Deirdre McLoughlin v Setanta Insurance Services Limited [2011]

Eamon Harrington analyses the use of an injunction by an employee to stop an employer's investigation into alleged misconduct.

Case Name and Reference: Deirdre McLoughlin v Setanta Insurance Services Ltd

Court or Tribunal: High Court  (Laffoy J., 8th November 2011)

Jurisdiction/Subject Matter: High Court restraining Employer from continuing with an Investigation.

The Employee successfully sought an injunction to restrain her employer from proceeding with an investigation. The Employee sought to stop the investigation saying she was absolutely convinced that the defendant’s attempt to suspend her, which she contended was wholly unlawful and did not accord with any fair procedures whatsoever, given that no allegations had actually been made against her, was “a dressed up attempt” to remove her from her position on the grounds of gross misconduct, thereby ensuring that the Defendant does not have to pay her notice entitlement pursuant to her contract of employment. She contended that, given the reputational damage being caused to her professionally, damages would not be an adequate remedy.

The Employee objected to the content of Affidavits sworn on behalf of the Employer, as it showed that the process that had been commenced by the Employer went beyond a “pure investigation”.

The Employer had suspended the employee on full pay.  The Employer issued a letter to the employee in which it stated that –

“… in light of certain very serious matters that have recently come to the [defendant’s] attention, the [defendant] intends to conduct an investigation into those matters in accordance with its Disciplinary Procedures. I have been nominated by the company to co-ordinate and conduct this investigation on its behalf.”

The letter went on to state that the matters under investigation related to the defendant’s “alleged role in the misrepresentation of the true position of the defendant’s outstanding claims reserves and underwriting results for the 2009/2010 financial year end to the Board of the Maltese sister company”, together with “other matters” related to alleged breaches by the Employee of both her fiduciary duties to the defendant and of the defendant’s policies and procedures. The letter went on to state:

“The purpose of the investigation is to establish the relevant facts related to the various matters under investigation and to prepare a report for consideration of the Board of the [defendant]. Upon receipt of the investigation report, the Board will then determine if there are sufficient grounds to warrant progressing to a formal disciplinary hearing in respect of any of the matters under investigation. You will be furnished with a copy of the investigation report, together with confirmation of the outcome of the investigation, in due course.”

The Employee was then warned that the various matters under investigation, if proven to be true, are sufficiently serious so as to constitute “Serious Misconduct” under the defendant’s Disciplinary Procedure, which could result in disciplinary action being taken against the Employee “up to and including summary dismissal”.

In response to the proceedings, the Employer on Affidavit stated that the investigation revolved around actions that were taken in late September 2010 which “gave rise to a significant overstatement of underwriting results” for the year ended 30th September, 2010 and “substantial reductions in the prevailing claims reserves held in the books of the defendant at that time”.

The Court accepted that issues of the type relied on by the Employer as justifying the suspension of the plaintiff are unquestionably of very serious import to the management of an insurance business and where discovered require investigation.

However, the Court noted that some of the content of the Employer’s affidavit had more of the hallmark of a reasoned determination against the plaintiff than merely an outline of why the invocation of the disciplinary process against the plaintiff was necessary.

The Employer’s Affidavit dealt in detail with the outcome of the review exercises which had been undertaken earlier this year to the extent of exhibiting charts. One of the charts, the Employer stated, reveals “the full impact of what appear to be wholly inaccurate representation of the true claims position as at 2010 financial year end”. The other chart, stated the Employer, demonstrates that “the level of active claims [in July, August and September 2010] with only nil or first notification reserves is highly unusual and suggests a substantial degree of incomplete and inadequate reserving for new cases which had not been taken into consideration by the plaintiff... and which further misrepresented the true claims position at the 2009/2010 financial year end.”

The Court commented that the Affidavits point to conclusions having been reached by the Employer as to misconduct on the part of the plaintiff. The Court also wondered whether such a conclusion could be reached by the person (with human resources expertise) who swore the Affidavit.

The Plaintiff took particular objection, justifiably in the Courts view, to an averment by the Employer in the following terms:

“The Plaintiff is quite correct when she says that the Defendant is dissatisfied with her management of its business and in particular the manner in which she has conducted herself in her dealings with staff, service providers, third party representatives and customers of the Defendant. Her conduct in that regard would, on its own, warrant the termination of her employment for cause.”