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A Cheeky Bankruptcy Petition - by Karen Davis


Nearly two years ago, then ERA Chief Crichton “fined” employment advocacy company Culturesafe NZ Ltd $30,000 for allegedly breaching a mediated settlement agreement signed by its client and Turuki Healthcare and countersigned by an MBIE mediator, as usual.


http://www.nzlii.org/nz/cases/NZERA/2018/136.html


Turuki failed to honour part of the settlement agreement and Culturesafe followed up by escalating it. Turuki, through its counsel, then claimed that Culturesafe and everyone who worked for it had been banned by the “settlement” from disparaging them. James Crichton agreed, cynically downplaying the employer’s breach, and fined all of them a total of $33,000, despite having no formal power to do that, and despite Culturesafe, its director and employee(s) not being party to the settlement.


At this point we should mention that Culturesafe, incorporated by Allan Halse in early 2014, is the product of an environment where NZ is the second worst country in the OECD for workplace bullying statistics, and name and shame campaigns on the Culturesafe Facebook page are part of efforts to reduce workplace bullying, along with negotiating exit packages for Culturesafe’s clients who have complained about being bullied. Most of these disputes are resolved in mediation although sometimes mediation is unsuccessful and this results in a personal grievance claim in the ERA.


Culturesafe has not paid the $30,000 portion of penalty or a similar amount in the employer’s costs because this has been challenged to the Employment Court; the 3 day trial is in early June 2020. Of the amount imposed, the breakdown is $10,000 each against Allan Halse, his then employee Tracey Simpson and Culturesafe NZ Ltd, jointly and severally.

The implication of the penalty being imposed as joint and several liability is that if Allan Halse was bankrupted and Culturesafe collapsed, Ms Simpson would be liable for the whole amount of $30,000 despite not having worked for Culturesafe since 2018.


Last week we found that Turuki are attempting to do just that, probably hoping that the public would be too distracted by the horrifying COVID-19 outbreak to notice. Turuki have petitioned for the bankruptcy of Allan Halse in the High Court. It’s no coincidence that two other Turuki employees have raised Personal Grievances through Culturesafe since mid-2018.


If Allan is declared bankrupt then he cannot legally direct a company, so that would probably be the end of Culturesafe NZ Ltd, although a Culturesafe (2020) Ltd or similar would likely emerge with a new director and Allan as its employee.


The $30,000 “penalty” was imposed on 1 May 2018. The Employment Court challenge is in early June 2020.

There are two similar matters before the Employment Court, the employer parties being RPW (Sam Hood’s case)

http://www.nzlii.org/nz/cases/NZERA/2019/121.html

and Bay of Plenty DHB http://www.nzlii.org/nz/cases/NZEmpC/2019/122.html.


These are being challenged at a constitutional level, including on the basis that the penalties were ultra vires (beyond the powers of the ERA). A fourth attempt on Culturesafe filed two days before Christmas 2019 failed spectacularly with a Culturesafe client being served with a SLAPP (a vexatious claim made by a richer party against a weaker one) while in labour; we had blogged on this but were threatened and took it down. Those two remaining challenges have the establishment rattled and Turuki are probably watching these matters with concern.


Hence the timing of the bankruptcy petition. Compared to employment proceedings, bankruptcy applications are processed relatively quickly by the High Court. The obvious defence Allan would have against being adjudged bankrupt is that the upcoming Employment Court challenge has a good prospect for success and the bankruptcy application should be adjourned. It is also possible to resist a bankruptcy application on the basis that it is motivated by malice.


However, where a “penalty” is imposed by the ERA, a challenge to the Employment Court does not operate as a stay of that penalty. This is what Turuki seem to be relying on. In theory, Allan could be bankrupted but go on to win the Employment Court challenge, collect most of Culturesafe’s costs from Turuki and have his bankruptcy annulled, but that would be a severe disruption to Culturesafe and a huge waste of court time.


Speaking of bankruptcy, a council IT Engineer was stitched up in mediation in 2015 as a result of some shonky legal representation and was subsequently bankrupted on indemnity costs in 2016.


http://www.nzlii.org/nz/cases/NZEmpC/2016/147.html

http://www.nzlii.org/nz/cases/NZCA/2017/126.html


Unfortunately these are not the only examples we are aware of where the employee has been threatened with bankruptcy – this often happens in mediation and under privilege which usually prevents us from hearing about it.


This is a bankruptcy petition against a non-party to a simple employment dispute that was supposedly resolved in mediation. We will be watching this with interest and will provide updates when available.

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