In a recent decision of the Federal Court in Van Efferen v CMA Corporation Ltd [2009] FCA 597, Justice Tracey considered a claim for damages for a breach of an Australian Workplace Agreement and also whether the term of good faith is implied into a contract of employment.

The case dealt with a barge master employed at Port Hedland and various difficulties which he had in relation to his position at the port and his ultimate termination said to be because of redundancy (at [17]). The applicant said his termination was brought about through difficulties which had taken place on the Dolphin Project at Port Hedland and had nothing to do with the fact he had been returned to CMA’s premises at Geelong where there was no work for him to perform. It was said on behalf of the company that he needed to be transferred from the Dolphin Project as his behaviour was such that it put into doubt the continued business relationship the company had with its client and in order to ensure the effect of operation of the project.

Mr Van Efferen’s Australian Workplace Agreement had a grievance provision. The company said notwithstanding that, it had a right to require him to move back to Geelong. The applicant claimed damages for breach of the grievance provision pursuant to s 721 of the Workplace Relations Act 1996 (Cth). Justice Tracey, in looking at the general nature of grievance provisions said that the purpose was “a form of protection to an employee whose conduct has, for any reason, given the employer cause for concern. It is designed to ensure that the employee is informed of the nature of those concerns and has the opportunity to disabuse the employer or to have the opportunity (in most instances) of rectifying any shortcomings which have given rise to the employer’s misgivings (at [44]). His Honour found that grievance clauses must be read and applied in a sensible and practical manner rather than concern itself with trivial issues (at [48]). The applicant was successful in having the Judge conclude that the grievance provision was breached (at [50]). The question was whether the loss or damage he suffered was a proximate cause to the breach of the provision (at [52]). This, His Honour said, was a question of fact (at [51]). His Honour found that the process which did not take place would have taken some time and would not have inevitably led to the termination of the applicant’s employment (at [61]). His Honour found had CMA not breached the grievance provision, the contract would not have been terminated and Mr Van Efferen would have continued working at Port Hedland until the completion of the Dolphin Project in April 2008. It was found therefore that a breach of the provision was a proximate cause to the loss of salary and other benefits he would have been entitled to as Marine Supervisor (at [62]).

Relying on the High Court authority of Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54, Justice Tracey found that the applicant should be placed in the same situation as far as money may do it as if the contract had been performed (at [63]). The losses calculated by the Judge related to the life of the project and ultimately less alternative earnings and the Judge assessed his loss at $304,765.53. The redundancy pay he received was not deducted from these damages as he argued he would have been likely to have been made redundant at the conclusion of the Dolphin Project in any event. Such an argument was accepted (at [71]). The Judge however made a discount of 10% for the contingency that the contract might have been validly terminated prior to April 2002 and consequently the damages were assessed at $274,288.00 (at [72]).

His Honour also deals with a claim for damages for “loss of a chance” which ultimately he found was not appropriate to this case. Further, he does deal with some useful authority for cases where “loss of a chance” damages are applicable in employment contracts. See [75]–[78].

His Honour then dealt with the question of the implied terms which can be tersely referred to as those implying “good faith”. His Honour did not deal to any great degree with this on the basis of his other orders. However, he made some short observations. His Honour then dealt with the New South Wales Supreme Court case of Russell v Trustees of Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104 and the Court of Appeal decision at (2008) 176 IR 82; [2008] NSWCA 217. He noted that in the Federal Court, single judges have adopted a far more guarded approach to the implication of such terms into contracts of employment (at [83]). In this regard, he followed the earlier Federal Court proceedings which doubted the implication of such terms.

This is a very useful case, particularly dealing with the employment protection provisions provided by grievance provisions found not only in Australian Workplace Agreements but also in Awards, Enterprise Agreements and in some common law contracts. Clearly this opens up, because of the size of the damages awarded, major areas of potential litigation.