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Accident Compensation Cases

Hogg v Air New Zealand Ltd (EMC, 22/10/93)

Judgment Text

Finnigan J
This is an appeal against a decision of the Employment Tribunal dated 24 March 1993. The Tribunal had dismissed an application for recovery of money. 
The claim had been brought under an individual employment contract between the parties dated 22 January 1992. The claim turns on interpretation of words in that written contract which I shall shortly set out. 
Briefly, the employer in December 1991 offered all international cabin crew a voluntary severance package should they wish to leave the airline with a cash payout. Ms Hogg had been employed as a flight attendant since August 1987. She discussed this offer with the personnel adviser, inflight services and was told that the redundancy payment would be calculated from her basic salary plus overseas flight service allowance. She was about to sign a fresh individual employment contract, which made provision for the voluntary severance and redundancy payment. On 22 January 1992 she signed her individual employment contract and at the same time applied for voluntary severance. The employer's signatory was the manager, inflight services international. Ms Hogg asked about the redundancy payment and was told what she had been told before. 
Her offer to take voluntary severance was accepted and she was paid a redundancy payment. The payment she received was calculated from her basic salary alone, excluding her overseas flight service allowance. The difference between what she had expected and what she received was $1084.44. 
In her claim before the Tribunal it was submitted on her behalf that cl 22 9) b) of her employment contract entitled her to a calculation based on basic salary plus overseas flight service allowance; the case for the employer was that the clause provided for a calculation taking account only of the basic salary. 
In deciding the issue the Tribunal guided itself by the principle that each claim of this sort depends on the language used in the instrument requiring interpretation, and there may be little help from decisions interpreting similar words or related words in other documents. I think that was the right approach. It considered the clause which I now set out here: 
. . . 
. . . 
bWeekly redundancy compensation payments shall be calculated on the basis of the ordinary time rate applicable at the date of termination (i.e. 100 % of the Annual salary divided by 52). 
For the provision in the contract about “the ordinary time rate” reference must be had to cl 6. That clause (in part) is as follows: 
The main relevant provision in cl 6 is a simple table headed “Basic Salary” which provides 11 steps of salary payment commencing with “Flight Attendant under training”. Ms Hogg was at Level 1, Third Year, $26,696. 
The other relevant provision is: 
Upon satisfactory completion of their training period an overseas Flight Service Allowance of $4028 per annum shall be paid to all flight attendants. This allowance shall be included for pay purposes in the computation of overtime. 
Referring to overtime, for completeness, cl 7 (Overtime) provides in para b): 
For the purpose of computing hourly rates for overtime payments, the ordinary hourly rate shall be deemed to be the appropriate gross salary prescribed by Clause 6 of this agreement divided by 1500. 
Clause 6 d) (above) has the effect of adding to each of the basic salary steps after the first a fixed sum of $4028. That is automatic upon completion of training. The first step is for flight attendants in training. All flight attendants who have this contract fly internationally as soon as they complete their training and thus qualify for the extra payment as soon as they leave the first step. It is called an “allowance” but is taxed as salary and is included in the payment from which overtime payments are calculated under cl 7 b) (above). 
The Tribunal saw relevance in the fact that the individual employment contract elsewhere uses the terms “full pay”, “gross taxable earnings” and “gross salary”, and did not use the term “full pay” in cl 22 9) b). It accepted that a decision given in a 1991 dispute of rights about the term “full pay”, settled the meaning of that term as used in agreements between the employer and the union to which Ms Hogg belonged. The employer had submitted before the Tribunal that where basic salary and overseas flight service allowance were to be taken together as one, the accepted term for that since April 1991 was “full pay”, and that had cl 22 9) b) intended the basis of redundancy payments to be basic salary plus overseas flight service allowance then the term “full pay” would have been used. He had submitted that the use of the term “the ordinary time rate” showed a different basis had been intended. 
The Tribunal concluded from its reasoning that the term “gross salary” in cl 7 b) (above) has the same meaning as the accepted meaning of the term “full pay”, ie both mean basic salary plus overseas flight service allowance. 
The Tribunal then examined Ms Hogg's pay slip and the use of the term “ordinary time payment” in that payslip. It concluded that, for the purpose of making overtime payments, the term ordinary time payment was used in the payslip in the same sense as “gross salary” or “full pay”. It concluded that the weekly ordinary time payment was full pay divided by 52. 
From further studying the fortnightly pay slips produced by Ms Hogg the Tribunal saw a clear distinction between the terms used therein, “basic annual salary”, “overtime” and “allowances”. It concluded that the overseas flight service allowance forms no part of the basic annual salary as that term is used in the pay slips. It concluded (among other things, and using my words) that the term “ordinary time payment” used for overtime pay calculations is gross salary/full pay divided by 52; that the term “annual salary” has the same meaning as “basic salary”; that the “ordinary time rate” is a rate derived by dividing the annual salary/basic salary by 52; and that “ordinary time payment” and “ordinary time rate” are not the same thing. 
The Tribunal concluded that what it called most of the confusion that had arisen in the present case probably arises from the fairly loose use of the two terms “ordinary time payment” and “ordinary time rate”. It found the distinction between those terms crucial to its decision. It held that the redundancy formula provided in the employment contract, being based on the ordinary time rate and not on the ordinary time payment, required calculation on the basic salary only. It held that the case for Ms Hogg was based on an incorrect interpretation of the redundancy clause in the employment contract. 
Mr Robson who appeared as counsel for Ms Hogg at the appeal submitted that the Tribunal was in error when it resorted to the pay slips as an aid to interpretation of the contract. In doing so he submitted it had reasoned erroneously from the term “basic annual salary” which is found nowhere in the contract. Second, he submitted that the Tribunal fell into error when it relied upon the payslip terminology to characterise the overseas flight service allowance as an “allowance” when the contract itself clearly provides at cl 6 that it is a component of salary. He submitted that it is clearly a fixed payment, in the nature of a salary increment payable on satisfactory completion of training and not mentioned elsewhere in other parts of the contract where provision is made for allowances which by and large are reimbursement of expenses. 
On this basis, he submitted that the separate terms “basic salary” (in cl 6) and “annual salary” (in cl 22) have in their separate contexts separate meanings. He submitted that basic salary is clearly the amount specified as basic salary in cl 6, while the provision in cl 22 for “annual salary”, which is by definition the same as “the ordinary time rate”, must in the case of trained flight attendants produce the basic salary increased by the overseas flight service allowance. It is that combined figure which he submitted is.the “ordinary time rate” and “annual salary” of a trained flight attendant; cl 22 9) b) is thus in his submission consistent with itself and reaffirms by repetition that the redundancy calculation is to be based on what the employee was receiving as an ordinary time rate. This he submitted is reaffirmed by the consistent provision for overtime which takes as the ordinary hourly rate a combination of both payments, not merely the basic salary. 
Mr Robson reinforced this submission with a further submission that, if the draftsperson of the contract had available, but chose not to use, the term “full pay” it could even more readily be argued that he had available but chose not to use the term “basic salary”. Each of those terms would have put the matter beyond doubt, the first clearly importing (in the reasoning accepted by the Tribunal) the combined payments, the second clearly importing basic salary to the exclusion of the overseas flight service allowance. 
Mr O’Connor, advocate for the employer, advised the Court that it was he who drafted the clause in question and, from the history of the predecessors to this contract as much as from anything else he had no doubts about what the words in the clause convey. He advised that he accepts however that interpretation of the words is for the Court and that it is for the Court to apply to that task a clear set of objective principles, particularly as the words were drafted and offered by the employer and accepted by Ms Hogg, rather than agreed upon in negotiations with her. 
Mr O’Connor emphasised that it was not just he but also the employer that had no doubt about the meaning of cl 22 9) b). The history of the matter is this: there originally existed a redundancy agreement which covered flight attendants, the formula being based on average earnings. Intending to reduce the amount of redundancy compensation which it paid, the employer negotiated a new document, the Flight Attendants’ Collective Employment Contract, which contains the formula or basis of the ordinary time rate applicable at the time of termination (ie 100 percent of the annual salary). This wording was negotiated between the employer and the Flight Attendants’ and Related Services Association who are the same Association representing Ms Hogg in the present case. The document was for national ie domestic flight attendants. That Association at no time has raised its present argument in respect of that contract. As Mr O’Connor conceded (at para 1.5 of his written submissions) this is perhaps because there is no overseas allowance added to the salary of persons covered by that document. Subsequently another document was negotiated for international flight attendants with Pegasus Flight Attendants’ Association (International) and members of that Association signed the document as a collective employment contract. Subsequently, the same wording was used in employment contracts for international flight attendants who were not members of the Pegasus Association and each of them signed the document, with appropriate changes, as an Individual Employment Contract between him/herself and the employer. The interpretation of the new wording has not until now been challenged, but Mr O’Connor has assured the Court that this is not in the nature of a test case. 
On the historical basis which I have just summarised, Mr O’Connor submitted that the words “annual salary” in cl 22 9) b) of Ms Hogg's individual employment contract have the same meaning as the words “basic salary” in cl 6 of that contract. He submitted that the flight service allowance is clearly an allowance and not part of annual salary. He pointed to cl 6 d) (above) which specifically provides for inclusion of the allowance in the computation of overtime. Mr O’Connor submitted further that the overseas flight service allowance is even more clearly not part of annual salary for the reason that it is a fixed sum. 
The salary provided as “basic salary” in cl 6 increases as the flight attendant moves from step to step in the scale, but the allowance does not. Likewise, if for any of the reasons provided in cl 6 a flight attendant's salary is reduced is the basic salary component which is reduced and the overseas flight service allowance remains untouched. 
Further, Mr O’Connor submitted that the Employment Tribunal in interpreting the words of cl 22 9) b) has given them their popular meeting [sic] and for that reason alone should be upheld in its interpretation by the Court. The term “annual salary” in his submission means “the basis on which income is earned”. Given that popular meaning, the term as used in cl 22 9) b) must in his submission mean the basic salary. 
Even with the respect I have for the experience of the individual people concerned, I have very strong doubts about the wisdom of importing the 1991 disputes committee decision about the meaning of the words “full pay” into the present context. Words must always be taken to mean what, in their context, they appear to mean. That is the principle that was applied in that decision. The context however in that decision was that the words in question had been negotiated between the parties to the dispute (which is not what occurred in the present case) and appeared in a clause making provision for accident insurance (in which the 80 percent provisions of the Accident Compensation Act 1982 were acknowledged). There was a different verbal context as well: 
vii)>In the event of temporary, total, or partial disablement arising out of such an accident, an Employee shall remain on the full pay he/she was receiving at the date of the accident until such time as he/she is to (sic) fit to resume normal duties or 100 weeks, which limitation shall first occur, . . . 
The actual issue decided by the disputes committee was whether those words entitled the employee after a disability accident to 80 percent or 100 percent of the amounts provided in s 57 and 59 of the Accident Compensation Act 1982. The disputes committee was dealing with what it perceived to be an argument that the words “on the full pay he/she was receiving at the date of the accident” mean payment at average gross weekly eamings. It found the words quoted above not to be the necessary clear statement of such an intention and interpreted the words by what it saw as their plain meaning. In that context it held that they mean “the basic salary payable to the worker under cl 6 of the Agreement together with the overseas allowance provided in cl 6 b) of the Agreement. In appropriate cases the payment(s) in cl 6 c) and cl 6 d) and cl 6 e) would also be paid”. To identify those latter three payments one would need to read the Agreement (Document 862 registered 12 June 1990). 
To me one thing seems clear. While the disputes committee decided, and the parties to that dispute accepted, the meaning of the words “on the full pay he/she was receiving it the date of the accident”, it did so only in their own context. On the face of the decision alone (and of the one presently under repeal) the words “full pay” have a different meaning even elsewhere in the same document, in the holiday pay provisions. Each time they are used, unless defined, they must be interpreted in their own context. That is what must happen when Ms Hogg's individual employment contract is being applied. It is the approach the Tribunal accepted in this case. As it happens, the meaning of the term “full pay” in the contract is not in my view an issue in the present case. 
The first principle of statutory interpretation and the one I daresay most frequently applied both inside and outside legal proceedings, is “determine the plain meaning of the words used”. Interpretation is sometimes difficult, but complex reasoning is never preferable to a simple solution if one is available. 
I propose to take the simple path which presents itself in the present case. I am aware that there is a history of related documents which might have caused the draftsperson to use the new words of cl 22 9) b) which are in question. If that happened however that may not necessarily have been clear to Ms Hogg, (who commenced employment as a flight attendant in August 1987), when she accepted the new wording and signed the contract in January 1992. She is entitled to have the words interpreted on their plain meaning, and in their own context. 
The income earned by Ms Hogg as a flight attendant pursuant to this contract is clearly defined in the contract at cl 6. There is a fixed annual sum called “basic salary”. With that in cl 6 is a further provision that after training her basic salary wil1 be increased each year, whatever her basic salary may be, by $4028. That increased sum must be her annual salary. It is her ordinary annual income. I am strengthened in this by cl 7 b) (above) which builds her further earnings — her overtime — on that foundation. After repeated study of Mr O’Connor's submissions I am still unable to see how this extra payment, a fixed sum “allowed” by the employer to all international flight attendants who have this individual employment contract once they have completed their training, is anything other than salary. It is permanent and irrevocable. Ms Hoggs’ actual ordinary time hourly and weekly rates can only be the figures which result when her ordinary income, ie the basic salary plus $4028, is broken down into its hourly component or its weekly component. That is acknowledged in cl 7 which provides that for calculating such payments as time and one half the ordinary hourly rate shall be deemed to be (ie shall be calculated from) the appropriate gross salary prescribed by cl 6. “Gross salary prescribed by cl 6” can only be basic salary for a flight attendant under training and for all others basic salary plus $4028 (unless this gross has been reduced as provided in cl 6, which is irrelevant here). 
I have no difficulty in arriving at that conclusion by the simple route I have described. Other routes are available, more complex and in my view less likely to arrive at the obvious interpretation. 
To the objective observer, a draftperson intending the basic salary to be used had that salary and that term available from cl 6, but did not use it. Looking at the term that was used, and defined, the meaning conveyed by both forms of words used in cl 22 9) b), is that the basis for the redundancy calculation is the annual salary provided at cl 6 not the basic salary, ie the ordinary income. That is what cl 22 9) b) says. That is what it provides. I hold accordingly. 
For these reasons I have found myself unable to accept the reasoning and the conclusion of the Employment Tribunal and for that reason this appeal is allowed. 
There is accordingly an order that the employer pay to Ms Hogg the amount claimed in the proceedings before the Tribunal, ie $1084.44. Neither party sought an order for costs. 

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