FEDERAL COURT OF AUSTRALIA

Sperandio v Lynch (No 2) [2006] FCA 1838

Workplace Relations Act 1996 (Cth): ss 170CK, 170CR  

Baltic Shipping Company v Dillon (1993) 176 CLR 344

Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711

Harding v Harding (1928) 29 SR (NSW) 96,106

Laz v Downer Group Limited (2000) 108 IR 244

Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784

JOSIE SPERANDIO v DRS JAMES AND SANDRA LYNCH T/AS DOCTORS OF NORTHCOTE

VID715 OF 2005

JESSUP J

19 DECEMBER 2006

MELBOURNE

THE COURT ORDERS THAT:

1.                  On the applicant’s claim under contract there be judgment for the applicant of $12,264.07 which sum includes $1,770.86 interest.

2.                  Pursuant to s 170CR(a) of the Workplace Relations Act 1996 (Cth) a penalty of $1200 be imposed upon the respondent for their breach of s 170CK(2)(a) of the Act in terminating the employment of the applicant on 4 March 2005 for reasons which included her temporary absence from work due to illness or injury.

3.                  The said penalty be paid to the applicant.

4.         The operation of Orders 1, 2 and 3 be stayed until 6pm on 21 December 2006.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 1 December 2006, I gave judgment in this matter: Sperandio v Lynch [2006] FCA 1648.  I required the parties to file and serve minutes of the orders which they proposed to give effect to my reasons, with supporting calculations and a note of their submissions.  The parties did so, and have addressed me further today. 

2                     With respect to damages for breach of contract, there is a measure of agreement between the parties.  Insofar as economic loss is concerned, the only disagreement relates to the matter of mitigation.  In the period between her dismissal by the respondents on 4 March 2005 and the expiration of the fixed term for which she was then employed, 25 October 2005, the applicant earned the sum of $11,600 in alternative employment.  Assuming, as I do and as I have been invited to do by the parties this afternoon, that she also had the benefit of employer superannuation contributions in the amount of 9% of her salary, the total of the benefits which she derived from that alternative employment during the period referred to was $12,644.  The applicant accepts that this sum should be set off against the amount to which she would otherwise be entitled as damages for loss of remuneration. 

3                     The respondents, however, take the position that the applicant has not sufficiently mitigated her loss and damage because the alternative employment which she sought and obtained was, by her own choice, of a part-time nature, involving, as it did, only 20 hours work per week.  They say that the applicant has provided no evidence as to why she did not seek, nor as to why she might not readily have obtained, full-time alternative employment at the same level of weekly remuneration as she received while employed by them at the clinic in High Street.  They would allow a period of two months after her dismissal for the applicant to have obtained such alternative full-time employment.  Subject to that, they resist what is implicit in the applicant's case, namely, that she did all that was required of her when she entered into part-time employment in April 2005. 

4                     In written submissions filed on their behalf, the respondents said:

The applicant wished to work part time.  She sought and relatively easily obtained part-time work for 20 hours per week, her preferred workload.  She was paid more per hour in her new job than she was in her former employment. The applicant had previously sought to work part-time with the respondents.  The evidence was that she told Dr Sandra Lynch that she wanted to spend more time with her family.  Her decision to work part-time was a lifestyle choice.  The applicant was seeking to be under-employed and now seeks that the respondents compensate her for the time she chose to spend with her family.  By failing to seek and obtain full-time work, the applicant has failed to take reasonable steps to mitigate her damage caused by the breach.  The applicant failed to adduce evidence to suggest that no full-time work was available or to provide a cogent reason for not seeking that work.  In light of the foregoing, if the applicant had not taken reasonable steps, then she would have been employed in full-time employment by about two months after the termination.

5                     This submission is, to an extent, based upon a view of the evidence which is not uncontroversial.  It was the evidence of Dr Sandra Lynch that the applicant suggested, in late 2003 or early 2004, that she might work part-time, in order to spend more time with her children who were growing up.  The applicant herself denied having made such a suggestion, and said that her children were at school at the time.  However that may be, there is no substance in the submission that the applicant's decision to work part-time after the termination of her employment by the respondents was a lifestyle choice, or that she was seeking to be under-employed.  When it was put to her that she worked only 20 hours per week in her new job because it suited her, and that she thereby had time to be with her children, she denied it, saying that she could not cope with any more than that.  On the other hand, she did say that she never sought full-time employment after being dismissed by the respondents.  The job that she obtained in April 2005 was the first one for which she had applied: she took it and made no attempt to find other employment. 

6                     The principle upon which the respondents rely is that, where an applicant succeeds in an action for damages for breach of contract, the measure of his or her compensation will not include any damages which might have been avoided by the reasonable efforts of the applicant.  Although the applicant carries the onus of proving that loss or damage has been suffered, the onus of establishing facts relevant to the question of mitigation lies upon the respondents: see Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, at 714-717, and the authorities there referred to.  Clearly, the onus will be more easily discharged in a case in which the applicant is shown to have done nothing in the way of mitigation:  see Harding v Harding (1928) 29 SR (NSW) 96,106 per Campbell J.  However, even in such a case, it remains a matter of evidence on which the respondent at least starts out with the evidentiary onus.

7                     In the present case, it does seem as though the applicant might have done more in the way of seeking full-time employment in and after April 2005.  However, the evidence does not disclose what would have been the likely result of further efforts on her part.  It is not self-evident that she would have found a suitable full-time position as easily as she apparently found a part-time position.  Since the respondents' evidentiary case made no attempt to deal with this question, I think it would be wrong for me to make assumptions adverse to the applicant based upon no more than intuition or general understanding.

8                     I shall, therefore, set off against the damages to which the applicant would otherwise be entitled only the amount of remuneration which she in fact received in her new employment within the period in question. 

9                     The result is that the applicant's prima facie damages by way of lost remuneration, including superannuation, for the 33.4 weeks during which she was out of employment as a result of the respondents' breach of contract, stands at a sum of $26,285.13.  To be set off that sum is the amount to which I have referred above which the applicant earned in her alternative employment, including superannuation, namely $12,644, plus the amount paid to the applicant by the respondents by way of notice on termination, again including superannuation, a sum of $3,147.92.

10                  The net result of these calculations is that the loss and damage suffered by the applicant as a result of the respondents' breach of contract is $10,493.21, a sum for which the applicant contended and which, save for their argument on the matter of mitigation with which I have just dealt, the respondents agreed.  To this I should add interest calculated in accordance with the submissions of the parties this afternoon, which, although originally somewhat different, in the final result were in accord.  The sum of interest which I calculate is $1,770.86, which comes down to today, 19 December 2006.  I propose to award therefore, the sum of $12,264.07, including interest, arising by way of economic damage on the breach of contract action. 

11                  The applicant next seeks an award of $10,000 by way of general damages in respect of the psychiatric illness from which, according to Dr Stewart's diagnosis, she suffered in the period leading to her dismissal.  She contends, and for present purposes I would be prepared to accept, that the existence of a diagnosed psychiatric illness takes the case out of the principle in Baltic Shipping Company v Dillon (1993) 176 CLR 344: see  Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784.  However, I reject this claim upon two bases:  first, the claim travels outside anything in the applicant's Statement of Claim; and secondly, there was no suggestion in the evidence that the applicant's psychiatric illness was caused or contributed to by the termination of her employment or by the circumstances thereof.    

12                  Turning to the applicant's claim for compensation under s 170CR(1)(c) of the Workplace Relations Act 1996 (Cth) (the Act), it is submitted on behalf of the applicant, and effectively accepted on behalf of the respondents, that the power of the court under that paragraph extends to awarding compensation for non-economic loss.  The applicant submits that I should make a “global assessment” based upon the following factors: 

(a)               the under-employment of the applicant since her unlawful termination, and the effect of the physical injury to her to which Dr Stewart attested;

(b)               by reason of the termination and in the absence of an order for reinstatement, the applicant’s loss of significant accrued sick leave benefits (up to 12 months) in circumstances where she has a physical injury contributed to by her employer;

(c)               the mental distress caused to the applicant; and

(d)               the physical injury “severe agitated depression”.

13                  What the applicant refers to as “under-employment” has, however, already been taken into account in the calculation of damages for breach of contract.  As to the mental distress and physical injury to which the applicant here refers, I have not found, and on the evidence I could not find, that the respondent's breach of s 170CK of the Act had either of those consequences.  From an evidentiary point of view, the matter is in a category similar to that of the applicant's claim for contractual damages on account of her psychiatric illness.  There is no evidence to support these claims.  Further, there was no allegation in the applicant's Statement of Claim that the breach of s 170CK led either to mental distress or to physical injury.  The only reference to the matter in the Statement of Claim appears in the particulars to par 13 thereof, which, relevantly, says no more than that the applicant seeks orders pursuant to s 170CR for compensation.  The particulars are said to be: "an amount to compensate the applicant for humiliation, distress and injury".  However, no such humiliation, distress or injury is anywhere alleged in the Statement of Claim, in which circumstances it would, I consider, be wrong for the court to make a finding, after the conclusion of the trial, adverse to the respondents in this regard. 

14                  Under s 170CR of the Act the applicant seeks compensation also for the loss of the benefit of her accrued sick leave, which she says was “up to 12 months” in circumstances where she had a physical injury which was contributed to by her employer.  There was, however, no proof as to the terms of the applicant's employment in relation to sick leave, although I accept that, whatever the entitlement, she had accrued a considerable amount of leave which had not been taken.  At the general level, I do not consider that an entitlement to sick leave is an absolute benefit for the loss of which the applicant should be compensated, regardless of whether any circumstance had, or might have, arisen requiring her to be absent from work on account of sickness. Had the applicant remained in employment with the respondents, she would have received her remuneration whether or not absent from work on account of sickness.  I have calculated her damages under her breach of contract claim on the assumption that she had a right to be employed on full pay until 25 October 2005.  I do not consider that the applicant is entitled both to a calculation of damages on that basis, and to compensation for the loss of an accrued entitlement to be absent from work without pay when sick.

15                  Although the applicant gave evidence that, in and subsequent to April 2005, she obtained part-time work only because she could not cope with anything further, it was not, in my view, established as a matter of fact that she was sick or unfit for work at that time.  Indeed, the fact that she worked for 20 hours per week is prima facie evidence of the contrary, to say the least.  Thus, I do not consider it appropriate to require the respondents to pay compensation to the applicant for no other reason than that, during the course of her employment with them, she did not use up all the sick leave to which she periodically became entitled. 

16                  In what appears to be in the nature of an alternative claim to her reliance upon par (c) of s 170CR(1) of the Act, the applicant also claims an order in the nature of compensation under par (d) of that subsection.  Having disposed of her claims under par (c) in the way that I have earlier outlined in these reasons, I do not consider this is an appropriate case for some other order which effectively achieves the applicant's objective but is made under par (d) of the subsection. 

17                  That leaves the question of penalty for breach of s 170CK of the Act.  In this regard the applicant proposes that a penalty of $5000 should be imposed under s 170CR(1)(a) of the Act, substantially for the following reasons: 

(1)          to provide a measure of general deterrence with respect to employers at large and their obligations under the legislation;

(2)          to indicate that the court is prepared to protect the rights of vulnerable persons who have been in effect the victims of conduct in breach of s 170CK; and

(3)          because the termination of the employment of the applicant occurred in circumstances in which she had considerable accrued sick leave credits and was a long-serving employee. 

18                  The respondents resist the imposition of any penalty, and rely upon the statements made by Moore J in Laz v Downer Group Limited (2000) 108 IR 244 at 261 to the effect that the imposition of no penalty in a case in which a contravention of s 170CK has been established is within the range of discretionary outcomes which the legislature contemplated.  In support of that submission, and generally by way of response to the applicant's submissions on penalty, the respondents point to the following circumstances:

1.                  The facts of the present case do not disclose a flagrant breach of s 170CK.

2.                  The circumstance that the applicant was absent from work on sick leave was one only of the reasons for her dismissal and was not a substantial reason.

3.                  Either by an award of damages for wrongful dismissal, or by a corresponding order under s 170CR of the Act, the applicant ought to be regarded as having been sufficiently compensated for the injury which the respondents’ breach caused to her.

4.                  The imposition of a penalty would do harm to the respondents’ high standing in the community.

5.                  The respondents have suffered considerable loss because of the applicant's conduct during the time of her employment with them.

19                  In considering the matter of penalty, I take into account the following circumstances:

1.                  The maximum penalty which may be imposed under s 170CR is $10,000.  It may be assumed that a penalty of that order, or of an amount approaching that sum, should be reserved for the more serious cases.

2.                  This is not a case of a serious or flagrant contravention of s 170CK.

3.                  There was nothing peremptory, or high-handed about the respondents’ termination of the applicant's employment.  The respondents gave the matter earnest consideration and set out their reasons carefully in their letter of 4 March 2005.  They invited the applicant to contact them to discuss her entitlements upon leaving their employ.

4.                  The respondents generally demonstrated a concern for the observance of the law in matters of employment and industrial relations.  They are what would be described as good employers, not bad ones.

5.                  There is no suggestion that any similar breach, or any transgression of the law in employment matters generally, has occurred over many years of the respondents engaging in medical practice.

6.                  For the above reasons no question of deterrent arises.  I do not think that there is any cause for the court to use this occasion as an opportunity to seek to deter the respondents, or other employers, from breaching s 170CK of the Act.

7.                  I do not consider that the applicant's long service is relevant to the matter of penalty, particularly having regard to the matters to which I referred in my reasons and in relation to which the respondents were entitled to be justly critical of the applicant's performance.

8.                  Neither do I think that - other than as may be implicit in the previous item - the penalty which would be appropriate should be reduced by reason of other reasons for which the applicant was dismissed.  The Act contemplates that there may be a breach of s 170CK where one only of the reasons for the employee's dismissal is a proscribed one, and effect must be given to the terms of the Act where a contravention has been found.

9.                  I accept that the standing of the respondents in the community may be diminished to an extent by the imposition of a penalty, but this is a normal consequence of the contravention of a penal provision.  It is an impact which would be felt by any person upon whom a penalty was imposed.

10.              I also accept that the actual losses of the applicant have been compensated, but this too is part of the legislative scheme which likewise makes provision for a penalty to be imposed in an appropriate case.  The mere fact that the applicant is none-the-worse-off, financially, should not be regarded as a circumstance depreciating what would otherwise be a suitable penalty.

11.              Importantly, s 170CK operates as more than a mere civil provision, which gives an injured party a right to approach the court for relief inter partes, as it were.  The section lays down a specific norm of conduct as a matter of public policy, and relevantly seeks to implement one aspect of Australia's obligations under an international instrument. 

20                  I consider that the circumstances of this case call for the imposition of a penalty, in the sum of $1200.  The applicant has sought, and the respondents do not resist, an order that the penalty be paid to her pursuant to s 356(b) of the Act, and I shall make that order. 

Associate:

Dated:         18 January 2007