COWAN v IDEA SERVICES LIMITED [2020] NZCA 239

COWAN v IDEA SERVICES LIMITED [2020] NZCA 239 [17 June 2020]NOTE: PERMANENT SUPPRESSION ORDER MADE BY THEEMPLOYMENT COURT PROHIBITING PUBLICATION OF THE NAMESAND IDENTIFYING DETAILS OF THE SERVICE USERS REFERRED TO INTHE PROCEEDING AS WELL AS THE LOCATION WHERE THEEMPLOYMENT RELATIONSHIP PROBLEM TOOK PLACE REMAINS INFORCE.IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA671/2019[2020] NZCA 239BETWEEN JEAN LOIS COWANApplicantAND IDEA SERVICES LIMITEDRespondentCourt: French and Clifford JJCounsel: P Cranney for ApplicantG Ballara and S Radcliffe for RespondentJudgment:(On the papers)17 June 2020 at 9 amJUDGMENT OF THE COURTA The application for leave to appeal is declined.B The applicant must pay the respondent costs for a standard application withusual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by French J)Introduction[1] Ms Cowan brought a personal grievance of unjustifiable dismissal against herformer employer IDEA Services Ltd. The claim was unsuccessful in boththe Employment Relations Authority1 and the Employment Court.2 Ms Cowan nowseeks leave under s 214(2) of the Employment Relations Act 2000 to appealthe Employment Court decision to this Court.Background[2] In order to explain the arguments advanced in support of the leave application,it is necessary to set out the background in some detail.[3] IDEA Services is the operational arm of IHC and a registered charity.It provides services for people with intellectual disabilities, known as service users.It employed Ms Cowan as a level 3 support worker. She had worked in that role forsome 17 years.[4] IDEA Services required staff to adopt a non-aversive approach to service users.Its policies included provisions that the safety and best interests of vulnerable adultswere paramount and that assaulting a person with an intellectual disability was anexample of serious misconduct.[5] Ms Cowan's dismissal arose out of an incident involving two service userswhom we shall call Mr C and Mr M. Both lived in the same residential housing andhad received support from IDEA services for many years. Mr C was in his mid-60swith relatively high needs. At the time of the events in issue, he was terminally ill.[6] On 26 March 2017, Mr M reported hearing a slapping sound duringthe morning from Mr C's room where he believed Ms Cowan was. Mr M was veryupset and kept asking if Mr C was ok. An incident report was prepared and on28 March the service manager talked to Mr C. When asked how he was, Mr C replied"Jean Cowan — bruise" and rubbed his right thigh. He was worked up and saidMs Cowan had hit him. The manager could not see any evidence of bruising.[7] Ms Cowan was notified of the allegation and attended an initial meeting withthe senior service manager. Ms Cowan confirmed she had been in Mr C's room at1 Cowan v IDEA Services Ltd [2018] NZERA Wellington 114.2 Cowan v IDEA Services Ltd [2019] NZEmpC 172 [Employment Court judgment].the relevant time but denied hitting him and had no idea why such an allegation wouldhave been made. At the end of the meeting, she was advised there would need to bean investigation and that she was suspended pending its determination.[8] The investigation was conducted by the senior service manager. She helda series of interviews with other staff who had worked with Mr M and Mr C, as wellas speaking to both men themselves. The investigator also arranged a re-enactment ofthe incident in which Mr M was asked which of three sounds was the one he heard.He correctly identified a slap noise.[9] Relevant information to emerge from the interviews included:(a) Mr C had been unusually unsettled the afternoon of 26 March(the incident occurred in the morning of 26 March). He did not wantthe support worker to leave him alone in his room. He was alsounsettled during the night.(b) On 27 March, Mr M had, unsolicited, repeated his allegation to anothersupport worker and said he had heard Ms Cowan tell Mr C to "piss off".He also stated he was surprised that Ms Cowan gave everyone a biscuitsoon after the incident including offering Mr C a second one.(c) On 29 March, Mr C had been very agitated and anxious about who wascoming, seeking reassurance it was not Ms Cowan, saying she had hurthim.(d) Mr C talked all week following the incident about his right leg beingsore and wanting to go to the doctor. He calmed down when toldthe doctor had prescribed skin moisturiser, which was applied.(e) One staff member thought she saw a bruise on his right leg a week afterthe incident, but no other staff noticed anything.(f) In the many years the staff members had known Mr C, he had neveraccused anyone of hitting him before. Staff thought it unlikely hewould make something like that up and did not regard him asimpressionable.(g) Ms Cowan was considered by one staff member to have a good rapportwith Mr C.(h) Ms Cowan had a reputation for being short tempered and impatient withthe service users. She had been heard to yell at them and get flustered.(i) Mr C could be very annoying, and easily wind up someone with a shortfuse.(j) Ms Cowan had in the past filed reports of being hit by Mr C in the vanand told other service users that if Mr C hit them they should hit himback.(k) Sometimes when Mr M wet his bed, Ms Cowan called him a baby.(l) The relationship between Mr M and Ms Cowan was not good.(m) Mr M and Mr C did not get along terribly well and sometimes Mr Mwould threaten Mr C.(n) When the investigator spoke to Mr C he repeated his allegation thatMs Cowan had hit him on the leg.(o) When the investigator spoke directly to Mr M, he repeated his earlieraccounts about the noise he heard, and the biscuits but also added thathe heard Ms Cowan say to Mr C that she "would do it again". Mr Malso stated that afterwards Mr C was upset.(p) Mr M was known to lie to get himself out of trouble.(q) None of the staff had known Mr C to lie.[10] The information obtained was forwarded to Ms Cowan and a second meetingwith her and her union representatives was held. During the course of the meeting,Ms Cowan said that, like all staff, she might raise her voice. She acknowledged shehad been spoken to in the past about being bossy and grumpy with service users butsaid she was being bullied by her supervisor. She denied ever hitting Mr C.Through her union representative, she accepted Mr C might genuinely believe she hadslapped him but suggested the belief could be the product of the medication he wastaking. She also denied ever calling Mr M a baby. Rather she had told him he was"not a baby".[11] The union representative also stated she had spoken to one of the staffinterviewed who said that Mr M would often tell staff things that may be untrue andthat Mr C was prone to parrot and repeat things. The staff member in question hadtold the investigator that she had never known Mr C to lie.[12] Following the meeting, the senior service manager spoke to an employmentcoordinator to obtain an opinion from another person who knew Mr M well.This person said she did not think Mr M would blatantly lie. She noted there wastension in the residence among staff and Mr M may overhear them talking andmisinterpret what he heard.[13] The senior service manager then concluded her investigation.After summarising the information obtained, she wrote to Ms Cowan advising that herpreliminary view was that on the balance of probabilities, Ms Cowan had hita vulnerable person with disabilities. She considered there was a pattern regardingMs Cowan's communication, behaviour and conduct towards such people.[14] The letter further advised Ms Cowan that when the various matters wereconsidered individually and cumulatively, IDEA Services had reached the tentativeconclusion that Ms Cowan had fallen well short of its expectations of a level 3 supportworker. The letter went on to say that given these findings, termination of employmentwas being considered.[15] After giving Ms Cowan a further opportunity to respond, IDEA Servicesterminated her employment with two weeks' pay in lieu of notice.[16] Ms Cowan then raised a personal grievance of unjustifiable dismissal.As mentioned, the claim did not succeed before the Employment Relations Authority.Ms Cowan then brought a de novo challenge to the Authority's determination inthe Employment Court where the case was heard by Judge Corkill.The Employment Court decision[17] Under s 103A(2) of the Employment Relations Act, the test to be applied indetermining whether a dismissal was justified is whether the employer's actions andhow the employer acted were what a fair and reasonable employer could have done inall the circumstances at the time the dismissal occurred. The section goes on toidentify four factors which the Court must consider in applying that test, and providesthat the Court may consider any other factors it thinks relevant.3[18] After referring to s 103A(2), Judge Corkill cited several decisions includingdecisions of this Court, from which he extrapolated the following principles:4(a) The task of the Court is to examine objectively the employer's decisionmaking process and determine whether what the employer did and howit was done were what a fair and reasonable employer could have done.(b) It is not for the Court to substitute its decision for what a fair andreasonable employer could have done in the circumstances.(c) There may be a range of responses open to a fair and reasonableemployer.3 Employment Relations Act 2000, s 103A(3) and (4).4 Employment Court judgment, above n 2, at [81]–[82] citing Angus v Ports of Auckland (No 2)[2011] NZEmpC 160, [2011] ERNZ 466 at [36]–[44]; A Ltd v H [2016] NZCA 419, [2017] 2NZLR 295 at [45]; and Whanganui College Board of Trustees v Lewis [2000] 1 ERNZ 397 (CA)at [19]–[20].(d) The requirement is for an assessment of substantive fairness andreasonableness not a minute and pedantic scrutiny to identify failings.(e) Regarding the standard of proof, a distinction must be drawn betweenthe inquiry the Court makes and the inquiry of the employer.The ascertainment of facts on which an employer forms a belief thatan employee has engaged in serious misconduct is not the same asproving to a court that the dismissal was justified. The first does notinvolve a standard of proof. The second does.(f) In ascertaining the facts, the employer may be presented withconflicting accounts. He or she, acting reasonably, will be entitled toaccept some in preference to others. That does not call forthe application of any standard of proof.(g) But when required to prove that dismissal was justified the employerwill need to show that both the course taken to ascertain the facts andthe determination that those facts warranted dismissal were reasonable.That must be shown on the balance of probabilities flexibly appliedaccording to the gravity of the matter (the dismissal) inthe circumstances.[19] After identifying what he considered the relevant legal principles, the Judgethen summarised the employer's reasoning process leading to its conclusions thatthe totality of the information established the slapping allegation, and thatthe information regarding Ms Cowan's general temperament and her calling Mr Ma baby was reliable. The Judge traversed the employer's evaluation ofthe information, and in particular the basis on which it had made key findings aboutthe truth and reliability of Mr C and Mr M.[20] The Judge then turned to address Ms Cowan's submission that thoseconclusions could not have been reached by a fair and reasonable employer in allthe circumstances because of the following: the absence of physical injury,the possible effect of medication, inconsistencies in Mr M's account, his propensityfor lying, reliance on hearsay and conjecture, alleged flaws in the re-enactment, andwhether those interviewed were in a position to provide reliable information aboutMs Cowan's general temperament.[21] The Judge considered each of these factors. He was satisfied on the evidencethat issues regarding lack of bruising, the possible effects of medication, anddifferences in the accounts given by M had been taken into account by IDEA Servicesand that the approach it had taken regarding those issues was an approach open toa reasonable and fair employer. He was further satisfied on the evidence thatthe re-enactment process could reasonably be regarded as a fair process and thatthe observations of Ms Cowan made by staff were not hearsay.[22] The Judge also rejected an argument that IDEA Services should have putthe information obtained from staff and Ms Cowan to Mr C and Mr M. He acceptedIDEA Services' explanation that such questioning of vulnerable people sufferingintellectual disabilities would have been wholly inappropriate and emphasised thatthe test of what is fair and reasonable has to be assessed in all the circumstances whichmust include the nature of the employer's enterprise.[23] Finally, the Judge held that in light of Ms Cowan's admission that she had toldMr M he was not a baby, the allegation that she called him a baby was made out.The application for leave[24] The formal application sets out what purport to be nine legal errors or questionsof law on which leave is sought.[25] However, in written submissions filed on Ms Cowan's behalf, these weredistilled by counsel Mr Cranney to one question formulated in the following terms:5Was the approach of the Employment Court in determining whether IDEAServices Limited had sufficiently investigated the allegations againstMs Cowan for the purposes of s 103A of the Employment Relations Act 2000correct in law?5 The question as formulated in the applicant's submissions referred to s 103 but that is clearlyan error and was intended to be s 103A.[26] Mr Cranney argued this was the same question in respect of which leave wasgranted in A Ltd v H in the very different context of the Employment Court imposinga standard of inquiry on an employer that was too stringent.6 The present case wasthe flip side of A Ltd v H because it involved the Employment Court tolerating andendorsing a standard of inquiry and decision making that was insufficient.[27] Developing that central submission, Mr Cranney argued that the Judge'sstatement of the relevant legal principles guiding the Employment Court's s 103Ainquiry was incomplete and inaccurate.[28] First the Judge had overlooked the statement of this Court in Air Nelson Ltdv C that within the inquiry into fairness and reasonableness, the Court is "empoweredto determine whether [the employer] had a sufficient and reliable evidential basis forconcluding that [the employee] had been guilty of misconduct".7[29] Secondly, according to Mr Cranney the Judge had misdirected himself onthe standard of proof. The Judge had relied on the decision of this court WhanganuiCollege Board of Trustees v Lewis as authority for the proposition thatthe ascertainment of facts on which an employer forms a belief that an employee hasengaged in serious misconduct does not involve any standard of proof.8 However,according to Mr Cranney, the Judge failed to appreciate or acknowledge that thestatement to this effect in Whanganui College Board of Trustees was obiter.Moreover, it was contrary to other decisions of this Court, most notably HondaNew Zealand Ltd v NZ Boilermakers etc Union9 and Airline Stewards and Hostessesof New Zealand Industrial Union of Workers v Air New Zealand Ltd.10 And furtherthat the Court in Whanganui College Board of Trustees had itself stated that in lightof its comments on the standard of proof it might be necessary to revisit some of theremarks in previous judgments including Airline Stewards.116 A Ltd v H [2015] NZCA 99 at [2]–[3].7 Air Nelson Ltd v C [2011] NZCA 488, (2011) 8 NZELR 453 at [19].8 Whanganui College Board of Trustees v Lewis, above n 4, at [19]–[20].9 Honda New Zealand Ltd v New Zealand Boilermakers etc Union [1991] 1 NZLR 392 (CA) at 394,citing New Zealand (with exceptions) Shipwrights etc Union v Honda New Zealand Ltd [1989] 3NZILR 82 (LC) at 4.10 Airline Stewards and Hostesses of New Zealand Industrial Union of Workers v Air New ZealandLtd [1990] 3 NZLR 549 (CA).11 Whanganui College Board of Trustees v Lewis, above n 4, at [21].[30] As we understand the argument, Mr Cranney contends that Honda and AirlineStewards are authority for the propositions that (a) an employer is required to applythe civil standard of proof to its consideration of whether serious misconduct hasoccurred and (b) that the employer must apply the standard of proof flexibly, so thatthe more serious the allegation, the more compelling the evidence required.[31] In Mr Cranney's submission, the errors of legal principle in this case ledthe Judge to endorse an approach that was precluded by Honda. The assault allegationagainst Ms Cowan was "profoundly serious" and instead of requiring evidencecommensurate with the gravity of that allegation, the Judge endorsed an approach thatrelied on vague gossip and innuendo, inadequate questioning of Mr C and Mr M,a peculiar and illogical slapping re-enactment and the use of "uninvestigated" yellingallegations to bolster the assault conclusion.[32] Further, the Judge's conclusion that reprimanding Mr M for wetting his bed bysaying "you're not a baby" was capable of amounting to serious misconductwarranting dismissal was wrong on any test.[33] In Mr Cranney's submission, the proposed appeal raised issues of job securityand human rights that were of importance to all employees and employers especiallythose in the residential care sector.Analysis[34] Under s 214(3) of the Employment Relations Act, this Court may only grantleave to appeal if the question of law raised by the proposed appeal is one that byreason of its general or public importance or for any other reason ought to be submittedto this Court for decision.[35] In our view, the proposed appeal does not satisfy those criteria.[36] Mr Cranney's argument hinges on the Honda and Airline Stewards decisionsbeing relevant to the application of s 103A and capable of affecting the outcome inthis case. In our assessment, they plainly are not.[37] The first point is that the comments in Honda on which Mr Cranney reliesrelated to the way in which a grievance committee (not the employer) should approachits decision making. We note too that since Honda was decided, the Supreme Courthas clarified the concept of a flexible standard of proof. In Z v Dental ComplaintsAssessment Committee, the Supreme Court rejected the suggestion — which is implicitin some of Mr Cranney's submissions — that the degree of probability to meetthe standard increases with the gravity of the misconduct.12 The Court also held thatflexibility in terms of the notion of requiring stronger evidence in relation to seriousallegations should not be regarded as a legal proposition.13 Rather it simply reflectedthe reality of what judges do.[38] We accept that the dicta in Airline Stewards regarding the burden of proof areexpressed to relate to the employer's decision making. However, like Honda, AirlineStewards was decided under differently worded provisions in a different statute,namely the Labour Relations Act 1987. The Labour Relations Act did not provide anydefinition of a justifiable dismissal or a statutory test for justification. The statutorytest under the section at issue in this case was only enacted in 2011.14[39] It is not, as this Court noted in Whanganui College Board of Trustees, usual toimpose the application of a legal standard of proof on the decisions of a litigant. It isnot needed. There is already the standard of reasonableness. Further, to fail to drawthe distinction between the employer's inquiry and the Court's inquiry may result inthe view of the employer reasonably formed being over-ridden by the views ofthe Court. And that is something that s 103A makes very clear is not to happen. Itclearly contemplates that a range of responses is available to a fair and reasonableemployer.[40] Our assessment of recent case law is that the legal principles articulated byJudge Corkill appear to be regarded as well established in the Employment Court and12 Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [28] perElias CJ dissenting and [102] per Blanchard, Tipping and McGrath JJ.13 At [105].14 The first formulation of a statutory test of justification was enacted in 2004. In 2011 the test ofjustification was amended from what a fair and reasonable employer 'would' have done to whata fair and reasonable employer 'could' have done in all the circumstances.have not occasioned any controversy.15 They accord with the statutory provision anddo not require further guidance from this Court.[41] Finally, for completeness we record two further points. First, althoughthe Judge may not have cited Air Nelson he did in effect examine the existence andsufficiency of the evidential basis for IDEA Services' decision. That examination wasan intensely factual inquiry and outside this Court's jurisdiction. In fairness tothe Judge, we would add the criticism that he adopted an approach that relied on vaguegossip and innuendo etc is unfounded. It is not an accurate reflection of the evidenceand IDEA Services' evaluation of it.[42] Secondly, according to the decision, the reason given by IDEA Services at thetime of dismissal was based on the three allegations (the assault, the bad-temperedinteractions and calling Mr M a baby) being considered individually and cumulatively.Although the Judge discusses the three allegations separately, he does not — contraryto Mr Cranney's submission — make any finding that calling Mr M a baby on its ownconstituted serious misconduct warranting dismissal.Outcome[43] The application for leave to appeal is declined.[44] The applicant must pay the respondent costs for a standard application withusual disbursements.Solicitors:Oakley Moran, Wellington for ApplicantMcBride Davenport James, Wellington for Respondent15 See for example the very clear analysis of Chief Judge Inglis in Ritchies Transport Holdings Ltdv Merennage [2015] NZEmpC 198 at [98]–[109].