Wellington Free Ambulance Service Inc v Ross

IN THE COURT OF APPEAL OF NEW ZEALAND

CA 181/00

BETWEEN	WELLINGTON FREE AMBULANCE SERVICE INC
Appellant

AND	BRIAN CLAYTON ROSS
Respondent

Hearing:	16 May 2001
Coram:	Richardson P Keith J Tipping J
Appearances:	J E Hodder and E S K Dalzell for Appellant/Cross‑appeal Respondent T B Blake for Respondent/Cross‑appellant
Judgment:	29 May 2001

JUDGMENT OF THE COURT DELIVERED BY RICHARDSON P

This appeal and cross‑appeal from the judgment of the Employment Court delivered on 3 August 2000 bring out the limited nature of appeals to this court under s135 of the Employment Contracts Act 1991. Section 135(1) excludes from appeal any decision of the Employment Court "on the construction of any individual employment contract or collective employment contract" and then further confines the right of appeal to decisions challenged as being "erroneous in point of law".

Background

Mr Ross was a long serving ambulance officer. A pilot programme providing for rapid response units involving 14 staff and funded by the Accident Compensation Corporation was terminated early and some redundancies were necessary. In December 1998 Mr Ross was one of five who were dismissed by the Wellington Free Ambulance Service on redundancy grounds. He brought a common law claim for damages seeking $50,000 for humiliation, trauma and stress, damage to reputation and loss of employment opportunities; $10,000 aggravated damages; $5,000 exemplary damages or penalties; and, as well, an order for reinstatement and declarations and costs. Reinstatement was not pursued before the Employment Court. Having found in part for Mr Ross, Judge Shaw awarded him $20,000 under the first head, humiliation and trauma, and refused the exemplary damages, aggravated damages and declarations sought.
The four causes of action pleaded all invoked the employment contract between the parties. As conveniently summarised in the judgment, the first was that the redundancy selection process was procedurally contrary to the terms of the employment contract concerning the degree of negotiation and consultation with the plaintiff. The second was that the redundancy selection process was contrary to the terms of the employment contract in a number of specified ways. The third was that the redundancy selection process was contrary to the employment contract in that it was carried out with bias, consideration of improper matters, and a failure to give proper consideration to relevant matters. The fourth was that there was a failure to attempt to offer or provide redeployment as required by the terms of the employment contract.
The hearing in the Employment Court lasted six days with 16 witnesses being called, 10 for the plaintiff, Mr Ross, and 6 for the employer. The Judge identified as the main issue whether the selection process used to decide that Mr Ross was to be made redundant was in breach of the express and/or implied terms of his contract of employment and posed and answered the questions:
1. What were the contractual obligations of the defendant to negotiate and consult with the plaintiff and were these fulfilled?
2. Did the defendant conduct the selection for redundancy process in a fair and reasonable way and without bias against the plaintiff?
The relevant express terms of the collective employment contract were clauses 18.2 and 28.1, 28.2, 28.3 and 28.4 which provide:
18.2Both parties agree that consultation with the Union regarding the declaration of any redundancy situation shall take place.   The Service shall notify the Union when the redundancy situation is planned to enable discussion to take place and to allow full, effective consultation prior to the implementation of the redundancy provisions.   It is further agreed, that at the request of either party, consultation will take place on the matter of employment patterns within the ambulance service, owing to any proposed introduction of new technologies and operational changes which could affect employment.
28.1Redundancy is defined as a situation where a position(s) is surplus to the requirements of the employer and as a result the incumbent, or in agreed circumstances, another employee, is also surplus to the employer's requirements.
28.2The employer shall give at least two weeks notice of a situation that may potentially result in redundancy(ies) to the affected employees.   That period shall be used to discuss the situation and how it may be resolved with the employee and, if applicable, their authorised representative.
28.3If upon completion of the consultative period referred to in 28.2 above, the employer concludes that the position is surplus to the employer's requirements, incumbent employees shall be given four weeks notice of an impending redundancy.   In the event that no suitable alternative employment is agreed, such notice shall be deemed to be notice of termination of employment (with such advice including the notice requirements of clause 18.1).
28.4The period referred to in 28.3 above shall be used to consult on how the affected employee shall be treated.   In doing so the parties will consider the following:
(a)   alternative work with the employer, which if available shall be offered to an affected employee;
(b)   possible transfer to an alternative workplace;
(c)   retraining if justified; or as a last resort -
(d) redundancy.
The plaintiff also pleaded as an implied term that, if the defendant was to effect redundancies, that should be carried out with trust, good faith, fair dealing, and/or in a manner that was reasonable. That implied term was denied by the employer but the Judge found, relying on Marlborough Harbour Board v Goulden [1985] 2 NZLR 378, that, at the very least, there is no question that all contracts of employment have an implied term requiring the parties to act in a manner that is reasonable and fair.
Judge Shaw stated her conclusions on the first question and the reasons for her decision in this way:
My decision on this aspect of the case is that clause 28.4 provides that the 4 week notice period is to be used to consult on how the affected employees shall be treated.   It is clear that at that stage the affected employees are those who are given their 4 weeks' notice of impending redundancy under clause 28.3 rather than all of the employees.   I find that two of the aspects of that clause were breached by the defendant as follows:
1. The notice to be given is of impending redundancy not of termination unless no suitable alternative employment is agreed.   Therefore when the individual is told of the impending redundancy, consultation must take place before the notice is deemed to be of termination of employment.
2. Redundancy is to be considered as a last resort.   Unavailability of alternative work is the first step.   If it is available it shall be offered to an affected employee.   In this case, two positions were available at Waikanae and the defendant decided not to offer these to the ambulance officers who were selected for redundancy.   Ms Denne [the Defendant's Human Resources Manager] says that the union agreed with this course of action but evidence is neither elaborated on nor supported by the agendas or records of meetings with the union.   Such a significant variation should have been formally recorded.   I am not satisfied there was an agreed variation.   This failure amounts to a breach of the contract.
Possible transfer to an alternative workforce was raised by the inclusion of a letter setting out opportunities for work as taxi drivers and the like.   But no evidence was given of the defendant offering retraining, either directly to Mr Ross or though the union.   Although participation in a "career transition programme" was offered this was a programme designed to assist redundant employees deal with the changes rather than looking for alternatives to redundancy.
The evidence all points to redundancy having been decided on at an early stage.   Once the selection based on competencies was completed the defendant closed its mind to alternative methods of treating the selected employee.   It was argued by Mr Hodder [for the Defendant] that, given that the circumstances of this case were dictated by the withdrawal of funds by ACC, redeployment, transfer, and retraining were untenable options which it was not realistic for the defendant to have to consider.   In these circumstances he said that any breach of the consultation clause cannot be material.
However, the requirement to consult in this case was a contractual obligation and one that should not have been unilaterally dispensed with by the defendant.   Merely offering an employee an opportunity to come and discuss matters if they wish does not discharge this obligation.
It is not possible to predict the outcome of consultation but there are two reasonable possibilities in Mr Ross's case.
The first is redeployment.   The defendant advertised the two new positions at Waikanae before announcing the redundancies.   This minimised the chances of those who did not contemplate being made redundant applying for those positions.   Although the defendant was contractually obliged to offer any available alternative work to employees affected by redundancy it deliberately chose to pre‑empt this possibility.
The second is the possibility of medical redundancy for Mr Ross.   While this is not one of the matters listed for consideration in clause 28.4 I find that in Mr Ross's particular circumstances where he had suffered a major health crisis and was on medical leave with the prospect of not being able to return to work then it would have been fair and reasonable for proper consideration to have been given to this by the defendant.   The defendant did consider the issue at Mr Ross's instigation but rejected it as being some kind of misrepresentation of the true position.   However, I find there was nothing to preclude a fair employer from allowing Mr Ross the dignity of taking medical redundancy.
I make this finding against the definition of redundancy in the contract of employment.   The primary reason for redundancy is the fact that a position is surplus.   The employee is not dismissed for misconduct.   The adoption of a selection method based on comparisons of competencies can be a proper method for selecting those to be made redundant but such a method does give rise to the inevitable dissatisfaction of people who, like Mr Ross, believe they have been incorrectly ranked.   Therefore an employer who uses such a method should take all possible steps to consult and provide alternatives for its employees who are potential candidates for redundancy in order to mitigate the hurt and humiliation of those chosen.
The Judge then turned to the second question she had earlier posed (para [4] above) and which had been the main focus of the evidence and argument before the Employment Court. She reviewed the evidence in some detail and, for the reasons she gave, held that the selection method adopted was fair and reasonable. That left as the crucial findings, against which she considered the remedies sought, her conclusions that the defendant did not breach its contractual obligations to consult and notify in the first part of the redundancy process; but it did breach its obligation to consult on how Mr Ross would be treated once he had been given notice of the impending redundancy; and that breach did cause harm to Mr Ross.

The submissions

Recognising the constraints of s135 Mr Hodder for the Ambulance Service advanced four submissions. The first was that the Judge erred in the interpretation approach to the redundancy provision in the contract and that an approach to interpretation (including principles as to implying terms) is open to appeal, even if the ultimate interpretation of a particular employment contract is not: Wellington College of Education v Scott [1999] 1 ERNZ 98, CA. A provision such as cl 28.4 should, he submitted, be approached in a pragmatic and practical fashion, recognising that consultation is a flexible concept directed to conveying information, and must be related to the particular circumstances.
The second and associated submission was that as a matter of law no fair and reasonable conduct term could properly be implied in this common law claim.
The third was that in crucial respects there was an absence of evidential support for a material conclusion, which constitutes error of law: Northland Co‑operative Dairy Co Ltd v Rapana [1999] 1 ERNZ 361, CA. In that regard, he submitted that there was no evidence to contradict the points that: (1) there were no redeployment opportunities available for the five officers dismissed for redundancy; and the employer provided advice on alternatives, offered a career transition programme, and offered discussions to the employees affected; and (2) that there was no evidential support for the findings in the judgment that, had more extensive consultation occurred, there were realistic possibilities for (a) redeployment within the employer's organisation or (b) "medical redundancy"; and, referring back to the second submission (para [10]), that, generally, the employer was under no obligation to attempt to reclassify a genuine redundancy dismissal as one related to the employee's (uncertain) medical condition and that in any event there was no evidence to support a finding that the employer acted other than fairly and reasonably.
Finally, assuming breach, he argued on various grounds against the awards of damages and costs.
Mr Blake, for Mr Ross, prefaced his submissions on the cross‑appeal with the acknowledgement that the points raised would be relied upon by the respondent as alternative grounds that were available to the Employment Court Judge that could have been relied upon by her, and can be relied upon now, to sustain the decision of the Employment Court. It is only if and insofar as this court reverses the Employment Court that Mr Ross seeks to argue a cross‑appeal. In response, Mr Hodder submitted that of the four points on the cross‑appeal, one, relating to cl 28.1 and incumbent employees, was rightly rejected, at least implicitly by the Employment Court and the other three were merely variations on a submission - precluded by s135 of the Employment Contracts Act 1991 - that the Judge was wrong in finding, as a matter of fact after considering a very substantial volume of conflicting evidence (including that of two experts), that the redundancy selection method adopted was fair and reasonable.

Discussion

The content and sequence of the steps involved in redundancy and resulting termination of employment situations are specified under clauses 18 and 28 of the collective employment contract. Clause 28.1 expresses the primary meaning of redundancy in employment law as being a situation where a position or positions are surplus to the requirements of the employer with the result that the incumbents, too, are surplus. By cl 18.2 the employer must give notice of the foreshadowed redundancy situation to the union to enable "full, effective consultation prior to the implementation of the redundancy provisions". Judge Shaw expressly found that the required consultation took place and that there was compliance with cl 18.2.
Next, by cl 28.2 the employer must give at least two weeks notice of a situation that may potentially result in redundancy to the affected employees. That period is to be used to discuss the situation and how it may be resolved. Judge Shaw expressly found that there was compliance with cl 28.2 through the notification to and discussion with the union and through a meeting with ambulance officers on 17 November.
During the period provided for by cl 28.2 the employer may undertake the redundancy selection process and, as already noted (para [8] above), Judge Shaw concluded that the selection method adopted was fair and reasonable.
The next step is provided for by cl 28.3. Where, as here, upon completion of the consultation period referred to in cl 28.2 the employer concludes that positions are surplus to the employer's requirements, incumbent employees must be given four weeks notice of impending redundancy. Clause 28.4 goes on to provide that that four week period shall be used to consult on how the affected employees shall be treated and, in the event that no suitable alternative employment is agreed, the particular four weeks notice is deemed to be notice of termination of employment (cl 28.3). Consistently with that provision, the Judge concluded that "the affected employees" are those who are given "their four weeks notice ... under cl 28.3 rather than all of the employees". Mr Ross was one of the five given the four weeks notice (in a standard form letter) on 2 December 1997.
The letter of 2 December handed to and discussed with Mr Ross and his partner at a meeting at his home on 2 December by Mr O'Flaherty, the Chief Ambulance Officer and Ms Denne, the Human Resources Manager, reads as follows:
Dear Brian
At the staff meeting held on Wednesday 11 November 1998 it was announced that 12 positions would become redundant following the cessation of the ACC Trauma Pilot.   After discussions with your Union representatives, a selection process was conducted.
That process has resulted in your being chosen to be one of those who will be made redundant.   If you would like to discuss the redundancy with us please contact Robyn Denne to make an arrangement that is suitable to you.
This letter is formal notice of termination of your employment due to redundancy.   You are entitled to four weeks notice as from today's date.   Your final day of employment will be 31 December unless you negotiate an earlier date with the Service.
In terms of your employment contract with Wellington Free Ambulance, you are entitled to redundancy compensation based on the following formula:
hsix weeks' ordinary wages for the first year of employment; plus
h2 weeks' ordinary wages for each subsequent year of employment (or a pro‑rated amount for any incomplete year of employment)
I set out below, and in the attached programme, the process we plan to follow from this point.   However, if there is any other way in which you think we can assist you please advise me or Robyn Denne.
We will pay out all moneys owing to you on your final day of employment including redundancy, notice, holiday and statutory holiday pay and any wages outstanding.
You are invited to meet with Graham Presland to discuss options regarding superannuation and any other financial issues.
We have arranged for 3 EAP counselling sessions to be available for you, and if you wish, your family.   We have also arranged career transition support services for you.   The details of the career transition programme are attached to this letter.
One of our Communication Supervisors has indicated an interest in voluntary redundancy.   We are willing to receive applications from suitably qualified and experienced officers.
Also attached for your information are details of the potential vacancies available from St John Ambulance Service in Auckland and Safeway Taxis in Wellington.
We appreciate this is a difficult time and wish to re‑emphasise that we want to provide you with any assistance we can.
Yours sincerely
Paul O'Flaherty
CHIEF AMBULANCE OFFICER
The attachment to the letter gave details of the career transition programme. It provided for two workshops, one on 8 December and the second on 16 December. The first, of 2½ hours, covered current recruitment practices, skills identification and CV work. The second, of 3 hours, covered self‑marketing and interviewing skills. The programme also provided for 2½‑3 hours individual consulting with a specialist consultant on searching for a new position and evaluating job offers and, as well, for starting a new business; plus a separate session with another consultant providing independent financial advice.

We should add that Mr Ross's unchallenged evidence was that when he was given the letter on 2 December it was on the basis that it was a final and irrevocable decision by the Ambulance Service.
Judge Shaw ultimately concluded that the Ambulance Service did not breach its contractual obligations to consult and notify in the first part of the redundancy process but, for the reasons given in para [7] above, that the Ambulance Service did breach its obligation to consult on how Mr Ross would be treated once he had been given notice of the impending redundancy (para [8]).
The starting point for consideration of the Ambulance Service obligations under cl 28.4 is that, before the four weeks notice was given to the affected employees, two Waikanae positions had been filled and a number of employees had elected to take voluntary redundancy. Further, in discussing the selection process which logically preceded the cl 28.4 consultation, Judge Shaw said she was satisfied that Mr Ross's medical condition played no part in his selection for redundancy and that the medical issues became somewhat of a red herring in the course of the hearing.
Next, as this court said in Wellington International Airport Ltd v Air New Zealand [1993] 1 NZLR 671, 676, "consultation" is a quite different process from "negotiation":
The word "negotiation" implies a process which has as its object arriving at agreement. There is no such requirement in the present case. The airport company is given the power to fix charges. Before doing so it must consult, and for consultation to be meaningful, there must be made available to the other party sufficient information to enable it to be adequately informed so as to be able to make intelligent and useful responses.
Clearly, what is involved in the consultation depends on the context. The premise underlying cl 28.4 is that the affected employees' positions are redundant. Those positions occupied by the five persons given four weeks notices were surplus to the requirements of the employer. As Mr Hodder put it, the reality was that there was no extra money available and no other jobs.
As well, consultation requires the parties to consider the matters specified in (a), (b) and (c), which are directed to continued employment in other positions. And the quest under cl 28.3 is for suitable alternative employment. If no suitable alternative employment is agreed the original four weeks notice is deemed to be notice of termination of employment.
It follows in our view that as a matter of contractual analysis the Judge's findings of breach by the Ambulance Service of cl 28.4 cannot stand. The Waikanae positions had been filled before cl 28.4 came to be applied. Mr Ross did not apply for those vacancies which, as it happened, were filled in‑house by applicants who might otherwise also have received four weeks notices. What the Judge describes as medical redundancy is simply not contemplated under cl 28.4. Under the contract, and entirely consistent with employment law, it is because the position is surplus to the requirements of the employer that the incumbent is dismissed for redundancy. The letter of 2 December invited Mr Ross to meet with Mr Presland to discuss options regarding superannuation and, had Mr Ross wished to do so, he could have taken up with the trustees of the AMP Superannuation Investment Trust his possible eligibility for a disablement benefit or for a benefit payable where employment ceases because of retrenchment or ill health. Finally, the 2 December letter had drawn attention to a likely vacancy for a communication supervisor and it is not suggested that there were any other potential vacancies at that time.
Clause 28.4 provides for the four weeks notice period to be "used to consult on how the affected employee shall be treated". That requirement is not necessarily satisfied by an immediate focussing on existing alternative employment possibilities. Any alternative employment possibilities which arise during the four week period would need to be considered. And "retraining if justified" under (c) also may look to the future subject to the obvious qualification that retraining may well not be justified unless there will be a job for the retrained worker. Second, how the affected employee shall be treated must extend to facilitating disengagement and moving from the present employment back into the workforce.
When they met with Mr Ross on 2 December the Ambulance Service representatives said that the decision as conveyed in the letter was final and irrevocable and the letter itself left Mr Ross to take the initiative in respect of the various matters offered rather than proposing continuing consultation. In those two very limited respects the Ambulance Service may have fallen short of those continuing consultation obligations. However, the Judge did not refer to any allegations of deficiencies in this regard and there was no evidential foundation to support any findings of causation and damages in that connection. In short, any such breach would have been immaterial in law.
That leaves for consideration whether the judgment is vulnerable on this appeal. It is well settled that erring as a matter of law in the approach to the interpretation of the relevant provisions of the employment contract is amenable to appeal under s135, whereas simply erring in the ultimate construction conclusions is excluded: and that an absence of any factual support for a factual conclusion is an error of law (Wellington College of Education v Scott (para [9] above)). In Edwards v Bairstow [1956] AC 14, 36 Lord Radcliffe expressed the latter inquiry compendiously in this way:
If the case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination. Rightly understood, each phrase propounds the same test. For my part, I prefer the last of the three, since I think that it is rather misleading to speak of there being no evidence to support a conclusion when in cases such as these many of the facts are likely to be neutral in themselves, and only to take their colour from the combination of circumstances in which they are found to occur.
With respect to Judge Shaw, we are satisfied that we must assume that there was a misconception of the law which was responsible for the determination. Whether directed to the interpretation approach or whether characterised as a case in which the true and only conclusion contradicts the determination, the decision is amenable to appeal under s135 for error of law.

Cross appeal

The only ground advanced by Mr Blake which requires discussion is the first: as Mr Hodder submitted (para [13] above), the remaining grounds sought to be advanced are essentially challenges to findings of fact by the Judge in relation to the redundancy selection method and whether it was conducted in a fair and reasonable way.
The first ground advanced by Mr Blake was that the Judge failed to deal with his argument that cl 28.1 provides either for a position being surplus to requirements (and the incumbent also being surplus) or "in agreed circumstances another employee is also surplus to the employer's requirements"; that it was the positions of the ambulance officers who had been assigned to the pilot scheme which were surplus to requirements; and that there needed to have been "agreed circumstances" for Mr Ross to have been made redundant.
The short answer is that the collective employment contract defined ambulance officer expansively as "an employee primarily engaged in front‑line emergency ambulance duties, notwithstanding that he/she will also be required to perform other duties directly connected with ambulance work" (cl 2.7.1) without differentiating para‑medics working in the pilot units and additional officers recruited from other ambulance officers; and that it is clear from the cross‑examination of Ms Denne that the para‑medic officers were rotated through the pilot units with each having a turn and further that the union had agreed with the Ambulance Service that neither the para‑medics nor the additional officers recruited were, as such, the incumbents of the redundancy positions.

Result

The appeal is allowed and the cross‑appeal is dismissed. In consequence the orders made in the Employment Court are quashed and Mr Ross's statement of claim is dismissed. As to costs, we note that legal aid has been involved. Accordingly, questions of costs in both courts are reserved and, if necessary, counsel may submit memoranda.

Solicitors
Chapman Tripp Shieffield Young, Wellington, for Wellington Free Ambulance
Service Inc.
Kevin Bell Law, Wellington, for Mr B C Ross

[2001] NZCA 185

29 May 2001