Employment, wrongful dismissal, loss of opportunity; Guthrie v News Limited [2010] VSC 196 (14 May 2010)

May 16, 2010 |

Last Friday there was judgment for Bruce Guthrie in Guthrie v News Limited.  It was a very high profile case, at least in Victoria. It is a long and quite complicated decision.

FACTS

After some negotiations, [5] – [6], News Limited (“News”), engaged Bruce Guthrie (“Guthrie”), as editor in chief of the Herald Sun, commencing 19 February 2007.  From March 2007 differences emerged between Peter Blunden (“Blunden”), the managing director (and previous editor) and Guthrie.  In August and October 2008 there were significant arguments between Guthrie and Blunden. On 11 October 2008 John Hartigan, the chairman and CEO of News, came to the view that the working relations between these two senior executives had irretrievably broken down and decided to terminate Guthrie from his position. He did so on 10 November.  Hartigan sought to keep Guthrie within News, suggesting a position in Sydney.  Guthrie declined stating that he had just purchased a house in Melbourne, was selling his Sydney home and his eldest daughter was doing her final year of school.

ISSUES

Kaye J set out, at [18],  the issues for determination as:

(1) Did the contract of service between the plaintiff and the defendant entitle the defendant to terminate the plaintiff’s employment in November 2008, before the expiration of the three year period of service set by the contract?

(2) If the contract of service did contain a provision entitling the defendant to terminate the plaintiff’s contract of service in November 2008 –

(a) was there an implied term of the contract that the defendant would act in good faith in exercising that power under the contract;

(b) if so, did the defendant breach such obligation of good faith in terminating the plaintiff’s employment with it?

(3) If the defendant breached the contract of service by terminating the plaintiff’s employment in November 2008, is the plaintiff entitled to make a claim for damages, arising from such breach, comprising the loss of opportunity by him, in February 2010, to obtain a renewal of that contract of service?

(4) If the plaintiff is entitled to maintain such a claim for loss and damage, did the plaintiff lose such an opportunity of renewal of his contract of service, by reason of the termination of his employment in November 2008, and, if so, what is the value of that lost chance to the plaintiff?

(5) Alternatively, is the plaintiff entitled to claim the additional payment asserted by him as the alternative basis by which he claims loss and damage?

(6) If the plaintiff is entitled to claim the termination payment, what is the amount of that payment?

DECISION

His Honour undertook  a very detailed analysis of the evidence and counsel’s submissions upon it, [75][165].  His Honour’s findings with respect to News’ witnesses were, on material issues, quite negative.

LOSS OF OPPORTUNITY

Kaye J found there were conflicting lines of authority regarding the right to claim a loss of opportunity.  Two New South Wales Court of Appeal decisions, New South Wales Cancer Council v Sarfaty and Murray Irrigation Limited v Balsdon found there was no basis in law to claim a loss of opportunity.  In the Federal Court decision of Martin v Tasmanian Development & Resources the Federal Court per Heerey (and upheld on appeal)  found there was a right of an employee to recover damages for loss of opportunity after wrongful dismissal.  Kaye J  (see [48] – [50]) and Heerey J distinguished  Sarfaty on the basis that in the latter the analysis of the High Court in  Commonwealth v AmannAviation Pty Ltd was wrong, see [52].  Kaye J found that the High Court did not

..preclude their Honours, in Amann Aviation, from upholding the claim of Amann, a necessary part of which was a claim for loss of opportunity to renew its contract with the Commonwealth. Their Honours recited the principle, which I have quoted above, but distinguished it, on the basis that, in a claim for loss of opportunity, the court is engaged in a hypothetical exercise, in determining how the contract would have turned out, if it had not been brought to an end by the Commonwealth’s wrongful repudiation of it. Thus, the passage from their Honour’s judgment, relied upon by Gleeson CJ and Handley JA in Sarfaty, did not support the conclusion that an employee may not make a claim for damages for loss of opportunity.

Kaye J regarded the second NSW decision of Murray Irrigation, the last in time, as not precluding a loss of opportunity action.

After a detailed analysis Kaye J found, at [57], that the authorities:

support the proposition that an employee may claim damages for loss of opportunity to renew a contract of employment which has been wrongfully terminated by the employer.

Kaye stated, at [58], that whether a plaintiff can recover in a claim of loss of opportunity depends on:

(1) Whether at the time at which the parties entered into the contract, it may be reasonably supposed to have been in their contemplation that, as the probable result of a breach of that contract by the defendant before its expiration, the plaintiff might suffer a loss of a valuable opportunity to renew or extend his contract with the defendant.

(2) If so, whether the plaintiff, as a result of the breach by the defendant of the contract in November 2008, did in fact lose a valuable opportunity to renew or extend his contract with the defendant.

The practical application of that test is, at [60], determining what information was available to the defendant employer at the time the contract was entered into and postulating whether it would have realised there would be a loss of opportunity to the plaintiff employee to renew his/her contract was a likely result of a wrongful termination of the existing contract. Kaye J found, at [61], on the first question that from the express terms of the contract and the background facts, that News was aware that with Guthrie’s wrongful termination he would  not have the  opportunity to obtain a renewal.

On the second question, whether there was a valuable loss of opportunity, Amman Aviation and Sellars v Adelaide Petroleum NL & Ors make it clear that in determining damages for loss of opportunity it is necessary to determine the probabilities of what would might have happened, see [167].  Kaye J undertook a detailed analysis of the evidence at [168] and [171][177].  His Honour found there was no prospect on the evidence that Hartigan would have renewed Guthrie’s appointment as editor in chief of the Herald Sun, see [169][170].  He also found there was no evidence that there was a chance of an alternate position within News being made available to Guthrie, see [178].

DAMAGES – WRONGFUL TERMINATION

The Plaintiff’s alternate claim was that under the contract he was entitled to a termination payment as at the completion of the contract, being 18 February 2010. The issue was the construction of clause 22.4. It is set out at [24] as:

22.4 Redundancy

In the event that your contract is not renewed, the Company may redeploy you to any other comparable position which is available within the company or the group. However, if the Company is unable to obtain for you offer of a comparable position, the Company will terminate your employment. In these circumstances, in addition to your entitlements under clause 22.3, you will receive a termination payment which is inclusive of notice and redundancy/severance pay. In determining an appropriate termination payment, the Company will take into account any applicable legislative requirements and your length of service with the Company.

If the Company obtains an offer of a comparable position for you and you do not accept the offer, you will only receive the payments due to you under clause 22.3.”

His Honour summarised the principles relating to the appropriate length of notice for a party not a fixed term contract as:

(1) The appropriate length of the “reasonable notice” (or period in lieu of which payment should be made) is determined at the time at which notice of termination of the employment is given, and not when the contract of employment was entered into.

(2) In determining what is a reasonable period of notice, it is important to bear in mind the primary purpose served by the giving of such notice, namely, to enable the employee to obtain new employment of a similar nature.

(3) Factors which are taken into account in order to determine the appropriate length of notice include matters pertinent to the nature of the employment itself, and also matters personal to the employee. Thus, they include the level of responsibility assumed by the employee, the high grade of his appointment, the importance of his position, the size of his salary, and industry practice. They also include matters personal to the individual employee, including the length of the employee’s service with the defendant, the employee’s age, the nature of the employment which the employee left, or gave up, in order to serve the present employer, and the expected period of time it would take for the employee to find suitable alternative employment.

(4) Damages arising from the failure of the employer to give adequate notice, or to provide adequate payment in lieu of such notice, are calculated in gross monies, and not net of taxation.

His Honour found:

    Leave a Reply