This post deals with the relationship bteween the common law doctrines of frustration of contract and unfair dismissal.
“[1] Mr Stephen Burns (the Applicant) applied to the Fair Work Commission (FWC) under
s.394 of the Fair Work Act 2009 (Cth) (the Act) alleging he had been unfairly dismissed from his employment with Odyssey Marine Pty Ltd (the Respondent). The Respondent has raised a jurisdictional objection that the Applicant’s employment was not terminated at the initiative of the Respondent but rather ended by way of frustration of contract. Given this, the Respondent says that the Applicant was not dismissed within the meaning set out in s.386 of the Act and that consequently the FWC does not have jurisdiction to deal with the matter.
Background
[2] The Applicant was – by contemporary standards – a long-serving employee of the Respondent, having commenced his employment in 2011. In February 2024 while working in his role as Vessel Master he was involved in a serious workplace accident. The Respondent’s workers’ compensation insurers (CGU) accepted liability for the injuries sustained in the accident and the Applicant began a long process of surgery and rehabilitation.
[3] The Western Australian Workers Compensation and Injury Management Act 2023 (the WCIM Act) confers upon injured workers a protection that their job must remain available to them during a twelve-month period called the “employment obligation period”1 This period commences on the day the worker first has an incapacity for work. In the present case, it would appear that in January 2025 – being a time towards the end of that twelve-month period – CGU arranged a comprehensive assessment of the Applicant from a Consultant Orthopaedic Surgeon Mr Anthony Jeffries.
[4] As a consequence of Mr Jeffries’ report, the Respondent set in motion a process of reviewing the Applicant’s employment. This led to the Respondent writing and advising the Applicant in early April that it had formed a view that his employment contract may be frustrated on the basis that he could no longer perform the inherent requirements of his role. As
a consequence, it was the Respondent’s position that the Applicant’s employment was at an end. The Applicant was invited to make a response which he subsequently did. However, the response provided did not change the Respondent’s view and it advised the Applicant on 15 April 2025 that his employment had come to an end on that day as a consequence of frustration of contract.
Representation
[5] The Applicant was self-represented. The Respondent sought permission to be represented and made submissions with respect to s.590(2) of the Act. I was persuaded that the FWC would be assisted by counsel given the complexity of the matter and so granted permission pursuant to s.590(2)(a).
Submissions and Evidence
[6] The Respondent’s evidence came from Mr Ryan Baker, its Operations Manager. Mr Baker’s evidence was essentially about the requirements of the role of a Vessel Master and his assessment of whether the Applicant could meet all those requirements in light of the restrictions set out in Mr Jeffries’ report. He stated:
“The Report, coupled with my knowledge of the requirements of a Vessel Master in the Port of Port Hedland, suggested to me that the Applicant could no longer perform this role safely, and that this incapacity was unlikely to resolve itself.
If the Applicant was not able to perform the role safely, he cannot be engaged as a Vessel Master. The Respondent would never employ someone who was not physically able to perform the role safely given the statutory and contractual obligations in respect of safety owed to our clients, employees, and seafarers at large.”2
[7] While the Applicant did seek to challenge some of the evidence of Mr Baker, the evidence as it is relevant to the issue of frustration of contract was undisturbed. I accept that the role Mr Baker played was to assess the information available in the report of Mr Jeffries and determine if the Applicant could perform all the required duties of a Vessel Master. Clearly, some of those duties related to safety and incidents that may occur very infrequently. Nevertheless, I accept that they are requirements of the role.
[8] The Respondent’s submissions set out the circumstances in which it found itself with respect to the Applicant’s employment. In summary, it had held his job open for twelve months as required in the WCIM Act. For the entirety of this period the Applicant had been assessed as totally unfit for work. At the end of the twelve-month period the Respondent carried out an assessment of the Applicant’s situation based on the report of Mr Jeffries and its assessment – provided by Mr Baker – of the likelihood of his ability to perform his role in light of that report.
[9] It had concluded that the Applicant was not capable of performing his duties and it was unlikely that this situation would change in the foreseeable future. As a consequence, the Respondent submits that it determined that the Applicant’s contract was frustrated and thus commenced a fair process to resolve what would happen. The Respondent wrote to the
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Applicant and advised him of its concerns and invited him to make a response. The Applicant made a response which the Respondent says it considered but did not find anything in the response that contradicted the information it held or its views on the consequences. The Respondent notes specifically that the Applicant did not suggest he was fit to return and indeed acknowledged that he could not do so. Consequently, it proceeded to advise the Applicant that his employment had ended by way of frustration of contract.
[10] The Respondent made extensive submissions on the doctrine of frustration based on established case precedent. The Respondent submitted that frustration occurs when, without default by either party to the contract, one party is unable to fulfill its contractual obligations other than in such a way as to render the performance something radically different to what was agreed in the contract3. Further, the Respondent submitted that where a contract is frustrated, the contract ends by operation of law, and not at the initiative of either party.4
[11] In terms of the industrial context, it noted the findings of the Full Bench of the Australian Industrial Relations Commission (as the FWC then was) in Smith and Kimbell v Moore Paragon Australia Ltd (Moore Paragon) as follows:
“… under the general law an employer may lawfully terminate, or perhaps treat as frustrated, the contract of employment of an employee who, by reason of illness or injury, does not have an ongoing capacity to perform the duties of the position in which he or she is employed.”5
[12] In its submissions the Respondent conceded that the partying arguing for frustration bears the onus of establishing that there are frustrating circumstances and those circumstances were not caused by any default of its own.6
[13] The Respondent further noted the findings of Donaldson J in Marshall v Harland & Wolff [1972] All E.R. 715 (Marshall) which were cited in Moore Paragon regarding the circumstances in which frustration may be found, as follows:
‘Was the employee’s incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment?’7
[14] Drawing further from Marshall, the Respondent noted that Donaldson J had identified a number of considerations that would bear on the issue of whether a contract was frustrated. These considerations are set out in full in Moore Paragon as follows:
(a) “The terms of the contract, including the provisions as to sickness pay
The whole basis of weekly employment may be destroyed more quickly than that of monthly employment and that in turn more quickly than annual employment. When the contract provides for sick pay, it is plain that the contract cannot be frustrated so long as the employee returns to work, or appears likely to return to work, within the period during which such sick pay is payable. But the converse is not necessarily true, for the
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right to sick pay may expire before the incapacity has gone on, or appears likely to go on, for so long as to make a return to work impossible or radically different from the obligations undertaken under the contract of employment.
(b) How long the employment was likely to last in the absence of sickness
The relationship is less likely to survive if the employment was inherently temporary in its nature or for the duration of a particular job than if it was expected to be long term or even lifelong.
(c) The nature of the employment
Where the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if he occupies a key post which must be filled and filled on a permanent basis if his absence is prolonged.
(d) The nature of the illness or injury and how long it has already continued and the prospects of recovery
The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.
(e) The period of past employment
A relationship which is of long standing is not so easily destroyed as one which has but a short history. This is good sense and, we think, no less good law, even if it involves some implied and scarcely detectable change in the contract of employment year by year as the duration of the relationship lengthens. The legal basis is that over a long period of service the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period.
These factors are inter-related and cumulative but are not necessarily exhaustive of those which have to be taken into account.”8
[15] The Respondent submitted that when these considerations were examined in the present matter, it was clear that the Applicant’s contract had been frustrated. With respect to consideration of the terms of the contract and the nature of the employment, the Respondent noted that the applicant was engaged for a specific role – being Vessel Master – which was a role that had various safety obligations an incumbent would need to meet. In the Respondent’s submission the contract did not contemplate the employment relationship continuing in circumstances where the applicant could not perform the duties required in the role.
[16] With respect to the duration of the contract, the Respondent submitted that while the Applicant had been employed for over thirteen years, the Respondent was nevertheless faced with a scenario where at the time of declaring the contract frustrated the Applicant was not fit for his role and it was unlikely – based on the medical evidence that was obtained at least in part from disclosures made by the Applicant – that he would ever be fit for the role in the future.
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Having been put on notice as to this interpretation, the Respondent submitted that the Applicant did not seek to substantively dispute it but rather raised the prospect of a transfer to an administrative role.
[17] The Applicant’s submissions and evidence were presented in one document with no clear delineation between what was to be taken as evidence and what was to be taken as submission. Having examined the document in some detail, I have drawn the following conclusions regarding the Applicant’s evidence.
[18] In the main, the Applicant’s evidence about the timeline of the various incidents is the same as that of the Respondent. The Applicant provides evidence with respect to the circumstances of the actual accident itself wherein it appears he seeks to apportion blame to the Respondent. However, it is not necessary for me to interrogate that evidence at any length. There is nothing other than the Applicant’s assertions to support the notion of blame and I note that some eighteen months later there has been no report to the safety regulator by the Applicant nor has he made any claims asserting negligence. I note also that the accident itself would appear to fall within the scope of a notifiable incident9 under the Work Health and Safety Act 2020 (WA) but there is no suggestion from the Applicant that he has been interviewed by Worksafe Western Australia.
[19] While it is the case that the party alleging frustration should not have been an agent of the circumstances that led to frustration, this requires more than allegations. The Respondent has been at pains to deny that there is any negligence on its part. While there was some evidence provided about the process used to climb aboard and disembark the boat in question, there was nothing in that evidence to confirm any negligence on the part of the Respondent.
[20] The Applicant’s evidence with respect to what transpired between the parties in early April 2025 is again not materially different from the Respondent and in any case most of what transpired is recorded in writing and in evidence before the FWC. The Applicant also provided evidence of a conversation he had face-to-face with the Respondent’s CEO Mr Wesley Van de Spey and a further conversation he had with Mr Ryan Baker by way of telephone. His evidence regarding these calls was not challenged but again I find it is not necessary for me to interrogate that evidence save for some comments which appear later in this decision.
[21] The Applicant states that in his conversation with Mr Van de Spey he was told that there would always be a job for him at Odyssey Marine. In considering what relevance I should attach to this evidence, I have formed a view that whether the offer was made or not is irrelevant. If the Applicant believes that there was a contractual arrangement entered into between the parties at that time it would seem that his avenue of remedy would be through a claim for breach of contract. However, there is no evidence that this purported contract ever came into being. At the time of the cessation of his employment it was his ongoing role as a Vessel Master that came to an end, and not some unspecified position that may or may not have been envisaged and contracted between the parties.
[22] The Applicant further states that in his conversation with Mr Baker he was told to use the “total insurance period” to maximise his recovery and then return to work. Again, whether this conversation took place is in my view not relevant to the issue of frustration. Having questioned Mr Baker at hearing it was clear that he was not the decision make in this matter
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other than to the extent of his opinion of the Applicant’s physical ability to perform his role. As such, it is difficult to see how what would appear to be advice from Mr Baker could be relied upon by the Applicant. In addition, the notion of “total insurance period” is somewhat unclear. Does this mean the total amount of time during which the Applicant would receive workers’ compensation payments, or does it refer to the employment obligation period? It would appear to me that if this was the advice given by Mr Baker it was based on his understanding only and could not and should not have been relied upon by the Applicant.
[23] In his submissions the Applicant has made a number of references to case precedents and provisions in statutes such as the WCIM Act that I do not find to be of assistance in examining the issue of frustration of contract. I do not propose to address each of these in great detail but will instead provide a brief summary of my thinking in each instance. Firstly, the Applicant proposes10 that as there were still amounts left to be paid to him as workers’ compensation, he should have been retained in employment. He infers that this would have provided a reasonable healing time. In my view if there is a period that should be regarded as reasonable healing time it is twelve months, which is the employment obligation period prescribed by the WCIM Act. There is no suggestion that the WCIM Act protects an employee’s employment beyond this twelve-month period and the employer’s obligations to the employee clearly change at that twelve-month mark.
[24] I would further note that while it does not state so explicitly, the WCIM Act protects not only against dismissal (other than for misconduct) during the employment obligation period, but it would also appear to have the effect of preventing the doctrine of frustration from operating. I note in support of this proposition that it was also the finding of Commissioner Beech of the Western Australian Industrial Relations Commission in Hoffman v Western Australian Aboriginal Media Association dealing with the Western Australian Workers’ Compensation Act as it then was, and particular the prohibition on termination found in s.84AA, the antecedent of s.166 of the WCIM Act:
“Even so, if the common law doctrine of frustration did apply, in my view, it is overridden by the provisions of section 84AA of the Worker’s Compensation and Rehabilitation Act, 1981. I do agree, as Mr. Woodward has said, that the Commission is not the body to enforce the Workers’ Compensation and Rehabilitation Act, 1981. However, I also agree that it is a provision that I can take into account in exercising my discretion. I have, on two earlier occasions, in the case of Stockwin v. Cable Sands a matter with which Mr. Clohessy was involved (77 WAIG 509), and in Pacey v. Modular Masonry (78 WAIG 1421) had occasion to consider section 84AA and I was of the opinion then, and I am of the opinion now, that section 84AA obliges an employer to hold the employee’s job open for 12 months whilst the employee is in receipt of worker’s compensation.
I am supported in that opinion by the decision of the Industrial Relations Coury in Fernandez v Comgroup Supplies Pty Ltd, a decision of Judicial Registrar Ritter of 11 December 1995. I only have the unreported decision. I do not have the citation of where it is reported. The relevance of that decision is that it leads me to the conclusion that section 84AA says that if somebody’s absence is less than 12 months, then they are able to return to the job, and that is an indication at least that the length of Ms Hoffman’s absence, being less than 12 months, does not allow frustration of the contract to operate.”11
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[25] The Applicant also seeks to rely on the lack of a return-to-work program as somehow indicative that his employment was unfairly ended. In the first instance I note that it is not contested that at all times during his absence from work the Applicant was diagnosed as totally unfit. I am not satisfied that this is an issue impinging upon the notion of frustration but in any case, it appears to be a matter for the WCIM Act and its statutory body Workcover. If – and I make no finding on this – the Respondent was in breach of its obligations under that Act, it was open to the Applicant to challenge this at the time.
[26] He cannot – in essence – allege that the Respondent was in breach and then claim this unreported accusation of breach has some part to play in the determination of whether his contract was frustrated. I also note that as I read the WCIM Act with respect to return-to-work programs12, it is difficult to see how a finding of breach of s.160 of the WCIM Act could have been made on the basis of the evidence currently before the Commission. As it stands, I am not prepared to give this allegation any weight.
[27] The Applicant also submits that the Respondent had a legal requirement to provide an alternative role.13 He claims that such requirement was “bypassed” by virtue of the Respondent claiming that an alternative role nominated by the Applicant – being Marine Supervisor – involved driving vessels. The Applicant does not support his claim about a requirement to provide an alternative role with reference to statute, but I have assumed that he is relying again on the employment obligation period. The relevant section of the WCIM Act provides as follows:
- Employer must provide position during incapacity
(1) In this section —
employment obligation period, for an injured worker, means the period of 12 months beginning on the day on which the worker first has an incapacity for work as a result of the injury;
suitable position, for an injured worker, means a position —
(a) for which the worker is qualified; and
(b) that the worker is capable of performing; and
(c) that is most comparable in status and pay to the position the worker held immediately before having an incapacity for work.
(2) The employer of an injured worker must, during the employment obligation period for the worker —
(a) provide to the worker the position the worker held immediately before having an incapacity for work (the pre-injury position); or
(b) ensure that the worker is provided with a suitable position if —
(i) it is not reasonably practicable to provide to the worker the pre-injury position; or
(ii) the worker does not have capacity to work in the pre-injury position.
[28] This is again a situation where the Applicant is suggesting a breach of the WCIM Act
without any evidence of having made a complaint to Workcover that the Respondent was in
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some way not meeting its obligations. The FWC does not administer the WCIM Act. If there is a breach, then it is open for the Applicant to pursue that matter with Workcover and seek a remedy. However, it is not open for me to make a ruling that the Respondent was in breach, and I do not propose to do so. The commentary from Workcover on its website suggests that the requirement to provide the job is constrained by what is reasonable and presumably what the employee can physically do. As such it may be that there is no breach. In any case, I am satisfied that this is not a matter that is properly considered when looking to the issue of frustration at the relevant point in time – which fell outside of the employment obligation period.
[29] While I again concede that a party alleging frustration should not be responsible for the circumstances that gave rise to the breach, the Applicant is making allegations about matters that should have been raised with Workcover. Had it been so raised and a finding of breach or breaches issued then this may have buttressed his argument that the Respondent – or perhaps its insurer – had some greater responsibility for his condition.
[30] The Applicant also sought to rely on the notion of the FWC finding that there was a job in the Respondent’s enterprise to which it would have been reasonable for him to be redeployed. As I pointed out to the Applicant at hearing the case he cited in support of this notion was dealing with the issue of genuine redundancy and the tests set out in the Act to determine if a redundancy is genuine. It is not relevant to the present situation.
[31] That deals with the submissions from the Applicant that I have not found to assist in forming a view on frustration. I now turn to some further submissions of the Applicant that deal with the issue of whether or not it could be said that his employment contract was frustrated. The first of these goes to the issue of timing.
[32] The Applicant submits that there is an imperative for an employer to notify an employee immediately if a contract becomes frustrated. He raises this notion at three separate points in his submissions14 however it is difficult to determine if there is any suggestion of case precedent. Notwithstanding this, I have resolved to address the notion, as the timing of frustration has been considered in previous cases. For example, in Zeiter v Melway Bin Hire, Commissioner Ryan, in rejecting the notion that frustration applied in the matter before him, noted as follows:
“When an intervening event occurs which frustrates the contract of employment the contract ends by operation of law as a result of that intervening event. The employer and the employee need do nothing to terminate the contract of employment. The contract terminates because of the intervening event.
In the present matter, the Respondents contend that the contract of employment was frustrated by the Applicant having his license suspended. If this was so then the contract terminated on 28 July 2015 when the Applicant’s driver’s license was suspended. Yet the Respondent continued to treat the Applicant as an employee and to take the Applicant’s work for the Respondent through to 3 October 2015…”15
[33] A related example can be found in the case of Cooper v Australian Taxation Office16 where the Applicant Mr Cooper had been incarcerated. The ATO argued that the contract was frustrated because of this incarceration. However, the FWC found that the Applicant had
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continued to provide service to the ATO by participating in its investigations even after incarceration. As such, the dismissal of his employment some months after his frustration event was not on the basis of frustration but rather for engaging in actions – being those that led to his incarceration – that were serious breaches of the employer’s code of conduct.
[34] In the present matter it might be argued – as indeed the Applicant did at hearing – that the contract was frustrated at the time the Respondent received the report from Mr Jeffries. If this was taken to be the case, then it might follow that the termination – occurring as it did some weeks after that report was received – was not due to frustration.
[35] The second submission from the Applicant relevant to frustration is that the Respondent was wrong to conclude that his inability to perform his role was permanent. There appear to be three main limbs to this assertion which I will address in no particular order. The first is the conclusions the Respondent has drawn from the report prepared by Mr Jeffries. The Applicant submits that the Respondent has drawn conclusions from that report which were not open to be drawn from the language used. For example, he submits as follows:
“The ‘Unlikely’ word from the Jefferies report has grown legs and has been massaged by the respondent into ‘impossible’ to consolidate its attempt to bolster the respondent’s frustration argument. Impossible is definitely a key part in this dispute and needs to be clearly established in a case of frustration. This is not the case here.
‘Unlikely’ means low probability based on a variety of definitions it can mean between a 20% to 40% probability of an event happening.”17
And further:
“Efforts have been made by the respondent in their submission to FWC to embellish what was discussed and written down into a prima facie case for frustration and subsequent termination.
In this Jefferies report TJ (Mr Jeffries) offered medical options going forward for the applicant. His comments are typical ‘cautious doctor speak’ with elements of probability relating to the options and potential outcomes.
The respondent has improved on the wording in the Jefferies report to now include the word impossible two times in their submission. A word TJ did not use in his report.
Impossible to perform is a key tenet of the doctrine of frustration. The respondent’s manipulation of the report as a result is flawed and their subsequent behaviour with regard to finding a solution – a way forward and a return to work for the applicant is pre- determined by this. More evidence of an intent to dismiss the applicant.”18
[36] In essence, the Applicant says that Mr Jeffries’ report was not an unequivocal statement that he would never be able to work again but has been treated as such by the Respondent. The second limb of this complaint is that the Respondent has been somewhat selective in what it has and has not considered with respect to evidence and submissions about his state of fitness. He submits that:
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“The respondent has not considered information that is credible relevant and
significant.”19
And further:
“The respondent has claimed to ‘look at all’ the medical evidence available. The applicant’s interpretation from discussions with his other providers including his personal doctor is that none of them have been contacted for an opinion.”20
[37] In summary, the Applicant submits that there was information that could have been accessed by the Respondent – such as reports from other medical providers – that would have provided a contrasting opinion to that of Mr Jeffries. The third and final limb relates to what the Applicant submits are provisions in his contract and the Respondent’s enterprise agreement with respect to fitness for work that have been ignored. The Applicant submitted as follows:
“The respondent has ignored the express terms of the applicants contract as covered in the EBA with regard to medical standards and fitness for work. Which if followed would potentially have allowed the contract to be performed and not be terminated.”21
And further:
“The respondent claims the contract can’t be performed but appears unwilling to use agreed performance standards and express legal terms of the contract (AMSA medical and STCW refresher course) to substantiate their thinking.”22
And further:
“Standards for the medical examination of seafarers (National Law Act 2012) are set for the medical fitness for seafarers by AMSA – Australian Maritime Safety Authority (Marine Order 505) The applicant has recognised and confirmed that he would need to pass these standards and suggested completing them in response to the cause letter before resuming employment.”23
[38] The Applicant also drew my attention to the findings of the South Australian Employment Tribunal in the matter of Geselle v Department for Health and Wellbeing. In that matter, which also involved an assertion by the employer that the contract was frustrated, the applicant was suspended with pay from her usual duties for a period of 14 months over concerns about her capacity to safely perform her work due to – amongst other things – obesity and a knee condition. The finding of His Honour Deputy President Lieschke was that the respondent had denied the applicant’s request to access her accrued leave entitlements of 200 hours of paid sick leave and 500 hours of annual and long service leave or to take leave without pay to address the health concerns.
[39] It was further found that the respondent did not seek any information from the applicant’s treating practitioners despite knowing she was actively seeking treatment and had justified the assertion of frustration by assumption without supporting medical evidence that the knee condition was permanently impaired. In making his decision, His Honour found as follows (citations omitted):
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“Whether a contract of employment has been frustrated is a question of fact. The impossibility to partly perform the contract of employment must satisfy an objective test, rather than the subjective opinion of a decision maker. All of an employee’s contractual and statutory rights must be exhausted before any further contractual performance becomes impossible. Termination for frustration is not a matter of managerial discretion.”24
Consideration
[40] The FWC’s task in this matter is to determine if the doctrine of frustration of contract is applicable to the situation in which the Applicant found himself. There is a reasonable amount of case law on the subject and some of the more recent cases have suggested that the approach to be taken has been moving away from some of the older common law cases. For example, a case which has been frequently cited with approval in recent years is that of Finch v Sayers (Finch) which was decided in the New South Wales Supreme Court.
[41] In Finch Justice Wootten undertook a careful review of what had been the prevailing views based largely on English cases. Although the case is now nearly fifty years old, it is useful to consider the observations made by Justice Wootten with respect to the evolution of the concept of frustration. In particular I note the following (with my emphasis and citations removed):
“One cannot but feel reluctance to embrace a view of the law of contract which produces a result not only contrary to what was a common assumption and basis of action of both parties, but contrary also to what common experience tells one is the normal basis on which employers and employees conduct their relationships today in this community, when permanent or indefinite employment is contemplated. If, as the defendants contend, the authorities constrain me to this course, I must adopt it. But I cannot accept that the proper starting point for consideration of this particular matter is the view adopted by the courts in England one hundred years ago of the consequences of an opera singer being disabled by illness…”25
“In short, the usual understanding in many types of employment today is that prolonged incapacity of an employee does not automatically terminate the employment but, subject to sick leave rights, excuses the employee from work and the employer from the obligation to pay, and gives the employer (and perhaps also the employee) the right to terminate the employment.” 26
“A chronological examination of the cases is useful in a situation where the law has had to accommodate to changing ideas of the employer-employee relationship, which necessarily affect the choice whether an illness is to be treated as automatically discharging the contract (frustration), or as giving one or both parties a right to terminate it. In the days when the consideration for work usually consisted only of current emoluments, the choice of consequence was of less importance, as a discharged contract could be replaced by a new one, if the parties wished to resume a relationship. Today, when there are often accumulating rights to leave and other fringe benefits,
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and provisions to give the employee security in illness or on retirement, the choice can have a considerable effect on rights, as the present case illustrates. Interestingly enough, the law was, at an earlier time, developed in a situation where continuity was most important—for the now forgotten purpose of acquiring a settlement in a parish under the Poor Law.”27
“The review of the authorities show that, before one can answer the question whether a contract of employment is frustrated, one must look at the whole of the terms of the contract, express and implied, and at all the surrounding circumstances, including the provisions made for the sickness and retirement of the employee, and the general practice of the particular employer, or in similar employment. When one does this, it may well be that,
in many areas of employment in contemporary society, particularly where
one is dealing with an indefinitely continuing relationship, and not the
performance of a specific task, there is relatively little room for the operation
of the doctrine of frustration due to illness. It is notable that, irrespective of what their lawyers may have subsequently argued for them, the employers, not only in Simmons Ltd. v. Hay, and in this case, but in every reported case in the last seventy years, have in fact acted on the basis that it was for
them to terminate the sick employee’s employment when they were no longer
willing to maintain the continuity of his employment.”28
[42] Although Finch draws upon the notions found in Marshall as set out in Moore Paragon and found at [13] above, it seems to me that Finch is setting a slightly higher bar than Marshall for finding frustration has occurred. I should also note that the language of these cases is such that they use “illness” rather than “injury” and in the present matter we are dealing with a worker who has sustained a work-related injury. While the situation of the Applicant is therefore different with respect to his entitlements to worker’s compensation benefits, I am of the view that no great distinction should be drawn between illness and injury for the purposes of establishing frustration.
[43] In the present matter the parties are in the first instance in furious disagreement over whether the Respondent was faced with the type of circumstance that might allow the doctrine of frustration to operate. Specifically, was the Applicant – taken at the time that the Respondent declared the contract frustrated – totally incapable of performing the job for which he was engaged or only capable of performing it in a manner that would be a complete departure from what was contemplated between the parties at the time the contract was formed. The Respondent says that it had sufficient cause to conclude that the Applicant both was, and would be for the foreseeable future, incapable of performing his contracted role. Its thinking in concluding that way was informed by the report of Mr Jeffries and the assessment of that report by Mr Baker.
[44] The Applicant objects to this conclusion. As noted at [34] above, in his submissions the Applicant proposed three limbs of argument as to why it was wrong to conclude that he was permanently incapacitated. Dealing with those limbs in reverse order of which they appear above, I firstly turn to the terms of his contract and the terms of the Respondent’s enterprise agreement. The contract relevantly provides as follows:
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“11. Fitness for Work
11.1 It is a condition of your employment that you are Fit to Work to undertake your assigned duties during each rostered shift.
11.2 For the purposes of the clause, “Fit to Work” means a state of physical, mental and emotional health, which enables you to perform your duties without endangering the health and safety of yourself and others as determined by the Company at its absolute discretion.”29
[45] It also requires, at cl. 1.1, that the Applicant maintain a Certificate of Competency and a Seafarer Medical. It is presumably these matters that the Applicant is concerned with in his submissions. As for the Agreement, it provides at cl. 7.1(c) that the employee must be Fit to Work when rostered to perform work, noting that the Agreement defines “Fit to Work” in cl.3 using the same definition as found in the contract.
[46] Having considered this limb of the submission I find I must reject it. The circumstances were that the Respondent had a medical report which casts grave doubt over the Applicant’s future prospects but more importantly assessed him as totally unfit at the time of examination. It would be inappropriate for the Respondent to have then asked the Applicant to submit to – for example – a Seafarer Medical or Certificate of Competency examination. Clearly an employee who is totally unfit will not only be incapable of passing either examination but should not be risking their physical condition further by undertaking the Certificate of Competency examination.
[47] The second limb of the submission was that the Respondent had not looked at all of the available evidence and had not contacted the Applicant’s other treating medicos for their opinion. In terms of the medical advice available at the time of making the call, the Respondent essentially had only the report of Mr Jeffries and presumably such other progress reports necessary to sustain the workers’ compensation claim. As I understand things, all this advice had the Applicant as totally unfit.
[48] I note that in his response to the show cause letter the Applicant did invite the Respondent to check his progress with the other providers.30 Based on the evidence before the FWC it is difficult to assess what those providers might have said. It is certainly the case31 that advice from these providers dated subsequent to the ending of the Applicant’s employment suggests that he may be fully fit, noting of course that neither of those providers has the standing of Mr Jeffries.
[49] I am also mindful that the Respondent has asked the Applicant to show cause, which rather suggests that it was for the Applicant to provide advice from the other medicos rather than simply inviting the Respondent to seek it out for themselves – something that they clearly did not do. However, in considering this matter I find that the Applicant’s submission does have some merit. The Respondent is considering terminating a long-serving employee in circumstances where – on the evidence of the Applicant which I accept – it’s CEO has suggested the Respondent will “look after him”. I think in those circumstances it would have been appropriate for the Respondent to have ensured it was as fully informed as possible by inviting
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the Applicant – specifically – to provide the alternative medical advice he foreshadows in his response to the show cause email.
[50] The final limb is that the Respondent has in effect extrapolated the information in Mr Jeffries’ report and has not given the language its proper meaning. I am not attracted to this proposition. The report is written in the usual careful language of medical professionals whereby while not ruling something out, they nonetheless express a view about its likelihood. I think that – absent anything else – the Respondent was entitled to view the report from Mr Jeffries as saying that the likelihood of his returning to his pre-injury duties was minimal.
[51] I then turn to the findings of Deputy President Lieschke in Geselle. Clearly, the scenario in that case can be distinguished from the present matter. However, there is one principle that I think is worthy of examination. This is the concept drawn from the fact that Ms Geselle had a large amount of leave of different kinds available to her. The Deputy President found she should have been given access to take that leave rather than being terminated. This consideration is essentially item “a” drawn from the findings in Marshall as set out in Moore Paragon and found at [13] above. The Applicant at hearing sought to draw on this concept by drawing a parallel between it and the fact that – on his evidence – he had approximately five months of workers’ compensation payments left which he should have been able to exhaust.
[52] This notion requires some explanation. Under the WCIM Act there is a capped amount of funds available to pay as wages / salary to an individual injured worker. The amount is not a percentage of their rate of pay but rather a fixed amount set by statute. That amount is available to an employee even if they have been terminated. That is to say termination does not end their entitlement to exhaust the cap for payments. However, I draw a distinction between this entitlement and a leave entitlement. It is an entitlement to reimbursement of wages lost due to injury, not an entitlement to paid leave. Thus, I do not think it should be considered analogous to sick leave and treated as part of the first of the considerations from Marshall.
[53] In my thinking I draw some satisfaction from the notion that the WCIM Act does contemplate termination and – as noted in [23] above – effectively prevents frustration from operating during the twelve-month employment obligation period. In treating entitlements to payments as de-facto leave I would in effect be potentially extending that period of twelve months to whatever time period the statutory cap allows given the employee’s salary – which will vary from employee to employee. The framers of the WCIM Act could of course have extended its protections this far but chose not to do so.
[54] However, what does flow from the operation WCIM Act that may require some consideration is that an employee who is unfit for work and on workers’ compensation payments still accrues annual, long service and personal leave.32 As such, in the highly likely case that the Applicant did not access any sick leave during the period in which he was receiving compensation payments, he would have had some entitlements to sick leave which were extinguished by the ending of his employment.
[55] If the Applicant had not taken any annual leave during the period he was receiving compensation – again likely to be the case – then he had annual leave available to him at the time of the ending of his employment. Now, the problem with this analysis may be that there is still a statutory entitlement to workers’ compensation payment sitting above these leave
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entitlements. Given this, could these leave entitlements be considered in the same manner as those in Geselle and as suggested by Marshall? To me the answer is not readily apparent, but this then creates – in my view – an uncertainty with the Respondent’s ability to determine the contract to be frustrated in those circumstances.
[56] I now turn to the issue of the timing of the frustration event. Clearly, in cases of illness or injury there is difficulty in determining the time at which frustration occurred. Unlike in the case of incarceration or loss of license, the point in time where frustration occurs is potentially open to interpretation. If we consider the situation of the Applicant. Did the frustration actually occur at the time he suffered the injury? This would be a difficult call to make, given that his medical prognosis at that time would have been at best uncertain.
[57] Does frustration occur at the point at which the Respondent receives Mr Jeffries’ report? Again, I do not think it is open to make that call at that time. As the Respondent itself has pointed out, it bears the onus of establishing frustration and to do so it must demonstrate that it was reasonable to conclude that the Applicant’s state of fitness was such that he was incapable of performing his regular duties and that it was unlikely that he would be fit to do so for the foreseeable future. To make that call without even consulting the Applicant himself would appear to create significant issues of procedural fairness.
[58] What then happens if the Applicant seeks to claim he may be fit and then the Respondent had required him to provide further and different medical evidence? While I note that this did not occur, it would appear to place the Respondent in a situation where it would be reviewing different medical evidence to decide if the Respondent meets the frustration test. If it decides he has, it is then faced with establishing when the frustration took place. What I think the above discussion shows is another of the practical difficulties in establishing frustration of an employment contract due to illness or injury.
[59] Finally, I want to make some commentary on the considerations set out in Marshall and found at [13] above. The first of these is whether there are provisions for sick leave. Drawing further from Geselle I would be inclined to include annual and long service leave entitlements in this analysis. There is of course no evidence of how much of each of these types of leave were available to the Applicant. However, drawing on my thinking in [53] and [54] above and from the termination letter provided by the Respondent33 it is likely that there was. If this was so, then it creates the difficulties discussed in [54] above.
[60] The second consideration is how long the employment was likely to last in the absence of sickness. This is of course difficult to tell. The Applicant has reached an age where many employees have long since decided to retire. While absent this accident there is no suggestion he was having any physical difficulties with the job, it is difficult to know what the future might hold. As such, I am not prepared to give much weight to this particular consideration.
[61] The third consideration is the nature of the employment, expressed in Marshall as:
“Where the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if he occupies a key post which must be filled and filled on a permanent basis if his absence is prolonged.”34
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[62] Neither party provided much evidence on this matter. I note that this reason was not proffered by the Respondent as being part of its thinking and there was no suggestion that there was a timing imperative for the Applicant’s return. Notwithstanding this, I am not prepared to draw any negative inferences against the notion of frustration on the basis of this consideration.
[63] The fourth consideration is the nature of the illness or injury and how long it has already continued and the prospects of recovery. As noted in Marshall:
“The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.”35
[64] On the face of the evidence from Mr Jeffries and based on the fourteen-month period of absence it may be that the Respondent was justified when looking to this consideration. However, as noted above at [48] I am not completely satisfied that using the report from Mr Jeffries on its own in the circumstances was reasonable. Certainly, the later medical reports tendered into evidence by the Applicant suggest he was fully fit some few weeks after the end of his employment. It may be that these reports ought to be taken – as suggested by the Respondent – with a “pinch of salt”. However, I am not satisfied that they can be so blithely ignored in the overall consideration of whether the Applicant’s employment contract was indeed frustrated.
[65] The final point is the period of past employment. As stated in Marshall:
“A relationship which is of long standing is not so easily destroyed as one which has but a short history. This is good sense and, we think, no less good law, even if it involves some implied and scarcely detectable change in the contract of employment year by year as the duration of the relationship lengthens. The legal basis is that over a long period of service the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period.”36
[66] To me it seems clear that the employment relationship was long by contemporary standards. I also accept the evidence of the Applicant regarding the discussion he had with Mr Van de Spey. While I have had little regard for the notion of contractual entitlement arising from this conversation, it appears to be one that suggests an employment relationship that contained some significant mutual respect. On that basis, I would be inclined to use this consideration to suggest that the Respondent should be held to a higher standard.
Conclusion
[67] Having considered the case history of the doctrine of frustration as it pertains to employment contracts and having considered the practicalities of both contemporary employment protections and the circumstances of this case, I cannot find that the Applicant’s employment has been frustrated. I have formed the view that frustration of an employment contract in circumstances of illness or injury is a difficult concept to establish. I note that it is not impossible, but it is attended by a variety of potential complications.16
[68] In the first instance, it is difficult to determine the actual point in time at which the operation of the law – independent of the parties – ended the employment relationship. There are issues with how outstanding employment leave entitlements ought to be considered and how these interact with any workers’ compensation entitlements. There are also issues in determining what evidence is sufficient to establish that there is little prospect of the employee ever returning.
[69] I note in this case the Respondent had one instance of such evidence in the report of Mr Jeffries but very soon after the ending of employment contrary medical information – that could have been specifically requested by the Respondent in response to the Applicant foreshadowing its existence – came to light. Whether the sources of this evidence could or should override Mr Jeffries is difficult to determine. Again, this highlights the difficulties with the doctrine of frustration in the employment context.
[70] If I then turn to the considerations in Marshall, I find that on balance they weigh against a finding of frustration for the reasons I have set out above. In summary, I believe that the high bar set for determining frustration of contract due to illness or injury in the contemporary workplace has not been met by the Respondent. As a consequence, I find that the Applicant’s employment ended by way of dismissal rather than frustration of contract.
[71] The matter will now be programmed for a merits hearing.”
Burns v Odyssey Marine Pty Ltd (2025) FWC 2490 delivered 25 August 2025 per O’Keeffe DP