SHADIAC v South Australian Amateur Football League Inc

[2014] SADC 124

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil: Appeal Against a Master's Decision)

SHADIAC v SOUTH AUSTRALIAN AMATEUR FOOTBALL LEAGUE INC & ORS

[2014] SADC 124

Judgment of Her Honour Judge Davison

11 July 2014

PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS

Appeal against a decision of a Master refusing leave to file and serve second statement of claim.

Appeal dismissed.

District Court Act 1991 s 43; District Court Rules 6 DCR 17, referred to.
Lennon v State of South Australia [2010] SASC 272; McLean v DID Piling Pty Ltd [2010] SASC 33; Baltic Shipping Company v Dillon (1993) 176 CLR 344; Ramsey v Annesley College [2013] SASC 72; Nikolich v Goldman Sachs [2006] FCA 784; Quinn v Gray [2009] VSC 136; The Commonwealth Bank v Barker [2013] FCAFC 83, considered.

SHADIAC v SOUTH AUSTRALIAN AMATEUR FOOTBALL LEAGUE INC & ORS
[2014] SADC 124

1. This is an appeal against a decision of a Master of the District Court refusing leave to the appellant to file and serve the Second Statement of Claim (“SSOC”). The appellant in the matter was the Chief Executive Officer of the first respondent from 3 May 2004 until his contract was terminated on 11 July 2011. Between 3 May 2004 and 3 March 2011 the appellant was employed on a series of fixed term contracts.

2. The appellant had entered into a new contract on 3 March 2011 which was signed by the appellant and the second respondent in his capacity as the president of the first respondent. This contract of employment was for an indefinite period of time. It provided for the rate at which a salary, superannuation entitlements, motor vehicle entitlements, mobile phone entitlements and annual leave entitlement would be paid. Under the terms of this contract each party could give to the other party three months’ notice of termination. On 11 July 2011 the first respondent terminated the contract summarily and paid to the appellant the equivalent of three months’ salary. The appellant issued proceedings for breach of contract and seeks damages. There is also a claim for damages in relation to defamation that is not relevant to this appeal.

3. The appellant applied for leave to file a SSOC in which he sought to pursue a claim for damages for loss of reputation, reduced earning capacity, hurt, distress and humiliation.[1] His application for leave was rejected.

   [1]    Proposed paras 9.2 and 9.3.

   The Application before the Master

4. After hearing argument in November 2012 on the respondent’s application of 10 September 2012 (FDN 9) seeking to have parts of the claim struck out, the learned Master made orders striking out paragraphs 9.2 and 9.3, part of paragraph 12 and directed that particulars be given in respect of paragraph 13. Thereafter the appellant provided to the court a SSOC by email on 7 December 2012. On 28 March 2013, the appellant provided a book of documents (FDN 17) relative to the argument that then took place on 2 April 2013. Reasons were delivered ex tempore by the learned Master on 2 April 2013 that related to the adequacy of the plea in paragraph 12 and he delivered reasons for his decision in respect of the SSOC paragraphs 9.1-9.3 on 8 May 2013.

5. The SSOC raises the plea for the appellant’s losses and damages as a result of the breach of contract. Paragraph 9.1 alleges loss of certain benefits including the payment of salary the appellant would have earned had he worked, loss of superannuation benefits over the three month period, loss of a motor vehicle, mobile phone and annual leave which would have accrued. This clause is not challenged by the first respondent.

6. SSOC paragraph 9.2 alleges that the appellant has suffered a loss of reputation and damage to his earning capacity because he was summarily terminated, contrary to clause 20 of the contract as he was terminated in the middle of the football season. He claims that termination without the ability to serve out the notice period meant that he lost the advantage of being able to seek employment from a position of having ongoing employment.

7. SSOC paragraph 9.3 asserts that the appellant has suffered hurt, distress and humiliation by reason of the matters listed in paragraphs 9.1 to 9.2.4 because the purpose of the terms set out in SSOC 7.3 was to provide the parties with peace of mind by providing to each party a period of three months to adjust their affairs so as to minimise the effect of termination.

8. SSOC paragraph 7.3 asserts that either the appellant or the first respondent are entitled to terminate a contract by providing to the other three months’ notice in writing, the relevant part of which reads as follows:

   … Which notice cannot be given at a time whereby the period of employment will cease during the month of February, March or April. If notice is given and the three months’ period expires in February, March or April, the date of termination of employment shall be the 30^th April. …

9. The learned Master received written outlines and heard argument in relation to the issue. He determined that the pleaded issues in paragraphs 9.2 and 9.3, being claims for damages for loss of reputation, damage, incapacity, hurt, distress and humiliation that were said to arise from the manner of termination and the fact of termination of employment without the ability to work out his affairs in an orderly way, were claims that could not be sustained. The learned Master felt bound by the decision of Layton J in Lennon v State of South Australia.[2] The learned Master determined that there was no arguable claim for distress, humiliation and injured reputation in South Australia in the circumstances of the claim in the case at bar. Accordingly, he refused leave to the appellant to file and serve the SSOC.

   [2] [2010] SASC 272.

   The appeal

10. The ground of appeal in FDN 22 is:

    The learned Master erred at [66] in making a finding there was no arguable claim for distress, humiliation and injured reputation in South Australia.

    I set out the actual finding of the learned Master in paragraph 66[3] (not in italics):

    In my view, for the reasons expressed in the earlier Reasons and herein, in south [sic] Australia the position is clear. I am bound by the decision of Layton J in Lennon v State of South Australia [2010] SASC 272 to the effect at para.676-681, there is no arguable claim for distress, humiliation and injured reputation in South Australia in the circumstances of the claim in the case at bar.

    [3]    FDN 25, Case Book, p 57.

    Nature of appeal

11. This is an appeal brought pursuant to s 43 of the District Court Act 1991, (hereafter called “the Act”) and the District Court Rules 2006 (“DCR”), 6 DCR 17. This provides for an appeal, as of right, from a judgment of a master of the court, to a court constituted of a judge. The appeal is by way of re-hearing on the documents considered at first instance but the court has the power to receive further evidence. There is a need to identify some error of the Master before allowing the appeal.[4]

    [4]    McLean v DID Piling Pty Ltd [2010] SASC 33 at [19]-[23].

    The appellant’s argument

12. The arguments relate to paragraphs 9.1 to 9.3 of the SSOC. The relevant paragraphs read as follows:

    9.1     The plaintiff has suffered the loss of the benefits as set out in paragraphs 7.2.1-       7.2.4 above.

    9.2     As a result of the breach of the contract set out in paragraphs 8.1 and 8.2 above the   plaintiff has suffered a loss of reputation and damage to his earning capacity.

    PARTICULARS

    9.2.1The contract entitled the first defendant to terminate the plaintiff’s         employment summarily for serious misconduct.

    9.2.2  The defendant terminated the plaintiff’s employment summarily.

    9.2.3 None of the circumstances as set out in paragraph 7.4 above occurred so as to entitle the first defendant to summarily terminate the plaintiff’s employment.

    9.2.4 Summarily terminated the plaintiff’s employment on 11 July 2011 during about the middle of the football season whereas but for such breach the defendant was not entitled pursuant to the contract to terminate the plaintiff’s employment until at least 11 October 2011 being a date after the end of the football season.

    9.39.3.1 The purpose of the term set out in paragraph 7.3 was to provide the parties with peace of mind by providing to each party a period (three months) in which to adjust its affairs so as to minimise the effect of the termination of the employment.

    9.3.2As a result of the defendant’s breach of contract as set out in paragraph 8.2      above the plaintiff has suffered hurt and distress thereby.

13. The respondents initially objected to the content of paragraph 9.1. However, this was abandoned when the matter came before Master Rice on 2 April 2013. The appellant submits however that the justification for paragraph 9.1 has continuing relevance in relation to this appeal. It is submitted that there was a misunderstanding on behalf of the respondents as to what “payment in lieu of notice entails”. It is contended by the appellant that it is unclear whether this misunderstanding also infected the balance of the reasons of the learned Master. It is submitted that the obligation to give three months’ notice cannot be satisfied by simply paying three months pay unless the contract specifically allows that and it does not. The appellant claims damages for loss of reputation, distress and hurt from the consequences that “flowed naturally from the breach”. This is because it is suggested that there was a breach of contract by terminating the employment summarily without providing the three months’ written notice when no good grounds for summary termination of employment existed. This is a claim flowing as a result of this loss of reputation, hurt and distress. In this regard the appellant relies upon Baltic Shipping Company v Dillon[5] and in particular, the statement of Brennan J:[6]

    If a contract contains a promise, express or implied, that the promisor will not cause the promisee, or will protect the promisee from, disappointment of mind, it cannot be said that disappointment of mind resulting from breach of the promise is too remote.

    [5] (1993) 176 CLR 344.

    [6] Ibid at p 308.

14. The appellant relies upon the interpretation of this portion of the judgment of Brennan J in a series of subsequent cases to support his claim. The appellant argues that the express term denying the right to payment in lieu of notice requiring a three month period before the cessation of work, is the platform in this case for such a claim. He argues that the purpose of that obligation (to give the period of notice) was to allow the appellant a reasonable period in which to adjust his affairs, to minimise the impact of termination and to cushion the emotional family and domestic stresses likely to occur. It is argued that these aspects are heightened when the position is one that has a notoriety in the sports world and has a likelihood of attracting publicity.

15. The appellant also sought to distinguish Lennon on the basis that there was no term in the contract, in respect of termination in the same form, as the one in this case.

    Respondents’ argument

16. The respondents’ argument relates entirely to the exception as stated in Baltic Shipping. In this regard they say that the comments cited at [13] of the judgment of Brennan J in that case need to be read in their context. The proper context includes:[7]

    The relevant question is whether “disappointment of mind “is sufficiently likely to result from a particular breach “to make it proper to hold that the loss flowed naturally from the breach”.

    In one sense, a promisee’s disappointment of mind flows naturally whenever a contractual promise is not fulfilled. This is the point made by Lord Atkinson in Addis v Gramophone Co Ltd. But where disappointment of mind is no more than a mental reaction to a breach of contract and damage flowing therefrom, the law has treated such a mental reaction as too remote. Thus in Fink v Fink, Dixon and McTiernan JJ held that, in assessing the amount to be awarded for breach of contract, “[r]esentment, disappointment, and the loss of esteem of friends are not proper elements” In my opinion, there is a sound policy underlying this rule.

    [7] Ibid at [20]-[30].

17. The respondents referred to the decision in Ramsey v Annesley College[8] and the decision of the Blue J as follows:[9]

    The principle established by Addis that damages due to loss of reputation caused by the manner (as opposed to the fact) of dismissal are not recoverable has been applied by single Judges in this Court.

    I am bound to follow decisions of intermediate courts of appeal in Australia as to the common law unless persuaded that they are plainly wrong. Given the decisions of intermediate appellate courts in Burazin and Russell, I am obliged to apply the principle established in Addis. (references omitted).

    [8] [2013] SASC 72.

    [9] Ibid at [456]-[458].

18. Blue J considered himself bound by the decisions of the intermediate Courts of Appeal in Australia of the common law position.

19. It was submitted by the respondents that the contract in this case is of the same type as that in Ramsey,[10] that is, a contract of employment terminable on notice.

    [10] [2013] SASC 72.

20. The respondents rely upon the judgment of Ramsey in relation to the arguments advanced by the appellant in respect of Nikolich v Goldman Sachs[11] and Quinn v Gray.[12]

    [11] [2006] FCA 784.

    [12] [2009] VSC 136.

    Conclusion

21. I am not satisfied that there has been any error demonstrated by the learned Master in determining to refuse leave to the appellant to file and serve the SSOC. The matters sought to be pleaded in paragraph 9.2 and 9.3 of the SSOC raise claims for damages for loss of reputation, damaged earning capacity, hurt, distress and humiliation. They are said to arise from the manner of the termination and the fact of termination from the employment without the ability of the appellant to work out his affairs in an orderly way. I am satisfied that on the law of contract as it currently subsists, it is quite settled that it is not arguable that there can be a claim for distress, humiliation and injured reputation following the termination of the appellant’s contract of employment in these circumstances.[13] Taking into account the terms of the appellant’s contract of employment and its termination, I am of the view that the appellant cannot succeed in bringing himself within the exceptions to the general rule as they are described by Brennan J in Baltic Shipping and Blue J in Ramsey.

    [13]   Lennon v State of South Australia [2010] SASC 272 and Ramsey v Annesley College [2013] SASC 72.

22. Finally, the learned Master canvassed in his Reasons at [27] et seq the question of the effect of a “summary” dismissal and paying three months’ salary in lieu instead of allowing the employee – here the appellant – to work out the period of notice under the contract. The appellant in his submissions on appeal contended that it is:

    … unclear whether the learned Master approached the attack on 9.2 and 9.3 from a position of misunderstanding as to the import of the obligation to give three months notice – compare [12], [13], [23] with [31] of the Reasons.

23. I have looked at these paragraphs of the learned Master’s reasons. The learned Master addressed the appropriate question in that discussion even though his language may have “strayed” into different forms of expression. I am satisfied on a reading of the whole of the learned Master’s decision, that he addressed the correct question in an appropriate manner. I am also satisfied that the Reasons of the learned Master disclose no appealable error.

24. I have also had regard to the decision of the Full Federal Court in The Commonwealth Bank v Barker[14] that was delivered shortly before the argument that I heard in relation to this matter. I gave both parties the opportunity to make submissions in relation to this case. The authority in Barker reinforces the authority of Addis, and Baltic Shipping, that damages for distress, hurt and loss of reputation are not available, except in a limited way as outlined in the five exceptions in Baltic Shipping, none of which have application in respect of this matter.

    [14] [2013] FCAFC 83.

25. For the sake of completeness, I mention that the High Court granted special leave to appeal and has heard the appeal from the judgment of the Full Federal Court and has reserved its decision.

26. I therefore dismiss the appeal.

    Orders:

    1)     Appeal dismissed.

    2)     Appellant to pay the respondents’ costs of the appeal.