Payslips showed he'd been paid, but the directors' personal liability turned on accountant advice
Three directors of a failed medicinal cannabis start-up were not personally liable for unpaid wages, Authority member Peter van Keulen ruled on 4 August 2026.
Aether Pacific Pharmaceuticals Limited (APP), a medicinal cannabis start-up, struggled to secure funding through 2024. Its former chief operating officer (COO), who joined on 4 November 2022 as process and operations manager before his promotion in early 2024, was dismissed on 23 October 2024, a move the Authority found was unrelated to APP's funding troubles.
APP went into voluntary administration on 20 November 2024 and liquidation on 4 February 2025. The former COO said he was never paid his final fortnightly salary of $4,732.55, nor his last pay covering a day worked and a day of annual leave, nor his accrued but untaken holiday entitlement. When the liquidators declined to let him pursue APP directly, he turned to the company's three directors personally, arguing they were liable under sections 142W and 142Y of the Employment Relations Act 2000 as persons involved in APP's breaches of employment standards.
One director, who had also served as acting chief executive during part of 2024, produced payslips appearing to show both payments had been made. The former COO maintained he never received the money, and the Authority preferred his account, noting it was unlikely he would pursue a costly claim against three individual directors if it were untrue. The position on the holiday entitlement was less clear-cut: APP may have reconciled other unrecorded leave against the balance, and the Authority could not establish exactly what amount, if any, remained owing.
APP's failure to pay the final two amounts was a breach of employment standards, the Authority found, and all three directors qualified as officers of the company for the purposes of the liability regime. None of them, however, knew the primary facts behind the non-payment: the two non-executive directors were not involved in APP's day-to-day operations, while the acting chief executive said he authorised payments through APP's payroll system believing they had gone through correctly.
The Authority accepted the directors had relied on advice from APP's accountants regarding the company's funding, cashflow and outgoings throughout 2024. Citing the Court of Appeal's judgment in A Labour Inspector v Southern Taxis Limited and Others, the determination noted the statutory scheme places liability on "a director who knows all the primary facts relevant to the company's breach," unless that director reasonably relied on third-party advice or took reasonable steps to ensure compliance.
Applying that test, the Authority found each director could rely on the statutory defence under section 142ZD, regardless of whether they held the requisite knowledge. Of the acting chief executive, it found he "did not know the payments had not been paid at the time" and had authorised them believing APP's payroll records were accurate.
The Authority determined APP breached employment standards by failing to pay the former COO's final wages in full, but that none of the three directors were personally liable for those breaches or for the unresolved holiday entitlement. The claim was resolved in favour of the directors, with costs reserved for the parties to resolve between themselves or refer the matter back to the Authority within 28 days.
