Two NZ Employment Disputes That Led To Brief Prison Sentences – by Tristam Price

We know of two people who were penalised by the Employment Relations Authority by their former employers, then later sentenced to imprisonment by other jurisdictions.

One was Mr Watchorn in 2013. He had prepared to go into competition with his employer, Tag Oil and had copied commercially sensitive data for the purpose of using it for his new position at ECNZ.

First the matter went to the Employment Relations Authority which order Mr Watchorn to pay Tag Oil $12,000 in penalties, and general damages of $65,567.

As an aside, in 2020 Judge Holden ruled that the ERA does not have the jurisdiction to award general damages as per Paragraph 3 .

Mr Watchorn then appeared before the New Plymouth District Court which sentenced Mr Watchorn to 2.5 years imprisonment. However, the criminal conviction was quashed by the Court of Appeal after he had served about a month.

We’re not experts on criminal law but we understand that Mr Watchorn obtained a "benefit", possibly an opportunity to benefit his new employer ECNZ for a higher salary than he otherwise would have got. Unsurprisingly, that benefit failed to materialise due to the ERA proceedings. Obtaining a “benefit” is not the same as obtaining "property", and the Court of Appeal found that the intellectual property most likely didn't find its way to Tag Oil’s competitor ECNZ. It’s possible that the data being stored on memory sticks owned by Mr Watchorn as opposed to being printed on paper owned by the company was a factor in that decision (Crimes Act Section 249). The Court of Appeal decided against entertaining a lesser charge due to the payments already made, as per the ERA determination.

Mr Watchorn’s actions as far as we can tell cost him perhaps a little over $100,000 including his own legal fees, a month in jail and presumably the loss of his new job, and that doesn’t include a lot of other bad stuff we don’t know about.

Now we move on to Geoffrey Brown who was an IT Engineer with Tauranga City Council. The Court of Appeal also made a ruling on his dispute with the Council in 2017:

Mr Brown, unrepresented, had applied for leave to appeal an award of $153,120 in indemnity costs to Tauranga City Council. The basis of the Council’s claim against Mr Brown was his breach of a mediated settlement agreement. The CA decision gives other information relevant to the nature of the dispute, including:

- Mr Brown having been employed by the Council from 1996 to 2014, and the dispute being an employment matter, specifically a breach of confidentiality obligations

- An unknown penalty imposed by the ERA which would have exceeded the maximum of $10,000, however he was also ordered to pay $15,000 towards the Council’s legal costs

- Mr Brown’s comprehensive allegations of contributory conduct by way of its alleged breaches of the Local Government Act 2002

- Several footnotes of relevant cases, mostly with the parties anonymised, about half of them ITE v ALA, and one anonymised to P v Q.

This is a huge costs award and indemnity costs are unusual. If Mr Brown was represented in mediation and he agreed to an indemnity clause being slipped into the settlement agreement, then he must have been stitched up by his own lawyer . But the CA decision doesn’t mention that, so we need to look further back to see what went wrong for Mr Brown that made an otherwise unremarkable appeal cost him six figures.

Turning now to the decisions that the junior jurisdictions (the Employment Court and before that, the ERA) made prior to April 2017, we should be able to find more decisions or determinations under those names using a simple search method eg: Ctrl F. But we can’t – why?

The answer is in the footnotes – remember that half of them are ITE v ALA. We can go to the Employment Court page and find those easily. So why did the Employment Court anonymise the parties, while the more senior Court of Appeal didn’t? Because Mr Brown’s mental health might suffer if his name was publicised? Possible, but unlikely given that his employer pursued him for over $150k. Let’s google him up then...

From the first page view it looks like he applied to become a councillor in the lead up to the 2019 local body elections. Also high on the list is a YouTube video called P2 – Tauranga City Council Sickness. There are actually six videos, each around 30 minutes long and named P1 to P6. Mr Brown is a whistleblower who does not want to be anonymised. We are aware that he was bankrupted on those indemnity costs, then briefly imprisoned in late 2017 for contempt of the Employment Court in that he refused to take down those videos.

ALA v ITE [2017] NZEmpC 130

Employment Court – Sentenced to 21 days imprisonment for breaches of Court orders

The employee breached the Court’s compliance orders on multiple occasions by publishing confidential information and declined to remedy the breaches (see paras 4, 28, 29). Two previous financial orders had not acted as a deterrent (see para 36). Consequently, the imposition of a fine was not considered an adequate response to the deliberate and continued breaches (see para 36). Instead, the employee was sentenced to a 21 day term of imprisonment under s 37(4) of the Corrections Act 2004 (see para 55).

Lately Tauranga City Council seems to have been much maligned for various reasons and we don’t know if its pursuit of Mr Brown contributed to that. From what we can see, the Council appear to have gagged and bankrupted a whistleblower, and although the imprisonment is not necessarily on them, they did pursue him into bankruptcy and this debacle is a lesson on the importance of having procedures in place to protect whistleblowers.

In this article from October we show how Tauranga City Council might possibly have pulled it off:

We received some criticism for telling public sector managers how to do bad things, but fortunately we were able to explain that we are just telling the public what employment lawyers and many HR advisors and managers already know.

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