IN THE COURT OF APPEAL OF NEW ZEALAND CA731/2013 [2014] NZCA 209 BETWEEN AND LAURA JANE GEORGE Applicant AUCKLAND COUNCIL Respondent Hearing: 12 May 2014 Court: Counsel: Judgment: Ellen France, Randerson and French JJ A R Drake for Applicant T L Clarke for Respondent 30 May 2014 at 11:30 am JUDGMENT OF THE COURT A The application for leave to appeal is dismissed. B The applicant must pay costs to the respondent as for a standard application on a Band A basis with usual disbursements. REASONS OF THE COURT (Given by Randerson J) Introduction [1] The applicant, Ms George, is a chartered accountant with substantial experience in accountancy and finance. At the time of her dismissal from employment on 4 February 2010, she held a senior position as Team Leader, Transactional Services, with the Auckland Regional Council (later the Auckland Council). GEORGE v AUCKLAND COUNCIL CA731/2013 [2014] NZCA 209 [30 May 2014]
[2] In late 2009 Ms George recruited a casual employee in the accounts payable section of the Council. At the time, the Auckland Regional Council was in a transitional phase prior to the Auckland Council being established. The Council alleged that Ms George had recruited the casual staff member without necessary approvals under the Council s recruitment policy. Investigations initiated by the Council into the apparent breach of the recruitment policy led to the initiation of a disciplinary process against Ms George. Responses received by Ms George during the course of investigations which were in apparent conflict with statements made by other Council staff caused the Council investigators to entertain concerns about the truthfulness of Ms George s explanations. [3] Steps were then taken to widen the allegations against Ms George to include alleged untruthfulness as well as the alleged breach of the recruitment policy. [4] After the disciplinary process had been concluded, Ms George was dismissed from employment on 4 February 2010. The dismissal had immediate effect although Ms George received one month s salary in lieu of notice. [5] Ms George filed personal grievance proceedings against the Council with the Employment Relations Authority. The proceeding was removed to the Employment Court. 1 [6] After a hearing occupying nearly two weeks plus two days of closing submissions, Judge Inglis dismissed Ms George s claim for unjustified dismissal on 27 September 2013. 2 In doing so, the Judge rejected a submission made by counsel for Ms George that it was not open to the Council to expand the disciplinary process to include alleged untruthfulness in the answers Ms George gave in the course of the investigation. The Judge found that the process adopted by the Council was lawful provided the process was fair and Ms George was given a reasonable opportunity to respond to the additional allegations. 1 2 The Council also brought a claim for breach of contract against Ms George in relation to an alleged failure to implement external tax compliance advice. This was dismissed by the Employment Court and is no longer relevant for present purposes. George v Auckland Council [2013] NZEmpC 179 [Employment Court judgment].
[7] While accepting that the initial allegation of failure to comply with the recruitment policy was relatively minor in nature, the Judge found that considering the circumstances overall, including the allegations of untruthfulness, there was a proper foundation for the Council s finding of serious misconduct by Ms George and that her dismissal was justified. [8] Ms George now seeks leave under s 214 of the Employment Relations Act 2000 (the ERA) to appeal on questions of law. The essence of these questions is contained in the following summary we have distilled from the submissions made: Did the Employment Court err in law in (a) (b) (c) Determining that it was permissible in the circumstances of this case for the Council to add a new allegation of untruthfulness amounting to serious misconduct during the course of the disciplinary process; Determining it was not necessary to commence a separate disciplinary process into the allegation of untruthfulness; Failing to consider whether the alleged untruthfulness was of sufficient gravity to amount to serious misconduct so as to justify summary dismissal. The background in more detail [9] After the discovery of the new casual employee, the Group Manager, Finance, Mr Kerr began preliminary inquiries including discussions with Ms George and other Council staff. [10] Mr Kerr was by this stage concerned about the appointment of a casual employee without the approval required under the Council policy but also that the appointment appeared to have been made despite his instructions as to the process that would need to be followed and further advice given to Ms George by the Human Resources Manager. Ms George was then invited by letter of 1 December 2009 to attend a meeting to discuss an allegation of serious misconduct in relation to the recruitment of the casual employee. One of the details of the allegations of
misconduct stated in the letter was Ms George s statement that the Human Resources Manager had told her that approval by the Position Approval Team was not required. Ms George was left in no doubt as to the seriousness of the allegations and that disciplinary action might include dismissal. [11] Thereafter, Ms George provided a detailed written response to the issues raised in the letter of 1 December 2009 and she attended a meeting with Council representatives on 9 December 2009 accompanied by her lawyer. [12] After further investigations by Council officers, Ms George was invited by Mr Kerr on 12 January 2010 to attend a disciplinary meeting to discuss allegations of serious misconduct relating to the recruitment of the casual employee and the access that person had to the confidential systems of the Regional Council. A copy of a preliminary investigation report and witness statements were enclosed. Significantly, the letter also raised serious concerns about the truthfulness of your explanation given that parts of your evidence are wholly inconsistent with evidence of other factual witnesses. The letter invited Ms George s response to these concerns and advised that: If it becomes evident that your explanation has not been truthful then this may itself constitute serious misconduct. [13] The preliminary investigation report set out in detail the Council s concerns regarding Ms George s truthfulness. [14] The disciplinary meeting took place on 28 January 2010 with Ms George providing a detailed written response to the matters raised in the preliminary report. Ms George s lawyer also made submissions on her behalf. [15] The meeting was reconvened on 2 February 2010 when Ms George was informed that the allegations relating to the recruitment of the casual employee had been substantiated and were considered to amount to misconduct. Ms George was further informed that there were serious doubts about the truthfulness of her explanations and that these were not accepted. The importance of trust and confidence, particularly in a key financial position such as that occupied by
Ms George, was emphasised. Ms George was advised that her lack of truthfulness was regarded as serious misconduct. [16] After a further adjournment to enable Ms George to make submissions with regard to the consequences of the finding of serious misconduct, Ms George was informed by letter of 4 February 2010 that she was dismissed. The letter of dismissal provided more detail but, in substance, recorded the Council s earlier oral advice which we have summarised in [15] above. The Judge s findings [17] Judge Inglis commenced her assessment of the evidence by referring to s 103A of the ERA in the form in which it stood prior to the amendment which came into force on 1 April 2011. 3 She found that the Council was entitled to commence a formal disciplinary process given the nature of the concerns about the recruitment of the casual employee contrary to policy and the issues raised about security by virtue of that employee s access to the Council s systems. [18] The Judge found that Ms George was aware of the relevant policy but observed that the finding in relation to that breach was only that of misconduct. The finding of serious misconduct was, the Judge found, squarely focused on the substantiated allegation that Ms George had been untruthful during the course of the investigation process. [19] That led to the Judge considering whether dishonesty during the disciplinary process could give rise to a dismissal. She rejected a submission made on Ms George s behalf that it was unlawful for the Council to include an allegation of lack of truthfulness as part of the disciplinary process into the original recruitment issue. In that respect, counsel had relied upon decisions of the Employment Court in Iakopo v Waikato Electricity Ltd and Macadam v Port Nelson Ltd (No. 1) which we discuss below. 4 3 4 By s 15 of the Employment Relations Amendment Act 2010. Iakopo v Waikato Electricity Ltd Auckland EmpC AEC36/94, 24 June 1994 and Macadam v Port Nelson Ltd (No 1) [1993] 1 ERNZ 279 (EmpC).
[20] The Judge noted a submission by counsel for Ms George that she could not be dismissed for telling untruths because she could not have been justifiably dismissed for the conduct that formed the basis of the initial allegations made against her. In rejecting this proposition, the Judge said: 5 In determining the scope of the employer s obligations and what is and is not permitted, it is useful to return to first principle. There is no doubt that dishonesty in the context of an employment relationship can give rise to disciplinary action and dismissal. That is because trust and confidence lie at the heart of the relationship between employer and employee. This is reinforced by the statutory obligations of good faith provided for in s 4 of the Act. I see no reason in principle why an employee who is untruthful to their employer during the course of a disciplinary process should be immune from disciplinary action. It would undermine the obligation of responsiveness that rests on each party and would encourage deception, rather than openness and honesty. [21] Judge Inglis went on to refer to the decision of this Court in Honda New Zealand Ltd v New Zealand Boilermakers Union in which the Court adopted counsel s submission that: 6... in an employment situation the telling of a lie, or even prevarication short of a lie, strikes at the fundamental requirement of honesty and good faith, so that its true relevance is as part of the total factual context in which the justification for the dismissal is to be considered. [22] The Court added: 7 A proved lie, told in denial or explanation of an allegation of misconduct, may not necessarily assist in the proof of the misconduct, but may be misconduct in itself. [23] The Judge then considered a submission made on Ms George s behalf that if allegations of dishonesty arose during the course of an investigation into an employee s actions, the employer was required to commence a fresh disciplinary process should the employer seek to rely on the alleged untrue statements to support disciplinary action against the employee. Counsel for Ms George cited Macadam v Port Nelson Ltd (No 1) in which former Chief Judge Goddard said: 8 5 6 7 8 Employment Court judgment, above n 2, at [97]. Honda New Zealand Ltd v New Zealand Boilermakers Union [1991] 1 NZLR 392 (CA) at 397. Ibid. Macadam v Port Nelson Ltd (No 1), above n 4, at 289.
As a general rule, an employee who is called to answer an allegation that he has been guilty of conduct of a particular kind cannot be dismissed if suspicion emerges during the course of an inquiry into that allegation that the employee may have been guilty of conduct of a different kind, including lying to the employer. That needs to be the subject of a separate set of disciplinary proceedings. [24] Judge Inglis rejected this proposition in these terms: [101] In order to undertake a fair and proper disciplinary process an employer is obliged to meet certain minimum standards, including adequately particularising the concerns that he/she has; identifying the potential consequences of a finding against the employee; providing sufficient information and a reasonable time to respond; and giving adequate consideration to any explanation given. I do not accept, however, that an employer who becomes concerned that an employee is not being truthful in his/her responses is obliged to conclude a disciplinary process that is already in train and then embark on a new process, or initiate parallel processes. That would lead to unnecessary complexity, delay, and inefficiency. Provided that the requirements of fair process are met, an employer may identify a concern about truthfulness and deal with that concern in the course of a pre-existing process. Whether the process that was adopted in this case met the minimum standards is answered by a consideration of what in fact occurred, rather than an application of blanket rules. [25] The Judge also noted that the Employment Court had held in several cases that lying during the course of a disciplinary process may justify dismissal. 9 [26] On the facts, the Judge concluded that there was a proper basis for commencing an investigation into Ms George s truthfulness. Ms George had ample notice of the nature of the Council s concerns on that topic and had sufficient time to respond. There was a sufficient basis in the evidence to find that the truthfulness allegations had been established. [27] On this last finding, the Judge accepted a submission made by counsel for Ms George that humans have an imperfect recall and that differing versions of the same event may be explicable on this basis. However, she concluded that it was open for those conducting the disciplinary hearing on behalf of the Council to conclude that the discrepancies in this case went well beyond the usual vagaries of 9 See for example: Blaker v B & D Doors (NZ) Ltd EmpC Auckland AC8B/07, 21 September 2007 at [97]; New Zealand Sugar Co Ltd v Connelly [1998] 3 ERNZ 198 (EmpC) at 207 208; and Ballylaw Holdings Ltd v Ward EmpC Wellington WC45/01, 13 November 2001 at [33] [34].
the human mind and to draw the conclusion that Ms George was not being truthful in her responses. 10 [28] Summarising her conclusions the Judge said: [111] Honesty and integrity are core elements of the employment relationship. Ms George was a senior employee with responsibility for financial management within the Council. Her role necessarily required that her employer could repose a high degree of trust and confidence in her. The Council could reasonably expect that she would be open and frank in explaining her actions and inactions. [112] I am satisfied that the procedure followed by the Council in relation to the truthfulness allegations was full and fair, and that there was a sufficient basis for Mr Winder and Ms Wiegandt-Goude s conclusion that Ms George had not provided truthful responses during the course of the investigative and disciplinary process, and to reach the view that this amounted to serious misconduct warranting dismissal. Discussion [29] In support of the application for leave to appeal, Mr Drake effectively repeated the submission he made to the Employment Court which, in key respects, were rejected by Judge Inglis. He submitted that the Employment Court erred in failing to give weight to the Iakopo decision and in rejecting the proposition stated in the Macadam case. [30] Mr Clarke submitted on behalf of the Council that both these decisions can be distinguished from the present case and that, in any event, the Judge was right to decline to follow them. He submitted that this Court s decision in Honda New Zealand Ltd v Boilermakers Union remains good law and that no arguable question of law arises. [31] On our reading of Iakopo, it does not stand for the proposition that an employer may not take into account deliberate lies told by an employee in the course of a disciplinary investigation or proceeding. The Court in that case did say that any misconduct in that respect must be proved in the same way as the original conduct that was the subject of the inquiry. That proposition is not in dispute. On the facts, the Court found that the process was unfair because Mr Iakopo was not given 10 Employment Court judgment, above n 2, at 107.
adequate notice of the allegations and there was unfairness in other respects as well. The Court concluded there was insufficient evidence to establish that Mr Iakopo had lied. Those matters immediately distinguish the case from the present. [32] In relation to the Macadam judgment, the remarks of Chief Judge Goddard we have cited at [23] above were obiter since there was no finding that the employees concerned had lied in the course of the disciplinary process into another matter. With respect, we are unable to agree with the proposition that a separate disciplinary process is required if the employer relies on lies made by the employee during an investigation in order to justify a summary dismissal. However, a fair process must be followed as we discuss below. [33] The general proposition we have stated is subject to the observation made by Colgan J (as he then was) in the New Zealand Sugar case that it is not open to an employer to inquire into and dismiss an employee on one ground of complaint and then to seek subsequently to justify the dismissal on an entirely new ground. 11 That did not happen here. [34] We have also reviewed the other employment cases cited by Judge Inglis and referred to in footnote 9 of this judgment. In each of those cases, the Employment Court was satisfied that lies by an employee (if established) during the course of a disciplinary process could be relied upon to justify summary dismissal. [35] We find ourselves in complete agreement with the conclusions reached by Judge Inglis on the questions of law Ms George seeks leave to appeal. In particular, we are satisfied that an employer may seek to rely on the untruthfulness of an employee in his or her responses to other allegations of misconduct. There is nothing to suggest that the decision of this Court in the Honda New Zealand case does not remain good law. We also agree that, provided a fair process is followed with a proper opportunity for the employee to respond to the allegations (which must be adequately detailed), it is unnecessary for the employer to commence a fresh disciplinary process. As the Judge said, this would give rise to unnecessary complexity, delay and inefficiency. 11 New Zealand Sugar Co Ltd, above n 9, at [207].
[36] We emphasise that mere differences in recollection are likely to be commonplace during the course of the disciplinary process including any earlier investigation stage. Differences of recollection or inconsistencies are not in themselves sufficient to support a finding that the employee has lied. An employee may honestly, but mistakenly, have a different recollection of events. In order to establish that the employee has lied, there must be proof of a deliberate untruth on the employee s part. The standard of proof is the civil standard but to a level commensurate with the seriousness of such an allegation. 12 [37] That is sufficient to dispose of the first two questions of law Ms George seeks leave to raise in this Court. We are also satisfied there is no basis to support the grant of leave for the third question. The Employment Court plainly considered whether the alleged untruthfulness was of sufficient gravity to amount to serious misconduct justifying summary dismissal. 13 Result [38] We are satisfied there are no arguable questions of law for which leave ought to be given. The application for leave is dismissed accordingly. [39] The applicant must pay costs to the respondent as for a standard application on a Band A basis with usual disbursements. Solicitors: Russell McVeagh, Wellington for Applicant Bell Gully, Auckland for Respondent 12 13 Honda New Zealand Ltd v Boilermaker Union, above n 6, at 394 395. Employment Court judgment, above n 2, at [110] [112].