Council-owned company fails to punish union through costs claw-back

Nelmac headquarters in Nelson. Photo / Tracy Neal

A council-owned contracting firm has failed to claw back a large chunk of legal costs incurred through fighting a union it argued had acted poorly.

Nelson City Council-owned environmental management firm Nelmac and the Reunited Employees Association will instead have to pay their own costs, following a decision by the Employment Relations Authority.

Nelmac sought full costs totalling almost $82,000 over two legal cases hammered out by the ERA last year.

The first was over a breakdown in bargaining, despite an agreement having been reached through facilitation. In the second determination, ERA member Peter van Keulen found the employees association had breached the duty of good faith in bargaining, through its conduct post-facilitation, and the breakdown in bargaining.

A penalty was not awarded but van Keulen fixed the terms of a new collective agreement between the two. Costs were reserved for the parties to try and agree.

Nelmac was a council-controlled trading organisation owned solely by the Nelson City Council. It sought indemnity costs – or full reimbursement reserved for cases where a party was considered to have acted "frivolously" or improperly during proceedings.

Van Keulen's decision to have each party pay their own costs was made based on a list of guiding principles, including that costs were not to be used as a "punishment or as an expression of disapproval" of the unsuccessful party's conduct.

He had to be satisfied REA's conduct in progressing its claims and responding to Nelmac's claims met the standard for awarding indemnity costs set out in case law.

"I have reviewed REA's conduct of this claim and overall, I conclude that there is no basis to award indemnity costs."

Van Keulen said REA's claims were not groundless and were not advanced for an ulterior motive, and therefore did not amount to misconduct.

"In fact REA's conduct of its claim and its response to Nelmac's claim was, at times, pragmatic in light of various issues impacting on the investigation meeting time that was available."

Nelmac's success with the earlier claim did support an application for costs in its favour, but was not a basis to award indemnity costs, the ERA said.

The employees association argued for costs to lie where they fell, even though van Keulen was not convinced by the union's argument about a power imbalance, and that Nelmac had the resources and ability to be "combative in its approach to REA", which was the basis of the problem.

He said there was merit in each party bearing their own costs. He said the interests of justice supported parties accessing the Employment Relations Authority for assistance with bargaining when they are unable to reach agreement.

"To enable this parties should not be hampered by concerns over cost implications."

Van Keulen also said there was a public interest in having the authority resolve collective bargaining impasses by fixing the terms of collective agreements.

He said the REA did not act unreasonably in bringing its claims against Nelmac, particularly as it related to seeking help in fixing the terms of the new collective agreement.