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Carter Holt Harvey Ltd v Yukich [2005] NZCA 98; (2005) 7 NZELC 97,834; [2005] ERNZ 300; (2005) 2 NZELR 347 (4 May 2005)

Last Updated: 20 December 2011


IN THE COURT OF APPEAL OF NEW ZEALAND

CA42/04

BETWEEN CARTER HOLT HARVEY LIMITED
Appellant


AND LOU YUKICH
Respondent


Hearing: 12 April 2005


Court: Glazebrook, Hammond and O'Regan JJ


Counsel: P T Kiely and R L Larmer for Appellant
G M Pollak for Respondent


Judgment: 4 May 2005


JUDGMENT OF THE COURT

The appeal is dismissed. The respondent is entitled to costs of $6,000 together with reasonable disbursements (including the travel and accommodation costs of counsel, if any) to be agreed by counsel or, in the event that agreement cannot be reached, to be fixed by the Registrar.


REASONS

(Given by O’Regan J)


Introduction


[1] The appellant (CHH) appeals against certain aspects of a decision of the Employment Court: Yukich v Carter Holt Harvey Limited; Carter Holt Harvey Limited v Yukich EMP C ARC 58/02; ARC 63/02 16 February 2004 Judge Colgan. In a judgment dated 28 April 2004, this Court granted leave to CHH to appeal on three points of law relating to the remedy awarded to the respondent, Mr Yukich, by the Employment Court, but declined leave in relation to two other proposed grounds of appeal.

Background

[2] Mr Yukich was employed by CHH for over 22 years, at the Kinleith Pulp and Paper Mill. He was a maintenance electrician and had a prominent role in union affairs at the Kinleith site.
[3] It was common ground that, on 7 December 2001 Mr Yukich was constructively dismissed by CHH. Mr Yukich claimed this constructive dismissal was unjustified, and the Employment Relations Authority made a finding to that effect. The Authority did not order reinstatement because it found the employment relationship had been irretrievably destroyed as a result of Mr Yukich’s contributory conduct, making it impracticable for the parties that he return to his job. The Authority sent the parties to mediation to discuss other remedies, however no agreement was achieved in mediation. Both parties challenged the Authority’s determination in the Employment Court.
[4] On 19 January 2003, before the Employment Court hearing took place, the whole of CHH’s maintenance trades workforce at Kinleith was made redundant and work taken over by a new contractor, ABB NZ Ltd. This was 58 weeks after Mr Yukich was constructively dismissed.

Employment Court award

[5] The Employment Court agreed with the Authority that Mr Yukich had been unjustifiably constructively dismissed, although on additional grounds. That finding is not the subject of this appeal. At issue are the remedies awarded to Mr Yukich in the Employment Court. The Employment Court upheld the Authority’s decision not to order Mr Yukich’s reinstatement, but awarded compensation as follows:

(a) 58 weeks lost remuneration from the date of dismissal. This amounted to $76,687.73 gross but was reduced by 50% to $38,343.86 under s 124 of the Employment Relations Act 2000 (the Act) to reflect the extent to which Mr Yukich’s actions contributed towards his constructive dismissal. No interest was awarded on this sum;

(b) $5,000 for hurt and humiliation under s 123(c)(i) of the Act, again reflecting a reduction of what would otherwise have been awarded but for Mr Yukich’s contributory conduct;

(c) Superannuation losses based on what he would have received if he had not been dismissed but had been made redundant on 19 January 2003, with no reduction for contributory conduct;
(d) Redundancy compensation under s 123(c)(ii): the exact amount to be calculated by the parties with no reduction for contributory conduct;
(e) 8% interest on the sums to be paid under (c) and (d) above from 19 January 2003 to the day they are paid.

Grounds of appeal

[6] Grounds of appeal are:

Employment Court decision

[7] In the light of the points at issue in the appeal, we highlight only three aspects of the Employment Court decision: the sum of lost remuneration and mitigation ([5](a) above), and the provision of redundancy compensation ([5](d) above).
[8] In regard to lost remuneration and mitigation, Judge Colgan found that Mr Yukich would have continued to work for CHH until dismissed by reason of redundancy in January 2003, but for the unjustified dismissal. The Judge calculated that Mr Yukich, having been off the payroll for 58 weeks between the time of dismissal and the time of the redundancies, suffered a gross loss of remuneration of $76,687.73.
[9] In the Employment Court, CHH had argued that Mr Yukich made insufficient attempts to mitigate his loss having applied for only three positions other than with CHH between 29 October 2001 and 29 October 2002. After his dismissal, Mr Yukich undertook regular work as an advocate for the Independent Electrical Workers’ Union (the Union). The Union paid him $600 per week, but this was said to be by way of advance rather than by way of remuneration. Apparently Mr Yukich is required to repay these advances out of the sum he receives from CHH as a result of the present litigation. CHH challenged the nature of this arrangement, saying the sums paid to Mr Yukich by the Union were not advances but rather remuneration. However the only evidence as to the nature of these “payments” was that of Mr Yukich, and CHH did not contradict his evidence that these payments were advances.
[10] In regard to mitigation, the Judge said that sufficiency of mitigation of loss is not only a question of the number of alternative positions applied for, nor is it a question of a dismissed employee having to apply for any job anywhere to mitigate loss. The Judge found Mr Yukich had good reason to remain living in Tokoroa, where there was little, if any, alternative work for someone with his skills and experience. The jobs he applied for would probably have required him to move elsewhere, forcing him to leave his family in Tokoroa. He consistently sought reinstatement with CHH as he was entitled to under the legislation.
[11] The Judge found that Mr Yukich did mitigate his loss in the sense of continuing to work, but as a Union advocate to whom weekly sums were advanced on the basis outlined above.
[12] For those reasons the Judge did not accept that Mr Yukich should be deprived of lost income by reason of any failure to mitigate loss. The Judge reduced Mr Yukich’s remuneration loss by 50% for contribution resulting in an order in his favour for $38,343.86. The Judge did not order interest to be paid given the periodic loan payments from the Union (which were interest-free) adequately took account of the loss of use of the money brought about by his dismissal
[13] In regard to redundancy compensation the Judge said at [55]-[56]:

[55] Had he not been dismissed, I find Mr Yukich would probably have continued working for CHH until 19 January 2003 when all trades maintenance personnel were dismissed by reason of redundancy. He would then have collected an accrued redundancy entitlement. I further conclude that he probably would not have obtained employment with ABB, the maintenance contracting company then engaged by CHH. No active Union officials from CHH were taken on by ABB although many maintenance trades employees were engaged by this successor.

[56] Mr Yukich’s claimed entitlement to redundancy compensation is $115,857.68. This reflected his 22 years at the mill. That, or such other sum to which he would have been entitled (CHH estimates this to be a smaller sum), would have been paid to Mr Yukich on or about 19 January 2003 had he not been dismissed as he was.

[14] CHH’s redundancy calculation was of a potential loss of $78,295.80 before tax, and $47,760.44 after tax, whereas Mr Yukich claimed for over $115,000. CHH claimed Mr Yukich could have no entitlement to any redundancy compensation because any entitlement to earnings loss should have ceased before 19 January 2003 when the mass redundancies took place. The Judge had already found against that contention, so redundancy compensation was for assessment under s 123(c)(ii) of the Act. The Judge determined that it was impossible for him to determine what the compensation should be based on the evidence before him. He determined that the exact amount was to be agreed by the parties, and if they could not agree, leave was reserved to apply further for the Court to determine the amount, probably in light of more evidence. We were informed by counsel that the amount has not been agreed, but counsel do not envisage any difficulties in that regard.
[15] We now turn to the three grounds of appeal, which we will consider in the order in which they were raised.

Remuneration award was manifestly excessive

Submissions for CHH

[16] On behalf of CHH, Mr Kiely said that the award of compensation for lost remuneration for 58 weeks was manifestly excessive, and was not in accordance with the principles established in earlier decisions of this Court, including the recent decision in Telecom New Zealand Limited v Nutter (2004) 7 NZELC 97, 563. He said that in the Nutter case at [81], this Court had said that the actual loss suffered by an employee set “an upper ceiling” on an award and was a logical starting point. But the Court said that it did not hold that full compensation must be awarded in the absence of good reasons to the contrary, and specifically said that the assessment of full compensation must allow for contingencies which might, but for the unjustifiable dismissal, have resulted in termination of the employee’s employment in any event.
[17] Mr Kiely accepted that the Nutter decision recognised that compensation for a period of more than 12 months can be awarded, but said that awards are discretionary and Judge Colgan had not set out the basis on which he had exercised the discretion in the present case. He also said that the decision was inconsistent with the need for moderation in awards which had been highlighted by this Court in Nutter at [79] and it did not meet the need for consistency in awards which had been referred to by this Court in Telecom South Limited v Post Office Union (1991) 1 ERNZ 711.
[18] Mr Kiely said that the award in this case was inordinately high because:

Submissions for Mr Yukich

[19] On behalf of Mr Yukich, Mr Pollak said that the Employment Court decision in this case pre-dated Nutter, but Judge Colgan had nevertheless applied the correct principles. He said that Judge Colgan found as a matter of fact that Mr Yukich would have continued to work at Kinleith until the redundancies occurred. He said there was no basis to criticise that finding. Mr Yukich had worked at Kinleith for 22 years before his constructive dismissal and continued to work at Kinleith after it, albeit on a voluntary basis for the Union, and undertook activities which he had previously undertaken in his capacity as a CHH employee. He said that, in the light of the Judge’s factual finding that Mr Yukich would have remained employed with CHH until the redundancies occurred, there was no basis for criticism of the Judge’s approach. He said that the present case differed from Nutter in that the circumstances were such that full compensation was appropriate here, because the “uncertainties of life” which had applied in Nutter were inapplicable to the present case. He said that the Judge had also considered mitigation, but had concluded that the efforts undertaken by Mr Yukich to obtain new employment in Tokoroa had been adequate but had not yielded another position.
[20] Mr Pollak did not dispute the need for moderation, which had been highlighted by this Court in Nutter. But he said that where the actual loss can be accurately calculated and there is no basis for giving any significant weight to contingencies, it was not contrary to principle to award compensation based on the actual period of employment which Mr Yukich would have worked if he had not been constructively dismissed.

Discussion

[21] The essence of CHH’s case is that it does not accept the Judge’s finding that Mr Yukich would have continued to work at CHH until the redundancies occurred, had he not been constructively dismissed. Its difficulty is that its right of appeal is limited to questions of law, but it seeks to challenge a finding which was clearly open to the Judge on the evidence before him. While Mr Yukich was obviously a difficult employee and his Union activities made him unpopular with CHH, he had remained employed for 22 years up until the time of his constructive dismissal. The Judge was entitled to conclude that he probably would have remained employed for another 58 weeks. And the Judge was also entitled to conclude that other contingencies were unlikely to have intervened to terminate his employment, given that Mr Yukich had actually continued to work on the Kinleith site during the 58 week period, undertaking similar Union activities to those which he undertook prior to his constructive dismissal.
[22] The Judge set the compensation for lost remuneration at a level which equates with the “ceiling” identified in the later decision of this Court in Nutter. In the light of his findings about the lack of likely contingencies, he did not determine that a lower figure was appropriate in this case. While that was a generous approach, we do not think it was outside the limit of the Judge’s discretion. He also took a benign view of the efforts made by Mr Yukich to mitigate his loss, but we think that was also an available view in this case. We will come back to this issue later.
[23] We think that the present case should be seen as something of a one-off situation. It was unusual in that it was a known fact that, if the dismissal had not occurred, Mr Yukich would not have worked for longer than 58 weeks after the date of his dismissal because of the redundancies and the very high probability that he would not have been hired by ABB. Often, the Court is required to determine an appropriate level of remuneration compensation in a situation where the likely length of the dismissed employee’s period of employment but for the dismissal is unknown. Another unusual feature was the fact that Mr Yukich effectively continued to undertake the same activities after his dismissal as he did beforehand, except that he was no longer paid by CHH to do so. And the finding by the Judge that Mr Yukich’s family circumstances meant it was not realistic for him to seek employment outside Tokoroa meant that job opportunities available to him were extremely limited, because of the domination of the employment market in Tokoroa by CHH itself.
[24] Overall, we conclude that the level of compensation for lost remuneration in this case was at the top of the available range, but not outside it. We can see no basis for interfering with the award given the limits of the right of appeal in this case, but we do not see the present case, with its unusual features, setting any kind of a benchmark for the future.

Result

[25] We therefore find that this ground of appeal fails.

Redundancy compensation

Submissions for CHH

[26] Mr Kiely said that the Employment Court erred in having regard to the redundancies that occurred on 19 January 2003 and in finding that Mr Yukich was entitled to redundancy compensation under s 123(c)(i) of the Act. He accepted that, in some circumstances, redundancy compensation may constitute a benefit which the employee might reasonably have expected to obtain and must be payable under that section. He expressly abandoned an argument that redundancy was not a “benefit” within the scope of that provision.
[27] In essence, Mr Kiely’s argument was that redundancy was too remote in this case. He said that where redundancy occurs outside the period in which the employee is expected to have obtained new employment, that is outside the period for which loss of earnings or lost remuneration is ordered, then the redundancy is too remote from the dismissal to be brought to account.
[28] In the present case he said that redundancy would occur outside such period if the award of 58 weeks lost remuneration were reduced by this Court, or if the effect of the 50% reduction in the compensation for lost remuneration (on the grounds of Mr Yukich’s contribution to the constructive dismissal) was seen to be an effective reduction of the period for which compensation had been awarded to 29 weeks after termination of the employment. Mr Kiely submitted that, if his submission was accepted, the award of redundancy compensation should be set aside completely.

Submission for Mr Yukich

[29] Mr Pollak said that the logical extension of the argument made on behalf of CHH was that all employees could have been unjustifiably dismissed prior to the contracting out of maintenance services to ABB, and CHH would thereby have avoided redundancy obligations. He said in this case, an unjustified dismissal had occurred, and CHH should not be rewarded for its unjustified actions.

Discussion

[30] The arguments on this ground of appeal were put to us on the basis that Mr Yukich should have received either all of the redundancy entitlement or none of it. But that approach would be inconsistent with the approach normally taken to damages for the loss of a chance to obtain a benefit in the future because of a breach of contract.
[31] In the present case the Judge determined that Mr Yukich probably would have been employed by CHH at the time of the redundancies, if his employment contract had not been breached by CHH. In effect, the Judge appeared to be saying that the chance that Mr Yukich would not have been so employed at the time of the redundancies was so low that it could be discounted. As we have said earlier, that was a very favourable finding for Mr Yukich, but we do not think it is one which can properly be interfered with in an appeal of this nature, given the fact that it was open to the Judge on the evidence before him.

Result

[32] This ground of appeal also fails.

Mitigation

Submissions for CHH

[33] Mr Kiely said the Judge was wrong to treat the Union work undertaken by Mr Yukich after his constructive dismissal as being mitigation of loss, because Mr Yukich was not paid for this work – rather he received advances which will be repayable if Mr Yukich succeeds in this litigation.
[34] He also said that the Judge had introduced an erroneous legal gloss on the principle of mitigation by suggesting that an employee who is seeking reinstatement has a less onerous obligation to mitigate his loss than a party who is not claiming reinstatement. In particular, he said the Judge had held that if Mr Yukich had accepted long term employment elsewhere, that would have compromised the feasibility of reinstatement. He said this seems to excuse Mr Yukich for not obtaining alternative employment after his constructive dismissal.

Submissions for Mr Yukich

[35] Mr Pollak said that no legal gloss had been introduced by the Employment Court. Rather, it had simply found that Mr Yukich had endeavoured to mitigate his loss by applying for positions, but had been unsuccessful. He said this was based mainly on Mr Yukich’s personal circumstances and the needs of his family, which prevented him from leaving Tokoroa to find employment.
[36] Mr Pollak said he accepted that an employee had a duty to take reasonable steps to mitigate his financial loss. He said in this case Mr Yukich did so, and that the Judge had made a finding to that effect. This meant that there was no issue of principle involved in this ground of appeal.

Discussion

[37] We accept Mr Kiely’s submission that voluntary work for the Union could not have amounted to mitigation of loss. If Mr Yukich had been paid for this work then the amounts he received would properly have been deducted from the award for lost remuneration. But the reality was that he was not paid, and therefore there was nothing to deduct.
[38] There is no doubt that Mr Yukich had an obligation to mitigate his loss, and that this obligation applied whether or not he was seeking reinstatement. We do not see anything in the Employment Court decision to the opposite effect. Rather, the Judge accepted that Mr Yukich’s job opportunities in Tokoroa were limited, and found that his efforts to obtain alternative employment had been adequate in the circumstances. Again, that was a reasonably favourable view of the situation, but we are satisfied that it was open to the Judge on the evidence before him. There is no basis to interfere with that finding in the context of an appeal limited to questions of law.
[39] Mr Kiely suggested that the Union activities undertaken by Mr Yukich prevented him from undertaking other work which could have mitigated his loss. He suggested that Mr Yukich could have undertaken odd jobs as an electrician, given his qualifications. But there was no evidence of such opportunities before the Judge, and therefore no basis for criticism of the fact that the Judge did not refer to that possibility in his judgment.

Result

[40] This ground of appeal also fails.

Decision

[41] We dismiss CHH’s appeal.

Costs

[42] Mr Yukich is entitled to costs of $6,000 together with reasonable disbursements (including the travel and accommodation costs of counsel, if any) to be agreed by counsel or, in the event that agreement cannot be reached, to be fixed by the Registrar.

Solicitors:
Kiely Thompson Caisley, Auckland for Appellant
Garry Pollak & Co, Auckland for Respondent


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