Ipsofactoj.com: International Cases  Part 9 Case 13 [NZCA]
COURT OF APPEAL, NEW ZEALAND
- vs -
7 NOVEMBER 2001
(delivered the judgment of the court)
This is an appeal against a decision of the Employment Court upholding the common law claim by the respondent, Ms N, of constructive dismissal from her civilian employment at Waiouru Military Camp in the aftermath of a sexual harassment complaint by Ms N. Judge Shaw awarded Ms N $49,729 damages ($9,729 special damages for actual and expectation loss of wages; and $40,000 general damages) plus interest and costs.
IMMEDIATELY RELEVANT FACTS AND FINDINGS
Ms N is married to a soldier in the New Zealand Army. He was transferred to Waiouru. In September 1994 she took up a one month temporary position as an accounts clerk at the camp. Soon after it ended she was employed there as a psychologist's assistant, again a temporary position. It was common ground that during that second period of employment she was sexually harassed by a staff sergeant on a social occasion and not in the course of her employment. She made a complaint which was dealt with on 1 November 1994 by what was described as the orderly room procedure. She was dissatisfied with the process, with the way in which the Army treated her through the inquiry, with the punishment meted out to the staff sergeant, and with the impact on her continuing employment with the Army.
Following a three day trial Judge Shaw made these findings on this branch of the case:
The way in which the army dealt with the plaintiff's complaint of sexual harassment was, at one level, procedurally correct. It meticulously followed army procedures for dealing with army discipline. However, it failed to comply with its own sexual harassment policy. There was no properly trained person to deal with the plaintiff. It failed to ensure, as promised, that she could have her husband as a support person with her in the hearing, and it failed to provide any back-up support for the complainant after the event. In particular, there was no counsellor to immediately support her and assist her to readjust her working relationships. This led the complainant's emotional trauma, which had been caused initially by the harassment and then exacerbated by her experience during the orderly room procedure, to remain unchecked and untreated. The defendant's sexual harassment policy requires that cases of this sort should be dealt with not only with speed but also with sensitivity. It was in the latter regard that the defendant failed the plaintiff. There must be advantages to a complainant to have her complaint dealt with without delay but unless speed is accompanied by sensitive handling appropriate to a victim of sexual harassment then speed can become a negative factor - as it did in this case. I conclude that the way in which the army handled the complaint did destroy or damage the relationship of trust and confidence between it and the plaintiff in breach of her employment contract.
In the light of this what followed was, sadly, virtually inevitable. Although she was able to return to work as a psychologist's assistant, the events which followed showed that she was in a very fragile condition.
Ms N was offered and accepted a further temporary position in the accounts section. When she arrived there on 28 November to take up the position, Mr J R Hibbard, the staff officer in the accounts section, immediately raised two matters with her: her past standard of dress and the need to avoid any trouble between her and the staff sergeant's wife, who also worked in the section. As well, the Judge found, Mr Hibbard told Ms N her temporary employment could be for one month or it could be for one year (the position was to cover for a staff member on 12 months maternity leave). She believed he was telling her that her employment would be for a longer period if she did not cause trouble in the work place. Ms N became very upset and left the room.
Mr Hibbard took no further steps except to inform the appropriate authorities the next day that she had left. Ms N herself contacted Ms Bateman, the supervisor of civil administration at the camp, the next day and told her why she could not continue working in the accounts section. There was no follow up by the Army and she was not offered any further temporary appointments before she and her husband left Waiouru, when he was posted to another camp in May 1995.
Judge Shaw concluded:
I have no doubt that Mr Hibbard was genuinely trying to do the best to maintain a settled work environment in his office. Unfortunately, because of his lack of knowledge and training about the sexual harassment policy he approached his objective in an inappropriate and insensitive manner. The responsibility for this approach must lie with the defendant. The policy required that all civil staff were to be formally educated in this policy and introductory training was supposed to have been conducted by 1 May 1994. The defendant failed to implement this part of the policy and this I find was a direct cause of the manner in which Mr Hibbard dealt with the plaintiff, causing her to repudiate the contract.
The Judge went on to find that:
Even at this late stage, if the sexual harassment policy had been properly invoked the army could have provided a counselling service and follow up to the plaintiff once it became aware of her distress. Ms Bateman at least knew why she could not work in the accounts department. It would have been fair and reasonable and in accord with its own policy for the army to have done this. The absence of any action whatsoever to assist the plaintiff with her employment problems is also in breach of its obligations to be a good employer.
In summary I hold that the defendant was in breach in two respects over this incident:
Applying well settled principles the Judge found that there was a constructive dismissal and:
In relation to this incident I conclude:
Turning to special damages, the Judge concluded that while Ms N was employed on a one month contract she had a reasonable expectation, based on her previous experience in other parts of the civil administration office and on the procedure adopted for filling positions while incumbents were on maternity leave, that that position could be extended for up to 12 months. She went on to conclude, for the reasons she gave, that "had it not been for the Hibbard interview I am certain that she would have had continuing employment made available to her for at least 6 months. She is entitled therefore to half of her annual salary - $9,729."
APPEAL LIMITED BY SECTION 135
Before going on to deal with the award of general damages and interest we pause to note that s 135 of the Employment Contracts Act 1991, under which the appeal to this court is brought, imposes two constraints.
First, the appeal is confined to questions of law.
Second, decisions on the construction of the particular individual employment contract are excluded.
It is well settled that there may be cases where the interpretation approach to the particular contract which the Judge has taken, as distinct from the construction conclusion, is susceptible to challenge, and there may also be rare cases where there is no evidence to support the Judge's factual findings, which is then properly characterised as an error of law. But there is nothing of that kind in the present case except in respect of the Judge's finding of a particular implied term in the employment relationship which Mr Gunn fairly recognised did not appear to have played any part in the Judge's ultimate reasoning and conclusions. There was no real challenge to the approach which the Judge took to the construction of the employment contract and there was ample evidence to support her factual conclusions as to liability and to special damages. In this regard this is yet another case where the appellant has attempted to dress up questions of fact as alleged errors of law.
We turn to the only difficult question in the appeal, the assessment of general damages.
Employment Court judgment
The Judge began by pointing to the longstanding principle in the award of damages that a defendant must take a plaintiff as it finds her. She then went on to emphasise the effect on the complainant, rather than the intentions of the harasser, as being a critical factor in sexual harassment cases, that feature being recognised by the Army in its sexual harassment policy.
The Judge went on to conclude that the harm which Ms N suffered, as described by herself, her husband and a psychologist whom she had recently consulted, was caused by the breaches of contract by the Army and that those effects were reasonably foreseeable by an employer acting within its own policy.
There is no doubt that the plaintiff suffered from a major depressive episode following the events in November 1994 and that the effects lasted for the best part of 5 years. It was not until 1999 that the psychologist observed that the plaintiff had begun to recover to the extent of altering her appearance to reflect her increasing self-esteem.
On the other hand, the evidence shows that the plaintiff, once she left Waiouru, was able to obtain very worthwhile employment and to that extent was able to begin to recover from the harm that had been caused to her.
The Judge concluded that, although it was not a case where the employer was directly responsible for the sexual harassment, it could have done a great deal towards assisting Ms N to stay in employment and recover from the trauma she had endured. Instead, the damage was aggravated by the Army's failure to implement its policy. The Judge said she had had regard to Managh v Wallington  2 ERNZ 337 and a summary of damages paid as the result of sexual harassment cases between 1995-2000 documented by the Human Rights Commission. In the end the award must reflect the damage to the plaintiff. She then fixed the amount of general damages at $40,000 and directed that interest on that sum at the Judicature Act rate should run from 28 November 1994, the date of the Hibbard incident.
The Employment Court was exercising the jurisdiction conferred by s 104(1)(g) of the Employment Contracts Act to hear and determine any action founded on an employment contract. The harassment itself was not the fault of the Army. It was not employment related, and Ms N's harassment complaint was not based on her then current temporary employment with the Army. But the Judge was entitled to find (para  above), "I conclude that the way in which the army handled the complaint did destroy or damage the relationship of trust and confidence between it and the plaintiff in breach of her employment contract."
On those findings it would appear to have been open for Ms N to claim breach of the then current temporary employment contract and to seek general damages for its breach based on failure by the Army to follow up and provide support and to seek to restore the relationship of trust and confidence. Assessing damages on that basis would have been a very difficult exercise and the more obvious approach in the circumstances that ensued was to recognise that Ms N was proved to have been in a very fragile condition when she was offered the accounts section appointment and sent there to take up that appointment on 28 November 1994. It was against that background that the Judge made the findings of breach and causation in relation to what she described as "the incident", obviously referring to what happened at and following the Hibbard interview as set out in paras  and  above.
However, when it came to the assessment of general damages the Judge clearly seems to have taken the harassment as something to be compensated for by the Army. At an early point in the discussion she recorded that the effect on the complainant was a critical factor in sexual harassment cases as recognised by the Army in its sexual harassment policy (para  above). While she later said it was not a case where the employer was "directly responsible" for the sexual harassment, she saw the damages as aggravated by the Army's failure to implement its sexual harassment policy. Significantly, Managh, the only case she cited, concerned sexual harassment in employment and the other reference point to which she had regard was a summary of damages paid as a result of sexual harassment cases (para  above). In the end, the Judge said, the answer must reflect the damage to the plaintiff which in context would have to include the damage resulting from the sexual harassment itself (para ). That analysis could also be tested by asking how much more an award, which included a specific sum for the harassment and as well $40,000 for the breaches of the Army's obligations to its employee, would have totalled.
In Managh, where the harassment included indecent assault and indecent exposure by the employer, the total awarded was $25,000. In the Human Rights Commission summary to which the Judge referred, the average damages paid by employers was $6,073 and the median was $3,619; and by harassers the average was $4,050 and the median $2,250. Mr Gunn also pointed to the pattern of awards in the Employment Court and the Employment Tribunal in breach of contract cases and under s 40(1)(c)(i) of the Employment Contracts Act (for humiliation, loss of dignity and injury to feelings), where there are few awards over $20,000 and most were for much less. Mr Gunn properly emphasised the observation of Cooke P in Telecom South v Post Office Union (Inc)  1 NZLR 275, 280:
Reasonable consistency is required; established patterns should not be departed from without good and enunciated reasons.
We are satisfied on our analysis of the judgment (para  above) that the Judge must be taken, erroneously, to have included damages for the original harassment in arriving at the $40,000 she awarded. As well, she must be taken to have gone beyond the pattern established in the awards referred to in para  above. Because of that error of principle we must assess the general damages afresh, excluding the harassment but giving generous weight to the trial Judge's assessment of all those factors properly relevant to the assessment referred to in paras  and  above. Weighing those matters as best we can, assessing the matter as the Judge did as at the date of trial, and having particular regard to the significance and duration of the major depressive episode which Ms N suffered from (para  above) we have concluded that general damages should not be more than $25,000, and, in the particular circumstances of this case, should be fixed at that figure.
Section 104(1)(h) empowers the Employment Court in any proceedings founded on an employment contract to make any order that the High Court may make under any enactment or rule of law relating to contracts. The Employment Court Regulations 1991, reg 25(1), properly recognising the Employment Court's power in that regard to award interest on damages, required the statement of claim to specify "any claim for interest".
In her amended statement of claim Ms N sought interest on the damages claimed, from 28 November 1994. The Employment Court expressly ordered that interest on the general damages award should run from that date at the Judicature Act rate but did not deal with the question of interest on the special damages award.
Section 87 of the Judicature Act 1908 gives the High Court and the Court of Appeal a wide discretion to award interest on damages for the period between the date when the cause of action arose and the date of judgment. By virtue of s104(1)(h) of the Employment Contracts Act the Employment Court has that same discretion. Importantly, for present purposes, interest may be awarded for the whole or any part of the period between the date when the cause of action arose and the date of judgment.
In the absence of any express limiting provision the discretion is to be exercised as the justice of the case requires (Wilson & Horton Ltd v Attorney-General  2 NZLR 513; Day v Mead  2 NZLR 443). There is no fixed rule as to the commencement date for interest (Wilson & Horton at p530). Generally, justice may require interest to run from the date the cause of action arose down to the date of judgment (Day v Mead at p 463; Report of the Law Commission, Aspects of Damages: the Award of Interest in Money Claims, NZLC R28, paras 57-59). And generally a cause of action in contract accrues on breach.
The claim to special damages as upheld by the Employment Court is based on salary for the six months from the date of constructive dismissal, 28 November 1994. Ms N had not been presented with the form of contract but the agreements completed in respect of the like earlier temporary employments provided for salary to be paid weekly. Rather than making separate calculations in respect of each week of the six months, a just approach in the circumstances is to order that interest run on the $9,729 from the half way point, i.e. from 28 February 1995.
We turn to the allowance of interest on the award of general damages, assessed now at $25,000. Whether damages are assessed at the date of judgment as opposed to the date of breach or some other earlier date, is obviously relevant and so in Bowen v Paramount Builders (Hamilton) Ltd  1 NZLR 394, where damages were fixed by the High Court on the basis of current costs, this court awarded interest only from the date of the High Court judgment.
In the present case the evidence and the calculation in the Employment Court assessed relevant factors over the period from 28 November 1994 up to, and so as at, the date of the trial. The case was not presented on the basis of an assessment as at 28 November 1994 or some other date earlier than the trial date of the then future expected impact on Ms N of the Army's responsibility for the harm to her with a discount to recognise that the award was being made as at an earlier date. To put it another way, it was, and sensibly so, a retrospective assessment expressing a current value assessment, not a prospective assessment made as at 28 November 1994. In these circumstances the appropriate course in the interests of justice is to award interest on the $25,000 from the date of the Employment Court judgment, namely 15 December 2000.
For the reasons given the appeal is allowed and the orders as to general damages and as to interest made in the Employment Court are quashed and in lieu it is ordered:
That the award of general damages is fixed at $25,000; and
That interest at the Judicature Act rate run on the special damages award of $9,729 from 28 February 1995 and on the general damages award of $25,000 from 15 December 2000.
As to costs, the orders made in the Employment Court stand and Ms N is allowed $3,000 costs plus reasonable disbursements on the appeal. That latter order recognises that the Crown failed in its major challenge as to liability, having attempted to dress up questions of fact as alleged errors of law (para  above), leading to a costs consequence which we foreshadowed in Northland Co-operative Dairy Co Ltd v Rapana  1 ERNZ 361, para .
Managh v Wallington  2 ERNZ 337; Wilson & Horton Ltd v Attorney-General  2 NZLR 513; Day v Mead  2 NZLR 443; Bowen v Paramount Builders (Hamilton) Ltd  1 NZLR 394; Northland Co-operative Dairy Co Ltd v Rapana  1 ERNZ 361
Employment Contracts Act 1991: s.11, s.40(1)(c)(i), s.104(1)(g)
Employment Court Regulations 1991: Reg.25(1)
Judicature Act 1908: s.87
Authors and other references
Report of the Law Commission, Aspects of Damages: the Award of Interest in Money Claims, NZLC R28
P J Gunn for Appellant (instructed by Crown Law Office, Wellington)
A J Douglass and S M Black for Respondent (instructed by Tripe Matthews & Feist, Wellington)
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