Gilbert v The Attorney-General in Respect of The Chief Executive of The Department of Corrections Ca

• Jurisdiction: New Zealand
• Judge: Randerson
• Judgment Date: 16 September 2010
• Neutral Citation: [2010] NZCA 421
• Docket Number: CA309/2009
• Court: Court of Appeal
• Date: 16 September 2010

Between

Christopher John Gilbert

Appellant

and

The Attorney-General in Respect of the Chief Executive of the Department of Corrections

Respondent

[2010] NZCA 421

Court:

Hammond, O'Regan and Randerson JJ

CA309/2009

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against an Employment Court decision regarding the approach taken in the calculation of the appellant's losses — the appellant was a probation officer and succeeded in a claim for unjustified constructive dismissal due to workplace stress — appellant was awarded a lump sum for loss of income and general damages — whether the Employment Court erred in its findings and approach to the appellant's likely date of retirement — whether the Employment Court erred in its findings and approach regarding the calculation of deductions for contingences when assessing loss of income, the approach to taxation on the awards and the assessment of superannuation losses.

Counsel:

Appellant in person

R B Chan and T M Bromwich for Respondent Judgment:

• A We allow the appeal in two respects only:

  • (i) The interest reduction of 4.7 per cent referred to in [107](d) of the first remedies judgment dated 4 December 2003 is not to be applied in calculating the appellant's salary loss after 14 October 2002.

  • (ii) Interest at five per cent per annum is payable by the respondent to the appellant on any unpaid balance of the sum determined to be due by the respondent to the appellant in respect of loss of salary in the period from 14 October 2002 to the end of his working life. The interest is to run from 14 October 2002 until the date of payment.

• B In all other respects the appeal is dismissed.

• C No order as to costs.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Randerson J)

Table of Contents

Para No

Introduction	[1]
The first judgment in 2000 (on liability and a partial conclusion on remedies)	[5]
The first remedies judgment in 2003	[8]
The recall judgment of 2006	[15]
The second remedies judgment of 2009	[16]
Issues on appeal	[18]
First issue: did the Employment Court err in its findings and approach to Mr Gilbert's likely date of retirement, absent the breaches?	[20]
Second issue: did the Employment Court err in its finding and approach as to Mr Gilbert's likely salary absent the breaches?	[36]
Third issue: did the Employment Court err in finding Mr Gilbert has not suffered any loss of superannuation entitlements?	[39]
Parry v Cleaver	[48]
Longden	[60]
Conclusion on the third issue	[73]
Fourth issue: did the Employment Court err in finding that the tax consequences of the damages award are not to be taken into account?	[82]
Fifth issue: did the Employment Court err in its approach to interest on the awards?	[96]
Summary	[104]

Introduction

1 The appellant Mr Gilbert commenced employment as a probation officer with the Corrections Division of the then Department of Justice in 1971. Apart from a period of approximately four years, he continued in employment as a probation officer until he was forced to leave through ill-health in 1996 when aged 51.

2 In July 1997, Mr Gilbert commenced proceedings in the Employment Court for unjustified dismissal. It is a regrettable feature of this case that some 13 years later the litigation has still not been finally resolved. There have been three substantive decisions of the Employment Court and this is the second occasion on which the litigation has received appellate attention.

3 This appeal raises issues relating to the calculation of Mr Gilbert's losses. Prominent amongst these are alleged errors of law in respect of the calculation of deductions for contingencies when assessing loss of income, the approach to taxation on the awards, and the assessment of superannuation losses.

4 Since the proceedings were commenced under the Employment Contracts Act 1991, leave to appeal is not required. 1

The first judgment in 2000 (on liability and a partial conclusion on remedies)

5 By a decision delivered on 21 June 2000, 2 Judge Colgan found that the Department had breached express and implied terms of Mr Gilbert's employment contract and that he had been unjustifiably constructively dismissed. A central feature of the Judge's finding was that Mr Gilbert had been exposed to unnecessary and avoidable workplace stress arising from work overload, management failure as well as office and resource deficiencies. This had caused Mr Gilbert to develop a cardiac condition that was aggravated by stress. It required his hospitalisation and an extended period of sick leave in 1995. He was advised to retire on medical grounds and did so with effect from 29 March 1996.

6 The Judge found that Mr Gilbert was entitled to the following remedies:

• (a) a lump sum for loss of income (which was to be the subject of actuarial evidence and a further hearing if the parties could not reach agreement);

• (b) general damages of $75,000 for humiliation, anxiety and distress;

• (c) medical expenses of approximately $14,000;

• (d) compensatory damages of $50,000 for loss of career, loss of employment status, employability and future marketability; and

• (e) exemplary damages of $50,000.

7 The liability finding was upheld by this Court on appeal 3 but the heads of damage identified as (d) and (e) above were quashed.

The first remedies judgment in 2003

8 The parties were unable to reach agreement on the calculation of Mr Gilbert's loss of income from 1996 to the end of his notional working life (the period until his 65th birthday on 5 March 2010). An issue also arose about the proper method of calculating Mr Gilbert's superannuation losses after his notional retirement date.

9 Judge Colgan heard extensive evidence over a five day period in late 2002 and early 2003 including expert medical and actuarial evidence. Although there were areas of agreement between the experts, there were also substantial areas of disagreement. The key findings made by the Judge in his decision delivered 4 December 2003 4 were:

• (a) But for the breaches of the Department's duty towards him, Mr Gilbert would very likely have survived to age 65. Although in the late 1980's and early 1990's he had experienced some chest pain, this was stress related and not cardiac in nature. It was generally able to be managed.

• (b) The presence of work stresses other than those involved in the Department's breach did not substantially increase his risk of coronary artery disease.

• (c) In the absence of the Department's breaches, the chances of Mr Gilbert surviving beyond age 65 were less than those of “average” New Zealand males of the same age as a result of his general state of health and his prolonged and intensive cigarette smoking.

10 There was a difference of opinion between the actuaries called on each side as to the likely length of Mr Gilbert's continued employment with the Department. Resolving those differences, the Judge found:

• (a) In the period from the date of Mr Gilbert's resignation in 1996 until 14 October 2002 (the first day of the remedies hearing) there was a 95 per cent chance that Mr Gilbert would have continued to work for the Department. It followed that a five per cent contingency deduction would be made to the loss of earnings calculation up to that date.

• (b) There was a 40 per cent chance that Mr Gilbert would have worked for the Department until age 65. For the period from 14 October 2002 until 5 March 2010 (the notional retirement date) a deduction of 60 per cent for contingencies was to be made for lost earnings during that period.

11 Mr Gilbert held a position with the Department as a unit manager at the time of his retirement on medical grounds. That position was subsequently abolished but the new position of service manager was created. Some of the former unit managers became service managers, but not all, since there were fewer service managers than unit managers. In some instances, the remuneration of former unit managers was “grandfathered”. The Judge found that Mr Gilbert had a 35 per cent chance of promotion to the position of service manager had he continued in employment with the Department. Had he not become a service manager, Mr Gilbert would have remained a probation officer but with a “grandfathered” unit manager's salary. [12] It followed that Mr Gilbert's loss of salary calculations were to be made on the basis of including 35 per cent of the difference between a unit manager's salary in 1996 and the relevant service manager's salary for the probable duration of his continued employment.

13 Against that background, Judge Colgan made the following awards:

For the period from March 1996 to 14 October 2002 (first day of the first remedies hearing)

• (a) $297,966, representing Mr Gilbert's loss of a unit manager's salary, including loss of the chance to earn a service manager's salary;

• (b) $102,974 of interest on salary loss to 14 October 2002;

• (c) accumulating interest on salary loss, from 14 October 2002 to date of payment, at the rate of $61 per day; and

• (d) a deduction of five per cent from the total of the above for contingencies.

For the period from 14 October 2002 until 5 March 2010 (Mr Gilbert's notional retirement date)

• (a) a sum, to be calculated, representing $42,447 per annum plus 35 per cent of the difference between $42,447 and a service manager's annual salary at the date of judgment for the period from 14 October 2002 to the date of judgment, reduced by five per cent for contingencies;

• (b) a sum to be calculated by adding to the annual equivalent of the total sum in (a) above a factor of one per cent 5 per annum to March 2010 and multiplying this by six years and five months;

• (c) the sums at (a) and (b) above to be reduced by 60 per cent.

• (d) the sum in (c) above to be reduced by 4.7 per cent for net interest to be earned.

• (e) the sum of $5,208.33 for interest on...