In that case, Mr Elisha was an employee of Vision Australia and was dismissed following an investigation into allegations of misconduct by him, whilst travelling for employment purposes. Mr Elisha claimed that the employer’s investigation was conducted in a way that caused him psychiatric injury and that the manner of the investigation was both negligent and a breach of his employment contract.
The trial judge found that the employer was not responsible to Mr Elisha in negligence because it did not owe him the duty of care that he claimed. However, Vision Australia were found to have breached Mr Elisha’s employment contract by the way in which they investigated the alleged misconduct and the trial judge agreed that Vision Australia should pay damages for the psychiatric injury suffered by Mr Elisha. He was awarded $1,442,404.50.
On Appeal, the Victorian Court of Appeal determined that the trial judge was correct to dismiss Mr Elisha’s negligence claim. However, they determined that contractual damages should not be awarded for Mr Elisha’s psychiatric injury – for two reasons.
- Firstly, Mr Elisha’s psychiatric injury (and his subsequent loss of earnings, pain and suffering) was not reasonably in the contemplation of the parties as a type of damage that would be suffered by Mr Elisha if the employer breached its contractual promises regarding investigation and dismissal procedures.
It is well established that in claims for contractual damages, a successful plaintiff is entitled to recover (i) such damages as arise from the breach, according to the usual course of things; or (ii) which were in the contemplation of the parties as probable results of a breach, at the time they made their contract.
By finding that the psychiatric injury suffered by Mr Elisha was extraordinary and not reasonably in the contemplation of the parties as a type of damage that would be suffered – Mr Elisha was not entitled to damages arising from his injury.
- Secondly, the Court of Appeal determined that damages are not available for psychiatric injury arising from a breach of contract except in special cases (such as contracts that were for the purpose of pleasure or relaxation – like a contract for a cruise or a holiday).
Because Mr Elisha’s contract and his claim for damages did not fit one of the recognised exceptions, the Court of Appeal determined that he should not be compensated for damage arising from the employer’s breach and Mr Elisha’s subsequent psychiatric injury.
It is expected that the High Court’s decision will clarify the law in this area, in particular with respect to whether:
- it is sufficiently foreseeable that an employee would suffer psychiatric injury due to the conduct of their employer that is also a breach of contract; and
- whether the general common law rule applied by the Court of Appeal, that damages are not generally available for psychiatric injury arising from a breach of contract, is good law in Australia.
Given that one of the live issues at trial and in the Court of Appeal was whether the employer owed any contractual obligation at all to Mr Elisha (either to investigate matters in a particular way or to take reasonable steps to prevent him from suffering workplace harm) – we hope that the High Court might also be asked to clarify the common law position on these matters also. However, that will be a matter for the parties conducting the appeal.
