Sutton v BE Australia WD Pty Ltd (No 4)

1. [1]

   HIS HONOUR: By a second further amended summons Mary Sutton (“the plaintiff”) sought declaratory relief and monetary payments, pursuant to s 106(1) and (5) of the Industrial Relations Act 1996 (NSW) (hereafter referred to as “the Act”), against BE Australia WD Pty Ltd (“the first defendant”) and Phillip James Davidson (“the second defendant”) regarding work performed by the plaintiff for the first defendant. The proceedings against the second defendant were dismissed upon the basis of consent orders, without admission of liability, for the payment of a sum of $350,000 inclusive of costs.

2. [2]

   The balance of the matter concerning the first defendant proceeded before the Court, ex parte.

RELIEF SOUGHT

1. [3]

   The plaintiff sought the following relief:

   1. (1)

      An order declaring void (except for monies already paid) the arrangement between the plaintiff and the first defendant whereby [the plaintiff] performed work in the taxation consulting industry for [the first defendant] (“the contract”).

   2. (2)

      An order declaring that the contract or arrangement was unfair, harsh or unconscionable or against the public interest.

   3. (3)

      An order that the contract be varied from its commencement in the terms set out in Schedule A.

   4. (4)

      An order that [the first defendant] pay [the plaintiff] such sum of money in connection with the contract or arrangement as the Court considers just in the circumstances of the case.

   5. (5)

      An order that the [first defendant] pay [the plaintiff’s] interest on the sums of money ordered to be paid by the Court, from 7 October 2005 being the date of the termination of the contract at the rates set by the Uniform Civil Procedure Rules 2005 (NSW).

   6. (6)

      An order that the [first defendant] pay the costs of the proceedings.

2. [4]

   Schedule A to the second further amended summons was in the following terms:

   1. (1)

      The [first defendant] and [second defendant] will not conduct themselves in a manner which:

   2. (2)

      The [first defendant] shall not terminate the contract without a proper reason and without providing the [plaintiff] procedural fairness, including informing the [plaintiff] of the precise nature of the allegations made against her and providing her an opportunity to answer those allegations and to be heard before a decision is made in relation to the termination of the contract.

   3. (3)

      The [first defendant] will take all reasonable steps to prevent any of its employees or agents from bullying and or harassing the [plaintiff].

   4. (4)

      The [first defendant] may only terminate the arrangement by giving the [plaintiff] 15 months' notice in writing or payment in lieu thereof.

   5. (5)

      For the purpose of (4), above, payment in lieu of notice shall be calculated by reference to the payments made to the [plaintiff] whilst performing work for the [first defendant] and based on her average hours per week.

   6. (6)

      The exercise of any discretion permitted under the contract shall be exercised by the [first defendant] towards the [plaintiff] in a manner that is at all times fair, just and conscionable, and in this regard the Respondent will afford to the [plaintiff] natural justice and procedural fairness.

   7. (7)

      The [first defendant] shall investigate any allegations made by the [plaintiff] concerning the conduct of the [defendants].

   8. (8)

      The [first defendant] will inform the [plaintiff] of its findings of any complaint made by the [plaintiff] concerning the conduct of the [defendants].

   9. (9)

      The [defendants] following the termination of the contract shall not alone or with others disparage the [plaintiff] and/or undermine her prospects of future employment and/or employment.

3. [5]

   The relief claimed in the second further summons for relief was as follows:

   1. (1)

      Fifteen months’ pay in lieu of notice $175,000

   2. (2)

      $220,000 as compensation for stress suffered by the [plaintiff] as a result of omission from the arrangement of a term requiring the [first defendant] take all reasonable steps to prevent any of its employees or agents from bullying and/or harassing the [plaintiff].

   3. (3)

      $20,000 in compensation for failing to abide by the representations made to the [plaintiff] about becoming an employee of the [first defendant].

   4. (4)

      $40,000 in compensation for disparaging the [plaintiff] and/or undermining her prospects of future employment and/or employment.

   5. (5)

      Plus interest and costs.

THE JUDGMENT IN SUTTON NO 3

1. [6]

   On 1 June 2017 the Court delivered judgment with respect to the second further amended summons: Sutton v BE Australia WD Pty Ltd (No 3) [2017] NSWSC 689 (“Sutton No 3”).

Merit

1. [7]

   In Sutton No 3 the Court identified that the plaintiff had relied upon the following grounds of unfairness (at [94]):

2. [8]

   As the first ground of unfairness the Court made the following findings (at [101]-[103]):

3. [9]

   As to the second ground relating to bullying and harassment the Court made the following findings (at [104], [110]-[112]):

4. [10]

   The Court rejected the third ground concerning disparagement.

Declarations

1. [11]

   The Court considered it appropriate to make declarations and directed the [plaintiff] to bring in short minutes of order of the declarations consistent with the Court’s judgment.

2. [12]

   On 22 June 2017 the Court made the following declarations:

Money Orders: Relevant Findings

1. [13]

   The Court made the following observations in Sutton No 3 as to the broad discretion in it under s 106 of the Act as follows (at [124]):

2. [14]

   The plaintiff sought that the Court make an order for the payment of money in connection with the arrangement that took account of the following:

   1. (1)

      The failure of the arrangement to contain any reasonable provision with respect to notice of termination or payment in lieu thereof and the consequences of the failure to protect the plaintiff from arbitrary and immediate termination on her future employment and career.

   2. (2)

      The stress and humiliation suffered by the plaintiff as a result of being exposed to bullying and harassment at the hands of the second defendant and the failure of the arrangement to include any adequate provision to protect her from such conduct.

   3. (3)

      The impact upon the plaintiff’s career and earnings resulting from the failure of the arrangement to protect her from conduct of the first defendant which disparaged her and undermined her future employment prospects.

3. [15]

   The Court then turned to deal with issues (1) and (2) given the plaintiff had failed to demonstrate the contract or arrangement was unfair, harsh or unconscionable or against the public interest with respect to the disparagement ground.

4. [16]

   The preliminary conclusion of the Court with respect to the money orders sought in relation to the termination of employment ground was as follows (at [132]):

5. [17]

   As the Court will return to the assessment of money orders, in that respect, after referring to some further submissions filed by the plaintiff pursuant to directions of the Court; it is convenient here to record the factors considered relevant to be taken into account in the assessment of money orders under this heading. Those considerations were as follows (at [127]-[131]):

6. [18]

   With respect to the claim for money orders in relation to this ground the Court determined that it would adopt the same approach to assessment and quantification as adopted with the termination of employment ground.

7. [19]

   Again, it will be useful to set out the Court’s preliminary reasoning as to the assessment and quantification of the bullying and harassment ground, which was as follows (at [104]-[112]):

8. [20]

   It is also important to extract the Court’s approach to the assessment of the quantification of this ground. The relevant passages of Sutton No 3 are at [133]-[141] and are extracted below:

9. [21]

   For the reasons discussed at [142]-[145] of Sutton No 3, the Court found that there was no basis for any money order made by the Court to be reduced by the operation of common law principles of mitigation.

10. [22]

    This issue, together with the following topic concerning interest, was the subject of directions by the Court requiring the plaintiff to make further submissions about those issues and giving leave to file further evidence. The plaintiff took advantage of those directions and filed submissions, with respect to both issues, and evidence in the form of an affidavit of Cheyne James Clarke sworn on 22 June 2017. I will incorporate discussion of the earlier rulings of the Court and those further submissions (and evidence) under this heading.

11. [23]

    The Court’s consideration of the implications of the settlement with the second defendant were discussed at some length in [147]-[163] of the judgment. Nonetheless, and having regard to the further submissions of the defendant in relation to the matter it is appropriate that those portions of the judgment be set out. I extract the relevant passages below:

12. [24]

    The submissions of the plaintiff make reference to her earlier written submissions filed on 24 February 2017. However, that reference would seem to serve no purpose given the further submissions, that the plaintiff was given an opportunity to make, were intended to be responsive to the abovementioned observations and findings of the Court.

13. [25]

    Nonetheless, the plaintiff made substantial submissions as to this question as follows:

14. [26]

    For reasons I will develop below, I consider the settlement with the second defendant should be taken into account in assessing the compensation payable by the first defendant. However, I agree with the submission of the plaintiff in the final paragraph of her submission, extracted above, that the Court should first determine any compensatory payment awarded, then apply interest to that amount and finally take into account any risk of double recovery: Westfield Holdings v Adams (2001) 114 IR 241; [2001] NSWIRComm 293 at [161](7). Given that approach I will firstly turn to the assessment of monetary compensation, with respect to the two grounds made out by the plaintiff, before turning to interest (noting the further submission of the plaintiff in that respect) before returning to the assessment of the implications of the settlement with the second defendant.

15. [27]

    In Sutton No 3, the Court entertained a short discussion as to interest as follows (at [164]):

16. [28]

    As earlier noted further submissions were received by the plaintiff as to interest which submissions were as follows:

17. [29]

    I shall address my conclusions as to this issue under the following heading of this judgment.

Money Orders: Assessment

1. [30]

   The money orders made by the Court must ultimately reflect an assessment by the Court as to which is just in the circumstances of the particular case.

2. [31]

   In the circumstances described in Sutton No 3 and in particular [96]-[103] thereof, I consider that the arrangement should be varied to provide for 5 months notice at the remuneration of $140,000 per annum (see reflected in [44] of this judgment). The ultimate money order made in the matter will take into account a sum reflecting the non-payment of such a period of months by the first defendant together with the sums arising out of the bullying and harassment ground and interest, adjusted for the settlement with the second defendant.

3. [32]

   Having regard to the finding at [140] of Sutton No 3, it is necessary to reach a conclusion as to the appropriate money order referable to this ground.

4. [33]

   As noted at [136] of Sutton No 3, such an assessment cannot be undertaken with mathematical precision. The ultimate question to be answered in this respect is what would represent a just outcome, with respect to this ground, in all the circumstances of the matter. However, the observations of the Full Bench of the Industrial Court of NSW in King v State Bank of New South Wales (No 2) (2002) 126 IR 407; [2002] NSWIRComm 353 (“King No 2”) (per Wright P, Walton VP and Cavanaugh J) need to be borne in mind. The Court there observed (at [114]) as follows:

5. [34]

   Before turning to those particular considerations I propose to briefly return to the authorities relied upon by the plaintiff.

6. [35]

   As to the authorities referred to in [136]-[139] of Sutton No 3, it is unnecessary to make further observations than those contained in the judgment in Sutton No 3, save for the mention of one further consideration with respect to the judgment in Walker v Citigroup Global Markets Australia Pty Limited (2006) 233 ALR 697; [2006] FCAFC 101 (“Walker”).

7. [36]

   In the extract from Walker referred to in [138] of Sutton No 3, the Full Federal Court stated that the evidence of consequential loss of Mr Walker was “not great in volume but striking in its effect”. The Full Court found that Mr Walker suffered “a considerable dislocation of his life with serious long term effects”.

8. [37]

   Those conclusions relate, in my view, to the summary of evidence by the primary judge referred to in [71] of the Full Court’s judgment. That summary refers to evidence considered by the primary judge as to consequential loss after “the misleading and deceptive conduct”. The Full Court ultimately found that it was unnecessary to make an assessment under that head of claim as the assessment of damages for breach of contract found by the Court exceeded the damages awarded by the trial judge for economic loss with respect to liability under the Trade Practices Act 1974 (Cth). Nonetheless, it would appear that the Full Court was relying upon that evidence as to consequential loss (at [101] of its judgment)(see the abovementioned extract from Sutton No 3), as the loss occasioned after the breach of contract, which was taken into account by the Court. The evidence, so described, involved no expert or other evidence but evidence of a breakdown of Mr Walker’s marriage and the loss of day-to-day company of his children in the year after the breach (or misleading and deceptive conduct).

9. [38]

   I turn then to the various authorities of the Industrial Court of NSW concerning the application under s 106 of the Act referred to by the plaintiff.

10. [39]

    In King No 2, the Court upheld an appeal against a sum of money awarded at first instance for stress and financial hardship. Marks J had found in King v State Bank of New South Wales [2000] NSWIRComm 229 at [109] that Mr King should be awarded compensation in the sum of $15,000. The award was not made for the clinical depression suffered by Mr King following his termination of his employment but for the stress caused by the respondent as a result of depriving him of monies which he was due which caused financial hardship. On appeal the Full Bench reduced the award of compensation to $5,000 (King No 2 at [115]).

11. [40]

    In the State of New South Wales v Banas (2004) 137 IR 63; [2004] NSWIRComm 255 (“Banas”), the Full Bench of the Industrial Court found at [101] and [104] as follows:

12. [41]

    It was clear that the Full bench was concerned in that account as to the risk of double counting (see at [102]-[105]).

13. [42]

    In Brown v State of New South Wales (Department of Education and Communities) [2013] NSWIRComm 115, Boland J found that the failure of the applicant to win a permanent Aboriginal Education Officer position was “a factor of some weight in causing Ms Brown’s psychological injury and compensation in that regard [was] appropriate” (at [193]). His Honour had regard to the risk of double compensation referred to in King and disallowed any compensation for psychiatric injury arising from the treatment of Ms Brown at the hands of the Principal of a school. His Honour also made some allowance for medical expenses. He awarded a sum of $5,000.

14. [43]

    In Wheelahan v North Coast Area Health Service [2008] NSWIRComm 164, Boland J again heard an application under s 106 of the Act. In that matter it was submitted that the medical evidence was consistent in demonstrating that the applicant suffered from an adjustment disorder with anxiety and depression and that the matter was analogous to Banas. An amount of $15,000 compensation for stress and suffering was claimed arising out of the applicant’s employment (at [155]). His Honour found that there was a direct relationship between the applicant’s medical condition and the unreasonable and unfair treatment and conduct of the respondent that had led to the contract being unfair (at [256]). He found it was appropriate, therefore, that a separate amount should be paid by the respondent, in relation to that aspect of the applicant’s claim, and made an order of $10,000 for “stress and suffering”.

15. [44]

    In a similar fashion, in this matter, it was found that the personal and reputational consequences for the plaintiff flowed from the failure of the first defendant to protect the plaintiff, with adequate provisions in the arrangement, from bullying or harassment and the failure to ensure that adequate action was taken to deal with her complaint regarding the conduct of the second defendant. The plaintiff’s unexplained termination had a direct relationship to those failures.

16. [45]

    At [104] of Sutton No 3 it was found, under this ground of the claim, the plaintiff had established that there had been a serious and enduring impact upon the plaintiff both personally and upon her reputation and career. Those findings were broad in nature and require some refinement for the purposes of more precisely assessing money orders.

17. [46]

    There is no doubt that the plaintiff suffered personally through humiliation, embarrassment and stress as a result of the unfairness of the contract. There was no evidence, however, that she suffered psychological harm (other than an indication that there were medical receipts not claimed) and there was an absence of a precise definition of the nature of the ongoing impact upon her, although, broadly speaking, it may be described as “serious”. Whilst the Court did not make findings under the ground of disparagement, many aspects of the evidence concerning that ground were instrumental in demonstrating the plaintiff had suffered a loss of career opportunities and reputational damage arising from the unfairness of the arrangement.

18. [47]

    Having regard to the decision in King No 2, it is also necessary to ensure that there is no double counting, with respect to the factors taken into account under the termination ground, such as the loss of long term future employment with the first defendant and the loss of her engagement in circumstances, which unfolded after he termination, resulting in the plaintiff suffering a significant period without finding alternative employment.

19. [48]

    The balancing of all those considerations results, in my view, in a finding that a money order of $20,000 would be appropriate under this ground. That amount will be taken into account for the purposes of assessing final money orders after allowance is made for the settlement with the second defendant.

20. [49]

    I accept the plaintiff’s submission as to interest, save that the assessment of interest should be calculated from 1 November 2005. A just assessment of interest will have interest calculated upon the loss occasioned by reason of the arrangement being an unfair contract and, accordingly, should be assessed against money amounts referrable to the termination of employment and bullying and harassment grounds, before deduction of any amount corresponding to settlement with the second defendant.

21. [50]

    Having regard to the further submissions of the plaintiff, in this respect, and the earlier discussion by this Court in Sutton No 3, I consider that it is appropriate to take into account the settlement with the second defendant in this matter in relation to the assessment of money orders in favour of the plaintiff, with respect to declarations and findings made against the first defendant. This course is necessary in order to prevent double recovery as there are overlapping elements of the declarations and the findings of unfairness by the Court as to the first and second defendants.

22. [51]

    That conclusion needs to be qualified in two respects. First, the total costs attributable to the claim against the second defendant should be taken into account in assessing the impact of the settlement of the second defendant. Having regard to the submissions of the plaintiff, I consider it is appropriate to remove from any deduction for the settlement with the second defendant an amount of $230,000, representing the costs component of that settlement. Secondly, I do not consider that the settlement with the second defendant should be approached on the basis that the contribution by the second defendant is equal to the first defendant with respect to findings of the existence of an unfair contract under s 105(1)(a) of the Act. I consider that the contribution of the first defendant to the unfairness of the arrangement resulting in compensation is greater than that of the second defendant.

23. [52]

    I will not quantify the impact of the settlement with the second defendant at this stage, but rather, I will adopt the following procedure before making a final assessment in that respect.

CONCLUSION

1. [53]

   I consider that money orders should be made under s 106(5) pursuant to the plaintiff’s application in this matter. The Court has partially ruled upon the elements of such orders earlier in this judgment. In the directions I will make, the plaintiff will be required to quantify such orders and, if appropriate, make further submissions as to the settlement with the second defendant in accordance with this judgment. Submissions will be required in relation to any application for costs.

DIRECTIONS

1. [54]

   The Court makes the following orders and directions all of which shall require compliance within 21 days of the publication of this judgment:

   1. (1)

      The plaintiff shall file in the form of short minutes of order or a schedule reflecting the following:

   2. (2)

      The plaintiff has liberty to file any final submissions as to the implications of the settlement with the second defendant. Those submissions shall be limited to the question of any deduction arising from the settlement with the second defendant and may address the issue of apportionment between the first the second defendants (after the deduction of costs referable to the proceedings against the second defendant).

   3. (3)

      The plaintiff shall file any application as to costs against the first defendant and any submissions in support thereof.