YONG V CHIN

A CASE OF INTEREST AND A CAUTIONARY TALE

Also titled “How to run up costs without really trying”

A study by Mark Nutsford

The majority of cases which we handle through Employment Relations Consultants are settled quickly and confidentially.  Indeed one of the provisions of settlement under Section 149 of the Employment Relations Act 2000 provides for that confidentiality and this, in turn, provides anonymity for those involved.  Because of this, advocates like myself are usually unable to discuss specific cases other than to talk in broad and often sweeping generalisations.

Once the case reaches the Employment Relations Authority, however, it then becomes public domain and unless otherwise specifically prohibited from publication it is available for anyone and everyone to view and learn from. This is such a case.

Despite this, and because I have developed a great respect for my client, her humility and her privacy and because neither she nor I bear any animosity towards her previous employer, I shall refer to them here only as “the employer” and “the employee” or “my client”.

I will also state that the point of telling this story is to draw attention to how some representatives will drag cases out presumably in order to increase their fees and to show how the obstinacy of some [employers] can result in astronomical sums of money being spent when a little rational thinking can resolve the issue cheaply and easily.  As an advocate I focus on resolution and not “the fight”.

I became involved in this case in late 2005 when a lawyer colleague of mine recommended me to one of her own clients.  The client had come to the lawyer seeking advice on how to protect herself against her employer who was seeking to recover money from her.  This was money which had been borrowed by her husband from her employer some years before without her knowledge.  The husband had since been declared bankrupt.  My lawyer colleague immediately recognised the employment relationship problem and sent her straight to me.

The employee was a lady of some refinement whose health had deteriorated rapidly over a short time following the actions of her employer.  She had resigned her position a day or so before I met her but it was clear to me that this was a case of constructive dismissal, albeit not without its twists and turns.

Although I will often preach about the simplicity of employment law and complain how many practitioners unnecessarily complicate cases, perhaps deliberately to run up fees, this case was not completely clear cut.  To understand the intricacies of the case it is necessary to turn the clock back to the commencement of my client’s employment.

My Client had originally commenced employment with the employer in July 2002, working as an assistant accountant

The employer, over time, had developed a relationship with my client’s husband who was some years older than her.  A venerable gentleman, my client’s husband was an experienced businessman who had a wealth of business ideas but little capital to initiate them.  Sometime around February 2003 the employer and my client’s husband planned a business deal together.  The employer lent my client’s husband a considerable sum of money with the promise of high returns. The pair made a pact to keep the dealings a secret from my client.

Unbeknownst to the employer, later that same year,, my client’s husband had made a similar secretive arrangement with a client of the employer for a different venture under much the same terms.  The husband had met the employer’s client when the employer’s client had invited my client and her husband to dinner after a particularly successful accounting exercise had been completed by my client.  The invitation to dinner had been refused by my client on several occasions until the insistence of the employer’s client became an embarrassment and she reluctantly accepted.

The long and the short of the story is that eventually both business deals turned sour and both investments were lost, each without the knowledge of the other and both without the knowledge of my client.

My Client, in the meantime, due to the harsh treatment of her employer, left her job in October 2003.  

My client’s husband’s financial position had become extremely precarious and she was unaware of the effect her unemployment was having on him.  Matters came to a head in February 2004 when my client inadvertently opened mail which contained some rejected cheques which her husband had post-dated for the employer’s client.  This led to her discovery of the first business deal with the employer’s client and she was not pleased.  I will leave it to the reader’s imagination as to the extent of domestic disruption this revelation caused.

After an approach by the employer, who begged her to return, she recommenced employment in May 2004 still completely unaware that her husband had also borrowed money from her employer.

She continued to work diligently for the employer until, still without her knowledge, the employer’s business deal failed.  Around September 2004 the employer’s client threatened both the employer and my client with legal action based on an unsubstantiated claim that somehow they had conspired with the husband.  This was refuted.  The claims were found to be without foundation and no action was ever taken against my client or her employer.

The employer performed his own investigation into the matter to satisfy himself that there was no impropriety on the part of his employee.  The investigation was carried out in a fair and reasonable manner, process was followed and the employer found no validity in the claims against his employee and everyone returned to work.  The relationship was on a firm footing and continued to be productive and friendly. 

At about the same time, the employer’s client commenced bankruptcy proceedings against my client’s husband. 

To this stage my client still had no idea about the deal between her husband and her employer and this continued until her husband was declared bankrupt following action by the employer’s client.  Despite being sworn to secrecy, the employer’s wife could not contain herself.  She approached my client and told her that her husband owed the employer “a considerable sum of money”.   The employer’s wife wouldn’t say any more than that and this caused my client considerable distress as her imagination ran wild.  (“Was it $1,000,000.00?”)    She confronted her husband that night and he confessed all.

In about May 2005 the employer met a senior member of the Church of Scientology in Auckland and was recruited into the fold of the organisation.  This particular Scientology practitioner claimed to be a “business advisor” and drew the employer into an alliance to “sort out his problems”.  It became apparent later that he knew nothing about employment law or the rights of employees.

My client’s husband was declared bankrupt on 17 August 2005.  It was shortly after this that the employer hired the Scientologist adviser as his consultant.

On September 29 2005 my client was called into a meeting with the employer and his consultant.  There was no warning of the meeting although my client was told that the meeting was to discuss the restructure of the employer’s business.  This could not have been further from the truth as the employer’s own minutes from the meeting later confirmed.  My client was subjected to a three hour interrogation focussing strongly on her relationship with her husband.  The main objective of the meeting centred on what she was going to do to honour her husband’s debt and how she was going to repay it.

My client was extremely distressed by the meeting and the atmosphere of the meeting and begged her employer to end this and allow her to leave.  The employer did nothing more than grin at her and issue a chuckle.

The meeting was followed up the next day with a letter demanding a “written solution” to her husband’s debt.  Those reading this that have even the most basic legal knowledge will be aware that this is in direct conflict with Section 369 of the Insolvency Act 2006 which prohibits the pursuit of debt against a bankrupt person.

Over the next three weeks or so letters were exchanged between the parties on an almost daily basis.  To her credit my client was very clear in her communications both to the consultant and to her employer.  She advised them that she was “not liable, legally or morally, for my husband’s indebtedness…”   She further advised them that she would take action against them if they did not desist.

By 21 November 2005 my client had become so stressed by what was happening that her health deteriorated markedly.  For the sake of her privacy I will not detail the symptoms but will say that they were severe.  My client was put on leave by her medical practitioner and remained confined to her home for the week.

That night, the employer and his Scientologist adviser arrived unannounced at my client’s home to confront her husband.  An ugly scene developed and the police were called.  The police escorted the two men from the property.

Following this episode my client deemed her employment relationship to be untenable and submitted her resignation on 25 November 2005, leaving no doubt of the reasons for this.

Once we were engaged, notification of a personal grievance was issued to the employer on 30 November 2005.   Despite our best endeavours to have him do so, no response was forthcoming from the employer.  I can say with absolute certainty that, had the employer responded at this point, the matter would have been resolved easily and at relatively little cost.

We lodged a Statement of Problem with the Employment Relations Authority on 10 February 2006.   Following receipt of the respondent’s Statement in Reply, the Authority referred the parties to mediation.  Mediation was held on 13 June 2006 without success. 

Mediation, as a process, is held on a “without prejudice” basis.  This then deems everything that happens in mediation to be strictly confidential and so unable to be discussed.  Interestingly though, the employer’s representative at mediation was not the person to whom the original response came.  In fact throughout this affair the employer had no less than five different representatives.

In any event, with mediation unsuccessful, we then called upon the Employment Relations Authority to conduct an investigation meeting.   The meeting was held on 3 October 2006 before Authority Member Leon Robinson.  The employer’s representative had changed again.

It is interesting that often the determination following an investigation meeting will take a considerable amount of time to arrive.  Two to six weeks is the norm and I have had cases where the determination has taken over five months.   In this case the determination came back the next day.  Determination AA312/06 awarded my client $3,653.85 in lost wages, $5,000.00 in compensation for distress, Holiday pay of $2,192.31 and interest to be paid on the holiday pay of 9% per annum from 25 November 2005.

A flurry of media interest followed the determination and several articles appeared in national newspapers at the time. A later cost Determination AA312A/06 issued on 9 November 2006 awarded my client a further $1615.00 in cost recovery. See article above.

Two other representatives later, the employer lodged a de novo challenge to the determination in the Employment Court.   The case was held before Judge ME Perkins over three days, 18 and 20 April and 7 May 2007.   The employer’s defence, given via his counsel bordered on farce.  The counsel’s verbose and repetitive style coupled with overly long and unnecessary cross examination and irrelevant issues dragged the hearing from what should have been one day to a three day ordeal. The Employment Court Judgement AC 37/07 was issued on 20 June and upheld the Authority’s determination.  It also increased the award for distress from $5000.00 to $8000.00.

We submitted a claim for total costs of $8268.75 and were awarded $5661.50 in Employment Court Judgement AC 37A/07.

In a bizarre turn of events, counsel for the employer then made application for a rehearing in the Employment Court as well as application to the Court of Appeal.  At the same time he lodged an application for a stay of proceedings in order to stop us from collecting the awards while he prepared his case.  We lodged objections to all three applications.  The application for the stay of proceedings was then linked to the rehearing application.

Following the direction of the court both parties prepared and submitted submissions for and against the right to be reheard.  The employer’s counsel’s submissions were a collection of ramblings which took hours to unravel.  He accused Judge Perkins of the most outrageous failings.   He claimed that Judge Perkins misconstrued or misapplied the law.  He claimed that Judge Perkins conduct in the trial was questionable and that he displayed bias towards my client and predetermination of the outcome.  He also accused the Judge of discriminating against his client on religious grounds in some apparent reference to scientology.
A hearing was scheduled for 27 September 2007 in order that the two representatives could present their submissions.  On the day counsel for the employer failed to appear and came only after being telephoned and ordered to do so.  He arrived breathless and without his robes an hour late claiming to have diarised the event for the following month.

A hearing like this would normally be an event which would take about half an hour.  Indeed, Judge Couch, at the commencement of the hearing said, “Gentlemen, I have read both your submissions thoroughly so I do not require you simply to re-read them to me.  I would like you just to clarify any main points which you feel I may need more information on.”  (This is my recollection of the actual words spoken and may not be absolutely verbatim)

Despite this request, Counsel for the employer took the entire day, from his arrival until after four o’clock that afternoon (with a lunch break) to dissect his submissions to the nth degree.  Once again his submissions were replete with inaccuracies and irrelevancies.  I was finally able to address the court at around about ten past four in the afternoon.  I addressed the disjointed presentation of my adversary as best as I was able pointing out several points he had made as being inconsistent with the briefs of evidence and the transcript of the original trial.  He had even claimed my client had committed a workplace indiscretion at a time when she was not even working for the employer.

In Employment Court Judgement AC 1/08 issued on 15 February 2008 Judge Couch dismissed the application for a rehearing and further dismissed the application for a stay of proceedings.

The Court of Appeal was another matter all together.  Although I prepared the initial Objection to the Appeal as well as the Statement of Defence, I had to make special application to be able to represent my client as a lay practitioner.  As the reader will no doubt appreciate, the Court of Appeal is a complex process held before three of the highest ranked judges in the land.  My application to represent was denied.  We then retained the services of Christopher Eggleston – Barrister.  Mr Eggleston prepared the submissions with me in the distant background as a sort of “Mackenzie Friend”.

The Court of Appeal sits in Wellington and a video link was arranged for 16 June 2008 from the High Court in Auckland to facilitate this.  I accompanied Mr Eggleston as an observer.  At this stage we were unaware of whether the employer’s counsel was going to appear in Wellington or Auckland.

The link was established and the Judge’s panel consisted of Judges O’Regan, Arnold and Baragwanath.  The employer’s counsel was nowhere to be seen.  Finally their Honours asked Mr Eggleston if he had any knowledge of his whereabouts.  Naturally the answer was no.   A telephone call was put through to the employer’s counsel’s office.  The employer’s counsel eventually came to the phone and incredibly made the same claim as he made when he attended the rehearing application, that he had diarised the event for the wrong month.  The application hearing proceeded with the Employer’s representative on the end of the phone.

In Appeal Court Judgement CA359/2007 [2008] NZCA 181 the application for leave to appeal was dismissed and the applicant was ordered to pay costs of $1500 plus usual disbursements.

In the meantime we had submitted costs for the failed application for a rehearing.  In EC Cost Judgement AC 1A/08 ARC 42/07 Judge Couch awarded a total of $4252.30 in costs and disbursements.

At this point the employer had exhausted all avenues of appeal.  Awards against him totalled well in excess of $27,000.00.  Although we can only estimate his legal costs I would guess these to be somewhere between $16,500.00 and perhaps more than $20,000.00.

Despite everything before him the employer still refuses to accept that he might have done anything wrong.  He, like many others, are still of the opinion that he can do what he wants in relation to his own business.  Of course, this could not be further from the truth. Every aspect of running a business is controlled by legislation.  From Taxation issues to compliance issues, employment law, health and safety….all covered by laws which dictate how something should or shouldn’t be done.

The most tragic thing about this particular case is that the majority of the costs the employer incurred were legal costs – all for a case which probably would have settled for $5000 - $8000 in mediation.