Chief Executive of Charitable Trust loses constructive dismissal claim…

A Charitable Trust uncovered potentially improper payments to a supplier.  It raised the matter with its Chief Executive as to why he had not had systems in place to prevent such an occurrence.  The matter was raised as an issue of serious misconduct and during the Charitable Trust’s investigation into those allegations, the Chief Executive resigned and claimed constructive dismissal.

He alleged that the Charitable Trust should not have begun an investigation into his actions because he claimed it knew that he was not responsible for the financial performance of the organisation at the time.  He also alleged that the Trust had predetermined the outcome of the investigation and had failed to act fairly by not providing him with full information of the allegations.

The Employment Relations Authority had rejected all of the Chief Executive’s claims and awarded costs against him.  The Chief Executive brought a claim in the Employment Court and the Employment Court has upheld the ERA decision and also found that the Chief Executive had no basis for claiming constructive dismissal.

The Court held that the Charitable Trust was entitled to commence an investigation into the Chief Executive.  Also that there had been no predetermination of the outcome by the Board and that all information had been provided, with a reasonable opportunity to the Chief Executive to consider the information and respond to it.  The Chief Executive resigned part-way through the process before the Board had an opportunity to reach any final conclusions on the allegations.

The Chief Executive argued that there was a breach by the Trust because it was adversarial and accusatory in its attitude to him.  The Court rejected that argument and held that the Trust was robust and plainly stated its concerns but that was “to do no more than to communicate effectively.  That action was consistent with the duty of good faith”. 

The Chief Executive also criticised the Board for accepting his resignation too quickly.  The Court rejected that argument and held there was no reason for the Trust to assume that the resignation was hasty or that it was a product of an ill-considered or intemperate act by him.  The Trust was aware that the Chief Executive was legally represented and was “entitled to treat his resignation at face value.”  The Court held that there was no duty on the Board to invite the Chief Executive to reconsider his resignation or to retract it.

Alan Knowsley

Employment Lawyer Wellington