CHIEF EXECUTIVE OF THE DEPARTMENT OF INLAND REVENUE V BUCHANAN AND SYMES CA CA2/05

CHIEF EXECUTIVE OF THE DEPARTMENT OF INLAND REVENUE V BUCHANAN AND SYMES CA CA2/05 9 June 2005IN THE COURT OF APPEAL OF NEW ZEALAND CA2/05BETWEEN CHIEF EXECUTIVE OF THE DEPARTMENT OF INLAND REVENUE Appellant AND GILLIAN MOANA BUCHANAN AND LYNETTE CATHERINE SYMES Respondents Hearing: 16 May 2005 Court: Anderson P, O'Regan and Robertson JJ Counsel: T Arnold QC and C Inglis for Appellant D G Dewar for Respondents Judgment: 9 June 2005JUDGMENT OF THE COURT A. Leave to appeal is granted on the question of law as to a presumption. B. Hearing adjourned in respect of disparity. REASONS(Given by Robertson J) [1] This is an application for leave to appeal under s 214(1) of the Employment Relations Act 2000 against the judgment of the Employment Court delivered by Chief Judge Goddard on 16 December 2004.[2] It is common ground that leave will only be granted where there is a question of law which, by reason of its general or public importance or for any other reason, appeal ought to be submitted to the Court of Appeal for decision. [3] The appellant contends that there are two issues which meet the test. First, whether an employee's ignorance of the content of a Code of Conduct promulgated by an employer necessarily means that repeated breaches of the Code of Conduct cannot constitute serious misconduct of such a type as to justify dismissal. [4] Secondly, the proper application of the test for disparity of treatment and associated with that whether, in a claim for disparity of treatment, the Court is entitled to have regard to subsequent disciplinary action against other employees. [5] It was argued that these issues and far reaching consequences beyond the parties to the present litigation, are of vital importance in the resolution of cases involving disciplinary processes generally and the manner in which they are conducted. [6] The factual circumstances in this case are not contentious and fall into a very narrow compass. Each of the respondents had been employed by the applicant over a substantial period of time and had good service records. [7] Both were dismissed summarily by the Chief Executive in July 2003 when it was discovered that they had been accessing, on multiple occasions, the files of a small number of family members and undertaking actions on those accounts including changing addresses, issuing or confirming personal taxation summaries, issuing stationery and in the case of Ms Buchanan transferring a credit from one tax year to another. There was no question that what they had done involved a breach of their obligations under the Department's Code of Conduct. [8] The respondents commenced personal grievance proceedings on the basis that their dismissal for serious misconduct was unjustified because no misconduct had occurred, the process adopted by the applicant was unfair and because the response was disparate to other staff of the IRD.[9] The Employment Relations Authority found that it was open to their supervisor to conclude that the workers had committed serious misconduct involving potential breaches of the Tax Administration Act. It noted in particular the unparalleled responsibilities that the Inland Revenue Department holds. [10] Subject to the issue of disparity, the Authority concluded that it would not be appropriate for it to substitute its judgment over that of the Inland Revenue managers, whose job it was to make such difficult decisions as summary dismissal. [11] On the issue of disparity, however, it concluded that there was unjustified dismissal and that the respondents should be reinstated. [12] There was a challenge and a cross-challenge to the Employment Court against both the finding that there was serious misconduct which justified dismissal, and the finding that there was strength in the argument of disparity which meant there should be reinstatement. [13] The Employment Court found that for an employee to engage in the activities which these two respondents did, cannot amount to serious misconduct irrespective of circumstances. That finding is not under challenge. [14] The Chief Judge, however, went on to say:Where, as here, the explanation is accepted by the decision-maker, that the problem was not the flouting of rules, but ignorance of the existence of rules then the question of honesty or fidelity is not ordinarily engaged. There is misconduct but it is not serious misconduct.[15] Although counsel for the appellant in written material put the question of law on the first point at a higher level, in the course of hearing, it was agreed that the real issue was whether the Chief Judge was correct in his conclusion that ignorance by an employee of his or her obligations means that ordinarily a breach of those obligations will not amount to serious misconduct. [16] The Chief Judge's decision was not predicated on the basis that such a breach cannot give rise to a finding of serious misconduct, but rather that it ordinarily willnot arise. In other words, the Chief Judge's statement of the law was that there was a presumption against such a breach giving rise to a finding of serious misconduct. [17] We are satisfied, because of the serious consequences which can arise, that there is an issue of general or public importance as to whether there is a presumption of this nature within the law. It clearly is of importance to this particular appellant with its unique role in the community, but more generally the issue of how the law responds to a breach of a code of conduct by a person who is ignorant of obligations (even when all steps have been taken to draw them to attention) is a matter of substantial importance. [18] We are satisfied that a suitable question of law arises under the first heading. [19] In respect of the issue of disparity, on the basis of the arguments that we have heard to date, this point appears more to be a challenge to the application of a defined test to the particular facts of the case which would not fall within the parameters of s 214. [20] We are conscious that the disparity point is integrally involved with the question of law upon which we have granted leave. The appropriate course of action is to adjourn that application for leave to appeal on disparity to the substantive hearing on the first question. The Court can hear further submissions on the issue then and reach a decision at that stage. [21] In all the circumstances, we reserve the question of costs to that date also.Solicitors: Crown Law Office, Wellington Thomas Dewar Sziranyi Letts, Lower Hutt