Katz v Mana Coach Services Ltd
 NZEmpC 49
IN THE EMPLOYMENT COURT WELLINGTON
In The Matter Of a challenge to a determination of the Employment Relations Authority
Tanya Kennedy, Counsel for the Plaintiff
Blair Scotland, Counsel for the Defendant
Appeal against Employment Relations Authority's decision to dismiss the plaintiff's claim for indemnification by employer — plaintiff incurred legal expenses in successfully defending careless driving charge — charge resulted from accident that occurred while driving in course of employment — whether plaintiff breached obligation to take all skill and care in performing job and lost her right to indemnification.
The issue of indemnification had been raised by the Union during a renegotiation of the collective employment agreement. Mana refused K's claim as it had not agreed to the indemnification proposal. K took the matter to the Authority, which considered K' application under common law principles of indemnification and found against her.
The issues on appeal were: whether K had been on duty and had been performing a duty of her employment when the accident had occurred; whether K had lost her right to indemnification through breach of duty, negligence or other fault.
Held: As there was no indemnification clause in the collective agreement, the matter had to be decided according to common law principles. The weight of the authorities made it clear that at common law an employee could lose a right to indemnity or reimbursement where the liabilities or expenses arose out of a breach of duty, negligence of other fault on the part of the employee (Christchurch City Council v Davidson (CA)).
The fact that K had been acquitted of the traffic offence was not determinative. The Court was still required to look at all the circumstances and determine in accordance with the civil burden of proof if the expenses arose out of a breach of duty, negligence of other fault. While K had contended that her admission of fault in the insurance form was invalid because she had been in a state of shock, other evidence established that the accident had been caused solely by K's negligence through a breach of her employment obligation to take all reasonable skill and care in the course of her employment.
The issue in this case is whether the plaintiff is entitled to be indemnified by her employer for legal expenses she incurred in successfully defending a careless driving charge arising out of an accident occurring in the course of her employment. The end result of the criminal proceeding was that the plaintiff was discharged without conviction.
The facts can be briefly stated. The plaintiff is a bus driver employed by the defendant. On 10 June 2009 she was involved in an accident at an intersection in Paraparaumu when she appeared to cut the corner while turning her bus to the right from Golf Road into Martin Road. Her bus collided with and scraped along the front of a Mitsubishi motor vehicle being driven by Mr Ian Phillips. Mr Phillips? vehicle was stationary in Martin Road waiting to cross over the intersection.
Later that same day, Ms Katz completed an insurance motor accident claim form for the defendant in which she admitted responsibility for the accident stating in explanation: “Just didn?t see vehicle”.
The police attended the scene and on 11 June 2009, Ms Katz was issued with an infringement notice alleging that she had operated a vehicle carelessly. On 21 October 2009 she was discharged without conviction.
On 2 November 2009, Ms Katz was invoiced by her counsel for attendances in defending the careless driving charge. The invoice showed that counsel had been required to make three court appearances on 9 August 2009, 26 August 2009 and 21 October 2009. The invoice totalled $562.50.
On 14 March 2010 Ms Katz, through the New Zealand Tramways and Public Passenger Transport Employees Union Inc (the union), wrote to the defendant seeking to recover the expenses she had incurred in defending the careless driving charge. The letter explains the grounds for making the claim in these terms:
As these expenses were incurred by Beatrice in the reasonable performance of her duty and the general rule of law is that an employee is to have indemnity acting in the execution and reasonable performance of duty, and the relationship of employer and employee raises by implication on the part of the employer a contract to reimburse the employee all expenses incurred in the reasonable performance of duty, we now ask that you reimburse Beatrice the sum of $562.50 which was the actual costs incurred by Beatrice in successfully defending the charge.
Following an unsuccessful attempt at mediation, the defendant?s Chief Executive Officer responded to the union by letter dated 7 July 2010 rejecting the plaintiff?s claim. He also pointed out that the issue of indemnity in such circumstances had been raised by the union in the renegotiation of the collective employment agreement but no agreement had been reached on the subject and the defendant had signalled that it was not prepared to agree to the suggested proposal.
Ms Katz then took the matter to the Employment Relations Authority (the Authority). The Authority Member specifically recorded in his determination 1 dated 30 November 2010 that the parties? employment agreement did not deal with the issue of indemnification and the case, therefore, fell to be decided on the basis of the common law. 2 The Authority dismissed the plaintiff?s claim. Ms Katz then elected to challenge the whole of the determination by way of a hearing de novo in this Court, although it was accepted that there was no express indemnity clause in the parties? employment agreement and that the case was to be decided on the basis of the common law.
The basis of Ms Katz?s claim is set out in her statement of claim in these terms:
Grounds of claim
15. When the facts giving rise to the charge occurred, the Plaintiff was “on duty” and performing a duty of her employment.
16. The Plaintiff relies on the term of employment, implied into every employment agreement in New Zealand, that an employer is liable to indemnify its employees for expenses incurred by those employees in the reasonable execution of their employment related duties.
In her submissions on behalf of the plaintiff, Ms Kennedy emphasised that the plaintiff was engaged in her employment duties when the accident occurred and she was “not off on a frolic of her own”. There was thus, in counsel?s words, “a direct causal link between the bringing of the careless driving allegation and the performance of the Plaintiff?s duty.” Counsel also submitted that there was no finding that the plaintiff had been driving carelessly because she was acquitted of that charge. Reference was made to s 106 of the Sentencing Act 2002 which provides that a discharge without conviction is deemed to be an acquittal.
Ms Kennedy claimed that the statement made by the plaintiff in the insurance form was irrelevant in that it was prepared for insurance purposes and was completed on the day of the accident when the plaintiff was in a state of shock. Inthe alternative, counsel submitted that the insurance statement did “not support a finding that the expenses incurred by the Plaintiff in defending the allegation of careless driving were solely attributable to her own default or breach of duty.”
In support of her submissions, Ms Kennedy cited the following extract from Brookers? Employment Law: 3
An employer is obliged to indemnify or reimburse an employee against liabilities, and in respect of expenses, incurred in the reasonable performance of the duties of the employment. The employee?s right to be indemnified extends to a tortuous action, provided that the employee does not know that the action is unlawful: at 70 (alleged defamatory communication about another employee in confidential memorandum to employer). The right extends to expenses incurred in defending a criminal charge of which the employee is acquitted: Act 2002). SC Wellington M73/99, 16 June 1981 per Quilliam J (discharge without conviction under s 42 of the Criminal Justice Act 1954; see now s 106 of the Sentencing
Ms Kennedy also sought to rely upon observations made in this Court in the recent decision of 4 where reference was made to an earlier decision of the Employment Court in 5 which went on appeal to the Court of Appeal as . 6 In the case a bus driver had been charged by the police with indecent assault arising from an incident where he required an intoxicated female passenger to leave the bus he was driving. He pleaded not guilty and the police subsequently withdrew the charge. The Court held that, pursuant to the relevant collective agreement, the employer was contractually required to reimburse the legal costs of the bus driver in successfully defending the criminal prosecution arising from events which occurred at work. 7 The Court also considered the position at common law...
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