Walsh v Police Association [2000] VSC 292

Supreme Court of Victoria|2000-07-26|Before: Gillard J

Interlocutory injunction - contract of employment - purported termination - frustration - balance of convenience - discretionary factors - injunction granted.

This is the return of a summons in a proceeding instituted by an origination motion seeking interlocutory relief pending the hearing of the proceeding.

The plaintiff, Daniel Maurice Walsh ("Mr Walsh") is the Secretary of The Police Association in this State. He was appointed secretary to the association with effect from 4 December 1990 and his contract of employment was in written form, executed by the parties on 2 July 1991. From about 1997 onwards his health began to deteriorate due to the duties and responsibilities imposed upon him as secretary of the defendant. It became impossible for him to continue his duties from about November 1998 and in March 1999 he was diagnosed with chronic fatigue syndrome. He has not returned to work.

The defendant, The Police Association, ("The Association") is a corporation established to promote, protect and represent the interests of police officers in this State. It has approximately 9,700 members.

The basic facts which led to the dispute and ultimately the proceeding in this court can be briefly stated.

By the beginning of this year the Executive of The Association formed the belief that it was difficult for The Association to properly conduct its affairs in the absence of the secretary. By letter dated 3 February 2000, The Association sought information from Mr Walsh as to when he was likely to return to work, information concerning his condition and copies of reports from his treating doctors.

Discussions took place between Mr Walsh and The Association and the lawyers acting for both parties and at a meeting of the executive of The Association held on Tuesday 2 May 2000 the Executive considered Mr Walsh's employment. He was invited to attend. Through his solicitors the Executive was informed that he was not in a fit condition to attend the meeting and no other person could appear on his behalf.

The question of his employment was further considered and on 23 May 2000 at a special Executive meeting a motion was passed that noted that Mr Walsh had been absent from duty since November 1998. Further, that it had sought medical reports from Mr Walsh who suggested The Association obtain the information from the employer's insurer. The Executive, having examined the medical information which indicated that Mr Walsh would be unfit for duty for the foreseeable future and further noting that it was becoming increasingly difficult for The Association to conduct its business in the absence of its key administrative officer, resolved as follows -

(a) TO AUTHORISE THE ASSISTANT SECRETARIES TO CONTINUE WITHOUT PREJUDICE DISCUSSIONS WITH MR WALSH AS TO A RESIGNATION PACKAGE. ON THE GROUNDS OF ILL-HEALTH;

(b) TO AUTHORISE THE ASSISTANT SECRETARIES TO COMMIT THE ASSOCIATION TO A MAXIMUM AMOUNT EQUIVALENT TO TWELVE MONTH'S SALARY PLUS ACCRUED ANNUAL LEAVE ENTITLEMENTS IN SECURING SUCH RESIGNATION AND FULL RELEASE;

(c) IN THE EVENT THAT A SETTLEMENT AGREEMENT IS NOT REACHED BY 30 MAY, 2000 OR AS TO SUCH DATE THE ASSISTANT SECRETARIES DETERMINE THE FOLLOWING RESOLUTION SHALL BECOME 0PERATIVE:

(i) THAT GIVEN MR. WALSH'S INABILITY TO PERFORM HIS DUTIES FOR THE FORESEEABLE FUTURE DUE TO ILLNESS, THE CONTRACT OF EMPLOYMENT BETWEEN THE ASSOCIATION AND MR. WALSH FOR HIS EMPLOYMENT AS SECRETARY BE REGARDED AS' HAVING BEEN FRUSTRATED.

(ii) THAT GIVEN THIS FRUSTRATION OF CONTRACT, MR. WALSH'S EMPLOYMENT AS SECRETARY BE TERMINATED BY PAYMENT OF 12 MONTHS' SALARY IN LIEU OF THE GIVING OF NOTICE TOGETHER WITH PAYMENT OF ACCRUED ANNUAL LEAVE ENTITLEMENTS.

(iii) TO THANK MR. WALSH ON BEHALF OF THE ASSOCIATION FOR HIS YEARS OF DEDICATED SERVICE, AND WISH HIM A RETURN TO GOOD HEALTH.

(iv) THAT THE EXECUTIVE WRITE TO MR. WALSH INFORM HIM OF THE RESOLUTIONS PASSED. (v) THAT THE POSITION OF SECRETARY BE DECLARED VACANT AND THAT A RECRUITMENT PROCESS COMMENCE FORTHWITH.

(vi) THAT THE FUTURE TERMS AND CONDITIONS OF EMPLOYMENT. OF THE SECRETARY BE THE SUBJECT OF A REPORT BY THE ASSISTANT SECRETARIES FOR CONSIDERATION AT (sic)".

Settlement was not reached by 30 May 2000 and The Association has called a meeting of the members of The Association to approve the termination of Mr Walsh's employment.

The meeting has been called for 30 July 2000 and the Notice of Meeting notes that the Executive Committee met on 15 June 2000 and passed a resolution to be put to the General Meeting. The motion to be put to the meeting is as follows -

"THIS GENERAL MEETING OF MEMBERS OF THE POLICE ASSOCIATION NOTES THAT:

(a) THE SECRETARY HAS BEEN ABSENT FROM DUTY SINCE NOVEMBER 1998 DUE TO ILLNESS AND HAS NOT PERFORMED DUTIES SINCE THAT TIME.

(b) THE POSITION OF SECRETARY CARRIES IMPORTANT RESPONSIBILITIES AND IT IS UNDESIRABLE FOR THE ASSOCIATION TO CONTINUE TO OPERATE IN THE ABSENCE OF ITS KEY ADMINISTRATIVE OFFICER.

(c) THIS GENERAL MEETING OF MEMBERS OF THE POLICE ASSOCIATION THEREFORE RESOLVES TO APPROVE THE DECISION OF THE EXECUTIVE TO TERMINATE MR WALSH'S EMPLOYMENT AS SECRETARY WITH EFFECT FROM 16 JUNE 2000, THUS ENDING MR WALSH'S SECONDMENT FROM VICTORIA POLICE TO THE POLICE ASSOCIATION."

It is to be observed that the original resolution purported to terminate his employment on the ground of frustration, and having reached that conclusion the resolution went on to provide that his employment was to be terminated by payment of 12 months' salary in lieu of notice.

If the Executive was seeking to invoke the doctrine of frustration of contracts, then as a matter of law if a contract is frustrated the legal effect is that it is discharged. It does not take any further act to give effect to the frustration. Yet the Executive purported to terminate the contract by payment of 12 months' salary in lieu of notice. This is inconsistent with the contract being discharged by frustration.

Further, that the Notice of General Meeting seeks an "approval" of what the Executive had done. This appears to give part effect to a term of the contract of employment and also to give part effect to Article 48 of the Articles of Association of The Association. I will return to this hereafter.

Mr Walsh contends that his contract of employment has not been frustrated and that the Executive has no power to terminate his contract except in accordance with its terms which do not include any right to terminate for "frustration" whatever that may mean in the context or by notice or payment in lieu of notice.

His originating motion seeks a declaration that the resolution by the Executive was unlawful, void and of no legal effect and a declaration that he has continued to be employed as Secretary of The Association. He claims an injunction both permanent and interlocutory restraining The Association from calling a meeting of members and from giving effect to the resolution of the Executive. In my opinion an originating motion is an inappropriate procedure and the proceeding should be by way of writ. I discussed this question with counsel and it was agreed by both sides that the court should direct that the motion be treated as a writ and that a statement of claim be delivered to clearly define the issues.

Mr Walsh seeks an interlocutory injunction to restrain The Association from calling the meeting and further, giving effect to the resolution of the Executive.

It is necessary to identify the real issue on this application. Mr Walsh contends that the bringing to an end his contract of employment was contrary to law and ineffective. He seeks to be restored to his position as an employee and that the position be preserved pending the trial of the proceeding. In other words, restoring the status quo to the position it was prior to the alleged unlawful act and preserving the position until the trial of the proceeding to determine the validity of what the Executive purported to do.

At this point it is necessary to briefly state the principles which guide a court on an application for an interlocutory injunction.

The court has an inherent power to grant an injunction. Jurisdiction is now the subject of statute. Section 37(1) of the Supreme Court Act 1986 provides -"The court may by order, whether interlocutory or final, grant an injunction or appoint a receiver if it is just and convenient to do so."

It is clear from sub-s.(2) that the order may be made subject to terms and conditions.

It is observed that the jurisdiction is indeed a wide one. It requires the court to be satisfied of two matters, namely, that it is just, and convenient, to grant an order.

An interlocutory injunction is merely provisional in its nature and does not conclude or determine any rights. Its object is to preserve the position which is in dispute in statuo quo until the hearing and determination of the dispute or further order. The court does not in general seek to anticipate the determination of the right but merely gives its opinion as to whether there is a serious question to be determined and if the case has been made out for the preservation of the right which has been breached or threatened.

First, it is necessary for the party claiming the injunction to establish that he has a right which is recognised as legal or equitable and there is an infringement or threatened infringement of that right by some unlawful act.

The second matter that has to be considered is the question whether there is a serious or substantial question to be decided or, depending on the nature of the relief sought, the plaintiff has a prima facie case. The two extremes are exemplified by the leading authorities of American Cyanamide Co v Ethicon Ltd [1975] UKHL 1; (1975) AC 396 and Beauchamp Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618. The established view today is that the applicant has to prove that there is a serious question to be decided. See Castlemaine Tooheys Ltd v South Australia [1986] HCA 58; (1986) 161 CLR 148 at 153 per Mason CJ.

The third matter that has to be addressed is the balance of convenience which means that the plaintiff must establish that if the injunction were refused he would suffer a greater injury than the defendant would suffer if the injunction was granted.

The final matter concerns the discretionary factors that may be applicable to the particular case. For example, delay causing prejudice or a failure by the plaintiff to disclose all relevant matters.

In the majority of cases where a plaintiff seeks to preserve the status quo or alternatively to restore the status quo to the position it was prior to the dispute arising, the serious question to be decided test is the applicable one. In this regard the question of the balance of convenience assumes considerable importance and if the court was of the view that the serious question to be decided consideration showed a weak plaintiff's case, the strength of his case on the balance of convenience may tilt the balance in favour of granting the relief. I refer to what Sir George Lush said in Slater Walker Superannuation Pty Ltd v Great Boulder Gold Mines Ltd [1979] VicRp 13; (1979) VR 107 at 110, quoted with approval by the Full Court in Magna Alloys and Research Pty Ltd v Coffey [1981] VicRp 3; (1981) VR 23 at 28.

Most applications, and this is no exception, are heard on affidavit material untested in any way. The court is not in a position to resolve disputed questions of fact and often time constraints make it difficult for the court to resolve complex and difficult questions of law.

But that is not to say that the court should not where possible make an attempt to form some view of the strength of the applicant's case. That of course is not an invitation to the court to speculate. But in some cases it is possible to make some assessment of the strength or otherwise of the two cases.

In Series Five Software Ltd v Clarke (1996) 1 All ER 853, Laddie J held that a court was not precluded from considering the strength of either party's case on an application for interlocutory relief, but should not attempt to resolve difficult issues of fact or law and express a view as to the strength of the respective cases unless it was apparent from the affidavit evidence and exhibits that one party's case was much stronger than the other. It is a trite observation to make that each case must depend upon its own circumstances. Nevertheless, I agree with the general approach stated by Laddie J bearing in mind that the material may be inadequate, incomplete and has not been tested, but nevertheless sometimes the court can express a view and this may give some assistance to the parties to resolve their dispute earlier rather than later. However, a court should be wary of doing this unless it was able to form a firm opinion based on the evidence which the court was prepared to rely upon.

Mr Walsh executed a written contract of employment with The Association.

It is dated 2 July 1991. It was the subject of negotiation between Mr Walsh and solicitors acting for The Association.

The contract sets out the duties of Mr Walsh, his salary package, leave, sick leave and long service leave.

The contract is for an indefinite period. It dealt with dismissal in these terms -

"Daniel Maurice Walsh may be removed or suspended by the Executive for misconduct or neglect of duty pending the decision of the majority of the members present at a general or special meeting called by the President within two calender months of such removal or suspension to deal with such removal or suspension. The Secretary shall have the right to be heard at such general or special meeting in reply to any charge laid against him. Such meeting may ratify such removal or suspension of the Secretary or reinstate him to his position. (As per legal advice received from Maurice Blackburn and Co). In the event that Daniel Maurice Walsh is removed or suspended from office he shall be furnished in writing the circumstances on which the grounds of the alleged misconduct or neglect of duty are based. ... "

There is no other provision in the contract dealing with removal or termination of the contract by either side. Evidence concerning negotiations was placed before the court and matters raised by the solicitors then acting for The Association were, inter alia, what was to be the length of the contract, the question of dismissal and termination in the case of a breach of contract to be predicated on substantial breach.

It is clear that consideration was given to the question of dismissal but in the end the parties agreed to the dismissal being in the terms stated in the contract of employment. These facts objectively established are relevant to the question of construction of the written contract of employment - see Codelfa's case [1982] HCA 24; (1982) 149 CLR 337 at 352.

In this regard it is necessary to refer to the Articles of Association.

The articles provide for the appointment of an Executive Committee consisting of 12 members of The Association and the business and affairs of it are under the management of the Committee. See Article 18(a).

Under Article 32 the Executive may appoint a secretary which is subject to the approval of the members of The Association at a meeting. Articles 46-48 (inclusive) are concerned with the secretary and state his powers and duties.

"48. The Secretary may be removed or suspended by the Executive for misconduct or neglect of duty pending the decision of the majority of the members present at a general or special meeting called by the President within two calender months of such removal or suspension to deal with such removal or suspension. The Secretary shall have the right to be heard at such general or special meeting and reply to any charge laid against him. Such meeting may ratify such removal or suspension of the Secretary or reinstate him to his position."

Mr Walsh contends that the Executive had no right to terminate his employment except in accordance with the express provision in his contract of employment which is in the same terms as Article 48. Further, insofar as the Executive purported to bring the contract to an end on the ground of frustration in law, the contract had not been frustrated.

It is somewhat difficult to determine precisely what the Executive intended. The difficulty arises as to whether it intended to use the word "frustration" in a legal sense or in a general sense. If the former, then the step taken to terminate the contract by payment of salary in lieu of notice is inconsistent with this intention.

In my opinion there is a serious question to be tried with respect to the purported termination of employment of Mr Walsh. Mr J.R. Dixon for the defendant conceded that there was a serious question to be decided and in my opinion his concession was correct.

The circumstances in which the contract of employment can be brought to an end depend upon the construction of his contract of employment, construed in its setting taking into account the objective circumstances known to the parties at the time. There is a real dispute as to whether The Association is confined to the express term in the contract of employment or whether there are implied terms with respect to bringing the contract to an end. Further, there is the difficult question of whether the contract has been frustrated which involves a question of construction and fact. See Codelfa's case, supra at pp.356 et seq.

It has been recognised that in contracts of employment, the contract can be frustrated by the failure of a party to provide personal services. But whether or not the contract has been frustrated in law in the present matter will depend upon the construction of the contract and also disputed questions of fact concerning the health of Mr Walsh and whether he can resume his duties.

In this regard I refer to the case of Morgan v Manser (1948) 1 KB 184. Streatfeild J at p.191 after considering the authorities stated the principles which were applicable. He stated that the event or changed circumstances had to go beyond what was contemplated by the parties at the time when the contract was entered into. In regard to a contract of employment it may be difficult for an employer to successfully establish frustration of a contract when the parties have contemplated sick leave and sick leave of some substantial duration. That is of course not to say that in a particular case frustration will not occur and bring the contract to an end.

These are all matters that will have to be considered and determined after a full trial which will investigate all the relevant facts including the surrounding circumstances objectively known to the parties at the time of execution of the contract of employment.

The plaintiff has established that there is a serious question to be decided.

Both parties maintain that the balance of convenience favours their case.

Prior to the resolution of the Executive, Mr Walsh was employed by The Association and had been for some ten years. He was on sick leave and had been on sick leave for approximately 17 months. As a result of an act by the Executive which it is contended was unlawful and contrary to the terms of his contract of employment, the Executive purported to terminate the agreement. The Association has been without an active secretary for about 20 months and in the meantime the Assistant Secretary has discharged the office and more recently two more Assistant Secretaries have been appointed to perform the workload.

The plaintiff's employment is remunerated by a substantial package which is in excess of what one would expect Mr Walsh would receive as a senior sergeant in the force, carries with it prestige and status and further, the evidence reveals that there is a possibility that he could resume his employment although not in the foreseeable future. If effect was to be given to the purported termination of his employment by the Executive then the Executive no doubt would appoint another secretary and make it impossible for Mr Walsh to resume his duties if he is successful in the proceeding. Hence, to deny him an injunction would cause him considerable damage.

Further in this regard he would lose the opportunity to seek employment elsewhere whilst holding down a job.

As against this if the injunction is granted then The Association operates as it has done in the past 20 months when Mr Walsh first suffered health problems.

If the parties expeditiously complete the interlocutory steps one would expect that a trial of the proceeding could take place within six months. Hence, from The Association's point of view there could be a further delay of six months but it is quite clear that the Assistant Secretaries are able to carry out the duties which are to be performed by the person occupying the office of Secretary.

In my opinion the balance of convenience favours the plaintiff.

One of the prime objects of granting an interlocutory injunction is to maintain the status quo until the dispute between the parties is investigated, considered and determined and hence enable the court to do justice between the parties.

Mr Dixon on behalf of The Association submitted that the status quo was in fact the position prior to the institution of the proceeding, namely, that the employment had been terminated. He referred me to what Lord Diplock said in Garden Cottage Foods Ltd v Milk Marketing Board (1984) AC 130 at 140. However, on a proper reading of what his Lordship said the status quo clearly depends upon the particular circumstances and it would be unjust to the plaintiff if a defendant could by an unlawful act obtain an advantage which could not be reversed because it was the state of the circumstances immediately prior to the institution of the proceeding.

In my opinion the issue between the parties is whether the Executive's resolution was lawful or unlawful. The relevant status quo is the relationship between the parties prior to the passing of the resolution.

In my opinion the court should proceed on the basis that the status quo is that which existed immediately prior to the execution of the resolution.

It is submitted on behalf of the defendant Association that the plaintiff will not suffer irreparable harm if his contract of employment has been unlawfully terminated and that damages are an adequate remedy.

In State Transport Authority v Apex Quarries [1988] VicRp 26; (1988) VR 187, Kaye J at p.193 stated what the proper test was. His Honour said -

"The proper test in these circumstances is not whether damages would provide the plaintiff with an adequate remedy, but rather the test is as was formulated by Sachs LJ in Evans Marshall and Co Ltd v Bertola S.A. (1973) 1 WLR 349 and 379 ... - 'Is it just, in all the circumstances, that a plaintiff should be confined to his remedy in damages?' "

In my opinion the plaintiff is arguably entitled to a permanent injunction and that damages would not be an adequate remedy. First, there is a degree of difficulty about assessing damages in that the contract is arguably for an indefinite period. Secondly, a termination immediately affects his reputation. Further, he wishes to retain his employment with The Association. Finally, he suffers a distinct disadvantage if he has to go into the job market seeking employment without the benefit of still being in employment. In my opinion it is arguable that it is not just in all the circumstances that Mr Walsh should be confined to his remedy in damages.

Again, this is a question more appropriate for determination after a full trial has investigated all the facts and upon a full consideration of the law.

Next, it is contended that an interlocutory injunction would operate in effect to compel the performance of a contract of employment, an outcome which equity is extremely reluctant to sanction. In considering this issue, I emphasise that the rule that equity will not compel parties to remain in a contract of employment is a general rule subject to the particular circumstances and secondly, emphasise that the question is more appropriate for determination after full investigation of the facts and not at this early stage.

This case is somewhat different to the run of the mill contract of employment cases where the relationship between the employer and employee has broken down and is irretrievably destroyed. There is no question here of a loss of faith in Mr Walsh, there is no question of misconduct or neglect of duty on his part, nor is there any evidence to suggest that the parties could not hereafter conduct the employer-employee relationship without any tension or pressure. In my opinion at this interlocutory stage the court could not say with any confidence that Mr Walsh would not obtain a permanent injunction and indeed I go one step further and say that Mr Walsh would have good prospects of obtaining a permanent injunction even though it means that the parties must continue their present relationship.

Mr Dixon also submits that given the terms of the Articles of Association the ultimate decision as to whether or not the plaintiff remains in employment is a matter for the members of The Association in general meeting. In my opinion that is an over-simplification of the true position. If his employment had been validly terminated on the ground of either misconduct or neglect of duty then the final decision does rest with the members of The Association under Article 48.

But no submission was put and there is no evidence to suggest that Mr Walsh has been guilty of misconduct or neglect of duty. Hence, on the face of it, Article 48 does not apply. So it is not a question of the ultimate decision resting with the members of The Association.

I do not accept the submission that this constitutes a discretionary basis for refusing an interlocutory injunction.

In my opinion there are no discretionary considerations which would at this interlocutory stage result in the plaintiff not obtaining interlocutory relief to preserve the status quo as it existed immediately prior to the disputed legality of what the Executive resolved to do with respect to Mr Walsh's employment.

In my opinion Mr Walsh is entitled to interlocutory relief pending the trial and determination of the issues between the parties. In reaching that conclusion I have not overlooked the fact that there is some controversy concerning the medical evidence of Mr Walsh's condition and there is a degree of speculation as to when he may return to work if at all. But these matters clearly are matters for full investigation at trial at which stage the condition of Mr Walsh may have changed either for the better or worse.

Subject to the submissions of counsel I propose to make the following orders -

Upon the plaintiff undertaking through his counsel to abide by any order which this court may make as to damages in case this court shall be hereafter of the opinion that the defendant shall have sustained by reason of this order which the plaintiff ought to pay:-

(i) That pursuant to Rule 45.05 of the Rules of Court, the requirements of Rule 5.03(1) and Rule 8.02 be dispensed with and authority be given to the plaintiff to commence the proceeding by originating motion in form 5C.

(ii) That the origination motion be treated hereafter as a writ of summons.

(iii) Until the hearing and determination of this proceeding or until further order -

(a) The defendant, its proper officers, servants and agents be restrained from putting the resolution of its Executive passed on 23 May 2000 which purported to remove the plaintiff from his position as Secretary of the defendant with effect on and from 16 June 2000 to a meeting of the members of The Association.

(b) The defendant, its proper officers, servants and agents be restrained from otherwise endorsing or giving effect to the purported resolution of the defendant's Executive passed on 23 May 2000 removing the plaintiff from his employment with effect on and from 16 June 2000.

(iv) That the plaintiff deliver and file his statement of claim on or before 8 August 2000.

(v) That the defendant deliver and file its defence on or before 21 August 2000.

(vi) That there be mutual discovery by affidavit delivered and filed on or before 28 August 2000.

(vii) That inspection take place on or before 5 September 2000.

(viii) That the proceeding be referred to the Listing Master in September 2000 for fixing a date for trial with such priority as she can give it in all the circumstances.

(xi) That the plaintiff's solicitors draw up this order and it be signed by a judge pursuant to Rule 60.04(1) of the Rules of Court.

At a glance

Court

Decision date

Before

Source

Judgment (97 paragraphs)

Parties

Cases Cited (3)