Ipsofactoj.com: International Cases [2000] Part 7 Case 6 [NZCA]



Eds (New Zealand) Ltd

- vs -





13 NOVEMBER 2000


Keith J

  1. EDS (New Zealand) Ltd ("EDS"), the appellant, terminated the employment of the respondent, Mr. Inglis, for reasons of redundancy on 23 October 1997. On 21 September 1998, following a thirteen day hearing, the Employment Tribunal decided that Mr. Inglis had not been unjustifiably dismissed and accordingly rejected his application for remedies, under that head, of reinstatement or damages in excess of $1,400,000. The Tribunal did however find that he had a personal grievance by reason of disadvantage and made an order in his favour of $7,000 for humiliation, loss of dignity and injury to feelings under s 40(1)(c)(i) of the Employment Contracts Act 1991.

  2. The major element in the Tribunalís rejection of the dismissal claim was that Mr. Inglisí position of Accounts Manager, Wellington Health, in the employment of the appellant, was genuinely superfluous to the needs of EDS. The case was one of genuine redundancy. On appeal by Mr. Inglis, the Employment Court (Judge Shaw) agreed with that conclusion; Inglis v EDS (New Zealand) Ltd [1999] 2 ERNZ 342.

    The Court began its summary of its judgment in this way (at 353):


    There was sufficient evidence for the Tribunal to reach its conclusion that Mr. Inglisí position had become redundant in circumstances where there were genuine commercial reasons to do so.

  3. The Court went to hold however that the dismissal was unjustifiable for a combination of reasons. Its summary, which helps introduce the main facts in the case (set out in some detail at 345-348), continued in this way ([1999] 2 ERNZ at 353-354):


    .... However, it [the Tribunal] failed properly to address the method of selection of Mr. Inglisí position for redundancy and the impact of the EDS dissatisfaction on Mr. Inglis in the course of this process.


    The decision by Mr. Cowan to initiate the PIP [performance improvement plan] process at step four was wrong and resulted in undermining the confidence and trust of the employee that he would be treated fairly and in accordance with the company policies. The effect of this was to have him disengage from the PIP process, as well as refusing to participate in the opportunity offered to apply for the new position. Whilst this attitude is understandable it makes the determination of what his losses are very difficult indeed.


    The correct approach of the Tribunal would have been to have found that Mr. Inglis was not dismissed genuinely for reasons of redundancy and that it had been "tainted by some inappropriate motive or irrelevant consideration" (see Savage v Unlimited Architecture Ltd [1999] 2 ERNZ 40,49). The Tribunal was not correct on the material before it to hold that the employer discharged the burden of proving that the dismissal was justified on the basis of redundancy. Much of the evidence given and referred to above suggests that but for the performance concerns about Mr. Inglis it is unlikely that EDS would have made his position redundant. If he had been performing adequately, the natural attrition of Ms Chalmersí position would have meant that the remnants of her accounts could have been incorporated into the accounts held by Mr. Inglis and he could have continued with his employment.


    All of the above, however, is entirely speculative because of Mr. Inglisí refusal to participate in the PIP process or the reselection procedures. Given the errors made by EDS in initiating the PIP at step four, Mr. Inglisí reasons are understandable; however, his failure to participate in any way leads inevitably to the conclusion that he contributed significantly to his own dismissal. Although the dismissal was unjustifiable for the reasons above, the remedies available to him must be reduced to reflect the extent to which is actions contributed towards his unjustifiable dismissal.

  4. The Court reversed the disadvantage ruling made by the Tribunal against EDS because the Tribunal had not given the parties the right to be heard on the point.

  5. Mr. Cowan, referred to in the second paragraph of the summary, was EDSí General Manager, Business Operations Health / Utilities. Mr. Inglis as Account Manager, Wellington Health, had responsibility to manage EDS contracts with Capital Coast Health Ltd ("CCHL") and Health Benefits Ltd. The second accounts management position in Wellington at the relevant time was held by Ms Chalmers, mentioned in para 3 of the summary. Her primary objective in her words "was to clean up the number of utilities and commercial accounts that were within [her] responsibility". She was given six months from January 1997 to do the job and within that time she had, she said, achieved the goals that had been set.

  6. The decision taken by EDS in August-September 1997 was to merge the two positions held by Mr. Inglis and Ms Chalmers into one and then to proceed to make an appointment to that single position. The PIP process, mentioned in para 2 of the summary, was a performance improvement plan process used by EDS, in the particular context of Mr. Inglisí role, to improve what management saw as a declining level of "added value" in the CCHL contract. That process had six steps. It was described as a "guide for progressive discipline which helps the leader deal quickly and fairly with marginal performance".

    The steps were headed as follows:

    Step One

    Step Two

    Step Three

    Step Four

    Step Five

    Step Six







    Early Recognition

    Early Notification

    Observation / Documentation

    Confrontation or Else

    The Improvement Plan

    Conclusive Action

    The Tribunalís finding of disadvantage in favour of Mr. Inglis was based on EDS beginning the process at step 4: "Confrontation or Else".

  7. As is indicated in para 4 of the Employment Court summary, Mr. Inglis did not apply for the single position created following the restructuring (Ms Chalmers, who did apply, was appointed); nor did he respond to proposals made, in terms of his employment contract, that he pursue possible deployment within the company.

  8. Mr. Inglis cross appeals against the finding that his position had become redundant for genuine commercial reasons. EDS appeals against the other findings against it, and especially against "the inescapable conclusion .... that EDSís selection of Mr. Inglisí position to be made redundant arose out of a specific desire to rid EDS of him" ([1999] 2 ERNZ at 351, quoted in context in para [15] below).


  9. The first issue, as the Tribunal and Court decisions, logic and chronology indicate, is whether Mr. Inglisí position was genuinely redundant. Both the Tribunal and the Court ruled that it was; and Mr. Toogood, for EDS, supported those concurrent findings of fact. It should be mentioned that both the Tribunal and the Court found that Ms Chalmersí position was also redundant, and that the two positions were in effect merged into a new one.

  10. The appeal to this Court is of course limited to questions of law; Employment Contracts Act s.135. For Mr. Greager, representing Mr. Inglis, to succeed on his challenge to that concurrent finding, he had to persuade us that he could clear the very high hurdle to which we referred, for instance, in Northland Coop Dairy Co Ltd v Rapana [1991] 1 ERNZ 361, 363: "the Court will intervene only where the lower Court has come to a conclusion for which there was no evidence or which is inconsistent with the evidence and contradictory of it". In this case, as in others, we are faced with an unrealistic attempt to dress up questions of fact as a question of law.

  11. The argument for Mr. Inglis was that one position had in fact become superfluous, but it was Ms Chalmersí and not his (nor both positions, to return to that point). The argument was closely related to the definition of redundancy in the employment contract: "the duties performed by and / or the position filled by [Ms Chalmers] [had] become superfluous to the needs of EDS". (We note but do not pursue the point that the construction of an employment contract is also excluded from our jurisdiction by s 135.) The argument was based on a comparison between positions, as they appeared in the organisational tables, of the two account managers and the new position. In its own terms that argument may have some force, but it completely ignores evidence which demonstrated that the role of account managers was not the subject of a precise, unchanging and unchangeable definition. It is not for us to evaluate the evidence. We simply point to evidence on which the findings of the Tribunal and Court could properly be based.

    According to the evidence of EDSís General Manager Human Resources:

    An Account Manager role is a generic one and the company has always exercised the right to move people around subject to consultation. The skills required for a successful Account Manager are transferable from one account to another.

  12. Mr. Toogood also pointed to a letter from EDSí human resources consultants which said that "written job descriptions [were] not standard practice with EDS and the general practice was to communicate and refine position requirements in direct meetings". He referred as well to the transfer provision in the employment contract, and to evidence by Ms Chalmers of possible new and extended business within the area for which she became responsible.

    Among other things, she said:

    When youíre looking at the account management role you canít just look at what are the current accounts that are there, you have to say what are the markets that have to be serviced from that role, and there were two markets, the health and the utility markets.

  13. There was an ample basis in the evidence, we consider, for the conclusion reached by both the Tribunal and the Court that EDS had made a decision for genuine commercial reasons to make redundant Mr. Inglisí position (and Ms Chalmersí position as well). To repeat, it is not for this Court to evaluate that evidence. That is for the Tribunal and the Employment Court. The latter said this ([1999] 2 ERNZ at 349):

    Having considered the evidence I believe that the Tribunal was justified in its conclusion that the new position was not simply Mr. Inglis's position under another name. The new position comprised the functions formerly undertaken by the account managers Wellington Health and Commercial. Both of these positions were subject to change. The contract of employment required him to work in other sections of the company and entitled the company to manage its staff to meet its customers' needs.


    At the time of the merger of the two positions both of the persons affected had the opportunity to apply for the new positions. In this way EDS fulfilled its part of the contract of employment by examining redeployment into a suitable alternative position.

    I conclude that the Tribunal did properly decide that Mr. Inglis's position of account manager, Wellington Health, was superfluous to the needs of EDS.

  14. As we have said, ample evidence existed to support that conclusion. The cross appeal on the issue of the genuineness of the redundancy of Mr. Inglisí position must fail. It is dismissed.


  15. That question uses the words of the Tribunal decision which ruled that there was no causal link. The Employment Court found to the contrary, concluding that the Tribunal erred. The Judge referred to "unequivocal evidence .... that there was dissatisfaction with Mr. Inglisí performance on the CCHL account". She then stated that the question was whether the ultimate dismissal was caused by the employerís dissatisfaction and continued:

    It is a question of whether the ultimate dismissal was caused by the company's dissatisfaction. In fact the dismissal for redundancy came about because Mr. Inglis failed to get the new position he had been invited to apply for. One of the reasons why he did not get the position was that he did not apply for it and refused to participate in the process. However, given the evidence heard by the Tribunal, this purely analytical approach does not take account of the strong probability that the history of dissatisfaction with Mr. Inglis was such that his chances of success for the new position were slim.

    This question of causation underscores the very real difficulty in analysing what may be called "mixed motive" dismissals. In the very recent decision of Savage v Unlimited Architecture Ltd [1999] 2 ERNZ 40, the Chief Judge provided a summary of the present law on redundancy and noted (p 48):

    It does not, however, follow that where an employee is dismissed for genuine reasons of redundancy, there can never arise an occasion for the award of remuneration lost as a result of personal grievance.

    Her Honour then sets out a number of hypothetical redundancy scenarios. Of these, two are pertinent to this case ([1999] 2 ERNZ at 350-351).

    Where redundancy is only the ostensible reason for the termination of employment, masking another and different reason, then of course the personal grievance will prevail and the full range of remedies (including reimbursement of remuneration lost, if any has been) will be available. The third situation is where the reason for wanting to terminate the employment of one or more employees is genuinely motivated by operational requirements but the selection of employees is tainted by some inappropriate motive or irrelevant consideration.

    The latter scenario most closely resembles Mr. Inglis's situation. It is quite clear on the evidence available to the Tribunal that EDS was genuinely motivated by operational requirements to terminate the employment of either Mr. Inglis or Ms Chalmers. However the evidence shows that the selection of Mr. Inglis was tainted by EDS's dissatisfaction with Mr. Inglis's performance.

    If EDS had correctly initiated the PIP in June when Mr. Cowan first started to express his dissatisfaction with Mr. Inglis's performance and if Mr. Inglis had not improved his performance to the required levels then EDS may have had justification for dismissing him under the company disciplinary procedures. As it was, the belated attempt to proceed with the PIP .... meant that the opportunity was lost for the PIP to be used correctly, i.e. as a guide for progressive discipline. Instead the PIP procedure became hopelessly entangled with the redundancy.

    The inescapable conclusion is that EDS's selection of Mr. Inglis's position to be made redundant arose out of a specific desire to rid EDS of him. Returning to the definition of redundancy in the employment contract it is clear that while Mr. Inglis's dismissal was partly attributable to the fact that either the duties or the position he occupied was superfluous to the needs of the company, his termination was much more attributable to the fact that EDS was dissatisfied with his performance.

    I conclude that the Tribunal erred when it found no causal link between the initiation of the PIP and the dismissal of Mr. Inglis.

  16. We consider, with respect, that there are two errors of law in that passage, the first relating to the proper approach of the Employment Court to the findings of fact made by the Tribunal, the second to the confusion of distinct concepts.

  17. On the former, this Court last year in Glovers Food Processors v Leaosavaii [1999] 1 ERNZ 478, examined the Employment Courtís appellate function.

    After reviewing the legislation it said this (at 486-487):


    In Big Save Furniture Ltd v Bridge [1994] 2 ERNZ 507 (CA) and Samu v Air NZ Ltd [1995] 1 ERNZ 636 (CA), referring to that statutory scheme, this Court emphasised that an appeal from the Tribunal is not expressed to be by way of rehearing, as are appeals from the District Court to the High Court and from the High Court to the Court of Appeal. Except in exceptional circumstances, the Employment Court may consider only those issues, explanations, and facts that were placed before the Tribunal. In Big Save Furniture Ltd Hardie Boys J continued at p 522:

    The Court's role is primarily to deal with legal issues (s 76(d)) but it is entitled to differ from the Tribunal's findings of fact, although it will of course be reluctant to do so when they turn on credibility, and on the advantage the Tribunal had in having the witnesses before it in person.

    And in Samu, Hardie Boys J said at p 639:

    The material the Employment Court may consider on an appeal is limited by s 95(4). None the less it is entitled to form its own assessment of the facts that are properly before it, bearing in mind first that every appellate Court must make full allowance for the advantage the trial Court had in seeing and hearing the witnesses; and secondly that it is for the appellant to show that the trial Court was wrong.

    See also Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA).

  18. In the present case the Employment court at the outset of its judgment quoted the passage from Samu set out in the Glover judgment. Mr. Toogoodís complaint for EDS is that while the Court was true to that direction in the first part of its judgment (about redundancy, paras [9] to [14] above) it departed from it in the second. We have to agree. There is no overt examination in this part of the Employment Court judgment of the Tribunalís careful consideration of the evidence nor of its reasoning which led it to the conclusion that there was no causal link between any EDS dissatisfaction with Mr. Inglis (indicated for instance by the initiation of the PIPs process) and the redundancy dismissal. In the course of its consideration of the extensive evidence, the Tribunal found that

    • there was no evidence of an EDS desire to get Mr. Inglis out of the Account Manager position or out of EDS in January 1997

    • Mr. Inglis was not taken to task for his performance by Mr. Cowan in late May or early June ó a finding with implications for the PIP process

    • in advancing discussions with Mr. Inglis at Step Four of the PIP process EDS was acting at variance with Mr. Inglisí contractual rights, raising questions about the motive behind the action

    • the PIP process put Mr. Inglis in a frame of mind that he had been unfairly and improperly treated and this was a legitimate attitude for him to adopt

    • there was no causal link between Mr. Inglis raising and pursuing certain matters with the Chief Operating Officer, EDS Asia Pacific and Mr. Inglisí dismissal by reason of redundancy

  19. Those findings, based on the detail of the evidence, led the Tribunal to say, as indicated at the beginning of this part of this judgment, that

    I cannot conclude that there was a causal link between the initiation of the PIP process and Mr. Inglisí ultimate dismissal by reason of redundancy.

  20. The Employment Court does not in this critical part of the judgment recognise the advantages which the Tribunal had in having the witnesses before it over several days. Nor does it point to particular errors in the Tribunal reasoning. Rather, it has simply substituted its impression of the overall situation for the carefully reasoned position of the Tribunal.

  21. In addition to making that error in its approach to its appellate role, the Court also confused four different matters ó to turn now to the second reason for allowing EDSí appeal on this issue. The matters are:

    1. the decision to declare a position (or in this case two positions) superfluous (or redundant in common usage)

    2. the decision to make an appointment to the resulting new single position

    3. the initiation of the PIP process with its potential disciplinary element, and

    4. the failure to redeploy Mr. Inglis ó with the result, along with 1, that in terms of his employment contract he was dismissed as redundant.

  22. The second decision is of course independent of the first. It will depend on the relative merits of the candidates including external candidates. Any earlier assessment of those who might be appointed from within the existing staff could quite properly be relevant to that selection: the "strong probability" to which the Employment Court refers in the first paragraph of the passage quoted in para [15] appears to be entirely proper in that particular context. The Tribunal made the following relevant comment after stating the conclusion, quoted earlier, about the lack of a causal link:

    Whilst I conclude that there was no causal link between his various complaints about the "Mefford matters" [the final point in para [18] above] and the initiation of the PIP process it seems to me more probable than not that he was not performing to the satisfaction of his seniors in the company and that Ms Chalmers was seen as the employee better suited to the position of Account Manager to deal with the important account manager matters of which CCHL formed part. It is notable that Mr. Inglis did not or could not call witnesses to speak in support of his competence as an Account Manager; as opposed to those who made comment about Ms Chalmersí capabilities. It comes as no surprise to me that Ms Chalmers was selected for the consolidated position over Mr. Inglis. I am satisfied that from the companyís perspective that Ms Chalmers succeeded over Mr. Inglis and that, whilst the initiating of the PIP process was wrong, it did not necessarily mean that Ms Chalmers would be selected over Mr. Inglis.

  23. The initiation of the third process is independent of the first decision, given the finding of the Court (as of the Tribunal) that the position was genuinely redundant. (It should be mentioned that the PIP process was intended to be initiated right at the time of the restructuring and was not taken any further.)

  24. And, to turn to the fourth matter, the termination of the employment was a result, given the outcome of the distinct decisions taken on the first and second matters, of the failure of Mr. Inglis to take up any redeployment possibility. It could not be taken to impugn retrospectively the genuine restructuring decision.

  25. To take one instance from the critical part of the Employment Court judgment quoted in para [15] above, the confusion between the different concepts appears right at the end of that passage. The Court there says that "his termination was much more attributable to the fact that EDS was dissatisfied with his performance", that is than the fact that his position had become genuinely superfluous. In a sense that statement is correct since Mr. Inglis was not appointed to the new position because Ms Chalmers was considered superior. But the step on which attention must focus is the first: the decision to make both positions redundant or superfluous and merge them into one. The Court agreed with the Tribunal that that decision was taken for genuine commercial reasons.

  26. It follows that we do not see any basis in the facts, given the distinct legal concepts, the concurrent finding on the genuineness of the initial redundancy of the position and the Tribunalís detailed findings of fact on the lack of "a causal link", for the Employment Courtís findings of "tainting", and "hopeless entanglement". Accordingly, we consider that the EDS appeal succeeds on this point and that the Tribunalís decision that there was no causal link between the initiation of the PIP or the employerís dissatisfaction with Mr. Inglis and the redundancy of his position should be restored. It follows that there was no unjustifiable dismissal.


  27. The Employment Court recognised that s 34 of the Employment Contracts Act permitted the Tribunal or Court to find a personal grievance of a type other than that alleged. That power was however subject to the natural justice requirement that both sides be given the opportunity to be heard and the breach of that requirement meant that the order should be set aside. Mr. Toogood, while not conceding the point, was hard pressed to support the argument that the issues about the PIP, the step chosen, the unfairness of that and the timing were not fully ventilated in the lengthy hearing in the Tribunal. In the overall context of this case, and given the unusual direction in s 34 and the character of the institutions (discussed for instance by this Court in New Zealand Van Lines Ltd v Gray [1999] 1 ERNZ 85, 91-95), we consider that the power was properly exercised by the Tribunal. We also take account of the inappropriateness in all the circumstances of sending just that issue back to the Tribunal for further consideration.


  28. For the reasons given, we dismiss Mr. Inglisí cross appeal in respect of the first, redundancy issue; allow the EDS appeal on the second, connection issue; and allow the EDS cross appeal on disadvantage. As a consequence of those rulings, the other matters raised in the notices of appeal and cross appeal do not require attention. The overall result is that the Tribunal decision on the substantive issues is restored.

  29. The appellant is entitled to costs of $5,000 in this Court and to reasonable disbursements, including the travel and accommodation costs of counsel, to be fixed by the Registrar if the parties cannot agree. The question of costs in the Employment Court remains to be considered by it in the light of this judgment. The EDS appeal against the Tribunalís costs decision remains to be considered, again by the Employment Court.


Inglis v EDS (New Zealand) Ltd [1999] 2 ERNZ 342; Northland Coop Dairy Co Ltd v Rapana [1991] 1 ERNZ 361; Savage v Unlimited Architecture Ltd [1999] 2 ERNZ 40; Glovers Food Processors v Leaosavaii [1999] 1 ERNZ 478; Big Save Furniture Ltd v Bridge [1994] 2 ERNZ 507 (CA); Samu v Air NZ Ltd [1995] 1 ERNZ 636 (CA); Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA); New Zealand Van Lines Ltd v Gray [1999] 1 ERNZ 85


Employment Contracts Act 1991: s.34, s.40, s.135


C H Toogood QC for the Appellant (instructed by Simpson Grierson, Wellington).
J E Greager and M D Patchett for the Respondent (instructed by Johnston Lawrence, Wellington)

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