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Background to Elisha v Vision Australia Limited [2024] HCA 50
- Adam Elisha was employed by Vision Australia Limited as an adaptive technology consultant under a written employment contract dated 27 September 2006 (the 2006 Contract).
- In 2015, during a work trip, an alleged incident occurred at a hotel. Following this, Vision Australia began internal disciplinary proceedings against Mr. Elisha.
- The disciplinary process was later found to be unfair:
- Allegations (especially about a supposed history of aggression) were not properly put to Mr. Elisha;
- He was denied procedural fairness promised under the employer’s enterprise agreement (Vision EA) and internal disciplinary procedures; and
- The process was described by the trial judge as a “sham” and a “disgrace”.
- Mr. Elisha was dismissed and subsequently developed a major depressive disorder, rendering him incapable of returning to work.
Lower Court Decisions
- Trial Court (Supreme Court of Victoria):
- Found that Vision Australia breached the employment contract by failing to follow due process.
- Held that this breach caused Mr. Elisha’s psychiatric injury.
- Awarded $1.44 million in damages for psychiatric injury.
- Court of Appeal (Victoria):
- Agreed there was a breach of contract.
- Overturned the damages award, saying psychiatric injury damages were not available for breach of an employment contract related to termination.
Key Issues Before the High Court
- Was the disciplinary policy part of the employment contract?
Yes: Found to be incorporated via the employment contract’s terms about compliance with policies and procedures. - Can an employee recover damages for psychiatric injury caused by a breach of an employment contract concerning the manner of dismissal?
Yes: Psychiatric injury is recoverable where it falls within the reasonable contemplation of the parties. - Was the psychiatric injury too remote to be compensable?
No: In the context of employment termination, it was a serious possibility (IE: ‘on the cards’) that breaching due process could cause psychiatric injury.
The High Court’s Rulings
- Psychiatric Injury Is Recoverable for Breach of Employment Contracts:
The longstanding view derived from Addis v Gramophone Co Ltd (1909) — that mental distress from dismissal is not compensable was rejected.
Damages for diagnosable psychiatric injury are available where contractual breaches cause such harm. - Scope of Duty:
In employment contracts, where disciplinary or termination procedures are contractually binding, breaching them can lead to compensable psychiatric injury. - Remoteness:
Psychiatric injury was reasonably foreseeable in 2006 when the contract was signed.
Given the importance of employment to identity, livelihood, and dignity, the risk of psychiatric injury from unfair termination was a serious possibility; not too remote. - Negligence:
(from case obiter) The Court chose not to decide whether there was also a common law negligence duty about safe disciplinary procedures. In effect this leaves that question open for another day.
Key Doctrinal Shifts from Elisha
| Old Law (pre-2024) | New Law (post-Elisha) |
|---|---|
| Psychiatric injury generally not recoverable for breach of employment contract (based on Addis rule). | Psychiatric injury is recoverable if flowing from breach of an employment contract, including breaches involving unfair dismissal procedures. |
| Remoteness evaluated strictly — damages rarely recoverable. | Remoteness evaluated with employment context in mind — psychiatric harm is foreseeable in dismissal contexts if due process is breached. |
| Procedural disciplinary policies seen as soft aspirational documents unless extremely clear. | If an employment contract references compliance with employer policies and procedures, they can be contractually binding — even if those policies change over time. |
Application to Broader Employment Law
- Employers must now strictly comply with internal policies during disciplinary actions if those policies form part of the employment contract.
- Failure to afford fair process during investigations, discipline, or dismissal creates exposure to substantial damages for psychiatric injury.
- Breach + Injury = Big Money Risk:
This case has opened a clear path for employees to claim damages that can far exceed standard unfair dismissal caps ($90,000+ limits under the Fair Work Act).
Message for employees and employers:
If a manager’s misconduct causes serious distress to an employee, particularly if coupled with procedural unfairness (e.g., biased evaluations, punitive treatment post-disclosure of sexual orientation) and a psychiatric injury develops, then the employee may ask that the Courts rely on Elisha to allow for contractual damages for breach of implied duty of good faith and fair dealing, and/or specific procedural policies.
In other words, Elisha gives a former employee a strong, High Court-approved path to a real, substantial damages claim, not just reinstatement or small unfair dismissal compensation.
Contact Cogent Legal for more information on unfair dismissal, general protections and employer negligence cases.