Carter Holt Harvey Limited v Pirie CA273/96 [1997] NZCA 315; [1997] ERNZ 648 (23 September 1997)

Last Updated: 4 February 2019

CARTER HOLT HARVEY LTD v PIRIE

Court of Appeal (CA273/96) 23 September 1997
Thomas, Tipping, Elias JJ

Remedies — General damages — Whether award of general damages excessive Employment contract provided for re-employment of equivalent seniority in defined circumstances — Alternative position rejected — Whether Employment Court erred in assessing damages by reference to loss of future earnings — Loss of earnings went to effect of breach — Manager.

The respondent's employment contract contained a term which provided that if the appellant's commercial circumstances changed and the respondent was not required in his original position, then another position of equivalent seniority within the company would be offered to him. As a consequence of a breakdown in negotiations with a third party company, the appellant was required to consider reemployment of the respondent under the employment contract. The appellant decided there were no suitable alternative positions available, and that the respondent was surplus to its requirements. Nevertheless, an alternative position was offered to the respondent, but he rejected it.
The Employment Court held that the alternative position was not in accordance with the appellant's obligation to provide the respondent with "another position or venture of equivalent seniority". The respondent was awarded special damages of $9,000 for loss of income and $30,000 general damages. In awarding $30,000 general damages the Court referred to the distress and humiliation suffered by the respondent following his dismissal; the effect on the respondent's career and self-esteem; and the fact that the respondent would have had a substantial claim for future loss of earnings had he not been so successful in mitigating his losses.
The appellant contended that the Judge erred in law when fixing the quantum of the general damages by taking into account an irrelevant factor, namely, "the fact that the plaintiff would have had a substantial claim for future loss of earnings had he not been so successful in mitigating his losses". It further argued that as the respondent had obtained other employment, the time during which he suffered distress was reduced and this should be reflected in a lower award.

Held, (1) in assessing the award of general damages the Employment Court focused on the distress suffered by the respondent as a result of the appellant's breach of contract. The Employment Court endeavoured to convey the extent of the breach's impact on the respondent by reference to the substantial sum of damages for loss of earnings which the respondent would have been able to claim had he not obtained alternative employment. This was used simply as a measure of the breach's effect on the respondent. The Employment Court, in fixing the quantum of damages, did so on the express basis that the damages were for "all

these aspects". Undoubtedly, this referred to all the matters previously traversed in the judgment. (p 651, line 29)

(2) The quantum of the general damages award was not so inordinately high as to require intervention. As a result of the appellant's breach of contract, the respondent suffered distress, mental anxiety, and worry which, for the most part, were suffered at or around the time of the breach and his departure from the company. While the award was in the upper level of this type of case, it was not so excessive as to be outside the range which was properly open to the Employment Court to award. (p 652, line 3)

Appeal dismissed; costs in favour of employee ($1,500).

Cases referred to

Ogilvy & Mather (NZ) Ltd v Turner [1995] NZCA 248; [1995] 2 ERNZ 398; [1994] 1 NZLR 641 (CA)

Appeal

This was an appeal against an Employment Court decision which held that the appellant had breached an express term of the respondent's employment contract.

P G Skelton counsel for appellant (Carter Holt Harvey Ltd)

P A Craighead and M R T Colthart counsel for respondent (Hamish Cran Pirie)

The judgment of the Court was delivered by

THOMAS J (orally): In a judgment of the Employment Court dated 22 October 1996 his Honour, Judge Travis, held that the appellant, Carter Holt Harvey Ltd, had committed a breach of its employment contract with the respondent, Mr Pirie.

5 The learned Judge awarded Mr Pirie special damages of $9,000 for loss of income and $30,000 general damages. Carter Holt has not appealed against the finding of liability. Its appeal is limited to the assessment of general damages.

Mr Skelton, who appeared for Carter Holt, contended that the Judge erred in law when fixing the quantum of the general damages award by taking into account

10 an irrelevant factor, namely, "the fact that the plaintiff would have had a substantial claim for future loss of earnings had he not been so successful in mitigating his losses". He further contended that the sum fixed was inordinately high in comparison with prevailing awards of general damages. He invited this Court to modify Judge Travis's decision by substituting an award of general
15 damages for $10,000, or such other sum as the Court might think fit.

We do not propose to accept the invitation. In our view, while the award of $30,000 for general damages is high, it is not so high that the Court should intervene.

It is not necessary to traverse the background facts at any length. Mr Pirie was

20 employed by Carter Holt in the position described as Manager, Asia, with the company's Market Development Division of the Plastic Products Group of the company. The terms and conditions of his employment were set out in a letter dated 29 April 1994. One of the conditions reads as follows:

"It is to be understood that your position of Manager, Asia, does not necessarily mean that you will take up residence in an Asian location as circumstances can change and CHH board approval may not be received for the ventures described to you. However, in such an event, another position or venture within CHH of equivalent seniority would be offered to

5 you."

(Emphasis added.)

At the time negotiations were in train between Carter Holt and Pepsi Cola International to set up a bottling plant in Shanghai, China. The negotiations had not concluded. Difficulties were encountered, however, and Pepsi Cola eventually

10 terminated its relationship with Carter Holt. It then became necessary for the company to address the question of Mr Pirie's re-employment in accordance with the contractual condition quoted above.

Executives of Carter Holt decided that no suitable alternative position could be found for Mr Pirie and that his presence in the company had become surplus to the

15 company's requirements. Efforts were nevertheless made to provide Mr Pine with an alternative position. The position offered was unacceptable to him, and Travis Jultimately held that it was not in accordance with the obligation the company had undertaken in the contract to provide "another position or venture of the equivalent seniority". Mr Pirie left immediately. He departed on 24 February 1995. He

20 was paid salary in lieu of notice and a further payment representing 8 weeks' salary as redundancy compensation, together with accrued sick leave totalling $11,166. Almost at once, through his solicitors, Mr Pirie submitted a personal grievance claim in relation to the breach of contract.

Between February and May, Mr Pirie found some work as a consultant engineer

25 with International Drilling Fluids Ltd. Later in the year, in September, he was employed for less than a fortnight on a special project for Fernz Corporation Ltd. It was not until October that he obtained permanent employment with Forestry Corporation.

As already indicated, Travis J held that Carter Holt had breached the express

30 term of the employment contract by failing to find him another position or venture with the company of equivalent seniority. He awarded Mr Pirie $9,000 as special damages for loss of income, being the difference in income between what Mr Pirie actually received and what he would have received up to the date of the termination of his employment had his salary been reviewed in accordance with

35 the contractual provision to that effect and, as also mentioned, he fixed the sum of $30,000 as general damages.

In respect of the award of general damages Travis J had this to say:

"In the present case I have no doubt that the termination of the plaintiff's contract caused him distress and humiliation. He had an excellent work record including some five years as

40 a captain and platoon commander in the airborne division of the Army, a project chemical engineer for the New Zealand Sugar Company and a career with his previous employer culminating in the position of area sales and marketing manager for the East Coast of Australia and Papua New Guinea. He saw his employment with the defendant as a career move based upon Mr Pickering's optimistic and enthusiastic account of the defendant's

45 intended joint ventures in Asia. Contrary to the reasonable expectations of a secure future he instead became caught in an internecine dispute, was marginalised and his view of his status and position was the subject of considerable disparagement by senior managers of the defendant. The defendant's rejection of his requests for an equivalent position were

demeaning and damaging to the plaintiff's self confidence. The plaintiffs appreciation of his true worth appears to have borne out by his successful efforts subsequent to the termination of the contract and in this regard I observe that he was receiving a salary equivalent at the Forestry Corporation of $112,000 inclusive of a car. He was not provided

5 with a position of equivalent seniority but instead his contract was terminated on the grounds of redundancy. This undoubtedly caused, and will continue to cause difficulty for the plaintiff in pursuing his career path. Having observed him giving evidence I have no doubt that the termination of his employment did cause him the damage he described. It is to the plaintiff's credit that he has been able to establish a consultancy business and to

10 obtain senior positions at substantial salaries albeit on a temporary basis. This demonstrates that he was able to make a satisfactory recovery from the damage he suffered. However the termination of his employment with one of New Zealand's largest companies will no doubt have continuing future consequences for the defendant in his chosen career path and in the establishment and maintenance of his business reputation. Taking into account the fact that

15 the plaintiff would have had a substantial claim for future loss of earnings had he not been so successful in mitigating his losses, I fix the general damages for all these aspects at $ 30,000."

(Emphasis added.)

In determining this appeal we are not prepared to rehear the issues of fact found 20 by the Judge in the Court below which are relevant to the question of damages.

In submitting that Travis J had taken into account an irrelevant factor, Mr Skelton relied upon the statement given emphasis in the above extract from the judgment. He contended that Mr Pirie's success in mitigating his losses should be taken into account as a factor when assessing general damages but that the factor

25 ought to reduce the award of general damages and not lead to a higher award. He submitted that, by increasing the quantum of the general damages simply because Mr Pirie had been so successful in mitigating his losses, the Judge erred in law by basing his assessment on a wrong principle of law.

We do not agree that Mr Skelton's construction of the Judge's observation is

30 correct. The Judge was not addressing the question of Mr Pirie's loss of future earnings. No calculation under that head was involved. Rather, he was focusing his attention on the distress suffered by Mr Pirie as a result of the breach of contract. While it is to be acknowledged that the Judge may not have made his meaning as clear as he would have liked, we consider that he was endeavouring to convey the

35 extent of the impact of the breach on Mr Pirie by reference to the substantial sum of damages for loss of earning which he would have been able to claim had he not obtained alternative employment. The loss of earnings claim which would have been possible was used simply as a measure of the effect of the breach of contract on Mr Pirie. We also note that the Judge, in fixing the quantum of general

40 damages, did so on the express basis that the damages were for "all these aspects". He was undoubtedly referring to the various matters which he had already traversed and which are included in the extract from his judgment we have quoted above.

But Mr Skelton then argued that the fact Mr Pirie had obtained other

45 employment reduced the time during which he suffered distress, and that this factor should be reflected in a lower award. The fact remains, however, that as a result of Carter Holt's breach of contract it was some time before Mr Pirie's position became at all settled. Moreover, it is only realistic to accept that the distress, mental anxiety and worry Mr Pirie endured, and which is what attracts the

damages, will for the most part have been suffered at or around the time of the breach and his departure from the company.

Nor do we agree that the quantum of the award is so ordinately high as to be beyond the Judge's discretion. Ogilvy & Mather (NZ) Ltd v Turner [1995] 2 ERNZ

5 398; [1994] 1 NZLR 641 (CA), concerned an award by the Employment Court of $50,000 to compensate the executive who had been wrongfully dismissed for the distress he had suffered in what was acknowledged to be a particularly bad case with far-reaching effects on him. The award was upheld in this Court. Delivering the judgment of the Court, McKay J stated (at p 654):

10 "The amount awarded of $50,000 is a very large sum of damages in a case arising from

the dismissal even of a chief executive, but there were features of the employer's action which make this a bad case of its kind."

This decision, upholding an award of general damages for $50,000 for wrongful dismissal, must be regarded as the high-water mark in cases of its kind. The award

15 turned on the particular facts of the case, and the Court's decision is not to be taken as in any way detracting from the principle that the Courts are to exercise firm restraint and a sense of proportion when considering an award of general damages.

Unlike wrongful dismissal claims where the issue is the length of the notice given, or required to be given, the present case involves a breach of a term which,

20 if complied with, would have secured Mr Pirie permanent employment with the company. It represents a serious breach. His expectation of continuous employment with Carter Holt was defeated. In contrast, an employee who is dismissed without adequate notice must accept the impact of the dismissal per se. His or her complaint is directed at the unreasonableness of the period of notice. No

25 such factor exists here. Carter Holt could not avoid its contractual obligation by giving reasonable notice or indeed, any notice at all. Mr Pine's employment opportunities with the company were brought to an abrupt halt by virtue of the breach.

We consider that, notwithstanding the restraint required, the Judge's award is

30 not so excessive that the Court is bound to interfere. The Judge clearly identified the features which required an award for more than a nominal sum. Certainly, a lesser sum could well have been considered appropriate. $30,000 is high, but we are not persuaded that it is so high as to be outside the range which was properly open to the Judge in all the circumstances of this case.

35 The appeal is therefore dismissed. Costs are awarded to the respondent in the

sum of $1,500 together with such disbursements and travelling expenses as may be agreed or otherwise approved by the Registrar.