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Employee Awarded $1.4 Million in Damages for Psychiatric Injury – Elisha v Vision Australia Limited [2024] HCA 50

Posted on January 23, 2025

In a recent landmark decision, the High Court has set a new precedent by awarding an employee $1.44M in damages for a psychiatric injury following the employer’s breach of the employment contract.[1]

This ruling is likely to have significant implications for employers, emphasising the need for adherence to contractual obligations and fair process when choosing to dismiss an employee.

Background Facts

  • From 2006, the former employee, Mr Elisha, was employed by Vision Australia Limited (Vision Australia). Mr Elisha’s employment was governed by a written employment contract.
  • During March 2015, Mr Elisha was involved in an incident while staying in a hotel while on a work-related trip. The circumstances of the incident were disputed, but it essentially involved allegations that Mr Elisha had been “aggressive and intimidating” during his stay at the hotel.
  • Mr Elisha was later given a letter from Vision Australia which explained that a decision had been made to stand him down as a result of the allegations surrounding the hotel incident. Despite the fact that Mr Elisha denied such allegations, his employment was nonetheless terminated.
  • It later emerged that in making the decision to terminate Mr Elisha, Vision Australia took into consideration reports that Mr Elisha’s had displayed a “pattern of aggression”. These allegations were never put to Mr Elisha, and he was never given an opportunity to respond to such allegations.
  • Following his termination, Mr Elisha was diagnosed with a major depressive disorder and an adjustment disorder with a depressed mood, with no capacity for work in the foreseeable future.

Unfair Dismissal Claim

In 2015, Mr Elisha commenced unfair dismissal proceedings against Vision Australia in the Fair Work Commission. Vision Australia settled for the maximum amount to which Mr Elisha was entitled, being $27,248.68. A settlement deed was entered into which provided for a release that applied to the “employment proceedings and the termination” (Settlement Deed).

The Settlement Deed did not bar Mr Elisha’s subsequent claim

The court found that Mr Elisha’s subsequent claim for breach of contract was not a matter that fell within the scope of the release in the Settlement Deed because the use of the word “and” limited the release only to matters that related to the unfair dismissal proceedings.

Decision of the Supreme Court of Victoria

In 2020, Mr Elisha commenced proceedings in the Supreme Court of Victoria alleging that the dismissal breached his employment contract and had caused his depressive and adjustment disorders.

The primary judge ultimately found that the process which led to Mr Elisha’s termination was a “sham and disgrace”.[2] His Honour concluded that Mr Elisha had not engaged in inappropriate behaviour at the hotel as alleged, and that the “claimed history” of aggression was the real reason for the dismissal despite the fact such claims lacked substance.[3]

In relation to the breach of contract, the Court, considered whether the contract of employment incorporated the employer's disciplinary policy and procedure as terms of the contract.

The employment contract provided that Mr Elisha’s employment would be in accordance with its policies and procedures and that a breach of the policies and procedure may result in termination of employment. Importantly there was no clause that provided that these policies and procedures were not incorporated into the employment contract.

His Honour held that based on the promissory and mandatory language used in the contract in referencing the policy and procedure clause, the disciplinary policy was incorporated as a term of the contract and that Vision Australia had breached the incorporated disciplinary policy by not following the applicable procedure in terminating Mr Elisha.

The Court also found that the possibility termination could result in psychiatric injury was foreseeable in the event that protective processes recognised by the employment contract were not followed.

Mr Elisha ultimately succeeded in his claim for damages for breach of contract and Vision Australia was ordered to pay up to $1.44 million in damages.

Decision of the Court of Appeal

Vision Australia appealed the decision of the Supreme Court, arguing that the disciplinary policy and procedure were not incorporated into the employment contract, and if they were, they had not been breached.[4] Vision Australia also argued that damages were not available for any psychiatric injury suffered by Mr Elisha, and damages for the psychiatric injury were too remote.

The Court of Appeal found that the disciplinary policy and procedure were incorporated into the employment contract. Nonetheless, the Court agreed damages for psychiatric injury were not available for the breach of contract by Vision Australia on the grounds that, amount other things, damages for Mr Elisha's psychiatric injury could not be recovered because the psychiatric injury was too remote.

Decision of the High Court

The High Court went on to ultimately uphold the findings of the primary judge. The High Court affirmed that:

  1. the contract did incorporate the disciplinary policy and procedure.
  2. liability for psychiatric injury is not beyond the scope of a contractual duty concerned with the manner of dismissal’ and
  3. that liability for psychiatric injury was not too remote, particularly in the serious circumstances of the breach.

In reaching this decision, the High Court stated that “[m]any people build their lives round their jobs and plan their future in the expectation that they will continue. For many workers dismissal is a disaster…”.[5]

The Court recognised that a person's employment "is usually one of the most important things in his or her life. It gives not only a livelihood but an occupation, an identity and a sense of self-esteem” and an unfair process of termination for alleged misconduct could affect all three of those interests.[6]

The orders made by the primary judge for damages of $1.44 million for the psychiatric injury suffered by Mr Elisha were subsequently restored.

Key Takeaways

  1. be aware that an employee who is unfairly dismissed may claim damages for psychiatric injuries caused by that dismissal if there has been a breach of the employment contract;
  2. carefully review the wording of employment contracts to ensure that there are no express terms which provide for policies and procedures to be incorporated as terms of the employment contract;
  3. carefully review the wording of policies to remove language which provides for rigid processes and instead ensure that policies provide for guiding principles regarding disciplinary matters;
  4. ensure that the disciplinary process in place complies with the relevant fairness requirements, including those set out in the Fair Work Act 2009 (Cth); and
  5. manage the termination of employees carefully and properly, ensuring to diligently follow any necessary obligations when considering whether to dismiss or terminate an employee.

If you require assistance in reviewing your employment agreements or policies and procedures, please contact the employment law team at Lynch Meyer on 08 8223 7600.

Written by Sonia Bolzon, Consultant and Chelsea Shinkfield, Solicitor.

[1] Elisha v Vision Australia Limited [2024] HCA 50, [2] Elisha v Vision Australia Ltd [2022] VSC 754 at [236], [3] Elisha v Vision Australia Ltd [2022] VSC 754 at [214], [4] Vision Australia Ltd v Elisha (2023) 328 IR 299, [5] Elisha v Vision Australia Limited [2024] HCA 50 at [67], [6] Elisha v Vision Australia Limited [2024] HCA 50 at [67].

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