District Court of WA|2010-02-08

HUNTER -v- SHIRE OF WAGIN [2010] WADC 13 (8 February 2010)

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA

CITATION : HUNTER -v- SHIRE OF WAGIN [2010] WADC 13

Procedure - Summary judgment - Defendant's application - Employment law - Ability to claim damages after lawful termination

Addis v Gramophone Company Ltd [1909] UKHL 1; [1909] AC 488

Ansearch Ltd v Wavetech Pty Ltd [2006] WASC 184

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332

Balangarri Aboriginal Corp (in liq) v Cleanthous [2004] WASC 200

Bednall v Wesley College [2005] WASC 101

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144

Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410

Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd [1986] HCA 14; (1986) 160 CLR 226

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120

Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365

Malik v Bank of Credit & Commerce International SA [1995] IRLR 375

Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193

Russell v Trustees of Roman Catholic Church for Archdiocese of Sydney [2008] NSWCA 217; (2008) 72 NSWLR 559

Van Efferen v CMA Corporation Limited [2009] FCA 597

1 PRINCIPAL REGISTRAR GETHING: By application dated 27 October 2009 the defendant, the Shire of Wagin, seeks summary judgment against the plaintiff, Mr Hunter, pursuant to the Rules of the Supreme Court 1971 O 16 r 1 ("RSC"). The plaintiff has claimed damages against the defendant arising out of an alleged breach of an employment contract in which he was engaged as the Chief Executive Officer ("CEO") of the defendant for a period of five years commencing 1 May 2008. The defendant says that it lawfully terminated the contract such that the plaintiff's claim for damages is frivolous or vexatious and that summary judgment should be ordered.

2 In support of its application, the defendant filed an affidavit of Phillip Blight sworn 26 October 2009. Mr Blight deposes that he is the elected president of the defendant.

3 The plaintiff swore an affidavit in opposition to the application dated 2 December 2009.

Law relating to defendants' summary judgment applications

4 The power of the court to grant a defendant summary judgment arises where the Court is satisfied "that the action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily or without pleadings": RSC O 16 r 1. The application must be brought "within 21 days after appearance or at any later time by leave of the Court": RSC O 16 r 1. In the present case, the memorandum of appearance was filed on 1 October 2009, but the application was not filed until 27 October 2009. The defendant therefore needs leave to bring the application. The defendant has not sought leave and I have not heard submissions on the point. However, given that the matter was fully argued before me, I propose to consider the application on the merits as if leave had been granted, and then deal with the issue of leave when I hear from counsel on the final orders to be made.

5 The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Balangarri Aboriginal Corp (in liq) v Cleanthous [2004] WASC 200, at [10]; Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 at 99. The claim must be so clearly untenable that it cannot possibly succeed: Balangarri (supra), at [10]; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129 - 130. Great care must be exercised to ensure that under the guise of achieving expeditious finality, a party is not improperly deprived of its opportunity for the trial of the case in the appointed manner by the court: General Steel (supra), at 129 - 130. However, it is not for the court to identify causes of action which are not pleaded: Balangarri, at [10]. At the same time, a court at first instance should be particularly astute not to risk stifling the development of the law by summarily terminating actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie: Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373.

6 By analogy to plaintiff's summary judgment applications, where there are disputed facts, and in the absence of cross-examination, the application is to be determined on the basis that the plaintiff's version of the facts, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action: Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 at 608. In the same case, the members of the High Court had previously commented that the "issue before the learned Master on the application for summary judgment was ... whether the material before the Master demonstrated that the action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail" at [602]. If after argument there remains real uncertainty as to the defendant's right to judgment without further investigation of the facts, summary judgment must be refused: Ansearch Ltd v Wavetech Pty Ltd [2006] WASC 184, at [28]; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332 at 335.

7 It is convenient to commence the analysis by reference to the defendant's position. Mr Blight in his affidavit deposes that on or about 1 May 2008 the plaintiff and the defendant entered into a written contract of employment ("the Contract"). He annexes the contract of employment to his affidavit. Clause 14.2 of the Contract provides:

"14.2 Termination by Either Party

Either party may terminate this contract by giving 3 months written notice to the other party. Council may approve a payment to the CEO of up to the maximum value year's remuneration if the contract has one year or more to run, or, if the contract has less than one year to run, payment not exceeding the value of the remuneration the CEO would have received if the contract had been completed."

8 Mr Blight goes on to depose that at a meeting of the Council of the defendant held on 24 February 2009, Council passed a resolution stating that it "believes that the conduct of its CEO, Mr John Hunter, has irretrievably undermined the relationship of trust and confidence necessary to continue the employment relationship and it can accordingly no longer continue to employ him in that role or any other role". The resolution then goes on to terminate Mr Hunter's employment by giving him three months written notice. Acting in accordance with the resolution, on 25 February 2009 Mr Blight handed a letter to the plaintiff informing him of the resolution and giving him three months notice of termination of his employment in accordance with cl 14.2 of the Contract.

9 The defendant submits that the plaintiff's contract of employment was lawfully terminated pursuant to cl 14.2.

10 In order for the plaintiff to have a maintainable claim against the defendant's use of cl 14.2, the plaintiff would have to show either:

(a) that cl 14.2 was subject to a pre-condition to its exercise which was breached such that the termination was unlawful; or

(b) a breach of a term of the Contract which gave rise to a right to substantial, as opposed to nominal, damages notwithstanding the subsequent lawful termination of the Contract.

11 In his amended statement of claim dated 14 January 2010, the plaintiff has sought to do both. In relation to the first limb, the plaintiff pleads an implied term that his employment would not be terminated for reasons relating to performance except in accordance with the performance review process set out in the Contract (par 5.5).

12 In relation to the second limb, the plaintiff pleads breaches of:

(a) an express term relating to performance review (par 21.1 to par 21.6);

(b) an express term relating to mediation of disputes (par 21.7);

(d) a term incorporated by reference that the defendant would not discriminate against the plaintiff (par 21.8);

(e) implied terms going to trust, confidence and good faith (par 21.9).

13 Each is dealt with in turn below. The issue of whether a breach of any of these terms could give rise to any substantial damages - given the lawful termination of the Contract - is dealt with at the end of these reasons.

14 The plaintiff pleads that the Contract contained an implied term that "the plaintiff's employment would not be terminated for reasons relating to the Plaintiff's performance except in accordance with the performance review process" pleaded in the statement of claim (par 5.5). Particulars are given for this plea, namely that "[t]he terms are implied by law in order to give business efficacy to the Contract or, are so obvious they go without saying, or alternatively are implied by reason of nature of the Contract of Employment and the obligations it imposes on the parties".

15 In par 4 of the statement of claim, the plaintiff pleads that the Contract contained express terms setting out the performance criteria for the plaintiff's position, being cl 7 and addendum 1. The plaintiff further pleads, in par 4.5, that the Contract expressly provided that the "Defendant would ensure a review of the Plaintiff's performance annually or more frequently with no less than 10 days notice to the Plaintiff if the defendant was aware of any performance issues" (referring to cl 8 of the Contract).

16 Paragraph 4.6 pleads that, where a performance review is conducted, "the Plaintiff would be afforded the opportunity to report to Council on the Plaintiff's own assessment of his performance for Council's consideration prior to the Council's final performance assessment".

17 The classic statement as to when a court will imply a term to ensure business efficacy is set out in the majority of the opinion of the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, at 283:

"...for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

18 Instances where the High Court has endorsed this statement of the law include Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd [1986] HCA 14; (1986) 160 CLR 226 at 241 and Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410 at 422.

19 In the present case, the term sought to be implied is, in effect, an additional sentence at the end of cl 14.2 of the Contract that: "Council will not exercise this power for reasons relating to the CEO's performance unless it has first complied with clause 8". I do not find it arguable that a term along these lines is necessary to give business efficacy to the Contract. The Contract is, in my view, clearly effective without it. Neither is it so obvious that it goes without saying. It was open to the parties to have placed a limitation on when the right to terminate in cl 14.2 was exercised, but they chose not to do so. The proposed term also contradicts cl 14.2 as that clause is unqualified in its terms.

20 The claim in relation to par 5.5 of the statement of claim is, in my view, so clearly untenable that it could not possibly succeed.

21 Once this plea falls away, there is no pre-condition to the exercise of the right to terminate in cl 14.2. On the pleadings and other material before me, I am of the view that the defendant will establish at any trial that the Contract was lawfully terminated.

22 The plaintiff pleads that the defendant breached express terms in the Contract relating to performance reviews (par 21.1 to par 21.6). The relevant clause is cl 8. For present purposes, I need only quote the first paragraph:

"Council will ensure that a review of the CEO's performance is conducted annually or more frequently if the Council or the CEO perceives the need to do so"

23 This clause is the trigger for the performance review processes which follow in the remainder of cl 8.

24 The particulars of breach assume that the performance review process has been triggered. There is no plea setting out the basis on which the performance review process in cl 8 was triggered.

25 The plaintiff only commenced employment on 1 May 2008. His employment was terminated on 25 May 2009, by letter giving three months notice dated 25 February 2009. Twelve months had not expired by the time the defendant sought to terminate the Contract. There is no evidence that the defendant perceived the need to conduct a performance review more frequently than annually. Significantly, there is no evidence that the plaintiff perceived the need for there to be a performance review in relation to the issues which ultimately led to his termination. Rather, the plaintiff sought to invoke the mediation/dispute resolution procedure.

26 In my view there are no facts pleaded, nor information in the plaintiff's affidavit, which could form the factual basis for a trial judge to find that cl 8 ought to have been invoked, and its procedures relied on. There is no real question to be tried in relation to this part of the plaintiff's claim.

27 The mediation clause is contained in cl 17, and is in the following terms (so far as are relevant):

"In relation to any matter that may be in dispute between the CEO and the Council the parties will:

17.1 Attempt to resolve the matter at workplace level by the CEO and the Council, or person or committee delegated by Council for that purposes, meeting and conferring on the matter.

17.2 Agree to allow either party to refer the matter to mediation if the matter cannot be resolved at workplace level.

17.3 Agree that if either party refers the matter to an independent mediator, both parties will participate in the mediation in good faith."

28 In his letters to the Shire President dated 12 January 2009 and 29 January 2009 the plaintiff sought to invoke cl 17.

29 The defendant argued before me that there was no dispute for the purposes of cl 17.

30 A similar issue arose in the decision in Van Efferen v CMA Corporation Limited [2009] FCA 597. In that case, Mr Van Efferen was employed pursuant to a combination of an Australian Workplace Agreement ("AWA") and a common law contract of employment. He was employed in a supervisory capacity to do work as part of a contract between the defendant, CMA Corporation Ltd ("CMA"), and John Holland to demolish a wharf in Port Hedland. As a result of certain differences of opinion, the plaintiff, in early to mid October 2006, was removed from the Port Hedland site and relocated to a site in Geelong. At the end of October 2006 the plaintiff's employment was terminated ostensibly because of a "lack of available work [in his] specialised field of work" [16]. The termination appears to have been pursuant to a clause similar to cl 14.2 in the present case (see [29]).

31 The plaintiff claimed that the defendant had breached the grievance procedure in the AWA. The grievance procedure was in the following terms:

"CMA Grievance Procedure is designed to deal with CMA's concerns about the behaviour of its employees. It operates as follows:

Step 1 In the first instance, the Manager and the Employee concerned will discuss the issue.

Step 2 If the concern continues or another concern arises, the Manager will formally counsel the Employee.

Step 3 If concern about the Employee continues, a more senior manager of CMA will formally warn the Employee.

Step 4 If the concern continues the Employee's employment may be terminated.

If the concern is serious enough, the procedure need not begin at step 1, but at a higher step.

'At steps 2 to 4, formal counselling and warnings will be in writing and will advise the Employee of the:

behaviour deemed to be unsatisfactory;
action to be taken to correct the situation;
consequence of continuing the unsatisfactory behaviour;
assistance available to the Employee to help him or her meet the required performance; and
a review date for reassessing progress in the Employee's performance.'

The Employee will be given the opportunity to record his or her version of the situation. At any stage the Employee may have a representative present during any discussions. Any dispute arising out of this procedure will be dealt with in accordance with the 'Employee Grievance Procedure' below.

Nothing in this clause affects the right of CMA to summarily dismiss the Employee for conduct justifying such action."

32 The trial Judge, Tracey J, commented on the approach to be used in interpreting industrial agreements drafted by non-lawyers:

"As is often the case with industrial agreements drafted by non-lawyers, the language of the AWA lacks the precision one would expect to find in a commercial contract. The looseness of the language of clause 2.10 has made it possible for the parties to advance radically different submissions as to its proper construction. Mr Van Efferen contended that clause 2.10 imposed a mandatory obligation on CMA to observe the staged process prescribed by the clause once it had developed a concern about his conduct. CMA, on the other hand, submitted that the occasion to apply the prescribed procedures only arose once CMA had decided to take disciplinary action against an employee by reason of its concerns about the employee's behaviour. Even then, CMA was disposed initially to argue that the clause imposed no mandatory obligation on CMA to apply the procedures.

In dealing with the construction of awards in Kucks v CSR Limited (1996) 66 IR 182 at 184 Madgwick J observed that:

'It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.'

This passage was quoted with approval by two members of the High Court in Amcor Ltd v Construction, Forestry, Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241 at 271 (Kirby J), 282-3 (Callinan J). In Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd (1998) 80 IR 208 at 212 Northrop J expressly agreed with this statement of principles and held that it had even stronger application to certified agreements than it did to awards.

In my view, these principles have application to the construction of Australian workplace agreements and, in particular, to provisions, like clause 2.10, which are expressed to apply generally to all employees of the employer (although, of course, only binding on the employer and the employee party to the particular agreement).

Guidance as to the construction of industrial instruments may also be obtained by reference to principles which courts apply to the construction of commercial contracts. Commercial contracts should, as Kirby J held in Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20; (2000) 170 ALR 579 at 584 'be construed practically, so as to give effect to their presumed commercial purposes and so as not to defeat the achievement of such purposes by an excessively narrow and artificially restricted construction.' An interpretation which accords with business common sense will be preferred to one which does not: see Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at 437.

In determining whether a commercial document imposes contractual obligations regard is had to the intention of the parties: would a reasonable person conclude that the person making the alleged binding promise intend to be contractually bound by that promise. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; at 179 the High Court summarised the position as follows:

'It is not the subjective beliefs or understanding of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe ... That, normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.' "

33 CMA had argued that even if the grievance procedure in cl 2.10 had potential application, in the circumstances of the case it was under no obligation to observe the terms. That was because it contended that the clause did not impose any contractual obligation on it as an employer unless and until it determined to take disciplinary action against the employee. The trial Judge disagreed [42] - [48]:

"CMA argued that, even if clause 2.10 had potential application, in the circumstances of the present case CMA was under no obligation to observe its terms. This was so, it was contended because the clause did not impose any contractual obligations on it unless and until it had determined to take disciplinary action against the employee.

The terms in which industrial instruments are drafted often require a distinction to be drawn between aspirational and promissory statements. In accordance with the objective theory of contract expounded in Toll, a provision in a document proffered by an employer, will be treated as promissory in nature if the hypothetical, reasonable, potential employee to whom the document is presented would have concluded that CMA intended to be contractually bound to follow the procedures, outlined in it if CMA developed any concerns about the behaviour of the employee.

Whether or not he or she would have so concluded will depend on a consideration of the terms of the clause, the surrounding circumstances known to the parties and the nature of the arrangement which is being entered into. In my view clause 2.10 does impose an obligation on CMA to proceed at least as far as step 1 in a case such as the present.

The clause appears in a particular type of contract which is recognised and regulated by statute. It is an agreement which is intended to govern the employment relationship of an employer and an employee. It provides a form of protection to an employee whose conduct has, for any reason, given the employer cause for concern. It is designed to ensure that the employee is informed of the nature of those concerns and has the opportunity to disabuse the employer or to have the opportunity (in most instances) of rectifying any shortcomings which have given rise to the employer's misgivings.

Although the clause does not commence with a statement of obligation it provides that it will operate in a particular manner. Then follows a series of sequential steps which set out what CMA's managers 'will' do in prescribed circumstances. Prejudicial action will only be taken if the employee fails, when provided with the opportunity, to alleviate CMA's professed concern. A reasonable employee would rightly conclude that CMA was committing itself to implementing these protective measures if the need arose. That employee would not conclude that the benefit of clause 2.10 would be dependent on the favourable exercise of CMA's unfettered discretion.

The making and operation of Australian workplace agreements was provided for in Division 4 of Part 8 of the Act. Section 351(a) of the Act provided that such an agreement bound the employer party. A reasonable person in the position of the employee who was invited to enter into such an agreement would, therefore, rightly assume that terms which said that the employer would, in prescribed circumstances, take certain action would require the employer to take such action if those circumstances arose in the course of the employer/employee relationship.

CMA contended that, if clause 2.10 were to be construed as imposing mandatory obligations on it whenever it had a concern about the behaviour of an employee, no matter how trivial that concern was, this would lead to absurd results: its managers would be forced to waste a large amount of their time in pointlessly working their way through the various steps whenever some minor concern arose in respect of any employee.

This sensitivity is misplaced. The clause must be read and applied in a sensible and practical manner. The type of 'concerns' to which it applies will only arise when the employee exhibits some type of behaviour which causes CMA anxiety as to the impact of that behaviour on some aspect of its operations. A trivial concern about the employee occasionally arriving a minute or two late for work would not, for example, invoke clause 2.10. Even if it did the matter could be resolved by a short discussion under step 1. No commercial absurdity arises."

34 In the present case, the defendant also raised the same point as CMA did in Van Efferen as to the level of concern which may give rise to the invocation of the dispute resolution procedures in cl 17. For the same reasons as Tracey J expressed in the last paragraph quoted above, I consider this concern misplaced.

35 In my view, it is arguable that there was a dispute for the purposes of cl 17. The ordinary meanings of "dispute" include "to engage in argument or discussion... to argue vehemently; wrangle or quarrel... to argue or debate about; discuss ... to argue against; call into question": The Macquarie Dictionary (2nd Revision, 1988), p 520. The exchange of correspondence between the defendant's industrial relations consultant, Mike Fitz Gerald, and the plaintiff annexed to the plaintiff's affidavit fits each of these descriptions.

36 It is also arguable that this clause was breached as the defendant did not accede to the plaintiff's request to refer their "dispute" to mediation.

37 I deal with the issue of whether this breach caused any loss or damage at the end of these reasons.

38 The plaintiff in its statement of claim pleads the defendant is and all material times was a local government established under the Local Government Act 1995 (WA) ("the LGA"). The plaintiff further pleads that the contract was made under and was subject to the LGA (par 4.2). Specifically, cl 1 of the Contract provides:

"The position is that of Chief Executive Officer of the Local Government. This contract relative to that position is made under and subject to the Local Government Act 1995."

39 The LGA in Division 4 contains a number of provisions relating to the appointment of a CEO. This includes a requirement on a Local Government to employ a CEO: LGA s 5.36. The Contract for a CEO cannot be for a term exceeding five years: LGA s 5.39(2)(b). A contract for a CEO is of no effect unless there are "specified in a contract performance criteria for the purpose of reviewing the person's performance": LGA s 5.39(3)(b).

40 Importantly for present purposes, LGA s 5.40 sets out a number of principles affecting employment by local governments. That clause is in the following terms:

"5.40. Principles affecting employment by local governments

The following principles apply to a local government in respect of its employees -

(a) employees are to be selected and promoted in accordance with the principles of merit and equity;

(b) no power with regard to matters affecting employees is to be exercised on the basis of nepotism or patronage;

(c) employees are to be treated fairly and consistently;

(d) there is to be no unlawful discrimination against employees or persons seeking employment by a local government on a ground referred to in the Equal Opportunity Act 1984 or on any other ground;

(e) employees are to be provided with safe and healthy working conditions in accordance with the Occupational Safety and Health Act 1984; and

(f) such other principles, not inconsistent with this Division, as may be prescribed."

41 The plaintiff pleads that it was an express term of the Contract that the defendant would treat him "fairly and consistently", referring to cl 1 of Contract and LGA s 5.40(c) (par 4.10). The plaintiff then pleads in general terms that the defendant's conduct was in breach of the Contract (par 21). The particulars for this allegation include that the "Defendant's conduct referred to in terminating the employment was unfair and discriminatory" (par 21.8).

42 The first issue which arises is whether LGA s 5.4 is incorporated by reference such that it is an express term of the Contract. This issue is similar, but not identical, to the issue considered by the High Court in Byrne (supra). In that case, two airport baggage handlers were dismissed from their employment by an airline operator for pilfering. They alleged that the dismissals were in breach of an award made under the Industrial Relations Act 1988 (Cth). The award relevantly provided in cl 11(a) that: "Termination of employment by an employer shall not be harsh, unjust or unreasonable. For the purposes of this clause, termination of employment shall include terminations with or without notice". The action was brought for breach of the contract of employment, which was said to include cl 11(a) as a term, and, in the alternative, for breach of statutory duty. The Court declined to incorporate or imply cl 11(a) into the contract of employment.

43 In a joint judgment, Brennan CJ, Dawson and Toohey JJ considered both whether cl 11(a) had been imported into the contract of employment, or formed the basis of an implied term. In relation to the former, their Honours looked at earlier cases dealing with the right to payment of award rates and commented (at 420):

"A right to the payment of award rates is imported by statute into the employment relationship, which is contractual in origin, and, express promise apart, it is only in that sense that it can be said that award rates are imported into the contract of employment. The award regulates what would otherwise be governed by the contract. But award rates are imported as a statutory right imposing a statutory obligation to pay them. The importation of the statutory right into the employment relationship does not change the character of the right. .... the legal relations between the parties are in that situation determined in part by the contract and in part by the award ... a provision in an award may also be made a term of the contract by agreement between the parties, but that is only to emphasise the distinction between an obligation imported by statute and one arising by agreement."

44 Their Honours rejected the argument that cl 11(a) had been imported into the contract of employment, stating (at 421):

"In a system of industrial regulation where some, but not all, of the incidents of an employment relationship are determined by award, it is plainly unnecessary that the contract of employment should provide for those matters already covered by the award. The contract may provide additional benefits, but cannot derogate from the terms and conditions imposed by the award...and, as we have said, the award operates with statutory force to secure those terms and conditions. Neither from the point of view of the employer nor the employee is there any need to convert those statutory rights and obligations to contractual rights and obligations."

45 In looking at whether cl 11(a) could be implied into the contract, their Honours adopted the test from BP Refinery (supra) set out above. Their Honours formed the view that it was not necessary to imply a term in the form of cl 11(a) for the reasonable or effective operation of the contract of employment in all the circumstances.

46 In the present case, following the decision in Byrne, in the absence of any express words in the LGA, there is no basis for a conclusion that LGA s 5.40 would be imported into the Contract by operation of the LGA. Although it was not pleaded in the amended statement of claim, neither would there be a basis for implying LGA s 5.40 as a term of the Contract.

47 The remaining question is whether the Contract incorporates LGA s 5.40 by reference. As is apparent from decisions such as Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193 and Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120, the issue of whether a particular reference is effective to incorporate the extrinsic terms is a matter of construction.

48 In Riverwood (supra), the employee, Mr McCormick, executed a written contract of employment with his employer, Riverwood. The written contract provided, among other things, that "[y]ou agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced". When the contract was entered into, the employer utilised a loose-leaf spiral-bound "Human Resources Policies and Procedures Manual". After the employee executed the written contract, the employer inserted a redundancy policy into the manual. The employee was terminated on the ground of redundancy. However, the employer did not make a payment to the employee pursuant to the redundancy policy. The employee successfully argued at first instance and on appeal (by majority) that the redundancy policy was incorporated by reference into the contract of employment.

49 In Nikolich (supra), the relevant phrase in the letter of employment was that: "From time to time the Company has issued and will in the future issue office memoranda and instruments with which it will expect you to comply as applicable" (see [176]). The issue was whether this wording was sufficient to incorporate at least some of the terms of a document entitled "Working With Us" given to the employee with the letter of offer. The trial Judge, following Riverwood, held that it did. On appeal, the Chief Justice and Marshall J held that it did, with Jessup J dissenting. Each Justice in the appeal considered Riverwood, with Jessup J distinguishing it on the facts.

50 In the present case, the wording of cl 1, set out in par 38 above, provides that the contract is "subject to the Local Government Act 1995". This is arguably a stronger reference to the employer being bound that in Riverwood where the term on its face was directed towards the employee. It is also arguably stronger than the position in Nikolich where the relevant document - "Working With Us" - was not referred to in express terms in the letter of offer. It is not open for the defendant to assert that the terms of LGA s 5.40 are merely aspirational, as was an issue in Nikolich (see eg, [29] - [30]). LGA s 5.40 is in mandatory terms. LGA s 5.40 makes direct reference in its terms to an obligation on a Council towards its employees. In my view, it is arguable that LGA s 5.40(c) is incorporated into Contract by reference.

51 On the facts set out in the statement of claim and in the plaintiff's affidavit, it is also arguable that the defendant failed to act fairly towards the plaintiff. The failure to submit the dispute to mediation in response to the plaintiff's request is at least one basis on which a trial judge could find breach of an obligation to act fairly.

52 I will deal with the issue of damages at the end of these reasons.

53 In par 4.11, the plaintiff further pleads that the defendant "would not discriminate against the plaintiff on a ground referred to in the Equal Opportunity Act 1984 or any other ground", referring to cl 1 of the Contract and LGA s 5.40(d). In the particulars to par 12, the plaintiff pleads that the "Defendant's conduct referred to in terminating the employment was unfair and discriminatory" (par 21.8).

54 For the reasons set out in relation to the obligation to act fairly, I am of the view that it is arguable that LGA s 5.40(d) is incorporated into the Contract by reference.

55 In looking at whether this obligation has been breached, I am to assume that the plaintiff's version of the facts would be accepted at trial. This obviously includes the statement of claim. However, given the caution which I am directed to exercise before granting summary judgment, it is appropriate that I also consider whether there is any material in the plaintiff's affidavit which, if presented as admissible evidence, could form the basis for a finding that there had been discrimination on the ground of impairment.

56 The only ground of discrimination I can discern from the statement of claim and the plaintiff's affidavit appears to stem from the injuries sustained by the car accident on 4 December 2008. I assume that the plaintiff would, at trial, argue that this was an "impairment" for the purposes of the Equal Opportunity Act 1984 (WA) ("EOA"), as defined in s 4. However, there are no facts pleaded from which a court could find that there was discrimination on the grounds of impairment such as would give rise to a claim for discrimination pursuant to EOA s 66A or s 66B.

57 In his affidavit, the plaintiff sets out the circumstances of his accident, injuries and subsequent time off work at par 17 to par 22. The only directly relevant impact of his injuries seems to have been at the Council meeting on 16 December 2008. In relation to that meeting, the plaintiff states: "I was in pain and barely coping at the meeting due both to my medication and pain" (par 38). At the meeting, the plaintiff was asked a question about an invoice for legal services to Civil Legal. He was unable to answer on the spot.

58 This issue of the invoice to Civil Legal was raised in Mr Fitz Gerald's letter to the plaintiff dated 6 January 2009. Mr Hunter responded on this issue in his letter dated 12 January 2009. Mr Fitz Gerald raised further questions on this issue in his second letter to Mr Hunter, that dated 21 January 2009. Mr Hunter responded in his letter of 29 January 2009. The concerns raised by the defendant through Mr Fitz Gerald do not go to the plaintiff not being able to respond to the question at the meeting on 16 December 2008. Rather, they are directed to the substantive issue of why the advice was requested.

59 In my view, there are no facts set out in the plaintiff's affidavit which, if accepted as admissible evidence, could form a factual basis for the trial judge to conclude that there has been any discrimination on the ground of impairment. Specifically, there is no material to suggest that the defendant treated the plaintiff "less favourably than in the same circumstances, or in circumstances that are not materially different, the discriminator treats or would treat a person who does not have such an impairment": EOA s 66A(1).

60 In my view, there is no real question to be tried as to whether the defendant's conduct in terminating the plaintiff's employment was discriminatory.

61 In Statement of Claim par 5.1 to par 5.3, the plaintiff pleads that the Contract contained implied terms of trust, confidence and good faith. It is clearly arguable that a term of trust, confidence and/or good faith may be implied in a contract of employment: see generally Bednall v Wesley College [2005] WASC 101, at [29]; Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144, at 151; Russell v Trustees of Roman Catholic Church for Archdiocese of Sydney [2008] NSWCA 217; (2008) 72 NSWLR 559, at [1], [29] - [37], [73], and the cases cited therein.

62 On the facts pleaded, read with those set out in the plaintiff's affidavit, I am satisfied that there is an arguable case that any term of trust, confidence and good faith was breached. The failure to use the agreed dispute resolution procedure is a fact a judge could rely on to support the finding of a breach.

63 The key issue is whether any such breach would give rise to substantial damages given the subsequent lawful termination of the Contract. It is to this issue I now turn.

64 The defendant argues that even if there was a breach of the Contract, the breach could not give rise to any substantial, as opposed to nominal, damages. This is because of the subsequent lawful termination of the Contract. No damages are required to place the plaintiff in the position he would have been in had the Contract not been breached, as he would only ever have been entitled to his remuneration up to the point of termination, which he received. As set out above, I have not found any pleaded, arguable, cause of action which would allow a trial judge to find that the Contract was not lawfully terminated pursuant to cl 14.2.

65 A claim which, if established, does not give rise to any entitlement to substantial, as opposed to nominal, damages would be appropriately described as "frivolous or vexatious" for the purposes of RSC O 16 r 1(1).

66 The plaintiff responds with the following particular (statement of claim, par 22.1):

"Had the Defendant engaged in the performance review process contained in the Contract and acted in good faith towards the Plaintiff, the Plaintiff's employment would have continued to 30 April 2013".

67 In order for this plea to be maintained the plaintiff must first establish that, as a matter of law, substantial damages can be awarded for a breach of a term requiring trust, confidence and/or good faith where the employment relationship has otherwise come to an end.

68 In Burazin (supra), the Full Court of the Industrial Relations Court of Australia considered the issue of whether damages could be awarded, following an unlawful termination, for distress, disappointment or injured feelings. The ratio decidendi of the case is that the compensation payable pursuant to Workplace Relations Act 1996 (Cth) ("WRA") s 170EE where there has been an unlawful termination, can include damages for shock, humiliation and distress (at 154 - 156).

69 In Burazin, the plaintiff had sought a declaration that the termination of her employment constituted a repudiatory breach of her contract of employment by her employer. This was on the basis of breach of an implied term that the employer "would not, without reasonable cause, conduct itself in a manner that was likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee" (at 146). The trial judge ordered statutory compensation in an amount that was approximately equal or equivalent to two months pay for the plaintiff. The trial judge further held that the plaintiff was not entitled to compensation either under the WRA or at common law merely for distress, disappointment or injured feelings arising out of the termination of her employment.

70 On appeal, the common law claim only became significant as an alternative ground for the awarding of damages for shock, humiliation and distress if compensation could not be paid under the WRA. Having allowed damages for shock, humiliation and distress under the WRA, the comments of the members of the Full Court in their joint decision in relation to the common law claim are thus obiter dictum.

71 Their Honours saw two issues arising in the case (at 153):

"Two issues have to be addressed in determining whether damages are recoverable for distress caused by a breach of an implied term: Whether the breach is capable of giving rise to a liability for damages, as distinct from founding a right to repudiate the contract; and, if so, where the damages are limited by the rule in Addis."

72 I pause here to note that this is a reference to the decision in Addis v Gramophone Company Ltd [1909] UKHL 1; [1909] AC 488 in which the House of Lords held that damages for wrongful dismissal cannot include compensation for the manner (as distinct from the fact) of the dismissal thereby occasioned to the employee. Their Honours continue (at 153):

"As it seems to us, there ought to be little doubt about the answer to the second question. Having regard to the purpose of the implied term, it is difficult to dispute that distress is a natural and probable affect of a breach. So if damages are an available remedy, Addis ought not to apply. But we have a doubt about the first question. Although it might seem strange to concede the existence of an implied contractual term but deny its capacity to give rise to liability in damages, it must be remembered that the term is intended to bolster an ongoing relationship. To permit an action for damages during the currency of the employment relationship, it might be argued, would be antithetical to the reason for implying the term; the action would itself presumably cause a further deterioration in the relationship. That argument would not apply in a case like Malik, where the relationship had already come to an end. But in some such cases, the implied term would have played its part in enabling the employee to improve his or her legal position by placing responsibility for the termination on the employer.

... As it will appear, we have reached the conclusion that Ms Burazin is entitled under her statutory claim to be compensated for the distress she suffered as a result of her treatment by the respondent on 12 and 13 April. It makes no difference whether the same compensation is also available under the contract claim. Accordingly, we leave open the questions discussed in this part of our reasons."

73 It is the first of these two questions that is of most relevant in the present case. Like the situation in the decision in Malik v Bank of Credit & Commerce International SA [1995] IRLR 375, the relationship in the present case has come to end. The argument against a breach of this term giving rise to damages set out in the decision of the Full Court quoted above does not apply. Given the comments of the Full Court in Burazin, the issue of whether or not a contractual term as to trust, confidence and/or good faith can give rise to a liability in damages where the employment relationship has come to an end must be regarded as, as yet, unsettled. That being so, it could not be said that this aspect of the plaintiff's claim is so clearly untenable it can not possibly succeed.

74 However, that is not the end of the matter. The critical issue is whether or not if an implied term of trust, confidence and/or good faith was breached in the present case (or any of the other relevant terms), whether that would (in the present case) give rise to any liability for substantial damages. The defendant's argument is that the Contract was lawfully terminated pursuant to cl 14.2. That being so, the defendant's submission is that plaintiff can have suffered no substantial damages on the contractual measure.

75 The issue of whether an employee can recover substantive damages for a breach of the contract of employment where the contract of employment has subsequently been lawfully terminated was considered in Van Efferen (supra). Having found a breach of the grievance procedure, Tracey J then had to consider whether the breach gave rise to loss and damage. The relevant context was WRA s 721(1) which provided that "[a] party to an AWA who suffers loss and damage as a result of a breach of the AWA by the other party may recover the amount of the loss or damage in an eligible court". His Honour noted that it was necessary for the plaintiff to show that the defendant's breach of the grievance procedure was "the proximate cause of the loss and damage he seeks to recover" at [51]. Significantly for present purposes, his Honour went on to state "whether the breach was approximate cause of Mr Van Efferen's loss and damage is a question of fact". CMA argued that it was not a proximate cause at [52]:

"CMA argued that, even if it had concerns about Mr Van Efferen's conduct and it was obliged to give effect to clause 2.10, there was no causal link between its failure to observe the requirements of clause 2.10 and the loss and damage suffered by Mr Van Efferen. CMA submitted that the causal link between the breach and damage had been or would have been broken by a series of anticipated events. They were:

Had CMA not removed Mr Van Efferen from the project, John Holland would have done so.
Mr Van Efferen would not have responded to counselling by CMA about his work performance and John Holland would have directed his removal.
As a result of a restructuring of CMA's management, which occurred shortly after Mr Van Efferen's departure, his former position was made redundant.
Had CMA been successful in tendering for other marine projects, Mr Van Efferen could have been deployed to one of those projects at any time."

76 Tracey J rejected each of the four points set out in the proceeding paragraph quoted on the facts of the case. His Honour's conclusion was in favour of Mr Van Efferen at [62]:

"Mr Van Efferen's AWA was expressed to be operative for a period of three years from the date on which it was lodged with the Office of the Employment Advocate. The contract was terminable for serious misconduct which warranted summary dismissal and otherwise by the giving of prescribed periods of notice. Had CMA not breached clause 2.10 the contract would not have been terminated and Mr Van Efferen would have continued working at Port Hedland until the completion of the Dolphin project in April 2008. The breach of clause 2.10 was a proximate cause of Mr Van Efferen's loss of the salary and other benefits to which he was entitled as the marine supervisor for CMA on the Dolphin Project."

77 As to the measure of damages, Tracey J stated at [64]:

"Although s 721(1) of the Act provides that a person who suffers loss or damage as a result of a breach of an AWA may recover that loss or damage in curial proceedings, the provision is silent as to the basis on which such loss and damage should be calculated. Mr Van Efferen submits that, because AWAs are statutory contracts, damages should be calculated as they would be in respect of any breach of contract. The applicant should be placed in the same situation, as far as money may do it, as if the contract had been performed: Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 80 (Mason CJ and Dawson J), 98-9 (Brennan J), 116 (Deane J) and 148 (Gaudron J). In appropriate cases damages could be calculated by reference to what the applicant was entitled to expect by way of performance by the respondent and the losses incurred when the respondent failed to comply with its contractual obligations: Amann Aviation, at 91-2.

Where an employer wrongfully terminates an employment contract which has a fixed term, thereby causing damage to an employee, damages are normally calculated on the basis that the employee would have enjoyed the benefits of the contract for the remainder of its term: see Kilburn v Enzed Precision Products Pty Ltd (1988) 4 VIR 31 at 33; Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405 at 406; Martin v Tasmanian Development and Resources [1999] FCA 593; (1999) 89 IR 98 at 120-1. The employee is under an obligation to mitigate his loss by seeking to obtain alternative remunerative employment. Although the AWA had a three year term, Mr Van Efferen only sought damages until CMA's work on the Dolphin Project ceased."

78 For present purposes, the decision in Van Efferen is significant because the court allowed an employee to obtain damages for a breach of a term of a contract of employment notwithstanding that the contract of employment had shortly afterwards been lawfully terminated.

79 The key issue was whether there was any loss or damage suffered. On this point, on the facts of the case the trial judge was able to find that had the contract of employment, relevantly the grievance provision, being complied with, the contract would not have been terminated.

80 The statement of claim in the present case does not plead the causes of action with the precision with which I have analysed them above, having had the benefit of submissions from counsel on both sides. It is deficient and will need significant amendment. However, in looking at whether a claim is "so clearly untenable that it cannot possibly succeed", it seems to me that I should assume that the causes of action in the statement of claim will ultimately be pleaded in their proper form. This position reflects the significance of the potential injustice to the plaintiff if summary judgment is given, but respects the decision in Balangarri (supra) that it is not for the court to identify causes of action which are not pleaded.

81 It seems to me that on the authorities I have analysed above, it arguable that the trial judge could imply terms of trust, confidence and good faith in the Contract. Likewise, it is arguable that the good faith obligation in LGA s 5.40(c) could be incorporated by reference. Further, if the facts set out it the statement of claim and the plaintiff's affidavit are accepted, there is a real question to be tried as to whether there was a breach of:

82 It also seems to me that, as a matter of law, it is possible for the plaintiff to claim damages for breach of these terms, notwithstanding the subsequent lawful termination of the contract. In coming to this view, I am being "particularly astute not to risk stifling the development of the law by summarily terminating actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie": Hospitals Contribution Fund of Australia (supra), at 373.

83 The critical issue is whether, if the facts set out in the statement of claim are accepted by the trial judge, they could found a conclusion by the trial judge that, but for one or more of the breaches set out above, the contact would not have been terminated. As I have noted above, the decision in Webster (supra), at (608) directs me to determine the application on the basis that the plaintiff's version of the facts, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action. It is not appropriate in a summary judgment application for me to review in detail the evidence put forward by the defendant, and make provisional or preliminary findings of fact. If that process appears necessary, it is a clear indication further investigation of the facts is required and that summary judgment must be refused.

84 The plea in par 22.1 (set out in par 66 above) is a plea of a material fact, namely causation, and ought not be a particular. There are no "particulars" to this plea which can be used to test whether there is a factual foundation which a judge could use to make the finding of fact that had the defendant engaged in the dispute resolution process contained in the Contract and acted in good faith towards the plaintiff, the plaintiff's employment would have continued to 30 April 2013.

85 That leaves the material in the affidavit of the plaintiff. The relevant question is whether there is information contained in this affidavit which, if presented as admissible evidence, could be used by a trial judge as the factual basis for a finding that had defendant complied with its obligations relating to dispute resolution and good faith, it would have made a decision not to terminate the Contract pursuant to cl 14.2. It is not sufficient that there is a finding that had the defendant acted fairly or reasonably, a different decision would have been made. As the decision in Van Efferen makes clear, the question of causation is specific, subjective and factual: would this defendant have made a different decision had it complied with the obligations which it had breached?

86 Having carefully reviewed the plaintiff's affidavit, I can find in it no information to the effect that had the defendant complied with the relevant obligations under the Contract, it would have made a different decision as to whether to terminate the contract with the plaintiff. Rather, the evidence is to the effect that as a result of a series of concerns set out in the letters from Mr Fitz Gerald, its industrial relations consultant, the Council of the defendant "reached the conclusion that it has lost the trust and confidence in you necessary to continue the employment relationship" (to quote from its final letter to the plaintiff, annexed to Mr Blight's affidavit). According to Mr Blight's affidavit, the motion to terminate the plaintiff's employment was "carried 9/2", with Councillor Anderson voting against the motion (presumably, there was one abstention).

87 A significant point of distinction with the Van Efferen case is that in that case there was a senior employee of CMA, a Mr Clarke, who may have made a different decision as to whether to remove Mr Van Efferen from the Port Hedland site had Mr Van Efferen had an opportunity under the grievance provision to explain his conduct ([58] - [61]). As it was, Mr Clarke's information was coming from a Mr Pick (a less senior officer than Mr Clarke), with whom Mr Van Efferen had a number of disagreements.

88 In the present case the peak decision making body of the defendant, its elected Council, decided to terminate Mr Hunter's employment even after hearing his explanation of his conduct.

89 For these reasons, I am of the view that the plaintiff's claim for substantial damages is so clearly untenable that it cannot possibly succeed. Subject to the question of leave identified at the beginning of these reasons, the defendant is entitled to summary judgment.

90 I will hear from counsel on the issues of leave and final orders.

Safety and Health Act 1984

Opportunity Act 1984

Addis v Gramophone Company Ltd

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (149 paragraphs)

HUNTER -v- SHIRE OF WAGIN [2010] WADC 13 (8 February 2010)

Parties

Legislation Cited (5)

Cases Cited (18)