The damages for wrongful dismissal
50 The first respondent was dismissed from her employment on 13 May 2002, without notice. The trial judge held that the reasonable notice to which she was entitled was eight weeks, and the damages awarded represented eight weeks of the salary of $110,000 in the Letter.
51 From 14 May 2002 the respondents established and conducted a financial planning business through a company Platinum Financial Planning Pty Ltd ("Platinum"). Many of their former clients returned to that business. Neither the appellant nor the respondents led evidence as to the income or other benefits derived by the respondents through Platinum from 14 May 2002.
52 The appellant submitted at trial that the respondents had therefore failed to establish the loss suffered by wrongful dismissal, and that on Jones v Dunkel (1959) 101 CLR 298 reasoning it should be taken that evidence of earnings through Platinum would not have assisted their case. (Indeed, it was submitted that it should be inferred that the evidence would have shown that their loss was nil, although this went beyond permissible Jones v Dunkel reasoning.) The trial judge was not assisted by elaboration of the submission. Her Honour said simply that she did not accept the appellant's submission as correct.
53 On appeal only the first respondent's loss was in question. The appellant again submitted that the first respondent had failed to prove her loss, but with some elaboration and without reliance on Jones v Dunkel reasoning. In its submission, in the assessment of her loss the first respondent was obliged to bring to account income received from alternative employment or other financial benefit from use of her earning capacity during the period of reasonable notice, including in the present case the increased value of her interest in Platinum attributable to her involvement in its business during that period. It was submitted that the first respondent bore the onus of establishing those benefits as part of proving her loss, that failure to do so left her loss unproved, and that she was entitled only to nominal damages. The appellant referred to Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR 421; Lavarach v Woods of Colchester Ltd (1967) 1 QB 278; and Goldburg v Shell Oil of Australia Ltd (1990) 95 ALR 711.
54 The first respondent submitted to the effect that any financial benefit referable to use of her earning capacity during the period of notice was brought to account in consequence of her "duty" to mitigate the loss suffered by the wrongful dismissal, and that according to principles of mitigation of loss the appellant bore the onus of establishing not only the benefits which should have been received in mitigation of loss but also the benefits which had been received in mitigation of loss. It submitted that the absence of evidence worked against the appellant, leaving the loss quantified as the eight weeks unpaid salary. The first respondent also referred to Goldburg v Shell Oil of Australia Ltd and Bagnall v National Tobacco Corporation of Australia Ltd, and to TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130.
55 In assessing the damages of a wrongfully dismissed employee there must be brought to account the financial benefit which the employee received, or acting reasonably should have received, from the exercise of earning capacity freed up by the dismissal. Bagnall v National Tobacco Corporation of Australia Ltd and Lavarach v Woods of Colchester Ltd are amongst the many cases which could be cited. In the latter case the employee immediately took other employment and bought a half interest in the new employer. He had to bring to account his salary earned in the relevant period and a sum representing the discounted value of the increase from his endeavours in the value of the half interest in the employer. In Bagnall v National Tobacco Corporation of Australia Ltd Jordan CJ said at 429 that in the case of wrongful dismissal the measure of damages is the salary or wages the employee has been prevented from earning and the value of any other benefits under the contract of employment of which the employee has been deprived -
" … with a deduction of the value to him of the time placed at his disposal by his dismissal - ie, what he has earned, or might have earned if he could by due diligence have obtained similar suitable employment elsewhere during the period:"
56 However, there can be a question of onus. Must the employee prove the financial benefit received (avoided loss) or which should have been received (avoidable loss), including that no benefit was or should have been received, as part of establishing loss? Or can the employee prove only the salary or wages and other benefits lost for the period of notice to which the employee was entitled, or for the balance of a fixed period of employment, with the employer having the burden of cutting down or negating the loss by proving any avoided loss or any avoidable loss?
57 In the case of avoidable loss, the answer is clear. Under accepted principles of mitigation of loss, the onus of proof of failure to take reasonable steps by which financial benefit should have been received is on the employer: see generally Roper v Johnson (1873) LR 8 CP 167 at 181-2; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd at 158; Garnac Grain Company Incorporated v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1140, and for wrongful dismissal, Harding v Harding (1929) 29 SR 96 at 106 and Bagnall v National Tobacco Corporation of Australia Ltd at 430.
58 It does not follow that the onus of proof of avoided loss is also on the employer. Failure to mitigate loss is one thing; suffering no loss or less loss because loss has been avoided, even by taking steps beyond the reasonable steps of the "duty" to mitigate loss, is another thing. Damages are compensatory, and on general principles a plaintiff must prove the loss suffered by the breach of contract and the damages awarded should be no more than the loss suffered. The appellant said that no loss or less loss is suffered where the employee receives income from alternative employment or other benefit from use of the employee's earning capacity during the relevant period, and that the receipt of the benefit is therefore part of proving loss and (at least where it is shown that some benefit was received) it falls to the employee to quantify it.
59 The appellant relied on Goldburg v Shell Oil of Australia Ltd, in which Shell repudiated a contract under which Mr Goldburg and another person were to conduct a petroleum distributorship.
60 The trial judge in that case declined to award damages assessed as "the difference between the profit he would have gained by performing the contract and the profit he could gain in the same field of activity during the period of the contract by the use of the resources which would have been committed to the performance of the contract" (at 714), saying that Mr Goldburg bore the onus of proving "both elements of the measure" and had not proved the second element. His Honour said in this regard that the contract should be regarded "not as analogous to a contract of employment, but as analogous to a contract for the provision of services by means of capital, or capital equipment and labour" (at 713), and so considered inapplicable a passage extracted from Greig and Davis, The Law of Contract -
"Upon breach by an employer of a contract of service the plaintiff employee bears the onus of proving only the remuneration lost which he would have earned if there had not been that breach, the onus lies upon the employer of proving what substitute employment the plaintiff employee ought reasonably to have obtained and what remuneration he would thereby have earned in mitigation of his loss."
61 On appeal Sweeney and Ryan JJ endorsed "the correctness of the approach to the general measure of damages which was taken at first instance" (at 717). They said that they doubted the correctness of the passage in Greig and Davis, discussing at some length the cases cited by the learned authors and other cases and, on the basis of the view at one point expressed "that proof of loss according to the proper measure of damages is an integral part of the cause of action for wrongful dismissal" (at 715), saying that their consideration of the passage in Greig and Davis "reinforced" (at 717) the correctness of the trial judge's approach.
62 The passage in Greig and Davis did not expressly refer to onus in relation to avoided loss. Their Honours' discussion was not directed to onus in relation to avoidable loss, and they appear to have taken the proposition that the employee bears the onus of proving only the remuneration lost which he would have earned but for the breach as implicitly including that the employee did not have to prove avoided loss, and to have questioned that inclusion. I doubt, with respect, that the learned authors had avoided loss in mind. They had said in the preceding paragraph that in assessing the damages flowing from a breach of contract the onus lies on the plaintiff to show the extent of the loss he has suffered, and the passage was in a paragraph then dealing with mitigation in relation to avoidable loss. The cases to which their Honours referred were generally concerned with avoidable loss, and so far as saying that the measure of damages is the remuneration lost less what was earned and what might acting reasonably have been earned (as in Bagnall v National Tobacco Corporation of Australia Ltd, one of the cases) were not concerned with the onus of proof of what was earned.
63 Be that as it may, in saying that their discussion reinforced the trial judge's approach their Honours must have meant that the employee bore the onus of proving the equivalent of the second element to which the trial judge had referred. That element was what Mr Goldburg could gain during the period of the contract during by the use of the resources which would have been committed to the performance of the contract, the equivalent being what the employee could have received from the exercise of the employee's earning capacity freed up by the dismissal. However, what the employee could have received is not what he did receive, nor is it what he should acting reasonably have received; so far as it encompassed what he should acting reasonably have received, it is not correct that the onus of proof is on the employee. Conceptual correspondence is wanting, and I respectfully do not think Goldburg v Shell Oil of Australia Ltd provides clear guidance on the present question.
64 The learned author of McGregor on Damages, 17th ed, states at para 28-002 in his chapter dealing with contracts of employment -
"The measure of damages for wrongful dismissal is prima facie the amount that the claimant would have earned had the employment continued according to contract subject to a deduction in respect of any amount accruing from any other employment which the claimant, in minimising damages, either had obtained or should reasonably have obtained. The rule has crystallised anomalously in this form. It is not the general rule of the contract price less the market value of the claimant's services that applies; instead the prima facie measure of damages is the contract price, which is all the claimant need show. This is then subject to mitigation by the claimant who is obliged to place his services on the market, but the onus here is on the defendant to show that the claimant has or should have obtained an alternative employment."
65 At this point authority is not cited for the defendant's onus, but the learned author's earlier discussion in his chapter dealing with mitigation of loss is relevant. He there first discusses avoidable loss and the onus on the defendant, including at footnote 48 to para 7-019 saying that "[t]he onus is the same for avoidable loss; see para 7-096". He then discusses avoided loss, and says at para 7-096 -
"Where it appears that steps have been taken by the claimant to avoid loss which are to be taken into account in assessing the damages, the onus is on the defendant to prove that, and also how far, loss has thereby been avoided. Thus in The World Beauty, where the claimants' ship had been damaged in a collision while engaged on a charter and the claimants had attempted to mitigate their loss by advancing the commencement of a later charter, it was held in their claim for loss of profits that it was for the defendant to prove the value of the advancement."
66 In Andros Springs (Owners) v World Beauty (Owners); The World Beauty (1970) P 144 it was accepted that the gain from advancement of commencement of the later charter had to be brought to account when calculating damages. The calculation of the gain was disputed. Lord Denning MR regarded the suggested calculations, involving putting the profit from the later charter out at interest, as speculative, saying that a businessman would not do that but would use the money in his business and might make a profit or a loss. In that connection his Lordship said at 154 -
"It must be remembered too, that it is for the defendant to prove the value of the advancement. It is he who prays it in aid in mitigation of damage. He must prove, therefore, the value of it."
67 Fenton Atkinson LJ also considered that the trial judge's calculation was "not realistic from a commercial point of view", and said at 158 -
"The onus was on the respondents, as it seems to me, to prove the value of that advancement of the Mobil charter to the appellants, and I think they left it wholly uncertain that there was any greater benefit to the appellants than the market rate of the Andros Springs as a free ship from June 7 until she would have been required for the Mobil charter."
68 Halsbury's Laws of England vol 12(1) at para 1152 states that the plaintiff has the burden of proving that he has suffered loss and its extent or amount, but "[w]here … the defendant alleges that the plaintiff should have mitigated his loss or that his loss has in fact been diminished or avoided, the burden of proving such matters rests upon the defendant". The citation in relation to avoided loss is The World Beauty. The proposition is repeated in para 1044.
69 To the same effect, in Simonius Vischer & Co v Holt & Thompson (1979) 2 NSWLR 322 Samuels JA, with whom Moffitt P and Reynolds JA relevantly agreed, said at 361 (with citation of The World Beauty and other cases) that the defendant bore the onus of establishing that receipt of a particular sum had to that extent "satisfied, mitigated or avoided" the plaintiff's loss. In Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) FCR 1 at 17 Burchett J, with whom O'Loughlin J agreed, held (with citation of The World Beauty, Simonius Vischer & Co v Holt & Thompson and a number of other cases) that the defendant bore the onus of proving that the plaintiff's loss had been diminished by receipt of a particular sum of money. His Honour said that there is no doubt that the onus in respect of mitigation of loss is on a defendant and "it would be extraordinary if the rule were the other way in respect of an elaboration of it", as I understand it meaning in respect of avoided loss as an elaboration of mitigation in relation to avoidable loss. The World Beauty and these cases were cited in Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443 at [44] (Giles JA, Santow JA and Hunt AJA agreeing), where the benefit in question was delay in payment of a sum of money, for the proposition that "[t]he guilty party bears the onus of proving that loss has been avoided and the extent to which it has been avoided".
70 The measure of damages can differ according to the wrong, and the basic principle that damages for breach of contract are to put the wronged party in the same situation, as far as money can do it, as if the contract had been performed (Robinson v Harman (1848) 1 Ex 850 at 855; 154 ER 363 at 365), qualified by a complex of questions of causation, remoteness and mitigation, readily permits what McGregor on Damages calls an anomalous rule. I respectfully question whether it should be seen as anomalous. The comparison is with a measure of damages according to the contract price less the market value of the employee's services. Contract price less the value of the commodity the subject of the contract is typically the measure of damages where the purchaser of goods fails to accept them, and the vendor's damages are not the contract price but the difference between the contract price and the price at which the goods could be sold at the date of breach (see for example Roper v Johnson at 181-2; the question of mitigation came after the plaintiff's proof of those values.) That may be appropriate where ordinarily there is a market for the goods, but the market for personal services is different in kind; earning capacity and the time available to exercise earning capacity might in economic terms be property, but they are not saleable commodities in all respects to be equated with goods. That can be seen in, for example, Payzu Ltd v Saunders (1919) 2 KB 581 in the recognition of the personal considerations going to reasonableness.
71 In The World Beauty there may have been a market value for the ship's freed-up time, but the gain was said to be greater; in the other cases to which I have referred the avoided loss in question was not simply the market value of a commodity. Avoided loss in some circumstances, including in the case of wrongful dismissal, can be regarded as what is referred to by, amongst others, Professor Burrows in Remedies for Tort and Breach of Contract, 3rd ed, Ch 7, as a compensating advantage, a distinct element in arriving at a wronged party's loss in relation to which it is appropriate to place the onus of proof on the other party: compare Ruthol Pty Ltd v Tricon (Australia) Pty Ltd at [44], [53].
72 There is thus justifiable support for placing the onus of proof of avoided loss also on the employer. The wrongfully dismissed employee's loss is measured by the salary and wages and other contractual benefits of which he has been deprived less the salary or wages and other financial benefits which he received or acting reasonably should have received from the exercise of earning capacity freed up by the dismissal. But it is not correct that the employee has the onus of proving his loss so measured. In relation to avoidable loss, the employer has an onus. In my opinion, it should be accepted that the employer has an onus also in relation to avoided loss, and it was for the appellant to prove the financial benefit received by the first respondent referable to the eight weeks use of her earning capacity.
73 The appellant submitted that it would often be difficult for an employer to prove the financial benefit received by the employee, particularly where it involved the conduct of a business rather than receipt of salary or wages. Any difficulty would also fall upon the employee, and I do not think the submission provides a sound reason for a different conclusion.
74 I add that the appellant submitted on appeal, in the alternative, that the evidence established receipt of financial benefit referable to the eight weeks which extinguished the $16,923. No such submission had been made at the trial, and it may be doubted that it was open to the appellant to make it on appeal. The calculation it proffered was wildly speculative. The correct approach may have been that the benefit was no more than receipt eight weeks earlier than would otherwise have occurred of the rewards of Platinum's business, and that the value of the earlier receipt was unlikely to have been significant. It is not necessary to come to a conclusion.