This is a significant decision in this area, as the Court set aside the orders of the Court of Appeal of the Supreme Court of Victoria (Court of Appeal), affirming the decision of the primary judge in the Supreme Court of Victoria (Supreme Court), that the Appellant had suffered damages for breach of contract. The primary judge ordered the Respondent to pay damages of $1,442,404.50 for failure to take reasonable care to avoid injury to the Appellant regarding its implementation of the processes leading to, and resulting in, the termination of his employment.
In this matter, the Appellant argued, following the circumstances of his dismissal, that the Respondent was in breach of cl 47.5 of the Vision Australia Unified Enterprise Agreement 2013 (Vision EA) and the Vision 2015 Disciplinary Procedure (the Procedure), both of which were held to have been incorporated into his contract signed on 27 September 2006 (the Contract).
The Procedure provided that the Respondent was:
‘committed to a fair, equitable and consistent approach to disciplinary action, and to act in accordance with this procedure, as well as all relevant industrial instruments and contract provisions’.
The findings of the Court provide useful insight for employers regarding the necessity of a well-informed and implemented disciplinary process.
Summary of Facts
Background
From 2006, the Appellant was employed by the Respondent as an Adaptive Technology Consultant. His duties consisted of setting up or assisting with software and hardware systems for the vision impaired. That required him to visit homes and workplaces across Australia.
On 23 and 24 March 2015, the Appellant was involved in an incident while he was staying in a hotel in rural Victoria during travel for his work duties (Hotel Incident). The circumstances of the Hotel Incident were disputed, however two other employees of the Respondent stayed at the hotel and were informed by the hotel proprietor that the Appellant was aggressive and intimidating during his stay. Those two employees reported the matter to their manager, who then escalated it to the Appellant’s manager. The relationship between the Appellant and his manager was already strained.
Disciplinary Process
Upon returning from leave, on 12 May 2015, his manager met with him and was told that a ‘serious’ complaint was made against him.
He was handed a ‘stand down letter’ (the Letter), where he was advised that a decision had been made to stand him down and attend a meeting two days later. The allegations in the Letter were that he had breached a number of policies which were annexed to the Letter. The allegations were confined exclusively to misconduct during the Hotel Incident.
Prior to the above meeting, the Appellant provided a written response to the allegations in the Letter, whereby he ‘vigorously’ denied any of the alleged misconduct and said that he ‘never behaved in any verbally aggressive nor intimidating manner’. At the disciplinary meeting of 26 May 2015, the Appellant explained that the allegations may have arisen out of a potential discrepancy in the bill from a previous stay. He also said that he was with the Respondent for 9 years without any history of aggressive behaviour. The file note by the attendees said that the Appellant presented himself ‘very arrogantly and showed no remorse’.
On 29 May 2015, in internal emails, the Respondent substantiated the allegation that the Appellant was aggressive on 23 and 24 March 2015 and it was ‘the latest example in a pattern of aggression [and it did not] need to get those previous examples and pattern on the record’.
That day, the Respondent terminated his employment by letter immediately for serious misconduct. Following the termination, the Appellant was diagnosed with a major depressive disorder, as well as an adjustment disorder with depressed mood. He was found to have no capacity for work in the foreseeable future. His medical evidence was supportive that he experienced a change in demeanour post-termination.
Proceedings
The Appellant commenced unfair dismissal proceedings against the Respondent, settling on 9 July 2015 for the maximum amount to which he was entitled to in that action. He then commenced these proceedings on 27 August 2020 in the Supreme Court.
The Primary Judge found that the:
- process of termination was ‘unfair, unjust and wholly unreasonable’ and ‘nothing short of a sham and a disgrace’; and
- the Respondent had contemplated that distress and potential psychiatric illness was a serious possible risk and directly contemplated by the terms of the contract (which were not followed).
The Court of Appeal held that cl 47.5 of the Vision EA had not been incorporated into the Contract. It also held that damages for psychiatric injury were not available for breach of contract as damages for psychiatric injury:
- were unavailable for a breach of contract other than where the psychiatric injury was consequent upon physical injury caused by the breach of contract or where the very object of the contract was to provide enjoyment or relaxation; and
- could not be recovered because the psychiatric injury was too remote from the breach of contract.
It dismissed his contention on the basis that an employer owes no duty of care to avoid injury to employees in the implementation of processes leading up to and resulting in the termination of employment.
The Appeal
Breach of Contract
The Appellant argued the Court of Appeal erred in concluding that damages for the psychiatric injury suffered by him were not recoverable in a claim for breach of contract.
Tort of Negligence
This ground concerned the Respondent not owing a duty to take reasonable care to avoid injury to himself in the implementation of the processes leading to and resulting in the termination of his employment.
Consideration and Findings
Breach of Contract
The Court found, consistent with previous case law, in the context of liability of a defendant for mental distress consequent upon a repudiation of a contract with an object of providing enjoyment and relaxation, psychiatric injury was part of a class of injury for which damages were recoverable. The Court did not consider that the damage was remote.
Remoteness of Damage in Contract
The test for remoteness of damage concerns, with regards to the facts of the breach of contract, whether, assessed at the date of contract, it could be said that the damage from that breach arose:
- ‘according to the usual course of things’; or
- whether the damage could ‘reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it’.(paragraph 61)
As the disciplinary meeting was found to be a ‘sham’/‘disgrace’ and the real reason for the Appellant’s dismissal was not mentioned, the type of damage was required to have been reasonably contemplated at the time of the Contract and had a serious possibility arising from such a breach of duty is psychiatric injury.
The Court found a causal breach between being dismissed for allegations of misconduct due to the summation of the employment relationship:
‘[many] people build their lives around their jobs and plan their future in the expectation that they will continue. For many workers dismissal is a disaster’; and
a person’s employment ‘is usually one of the most important things in his or her life. It gives not only a livelihood but an occupation, an identity and a sense of self-esteem’.
An unfair process of termination for alleged misconduct could affect those three aspects (paragraph 67).
Tort of Negligence
Based on the Appellant’s success in breach of contract, and due to a lack of particularisation of this appeal point, the Court found that it would not discuss the scope of an employer’s duty to provide a safe system of work.
Conclusion
The case demonstrates the mutual obligations that occur from contracts that allow for incorporation of company policies and procedures.
Employers should ensure that all policies and procedures, that it intends to rely on, are suitable for the needs and are appropriately implemented. This case shows that it is not enough to simply cite compliance with a policy or procedure.
Given the all-encompassing nature of the employment relationship, catastrophic injuries can arise from disciplinary actions that are poorly managed.
Please find the link here to the full decision for your information: Elisha v Vision Australia Limited.
This case summary was written by Victoria Stamper, Principal Lawyer, and Cyle Schneider, Associate, in the Employment, Workplace and Relations and Safety Team. Please do not hesitate to contact them on (08) 9321 0522, if you have any questions.
They would be happy to have a chat about this or any other employment matters.
