Rising from the ashes - by Tristam Price

In 2021, a family lawyer was bankrupted on a tax debt of around $100,000, but was still allowed to continue practicing according to the Law Society directory. The lawyer’s company was also placed in liquidation.

This week saw employment advocacy company Culturesafe NZ Ltd placed in liquidation over a similar amount that was ostensibly an award for breaching a mediated Record of Settlement (RoS), but had the character of a commercial dispute that happened to be litigated in the employment jurisdiction.

The applicant, a Putaruru rest home, had a suffered a severe workplace bullying problem in 2018. Culturesafe’s director Allan Halse, pictured, is a workplace bullying specialist. A total of thirteen employees had raised personal grievances through Culturesafe. If it had been just one or two employees, the personal grievance would almost certainly have been resolved with the negotiation of an exit package and NDA (as it was when one employee had alleged payroll fraud), however in this case, two alleged bullies parted ways with the rest home and most of the affected employees were able to keep their jobs.

Four years of litigation

Briefly, the legality of penalty orders made against Halse and Culturesafe has been challenged and hard-fought over four years, and the matter has become highly politicised (in the context of lobbying for regulation for lay advocates) and is still not resolved due to an application for judicial view remaining live. Technicality-ridden, nasty, sloppy, with allegations of corruption, threats, fraud, perjury and wasting a lot of money - we can’t predict how this will end.

We won’t go into specifics because this article is about insolvency law. As mentioned, Culturesafe NZ Ltd is in liquidation although the High Court reserved its decision to declare Halse bankrupt. We don’t have an indication of when that decision will be made.

The liquidator’s job should be relatively simple for two reasons. At the time of liquidation, Culturesafe NZ Ltd had around 100 clients on its books. These are mostly No Win No Fee arrangements. Also it was an almost assetless service company, unlike a company that deals with goods that can be auctioned off to settle preferential claims.

Too old for job market

In 2014 at the age of 62 Halse lost his job at Hamilton City Council and became a “necessity entrepreneur”, ie: he had to either hawk his wares as a sole trader, or start a company in order to become an employee of it. He chose the latter because administratively it’s more conducive to business growth.

But now, Halse doesn’t know whether or not he’ll be bankrupt and therefore ineligible to be a company director, so the only way he can get back on the tools would be as a sole trader, eg: Allan Halse trading as Culturesafe, or just “Allan Halse”. If Halse’s debt to the rest home is found by way of judicial review to be fictitious or legally invalid, Halse could then go ahead and incorporate “Culturesafe (2022) Ltd” if he prefers.

What next for clients?

The clients will now have to get a new person or entity to represent them. Culturesafe employed a total of three advocates including Halse although the litigation ultimately led to the loss of their jobs. Allan Halse as a sole trader is a separate legal entity to Culturesafe. Notwithstanding the disruption that restructuring always brings, some clients may choose to send their file to Halse to continue their claims to avoid the inconvenience of having to bring another representative up to speed, and life goes on.

Culturesafe NZ, Inc?

The 8.5 year existence of Culturesafe NZ Ltd could be seen as an experiment in combining a commercial activity (albeit with low margins) with political lobbying. We see from the extensive litigation that these functions should not have been combined into one entity. If Halse wants to continue anti-bullying lobbying and activism (given that WorkSafe is yet to prosecute its first workplace bullying case), we’re sure he has the goods to help establish an Incorporated Society to perform this function independently so that his new advocacy business doesn’t have to be exposed to blowback.

An Incorporated Society requires at least 15 members and ELINZ and AMINZ are well-established examples in the employment dispute resolution industry.

See Wikipedia’s definition of a Phoenix Company.

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