Bluestar Print Group (Nz) Ltd v David Mitchell

CourtCourt of Appeal
Docket NumberCA504/2009
JudgeStevens J, Heaton
Judgment Date19 Aug 2010
JurisdictionNew Zealand
Neutral Citation[2010] NZCA 385

[2010] NZCA 385

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

O'Regan P, Randerson and Stevens JJ

CA504/2009

BETWEEN
Bluestar Print Group (Nz) Ltd
Appellant
and
David Mitchell
Respondent

C Heaton for Appellant

P B Churchman as counsel assisting the Court

Catchline:

Appeal concerning the correctness of the Employment Court's decision to disregard a Calderbank offer when assessing costs because the offer did not address the vindication that employee (who had brought a personal grievance claim for constructive dismissal) was seeking — whether there was an error of law by the Employment Court in not taking into account the Calderbank offer because it did not address the personal vindication elements of the personal grievance.

Held: The Judge made an error of principle in disregarding the Calderbank offer. The starting point was that r68(1) Employment Court Regulations provided that the Court may, in the exercise of the Court's discretion, have regard to any conduct of the parties tending to increase or contain costs. Further, such conduct may include “any offer made by either party to the other, a reasonable time before the hearing, to settle all or some of the matters at issue between the parties”. The relevance of Calderbank offers could hardly be clearer.

The High Court Rules provided detailed guidance as to the effect of a Calderbank offer. The courts have developed a considerable body of jurisprudence as to the exercise of the Court's discretion under the rules. There may be cases where vindication through seeking a statement of principle in the employment context may be relevant to the exercise of the Court's discretion. Thus the relevance of reputational factors meant that cost assessments were not confined solely to economic considerations. But equally, an offer to pay compensation at a level that was reasonable might well be regarded as conveying a distinct element of vindication to the plaintiff.

The potential for vindication to be a relevant factor did not mean that the developed jurisprudence under the High Court Rules costs regime should be ignored.

It was not correct to say that the principles applicable to Calderbank offers should be adjusted or ignored in employment cases merely because of the nature of the employment relationship and because employees may in certain cases be motivated in part by the desire for vindication. As the Court had previously said, a “steely” approach was required. The scarce resources of the Courts should not be burdened by litigants who chose to reject reasonable settlement offers, proceed with litigation and then fail to achieve any more than was previously offered. Where defendants have acted reasonably in such circumstances, they should not be further penalised by an award of costs in favour of the plaintiff in the absence of compelling countervailing factors. The importance of Calderbank offers was emphasised by r68(1). It was the only factor relevant to the conduct of the parties specifically identified as having relevance to the issue of costs.

In the Employment Court, Mitchell's claim of unjustified constructive dismissal was upheld. He was successful in his claim for compensation for the effects of the breaches of duty in the sum of $10,000. He was unsuccessful in claiming lost wages, in seeking lost benefits, and in his exemplary damages claim. Thus in monetary terms he had partial success before the Employment Court, albeit well short of the substantial losses he had sought in his statement of claim.

In determining costs, it was necessary to measure the degree of success Mitchell achieved in the Employment Court. While he obtained a modest award of $10,000 compensation, he lost on all the other monetary claims. It was then necessary to take into account the Calderbank offer, which was more than what Mitchell achieved in the Employment Court. The normal effect of a Calderbank offer was that the costs position was reversed. In this case, Bluestar did not seek costs, but rather contended that the costs order against it should be reversed. The Court agreed. Bearing in mind the offer, the timing of the offer and other factors relevant to the outcome of the claim, the Court was satisfied that there should have been no award of costs against Bluestar in the Employment Court. The leave question was answered “yes”.

JUDGMENT OF THE COURT
  • A The appeal is allowed.

  • B The costs order in the Employment Court is quashed.

  • C There is no order for costs in this Court.

REASONS OF THE COURT

(Given by Stevens J)

Introduction
1

Mr Mitchell was employed as a cutter and guillotine operator by Printlink (a subsidiary of the appellant Bluestar) from 1990. He brought a personal grievance for constructive dismissal following his resignation on 30 December 2003. He claimed reimbursement of lost wages, compensation, including $100,000 for hurt and humiliation, and exemplary damages of $400,000, each sought under s 123 of the Employment Relations Act 2000 ( ERA). Among other complaints, he contended that the appellant had given incorrect information to the Accident Compensation Corporation (ACC) which led to his claim for compensation for a work-related accident being declined.

2

This appeal concerns the correctness of the Employment Court's decision 1 to disregard a Calderbank offer 2 by the appellant when assessing costs because the offer did not address the vindication that Mr Mitchell was seeking. This Court 3 granted leave to appeal under s 214 of the ERA on the following question of law:

Was there an error of law by the Employment Court in not taking into account the Calderbank offer because it did not address the personal vindication elements of the personal grievance?

Procedural history
Employment Relations Authority
3

Mediation failed and the matter went to the Employment Relations Authority. The Authority dismissed Mr Mitchell's personal grievance and exemplary damages claims. After the parties were unable to settle costs, the Authority awarded $6,000 to the appellant. Mr Mitchell appealed to the Employment Court.

Employment Court
4

Mr Mitchell was partially successful in the de novo hearing before the Employment Court. 4 Judge Shaw found that the employer had breached its duty of good faith to Mr Mitchell by failing to respond to his complaints, failing adequately to review his working conditions when he returned to work from sick leave, and providing incorrect information to ACC without offering him a chance to comment on it, which resulted in his ACC claim being initially declined. The Judge concluded that the employer's unreasonable actions caused his foreseeable resignation. She found that he had been unjustifiably constructively dismissed and awarded him

$10,000 under s 123(1)(c)(i) of the ERA. The claim for exemplary damages was dismissed on the basis that it had been abandoned. 5 We return to this finding below.

Costs decision
5

The Judge noted that there was no specific guidance in the Employment Court Regulations 2000 (the Regulations) and applied the costs regime stated at r 14.11(4) of the High Court Rules. This rule provides that the Court may take into account a Calderbank offer which is “close to” the benefit obtained in judgment. The Judge disregarded the Calderbank offer stating that it did not address the personal vindication element which was “at the heart of Mr Mitchell's claim”. 6 The offer was unaccompanied by an acknowledgement of wrongdoing or apology. Hence, the Judge concluded that Mr Mitchell, having abandoned some of the large monetary claims, was not motivated by money, but rather by having a court assess the merits of his claim. The Judge awarded Mr Mitchell $1,000 for Authority costs,$3,000 Court costs and $1,510 disbursements.

Applicable regulations and rules
Employment Court Regulations
6

Regulations 68 and 69 contain costs rules for that Court. Regulation 68(1) states:

In exercising the Court's discretion under the Act to make orders as to costs, the Court may have regard to any conduct of the parties tending to increase or contain costs, including any offer made by either party to the other, a reasonable time before the hearing, to settle all or some of the matters at issue between the parties.

7

Regulation 6 states that where there is no relevant procedure in the Regulations or the ERA, the Court must resolve the issue, as nearly as is practicable, in accordance with the High Court Rules.

High Court Rules
8

Rules 14.1–14.23 of the High Court Rules set out the costs regime. Rule

14.10

states that a party may make a Calderbank offer at any time. Rule 14.11 governs the effect of Calderbank offers on costs:

Effect on costs
  • (1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

  • (2) Subclauses ( 3) and (4)

    • (a) are subject to subclause (1); and

    • (b) do not limit rule 14. 6 or 14.7; and

    • (c) apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

  • (3) Party A is entitled to costs on the steps taken in the partner after the offer is made, if party A–

    • (a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

    • (b) makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.

  • (4) The offer may be taken into account, if party A makes an offer that–

    • (a) does not fall within paragraph (a) or (b) of subclause (3); and

    • (b) is close to the value or benefit of the judgment obtained by party B.

Effect on costs
Submissions
9

Ms Heaton for the appellant submitted that the Employment Court erred in finding that Mr Mitchell had abandoned his claim for exemplary damages with the result that Judge Shaw erred in her...

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