Damages awarded for breach of employment contract

In this post I have published various extracts from a civil judgement in the District Court of New South Wales which arose from a common law action by an employee who sued for breach of contract over his dismissal for serious misconduct and won. The decision is interesting for various legal reasons including that it contains an analysis of the legal issues which arise as to both liability and damages in an employment breach of contract setting.

 

“Mr Sherry’s Case at Trial

  1. The plaintiff’s case at trial was that he was he had not engaged in serious misconduct and that TMCA’s termination of the employment contract was wrongful and amounted to a repudiation of it, because it amounted to a clear indication of a refusal by TMCA to perform: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 453. This general principle extends to wrongful dismissal by an employer: Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435.
  2. The plaintiff is entitled to loss of bargain damages for TMCA’s repudiation of the employment contract: Esanda Finance Corp Ltd v Plessnig (1989) 166 CLR 131 at 143.
  3. In assessing the loss of bargain damages in this case, the Court is entitled to consider what would have happened if the termination had not occurred: Maredelanto Compania Naviera SA v Bergau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164. Damages should be assessed by reference to the facts that are known at the time of assessment: Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] AC 353 and Bunge SA v Nidera BV [2015] UKSC 43 at [20].
  4. In the present case, if the termination had not occurred, the plaintiff’s position would have become redundant on 31 March 2018 and the redundancy clause provided that TMCA would make redundancy payments in accordance with the applicable industrial legislation or such other sum commensurate with the plaintiff’s seniority within the company. On 31 July 2017 TMCA had represented to the plaintiff that his redundancy payment would be $379,268.10 gross ($290,359.10 net).

TMCA’s Case at Trial

  1. TMCA bore the onus of establishing that it had a right to terminate the performance of the contract: Smith v Butler [1900] 1 QB 694 at 699.
  2. TMCA was entitled to justify its election to terminate on the basis of any right of termination that was available to it at the time of termination: Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 and Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 305.
  3. TMCA contended that the plaintiff had:
  1. engaged in “serious misconduct” as defined in the summary dismissal clause of the employment contract; and/or
  2. engaged in serious misconduct as defined at common law in the nature of:
  3. conduct incompatible with the fulfilment of an employee’s duty, involving an opposition to or conflict with the interests of the employer, impeding faithful performance of the employee’s obligations or that was destructive of the necessary confidence between the employer and the employee: Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81.
  4. a breach of the obligation not to engage in conduct incompatible with employment: Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 at [12], [55] and [87].
  5. a habitual neglect or definite refusal of a general kind to pursue the employer’s lawful policy of business: Adami v Maison de Luxe Ltd (1924) 35 CLR 143 at 153 and Sautner at [19].
  6. dishonesty: Condren v Southport Workers Community Club Inc [2010] QSC 130 and Seventi v John Holland Group Pty Ltd [2006] FCA 1049.
  7. a failure to provide a full and frank disclosure: Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524 at [140].
  1. TMCA expressly disavowed any reliance on the notice clause in the termination of the plaintiff, stating that the purported payment in lieu of notice described in the termination letter was an “ex gratia payment”. TMCA did not allege or seek to prove that the words in the termination letter were capable of amounting to an exercise of the notice clause. As a matter of principle I assume that TMCA accepted that the termination letter was an election by it to rely on the summary dismissal clause which was an alternative and inconsistent right to the notice clause: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641. This accords with the observation that TMCA’s reliance on the summary dismissal clause was intended to immediately terminate the employment contract, whereas reliance on the notice clause would have resulted in the employment contract continuing for a short time until the notice period expired or a payment in lieu of notice was made.
  2. TMCA did not contend that the plaintiff’s conduct repudiated the employment contract, relying on the proposition that an employee’s conduct does not need to amount to repudiation (by renunciation) of the employment contract to justify summary dismissal: Rankin v Marine Power International Pty Ltd (2001) 107 IR 117 at [254] and Melbourne Stadiums v Sautner (2015) 254 IR 1 at [125].
  3. TMCA properly abandoned some of the matters it relied on for the plaintiff’s summary dismissal that were set out in the letter of 28 March 2018. Clearly the allegation that the plaintiff deliberately delayed putting in his expense claims to sneak through some personal expenses was untenable, for the reasons set out at [214].
  4. TMCA contended at trial that the plaintiff’s summary dismissal was justified on the following grounds:
  1. The plaintiff booked a larger hotel room than necessary to accommodate his family (Ground 1).
  2. The plaintiff booked an extra night of hotel accommodation on 19 January 2018 for personal purposes (Ground 2).
  3. On 19 January 2018 the plaintiff purchased a meal for his son on his corporate credit card (Ground 3).
  4. Without TMCA’s knowledge or authority the plaintiff used his corporate credit card to purchase credit on the Telstra Dongle service, for personal use (Ground 4).
  5. The plaintiff was dishonest when asked about these expenses (Ground 5).
  1. On damages, TMCA contended that if it failed to establish the right to terminate the employment contract for serious misconduct, then it would have relied on the notice clause and by making payment in lieu of notice the employment contract would have been terminated on the date that the payment was made: Sautner and Geys v Société Générale London Branch [2013] 1 AC 523.
  2. Further, or in the alternative, TMCA submitted that the plaintiff had failed to mitigate his damages and or to provide evidence of his earnings in the period after his termination in order for those earnings to be taken into account. TMCA also contended that as a matter of construction it was not obliged to make a redundancy payment to the plaintiff and that it retained a discretion to pay a lesser amount to that which it had previously indicated.

……………………………………….. Was the summary dismissal clause a condition of the contract?

  1. The question of whether or not the summary dismissal clause is a condition is a question of construction of the contract.
  2. A condition is a term, the breach of which will justify the termination of the contract. Conditions are essential terms of the contract. The test of essentiality is if it appears from the contract as a whole, or particular terms, that the promise is of such importance that the promisee would not have entered into the contract unless they were ensured of strict compliance with it. Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 (Jordan CJ), cited with approval in the High Court on appeal and in Associated Newspapers Ltd v Bancks (1951) 83 CLR 322.
  3. The determination of whether a term is a condition depends on the construction of the contract. It is the intention of the parties, expressed in the language of the contract understood in the context of the relationship established by that contract, the commercial purpose it served (if applicable), that determines whether a term is “essential” so that any breach will justify termination: Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [48].
  4. The summary dismissal clause provided a right to TMCA to terminate the contact without notice if TMCA could prove serious misconduct as defined. In all the circumstances I am satisfied that the summary dismissal clause was a condition of the contract.

Did the plaintiff’s conduct established as relevant to Ground 1 amount to serious misconduct as defined by the summary dismissal clause or at common law?

  1. The definition of serious misconduct also falls to be determined as a question of construction of the contract. Serious misconduct is a term that is informed by the common law, which I have sought to summarise at [81] and I will not repeat.
  2. The definition of serious misconduct in the summary dismissal clause is inclusive and expressly incudes “any act of dishonesty”. There is some ambiguity as to what are the relevant breaches of policies and procedures that might amount to serious misconduct. None of the specified policies and procedures expressly referred to in the definition of serious misconduct are relevant in this case. On the assumption that a breach of a policy or procedure was prima facie evidence of misconduct, that would not be enough in itself to satisfy the requirement for serious misconduct, on the ordinary and natural meaning of the words used. As a matter of context, the written contract obliged the plaintiff to comply with all of TMCA’s policies and procedures. It was an express term of the contract that breaches of TMCA’s policies and procedures “may result in disciplinary action up to and including potential termination of employment”. This use of this language objectively conveys that not all breaches of TMCA’s policies or procedures would lead to termination of the employment contract because they did not necessarily constitute serious misconduct.
  3. In dealing with Ground 1, I am not satisfied that TMCA has established that the plaintiff acted dishonestly and accordingly his conduct did not come within the definition on that basis.
  4. I have found that the plaintiff was in breach of TMCA’s policies and his contractual obligations by inadvertently selecting the Loft room in the second travel request and by failing to take action to alleviate the cost of the room with the Crown when he was staying there.
  5. The plaintiff’s initial breach of the Accommodation Procedure was not a deliberate breach and the plaintiff had reasonable grounds for believing that the Loft room was a standard room within the meaning of the Accommodation Procedure.
  6. At the point when the plaintiff first gained actual knowledge that the Loft room was a suite, he was in a difficult position to remedy the situation because he was at the airport and in transit to Melbourne with his family and could not comprehend how he could fix the problem and comply with TMCA’s policies and procedures.
  7. Late on Sunday 14 January 2018, the plaintiff had little alternative but to check in to the Crown on the booking made subsequent to the second travel request. He had his family with him, including his children and he needed to accommodate them somehow. Mr Findlay was on leave and had been in sporadic contact with the plaintiff in the period leading up to that day.
  8. I am satisfied that the Serko system would not have offered the plaintiff a Luxe King room if he had tried to cancel the booking on the night he was due to check in and thereby take up the suggestion of Ms Dhillon. I am satisfied that Mr Findlay would not have approved the necessary third travel request in time for the system to generate the necessary booking. I infer from the evidence of the generation of the first and second travel requests that the accommodation booking could not be cancelled without cancelling the air travel and hire car bookings that were all on the same travel request. If Mr Findlay’s approval could not be obtained, the plaintiff was required by the Travel Authorisation and Arrangements Procedure to use the approved travel management company. All of these matters would have put the plaintiff at significant risk of not being in Melbourne as required on the Monday morning.
  9. Whilst the plaintiff should have taken the matter up with Ms Dhillon, I am satisfied that he did not do so because he did not understand how he could have done so and still complied with the relevant policies and procedures, His failure to do so was inept and not dishonest.
  10. In all the circumstances the plaintiff’s breaches of the relevant policies and procedures did not amount to serious misconduct as defined in the summary dismissal clause. TMCA was not entitled to terminate for breach of condition because it could not establish that the plaintiff had engaged in serious misconduct.

Did the plaintiff’s conduct established as relevant to Ground 1 amount to a sufficiently serious breach of an intermediate term to justify the termination of the contract?

  1. A party may terminate a contract for a sufficiently serious breach of an intermediate term. A breach of an intermediate term is sufficiently serious to justify termination if the event “goes to the root of the contract” or in other words it would deprive the injured party of substantially the whole of the benefit that it was entitled to under the contract. The determination of what the injured party was entitled to rests on a construction of the contract at the time of entry into the contract. The analysis takes into account the nature of the contract and the relationship it creates, the nature of the term, the kind and degree of the breach, and the consequences of the breach for the other party. A further material consideration is the adequacy of damages for the breach as a remedy, because that is the corollary to allowing the injured party to terminate: Koompahtoo at [49]-[55].
  2. For the reasons given, I am satisfied that the plaintiff’s conduct was in breach of the following overlapping obligations in the written contract:
  1. the Accommodation Procedure by booking a suite;
  2. the Travel Policy by failing to ensure that the Crown accommodation expenses were reasonable;
  3. his contractual obligations to act in accordance with TMCA’s best interests and to avoid conflicts of interest.[10]
  1. I am not satisfied that the plaintiff’s breach was a sufficiently serious breach of an intermediate term to justify termination of the contract because it did not deprive TMCA of substantially the whole of the benefit that it was entitled to under the contract. The contract was one of employment. It is a natural consequence of the employment relationship that an employee’s misconduct may cause financial loss to their employer. The quantum of the loss was relatively small. The plaintiff’s error did not alter his performance of the employment contract. The breach did not involve dishonesty. The conduct could not be repeated because the plaintiff’s corporate credit card had been cancelled and he was not required to travel as much. Further, there was no evidence that the conduct was repeated in the period of 19 January to 21 February 2018. The breach was adequately compensated by the payment of damages, which the plaintiff had already agreed to pay at the time the contract was purportedly terminated and in any event that TMCA had a contractual right to withhold from any amount payable to the plaintiff.
  2. I am not satisfied on the balance of probabilities that TMCA has established serious misconduct on the basis of the allegations in ground 1.

Ground 2 –   Did the plaintiff book an extra night of hotel accommodation on 19 January 2018 for personal purposes?

  1. At the time of making the first and second travel requests, the plaintiff was unsure at what time on Friday 19 January 2018 that he would finish work at Port Melbourne and that it was reasonable that he would need to leave the office at least three hours before the scheduled departure time of his flight back to Sydney. In those circumstances, there was a reasonable business purpose for him to stay in Melbourne on that night and that he would need to book accommodation to do so.
  2. I accept the plaintiff’s evidence that he did not know when he was going to finish at work on 19 January 2018 and that he had previously stayed on the last night of a business trip on many occasions. I also accept the plaintiff’s evidence that it was reasonable to allow three hours between leaving the Port Melbourne office and the scheduled departure time of a flight back to Sydney. In other words, the plaintiff would have had to be sure that he could leave the office by 6.00pm on that day.
  3. I accept the plaintiff’s evidence that his uncertainty as to his finishing time on Friday 19 January 2018 provided a legitimate business reason justifying a departure from Melbourne on Saturday 20 January 2018. The plaintiff’s intention to stay in Melbourne on 19 January 2018 was conveyed to Mr Findlay in the second travel request that was approved by Mr Findlay.
  4. I accept the plaintiff’s evidence that he did not finish work on 19 January 2018 before 6.00pm and I find that would have made it impractical for him to have returned to Sydney on that night.
  5. The Travel Authorisation and Arrangements Procedure stated that managers in the position of Mr Findlay “must review itineraries to ensure alignment with business purposes and the minimisation of time away (particularly overnight and weekends away)”. [11]
  6. I am satisfied that Mr Findlay’s approval of the trip included an approval for the plaintiff to stay in Melbourne on 19 January 2018 and that was an approval given by TMCA.
  7. Ms Buchanan conceded in cross-examination that it might have been reasonable for the plaintiff to stay in Melbourne overnight on 19 January 2018.
  8. I am satisfied that the plaintiff said in the 14 March 2018 meeting that it was inappropriate to stay in Melbourne on 19 January 2018 because he was put under pressure in the meeting and answered by reference to his usual practice rather than by reference to the particular trip. I am satisfied that he was also conscious of the fact that he had agreed to pay for the final night’s accommodation as a compromise and that he adopted TMCA’s binary classification of the expense, when the situation was more complicated than that.
  9. I am not satisfied that the plaintiff acted dishonestly by reference to Ground 2. I am not satisfied that the plaintiff was in breach of any of the relevant policies and procedures or his contractual obligations. To the contrary I am satisfied that there was a legitimate business reason for the plaintiff to stay in Melbourne on 19 January 2018, that this was approved by Mr Findlay and that the plaintiff was entitled to reimbursement of the actual cost of the hotel room in accordance with the Accommodation Procedure, subject to my findings on Ground 1.
  10. I am not satisfied on the balance of probabilities that TMCA has established serious misconduct on the basis of the allegations in ground 2.

Ground 3 –    Did the plaintiff pay for his son’s meal at the Common Man Restaurant using his corporate credit card?

  1. The evidence relied on by TMCA to establish this ground was flimsy. In the 14 March 2018 meeting the plaintiff volunteered that there was one meal where he may have had his son with him. The alleged admission did not extend to paying for anything on his corporate credit card. Neither Ms Buchanan, nor Ms McCarthy saw fit to interrogate the plaintiff any further on this issue, yet they were quick to conclude that the plaintiff was dishonest on this issue.
  2. Somehow, and in a way that is unclear from the evidence, the meal at the Common Man was identified as the offending occasion. It was referred to in the Investigation Summary and the letter dated 23 March 2018. It is apparent from these references that the content of the notes of the 14 March 2018 meeting were not a complete record of what was said.
  3. The objective evidence does not support TMCA’s case that the plaintiff was in breach of the Expense Reimbursement Policy. The tax invoice for the meal served to the plaintiff on 19 January 2018 described the number of diners being served as one. It recorded the service of one meal and one beer. There was also evidence that the plaintiff paid for his family’s meal on his personal credit card at the cost of $50.50. From this I infer that the plaintiff did separate his personal expenditure from his business expenditure, for which he was entitled to incur as a business meal expense on his corporate credit card.
  4. The plaintiff’s evidence that his son consumed some left over pizza of his meal is consistent with the objective evidence. I accept the plaintiff’s evidence on this point and generally for the reasons already given.
  5. A further alternative basis for finding against TMCA on ground 3 is that Ms Buchanan accepted in cross-examination that there was no additional expenditure incurred by TMCA to benefit the plaintiff’s son. She contended that the issue with the Common Man expense claim was that it was incurred on 19 January 2018 at a time when the plaintiff should have returned home. On this contention, it follows from my finding on Ground 2 that there was a legitimate business reason for the plaintiff to stay in Melbourne on 19 January 2018 that the Common Man expense claim was a legitimate business meal expense.
  6. I am not satisfied that the plaintiff was in breach of any of the relevant policies and procedures or his contractual obligations. To the contrary I am satisfied that the plaintiff was entitled to claim the Common Man expense as a business meal expense under the Business Meal and Other Expenses Procedure.
  7. I am not satisfied on the balance of probabilities that TMCA has established serious misconduct on the basis of the allegations in ground 3.

Ground 4 –   Did the plaintiff use his corporate credit card to purchase credit on the Telstra Dongle service for personal use, without TMCA’s knowledge or authority?

  1. The only evidence was that the Telstra Dongle was used by the plaintiff to access the internet for the purpose of presenting training to TMCA employees and others during the course of his employment. Mr Langridge had approved the payment of the charges incurred by the plaintiff using the Telstra Dongle following a request made to him by Mr Irwin and Mr Chellingworth, in accordance with the Expense Reimbursement Policy.
  2. After that approval was given, the plaintiff submitted a number of expense claims related to the use of the Telstra Dongle that were approved for payment by Mr Chellingworth. The plaintiff was entitled to claim the sum of $180 in reimbursement for the cost of using the Telstra Dongle for TMCA’s business purposes, in accordance with the Expense Reimbursement Policy.
  3. TMCA did not make any competent inquiries of the plaintiff’s former managers, which would have corroborated his version of events.
  4. TMCA’s case was based wholly on assertions that remain unsubstantiated.
  5. I am not satisfied that the plaintiff was in breach of any of the relevant policies and procedures or his contractual obligations. To the contrary, I am satisfied that the plaintiff was entitled to claim reimbursement of the Telstra Dongle expense because he had obtained an authorisation from Mr Langridge under the Expense Reimbursement Policy and that authorisation had not been revoked.
  6. I am not satisfied on the balance of probabilities that TMCA has established serious misconduct on the basis of the allegations in ground 4.

Ground 5 –   Was the plaintiff dishonest when asked about these expenses?

  1. For the reasons given I have concluded that the plaintiff did not act dishonestly, but Ground 5 is based on the premise that the plaintiff gave dishonest answers in the course of the TMCA investigation.
  2. TMCA submitted that Ground 5 was “based on Mr Sherry’s denial that he had incurred any personal expenses when asked during his Skype interview with Mr Findlay and Ms Eather”.
  3. TMCA’s approach to this issue was based on its binary classification of expenses as personal or business expenses. The expenses that the plaintiff accepted were personal after they were rejected by TMCA were expenses that he maintained were business related. In other words, the subject expenses were disputed and it was reasonably open to the plaintiff to hold the view at the time that it was expressed that he had not incurred any personal expenses on the corporate credit card.
  4. The plaintiff had not been told before the Skype meeting on 21 February 2018 that there was a problem with the acceptance of any of his expenses. I do not accept Mr Findlay’s evidence that he was told that there was a problem on 21 February 2018, following the Skype meeting.
  5. On 14 March 2018 and perhaps later as well, the plaintiff was lured into TMCA’s binary classification without representing himself strongly enough as to the disputed expenses. I do not consider his references to the disputed expenses being personal expenses on that day to be determinative of the issue.
  6. For the reasons given, the plaintiff was correct in maintaining that the accommodation cost on 19 January 2018, the Common Man expense and the Telstra Dongle were not personal expenses.
  7. In relation to the Crown accommodation expenses, the true position was that the plaintiff maintained that he did the right thing but accepted with the benefit of hindsight that he could have done more. The plaintiff had reasonable grounds for believing that he could not have fixed the problem in compliance with TMCA’s policies and procedures.
  8. TMCA has failed to prove that the plaintiff had no reasonable belief that what he said to Ms Eather and Mr Findlay on 21 February 2018 was true.
  9. I am not satisfied that the plaintiff gave dishonest answers to TMCA in the course of the investigation.

Conclusion on Issue 1

  1. I am not satisfied on the balance of probabilities that the plaintiff engaged in serious misconduct as defined in the written agreement or at common law to justify the plaintiff’s summary dismissal.

Issue 2 –    What are the appropriate damages to be awarded to the plaintiff?

  1. TMCA represented to the plaintiff that he was entitled to a redundancy payment of $379.268.10 gross ($290,359.10 net) if he continued to remain in its employment until 31 March 2018. It is beyond doubt that TMCA retained the right to summarily dismiss him if it had appropriate grounds to do so.
  2. The plaintiff was purportedly summarily dismissed on 28 March 2018. TMCA admitted in its Defence that the plaintiff’s last day of work before the End Date would have been 29 March 2018.
  3. The plaintiff submitted that his position was being made redundant on 31 March 2018 and that if the contract had not been wrongfully terminated that he would have still been employed by TMCA on the End Date. The redundancy clause obliged TMCA to make a redundancy payment if the plaintiff’s position became redundant and if TMCA could not offer him a suitable alternative position. It was common ground that the plaintiff’s position became redundant and that TMCA did not offer him a suitable alternative position. The redundancy clause obliged TMCA to make a redundancy payment in an amount according with the applicable industrial legislation or such higher amount as it otherwise decided. TMCA decided to pay the plaintiff more than his legislative entitlements in or about July 2017. TMCA was not contractually obliged to pay the larger sum, but it did not indicate at any time that it would do otherwise.
  4. The plaintiff submitted that if the contract had not been wrongfully terminated then the plaintiff would have only had to work one more day to be paid what TMCA had told him he was entitled to. The plaintiff contended that these arrangements were almost certain.
  5. TMCA contended that if the Court was satisfied that the plaintiff had engaged in misconduct, but not serious misconduct to justify summary dismissal, then it would have relied on the notice clause and paid the plaintiff out his notice period on 28 March 2018, thereby terminating the contract on that day and avoiding any obligation to make a redundancy payment.
  6. TMCA correctly submitted that it was not contractually obliged to pay the larger sum. It retained a discretion to pay the plaintiff his legislative entitlements or another amount in between.
  7. The plaintiff bore the onus of establishing on the balance of probabilities as to what would have been the value of the contract, if it had not been terminated: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 7 (Gibbs CJ) and 15 (Mason, Wilson and Dawson JJ). The value is to be determined objectively and therefore takes into account the possibility that other events may make the lost contractual rights less valuable: The Mihalis Angleos, The Golden Victory and Bunge SA v Nidera BV.
  8. However, the mere existence of a wrongdoer’s right to terminate the contract does not mean that the contract operates automatically to restrict the damages that can be awarded: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 91-93 (Mason CJ and Dawson), 133-115 (Brennan J), 132-133 (Deane J), 143-144 (Toohey J) and 149-150 (Gaudron J), TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 10 at 154 (Hope JA, Priestley and Meagher JJA agreeing) and Berry v CCL Secure Pty Ltd [2020] HCA 27 at [37] (Bell, Keane and Nettle JJ) and [69] (Gageler and Edelman JJ).
  9. The question is whether absent the wrongful termination, would the wrongdoer would have terminated the contract? To decide that requires the court to have regard to all the facts and circumstances of the case, including events extraneous to the contract that were in the control of the wrongdoer: Berry at [38]. The Court is not obliged to assess damages by reference to an improbable factual hypothesis: TCN Channel 9 and Amann Aviation.
  10. Whilst the burden of proof in the sense of the ultimate burden of establishing his case on the balance of probabilities remained with the plaintiff, the burden of proof in the sense of introducing evidence was liable to shift constantly “according as one scale of evidence or the other preponderates”: Purkess v Crittenden (1965) 114 CLR 164 at 168 (Barwick CJ, Kitto and Taylor JJ).
  11. I have concluded that TMCA did not have the right to summarily dismiss the plaintiff. The mere existence of the notice clause is insufficient to displace the inference that the contract of employment would have continued in existence until the End Date, bearing in mind that involved only one more work day. The practical burden of introducing evidence to show that on the balance of probabilities that the employment contract would have been terminated by TMCA relying on the notice clause, fell to TMCA.
  12. TMCA did not plead that if the Court decided that it did not have the right to terminate the employment contract that it would have relied on the notice clause. In effect, TMCA pleaded an all or nothing case by maintaining in the Defence that it was entitled to summarily dismiss the plaintiff for serious misconduct.
  13. The function of pleadings is to state with sufficient clarity the case that must be met and thereby to ensure the basic requirement of procedural fairness that a party should have the opportunity to meet all of the material facts against them and to have the issues for decision defined: Banque Commerciale SA (En liq) v Ankil Holdings Ltd (1990) 169 CLR 279 at 286.
  14. TMCA was required to plead the counterfactual on which it intended to rely to deny the causal link between TMCA’s repudiation of the employment contract and the loss sought by the plaintiff: Berry at [72]. It cannot be assumed that in the absence of any pleaded counterfactual that TMCA would have pleaded the counterfactual that it has contended for in final submissions at [309]. In the absence of the pleaded counterfactual, the Court is not required to make a factual finding on the issue as to a counterfactual and it would be procedurally unfair to the plaintiff to do so.
  15. The absence of the counterfactual in the pleading also denied the plaintiff the opportunity to plead relevant matters in its Reply. In this case, it was open to the plaintiff to argue that TMCA was estopped from relying on the notice clause by reference to its representations relating to the plaintiff’s position becoming redundant. The plaintiff put on a Reply, which did not raise an estoppel because it was not necessary to do so, based on TMCA’s pleaded defence.
  16. TMCA led no evidence of the counterfactual it contended for in [309].
  17. TMCA seeks to rely on the hypothetical that it did not call any evidence about. The result is that the plaintiff was not given the opportunity to challenge the hypothetical in cross-examination in circumstances where I have largely rejected the evidence of its witnesses.
  18. There is no basis for assuming the counterfactual and the consideration of it is not permitted by the issues defined in the pleadings. Accordingly, TMCA cannot contend that it would have relied on the notice clause to terminate the employment contract prior to 31 March 2018, thereby avoiding the obligation to make a redundancy payment.
  19. If I am wrong that the TMCA was required to plead the counterfactual and to lead evidence of it, I would not infer that TMCA would have made the necessary payment in lieu of notice in time to terminate the employment contract before the End Date, because its purported payment in lieu of notice referred to in the Termination Letter was not made for about one month after the plaintiff’s termination. At the time, TMCA had legal advice and acted on it. I infer that TMCA had not been advised that if it wanted to rely on a payment in lieu of notice that making of the payment was necessary to bring the employment contract to an end.
  20. In a case of termination of a contract of employment for wrongful dismissal, at common law the employee is prima facie entitled to recover the present value of wages which would have been earned for the remaining period of the contract: Tasman Capital Pty Ltd v Sinclair (2008) 75 NSWLR 1 at [64] and [70].
  21. It was common ground that the remaining period of the contract was until 31 March 2018, which required the plaintiff to attend for work on 29 March 2018 only. TMCA had represented up and until 28 March 2018 that the plaintiff’s redundancy payment would be in the sum stated in the 31 July 2017 letter.
  22. TMCA did not plead any counterfactual to the effect that it would have decided to exercise its discretion to pay the plaintiff less than the redundancy payment it had previously advised. Again this deprived the plaintiff of the opportunity to plead in its Reply any relevant counter argument.
  23. TMCA did not lead any evidence on this issue.
  24. Generally speaking where there are several ways in which a contract may be performed the mode to be adopted in assessing he value of a contract is the least profitable way to the plaintiff or the least burdensome way to the defendant: Cockburn v Alexander (1848) 6 CB 791 at 814 (Maule J). Another way of saying this is that a defendant is not liable for doing that which he is not bound to do: Lavarack v Woods of Colchester Ltd [1967] 1 QB 278. But this is subject to the proviso stated by Lord Diplock at 295-6 and cited with approval by the High Court in Berry at [38] :

The events extraneous to the contract, upon the occurrence of which the legal obligations of the defendant to the plaintiff thereunder are dependent, may include events which are within the control of the defendant: for instance, his continuing to carry on business even though he has not assumed by his contract a direct legal obligation to do so. Where this is so, one must not assume that he will cut off his nose to spite his face and so control these events as to reduce his legal obligations to the plaintiff by incurring greater loss in other respects. That would not be the mode of performing the contract which is “the least burdensome to the defendant”.

  1. Without evidence from TMCA that it would have decided to pay the plaintiff only his legislative entitlements on redundancy, I am not satisfied that I should make that assumption because that could have caused significant problems for TMCA in application of the Redundancy Procedure to its employees in the future.

Mitigation of damages

  1. TMCA finally contended that the plaintiff was required to take steps to mitigate his loss and that he provided no evidence that he had done so. I do not accept that the plaintiff has failed to mitigate his loss for the reasons that follow.
  2. In assessing damages for wrongful dismissal, there must be brought to account the financial benefit which the employee received, or acting reasonably should have received, from the exercise of earning capacity freed up by the dismissal: Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR(NSW) 51 and Lavarock. For example, in the case of wrongful termination by a failure to give the required notice provided for by the contract, the employee is freed up for the period of notice required to be given under the contract, but not given: Bagnall.
  3. In the unusual circumstances of this case, the plaintiff was not bound to work for TMCA after 31 March 2018, because he had been told by TMCA that his position would become redundant on that day. I infer from the evidence that the plaintiff’s position did become redundant on that date and that Mr Kerr assumed his role in Melbourne from that time. The effect of the wrongful dismissal was to free the plaintiff up to find other alternative employment for one day, being 29 March 2018 only, because 30-31 March 2018 were not work days.
  4. The plaintiff’s evidence was that he did not seek other employment until August 2018 and that he did not earn any income in that period.
  5. For the reasons given, I am satisfied that but for the wrongful termination of the employment contract by TMCA, the plaintiff would have continued to work until the End Date, that his position became redundant on that day, that he had not been offered suitable alternate employment and that TMCA was contractually obliged to provide redundancy payments in the amount that it represented that it would.
  6. The onus of proving that the plaintiff could have or did earn or should have earned in the relevant period was on TMCA: Tasman Capital.
  7. TMCA did not lead any evidence on this point.
  8. In the circumstances of this case, it is absurd to suggest that TMCA could have proved that the plaintiff failed to mitigate his loss by not taking any steps to exercise his earning capacity in the period 29-31 March 2018.

Assessment of damages

  1. It is appropriate that the so called “ex gratia” payment made to the plaintiff by TMCA should be taken into account. This was accepted by the plaintiff in the Statement of Claim, but became the source of controversy by reference to TMCA’s characterisation of the payment. In my view, the “ex gratia” payment should be taken into account in assessing damages to avoid double compensation.
  2. The plaintiff must also account for the amounts he agreed to repay TMCA relating to the Crown accommodation expenses. For the reasons given, he was in breach of the relevant policies for which the appropriate remedy is damages in the sum that he has already paid to TMCA. The amount of the repayment in relation to the extra night should be reduced because I have found that there was a legitimate business reason for the plaintiff to stay in Melbourne on 19 January 2018. I do not have the necessary information to calculate the appropriate reduction. In the outcome of the proceedings, it does not matter much and it is appropriate to take a broad brush approach and to not to complicate the case any further.
  3. TMCA must account to the plaintiff for the Common Man expense and the Telstra Dongle expense in the total sum of $212.50, which I have found that he was justified in claiming.
  4. The parties did not make any submissions about whether the judgment sum was to be on gross or nett figures. From my research it appears that the award of damages to the plaintiff would qualify as an eligible termination payment, that special taxation provisions apply and it is appropriate to award damages on the gross figures. In case I am wrong on this point, I will grant the parties liberty to apply.
  5. The plaintiff is entitled to an order for damages for TMCA’s repudiation of the employment contract in the sum of $298,958.70 being the difference between the gross figures set out in [3] and [4] above, with the addition of $212.50 referred to in [340] above.
  6. The plaintiff is also entitled to interest on the nett amount of the loss from 29 March 2018 to 23 December 2020 at the rate of 5.5% from 29 March 2018 to 31 December 2019 (1,009 days) and 4.75% from 1 January 2020 to 23 December 2020 (358 days).

Orders

  1. I make the following orders.
  1. Verdict for the plaintiff in the sum of $298,958.70, plus interest pursuant to s 100 Civil Procedure Act 2005 to be calculated by the parties, in accordance with these reasons.
  2. I direct the parties bring in Short Minutes of Order by providing them to my Associate relating to the interest calculation on or before 5pm on 22 January 2021.
  3. On receipt of the Short Minutes of Order, I will amend the judgment sum in chambers and provide a sealed copy of the orders to the parties on the day they are made.
  4. The defendant is to pay the plaintiff’s costs of the proceedings as agreed or assessed, on the ordinary basis.”

Sherry v Toyota Motor Corporation Australia Limited [2020] NSWDC 827