JKL v OPQ Limited

Normally when I write these stories I can give you a juicy taster about what has happened to spark your interest, but not this time because all the details are cloaked in the secrecy of suppression orders preventing the identification of the parties. They should come out at the end of the Serious Fraud Office (SFO) investigation, but meantime we know very little about the players.

JKL has been a senior manager in the company for a number of years and also owned a separate company that provided services to the employer. The employer engaged a Queen’s Counsel (QC) lawyer (who now happens to be a High Court Judge) to review a number of issues in the business relating to governance and management controls, strategic and operational management and planning, financial practices and processes, inventory management and health and safety practices. The nature of the review is one that would normally be conducted by management consultants, but not usually a QC.

The review contributed to a process that led to a restructure which had an impact on JKL’s job. JKL said he participated in the review on the assumption that he would receive a copy of the report. The employer responded that the report is legally privileged and won’t release it.

Shortly after the implementation, the employer became concerned about the whereabouts of a significant company asset. JKL confirmed the asset was no longer in the company’s possession but said the directors knew about its removal. JKL was suspended, sometime around July, and further investigation led to allegations of financial impropriety, improper use of the IT system, abuse towards an employee and irregularities regarding other significant assets.

In the middle of this muddle the owner reported the first issue to the SFO which has commenced an investigation and executed a search warrant in respect of an offence involving serious or complex fraud.

The employer wants to get on with the disciplinary process. JKL wants to see the lawyer’s report and wait until the SFO has finished before the disciplinary process is followed up and appealed to the Employment Relations Authority for a disclosure of the report and an injunction suspending further disciplinary action until the SFO processes are finished.

With respect to the lawyer’s report, the employer argued that it was privileged communication between the lawyer and his client and therefore it did not come within the scope of information that had to be released under the good faith provisions of the Employment Relations Act.

To some degree the parties were caught in a Catch 22 as, until the processes are complete…it is difficult to conclude whether or not the [QCs} report is relevant. The Authority is in a special position, however, and the parties agreed to let it examine the report to enable the decision be made. It was concluded that the report contained highly relevant material to the allegations, and that the report was bereft of legal advice, therefore it did not come under the privilege umbrella. Having reached these conclusions, the Authority still declined to order the release of the QCs report, instead suggesting the employer could release a redacted copy (one with sections blacked out), and hinting that the applicant could challenge the decision in the Court.

The second issue of whether the disciplinary process should be suspended while the SFO investigation still had to be resolved. There is established case law that protects employees from having to participate in a disciplinary process when they are facing criminal proceedings for the same actions.

JKL is currently suspended on full pay. The SFO could take years to resolve its situation and it is manifestly unfair for the employer to keep a senior manager on full pay while the matter is outside their control.

The Authority concluded that not all the matters that were the subject of the disciplinary process were also subject to the SFO investigation, therefore the disciplinary processes on the unrelated matters could continue to proceed.

The matters that were subject to the SFO process would be put on hold until the SFO was finished. However, there was a time limit put on the injunction, so it expires in January, unless the SFO completes its process earlier. However, JKL may seek an extension of the injunction if the matter is not over.

The key lesson from this is that not all matters between lawyers and their clients are privileged. Secondly, the suspension on pay does not automatically carry on for the duration of the SFO investigation. Fortunately these situations don’t arise very often, but it you can get the disciplinary process resolved before the criminal investigation, it is really helpful.

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