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The Christchurch Civic
Creche Case |
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In the Employment Court Goddard CJ awarded the 13
displaced workers some $860,000 compensation in addition to the amounts
received while they were suspended and redundancy payments in terms of the
employment contracts. The four prosecuted workers were also awarded
$89,478.96 by way of indemnity in respect of the costs of defending the
criminal proceedings against them. The Judge also ordered the council to pay
the 13 workers sums totalling $75,000 plus disbursements in respect of costs
of the Employment Court proceedings. The Judge concluded that there were two grounds on which
the workers were entitled to compensation for unjustifiable dismissal. The
first was, in essence, that the dismissals were in reality for cause, the
Council acting on suspicion that staff of the creche were sexually abusing
children attending the creche, rather than for redundancy as asserted by the
Council. The second was a process failure, that the Council breached the
requirement of the collective employment contract that it give two weeks
notice to the Union of termination for redundancy. For reasons which we shall set out we hold that the
Employment Court erred in law in its conclusions on that first ground and
that, while there was a procedural failure, it was limited to the
notification of redundancy on 3 September 1992 which was formally superseded
the following morning by a suspension on pay of the workers. The compensation
consequential on that limited procedural breach, which is confined to
compensation for resulting distress and humiliation, is assessed in this
judgment at sums totalling $83,500. The Council’s appeal in respect of the
unjustifiable dismissal claim is allowed and those lesser sums totalling
$83,500 are substituted for the compensation awarded by the Employment Court. The Council’s appeal as it relates to the indemnity award
in respect of the four creche workers’ legal costs of defending the criminal
proceedings against them is dismissed. The amount itself is no longer in
dispute. On our analysis of the Employment Court judgments dealing with the
issue we conclude that the Chief Judge did invoke, at least as one ground, a
provision of the collective employment contract. Section 135 of the
Employment Contracts Act 1991 conferring appellate jurisdiction on this court
confines appeals to decisions allegedly erroneous in point of law and
expressly excludes any decision of the Employment Court on the construction
of any employment contract. It follows that we are precluded from examining
the correctness of the Chief Judge’s construction of the indemnity clause,
even though we conclude that he erred in his view of the indemnification of
agents at common law. Finally, we order that the parties meet their own costs in
both the Employment Court and this Court. The following list of paragraph headings will indicate the
topics which we see as material to the consideration of the appeal:
Background to events 4 Chronology of events 7 The pleadings 22 The four judgments in the Employment Court 22 Unjustifiable dismissal: the Chief Judge’s reasons 24 Unjustifiable dismissal: the first ground 26 Unjustifiable dismissal: the second ground 30 Unjustifiable dismissal and unjustifiable action: conclusions
32 Compensation for process failure 32 The question of indemnity 34 Result 36
The events directly in question occurred over September
and October 1992, particularly on 3 and 4 September. To set them in context
some mention should be made of the history of the creche. It is taken largely
from the evidence of Mr Simon Fraser, who chaired the management committee of
the creche from 1991, and Mr J H Gray, City Manager of the Council since 1989
and previously Town Clerk of the Christchurch City Council since 1973. The Christchurch Civic Child Care Centre was started by
the Council in 1976 to assist parents engaged in employment. The City Manager
was ultimately responsible on behalf of the Council for the creche. The
management committee had responsibility in conjunction with the supervisor,
Ms Davidson, the firstnamed respondent, to oversee the day to day
administration. As at September 1992 ten other child care workers and two
cleaners were employed there. The children were aged from about 12 months up
to 5 years. Reflecting the importance in the public interest of
ensuring high standards of care and protection of young children, the
operation of the creche was subject to regulatory controls and reporting
responsibilities. The Education (Early Childhood Centres) Regulations 1990,
administered by the Ministry of Education, established a licensing regime.
When granting licences the Secretary (the Chief Executive) of the Ministry
(the Director-General of Education), was required to be satisfied that the
premises and equipment complied with the standards specified and that the
management and staffing practices, the curriculum and the standard of care
and education in the centre were likely to comply with Part IV of the Regulations
(Reg 4). By Reg 13(1): If
satisfied that it is not in the interests of children attending a licensed
centre for the centre to continue to be open, the Secretary shall, by written
notice to the licensee, suspend the centre’s licence. Such a suspension "shall take effect on a day
specified in the notice effecting it, and may be immediate" (Reg 13(2))
and "a notice suspending a licence shall specify the conditions on
compliance with which the suspension will be revoked" (Reg 13(6)). In
supplementation of the power to suspend, Reg 36 requires the licensee of a
centre, who becomes aware that there are reasonable grounds for believing
that a member of the staff has ill-treated a child, to exclude the staff
member from coming into contact with the children and, if necessary, from the
centre itself (subcl (1)); and, if satisfied on reasonable grounds that the
licensee has failed to comply with subcl (1), the Secretary may forthwith
suspend the centre’s licence under Reg 13(1). By Reg 18 any person affected
by a decision of a Secretary under the regulations may appeal to a District
Court but, unless the Secretary gives the court notice to the contrary, the
decision appealed against remains in full force until the court has reached
its decision. In its child welfare role, the Department of Social
Welfare was also involved with child care centres and the creche was also
subject to inspection by the Education Review Office. Late in November 1991 parents of a child at the centre
expressed concerns that a then staff member, Mr Peter Ellis, had acted in an
improper manner towards their son. Various meetings were held between staff,
Council and Union representatives on behalf of Mr Ellis. On 20 November a
formal complaint was made to the Council. On 21 November Mr Ellis was
suspended. On 28 November the management committee met with the police who by
then were investigating. The Specialist Services Unit of the Department of
Social Welfare had commenced interviewing creche children. Further meetings
occurred. There was considerable media publicity. By letter of 18 December
1991 Mr Fraser on behalf of the management committee advised the Council as
follows: At
the outset we would acknowledge that the staff member involved has over a
period of time contributed greatly to the culture and atmosphere of the
Centre. Regardless of all else the positive nature of the contributions made
ought not to be overlooked and to some extent this has been recognised in the
messages of support received from some parents. The
Committee are also aware that by making any decisions/recommendations they
are doing so in a situation where the staff member concerned will be unable
to prove their innocence one way or another. The Committee acknowledges that
this may be unfair. However
having considered the situation from all positions and weighed up the
conflicting factors the Management Committee are firmly of the view that it
would simply not be possible for the staff member to return to childcare
duties at the Civic Childcare Centre. Beyond the concepts of justice and
fairness childcare relies on trust and however unfairly that trust has now
been destroyed in respect of the staff member concerned. To
seek reinstatement at the Centre, we believe, would irrevocably destroy the
fabric on which the Centre operates. There would be a decisive split between
the parents and from our own discussions with parents (notwithstanding the
messages of support) there would be large scale withdrawals of children. The
finding of replacement children to keep the Centre viable would in our view
be near impossible as the service of child care survives on trust and in this
situation there would only be mistrust. By letter of 20 December the police advised the Council
that to date there had been no disclosures of any sort of indecent touching
by any person employed at the creche but that, for other reasons that had
emerged from the interviews, Mr Ellis was not suitable for employment in
child care. On 24 January 1992 Mr Ellis was dismissed by the Council with
effect from 14 February 1992. The Specialist Services Unit had continued the interview
processes. On 19 February the management committee was advised by the police
that the investigation against Mr Ellis was being renewed. At the request of the
police a meeting of all parents who had children at the creche since
September 1986 was arranged for 31 March 1992. Attended by some 250 parents,
the purpose of the meeting was to inform parents of the process of the police
inquiry, to pass information to parents, and to advise how to discuss and
treat the issue of abuse with their children. On 30 or
31 March 1992 Mr Ellis was arrested and charged with sexual abuse. Further
charges were added later. Depositions were taken between 2 November 1992 and
4 April 1993. He was committed for trial, as were four other creche workers
who had been arrested and charged on 1 October 1992 and are now respondents
in this appeal. The four other creche workers were discharged by the trial
Judge under s 347 of the Crimes Act and for various reasons before the trial
began in the High Court at Christchurch. After a lengthy trial Mr Ellis was
found guilty on a number of counts. Following conviction he was sentenced to
10 years imprisonment. His appeal to this Court was dismissed. 1 September 1992 The
Department of Social Welfare sought from the City Manager’s Secretary an
urgent appointment with the City Manager about the creche 2 September 1992 Mr
Gray, the City Manager, was surprised to find so many and such senior people
at the meeting. There were three police officers, a Detective Inspector, a
Detective Senior Sergeant, and the Regional Legal Adviser. The Deputy Manager
of the Ministry of Education (South Island Operations) and another officer of
the Ministry were there. So too was the head of the Children and Young
Persons Division of the Department of Social Welfare at Christchurch. A
lawyer from the Crown Solicitor’s Office was also there. Mr Gray, the City
Manager, was accompanied by two officers - Mr Dally, Group Manager,
Metropolitan Services, and Mr Maguire, Senior Community Development Adviser.
Noting the other lawyers present, Mr Gray then arranged for Mr Mitchell, the
City’s Office Solicitor, to attend. Mr
Gray’s brief of evidence continues: Right at
the beginning of the meeting it was made clear to me that there were ongoing
Police investigations concerning the creche. This came from Inspector Pearce
who did most of the talking on behalf of the Police. I was not told in any
specific way what these investigations were. I came to assume during the
course of the meeting that the investigations involved child abuse and staff
other than Peter Ellis. ... It was explained to me that because there were
ongoing Police investigations the discussion that was to occur at the meeting
was to be kept in the strictest confidence. I asked whether the Mayor could
be immediately advised and was told the answer to that was no. Before
proceeding, the Police required that I agree to the requirement that the
information remain confidential. They required similar undertakings from the
other Council representatives present. ... I was then told that as a result
of this ongoing investigation the Police were satisfied that the children at
the centre were considered to be in "serious danger". I remember
these words being used and emphasised. I was told that the persons present at
the meeting wanted the centre to be closed that very day. I think 1.00pm was
the time mentioned. The Police told me that they could not share the details
of the investigation with myself or the Christchurch City Council. ... It was
explained to me that the "cardinal principle" of the [Children,
Young Persons and Their Families] Act is that children and young persons
must be protected from harm and that their rights should be upheld and their
welfare promoted. In the event of an apparent conflict of any duty, the
well-being of the child was to be paramount. ... The Police told me that they
had received legal advice both internally and from Raymond Donnelly (Crown
Solicitor’s Office) supporting their decision. This was confirmed by the two
solicitors present. ... During the course of this introductory discussion I
was reminded that the centre was only able to operate by virtue of a licence
issued by the Ministry of Education in terms of the Regulations. ... The
Ministry of Education representatives then confirmed that situation. It was
apparent to me that they knew something of the nature of the investigation
and inquiries but they, too, were not able or prepared to tell me what they
were. ... I told the Police and the Ministry that it made it very difficult
for me if I was not told anything of the details. Notwithstanding that I
asked them on several occasions to tell me more about the details, so that I
could make a better assessment of the situation, they refused to do so. ...
After consulting with Martin Maguire, I pointed out that parents and guardians
would not be immediately available and that the proposal to close the centre
virtually within the hour was, everything else to one side, quite
impracticable. After discussion, it was agreed that if the centre was to
close, it would have to be the following day. ... As a result of the advice I
received from Peter Mitchell I was satisfied that, in general, the advice
given to me by the Police as to the legal position was correct. ... Several
times during the course of the meeting on 2 September I discussed my
obligation to be a good employer. ... I was conscious that if the licence was
suspended then it might be a redundancy situation. I was aware that there
were redundancy provisions in the applicants’ contracts but I did not see
redundancy simply as an easy way out for the Council. ... I was very
conscious that irrespective of whatever actions I took, the creche would be
effectively closed while its licence was suspended. I understood that
suspension would subsist as long as the Police inquiries did. It occurred to
me there was a likelihood of the whole matter dragging out for a long time.
... The Ministry said that they would prefer to cancel the licence rather
than leaving it suspended in order not to leave any loose threads. They asked
whether I would make any submissions in relation to the suspension and/or the
cancellation. By the conclusion of the meeting I agreed that I would not
because, practically speaking, it seemed to me that there was no real
distinction between suspension and cancellation in that either way the creche
would close, and the parents necessarily disperse. ... It was agreed that
there would be an exchange of correspondence the next day in relation to
suspension and cancellation The
meeting had lasted some three hours. Mr
Mitchell’s evidence was to the same effect. In his brief he agreed with the
evidence given by Mr Gray in the latter’s written brief. Mr Mitchell added
that the Ministry made it plain that they were going to suspend the licence
and that they would maintain the suspension until the police were satisfied
the children were no longer at risk; that as to the possibility of appeal
under Reg 18, the police said that on the basis of the evidence they would
put before the District Court they were satisfied any appeal would fail; that
it might take up to six months before there was a hearing; and that in the
meantime the creche would be closed.
3 September 1992 1. At a short
meeting on the morning of 3 September and in terms of the sequence agreed the
previous day, Mr Cooper of the Ministry gave Mr Gray a notice of suspension
of the licence for the creche. Mr Gray handed him a letter advising that he
had no representations to make concerning the licence and Mr Cooper gave Mr
Gray a notice of cancellation of the licence which added that continued
operation of the centre was illegal and would lead to legal action by the
Ministry pursuant to s 316 of the Education Act 1989. The
notice of suspension recorded that it was given pursuant to Reg 13 and that
in accordance with Reg 13(1) Mr Deaker, Manager, National Operations (South
Island), who signed the notice, was "satisfied it was not in the
interests of the children attending, in terms of their health and safety, to
continue to attend the centre". 2. Following
notification by Mr Gray to the Unions and the creche Supervisor, Ms Davidson,
a staff meeting was held at 5.30. Clearly it was a stressful occasion for all
present, who also included Mr Fraser, Chairman of the Management Committee.
Mr Fraser’s evidence is a sufficient and independent summary of what occurred Both as
a parent and a member of the Management Committee, I was shocked at the
announcement made by Mr Gray that the creche was to close with immediate
effect. Indeed, the manner of the closure was very abrupt. As I recall it, Mr
Gray read the notice that was either then or had previously been handed out
to staff. He stressed to those present that the Ministry of Education had
cancelled and/or withdrawn the licence and that was why the creche had
closed. I can remember staff being asked to immediately remove their
possessions from the creche. It was an extremely emotional time for the
staff. The matter was terribly upsetting to the staff who were present with
many of them in tears and confusion reigned. Mr Lawson from the Southern
Local Government Officers Union challenged Mr Gray in relation to the
redundancy and bemoaned the lack of consultation. Clearly, nothing was going
to be resolved between those two at the meeting and, as I recall it, Mr
Lawson suggested it might be better for Mr Gray to leave, which he did. ...
What concerned me most was the complete lack of information as to the reasons
the actions had been taken by the City Council. All Mr Gray would say was
that he had been briefed by the Ministry of Education and the Police. The text
of the written notice given by the City Manager to the staff and unions read: CLOSURE OF CIVIC CHILDCARE CENTRE 1. The Ministry
of Education has withdrawn its licence for the Civic Childcare Centre from today,
as it considers that it no longer complies with the Early Childhood
Regulation 2. There is no
choice other than for me to close the Centre with immediate effect. 3. I know that it
will be a shock to you, to have your employment terminated in this way but
unfortunately there is no opportunity for your redeployment into other
elements of the Council’s service. 4. In accordance
with the terms of your Collective Employment Contract you are entitled to
four weeks payment in lieu of notice and of course to accumulated holiday
pay. A cheque covering these items will be mailed to you on Monday. 5. If you are a
full-time employee you are entitled to a redundancy payment as well which
will also be included in this cheque, if applicable. The redundancy formula
in your collective contract is as follows: "Six weeks average pay for
the first year of service and two weeks average pay for the second and each
completed subsequent year of continuous service with the Christchurch City
Council" 6. Opportunity
will be available to you tomorrow until 12 noon, to remove any personal
possessions from the Childcare Centre premises. Locks
were being changed before the meeting ended 3. The City
Manager issued a press release to the media at 6.30pm announcing the closure
of the Centre as a consequence of its ceasing to be licensed to operate by
the Ministry of Education "which considers that it no longer complies
with the Early Childhood Regulations". The press release ended: "Unfortunately
there is no alternative employment available for the 13 staff members, some
of whom are part time, but an appropriate redundancy payment will be made to
those so entitled" 4. The City
Manager sent a report, delivered by hand, to the Mayor and Councillors and
certain Council officers attaching a copy of the press release and
continuing: 2. In
view of ongoing Police inquiries and forthcoming prosecution action I am
unfortunately not at liberty to say a great deal more at this time. I can
however say that both myself and the Ministry of Education were briefed by NZ
Police beforehand, and I am bound to agree with the action taken by the
Ministry 5. Late on the
evening of 3 September 1992 Mr Gray telephoned Mr Peter Lawson of the
Southern Local Government Officers Union. At the meeting earlier that evening
Mr Lawson had argued that Mr Gray had not complied with the redundancy notice
provisions of the collective employment contract. That provision (cl 53.4 of
the Christchurch City Council Salaried Staff Collective Employment Contract)
set out the consultative processes to be followed, including in para (b) the
requirement that the Council "advise the Union of any impending
redundancy situation at least two weeks prior to the issue of notice of
termination of any employee" 4 September 1992 1. Mr Gray issued
a substitute notice addressed to creche staff and unions. It read: CLOSURE OF CIVIC CHILDCARE CENTRE 1. I refer to my
memo of 3 September in which I advised that there was no choice other than
for me to close the Centre with immediate effect. 2. I have now
agreed that the notice of termination be withdrawn and that it be replaced by
suspension on two weeks leave with pay as from today 4 September 1992. 3. This two week
period is to enable the Council together with your Union and yourself to look
at and consider options in regard to redeployment and/or relocation within
the Council. 4. Marshall
Wright the Personnel Manager (DDI3711-534) is available to discuss with you
any matters of employment if you feel the need for this. 2. When, as had
been indicated by Mr Gray, staff went to the centre to collect their
possessions, police who were conducting a search sent them away 3. "The
Press" gave extensive publicity to the matter. The report began: The
Christchurch Civic Child Care Centre was abruptly closed yesterday, angering
staff and parents, after the Ministry of Education withdrew its operating
licence Because
of their relevance to issues in the appeal two other passages in "The
Press" report should be noted. First, Mr Deaker of the Ministry was
reported as saying that he moved to suspend the licence yesterday morning
after being briefed by the police; that he would not comment on whether the
briefing related to a police inquiry into sexual abuse at the centre; and
that the council was legally entitled to make "representations" on
the decision, should it have wanted to keep the centre open. However, Mr Gray
had said that none would be forthcoming. The second was a reference to the
discussion the previous evening between Mr Gray and Mr Lawson, and reporting
that Mr Gray had formally withdrawn the notice of redundancy and placed staff
on two weeks paid leave. 4. The police had
issued a press release for use on 4 September. It said that police had been
involved in an ongoing investigation relating to the creche since February
1992 and that: As a
result of those enquiries Police referred some matters on to the Ministry of
Education which has now cancelled the Christchurch City Council’s licence to
operate the Civic Child Care Centre. 5. It seems that
the Ministry of Education did not issue a press release. However Mr Deaker
responded to a request by Mr Fraser for information in this way: Thank
you for your letter of 4.9.92. I can understand the anxiety felt by you and
other parents. But I must repeat that the briefings given by the police to my
colleagues on Tuesday and Wednesday, and me yesterday, were entirely
confidential. I cannot and will not break that confidence. 6. Mr Gray faxed
Mr Lawson confirming that there was an impending redundancy situation at the
creche. 7 September 1992 1. By further
notice to creche staff and unions the City Manager extended the suspensions
on leave with pay to 22 October 1992. He had earlier that day orally agreed
with Mr Lawson to withdraw the notice of impending redundancy (Item 6, 4
September) 2. Mr Lawson met
with the Police. According to his brief of evidence the police were not very
forthcoming but confirmed that they were investigating further complaints of
child abuse and indicated that they would be ready to lay charges in about 4
weeks. 3. The City
Manager reported by memorandum to an augmented Cultural and Social Services
Committee of the Council. Extracts from the report read:
4. Various groups,
and notably the Methodist Mission, had expressed interest in obtaining a
licence for the creche. "The Press" reported: The
mission has offered to take over running the centre, which was abruptly
closed by the Ministry of Education on Thursday after a police briefing. 5. Another article
in the same issue of "The Press" reported: The
Ministry of Education confirmed yesterday that any application to reopen the
centre employing former staff members was unlikely to succeed. 11 September 1992 The Methodist
Mission advised Mr Gray of their decision not to proceed with plans to
re-open the creche. Because of the relevance to the appeal of the reason
given by the Methodist Mission it is as well to set out the material part of
the letter. We
believe that child care should not be offered from this site again. The
letter was released to the media and widely reported, at least in "The
Press" of 12 September 1992. 14 September 1992 Representing
the 11 child care workers at the creche, Mr Nation formally sought from the
police advice of any allegation the police were investigating against any of
the workers and an opportunity to reply. 15 September 1992 Mr Fraser and
his wife, Ms Dobson, filed notice of appeal to the District Court against the
suspension of the creche licence. They referred to their inability to obtain
information sought from the Ministry of Education and the police and annexed
Mr Deaker’s memorandum of 4 September and a copy of the police press release. 21 September 1992 The police
responded to Mr Nation’s letter of 14 September in these terms:. Section
17(2) of the Children and Young Persons and Their Families Act 1981 requires
the Police, or a Social Worker to take positive action where a reasonable
belief exists that a child is in need of care or protection. 28 September 1992 On behalf of
10 of the workers, Mr Lawson for their Union submitted a personal grievance
claim to the City Manager: The
employees allege that their employment has been affected to their extreme
disadvantage by the unjustified actions of you as their employer in
voluntarily surrendering (or alternatively in acceding to the revocation of)
the licence to operate the Civic Childcare Centre, and by your having failed
to carry out your statutory obligation under the Local Government Act 1974
(or the implied conditions of employment law generally) to be a "good
employer" and provide fair and proper treatment of employees in all
aspects of their employment, following your having received allegations from
various authorities including the N.Z. Police Department and the Ministry of
Energy in respect of some or all of the applicant employees without: (i)
Following the Complaints Procedure in the employees Collective Employment
Contract; and before taking
the action to surrender (or alternatively acceding to the revocation of) the
licence and thereby cause the unjustified extreme disadvantage to their
employment 1 October 1992 and Four of the
workers, Ms Davidson, Buckingham, Keys and Gillespie, were arrested and
charged with abuse of children 7 October 1992 The Council
notified Mr Lawson that the workers’ employment would terminate on 22 October
and they would be paid out in terms of the redundancy provisions unless
redeployed within the Council. 22 October 1992 Except for two
staff members who by agreement were redeployed, the workers were paid out in
terms of the redundancy provisions. It was common ground that that was
without prejudice to pursuing any claims against the Council. 11 February 1993 Following the
taking of depositions the four workers charged were committed for trial. 2 March 1993 The personal
grievance remaining unresolved, it was filed with the Employment Tribunal. It
was subsequently removed into the Employment Court. 5 March 1993 and The four
workers were discharged by the trial Judge under s 347. Subsequently, on 15
December 1993, the Judge refused an application by them for an award of costs
under the Costs in Criminal Cases Act 1967.
Amended statements of claim in relation to the personal
grievances were filed in the Employment Court on 15 November 1994. The first,
on behalf of 12 of the 13 workers, presented the claim and the relief sought
as arising from unjustifiable dismissal. The second, on behalf of the other
worker, Ms O, was advanced as a claim of unjustifiable action on the part of
the Council, essentially in acting to abolish her position without following
the reorganisation procedure under the employment contract and in voluntarily
surrendering the creche licence.
Following an eight day hearing the Chief Judge delivered
an interim judgment on 16 March 1995 which is now reported at [1995] 1 ERNZ
172. In a 13 page judgment the court gave "skeletal reasons" for
its substantive conclusions and for the remedies provided. At the time the
Chief Judge contemplated that "a much fuller judgment" would follow
"stating comprehensively my reasons for each conclusion reached,
including an account of the evidence given and the arguments advanced". Three weeks later the court delivered its
"Supplementary Judgment". Departing from the previously expressed
intention, the judgment recorded that it was to be read together with the
interim judgment. A "Further Supplementary Judgment" of 3 May 1995
dealt with costs questions and clarified the Chief Judge’s intentions in
relation to the quantum of the award to Ms Buckingham. A fourth judgment was delivered on 2 August 1995, dealing
again with Ms Buckingham’s entitlements and remedies. The course followed, in particular with the first two
judgments covering largely the same ground, and in some respects with
somewhat different reasoning and different emphases and factual references,
has created difficulties on appeal. Eichelbaum CJ faced a similar problem in Stratford v Ministry of Transport
[1992] 1 NZLR 486, 489. In that case a District Court Judge had delivered a
seven page judgment, described as a synopsis of her views, followed by an 18
page reserved judgment. The Chief Justice emphasised that such a course
should not be regarded as a desirable precedent and should not be followed
save in exceptional circumstances. The potential for uncertainty as to when
the decision making process will be completed, and the potential for
confusion and apparent inconsistencies in reasoning between the two judgments
are obvious. Where in permissible circumstances two sets of reasons are
delivered, on appeal regard has to be had to both. Just what status it is
appropriate to attach to the reasoning in the second judgment relative to the
first in this case is not self-evident from the differing adjectival
descriptions of the second judgment as "amplifying" and
"ancillary to" the first judgment.
The Chief Judge held that "the dismissal on 3
September 1992" of the 13 applicants was unjustifiable for two reasons.
In the first judgment he said: The
first reason is that the council has not discharged the burden of proving
that redundancy, and not untested suspicion of serious misconduct, was the
true reason for the dismissal. The second is that even if redundancy had been
the dominant reason, the council was not entitled to move at once to
dismissal in disregard of its contractual obligations in the event of
redundancies arising. On the first point he said, "At the heart of this
case is whether Mr Gray handed in the licence because of a business decision
no longer to operate the creche, or whether he did so as a means to the end
of dismissing employees who were suspected of a grave dereliction of duty of
which, however, he had no evidence". After referring to Marlborough
Harbour Board v Goulden [1985] 2 NZLR 378 he continued: Similarly
in the present case, the council made no inquiry at all, and it has
maintained stoutly throughout that it did not receive any allegation or
complaint about any employee. It is true that the allegation was directed at
the employees of the creche generally, and that the complaint was unspecific
as to date, place, and circumstances. However, the number of employees was
small - 11 excluding the cleaners, 13 including them - and the nature of the
allegations was reasonably specific, and it was plainly their commission
currently that was alleged. I do not see how the respondent can say that it
had received no complaint within the meaning of the contract. It had plainly
received a very serious and very pointed complaint. Mr
Gray pointed not only to the risk to the children but to the criticism that
the council might sustain if he refused to heed the police warnings and they
turned out to be prophetic. However, Mr Gray had absolutely nothing to go on
except the word of two police officers and Ministry and departmental
officials that they were satisfied. As a body of jurisprudence shows, it was
for him to be satisfied of the facts before taking a step that could and did
destroy the lives and the careers of council employees. He was not entitled
to substitute the opinion of a police officer for the council’s own enquiries
and assessment. In the second judgment, and referring to the stance of the
Ministry of Education and the police, the Judge said: They
were determined to bring about the immediate closure of the creche and
persisted in that determination after being informed that the respondent
council had binding obligations under employment contracts to its staff.
Whatever may be thought of the propriety of the actions of the police or the
Ministry of Education, it was the clear duty of the respondent to resist all
inducements, however strong and however persuasive, to breach its employment
contracts with the applicants. It is not really surprising that nothing has
emerged to show that children at the creche on 1 September 1992 were in
danger or at risk, nor does the council suggest that it was so or that it had
any basis for thinking so at the time or at any time since. That merely shows
the danger of acting upon rumour, speculation, or the untested opinions of
others, however imposing those others may seem. In
these circumstances I hold that the council has not established that it
dismissed the applicants for reasons of genuine redundancy. It was a
contrived situation, and while Mr Weston objected to Mr Lawson’s description
of what happened as a conspiracy, I am not left in the slightest doubt at
least of this proposition: that the council has not shown that it was not
acting in concert with the policy and the Ministry of Education in the sense
of carrying out the purposes of the police or of the Ministry or both. The second ground on which the Chief Judge held the
dismissal on 3 September 1992 to be unjustifiable was that the Council failed
to follow the redundancy procedures provided for in the employment contracts.
As noted earlier in this judgment (item 5 under the date heading, 3 September
1992), the consultative process required the Council to advise the Union of
any impending redundancy situation at least two weeks prior to the issue of
notice of termination of any employee. The notice given by the Council to the
workers at the meeting on 3 September was in breach of that provision but was
replaced within hours by the suspension notice of 4 September. In the first
judgment the Chief Judge said that the corrective action taken by Mr Gray was
"available in mitigation but could not undo the damage done by his
revelations to the staff, to parents and to the world at large (by means of
media release) on 3 September". In the second judgment he elaborated on the reasoning: If
notice had been given to Mr Lawson, and assuming Mr Gray put his cards on the
table, it is likely that Mr Lawson would have opposed the idea that the
arrangement Mr Gray had in mind amounted to a genuine redundancy. Mr Lawson
is likely to have insisted that if there was some complaint that his union’s
members were endangering children, a written statement of that complaint
should be obtained at once and put promptly to the members concerned, so that
they could respond. Mr Gray is unlikely to have had an answer to that
proposition, especially if he had taken proper advice from the council’s
personnel department. However, even if the respondent had insisted upon
making a business decision to close the creche because of the likely
impending adverse publicity (it could not rely on danger to children for it
had no evidence of any such danger) then, in terms of the contract, long
before any dismissals could be effected, the union could have invoked the
right to require discussions and the council would have been under an
obligation to enter into discussions with the union. By acting as he did,
especially on 2 September and early on 3 September, but also by his failure
to notify the union well in advance of dismissals, Mr Gray put it out of the
power of the respondent to comply with the contract in any but a perfunctory
or token manner. All that could be achieved, and all that was achieved, was a
pause for a few weeks in the downward swing of the executioner’s axe.
For reasons we can express quite briefly we consider that
the first ground for the Employment Court decision is erroneous in point of
law in two respects. The first is in its statement of the legal
responsibility of the Council in relation to the closure of the creche. The
second is the absence of an adequate foundation in the evidence for
particular findings of fact, which on well-settled principles constitutes
error of law (Edwards v Bairstow
[1956] AC 14; Talbot v Air New Zealand
Ltd [1996] 1 NZLR 414). First, the suspension of the licence by the
Director-General of Education which inevitably resulted in the closure of the
creche and the Council’s actions under the employment contracts were in law
and fact separate questions. They involved different parties. The legal
responsibilities were different. The relevant facts were different. But the
Employment Court in effect treated the distinct questions as a single
employment issue dominated by the Council’s responsibilities to the workers
under the employment contracts. In the first judgment the first reason given for holding
that "the dismissal" on 3 September was unjustifiable was that the
Council had not discharged the burden of proof that redundancy and not
untested suspicion of serious misconduct was the true reason for their
dismissal. Earlier, and referring to the risk to the children expressed at
the meeting on 2 September initiated by the police, the Chief Judge had said
that Mr Gray had absolutely nothing to go on except the word of two Police
Officers and ministry and departmental officials that they were not
satisfied; and that he was not entitled to substitute the opinion of a Police
Officer for the Council’s own inquiries and assessment. Then, in the second
judgment, he accepted that the Ministry of Education and the police
"were determined to bring about the immediate closure of the creche and
proceeded in that determination though being informed that the respondent
Council had binding obligations under employment contracts to its
staff". But, he said, it was the clear duty of the Council to resist all
inducements, however strong and however persuasive, to breach its employment
contracts with the applicants; and ended that the Council had not shown that
it was not acting in concert with the police and the Ministry of Education
"in the sense of carrying out the purposes of the police or of the
Ministry or both". The crucial point is that the Judge’s approach confuses
the legal responsibilities. The Director-General of Education, not the
Council, had the legal power to suspend and then to cancel the licence, and
the employment contract could not override the law of the land. The Chief
Judge accepted that Police Officers and Ministry and Department officials
stated that they were satisfied that there was risk to children and that the
Ministry and the police were determined to bring about the immediate closure
of the creche. The validity of the subsequent exercise by the Ministry of its
legal power in issuing the suspension notice, which could be impugned only in
appropriate proceedings, has not been challenged. In that legislative context
the Council was not "carrying out the purposes of the police or of the
Ministry or both". It was responding to the exercise of legal powers by
the Director-General of Education. The only action it took to facilitate the
second part of the Ministry’s action was to indicate that it would not object
to the exercise of the power of cancellation. Given suspension, we see no
basis in the evidence for resisting that further step, or at least for a
finding that the Council should have resisted that further step. Second, in our judgment the evidence does not provide any
foundation for a factual finding that the true reason for the dismissals was
not redundancy. The sequence of events and contemporary statements by various
participants have been traversed in the chronology of events. The publicly
reported stance of the police and the Ministry at material times is clear.
And the practical impossibility of reopening the creche given the ongoing
police investigation, is reflected in the Methodist Mission publicly released
letter of 11 September 1992. There is ample external support for Mr Gray’s
stance in the matter. Cancellation made no practical difference once the
Ministry had decided to suspend the licence. We can discern no basis in the
evidence for a finding other than that the closure of the creche led the
Council to see it as a genuine redundancy situation. It seems that the Judge saw the matter as amounting to a
complaint by the Ministry and the police of misconduct on the part of
unspecified workers which ought to have been dealt with by the Council under
the complaints procedure. There is no evidence to suggest that the police or
the Ministry ever considered the situation, which they were satisfied they
were confronted with, as capable of any solution other than immediate closure
of the creche. Next, in the central passage in his reasoning in that
second judgment set out earlier, the Chief Judge said that nothing had
emerged to show that children at the creche on 1 September 1992 were in
danger or at risk "nor does the Council suggest that it was so, or that
it had any basis for thinking so at the time, or at any time since". The
Chief Judge had already accepted that Police Officers and Ministry of
Education and Department of Social Welfare officials were satisfied that
there was a risk to children at the creche and that the police told Mr Gray
that as a result of the ongoing investigations they were satisfied that the
children at the creche were in serious danger and all those present at the
meeting wanted the creche closed that very day. That state of mind relates
directly to the test under the requirements of "being satisfied that it
is not in the interests of children attending a licensed centre for the
centre to continue to be open". Proof of actual criminal wrong-doing or
criminal conviction is not required before action is taken in accordance with
the requirements. Indeed, once the Director-General is so satisfied he or she
must suspend the licence; and the Director-General did so on 3 September. On
the information provided to the Council on 2 September and given the
insistence by the senior Police and Departmental officers that the creche must
close, it is unrealistic to suggest that the Council could have embarked on
its own inquiry into possible criminal wrongdoing and required Police and
Ministry to stay their hands. And, importantly for present purposes, there is
nothing in the evidence to justify a finding that the Council did not have
any basis for accepting the categorical statements of the police and the
Ministry, or that the Council did not in fact accept the express reasons for
closing the creche.
It is common ground that notices given to the workers and
the unions at the 5.30 pm meeting on 3 September did not comply with the
redundancy procedures of the employment contracts. The legal issue concerns
the scope and implications of that process failure. Before that meeting took place the licence for the creche
had already been suspended and then cancelled. The creche had been closed.
Later the same evening Mr Gray accepted the argument which Mr Lawson of the Union
had made at the meeting that the redundancy provisions had not been complied
with. He promised to issue notices of suspension in their place and did so
the next morning. Paragraph 2 of the 4 September notice recorded that Mr Gray
was now agreed that the notice of termination "be withdrawn and that it
be replaced by suspension on two weeks’ leave on pay as from today, 4
September 1992". There is no suggestion that the original notices
operated after they had been replaced. On 7 September the suspensions on
leave with pay were extended to 22 October. The formal redundancy procedures
were set in train on 7 November 1992 and, except for two staff members who by
agreement were redeployed, the workers’ employment came to an end on 22
October and they were paid out in terms of the redundancy provisions without
prejudice to any claims against the Council. In both judgments the Chief Judge held that the corrective
action taken by Mr Gray was available in mitigation, but did not specify how
mitigation was to be assessed and, it seems, did not make any allowance for
it. In the relevant passage cited earlier from the second judgment, the Chief
Judge proceeded on the assumption that if notice of an impending redundancy
situation had been given to Mr Lawson on 3 September, and if the Council had
insisted on making a business decision to close the creche, then in terms of
the contract and long before any dismissals could be effected the Union could
have invoked the right to require discussion and the Council would have been
under an obligation to enter into discussions with the Union. By acting as Mr
Gray did, the Chief Judge said, essentially on 2 September and early on 3
September, and by failing to notify the Union well in advance of dismissals,
Mr Gray put it out of the power of the Council to comply with the contract in
but a perfunctory or token manner. The Judge’s conclusion in the first part of the last
sentence proceeds on the assumption, which we have already rejected, that the
earlier decisions in relation to the suspension and cancellation of the
licence constituted an employment issue to be dealt with in terms of the
employment contracts. They were decisions made by the Director-General of
Education under the powers conferred by the regulations. Further, the 3
September notice to the workers having been withdrawn on 4 September, and
there being no challenge to the validity of the redundancy procedures set in
train on 7 October, the original process failure was spent on 4 September and
there is no basis in law for a finding of unjustifiable dismissal for
redundancy. The employment contracts had not terminated before the withdrawal
of the notice. Their eventual termination was not in law pursuant to the 3
September notice. The process failure is more aptly characterised in terms of
s 27(1)(b) of the Employment Contracts Act 1991 as "unjustifiable action
... to the employee’s disadvantage". The personal grievance claim in respect of process failure
is accordingly limited to consequences flowing from the wrongful issue of the
3 September notices. There is no basis for a claim to income loss because the
workers were paid throughout, and no losses of that kind flowed from the
short duration procedural breach. The remedy for settling the grievance is
confined to payment of compensation for humiliation, loss of dignity and
injury to the feelings of the employees arising out of the notice of 3
September and that evening’s meeting erroneously premised on a redundancy
situation, and loss of any benefit which the workers might reasonably have
been expected to obtain if the personal grievance had not arisen (s
40(1)(c)).
For the reasons given we conclude that the Employment
Court erred in law in finding that the workers were unjustifiably dismissed.
Redundancy was the reason for their dismissals. The process failure
constituted unjustifiable action, not unjustifiable dismissal. The remedy for
the personal grievance in respect of process failure is compensation. That
compensation is confined to compensation for humiliation and distress and any
lost benefits. In the result it is unnecessary to consider the Judge’s
assessments of income losses. Rather than remit the matter to the Employment
Court for consideration of the quantum to be awarded, counsel invited this
Court to fix those figures. In the interests of achieving immediate finality
in respect of this matter which began 4 years ago and has caused continuing
anxiety and concern to many people, we shall do so.
The Chief Judge awarded compensation for distress and
humiliation of $2,500 and $6,000 to two part-time cleaners, and ranging from
$15,000 to $25,000 to the ten child care workers other than the supervisor,
who was awarded $30,000. Those figures were arrived at on the assumptions,
which we have rejected, that the process failure constituted unjustifiable
dismissal and that their distress right through to the end of the saga was to
be attributed to that failure. Many of the clearly painful experiences and
sufferings to which individual workers referred in the lengthy summaries of
their evidence appended to the second judgment related to the impact of
closure itself and to later events, including the charging of the four creche
workers and the continuing distress occasioned by the loss of their
employment and career expectations. Accordingly, the Chief Judge’s awards are
not a guide to the proper compensation levels on the more limited basis on
which we must approach the matter. In assessing the compensation it is important to try to
separate the distress occasioned by the suspension of the licence, which led
to the closure of the creche and for which the Council is not accountable,
from the distress flowing from the Council’s actions that evening and in
asserting redundancy before the notices were withdrawn the next morning and
replaced with suspension of the workers. The actions by the Council in that
regard that evening caused acute humiliation and distress and continuing
injury to the workers’ feelings. The Chief Judge summarised the evidence in
this way: As
to the dismissal itself, Mr Gray’s manner was variously described as
unapproachable, unfriendly, not appearing to be sorry, lacking in concern for
employees who were shocked and scared, very businesslike, very impersonal,
very concise, insensitive, cold and clipped, cold and abrupt, treating staff
with disdain and distaste as if pleased to wash his hands of the whole
centre, awkward manner lacking in clarity or honesty, making no eye contact
with the staff, blunt, standing side on to the staff with his hands in his
pockets, cold-bloodedly delivering his message, cold and gruff. The Chief Judge went on to acknowledge that Mr Gray found
presiding at the meeting a stressful and difficult duty and was upset by
having to discharge it. The changing of the locks while the meeting was going on
must have added to the trauma suffered by those present. Also relevant is the
by-passing of the Unions, which ought to have been notified in advance, and
the press release by the Council that same evening announcing redundancy.
However the impact on the workers of that publicity must have been lessened
by two features of the immediate publicity. First, the focus of the press
coverage was on the abrupt closure of the creche. The second was that at the
outset "The Press" reported that suspension on pay had replaced the
short-lived redundancy notices. It is difficult to discern in the Chief Judge’s awards any
particular pattern referable to the stress occasioned by the announcement of
redundancy at the meeting, the manner in which the meeting was conducted, and
events associated with it, including the changing of locks and the media
publicity. Thus, while the cleaner who was present at the meeting received a
larger award for distress than the cleaner who was absent, a child care
worker who was absent received more under this head than two who were
present. On the restricted basis on which we must make the assessments, we
consider it is appropriate to differentiate on that ground and that as well
as distinguishing between cleaners and child care workers, it is also
appropriate to allow for the somewhat greater impact and distress suffered by
Ms Davidson, the supervisor of the creche. As to the cleaners, the Chief Judge considered that the
general perception was that, as after hours cleaners, they had no contact
with the children and that no mud should stick to them. In our view there is
no basis for an award of distress compensation to the cleaner who was on
accident leave from work and was not present at the meeting. The other
cleaner’s award should be reduced to $1,000. In what is essentially an
exercise of judgment, we fix the distress amounts for the child care workers
at $7,500 each, except for the supervisor, $10,000, and the worker who was in
Dunedin and did not attend the meeting, $5,000.
Clause 47 of the relevant collective employment contract
provided: The
Council shall indemnify and keep indemnified its employees against the
outcome of any legal action taken by a third party against them or the
Council based upon any act or admission or statement (whether or not in
writing) of the employee during the course of his/her employment provided
that such act or admission or statement on his/her part (if so established)
does not arise from theft, misappropriation or malfeasance on the part of the
employee. In the first judgment Chief Judge Goddard held that on two
grounds the four workers charged were entitled to be reimbursed the costs of
the successful defence in the criminal proceedings over and above legal aid.
The first was entitlement under cl 47. The second was as compensation for
loss of benefit where in the circumstances a "good employer" should
stand behind loyal employees. In the second judgment the Chief Judge repeated
his conclusion that cl 47 applied but added as a second ground a third point,
namely that the four workers would be entitled to be indemnified on ordinary
principles of agency. The Chief Judge’s finding that cl 47 entitled the workers
to recover was based on his construction of that provision of the employment
contract. That finding comes squarely within and is protected by the
exclusion from appellate challenge of any decision of the Employment Court on
the construction of any employment contract. The quantum of the indemnity is
also no longer in issue. While the appeal on the indemnity question must
accordingly fail, we should record that the indemnification of agents at
common law does not extend to expenses incurred in defending an allegation
that the person charged did something which he or she did not in fact do and
which it was not his or her duty to do. The reason is that such expenses were
not incurred by the worker as an agent of the employer in the reasonable
performance of the worker’s duties (Tomlinson
v Adamson [1935] Session Cas 1 (HL); Nathan
v Kiwi Life & General Mutual Assurance Co Ltd (1982) 1 BCR 416).
The appeal by the Council against the four judgments of
the Employment Court in this matter is allowed in part and, subject to two
qualifications, the orders made in the Employment Court are set aside. First,
the Council fails in its appeal on the indemnity question and the order for
payment of $89,478.96 to the four workers concerned stands. Second, in lieu
of sums totalling $248,500 awarded by the Employment Court in respect of
compensation for distress, the amounts referred to earlier totalling $83,500
are substituted. Various questions of costs were canvassed in argument. In view
of the limited success overall eventually achieved by the workers and the
time and expense of the major issues on which they have failed, we consider
that the interests of justice are best served if the parties meet their own
costs in both courts.
Buddle Findlay, Christchurch, for appellant |
