A Court of Appeal decision concerning personal grievance remedies is set to benefit employers.

Taupo float plane company, Ark Aviation, employed Keith Newton as a manager and pilot. Mr Newton was a director of the company along with two others, Mr Campbell and Mr Harnish.

For many years, Mr Harnish had very little involvement with the running of the company. However, in 1997 Mr Campbell provided him with a set of accounts for the company covering the past 14 years. Mr Harnish was surprised to find that the company had made a net loss year after year, but was continuing to operate.

After closely analyzing the accounts, Mr Harnish became concerned that the company's continuing losses appeared to be connected to the aircraft's extraordinary and unusually high fuel usage, unauthorised overseas travel by Mr Newton, and an interest free loan to Mid Island Aviation Ltd, a company partly owned by Mr Newton. He was also concerned about the company's poor performance generally, an incident of engine failure on take off and the failure to report the matter to the Civil Aviation Authority, and the lack of insurance cover on the aircraft.

Mr Harnish called Mr Newton to a meeting to explain about these concerns. At the meeting, the first few items on the agenda were discussed, but when questioned about the shortfall in revenue, Mr Newton left the meeting and refused to justify himself further.

The company dismissed Mr Newton later that afternoon by letter, the reasons given being the company's poor performance, and his unwillingness or inability to explain the revenue shortfall.

After Mr Newton's dismissal, Mr Harnish and Mr Campbell continued going through the company's records and found other irregularities, including that the company car was registered in Mr Newton's name, fuel cards had been applied for in the company's name for aircraft operated by Mid Aviation Ltd, and that other aircraft had been refueled at the company's facility.

Mr Newton brought an unjustified dismissal claim against the company. The Employment Tribunal held his dismissal was unjustified due to procedural defects, but declined to award him any remedies because of his contributory conduct.

Mr Newton appealed. The Employment Court held that, when assessing contributory conduct, the Tribunal had incorrectly taken into account matters that had not been put to Mr Newton for explanation. These should not have been taken into account, and Mr Newton's remedies should therefore not have been reduced by 100 per cent.

The company appealed to the Court of Appeal. The Court of Appeal disagreed with the Employment Court. Matters of which an employer was aware at the time, which, directly or indirectly, impacted on the decision to dismiss, may be taken into account when assessing the reduction of remedies for contributory conduct. It did not matter whether or not those matters had been put to the worker for explanation, the Court of Appeal said. This has obvious benefits for employers, and reduces the financial consequences of procedural defects.

The Court of Appeal also explained how misconduct discovered after dismissal could also affect remedies awarded to dismissed workers. Such conduct did not fall within the statutory provisions of the Employment Contracts Act (now the Employment Relations Act) that dealt with contributory fault, but traditionally the Employment Tribunal and Court had used its "equity and good conscience" jurisdiction to reduce remedies in such cases.

The Court of Appeal pointed out that "equity and good conscience" could not be used for this purpose because it was inconsistent with section 41 (1) ERA which directed that, once a finding of unjustified dismissal is made, the Tribunal or Court must order the employer to reimburse the employee for lost wages.

The Court of Appeal said that the answer lay instead in the wording of the remedies sections themselves. "An employee guilty of a fundamental breach of [the obligations of confidence, trust and fair dealing] arguably cannot be said under s. 40 (1) to have lost wages or other money or any benefit, or under s. 41 (1)(b) to have lost remuneration, as a result of a personal grievance. Nor would reinstatement or compensation for humiliation, loss of dignity or injury to feelings, both of which are discretionary remedies, be appropriate", Justice McGarth said.

The Court of Appeal also went on to say "[t]he answer may also be implicit in the term grievance in the definition of "personal grievance" under s.27. The essence of a grievance in its ordinary meaning is the infliction of a wrong or hardship upon a person. An employee guilty of a fundamental breach of such central obligations to the employer justifying dismissal arguably cannot be said to have been subjected to a wrong or hardship and thus, to have a grievance at all."