Grace Team Accounting Ltd v Brake

• Jurisdiction: New Zealand
• Judge: O'Regan P
• Judgment Date: 11 November 2014
• Neutral Citation: [2014] NZCA 541
• Docket Number: CA368/2013
• Court: Court of Appeal
• Date: 11 November 2014

Between

Grace Team Accounting Limited

Appellant

and

Judith Brake

Respondent

[2014] NZCA 541

Court:

O'Regan P, Wildand White JJ

CA368/2013

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from an Employment Court (“EC”) decision that the respondent had been unjustifiably dismissed — appellant ordered to pay compensation of $85,000 — respondent had been made redundant due to an accounting error which had led the appellant to believe it was losing money when it was actually making a profit — EC found that the dismissal was a genuine but mistaken dismissal — pre 2010 amendment of s103A Employment Relations Act 2000 ERA (test of justification) applied (whether the employer's actions were what a fair and reasonable employer would have done) — whether in redundancy situations the reference in s103A ERA to a “fair and reasonable employer” should be as meaning “a genuine employer” — whether redundancy was a “special situation” when applying s103A ERA — whether the “managerial prerogative” applied in the context of the ERA — whether the EC applied the correct principles when exercising its discretion to award remedies to the respondent.

Counsel:

P M Muir and R M Rendle for Appellant

Respondent in person ( W Reid as McKenzie Friend)

P M Cranney, Counsel Assisting the Court

NOTE: ORDER OF EMPLOYMENT COURT PROHIBITING PUBLICATION OF MEDICAL CERTIFICATES, CONFIDENTIAL COMMUNICATIONS RELATING TO THE REPORT CARRIED OUT BY THE EXPERT ENGAGED BY THE APPELLANT AND FINANCIAL ACCOUNTS OF THE APPELLANT REMAINS IN FORCE.

• A We answer the questions on which leave was given as follows:

  • (i) Question: Did the Employment Court apply the correct test under s 103A of the Employment Relations Act 2000 for justification of dismissal on the grounds of redundancy?

  • Answer: Yes.

  • (ii) Question: Did the Employment Court apply the correct principles when exercising its discretion to award remedies to the respondent?

  • Answer: Yes.

• B The appeal is dismissed.

• C The appellant must pay the usual disbursements of the respondent and the reasonable travel and accommodation costs of the McKenzie Friend in relation to the appeal.

• D We make no award of costs in relation to the application for leave to appeal.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by O'Regan P)

Table of Contents

	Para No
Introduction	[1]
Questions of law	[2]
Counsel assisting the Court	[3]
Section 103A	[4]
Other matters raised by GTA	[5]
Facts	[12]
Employment Court decision	[30]
Did the Employment Court apply the correct test under s 103A?	[37]
Hale	[42]
Aoraki	[49]
Coutts Cars	[52]
2004 amendment	[55]
Simpsons Farms	[63]
Air New Zealand	[66]
Totara Hills Farm	[69]
Commentary	[73]
2010 amendment	[74]
Our analysis of the s 103A test	[78]
Application of the law to this case	[90]
Did the Employment Court apply the correct principles in relation to remedies?	[99]
Compensation for lost remuneration	[102]
Compensation for humiliation	[109]
Conclusion	[116]
Result	[117]
Costs	[118]

Introduction

1 This is an appeal against a decision of the Employment Court in which it found that the respondent, Ms Brake, had been unjustifiably dismissed by the appellant, Grace Team Accounting Ltd (GTA). 1 The Employment Court Judge, Judge Travis, ordered GTA to pay compensation of $85,000 to Ms Brake. 2 In a later judgment he ordered GTA to pay $16,000 to Ms Brake as a contribution towards her actual and reasonable costs. 3

Questions of law

2 Leave to appeal to this Court was granted on 4 December 2013 on the following questions of law: 4

• (a) Did the Employment Court apply the correct test under s 103A of the Employment Relations Act 2000 (the Act) for justification of dismissal on the grounds of redundancy?

• (b) Did the Employment Court apply the correct principles when exercising its discretion to award remedies to the respondent?

Counsel assisting the Court

3 In the leave judgment, this Court noted that Ms Brake was self-represented and directed the Registrar to appoint counsel to assist the Court on the questions of law for which leave was granted. Mr Cranney appeared as counsel assisting and we thank him for his thorough and thoughtful submissions.

Section 103A

4 Section 103A of the Act is the provision at the heart of the present appeal. It was inserted into the Act in 2004 (the 2004 amendment). 5 Section 103A was then

amended in 2010 (the 2010 amendment). 6 The 2010 amendment took effect on 1 April 2011, after Ms Brake was dismissed. The applicable law is therefore s 103A as it stood before the 2010 amendment. At that time, s 103A provided:

103A Test of justification

For the purposes of section 103(1)(a) and (b), the question of whether a dismissal or an action was justifiable must be determined, on an objective basis, by considering whether the employer's actions, and how the employer acted, were what a fair and reasonable employer would have done in all the circumstances at the time the dismissal or action occurred.

Other matters raised by GTA

5 In relation to the first question of law, counsel for GTA, Ms Muir, argued that s 103A of the Act as enacted in 2004 and amended in 2010 did not change the law relating to dismissal for reasons of redundancy as outlined in the decisions of this Court pre-dating the 2004 amendment. She relied on a statement of the Chief Judge of the Employment Court in Simpsons Farms Ltd v Aberhart, where the Judge stated the 2004 amendment was not intended to revisit long-standing principles about substantive justification for redundancy. 7 However, the Judge subsequently clarified his position on this in a later case, Rittson-Thomas t/a Totara Hills Farm v Davidson, where he indicated that he had not intended to say the pre-existing law should be applied. 8

6 Ms Muir said this change of approach by the Employment Court gave rise to two issues. These were:

• (a) whether the Employment Court had changed the law, and if so, whether it was entitled to do so; and

• (b) whether there was a breach of natural justice in the present case. The decision in Totara Hills Farm was delivered after the hearing in the Employment Court in the present case but before its delivery of

  judgment. Counsel were not given the opportunity to make submissions on the effect of the Totara Hills Farm decision.

7 We do not propose to engage with those issues because we see them as distracting from the essential issue, which is the question of the correct interpretation of s 103A of the Act. We are not bound by the Employment Court decisions in Simpsons Farms and Totara Hills Farm, and our task is to determine the correct interpretation of s 103A in light of the argument we have had presented to us. While we accept that it may have been advisable for the Employment Court in the present case to seek further submissions on the interpretation of s 103A after the decision in Totara Hills Farm was released, we see the very full argument on that issue presented to us as answering any concerns about natural justice. Even if we were to accept that a breach of natural justice occurred and remitted the matter to the Employment Court for reconsideration, the Employment Court would be bound to follow the interpretation of the law set out in this judgment.

8 Ms Muir raised as a separate issue what she termed the failure of the Employment Court to treat redundancy as a “special situation”. We will address that issue as part of the evaluation of the correct interpretation of s 103A of the Act.

9 In relation to the relief granted to Ms Brake, Ms Muir argued that the award of $65,000 (roughly equivalent to 12 months' salary) for lost remuneration was wrong in principle, being four times the starting point of three months' lost earnings as set out in s 128(2) of the Act. She also argued that the award of $20,000 compensation under s 123(1)(c)(i) of the Act for humiliation, loss of dignity and injury to feelings was wrong in law.

10 We add for completeness that Ms Brake sought to renew in this Court the argument she had made in the Employment Court that GTA was estopped from dismissing her. The argument was that GTA induced her to leave her secure position at KPMG, her previous employer, by promising a secure, long-term position. There was no downturn in workload after she commenced work at GTA and no hardship to GTA. Judge Travis said this claim was made out and that it supported the conclusionhe had reached under s 103A. 9 But he did not find it necessary to make a finding on whether an employer who did comply with s 103A could nevertheless be estopped from dismissing a redundant employee. 10 We do not see this issue as arising in terms of the leave given. On our approach to the present appeal, it is not necessary to engage with it. We therefore say no more about it.

11 We address the test under s 103A first, before turning to the issues relating to the remedies awarded to Ms Brake. Before we do, we set out the factual background as reflected in the factual findings of the Employment Court. As the present appeal is an appeal on points of law only, we are bound by the factual findings made by the Employment Court. 11

Facts

12 Ms Brake entered into an individual employment agreement with GTA in August 2009, and commenced work as an accountant on 5 October 2009. The agreement provided for redundancy, which it defined as “a situation where the position of employment of an employee is or will become surplus to the requirements of the Employer's business”. It provided for a process of consultation but said no redundancy compensation was payable to a redundant employee.

13 The background to Ms Brake's employment was that she had been employed by KPMG for a number of years and had approximately 24 years'...