Auckland gym business liquidated days after $31,000 penalty order for unjustly sacking instructor

An Auckland gym business ordered to pay nearly $30,000 to a staff member deemed to have been unjustifiably dismissed has been liquidated just days after the penalty order was handed down.

JKD Fitness East Auckland Ltd, which ran a children’s martial arts ‘combat fitness’ gym on the city’s North Shore, was ordered by the Employment Relations Authority (ERA) to pay instructor Peisen Fan after ruling that he was unfairly sacked as a result of a three-hour ‘torrent’ of WeChat messages from the company’s sole director, Shuai ‘Abel’ Chen in late 2020.

The dispute followed rumours that Fan had been encouraging customers to bring their children to a rival gym, which Fan denied.

Handed down in February, the ERA decision says an angry Chen objected to the “immorality of stealing clients”, telling Fan he should stop coming to work and remove his personal belongings.

Chen later admitted he was too angry to meet Fan in person and that he had overreacted.

The ERA decision says Fan - a recent migrant from China - was significantly affected by the termination.

Fan took his case to the ERA, seeking $20,000 compensation for humiliation, loss of dignity and injury to feelings.

ERA adjudicator Nicola Craig said Chen did not approach the situation with an open mind, stating “he was upset and angry and had predetermined the decision. Mr Fan’s denials that he had tried to persuade parents to transfer had no traction as Mr Chen was not open to investigating further or changing his mind.”

Craig found that JKD did not act as a fair and reasonable employer and that Fan was unjustifiably dismissed.

She ordered the company to pay $28,000 in compensation, lost wages, outstanding holiday pay and penalties to Fan, and $3000 to the Crown.

Craig noted there was “no suggestion” the company would have any financial difficulty paying the money.

However, just three weeks later, on 8th March, JKD was placed into liquidation with the subsequent liquidator’s report saying the company was established in 2017 with the backing of local Chinese donors, who became shareholders.

The report says Fan’s dismissal led to a “protracted and expensive” ERA dispute.

“The fines were to be paid within 28 days ... and the company, we are advised, had no access to credit, and no funds to meet the payment by due date.”

The report claims the company’s shareholders were unhappy with the ERA decision and did not want association with a company unable to pay its debts. JKD’s accountant advised them to liquidate the business.

Chen - who is now listed as the sole shareholder and director - told the liquidator the company was insolvent due to the ERA determination.

The liquidator’s report says the company has no substantial assets other than a used boxing ring, punchbags and boxing gloves. The business is still running but now for sale.

It’s understood Chen has now launched a counter claim in the ERA against Fan and another former employee, alleging they tried to poach JKD’s customers.

Fan’s employment advocate Mins Chang told the New Zealand Herald that the timing of the liquidation was suspicious, coming just days after the ERA determination.

Chang suggested “we think it could be a way to avoid liability.”

Meanwhile, the Herald reported that the liquidator was preparing to contact North Shore Police after a masked individual allegedly entered the gym without permission last month and began filming children, just days after the liquidation as the business continued to trade.

Chang told the Herald she was aware of the allegation but the masked man was not her client.

Images: JKD Fitness East Auckland Ltd Director Abel Chen. Credit: JKD Fitness East Auckland Ltd.