Company spends $20,000 in effort to recoup $683 from staff member

THE DOMINION POST - TUESDAY 23 JUNE 2011

What happens if you crash the company car? Who is responsible for the repairs?

In a recent Employment Relations Authority case, the employee was found liable because he was negligent and had a duty of care and diligence. However, the dispute ended up costing both the parties an extraordinary amount of money.

Mr Steele is a parts person at BNT, a supplier of automotive and commercial parts, accessories and engineering supplies. Mr Steele backed into another vehicle while driving a work car, resulting in $686.25 in panel beating costs.

BNT at first decided to lodge an insurance claim, given the damage to the other car. However, under the two insurance companies' “knock for knock” agreement BNT was only required to pay the panel beating cost for its car and none of the costs for the other car.

BNT chose to pay the costs directly, rather than claim from its insurance company, given that it had an excess under its policy of $2,000.

BNT asked Mr Steele to pay the panel beating costs but he declined to do so, despite admitting responsibility for the accident.

Some 18 months earlier, when Mr Steele first started his job he signed an individual employment agreement accepting that the BNT’s general terms of employment would apply.

The Vehicle Policy said that where an employee was found to be at fault in a motor vehicle accident in a company vehicle “…the employee may also be liable to reimburse the company for any insurance excess payable in relation to any such at fault accident.”

But there was no insurance excess payable because BNT chose to pay the sum directly without claiming from its insurance company. The Authority said that because there was no insurance excess payable, BNT was unable to rely on the wording of its own agreement to recover the costs from Mr Steele.

Could Mr Steele get away with it? No, said the Authority. It was Mr Steele’s negligence that caused the accident. Mr Steele could be held accountable to pay the sum of the repairs as special damages for breach of the implied term that an employee will exercise due care and diligence in his work.

Accordingly, the Authority ordered Mr Steele pay to BNT $686.25, the cost of the panel beating repairs. However, there were no real winners when it came to costs.

Mr Steele was fortunate enough not to incur any costs in defending the case as he was assisted by Community Legal Advice. BNT claimed a contribution of two thirds of its costs totaling $19,453. BNT also sought reimbursement for travel costs of $864 and a filing fee of $70. BNT also sought interest from the date of a letter of demand.

The Authority said that it was not appropriate to award interest, as this was not claimed until well after the investigation meeting had concluded. However, BNT was entitled to a contribution towards its costs of representation. The Authority considered that an appropriate contribution for Mr Steele to make to BNT's costs was $1,200 and $70 in expenses to cover the filing fee.

This case is interesting for several reasons.

First, Mr Steele, at the time of the Authority’s decision, was still an employee of BNT. It is interesting that the employer would resort to legal action when the employee was still employed.

Second, it is a reminder that employees must take care when carrying out their jobs, as they are under a duty to exercise care and diligence and could be liable to their employer for any damage they cause in breach of the duty.

Third, it is astonishing that a company would accrue legal costs of $20,000 trying to retrieve $683 from an employee.

I understand that the parties attended mediation before the Authority hearing, but were unable to reach agreement. It seems extraordinary that the parties could not settle the dispute and the company chose to take the matter to the Authority at such cost.