Allan James Duncan v Kingfleet Holdings Pty Limited trading as Lyster Removals and Storage
[1995] IRCA 444
•01 August 1995
CATCHWORDS
INDUSTRIAL LAW - UNLAWFUL TERMINATION - Abuse of process - Remedy sought by applicant not open on the evidence - application dismissed.
INDUSTRIAL LAW - UNLAWFUL TERMINATION - COMPENSATION under section 170EE(2) of the Industrial Relations Act 1988, is not to be ordered for mere stress, distress, humiliation or disappointment which does not amount to a psychiatric illness.
INDUSTRIAL LAW - UNLAWFUL TERMINATION - COSTS can only be ordered where proceedings have been instituted vexatiously or without reasonable cause and are not available in circumstances where a proceeding was instituted neither vexatiously nor without reasonable cause, but, due to changed circumstances, became an abuse of process.
Industrial Relations Act 1988 ss 170EA, 170EE, 347
Industrial Relations Court Rules, Order 20 Rule 2
Baltic Shipping Company -v- Dillon (1993) 176 CLR 344
Raymond Ernest Grout -v- Gunnedah Shire Council (1995)58 IR 67
Nicholson -v- Heaven & Earth Galley Pty Ltd (1994) 57 IR 50 at 60
Narelle Jones -v- Armas Nominees Pty Ltd t/as Network Rent a Car VI 1245 of 1994 (unreported, 22 December 1994)
ALLAN JAMES DUNCAN -v- KINGFLEET HOLDINGS PTY LIMITED trading as LYSTER REMOVALS AND STORAGE
No. WI 1215 of 1995
COURT: PATCH JR
PLACE: PERTH
DATE: 1 AUGUST 1995
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES REGISTRY
No. WI 1215 of 1995
BETWEEN:
Allan James DUNCAN
Applicant
AND:
KINGFLEET HOLDINGS PTY
LIMITED trading as LYSTER
REMOVALS AND STORAGE
Respondent
BEFORE: PATCH JR
PLACE: PERTH
DATE: 1 AUGUST 1995
REASONS FOR JUDGMENT
(Delivered ex tempore, revised from transcript)
This is an application under section 170EA of the Industrial Relations Act 1988 ("the Act"). The only order the applicant seeks is an order for "compensation".
Mr Ebedes, who appears for the respondent moves, in accordance with Order 20, Rule 2, that, at this stage of the hearing of the matter, the application be dismissed. That rule is as follows:
(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding:
(a) no reasonable cause of action is disclosed;
(b) the proceeding is frivolous or vexatious; or
(c) the proceeding is an abuse of the process of the Court;
the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding.
(2) The Court may receive evidence on the hearing of an application for an order under subrule (1).
In accordance with subrule (2), the Court did receive evidence on the hearing of the application.
The applicant's case is not yet finished, but the applicant has given all the evidence that he wishes to give on the question of what compensation is owing to him. At my instigation, and with the consent of both parties, cross-examination was interrupted for him to give such further evidence as he might want on that particular question, and he was given an opportunity so to do. He was then cross-examined in respect of that part of his evidence and that cross-examination was concluded. I then asked him if there was anything more he wanted to say about the matter, and he said that there was nothing further that he wished to say.
The applicant's employment ceased, to use neutral terminology, on 21 February 1995. He received one week's pay in lieu of notice. He started a new job about 8 weeks later. At the time of the ending of his employment with the respondent, he was in receipt of a salary of $30,000.00 per annum. When one divides 30,000 by 365, (in order to reach the daily rate), and then multiplies that resulting figure by 49, (to allow for the 7 weeks which passed between the expiry of the one week for which the applicant was given pay in lieu of notice, and the commencement of his new full-time job), one reaches the figure of $4,027.40.
The applicant gave evidence today that he earned the sum of $5,189.00 during that 8 week period. This was from contract work that he, through his diligence, for which he is to be commended, was able to find.
As he actually earnt more than he would have earnt if he had remained in the employ of the respondent, it follows that, during that 8 week period, he in fact suffered no financial loss as a result of the termination of his employment. He is, therefore, having mitigated his loss completely, not entitled to any "compensation" under section 170EE(2) for the period.
The applicant's new job, according to his evidence, is a job in which he earns the sum of $37,000.00 per annum, so there is no on-going loss for which he might be compensated.
The applicant also claims compensation under section 170EE(2) of the Act for the stress, distress, humiliation and disappointment which he suffered as a result of the alleged termination of his employment and the alleged manner of the termination of his employment.
On this point, he gave evidence that he had been unemployed for a long time, that when he got the job with the respondent it took a great weight off his shoulders, and it lifted the spirits of the family as a whole. I accept all of that.
His parents, who live in Wales, and are aged 75, came to visit him because he had a job and it was thought by all that he would be able to look after them while they were in Australia for 4 weeks, without them being an undue burden upon him. He lost his job after his parents had been here for 2 weeks, and they were here for a further 2 weeks.
He says that he suffered because his parents suffered, because they felt very guilty at being a financial burden to him at a bad time.
The applicant gave evidence that he had never been dismissed from a job before, and that fact made things worse. He gave evidence that, to tell his wife and parents that he had been dismissed for, what was according to him, no just cause, was very humiliating. He said that he had just recommenced mortgage repayments and had to go back to the bank and tell them that he had been dismissed, and that was also very humiliating. He also found it humiliating and distressing when his friends and acquaintances asked him, "How's the job going?", and he had to tell them the truth.
He said that the ending of his employment caused considerable friction at home. He became very introspective and bad at job interviews, but he managed, he said, to pull himself up, that he was basically a positive person.
He said that he was depressed and that his family was depressed. He said that there was a period of 2 weeks, which was the last 2 weeks of his parents' visit, during which he was very difficult to live with and very difficult to respond to. He said that his confidence had taken a shock and that therefore he had a feeling of insecurity at the beginning of his new job, but that feeling has now passed as he feels he is working well in his new position and is getting positive feedback form his new employer.
The question arises, therefore, in a direct way, as to whether or not, when seeking compensation under section 170EE(2), of the Act, an applicant is entitled to damages for distress, stress, disappointment, or humiliation, or the like.
Section 170EE(2) is as follows:
"If the Court thinks, in respect of contravention of a provision of this Division (other than section 170DB or 170DD) constituted by the termination of employment of an employee, that the reinstatement of the employee is impracticable, the Court may make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate."
I should add here that this matter is being decided on the assumption, but without deciding, that the applicant would succeed in his claim that the termination of his employment was unlawful.
In Baltic Shipping Company -v- Dillon (1992-93) 176 CLR 344, the High Court considered the question of whether a plaintiff in a breach of contract case could recover damages for injured feelings or distress or humiliation resulting from a breach of contract.
Mason CJ, with whom Toohey and Gaudron JJ agreed on this point, said, at page 361:
".....in Addis -v- Gramophone Company Limited (1909) A.G. 488, the House of Lords held that the plaintiff could not recover in an action for damages for breach of contract in respect of his injured feelings and loss of employment prospects arising from the harsh and humiliating manner of his dismissal.
He went on to say:
"The general rule that damages for anxiety, disappointment and distress are not recoverable in actions for breach of contract is, in any event, subject to exceptions to which I shall refer shortly."
The exceptions to which his Honour referred are:
contracts, a purpose of which was to provide a stipulated holiday entertainment or enjoyment;
contracts the object of which is to provide pleasure or relaxation; and
contracts, the object of which is to protect a person from molestation.
His Honour also referred to an exception where the type of damage suffered by the plaintiff is physical inconvenience or physical injury.
His Honour considered the policy rationale underlying the limitations the courts have placed on heads of damage in cases of breach of contract, and concluded, at page 365:
"..... as a matter of ordinary experience, it is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation."
In the same case, Deane and Dawson JJ delivered a joint judgment. They said, at page 380:
"One of the general rules relating to the assessment of compensatory damages for breach of contract which has been accorded the status of settled principle is the rule that a plaintiff is not entitled to recover damages for the "disappointment of mind", distress and injured feelings "occasioned by the breach of contract". That rule, where applicable, represents an essentially pragmatic and judicially imposed assumption which is to be made for the purposes of the application of the second limb of the rule in Hadley -v- Baxendale, that is to say, it is to be assumed that disappointment or distress flowing from the breach of contract would not have been in the contemplation of the parties, at the time they made the contract, as a likely result of breach. As Kirby P commented in the Court of Appeal, it is a result of history, rather than logic, that a different rule evolved in the law of torts. Notwithstanding that the rule is based upon pragmatism rather than logic, we are unable to agree with the suggestion to be found in some recent judgments that it should now be effectively abolished by judicial decision."
They went on to refer to the same sorts of exceptions as Mason CJ had.
McHugh J in his judgment said, at page 394:
"Under the common law, damages are not recoverable for distress or disappointment arising from a breach of contract unless the distress or disappointment arises from breach of an express or implied term that the promisor will provide the promisee with pleasure, enjoyment or personal protection or unless the distress or disappointment is consequent upon the suffering of physical injury or physical inconvenience."
He went on to say, at page 395:
"The rule that damages cannot be recovered for distress arising out of a breach of an ordinary contract was substantially confirmed in Addis -v- Gramophone Company Limited where the House of Lords set aside an award of damages for "the abrupt and oppressive way in which the plaintiff's services were discontinued, and the loss he sustained from the discredit thus thrown upon him." Lord Loreburn LC said "that indemnity cannot include compensation either for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment."
His Honour went on to say after that quote:
"After the decision in Addis, the general rule was so firmly established in England and Australia that in Fink -v- Fink Dixon and McTiernan JJ could say that, in an action for breach of contract, "resentment, disappointment and the loss of esteem or friends are not proper elements."
Moore J of this Court considered the position in relation to actions, in the associated jurisdiction of the Court, for common law damages for breach of the contract of employment, in Raymond Ernest Grout -v- Gunnedah Shire Council (1995) 58 IR 67.
In that case, the applicant was seeking common law damages for wrongful dismissal. In this case, the applicant makes the point that he is not so much seeking common law damages for wrongful dismissal, but is seeking compensation for the unlawful termination of his employment in accordance with section 170EE(2). He seeks to draw a distinction between the two things, and says that Grout -v- Gunnedah Shire Council should be distinguished on that basis.
In Grout -v- Gunnedah Shire Council, under the heading: "Damages for Stress Flowing From The Contractual Breach", his Honour said this:
"The view that has historically been adopted as to the damages which might be awarded for wrongful dismissal was that they were the entitlements that an employee would have enjoyed under the contract of employment had the employee worked during a period of reasonable notice, though subject to the employee's obligation to mitigate the damage. A feature of that approach has been that the employee is not entitled to any damages for any humiliation or distress that might be suffered as the result of the wrongful dismissal. See Addis -v- Gramophone Company Limited (1909) Appeal Cases 488."
His Honour went on to point out that some decisions of New Zealand courts have ceased to adopt what might be thought to be a narrow view of the damages that might be awarded, and cited some of those cases. He went on to say:
"It is a matter that is the subject of contemporary legal debate."
and referred to an article by Gray J of this Court, "Damages for wrongful dismissal - is the gramophone record worn out", which was published in Employment Security 1994 by the Federation Press.
His Honour went on to say:
"The applicant submitted that, having regard to the judgments of the members of the High Court in Baltic Shipping Company -v- Dillon (1993) CLR 344, damages could be awarded for the distress caused to the applicant by the respondent's repudiation of the contract. If the applicant was thereby suggesting that damages could be awarded for what might be described as mere distress or disappointment or humiliation, then it is not apparent that the members of the High Court in Dillon, supra, were expressing the view that Addis, supra, is no longer to be accepted as correctly stating the common law position as it concerns damages for wrongful dismissal. This is so even though Mason CJ and McHugh J plainly indicate or imply that the present principles may warrant reconsideration as part of a review of whether damages can be awarded for distress flowing from a breach of contract. However, the general principles reflected in Addis, supra, are subject to accepted exceptions which include an entitlement to damages for distress associated with physical injury resulting form a breach of contract. Physical injury may be taken include psychiatric illness."
I add here, myself, that physical injury can also be taken to include exacerbation of an existing psychiatric illness.
In my opinion, the applicant's evidence did not go so far as establishing that he suffered a psychiatric illness as a result of the alleged termination of his employment or the alleged manner in which his employment was terminated. In other words, even if he were to prove his case, namely, that his employment had been unlawfully terminated, he would not succeed in proving that the distress and humiliation and suffering caused to him amounted to a psychiatric illness. His evidence did not go that far and there was no medical evidence upon which I could conclude that he had suffered a psychiatric illness. Indeed, the applicant gave no evidence that he had even sought medical attention.
In my view, the same policy considerations as enunciated by the High Court in Baltic Shipping Company (above) for limiting damages for distress, humiliation, suffering, and the like, in breach of contract cases apply to applications for compensation under section 170EE(2) of the Act. It is essentially a pragmatic rule limiting damages in order to avoid damages the nature of which cannot be reasonably predicted at the commencement of, in the general case, the contract or, in this particular case, the contract of employment.
Although, strictly speaking, Moore J's decision in Grout -v- Gunnedah Shire Council (above) is limited to common law damages for breach of the contract of employment - that is to say, it was a breach of contract case per se and not compensation under section 170EE(2) of the Act - the same pragmatic considerations must, in my opinion, apply.
An examination of the scheme of Division 3 of Part VIA of the Act also leads me to conclude that "compensation" under section 170EE(2) is not available for mere distress, stress, humiliation or disappointment.
If the Court orders reinstatement, then the Court may make an order under section 170EE(1)(b)(ii) "requiring the employer to pay the employee remuneration lost ....."
An order for lost remuneration is clearly limited to the direct financial loss of the employee.
If, on the other hand, the Court determines that reinstatement would be impracticable, then the Court may make an order under section 170EE(2) "requiring the employer to pay the employee compensation of such amount as the Court thinks appropriate."
The Court is required to first consider whether reinstatement is impractical, and only then, if it does so decide, may it consider whether or not to order "compensation". (See Nicholson -v- Heaven & Earth Galley Pty Ltd (1994) 57 IR 50, at 60).
An order for "compensation" under section 170EE(2) is an alternative order, only available to the Court if "reinstatement" and "lost remuneration" orders are not made, due to reinstatement being impractical. "Compensation" is awarded in lieu of "reinstatement" and "lost remuneration".
Logically, therefore, "compensation" orders should be subject to the same limitations as "lost remuneration" orders.
For the above reasons, compensation under section 170EE(2) of the Act is not to be ordered for mere stress, distress, humiliation or disappointment which does not amount to a psychiatric illness.
In my opinion, the decision of another Judicial Registrar in Narelle Jones -v- Armas Nominees Pty Ltd T/as Network Rent A Car, VI 1245 of 1994 (unreported, 22 December 1994) to the contrary, is, with respect, wrong, and I decline, therefore, to follow it.
So, at the end of the day, even if the applicant were to prove his case in every respect, he would not be entitled to any compensation. Nor would he be entitled if to, he had claimed it, (which he has not), any common law damages in the associated jurisdiction of the Court for breach of the contract of employment. The only order he seeks is an order for compensation under section 170EE(2) of the Act.
What then is the result of this? In my opinion, now that the evidence has reached the stage where it is clear that the applicant is not entitled to, even if he were to succeed in providing everything which he claims he could, any compensation under section 170EE(2) of the Act, and that being the only remedy he seeks, the proceeding, if it were to continue, would be an abuse of the process of the Court.
Therefore, in accordance with the power given to the Court under Order 20 Rule 2(1), I order that the proceedings be dismissed.
Costs
In this matter the respondent applies for costs. I have just dismissed the application under Order 20 Rule 2, because, as it turned out in evidence today, the applicant would not be entitled to any compensation under section 170EE(2) of the Act and that is the only order he seeks. However, at the time the applicant instituted the proceedings, namely, 2 March 1995, he was prima facie at least entitled to compensation because he had not yet earned the money from subsequent casual employment (in mitigation of his loss) which meant that he suffered no financial loss as the result of the alleged termination of his employment. Therefore, it cannot be said that he, in the words of section 347 of the Act, "instituted the proceeding vexatiously or without reasonable cause."
A distinction has to be drawn between proceedings which would be an abuse of the process of the Court if they continued, which is the case here, and proceedings which were instituted, in circumstances in which it could not be said that they were vexatious or without reasonable cause. The application for costs is therefore refused.
I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment of Judicial Registrar Patch.
Associate: Caroline Sternberg
Date: September 1995
Appearances:
Applicant: In person
Counsel for Respondent: Mr B Ebedes
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES REGISTRY
No. WI 1215 of 1995
BETWEEN:
Allan James DUNCAN
Applicant
AND:
KINGFLEET HOLDINGS PTY
LIMITED trading as LYSTER
REMOVALS AND STORAGE
Respondent
BEFORE: PATCH JR
PLACE: PERTH
DATE: 1 AUGUST 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The application be dismissed.
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