Morgan v Whanganui College Board of Trustees

JurisdictionNew Zealand
JudgeHarrison J
Judgment Date22 July 2014
Neutral Citation[2014] NZCA 340
Docket NumberCA498/2013
CourtCourt of Appeal
Date22 July 2014
Kenneth Lee Morgan
Whanganui College Board of Trustees

Ellen France, Randerson and Harrison JJ



Appeal against Employment Court (EC) finding that communications between legal representatives which took place on a “without prejudice” basis, were privileged — discussions took place before the formal hearing and finding of misconduct which led to dismissal — appellant said that until there had been a hearing and a finding of misconduct by the employer, there was nothing on which the appellant could have litigated and a dispute was therefore not in existence at the time of the discussions — without prejudice rule did not apply without a dispute in existence — whether there was a dispute at the time the communications were made — whether, in the employment context, the parties had to have undergone a formal hearing and employer's findings before confidential negotiations could begin — whether there was a residual discretion to admit without prejudice communications.


D Burton and F Hill for Appellant

P B Churchman QC and L S Castle for Respondent

  • A The appeal is dismissed.

  • B The appellant must pay costs to the respondent for a standard appeal on a band A basis together with usual disbursements.


(Given by Harrison J)


Kenneth Lee Morgan, who was employed as a senior teacher at Wanganui Collegiate School, was dismissed by the Whanganui College Board of Trustees for serious misconduct. He has brought a personal grievance proceeding against the Board under the Employment Relations Act 2000 (the Act). At an interlocutory stage the Employment Relations Authority (the Authority) declined Mr Morgan's application to admit evidence of statements made in two conversations between legal representatives of the parties which took place on an agreed “without prejudice” basis. 1 The Chief Judge dismissed Mr Morgan's appeal to the Employment Court. 2


This Court granted Mr Morgan leave to appeal against the Employment Court's decision on the following question of law: 3

Was the Employment Court correct to determine that the relevant communications between the parties or their representatives were protected by privilege or otherwise inadmissible?


In granting leave the Court identified three sub-questions as requiring consideration:

  • (1) Are the Employment Court decisions in this case and in Bayliss Sharr v McDonald 4 inconsistent as to the requirement and scope for a “dispute” – the common law justification for invoking the protection of a without prejudice communication?

  • (2) Is a more nuanced approach required in the employment law context where statements made in privileged communications may constitute evidence of constructive dismissal?

  • (3) Are any of the relevant communications capable in law of constituting an established exception to the protected status of privileged communications?


Counsel advanced argument in the same sequence. We shall address the appeal accordingly. However, it is necessary first to say a little more about the relevant facts as recited in an agreed statement submitted by counsel in the Employment Court.


The Board employed Mr Morgan as a teacher at Wanganui Collegiate from 1999 to April 2012.


On 29 March 2012 while on duty in the school grounds Mr Morgan intervened in a physical dispute between two boys. In the course of separating the boys he placed one in a headlock. He promptly reported the incident to another teacher.


On 5 April Mr Morgan and his then legal representative, Mr Robinson, met with the headmaster and deputy head to discuss the incident. He admitted that his action was wrong and might technically constitute serious misconduct. He apologised but said that dismissal was unnecessary.


On 11 April the Board's lawyer, Mr Unsworth, spoke with Mr Robinson by telephone. At Mr Unsworth's request, they agreed their discussion would be without prejudice. While there is a measure of consensus about some of what was said, the participants differ in other material respects. In essence, Mr Morgan asserts that Mr Unsworth (1) reported that the headmaster and chairman of the Board had agreed Mr Morgan's action constituted serious misconduct which would justify dismissal; and (2) enquired whether Mr Morgan wanted to end his teaching career as a person dismissed for serious misconduct or would prefer to tender his resignation.


Correspondence followed between the legal representatives, also on a without prejudice basis. On 12 April Mr Robinson advised Mr Unsworth that Mr Morgan did not intend to resign.


On 18 April a formal disciplinary meeting was held. Mr Morgan accepted that his actions amounted to serious misconduct but on a technical basis only and at the low end of the scale. The meeting was adjourned for the Board to consider the issue further. Messrs Unsworth and Robinson then had a second without prejudice discussion which was inconclusive. An apparent obstacle to resolution was the Board's refusal to pay compensation to Mr Morgan. The Board concluded the disciplinary process and on 23 April dismissed Mr Morgan.

(a) Was there a dispute?

The rule protecting without prejudice communications from admission as evidence in Court proceedings is well settled. Its existence is justifiable on two complementary bases. 5 First, as a matter of public policy, the rule is designed to encourage parties to negotiate settlements of disputes (using that phrase in the broad sense), secure in the knowledge of two things – that whatever is said openly and honestly for that purpose will remain confidential; and that if those negotiations are unsuccessful any statements or offers made adverse to the maker cannot be considered in determining liability in later litigation. Second, as a matter of contract, the law should recognise the sanctity of the parties' agreement to communicate on a without prejudice basis with its underlying expectations of absolute confidentiality and protection.


The law has allowed exceptions to this rule, again based largely on considerations of public policy, and we shall return briefly to them. But the guiding precept is that “the Court should be very slow to lift the umbrella [of protection] unless the case for doing so is absolutely plain”. 6


In its original formulation the rule required as a precondition to its invocation: (1) the existence of a dispute or negotiations and (2) the offer of terms for settlement. 7 That prerequisite has since been compendiously described as a difference, 8 and its scope is much wider than it was historically. 9 The protection extends to negotiations where at the time of the communications “the parties contemplated or might reasonably have contemplated litigation if they could not agree”. 10 That is because such a construction of the rule “fully serve[s] the public

policy interest underlying it of discouraging recourse to litigation and encouraging genuine attempts to settle whenever made”. 11

In support of Mr Morgan's appeal, Mr Burton, as he had done apparently in the Employment Court, relied on Judge Couch's decision in Bayliss Sharr. 12 He cited the judgment for the proposition that the without prejudice rule cannot be invoked, at least in the employment law context, unless a dispute is in existence. To satisfy that requirement, there must be something capable of being litigated in the nature of a significant difference between the expressed views of the parties about an issue concerning them both.


Here, Mr Burton submitted, when the legal representatives first communicated on a without prejudice basis, the Board had neither found serious misconduct nor imposed an appropriate penalty. Mr Morgan had no cause of action on which to litigate with the Board. He could not even threaten litigation. Thus there was no dispute. To the contrary, Mr Morgan had in fact accepted that his action amounted to serious misconduct. There was no basis for invoking the rule.


In rejecting this argument, the Chief Judge held: 13

[49] Although I agree that a “without prejudice” offer to settle litigation requires the existence of at least a dispute before privilege would attach to the offer, that is not the only circumstance in which discussions or negotiations between parties' representatives may attract such agreed privilege. Here, there was clearly a serious problem in the employment relationship. The employer was investigating an incident of what Mr Morgan accepted was serious misconduct in his employment. [Mr Morgan] was at risk of a range of sanctions up to and including his dismissal and being reported to the Teachers' Council with potential consequent serious professional registration implications. When Mr Morgan's legal representative agreed to Mr Unsworth's proposals to hold discussions [off] the record, Mr Robinson knew or ought reasonably to have known that that was Mr Morgan's position. It was open to Mr Robinson to have declined to have discussions with Mr Unsworth on this basis. I do not accept, therefore, the necessity for there to be a dispute (narrowly defined) before the privilege can be asserted in respect of inter-lawyer discussions during an employer's investigations of alleged misconduct.


We agree with the Chief Judge. The word “dispute” is not a term of art; its use was not meant to be exclusive. 14 And, as noted, “negotiations” or the broader term “difference” will suffice. None of these phrases warrant a narrow construction where something has arisen between the parties which must be resolved and they have expressly agreed their communications should be protected for that purpose.


In our view the common law protection must include a situation where, as the Chief Judge found, there is a serious problem in the...

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2 cases
  • Fiona Walker v Delta Community Support Trust
    • New Zealand
    • Employment Court
    • 30 September 2014
    ...of Appeal should be relied on for determining when litigation should be regarded as being in reasonable contemplation. In Morgan v Whanganui College Board of Trustees the Court reviewed the rule which protects without prejudice communications from admission as evidence in Court proceedings ......
  • Pollard Contracting Ltd v Shaune Donald
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    ...O Tawhiuau v Edmonds [2008] ERNZ 139 (EmpC) at [42]. 14 At [40]. 15 A point which was confirmed by the Court of Appeal in Morgan v Whanganui College Board of Trustees [2014] NZCA 340, at 16 Referred to in the Brookers extract at [11] above. 17 Premier Events, above n 2, at [11]. 18 Except ......

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