WAITAKERE CITY COUNCIL V IOANE CA CA21/03

WAITAKERE CITY COUNCIL V IOANE CA CA21/03 27 September 2005IN THE COURT OF APPEAL OF NEW ZEALAND CA21/03BETWEEN WAITAKERE CITY COUNCIL Appellant AND PONIFASIO IOANE RespondentCA113/03AND BETWEEN PONIFASIO IOANE Appellant AND WAITAKERE CITY COUNCIL Respondent Hearing: 6 September 2005 Court: Anderson P, Hammond and William Young JJ Counsel: J E Latimer and M G Berryman for Waitakere City Council P J Pa'u for Ioane Judgment: 27 September 2005JUDGMENT OF THE COURT (No 2) A Compensation for Mr Ioane is fixed in the sum of $17,000. B There is no order for costs in relation to the appeals to this Court but costs in the proceedings before the Chief Judge are to be fixed in the Employment Court. REASONS(Given by William Young J)Introduction[1] In a judgment delivered on 18 January 2003, Chief Judge Goddard (sitting on appeal from the Employment Tribunal) held that Mr Ponifasio Ioane had been unjustifiably dismissed by the Waitakere City Council ("the Council"). After a further hearing at which evidence was called, the Chief Judge issued a second judgment (on 2 April 2003) in which he awarded Mr Ioane compensation of $67,666 (of which $60,166 was for financial loss) but declined to order his reinstatement. [2] Mr Ioane appealed to this Court against the decision by the Chief Judge not to order reinstatement. The Council appealed against the damages which were awarded. The primary issue on the Council's appeal was the extent to which the award should reflect Mr Ioane's own misconduct in bringing about the impugned dismissal. These appeals were heard before the Court as presently constituted. We dismissed Mr Ioane's appeal but allowed the appeal by the Council. [3] In allowing the Council's appeal we indicated that, in the interests of finality, we would resort to our powers under s 135(3) of the Employment Contracts Act 1991 ("the Act") to fix compensation if the parties could not agree. The parties have not reached an agreement and therefore the extent of the reduction now falls to be decided by this Court. [4] For the sake of completeness we record that Mr Ioane applied unsuccessfully for leave to appeal to the Supreme Court; see Ioane v Waitakere City CouncilSC CIV 17/2004 3 December 2004.The relevant legislative provisions[5] The case primarily concerns ss 40(2) and 41(3) of the Employment Contracts Act 1991. Relevantly, those sections provided:40 Remedies(2) Where the Tribunal or the Court determines that an employee has a personal grievance by reason of being unjustifiably dismissed, the Tribunal or Court shall, in deciding both the nature and the extent of the remedies to be provided in respect of that personal grievance, consider the extent to which the actions of the employee contributed towards the situation that gave rise to the personal grievance, and shall, if those actions so require, reduce the remedies that would otherwise have been awarded accordingly.41 Reimbursement (3) Where— (a) The Tribunal or the Court is obliged to make an order under subsection (1) of this section; and (b) The Tribunal or the Court is satisfied that the situation that gave rise to the personal grievance resulted in part from fault on the part of the employee in whose favour the order is to be made,— the Tribunal or the Court shall reduce, to such extent as it thinks just and equitable, the sum that would otherwise be ordered to be paid to the employee by way of reimbursement.The factual background[6] Mr Ioane was employed by the Council as a parking warden between September 1995 (when he started work) and 30 July 1999 (the date of his dismissal). [7] The events which led to Mr Ioane's dismissal started with the appointment by the Council of Mr Colin Waite as team manager, parking services division. Mr Waite started work in this position in March 1998 and he was Mr Ioane's direct supervisor. [8] Mr Waite quickly formed the view that the parking wardens, including Mr Ioane, were not issuing enough tickets. He conveyed this view to the parking wardens. Mr Ioane and one other warden were initially reluctant to comply with Mr Waite's directions but eventually agreed to do so. This led, during the latter part of 1998, to an increase in the number of tickets being issued. [9] More acute difficulties arose at the end of 1998 or the beginning of 1999. Given the findings of fact made in the Employment Tribunal to which we will be referring, we see no need to discuss the facts in great detail. It is sufficient to saythat the difficulties between Mr Waite and Mr Ioane involved a number of issues: whether Mr Ioane should be issued with a court jacket, his hours of work and the suggestion that he may have falsified a time sheet, the limited number of parking infringement notices issued by Mr Ioane, the time gaps between notices, Mr Ioane's refusal to show Mr Waite his work diary and his refusal to allow Mr Waite to accompany him while he was patrol. [10] By March 1999 Mr Waite's immediate superior, Mr Max Wilde had become involved in dealing with Mr Ioane. [11] Most unfortunately (not least from his own point of view) Mr Ioane did not make serious efforts to address the understandable reasons why Mr Waite was dissatisfied with his performance. Rather his response was to allege harassment. [12] The situation did not improve and interactions between Messrs Wilde and Waite on the one hand and Mr Ioane became increasingly formal. [13] Events came to a head at a work meeting on 24 May 1999 at which Mr Ioane made it clear that he would not take any further instructions from Mr Waite and became agitated and aggressive. Later he told Mr Waite that he would have him and Mr Wilde sacked. Mr Ioane left work that day and, as it turned out, was never to return. [14] The resulting formal disciplinary process led to Mr Ioane's solicitors writing a letter of 23 June 1999 to the Council's solicitors. Parts of this letter can be seen as constructive but its general tone cannot be so regarded. Mr Ioane's solicitors largely sought to justify his conduct. In particular, they denied that Mr Ioane had ever refused a request by Mr Waite to accompany him. The letter did not squarely address the complaint that Mr Ioane would not show Mr Waite his diary and likewise did not answer the legitimate concerns of the Council about Mr Ioane's ticket issuing practices. Further, the letter reiterated complaints of harassment against Messrs Wilde and Waite.[15] On 30 July 1999 the Council's solicitors wrote to Mr Ioane's solicitors stating that the Council had decided to dismiss Mr Ioane. [16] Mr Ioane was very distressed by his employment difficulties and, on the evidence, became clinically depressed. What is not clear is whether and, if so, the extent to which, his depression was causative of his behaviour. In his dealings with the Council Mr Ioane largely held to the position that his conduct was justified and did not seek to explain it by reference to his medical condition. [17] Mr Ioane's claim for unjustified dismissal failed in the Employment Tribunal which ruled that he had not complied with his employer's reasonable and lawful instructions. [18] The decision of the Tribunal is notable for its devastating assessment of Mr Ioane's credibility as a witness and his conduct at work. The Tribunal stated:After nearly 9 years of sitting on this Tribunal I have to rank Mr Ioane as one of the most evasive witnesses ever to appear before me. In cross-examination he showed himself a master of the stonewall, the smokescreen and the red herring. His answers and his demeanour corroborated much of what Mr Waite and Mr Wilde said about him. He gave repetitive, off-the-point answers to some of the most straightforward questions. He showed an adeptness at rearranging the facts, so as to portray himself as a victim and to put Mr Waite in a bad light. Mr Ioane seemed to see himself as some sort of shadow leader of the section, taking to himself the right to intervene in any situation and to refuse any instruction that did not please him. I find that Mr Ioane refused to allow Mr Waite to accompany him on patrol, refused to show Mr Waite his work diary, refused to account in any reasonable way for the long gaps between his issuance of tickets. I find that at the team meeting on 24 May 1999 Mr Ioane forcefully announced his intention to defy any instructions from Mr Waite from that time on and that he sought unsuccessfully to obtain the support of his fellow employees in this defiance. Mr Ioane used the word "harassment" with an infinitely elastic meaning. If he did not want to obey a lawful and reasonable instruction, he labelled it as "harassment." The reality was that Mr Ioane had decided that he would not comply with even the simplest, clearest, most direct, lawful and reasonable instruction of any kind, if that instruction came from Mr Waite. He had also decided that he would not answer any questions from Mr Waite about howhe was spending his working hours. In short, he consistently breached one of the fundamental terms of an employment contract – the employee's duty to carry out the employer's lawful and reasonable instructions. Mr Ioane's calculated misconduct provided a clear and complete substantive justification for his dismissal and he maintained his misconduct right to the end.The Tribunal found that the decision to dismiss Mr Ioane was justified. For the sake of completeness, however, the Tribunal went on to address whether, if the dismissal had been procedurally unjustified, compensation was warranted: Mr Ioane's misconduct was of such a nature and degree that it made the employment relationship unworkable. That was Mr Ioane's clear and deliberate choice. For him to be enriched by as much as one cent by the outcome of the case would be an affront to justice. Mr Ioane's conduct disentitled him from any remedies. Had I held that the dismissal was unjustified, I would have found his contribution to the situation to be 100 percent and would have declined to award any reimbursement of lost remuneration or compensation under section 40(1)(c)(i) of the Act.[19] On appeal, Chief Judge Goddard accepted the findings of fact made by the Employment Tribunal and thus that the Council had grounds for complaint about Mr Ioane which, substantively, were sufficient to justify the dismissal. However, the Chief Judge held that the dismissal was procedurally unfair. [20] As we have noted, Mr Ioane reported to his team manager, Mr Waite and Mr Waite reported to Mr Wilde. Neither of them had the power to dismiss, a power which was relevantly vested in Mr John Woodward who was Mr Wilde's immediate superior. The decision to dismiss Mr Ioane was made by Mr Woodward who had not had direct personal contact with Mr Ioane. It was this feature of the process that the Chief Judge saw as rendering the dismissal unjustified.The Chief Judge's approach to compensation[21] In his first judgment (of 18 January 2003) the Chief Judge said:[39] Now I come to contribution. The statutory test is twofold: i. Did the employee's actions contribute to the situation that gave rise to the personal grievance?ii. Do those actions require that the remedies otherwise available should be reduced and, if so, to what extent? [40] It is made clear by s41(3) of the Employment Contracts Act 1991 that, for any contributory actions to be taken into account in reduction of remedies, the Tribunal or the Court must be satisfied that the situation that gave rise to the personal grievance resulted in part from fault on the part of the employee. [41] The Tribunal was obviously so satisfied. The Court sees the matter in a different light. The situation in question embraces the whole transaction. All relevant facts can be taken into account. In this case, however, the appellant had done nothing wrong since the end of May 1999. A process was being followed. The appellant submitted some responses on 23 June 1999. Then on 30 July, out of the blue and without prior warning or discussion, he was summarily dismissed. As Mr Mitchell colourfully put it, the rubber was not allowed to hit the road. His earlier behaviours could not have influenced the decision to treat him in this way. They merely explain why he was being spoken to. [42] The quality of his conduct is in dispute. I cannot assess it. The Tribunal should not have when Mr Woodward did not. Plainly the Tribunal thought that the appellant deserved to be dismissed but it was not for the Tribunal to say so when the proper officer of the respondent had not turned his mind to the matter and any possible explanation or excuse that the appellant may have offered, given the chance. [43] The appellant may have been tenacious of his views and perhaps he went too far. On the other hand, changes of work practices were being made that needed to be patiently explained if staff were not to be confused. At least two were. The outburst of 24 May was unfortunate but the appellant was clearly unwell at the time. I do not consider any reduction of remedies to be warranted.[22] In his second judgment (of 2 April 2003) the Chief Judge concluded that Mr Ioane had lost remuneration totalling $60,166. The Chief Judge then went on to discuss compensation for non-economic loss:[5] I found in my earlier judgment that the appellant had been severely affected by his dismissal and held that the consequences I described in my judgment called for a substantial award. I also found that he had not contributed to the unfeeling manner of his dismissal. However, his conduct is still relevant. I accept the respondent's contention that dealing with the appellant and his difficulties had been a most time consuming exercise and had caused his immediate supervisors considerable difficulty. He is, however, an extremely sensitive person and the respondent has to take the consequences of that. It must take its employees as it finds them. It may be that if it had been realised earlier just how ill the appellant had become in the months preceding the dismissal, the matter may have been handled differently. [6] In all these circumstances moderation must prevail and particularly in view of the substantial award of remuneration that has been made.Therefore, balancing the effects of the dismissal against the fact that the appellant did not succeed in disturbing the adverse conclusions about his conduct of a more or less historical nature preceding his dismissal, though not causing it to be carried out in the way it was, I must do my best to make an assessment that is fair to both parties. There will be an award of $7,500 under this head.Where we differed from the Chief Judge[23] When we allowed the Council's appeal, it was primarily for the following reasons (given by Anderson P, for himself and Hammond J):[18] With respect to the Chief Judge, we have difficulty with the logic of those reasons [being those set out in [21] above]. For him to have said that Mr Ioane had done nothing wrong since the end of May 1999, a date when he stormed irrationally from a meeting and failed thereafter to return to work, suggests that the situation that gave rise to his dismissal is confined to the period of his absence from work and that all of the serious misconduct, as found by the Tribunal is to be ignored. That cannot be so. In any event, there was no opportunity for Mr Ioane to have done anything wrong since the end of May because he had not been carrying out any work. [19] We also have difficulty with the Chief Judge's holding that the quality of Mr Ioane's conduct was in dispute and he could not assess it. Its quality was clearly articulated by the Tribunal whose findings of credibility and fact were accepted by the Chief Judge. By any objective standard it was, qualitatively, a significant and substantial cause of Mr Ioane's dismissal. The objectively assessable facts were clearly such as to require the Chief Judge to reduce, to such extent as he thought just and equitable the damages to be awarded to Mr Ioane.[24] In separate reasons, William Young J said:[23] It is likely, to say the least, that a fair process would have resulted in Mr Ioane's justifiable dismissal. The approach adopted by the Chief Judge made no allowance for this possibility and this seems to me to be contrary to the principles which underlie the fixing of compensation. [24] If a fair process would unquestionably have resulted in Mr Ioane's justifiable dismissal, the Council's "unfair" process was not causative of any significant loss of remuneration. [25] If such an outcome (ie justifiable dismissal) was likely but not inevitable, some conceptual difficulty arises, see for instance Benton v Miller and Poulgrain Ltd CA118/03 15 June 2004 at paras [43] – [52] and [103]. [26] I favour a loss of chance approach in this situation. This would recognise the possibility or probability of justifiable dismissal amongst the contingencies which would have affected Mr Ioane's likely future employment had he not been unjustifiably dismissed. In this regard I referto Telecom New Zealand Ltd v Nutter CA 127/03, 21 July 2004 at para [81] where we observed: Those fixing compensation in this area must have regard to the actual loss suffered by the employee. We also emphasise that in no circumstances should an award be made which exceeds the properly assessed loss of the employee. The assessment must allow for all contingencies which might, but for the unjustifiable dismissal, have resulted in termination of the employee's employment. For instance, where a dismissal is regarded as unjustifiable on purely procedural grounds, allowance must be made for the likelihood that had a proper procedure been followed the employee would have been dismissed. In this regard we draw attention to the English jurisprudence reviewed in 16 Halsbury's Laws of England (4th ed, reissue) at para [529].The competing positions of the parties[25] There is a stark contrast between the positions adopted by the parties. [26] The Council maintains that Mr Ioane's conduct was so bad and the likelihood of a dismissal if a justified process had been followed so great that he should not be awarded any compensation at all. [27] Mr Ioane's contention, on the other hand, is that his level of contribution to his dismissal was "minimal" and that the reduction should be "no more than 10% - 15%".Evaluation[28] We reiterate the point made in Telecom New Zealand Limited v NutterCA127/03 21 July 2004 at [81] that the actual loss suffered by an employee sets the upper ceiling on an award which can be made. If the employee has suffered no loss, no award of compensation is appropriate. It follows, therefore, that if a fair procedure would inevitably have resulted in a justified dismissal, procedural infelicities associated with the dismissal do not warrant an award of compensation. So the fixing of a maximum sum for compensation must reflect the likelihood, where it is relevant, that had a proper procedure been followed, the employee would havebeen dismissed. It follows that we entirely disagree with the comment made by the Chief Judge in [42] of his judgment (set out above at [21] of this judgment). [29] The case for the Council was not run on a loss of a chance basis either in the Employment Tribunal or the Employment Court. Had it been run on that basis, we would have expected Mr Woodward to give evidence and a notable feature of the case is that he did not do so. In those circumstances we propose to determine the case by reference to ss 40 and 41 of the Employment Contracts Act, albeit that the quality and significance of an employee's misconduct cannot be assessed without considering whether it would have warranted dismissal had a fair process been followed. Given this, the likelihood of dismissal if a fair process had been followed is necessarily part of the exercise required by ss 40 and 41. [30] These sections refer to "the situation that gave rise to the personal grievance". This language must be considered broadly and, in the present context, extend to the entire history of the dispute between Mr Ioane and his superiors. In other words, the assessment required by ss 40(2) and 41(3) is not confined to considering whether the actions of Mr Ioane were causally linked to the procedural infelicities that resulted in the decision that his dismissal was procedurally unjustified, see Ark Aviation Ltd v Newton [2001] 1 ERNZ 133 at [42]. [31] Mr Ioane was very much the author of his own misfortune. Any award of compensation would be entirely unjust if it did not reflect that reality. Further, it is important to recognise, as Ms Latimer stressed, that even at the hearing before the Employment Tribunal (some 12 months after the dismissal) Mr Ioane was still displaying the same sort of attitude which was at the heart of the breakdown of the relationship between him and Mr Waite. [32] On the other hand, it was unfortunate that the decision to dismiss was so heavily influenced by Messrs Waite and Wilde (and very much made by the latter man) given that they were the managers who were primarily in the firing line in the Council's interactions with Mr Ioane. This supports Mr Ioane's claim. How Mr Woodward would have addressed the issue had he been fully engaged in the process to dismiss Mr Ioane is necessarily a matter of speculation.[33] Mr Pa'u tried to persuade us that the letter of 23 June 1999 written on behalf of Mr Ioane to the Council was conciliatory and indicated an intention on the part of Mr Ioane to mend his ways. As is apparent, that is not the way we read the letter. While we accept that some reasonable propositions emerge from the letter, Mr Ioane's overall position, as conveyed by the letter, would be viewed as unacceptable by any reasonable employer. [34] On the other hand, there is some substance in Mr Pa'u's argument that if Mr Woodward (who had not previously been directly involved in the dispute) had dealt directly with Mr Ioane, this may have resolved the impasse which had developed. Of relevance is Mr Ioane's depression. If this had been recognised by the Council and addressed sensitively, it is at least possible that there may have been a different outcome. Our impression of the case as a whole is that if Mr Woodward had become fully engaged in the decision whether or not to dismiss Mr Ioane, and in particular, if there had had been personal interaction with Mr Ioane, a dismissal would not necessarily have resulted. [35] The fact remains that the situation which developed was basically the fault of Mr Ioane and the probabilities are that the Council would have dismissed him for misconduct if an appropriate procedure had been followed. In those circumstances there must be a substantial diminution in the remedies quantified by the Chief Judge. Accordingly, we reduce the award made by the Chief Judge to $17,000 (representing broadly a 75% reduction from what would otherwise have been appropriate).Result[36] The award of compensation to Mr Ioane is reduced to $17,000. [37] As agreed between the parties there is no order for costs in this Court. Costs in the Employment Court will have to be fixed by that Court.Solicitors: Kensington Swan, Auckland for Waitakere City Council Gubb Mitchell Crawshaw, Auckland for Ioane