Tourism Holdings Ltd (Trading as Ci Munro) v Andrew Charlesworth

JurisdictionNew Zealand
CourtEmployment Court
JudgeB S Travis
Judgment Date23 February 2012
Docket NumberARC 16/11
Date23 February 2012

[2012] NZEmpC 29


ARC 16/11

In The Matter Of a Challenge to a Determination of the Employment Relations Authority

Tourism Holdings Limited (Trading as CI Munro)
Andrew Charlesworth

Challenge to determination of the Employment Relations Authority as to costs — Authority rejected claims of defendant as to unjustifiable dismissal and awarded costs of $3,000 to plaintiff — no uplift granted despite a reasonable Calderbank offer by plaintiff — Authority took into account the financial circumstances of the defendant in making the award — whether a offeror had to take into account its own future costs in determining amount of Calderbank offer — whether the defendant's financial circumstances ought to “trump” an otherwise effective Calderbank offer when determining costs award.

The issues were: whether the Calderbank offer was credible; whether the plaintiff should have taken into account its future costs while making the Calderbank offer; whether the plaintiff should be indemnified for all the costs incurred in resisting the claim where the defendant had unreasonably rejected a reasonable Calderbank offer; whether the undue hardship threshold had to be at the highest level where a settlement offer had been rejected; and, whether the defendant's financial circumstances ought to “trump” an otherwise effective Calderbank offer.

Held: It was not the task of an offeror to take into account its own future costs in determining the Calderbank amount. The task of a litigant making a Calderbank offer was to endeavour to make an accurate assessment of what the court or tribunal was likely to offer, because if the offer did not exceed the result the other side was likely to obtain at trial, it would be ineffective. The offeror's own costs were therefore not a relevant consideration in formulating the offer. The fact that THL incurred costs nearly three times the amount it was prepared to offer C was irrelevant in determining whether the Calderbank offer was proper. The offer had been credible and had to be considered.

Both the Employment Court Regulations and the High Court Rules gave the Court discretion in dealing with Calderbank offers. However the Court of Appeal in Health Waikato Ltd v Elmsly had stated that there should be a “more…steely” approach to costs where reasonable settlement proposals had been rejected. The cases dealing with the Authority's discretion as to costs did not require that the threshold for undue hardship should be especially high or that proof required to establish it be very convincing, in cases in which Calderbank offers had been declined. Where the ability to pay was in question, adequate financial information had to be placed before the Court. If the material was inadequate and a valid Calderbank offer had been made, then there was a risk to the party rejecting that offer that something in the nature of indemnity costs would be awarded.

The information placed before the Authority was barely adequate, but the material placed before the Court did establish a situation where C at that time did not have the ability to pay the amount of costs sought by THL. The costs incurred by THL subsequent to the offer were reasonable and it was not seeking full indemnity but a reasonable contribution. However the amount of the order should be commensurate with the ability to pay ( Bay Milk Distributors Ltd v Jopson).

Relevant factors included C's limited success, his financial circumstances, the fact that C's wife was also made redundant by THL after the expiry of the Calderbank offer, and an injury C had sustained. C had not been aware of these factors when rejecting the offer. In all these circumstances a reasonable contribution would be the sum of $10,000 to be paid in instalments.

Determination of Authority as to costs set aside.



The plaintiff has challenged by way of a hearing de novo, a costs determination of the Employment Relations Authority issued on 1 February 2011. 1 In that determination, the Authority ordered that the defendant pay the plaintiff $3,000 in costs, with no uplift on account of an offer made without prejudice as to costs (a Calderbank offer 2) on the basis of the defendant's impecuniosity.


In its substantive determination, 3 issued on 23 September 2010, the Authority had dismissed the defendant's claims that he had been unjustifiably disadvantaged by an unjustified final warning and had been unjustifiably constructively dismissed by the plaintiff.


The Authority found that the issuing of a final warning was an unjustified action but that the defendant's conduct would have entitled the plaintiff to issue a

written warning. The Authority went on to find that the unjustified final warning did not affect the employment of the defendant to his disadvantage because the defendant elected to terminate his employment with the plaintiff by his resignation, two days after receiving the final warning. It therefore followed that he did not have a personal grievance or remedy available.

The Authority's costs determination found that the investigation meeting had been comfortably completed within one day but there was nothing particularly exceptional about the case with both parties being well prepared and the proceedings being conducted efficiently.


The plaintiff had, by letter dated 2 June 2010, made a Calderbank offer to the defendant of $4,500, which was not accepted by the defendant.


Before the Authority, the plaintiff advised that it had incurred total costs of $31,054.54 including GST, plus disbursements of $885.25. The determination notes that the plaintiff had acknowledged the tariff based approach of the Authority towards awarding costs, but that it had sought a higher contribution because the defendant had rejected its Calderbank offer. This offer was made more than a month prior to the plaintiff having to incur costs in relation to reviewing the defendant's witness statements, preparing its own witness statements, preparing for and attending the investigation meeting and preparing its final submissions. The plaintiff therefore sought costs of $15,000 as a contribution towards its costs incurred after the Calderbank offer and $500 for preparing its costs submissions.


The Authority found that a credible Calderbank offer had been made and, had it not been for the financial circumstances of the defendant, it would have awarded costs considerably in excess of the daily tariff amount. The Authority found: 4

But I am bound to take into account the financial circumstances of Mr Charlesworth and it is not the role of the Authority to impose undue hardship upon an unsuccessful party.


The Authority's conclusion was based on the finding that the defendant had a very substantial student loan liability, incurred apparently in the course of obtaining

a helicopter pilot licence, that there was an IRD record of limited earnings for the 2009/10 tax year and that a bank record showed that, as at 20 October 2010, the defendant had a substantial overdraft liability.

The plaintiff's statement of claim seeks an order quashing the Authority's costs determination and replacing it with an order that the defendant pay the plaintiff a total of $15,500 in costs in the Authority plus the filing fee and costs in the Court.


The defendant's statement of defence asserts that his financial situation has deteriorated further and, on other grounds to which I will refer later, the defendant also seeks to have the Authority's award of $3,000 quashed and replaced with an order that costs should lie where they fall.


It was helpfully agreed by the parties that the challenge would be dealt with by way of an exchange of written submissions on an agreed timetable. Counsel for the plaintiff sought an extension of time for filing its submissions in reply because of delays in its receipt of the defendant's submissions. The defendant objected “in the strongest manner”. Because there was no prejudice to the defendant the extension was granted.

The Plaintiff's submissions

Mr Langton, counsel for the plaintiff, submitted that the central issue for the Court's consideration is whether the defendant's financial circumstances should “trump” an otherwise effective Calderbank offer, in the Authority's exercise of its discretion on costs. He submitted that only in exceptional circumstances should the effect of a Calderbank offer be extinguished by a claim of undue hardship by an unsuccessful applicant and that the proof of such hardship should be comprehensive and convincing.


The plaintiff claimed that the defendant had not established that his financial circumstances were such that he could not meet an increased award of costs without undue hardship and it should therefore be presumed that he could meet enhanced costs as a result of the Calderbank offer.


Mr Langton submitted that the Calderbank offer was, as the Authority found, valid and effective and would have resulted in an uplift of costs if the Authority had not found the defendant's financial position justified the imposition of the tariff rate. He rejected the defendant's claim that the Calderbank offer was not credible and valid because the plaintiff's actual costs incurred after the offer exceeded the amount it was offering to the defendant in settlement. Mr Langton submitted that this showed a misunderstanding of the nature of a Calderbank offer. He submitted that there is no requirement that a Calderbank offer must take into account the costs the party making the offer might subsequently incur and that the offer need only be directed to the merits of the claim and its likely outcome at the hearing, or in this case the Authority's investigation, including costs.


Mr Langton also submitted that the defendant's claims had all been dismissed by the Authority even...

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