JurisdictionNew Zealand
CourtEmployment Court
JudgeChristina Inglis
Judgment Date29 February 2012
Docket NumberARC 86/11
Date29 February 2012

[2012] NZEmpC 35


ARC 86/11

In the Matter of challenge to a determination of the Employment Relations Authority

New Zealand School of Education Limited
Bahram Nafissi

Marie Wisker, counsel for plaintiff

Diana Christensen, counsel for defendant

Challenge to determination of the Employment Relations Authority awarding costs of $3000 to defendant — defendant pursued various grievances before the Authority against dismissal by plaintiff — defendant rejected Calderbank offer of $12,000 — successful in unjustified dismissal claim but other matters raised were dismissed — Authority awarded costs of $3,000, noting defendant had contributed to increased costs and Calderbank offer should be given full weight — applied daily tariff in determining amount — whether the Authority had properly taken into account Calderbank offer — whether defendant was entitled to reject offer as it did not address reinstatement or offer an apology.

Held: The Authority's discretion to award costs by was to be exercised in accordance with principle and not arbitrarily. The Authority purported to give full weight to the Calderbank offer but did not do so. Instead the usual approach to costs was adopted, applying the daily tariff rate. The award did not reflect any element of uplift in relation to N's conduct (including refusal of the Calderbank offer) and accepted by the Authority as a relevant and aggravating feature of the proceedings.

NZSE's proposal to settle was reasonable and significant. No countervailing factors (other than N's partial success) were identified. There was no evidence that N's main concern was reinstatement and therefore it was not relevant that the Calderbank offer did not address this. Cases dealing with rejection of offers where reinstatement was not addressed were decided before the Employment Relations Act was amended, and were on the basis that reinstatement was the primary remedy. The Authority had held that N had not acted in good faith following his dismissal and that reinstatement was not practicable. The omission of an apology in the Calderbank offer did not lead to the conclusion that it ought not to have been taken into account in assessing costs ( Bluestar Print Group Ltd v Mitchell).

The Authority's determination indicated that the Calderbank offer was given no weight despite the Authority's well founded conclusion that it ought to be have given full weight. The award could hardly be regarded as steely. The fair and expeditious resolution of disputes would be undermined if a party was able to ignore the Calderbank offer without any consequences as to costs ( Bluestar).

The order of the Authority awarding costs of $3,000 to the defendant was quashed. Costs to lie where they fell.

JUDGMENT OF JUDGE Christina Inglis


The plaintiff has brought a challenge against a determination 1 of the Employment Relations Authority (the Authority) awarding the defendant $3,000 by way of costs. The defendant has filed a cross-challenge. Both challenges are pursued on a non-de novo basis. The parties agreed that the matter could be determined by the Court on an exchange of submissions, without the need for a hearing.


Mr Nafissi had been employed as a tutor by New Zealand School of Education (NZSE). A restructuring exercise was undertaken and Mr Nafissi was dismissed. He lodged a grievance with the Authority, seeking a range of remedies –

reinstatement, lost wages, bonus payments, overtime, $75,000 by way of compensation for hurt and humiliation, and contribution towards legal costs of $5,000. His claim included serious allegations against NZSE.

A Calderbank offer was made by NZSE on 23 June 2008, six weeks before the investigation meeting was due to take place. The offer was a detailed one and pointed out a number of perceived deficiencies in the grievance being advanced on Mr Nafissi's behalf. The offer was for $12,000 (inclusive of costs and GST, if any) and was expressed to be open for acceptance for a period of seven days. Mr Nafissi rejected the offer on 28 June 2011 and counter-offered in a sum in excess of $30,000. The grievance proceeded to an investigation meeting.


In the event, the Authority found that Mr Nafissi's dismissal was unjustified, as an aspect of the process that had been followed was not fair and proper. However, the Authority dismissed each of the other claims advanced on his behalf, finding that the selection process had been fair and reasonable and that NZSE had acted in good faith. The Authority also rejected the allegation that NZSE had predetermined the outcome of the restructuring exercise.


In relation to remedies, the Authority declined to order reinstatement, holding that it was not practicable. Three months' lost wages were awarded pursuant to s 128(2) of the Employment Relations Act 2000 (the Act), less the amount paid by way of salary in lieu of notice, together with $4,000 pursuant to s 123(1)(c)(i). The total award was $11,607.81. The Authority declined to award Mr Nafissi any additional relief, finding that the claim for certification training was ill-founded; that he had failed to meet the conditions for the payment of a bonus payment; and that no evidence had been produced to support a claim for overtime payments.


An application for costs was pursued by both parties — the defendant cited actual costs of $22,624.25 plus disbursements of $565.61 (plus GST). NZSE sought costs in the sum of $2,500 (plus GST), having particular regard to the Calderbank offer that had been made.

The Authority's costs determination

In its subsequent costs determination, the Authority took into account the fact that the matter had involved one day of meeting time and that Mr Nafissi had been partially successful in his grievance. The Authority Member referred to the full Court's judgment in PBO Ltd (formerly Rush Security Ltd) v Da Cruz2 as setting out the principles applying to an order of costs, namely that costs generally follow the event, without prejudice offers can be taken into account, and that costs are modest. The Member said that she had “relied upon the principles as set out in Da Cruz in determining this matter”. 3


In dealing with the Calderbank offer, the Authority referred to the Court of Appeal's judgment in Health Waikato Ltd v Van der Sluis4 and made the point that there is a wide discretion in terms of considering the impact of Calderbank offers. Reference was also made to Aoraki Corporation Ltd v McGavin5, where the Court of Appeal noted the public interest in the fair and expeditious resolution of disputes. Finally, the Authority Member recorded the observation made by the Court of Appeal in Health Waikato Ltd v Elmsly6 that there was a need for a “more … steely” 7 approach to costs where reasonable settlement proposals have been rejected.


The Authority found that:

  • • the Calderbank offer had been made in a genuine attempt to resolve the matter without further expenditure on litigation, and had been made at a relatively early stage (although after Mr Nafissi's brief of evidence had been filed);

  • • Mr Nafissi's conduct throughout the course of the proceedings had had the effect of unnecessarily increasing costs;

  • • Mr Nafissi had unrealistic expectations of recovery, and this had been raised with Mr Nafissi at an early stage by the Authority Member first assigned to the case. He had been advised to revisit the amount being sought, which had presented a barrier to settlement, but despite this advice proceeded to file an amended statement of problem containing similarly unrealistic levels of claims, “including a claim for compensation alone of $75,000, a matter which was addressed at the outset of the Investigation Meeting.” 8


While these factors led the Authority to conclude that this was a case where a more steely approach to costs was appropriate, the Authority Member proceeded to hold that there was “no justification for not making the costs award to Mr Nafissi as the successful party in the proceedings, however I also see no justification for increasing the notional daily rate of $3,000.00.” 9

The parties' submissions

The plaintiff's primary submission is that the Authority erred in failing to give any, or proper weight, to the Calderbank offer that had been made. Counsel submitted that had Mr Nafissi accepted the offer, he would have been in a better position than he achieved from the Authority's determination and that this would have saved the time and expense associated with the investigation meeting.


It was submitted that the Authority's approach to the issue of costs was not consistent with the principles expressed in the Court of Appeal judgments referred to in the costs determination, having particular regard to the fact that Mr Nafissi had failed in respect of the majority of the complaints he had made, had conducted himself in an unreasonable manner, and had acted in a way that had increased the level of costs incurred in the proceedings.


On behalf of the defendant, it is submitted that the award of costs ought to be increased. It is submitted that the Calderbank offer lacked specificity, failed to

address the issue of reinstatement, did not meet Mr Nafissi's core needs (by incorporating an apology or acknowledgment of wrongdoing), and had not been made at a reasonable time before the hearing. While it was accepted that the amount recovered by the defendant was less than the offer made by the plaintiff and that he was “vulnerable” to an award of costs, it is submitted that the pre-offer costs and timing of the offer, together with other factors, means that it would be unjust for the defendant to have costs awarded against him. The contention that Mr Nafissi acted...

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