Aldersea v Public Transport Corporation [2001] VSC 169

Supreme Court of Victoria|2001-05-28|Before: Ashley J

Contract - employment contract - alleged termination by employer in breach of contract - alleged psychological injury and distress - fact and manner of termination - whether damages recoverable for injury or distress. Torts - deceit - whether damages recoverable for injury or distress occasioned by deceit. Trade Practices - ss. 52, 53B Trade Practices Act 1974 (Cth) and ss. 11 and 24 Fair Trading Act 1985 - alleged breach by employer - alleged psychological injury and distress - whether damages recoverable for injury or distress.

Mr D. Galbally, QC, with Mr G. Grabau and Mr J. Toal

Almost all of the plaintiffs have given notice of intention to call a psychologist, Mr Peter Rosenweg, in connection with their claims.

The notice of intention specifies that expert evidence is to be adduced as to:

"(1) The psychological effect on the plaintiffs of the abolition of the Transit Patrol Department (`the abolition') and the method of and the circumstances of the abolition. (2) The inadequacy of notice of the contents of the documents commonly referred to as section 140 (of the Victorian Railways Act) documents allegedly given to 7 of the plaintiffs and the effect of such inadequate notice in the minds of the plaintiffs. (3) The psychological effect on the plaintiffs generally (including but not limited to their functioning capacity and ability) of the inadequacy of notice and the circumstances and method of the abolition of the Transit Patrol Department. (4) The lack of voluntariness and the coercion and compulsion of the plaintiffs to take from the defendant certain departure packages such as the Voluntary Departure Package, the Separation Package, the Targeted Separation and like packages. (5) The psychological disposition and fitness of the plaintiffs to accept the defendant's alleged `Offer' to join the Victoria Police at or around the date of the abolition."

In the case of each of the plaintiffs[1], reports have been provided to the defendant and to the Court.

The reports, each headed "psychological assessment", state that the purpose of the particular plaintiff's psychological evaluation was to determine:

"(1) The perception and belief (the plaintiff) held about his tenure as a Transit Patrol Officer for the PTC. (2) Whether (the plaintiff) was acting under coercion or free will at the time of accepting the PTC Voluntary Departure Package (VDP). (3) Whether career transition assistance was in fact provided to (the plaintiff). (4) What effect the experience has had on (the plaintiff) and his career. (5) (the plaintiff's) current psychological functioning."

Senior counsel for the defendant informed me that there were multiple objections to the receipt of Mr Rosenweg's evidence. He invited me to consider the objections before the witness gave substantive evidence. Counsel for the plaintiffs agreeing in the proposed course, and bearing in mind the fact that, were substantive evidence admissible, the evidence would evidently occupy a long time, I agreed to the proposal. I required, however, that Mr Rosenweg's professional qualifications and experience be the subject of evidence before the objections were ventilated. That evidence was given on the morning of 9 May. The witness was examined and cross-examined; and I asked him a considerable number of questions to clarify pertinent issues.

In the event, it became clear - if it was not already clear - that neither the first nor the second issues which Mr Rosenweg was asked to determine, and which he did determine, was an issue calling for expert evidence; or was in any event an issue concerning which the witness could give expert evidence. Counsel for the plaintiffs rightly conceded that Mr Rosenweg could not address those matters.

It is next convenient to consider whether the fourth and fifth issues that Mr Rosenweg was asked to address were issues permitting the giving of expert evidence by the particular witness. In the case of the fourth issue that requires an understanding of the task as Mr Rosenweg understood and dealt with it.

I asked Mr Rosenweg what he understood was meant by "the experience" in issue four. He provided answers on two occasions. His fullest answer was this:

"The experience I refer to here specifically is the voluntary departure packages that were given to members, the manner in which that was conducted, the activities and behaviour of the organisation at that time to those members."[2]

In answer to my question what he understood the words "the effect" in issue four to mean he replied that he was being asked:

"to identify the extent of damage that was caused by the way that that experience was conducted." [3]

"...different for different individuals. In some cases immediate psychological damage, such as descent into depression; in other cases further problems with marriages and so on."[4]

The nature of the task as understood and undertaken by Mr Rosenweg in respect of the fourth issue having been thus clarified, I am satisfied that - subject to relevance - the fourth and fifth issues raise matters concerning which he is qualified to give expert evidence.

In the case of the fifth issue, I am satisfied that by qualification, training and experience the witness was equipped to administer and interpret tests, well recognised in the areas of psychology and psychiatry, which are designed to elucidate the presence or absence, and if present the extent, of anxiety and depression - those terms here describing conditions of clinical significance. I am further satisfied that by qualification, training and experience the witness was equipped to determine the presence or absence in a particular individual of the condition described as post traumatic stress disorder.

Then, as to the fourth issue, I am satisfied that the witness's qualification, training and experience equipped him to consider and determine whether it was likely that "the experience" as described to him by a particular plaintiff caused any psychological disturbance at the time; and the connection, if any, between the condition at that earlier time and any psychological disturbance found on recent testing. In that connection the witness conceded that:

"None of the tests could tell us how the person felt nine years ago."[5]

"...the biographical of the individual since that time and their response... the way they speak and are asked about the event either draws forth or attenuates or brings up the memory of that thing, and how they were... the test gives us an idea of the extent of the severity of the shadow experience, if you like."

A conclusion that psychological disturbance was present in late 1992 and/or early 1993 in response to "the experience" would ordinarily presuppose not merely that unpleasant events had then occurred but that symptoms or signs of disturbance appeared contemporaneously or soon thereafter. Given present disturbance and an absence of other obvious causes, however, it might be the case that conclusions could legitimately be drawn that a condition now present was probably present at or shortly after the events of late 1992, and that it was related to those events. Conclusions of that kind would go to the weight and not the admissibility of Mr Rosenweg's evidence.

Thus far, in connection with issues four and five, I have referred to conditions which, as the evidence presently stands, should be considered to fit the term physical injury as that term is understood in tort and contract law, a term inclusive of psychiatric illness.

In the present case, as I perceive it, the plaintiffs seek to allege (at least in connection with one cause of action, and, they say, more widely) physical injury. But they also allege that they suffered distress - a term which embraces, as the cases show, things such as inconvenience, emotional suffering and vexation.

In tort and contract, and probably also in claims brought under the provisions of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1985 the law recognises a distinction between physical injury and distress. The latter describes a subjective, generally transient perception of, or response to, an event or events.

I very much doubt that it is a matter of expertise whether a person suffered distress; and, if so, what was its cause. A person will describe his or her perception of or response to certain circumstances, and the listener will readily conclude whether the person has described distress; and, if so, its apparent cause or causes.

On the other hand, it may be the case that a reported response to certain circumstances will be seen by an expert as significant in determining the existence or extent of (psychological) injury. In that event, the reported response will be admissible through the expert witness as part of the history upon which an admissible opinion is received. If the evidence does not make the history good, the opinion will be affected. But that does not gainsay the admissibility of the history - though not as an opinion that the patient suffered distress, and that by reason of particular circumstances.

I turn to the third issue considered by the witness, that is

"whether career transition assistance was in fact provided to"

the plaintiffs. In each case the witness's answer was in this form:

"No career transition assistance was provided to [the plaintiff] as there were to employees of other government departments."

It appears to me that the issue as raised and answered addressed a purely factual matter, not a matter calling for expert evidence at all.

I should add this: it appears that there is a considerable body of learning which pertains to the need for and the means of providing career transition assistance, and to the psychological disturbance which may ensue if such assistance is not provided. I am satisfied that the acquisition and assimilation of this learning was pertinent to Mr Rosenweg's professional discipline; and that he has had experience of the effects of the provision of such assistance. If the fourth issue considered by Mr Rosenweg was relevant to some matter raised by this proceeding, "the experience" as he described it might well be thought to embrace the presence or absence of adequate career transition assistance, and the likely effect of any inadequacy upon particular plaintiffs. Evidence might well then be receivable from Mr Rosenweg as to the body of learning to which I referred a few moments ago.

Those observations lead on to the issue of relevance generally.

The statement of claim in its present form is very largely the document filed on 13 July 2000 (the original statement of claim was dated 16 October 1995, the matter then being in the Federal Court). As presently pleaded, six causes of action may be discerned.

First, by paragraph 4 it is pleaded that the plaintiffs entered into employment agreements with the defendant (or its predecessors) which contained the terms and conditions alleged by paragraph 5. According to paragraph 6 the defendant breached the agreements in late October 1992, or alternatively (see paragraphs 6A and 6B) evinced an intention no longer to be bound, which repudiation the plaintiffs accepted. By paragraph 7 an allegation is made of loss and damage in consequence of the wrongful termination of employment or repudiation. The particulars subjoined to paragraph 7 identify pecuniary loss. They add:

"Further particulars of loss will be furnished after discovery. Reference is made to the up-dated particulars provided."

Second, by paragraph 7A an allegation is raised which in place of the allegation in paragraph 5(iii) that it was a term of the agreements that the plaintiffs would be employed until retirement raises an allegation that the agreements were for an indeterminate period and could only be determined upon the defendant giving each plaintiff reasonable notice. By paragraph 7B breach of agreements thus formulated is alleged; and by paragraph 7C an allegation of loss and damage is raised. Again, the particulars subjoined to paragraph 7C identify pecuniary loss.

Third, by paragraph 7D a different contractual term is alleged - an implied term in each of the agreements:

"that in the event an employment agreement was terminated the defendant would act in good faith and fairly in connection with its termination."

The defendant sought further and better particulars concerning that implied term. The plaintiffs provided further particulars by document dated 1 August 2000. As explained by plaintiffs' counsel in argument the term should be implied by reason:

[diamond] that the nature of the plaintiffs' employment and undertaking as law enforcement officers on the public transport system was unique in nature and as to the career path it provided and the training it required. The employment involved a probation period, and necessitated specialised training and courses; and

[diamond] of the representations made to each plaintiff before he or she entered upon employment as a member of the Railways Investigation Department/ Transit Patrol Department.

The plaintiffs do not contend, then, that the term under discussion was to be implied by operation of law.

By paragraph 7E of the statement of claim breach of the term pleaded by paragraph 7D is alleged as follows:

"...each of the employment agreements was terminated in a manner which was harsh, unjust and unreasonable and without due regard to the health, dignity and well-being of the plaintiffs."

It is not presently necessary to refer to the particulars subjoined to that paragraph.

By paragraph 7F it is alleged that by reason of the paragraph 7E breach each of the plaintiffs has suffered loss and damage. That allegation is particularised in part as follows:

"(i) humiliation, distress and anxiety (ii) consequential depression and protracted psychological torment."

Fourth, paragraphs 8-15, as I understand it, plead a claim in deceit. The claim is laid on the basis that the defendant made pre-contractual and post-contractual representations to each plaintiff that it would provide him or her with employment until retirement subject only to termination for major or persistent disciplinary breaches, the employment providing a career as a law enforcement officer together with reasonable opportunities for promotion in that occupation, and pay accordingly. Those representations are alleged to have been false, and to have been made recklessly caring not whether they were true or false. Reference then being made to events which took place in 1991 and 1992, and to the defendant's letters to Transit Patrol Officers dated 13 and 22 October 1992, it is alleged that "(i)n the premises, each of the plaintiffs has suffered loss and damage". The loss and damage is particularised as a loss of opportunity to obtain secure employment in a like capacity or other suitable employment at a comparable salary with like prospects of salary increase. To those particulars there is added:

"The plaintiffs otherwise refer to the further and better particulars filed and served herein."

The only further and better particulars filed as at July 2000 were further and better particulars dated 2 May 1996.

Fifth and sixth, the plaintiffs allege, by paragraphs 16 and 17 of the statement of claim, that the making of the representations infringed ss.52 and 53B of the Trade Practices Act and ss. 11 and 24 of the Fair Trading Act. In each instance it is alleged that the plaintiffs have suffered loss and damage. In that connection:

"The plaintiffs refer to and repeat the particulars furnished under paragraph 15 hereof."

It is necessary, for completeness sake, to refer to paragraph 18 of the statement of claim. It relies upon ss. 51A of the Trade Practices Act and s. 10A of the Fair Trading Act not as separate causes of action, but for evidentiary purposes. That is the correct approach.

Looking simply to the statement of claim in its July 2000 form, I should have thought that it was crystal clear that the claims for damages for psychological injury and for distress were being raised only in connection with breach of the implied term pleaded by paragraph 7D. So to conclude would be quite consistent with the understanding that Mr Rosenweg formed as to "the experience" whose effects he was asked to consider.

Counsel for the plaintiff submitted, however, that damages were sought for psychological injury and distress in respect of each of the pleaded causes of action. He relied upon a single sentence at the tail-end of 56 pages of the further and better particulars of claim dated 2 May 1996, that is:

"In addition each of the applicants seeks an allowance for the distress, anxiety, humiliation and psychological trauma arising to them from the breaches by the Respondent."

He submitted that this sentence was picked up, first, by the reference in paragraphs 7 and 7C to "the updated particulars provided"; and second, by the reference in paragraph 15, picked up in paragraphs 16 and 17, to "the further and better particulars filed and served herein". He could cast no light on the variation in language; nor explain how a reference to "updated" particulars in a document dated July 2000 could refer to the first (and only) set of particulars filed in May 1996.

In the event, I am not at all impressed by the submission that the plaintiffs put the defendant on notice that they claimed damages for psychological injury and distress under each head of claim. Certainly, in light of the form of the statement of claim filed in July 2000 - it was substantially recast from its 1996 form - the defendant was given no substantial notice of such claims.

Senior counsel for the defendant did not, however, submit that his client would be unable to meet, or should not be required to meet claims of the type now under discussion. He accepted that his client was on notice that the plaintiffs made claim for damages for psychological injury and distress; and that the question whether such claims could be pursued under one head of claim or another was one of legal analysis. He did not suggest that the cross-examination of the plaintiffs would have been any different had he understood that the claims for damages for psychological injury and distress were being pursued under one head of claim rather than another. He conceded that such authority as there is favours a conclusion that damages in the statutory claims here pursued can include damages for what has been variously described as "distress and inconvenience", "emotional suffering, nervous shock and the like", "distress", and "(severe) mental distress"; and he did not submit that damages for psychological injury and distress, conceptually, are unavailable in a claim in deceit.

In the event, it seems to me right to consider the present debate on the footing that the plaintiffs do contend that they are entitled to damages for psychological injury and distress in respect of each of the pleaded causes of action.

It is convenient to begin with the statutory claims. Consideration of the authorities satisfies me that in appropriate circumstances damages can be awarded for "distress" which is a consequence of the statutory contravention. I use the word "distress" to comprehend the various descriptions in the cases. Thus

[diamond] "loss of employment... and distress and inconvenience"[6]

[diamond] "emotional suffering, nervous shock and the like"[7]

[diamond] "severe stress and illness" and "severe mental distress"[9]

[diamond] "mental distress and vexation"[10]

[diamond] "mental distress, vexation and inconvenience"[11]

It is the fact that in a number of the cases cited an entitlement to damages of such a kind was conceded; and that in other cases damages were not in fact awarded. But the principle that such damages may be awarded seems to be pretty clearly established notwithstanding.

It is necessary to keep in mind the type of condition to which the cases relate. It is, I think, apparent that it is something other than physical injury as I have earlier described it. The point emerges not only from the language used in the cases, but from observations of Wilcox J in Steiner[12] and of Lee CJ at CL in Holloway[13]. The distinction between physical injury and "inconvenience" and "mental distress" is, as I have said, well recognised in torts and contract law. A useful summary appears in McGregor on Damages, 16th Ed, paragraphs 88-90.

As I apprehend it, then, no court has yet decided that damages may be awarded under the Trade Practices Act or the Fair Trading Act for what Wilcox J described in Steiner[14] as "a persisting psychological condition" - which seems to mean physical injury as I have described it. At least in part that is what the plaintiffs seek in the present case.

If the only causes of action pleaded by the plaintiffs in respect of which damages for psychological injury and distress might possibly be awarded were the statutory claims it would be necessary to consider now whether the plaintiffs should be entitled to adduce evidence concerning such injury. But is that the situation?

I turn to the claim in deceit. I understand the law to be this: that where, rarely, physical injury results from deceit, damages may be recoverable for such injury in accordance with ordinary principles: Burrows v Rhodes[15]. In that connection issues of causation and remoteness will fall for consideration.

Further than that, it seems that damages may be awarded for physical inconvenience and discomfort: Mafo v Adams[16] and for matters such as worry, strain, anxiety, and unhappiness, upset and distress: Shelley v Paddock[17]; Archer v Brown[18] and East v Maurer[19]; see also, conceptually, Doyle v Olby (Ironmongers) Ltd and Ors[20].

In the event, without so far considering the claims founded in contract, the plaintiffs are, in my opinion, entitled to adduce evidence pertaining to both physical injury (here, psychological injury) and distress (in which term I include the various descriptive words and phrases noted a little earlier) in connection with the claim in deceit; and to adduce evidence of distress, at least, in connection with the statutory claims. Such evidence, with respect to alleged injury, could properly include expert opinion evidence. But for reasons previously explained it could not include expert evidence pertaining to distress.

The defendant raises substantial challenges to the statutory claims and to the action laid in deceit. In the course of argument it became clear that the challenges - specifically with respect to the statutory claims - could not presently be resolved; at least not in their entirety. Perhaps the statutory claims will eventually fall by the wayside. It would be premature, in the event, to determine whether under those claims the plaintiffs could recover damages for physical injury as well as for distress. The issue might never arise.

A question then arises whether the evidence which is foreshadowed by Mr Rosenweg's reports is admissible in respect of the claims in deceit and under statute. It appears, both from Mr Rosenweg's evidence concerning his understanding of "the experience" which he was asked to investigate, and from his reports, that in the main he considered whether there was any connection between a past and/or present psychological disturbance and the circumstances in which the plaintiffs say that their employments were terminated. There is in the reports some reference to the simple fact of termination; but it is, at least in the reports which I have read, a minority content.

It is possible that both in connection with the statutory claims and the claim in deceit an issue might arise whether the alleged termination of employment or the manner of termination was a consequence of the misrepresentations upon which the plaintiffs rely and thus whether damages could be recovered in respect thereof. That was not canvassed in argument, however, and I approach the question of admissibility of Mr Rosenweg's foreshadowed evidence on the footing that it is at least arguable that there is a causal link between those circumstances and any physical injury suffered by the individual plaintiffs.

Insofar as the plaintiffs are able to claim damages for physical injury and distress in the claim in deceit and for distress at least in the claims founded on statute (I say nothing for the moment about the claims in contract) it may be the case that a distinction will need to be drawn between any injury or distress attributable to the fact of termination and injury or distress attributable to the manner of termination. It may be the case that injury or distress attributable to the latter circumstance is too remote in the eyes of the law.

Can it be said with certainty at this stage of the trial that such injury or distress necessarily would be too remote? I consider that the answer is "no". The remoteness issue was hardly argued. It would be wrong to resolve that issue without being assisted by counsel's analysis of the content of the different causes of action, of remoteness principles, and, in the case of the statutory causes of action, specific consideration of the question whether remoteness is pertinent to damages claimed.

It follows from what I have said that, as matters presently stand, evidence is receivable from Mr Rosenweg which bears upon the question whether physical injury was caused (as the law understands causation) by the fact of termination; and upon the question whether such injury was caused by the manner of termination. But because damages may not be recoverable in the latter case, evidence which failed to draw a distinction between the fact of termination and the manner of termination could prove to be useless from the plaintiffs' standpoint.

I have read, as I said earlier, some of Mr Rosenweg's reports. As I perceive it, they do not distinguish between the impact of the fact and the manner of the alleged termination. I do not know whether the witness could possibly differentiate between those effects having regard to the task which he undertook. Whether there will be objection to his doing so - in light of the reports themselves, and in light of paragraph 1 of the substance of evidence set out in the notices of intention to call expert evidence - I cannot forecast. These are not, however, considerations which require rejection of the witness's evidence.

Although I have determined the admissibility of the evidence proposed to be adduced from Mr Rosenweg without the need to consider its admissibility in the context of the contract claims, its admissibility in that context was debated at length. It seems desirable to set out my conclusions with respect to the matters raised. I do so confident in the expectation that counsel will not, in the event, seek to re-argue those matters at trial's end.

I earlier referred to the way in which the statement of claim is formulated. It raises, in effect, three claims in contract. A convenient starting point for considering whether the plaintiffs can maintain any of these claims is the statement by Mason CJ in Baltic Shipping Co v Dillon that there is a general rule that:

"damages for anxiety, disappointment and distress are not recoverable in actions for breach of contract" [21].

What his Honour meant by "anxiety, disappointment and distress" emerges, I think, from two portions in his judgment. First his Honour said this, in introducing the topic of "The claim for Damages for Disappointment and Distress":

"Pain and suffering is a well-known common law head of damage recoverable in actions for damages for personal injury, whether awarded for tortious conduct or conduct which constitutes a breach of statutory duty. And, in some circumstances at least, a plaintiff can recover damages for injury to his or her feelings caused by tortious conduct; assault, false imprisonment, malicious prosecution and defamation are causes of action in which a plaintiff may recover damages on that score."[22]

Second, in describing exceptions to the general rule his Honour said this:

"...it is beyond question that a plaintiff can recover damages for pain and suffering, including mental suffering and anxiety, where the defendant's breach of contract causes physical injury to the plaintiff."[23]

The same conception is conveyed by the judgment of McHugh J. Thus, under the heading "The general rule relating to damages for distress and disappointment":

"Damages for breach of contract cannot ordinarily be awarded for distress or disappointment arising from that breach."[24]

"The application of basic principle concerning the awarding of damages for breach of contract requires an award of damages for distress or disappointment where it is an express or implied term of the contract that the promisor will provide pleasure or enjoyment or personal protection for the promisee. Unless this Court were to refuse to follow Burton, Hobbs and Bailey as well as the decisions in Stedman and Athens-MacDonald Travel Service Pty. Ltd., damages must also be recoverable for distress or disappointment consequent upon the suffering of physical inconvenience as the consequence of a breach of contract. Furthermore, because damages for personal injury may be recovered in an action for breach of contract and because psychiatric illness constitutes personal injury, damages for mental distress associated with a psychiatric illness or physical injury must also be recoverable in an action for breach of contract."[25]

See further the joint judgment of Deane and Dawson JJ:

"One of the general rules relating to the assessment of compensatory damages for breach of contract which has been accorded the status of settled principle is the rule that a plaintiff is not entitled to recover damages for the `disappointment of mind', distress and injured feelings `occasioned by the breach of contract'[26]."

"Notwithstanding that the rule is based upon pragmatism rather than logic, we are unable to agree with the suggestion to be found in some recent judgments that it should now be effectively abolished by judicial decision. There are, however, established qualifications of or exceptions to the general rule. The question which arises on this aspect of the case is whether disappointment and distress sustained by reason of breach of a contract to provide a pleasant and relaxing holiday experience comes within them. In our view, it does. The many cases in which an award of damages for breach of contract has included compensation for mental distress can be grouped (sometimes a little uncomfortably) into a number of different categories, including breach of promise of marriage, breach of contract causing physical injury and breach of contract directly causing physical inconvenience."[27]

In each of these judgments it seems clear that a distinction was drawn between what I have called "distress" and what I have called "physical injury" - subject only to the point that in a particular case physical injury may be productive of distress; in which event it is the fact that injury has been sustained which is decisive.

59 Baltic Shipping was a case in which an exception to the general rule applied. The claim for damages for disappointment and distress succeeded because the object of the contract was to provide for enjoyment and relaxation. The case, then, did not have to consider the question whether damages are recoverable for distress arising from the harsh and humiliating manner of dismissal, a question addressed in Addis v Gramophone Co Ltd[28]. Nonetheless, Baltic Shipping presented an opportunity to the High Court to say that the general rule, of which Addis was an exemplification, no longer existed; and that opportunity, clearly, was not taken.

Mason CJ described the ratio of Addis this way in Baltic Shipping:

"... the House of Lords held that the plaintiff could not recover in an action for damages for breach of contract in respect of his injured feelings and loss of employment prospects arising from the harsh and humiliating manner of his dismissal."[29]

In the recent case of Johnson v Unisys Ltd[30], where a dismissed employee sued for damages for economic loss resulting from a major psychiatric illness claimed to result from the fact and the manner of dismissal (and not for compensation for anxiety and mental stress arising from the manner of dismissal) Lord Steyn concluded that the ratio in Addis did not extend to the pecuniary consequences of a harsh manner of dismissal. His Lordship alone reached that conclusion. Even if his opinion was accepted it does not touch the ratio in Addis for present purposes.

In Johnson, Lord Hoffman, who gave the leading opinion, referred with apparent approval to the opinion of Lord Steyn in Mahmud v Bank of Credit and Commerce International SA[31] that the true ratio of Addis was that damages were recoverable only for loss caused by breach of contract, not for loss caused by the manner of its breach. He also referred with apparent approval to the statement of McLachlin J of the Supreme Court of Canada in Wallace v United Grain Growers Ltd[32] that the only loss caused by a wrongful dismissal flows from the failure to give proper notice or make payment in lieu. Therefore, said his Lordship:

"If wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation."[33]

What his Lordship there said was reinforced by his observation[34] that no damages are recoverable for the "psychiatric consequences" (his terminology) of the fact of dismissal. The same notion was conveyed by Lord Millett in his analysis of the consequences of implying into a contract of service a term obliging an employer not to exercise right of dismissal in bad faith or without reasonable cause.[35]

Confining "psychiatric consequences", for the moment, to distress as I have described it, nothing said by their Lordships is at odds with what Mason CJ said in Baltic Shipping was the ratio of Addis. The passages in their Lordships' opinions to which I have referred rather explained why it was that damages are, according to Addis, not awarded for distress attributable to the manner of a dismissal which dismissal is in breach of contract.

It may be said that Johnson was decided by reference to the state of industrial legislation in England at the particular time. So much is true. But it does not follow that their Lordships' analysis of Addis was either unconsidered or that it is not at the least highly persuasive.

In the event, putting to one side the possible significance of an implied term concerning the manner of dismissal, it seems to me that authority is against the recovery of damages for distress occasioned by the wrongful termination of an employment contract, in which I include the manner of termination.

In more recent years courts (and tribunals presided over by a judge) have been prepared to imply into employment contracts a term that an employer will not, without reasonable cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between itself and the employee.[36] In Mahmud, a breach of that term during the currency of the employment of persons whose employments were later terminated was held to entitle the past employees to claim damages for inability to get work because of a stigma attaching to them by reason of the breach. So, in a practical way, the employees were able to maintain a claim for the economic consequences which ensued after termination. In that case, I should note, no claim was made for distress damages.

Consideration has been given to the question whether, in reliance upon such an implied term, damages might be recovered for distress in the event of harsh dismissal in breach of contract. As Lord Hoffman pointed out in Johnson[37], if damage could be said to flow not from dismissal, but from breach of another implied term of the contract, Addis would not stand in the way.

A number of reasons have been advanced why the particular implied term might not provide a vehicle for recovering damages for distress in the event of harsh dismissal in breach of contract. First, an implied term may supplement but not override an express contractual term. If a contract of employment provided a regime for termination by the employer it would be very difficult to imply a term that the employer should not implement that regime except in accordance with the implied term now under discussion[38].

"is concerned with preserving the continuing relationship which should subsist between employer and employee. So it does not seem altogether appropriate for use in connection with the way that relationship is terminated"[39].

Third, implication of a term which had the effect of laying an employer open to a claim for damages for distress might conflict with industrial legislation which provided a remedy for unfair dismissal.[40]

A fourth reason was advanced in Burazin: that breach of the particular implied term may not yield a remedy in damages. That proposition, strictly obiter dicta, was based, at least in part, upon the decision of the Court of Appeal in Mahmud, a decision reversed on appeal. I think, with respect, that the proposition could not now stand.

I have referred to the particular implied term because, although it is not in the present case alleged by the plaintiffs, it sets a framework for consideration of the implied terms which are alleged. There are two of them. First, by paragraph 5(v) of the statement of claim, an implied term that the defendant would:

"act in good faith and fairly in all its dealings with the employee in connection with the employment agreement."

Second, the implied term alleged by paragraph 7D to which, and to the further and better particulars concerning which, I have already referred.

In argument, attention was primarily paid to the implied term pleaded by paragraph 7D. It was contended for the plaintiffs that such a term should be implied, it being the same as or analogous to the implied term of good faith and fair dealing in contract performance and enforcement recognised in Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd[41] and in K & S Freighters Pty Ltd v Linfox Transport (Aust) Pty Ltd[42]. For the defendant it was contended that no term such as that pleaded had been implied into employment contracts, that reason had been demonstrated in Johnson why such a term should not be implied, and that the acts, facts and circumstances relied upon to support the implication did not sensibly do so. It was further pointed out that here the plaintiffs relied upon implication by reference to acts, facts and circumstances, which was to be contrasted with the term implied in Garry Rogers Motors and K & S Freighters - a term implied into some or all commercial contracts as a matter of law.

In my opinion the plaintiffs' attempt to circumvent Addis by reliance upon the term pleaded by paragraph 7D fails. I consider that there is no warrant for the implication of such a term. That is so for a number of reasons.

First, there is good reason why such a term should not be implied, as explained by Lord Hoffman in Johnson[43].

Second, the Canadian Supreme Court has rejected, by majority, the implication of a term precluding "bad faith discharge"[44].

Third, the little discussion of a term broadly in the form of paragraph 7D as there has been in Australia has not led to a conclusion that the same should be implied: see Brackenridge v Toyota Motor Corporation Australia Ltd[45].

Fourth, I consider that there is no analogy between the term which may be implied by law into commercial contracts (to which plaintiffs' counsel referred) and the term(s) sought to be implied by reference to acts, facts and circumstances in the present case.[46]

Fifth, I fail to understand how the identified acts, facts and circumstances could, consistently with the principles of implication of terms, lead to implication of the term pleaded either by paragraph 7D - or, for that matter, the term pleaded by paragraph 5(v).

Sixth, there is a question whether and to what extent the term pleaded by paragraph 7D would supplement, rather than conflict with, the contractual terms elsewhere pleaded.

I should also refer to the situation concerning employment legislation and award provisions at pertinent times. I mention it for completeness sake.

The Termination Change and Redundancy Case[47] led to the insertion into awards of clauses precluding harsh, unjust or unreasonable termination. In Gregory v Philip Morris Ltd[48] it was held, in effect, that such a clause was imported into individual contracts of employment. In Byrne and Frew v Australian Airlines Ltd[49] the High Court disapproved that conclusion. In any event, it does not appear that the pertinent award ever contained such a clause.

The Industrial Relations Act 1988 (Cth) was in force throughout 1992. It did not create a statutory jurisdiction for dealing with dismissals that were alleged to be harsh, unjust or unreasonable.

The Industrial Relations Act 1979 (Vic) was also in force during 1992[50]. It bound the Crown in light of the State of Victoria[51] (which the defendant says is pertinent in this case). It was amended in mid 1992 to give the State Industrial Commission a certain jurisdiction with respect to dismissals[52].

But the Commission's power was limited to ordering reinstatement and back pay for lost wages. Moreover, if a worker was covered by a Federal Award, the State Commission had no jurisdiction unless the award preserved the operation of State legislation[53]. As I understand it, the plaintiffs were employed under a federal award. It was not suggested in argument that the award preserved State legislation. No print of the award was produced.

Despite the Federal Commission having no statutory jurisdiction in 1992 to deal with dismissals that were alleged to be harsh, unjust or unreasonable, the Commission in fact asserted some jurisdiction in that connection. It was apparently assumed on a case by case basis. To attract the Federal jurisdiction there needed to be an interstate element.

In all, as at late 1992 and early 1993 there was an incomplete legislative regime applicable to instances of alleged harsh, unjust or unreasonable dismissal. As I understand its likely operation in the case of these plaintiffs, it would not stand in the way of implication of the term alleged by paragraph 7D.

The Industrial Relations Reform Act 1993 (Cth) amended the Industrial Relations Act 1988. It created the Industrial Relations Court of Australia. It inserted the predecessor of what is now Division 3 of Part VIA of the Workplace Relations Act 1996 (Cth). By that legislation a dismissed employee could make complaint of dismissal on the ground that it was harsh, unjust or unreasonable. Under the present legislation there is a requirement for consideration of some such complaints by the Australian Industrial Relations Commission. Under the 1993 legislation, however, such matters came to the attention of the Industrial Relations Court of Australia. Burazin, Brackenridge and Clunne v Nambucca Shire Council[54] are instances of matters dealt with by that court. It took the view that compensation which it was empowered to order under the legislation could include compensation for mental distress or injured feelings caused by a harsh, unjust or unreasonable termination.[55] The same position has been adopted by the Commission under the present legislation[56].

Under the Commonwealth legislation operative since 1994, then, there has been an availability of compensation for distress (not injury) in the event of harsh, unjust or unreasonable dismissal in the situations to which the legislation has from time to time applied. Many of the features of the statutory regime mirror those applicable in England as they were described by Lord Hoffman in Johnson[57]. The fact that in Australia, unlike in England, the legislation regime has been construed to permit an award of compensation for distress provides a further reason why, more so than in England, the legislative regime might be considered to lead to a conclusion that a term such as that pleaded by paragraph 7D of the statement of claim should not be implied.

There was, however, really no debate whether the Commonwealth legislation in force since 1994 operated with respect to any of the plaintiffs. For that reason I have not relied upon that legislation as providing an additional reason for rejecting the implication of the paragraph 7D term.

I summarise the position thus far reached with respect to the claims for damages for physical injury and distress under the contract claims as follows:

First, the claims founded on paragraph 7D cannot be sustained; for reasons discussed the pleaded term could not be implied.

Second, the consequence of the authorities is that claims for damages for distress founded upon alleged termination in breach of contract cannot be sustained. In this context, termination must be understood to comprehend both the fact and manner of termination.

That leaves a single question for resolution: is it open to the plaintiffs to succeed in a claim for damages for physical injury resulting from the alleged wrongful termination of their contracts of employment?

In Baltic Shipping each of Mason CJ and McHugh J said that an exception to the general rule that damages for what I have called distress are not recoverable for breach of contract is the situation where the defendant's breach of contract causes physical injury to the plaintiff[58]. Physical injury includes psychiatric injury, and symptoms of distress may ensue from or be manifestations of psychiatric injury.

The principle is clear enough. Instances of its application include the type of situation which arose in Godfrey v Perry[59] and claims by employees for damages for injuries sustained in consequence of breach of the employer's contractual duty to provide a safe workplace and so on.[60]

To say that damages for personal injury may be awarded where the breach results in physical injury cannot mean, however, that every breach of contract which results in such injury must yield an award of damages for such injury. Whether the particular breach will do so must surely depend upon consideration of the question of remoteness. In cases of the types referred to a moment ago no problem of remoteness would arise. But what of claims of the type now under discussion?

The answer to that question begins with the circumstance that there is some limited support in the cases for the proposition that damages may be payable for physical injury resulting from termination in breach of contract of employment.

In Clunne, supra, Moore J said, having referred to Baltic Shipping, that he:

"proceeded on the basis that Mrs Clunne is entitled to damages for any physical injury, including psychiatric illness, resulting from the breach of contract and any mental distress associated with that psychiatric illness."[61]

He found that the plaintiff had suffered injury, not mere distress, and so he awarded damages.[62]

In an earlier case, Grout v Gunnedah Shire Council[63], Moore J had awarded damages on the basis that stress suffered by the applicant as a result of his wrongful dismissal had aggravated an underlying psychiatric condition.[64] His Honour noted that:

"There is no authority of which I am aware in which damages have been awarded where wrongful dismissal has caused or has exacerbated a psychiatric illness of a dismissed employee. That may be because such situations may be rare, unlike situations where an employee felt, as could be expected, anxious and distressed at being wrongfully dismissed[65]."

Again, in Brackenridge, Beazley J at first instance, obiter dicta, arguably gave support for the proposition that in the type of case now under discussion damages might be awarded for distress when related to psychiatric injury, but not for distress simpliciter[66].

I should refer again to Gogay. Decided before the House of Lords reversed the Court of Appeal in Johnson, it was not a dismissal case. It shows that breach of an implied term of confidence and trust contained in an employment contract which results in physical injury may in the particular circumstances entitle an employee to damages for such injury. It confirms, also, the difference that there is between injury and distress, and the potential significance of that distinction in a particular case. But it does not stand for the proposition that, in the absence of a pertinent implied term, physical injury resulting from an employer's breach of a contract of employment will entitle the former employee to damages for that breach.

I should return to Burazin. In the judgment of the Full Court of the Industrial Relations Court there was no reference either to Grout or Clunne. They were, of course, cases of injury. Concerning Addis, their Honours said this:

"If Addis is open to criticism, in our view it must be on the ground that the House failed to consider whether, in the case of breach of a contract of employment by a wrongful dismissal, distress was a loss that might fairly be considered as arising according to the usual course of things, or at least might reasonably be supposed to have been in the parties' contemplation when they made the contract. The House of Lords treated contracts of employment as being the same as other commercial contracts, without reference to the interpersonal relationship that employment contracts establish or the fact that a breach of an employment contract, especially by an employer, may have a substantial effect on the other party's emotional well-being and self-esteem."[67]

Their Honours then considered Baltic Shipping in some detail. After referring to the judgments of Mason CJ[68], Brennan J[69] Deane and Dawson JJ[70] and McHugh J[71] their Honours said this:

"As it seems to us, the High Court rejected the opportunity in Baltic Shipping to throw over the constraints imposed by Hamlin and Hadley v Baxendale and their successors. It approved the awarding of damages for distress only in a limited range of cases. Although there was some difference in the precise formulations put forward by their Honours, none was broad enough to cover distress resulting from a wrongful dismissal. If such damages are to be awarded, it must be after rejection, at High Court level, of the Addis conclusion that employment contracts are to be treated like other commercial contracts for the purposes of the rules in Hadley v Baxendale."[72]

There is no doubt, in my respectful opinion, that their Honours' conclusion was amply justified by the passages in Baltic Shipping which they cited.

The question which then arises is whether, in the presently relevant context, that conclusion could have been any different if "injury" had been substituted for "distress". Notwithstanding the distinction drawn between injury and distress in the judgments of Mason CJ and McHugh J, I think that the answer must be "no". As I have pointed out, the cases in which breach of contract has been held to authorise a claim for damages for injury are far removed from the present context, and in each instance raise no problem of remoteness. If distress is outside the boundaries of remoteness in cases of the present type, how could it be any different if the consequence of breach was injury rather than distress?

109 Johnson tends, I consider, in a similar direction. True it is that the case ultimately turned on the impact of the English industrial legislation upon the common law in the context of an attempt to imply a particular and inapt term into a contract of employment. True also it is that in Johnson the plaintiff sought damages for economic loss flowing from psychiatric injury rather than damages for that injury itself. Even so, the opinions of Lord Steyn[73], Lord Hoffman[74] and Lord Millett[75] would not appear to assist a favourable conclusion for the plaintiffs in the situation now under discussion.

I summarise the situation as follows: first, there are a very few cases in which damages have been awarded for personal injury resulting from an employer's wrongful termination of a contract of employment. In none of those cases has the issue of remoteness been explicitly canvassed.

Second, I do not think that it can be said that dicta in Baltic Shipping mean that a breach of contract which results in personal injury as distinct from distress will inevitably entitle the innocent party to damages. The issue of remoteness must necessarily be considered.

Third, the resolution of the remoteness issue in the case of breach of an employment contract by a wrongful termination which results in personal injury would seem most probably to be the same as in the case where the breach results in distress.

Fourth, it might be the case, if a term such as that pleaded by paragraph 7D of the statement of claim could be implied into a contract of employment, that breach resulting in personal injury could yield an entitlement to damages. But as matters presently stand there are very great difficulties in implying such a term into an employment contract.

Fifth, if there is to be a broad right to damages for personal injury or distress resulting from an employer's wrongful termination of its employee, it would seem that it must depend upon judicial acceptance of the proposition that employment contracts are - in some respects - unlike commercial contracts generally; and that a critical point of distinction is that in the case of employment contracts (whether by recourse to a term implied by law or individual circumstances, or simply by reason of the class of contract) damage by way of personal injury or distress resulting from wrongful termination should not be considered too remote.

A great deal has been written, judicially or otherwise, concerning the matter last-mentioned. It has been affected by debate whether an "employment relationship" underlies the contract of employment.[76] This is not the occasion to exhaustively review the literature. This may be said: there have been judicial pronouncements tending towards a conclusion that employment contracts should, uniquely, be considered to yield the outcome that personal injury or distress resulting from unlawful termination is within the boundaries of remoteness[77]. Nonetheless no case appears to have squarely confronted that issue and to have so concluded. It may be that Grout and Clunne proceeded upon such a basis. But that is speculative.

Sixth, whether the common law should in any event be developed so as to permit an award of damages for personal injury resulting from wrongful termination would require consideration of the impact of Australian industrial legislation, just as Johnson considered such legislation in the English context.

In all, I conclude that the Australian common law does not yet recognise an entitlement to damages for personal injury resulting from wrongful termination of a contract of employment. The very few cases which have yielded a contrary result appear to be at odds with principle.

It follows from what I have said that, if the plaintiffs' case was pleaded only in contract, I would not permit any evidence to be adduced from Mr Rosenweg. Because, however, the case is otherwise pleaded, and because as otherwise framed damages for injury or distress may be available, pertinent evidence must be received.

[1] Save for one who is deceased and one who gave instructions not to pursue a claim for psychological injury.

[6] Steiner and Anor v Magic Carpet Tours Pty Ltd and Ors (1984) ATPR 40-490 at 45642 per Wilcox J.

[7] Argy and Anor v Blunt & Lane Cove Real Estate Pty Ltd and Ors [1990] FCA 51; (1990) 26 FCR 112 at 145 per Hill J, citing Steiner.

[8] Zoneff v Elcom Credit Union Ltd (1990) ATPR 41-009 at 51747, Full Court of Federal Court.

[9] Murran Investments Pty Ltd and Anor v Aromatic Beauty Products Pty Ltd [2000] FCA 1732 at paragraphs 20, 21 and 32 per Mansfield J.

[10] Holt v Biroka Pty Ltd and Ors (1988) 13 NSWLR 629 at 637 per Kearney J.

[11] Holloway v Witham and Anor (1990) 21 NSWLR 70 at 86-87 per Lee CJ at CL.

[16] [1970] 1 QB 548 at 554 per Sachs LJ and at 558 per Widgery LJ.

[29] At 361; see also per McHugh J at 395.

[36] See Mahmud, supra, and the discussion and citations in Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144 at 151.

[38] Johnson, per Lord Hoffman at paragraphs 37 and 42.

[39] Johnson, per Lord Hoffman at paragraph 46; see also per Lord Millett at paragraph 78; compare Burazin at 152, lines 29-32; Gogay v Hertfordshire County Council [2000] TLR 677 (CA) is an instance of damages being recovered for physical injury for breach of the term during the continuance of the contract.

[40] It must, of course, depend upon consideration of the particular legislation. In Johnson, the form of pertinent legislation was decisive. See per Lord Hoffman at paragraphs 55-59 and per Lord Millett at paragraphs 79-81.

[44] See Wallace, supra, per Iacobucci J at 27-28: his Honour did however conclude that employers should be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which may be compensated for by adding to the length of the notice period; and that injuries such as humiliation, embarrassment or damage to self-esteem caused by bad faith conduct in the course of dismissal may be compensable in such a way (see at 31-37). Compare the dissenting judgment of McLachlin J at 38 and 44-48.

[45] [1996] IRCA 628; (1996) 142 ALR 99 at 109-110; the term relied upon was akin to the term pleaded by paragraph 5(v) of the statement of claim rather than the term pleaded by paragraph 7D.

[46] The circumstances in which the former may be implied are canvassed in the authorities cited by Finkelstein J in Garry Rogers Motors, supra, paragraph 34.

[50] It was repealed by the Employee Relations Act 1992, which established a somewhat different regime. It appears that the repealing Act did not relevantly commence until 1 March 1993; see the Victorian Government Gazette 27 November 1992.

[56] See Coms21 Ltd v Liu, unreported, Print S3571, 25 February 2000, Full Bench of the Australian Industrial Relations Commission, noted in the Queensland Lawyer, vol. 20, pp. 224-225.

[58] Per Mason CJ at 362; per McHugh J at 405.

[60] Such claims are now almost always pleaded only in tort. But it is not so long ago that they were also pleaded in contract.

At a glance

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Judgment (208 paragraphs)

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Legislation Cited (8)

Cases Cited (13)