Keywords
Damages – breach of contract – scope of contractual duty – negligence – discipline and termination of employment.
Facts
The plaintiff, Adam Elisha, had been employed by Vision Australia Limited. His employment was terminated in circumstances which the trial judge found were “unfair, unjust and wholly unreasonable”.
The employer’s primary complaint centred on allegations of the way in which the plaintiff had behaved when staying at a hotel on business for the employer.
It was suggested that he had intimidated and humiliated a hotel staff member.
The trial judge awarded damages of $1,442,404.50 for the psychiatric injury suffered by the plaintiff, and its consequences. The trial judge found breaches of the employment contract in how the employer investigated the alleged misconduct.
An appeal to the Victorian Court of Appeal was successful however, as the Court of Appeal found that damages for psychiatric injury were not available for 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.
Reliance was placed on a range of precedents which went back over 100 years to the English decision in Addis v Gramophone Company Ltd [1909] AC 488.
The plaintiff applied for and obtained leave to appeal to the High Court.
Decision
Gageler CJ, Gordon, Edelman, Steward, Gleeson, Jagot, Beech-Jones JJ, decision delivered 11 December 2024.
Appeal allowed.
Ratio
The plurality (Gageler CJ, Gordon, Edelman, Gleeson and Beech-Jones JJ) considered that an employee can succeed in a claim against an employer for damages for breach of contract, provided it is not too remote and where there is an express prescriptive provision in the contract which sets out the process that the employer must go through to undertake disciplinary action against an employee.
The Court found that it was not necessary for the precise manner in which the breach by the employer would cause psychiatric injury to have been contemplated by the parties but “an important element in the causal sequence by which Mr Elisha’s psychiatric injury occurred was that without Vision Australia’s breach, Mr Elisha would not have been dismissed for alleged misconduct. This causal element was entirely predictable in light of the nature of Vision Australia’s breach” [at 67].
The Court observed that it was not necessary to go further to consider other grounds of appeal, including the tort of negligence, but noted that to decide this issue would require full argument and consideration of the relevant legislation.
The Court said:
“The duty of care alleged by Mr Elisha was upon employers to provide “a safe system of investigation and decision-making with respect to discipline and termination of employment”. Unlike the duty that arose from the 2006 Contract by agreement between Vision Australia and Mr Elisha, a duty that is imposed by law can be shaped by, and must be coherent with, relevant legislation.” [at 74].
Observations
The decision does not recognise a duty of care being owed in all circumstances – but certainly recognises a contractual duty where the contract of employment will imply it either because of the written terms of the contract or Fair Work legislation.
Given the view of the plurality, it does seem highly likely that a duty of care will often be found in tort to avoid foreseeable risk of psychiatric injury during a disciplinary or termination process, provided there is coherence with the legislative regime that applies to the employee’s circumstances.
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