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[2025] NSWCA 150
mixed. Appeal dismissed with costs; cross-appeal dismissed with costs. Dr Daynes was granted leave to appeal the costs judgment and succeeded. The order requiring Dr Daynes to pay I-MED's costs from 29 June...
I-MED dismissed Dr Daynes without notice after workplace allegations. The trial judge found the alleged sexual harassment and bullying were not established and that the contract did not justify summary dismissal. The Court of Appeal upheld that result and also upheld the damages assessment, which covered the remaining fixed term and three months' notice rather than the longer period Dr Daynes claimed. On costs, however, the trial judge had not dealt with Dr Daynes' substantial argument that I-MED's settlement offer did not address the public and professional reputational consequences of the dismissal. The Court of Appeal found it reasonable to reject the offer and restored the ordinary costs outcome, requiring I-MED to pay Dr Daynes' costs.
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6 cited instruments linked from this judgment.
2,376 words · generated 06/10/2026
Daynes v I-MED Central Queensland Pty Ltd; I-MED Central Queensland Pty Ltd v Daynes [2025] NSWCA 150 concerned the summary dismissal of Dr Anthony Daynes, a senior radiologist who had worked in Cairns for about 35 years. He began working for I-MED on 2 August 2019, after selling his radiology business to the company ([10]-[16]). His employment terms provided for an initial three-year fixed term, followed by conversion to an indefinite term if he elected to continue, with three months' notice applicable to termination without cause ([20]-[24]).
I-MED dismissed Dr Daynes on 11 May 2022, relying on allegations about two colleagues. It alleged sexual harassment of Ms Turner at a staff Christmas party, involving a pelvic thrust, and bullying and victimisation of Ms Odgers over a longer period ([32]-[36]). An independent investigator, Workdynamic Australia, reported adversely on both allegations ([36]).
Dr Daynes denied the alleged pelvic thrust. He said that he had made a humorous imitation of a haka following a reference to Kiwis and hakas ([43]-[45]). Ms Turner did not give evidence. Ms Bailey said she saw a pelvic thrust, but ultimately could not confirm that Dr Daynes made contact with Ms Turner's costume ([48]-[51]). For the workplace allegations, the primary judge accepted that Dr Daynes had sometimes been rude, abrupt, avoidant and frustrated, but rejected several more serious allegations, including swearing, repeated shouting and throwing paperwork ([74]-[75]).
The primary judge found the dismissal was not contractually justified and was a repudiatory breach of the employment contract. He awarded $348,179.96, including interest, rather than the $4.3 million Dr Daynes claimed ([4], [80]-[87]). He initially ordered I-MED to pay Dr Daynes' costs. After considering settlement offers, he changed the order so that Dr Daynes would pay I-MED's costs from 29 June 2024 ([7], [185]).
The Court of Appeal dismissed Dr Daynes' appeal on damages and I-MED's cross-appeal on the dismissal finding. It allowed Dr Daynes' appeal on costs, set aside the divided costs order, and ordered I-MED to pay his costs as agreed or assessed ([210]).
On the sexual harassment allegation, the Court of Appeal considered whether the trial judge had erred in not being satisfied that Dr Daynes engaged in “conduct of a sexual nature” ([95]). The Handbook required conduct to be of a sexual nature and unwelcome, and to occur in circumstances where a reasonable person would have anticipated offence, humiliation or intimidation. It also said the viewpoint of the person harassed was relevant ([29], [98]).
The Court found no basis to disturb the trial judge's assessment. Ms Turner did not give evidence about what she saw or how she reacted. Ms Bailey was the only witness who said she observed the alleged conduct, but her evidence about physical contact became uncertain under cross-examination ([99]-[101]). The primary judge had also considered the possibility that the movement was a haka gesture, the surrounding conversation, and the competing perceptions of the witnesses ([102]-[109]). Bell CJ held that the primary judge's reasoning was “not only sound but unimpeachable” ([105]). The Court did not require a binary decision between “haka” and “pelvic thrust”; it had to decide whether the evidence established conduct of a sexual nature ([102]-[107]).
On bullying, the primary judge's factual findings were not challenged as such. The question was whether the conduct he accepted met the Handbook's definition ([113]). That definition required repeated and unreasonable behaviour directed towards a worker or workers, creating a risk to health and safety ([31]). The Court rejected I-MED's approach of treating repetition, risk and harmful effect as enough by themselves. It said the analysis also required identification of particular behaviour and assessment of whether it was unreasonable and directed towards the worker ([115]-[117]). For example, the use of capitalised post-it notes was repeated, but the primary judge found it was not shown to be unreasonable or to single Ms Odgers out ([117]). The Court held that the judge's distinction between rudeness and bullying was not legally erroneous ([120]-[122]).
The damages issue turned on the structure of the employment contract. Dr Daynes argued for a loss-of-chance approach, treating continued employment until retirement as an opportunity lost when I-MED dismissed him ([145]-[147]). Bell CJ rejected that characterisation. On his analysis, after Dr Daynes elected to continue, he had a contractual right to indefinite employment, subject to I-MED's separate right to terminate without cause on three months' notice ([148]-[150]). The question was therefore what would probably have happened under that contractual arrangement, not the value of a chance to receive an extension.
The primary judge had to consider the likelihood that I-MED would exercise its notice right, and what Dr Daynes himself would have done. The Court said that the mere existence of a termination right did not automatically limit damages: all relevant facts had to be considered ([152]-[154]). The primary judge had considered evidence including succession planning, workplace concerns, disputes between the parties, Dr Daynes' stated retirement plans, and the lack of support for his assertion that he needed to continue working for financial reasons ([86]-[87], [154]-[168]). The appellate court found no proper basis to interfere.
The costs issue differed. I-MED's offer of 28 June 2024 was for $435,000, with costs and a release, confidentiality and non-disparagement terms ([182]). It was more than the judgment Dr Daynes ultimately obtained. But Dr Daynes had argued that the offer did not address his concern for public and professional vindication, unlike his own earlier proposal, which included proposed statements about his work and departure ([179]-[183], [193]). The primary judge's brief reasons did not engage with that substantial argument ([185], [192]-[195]). Bell CJ held that substantial, clearly articulated arguments should ordinarily be addressed when a court departs from the ordinary costs rule ([197]-[198]). On re-exercise, the Court concluded that the offer did not provide functionally equivalent reputational terms and that rejection was reasonable ([203]-[209]).
The judgment did not purport to establish a new general rule for summary dismissal or damages. It applied the contract, the employer's Handbook and existing principles about proof, contractual damages and costs.
For the disputed workplace allegations, the Court applied the civil standard in light of the seriousness and context of the allegation. It discussed the approach associated with Briginshaw, including attention to the seriousness of an allegation, its inherent likelihood and the gravity of its consequences ([103]-[109]). The Court did not treat that approach as a different standard of proof. It upheld the trial judge's assessment of whether the evidence established the alleged conduct.
On contractual damages, the Court drew on authorities including Amann Aviation, TCN Channel 9, Berry and Chandrasekaran ([152]-[154]). Those authorities informed the approach that a contractual termination right does not automatically cap damages. A court evaluates whether the right would have been exercised in the relevant counterfactual, having regard to all the circumstances. The judgment applied that reasoning to a contract that converted to an indefinite term on election but permitted termination without cause on three months' notice.
The decision also distinguishes a contractual right from a mere chance of renewal. Dr Daynes' contract, as construed by Bell CJ, gave him an indefinite-term employment right if he elected to continue. That was different from a claim for the loss of an opportunity to obtain a future contract where no contractual extension right existed ([148]-[150]). The Court therefore rejected the proposed loss-of-chance framework for the damages question before it.
For costs, the decision restates that an unaccepted Calderbank offer does not automatically produce a costs consequence for the offeree. The decisive question is whether rejection was unreasonable in all the circumstances, judged at the time of the offer rather than with hindsight ([187], [190]-[191]). The application of that principle here emphasises that a monetary comparison may not exhaust the relevant circumstances. Where the offer does not address a clearly evidenced non-monetary concern, such as reputational vindication, that issue may matter to the reasonableness assessment ([192]-[209]).
At [98], Bell CJ noted that the Handbook made the harassed person's viewpoint relevant. In plain English, the inquiry was not just whether a movement could be described as sexual by an observer; the policy also required consideration of whether it was unwelcome and the surrounding circumstances.
At [103]-[109], the Court explained why the first-instance finding could stand. The primary judge was entitled to assess the disputed movement in context, including the haka explanation and the absence of evidence from Ms Turner about her reaction. The appellate court was not being asked simply to choose which witness it preferred; it was reviewing whether the trial judge's conclusion was open on the evidence.
At [116], Bell CJ rejected a simplified formulation of the bullying definition. In plain English, repeated conduct and a harmful effect do not automatically establish bullying. The court must identify what conduct occurred and assess it against the complete policy definition, including whether it was unreasonable and directed towards the worker.
At [148], Bell CJ described Dr Daynes' position as a contractual entitlement to continue indefinitely if he elected to do so. In plain English, this made the case different from one where an employee merely hopes for renewal. But the entitlement was not guaranteed for life because the contract allowed termination without cause on three months' notice.
At [154], the Court stated that damages required evaluation of whether I-MED would probably have exercised that termination right. In plain English, the court could not assume either that employment would definitely continue or that I-MED would automatically terminate at the first opportunity. The question depended on the evidence and circumstances.
At [198], Bell CJ said that a detailed argument about departure from the ordinary costs rule should ordinarily be addressed, even briefly. In plain English, concise costs reasons can be sufficient, but a court should not overlook a substantial argument that could affect the result.
At [204]-[209], the Court explained why the offer did not make rejection unreasonable. In plain English, the offer's higher dollar amount was important but not decisive. The Court considered that it did not address Dr Daynes' concern about repairing reputational harm arising from a public dismissal on misconduct allegations.
The decision is particularly relevant where an employment contract gives an employer a specific right to dismiss without notice, but the employer relies on alleged misconduct that is contested in later proceedings. It illustrates the importance of identifying the exact contractual termination clause, the employer's policy definition, and the factual conduct said to engage the clause. The result here depended on the evidence and the wording of the particular Handbook and terms of employment, so it does not establish that similar conduct will always fall outside a bullying or harassment policy ([95]-[143]).
The damages reasoning is relevant where an employee elects to continue beyond a fixed term, but the contract allows termination without cause on notice. The court may need to determine what the employer would probably have done and what the employee would probably have done, using the circumstances existing at the time of the breach but on the hypothesis that the breach did not occur ([151]-[161]). The judgment also shows that evidence of retirement plans, replacement arrangements, workplace concerns and ongoing disputes may bear on that counterfactual ([86]-[87], [155]-[166]).
The costs reasoning is relevant where an unsuccessful party makes a Calderbank offer that is financially better than the eventual judgment, but the offeree says the offer did not address an important non-monetary interest. The case illustrates that public vindication and reputational concerns may be relevant when supported by the circumstances and communicated in the offer process. The question remains whether rejecting the offer was reasonable in all the circumstances at the time ([190]-[209]).
The supplied judgment is dated 11 July 2025 and contains no account of later judicial treatment of Daynes. It is therefore not possible from this source to state whether later courts have followed, distinguished or otherwise treated the decision.
The judgment itself places its reasoning within earlier authority. For factual review, it refers to Fox v Percy and Lee v Lee ([110]). For employment damages and contractual termination rights, it draws on Martinez, Amann Aviation, TCN Channel 9, Berry and Chandrasekaran ([152]-[154]). On the counterfactual to be considered after wrongful dismissal, it applies Bartlett, holding that the hypothetical is one where the employer did not summarily dismiss, while other facts, including the investigation, are not automatically removed ([158]-[160]).
For Calderbank costs, the judgment applies principles from SMEC, Hunter, Crump and Valmont, including the need to assess rejection in all the circumstances and without hindsight ([186]-[198]). Its contribution in this case is the application of those principles to the specific importance of reputational vindication following a dismissal based on allegations of sexual harassment and bullying.
The Court did not need to decide the construction of cl 7.3(c) or cl 7.3(a)(2) because the conduct relied on to engage those provisions was not established. Bell CJ nevertheless gave a provisional view on each clause, while Leeming JA and Free JA expressly declined to decide the construction question ([123]-[143], [212], [215]). The scope of “material term” and the operation of the subjective “we consider” wording therefore remain unresolved by a majority determination in this appeal.
Bell CJ's suggested meaning of “material term” was an available interpretation, not a necessary holding: the term would be material if its breach had a serious effect on the benefit the innocent party would otherwise derive from performance ([131]-[134]). The case does not decide whether a breach of the Handbook obligation in cl 12 would meet that test.
The judgment also does not establish a general formula for weighing reputational vindication against the monetary value of a Calderbank offer. It holds that the factor was relevant in Dr Daynes' circumstances and that the primary judge's failure to address the argument vitiated the costs discretion. How much weight reputation should receive in another case will depend on that case's facts, the offer's terms and the information available when it was made ([192]-[209]).
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on, relying on, or using this analysis, have it checked by a qualified Australian lawyer.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Daynes v I-MED Central Queensland Pty Ltd; I-MED Central Queensland Pty Ltd v Daynes [2025] NSWCA 150
Hearing dates: 14 May 2025
Date of orders: 11 July 2025
Decision date: 11 July 2025
Before: Bell CJ at [1];
Leeming JA at [211];
Free JA at [215].
Decision: (1) Appeal dismissed with costs.
(2) Cross appeal dismissed with costs.
(3) Grant leave to Dr Daynes to appeal with respect to the costs judgment of the primary judge and allow the appeal with costs.
(4) Set aside the following order of the primary judge, namely:
“(i) Judgment for the plaintiff in the sum of $348,179.96.
(ii) The defendant is to pay the plaintiff's costs as agreed or assessed up to and including 28 June 2024.
(iii) The plaintiff is to pay the defendant's costs as agreed or assessed from 29 June 2024.”
and, in lieu thereof, order:
“(i) Judgment for the plaintiff in the sum of $348,179.96.
(ii) The defendant is to pay the plaintiff's costs as agreed or assessed.”
(5) Cross Summons seeking leave to cross appeal with respect to costs dismissed with costs.
Catchwords: CONTRACT – contract – summary dismissal – allegations of sexual harassment and workplace bullying – whether Appellant engaged in a “haka” or a pelvic thrust – where conduct relied upon to found summary dismissal held not be established
COSTS – Calderbank offer – where successful party did not “better” financial terms of offer by unsuccessful defendant made shortly prior to trial – relevance of issues going to public vindication in assessing reasonableness of rejection of offer – where argument going to this issue inadvertently overlooked – nature of judgment awarding of costs – even if matter dealt with summarily, key arguments need to be addressed
DAMAGES – contract of employment – where conduct relied upon to found summary dismissal held not to be established – whether employer would have terminated employment following expiry of fixed term of employment on three months’ notice under termination without cause provisions in circumstances where employee had elected to continue employment following expiry of fixed term – proper basis for assessment of damages in such circumstances – loss of a chance or balance of probabilities
EMPLOYMENT LAW – contract of employment – summary dismissal – allegations of sexual harassment and workplace bullying – whether Appellant engaged in a “haka” or a pelvic thrust – where conduct relied upon to found summary dismissal held not be established
Legislation Cited: Civil Procedure Act 2005 (NSW) s 100(4)
Evidence Act 1995 (NSW) s 140
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005 (NSW) rr 42.1, 42.34
Cases Cited: Alexander v Railway Executive [1951] 2 KB 882
Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30
Bartlett v Australia & New Zealand Banking Group Ltd (No 2) [2016] NSWCA 142
Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
Calderbank v Calderbank [1976] Fam 93
Chandrasekaran v Western Sydney Local Health District [2023] NSWCA 288
Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240
Chaplin v Hicks [1911] 2 KB 786
Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55
Crump v Equine Nutrition Systems Pty Ltd trading as Horsepower (No 2) [2007] NSWSC 25
Dovuro Pty Ltd v Wilkins (2000) 105 FCR 486; [2000] FCA 1902
Eldridge v Wagga Wagga City Council [2021] NSWSC 312
Fayad v B & G Properties Pty Ltd [2022] NSWCA 129
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Guthrie v News Ltd (2010) 27 VR 196; [2010] VSC 196
Hunter v Roberts (No 2) [2019] NSWCA 235
Johnson v Perez (1998) 166 CLR 351; [1998] HCA 64
Jones v Bradley (No 2) [2003] NSWCA 258
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Martinez as trustee for Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers v Griffiths as trustee for the Griffiths HWL Practice Trust [2019] NSWCA 310
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; (1951) HCA 79
Milich v The Council of the City of Canterbury (No. 3) [2012] NSWSC 1280
Minister for Immigration, Local Government & Ethnic Affairs v Dela Cruz (1992) 34 FCR 348
New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68
North v Marina [2003] NSWSC 64
Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268
Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18
Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357
Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 1) [1953] 1 WLR 1468
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
State of New South Wales v Quirk [2012] NSWCA 216
Sydney City Council v West (1965) 114 CLR 481; [1965] HCA 68
TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54
Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669
Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160
Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687
Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381
Wilson v Arwon Finance Pty Ltd [2020] WASCA 137
XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215
Texts Cited: JD Heydon, Heydon on Contract: The General Part (2019, Thomson Reuters)
Category: Principal judgment
Parties: Anthony Kevin Daynes (Appellant and Cross-Respondent)
I-MED Central Queensland Pty Ltd ACN 088 326 514 (Respondent and Cross-Appellant)
Representation: Counsel:
A R Moses SC with J Bennett (Appellant and Cross-Respondent)
R Foreman SC with L Saunders (Respondent and Cross-Appellant)
Solicitors:
Gillis Delaney Lawyers (Appellant and Cross-Respondent)
Herbert Smith Freehills Kramer (Respondent and Cross-Appellant)
File Number(s): 2024/346223
2024/422225
Publication restriction: n/a
[This headnote is not to be read as part of the judgment]
This appeal arose out of the decision of the Respondent/Cross Appellant, I-MED Central Queensland Pty Ltd (I-MED) summarily to dismiss the Appellant/Cross Respondent, Dr Anthony Kevin Daynes (Dr Daynes), from his position as senior radiologist at I-MED’s radiology clinic in Cairns (the Cairns clinic).
Dr Daynes is 73 years old and has worked as a radiologist in Cairns for 35 years. His summary dismissal followed allegations of sexual harassment by way of a pelvic thrust directed towards one co-worker, Ms Turner, at the 2021 I-MED staff Christmas party, and the bullying and victimisation of another, Ms Odgers. Both allegations were purportedly substantiated by the report of an independent consulting firm named Workdynamic Australia (Workdynamic).
Dr Daynes’ employment was terminated by an email on 11 May 2022 which alleged that Dr Daynes had breached the sexual harassment, bullying and victimisation policies in I-MED’s Workplace Policies Handbook (the Handbook). I-MED justified that termination on the basis that Dr Daynes had breached cll 7.3(a) and 7.3(c) of the “Radiologist & Nuclear Medicine Physician’s Terms and Conditions of Employment” (TCE) which justified his summary dismissal for “serious misconduct” and breach of a “material term” respectively. Dr Daynes treated this as a repudiatory breach of contract and himself purported to terminate the contract. He brought a claim for breach of contract and damages.
At trial, the primary judge was not satisfied that the alleged pelvic thrust occurred, nor that Dr Daynes had failed to comply with the victimisation and bullying policies in the Handbook. His Honour therefore found that the summary dismissal was unlawful and constituted a repudiatory breach of the employment contract, entitling Dr Daynes to terminate it and to an award of damages.
Dr Daynes sought damages in the sum of $4,308,164.38. However, the primary judge found that neither I-MED nor Dr Daynes would have extended the contract beyond the fixed term period, and thus Dr Daynes was entitled to recover only the last 11 weeks and 5 days of his fixed term contract, plus the three months’ notice period, which amounted to $348,179.96, including $45,410.73 in the way of interest.
The primary judge initially indicated that costs should follow the event, but later varied that following an application brought after the delivery of reasons which raised various offers of compromise, in particular I-MED’s Calderbank offer of 28 June 2024, which Dr Daynes rejected. The primary judge ordered that I-MED pay Dr Daynes’ costs up until and including 28 June 2024, and Dr Daynes pay I-MED’s costs from 29 June 2024.
Dr Daynes appealed from the primary judge’s damages assessment. I-MED cross-appealed from the finding that it was not entitled summarily to dismiss Dr Daynes. Both parties sought leave to appeal from the primary judge’s orders as to costs.
The Court (Bell CJ, Leeming JA and Free JA agreeing) held, dismissing the appeal and cross appeal but granting Dr Daynes’ application for leave to appeal against the costs decision, and upholding that appeal:
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34, applied.
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28, cited.
Minister for Immigration, Local Government & Ethnic Affairs v Dela Cruz (1992) 34 FCR 348; Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669; Eldridge v Wagga Wagga City Council [2021] NSWSC 312, cited.
Fayad v B & G Properties Pty Ltd [2022] NSWCA 129; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215; North v Marina [2003] NSWSC 64; Dovuro Pty Ltd v Wilkins (2000) 105 FCR 486; [2000] FCA 1902; Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240; Alexander v Railway Executive [1951] 2 KB 882; Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 1) [1953] 1 WLR 1468; Sydney City Council v West (1965) 114 CLR 481; [1965] HCA 68, referred to.
Martinez as trustee for Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers v Griffiths as trustee for the Griffiths HWL Practice Trust [2019] NSWCA 310; Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27; Chandrasekaran v Western Sydney Local Health District [2023] NSWCA 288; The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130, applied.
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28; Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30; Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55; Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18; Wilson v Arwon Finance Pty Ltd [2020] WASCA 137, cited.
Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adeliade Petroleum NL (1994) 179 CLR 332; [1994] HCA 4; Chaplin v Hicks [1911] 2 KB 786; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; (1951) HCA 79; Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687; Guthrie v News Ltd (2010) 27 VR 196; [2010] VSC 196; Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357, distinguished.
State of New South Wales v Quirk [2012] NSWCA 2; Milich v The Council of the City of Canterbury (No. 3) [2012] NSWSC 1280, cited.
Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160; Jones v Bradley (No 2) [2003] NSWCA 258; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Hunter v Roberts (No 2) [2019] NSWCA 235; Crump v Equine Nutrition Systems Pty Ltd trading as Horsepower (No 2) [2007] NSWSC 25; Bartlett v Australia & New Zealand Banking Group Ltd (No 2) [2016] NSWCA 142, cited.
Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268, distinguished.
BELL CJ: This matter involved an appeal and cross-appeal from a decision of Cavanagh J (the primary judge) in Daynes v I-MED Central Queensland Pty Ltd [2024] NSWSC 1064 (PJ or primary judgment). The appeal was heard concurrently with applications for leave to appeal and cross appeal from the primary judge’s decision in respect of costs: Daynes v I-Med Central Queensland Pty Ltd (No 2) [2024] NSWSC 1313 (CJ or c****osts j****udgment).
The proceedings arose out of the decision of the Respondent and Cross Appellant, I-MED Central Queensland Pty Ltd (I-MED), summarily to dismiss the Appellant and Cross Respondent, Dr Anthony Kevin Daynes (Dr Daynes), from his position as a senior radiologist at I-MED’s radiology clinic in Cairns (the Cairns Clinic).
The summary dismissal of Dr Daynes followed allegations of bullying and victimisation of one co-worker, Ms Odgers, and the alleged sexual harassment of another, Ms Turner. Both allegations were the subject of a report by an independent consulting firm named Workdynamic Australia (Workdynamic), commissioned by I-MED: PJ [4], [26]. The report was adverse to Dr Daynes and he was summarily dismissed on 11 May 2022, having been suspended during the pendency of an inquiry leading to the report.
The primary judge held that I-MED was not entitled summarily to dismiss Dr Daynes and that his dismissal entailed a repudiatory breach of his contract of employment which justified Dr Daynes in terminating that contract, and entitled him to an award of damages. Dr Daynes sought damages in the sum of $4,308,164.38 but was held to be only entitled to recover the last 11 weeks and 5 days of his fixed term employment contract in addition to an amount representing the three months’ notice period under his contract of employment: PJ [263]. That amounted to $302,769.23, plus interest of $45,410.73 (PJ [267]), totalling $348,179.96.
The following two key findings of the primary judge were subject to challenge by I-MED and Dr Daynes respectively:
that I-MED’s summary dismissal of Dr Daynes was unlawful (PJ [6], [221]);
that Dr Daynes’ damages were $348,179.96 (PJ [268]).
In holding that the summary dismissal was unlawful, the primary judge was not satisfied that Dr Daynes performed a pelvic thrust towards Ms Turner at a staff Christmas party on 11 December 2021 and thereby had engaged in conduct of a sexual nature. His Honour was also not satisfied that Dr Daynes had failed to comply, in breach of contract, with certain policies in I-MED’s Workplace Policies Handbook () relating to victimisation and bullying.
It is convenient to summarise the background facts in relation to Dr Daynes’ professional history and the Cairns clinic. The two overlap.
Dr Daynes is 73 years old and worked as a radiologist in Cairns for 35 years between 1987, when he obtained his specialist registration, and May 2022, when he was summarily dismissed from his position as senior radiologist at I-MED where he had been employed since 2019: PJ [7]-[8].
Dr Daynes originally worked in the only radiology practice in Cairns, where he quickly became partner and then stayed on as an employee for three years after he and his fellow partners sold the business: PJ [8].
In 2010, Dr Daynes established a radiology practice in Cairns with his wife, Ms Gordon-Daynes: PJ [9]. Between 2010-2019, that business developed into a very successful practice, employing approximately 25 to 30 people, including two other radiologists: PJ [9], [14]. Ms Gordon-Daynes worked as the practice manager, doing “everything other than the actual radiology work” at the clinic: PJ [13], [16].
Once the two other radiologists joined the practice, Dr Daynes focused on the “women’s imaging side of the practice” which included “obstetrics, bone density, and breast imaging”: PJ [15]. Dr Daynes gave evidence that his practice was the “leading site in Cairns for breast investigation work”: PJ [16]. The primary judge accepted Dr Daynes was an experienced radiologist with an excellent reputation: PJ [17], [7].
In 2019, Dr Daynes and Ms Gordon-Daynes sold the business to I-MED: PJ [9]. There was some dispute at trial as to how much they received from the sale, but the Sale and Purchase Deed (the D****eed) records the completion payment as $15,000,087.00, “as adjusted in accordance with clause 7” of the Deed, which dealt with advance payments and apportionment of outgoings: PJ [10]. In cross examination Dr Daynes suggested “the final number was $21 million”. Suffice to say, the business was sold for a very substantial sum: PJ [11].
A condition precedent of the Deed was Dr Daynes entering into an employment agreement with I-MED: PJ [12]. The precise terms of that employment are outlined below: see [19]-[28].
The completion date in the Deed was 1 August 2019, and Dr Daynes commenced his employment as the senior radiologist with I-MED on 2 August 2019: PJ [21]. He remained in that position until 11 May 2022, when his employment was terminated without notice by way of an email from Ms Nicholson, the general manager of I-MED for Queensland and the Northern Territory (the termination letter): PJ [28]. The key terms of that letter are reproduced at [33] below.
Some nine days prior to his termination, Dr Daynes sent the following email to Ms Nicholson:
“Dear I-MED Central Queensland Pty Ltd / Bronwyn
Pursuant to the Schedule of the Commercial Terms of my contract of employment with I-MED Central Queensland Pty Ltd, I hereby provide notice of my intention to continue employment after the Initial Fixed Term.
Kindly acknowledge receipt of this correspondence.
Sincerely,
Kevin Daynes”
Annexed to the Deed was a document dated 31 May 2019 and headed “Schedule of Commercial Terms – employee” (Schedule of Commercial Terms) and another document dated 1 May 2016 headed “Radiologist & Nuclear Medicine Physician’s Terms and Conditions of Employment” (TCE): PJ [82].
Under the heading “Term”, the Schedule of Commercial Terms provided that the employment would run for an “Initial Fixed Term of 3 years” (the Initial Fixed Term), “then conversion to an Indefinite Term with a Notice Period”.
Under the heading “Expiry Date”, the Schedule of Commercial Terms provided that:
“The Initial Fixed Term of 3 years will have an Expiry Date of 3 years from the Start Date. After 2 years and 9 months the Employee should provide notice to the Employer of their intention to continue employment after the Initial Fixed Term.”
“Start Date” was defined as “the day after the Completion Date” (as that term was defined in the Deed). As already noted, the Completion Date was 1 August 2019.
Under the heading “Notice Period”, the Schedule of Commercial Terms provided:
“After 3 years from the Start Date your employment will convert to an Indefinite Term and a Notice Period of 3 months will apply to the Employee from that date onwards.”
“Indefinite Term means that the term of your employment commences on the Start Date and continues for an indefinite period, with the parties to provide the Notice Period for termination without cause as per clause 7.4 (unless the employment is terminated earlier in accordance with clause 7.2 or 7.3).”
“You must at all times perform your work and conduct yourself:
(a) promptly, faithfully and diligently;
(b) in a professional and commercial manner;
(c) with care, diligence and skill having regard to your status as a professionally competent Radiologist or Nuclear Medicine Physician;
(d) in accordance with reasonable directions given by us, the Business Unit Management Committee and the Clinical Management Committee;
(e) in accordance with our values and ethics;
(f) in accordance with minimum performance requirements as agreed between I-MED, the Business Unit Management Committee and the Clinical Management Committee from time to time; and
(g) in accordance with the Medical Board, RANZCR and ANZAPNM approved quality standards and appropriate managerial standards, including the standards set out from time to time in Clinical Protocols and Practice Guidelines.”
“7.3 Immediate termination by us
We may terminate this agreement immediately and without providing notice to you if:
(a) Serious misconduct: you:
(1) commit any dishonest, fraudulent, reckless or criminal act or omission in connection with the Business, as determined by I-MED and/or the I-MED Network Pty Limited Board or the Business Unit Management Committee; or
(2) commit any other act or omission, that we consider materially and detrimentally affects us or the I-MED Network including deliberate or serious misconduct, serious professional misconduct or serious breach of duty;
(b) Repudiation: you repudiate these terms and conditions, cease or suspend performing your obligations under them, or inform or indicate to us or I-MED that you intend to cease or suspend performing your obligations;
(c) Breach: you breach a material term of these terms and conditions;
(d) Repeated breaches: you repeatedly or persistently breach these terms and conditions;
(e) Failure to follow lawful and reasonable directions: you refuse to comply with any lawful and reasonable direction given to you in the course of your employment;
(f) Bankruptcy: you become bankrupt, commit an act of bankruptcy, enter into any arrangement or assignment for the benefit of your creditors, or admit in writing to being insolvent or unable to pay your debts when they fall due;
(g) Deregistration: you cease to be eligible to practise as a Radiologist or Nuclear Medicine Physician; or
(h) Engage in any conduct for which the Employer may terminate your employment at law.”
As will become clear, I-MED placed significant weight on the Handbook, which provided definitions and examples of workplace bullying, victimisation and sexual harassment.
Clause 12 of the TCE provided:
“You must at all times comply with the policies and procedures outlined in the I-MED Workplace Policies Handbook as amended from time to time. A copy of the I-MED Workplace Policies Handbook will be issued to you together with these terms and conditions. The I-MED Workplace Policies Handbook does not form a part of this agreement.”
The Schedule of Commercial Terms similarly provided that:
“The employee also acknowledges and agrees that the Employee has been provided with a copy of the I-MED Workplace Policies Handbook, that the Employee has read and understands each of the policies contained in the Handbook and that the Employee will comply with the policies in the Handbook, as amended from time to time. The I-MED Workplace Policies Handbook does not form part of this employment agreement”.
**“**Sexual harassment means any unwelcome conduct of a sexual nature that a reasonable person would find offensive, humiliating or intimidating having regard to all of the circumstances.
A person sexually harasses another person if they:
- make an unwelcome sexual advance;
- make an unwelcome request for sexual favours; or
- engage in other unwelcome conduct of a sexual nature in relation to the person harassed,
in circumstances in which a reasonable person, in the circumstances, would have anticipated that the person harassed would be offended, humiliated or intimidated.
Sexual harassment:
- can involve any physical, visual, verbal or non-verbal conduct of a sexual nature;
- can be experienced by both women and men;
- can be experienced where the person harassed is the same sex as the alleged harasser;
- may include conduct which occurs in the workplace or in connection with work, for example, at a work Christmas party or at a work function outside of work hours; and
- can involve a series of incidents or it can be a one-off occurrence. While single or isolated occurrences of some behaviour may appear relatively minor, when continued over an extended period they can become very wearing and stressful.
Conduct can amount to sexual harassment even if the offender did not intend to sexually harass anyone. It is the viewpoint of the person harassed that is relevant – not the intention of the offender. Further, sexual harassment does not have to be directed at a particular individual to be unlawful. Your conduct may breach this policy even if no person raises a complaint. For example, telling a joke with sexual content at work may constitute sexual harassment under this policy even if there is no complaint made against you.”
Other examples of sexual harassment were then given, all of which were qualified by the phrase “[d]epending on the circumstances”. One of these was “[d]eliberate and unnecessary physical contact, such as patting, pinching, fondling or deliberately brushing against another body, attempts at kissing.”
Workplace bullying was defined in the Handbook as follows:
**“**Workplace bullying means repeated, unreasonable behaviour directed towards a worker or a group of workers, that creates a risk to their health and safety. Workplace bullying includes behaviours that intimidate, offend, degrade or humiliate others.
Bullying can be:
- intentional - where conduct is intended to humiliate, offend, intimidate or distress, (whether or not the behaviour did have that effect); or
- unintentional - where conduct is not intended to humiliate, offend, intimidate or distress another person but can reasonably be expected to have that effect.
A broad range of behaviour can be viewed as bullying behaviour and includes both physical and psychological behaviours. Bullying may involve humiliation, sabotage, spreading gossip, overwork, unnecessary pressure, delaying tactics and physical or verbal assault.”
The termination letter was sent to Dr Daynes by Ms Nicholson. The letter purported to justify the termination of Dr Daynes’ employment by reference to alleged breaches of cl 7.3 of the TCE: PJ [54].
The termination letter relevantly provided as follows: PJ [56]
“The investigators also found that you breached several I-MED policies, specifically:
• you engaged in bullying conduct towards Ms Odgers in breach of I-MED’s Workplace Behaviours and Equal Opportunity Policy;
• you engaged in victimisation towards Ms Odgers in breach of I-MED’s Workplace Behaviours and Equal Opportunity Policy;
• you engaged in sexual harassment towards Ms Turner in breach of *I-*MED’s Workplace Behaviours and Equal Opportunity Policy; and
• you breached I-MED’s Code of Conduct and the I-MED Radiology Network Values.
I have considered the findings of the investigation. I consider that the process conducted was fair and have accepted the findings in their entirety.”
Termination of employment
I have concluded that your conduct above, and in particular the sexual harassment, amounted to serious misconduct in direct breach of your duties and responsibilities as an I-MED employee.”
Two kinds of alleged misconduct were thus relied on: PJ [58]
The sexual harassment of Ms Turner at the 2021 Christmas party; and
The bullying and victimisation of Ms Odgers.
I-MED particularised that alleged misconduct as occurring in the period between September 2020 and the termination of Dr Daynes’ employment on 11 May 2022 (the particularised period): PJ [18].
Both allegations were purportedly substantiated by an independent report requested by I-MED and prepared by “the investigators” at Workdynamic, which was dated 1 April 2022: PJ [62]. Workdynamic understood its role in the investigation as: PJ [62]
“to make findings of fact in relation to:
(1) complaints made by Ms Odgers and Ms Turner about the plaintiff; and
(2) whether any of the substantiated allegations constituted misconduct or breach of any relevant I-MED policies or codes”.
I-MED relied on a single incident to substantiate the allegation of sexual harassment, which was said to have occurred at the I-MED office Christmas party on 11 December 2021: PJ [105]. The party was fancy dress, the theme was to come as something relating to your first initial or name, and so Ms (Holly) Turner wore “a large foam costume over her clothes in the shape of a holly leaf”: PJ [106].
The function was held on the veranda of the Edge Hills Bowls Club and there were roughly 20 to 30 people in attendance: PJ [107]. Dr Daynes gave evidence that he arrived at the event between 5:05 pm and 5:10 pm and stayed “for about an hour”, during which period he consumed only one glass of wine: PJ [108].
At some point in the evening, Ms Turner was standing in a circle of a group of people which included Dr Daynes: PJ [108].
On Dr Daynes’ recollection of the evening, provided by way of an affidavit filed 29 September 2023, the following conversation took place between him and Ms Turner: PJ [109]
“Dr Daynes: Did you come as a Christmas tree?
Ms Turner: I’m Holly. Obviously, it’s holly.
Dr Daynes: So are these prickly holly things?
Ms Turner: What are you dressed as?
Dr Daynes: Well, I tried to work out what to come as. I could either come as an angel or an arsehole.”
“Approximately 15 minutes later, she returned to the same position to my left, wearing regular clothes. Someone – I cannot remember if it was me or another member of the group – said words to the effect, ‘You’ve removed your costume.’ Ms Turner re[p]lied with words to the effect [of]:
Yeah. Well it’s pretty hot*. I made the costume myself. I’m* pretty proud of it. It’s made of plastic. I took it off because it was hot.”
(Emphasis in original.)
“During the time that I was at the Christmas party, I stayed standing in the same spot, and did not move from that spot. The only time I moved was when Mr Mohan, made a comment about Kiwis and hakas. I responded by moving a little on the spot and raising my hands to approximately face level, as a humorous demonstration of a haka, to which the group responded with a little laughter. At that time, I was facing the circle of people I was standing with. I cannot recall if Ms Turner was standing nearby during that part of the conversation, but to the best of my recollection it was before Ms Turner arrived.”
“Q. Instead, at some point, you did a humorous imitation of a Haka.
A. Yes.
Q. At this point, you were stone-cold sober?
A. Absolutely, yes.
Q. You describe it in your affidavit as raising your arms up and down.
A. Yes.
Q. And moving on the spot a little.
A. Yes.
Q. A Haka involves a sharp explosive movement. You’d accept that?
A. Yes.
Q. Involves moving your knees and hips.
A. I - I can’t recall if I moved my knees and hips, but I may have, yes.
…
Q. So a movement of your hips and knees, that could be perceived as thrusting movement by someone watching it.
A. Yes, yes.
Q. So is it possible that what you’re saying is that Ms Turner has simply misunderstood the gesture?
A. Ms Turner was not, to the best of my knowledge, Ms Turner was not in the group when that happened.
Q. To the best of your knowledge, you’re not entirely sure.
A. I’m over 99% certain, yes.
Q. You can see, Dr Daynes, that a pelvic thrust could be considered by another person to be sexual.
A. No, sir, this - this was a haka-type movement.”
Dr Daynes denied ever making a pelvic thrust towards Ms Turner: PJ [114].
In support of Dr Daynes’ recollection was the evidence of Ms Couch, a medical receptionist at the Cairns clinic, who was present at the Christmas Party. Ms Couch had formerly worked for Dr Daynes prior to I-MED purchasing the Cairns clinic: PJ [125]. Ms Couch did not observe any interactions between Dr Daynes and Ms Turner that evening, and told the Court that it would have surprised her to hear that Dr Daynes had performed a pelvic thrust “as that is inconsistent with [her] observation of his character and behaviour”: PJ [126].
Ms Della Bella, a medical receptionist and later the practice manager at the Cairns clinic, gave evidence that she did not observe any physical contact between Ms Turner and Dr Daynes: PJ [128]. Neither Ms Couch nor Ms Della Bella were cross-examined on their evidence dealing with the Christmas Party (and Ms Della Bella was not cross-examined at all): PJ [127].
Ms Turner did not give evidence: PJ [115]. Ms Nicholson could only give evidence of Ms Turner’s complaint: PJ [121]. I-MED thus relied on the evidence of Ms Bailey, a supervisor employed by I-MED, who claimed to have observed Dr Daynes make a pelvic thrust towards Ms Turner: PJ [121].
In cross examination, Ms Bailey provided the following recollection of the pelvic thrust:
“MR MOSES: Would you like then to just explain what you say you observed?
MS BAILEY: We were chatting about costumes because it was a dress-up party. I don’t know if Holly and Dr Daynes actually discussed that in private, but it was just a general conversation. And Dr Daynes then turned towards Holly’s side, and pelvic thrusted the side of her costume.”
“HIS HONOUR: What part of his body came into contact with her costume?
MS BAILEY: I guess leg, pelvis.
MR MOSES: When you say you guess, ma’am--
MS BAILEY: I couldn’t confirm that it contacted the costume. It was quite large. Just foam.
MR MOSES: I apologise. I interrupted you.
MS BAILEY: That’s okay.
MR MOSES: You just told the Court that he did come into contact with the costume. Did he or did he not?
MS BAILEY: I can’t confirm that it did come into contact.”
Ms Bailey went on to say that she did not recall Dr Daynes having a conversation about “kiwis” or a haka, and did not agree that she could have confused a haka movement for a pelvic thrust: PJ [124].
Ms Nicholson gave evidence that, in the week commencing 13 December 2021, she was informed by Ms Murphy, a member of the Human Resources team, that Dr Daynes “had acted inappropriately towards Ms Turner at a Christmas party function by thrusting into her and that this occurred in front of other colleagues”: PJ [117].
Other evidence was referred to in the Workdynamic report regarding Dr Daynes’ comments or behaviour which was “of a sexualised nature” at times other than the 2021 Christmas party, but I-MED did not rely on that behaviour “as providing any part of the foundation for its termination”: PJ [120].
I-MED alleged that Dr Daynes engaged in the bullying and victimisation of Ms Odgers in the particularised period: PJ [139]. In support of these allegations, I-MED called evidence from:
Ms Odgers, a radiographer at I-MED; (PJ [140]-[163])
Ms Nicholson (PJ [164]);
Ms Wilson, a senior radiographer at I-MED (PJ [165]-[166]);
Mr Kamau, I-MED’s Operations Manager (PJ [167]-[169]); and
Mr Paul Wellby, Chief Radiographer at I-MED (PJ [170]-[174]).
Ms Odgers moved to Cairns in September 2019, and worked at the Cairns clinic from October that year as a radiographer specialising in mammography: PJ [140]. Ms Odgers worked part time, originally four days a week, then, after COVID-19, two days a week, and finally she settled on three days a week: PJ [140].
Ms Odgers gave evidence that she reported directly to Mr Wellby but regularly interacted with Dr Daynes as the senior radiologist: PJ [141]. She recalled that she initially “got along really well” with Dr Daynes until their relationship changed around late 2019.
Ms Odgers made three complaints about Dr Daynes’ behaviour, only the latter two of which fell within the particularised period: PJ [152].
The first complaint concerned Dr Daynes’ behaviour in late 2019. At that time, Ms Odgers began to perceive Dr Daynes to be treating her rudely particularly by blaming her for technology problems: PJ [141]-[142]. That behaviour coincided with a change in the software used by the clinic to view patients’ images: PJ [142]. Ms Odgers raised this complaint with the Chief Radiographer, Mr Wellby, and Mr Wellby raised the issue with Dr Daynes: PJ [143]. She also sent an email to Mr Wellby outlining these concerns in late January 2020: PJ [144].
The second complaint emerged in August 2020 (PJ 154) by way of a Microsoft Teams message from Mr Wellby to the Queensland Regional Manager, Mr Keri Kamau, who then conveyed the complaint by email to Ms Nicholson: PJ [154]. That complaint included allegations of Dr Daynes ignoring Ms Odgers, swearing at her, and throwing paperwork around: PJ [154]. The primary judge pointed out not that all of that alleged behaviour was the subject of evidence at trial (PJ [155]), although Ms Odgers did give evidence that around this period Dr Daynes: PJ [146]-[147]
spoke “less and less to her”, ignoring and avoiding her;
communicated with her via sticky “post-it” notes containing messages she considered rude and abrupt; and
spoke to her “in a short and sharp tone” and would “scowl or look at her with disdain”.
Ms Odgers did not observe Dr Daynes treat other staff in that way, and felt she was being intentionally humiliated: PJ [147].
“On 6 December 2021, she was leaving the staffroom when she heard the plaintiff coming towards her. She heard him say in a raised and angry tone “[t]he request said follow up. If it’s a follow-up, it’s old images. But oh no you can't get the old images for me”. She started to ask the plaintiff for a name of the patient. The plaintiff responded, “[d]on't you dare argue with me!”
Following that encounter, when Ms Odgers went to find the paperwork, she found a sticky note in heavy capital letters asking for old images: PJ [160]. Following that incident, Ms Odgers made a formal complaint to I-MED and applied for workers compensation: PJ [149]. The application was accepted.
Dr Daynes denied bullying Ms Odgers at any time: PJ [175]. He also denied not speaking to or failing to acknowledge Ms Odgers (“at least generally”), or swearing or yelling at her: PJ [184]. He also denied throwing paperwork around and “saying that he didn’t want to talk to her”: PJ [184].
Dr Daynes did, however, give evidence of having concerns in relation to Ms Odgers’ performance, including that “he did not consider [Ms Odgers] to have the experience necessary to be hired for the job”: PJ [177]. He told the Court that it was not his practice to engage in small talk in the tearoom or hallways, and that communicating with post-it notes was “a general practice of staff” which he regularly engaged in with all radiographers, between 20 to 30 times a day: PJ [180], [184]. As the primary judge concluded: PJ [186]
“As I understand his evidence, except for issues which he related to Ms Odger[s’] performance or lack of performance, he does not consider that he treated her differently from other staff.”
Dr Daynes also gave evidence that he was under significant stress whilst working at I-MED, owing to an audit from Medicare of over 4000 of I-MED’s billings using Dr Daynes’ provider number (the Medicare audit), and concerns about the spread of COVID-19, and the way I-MED was operating the practice, particularly in relation to the distribution of patients’ radiography images: PJ [175]-[178].
Dr Daynes’ response to the incident of 6 December 2021 was summarised by the primary judge as follows: PJ [183]
“He acknowledged that a conversation took place when he asked Ms Odgers to send through old images for a patient. When Ms Odgers asked the patient’s name, he said “it’s at your workstation”. When she started to say something in response he said “don't argue with me. Just send the films through”. He acknowledged that he became aware that the patient was not Ms Odgers’ patient and there were no old films. He agreed that Mr Wellby approached him about the situation and he said he would go and apologise, but recalled that Mr Wellby said that was not necessary. He said he did not apologise to Ms Odgers on the basis of that comment from Mr Wellby. I have difficulty accepting that particular aspect of the plaintiff's evidence.”
Dr Daynes’ position at trial was that, by terminating his employment without notice, I-MED either breached the employment contract, or evinced an intention not to be bound by it: PJ [32]. Either, it was argued, constituted a repudiation of the employment contract, entitling Dr Daynes to terminate it and seek damages for breach of contract: PJ [32].
Dr Daynes also argued that I-MED breached an implied term of the employment contract to act in good faith by the way in which it formed the opinion that Dr Daynes had engaged in serious misconduct: PJ [33], [225]-[230]. That alternative case was not determinatively considered by the primary judge: PJ [222]-[234].
I-MED relied on the allegations of sexual harassment and bullying and victimisation, the evidence of which has been summarised at [38]-[68] above, as entitling it to terminate Dr Daynes’ employment: PJ [100]. The primary judge thus had to consider two questions: PJ [64]
what conduct Dr Daynes’ engaged in; and
whether that conduct entitled I-MED to terminate his employment without notice.
The primary judge concluded that the alleged sexual harassment of Ms Turner at the 2021 Christmas Party was not established, at least to the degree of satisfaction required for such a serious allegation, citing s 140 Evidence Act 1995 (NSW) and Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (Briginshaw): PJ [131]-138].
That finding was reached in light of the conflicting evidence of the witnesses as to the occurrence of the alleged pelvic thrust (PJ [133]), and the lack of explanation as to why Dr Daynes would perform such an act: PJ [134]. On that latter point, the primary judge reasoned: PJ [135]
“There is no suggestion that the plaintiff had consumed excess alcohol. There is no suggestion that the conversation between anyone in the group was of a sexual nature. There is no suggestion of the plaintiff making any sexualised comment to Ms Turner. Ms Turner did not generally work with the plaintiff. There is no evidence of any relationship between them. Except for the suggestions that the plaintiff may have been “slimy” or behaved inappropriately towards women at other times (which are only referred to in the investigators’ report and are somewhat vague and non-specific), there is really no explanation as to why the plaintiff would have done what he is alleged to have done.”
“[196] In this regard, I accept that the following.
(1) The plaintiff experienced performance related issues with Ms Odgers within weeks of her commencing work. Those issues may not have been Ms Odger[s’] fault as she came into the job with a significant gap between her last experience in undertaking breast intervention work and there were problems with the defendant’s systems. However, I accept that the plaintiff was at least on occasions directing his frustrations at Ms Odgers.
(2) Further, I accept that the primary origin of the conflict between Ms Odgers and the plaintiff, such as it was, was performance related. The plaintiff became frustrated with the work, the defendant’s computer system and the technology difficulties which were arising which he believed were hampering him in his work.
(3) I accept that over time the plaintiff perceived that some of these difficulties might also have been caused by Ms Odger[s’] lack of experience or shortcomings, albeit it is also the position that specific instances have been referred to in which no blame should have been attributed to Ms Odgers. I am not attributing any blame or criticism to Ms Odgers but merely identifying the context in which there appears to have been a deterioration in the relationship.
(4) I accept that the plaintiff took to communicating with Ms Odgers by means of post-it notes, but also accept that this was a practice which he used for some other staff, albeit he might not have always done so.
(5) I accept that the plaintiff capitalised some of the notes so as to import some urgency or dissatisfaction.
(6) I accept the plaintiff decided it was best that he not be social with Ms Odgers. He wasn't interested in talking with her in the tearoom and decided not to engage if they happened to pass in the corridors.
(7) I accept that on one occasion, in December 2021, he raised his voice with her again complaining of an issue with the imaging or reporting.
(8) I accept that Ms Odgers felt stressed and anxious and even belittled by the plaintiff's conduct towards her. She ended up stopping work and receiving workers compensation.
(9) I accept that there were times when the plaintiff was rude to Ms Odgers. He seemed to Ms Odgers to be going out of his way not to talk to her (which is so). He kept her waiting by refusing to acknowledge her presence whilst he was working in the imaging room.
(10) I accept that he made adverse comments about her performance, both directly to her and to others, albeit he was the senior skilled employee and was responsible for ensuring that the work was done properly. His view of her performance may have been mistaken at times but it was a view he had. There is no evidence that he imagined some false narrative for some devious purpose. He may have been wrong, but his complaints were based on his perception of her performance.
(11) He presented to Ms Odgers as being frustrated and exasperated by his difficulties with her.
(12) His method of communication with her was abrupt and might have seemed to her to be rude.
[197] Having said that, I do not accept the following.
(1) He swore at Ms Odgers.
(2) He raised his voice with her on a regular basis or even on more than one occasion (he did so only once).
(3) He threw any paperwork at her.
(4) He did not speak to her at all from August 2020 to December 2021 (as there is evidence from other persons of observing the plaintiff engaging with Ms Odgers in a professional way during that period).
(5) He engaged in any conduct which tended to isolate her from other staff or in any way prevented her from working with other staff (other than the conduct that I have referred) or prevented her from doing her job.
(6) He sought to have her removed or her employment terminated.
(7) He spoke about her behind her back in respect of any personal issues or in respect of matters other than her work performance. He did however raise issues with her performance.”
“The plaintiff was in a position of authority to Ms Odgers. He ought to have been conscious as to how his behaviour might impact upon her. It can be said that there should be no place for rudeness and discourtesy at the workplace but the workplace remains a melting pot of persons with different personalities, different levels of experience, different levels of competence and is often mixed with high levels of stress and anxiety. Again, none of that justifies rudeness or discourtesy, but there is a line to be drawn between what might be described as bullying an employee at the workplace and being rude, discourteous and uncooperative”
his Honour concluded that Dr Daynes’ conduct did not amount to workplace bullying within the definition of that concept in the Handbook: at PJ [209]. He further elaborated on his findings set out at [74] above as follows:
“[210] The issues between the plaintiff and Ms Odgers appear to have arisen as a result of a loss of confidence on the part of the plaintiff in relation to Ms Odgers, perhaps more arising out of some deficiencies in the defendant’s systems rather than Ms Odgers’ own competence levels, but nevertheless were still perceived by the plaintiff to be arising as a result of lack of training or experience in the particular task.
[211] As established by other evidence, there was a practice of using post-it notes to communicate, particularly instructions about imaging. The fact that the plaintiff used capital letters might have been a sign of his frustration but I do not accept that Ms Odgers was ever being singled out or in some way humiliated because the plaintiff sent her post-it notes using capital letters.
[212] The plaintiff’s decision not to go into the tearoom with Ms Odgers or speak to her as they passed in the hallway might be described as rude and was perceived by Ms Odgers as being so but I do not consider that such conduct could fall within the definition of bullying a fellow employee. Not speaking to a more junior employee working side by side on a continuous basis may be different but that is not case. Again, each case is fact specific. There is evidence from one witness that the plaintiff did engage with Ms Odgers in a professional manner, such that this is not a case of a senior employee not speaking to a junior person over a continuous and lengthy period.
[213] There is only one complaint of the plaintiff raising his voice at Ms Odgers and there is no evidence that he swore at her or abused her in anyway.
[214] There is no evidence of the plaintiff holding Ms Odgers up to ridicule amongst a group of her peers or her being taunted or teased in anyway.
[215] The evidence does not rise to the level of constant belittling. There are some isolated examples of the plaintiff making adverse comments about Ms Odgers’ ability to do the work to which she objects and says were unfair but, in my opinion, the evidence does not rise to the level of constant belittling of Ms Odgers by the plaintiff. On the evidence, the language used by the plaintiff is not indicative of him directing constant vitriol at Ms Odgers.
[216] It is clear that the plaintiff wrongly blamed her for workplace performance and for errors on occasions but the examples given are again limited. The termination letter refers to the plaintiff repeatedly belittling the plaintiff in relation to the work she has performed, but the actual evidence does not support the suggestion of repeated belittling or berating.”
In light of his findings, the primary judge was not satisfied that Dr Daynes’ conduct entitled I-MED summarily to dismiss him: PJ [221].
His Honour emphasised that employment contracts should not be construed such that any trivial breach of policy gives rise to a right to dismiss employees without notice: PJ [199], [202], [219]. His Honour held that the requirement for a “material” breach in cl 7.3(c) of the TCE was a reference to “something so significant such that the conduct might constitute serious misconduct as referred to in 7.3(a)”: PJ [203].
As to whether the requirement for “serious misconduct” in cl 7.3(a) of the TCE was made out, the primary judge acknowledged that cl 7.3(a)(2) imported a subjective element, but found that the threshold was not met due to a lack of “deliberate or serious misconduct or serious professional misconduct or serious breach of duty”: PJ [217]. Nor were breaches of cll 7.3(b) or (e) made out: PJ [218]-[220].
In any event, and even if a mere breach of policy in the Handbook were sufficient, the primary judge was not satisfied that Dr Daynes engaged in sexual harassment at the Christmas party towards Ms Turner and found that such of Dr Daynes’ conduct towards Ms Odgers as he held was established on the evidence fell below the standard of “workplace bullying” as defined in the Handbook: PJ [204]-[216]. In reaching that conclusion, the primary judge accepted that Dr Daynes had (wrongly) blamed Ms Odgers for aspects of her workplace performance, but held that he had not repeatedly belittled or berated her: PJ [216].
The task of the primary judge was to identify “the value of the loss of entitlements” which Dr Daynes would have achieved but for the wrongful termination (citing Johnson v Perez (1998) 166 CLR 351 at 355; [1998] HCA 64): PJ [235]-[239]. His Honour proceeded on the basis that he was required to engage in an assessment, as a matter of probability, of what would have occurred but for the wrongful summary dismissal, applying this Court’s decision in Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 at [122] per Macfarlan JA (Willis).
Both parties agreed damages would be assessed by reference to Dr Daynes’ base salary, regional salary, and clinic director allowance: PJ [243], [245]. The difference between the parties, and the critical question at trial, was for how long Dr Daynes would have continued to be employed at I-MED but for the wrongful termination of his employment contract: PJ [250].
Dr Daynes contended that, but for the wrongful termination of his employment, he would have worked at I-MED for 6 years and 8 months from the date of his termination, until he was 77 years of age: PJ [243]. Damages for that period calculated by reference to his base salary, regional salary, and clinic director allowance would have amounted to $4,308,164.38: PJ [243].
I-MED, on the other hand, submitted that Dr Daynes’ damages should be calculated on the basis of an additional 11 weeks and five days from the date of his termination until the expiration of the initial fixed term of his contract, plus three months of notice to which he would have been entitled if terminated without cause on the expiry of the fixed term of the contract: PJ [244]. This was because it was said that neither Dr Daynes nor I-MED would have extended his employment following the three-year fixed period and that he would have ceased to work following the giving of a three month notice period at the end of the fixed term, it being recalled that I-MED could terminate the employment agreement without cause upon the giving of three months’ notice following expiry of the fixed term.
His Honour did not resolve the damages issue by resort to any presumption or common law rule that I-MED would have adopted the most advantageous approach available to it regarding Dr Daynes’ continued employment (meaning that it would have terminated his employment at the earliest stage permitted by law) and noted the disapproval by Macfarlan JA (with whom Ward JA agreed) in Willis of what had been said by this Court in New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 (Sarfaty). Rather, his Honour proceeded to consider the evidence bearing on the probabilities of what would have happened. This entailed consideration both as to:
(a) what Dr Daynes would have done i.e. would he have continued to work for an indefinite period, as the contract contemplated, or at least up to the age of 77, as he contended, or would in fact he have chosen to retire at or shortly after the expiry of the fixed term of the contract, and (b) what I-MED would have done, and, in particular, whether it would have brought the employment relationship to an end by giving 3 months’ notice under the contract immediately following the expiry of the fixed term. As noted above, this was the basis on which it contended for an award of damages representing the balance of the fixed term and the notice period.
“[253] Firstly, I have a considerable doubt that the plaintiff would have wanted to remain in employment with the defendant in any event despite his suggestion to the contrary in the witness box.
[254] Secondly, I do not accept that the defendant would have continued to employ the plaintiff, even if the plaintiff wanted to continue his employment after his fixed term.”
“(1) The fixed term was coming to an end in less than 3 months. If the defendant had not summarily dismissed the plaintiff, his contract would have come to an end in any event subject to the giving of the extra 3 months’ notice.
(2) The defendant's concerns about the plaintiff’s behaviour at the workplace would have remained. The defendant had received complaints about the plaintiff’s conduct of the type which I have accepted and about which it was concerned. It seems somewhat wishful thinking on the part of the plaintiff that, if the defendant had not summarily dismissed him, it would have continued to employ him beyond the fixed term, even despite its concerns about his conduct.
(3) The defendant had hired a replacement for the plaintiff and the plaintiff had been involved in training that replacement.
(4) On the plaintiff’s own case, the quantity or level of imaging being undertaken was not as high as he wanted or might have been expected. He blames the defendant for that, thus resulting in less of an earnout payment than he had hoped for. Whatever the cause, the fact is that the level of imaging was not as high as might have been hoped for by both the plaintiff and the defendant. This tends to detract from the idea that the defendant might have been in a position to continue to employ both the plaintiff and his replacement.
(5) The plaintiff was in dispute with the defendant about its lack of support and problems with its systems. He admits to being frustrated. He was plainly disgruntled. The level of dispute was such that the plaintiff is taking action in a different court to recover damages from the defendant in respect of his earnout payments.
(6) The defendant and the plaintiff had been required to respond to an audit of the billings using the plaintiff’s provider number, albeit that audit was discontinued following correspondence from the plaintiff. As part of the process of bringing the audit to an end his solicitors wrote to the Department of Health informing it that he intended to retire:
‘Dr Daynes turns 70 years of age in January 2022 and is preparing to wind down his practice to retirement in July 2022. The administrative processing required by the remaining portion of the audit would effectively remove Dr Daynes from clinical practice.’
(7) Again, he seeks to overcome the statement in that letter by suggesting that he needed the money. I do not accept that.
(8) The defendant points to the evidence of Ms Nicholson, the relevant manager, to the effect that it would not have continued to employ the plaintiff in any event, albeit the plaintiff says that that statement was not admitted to prove that fact. I accept that. However, there is ample other evidence to support the defendant's case that it would not have continued to employ the plaintiff.
(9) The idea that he wanted to continue to work because he needed the money seems absurd. No other evidence was adduced such as financial records, details of debts or outstanding loans or any other evidence suggesting that the plaintiff was in financial difficulty. No evidence was adduced which would suggest that he made use of that very significant sum he received for the sale of business for some other purpose. Ms Gordon-Daynes was not called.”
“[256] As demonstrated through cross-examination, he had both sold the business with the intention to retire and made it plain during the course of his work as an employee of the defendant that he was going to retire. By his own admission, he was frustrated working for the defendant. He was unhappy with their systems, and as is evident by his relationship with Ms Odgers, he was experiencing difficulties with other employees at the workplace.
[257] I accept that despite indicating an intention to retire he might have wanted to undertake some part-time work going forward after the fixed term contract expired.
[258] However, he could not initially obtain any other part-time work from any other radiology practice in Cairns because of the restraint arising under the deed. There is no evidence that would permit a finding that but for the wrongful dismissal he would now be working at some other clinic on a part-time basis.
[259] That would have left him only seeking part-time work from the defendant.
[260] For the reasons I have already set out, I do not accept that the defendant would have offered him part-time work.
[261] The reality is the plaintiff was summarily dismissed less than 3 months before the expiry of the fixed term contract, in circumstances in which the plaintiff was required to work for the defendant for that three-year period, as part of the payment of a significant sum to the plaintiff for the sale of his business to the defendant.
[262] All indications by the plaintiff prior to him being dismissed were to the effect that he would be ceasing work at the end of his fixed term contract. In any event, the relationship between the plaintiff and the defendant was deteriorating for the various reasons referred to in this judgment. I do not accept that the defendant would have continued to offer the plaintiff employment even if as he says he had a change of heart and wanted to remain employed.
[263] In the circumstances, the damages the plaintiff is entitled to recover are limited to the last 11 weeks and 5 days of his fixed term period and the additional three months’ notice which the defendant accepts it would have been required to provide to the plaintiff.”
Dr Daynes challenged the primary judge’s damages assessment in some 11 grounds of appeal.
I-MED opposed the orders sought by Dr Daynes and relied on a Notice of Contention, identifying two additional grounds on which it was contended the assessment of damages in the primary judgment ought to have been affirmed.
By way of an Amended Notice of Cross Appeal, I-MED cross-appealed from the finding that I-MED was not entitled to dismiss Dr Daynes summarily and that I-MED’s termination of Dr Daynes’ employment constituted a repudiatory breach of the employment contract, justifying Dr Daynes’ termination of it.
These grounds of appeal and cross appeal will be dealt with thematically, dealing with the lawfulness of the summary dismissal, then the damages assessment, and finally the costs appeals.
The primary judge’s findings relevant to his decision that I-MED unlawfully terminated Dr Daynes’ employment without notice have been summarised above at [72]-[79].
By its Amended Cross-Appeal, I-MED contended that the primary judge erred in:
“1A a. finding at [202]-[203] that cl 7.3(c) of the contract required serious misconduct within the meaning of cl 7.3(a) of the contract;
b. therefore concluding that the Cross-Appellant did not have a contractual right to terminate the Cross-Respondent’s employment without notice.
- a. finding at [138] that the Cross-Respondent did not engage ‘in conduct of a sexual nature’ towards a staff member, i.e. making a pelvic thrust toward another staff member; and
b. therefore concluding that the Cross-Appellant did not have a contractual right to terminate the Cross-Respondent’s employment without notice.
- a. finding at [209] that the Cross-Respondent’s conduct toward Ms Nina Odgers did not constitute workplace bullying or otherwise a breach of his obligations under his contract of employment; and
b. therefore concluding that the Cross -Appellant did not have a contractual right to terminate the Cross-Respondent’s employment without notice.
- a. construing cl.7.3(a)(2) of the contract as requiring ‘deliberate or serious misconduct or serious professional misconduct or serious breach of duty’ to have occurred at [217] , rather than construing cl 7.3(a)(2) as applying where the Cross-Appellant considered that any act or omission materially and detrimentally affected it or the I-MED Network; and
b. therefore concluding that the Cross-Appellant did not have a contractual right to terminate the Cross-Respondent’s employment without notice.”
The primary judge was not satisfied to the requisite standard that Dr Daynes engaged in “conduct of a sexual nature towards Ms Turner at the Christmas Party”: PJ [138].
It will be recalled that Dr Daynes’ evidence was that he had sought to imitate the Maori “haka” after another member of the group in which he was standing at the staff Christmas party made a comment about “Kiwis and hakas”. He was adamant, however, that in making a haka movement at a particular point in a conversation at the Christmas party, he did not make a “pelvic thrust”: see [45] above. Dr Daynes’ relevant evidence about the alleged incident has been set out earlier in these reasons.
The expression “pelvic thrust” carries a strong sexual connotation. Dr Daynes candidly accepted that a pelvic thrust could be considered by some people to be sexual in nature, could offend and could humiliate.
The person to whom it was said that the pelvic thrust was directed, Ms Turner, did not give evidence either as to the physical conduct as she observed it, or her reaction to it, or at all. This last point, in particular, is of significance as, to constitute sexual harassment within the terms of the Handbook, the conduct in question was required not only to be “of a sexual nature” but “unwelcome” and the Handbook stated that “[i]t is the viewpoint of the person harassed that is relevant.”
Ms Couch who gave evidence that she was in the group with Dr Daynes and Ms Turner said that she did not observe Dr Daynes make a pelvic thrust towards Ms Turner and that it would have surprised her if he had as that would have been inconsistent with her observation of his character and behaviour: see [47] above. Ms Della Bella gave evidence that she did not see any contact between Dr Daynes and Ms Turner: see [47] above. It was not suggested to either of them in cross examination that he made any movement towards her of any kind. Ms Couch was not cross examined to suggest that the alleged conduct was not out of character for Dr Daynes.
The only witness who gave evidence of observing the alleged conduct was Ms Bailey whose evidence has been set out at [48]-[51] above. Although she had initially said that there was physical contact between Dr Daynes and Ms Turner, she was effectively cross examined and was not confident in her evidence that there had in fact been physical conduct.
No evidence was given by Ms Bailey or any other witness as to how Ms Turner reacted to the alleged pelvic thrust.
This is not a case where there is a dispute as to whether Dr Daynes made any movement at all. It is a dispute, at best, about the characterisation of a brief movement, whether it amounted to conduct “of a sexual nature” and whether it was unwelcome. Putting aside this last matter, both a pelvic thrust and a haka involve a movement of the body and a certain thrusting motion. The latter is not of a sexual nature whereas the former may be, as Dr Daynes accepted under cross examination.
“[132] In the circumstances, I must be comfortably satisfied to a high degree that the matters relied upon by the defendant actually occurred.
[133] In a case in which there is conflicting evidence as to the occurrence of the event but there is no reason to doubt that the beliefs held by the witnesses are honestly held, I must have regard not just to the statements of the witnesses as to what they saw and did not see, but also consider the probability or likelihood of the event occurring, the context in which the event is said to have occurred and whether there might be any explanation or reasons why such conduct occurred.
[134] The difficulty for the defendant is that there is nothing in the context or circumstances or even surrounding conversation which provides any real explanation as to why the plaintiff would have done a pelvic thrust towards Ms Turner.
His Honour then made the observations set out at [73] above before continuing:
[136] Two witnesses speak of subsequent interactions with Ms Turner at the Christmas party and refer to some issue between her and another employee (I emphasise that I am not in any way suggesting that occurred or being critical of Ms Turner).
[137] Ms Bailey struck me as a genuine person. I have no reason to doubt that she believes what she said she saw. However, it is at least possible that she saw what the plaintiff says he was doing, that is attempting to imitate a haka. He was standing next to Ms Turner at the time and did not actually come into contact with her or her costume in any way (as Ms Bailey ultimately accepted). The plaintiff denies making a pelvic thrust and one other person in the group (Ms Couch) did not see any such thing. I am unable to compare and assess what Ms Turner says she saw as she did not give evidence.
[138] In the circumstances, I am unable to be satisfied to the required standard that the plaintiff engaged in conduct of a sexual nature towards Ms Turner at the Christmas party. The allegation of sexual harassment (however it may be defined) is not made out.”
This reasoning is, in my view, not only sound but unimpeachable.
I-MED’s position on appeal was that none of the evidence presented by Dr Daynes, Ms Della Bella or Ms Couch was materially inconsistent with Ms Bailey’s evidence that Dr Daynes “made a physical gesture capable of description as a pelvic thrust”, and thus the primary judge’s contrary conclusion was in error.
The primary judge had to be satisfied that Dr Daynes “engaged in conduct of a sexual nature”, not that he “made a physical gesture capable of description as a pelvic thrust”. While this may have been Ms Bailey’s perception of what she saw, as reflected in her evidence, the two movements were, on Dr Daynes’ evidence, quite distinct and he was adamant that what he did was not a pelvic thrust, still less was it conduct of a sexual nature.
It is far from surprising, based upon the competing perceptions and the primary judge’s acceptance of the honesty and genuine beliefs of all relevant witnesses that he was unable to reach the “actual persuasion” referred to by Sir Owen Dixon in Briginshaw at 361. In that famous decision at 362, his Honour went on to observe that:
“The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding, are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.”
The primary judge, especially at PJ [134]-[135], tested the probabilities of whether the disputed movement was of a sexual nature by reference to context, circumstances and the surrounding conversation in a manner entirely consistent with these observations. Dr Daynes’ evidence of Mr Mohan having made a reference to “Kiwis and hakas” was a matter which supported Dr Daynes’ explanation of what he did and negated any characterisation of his conduct as being of a sexual nature. His Honour also had the benefit of Ms Couch’s evidence that any such conduct would have been inconsistent with her perception of Dr Daynes. It was to Ms Couch and not Ms Della Bella that the primary judge referred in PJ [137] as not having seen “any such thing”, referring to the pelvic thrust. To the extent that the primary judge referred in PJ [129] to Ms Della Bella also not observing “anything like that happening” – a matter complained about by I-MED in its submissions – this was a slight overstatement by the primary judge of her evidence but was not repeated in the essential part of his reasoning in PJ [137].
I-MED’s submissions in effect invite this Court to prefer Ms Bailey’s evidence over that of Dr Daynes in circumstances where it did not have the benefit of observing either witness. While his Honour did not make a finding of fact, per se, which could be described as “glaringly” mistaken (cf. Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28), rather relevantly expressing himself in terms of not reaching the requisite state of satisfaction, his Honour was undoubtedly in a superior position to this Court to assess all of the evidence.
For the above reasons, I-MED’s challenge to an essential part of the primary judge’s reasoning must be rejected.
The evidence before the primary judge as to the alleged bullying and victimisation of Ms Odgers has been summarised above at [54]-[68], and the primary judge’s factual findings and reasoning has been reproduced at [74]-[75] above.
His Honour’s findings of fact were not challenged per se. Rather, what is challenged by ground 2 was the primary judge’s failure to characterise what he did find to be Dr Daynes’ conduct as meeting the definition of workplace bullying in the Handbook. His Honour’s task was an evaluative one based upon his underlying findings of fact in light of the definition of workplace bullying in the Handbook.
No detailed criticism was advanced in relation to his Honour’s extended reasoning process as set out at [75] above and very little was advanced orally by Mr Foreman SC in support of ground 2 of the Amended Cross Appeal.
In terms of written submissions, I-MED submitted that:
“On the facts as found, Dr Daynes’ conduct was:
a. unquestionably repeated;
b. involved a chain of behaviours which can be reasonably expected to intimidate, offend, degrade, distress or humiliate others; and
c. caused a risk to health and safety – which here crystallised,
and as such was workplace bullying within the meaning of I-MED’s policies.”
This submission is, with respect, unhelpful. The definition of workplace bullying in the Handbook (which has been set out at [31] above) does not simply entail the three elements highlighted in I-MED’s submissions. Rather, it requires the identification of particular behaviour. This impugned behaviour must be “unreasonable”, “be directed towards a worker or group of workers” (i.e. not of a general kind) as well as having the characteristics contained in the passage from I-MED’s written submissions set out above.
This criticism may be illustrated by what his Honour held with regard to Dr Daynes’ practice of giving instructions by way of post-it notes containing capital letters. That conduct was unquestionably repeated. There was no finding that it was unreasonable, however, nor was there any finding that it involved a singling out of Ms Odgers. Indeed, at PJ [211], his Honour rejected any singling out or suggestion of humiliation by this practice.
I reject I-MED’s submission that the primary judge’s conclusion that Dr Daynes’ conduct did not meet the definition of workplace bullying in the Handbook was influenced by a view that any such conduct would need to amount to serious misconduct, and so was infected by “some externally derived standard of seriousness”. That submission is not supported by the clear terms of PJ [209] or his Honour’s extended reasoning process at PJ [210]-[216]. It is true that his Honour returned to the question of serious misconduct at PJ [217], but the question of the proper construction of cl 7.3 of the TCE and the contractual right summarily to dismiss was not reached unless workplace bullying was established. This was because if the act (here, relevantly, sexual harassment and/or workplace bullying) relied upon for the purposes of cl 7.3(a)(2) was not found by the Court to have occurred, then the clause could not be engaged or relied upon to justify the summary dismissal of Dr Daynes.
I-MED also submitted that the primary judge’s conclusions at PJ [211]-[216] were “highly informed by what Dr Daynes did not do – swearing or repeated shouting – as opposed to what he did.” This is an unfair criticism of his Honour’s careful and close analysis of the evidence before him which resulted in findings of fact which are not challenged. It was obviously relevant and appropriate for his Honour to reach the necessarily evaluative conclusion or characterisation exercise by reference to his detailed findings.
I-MED’s final written submission on this topic was to criticise the primary judge’s observations at PJ [206]-[208] as erroneously equating “bad management practices” as referred to in the Handbook’s workplace bullying provisions with “rude or discourteous behaviour by managers” rather than “poor systems of managing work”. No such equation was drawn. At PJ [208], what his Honour said was:
“The plaintiff was in a position of authority to Ms Odgers. He ought to have been conscious as to how his behaviour might impact upon her. It can be said that there should be no place for rudeness and discourtesy at the workplace but the workplace remains a melting pot of persons with different personalities, different levels of experience, different levels of competence and is often mixed with high levels of stress and anxiety. Again, none of that justifies rudeness or discourtesy, but there is a line to be drawn between what might be described as bullying an employee at the workplace and being rude, discourteous and uncooperative.”
No specific criticism was made of the observations in this passage and they are a statement of commonsense. Rudeness and discourtesy are obviously undesirable characteristics of both individuals and institutions, and are properly to be discouraged. They are not coterminous with the bullying of an individual and a fair reading of the definition of workplace bullying in the Handbook and the examples of what may and may not constitute workplace bullying do not support any different conclusion.
For these reasons, ground 2 of the Amended Cross Appeal must also be dismissed.
Grounds 1A and 3 of the Amended Cross Appeal both involve the proper construction of cl 7.3 of the TCE.
Questions relating to the proper interpretation of cl 7.3 do not strictly arise because the acts or conduct of Dr Daynes said to engage various aspects of cl 7.3 and entitle I-MED summarily to dismiss him were found not to have been made out, and the appeal from those findings the subject of grounds 1 and 2 has also failed. In deference to the arguments of the parties, however, I will deal with them briefly.
Clause 7.3(c) entitled I-MED summarily to dismiss Dr Daynes if he breached a “material term of these terms and conditions”.
The primary judge held at PJ [202]-[203] that:
“[202] Whilst the defendant relies on clause 12 and says that the plaintiff did not comply with the workplace policy which gives rise to the operation of clause 7.3(c), the contract of employment should not be construed in such a way that any breach of the contract would give rise to a right to dismiss an employee without notice.
[203] Indeed, in my view, the reference to breaching a “material term” in clause 7.3(c) suggests that the parties did not intend that merely any breach of the terms and conditions would give rise to a right to terminate without notice. Material must be a reference to something so significant such that the conduct might constitute serious misconduct as referred to in 7.3(a).”
I-MED submitted that only breach of a “material term” of the employment contract was required to justify summary dismissal under cl 7.3(c) of the TCE, without also having to establish “serious misconduct” as referred to in cl 7.3(a). To import the additional requirement of “serious misconduct”, argued I-MED, erroneously focused on the materiality of the breach where the focus ought to have been the materiality of the term. On that construction, I-MED submitted that the obligation to comply with its workplace conduct policy (as outlined in the Handbook) as imposed by cl 12 of the TCE (set out at [28] above) was a “material term” breach of which would justify summary dismissal.
Against the primary judge’s construction, I-MED also submitted that, if the reference to a “material term” in clause 7.3(c) is equivalent to that of “serious misconduct” in clause 7.3(a), then clause 7.3(c) had “no independent life” and courts should generally interpret contracts to avoid such redundancies, citing Fayad v B & G Properties Pty Ltd [2022] NSWCA 129 at [25]; XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215 at [72]; North v Marina [2003] NSWSC 64 at [45]; Dovuro Pty Ltd v Wilkins (2000) 105 FCR 486 at [152], [230]; [2000] FCA 1902.
Dr Daynes supported the construction of the primary judge, and submitted that what the primary judge held at PJ [203] when read in context entailed a recognition that there is overlap, rather than any redundancy, between “serious misconduct” in clause 7.3(a) and “breach of a material term” in clause 7.3(c).
The expression “material term” is not defined in the TCE. Neither party pointed to any authorities outlining the approach to be taken by courts seeking to determine what constitutes a “material term” absent an express definition in the contract. “Material term” is a protean phrase, the meaning of which must ultimately be derived from its broader contractual context. There have, of course, been cases where judges have used the expression “fundamental term” (see, for example, Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240; Alexander v Railway Executive [1951] 2 KB 882; Smeaton Hanscomb & Co Ltd v Sassoon I Setty*,* Son & Co (No 1) [1953] 1 WLR 1468 at 1470) but, as has been explained, these cases arose in the context of attempts to circumvent exemption clauses, and were the subject of criticism by the High Court in Sydney City Council v West (1965) 114 CLR 481 at 488-490, 500; [1965] HCA 68: see JD Heydon, Heydon on Contract*: The General Part* (2019, Thomson Reuters) at [11.180], [11.220]. A feature of these cases was that the expression “fundamental term” was often used interchangeably with “fundamental breach”.
“[186]: …When considering “material breach” in Celtech International Ltd v Dalkia Utility Services plc [2004] EWHC 193 (Ch), Richards J observed at [25]:
‘… as Colman J put it in National Power plc v United Gas Co Ltd (3 July 1998, unreported), a breach is material if it is:
*‘*serious in the wide sense of having a serious effect on the benefit which the innocent party would otherwise derive from performance of the contract in accordance with its terms.’
Celtech v Dalkia Utility Services was followed in Elders Ltd v EJ Knight Co Pty Ltd [2009] NSWSC 1462 (per White J) at [48]; Androvitsenas v Members First Broker Network [2013] VSCA 212 at [90]–[91]; Cargill Australia Ltd v Viterra Malt Pty Ltd (No 28) [2022] VSC 13 at [3662] (per Elliott J).
[187] In Waters Lane v Sweeney [2007] NSWCA 200, Tobias JA considered “material breach” of heads of agreement and proceeded on the basis that for the breach to be material, it must be of particular significance to the relevant party to the agreement: at [163]–[165]. In Mobileciti Pty Ltd v Vodafone Pty Ltd [2009] NSWSC 899, Hamilton AJ used dictionary definitions of “material”: of substantial import or much consequence; of serious or substantial import. His Honour was there considering the meaning of “material representation” and followed Waters Lane v Sweeney in focussing on whether the representation was material to the party to whom the representation was made: at [60].”
Drawing on these authorities, an available interpretation of “material term” in the TCE is a term which, if breached, would have a serious effect on the benefit which the innocent party would otherwise derive from performance of the contract in accordance with its terms. This construction does not entail any necessary redundancy by reason of cl 7.3(h) which permitted summary dismissal in circumstances where the employee engaged in conduct for which the employer “may terminate your employment at law” although it may be accepted that it would entail a degree of overlap between the two sub-clauses. As Mr Moses SC on behalf of Dr Daynes submitted, however, it is not surprising that there might be overlap in a clause such as cl 7.3.
Whether or not breach of cl 12 of the TCE would have had a “serious effect on the benefit which the innocent party would otherwise derive from performance of the contract in accordance with its terms” was not explored at the trial and, because of I-MED’s failure to establish a breach of the Handbook’s workplace conduct policy, it does not fall to this Court to consider it.
In relation to cl 7.3(a)(2), the subject of ground 3 of the Amended Cross Appeal, notwithstanding the way this ground is formulated, it was accepted by Mr Foreman SC that the formation of a view by I-MED that acts or omissions of an employee “materially and detrimentally affected I-MED or the I-MED Network” was predicated on those acts or omissions having occurred. If, as in the present case, the “findings” of an adviser such as Workdynamic as to sexual harassment and/or workplace bullying and victimisation were not vindicated in subsequent court proceedings where they were put in issue, a previously formed view by I-MED based on those original findings could not be relied upon to justify summary dismissal.
It is convenient to set out again the terms of cl 7.3 (a):
“Serious misconduct: you:
(1) commit any dishonest, fraudulent, reckless or criminal act or omission in connection with the Business, as determined by I-MED and/or the I-MED Network Pty Limited Board or the Business Unit Management Committee; or
(2) commit any other act or omission, that we consider materially and detrimentally affects us or the I-MED Network including deliberate or serious misconduct, serious professional misconduct or serious breach of duty.”
Also to be noted is that aspect of the Interpretation clause of the TCE which states that “use of the expressions ‘include’ and ‘in particular’ does not limit the generality of the preceding words, or exclude anything not expressly included or particularised, unless these terms and conditions expressly provide otherwise.”
As to cl 7.3(a)(2), the primary judge held at PJ [217] that:
“Although I accept the defendant's submission that the construction of 7.3(a)(2) involves a subjective element (having regard to the words “that we consider”), and although the description in 7.3(a)(2) is said to be inclusive (having regard to the use of the word “including” rather than an exhaustive statement), there must be deliberate or serious misconduct or serious professional misconduct or serious breach of duty. It is not just any conduct or poor behaviour at the workplace which would give rise to the right to terminate without notice.”
His Honour’s view was no doubt informed by the fact that cl 7.3(a) is headed “Serious misconduct” which is emboldened.
Although the matter is finely balanced and, as I have said, strictly not necessary to decide, I would respectfully disagree with the primary judge’s construction to the extent that it required “deliberate or serious misconduct or serious professional misconduct or serious breach of duty” for the purposes of subclause (2).
In Eldridge v Wagga Wagga City Council [2021] NSWSC 312 at [285], I said that:
“The starting point of any inquiry as to whether the summary termination of employment is justified is the terms of the relevant contract, in recognition of the fact that an employer’s right of summary dismissal, as a matter of law, is ‘no more than an example of the general right of any contracting party to treat certain breaches as bringing the agreement to an end.’” (footnotes omitted)
Subclause 7.3(a)(2) deliberately extends subclause (1) in at least three ways: first, subclause (1) requires the conduct, act or omission to be in connection with the Business whereas subclause (2) does not require a connection but the formation of a view that any other act or omission has a material and detrimental effect upon I-MED or the I-MED Network; secondly, the expression “any other act or omission” identifies acts or omissions other than the ones identified in subclause (1); third, those other acts or omissions may include deliberate or serious misconduct, serious professional misconduct or serious breach of duty but the use of the word “includ[e]” does not limit the generality of the expression “other act or omission”.
What it is that makes “any other act or omission” “serious misconduct” for the purposes of cl 7.3(a) is the determination, no doubt required to be made in good faith, by I-MED (“we”) that the act or omission in question “materially and detrimentally affects” I-MED or the I-MED Network. In the context of a business that was acquired for between $15-21 million, conduct which had that effect would appropriately be described as “serious misconduct”. Contrary to Dr Daynes’ submissions, this construction of cl 7.3(a) does not result in any absurdity or lead to commercially unreasonable outcomes. I-MED would need to be satisfied that the underlying act or omission occurred (if it did not, as in the present case, any termination could be subject to effective challenge) and form its view as to “material” and “detrimental” effect in a bona fide manner.
Dr Daynes raised no fewer than 11 grounds of appeal in relation to the primary judge’s findings on damages but Mr Moses SC distilled this in oral submissions to “one central question”, namely “was the judgment amount the correct measure of damages for his wrongful dismissal?”.
The first seven grounds of appeal were essentially a variation on a theme, namely that the primary judge had erred in not approaching the assessment of damages on the basis of a loss of a chance or loss of opportunity to continue working for I-MED beyond the end of the (three year) initial fixed term of his employment contract. In this context, Dr Daynes relied on Sellars v Adelaide Petroleum NL*; Poseidon Ltd v Adelaide Petroleum NL* (1994) 179 CLR 332; [1994] HCA 4 (Sellars) for the proposition that a loss of opportunity or chance, if it has value, is a compensable form of economic loss even where that chance is unlikely to eventuate, citing in addition to Sellars at 349, Chaplin v Hicks [1911] 2 KB 786 and McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411-412; (1951) HCA 79.
Dr Daynes submitted the lost chance or opportunity in the present case was the “promise to provide the chance of indefinite employment until [Dr Daynes’] retirement”. That promise to provide the chance of employment was said to be located in those terms outlined at [20]-[24] above which provided for conversion of the fixed term contract to an indefinite term contract with a notice period, permitting the indefinite contract to be terminated without cause on the giving of three months’ notice.
As for the determination of how the loss of chance should be compensated, Dr Daynes contended that the Court should have “determine[d] the outer limit for which the employee could have remained in employment by reference to the evidence”, then assigned a percentage to the possibility that he would not have continued in employment at I-MED until aged 77 and apply a discount accordingly, citing Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687 (Walker).
I do not agree that the question of Dr Daynes’ entitlement to contractual damages should have been assessed on the basis of loss of a chance cases or the principles enunciated by the High Court in Sellars which was, of course, a decision concerning the assessment of damages for breach of the Trade Practices Act 1974 (Cth). Dr Daynes had a contractual entitlement to continue to be employed for an indefinite period if he elected to continue to work for I-MED. This was not an uncertain chance but a contractual right following his giving of notice that he intended to continue past the end date of the fixed term contract. That right, once exercised, was then subject to I-MED’s contractual right to terminate his employment without cause on the giving of three months’ notice.
“[29] The respondent claimed damages on the basis that he lost the benefit of an employment contract which, unless terminated, was likely to have continued until he reached the age of 65 years (Judgment [597], [599]). The firm’s response, accepting that Mr Griffiths was entitled to be placed in the position he would have been in had that contract been performed, was that the least onerous means of performance, consistent with the desire to bring the contract to an end, was to terminate with immediate effect by payment of three months’ salary ($108,750) in lieu of notice (Judgment [607], [608]).
[30] As Mason CJ and Dawson J observed in The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80; [1991] HCA 54:
‘The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff’s expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.’
[31] In assessing those damages the relevant principle is that where the defendant could have performed the contract in one of several ways “damages are assessed assuming performance in the way least onerous to the defendant. This mode of assessment will not be employed where the least onerous method of performance is in fact highly unlikely to have been selected by the defendant”: J D Heydon, Heydon on Contract (2019, Lawbook Co) at [26.200].
[32] In TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 154, Hope JA said in relation to this qualification to what McHugh JA in Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 156 described as the “settled rule”:
‘The question thus arises whether the mere existence of this contractual right [in the defendant] operates automatically to restrict the damages which can be awarded… or whether regard can be had to the facts… I have concluded that the true principle does allow, indeed require, that regard be had to the facts, although of course the rights and obligations flowing from the contract are the starting point of the matter.’
In the first place the question of what is the least burdensome mode of performing the contract for the defendant is not to be tested by isolating the particular contractual provision and the defendant’s rights under it from the rest of the relevant circumstances…’
and at 156:
‘In some cases, the evidence may be silent as to whether the defendant would have exercised the option apparently favourable to himself; in other cases, although not silent, the evidence may not justify a finding that the defendant would not have exercised it. In these cases it can be said that it is “a natural inference from the terms of the contract” that the defendant would have exercised that option which in terms benefits him… It is not a natural inference when the facts point to the opposite conclusion.’
[33] And in Amann Aviation, Mason CJ and Dawson J said at 93, having referred to Hope JA in TCN Channel 9 at 150-156:
‘… the mere existence of a contractual right in a party to terminate does not operate automatically to restrict the damages that can be awarded. The court does not reach a conclusion by reference to an improbable factual hypothesis. The court must have regard to the facts and evaluate the possible exercise of the right in all the relevant circumstances of the case. Moreover, in determining what is or would be beneficial for the defendant, the court does not confine its attention to the relationship between the plaintiff and the defendant; it would be wrong to reduce the defendant’s legal obligations to the plaintiff on the footing that he or she would incur greater loss in other respects.
[34] Their Honours had earlier (at 92-93) referred to the “settled rule” as a “manifestation of the principle that damages will not be awarded for not doing that which there is no legal obligation to do”.
[35] It has also been said that the damages “ordinarily” payable for wrongful termination where the employer is entitled to terminate by giving a period of notice are the amount which would have been payable had that notice been given: see Sanders v Snell (1998) 196 CLR 329; [1998] HCA 64 at [19] and Delaney v Staples [1992] 1 AC 687 at 692-693. That ordinary measure is the result of the application of these principles to contracts of employment, as the decisions of this Court in Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381 and Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30 illustrate.”
“[148] A plaintiff claiming damages for loss of a contract bears the onus of establishing on the balance of probabilities what would have been the value of the contract to the plaintiff had it not been wrongfully terminated: Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27 (Berry) at [37] (Bell, Keane and Nettle JJ). The plurality in Berry continued at [37]-[38]:
‘The value is to be determined objectively, and thus, where the lost contractual rights were by their terms capable of being rendered less valuable in certain events, the assessment must take account of the possibility that those events might have eventuated (77). More generally, if there are two or more ways in which a wrongdoer could lawfully have performed a contract which is rescinded for anticipatory breach, it is to be assumed that, but for rescission, the wrongdoer would have adopted the mode of performance most beneficial to the wrongdoer (78). And so, if the contract was lawfully terminable at the instance of the wrongdoer, it must be valued accordingly and, subject to the evidence, not as if it were bound to continue.
So to say, however, does not mean that the mere existence of the wrongdoer's right to terminate the contract operates automatically to restrict the damages that can be awarded (79). The question is whether, absent rescission, the wrongdoer would have terminated the contract. And to decide that requires the court to have regard to all the facts and circumstances of the case, including events extraneous to the contract that were within the control of the wrongdoer, such as the need to retain third party custom. … ‘
(Footnotes omitted).
[149] In Berry at footnote (77), the plurality cited among others Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164 at 196-197 (Lord Denning MR); at 202-203 (Edmund Davies LJ); at 209-210 (Megaw LJ). What is sometimes called the “Mihalis Angelos principle” was described in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; [2008] HCA 10 at [89], (Gleeson CJ, Kirby, Heydon, Crennan and Kiefel JJ) as follows:
‘The principle is that that where a contract-breaker has a choice of methods of performance, damages will be assessed on the basis of the contract-breaker's minimum legal obligation - the method which would have been least onerous to the contract-breaker in the sense that non-compliance with it attracts the lowest measure of damages.’
[150] In Berry at footnote (79) the plurality cited among others Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54, including the passage by Mason CJ and Dawson J at 92:
‘…where there are two or more ways in which a defendant might perform the contract, the court, in assessing damages, adopts the mode of performance which is most beneficial to the defendant. That rule, which is a manifestation of the principle that damages will not be awarded for not doing that which there is no legal obligation to do, is well supported by authority.’
[151] Applying this principle to the present case, at the time the Health District breached the locum agreement, circumstances had arisen which would have entitled the Health District to have exercised its power under cl 15 of the Sessional determination to suspend the appellant's appointment, given the dual concerns held by Dr Padhi for patient safety with respect to the vulnerable young children and adolescents treated at Redbank House, and the appellant's own wellbeing, with which A/Prof Kotze concurred. …
[152] The natural inference is that the Health District would have acted in a way that was most beneficial to it, and there are no facts which point in the opposite conclusion: TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 156, Hope JA (Priestley and Meagher JA agreeing at 161, 163). Given the dual concerns mentioned above held by Dr Padhi, with which A/Prof Kotze concurred, it can readily be inferred that but for the termination of the locum agreement the Health District would have exercised the power of suspension of the appellant under cl 15 of the Sessional determination.”
Even had the primary judge proceeded on the basis of these authorities, it is plain that the question of damages needed to be addressed having regard to the evidence and by making findings both as to what I-MED would likely have done as well as what Dr Daynes would have done, on the balance of probabilities. The primary judge evaluated the “possible exercise of the right [to terminate without cause] in all the relevant circumstances of the case”, to use the language of The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 93; [1991] HCA 54, citing TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 154*,* and found, on the balance of probabilities, that it would have been exercised by I-MED as early as possible.
His Honour reached his detailed conclusions with reference to the significant body of evidence that emerged or was tendered in the course of the four-day trial, including documentary evidence such as Avant Law Pty Ltd’s letter to Mr Mark Phelps informing the Department of Health of Dr Daynes’ intention to retire in July 2022:
“Dr Daynes turns 70 years of age in January 2022 and is preparing to wind down his practice to retirement in July 2022. The administrative processing required by the remaining portion of the audit would effectively remove Dr Daynes from clinical practice.”
While his Honour’s findings in this regard were on the counterfactual scenario that I-MED had not summarily dismissed Dr Daynes, those findings were reached with the same advantages that a trial judge determining disputed factual questions enjoys over those of an appellate court: see Percy; Lee*.* That has implications for the standard of appellate review where an evaluative judgment in relation to factual questions (including counterfactual questions) has been reached.
During the course of the hearing of the appeal, the question was posed as to how much of what had in fact transpired between the parties leading up to Dr Daynes’ summary dismissal should be excised from consideration of the counterfactual for the purposes of assessing damages, that is to say, was the Court only to proceed on the basis that I-MED had no entitlement summarily to dismiss Dr Daynes, or was it required to proceed on the basis that no complaints had been made in respect of his alleged conduct, that the report of Workdynamic had not been received and that the whole process of investigation into the complaints had not exacerbated relations between Dr Daynes and I-MED.
The answer to this question was identified in this Court’s decision in Bartlett v Australia & New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30 (Bartlett) where Macfarlan JA (with whom Meagher JA agreed) said as follows:
[82] In his supplementary written submissions on damages Mr Bartlett asserted that, for the purposes of assessment of damages, “the effect of Ms Novotny’s report and the investigation and the investigation report must be eliminated” (paragraph [12]).
[83] I do not agree that this is the correct approach. The hypothetical circumstance to be considered is one in which the Bank did not purport to dismiss Mr Bartlett summarily. No other fact or circumstance should be assumed to be changed. Accordingly, the relevant hypothetical situation was one in which the Bank investigation occurred and Mr Corbally received and considered the investigation report but realised, or was advised, that Clause 14.3(b) did not in the circumstances authorise summary termination. In particular, there is no warrant for assuming, contrary to the facts, that the investigation did not occur.”
As Meagher JA put it at [101], the inquiry as to damages is directed to “the circumstances as they existed at the time the breach or repudiatory conduct occurred, but on the hypothesis that such conduct had not occurred.” In that case, as in the present case, the repudiatory conduct was the unjustified summary dismissal of the employee.
It follows, contrary to an argument put by Mr Moses SC, that many of the considerations to which the primary judge had regard in PJ [255] (set out at [86] above), such as that “the defendant's concerns about the plaintiff’s behaviour at the workplace would have remained” (PJ [255(2)]), for example, were legitimately taken into account.
The cumulation of factors referred to by the primary judge laid a solid foundation for his Honour’s ultimate conclusion that I-MED would have terminated Dr Daynes’ employment by the giving of three months’ notice at the end of the fixed term contract, i.e. from 2 November 2022. The only qualification to that would have been if Dr Daynes had voluntarily retired earlier which is what his lawyers had told the Department of Health he was preparing to do: see [155] above. This powerful forensic matter only operated to reinforce the primary judge’s conclusion on damages and underpinned what his Honour said at PJ [253], noted at [85] above.
Dr Daynes relied upon Walker especially at [82] in support of the proposition that direct evidence as to whether the employer would have terminated an employee without cause in any event was necessary, and that there was no such evidence in the present case. The inquiry as to what would have occurred is classically fact-specific and I would not interpret the Full Court as purporting to express a general rule.
Hypothetical evidence is frequently of limited value, such as in cases of reliance and causation: see, for example, Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 at [93]; Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 at [87], [109]; W**ilson v Arwon Finance Pty Ltd [2020] WASCA 137 at [227]-[229]. The decision in Walker, moreover, predated most of the authority as to proof of loss in employment cases referred to at [152]-[154], [158]-[159] above, and the Full Court did not consider the role assumptions of damage-minimising conduct play in this area of discourse.
It was open to the primary judge to reach the clear conclusions he did and his reasoning was not so much attacked on the appeal but, rather, other reasons pointing the other way, such as Dr Daynes’ financial value to I-MED, were relied upon. These reasons were undoubtedly taken into account by the primary judge but rejected by him in his careful evaluation of all of the evidence.
To the extent that Dr Daynes gave evidence that he wanted to continue to work because he needed the money, the primary judge rejected this evidence as “absurd” (PJ [255(8)) and this credit based finding was not assailed on the basis that it was “glaringly” improbable cf. at [28]-[29].
“What we say is his Honour didn't direct himself to the question of likelihood. His Honour dealt with it in the terms of would. Whether he would have.”
This submission should be rejected. When his Honour said at PJ [254], that “I do not accept that the defendant would have continued to employ the plaintiff, even if the plaintiff wanted to continue his employment after his fixed term”, his Honour was not expressing a definitive or absolute conclusion but was using the word “would” based on his assessment of the balance of probabilities. This was entirely orthodox. The same observation may be made in relation to the primary judge’s use of the word “would” in PJ [262], set out at [87] above.
Grounds 10-11 of the Notice of Appeal related to the restraint period in the Deed. Given that the primary judge held, correctly as I have found, that I-MED would have exercised its contractual right to terminate Dr Daynes on three months’ notice following the expiry of his fixed term, the significance of the restraint period and how the primary judge dealt with it does not arise.
For the above reasons, Dr Daynes’ appeal in relation to damages must be dismissed with costs.
Both parties have filed applications for leave to appeal from the primary judge’s orders as to costs, noted at [7] above.
The primary judge initially ordered that I-MED pay Dr Daynes’ costs in view of his success in the proceedings and in accordance with the usual rule that costs follow the event. However, by way of an Amended Notice of Motion filed 16 September 2024, I-MED successfully sought a variation of that 22 August 2024 costs order, advancing three arguments in favour of the proposed variation. They were that:
“(1) firstly, no costs ought to be awarded to the plaintiff, having regard to the amount of the judgment and having regard to r 42.34 UCPR; and
(2) secondly, even if the plaintiff is entitled to costs until 8 December 2023, on that date the defendant made offers which should result in the defendant not being liable to pay the plaintiff's costs; and
(3) even if that not be so, the defendant made a further offer on 28 June 2024, which it has beaten.”
“42.34 Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court
(1) This rule applies if--
(a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and
(b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants.
(2) If the proceedings could have been commenced in the District Court, an order for costs must not be made unless the Supreme Court is satisfied that the commencement and continuation of the proceedings in the Supreme Court was warranted.”
“It is only necessary to say that the plaintiff was seeking a significantly higher sum than he obtained (in excess of $5 million). Whilst the factual issues were not that complex, they involved a consideration of different types of evidence. Further, the plaintiff raised as an alternative to his primary case, an argument that had some legal complexity. If I had made different findings and if the plaintiff had pursued the proceedings in the District Court, there would have been a risk of the plaintiff recovering more than the jurisdictional limit of the District Court. In those circumstances, I am satisfied that the commencement and continuation of the proceedings in this Court was warranted. I would not vary the costs orders because of r 42.34.”
I-MED maintained that leave to appeal was not required from this decision in circumstances where there was an underlying challenge to the primary judgment. Had I-MED succeeded in its cross-appeal, there would been obvious strength to that position as the underlying costs discretion would fall to be re-exercised in view of the success on the cross appeal. But it has not succeeded and the costs judgment involved discrete questions of a kind ordinarily requiring a grant of leave to appeal.
I-MED made an application for leave to appeal from this aspect of the primary judge’s decision, notwithstanding its position that leave was not strictly necessary. I would refuse I-MED any grant of leave to appeal, and even if no grant of leave were required, I would have dismissed any appeal on this aspect of the case. The primary judge was best placed to make the assessment he did as to whether commencement in the Supreme Court was warranted and no error of principle in his reasoning has been identified which would warrant a grant of leave to appeal. In any event, having considered all aspects of the proceedings at first instance in the course of dealing with both the appeal and cross appeal, I agree with his Honour’s conclusion that commencement of the proceedings in the Supreme Court was warranted.
Moving to I-MED’s alternative arguments on costs at first instance, noted at [172] above, a number of relevant offers were considered by the primary judge:
I-MED’s Offer of Compromise of 8 December 2023 of $307, 728.23 plus costs as agreed or assessed (the Offer of Compromise);
I-MED’s offer in the same terms in accordance with the principles in Calderbank v Calderbank [1976] Fam 93 (a Calderbank offer) also on 8 December 2023; and
I-MED’s Calderbank offer of 28 June 2024 of $435,000 plus costs as agreed or assessed.
The offers of 8 December 2023 were not replied to and in any event were bettered by the judgment Dr Daynes secured. The primary judge correctly declined to vary his costs order by reference to this offer, since it was less than the total damages Dr Daynes received, when interest was included: CJ [34].
Prior to considering I-MED’s later Calderbank offer of 28 June 2024, a Calderbank offer made by Dr Daynes on 26 June 2024, following a mediation the previous day, should be noted. The terms of that offer were relevantly as follows:
“… in order to avoid time consuming and costly litigation, our client has instructed us to make an offer of compromise on the following basis:
a. Judgment for the Plaintiff in the amount of $740,000;
b. The Defendant pays the Plaintiffs costs as agreed or assessed.
This offer is equivalent to an amount of twelve months' base salary of $500,000.00, plus bonuses in the amount of $100,000.00, a regional allowance of $100,000.00 and a clinic director allowance of $40,000.00. However, in light of the pain, suffering and reputational damage suffered by Dr Daynes, it is proposed that the judgment amount consist of $500,000.00 for twelve months' base salary and $240,000.00 general damages.
In the alternative to the [above] offer […], our client is also willing to resolve the matter on the basis set out in the attached Heads of Agreement which would not involve Judgment for the Plaintiff, but rather a Notice of Discontinuance with other components of the settlement to be dealt with in a Deed of Release.”
“Kerryn Dillon [or other mutually agreeable person to be nominated by I-MED] (Designated Contact Person) will be the designated contact person if anyone (within or external to I-Med Central Queensland Pty Ltd) makes inquiries regarding Dr Daynes. If the Designated Contact Person is asked about Dr Daynes and the circumstances surrounding his departure from the I-Med Central Queensland Pty Ltd, he/she will say that:
‘Dr Daynes worked for I-MED Central Queensland Ply Ltd from 2 August 2019 to 11 May 2022, performing the following duties:
• General radiology specialising in breast imaging.
I-MED acknowledges Dr Daynes ' excellence as a clinician.’
I-Med Central Queensland Pty Ltd will issue the following statement to Directors and employees of I-Med Central Queensland Pty Ltd within 3 business days of making the payment in paragraph 2 in the following terms:
‘Dr Daynes commenced legal proceedings against I-Med Central Queensland Pty Ltd in relation to his employment coming to an end on 11 May 2022. The legal proceedings have been settled on the basis that I-Med Central Queensland Pty Ltd withdrew its notice to terminate of 11 May 2022 and on other terms which are confidential between the parties. I-Med Central Queensland Pty Ltd acknowledges the dedicated service of Dr Anthony Kevin Daynes during the period 2 August 2019 to 11 May 2022 in which he provided with distinction radiology services to the Cairns community.
I-MED Central Queensland Pty Ltd wishes Dr Daynes well in his future endeavours.’”
These clauses reflected the reputational impact Dr Daynes evidently considered his summary dismissal had had on him, which concern was wholly unsurprising.
This offer was not accepted and two days after it was made (on 28 June 2024), I-MED countered with the following Calderbank offer:
“(a) the Defendant make a payment to the Plaintiff in the gross sum, less applicable taxation, of $435,000 which is broadly equivalent to the balance of the Initial Fixed Term, plus an additional 6 months;
(b) the Defendant to pay your client's legal costs to be agreed or assessed;
(c) the Plaintiff to discontinue the proceedings with no order as to costs;
(d) the parties entered into a deed of release, under which the Plaintiff releases the Defendant in relation to all claims in the proceedings, and which includes the usual provisions in relation to confidentiality and non-disparagement.”
There was no suggestion in this letter of any of the proposed agreed statements that had been set out in the draft Heads of Agreement that had been proffered on behalf of Dr Daynes two days earlier.
I-MED’s Calderbank offer of 28 June 2024 was issued 10 days prior to the commencement of the hearing.
The primary judge’s reasoning which led to his varying the previously pronounced costs order in favour of Dr Daynes was set out in the following three paragraphs of the costs judgment:
“[35] The defendant then made a further offer on 28 June 2024 in accordance with Calderbank v Calderbank in the sum of $435,000 plus costs as agreed or assessed. The offer included other terms which might be considered usual terms such as the plaintiff discontinuing the proceedings and entering into a deed of release, again, on standard terms. The offer was made at a time approaching the hearing date when the parties must have been aware of all the issues in the case and the evidence to be relied upon. It was made following the mediation. The plaintiff must have been in a position to accept it if he wished to do so.
[36] The plaintiff recovered less than that offer and substantially so. The principles in Calderbank v Calderbank apply. The Court has a broad discretion as to costs.
[37] It is notable that the defendant has been ordered to pay substantially less than the offer of 28 June 2024. Further, the offers made by the plaintiff were all well above what he actually received. Having said that, the defendant’s offer was made very close to the hearing and only open for a very short time. In my view, the appropriate orders with respect to costs are:
- The defendant pay the plaintiff’s costs as agreed or assessed up to and including 28 June 2024.
- The plaintiff pay the defendant’s costs as agreed or assessed from 29 June 2024.”
It was from these orders, varying the original costs orders made in Dr Daynes’ favour, that he now seeks leave to appeal.
“Where an unaccepted Calderbank offer has been made by a party which, although ultimately unsuccessful, nevertheless made an offer which bettered the successful party’s final position, there is a wide range of possible orders that may be made in the Court’s discretion. These include that:
(i) the offeror pay the offeree’s costs before the date of the offer on the ordinary basis, and the offeree pay the offeror’s costs after the date of expiry of the offer on either:
(a) an ordinary basis, or
(b) an indemnity basis;
(ii) the offeree pay the offeror’s costs before the date of the offer on the ordinary basis, and after the date of expiry of the offer on either:
(a) an ordinary basis, or
(b) an indemnity basis: see, for example, Hunter and Squire at [8];
(iii) the offeree only be awarded its costs up to the date of expiry of the offer: see, for example, Tambree v Travel Compensation Fund (No 2) [2004] NSWCA 147 at [14], and that there be no order as to costs thereafter;
(iv) there be no order as to costs of the proceedings at first instance: see, for example, Gilberg v Maritime Super Pty Ltd (No. 2) [2009] NSWCA 394; or
(v) ordinary rule as to costs applies, namely that costs follow the event, because of the unaccepted offer: see, for example, Commonwealth of Australia v Gretton [2008] NSWCA 117.”
Failure to accept a Calderbank offer does not create a presumption in favour of the offeror as to costs or indemnity costs, even where the party making the offer receives a result more favourable than that offered: Jones v Bradley (No 2) [2003] NSWCA 258 at [9].
It is clear that the primary judge’s decision in light of the Calderbank offer of 28 June 2024 was a discretionary decision, and his Honour’s reasons plainly disclose that he took into account and weighed a number of matters, including the differential between the monetary value of the offer and what Dr Daynes obtained as well as the proximity of the offer to the commencement of the proceedings.
In his submissions in support of a grant of leave to appeal, Dr Daynes complains that his Honour did not have regard to an important argument raised in writing by him going directly to the question of whether the rejection of I-MED’s offer of 28 June 2024 was reasonable.
That the reasonableness of any rejection of a Calderbank offer is a centrally important question going to the exercise of the costs discretion is well established*:* SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] (SMEC). In Hunter v Roberts (No 2) [2019] NSWCA 235 at [6] (Hunter), quoted in Valmont at [21], it was observed that:
“The making of an offer of compromise in the form of a Calderbank letter may justify a departure from the ordinary basis on which costs are awarded and assessed and, as Giles JA observed in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], the ultimate ‘question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule’.” (emphasis added)
The question of the reasonableness or otherwise of the rejection of a Calderbank offer falls to be considered by reference to “the situation at the time when the offer was made and not solely by reference to the ultimate outcome of the proceedings”: Crump v Equine Nutrition Systems Pty Ltd trading as Horsepower (No 2) [2007] NSWSC 25 at [41] (Crump). The inquiry should not be undertaken with the benefit of hindsight: Crump at [41]; SMEC at [41], [93], [101].
Dr Daynes’ complaint is that his Honour did not appear to take into account in considering the Calderbank offer of 28 June 2024 the fact that it did not contemplate or accommodate in its terms the consequence of public aspects of his summary dismissal by I-MED.
That this was the central aspect of Dr Daynes’ submissions may be seen in the following extracts of those submissions before the primary judge on this question (the matter having been determined wholly on the papers):
“None of the offers advanced (and particularly the Calderbank offers) by the Defendant accommodated (or even contemplated) what was a most significant aspect of these proceedings: reputation and vindication that the Plaintiff had not engaged in sexual harassment or misconduct. There was no offer ever made that encompassed a form of public statement or judgment in favour of the Plaintiff.
It is axiomatic, in a case where a breast radiologist has been terminated for purported sexual misconduct, inter alia, that:
a. vindication through facts found in his favour that there was no such conduct;
b. judgment entered in his favour in the proceedings; and
c. public acknowledgement of wrongful termination by the Defendant (in a would-be settlement),
would be a significant and central aspect to his consideration of offers, and inform whether his response to those offers is reasonable.
The significance of this is told, inter alia, in:
a. the letter of Gillis Delaney of 26 June 2024, where it is noted “…our client has been unable to work since his termination – not only as a result of the challenges in finding alternative work in his specialist field of breast radiology following allegations of sexual harassment” in an offer that included a judgment entered, which would be a public instrument;17
b. in the Heads of Agreement proposed,18 which would not involve judgment, but would per clause 3 and 4 of that instrument provide for publication terms and a statement to directors and employees of the defendant, which would in effect undo the harm of the termination on sexual harassment /misconduct grounds;
c. the letter of 28 June 2024 from Gillis Delaney, again which proposed terms contemplating a judgment for the plaintiff, being a communication of a vindication to the world at large.
… offers made by the Defendant in this case, would have taken away an outcome that was emphatically achieved by the Plaintiff with a positive judgment (the public aspect), and could only otherwise be answered with settlement terms similar to those proposed in the heads of agreement offered by the Plaintiff (with a public statement to be made by the Defendant).
None of the Defendant’s Calderbank offers adequately addressed the public aspect. The Defendant cannot sensibly contend that it was unreasonable for the Plaintiff, in the circumstances, to have rejected those offers.”
There is no indication in the primary judge’s very brief reasons in respect of the Calderbank offer of 28 June 2024 that his Honour considered these submissions: see [185] above. The failure to do so would vitiate any exercise of his discretion because, contrary to SMEC, the question of the reasonableness of the rejection of the Calderbank offer would not have been undertaken by reference to “all the circumstances”. All the circumstances in the present case included Dr Daynes’ concern for his personal and professional reputation. That this concern was a real one was plain from the fact that his attempts to secure a settlement of the dispute required either entry of a public judgment in his favour or a series of agreed statements going to his departure from I-MED and his reputation, coupled with a non-disparagement clause: see [179]-[180] above.
If, contrary to the above, his Honour did in fact take these submissions into account, no reasons are apparent in the costs judgment for any rejection of them. These complaints are both taken up in Dr Daynes’ draft Notice of Appeal. Whether the primary judge failed to take these submissions into account or, if he did so, failed relevantly to give reasons, are matters which, notwithstanding the discretionary nature of his Honour’s decision, merit the grant of leave to appeal and, for reasons explained below, the upholding of Dr Daynes’ appeal in relation to costs.
In reaching these conclusions I note the following arguments advanced by I-MED. First, I-MED submitted that:
“The obligation to give reasons does not extend to an obligation to address every submission that has been made: Mifsud v Campbell (1991) 21 NSWLR 725 at 728. The scope of the obligation – i.e. the level of detail required to achieve adequacy – depends on the nature of the case and the particular questions: Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 281. The fact that reasons are not lengthy or elaborate does not itself indicate error; the question is instead whether the reasoning leading to the order is demonstrated: Ex parte Powter; Re Powter (1945) 46 SR (NSW) 1 at 5*;* 63 WN (NSW) 34 at 36.
It needs to be demonstrated that there was a failure to grapple with a ‘substantial, clearly articulated argument’: Ming v Director of Public Prosecutions [2022] NSWCA 209; (2022) 109 NSWLR 604 at [15], citing SZMTA Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421; [2019] HCA 3 at [13] and [105] and Plaintiff M1/2021 v Minister for Home Affairs (2022) 96 ALJR 497; [2022] HCA 17 at [27].”
There is no issue with the accuracy of these statements of principle. The difficulty for I-MED arises from the fact that there was, as the extract from Dr Daynes’ costs submissions reproduced at [193] above demonstrates, a ‘substantial, clearly articulated argument’ with which his Honour did not grapple or engage. True it is that shorter reasons will frequently be more likely to be appropriate in determining a question of costs and that an assessment of the reasonableness of a party’s conduct in not accepting an offer may be made on a summary basis: see e.g. Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [16]. Costs decisions may, however, have significant financial consequences for parties especially when there has been a multi-day proceeding and where the outcome of a costs decision is to reverse, or partially reverse, the usual rule, as stated in UCPR r 42.1, namely that costs follow the event.
Where a detailed argument is put in favour of or against a departure from this rule, it should ordinarily be addressed, even if only briefly. For whatever reason, that did not occur in the present case. The fact that, as I-MED submitted, the primary judge’s process of reasoning in relation to the significance of Dr Daynes’ Calderbank offer was “explicit and explicable”, and that “[r]ead fairly, the Costs Judgment makes it clear that the primary judge’s principal reason for ordering that Dr Daynes pay I-Med’s costs on and from 29 June 2024 was the significance of the monetary difference between the offer and the outcome Dr Daynes achieved”, is no answer to the failure to engage with what was Dr Daynes’ central argument on the question of costs and the particular question of the reasonableness of I-MED’s rejection of Dr Daynes’ offer.
I-MED drew attention to the fact that in another part of his Honour’s costs judgment dealing with the question of interest, the primary judge noted the following matters:
“[46] The plaintiff submits that the special circumstances of the case warrant the making of an order for interest up to the time of judgment. The plaintiff submits that special circumstances exist because this was a case in which he, as a specialist in breast work, was dismissed in part for sexual harassment of a woman. He submits that he was entitled to pursue public vindication by obtaining a judgment in his favour and, of course, the effect of the judgment was a finding that he did not engage in sexual harassment such as to entitle the defendant to terminate him summarily.
[47] The defendant responds by submitting that the plaintiff in fact did not obtain vindication because he did not establish otherwise unreasonable behaviour on the part of the defendant and that his claim of reputational damage and being unable to find work could not be accepted on the evidence presented in the proceedings. I find it difficult to accept that a radiologist accused of sexual harassment would not suffer reputational damage but it is unnecessary for me to make any further finding about that. I accept that, having regard to the plaintiff’s submissions, special circumstances existed such that he should be entitled to interest up to the date of the judgment.” (emphasis added)
These paragraphs do not assist I-MED. On their face, they make it clear in the passages to which emphasis has been added, that the primary judge was dealing with the question of vindication to reputation in the specific context of the availability of interest from the commencement of proceedings. This required the demonstration of special circumstances: Civil Procedure Act 2005 (NSW) s 100(4). His Honour had already dealt with the question of costs by this stage of his reasons, and it would not have been correct to deal with questions of vindication to reputation in the context of a question of interest rather than costs (and I do not suggest that his Honour did so). If such questions were relevant to both the question of costs and interest, they had to be dealt with in both, quite distinct, contexts.
What is, perhaps, significant about these paragraphs is his Honour’s statement at [47] that “I find it difficult to accept that a radiologist accused of sexual harassment would not suffer reputational damage.” This observation tends to confirm that his Honour must have inadvertently overlooked this aspect of the argument advanced in the context of the 28 June 2024 Calderbank offer, dealt with earlier in the costs judgment.
That a concern to vindicate his personal and professional reputation through the Court proceedings by establishing that his summary dismissal was unlawful was a relevant matter for Dr Daynes to raise in the context of an assessment of the reasonableness or otherwise of a rejection of a Calderbank offer is supported, if authority were required, by this Court’s decision in Bartlett v Australia & New Zealand Banking Group Ltd (No 2) [2016] NSWCA 142 at [25].
Having found error in the manner in which the primary judge reached his ultimate order as to costs, that discretion falls to be re-exercised.
In my opinion, notwithstanding that Dr Daynes did not better I-MED’s Calderbank offer of 28 June 2024, it was reasonable for him, in all the circumstances, to have rejected it, with the consequence that there should not have been a departure from the usual rule that costs follow the event.
Dr Daynes’ summary dismissal had obvious ramifications for him of a reputational kind, especially given the “particulars”, as it were, which underpinned that dismissal, namely alleged sexual harassment of one co-worker and the bullying and victimisation of another. Dr Daynes was a senior radiologist who had been working in Cairns for more than 35 years.
That Dr Daynes was concerned about his reputation must have been obvious to I-MED but, even if that were not the case, his concern was manifested in the terms of his own Calderbank offer made two days prior to I-MED’s offer and which has been produced at [179]-[180] above.
I-MED’s Calderbank offer contained no functionally equivalent terms that would have permitted at least some salvaging of, or amelioration of any harm to, Dr Daynes’ reputation as a consequence of his summary dismissal. Indeed, the confidentiality and non-disparagement terms in I-MED’s offer would have operated to constrain any attempts by him to defend himself vis-a-vis I-MED. While such a clause may have foreclosed any further reputational damage to Dr Daynes by publication or disclosure of allegations of misconduct by I-MED, the fact was that he had been peremptorily suspended during the Workdynamic Inquiry and then summarily dismissed. It is entirely understandable that leaving these matters unexplained in the context of a senior medical practitioner with a large roster of patients was unsatisfactory to the doctor.
For the foregoing reasons, I propose the following orders:
Appeal dismissed with costs.
Cross appeal dismissed with costs.
Grant leave to Dr Daynes to appeal with respect to the costs judgment of the primary judge and allow the appeal with costs.
Set aside the following order of the primary judge, namely:
“(i) Judgment for the plaintiff in the sum of $348,179.96.
(ii) The defendant is to pay the plaintiff's costs as agreed or assessed up to and including 28 June 2024.
(iii) The plaintiff is to pay the defendant's costs as agreed or assessed from 29 June 2024.”
and, in lieu thereof, order:
“(i) Judgment for the plaintiff in the sum of $348,179.96.
(ii) The defendant is to pay the plaintiff's costs as agreed or assessed.”
Cross Summons seeking leave to cross appeal with respect to costs dismissed with costs.
LEEMING JA: I agree with the orders proposed by the Chief Justice, and with his Honour’s reasons, subject to the following, which is mostly added by way of emphasis rather than qualification.
Logically, the cross-appeal (which sought to set aside the judgment in Dr Daynes’ favour) should be addressed first. The challenge to the factual findings made by grounds 1 and 2 of the cross-appeal should fail for the reasons given by the Chief Justice: I agree with him that no basis for setting aside the finding by the primary judge, on evidence adduced at trial which was different from and in significant respects more limited than, the material supplied to the investigator, that a basis of bullying or sexual harassment sufficient to summarily terminate Dr Daynes’ employment pursuant to cl 7.3(a)(2) had not been made out. Ground 3 does not strictly arise, and accordingly I see no reason to express a conclusion on the proper construction of the contract. However, I would say that more light is apt to be shed upon the legal meaning of a clause that uses “material” to qualify “term” as opposed to “breach”, and also uses “materially” in a related context, by reading the clause as a whole in its context, rather than by relying on dictionary definitions and constructions of the same word in different contexts.
On the question of damages, in addition to what the Chief Justice has said, the primary judge made a finding of fact as to when Dr Daynes would leave his employment. On the view I take, that finding was favourable to Dr Daynes. It was inconsistent with what he had advised during a Medicare audit, on the basis of which Medicare appears to have abandoned the audit. His solicitor told Medicare’s investigator that he “turns 70 years of age in January 2022 and is preparing to wind down his practice to retirement in July 2022”, in support of a submission that the audit contemplated would “effectively remove Dr Daynes from clinical practice”. The judge awarded damages for a longer period. There was ample evidence of his dissatisfaction with I-MED aside from the investigation. Further, the primary judge rejected Dr Daynes’ evidence that he intended to continue to work because he needed to raise the money. That rejection was a finding based on what had been squarely put to Dr Daynes in cross-examination. No proper basis was put forward to interfere with the findings made by the primary judge.
Finally, I agree with the Chief Justice that Dr Daynes should succeed, and I-MED should fail, on their separate summonses seeking leave to appeal from the costs orders.
FREE JA: I agree with Bell CJ, subject to the qualification that, in light of the failure of the cross-appeal based on the determination of grounds 1 and 2, I prefer not to express a view about the construction of cl 7.3 of the agreement.
**********
(2016) 92 NSWLR 639
(2020) 271 CLR 151
(1938) 60 CLR 336
(1998) 195 CLR 232
(2000) 105 FCR 486
(2003) 214 CLR 118
(2010) 27 VR 196
(1998) 166 CLR 351
(2019) 266 CLR 129
(1951) 84 CLR 377
(1992) 34 FCR 348
(1992) 28 NSWLR 68
(2001) 205 CLR 434
(1994) 179 CLR 332
(1965) 114 CLR 481
(1989) 16 NSWLR 130
(1991) 174 CLR 64
(2006) 233 ALR 687
(1988) 15 NSWLR 130
(1998) 196 CLR 329
(2008) 234 CLR 237
(1991) 21 NSWLR 725
(1987) 10 NSWLR 247
(2022) 109 NSWLR 604
(2019) 264 CLR 421
(2022) 96 ALJR 497
Appeal dismissed with costs; cross-appeal dismissed with costs. Dr Daynes was granted leave to appeal the costs judgment and succeeded. The order requiring Dr Daynes to pay I-MED's costs from 29 June 2024 was set aside; I-MED was ordered to pay Dr Daynes' costs as agreed or assessed. I-MED's cross-summons for leave to cross-appeal costs was dismissed with costs. The judgment for Dr Daynes of $348,179.96 remained in place.
The primary judge initially indicated that I-MED should pay Dr Daynes’ costs but varied this following an application made after the delivery of reasons which drew the Court’s attention to the fact that certain offers of compromise had been made. While his Honour rejected an argument that the proceedings should have been commenced in the District Court with costs consequences under the Uniform Civil Procedure Rules 2005 NSW (UCPR) because Dr Daynes was awarded less than $500,000, the primary judge held that the rejection by Dr Daynes of a Calderbank offer of 28 June 2024 made by I-MED, was unreasonable. This led his Honour to ordering that:
I-MED pay Dr Daynes’ costs as agreed or assessed up to and including 28 June 2024; and
Dr Daynes pay I-MED’s costs as agreed or assessed from 29 June 2024.
Both parties seek leave to appeal from the costs judgment. These applications are dealt with at [171]-[209] below.
Ms Nicholson followed this complaint up with Dr Daynes, who responded by suggesting Ms Odgers “talks too much”, admitted to ignoring her, and claimed “what do you want me to do, she’s hopeless”: PJ [156]. Ms Nicholson also followed up with Ms Odgers, and I-MED’s human resources department: PJ [157].
The third complaint arose in December 2021, by way of an email dated 8 December 2021 from Ms Odgers to Ms Nicholson: PJ [157]. That complaint primarily concerned a particular incident which occurred on 6 December 2021 between Ms Odgers and Dr Daynes. The primary judge summarised the alleged incident as follows: PJ [148]
The primary judge did not have to make a binary decision as to whether the movement in question was one or the other; rather, he needed to be satisfied that Dr Daynes engaged in “conduct of a sexual nature”. He expressed himself in classical terms of not being satisfied to the requisite standard of proof. He made reference to Briginshaw in a manner that did not attract criticism from I-MED.
The primary judge, having cited Briginshaw, expressed himself as follows:
Accepting that cl 7.3 makes it plain that the breach of any term of the contract will not necessarily warrant summary dismissal, the word “material” in the phrase “material term” must be given some work to do but in a way that would not render other parts of cl 7.3 otiose or redundant, in accordance with well established principles of contractual construction. There has been some judicial consideration as to what “material” means more generally. For something to be “material”, it “must be of moment or of significance, not merely trivial or inconsequential”: Minister for Immigration, Local Government & Ethnic Affairs v Dela Cruz (1992) 34 FCR 348 at 352, applied in Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669 at [186] (Thera Agri).
In the context of the expression “material breach” of contract, Rees J in Thera Agri reviewed the relevant authorities as follows:
In short, Dr Daynes’ contract did not contain “a promise to provide the chance of indefinite employment until the Appellant's retirement”, to quote the language of ground 1 of the Notice of Appeal.
The case was very different from Guthrie v News Ltd (2010) 27 VR 196; [2010] VSC 196 where damages were sought (but not awarded) for the loss of opportunity to have a contract renewed in circumstances where, unlike the present case, there was no contractual right to an extension of a fixed term contract, subject to a right to terminate without cause on three months’ notice. Dr Daynes’ contract with I-MED did not contain a promise of an opportunity or chance to obtain a benefit which was lost upon its wrongful termination: cf. Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357 at [2]. Rather, as noted above, it contained and conferred, on his election, a right to continuing indefinite employment subject to I-MED’s right to terminate without cause on 3 months’ notice.
As part of his claim for damages, Dr Daynes needed to establish on the balance of probabilities that I-MED would not have exercised that right to terminate or would not have exercised that right at the earliest available date following the conclusion of the fixed term. As noted at [84] above, the primary judge did not invoke or place any reliance on any presumption (but not a rule of law) that a contract breaker would act to minimise the loss to itself to the extent that it could lawfully do so. By its Notice of Contention, I-MED contended that his Honour should have done so and that, had he done so, this would only have served to reinforce his finding that I-MED would have exercised its right to terminate without cause at the earliest available opportunity.
The relevant legal principles and authorities were succinctly identified by Meagher JA (with whom Barratt AJA and I agreed) in Martinez as trustee for Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers v Griffiths as trustee for the Griffiths HWL Practice Trust [2019] NSWCA 310 at [29]-[35] (Martinez) as follows:
In PJ [255(7)], the primary judge referred to “ample other evidence to support the defendant's case that it would not have continued to employ the plaintiff.” This evidence was identified by I-MED in its written submissions on appeal, sourced in the Affidavit evidence of Ms Nicholson. This evidentiary material was summarized as follows:
I-MED had commenced succession planning for Dr Daynes’ anticipated retirement,
Dr Daynes had a reputation amongst staff as being temperamental and volatile at work;
I-MED had received complaints about his behaviour which persisted even after he was spoken to;
I-MED found these complaints serious and credible enough to investigate and indeed considered that they required his removal from the workplace from a risk management perspective at least while being investigated; and
I-MED considered his communications (via his solicitors) toward the end of the relationship to be aggressive and antagonistic.
I-MED also submitted that the primary judge’s use of the word “would” in PJ [254] meant that his Honour had excluded the possibility that Dr Daynes’ employment may not have been terminated without cause at all or by the giving of three months’ notice at the time of expiry of the fixed term, namely 2 August 2022. Mr Moses SC’s submission was that:
Absent I-MED proposing a mechanism to accommodate these reputational concerns or incorporating those that had been reasonably proposed in Dr Daynes’ own Calderbank offer of 26 June 2024, he had only one available course if he was to have any chance of reputational repair. He achieved that to a large degree by his success in the proceedings, albeit that he did not secure as large an award of damages as he had hoped.
It was not unreasonable for him to have rejected I-MED’s Calderbank offer. In reaching that conclusion, I have, of course, taken into account the financial differential between what was offered and what was ultimately awarded, as well as the proximity of the offer to the commencement of the trial. Taking all matters into account, notwithstanding the Calderbank offer of 28 June 2024, the costs of the trial should follow the event.