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Accident Compensation Cases

Foai v Air New Zealand Ltd (EMC, 04/04/12)

Judgment Text

Cur Adv Vult
Judge Ford
Introduction 
[1]
During the course of a 16-month period between July 2007 and November 2008, the defendant (Air New Zealand) overpaid Mr Foai, who was then on its payroll, a total of $70,428.04. The company now seeks to recover the nett amount of the overpayment which equates to $42,635.40. It was successful in its claim before the Employment Relations Authority (the Authority) and Mr Foai has challenged that particular determination. Mr Foai does not, at this point in time, dispute the overpayment but he maintains that he received his wages in good faith and that he altered his position in reliance on the validity of the wages he was paid. He, therefore, seeks to rely upon the equitable defence of change of position and the statutory defence under s 94B of the Judicature Act 1908 in support of his contention that the defendant is not entitled to recover the overpayment of wages. 
[2]
Mr Foai's employment with Air New Zealand was terminated in July 2009. Air New Zealand claimed that there had been a fundamental breakdown of trust and confidence in the employment relationship in four respects. Relevantly, one of its allegations was that Mr Foai had not been proactive enough in querying the overpayment. Mr Foai pursued a personal grievance in the Authority claiming that he had been unjustifiably dismissed. The Authority issued a determination1
| X |Footnote: 1
Foai v Air New Zealand LtdERA Wellington WA120/10, 30 June 2010
in relation to that grievance on 30 June 2010. There was no challenge to that determination and the claim relating to Mr Foai's dismissal, therefore, forms no part of the case before me. The parties accept that the only relevance of the Authority's determination dated 30 June 2010 is that, by agreement, it reserved making a determination on two of the issues that had been raised before it. One of those issues was Air New Zealand's claim in respect of the overpayment and the other was a claim by Mr Foai that Air New Zealand was required to pay to him the sum of $9,363.04 which it had withheld from his final pay and purported to offset against the overpayment. 
[3]
Subsequently, the Authority was requested to revisit the two issues it had reserved making a determination on and in a further determination2
| X |Footnote: 2
Foai v Air New Zealand LtdERA Wellington WA120/10, 8 November 2010
dated 8 November 2010, it concluded that Air New Zealand was required to pay Mr Foai the sum withheld of $9,363.04 together with interest and Mr Foai was required to repay Air New Zealand the sum of $42,635.40 being the nett amount of the overpayment. Air New Zealand has accepted that it is required to pay the amount withheld of $9,363.04 but Mr Foai has challenged that part of the determination that dealt with the overpayment. In particular, he challenges the Authority's conclusions that Air New Zealand was not precluded from recovering the amount of the overpayment as “a recoverable debt” and its factual finding that while Mr Foai accepted his pay in good faith and did ask questions to check that he was being properly paid, “Air New Zealand had no knowledge of a problem”. Mr Foai told the Court that since his dismissal from Air New Zealand, he has had various casual and part-time jobs. Currently, he is working as a Court Security Officer with the Ministry of Justice. 
Background 
[4]
Mr Foai commenced working for Air New Zealand Airport Services on 20 March 2002 as a casual loader/cleaner at Wellington Airport. Initially, he was not a member of the union but he later joined. His terms and conditions of employment were set out in an individual employment agreement dated 19 March 2002 which incorporated the terms and conditions of the Air New Zealand Ground Staff Collective Employment Agreement. He was employed on an “as required” basis to cover absences of permanent employees. He described his duties as being the loading and unloading of luggage and freight and the interior cleaning of aircraft. 
[5]
As from 30 September 2002, Mr Foai's status changed from a casual worker to that of “Permanent Part-time Airline Serviceperson”. That position was confirmed in a letter dated 27 September 2002. His status under the new individual employment agreement which he signed on 21 October 2002 was shown as “Part time Airline Serviceperson”. He continued to be bound by the Ground Staff Collective Agreement. Mr Foai said in evidence that he remained a part-time employee until March 2007. During that period he worked under a roster which required him to work split shifts. He was living at Porirua at the time and he said that he found the split-shift work frustrating because of the effects his irregular working hours were having on his young family. For that reason, he became anxious to secure a full-time position. He made four applications for full-time positions during the period he was employed on a part-time basis but on each occasion he was unsuccessful. 
[6]
Mr Foai's change of status from casual worker to part-time serviceperson did not result in any immediate pay increase. His individual employment agreements, dated 19 March 2002 and 21 October 2002 respectively, stated clearly that he would be paid at a rate of $11.192 per hour (the October agreement actually showed a figure of $11.1928). That hourly rate figure increased over time and Mr Foai said that in early 2007 he was paid $17 per hour for up to 30 hours per week. He would then work overtime according to the roster and be paid at time and a half for the first three hours and double time thereafter. Mr Foai said that when he worked “a lot of overtime” as a part-time loader he could earn “about $2000 per fortnight”
[7]
In 2005, Mr Foai was awarded a letter of appreciation from the airport manager for having handed in a wallet which he had found on an aircraft containing a large amount of money. The customer also gave him $50 as a token of appreciation. The airport manager congratulated him on his efforts and integrity and the manager's letter was retained on Mr Foai's employment file. 
[8]
As a relatively junior employee, Mr Foai appeared to demonstrate some initiative in his work. In an uncontested passage of his evidence, he explained one of the voluntary assignments he undertook in early 2007 which involved Air New Zealand's CEO, Mr Rob Fyfe: 
“8.
At the start of 2007 it was announced that there were to be job cuts and major restructuring among Air NZ ground staff. A lot of my colleagues were very unhappy with the newly appointed CEO Rob Fyfe's decision at the time. Especially the Senior Loaders who have been there for more than 20 years. A lot of the staff morale had dropped which had affected the performance of the workers. [Staff] weren't turning up to work and the atmosphere in our environment was increasingly negative. 
9.
I took the initiative to do something about this as it was also affecting the way I worked as well, and I did not like the impact it was having on my workmates. I knew that the re-structuring was affecting not only them but most importantly their families. I decided to approach the management team and brought forward the idea of having a ‘Family Day’ for the loaders. I explained in regard to staff morale and negative attitude and thought this would be a good idea for us loaders to enjoy each other's company outside of work and meet and greet our partners and children. 
10.
Management thought it was a great idea, and supported my idea and planning of the ‘Family Day’ in March 2007. Me and two of my work mates helped organise the event. I also decided to invite the CEO himself to a fun day out. I called Mr Fyfe and asked if he would like to attend our [loaders'] family day and he happily obliged. Despite the fact that he was not a ‘popular’ person at the time, I knew that given children and family were present, the loaders were restricted to any ‘inappropriate’ behaviour towards Mr Fyfe. 
11.
The day was a success as all families present were treated to fun filled games and entertainment and not much talk of the re-structuring process, though Rob Fyfe did give a full description on what the plans were for the future where those who were present understood a lot more than what was broadcast earlier about the new re-structure. This event also gave the incentive for Mr Fyfe himself to come to Wellington and be a loader for the day to get a better understanding on how our role works and also to answer more questions our colleagues had for him in regards to their futures with Air New Zealand. 
12.
I felt a sense of accomplishment with what the ‘family day’ achieved. I received a letter from Mr Fyfe himself thanking me for the invite and booking in a date to come down and fulfil his promise as stepping in to being a loader for a day. He also passed on to me and the 2 work mates who helped me organise the day tickets to watch the Wellington Hurricanes game in the Air NZ corporate box. Most importantly it helped [pick] up the morale of the guys I worked with. ”
[9]
Mr Foai said that because of the success of the Family Day he was later given the task of organising another event involving something special for all Air New Zealand Wellington Airport staff. He carried out that assignment as event organiser even though it was not a duty set out in his employment agreement. 
[10]
In her evidence, Mr Foai's manager, Ms Tania Budny, made no reference to these extra-curricular activities but she told the Court about four incidents involving Mr Foai. First, she said that on 2 May 2006 she had cause to write to him over an issue involving his failure to swipe his identity card at work. On 16 October 2006, there was an incident where she said Mr Foai refused to carry out instructions but it was resolved through an apology. Ms Budny also noted that on 15 May 2006 and again on 16 January 2007 she had cause to write to Mr Foai about an attendance problem. 
New role as Time & Administration Administrator 
[11]
Ms Budny told the Court that towards the end of May 2007 they needed a temporary Time & Administration Administrator (T & A Administrator) as the incumbent, Mr Keri Fiu, had been seconded to assist her in other work. The position was advertised internally. Ms Budny said that even though Mr Foai was the only applicant, she still formally interviewed him before confirming his appointment. Ms Budny said that she subsequently looked for the contract that should have been signed at that time but she had been unable to find it. The internal advertisement described the skills required as: computer literate; good time-management; good understanding of Collective Employment Agreements plus a need to “multi-task”. The “Position Description” for the job was produced. It is a detailed, closely typed seven-page document which sets out 36 rather daunting tasks and activities which were all part of the T & A Administrator's role. The “Location” is stated to be “Auckland/Wellington/Christchurch”. Mr Foai told the Court that the document had not been given to him at the time but he had “briefly gone through it” subsequently and there was nothing in it which he disagreed with. The introduction to the “Role Purpose” section of the Position Description reads as follows: 
“The purpose of this role (T&A Administrator) is to ensure that post roster publication, unallocated duties are assigned in order of priority and that factors [affecting] manpower levels (such as changing load factors and schedule changes) are reflected in the plan for the day of operation. 
Responsible for the accurate, timely and auditable processing of Time & Attendance (OPUS One) data and for the assignment of Unallocated Duties in preparation for the Day of Operation. ”
[12]
The T & A Administrator's position was clearly something quite different from Mr Foai's previous part-time position. Ms Budny acknowledged this point when she told the Court: 
“55.
The role was very different to Mr Foai's previous role in many respects. First, it was an administrative, office based role as opposed to being a physical mainly outside/loading based role. It was a computer-based job because the T&A system captured electronic records. Computer log-on and extensive computer use was a necessary daily occurrence for the job. 
56.
Second, it was a full-time position (ie 40 hours per week) which I was aware Mr Foai was seeking to achieve for some time. As well as being full-time it had regular hours ie Monday - Friday and without a work roster. I have, on occasion had to fill the role myself. It is one which with minimum application an operator can easily do in fewer than 40 hours per week even with roster fluctuations and other irregular events. 
57.
Third, the job had no overtime component attached to it compared with Mr Foai's previous work hours which consisted on 30 hours rostered ordinary time with overtime added on top of that. The only exception was if there was a Monday public holiday, it was a requirement that T&A duties continued as each Monday timesheets had to be finalised and sent to payroll for the day cycle that week. 
58.
The role was also different in that it was a temporary assignment until we had sorted out the restructuring and operational changes and once the role was complete it was intended that Mr Foai would return to his loading role. ”
[13]
In an earlier part of her evidence, Ms Budny provided another description of the T & A Administrator's position: 
“5.
… This role was aimed at achieving consistency between the T&A records and employees' actual attendances at work. Essentially the role involved reconciling electronic T&A readings as activated by employees' swipe cards with their actual attendances at work, where there was a variation. There was a constant need to check records and amendments with our payroll department which was based in Auckland. ”
[14]
The start date as to when Mr Foai commenced working as the T & A Administrator assumed some significance. Perhaps, understandably, given the passage of time and the inability of Air New Zealand to locate the relevant employment agreement, there was some confusion over when Mr Foai took up his new position as T & A Administrator. In his examination-in-chief, Mr Foai said that he had been “successful in picking up the temporary full time role of Time & Attendance (T&A)” during the month of March 2007. Later he said that he “started the T&A position in May”. In cross-examination by Mr Cleary, counsel for the defendant, Mr Foai was again asked about when he started the T & A Administrator's job and he said that it was at the end of April 2007. Mr Cleary then referred the witness to a brief letter on Air New Zealand letterhead dated 3 October 2007 addressed “Dear Clint” which was headed: Offer of temporary assignment: T&A support, Wellington Ramp. The letter commenced: 
“We are pleased to confirm the current arrangements for the above. 
This assignment commenced mid June 2007 and will conclude on 3 February 2008. The reason for the assignment is to provide temporary support whilst the operating IT systems and new rostering tools are implemented. ”
[15]
Mr Foai agreed with Mr Cleary that the T & A contract was renewed every three months in the form of the letter dated 3 October 2007. The letters were referred to in evidence as “contracts”. The so-called “temporary assignment” continued by way of the three-monthly extensions until 20 July 2009. Counsel put it to Mr Foai that going back three months prior to the date of the October 2007 letter would have meant that he commenced the T & A Administrator's job in July 2007. Mr Foai again responded that it was the end of April. The October letter refers to the assignment having commenced “mid-June 2007” and Air New Zealand's own witness, Ms Budny, said in her examination-in-chief that Mr Foai, “started in the role at the end of May 2007. We have looked for the contract that should have been signed at that time but cannot find it. He was trained in the new role by Mr Fiu but he reported to me as his manager.” Mr Foai said that he was also trained in the T&A system by Mr Hugh Galbraith. I make the observation that one explanation for the variation in start dates could relate to the period Mr Foai had in training before assuming the role on his own. That possibility was not fully explored before me but I consider it the most likely explanation. No help is found in Mr Foai's payslips. Not all of his payslips were produced to the Court — only a small sample. It appears, however, from the payslips that were produced, that after Mr Foai took up the T & A Administrator's position the job description in his payslips remained that of his old job description “P/T A/Line Svc/Prsn”
[16]
It is not clear whether Ms Budny's reference to the “contract that should have been signed” is a reference to a new individual employment agreement or to an earlier version of the letter dated 3 October 2007. On the facts, however, I am not prepared to accept that a new individual employment agreement had been entered into when Mr Foai took up the T & A Administrator's position. If that had been the case, then I am confident that a reference would have been made to that agreement in the letters extending the term of the assignment every three months but none of the letters make any such reference. Likewise, if an individual employment agreement had been in existence, then there would have been no need for the letter of 3 October 2007 and the subsequent letters of renewal to set out the terms and conditions applying to the T & A Administrator's position because they would have already been stipulated in the individual employment agreement. My conclusion is that the “contract” Ms Budny referred to in this regard was simply an earlier version (date unknown) of the letter dated 3 October 2007 setting out the basic terms and conditions of Mr Foai's “temporary assignment” as T & A Administrator. 
[17]
The terms and conditions set out in the letter of 3 October 2007 recognised that, although he was to be based in Wellington, Mr Foai may have to make trips to other centres “as required from time to time”. The terms also stated that Mr Foai would be employed “on a full-time (40hr pw) basis” and that his employment under the assignment was “part of a continuous period of employment with the company”. The change of status to “full time” did not, however, appear to be reflected in Mr Foai's payslips which continued to show his old job description of “P/T A/Line Svc/Prsn” (the “P/T” presumably being an abbreviation for “part-time”). On the face of it, therefore, Mr Foai was still being paid as a part-time employee and that factor later caused him to query the position. 
[18]
The significance of knowing whether a fresh individual employment agreement had been drawn up for Mr Foai when he assumed the T & A Administrator's position is because, although the letter of 3 October 2007 set out the terms and conditions which were to apply to the T & A Administrator's role, it did not specify any salary or hourly rate for the role. It simply stated: 
“3.
Payment for hours worked will be as now, at your average earnings hourly rate. ”
I suspect that the same wording would have appeared in the original “contract” which could not be located and I record that the wording continued to appear in each of the three-monthly renewals down to 23 December 2008 when it was changed to read: 
“3.
Payment for hours worked will be as now, at your average earnings hourly rate as set $25.30 per hour. ”
Ms Budny said the change was made in December 2008, “because the overpayment had been identified by that time”
The overpayment 
[19]
Mr Foai told the Court that the new role “was perfect” for him because he no longer had to work the shift-work hours he had worked throughout the previous five years. He said that his contract for the T & A Administrator's position was set up by Ms Budny and Mr Paul Daniell, a Human Resources Manager with Air New Zealand. Mr Daniell was based in Christchurch but he would travel to Wellington periodically. Mr Foai said that when he asked Ms Budny at the outset what “average earnings” were, he was told that, “it was a top up from my original hourly rate and that it prevented me from receiving overtime since I was still classed as Part time in the system”. Mr Foai was cross-examined at length as to his understanding of the term “average earnings”. He stated, at one point of his cross-examination, that at the time, “I'd had, I had no idea what average earnings was”. Shortly before making that statement he said, “I just, I just knew that it was a top-up, that was the only explanation that was given to me and, I mean, when I query — when I look at my payslip and I see ‘average earnings’ for the 3rd of the 6th, and there's not rates that it was based on, there's no units it was based on”
[20]
In relation to the payment issue, Ms Budny told the Court: 
“24.
At the interview I recall we discussed the pay that would apply if he was successful. The intention was that Mr Foai would be paid 40 hours with no overtime. However because Mr Foai's then current remuneration was based on different rates (ordinary and overtime) the first hourly rate to apply was an average rate of those rates spread over the last year. I refer to clause 15.2(ii)(b) of the collective agreement 2007-2009 which refers to average earnings. Mr Foai agreed with me that he would accept that. ”
[21]
The clause in the collective agreement relating to the meaning of average earnings was put to Mr Foai in cross-examination but it was not cl 15.2. Instead it was cl 112, a provision appearing under the heading, Company Training Course. Subclause (b) of that provision, under a subsection headed: Away from Home Base stated: 
“(b)
Should the period away from home base exceed eight hours the employee shall be paid eight hours at average earnings in lieu of (i) above. The average earnings will be calculated on the basis of the previous 12 [months'] employment. ”
[22]
It is not altogether clear, but if Ms Budny was intending to suggest to the Court that during the course of her interview, she had actually referred Mr Foai to cl 112 or any other provision in the collective agreement dealing with the phrase “average earnings” then I find that most implausible and I do not accept that that would have been the case. 
[23]
In cross-examination, Ms Budny was asked: 
“Q.
Can you explain, sorry, again what average earnings are and how you would have explained that to Mr Foai? 
A.
So my [understanding] of average earnings, um, which is a little bit different to when calculating annual leave is total of your last 52 weeks' earnings divided by the number of hours that you've worked over that time gives you an average hourly rate. 
Q.
And you're saying that you explained that formula to Mr Foai? 
A.
Yes. ”
[24]
One of the important witnesses for Air New Zealand was Ms Aruna Singh, a payroll officer based in Auckland. I will need to come back to Ms Singh's evidence but in relation to the phrase “average earnings” the witness told the Court on more than one occasion that Mr Foai was, “getting average earnings paid at the higher amount”. She did not clarify what she meant by this statement. Suffice it to say, however, that I am satisfied on the evidence that, although Mr Foai knew he would be receiving “average earnings” when he assumed the role of T & A Administrator, he did not know what the formula would equate to in terms of dollars and cents. Had he turned his mind to the question, I suspect that he would simply have assumed, as he was entitled to assume, that his employer would get it right and he would be paid the correct amount, whatever that figure came to. When Mr Foai was asked in cross-examination to clarify whether he was saying that he didn't know exactly what he was earning because he had no idea of the set contractual rate and the position was, therefore, “up in the air”, he replied: 
“I was happy enough just to get the job, just to get out of shift work and finally have weekends with my daughter. ”
[25]
One of the documents produced by Air New Zealand was a summary of the overpayments Mr Foai received. It was headed Retro Calculation Report (the retro report) and was apparently prepared by Ms Singh. Counsel for the plaintiff, Ms Greally, helpfully accepted the accuracy of the various entries without requiring each individual entry to be formally proved but the defendant did not concede at any stage that the so called “overpayment” was the result of a mistake. What does emerge from the retro report is that even if Mr Foai had been paid correctly, the amount he would have received each fortnight would not have been a set amount but the figure would have varied from one fortnight to another. The difference in amounts could be significant. For example, for the fortnight ending 8 July 2007, the retro report shows that Mr Foai should have received $871.68 but for the fortnight ending 9 December 2007, if correctly paid, he should have received $487.58. No satisfactory explanation was given as to why that should have been the case and, in cross-examination, Ms Singh was unable to give a convincing explanation as to why there was a significant variation also in the rates used to calculate Mr Foai's annual leave entitlement. 
[26]
The retro report disclosed that the actual overpayment figures also varied significantly. The initial overpayment for the fortnight ending 10 June 2007 amounted to $59.93. For the fortnight ending 14 October 2007 the overpayment amounted to $462.22, for the following fortnight it reduced to $14.29 and then for the next fortnight ending 11 November 2007 the figure increased again to $622.04. During 2008, the overpayments gradually increased to over $3,000 for the pay period ending 8 June 2008 and the all-time high figure of just over $4,800 for the pay period ending 28 September 2008. The retro report also disclosed that on two occasions during the period in question, Mr Foai was underpaid by $27.24 and $582.07 respectively. 
Inquiries 
[27]
It was difficult to reconcile the evidence of the various witnesses as to precisely when and how Mr Foai raised queries in relation to his wages. I do not think the witnesses were being deliberately obstructive in this regard. I accept that the most likely explanation for the discrepancies in their evidence was the lapse of time since the events in question and the fact that the witnesses were being asked to recall matters which, more than likely, would not have assumed any great significance in their minds at the time. The evidence was that, in the second half of 2007, Air New Zealand was going through a major restructuring exercise with redundancies and other significant developments and, given that scenario, the queries Mr Foai raised about his pay, understandably, may not necessarily have been a particularly high priority. I am satisfied, however, that Mr Foai did raise queries about his pay and, responsibly, Mr Cleary accepted that that was the position. The grey area was the nature and dates of those queries. 
[28]
To appreciate some of the concerns raised by Mr Foai, it is probably appropriate at this point to refer to certain particulars in his payslips which gave rise to his queries. As already noted, not all of the payslips were produced but only a small sample. The first, for the fortnight ending 15 April 2007 shows a gross payment of $1,371.52 made up principally of “basic pay” and annual leave; the second, for the fortnight ending 29 April 2007, shows a gross figure of $1,355.36 made up principally of basic pay and overtime; the next payslip for the fortnight ending 13 May 2007 shows a gross figure of $2,724.37 made up again principally of basic pay and overtime with a “Gross Up adjustment” of $521. The payslip for the fortnight ending 27 May 2007 shows a gross figure of $1,609.23 made up of basic pay and overtime. The next payslip for the period ending 10 June 2007 is for a gross figure of $2,234.89 made up principally of basic pay ($1,103.30) and “Average Earning Adj” ($844.44). The payslip for the period ending 24 June 2007 is for a gross figure of $1,997.31 made up principally of basic pay ($1,103.30) and Average Earning Adj ($844.44). Then for the pay period ending 8 July 2007, the gross figure is $2,197.21 made up of basic pay ($1,103.30) and then a figure of $922.72 for what is recorded as: “PP080707, WE1/7 pp080707, we08/ ”. Finally, for the pay period ending 22 July 2007 the gross figure is shown as $2,136.45 made up principally of basic pay ($1,103.30) and “Average Earning Adj” ($983.88). It is not easy to reconcile the actual figures shown on the pay sheets with the comparative figures in the retro report. For example, the payslip for the period ending 22 July 2007 records that Mr Foai's net pay, after the PAYE deduction, was $1,440.75, whereas the retro report states that the amount paid to Mr Foai for that same period came to $983.58. The discrepancies were not explored in evidence before me. 
[29]
Mr Foai said that the first query he raised was with Ms Budny and he had asked whether he was supposed to be getting paid overtime every fortnight as if he was still a part-time loader. He said that Ms Budny told him that he was not supposed to be getting overtime and he should be paid on the basis of average earnings which would work out at a higher hourly rate. He continued: “She told me that the system would be amended to my average earnings rather than the part-time loader rate.” In his examination-in-chief, Mr Foai indicated that this conversation with Ms Budny took place around July/August 2007 but in cross-examination and in his answers to questions from the Court, he identified the payslip to which his query related as being the payslip for either the fortnight ending 13 or 27 May 2007. In her evidence, Ms Budny said that she could not specifically recall the conversation that Mr Foai referred to “in July or August 2007 but I would have advised him that he should not be paid overtime. I would not have said the system would be amended as in my mind at the time that was already happening.” Allowing for the correct time of the conversation, which was not identified until his cross-examination, I accept what Mr Foai told the Court. 

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