Snapshot. Vector Gas Limited v Bay of Plenty Energy Limited [2010] NZSC 5; [2010] 2 NZLR 444 The fateful words: “BOP will pay NGC on demand, for each.

Snapshot

Vector Gas Limited v Bay of Plenty Energy Limited [2010] NZSC 5; [2010] 2 NZLR 444

• The fateful words:

“BOP will pay NGC on demand, for each GJ supplied, the difference between the price set out in the Agreement and $6.50 per GJ”.

• Question: Were transmission costs included in the price?

Supreme Court decision

• All five Supreme Court judges agreed that the price excludes transmission costs

• Five separate judgments

• Five different sets of reasoning

The judges considered

• Context (“factual matrix”)• Pre-contract negotiations• Business commonsense regardless of plain meaning of the words• Post-contract conduct

“Interpretation of a commercial agreement is the ascertainment of the meaning it would convey to a reasonable person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contract.”

• Contract

• Pre- contract• negotiations

• Context

• Pre-contract conduct• Background

• Commercial purpose

Employment Agreements

• Vector Gas applies to the interpretation of employment agreements

• The ultimate objective in a contract interpretation dispute is to establish the meaning the parties intended their words to bear

• Extrinsic material can be used to clarify the meaning of an agreement, whether or not the terms used are ambiguous

Written vs Oral Agreements

• Collective agreements must be in writing to be enforceable (s 54(1)(a))

• Individual employment agreements do not have to be in writing to be enforceable (Warwick Henderson Gallery v Weston (CA))

• S 63A obligations

• Some provisions in IEA’s must be in writing to be enforceable e.g. Trial periods (s 67A)

Offers of employment

• NO verbal offers of employment

• If collective agreement applicable, employer must provide a copy of the collective agreement at time of entering into the employment (s62(2)(b)

• If no collective agreement applicable, the employer must provide copy of intended individual employment agreement to the prospective employee

Interpretation issues

• Determining and interpreting the terms of verbal agreements is assisted by the Vector Gas decision

• Recommend keeping all communications and related documents relevant to provisions bargained for, collectively and with individuals

• Recommend careful and skilful drafting - if in any doubt include explanations and examples in the agreements

• Keep notes and consider rewording negotiations, particularly in collective bargaining

Equal Pay Act ClaimSFWU v Terranova Homes and Care Ltd

• Application seeking guidance from the Court

• Concerned section 3 of the Equal Pay Act 1972

• Task is to select comparator which best fits the statutory scheme in relation to the particular ground of discrimination

• Lack of intention to discriminate is not relevant to establishing whether or not unlawful element of differentiation exists

• Court held that the Act requires determination by reference to what men would be paid to do the same work abstracting from skills, responsibility, conditions and degrees of effort as well as any systemic undervaluation of the work.

Liabilities for costs of accrued entitlements – Part 6APacific Flight Catering Ltd & Anor v LSG Sky Chefs NZ Ltd• Question:

Who is currently liable for the costs of accrued leave when employees transfer pursuant to part 6A of the Act?

• Answer:

Unless there is an agreement otherwise, the incoming employer is liable as at the date of transfer.

Work Trials vs Trial/probationary periodsThe Salad Bowl Ltd v Howe-Thornley

• Assessment for suitability of employment by undertaking performance of tasks

• Employee not offered nor accepted any permanent employment and no written employment agreement

• Howe-Thornley was an employee but of limited duration – caught by section 66

• Obiter comments by Chief Judge include suggestion that “testing” candidates requires a written agreement with reference to s 67 trial period