Charitable Trust Used to Fund a Legal Experiment - by Karen Davis

Turuki Healthcare Services Charitable Trust is a group established in 1995 by Maori midwives. There was an employment relationship problem in 2017, which was settled in mediation.

A dispute occurred over non-payment of certain expenses of the former employee that had been agreed in the mediation, and there was a further dispute about how the employee’s advocates handled it. A certain clause in the settlement agreement seems to have been overly complicated; miscommunication and escalation featured prominently, the name of Culturesafe NZ Ltd had been slipped into the agreement and the fallout from the miscommumication triggered an application for penalties against the former employee and her advocates.

The Chief of the ERA, Jim Crichton, issued a Compliance (gag) Order against Culturesafe. The director Mr Halse, incensed, wrote to the then Workplace Relations Minister calling for the sacking of the ERA Chief including for protecting workplace bullies generally, and publicly criticised Turuki’s lawyer. Turuki’s lawyer threatened to sue Allan Halse for defamation. Mr Halse posted this threat on Facebook with the comment that he raise a defence of truth.

That defence of truth is not available in the event of a “breach” of a mediated settlement agreement, and a vengeful ERA Chief Crichton “fined” him, his company and his subordinate a total of $43,000.

To facilitate this Turuki initially made a claim, regardless of the merits and however token, against the former employee. They folded in a claim against the real targets; her advocacy company, its director and its then contractor, Ms Simpson.

Thus a total of $43,000 in penalties and general damages were ordered against Culturesafe, Mr Halse and Ms Simpson in mid-2018. The $500 claim against the former employee was dismissed because she had not done anything wrong.

This case is novel because it was the first ever enforcement of a mediated settlement agreement against third parties. The only previous mention of such an idea had been in 2010 in the Musa case, but no order had actually been made. Musa was raised in the Employment Court for this and one other case (RPW).

Let’s look at this from the perspective of Turuki Healthcare.

In 2018 Turuki was awarded a record $43,000 in penalties, general damages and costs, jointly and severally against the three third parties.

We don't know the size of the bill to Turuki from their lawyers. Turuki tried to get the ERA to order $25,000 costs against the third parties, and actually got an order for $10,000 (part of the $43,000 total).

Here’s a separate problem: in March 2020, a few months before the three day hearing in the Employment Court, Turuki petitioned for the bankruptcy of Allan Halse. If that petition had not been stayed and Halse had been adjudged bankrupt, he would not have been able to direct Culturesafe, Culturesafe would almost certainly have been placed in liquidation, and Tracey Simpson would have been liable for the entire $43,000 in penalties and general damages because the award was, unusually, joint and several.

In a three day hearing in June Ms Simpson represented herself and refused to face Turuki’s senior counsel Anthony Drake; she was allowed to face the judge instead.

Judge Holden - like Judge Perkins in the RPW case - ruled that mediated settlement agreements do bind third parties. That could include not only advocates, but also reporters, family members, contractors and colleagues – basically everyone. That decision has been filed in the Court of Appeal for Judicial Review on the basis that the judge (and the ERA) did not have jurisdiction to make those orders.

Elsewhere, sanity prevailed. If we put aside the issue of whether a settlement agreement between an employer and an employee binds third parties, and look at the penalties awarded by Judge Holden, they range from $2,000 to $5,000 and replace the penalties ordered by ERA Chief Crichton in 2018. The judge found that the original penalties were beyond the maximum of $10,000 for a breach, they should not have been joint and several, and there’s no such thing as general damages in employment cases. One might expect the ERA Chief to have known better, but we have no information on how the then Workplace Relations Minister, Iain Lees-Galloway, had responded to Mr Halse’s call for Mr Crichton’s dismissal.

The March 2020 bankruptcy petition was mentioned in the decision although the petitioning creditor Turuki probably feels that this activity was a waste of time and money given that Halse and Culturesafe now need to pay a considerably lesser amount, and even that lesser amount is disputed as per the Judicial Review.

So, from the perspective of an entity such as Turuki Healthcare, it’s not pretty. First there was an employment dispute that ended up in mediation and a payout for hurt and humiliation. Then there was some fallout from what appears to be an administrative oversight. Turuki could have gone into damage control mode and moved on quickly, but for whatever reason they have lawyered up and committed themselves to what is likely to be a four year journey through New Zealand’s arcane employment law landscape as an experimental guinea pig – good luck to them!

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