ERA costs - Broughton v Whanau Ora Community Clinic

ERA Costs determination

A Member of the Authority, Alistair Dumbleton, has recently chastised our fees in relation to the “No Win, No Fee” arrangement that we have with our clients. This was in the Authority’s recent costs determination of Broughton v Whanau Ora Community Clinic Limited. It is about to be published on the ERA Database and we will link to it as soon as practicable.

In particular, the amount charged to the client of one third plus GST of the overall amounts awarded to the client was referred to there being “nothing to admire about the arrangement”, and further there was little understanding had by the Member for how a business charges for a disbursement, what we call the ERA Filing Fee of $345. The rationale for the fees will be explained here in this article.

The Whanau Ora Community Clinic Limited was first ordered to pay our client the amount of $37,916.94. That was for compensation and loss of wages for the unjustifiable dismissal claim, an unjustifiable disadvantage claim for Whanau Ora failing to give and pay a notice period in terms of the provisions of the written employment agreement, and failing to pay holiday pay upon termination of the employment relationship.
Broughton v The Whanau Ora Community Clinic Limited [2023] NZERA 52

Terms of engagement and "no win, no fee" fees

Our Terms of Engagement that we have the client read, understand and sign included these relevant provisions:

The ERA Filing Fee disbursement

In this case we invoiced the client the ERA Filing Fee disbursement of $345. The amount of $71.56 is used from that to pay the Authority on filing the application. The remainder covers the time to load all of the details into the Authority’s RealMe website and to submit the application. It is also for administrative costs for bookkeeping for the client paying for the ERA Filing Fee, our receiving of it, and paying the necessary amount for the application to the Authority.

Often our clients cannot pay this disbursement in full and often pay it off at around $10 per week.

We run a business and to run a business there are disbursements that operate in that way. The Authority Members do not appear to give us any recognition for how it would operate as an administrative charge as described.

When we ask for contribution to costs for our clients, we ask for the $71.56 to be reimbursed but we are not asking for more than that with regard to the ERA Filing Fee disbursement. The Members seem to unnecessarily read too far into this.

Charging based on a percentage

Just because there is a half day Investigation Meeting in the Authority does not automatically mean that an advocates costs of representation was low. You do not just go to the Authority and magically win, there is a lot of paperwork and preparation that is required to be undertaken before we participate in an Authority Investigation Meeting with our clients. A lot of work goes on behind the scenes.

In Broughton v Whanau Ora Community Clinic, the substantive fee charged to the client was $14,534.83 including GST and that was charged on the greater of what the hourly rate fees would have been or one third plus GST. This figure was come to on a one third plus GST basis and was justified for the following reasons.

Particularly for a case such as this one where an employer that fails to provide adequate wages/time and holiday records in a timely way, and where there is significant work to be undertaken to quantify our client’s losses, there can be a significant amount of time and effort performed by the advocates in the background. In this case there was other supporting staff working for the client to perform these tasks. There is a lot of document preparation including the writing of witness statements and written submissions. There is a lot of correspondence with the Authority also in the lead up to the Investigation meeting.

There was the need to file Amended Statements of Problem for claiming a further unjustifiable disadvantage for a notice period not being paid, and also to provide further particulars surrounding an employment relationship having been formed earlier than the written employment agreement had indicated such that the employer had asserted that there was an independent contractor relationship and the client was not paid in the same way that wages are usually paid. There was no way that the client could have been by matter of fact and law an independent contractor, therefore the inquiry involved further investigation into what minimum entitlements were theoretically owing.

All efforts had been put forward by our office to cover all bases for all claims and how the remedies should be determined. The work we do as advocates makes the job for the Member easy where the evidence and submissions are perfectly presented by us.

It is also convenient here to add that for a lot of cases we often submit multiple reasons why our client should win. If it is not for reason A, then it could be for reasons B, C or D.

Written submissions were provided to the Authority and the non-economic losses and evidence supporting the granting of remedies for that, often, and as in this case, comes from the advocate writing the witness statement on behalf of the client after extensive interviews with the client. Most of our clients are not in a position to be able to write an effective witness statement.

This case involved quite a high level of hurt and humiliation and the non-economic losses were remedied by way of the determination. We go to a lot of effort to have the client record and provide their job searching efforts to show that they mitigated their losses. Before we get to the Authority Investigation Meeting there has been considerable time in putting this evidence together to present to the Authority for the client and ongoing communication with the client to gather this information.

Whanau Ora put up arguments of there being an independent contractor relationship before it had said employment to have officially commenced. There were also arguments put forward by Whanau Ora that it could rely on a trial and/or probationary period clause in the employment agreement. Those arguments had to be countered by our work. We also had to put forward arguments to prevent the client’s award for lost wages being offset by MSD earnings.

In this case the Investigation Meeting ran a duration of three hours, which is often considered to be half a day, that was from 10:00 AM to 1:00 PM. There were only a few very short breaks during that period. As described above, we brought with us pre-written closing submissions that would assist the Member in finding for our client and quantifying the remedies sought.

We will now make a reasonable comparison with another recent costs determination, Roy v Carrington Resort Jade LP [2023] NZERA 51, where our client, Stacey Roy was awarded $42,065.72. In this case we attended the Authority Investigation Meeting for two and a half hours, 10:00 AM - 12:35 PM.
Roy v Carrington Resort Jade LP [2023] NZERA 51

In the costs determination Member Rachel Larmer referred to the itemized invoice that we provided which came to $15,106.05 including GST, which is more than the Broughton case. The Member actually complemented our practice for having decided to charge the lessor amount of the hourly rate time rather than the full third plus GST:

"[21] Ms Roy’s advocate also informed the Authority that although he had been engaged under a ‘no win no fee’ arrangement that provided for Ms Roy to pay costs equal to one third plus GST of the money she had recovered, her actual invoices had been slightly reduced to bring them more in line with the extent of the work that had been undertaken. The Authority finds there was no issue with that having occurred."

Member Larmer ordered Carrington Resort Jade LP to pay $8,209.04 as a contribution to Ms Roy’s costs. In that case there were similar difficulties that we experienced with Whanau Ora in obtaining relevant information in a timely way to be able to quantify the claims.

With the Broughton v Whanau Ora Community Clinic case, in order to save time, and with the objective set on the assessment of consideration of the Authority’s notional daily tariff, we did not provide the Authority on this occasion with a break-down of time spent on this case. We consider that would have been unnecessary and irrelevant to do so. Doing so would have increased costs in having to go to that administrative effort. We were seeking $4,571.56 for the client's contribution to costs, and the Authority awarded $3,271.56 to the client with regard to contribution to costs.

The invoice of $14,534.83 including GST being a charge of one third plus GST was irrelevant here. The Authority Member has just decided to chastise us publicly just for the sake of it but without any legal or reasonable grounds. The Authority Member's reference to Order of St John v Greig [2004] 2 ERNZ 137 had no real application here either.

We did record the time spent on this case and the writer asserts that the way that the client was charged was justifiable here and in line with the amount of time that we spent working on this case.

To throw in a further comparison, in an earlier article we described employment advocates charging an employer $25,686.77 just for producing and filing witness statements in a matter of ordinary complexity. In that case only $2,000 was recovered by the employer against the employee in the end.
Unreasonable Employment Lawyer Costs article

The Authority’s interference with employment advocacy contracts

"From the laissez faire economies of the 19th century, to the free market and global economies today, freedom from interference has been and remains a fundamental premise" (emphasis added, Thomas J. p 6 of the review article)

Second year law students learn about the law of contract: "... it is the law of contract which has the greatest impact on interactions where freedom of choice and action and freedom from interference are most coveted." (p 14)

The writer places emphasis also on the relevance of contractual jurisprudence, Liberal Theory ("liber" (Latin) = "free"), promotes individuals rights, liberty, free enterprise. It focusses on consent and voluntariness. Courts give effect to agreement of parties.

The Authority is not a Court, it is a decision making body that is administered by the executive branch of government, not the Ministry of Justice. It is not a part of the judiciary. We have been observing its interference with employment advocacy contracts with clients. It's adverse comments about our fee structure is unwarranted.

We refer to a recent determination regarding the Authority’s interpretation of Section 150A, that we do not agree with, resulted in the Authority’s interference with an employment advocate’s contract with his client, Armstrong v MTS Energy Limited and Anor [2023] NZERA 72. In that case the parties had expressly agreed that the employee’s advocate would be paid by the employer directly on an invoice to the employer. The employer did not pay, the employee sought a compliance order, and the Authority ordered that the employee be paid the invoice rather than the advocate directly.
Armstrong v MTS Energy Limited and Anor [2023] NZERA 72

This was an approach opposite to another recent compliance order where the Authority ordered the employer to pay another advocate directly, but forgot to add the GST in the order, which would have been very inconvenient to the advocate for the employee.
Maree v Sanem Digital Limited [2023] NZERA 50

Parties can agree in a Record of Settlement that an advocate is paid directly on an invoice. In 2008 this was approved by MBIE (DOL at that time): Mediation Practice Note, Topic: Recorded Settlements, Date of Issue: November 2008. We have already written about this.
S 150A Payment on resolution of problem and advocates GST invoices article

"No Win, No Fee" some final comments

Our company takes on all the risk to do all this work without being paid for our time upfront. There is a possibility that we would not be paid, or the possibility that the case may not be won in the Authority and if the client does not instruct us to challenge the loss in the Employment Court then it becomes an all-round wasted effort.

If the client wishes to use a lawyer and cannot get legal aid then they will no doubt be paying a lot of fees upfront to their lawyer. If they get legal aid they have to pay it back later as a loan. If the client does not wish to pay on an hourly rate basis as we perform the work, with consideration of the risks it is reasonable to charge a higher rate if that be based on a percentage. Most advocacy companies also charge based on the same fee structure. The employment advocacy industry is competitive but commonly adopts this practice between most if not all advocacy firms.

Think about what happens when there is a challenge by the Employer to the Employment Court where the employee has been awarded remedies. Often the time spent on the case will then exceed one third for a lot of cases. We have to show costs incurred to recover costs on the Employment Court’s guideline scale costs system, which is different to how the Authority deals with costs.

The client gains the benefit in not paying for out substantive time up front. The client would not be able to seek justice if we did not offer this as they simply cannot afford to fight their employer.