KordaMentha's lawyer Tim Clarke argued the staff were employed solely by ProvencoCadmus Limited, which as a holding company, had no inventory or accounts receivable from which preferential creditor claims can be paid. ProvencoCadmus' only major asset was shareholdings in subsidiary trading companies including Provenco Payments, Provenco Retail Automation, Cadmus Payment Solutions, and Provenco Technology.
The $1.6 million is comprised of wages, holiday pay and redundancy entitlements. Under the Receiverships Act and Companies Act employees are given preferential creditor status up to a specific amount each, which at the time of ProvencoCadmus' demise was $16,420.
KordaMentha has accepted that the amounts claimed are legitimate.
However, KordaMentha argued that before the receivership, the employees were employed solely by holding company ProvencoCadmus, whereas the staff themselves maintain they were employed by ProvencoCadmus and at least one of the subsidiary operating companies.
Thus the Employment Relations Authority was tasked with determining the identity of the employer or employers. In his ruling, Dumbleton sided with KordaMentha in deciding ProvencoCadmus was the sole employer, leaving ANZ, which earlier this month posted record annual profit of more than $1 billion, in line to pocket the $1.6 million.
The employees have 28 days in which to mull an appeal to the Employment Court, and are yet to decide.
In a high profile demise, ANZ pulled the plug on ProvencoCadmus after the company tried unsuccessfully to secure funding from its major shareholders Todd Capital and Navman founder Peter Maire.
At the time of the receivership ProvencoCadmus chairman Rick Christie blamed an unsustainable debt burden, sluggish investment and product markets, and a weaker-than-expected trading performance for the demise. The ProvencoCadmus group was created through the May 2008 merger of Provenco and Cadmus who both had ANZ as their bank.
In his ruling, Dumbleton says after the merger of Provenco and Cadmus staff were given a written employment agreement naming ProvencoCadmus solely as their intended employer. All bar one of the ex-employees in dispute with KordaMentha signed it.
At the time their jobs were terminated in 2009, none of them had a written agreement with Provenco Payments, Provenco Retail, Cadmus Payment Solutions or Provenco Technology.
However, payroll services were provided by Provenco Payments, which paid the staff their salary or wages and deducted income tax which was paid to the Inland Revenue Department. Provenco Payments' name was on the pay slips.
Representing the employees, barrister Philip Skelton argued staff were employed by both ProvencoCadmus and Provenco Payments, given the latter was a 100 per cent owned subsidiary of ProvencoCadmus and was the legal entity through which its business was undertaken.
"Provenco Payments was the company that had the customers, generated the revenue, for whom the employees provided their services, who paid the employees, who accounted for their tax, who paid their ACC levies etc," Skelton said.
"Provenco Payments was not simply an 'employer of record' it was the company that in fact carried on a multi-million dollar business. Contrast ProvencoCadmus - a hold company that did not trade in its own right."
ProvencoCadmus 'logically and legally' the sole employer
But Dumbleton says simply because it performed the payroll function, didn't mean Provenco Payments replaced ProvencoCadmus as the sole employer. He said the staff were "integrated into the unincorporated ProvencoCadmus Payment Solutions business unit rather than into any of the corporate entities the unit had oversight of."
"Although the Payment Solutions business unit was ProvencoCadmus' headquarters group, ProvencoCadmus logically and legally was the sole employer of those including the applicants who worked in or for the unit."
He noted chief financial officer Mathew Gibson, human resources general manager Steven Corrick, and chief executive officer Julian Beavis all had written employment agreements with ProvencoCadmus.
Gibson said KordaMentha had cash on hand to cover the dispute if it ultimately went against the receiver. And, with no further assets left to sell, whether ANZ got any more money back from the receivership, would depend on the dispute's ultimate outcome.
KordaMentha has long maintained that ANZ faces a "significant shortfall" on its loans to ProvencoCadmus.
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