Ipsofactoj.com: International Cases [2002] Part 1 Case 5 [NZCA]


COURT OF APPEAL, NEW ZEALAND

Coram

Business Distributors Ltd

- vs -

Patel

GAULT J

KEITH J

BLANCHARD J

13 AUGUST 2001


Judgment

Blanchard J

FACTS

  1. The respondent, Mr Faruq Patel, had worked for the appellant, Business Distributors Ltd (BDL), for about eleven years as a photocopier salesman. He was on a salary of $72,000 pa. There was some suggestion that payments were merely advances against commission but the Employment Tribunal found otherwise. Mr Patel had a number of long-established customers. Towards the end of 1997 a Mr Parker, another employee, suggested to Mr Huston, the owner of BDL, that instead of each salesman having a personal list of customers, the companyís sales staff should move to a geographical or territory system and that everyone should be on commission.

  2. Mr Huston agreed and became eager to implement this change. He appointed Mr Parker as copier Division Manager. Until this time Mr Patel had been the longest serving salesman and had, he said, held the title of Sales Manager of the division. But the Tribunal held that Mr Parkerís promotion was not a breach of Mr Patelís contract; that he was not demoted. His management title had been informal only. However, the change to a territory system would mean that Mr Patel would have to sell on commission and would not retain many of his former client contacts. He was very resistant to the change and pressure was applied to him by the employer to get him to alter his attitude. He received several warning notices about his sales performance. One of these was sent to him on 7 January 1998 when he was on holiday, telling him that unless a shortfall in his figures was made up in that month he would be dismissed. This prompted a letter of objection from Mr Patelís solicitors who said that the warning was unjustifiable. Several new restrictions on his activities were also imposed. He was told that he would no longer be permitted to go to the storeroom. He disobeyed this restriction on one occasion and was given a warning about that. He was not permitted to contact the companyís Australian suppliers. BDLís leasing company was directed not to provide him with information.

  3. On 4 February 1998, evidently as a means of trying to get Mr Patelís cooperation, a proposal was put to him by Mr Huston that the territory system would be introduced but that his salaried remuneration would remain unchanged for 6 months and would then be reviewed. He would get the first choice of a territory and would not have a sales target during that time. He was told his options were to accept this plan, to come up with an alternative or to have his employment terminated.

  4. Mr Patel did not acquiesce. Correspondence between his solicitors and BDL followed. On 19 February BDL told Mr Patel that the territory system would commence on 2 March and that he should choose his territory by 23 February. He did not do so. On 2 March a territory was allocated to him by the company.

  5. The next day, 3 March 1998, Mr Patel tendered a letter of resignation telling Mr Huston that he had given him no option but to leave. Mr Patel said Mr Huston appeared surprised. The letter read:

    At our sales meeting today I was formally given area B as my working area.

    You therefore have rescinded my current contract.

    I do not accept the new terms.

    As per our previous correspondence I understand that you have terminated my contract without notice.

  6. Mr Huston attempted to get Mr Patel to withdraw his resignation but in vain.

    THE EMPLOYMENT TRIBUNAL DECISION

  7. Mr Patel brought a personal grievance claim under s27 of the Employment Contracts Act 1991 claiming both unjustifiable (constructive) dismissal and unjustifiable disadvantage. After a four day hearing the Employment Tribunal held that the change to a territory system was not a breach of Mr Patelís employment contract because the contract allowed for a change in his job description provided there was suitable consultation, as was found to have occurred. The Tribunal found also that BDL had never intended that Mr Patel leave its employ. He was a long-serving and very experienced salesperson. BDL had merely been trying to pressure Mr Patel into accepting the change to the territory system which it was entitled to make.

  8. But in applying that pressure, the Tribunal held, BDL had acted unfairly. It referred to two written warnings, including that of 7 January, and to the "petty restrictions" placed on Mr Patel in relation to his access to the storeroom area, which entailed an implied threat of dismissal for disobedience, and in relation to the suppliers and the leasing company.

  9. The Tribunal concluded:

    The fact that the respondent may not have wished to persuade the applicant to resign but rather pressure him into accepting changes he was resisting, does not detract from the fact that the applicant viewed the respondent's conduct as being designed to coerce him, and that the respondent ought to have anticipated that it was likely that he would do so and might resign given his length of service and the fact that aspects of the respondentís conduct were so obviously unfair and so obviously coercive.

    Whilst the Tribunal acknowledges that the applicant was a significant contributor to the "stand off" that developed with regard to the introduction of the territorial sales system it considers that the evidence shows that the respondentís conduct was in serious breach of the implied duty of fair treatment it owed the applicant as its employee and, as such, the applicant was entitled to treat the respondentís behaviour as repudiatory. He was entitled to form the view, and did form the view based on that conduct that the respondent was both attempting to secure his departure and/or refusing to treat him in accordance with standards of fairness appropriate to a senior and long serving employee.

    It therefore follows that the Tribunal must find that the applicantís dismissal was a constructive dismissal. His resignation occurred as the result of a dispute between himself and the respondent and numerous aspects of the respondentís reaction to his failure to agree to changes in the respondentís sales operation were unfair and ought to have been anticipated to have resulted in the applicantís resignation.

  10. Because it had addressed issues relating to the unjustifiable disadvantage claim in dealing with unjustifiable dismissal, the Tribunal made its awards only in relation to the unjustified dismissal. It ordered BDL to pay Mr Patel compensation of 8 weeks salary (s40(1)(a)) and a further sum of $5,500 for humiliation, loss of dignity and injury to feelings (s40(1)(c)).

    THE APPEALS

  11. BDLís appeal to the Employment Court was dismissed. It now pursues an appeal to this Court under s135, which of course is restricted to a question of law. BDL says that it argued in the Employment Court that the Employment Tribunal had not applied the correct legal test in determining whether or not Mr Patel was unjustifiably constructively dismissed and, in particular, whether his resignation was caused by a breach of duty on the part of BDL. It now says that Judge Palmer, in confirming the Employment Tribunalís decision, made the same error. BDLís further argument is that the Judge failed to provide any reasons for rejecting that ground of appeal and failed to turn his mind at all to some crucial elements of what is described as the "large amount of evidence" that was put before him showing that Mr Patel resigned solely because of his objection to the new territory-based system and not because of BDLís conduct towards him.

  12. We are satisfied by Ms Brokenshireís argument for the respondent that the first of these grounds must fail. Indeed it was not pressed in Mr Paulsenís oral argument. It can be seen from the passage from the Tribunalís decision quoted in para [9] above that the Tribunal did not directly state that BDLís conduct was causative of the resignation. But that is certainly implicit in the final paragraph. The Tribunal had correctly directed itself, as Judge Palmer did, in accordance with this Courtís decision in Auckland Electric Power Board v Auckland Provincial District Local Authorities Officers IUOW Inc [1994] 1 ERNZ 168, 172:

    In such a case as this we consider that the first relevant question is whether the resignation has been caused by a breach of duty on the part of the employer. To determine that question all the circumstances of the resignation have to be examined, not merely of course the terms of the notice or other communication whereby the employee has tendered the resignation. If that question of causation is answered in the affirmative, the next question is whether the breach of duty by the employer was of sufficient seriousness to make it reasonably foreseeable by the employer that the employee would not be prepared to work under the conditions prevailing: in other words, whether a substantial risk of resignation was reasonably foreseeable, having regard to the seriousness of the breach.

    FAILURE TO ADDRESS ARUGMENT OF APPELLANT

  13. Turning to the other ground of appeal, we regret to have to say, however, that we consider that Mr Paulsenís criticisms of the Employment Court judgment on that ground have substance. The complaint being made to the Employment Court about the Tribunalís decision was that the Tribunal had overlooked some crucial evidence establishing that there was no causative link between BDLís conduct and Mr Patelís resignation Ė in particular, the terms of the resignation letter and Mr Patelís own evidence that he did not think Mr Huston was trying to get rid of him. The letter referred only to the territory system and did not mention any of the matters which the Tribunal held collectively to amount to a breach of the duty to act fairly towards Mr Patel. In his evidence Mr Patel had himself stated that, although Mr Huston had not gone out of his way to keep him with BDL, he did not think Mr Huston had wanted him to go. He said that Mr Huston "fell off his chair, he was surprised" by the resignation "and I didnít think he thought I was going to leave". Mr Patel seemed to be suggesting it was instead Mr Parker, who had set up the "whole proposal". But it was Mr Huston, not Mr Parker, who had the ability to terminate Mr Patelís employment. None of this was referred to by Judge Palmer despite an argument having been made to him that the Tribunal had failed to make a proper assessment because it had not paid any regard to these aspects of the evidence.

  14. If the Employment Court had traversed these matters even very briefly in its decision, and had concluded that nevertheless the Tribunalís decision should not be disturbed, BDL could not now expect this Court to interfere with the Employment Courtís judgment unless it was able to clear the very high hurdle of showing that there was no evidence to support the Courtís decision. Mr Paulsen rightly does not put his case on that basis, accepting that there was some evidence on the point which might have given a measure of support for the Tribunalís view, as confirmed by the Court. Normally an attempt to have this Court review the balance of the evidence, as if engaged upon hearing a general appeal, must fail, even if we ourselves might have assessed the evidence differently. This is because a complaint about the weight of evidence and the conclusions drawn from it by the adjudicator is an entirely factual question and does not raise any issue of law.

  15. However, we accept Mr Paulsenís argument that a complete failure by a Court hearing a general appeal to consider and address material evidential matters which the body appealed from is said to have overlooked, can amount to an error of law. The consequence may be that the appellant is deprived of the general right of appeal which Parliament has conferred on it. When an appellate Court is asked to review and re-assess the evidence which has in material respects been traversed in the judgment of the lower court, it may be permissible for the appellate court simply to record that it has conducted a review and is satisfied, for the reasons given by the lower court, that the lower courtís assessment of the evidence should not be disturbed. But such a course cannot adequately discharge the appellate function where the very ground of appeal is that the lower court has neglected to take account of particular evidential matters. In order to respond properly to an appeal ground of this nature, the appellate courtís judgment rejecting the appeal will need to include its reasons for concluding that either the evidence in question was in fact considered by the lower court, or that the evidence is not material or that its weight is not sufficient to alter the overall balance of the evidence and thereby produce a different result.

  16. With great respect to Judge Palmer, we are troubled by the way in which he has constructed his judgment and by its lack of an adequate focus upon the evidential matters which the appellant had identified and was asking him to consider. The judgment is lengthy, consisting of 38 closely typed pages, of which more than 13 pages involve extended, and essentially unhelpful, quotations from the grounds of appeal and the Tribunalís decision. One of the quotations runs, in small print, for some six pages.

  17. The Judge has set out counselís submissions, often word for word, at some length but then has proceeded straight to a conclusory statement without any apparent attempt to analyse the matter upon which he was making a determination that the Tribunal had not erred. The judgment nowhere indicates that the Judge considered Mr Paulsenís argument that the Tribunal overlooked important pieces of evidence. In the absence of any acknowledgement of this argument and a brief response, it cannot be said that the Judge has discharged his appellate function. It was not enough for him merely to remark that the Tribunalís determination was "amply justified Ė compellingly justified Ė upon the material evidence as evaluated by the Tribunal", without saying why the apparently significant points made by Mr Paulsen could make no difference to the result.

  18. An example of the Judgeís technique in this case is in the following paragraph of the judgment:

    BDL, through Mr Paulsen, has strongly contended at a fundamental level that the Adjudicatorís primary determination upon the grounds he particularised that Mr Patel was constructively unjustifiably dismissed on 2 March 1998 is an unsustainable determination as a mixed question of fact and law in the material circumstances of this case. With respect to Mr Paulsen I reject this primary argument.

    The Judge provided no explanation for rejecting the grounds which Mr Paulsen had particularised.

  19. Later the Judge said:

    The Tribunalís decision is an extensive structured decision which is not wholly devoid of factual error and/or arguable factual error. As a matter of fact and degree, however, the incidence of such factual error as has occurred certainly, in my firm conclusion, does not significantly detract from the primary determination made by the Employment Tribunal as to how and why the company constructively unjustifiably dismissed Mr Patel from his employment on 2 March 1998.

    The Judge does not specify what factual errors he accepts had occurred. Nor does he say why they did not significantly detract from the Tribunalís determination.

  20. We have been brought to the conclusion that, because there has been a failure to give a reasoned response to one of the appellantís primary arguments, the Employment Court judgment must be set aside. Ordinarily, since facts are not the province of this Court on an appeal under s135, we would refer the case back to the Court for re-determination, as we have done recently in Empress Abalone Ltd v Langdon (CA4/00, 23 August 2000) and Harris v Chief Executive, Department of Correction [2000] 1 ERNZ 544. However, we are conscious of the limited sum now in dispute and the fact that the case has already been to (unsuccessful) mediation, a four day hearing before the Tribunal, a one day hearing in the Employment Court and a half-day hearing in this Court. Both counsel urged us, if we reached this point, to give the matter finality by determining ourselves whether the appeal should have been allowed by the Employment Court. This we now proceed to do.

    NO CONSTRUCTIVE DISMISSAL

  21. Having reviewed the evidence, we find persuasive Mr Paulsenís argument that Mr Patel resigned not because of the way in which he had been pressured to accept the territory system (which pressure, to an extent, BDL was entitled to exert) or because of the unfair treatment to which he had been subjected by BDL, but because he was not prepared to accept the new system. His letter of resignation makes that plain:

    .... I was formally given area B as my working area.

    You therefore have rescinded my current contract.

    I do not accept the new terms.

  22. That letter, and the correspondence from his solicitors to BDL which preceded it by a few days, say nothing about the unfair warnings, which by then were well in the past and had not been followed up, or about the continuance of the "petty restrictions" which, we accept, may have been having some continuing impact on Mr Patelís day to day functioning as a salesman.

  23. When he gave evidence, as recounted in para [13], Mr Patel readily accepted that Mr Huston, the personification of the employer, did not want to get rid of him and was surprised by the resignation. We add that Mr Huston demonstrated his desire to retain Mr Patel (on the basis that he would, as properly required of him, work within the new system on an unchanged salary basis for six months) by attempting to get Mr Patel to withdraw his resignation. This occurred before Mr Patel actually left the premises for the last time.

  24. Mr Patel also said in his evidence that he had a concern that at the end of the six month period of salaried remuneration he would not be treated fairly when the review occurred; and that a sales target would then be imposed upon him in an unfair manner. However he was not entitled to treat himself as constructively dismissed in anticipation of something which lay well in the future and may well never have occurred. He cannot point to the employerís possible future conduct as causative of the resignation.

  25. We are satisfied, therefore, that the Tribunal wrongly assessed the relevant evidence, to which it made little reference in its decision. The only proper conclusion to be drawn from the evidence as a whole was that Mr Patel resigned because of the employerís insistence on the territory system, not because of the unfair way in which he had been treated. BDLís appeal against the finding of unjustifiable dismissal should accordingly have been allowed.

    UNFAIR DISMISSAL

  26. However, if the Tribunal had found that there was no unjustifiable dismissal, it would then have turned its attention to the claim for unfair disadvantage. It follows from what we have already said that we are of the view that this claim was made out on the evidence. Indeed, Mr Paulsen did not really dispute it in this Court. The warnings, particularly that of 7 January 1998, and the restrictions placed on someone who had loyally served the employer for many years were acts of unfair treatment of an employee. BDL was entitled to place some pressure on Mr Patel to get him to accept the change in his working arrangements, but in these respects it went much too far.

  27. Although an award of $5,500 for this treatment must be considered quite generous for an employee who was not demonstrating an accommodating spirit, consistent with the terms of his employment contract, there can be no doubt that Mr Patel was humiliated and affronted by BDLís tactics. Therefore, while the award of compensation in the form of eight weeks salary cannot stand, we do not propose to reduce the award under s40(1)(c).

    RESULT

  28. The appeal is allowed. The order made by the Tribunal, as confirmed by the Employment Court, is set aside, along with the costs orders made below. Instead we substitute an order for payment by BDL to Mr Patel of the sum of $5,500 under s40(1)(c).

  29. In the circumstances, and bearing in mind that Mr Patel has achieved a modest recovery, but one which is only a small fraction of his claims, there will be no award of costs to either party in respect of this appeal or the hearings below.


Cases

Auckland Electric Power Board v Auckland Provincial District Local Authorities Officers IUOW Inc [1994] 1 ERNZ 168

Empress Abalone Ltd v Langdon (CA4/00, 23 August 2000)

Harris v Chief Executive, Department of Correction [2000] 1 ERNZ 544

Legislations

Employment Contracts Act 1991, s.27

Representations

O G Paulsen for Appellant (instructed by Owen Paulsen, Christchurch)

L A Brokenshire for Respondent (instructed by Cavell Leitch Pringle & Boyle, Christchurch)


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