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

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeRanderson
Judgment Date16 Sep 2010
Neutral Citation[2010] NZCA 421
Docket NumberCA309/2009

[2010] NZCA 421

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Hammond, O'Regan and Randerson JJ

CA309/2009

Between
Christopher John Gilbert
Appellant
and
The Attorney-General in Respect of the Chief Executive of the Department of Corrections
Respondent
Counsel:

Appellant in person

R B Chan and T M Bromwich for Respondent Judgment:

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.

The issues on appeal were whether the Employment Court erred in its findings and approach regarding: G's likely date of retirement; G's likely salary; whether G had suffered any loss of superannuation entitlements; the finding that the tax consequences of the damages award were not to be taken into account; and whether the EC erred in its approach to interest on the awards.

Held: The resolution of whether the EC erred in the approach to G's notional retirement age depended on the EC's assessment of the medical evidence called on both sides. The EC held the chance of G continuing to work until his notional retirement date at 40%. There was sufficient evidence upon which the EC based its findings in relation to morbidity and mortality issues and the deduction for contingencies. No error of law arose; the issues were purely factual.

The issue regarding the EC's findings as to G's likely salary was also factual and gave rise to no error of law. The approach taken by the EC had been more favorable to G since his earnings as probation officer were unlikely to have exceeded the notional figure adopted.

Up to the date of his retirement, G and the Department as employer had made contributions to the Government Superannuation Fund. Under s35 Government Superannuation Fund Act 1956 (“GSFA”) (retiring allowance) G would have been entitled, on reaching 65 years, to receive an annual retiring allowance for the remainder of his life calculated on the basis of a formula set out in the section. In terms of s36 GSFA (retiring allowance when contributor medically unfit for further duty), where a contributor retired on grounds of ill health before reaching normal retirement age, they were entitled to receive an annual retiring allowance calculated pursuant to s35 GSFA. The general principle was that a plaintiff should not be put in a better position as a result of the breach than he would otherwise have been. If that principle was applied here (using the capitalised value approach to compare the value of the retiring allowance G actually received with the value of his notional retiring allowance if he had worked to 65) G was no worse off. The effect for G of receiving his retiring allowance much earlier than would otherwise have been the case meant that he had not suffered any loss despite the fact that the amount so received was lower in nominal years than the figure he would have received at his normal retirement date of 65 years. G had been fully compensated for his loss of earning and by virtue of the early receipt of his retiring allowance he was better off in pension terms according to the actuarial calculations accepted by the EC than he would have been if he had retired at the normal age. Therefore he had been restored in pension terms to the position he would have been absent the department's breach. If the value of his pension received prior to 65 were to be deducted as G contended, he would have received a windfall gain at the expense of the Department.

If G was to be properly compensated for his loss, he ought to receive an amount that would restore him to the position that would otherwise have applied. Here, G would be worse off if his income was taxed in the year his compensation was received, than if he had been taxed on a progressive basis over the years in which the wages would ordinarily have been received. However, the Court on appeal was reluctant to reconsider Hewin. The Court in Hewin was concerned about the possible difficulties of assessing the tax treatment that would have applied to the plaintiff in the absence of a breach and although that problem was not insurmountable here, it may give rise to considerable difficulties in other cases and there may be wider implication of a change to the longstanding approach in Hewin which were not before the Court and which were not practicable in the context of this appeal.

G had already received substantial awards of interest in relation to the loss of income. There was no fixed rule as to the commencement date of interest although justice may require that interest should run from the date the cause of action arose down to the date of judgment. Although there had been delays caused by both sides, to the extent that the Department owed further sums for loss of salary, the Crown had had the use of the money and G had not. Where a defendant had had the use of money which should have been available to the plaintiff, the plaintiff should generally be compensated accordingly. Interest should be paid on any unpaid balance of the amount determined to be due for loss of salary after the date of the second hearing in 2002 until the date of payment.

Appeal allowed in two respects. Interest reduction of 4.7% was not to be applied in calculating G's loss of salary after 2002. Interest at 5% was payable by the respondent on any unpaid balance from the period of 2002 to the end of G's working life.

JUDGMENT OF THE COURT
  • 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.

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)...

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