Injured worker succeeds in breach of contract claim over how he was dismissed

Until recently, it has long been the case in Australian law that courts would not award damages for breach of contract because of the way in which the worker was dismissed. 

In Elisha v. Vision Australia Limited [2024] HCA 50, the High Court decision resulted in an employer being liable for almost $1.5 million to an employee for breaching his contract by failing to follow its disciplinary policy when terminating that employee’s employment. 

In 2006, Adam Elisha commenced employment with Vision Australia in a role that required him to travel for work. His contract had not been comprehensively updated since he started. 

On one work trip in 2015, he allegedly was rude and aggressive towards the acting hotel manager. The allegations came to light sometime later when other Vision Australia employees stayed at the same hotel. After completing an investigation, Vision Australia dismissed Elisha for serious misconduct. The Supreme Court found that the investigation that led to the dismissal was flawed. 

Unfair dismissal 

Soon after his dismissal, Elisha lodged an unfair dismissal claim. Vision Australia paid him $27,248.68, equal to 26 weeks’ pay, to settle his claim. Elisha signed a deed of settlement. 

Elisha also made a WorkCover claim for psychological injury. He claimed that his injury was caused by Vision Australia not following its disciplinary procedure and enterprise agreement terms when dismissing him, including by failing to accord him procedural fairness. 

In 2020, Elisha commenced proceedings against Vision Australia on the grounds that his severe psychiatric illness was the result of a breach of his employment contract caused by the failures in the way in which the employer carried out the dismissal, when his contract required the employer to comply with its disciplinary procedures. He also claimed that the employer had negligently failed to take proper care to avoid causing him injury through the way it carried out the disciplinary process. 

The case was initially heard in the Supreme Court of Victoria, which awarded Elisha $1.44 million dollars in damages for breach of contract. The Court of Appeal overturned this, on the basis of the long-accepted principle that damages are not payable for the manner of dismissal. The Appeal Court’s decision was appealed again to the High Court. 

Breach of contract 

Elisha signed the Deed when settling the unfair dismissal claim. The Deed stated that it released Vision Australia from claims “arising out of or incidental to his employment proceedings and the termination.” 

Despite the broad wording in the Deed, the High Court at first instance held that Elisha remained able to bring the subsequent claims. 

Elisha successfully established that Vision Australia’s disciplinary policy was incorporated into his contract. His employment contract stated: “Employment Conditions will be in accordance with regulatory requirements and Vision Australia Policies and Procedures. Breach of the Policies and Procedures may result in disciplinary action.” 

The High Court found that this clause intended to create contractually binding obligations on Vision Australia to comply with their own policies. This is because: 

• Elisha was bound to follow the policies and procedures and would be subject to disciplinary action based on the wording. 

• It would “defy logic and common sense” not to apply the same obligations on both parties (in the absence of clear wording to that intent). 

• There was promissory and mandatory language within the policy outlining the specific procedure to be followed. 

Damages for psychiatric injury 

Vision Australia argued that it could not be liable for Elisha’s psychiatric injury because the injury was both beyond the scope of a contractual duty and too remote (not a foreseeable outcome) of any contractual breach. 

The High Court rejected this argument, finding that damages were available for a psychiatric injury and that it could be foreseeable that Elisha would suffer a psychiatric illness because of the way he was dismissed - which included not providing him an opportunity to respond to the reason for his dismissal from his job, which he held for almost a decade. 

In light of this decision, we recommend employers review their employment contracts, especially with long-serving employees, to ensure that those contracts align with the current understandings about policies. 

Maddy Lodge is Lawyer at Rigby Cooke Lawyers in Melbourne, specialising in employment matters and occupational health and safety. Sam Eichenbaum is a Senior Consultant in the Workplace Relations group at Rigby Cooke in Melbourne.