Westpac Banking Corporation v Money

[2004] NZCA 25

IN THE COURT OF APPEAL OF NEW ZEALAND

CA44/03

BETWEENWESTPAC BANKING CORPORATION

Appellant

ANDBRUCE MONEY

Respondent

Hearing:9 March 2003

Coram:McGrath J
Hammond J
O'Regan J

Appearances:  K D Binnie for Appellant

P J Reardon for Respondent

Judgment:22 March 2004 

JUDGMENT OF THE COURT DELIVERED BY O’REGAN J

[1]       This is an appeal under s135 of the Employment Contracts Act 1991 against a decision of the Employment Court dated 20 February 2003.  In that decision Chief Judge Goddard found that the appellant, Westpac Banking Corporation (Westpac), had breached its employment contract with the respondent, Mr Money, at the time that it made him redundant and that Mr Money had therefore been unjustifiably dismissed.  Mr Money was awarded approximately $52,000 for loss of remuneration and $12,000 for the psychological affects of the dismissal.

Background

[2]       Mr Money was an agri-business manager for Westpac based in Wanganui.  He started work with Westpac in 1994.  In 1996 Westpac merged with Trust Bank and changed its name to WestpacTrust.  It has since changed its name back to Westpac and we will use that name in this judgment.

[3]       In 1997 Westpac and Mr Money entered into an individual employment contract which replaced his earlier employment contract.  This contract had a schedule which dealt with redeployment and redundancy.  For present purposes the key provision is cl 2.1 of the schedule which provided:

Before you are made redundant, the Bank undertakes to examine in discussion with you all alternative job options and make every reasonable endeavour to identify and offer at least one job option, which is substantially similar to the position being made redundant.

The terms “redundancy” and “substantially similar position” were defined as follows:

“Redundancy” means a situation where your employment is terminated by the Bank, the termination being attributable, wholly or mainly:

(i)To the fact that the position filled by you is, or will become, superfluous to the needs of the Bank; or

(ii)To a change or changes in the Bank’s overall business needs, policies or practices rendering you superfluous or unsuitable to the needs of the Bank.

A “substantially similar position” shall mean a position:

(i)In the same location or at another location within reasonable commuting distance of the previous location; and

(ii)Involving responsibilities, skills and competencies broadly comparable to those exercised or enjoyed in the previous position; and

(iii)Attracting comparable remuneration to the previous position. 

[4]       In 1998, Westpac undertook a major restructuring process.  This involved a change in the way Westpac serviced its customers including its agri-business customers.  Smaller customers were to be serviced from a call centre in Wellington which substantially reduced the number of customers for which agri-business mangers were responsible.  This in turn meant that the number of agri-business managers nationwide would drop from 65 to 42, and the number in the Wanganui/Palmerston North/Dannevirke area (the central area) would be reduced from 4 to 2, with the two ongoing positions both being based in Palmerston North.  There was a similar process involving business managers.

[5]       Westpac set up a process which allowed the agri-business managers in the central area to apply for the two ongoing positions.  Mr Money participated in that process but was not a successful candidate.  This meant that the redundancy provisions in his individual employment contract were triggered.

[6]       Westpac wrote to Mr Money telling him he had been unsuccessful in his application for one of the new agri-business manager positions and informing him that Westpac was trying to identify alternative positions for him.  He was asked for suggestions he had about redeployment but advised that redeployment possibilities were remote.  He was told that if Westpac was unsuccessful in identifying a redeployment option his employment would be terminated by reason of redundancy with effect from 23 April 1999.  Mr Money replied to that letter suggesting various positions which he would like to explore.  Mr Money was then sent a letter by Westpac outlining some positions for which he might wish to be considered.  He indicated he was “mobile” i.e. prepared to move to get a new position.  These positions were located in Auckland, Wellington, Palmerston North and Taupo.  He was told that all positions would be advertised and that they would be contestable.

[7]       Mr Money indicated an interest in the Palmerston North position.  Westpac wrote to him to say that this position was not directly comparable to his current position and, because there had been interest expressed by others, the role would be contestable.  Mr Money was interviewed for the position but was not the successful candidate.  The successful candidate was not another of the agri-business managers or business managers who had been subject to redundancy but was a branch manager from Feilding.  Mr Money also applied for other roles but was unsuccessful, and his redundancy took affect on 23 April 1999.  He then commenced personal grievance proceedings.  He was unsuccessful in the Employment Tribunal and appealed to the Employment Court.

Employment Court judgment

[8]       Chief Judge Goddard found that Westpac had established that a redundancy situation had arisen, even though Westpac’s Wanganui agri-business customers still needed to be serviced.  He found that the situation which arose fell within paragraph [ii] of the definition of redundancy in the schedule to the employment contract and that the change in Westpac’s policies had made Mr Money superfluous or unsuitable to Westpac’s needs. 

[9]       The Chief Judge then turned to the question of Westpac’s compliance with its obligations in relation to redeployment.  He found that the business manager role in Palmerston North was a substantially similar position in terms of the definition of that term in the employment contract.  In particular he found that it was in a location “within reasonable commuting distance of the previous location”, i.e. that Palmerston North was within a reasonable commuting distance of Wanganui.  In coming to that conclusion he said that he took judicial notice of the fact that people commute daily to work in Wellington from as far away as Palmerston North and Masterton, that Wanganui is closer to Palmerston than either of those centres is to Wellington and that Palmerston North attracts a workforce commuting from the surrounding regions including Wanganui.

[10]     As the business manager position in Palmerston North was in other respects a substantially similar position, the Chief Judge found that Westpac was obliged not only to identify that position but also to offer it to Mr Money in terms of cl 2.1 of the redundancy schedule to the employment contract.  Westpac argued that it was sufficient that it gave Mr Money an opportunity to apply for this position, arguing that in a situation where a number of similar employees are made redundant at the same time it is not feasible to offer one position to all of them.  The Chief Judge commented on that argument as follows at para 39:

… Nor is it an answer for the respondent [Westpac] to say that it had like obligations to other employees, because it had assumed a personal or individual obligation to the appellant.  If it has taken on inconsistent obligations under separate contracts to different people, it is no answer to say that it is not possible to meet all those obligations.  This is because the respondent had created the situation when it signed the individual employment contracts which it had drafted and in respect of which employees like the appellant had little if any input beyond their signature.  Put another way, it is not open to the respondent to rely on an impossibility that it has created.

[11]     The Chief Judge said that having identified a substantially similar job option in Palmerston North, Westpac was obliged to make an offer of that job to Mr Money. Since it had not done so it was in breach of the employment contract.

[12]     Later in the judgment the Chief Judge commented at para 43:

… The principal error was in opening to competition the position that the respondent had bound itself to offer the appellant in just such a situation.  As stated, it is the respondent’s misfortune if it made the same promise to other personnel as well.  There is nothing in the appellant’s contract to suggest that he must compete for any available positions.  On the contrary, the respondent willingly undertook an obligation to try conscientiously to find him another similar position and, if it found some, as it did, to offer him at least one of them.  This it did not do and it failed to do so not through oversight but as a matter of policy.

[13]     The Employment Court therefore allowed the appeal and ordered Westpac to make the payments to Mr Money to which reference has already been made.

Points on appeal

[14]     Westpac based its appeal on two grounds.  The first relates to the term “reasonable commuting distance”, and the second to the scope of Westpac’s obligation to a redundant employee. 

[15]     On behalf of Westpac Mr Binnie argued that there were two errors of law in relation to the Chief Judge’s conclusion that the position in Palmerston North was within a reasonable commuting distance from Wanganui.  The first was that the Chief Judge made an error of law in determining that Palmerston North was a reasonable commuting distance from Wanganui because there was no evidential basis for the finding that people commute daily from Palmerston North to Wellington.  The second was that the Court’s approach to the interpretation of the phrase “reasonable commuting distance” was an error of law because it was contrary to the principles set out in previous authorities. 

[16]     Mr Binnie also argued that Employment Court’s approach to the application of the redeployment provisions in the employment contract involved an error of law.  In particular, he argued that there was an error in the approach taken to the interpretation of the obligation of Westpac to make every reasonable endeavour to identify and offer at least one job option to Mr Money.

Limited appeal

[17]     This is an appeal pursuant to s135 of the Employment Contracts Act 1991.  That provision allows for appeals against decisions of the Employment Court other than decisions on the construction of any individual employment contract or collective employment contract on the basis that the decision is erroneous.  We are mindful of this limit to the scope of the appeal right.  As this Court said in Wellington Free Ambulance Inc v Ross [2000] 2 ERNZ 461 at para 29:

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.

Reasonable commuting distance

[18]     Mr Binnie argued that there were errors of law in the Chief Judge’s finding on the “reasonable commuting distance” point.  He said that the Chief Judge based his finding on taking judicial notice of the fact that people commute daily to work in Wellington from as far away as Palmerston North and Masterton, that Wanganui was much closer to Palmerston North than either Palmerston North or Masterton were to Wellington, and that Palmerston North attracted a workforce commuting from surrounding regions including Wanganui.  He said this involved errors of law because:

(a)there was no evidence on these matters before the court;

(b)the court failed to have regard to the fact that the new location of Palmerston North involved an extra 75 kilometres of travel each way and an extra hour and a quarter travelling time each way; and

(c)the court failed to consider other decisions on what constitutes a reasonable commuting distance. 

[19]     The Employment Court had before it evidence that the distance between Wanganui and Palmerston North is 74 kilometres and that the driving time (apparently assessed on a conservative basis) is one and a quarter hours.  In our view those facts provided an evidential basis for the Chief Judge’s assessment that, in the circumstances of this case, the new position in Palmerston North would be within a reasonable commuting distance of the location of the old position in Wanganui.  This was an assessment which a specialist court such as the Employment Court is entitled to make, taking into account the distance involved, the travelling time, the transport options and other factors which are relevant to the particular case.  The assessment made by the Chief Judge was one which was open to him on the evidence before him and in those circumstances there is no basis for this court to interfere with his assessment given the limited nature of the right of appeal.

[20]     We accept the criticism that the reference in the judgment to judicial notice being taken of certain matters was not judicial notice in a technical sense.  However, we were not assisted by the detailed argument on the scope of judicial notice, because the Chief Judge’s reference to the matters of which he took judicial notice does not alter the fact that he has made a judgment on the issue of reasonable commuting distance, which was open to him on the evidence before him.

[21]     Mr Binnie argued that the decision in this case created a new benchmark which was nearly twice as high as the benchmark from previous Employment Court and Employment Tribunal cases dealing with the issue of reasonable commuting distance.  He said the Chief Judge’s failure to consider these cases was itself an error of law.  We disagree. There was no benchmark in this case, rather it was a matter of judgment taking into account the factors which were relevant to the assessment in the present case.  We note that the authorities which Mr Binnie cited to us (AMI Insurance v Kirk [1999] 1 ERNZ 301, Brooker v State Insurance Ltd [2000] 2 ERNZ 274, New Zealand Printing etc IUOW v Sigma Print Ltd [1979] ACJ 297, Tuilaepa v Auckland Area Health Board [1992] 2 ERNZ 114, Cowan v United Carriers Ltd (Unreported) AT 216/95, 28 July 1995, and Hamilton v Banks Shoe Co Ltd (Unreported) WT 77/97, 8 October 1997) are all cases in which the assessment of reasonable commuting distance was being made in the context of an argument by an employee that he or she should not be required to travel to a new position and that the employee was therefore redundant.  That can be contrasted with the present case where the context was that the employee believed that the distance was reasonable, and the employer was seeking to establish that it was not reasonable and that the position that in remote location was therefore not a substantially similar position. 

[22]     In our view there was no error of law on the issue of “reasonable commuting distance”.  Accordingly, the first ground of appeal fails.

Impossibility of performance

[23]     Mr Binnie argued that the Chief Judge was wrong in his finding that the contractual obligation undertaken by Westpac in the employment contract with Mr Binnie was to identify a substantially similar position and offer that position to Mr Money.  He took particular issue with the Chief Judge’s observation that by entering into employment contracts with a number of employees containing the same term Westpac made it impossible for itself to comply with its contractual obligations in a situation where a number of employees were made redundant at the same time but only one substantially similar position was available.

[24]     Mr Binnie argued that the Chief Judge had given insufficient recognition to the fact that the obligation undertaken by Westpac in the employment contract was an obligation to “make every reasonable endeavour” to identify and offer a substantially similar position, rather than an absolute obligation to make such an offer.  He argued that Westpac was entitled in circumstances, where it had only one substantially similar position available and more than one redundant employee, to conduct a contestable process giving each employee an opportunity to apply for the available position.

[25]     In response Mr Reardon argued that the point of the appeal was academic because, even if Mr Binnie’s interpretation of the contract were correct, Westpac would still be in breach of that obligation.  We accept Mr Reardon’s submission in that regard.  It was not disputed that the successful candidate for the business manager position in Palmerston North, for which Mr Money applied, was an employee of Westpac who had not been affected by the redundancies.  In order to comply with the contractual obligation, as interpreted by Mr Binnie, the position of business manager should have been available only to Mr Money and other managers who had been made redundant during the restructuring process.  As it had been made available to candidates who were not so affected, it was clear that Westpac had not complied with its obligation to make every reasonable endeavour to identify and offer a job option to Mr Money.  Accordingly this ground of appeal also fails.

[26]     We do, however, record that we disagree with the Chief Judge’s observation that Westpac had accepted an obligation to offer a position to Mr Money, which had become impossible because of its similar obligations to other employees who became redundant at the same time.  In our view, that overstates the nature of the commitment made by Westpac in the individual employment contracts.  In the circumstances of this case, where a number of employees had been made redundant and only one substantially similar position was available, we believe that Westpac would have complied with its obligation to make every reasonable endeavour to identify and offer a job option to the redundant employees if it had given the redundant employees for whom the position was substantially similar (but nobody else) the opportunity to apply for that position and awarded the position to the person it considered to be the best applicant.  What will amount to “all reasonable endeavours” in any particular case will depend on the circumstances of each case, but we accept the point made by Mr Binnie that the employment contract in this case did not give rise to an absolute obligation to offer the single substantially similar position that had become available to each redundant employee.

Conclusion

[27]     We dismiss the appeal.  Mr Money is entitled to costs in this Court.  Counsel indicated there may be agreement on the costs issue and we will therefore reserve costs.  If no agreement is reached counsel may submit memoranda.

Solicitors:

Simpson Grierson, Wellington for Appellant
Cooper Rapley, Palmerston North for Respondent