) Conspiracy; or

(b) Intimidation; or

(d) Interference by unlawful means with trade, business, or employment,

the Court shall have full and exclusive jurisdiction to hear and

determine such proceedings."

Subsection (2) then stipulates that no other Court shall have jurisdiction to hear and determine any proceedings founded on any of the torts specified in subs (1) resulting from a strike or lockout. The final subsection, subs (3), provides that where any proceedings founded on any of these torts are commenced in the Employment Court, and the Employment Court is satisfied that the proceedings resulted from participation in a strike or lockout which is lawful under s 64 of the Act, the Court is to dismiss the proceedings, and no proceeding founded on such a tort and resulting from a strike or lockout is to be commenced in the High Court. As to be expected where the Employment Court is exercising jurisdiction which would otherwise be within the jurisdiction of the High Court, Parliament has provided that, in hearing and determining a proceeding under s 73, the Employment Court cannot utilise its equity and good-conscience jurisdiction under s 104(3) or the enlarged powers it possesses in relation to receiving evidence under s 126. (See ss104(3) and 126 respectively).

Apart altogether from the heading, it is clear to me that s 73 purports to establish the exclusive jurisdiction of the Employment Court in respect of proceedings in tort. In short, that jurisdiction will not exist unless a strike or lockout is threatened or is occurring or has occurred, the proceedings are issued as a result of that strike or lockout and are issued against a party to the strike or lockout, and the proceedings are founded on one or more of the specified torts. The direct nexus between the tort and the strike or lockout is readily apparent. The proceedings in which the tort is pleaded are the proceedings which result from the strike or lockout and must be against a party to that strike or lockout. A tort, even though of the kind specified in subs (1), cannot be included in the proceedings simply as a matter of convenience.

If it were possible to include a tortious claim in proceedings resulting from a strike or lockout where the tort pleaded did not also result from the strike or lockout, the situation could arise by virtue of subs (3) whereby the Employment Court, on finding

that the strike or lockout was lawful, would be required to dismiss the proceedings and no other proceedings could not then be brought in the High Court. No jurisdiction to hear and determine the tortious claim would exist even though there was no nexus between it and the lawful strike or lockout. The plaintiff would be deprived of a right to have the tort heard and determined in either Court. Parliament cannot be deemed to have intended to deprive citizens of the right to sue an alleged wrongdoer for such torts altogether. The jurisdiction under s 73 therefore contemplates the kinds of cases where the tort is related to or connected with the strike or lockout which gives rise to the proceedings.

Bearing these general comments in mind, the questions which arise in establishing whether the Employment Court had jurisdiction in this case are threefold; was the Chief Judge correct in holding that there was a lockout. If so, was the Church a party to the lockout? And, as a matter of law, can there be a lockout against a single employee?

(a) Was there a lockout?

As already indicated, the Chief Judge accepted that the earlier suspension of Mr Gray by the Chaplaincy Committee could not be considered to be a lockout as it was not done with a view to extracting some contractual or other concession from him. The position changed, the Chief Judge considered, when the Committee advanced the alternative proposals of resignation on payment of six months salary or suspension for a period of three months on full salary in its letter of 3 October. These proposals were construed by the Chief Judge as an ultimatum involving a variation of Mr Gray's terms of employment and therefore made with a view to compelling him to accept a variation of the contract.

With due respect to the Chief Judge, this construction of the facts is artificial and cannot be sustained. Indeed, it seems to me that it is indefensible.

In the first place, it is plain from a reading of the letter of 3 October as a whole that the proposals were not put forward with a view to compelling Mr Gray to accept a variation of his employment contract at all. On the contrary, the proposals were directed to bringing Mr Gray's employment contract to an end or suspending him for a period pending resolution of the question of his standing as a minister of the Methodist Church. The Committee reasonably believed that Mr Gray should not be employed as a chaplain until his status as a minister of the Methodist Church had been resolved. As a consequence its objective in suspending him was to allow time for that issue to be resolved.

This interpretation is supported by the only direct evidence bearing on the issue. Reference has already been made to Mr Kirton's evidence. He described Mr Gray's suspension on full pay as a "breathing space" to allow him to sort out the question of his status. This attitude persisted. The letter of 3 October was an endeavour to give Mr Gray an opportunity to resign on generous terms or be suspended "while he sorted out the question of his status". This purpose was repeated in the solicitor's letter of 28

October when they had not received a reply to the proposals contained in their letter of

3 October. The final sentence of that letter confirms that the Committee is obliged to Mr Gray's solicitors for keeping it in touch with developments relating to Mr Gray's discussions with the Methodist Church and expresses the hope that these communications will continue. That this was the reason for suspending Mr Gray would also appear to have been recognised in the advice given by Mr Gray's own solicitors in the letter of 25 November to the effect that they believed it wrong for the Committee to suspend their client "while the matter of his standing is yet to be finally determined".

Secondly, the Chief Judge appears to have overlooked the fact that the Chaplaincy Committee took the view, supported by legal advice, that because Mr Gray was (for whatever reason) no longer a minister of his Church, he was in breach of a fundamental term of his employment. The Chief Judge subsequently held that there was an implied term in the contract to that effect. Inevitably, therefore, the alternative proposals must be seen as an attempt to do something positive about the situation pending Mr Gray's appeal to clarify his status. The offer to accept his resignation on payment of six months salary is described as a generous offer for Mr Gray and the offer of a suspension for a period of three months, subject to review after three months, a necessary alternative until it has, in effect, been confirmed that he is not in breach of his employment contract with the Committee.

Thirdly, it is to be borne in mind that the alternative proposals were put forward in full settlement of any claims which Mr Gray might have against the Committee in respect of his employment. Mr Gray's solicitors had already indicated that Mr Gray would issue proceedings in the Employment Court against the Committee for wrongful dismissal and had mentioned damages amounting to $200,000 as the figure likely to be awarded by the Employment Court. It cannot reasonably be suggested that an offer of settlement of a legal claim can be construed as a demand made with a view to compelling the employee to accept a variation of his contract. Indeed, the necessary implication is that the offer can be rejected. Nor did the Committee's refusal to permit Mr Gray to work with patients turn on whether he accepted the offer of suspension or not. He was already suspended and his suspension was to remain in force until such time as his position as a minister of the Church had been confirmed.

For these reasons, I am satisfied that there was no lockout in terms of s 64(1). Mr Gray might be able to argue, as he did, that he had been wrongfully dismissed, but

he could not claim that he had been refused work with a view to compelling him to accept a variation to his employment contract.

(b) Was the Church a party to the lockout?

Because I have held that no lockout occurred, it is not necessary to decide whether the Church was a party to a lockout. Because of the way in which the point arose in argument before this Court, however, it is only fair to do so. Ms Harley was initially unwilling to assert that the Methodist Church was a party to the lockout. Perhaps encouraged by me in the course of argument, she finally advanced that contention. But, on reflection, I have come to the conclusion that Ms Harley's initial inclination was well-founded.

There are a number of cases in which it has been held that a third party does not have to be a party to the employment contract to be a party to a strike or lockout. (See, New Zealand Labourer's Union v Fletcher Challenge Ltd [1988] 1 NZLR 520).

Because Ms Harley relied upon s 104(1)(f), (g) and (h) to found the Employment Court's jurisdiction, the Chief Judge was not required to make a finding that the Church was a party to the lockout which he held had occurred. But even assuming that the later suspension constituted a lockout, I do not consider that it can be tenably held that the Church was a party to what the Chaplaincy Committee did. The Committee, if anything, acted independently of the Church in this regard. It is true that the Church, in its letter of 2 September 1994 to the Committee, indicated what it would have been prepared to do if it were Mr Gray's employee and that it made an offer of financial assistance, without admitting liability, if his employment were to be terminated. While it contemplated the termination of Mr Gray's contract, however, there is nothing in the evidence to indicate that it envisaged anything in the nature of

the demands being made of Mr Gray to vary the terms of his employment as held by the Chief Judge. Those terms emanated from the Committee itself.

When the Chaplaincy Committee met on 30 September it had already suspended Mr Gray without pay on a number of occasions. It is true that the secretary of the Church was in attendance at that meeting, and that he gave the Committee an account of the procedure which the Church had adopted in relation to the parishioner's complaint. It was this advice which led to the Committee's conclusion that the allegations had to be taken seriously. The alternative proposals, however, were not put forward at that time. It was because the question of clarifying Mr Gray's status did not seem to be making progres that the Committee resolved, at a subsequent meeting, to instruct its solicitors to write the letter of 3 October which contained the alternative proposals. It is to be borne in mind that the Committee and its members personally had been already threatened with a claim for damages of the order of $200,000. Their desire to resolve the issue pending clarification of Mr Gray's status was understandable. But there was no reason why the Church should share that view. After the initial confusion, it had been accepted that the Church was not Mr Gray's employer. Irrespective, therefore, whether the conduct of the Church amounted to an inducement of breach of contract, it did not amount to participation as a party in the circumstances which the Chief Judge held amounted to a lockout.

(c) Can there be a lockout of a single employee?

Again, it is not strictly necessary to resolve the question whether an employer can lockout a single employee. But for completeness and in deference to counsel's careful argument, and because of conflicting views which have been expressed in the Employment Court, it may be helpful to set out my view. Mr Smith, appearing for the Church, submitted that the Chaplaincy Committee did not commit any of the acts set out in s 62(1)(a) to (d) because those provisions do not apply when the employment of

one employee is suspended and there is no collective agreement in force or under negotiation.

Section 62(1) refers to employees in the plural. It reads as follows:

" 62. Definition of lockout (1) In this Act the term "lockout" means the act of an employer

(a) In closing the employer's place of business, or suspending or

discontinuing the employer's business or any branch thereof;

(b) In discontinuing the employment of any employees, whether wholly or partially; or

(d) In refusing or failing to engage employees for any work for which the employer usually employs employees

with a view to compelling any employees, or to aid another

employer in compelling any employees, to accept terms of employment or comply with any demands made by the employer."

Pursuant to s 64(1), a lockout is lawful if it is not unlawful under s 63 (which specifies a number of different situations) and relates to "the negotiation of a collective employment contract for the employees concerned". It was Mr Smith's contention that both the wording and the scheme of the Act necessitate construing the word "employees" in s 62 so as not to include the singular, "employee".

I reject Mr Smith's argument. In my view a lockout may occur even though it is directed at a single employee.

In the first place, I do not consider that s 4 of the Acts Interpretation Act 1924 can be so lightly set to one side. Unless it is inconsistent with the context or where there are words to exclude or restrict the meaning, "... words importing the singular number include the plural number, and words importing the plural number include the singular number ...". Apart from the terms of s 64(1)(b) requiring a lawful strike or lockout to

relate to the negotiation of a collective employment contract for the employees concerned, no other wording points to a restricted meaning. On the contrary, the word "employees" is not mentioned in para (a) of s 62(1) itself. Thus, an employer who closed his place of business or suspended or discontinued his business or any branch thereof would come within the terms of that paragraph irrespective that he or she employed only one employee. Presumably, too, an employer would come within the wording of para (c) if he or she broke the employment contract with a single employee in terms of that paragraph.

In the second place, I do not discern anything in the context of s 62 which would indicate that the word "employees" does not include the singular. I accept that s 64 only applies where the lockout relates to the negotiation of a collective employment contract and that this necessarily means there must be more than one employee for the lockout to be lawful. But the enactment of s 64(1)(b) in these terms is the logical corollary of the workers right to participate in lawful strikes. A strike must by definition involve more than one employee, and such employees may carry out a lawful strike in terms of s 64 where it is not unlawful under s 63 and the strike relates to the negotiation of the collective employment contract for the employees concerned. Vesting employers with the right to instigate a lawful lockout in the same circumstances can be seen as Parliament's attempt to maintain the industrial balance between the employees and their employers in relation to the negotiation of a collective employment contract. The employees may lawfully strike in relation to the negotiation of a collective employment contract but, so too, the employers may lawfully impose a lockout. The wording of s 64(1)(b) is appropriate to achieve this objective.

It is true that this construction means that the lockout of an individual employee cannot be lawful other, possibly, than in the circumstances adverted to by Palmer J in Hawtin v Skellerup Industrial Ltd [1992] 2 ERNZ 500, at 539 (see below). At first glance,

this result is anomalous in that an employer may lawfully lockout a number of employees but not a single employee. But, as Ms Harley cogently pointed out, this apparent anomaly loses its force once it is appreciated that the same situation exists where an employer locks out a number of employees who do not have, or are not seeking, a collective employment contract. It can hardly be contended that the word "employees" in s 62(1) does not include employees in this category.

Finally, there are no decisions in the Employment Court which would inhibit me from holding that an employer can lockout a single employee. In both O'Malley v Vision Aluminium Ltd (No. 2) [1992] 2 ERNZ 368 and Burgess v Command Pacific (NZ) Ltd (t/a United Healthserv) [1994] 2 ERNZ 684, the plaintiffs were seeking an interlocutory injunction to prevent the continuation of a lockout. The question in both cases was whether there was a serious issue to be tried. Neither Travers J in the O'Malley case or Colgan J in the Burgess case can be criticised for holding that the issue is seriously arguable. That is not in dispute, but the learned Judges did not purport to resolve the issue. The one case in which the point arose in the course of the substantive hearing is Hawtin v Skellerup Industrial Ltd (supra). Although his observations were obiter, Palmer J held, applying s 4 of the Acts Interpretation Act, that there could be a lawful lockout of an individual employee. In the circumstances of that case he held that there was no conceptual problem, either in logic or in law, occasioned by a collective employment contract which must, by definition, bind two or more employee parties with one or more employers and a lawful lockout by a particular employer of a single employee who refuses, in contrast with his or her current employees, to become a party to the collective contract in question.

For these reasons, and in order to provide some certainty on the point, I am prepared to hold that an employer can lockout a single employee for the purposes of s 62. I do not suggest, however, that where there has been a lockout of a single employee, a

claim for damages for unlawful lockout will necessarily attract a significant award. For the most part it is likely that the grievance which the employee nurtures will be able to be adequately compensated for by way of damages for breach of contract or for wrongful dismissal or by way of a payment pursuant to the personal grievance procedure, as the case may be.

Jurisdiction under Section 104(1)(l)?

Section 104(1)(l) reads:

"104. Jurisdiction of Court - (1) The Court shall have jurisdiction-

...

(l) To hear and determine any proceedings founded on tort and of a kind specified in section 73 of this Act:"

The question is whether this paragraph provides independent and, possibly, enlarged jurisdiction for the Employment Court in tort or simply reiterates the Court's jurisdiction already established under s 73. I am satisfied that the paragraph does no more than confirm the jurisdiction conferred on the Employment Court under the earlier specific section.

Section 104 is designed to provide a comprehensive definition of the Employment Court's jurisdiction. This comprehensive definition immediately follows the section establishing the Employment Court as a Court of record (s 103), and it is logical that the jurisdiction of the Employment Court should be spelt out next. As such, s 104 includes a wide range of provisions, some conferring original jurisdiction, some conferring ancillary jurisdiction and some confirming jurisdiction already conferred elsewhere in the Act. For a number of reasons, I consider that para (l) falls naturally into the latter category.

In the first place, it would be inconsistent with the enactment of a specific provision relating to the Employment Court's exclusive jurisdiction to hear and determine proceedings in tort, to provide a further provision enlarging that jurisdiction by excluding the limitations or scope of the specific section. Thus, it would be incongruous to provide in s 73(3) that proceedings founded on one of the specified torts resulting from a lawful strike or lockout must be dismissed and cannot be brought in the High Court, and then enact another provision conferring jurisdiction in respect of the same kind of proceedings free of that requirement. It also would be anomalous for the Employment Court to be able to exercise its equity and good conscience jurisdiction under s 104(3) if it asserts its jurisdiction in tort under s 104(1) but not if jurisdiction is assumed under s 73. Similarly, it would be inconsistent for the Court to receive evidence which is not strictly legal which it may do in respect of proceedings under s 104(1) but not under s 73. To make sense, the words "of a kind specified in s 73" must be construed as a reference to proceedings brought under s 73.

Unless this construction is correct s 73 becomes largely superfluous simply because the same or an extended jurisdiction can be exercised under s 104(1). Moreover, tortious actions not specified in s 73 could be heard in conjunction with proceedings founded on an employment contract. See, for example, Fletcher Bernard-Smith Ltd v Fletcher Holdings Ltd & Ors (Unreported, 14 December 1978, CA 9/78), where a cause of action based in defamation was included in proceedings in which breach of contract in an industrial setting was also pleaded). Nor, indeed, would the Employment Court be confined to tortious causes of action. Proceedings founded in equity or restitution, for example, could, if the Employment Court's approach is correct, also be brought in the Employment Court. Parliament cannot be thought to have transferred such wide exclusive jurisdiction from the High Court to the Employment Court in such an indirect and incidental manner.

Secondly, a literal reading of para (l) indicates that it does not confer a separate or an enlarged jurisdiction. The words "of a kind specified in s 73" relate to the word "proceedings" and not to the word "tort". This meaning follows from the draftsperson's use of the word "and" between the words "proceedings founded on tort" and "of a kind". Thus, the paragraph, strictly construed, gives the Employment Court jurisdiction to hear and determine proceedings founded on tort (and of a kind) specified in s 73. As a consequence the jurisdiction defined under s 104(1)(l) is restricted to proceedings which may be brought under s 73.

Thirdly, the context in which the paragraph appears suggests that it is confirmatory of jurisdiction conferred elsewhere in the Act. Paragraphs (j) to (n) all refer to specific sections of the Act. It is clear in paras (j) and (k) that no more is being done than to verify the jurisdiction already vested in the Employment Court under ss 56 and 57 respectively. Although the phrase "of a type" is used instead of "of a kind" as in para (l), paras (m) and (n) equally clearly refer to the jurisdiction conferred under ss 74 and

105 of the Act. It is not to be thought that paragraph (l) should be approached any differently.

For these reasons I have concluded that s 104(1)(l) does not confer jurisdiction on the Employment Court beyond the jurisdiction already conferred in s 73. That section, and the scope and requirements of that section, continue to prevail. Section 104(1)(l), therefore, cannot be utilised to confer jurisdiction on the Employment Court to hear Mr Gray's proceeding founded on inducement of breach of contract.

Jurisdiction under ss 104(f), (g) and (h)?

It will be recollected that it was Ms Harley's primary contention that the Employment

Court had jurisdiction to entertain the tortious claim against the Church under paras

(f), (g) or (h) of s 104(1). The Chief Judge accepted this submission. To him the issue is well and truly settled. He said:

"Inducement of breach of contract is a tort. The Court has jurisdiction to entertain an action based on this tort only in two situations:

(1) Where there has been a strike [or lockout]; and

(2) Where the action is concerned or related to an employment contract.

This is now well settled. Medic Corp Ltd v Barrett (1992) 3 ERNZ

523 was the first of cases saying so in what is now a long series."

It is fair to point out that the Church did not challenge the jurisdiction of the Employment Court when the proceedings were before that Court. Mr Smith said that, having regard to the long series of cases confirming the jurisdiction under these paragraphs, it would have been futile to do so. That may be so, but the point should have been noted and reserved. Be that as it may, however, counsel's acquiescence or failure to note an objection to jurisdiction cannot confer jurisdiction on the Employment Court if it does not have that jurisdiction under the Act. The question therefore remains whether paras (f), (g) or (h) vest the Employment Court with jurisdiction to hear and determine Mr Gray's claim for inducement of breach of contract against the Church.

The particular paragraphs read as follows:

"(f) To hear and determine any question connected with any employment contract which arises in the course of any proceedings properly brought before the Court:

(g) To hear and determine any action founded on an employment contract:

Ms Harley advised the Court that there is now a "long line of authorities of some ten decisions" following the Employment Court's assertion of jurisdiction in tort under s

104(1) in Medic Corp Ltd v Barrett. Mr Smith referred critically to a number of these decisions. It is sufficient for present purposes, however, to refer to the Chief Judge's reasoning in Medic Corp Ltd v Barrett.

The Chief Judge considered that the point, as a matter primarily of statutory interpretation, was quite clear. He took the view that the phrases "relating to" and "founded on" did not need to be given a narrow meaning. Thus, he held: "An action is founded on or relates to an employment contract if it could not succeed without relying on either the existence of such a contract, present or in the past, or upon a term of the contract or if it is closely referable to an employment contract."

The Chief Judge considered that his interpretation was supported by the legislative history of the Act, although it must be said that the history then recounted is more the history of the Chief Judge's personal involvement before the Labour Select Committee which received and heard submissions on the earlier Labour Relations Bill after it had been introduced to the House in 1987 and his recollection of the publicity associated with the legislation. It is certain, as the Chief Judge states, that the Government had to decide then whether jurisdiction relating to employment contracts would be exclusive to the Employment Court or concurrent with the Courts of general jurisdiction. Reference is made to the statement of the Chairman of the Select Committee to the effect that one of the ten major areas of change proposed was that all employment contracts, whether of an individual or collective nature, would be covered by one jurisdiction rather than split between the civil courts and the specialist Labour Court. Parliament, the Chief Judge concluded, had clearly achieved that objective with the wording of the Act.

With respect to the Chief Judge, however, this history does not assist with the task of interpreting the provisions in issue. The question is not whether Parliament has chosen to vest the Employment Court with exclusive jurisdiction in respect of any question connected with an employment contract or any proceedings relating to an employment contract. The Employment Court's jurisdiction in that regard is unassailable. The key question is the extent to which the Employment Court's exclusive jurisdiction in relation to employment contracts extends to questions or proceedings connected with or relating to an employment contract. The jurisdiction is not restricted to the rights of parties to employment contracts and differences between parties to such contracts, although these are stated objectives (see s 76(a)). The question, therefore, is where to draw the line. To indicate where that line is to be drawn, Parliament has used phrases such as "connected with", "founded on", and "relating to", and references to the legislative history will not be helpful unless they throw some light on the interpretation to be adopted in construing these phrases. It simply begs the question to reiterate that the Court has exclusive jurisdiction in respect of employment contracts.

To my mind, such legislative history as can be ascertained is not particularly pertinent to the task of determining where the line is to be drawn. The precursor to s 73 was s 242 of the Labour Relations Act 1987. The provision went through various changes, none of them of assistance in respect of the present question. The Minister of Labour, in introducing the Labour Relations Bill, referred to the fact that remedies through civil actions for injunctions and damages were made available for unlawful strikes and lockouts (which is what was achieved in s 242) and that such actions would not be heard in the High Court. He referred to the fact that the legislation transferred jurisdiction in proceedings founded on tort arising out of the strike or lockout from the High Court to the more appropriate Labour Court. "Civil actions in tort" he said, "will not be available in any court in relation to lawful strikes and lawful lockouts". The

point was repeated by the Minister during the second reading but it does not appear that any comment was directed at the clause which ultimately became s 242 of the Labour Relations Act. Nor does it appear that anything was said which would indicate Parliament's intention in utilising the phrases referred to when enacting paragraphs (f), (g) and (h) in s 104(1). Reference to the legislative history, therefore, does little more than confirm that part of the jurisdiction traditionally exercised in tort by the High Court was transferred to the exclusive jurisdiction of, first, the Labour Court and, then, its successor, the Employment Court.

The clearest indication of Parliament's intention when interpreting s 104(1)(f), (g) and (h) is to be found in Parliament's contemporaneous enactment of s 73 itself, a section headed "Jurisdiction of Court in relation to torts". The section is explicit in defining the scope of the Employment Court's exclusive jurisdiction in tort and, as has been demonstrated, it would be inconsistent for Parliament to then enact another provision, or other provisions, which enlarge the scope of that jurisdiction and render the specific scope and requirements of s 73 superfluous.

This conclusion is fortified by a close examination of each of the paragraphs in issue.

(a) Section 104(1)(f)

For jurisdiction to exist under para (f), the "question" which is contemplated must be connected with an employment contract and must arise in the course of proceedings properly before the Court. The phrases "in the course of proceedings" and "properly brought before the Court" cannot be ignored. They point to one meaning only; that is, that jurisdiction to entertain the proceedings must exist under another of the provisions conferring jurisdiction under the Act. In other words, para (f) expands the Employment Court's jurisdiction in relation to employment contracts to include

ancillary questions connected with that contract arising in the course of an authorised proceeding. It does not confer originating jurisdiction.

Thus, in the present case it cannot be said that the proceeding for inducement of breach of contract is a question which arose in the course of proceedings otherwise properly before the Court. The cause of action was not "otherwise properly brought before the Court".

(b) Section 104(1)(g)

Paragraph (g) confers jurisdiction on the Employment Court where the action is "founded on" an employment contract. It cannot, in my view, be fairly said that Mr Gray's action against the Methodist Church for inducement of breach of contract is founded on the employment contract. Although the employment contract is the contract which it is alleged the Church induced the Chaplaincy Committee to breach, and the contract is referred to and relied upon in respect of that issue, it is straining the language to suggest that the cause of action is founded on the contract. Liability is attracted because of the element of inducement held out to another party to break its contract. The proceeding is founded on that inducement, not the resulting breach.

This interpretation is confirmed by the language of the Act itself. Section 3(1) and s

104(1)(g) itself refer to proceedings founded on an employment contract. Sections 73 and 104(1)(l) refer to proceedings founded on a tort. The legislature clearly contemplated two discrete categories. Mr Gray's claim against the Church is undoubtedly within the latter category.

(c) Section 104(1)(h)

Paragraph (h) confers remedial powers rather than a substantive jurisdiction. It provides that the Employment Court can, in any proceedings founded on or relating to an employment contract, make any order which the High Court or District Court could make under any enactment or any rule of law relating to contracts.

In addition to the phrase "founded on", the words "relating to" are necessary to permit the paragraph to apply to proceedings commenced under other sections of the Act, such as ss 57, 73 and 74. The final words "relating to contracts" further qualify the enactment or rule of law prescribing the High Court or District Court's powers which the Employment Court may exercise. Notwithstanding that it has been relied upon by the Employment Court to found jurisdiction in tort, therefore, para (h) also falls short of providing that Court with jurisdiction to hear a tortious claim.

It is apparent that the situation envisaged by the Chief Judge in Medic Corp Ltd v Barrett (at 532) whereby a plaintiff could sue a defendant in the Employment Court and be required to sue another defendant in the High Court could and, no doubt will, arise. The additional cost and inconvenience to the parties must be acknowledged. But it is not possible to disregard the clear meaning of the statutory provisions which accord with the stated objectives of the Act (see s 72(a)) and which are consistent with the context in which they are used. (See also NZ Air Line Pilots' Assn v Air NZ Ltd [1992] 1 ERNZ 353, per Cooke P at p 358).

Nor is it particularly satisfactory to focus only on the position of the plaintiff. The defendant has a right to have an action in tort which does not fall within the scope of s 73 heard and determined in the High Court. Parliament has sought to confer jurisdiction which was previously the jurisdiction of the High Court on the Employment Court on the basis of its specialist capacity to deal with employment

contracts and associated industrial matters, such as strikes and lockouts. Tortious claims, limited to those specified in s 73, have been included in that jurisdiction in relation to those matters only. Section 104(1)(f), (g) and (h), therefore, cannot avail Mr Gray.

Judgment

For these reasons I would allow the appeal. It is, of course, open to Mr Gray to commence a proceeding against the Methodist Church founded on the tort of inducement of breach of contract in the High Court. It should not be assumed, however, that the High Court would necessarily reach the same findings of fact as the Chief Judge. My detailed examination of the facts in this judgment would suggest that findings more favourable to the Church would be a distinct possibility.

Solicitors:

Cairns Slane, Auckland for Appellant

Fell Harley Nelson, Wellington for Respondent

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