Ryan v Australian College of Mental Health Nurses Incorporated
[2019] ACTSC 268
•1 October 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Ryan v Australian College of Mental Health Nurses Incorporated |
Citation: | [2019] ACTSC 268 |
Hearing Date: | 24 September 2019 |
DecisionDate: | 1 October 2019 |
Before: | Crowe AJ |
Decision: | See [42] |
Catchwords: | PRACTICE AND PROCEDURE – Application for the continuation of an injunction – employment law – whether an injunction restraining the board from terminating the employment of its CEO should remain in place – whether there is a serious question to be tried – whether damages are an appropriate remedy – whether the balance of convenience favours the continuation of the injunction |
Cases Cited: | Bartlett v Australia & New Zealand Building Group Ltd [2016] NSWCA 30; 92 NSWLR 639 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Walsh v Police Association [2000] VSC 292; 140 IR 58 |
Parties: | Kim Ryan (Applicant) Australian College of Mental Health Incorporated (Respondent) |
Representation: | Counsel R J Arthur (Applicant) M Murphy (Respondent) |
| Solicitors Badgery & Rafferty Lawyers (Applicant) Lynch Meyer Lawyers (Respondent) | |
File Number: | SC 429 of 2019 |
Crowe AJ
By Amended Application in Proceeding (the application) Kim Ryan (the applicant) seeks an order restraining the Australian College of Mental Health Nurses Incorporated (the respondent) from terminating her employment with that organisation. Mr Arthur, counsel for the applicant, indicated that the precise terms of the orders sought are a little different from that set out in the application. In essence, the applicant now seeks an order requiring the respondent to comply with cl 14.2 of the written employment contract between the parties before taking any steps to terminate her employment under cl 14.1 of that contract. Mr Murphy, counsel for the respondent, advised that his client was content for the application to proceed on that basis.
Factual Background
The applicant is a registered nurse who al so has credentials as a mental health nurse. She is 60 years of age. She has been a member of the respondent since 1987. She is also a Fellow of the College. In 2004 she was appointed as the Chief Executive Officer (CEO) of the respondent. She has had a distinguished career representing the mental health nursing profession in various peak bodies in Australia, culminating in the receipt of the inaugural Australian Mental Health Prize in December 2016.
The respondent has a membership of around 3,000, with gross annual revenue of approximately $2.5M. The bulk of the income of the respondent comes from membership activities. However, a significant amount is also obtained from project funding from the Commonwealth and State/Territory governments. It has nine full-time and four part-time staff, who report to the CEO.
On 11 May 2017, the parties entered into a written contract in relation to the employment of the applicant. The terms relevant for current purposes are:
2.Appointment to Position
2.1The Employee will be employed as the Chief Executive Officer (CEO) and will serve the Employer in that capacity upon the terms and conditions contained in this agreement and in accordance with the Employer’s policies and procedures.
2.2The Employee shall report directly to the President or delegate.
3.Term of Agreement
This Agreement will operate for a period of three years commencing 11 May 2017 and, subject to clause 14, expiring on 10 May 2020.
…
9Performance Review
9.1This Agreement is subject to the following conditions:
(a)Development of, and Board agreement to, KPIs at the commencement of the review period.
(b)A satisfactory performance review. The performance review will be conducted by the President or delegate and will be based on the duties, functions and responsibilities (Section 7.1) and agreed performance objectives, key performance indicators (Schedule 1) and targets determined at the commencement of the review period.
(c)Within four (4) weeks of completing the performance review, the Employer shall provide the Employee with a written statement giving details of the performance outcome and any recommendations or directions concerning the Employee’s future performance.
…
13.Renewal of Agreement
(a)The Employer shall no later than two (2) months before the Expiry Date, advise the Employee in writing of its intention to either advertise the position, or offer the Employee re-appointment to the position.
(b)Where the Employer offers the Employee re-appointment, the Employer shall advise the Employee of the terms of employment relating to the offer of re-appointment.
(c)Where the Employer offers the Employee re-appointment, the Employee shall advise the Employer, no later than one (1) month before the Expiry Date, of their acceptance or rejection to the offer of re-appointment.
(d)The parties may agree, in writing, to vary the time periods set in this clause.
14.Termination of Agreement
14.1Termination during Term of Agreement
(a)Subject to clause 14.2 and 14.3, the Employee’s employment may be terminated at any time by the Employer, upon giving three (3) months' notice in writing. The Employer, at its discretion, may pay the Employee in lieu of the notice period not served by the Employee at the rate of the Employee's termination salary, or require the Employee to serve part or all of that period without attending work and/or performing duties.
(b)If the Employee resigns a one (1) month notice period in writing applies. If the Employee declines to serve part or all of that notice period without the agreement of the Employer, then the Employer may withhold money from the Employee's pay entitlements equal to the amount of notice that the Employee failed to give. ·
(c)If the Employee is terminated solely by reason of redundancy, takeover or merger of the Employer, in addition to any untaken leave or other entitlements, and/or payment in lieu of notice outlined in clause 14.1 (a), redundancy provisions in accordance with the Fair Work Act 2009 will apply.
14.2Unsatisfactory Performance Rating
The Employee's contract may be terminated if the performance rating at any of the reviews is unsatisfactory and is subject to: ·
(a)The Employer providing written advice on the areas of the Employee's performance requiring improvement;
(b)The Employer and the Employee agreeing to a reasonable timeframe in which to demonstrate improvement in any area identified in clause 14.2 (a); and
(c)The Employer will provide monitoring and guidance during the time frame set in clause 14.2 (b).
14.3Immediate Termination
This agreement may be terminated immediately by the Employer by giving written notice to the Employee and without being required to provide any compensation or payment in lieu of notice if (but not limited to) the Employee:
(a)wilfully commits any breach of this agreement; or
(b)in the opinion of the Board (or its delegates) is guilty of any misconduct, neglect of duty, fraud or dishonesty; or
(c)fails, or refuses to comply with any lawful direction given by the Employer through its
authorised representative; or
(d)becomes bankrupt or makes an arrangement or composition with their creditors; or
(e)is convicted of a criminal offence which within the reasonable opinion of the Board
brings serious disrepute to the Employer.
14.4Termination of Employment at Expiry Date
(a)Where the Employer notifies the Employee in accordance with clause 13 that the Employee will not be re-appointed, then the Employee's employment will terminate on the Expiry Date unless the Employer and the Employee agree that the Employee's employment will continue in an alternative role.
(b) ln circumstances where the Employee's employment is continued beyond the Expiry Date, the Employee's employment may be terminated by the Employer in accordance with the provisions of clause 14.1 unless both parties agree otherwise.
14.5No further Claims
If this agreement is terminated under clause 14.2 or 14.3, the Employee will have no further claim against the Employer for compensation for loss of office or otherwise in respect of that termination.
On 16 July 2019, the applicant received an amended unsatisfactory performance review from the Board of the respondent. The original review had been provided on
2 July. It was amended after correspondence from, and a meeting with, the applicant. On 6 August 2019, the applicant wrote to the President of the respondent taking issue with the substance of the review and also the procedure adopted by the Board in issuing her with the findings of the review. She requested that the review be withdrawn and that the Board appoint a consultant to assist the parties work through the performance review process. The letter sought detailed clarification of some of the assertions made in the review.
The only response to this letter was a letter from the President, dated 27 August 2019, requiring the applicant to attend a meeting with the President and Vice President on
30 August 2019.
On 28 August 2019, the applicant notified the Board of a dispute pursuant to the dispute resolution provisions of the contract of employment.
On 29 August 2019, the applicant received an email which had been sent at 10:14 pm the previous evening. The email was sent from one of the Board members to other Board members. I gather that it was also sent to the applicant by mistake. It contained a number of references to a proposal to terminate the applicant’s employment. By way of example, the following comment appeared at paragraph [2] in the email:
I note the legal advice that the terminations (sic) should proceed despite the receipt of the CEOs formal notice of dispute.
This led to a letter from the applicant’s solicitor seeking an assurance that no action be taken to terminate her employment until the provisions of cl 14.2 of the contract had been complied with. The letter was sent by email at 2:37 pm on 29 August 2019. It requested that the assurance be given by 3 pm that day, failing which the applicant would take legal action. No assurance was given and the applicant commenced these proceedings and applied for an ex parte interlocutory injunction that afternoon. That injunction was ordered by Justice Elkaim. The matter then came back before the court for procedural directions. However, the interlocutory injunction remains in place.
The applicant relies upon five affidavits, they are:
(1)The affidavit of her solicitor, Ms F Rafferty, sworn on 29 August 2019 (Exhibit “A1”).
(2)That of the applicant, sworn on 6 September 2019 (Exhibit “A2”).
(3)That of the applicant, sworn on 13 September 2019 (Exhibit “A3”).
(4)That of the applicant, sworn on 23 September 2019 (Exhibit “A4”).
(5)That of the applicant, sworn on 24 September 2019 (Exhibit “A5”).
The respondent relies on the affidavit of Dr Scott Trueman, affirmed on 18 September 2019 (Exhibit “R1”).
I have briefly summarised the factual background contained in the first two affidavits relied upon by the applicant in the above discussion. In her affidavit, sworn on
6 September 2019, the applicant emphasises the importance of her work as the CEO of the respondent and the harm that may be done to her professional reputation and standing should her employment be terminated for unsatisfactory performance or for undisclosed reasons.
In the applicant’s second affidavit (Exhibit “A3”), she recounted that she did attend a meeting with the President and Vice-President on 30 August 2019. She was handed a letter of that date directing her to take recreation leave from the end of Friday
13 September to 7 October 2019. This was said to be in the context of her having approximately 500 hours of such leave accrued.
After receiving the email referred to in paragraph [8] above, the applicant was given notice by a colleague that her computer access, and access to the building where she worked, were to be cancelled. This led to the applicant becoming overwhelmed, such that on 3 September 2019 she felt distressed and unwell. She went home and the following day consulted her doctor. She was certified as unfit to attend work until Wednesday 2 October 2019.
In the affidavit relied upon by the respondent (Exhibit “R1”), Dr Trueman explains that he is a member of the Board of the respondent and the Chair of its Finance and Audit and Risk Committee. He confirms that historically a significant part of the respondent’s revenue has been funded by government grants and projects. He says that in or about late April 2019, he was advised by the applicant that the income receivable from such grants and projects would expire by 30 June 2019, and that there were no successful tenders for future grants or projects.
Based on that information, Dr Trueman estimated that the respondent would suffer a deficit of between $500,000 and $600,000 if it was not successful in obtaining further government grants or projects. He said that the respondent’s total retained earnings/equity funds was then about $800,000. He raised his concerns at a Board meeting in or about April 2019, which led to a number of steps being taken to mitigate the financial risk.
Annexed to Dr Trueman’s affidavit is a redacted copy of the minutes of a Board meeting held on 20 August 2019. Those minutes include a resolution to terminate the applicant’s employment pursuant to sub-cl 14.1(a) of the employment contract. That resolution was passed unanimously by the eight Board members present (including the President).
Dr Trueman says that as at the date of his affidavit no further government grants or projects have been approved. He states that the continuation of the injunction will prevent the respondent from dealing with the serious financial situation it finds itself in.
The applicant’s third and fourth affidavits respond to that of Dr Trueman. In those affidavits the applicant takes issue with the extent of the financial problems depicted in Dr Trueman’s evidence. She also says that there are a number of project grant applications in the pipeline which would result in significant revenue for the respondent during the current financial year and following years. The applicant says that all indications are that these applications are likely to be successful.
Submissions
Both parties accepted that the principles to be applied in deciding whether or not to continue the interlocutory injunction are as stated by Mason CJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153. In order to obtain the injunction the applicant must demonstrate that:
(1) There is a serious question to be tried in relation to the substantive relief claimed by the applicant. In Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] Gummow and Hayne JJ described the test as whether the applicant had established “…a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial…”;
(2) Damages would not be an adequate remedy for the applicant should the injunction not be granted; and,
(3) The balance of convenience favours the granting of the injunction.
In relation to the first issue, the applicant submitted that on the correct construction of cl 14 of the contract, the only means of termination open to the respondent (aside from redundancy, takeover or merger, or misconduct, which are not relevant here) is by engaging in the process described in cl 14.2. This arose from the fixed term nature of the employment for three years, and the words “subject to clause 14.2 and 14.3…” at the commencement of sub-cl 14.1(a). Mr Arthur argued that it was clear from the terms of the contract and the circumstances, including the applicant’s long tenure as CEO, that it was the intention of the parties to confer on the applicant secure long-term employment which could not be terminated “at whim”. In this context, the purpose of the notice provided for in sub-cl 14.1(a) was to provide for notice at the end of the performance review process mandated by cl 14.2, or in the case of redundancy (etc.).
Against this proposition, Mr Murphy submitted that the only construction of cl 14 reasonably open in the context of the contract was that the respondent has an unfettered right to terminate the employment on three months’ notice independent from the provisions for termination contained in clauses 14.2 and 14.3. The distinction between cl 14.1 and the latter clauses arise from the requirement for notice in
cl 14.1. Clauses 14.2 and 14.3 do not require the giving of notice. Clause 14.3 allows for summary dismissal. Clause 14.2 allows for termination if the remedial process prescribed is unsuccessful.
In relation to the submission that the contract provides for secure long-term employment, the respondent pointed to the fact that the fixed term is only 3 years. Moreover, it is inconsistent with such an intention that the applicant has the right to resign on 1 months’ notice (sub-cl 14.1(b)). Mr Murphy argued that it would not make sense to require the giving of 3 months’ notice after the completion of the
cl 14.2 process if the unsatisfactory performance issues raised had not been remedied.
As to the adequacy of damages, it was submitted for the applicant that her special connection to the endeavours of the position took this case out of the ordinary. Also, evidence was put before the Court as to her professional reputation, which might not recover from the termination of her employment, to support the proposition that damages would not be an adequate remedy.
Mr Murphy submitted that the issues of the applicant’s extreme disappointment at the loss of her position and any reputational harm would occur with the termination of her employment in any event, even in circumstances where the termination occurred in accordance with the terms of the contract. In that context, he pointed out that the respondent was not seeking to terminate her employment on the basis of poor performance. As the resolution of the Board on 20 August 2019 made clear, the respondent considered that it had the right to terminate on three months’ notice under Sub-clause 14.1(a) without specifying any particular reason. This is what it proposed to do.
Moreover, the respondent pointed to the decision of Jessup J in Mastromanno v Temando Pty Ltd [2014] FCA 445 (Mastromanno) in which his Honour said at [18]:
The only other factor upon which the applicant relied for the proposition that the court might, at trial, grant him a permanent injunction was the avoidance of the “stigma” which presumptively attached to him having lost his employment by dismissal. But counsel for the applicant was unable to refer me to any precedent for the granting of an injunction – permanent or interlocutory – to restrain an employer from acting upon a notice of termination on this ground. For my part, I am unaware of any.
In relation to the balance of convenience, Mr Arthur pointed to the evidence of the applicant suggesting that the financial position of the respondent was not a bad as might be thought from the affidavit of Dr Trueman. He also argued that the maintenance of the status quo would allow for a possible mending of the relationship between the applicant and the Board. Moreover, it would allow the applicant to continue the essential work of progressing the grant applications and managing the financial issues which faced the respondent.
The applicant relied on comments in the cases of Turner v The Austral Asian Coal and Shale Employees Federation (1985) 6 FCR 177 (Turner) at 192-3 and by
Blomberg J in Quinn v Overland [2010] FCA 799; 199 IR 40 (Quinn) at [95]-[104], to support the proposition that the old reluctance to order (in effect) specific performance of an employment contract had been eroded by changes in modern society and industrial practice. This culminated in the statement of Blomberg J at [104] that:
It has been said that special or exceptional circumstances need to be shown to justify an order for specific performance of an employment contract: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 428 per Brennan, Dawson and Toohey JJ. However, as is demonstrated in the cases where specific performance has been granted, the burden of that requirement ought not be considered particularly onerous. As the Full Court said in Turner at 193, cases where continuing obligations and rights are in question might give rise to such special circumstances”.
Mr Murphy pointed out that the position of CEO is one appointed by the Board of the respondent. It is the only position of its kind in the organisation. In that context, the relationship between the Board and the CEO is of particular importance. It is clear that the relationship has broken down and the circumstances are such that the respondent has an urgent need to appoint a replacement.
He argued that the actual decisions in Turner and Quinn were made in the context where the applicants had enforceable rights under statutes, which is not the case here. He also pointed to a decision of Street J in McIntosh v Camilla Australia Pty Ltd [2018] FCCA 239 at [2]-[3], who stated in effect that the need for an applicant to establish exceptional and special circumstances to compel the continuation of an employment relationship is more stringent where there is no statutory right to injunctive relief.
Consideration
I am conscious that the issues summarised in [20] are in reality components of the overall consideration of the justice of the case. This involves the evaluation of the harm which the applicant is likely to suffer if no injunction is granted against the prejudice which the respondent it likely to suffer if it is (see Samsung Electronics Company Ltd v Apple Inc [2011] FCAFC 156; 217 FCR 238 at [62]–[67] per Dowsett, Foster and Yates JJ).
In relation to the issue of whether the applicant has demonstrated that she has an arguable claim for substantive relief, I should say that although I am not persuaded that her claim is unarguable, as the respondent contends, I do not consider it to be a particularly strong claim. It seems to me that there is some force in the submissions of the respondent as to the construction of sub-cl 14.1(a), as providing a means for the ending of the employment relationship independent of the procedures prescribed by cl 14.2.
If the applicant is correct in her argument as to the construction of the contract, the termination of her employment as proposed by the respondent would leave her with a claim for damages probably calculated by reference to her loss of salary and related benefits to the expiry of her contract on 10 May 2020 (see Bartlett v Australia & New Zealand Building Group Ltd [2016] NSWCA 30; 92 NSWLR 639). Ordinarily this potential entitlement to damages would be a strong factor weighing against granting injunctive relief.
I accept that the applicant has, in many ways, played a special and instrumental role in the creation of the respondent as a prominent national representative body for mental health nursing. Her personal involvement and identification with the organisation is significant. It goes beyond matters of professional reputation, although it seems to me that this may also be a relevant factor, notwithstanding the comments of Jessup J in Mastromanno (see by way of example the decision in Walsh v Police Association [2000] VSC 292; 140 IR 58 (Walsh) at [63]).
It should be noted that the employment in Walsh was, unlike the situation here, indefinite in nature. Also, akin to the situation in Hill v CA Parsons & Co Ltd [1972] 1 Ch 305, the relationship of confidence between Mr Walsh and the Association had not broken down. The reason why the latter had sought to end his employment was his long term absence due to illness. Those matters do provide a basis for distinguishing that case.
Overall, having regard to the fact that the applicant does not have a legal entitlement to ongoing, permanent employment with the respondent, I see the balance as slightly favouring a finding that damages would represent an adequate remedy at the substantive hearing of her claim.
In relation to the balance of convenience, I consider that the cases referred to by Blomberg J in Quinn indicate an alteration in the approach taken to the assessment of injunctive relief to maintain an employment relationship. However, as his Honour points out at [100] of his reasons, it remains crucial to analyse the particular circumstances of each case in determining the balance of convenience.
Here, I see the following issues as weighing against continuing the injunction:
(1)The size of the respondent and the crucial role of the CEO in carrying out the directions of the Board. This is not a case where the applicant fulfils a role within a large corporation that could be filled by anybody, or in the words used in Turner at 192, “…where the precise identity of the employee …is immaterial to the collective management of the corporation.”
(2)The breakdown in the relationship between the Board and the applicant. It is apparent that the Board has lost confidence in the applicant and wishes to replace her. It is probably an exercise in undue optimism to expect that an order forcing the respondent to maintain the employment of the applicant would lead to a rapprochement. Moreover, it seems that there is a real risk that maintaining her employment will lead to continuing conflict between the parties leading to further pressure on, and distress for, the applicant.
(3)The urgent need of the respondent to have a CEO in place to manage the financial issues it is facing. It is not appropriate for me to make any detailed findings as to the respondent’s current financial situation. The evidence before me does not allow for this in any event. However, suffice to say that the evidence does disclose that there are serious financial issues which require high level management sooner rather than later.
(4)The intent of the respondent to terminate the applicant’s employment on the “neutral” basis of giving notice under sub-cl 14.1(a). Although this will be disappointing for the applicant, perhaps bitterly disappointing having regard to her efforts on behalf of the respondent over the years, I do not see it as reflecting on her reputation in the same way and to the degree as would a termination on the ground of established unsatisfactory performance.
I take into account the importance of the position of CEO to the applicant and the career difficulties which the termination of her employment may well create for her. However, as the respondent submitted, she would face those same issues should the injunction be maintained and her employment end in May 2020, which appears likely having regard to the attitude of the respondent.
Having regard to the prejudice which the respondent is likely to suffer if the injunction is continued, it seems to me that the balance of convenience favours refusal of the application.
Having regard to the combination of the matters discussed in paragraphs [32]-[40], I have reached the firm view that this is not an appropriate case in which to maintain an injunction. I will dismiss the Amended Application in Proceeding and hear the parties as to what further orders should be made in the substantive proceeding. Subject to hearing from the parties, I propose to reserve the costs of the application at this stage.
Orders of the Court
The orders of the Court are as follows:
(1)The Amended Application in Proceeding dated 4 September 2019 is dismissed.
(2)Order 3 made by Justice Elkaim on 29 August 2019 restraining the respondent from taking any step to terminate the employment of the plaintiff is discharged.
(3)The costs of the Amended Application in Proceeding are reserved.
| I certify that the preceding forty-two [42] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Crowe. Associate: Date: 1 October 2019 |
1