Laura Jane George v Auckland Council NZEmpC Auckland

• Jurisdiction: New Zealand
• Judge: Judge Christina Inglis
• Judgment Date: 27 September 2013
• Court: Employment Court
• Docket Number: ARC 91/10
• Date: 27 September 2013

In the Matter of proceedings removed by special leave

Between

Laura Jane George

Plaintiff

and

Auckland Council

Defendant

In the Matter of proceedings removed

Between

Auckland Council

Plaintiff

and

Laura Jane George

Defendant

[2013] NZEmpC 179

ARC 91/10

ARC 124/10

IN THE EMPLOYMENT COURT AUCKLAND

Personal grievance claiming that plaintiff was unjustifiably dismissed — cross-claim by defendant for breach of contract in relation to failing to implement external tax advice — plaintiff was a senior accounts manager — was dismissed for recruiting a casual employee without permission — alleged plaintiff was dishonest during disciplinary process — whether dismissal was justified under s103A Employment Relations Act 2000 (test of justification) — whether there was disparity of treatment with other managers who had hired staff — whether there was bias in the investigation — whether the defendant had been entitled to commence a formal process given the nature of the concerns — whether dishonesty during the disciplinary process could give rise to a dismissal — whether higher standards applied in disciplinary processes involving senior managers — whether plaintiff was entitled to special damages relating to the investigation or general or aggravated damages for her dismissal, if the plaintiff had been unjustifiably dismissed.

Appearances:

Tony Drake, counsel for Ms George

Tim Clarke and Elizabeth Coats, counsel for Auckland Council

JUDGMENT OF Judge Christina Inglis

Introduction

1 Ms George was appointed to the role of Group Manager, Accounting Services with the Auckland Regional Council (the Council) on 2 October 2006. She had been engaged on a fixed term contract from May 2006. Her position changed to Team Leader, Transactional Services, on 29 October 2009. Ms George was dismissed for serious misconduct less than four months later. She claimed that her dismissal was unjustified, and filed a personal grievance with the Employment Relations Authority (the Authority). The proceeding was removed to this Court.

2 The Council subsequently filed a claim for breach of contract against Ms George. The claim alleged that Ms George had breached her contractual obligations to it during the course of her employment by failing to take any steps to implement external tax compliance advice she had received on behalf of the Council. The Council's claim was also removed from the Authority, and the Court directed that the two claims be heard together.

3 The essence of Ms George's case is that the two claims are inextricably linked. She contends that the Council brought its claim to strong-arm her into dropping her personal grievance and that she was dismissed for reasons not disclosed to her at the time, namely because of suspicions her employer harboured about her failure to implement the tax compliance advice she had received.

4 These proceedings raised a plethora of issues, which were carefully traversed by the parties in nearly two weeks of hearings and two days of closing submissions.

The facts

5 Events giving rise to Ms George's dismissal arose from seemingly innocuous beginnings. They revolved around the engagement of a casual employee.

6 In order to understand the chain of events that unfolded it is necessary to appreciate the circumstances existing within the Council at the time. The Council was to be merged into a newly created entity, the Auckland Council. This subsequently occurred on 1 November 2010. A transition agency (the Auckland Transition Agency, ATA) was established in May 2009. 1 As amalgamation approached the requirements relating to the recruitment of staff were tightened. The concern was to ensure that the newly merged Council was not saddled with an inflated number of permanent employees, duplicating functions and increasing its redundancy liabilities.

7 As Group Manager, Accounting Services, Ms George was a third tier manager. She reported to the General Manager, Finance (Mr Monk). Mr Monk's evidence (which I accept) was that while there were some differentials in terms of salary and other benefits enjoyed within the Level 3 group of managers, this did not affect their overall level of responsibilities. The role was a senior one, with a number of direct reports. Amongst other things Ms George was responsible for the delivery of financial accounting and transactional services, including payroll, accounts payable, GST, fringe benefit tax, and PAYE; financial and technical advice on accounting and tax matters; and customer and supplier relationship management. Ms George's role involved a high level of transactions and was a very busy one, with a constant flow of documentation crossing her desk. Ms George said that during the course of a month she would typically receive and read thousands of accounting, financial and operational documents. In her subsequent role as Team Leader, Transactional Services, Ms George reported to Mr Kerr (Group Manager, Finance).

8 Ms George had a number of dealings with external suppliers, who provided tax and accounting services to the Council. One of those suppliers was Toovey Eaton and MacDonald Limited (TEAM). TEAM provided tax advice to the Council prior to the amalgamation of the Auckland local government bodies and the creation of the Auckland Council. Mr Fisher, of TEAM, took the day-to-day lead role in terms of client management with the Council, although Mr Eaton was the Lead Director at TEAM for this work. Ms George was TEAM's principal contact within the Council. She regularly met with Mr Fisher and occasionally with Mr Eaton.

9 In the year prior to Ms George's arrival, TEAM provided the Council with a comprehensive suite of tax policies. These policies set out the Council's tax responsibilities, and were updated as necessary to reflect changes in the law. In April 2006 the tax policies were amended to include a section relating to the GST treatment of residential property income and expenditure. Ms George accepts that she was aware of, and understood, these policies.

10 In late 2007 Mr Fisher received a query from Ms Torr, who held a comparable position to Ms George's in the Auckland Regional Transport Authority (ARTA). The query related to contractor accommodation and led to a discussion about the tax treatment of contractors. This in turn led to further work being undertaken by TEAM. TEAM considered that the same issues may exist within the Council. Mr Fisher met with Ms George and issues relating to the Council's tax compliance were discussed, including issues relating to fringe benefit tax on motor vehicles and the engagement of contractors. Mr Fisher said that an agreement was reached that TEAM would provide further advice on the employee/contractor issue and the fringe benefit tax issue. Ms George could not recall the meeting, but accepts that it took place.

11 Two reports were subsequently produced by TEAM for the Council. The first, which remained in draft form, was dated 21 December 2007 (the draft December 2007 report). It dealt with the contractor issue. The second was dated 8 February 2008 (the February 2008 report). It dealt with the fringe benefit tax issue. Both reports were sent to Ms George. Mr Fisher's evidence was that neither report was copied to any other person within the Council. This was consistent with the way in which the reports were addressed and is consistent with the nature of the relationship that Ms George had with TEAM at the time, her position within the organisation, and discussions leading up to the production of the reports.

12 The draft December 2007 report set out a general overview of tax issues when engaging contractors, TEAM's assessment of risk in relation to the Council's treatment of contractors, and a recommended “best practice” procedure for implementation to mitigate further risk in relation to the engagement of independent contractors. The draft report identified a key risk for the Council, namely the absence of a formalised procedure for determining an individual's employee—contractor status at the time they were engaged by the Council. TEAM recommended that the Council document and implement a best practice procedure, and a “best practice” guide was provided. This guide had been discussed, Mr Fisher says, at the earlier meeting with Ms George on 13 November 2007. TEAM also recommended that once the Council had implemented the recommended best practice procedure, it should quantify the potential historic tax risk it faced, enabling the Council to decide the approach that should be taken to the Department of Inland Revenue (IRD). As Mr Fisher said in evidence, the risks faced by the Council in relation to the contractor issue were not simply financial. Misclassification could give rise to adverse publicity, particularly if penalties were subsequently imposed.

13 Ms George gave evidence that she could not specifically recall receiving the draft December 2007 report but accepts that she would have. Mr Fisher said that there was no record of Ms George responding to the report or providing any feedback on it. Nor, I note, is there any record of TEAM following up with the Council to ascertain whether it had any comments on the draft, or whether (like the report to ARTA) it could be finalised. In the event, it remained in draft form.

14 There is nothing to suggest that any voluntary disclosure took place, as recommended in the draft report. This, the Council submits, reflects the fact that Ms George sat on the advice she received and did nothing about it. She refutes any such inference. Ms George is sure that she told Mr Monk about the draft report and that he asked her to send it to Human Resources, which she believes she would have done. She gave evidence that such an approach would be consistent with her usual practice of forwarding documents of interest, either via email or by way of hard copy distribution. She would then retain a copy in a...