Summary of the Facts and Procedural History:

Mr Elisha (‘the Appellant’) commenced employment with Vision Australia Limited (‘the Respondent’ or ‘Vision Australia’) in 2006. Mr Elisha signed the employment contract (‘the 2006 Contract’) on 27 September 2006. Mr Elisha’s employment involved travelling to various sites throughout Australia.

While travelling for his employment, Mr Elisha stayed in a hotel in rural Victoria. While there, Mr Elisha complained to staff of a noise outside his room occurring at 12:30 am. He was moved to another room. Ms Trch, one of the hotel’s proprietors, alleged that Mr Elisha had been “aggressive and intimidating” during this incident, which left Ms Trch feeling “humiliated” by the behaviour. The incident was eventually communicated to several Vision Australia employees, including Ms Hauser, who was Mr Elisha’s manager.

Ms Hauser met with Mr Elisha on 19 May 2015, and gave him a letter (‘the stand down letter’). The stand down letter contained allegations of serious misconduct, required him to not work, and to attend a meeting to address the allegations. It was alleged Mr Elisha breached various Vision Australia Policies during the Hotel incident.

The discipline meeting was held on 26 May 2015. During the meeting, Mr Elisha “vigorously” denied the alleged misconduct. Prior to the meeting, Ms Hauser expressed the view, to several who would attend the meeting, that Mr Elisha had a pattern of aggressive behaviour. This view was also repeated by many who attended the meeting after it occurred. However, these allegations were not put to Mr Elisha during the disciplinary meeting, and he had no opportunity to respond to them.

Later, on 29 May 2015, Mr Elisha’s employment was terminated by letter (‘the Termination letter’). Mr Elisha was diagnosed with a major depressive disorder following his termination, and he had “no capacity for work in the foreseeable future.”

Mr Elisha commenced unfair dismissal proceedings, settling for $27,486.68, the maximum amount he was entitled to in those proceedings. Mr Elisha later commenced proceedings in the Supreme Court of Victoria on 27 August 2020. The Primary Judge, ruling in favour of Mr Elisha, awarded $1.44 million in damages for the psychological injury sustained due to an unlawful breach of contract. The unlawful breach of contract was that Vision Australia did not follow the disciplinary procedures which, although not written in the 2006 Contract, were held to be incorporated into the 2016 Contract. The Victorian Court of Appeal held in favour of Vision Australia’s appeal, and determined no damages were recoverable.

The Issues and Decision:

The issues before the High Court were threefold. Firstly, did Vision Australia’s disciplinary policies form part of the 2006 Contract? Secondly, if yes, did the appellant’s psychiatric injury, which arose by the employer’s breach of contract, fall within the scope of the contractual duty? Thirdly, was the psychiatric injury too remote given these circumstances?

The High Court held in favour of the appellant, which upheld the appeal and restored the primary judge’s order for damages.

Reasoning

The High Court determined that a reasonable person in the position of the parties would conclude that Vision Australia’s Policies and Procedures were incorporated into the 2006 Contract. The Court reasoned that the “Other Conditions” section, and “Agreement” section of the 2006 contract contained wording that would, to a reasonable person in the position of the parities, be understood as incorporating the Disciplinary Procedures into the 2006 Contract.

The Court also determined that liability for psychiatric injury is not beyond the scope of the contractual duty concerned with the manner of dismissal. The Court found it was reasonable to expect Mr Elisha’s distress occurring in response to the way Vision Australia breached the 2006 Contract. There was a serious possibility that Mr Elisha would suffer a serious psychiatric injury.

Finally, the Court held that liability for psychiatric injury is not too remote, especially due to the serious circumstances surrounding the breach.

Key Takeaways:

The Elisha case demonstrates how important it is for employers to follow their own policies and procedures. Employers should carefully review employment contracts and identify which policies and procedures the contract refers to that may be incorporated into the employment contract. Employers may be expected to follow these policies and procedures as if they were written in the employment contract itself.