Telecom New Zealand Ltd v Nutter
[2004] NZCA 154
•21 July 2004
IN THE COURT OF APPEAL OF NEW ZEALAND
CA127/03
BETWEENTELECOM NEW ZEALAND LIMITED
Appellant
ANDVINCENT NUTTER
Respondent
Hearing:30 March 2004
Coram:Anderson P
Hammond J
William Young JAppearances: K D Binnie and H G Walton for Appellant
Respondent in person
Judgment:21 July 2004
JUDGMENT OF THE COURT DELIVERED BY WILLIAM YOUNG J
Table of Contents Paragraph Number Introduction [1] Background [4] The relevant contractual provisions and Telecom’s policies [37] The judgment of the Employment Court [41] The issues before us [46] The Judge’s conclusions as to unjustifiable dismissal Overview [48] The conclusion that the August 2000 employment
agreement wiped the slate clean in relation to the
earlier incidents involving Mr Nutter[49] The Judge’s conclusion that the absence of a warning
meant that the dismissal was unjustifiable[53] Conclusion [63] The Judge’s conclusions as to remedies Overview [64] The relevant statutory provisions [67] Compensation for financial loss – the principles [70] Compensation for non-economic loss – the principles [84] Did the Judge assess compensation for financial loss on
an appropriate basis?[86] Did the Judge assess compensation for non-financial
loss on an appropriate basis?[93] Was the Judge’s discount for contributory conduct
appropriate?[95] Calculations [100] Disposition [104] Introduction
[1] In an Employment Court judgment delivered on 4 March 2003, Judge Shaw found in favour of Mr Vincent Nutter in personal grievance proceedings associated with his dismissal from employment by the appellant, Telecom New Zealand Limited. The Judge required Telecom to compensate Mr Nutter by paying him 5 months loss of remuneration and associated benefits and $5,000 by way of compensation for distress and humiliation. In a later, supplementary judgment, delivered on 3 July 2003, she fixed $30,200 as the value of the 5 months remuneration and loss of benefits. So, allowing for the award of $5,000 for distress and humiliation, the total amount of Mr Nutter’s judgment was $35,200.
[2] Those proceedings involved a challenge to a decision of the Employment Relations Authority which had dismissed Mr Nutter’s claim. Because the challenge was heard de novo by Judge Shaw under s182 of the Employment Relations Act 2000, there is no need to refer to the decision of the Authority.
[3] Telecom, pursuant to leave, appeals against the decision. Mr Nutter seeks to challenge the quantum of the award by way of cross-appeal.
Background
[4] Mr Nutter began working for Telecom in the late 1980’s. In 1999 he became an investment analyst in the access and transport group. His manager was Mr Gavin Knight.
[5] Mr Nutter’s employment came to an end in June 2001. To explain how and why this happened, it is necessary to refer to two earlier incidents.
[6] The first of these occurred in 1999. Mr Nutter had attempted to renew a friendship with a female Telecom employee whom he had previously taken out. She spoke to Mr Knight about this and this resulted in a discussion between Messrs Nutter and Knight in which Mr Nutter indicated that he would not contact the employee again.
[7] The second incident occurred in 2000. Mr Nutter had developed an interest in another female Telecom employee. She complained to Mr Knight about Mr Nutter’s behaviour which included him talking to her on the bus and in the street and contacting her by email.
[8] This complaint, unlike the earlier one, resulted in a formal disciplinary process. There was dispute in the Employment Court about the outcome of this process. On the findings of fact made by Judge Shaw, Mr Knight explained to Mr Nutter how his actions could be perceived by others and offered to pay for counselling so he could properly understand this. He gave Mr Nutter the names of two or three counsellors to contact.
[9] Mr Knight also spoke to Mr Nutter about the use of the email system for personal communication. On this point, the findings of fact made by the Judge were not entirely clear. She found it more likely than not that Mr Knight instructed Mr Nutter not to use the system for personal emails to other staff. But she also concluded that whatever Mr Knight had said, Mr Nutter went away believing that he could still send personal emails as long as they did not cause offence. No written warning was given to Mr Nutter but what was said to him was in the nature of a caution.
[10] Mr Nutter attended one counselling session.
[11] Mr Nutter’s dismissal arose out of his interactions with a third female Telecom employee, Ms W.
[12] Both Mr Nutter and Ms W are from the United Kingdom. They were on friendly terms.
[13] Also involved in their interactions was a further Telecom employee, Ms B, who worked next to Ms W.
[14] The evidence points to a good-humoured relationship between Ms W and Ms B and Mr Nutter. There were occasional presents (of an amusing nature) and lunches. When Mr Nutter was ill Ms W sent him flowers. The drift of the evidence as a whole suggests that Mr Nutter may have been looking for more from the relationship than Ms W.
[15] The situation came to a head on 17 May 2001. On that day, Mr Nutter shouted Ms W and Ms B lunch. There was some brief touching in the lift on their return to work. Mr Nutter’s behaviour was flirtatious and addressed primarily to Ms W.
[16] Two emails followed. The first, from Ms W to Mr Nutter, apparently referring to something Mr Nutter was eating, was in these terms:
After the amount you just ate – how much fat content is there in that biscuit???
To this email Mr Nutter responded:
It was an apple – no fat there.
I’m coming to see you about a Voodoo doll I’m building at home.
Vince
[17] Mr Nutter then went across to Ms W’s desk and showed her a strand of hair he had found on his jacket and asked if it came from her or Ms B. He ran his fingers through her hair for comparison and, when Ms W moved her head away, plucked out a hair. Ms W protested. Mr Nutter told her he was going to made a Voodoo doll of her. He then said he would take a piece of fluff from her pullover to go with it and reached towards her sleeve. Ms W pointed to a piece of fluff on the carpet, which he picked up. He then returned to his desk and put the strand of hair and piece of fluff into a plastic folder and went back to her. He showed the plastic folder to her. Ms W snatched it from his hand and took the hair and fluff from it before returning it to him. Ms W placed the hair and fluff in the rubbish bin.
[18] Ms W then sent Mr Nutter an email in these terms:
All I can say was that it was a very flat looking apple.
Re the voodoo doll – you really are sadder than I first thought!!!!
Get a life Vince and keep me out of it.
From a happily married
[Ms W]
[19] Mr Nutter was upset by the tone of the email.
[20] The next week Ms W delivered mail to Mr Nutter’s desk and asked how his weekend had been. He made a comment about her last email and that it had been hurtful. She said that she would read the email she had sent. Shortly after that she sent him an email in these terms:
Vince
I have just re-read the email I sent you and can’t see how it can have offended you so badly but I am sorry if you feel it did. We are friends Vince, there will never be anything else between us. If you can’t handle that then I suggest we stop the banter and the nice lunches and go back to how we were before.
[21] She sent another email not long afterwards with the subject heading “Lets clear the air” which was otherwise in these terms:
Vince
I’m sorry if my comments have upset you. It seems that things get carried away when things get personal and that makes me feel uncomfortable and then when I express this, your feelings get hurt. The last thing I want to do is hurt your feelings. The only way I can see to avoid this situation is to keep our relationship strictly professional. This doesn’t mean that we can’t have a kid around but without it getting personal. I do appreciate the lunches but this does seem to lead to your expectations of a more than professional relationship so therefore I think it best that this does not continue.
Kind regards,
[Ms W]
[22] Mr Nutter responded in this terms:
OK then.
The lunches were merely to enjoy your company (and [Ms B’s]) in a less constricted atmosphere and had no ulterior motive.
I do not have “expectations” of you, and was not working to any particular end – just following my feelings day by day.I saw the “banter” you mention as partially flirtation and mutual attraction which has gone on for a long time. I have grown to like you a lot and that has led to me feeling hurt.
But you are right, things have gotten awkward and if you are uncomfortable then we’ll call an end to it.
with regret
Vince
[23] On 4 June Mr Nutter sent a website address called “Hot or Not” collectively to Ms B and two male staff. It was an American dating service with an entry page to which anyone could send his or her photograph. Visitors to the site could then rate the person’s photograph on a scale of 1 to 10 for attractiveness. A day or so later he asked Ms B if she had been “game enough to send her photograph there”. On the findings of fact made by the Judge that is as far as this conversation went.
[24] Ms W’s birthday was on 7 June. Before the events of 17 May she and Mr Nutter had discussed what she wanted for her birthday and she had asked for flowers. Mr Nutter gave her a card and a red rose. Ms W was uncomfortable with this and Mr Nutter took them away.
[25] As a result of these events Ms W asked her immediate supervisor that she be seated further away from Mr Nutter after a pending office reorganisation was completed. The supervisor told Mr Knight, and this prompted the disciplinary process which resulted in Mr Nutter’s dismissal.
[26] Mr Knight spoke to Ms W on 14 June. She prepared a document setting out her concerns, which she gave to Mr Knight on 18 June when she and Mr Knight met again.
[27] Ms W was plainly upset by the voodoo doll email and its immediate sequels. In the statement which she gave to Mr Knight she said that Mr Nutter had picked up the hair and piece of fluff from the rubbish bin in which she had placed them. She indicated that she was concerned that Mr Nutter might erect a shrine to her at his house. She made it clear that she was unhappy about the red rose which he offered to her on her birthday. There was no complaint about the limited physical contact which had occurred.
[28] Ms W indicated that the outcome she wanted was to be seated further away from Mr Nutter and she did not want to be the cause of him being sacked. She told Mr Knight about the participation in the relevant events by Ms B.
[29] Mr Knight also spoke to Ms B. She referred to the physical interaction which occurred on 17 May and the “Hot or Not” website (saying that the reference to her photograph made by Mr Nutter had been to a “sexy photo”), but made no complaint against Mr Nutter. She did refer to the events of 17 May as “creepy”.
[30] Mr Knight wrote to Mr Nutter on 20 June in these terms:
Dear Vince
The purpose of this letter is to request a meeting with you on Friday 22nd June at 10:00am to discuss an allegation of sexual harassment/inappropriate/unprofessional behaviour which has been made against you. Telecom views these issues very seriously and if the allegation is upheld then disciplinary action may be taken against you which may include a final warning or instant dismissal.
Because of the seriousness of the situation, you are advised to bring a support person with you. If the suggested time is unsuitable, please contact me to arrange an alternative.
Regards
Gavin Knight
Manager Transport
The letter was headed “STAFF CONFIDENTIAL: NOT TO BE COPIED”. It was handed to Mr Nutter by Mr Knight who told him (on the findings of fact made by the Judge) that he should keep its contents confidential.
[31] The following day Mr Nutter told Ms B that he probably would not have a job on the following Monday and that he thought that Ms W had made an allegation of sexual harassment against him. He referred to the disciplinary meeting he would have to attend the next day. Mr Knight heard of this conversation and called Mr Nutter into his office. He told him that his discussion about the confidential letter had caused upset around the office. Accordingly, he sent Mr Nutter home, and he told him to come back the next day for the disciplinary meeting.
[32] At the meeting the next day Messrs Knight and Nutter were present along with Mr Martin Scott, a Telecom manager who seems to have acted principally as a note taker. In the course of the meeting Mr Knight went through Ms W’s allegations, to which Mr Nutter responded. Arrangements were made for a further meeting. Mr Nutter was recorded as being happy as to how the investigation had gone and suggested that Ms B be asked about an aspect of the investigation concerning the “Hot or Not” website incident.
[33] Mr Knight decided that what was said about the website incident did not raise any new issues that needed further investigation. He concluded that Mr Nutter’s employment should be terminated and recorded this and the reasons in a letter dated 25 June to Mr Nutter. The letter was in these terms:
Dear Vince,
I have completed my investigation into the events we discussed on Friday and concluded that you have acted in a significantly inappropriate and unprofessional manner.
Of particular concern are your communications and actions regarding obtaining clothing fibres and hair from a female employee for a voodoo doll, as well as other inappropriate and disturbing comments by you to female employees. The impact that this behaviour has had on the women concerned is significant.
I have considered your recent behaviours in light of your previous history of instances of a similar nature; in particular the fact that on repeated occasions your behaviour has caused a number of female employees to be disturbed and upset by unwanted attention from you. Your propensity to ‘misunderstand’ the wishes of female employees and acting inappropriately has previously been brought to your attention and you have already received cautions from me, and professional counselling for this. Despite this, you have repeated the same type of behaviour.
Vince, I have already given you a second chance and the opportunity to refrain from this type of behaviour, yet you do not appear to have taken this to heart. I have an obligation to protect Telecom employees from such behaviour, and as recent events are representative of your continued inappropriate/unprofessional behaviour, I have decided to dismiss you from employment with Telecom.
Your employment will be terminated effective 5pm, 25 July. Until then your attendance at work is not required.
I would again like to offer you professional psychological counselling. I strongly suggest you acknowledge to yourself that your repeated ‘misunderstanding’ of others and your consequent behaviour is causing serious problems for yourself and others, and that you take my offer and seriously seek to overcome this problem.
Yours faithfully
Gavin Knight
Manager Transport
NETWORK
[34] At the time Mr Nutter was 61.
[35] Between his dismissal and the hearing in the Employment Court Mr Nutter applied without success for in excess of 50 jobs in New Zealand, Australia and the United Kingdom. His evidence was that he had intended to work until he was 65. Since his dismissal he has been supporting himself on his savings and the unemployment benefit.
[36] On 22 September 2001 Mr Nutter wrote to Ms W and Ms B. This correspondence (which was not produced) was apparently referable to the then pending personal grievance proceedings. Telecom has (apparently in response) indicated to its employees that they should avoid contact with Mr Nutter.
The relevant contractual provisions and Telecom’s policies
[37] At the time of his dismissal, Mr Nutter’s employment was pursuant to an employment agreement entered into in August 2000. This agreement provided:
This contract may be terminated by [Telecom]:
a.subject to due disciplinary process, by the giving of one months notice in writing provided however that [Telecom] may elect to make a payment of base salary in lieu of such notice. …
b.without notice in the case of serious misconduct. Examples of serious misconduct include (but are not limited to):
i.The commission of a criminal offence;
ii.Failure to comply with the lawful reasonable, but not of a trivial nature, instructions of [Telecom];
iii.Being guilty of conduct which may bring [Telecom] into disrepute.
[38] Telecom’s dismissals policy provided:
Dismissals
Dismissals must be writing. All grounds for the dismissal must be contained in the letter.
Dismissal with Notice
An employee may be required to work their notice period e.g. where an unacceptable behaviour persists and the performance management process has been followed. May occur where unacceptable behaviour or unsatisfactory work performance persists following a written warning.
Summary Dismissal without Notice
May be appropriate where the offence is very serious. This may be appropriate where, for example:
…
· Harassment.
…
Other misconduct deemed to be of a serious nature.
[39] The warnings policy was in these terms:
A warning is an indication to the employee that their current behaviour or work performance does not meet expectations, and gives them an opportunity to ensure that it does not happen again. A warning may be given for conduct such as:
…
· Harassment.
The policy made it clear that warnings are to be in writing with a copy forwarded to “HR Systems” for noting against the employee’s file. The policy also makes provision for the cautioning of employees:
… Cautioning an employee’s current work performance and/or behaviour means a minimum expectation has been communicated. Where an employee who has been cautioned fails to make efforts to improve performance and/or behaviour, the manager will need to consider following disciplinary procedures.
A caution does not warrant a written record to be attached to the employee’s personal file. A caution is intended as notification that aspects of the employee’s performance and/or behaviour are inappropriate.
[40] Telecom also has a harassment policy:
What is Harassment?
Sexual harassment:
…
If a person uses language (whether written or spoken), visual material or physical behaviour of sexual nature which is unwelcome or offensive to another person, and it is either repeated or is so significant that it has a detrimental effect on that person in respect of his or her employment, job performance, or job satisfaction.
…
Whether or not harassment has occurred is determined from the point of view of the victim, irrespective of whether the alleged harasser intended to offend or not.
…
Harassment is not:
Occasional compliments.
Behaviour based on mutual friendships, sexual or otherwise, between freely consenting parties.
The judgment of the Employment Court
[41] Judge Shaw decided to approach the case on the basis that the dismissal was on notice; this given the one months notice provided in the letter of dismissal and the fact that the reasons for termination were not referenced to any of the matters listed in the Telecom policy under the heading “Summary Dismissal without Notice”.
[42] She concluded that the reliance on the July 2000 incident was in breach of the due disciplinary process provided for by Telecom for two reasons: first because Telecom’s position had not been reserved when the August 2000 agreement was entered into (which she saw as expunging the caution); and secondly, the 2000 incident did not result in a written warning being given to Mr Nutter at the time.
[43] The Judge saw Mr Nutter’s relationship with Ms W as consensual and mutual up until “late May”. She regarded Mr Nutter’s actions in giving Ms W a flower on her birthday as a “serious error of judgment”. In her view, Mr Nutter had been naïve and consequently breached acceptable parameters of behaviour through lack of judgment. She regarded what she described as the “ambivalent background to his offensive behaviour, particularly towards Ms W” as being explanatory of what happened if not an excuse for it. She saw this as precisely the type of case that called for clear lines to be drawn by an employer. In practical terms she saw this as the sort of behaviour for which the warning procedure was appropriate.
[44] She then went on:
[82] The wording of the “Dismissal with Notice” section of the Telecom HR policy relating to written warnings is not mandatory but indicative. It would be going too far to say that in all circumstances a dismissal on notice must be preceded by a written warning. However the use of such warnings has become almost standard HR practice and on the facts in this case, a written warning may have prevented the events leading to the dismissal. At the very least the presence of a written warning on the plaintiff’s file would have left no room for dispute when it did arise again.
[83] For these reasons I find that the employer did not act in accordance with due disciplinary process when deciding to dismiss the plaintiff. Because of the procedural deficiencies he was unjustly dismissed. …
[45] Judge Shaw reduced what she would otherwise have awarded by 50% to recognise Mr Nutter’s contributory conduct. In light of that, the remedies awarded by the Judge appear to have been arrived at on the following basis:
1.In the absence of contributory conduct, Mr Nutter would have been awarded 12 months loss of remuneration and associated benefits (less an allowance for the one months notice received by him); and $10,000 compensation for distress and humiliation.
2.Given his contribution to his dismissal the remedies would be reduced by 50% resulting in 5 months loss of remuneration and associated benefits and $5,000 by way of compensation for distress and humiliation.
The issues before us
[46] At the hearing of the appeal Telecom sought to challenge the finding that Mr Nutter had been unjustifiably dismissed, whereas Mr Nutter challenged the level of the remedies awarded by Judge Shaw.
[47] Accordingly we will address the case by reference first to the Judge’s conclusions as to unjustifiable dismissal (in respect of which Telecom complains) and secondly as to the remedies awarded by the Judge (in respect of which Mr Nutter complains).
The Judge’s conclusions as to unjustifiable dismissal
Overview
[48] Mr Binnie for Telecom raised two issues as to the Judge’s finding that Mr Nutter had been unjustifiably dismissed:
1.The conclusion that the August 2000 employment agreement wiped the slate clean in relation to the earlier incidents involving Mr Nutter; and
2.The conclusion that the absence of a warning meant that the dismissal was unjustifiable.
The conclusion that the August 2000 employment agreement wiped the slate clean in relation to the earlier incidents involving Mr Nutter
[49] Judge Shaw referred to and relied on Ashton v Shoreline Hotel [1994] 1 ERNZ 421 in support of her conclusion that the August 2000 agreement between Telecom and Mr Nutter rendered irrelevant the incidents that preceded that agreement.
[50] In Ashton the employee had been dismissed for gross misconduct associated with an incident which occurred on 19 September 1992 and prior to the entering into of the employment contract, which was current when the employee was dismissed. Chief Judge Goddard held that an earlier incident could not be relied upon by the employer in support of the dismissal:
… [T]his incident, such as it was, occurred soon after Mr Addie’s arrival and was reported to him but he not only decided to do nothing about it in the way of investigation or disciplinary action, but after a few weeks in his position as general manager invited all the employees, including the appellant, to sign a new employment contract, which the appellant duly did. In the absence of any reservation of position as to previous conduct, … the new contract wiped the slate clean. It was no longer open to the respondent from then onwards or to the Tribunal to rely on such conduct. …(at 429)
[51] The facts of the case at hand were distinguishable from what was involved in Ashton. First, both pre-August 2000 incidents resulted in action from Mr Knight and, in relation to the second of the incidents, a formal disciplinary process took place. So it is not a case of the relevant conduct being overlooked. Secondly, this is a pattern of conduct case and it is plainly unreasonable and illogical to exclude from consideration any relevant facet of that pattern of conduct. As Chief Judge Goddard observed in Ashton:
Overlooking one act may not amount to more than an election to affirm the contract on the footing that the act in question is isolated and not the beginning of a course of unacceptable conduct. (at 429)
[52] In that context we are satisfied that the earlier incidents and particularly what happened in July 2000 were part of the relevant background and that the reason given by the Judge for treating it as irrelevant was not open to her.
The Judge’s conclusion that the absence of a warning meant that the dismissal was unjustifiable
[53] Mr Binnie’s argument in relation to this aspect of the case involved the following contentions:
1. Mr Nutter’s actions were serious enough to warrant summary dismissal;
2.The Court substituted its own view for that of Telecom; and
3.The Court’s findings were against the weight of evidence as to the seriousness of the misconduct given the context in which it occurred.
[54] It will be recalled that the Judge took the view that Telecom had dismissed Mr Nutter not on the basis of serious misconduct warranting summary dismissal, but rather on the basis that the conduct of Mr Nutter warranted dismissal on notice.
[55] Mr Binnie’s position was that if the circumstances had warranted summary dismissal it followed, a fortiorari, that dismissal on notice was also justifiable. We agree with this proposition. Mr Binnie then went on to complain that the way the Judge approached the case meant that she did not focus on what he claimed was Mr Nutter’s actual misconduct and did not apply the correct legal test.
[56] That legal test is provided by this Court’s judgment in W & H Newspapers Ltd v Oram [2000] 2 ERNZ 448 at 457:
[31] … The Court has to be satisfied that the decision to dismiss was one which a reasonable and fair employer could have taken. Bearing in mind that there may be more than one correct response open to a fair and reasonable employer, we prefer to express this in terms of “could” rather than “would” … .
[57] This is an appeal confined to points of law. It is not open to us to allow the appeal for instance on the basis that the weight of evidence was against the conclusion reached (which was one of the arguments advanced by Mr Binnie). To succeed Telecom must establish that there was an error of law by the Judge.
[58] Mr Binnie maintained that he could do this in the following respects:
1.The Judge did not analyse in any detail the nature of the misconduct and, whether in light of that misconduct, it was open to Telecom to conclude that it had lost all trust and confidence in Mr Nutter.
2.In focussing on whether there were additional steps which Telecom should have taken (eg giving a written warning following the July 2000 incident) the Judge ignored the reality, as Mr Binnie saw it, that the dismissal was also an option which had been open to Telecom based on facts which Telecom had fairly arrived at through its disciplinary process.
[59] The Judge was plainly aware of the Oram test and set out to apply it. She noted that the question for her was:
[W]hether the decision to dismiss is one that a reasonable and fair employer could have taken.
So she must have concluded that a fair and reasonable employer could not have decided that dismissal was appropriate on the facts of the case albeit that she did not revert to the Oram test in the key passages in her judgment which we have set out in para [44] above.
[60] We start by observing that conduct of the sort alleged against Mr Nutter is not easy to evaluate.
[61] It is perfectly clear that, as between him and Ms W, there had been a friendly relationship, which included exchange of personal emails and general badinage. In this context Telecom might be thought to have over-reacted to the voodoo doll incident. It is hard to see how Mr Knight could seriously have concluded (as he would appear to have, given the terms of his letter of 25 June 2001) that Mr Nutter actually intended making a voodoo doll. Further, Ms W’s fear that Mr Nutter might have a “shrine” to her at his house appears to border on the over-wrought. The single rose which Mr Nutter presented to Ms W on her birthday was undoubtedly a mistake and understandably upset Ms W. But this happened on 7 June and no further relevant interaction occurred between Mr Nutter and Ms W prior to the disciplinary process starting. From this it appears that Mr Nutter had got the message by the time that Mr Knight became involved.
[62] The Judge, who had the opportunity of hearing Messrs Nutter and Knight give evidence, was well-placed - indeed better placed than us - to evaluate the significance of what had happened. In general terms, she saw Mr Nutter’s conduct as being at a level which could only fairly and reasonably warrant dismissal if there had been an earlier written warning. It seems to us to have been a decision which was open to her. Further it is consistent with the structure of Telecom’s disciplinary policy.
Conclusion
[63] Although we have concluded that the Judge was wrong to hold, in terms of Ashton, that the pre-August 2000 incidents were irrelevant, it is clear that her conclusions as to the significance of the absence of a warning was an independent basis for her decision. In those circumstances, we uphold her conclusion that the dismissal was unjustifiable.
The Judge’s conclusions as to remedies
Overview
[64] Mr Nutter challenged, by way of purported cross-appeal, the Judge’s conclusions as to remedies.
[65] He had not obtained leave for the cross-appeal and it is doubtful whether he may pursue the cross-appeal without leave. But some of the issues which he has raised involve important questions of law and practice as to the fixing of compensation in this jurisdiction. So, on the assumption that it is necessary, we grant leave for the cross-appeal.
[66] Mr Nutter’s submissions covered rather more ground than was appropriate given the limited nature of the right of appeal. We will therefore confine our consideration to three points he made which seem to us to warrant serious consideration. Those points are:
1. Did the Judge assess compensation for financial loss on an appropriate basis?
2.Did the Judge assess compensation for non-financial loss on an appropriate basis?
3.Was the Judge’s discount for contributory conduct appropriate?
The relevant statutory provisions
[67] The relevant provisions of the Employment Relations Act 2000 are as follows:
123 Remedies
Where the Authority or the Court determines that an employee has a personal grievance, it may, in settling the grievance, provide for any 1 or more of the following remedies:
(a) reinstatement of the employee in the employee's former position or the placement of the employee in a position no less advantageous to the employee:
(b) the reimbursement to the employee of a sum equal to the whole or any part of the wages or other money lost by the employee as a result of the grievance:
(c) the payment to the employee of compensation by the employee's employer, including compensation for—
(i) humiliation, loss of dignity, and injury to the feelings of the employee; and
(ii) loss of any benefit, whether or not of a monetary kind, which the employee might reasonably have been expected to obtain if the personal grievance had not arisen: … .
128Reimbursement
(1) This section applies where the Authority or the Court determines, in respect of any employee,—
(a) that the employee has a personal grievance; and
(b) that the employee has lost remuneration as a result of the personal grievance.
(2) If this section applies then, subject to subsection (3) and section 124, the Authority must, whether or not it provides for any of the other remedies provided for in section 123, order the employer to pay to the employee the lesser of a sum equal to that lost remuneration or to 3 months' ordinary time remuneration.
(3) Despite subsection (2), the Authority may, in its discretion, order an employer to pay to an employee by way of compensation for remuneration lost by that employee as a result of the personal grievance, a sum greater than that to which an order under that subsection may relate.
[68] Broadly the scheme of the legislation is that:
1.Compensation for economic loss is provided for by ss123(b) and (c)(ii) and 128;
2.Compensation for non-economic loss is provided for by s123(c)(i) and perhaps s123(c)(ii) in relation to loss of benefits of a non-monetary nature;
3.Subject to the operation of s128(2), remedies are discretionary.
[69] We do not overlook the provisions of the Act which provide that reinstatement is intended to be the primary remedy in respect of a successful personal grievance claim, see ss101(c), 123 and 125.
Compensation for financial loss – the principles
[70] Given the generally indefinite duration of employment agreements, there is legitimate scope for debate as to the periods of time in respect of which compensation should be awarded in cases of unjustifiable dismissal.
[71] Such an issue did not, at least in practice, arise in relation to the old common law rules associated with wrongful dismissal; this because at common law contracts of employment were terminable on either the period of notice expressly provided for or on reasonable notice, and damages for wrongful dismissal were always calculated by reference to the relevant notice period.
[72] In England and Australia the practice in relation to legislative schemes corresponding broadly to our personal grievance regime has been to award compensation for what we would call unjustifiable dismissal on what is effectively a “full” basis. In those jurisdictions there is no judicially imposed cap on the period in respect of which such compensation should be awarded, see for instance Courtaulds Northern Spinning Ltd v Moosa [1984] ICR 218 and Bostik (Australia) Pty Ltd v Gorgevski (1992) 36 FCR 20. It should be noted, however, that in the United Kingdom there are statutory limits on the compensation which can be awarded, see the discussion in 16 Halsbury’s Laws of England (4th ed, reissue) at para [534].
[73] The making of any compensation award involves the asking and answering of a hypothetical question as to how the plaintiff would have been placed in the absence of the legal wrong in issue – in other words, counterfactual analysis. The longer the period in respect of which compensation is sought, the more uncertain and speculative the assumptions underlying the eventual award become. This is illustrated by the facts of this case. Mr Nutter sought compensation based on the hypothesis that if he had not been unjustifiably dismissed he would have worked for Telecom until he was 65. But there are many contingencies (or vicissitudes of life) which may have to be allowed for. If he had not been dismissed in June 2001 his employment may have come to an end for other reasons. He had had a heart attack a few months before he was dismissed. One of the contingencies which might require consideration is whether his health would have permitted him to work until he was 65. Mr Nutter is sensitive to slights and reverses. Had he not been dismissed, it is perhaps conceivable that he may have found the atmosphere between him and Ms W too difficult to tolerate. He may have reacted badly to the sort of warning (and restrictions on interactions with female colleagues) which might legitimately have resulted from the June 2001 disciplinary process. He may have been dismissed for unrelated reasons or, indeed, given his pattern of conduct, for similar reasons. The idea that full compensation in this sort of case can ever be assessed with anything like precision is a fallacy.
[74] Notwithstanding the practice in other jurisdictions, it is now well established in New Zealand that a “full” assessment of the financial loss suffered by an employee as a result of an unjustifiable dismissal merely sets the upper limit on an award of compensation (in that no award can be for more than has been lost) and there is no automatic entitlement to “full” compensation.
[75] Provisions corresponding to ss123(b) and (c)(ii) and 128 in earlier legislation were considered by this Court in Air New Zealand Ltd v Johnston [1992] 1 ERNZ 700 and Telecom South v Post Office Union [1992] 1 ERNZ 711. In the second of those cases, Cooke P observed:
I do not doubt that under the Act the period for which the employee could reasonably have expected to work but for the unjustified dismissal is a proper consideration.
…
But it is clear under the New Zealand legislation, both the 1987 Act and the 1991 Act, that the employee has no legal right to compensation for either the whole of his or her career expectancy or even any shorter future period. Section 229(1) of the 1987 Act, now replaced by s41(1) of the 1991 Act, gives a right by way of reimbursement to the lesser of lost remuneration or three months’ ordinary time remuneration. Beyond that, under s229(2) and now s 41(2), there is an express discretion to order a further payment by way of compensation for remuneration lost. The general power to award compensation under s 227(c) and now s 40(1)(c) is consistent with this, for it too is discretionary - the word is "may" and there is no legislative prescription of the extent of compensation. Perhaps there is some overlapping, but that is unimportant.
What is important is that, apart from the minimum reimbursement, the jurisdiction is essentially discretionary. …
…
In evolving their approach to the exercise of their discretion the Labour Court and now the Employment Court must of course act judicially and on the basis of principle. Reasonable consistency is required: established patterns should not be departed from without good and enunciated reasons. To adopt the phrase used by North J in a case in a very different field of monetary awards, in Re Crewe [1956] NZLR 315, 435, there should be a defined cursus curiae. And, apart from the present case and Air New Zealand v Johnston [1992] 1 ERNZ 700, it would seem that the Labour Court has indeed generally acted in that way. The most helpful part of the submissions of Mr Carruthers was his summary of all the relevant decisions of the Labour Court under the 1987 Act. This brings out that awards in excess of $50,000 have been exceptional. But apparently there has been no other case of an employee in a senior management position comparable to that of Mr Devlin, and it is not surprising in the particular circumstances of this case that there should be a considerably higher award for him. Even so, the figure suggested in the minority opinion [in the Labour Court] is, in my view, much more in touch with precedent and reasonableness than the majority award. (at 716-717)
[76] In the same case, Richardson J took a broadly similar approach:
A dismissal is unjustifiable if it is not capable of being shown to be just in all the circumstances. Justifiability is directed at considerations of moral justice. Whether a dismissal is justifiable can only be determined by considering and balancing the interests of worker and employer. It is whether what was done and how it was done, including what recompense was provided, is just and reasonable to both parties in all the circumstances including, of course, the reason for the dismissal. Where it does not meet that test and the primary remedy of reinstatement is not available, the awarding of compensation recognises the reality that the employment is at an end and life must go on. And a just and reasonable award must reflect the circumstances and the legitimate interests of both parties.
It follows that the status of employment and the right to job security do not justify an award for the balance of the expected working career of the worker, any more than that the management prerogative justifies an early cut off whatever the circumstances of the parties. Where it comes down to fixing a capital sum as the perceived value of future losses resulting from the dismissal, that necessarily involves considering what is a reasonable period to allow for in the circumstances and to make allowance too for the contingencies of life. That is a familiar inquiry at common law and one which is appropriate under the statute. Indeed, it was the approach taken by the Labour Court in this case in effectively adopting two and a half years’ salary as the measure of compensation.
In striking a reasonable balance between the interests of worker and employer it may be helpful to consider what would have been reasonable notice and accompanying salary and incidental recompense to justify terminating the particular employment contract in that way. In that regard the period of reasonable notice implied in such a contract at common law may be useful as a check. What is reasonable notice at common law depends on the particular circumstances, but it would be rare for the period to exceed twelve months. On that basis it would ordinarily be difficult to justify an award of compensation under s227(c) and s229(2) for a senior management employee substantially in excess of a years salary overall. (at 722-723)
[77] There are some observations in Trotter v Telecom Corporation New Zealand Ltd [1993] 2 ERNZ 659 which are not entirely consistent with what was said in the Telecom South case. In Trotter Chief Judge Goddard said compensation for pecuniary losses was to be ordinarily addressed on a “full” basis. He also rejected a submission that compensation should be regarded as limited to the equivalent of remuneration for a 12 month period. His broad position was that full compensation should be awarded unless there was a good reason to the contrary.
[78] The true position must be that expressed in Telecom South Ltd v Post Office Union. That case decided authoritatively that awards of compensation are discretionary and that there is no automatic entitlement to an award reflecting the balance of the expected working career of the employee or any similar approach. This is in accordance with what we take to be the general practice of the Employment Court. An award of more than 18 months remuneration is at the “higher end of the exercise of the discretion”, see the remarks of Judge Travis in Betta Foods (NZ) Ltd v Briggs [1997] 1 ERNZ 456 at 460.
[79] There are a number of reasons why moderation is appropriate:
1.The discretionary nature of the remedy is obviously inconsistent with any principle requiring “full” compensation to be awarded.
2.The concept of unjustifiable dismissal is flexible and a full compensation approach may be disproportionate to the nature of the wrong.
3.Full compensation may be unnecessarily and inappropriately damaging to the employer (and indirectly to the position of other employees of the same employer).
4.Rules of thumb as to appropriate measures of compensation can facilitate both the efficient dispatch of litigation and reasonably predictable outcomes, although cf the comments made by Cooke P in Bailey v Minister of Education [1993] 2 ERNZ 321 at 324 distinguishing between “rules of thumb” and “principles”.
5.A community expectation of “full” compensation extending to compensation for years of foregone remuneration could discourage employment and personal rehabilitation.
[80] We think that it is perfectly clear that compensation which exceeds the equivalent of 12 months remuneration can be awarded. In this respect we respectfully differ from the view expressed by Richardson J in the Telecom South case as to the relevance of what would have been an appropriate notice period at common law. It is plain from what Cooke P said in the Telecom South case that the period for which an employee could fairly have expected to work for his or her employer, if not unjustifiably dismissed, is a relevant consideration. Obviously the assessment of compensation in any particular instance must be individualised to the circumstances of the case.
[81] Those fixing compensation in this area must have regard to the actual loss suffered by the employee. As indicated, that loss sets an upper ceiling on any award and it is plainly a logical starting point for assessment. We do not go as far as the Chief Judge in Trotter in holding that full compensation must be awarded in the absence of good reason to the contrary; this because no such directive appears in the legislation. We also emphasise that full compensation must be assessed in light of all contingencies and in no circumstances should an award be made which exceeds the properly assessed loss of the employee. The assessment must allow for all contingencies which might, but for the unjustifiable dismissal, have resulted in termination of the employee’s employment. For instance, where a dismissal is regarded as unjustifiable on purely procedural grounds, allowance must be made for the likelihood that had a proper procedure been followed the employee would have been dismissed. In this regard we draw attention to the English jurisprudence reviewed in 16 Halsbury’s Laws of England (4th ed, reissue) at para [529].
[82] We should make it clear that we are not setting out to impose on the Employment Court or the Employment Relations Authority a requirement to award compensation for economic loss on what is sometimes referred to as a conventionalised basis.
[83] In Heil v Rankin [2000] 3 All ER 138 at 145-155 Lord Woolf MR, in delivering the judgment of a five Judge Court, discussed the appropriateness of conventionalised awards of damages for non-economic loss. This was in a case in which the relevant “tariffs” were reviewed upwards. Heil v Rankin involved a situation very different from the present. The subject matter of the case (the awarding of damages for personal injuries) was within the purview of courts of general jurisdiction. The right of appeal involved was general and not confined to points of law. Finally, and perhaps most importantly, the case involved non-economic losses in respect of which no simple conversion factor is available to produce a monetary award.
Compensation for non-economic loss – the principles
[84] An award of $20,000 for an “almost brutal” dismissal was upheld in Telecom South. However, an award of $10,000 was been seen as being on the high side in Air NZ Ltd at 169. As late as 1999, awards in excess of $10,000 were made in only 10% of cases, see NZ Fasteners Stainless Ltd v Thwaites [2000] 2 NZLR 565 at 575‑576.
[85] We note that some generalised guidance as to the levels of awards for non‑economic loss might be called for. But we are at something of a disadvantage in this case in that we have not had the sort of survey of the authorities which would permit us to give confidently such guidance in this judgment. We are hearing an appeal and a cross-appeal confined to points of law from a Court of specialised jurisdiction and this is also an inhibiting factor. It is sufficient for the purposes of this case to note that awards of compensation for non-economic loss are not necessarily to be confined to $10,000. Indeed, in applying the older cases, some allowance must be made for subsequent inflation. Further, while we are conscious of, and indeed emphasise, the need for moderation and the appropriateness of reasonable consistency, any award must address the actual consequences for the employee of the dismissal, a point fairly made by Chief Judge Goddard in Ballylaw Holdings Ltd v Henderson (Employment Court, WEC14 and 15/02, 20 May 2003) in paras [80] and [81].
Did the Judge assess compensation for financial loss on an appropriate basis?
[86] As is apparent from our analysis of the judgment appealed from, Judge Shaw approached the case on the basis that, in the absence of contributory fault, she would have fixed compensation for financial loss by reference to loss of remuneration for a 12 month period. She did not explain why that was her approach; despite the fact that by the time of the hearing before her (which was in December 2002) Mr Nutter had been unemployed for around 18 months. Further, as a corollary of her limiting compensation (on a pre-contribution basis) to 12 months loss of earnings, Judge Shaw did not address Mr Nutter’s claim associated with future financial loss.
[87] Mr Nutter was 61 at the time of his dismissal. He worked in a reasonably specialised area. The circumstances of his dismissal along with his age were such as to compromise his ability to obtain another job in the same field of employment. He made sustained but unsuccessful efforts to obtain employment. Making all realistic allowances for contingencies we cannot see how an award of 12 months remuneration would have been commensurate with his loss.
[88] As indicated, the Judge’s reasons in relation to compensation for economic loss are elliptical. The Judge did not set out to assess the actual loss suffered by Mr Nutter. Given this, we cannot see how she could have reached her conclusion unless she treated 12 months remuneration as a ceiling on any award of compensation for financial loss. Yet if the Judge took that view, she was wrong as a matter of law. It follows that Mr Nutter must succeed, at least to this extent, on his cross-appeal.
[89] Given the limited amount of money involved we propose to fix compensation ourselves rather than referring the issue back to the Employment Court.
[90] In her judgment, Judge Shaw indicated that she found that Mr Nutter’s dismissal was unjustifiable given what she described as “procedural deficiencies”. By this she meant that while dismissal may have been justifiable had he been the subject of a warning in relation to the July 2000 incident, the fact that such a warning was not given meant that the dismissal was unjustifiable. On this basis, it would appear to follow that no matter what procedure Mr Knight might have followed in June 2001, it would not have been open to him to dismiss Mr Nutter. So it would have been equally open to Judge Shaw to have described the dismissal as substantively unjustifiable. We will approach our assessment of compensation on this basis. In other words, we see no need to make an allowance for the contingency that had a more appropriate procedure been adopted in 2001, it might have resulted in Mr Nutter’s dismissal.
[91] We think it likely, but not certain, that, but for his dismissal, Mr Nutter would have retained his employment until his 65th birthday. We would allow at least one third allowance for contingencies in that regard and further allowance is also appropriate for what we see as the likelihood that he will, once this litigation is completed, be able to obtain some form of employment, presumably outside the telecommunications industry, and his entitlements to the unemployment benefit. On that basis, we see his financial losses associated with his unjustifiable dismissal as not exceeding approximately 2 years remuneration.
[92] Given the policy reasons why moderation is appropriate and the discretionary nature of the jurisdiction, we think the appropriate starting point for the assessment of compensation (ie before any allowance for contributory fault) is the equivalent of 18 months remuneration.
Did the Judge assess compensation for non-financial loss on an appropriate basis?
[93] On the basis of the approach already referred to, Judge Shaw must have concluded that an appropriate award of compensation for non-financial loss was $10,000. This seems a meagre award given the humiliating circumstances of, and grounds for, the dismissal and the consequent loss by Mr Nutter of what seems to have been his social network within Telecom and elsewhere.
[94] Although the Judge mentioned and put on one side some of the arguments advanced on behalf of Mr Nutter as to this aspect of the case, she did not explain her reasons for adopting a starting point of $10,000, and this has caused us some discomfort. On balance, however, we are not able to discern an error of law in the approach taken by the Judge.
Was the Judge’s discount for contributory conduct appropriate?
[95] Section 124 of the Employment Relations Act provides:
124 Remedy reduced if contributing behaviour by employee
Where the Authority or the Court determines that an employee has a personal grievance, the Authority or the Court must, in deciding both the nature and the extent of the remedies to be provided in respect of that personal grievance,—
(a) consider the extent to which the actions of the employee contributed towards the situation that gave rise to the personal grievance; and
(b) if those actions so require, reduce the remedies that would otherwise have been awarded accordingly.
…
[96] After the events of 1999 and 2000 Mr Nutter would have been well advised to stop making romantic overtures to female colleagues. More particularly, it was most unfortunate that he saw fit to give Ms W a rose and card on her birthday. By doing this he brought about the situation which led to his dismissal.
[97] Mr Nutter was able to produce a number of cases in the Employment Court where conduct which, on the face of it, was more serious than his warranted contribution reductions of no more (and usually less) than 50%. So the 50% reduction was substantial.
[98] As we have noted at various times in this judgment, the appeal to this Court in employment cases is confined to points of law. The relevant assessment by the Judge was entirely factual. While the 50% discount may appear to have been a heavy allowance given the usual practice of the Employment Court, the reality is that it would have been open to the Judge to find that the dismissal was justifiable (as indeed the Employment Relations Authority did).
[99] In those circumstances, we are not inclined to interfere with her approach on the contribution issue.
Calculations
[100] The judgment in favour of Mr Nutter as quantified by Judge Shaw was $35,200.
[101] We assess compensation for economic losses as follows:
1.
18 months remuneration (including bonuses and telephone allowances)
$110,533
2.
Less 50% allowance for contribution
$55,267
3.
Less one month’s notice as paid ($6141)
$49,126
4.
TOTAL AWARD (rounded)
$50,000
We note that there is some element of reconstruction in our figures and thus there could possibly be scope for debate about some of the details. We emphasise, however, that the assessment should be regarded as being broad-brush rather than arithmetically derived.
[102] There is a further award of $5,000 for non-economic loss.
[103] So the total figure for which judgment is to be entered is $55,000.
Disposition
[104] The appeal is dismissed.
[105] The cross-appeal is allowed. In lieu of the judgment in the Employment Court in favour of Mr Nutter we enter judgment in his favour in the sum of $55,000. This award is to carry interest at the rate of 7% per annum from 4 March 2003. Mr Nutter is entitled to any disbursements he has incurred in relation to the appeal, these to be agreed between the parties and in default of agreement to be fixed by the Registrar.
Solicitors:
Simpson Grierson, Wellington for Appellant