The damages awarded to a dismissed salaried partner of a law firm have been reduced from almost half a million dollars following an appeal by the firm against the judgment of the Supreme Court of NSW.
In June of this year, NSW Supreme Court judge Stephen Robb found that HWL Ebsworth managing partner Juan Martinez, acting on behalf of the equity partners of the firm, did not have the delegated authority to terminate the employment of partner Tim Griffiths.
His Honour awarded damages of just over $450,000, comprising $145,000 for lost salary and three months’ notice, as well as $305,375 for the loss of opportunity to seek other employment while having the benefit of incumbency.
In appealing the primary judge’s findings, HWL Ebsworth contended that the primary judge had erred in the assessment of damages.
When and how lawful termination would be given
The question for the primary judge, the Court of Appeal said, was whether, had Mr Martinez not purported to dismiss Mr Griffiths immediately with one month’s pay, HWL Ebsworth would have terminated his employment immediately with three months’ pay.
Justice Robb assessed Mr Griffiths’ damages at $145,000 (being four months’ salary), the first month representing the period from 17 August to 18 September, 2015 during which Mr Griffiths’ employment would have continued, and the balance being the period of three months expiring on 18 December, 2015.
There were two matters for the Court of Appeal to determine, Justice Anthony Meagher said:
- the likelihood that a general meeting of the partners would have occurred earlier, with the consequence that the damages awarded for the period from 17 August to 18 September 2015 should be reduced accordingly.
- and whether the termination would have been by payment in lieu of notice, which only has significance for Mr Griffiths’ award of compensation for the loss of the ‘benefit of incumbency’.
“It is my view that the primary judge erred in assessing as more probable than not that the equity partners would have allowed Mr Griffiths the opportunity to work out his three-month notice period,” Justice Meagher said.
“Rightly or wrongly, Mr Martinez had decided that Mr Griffiths’ contract should be terminated immediately, principally because Mr Griffiths’ billings did not justify his continued employment.
“Furthermore, there was no reason why it would be necessary for Mr Martinez to permit that opportunity, where the termination was to be by payment in lieu of notice and without any need for justification, especially where the decision to terminate had been made in mid-July.
“In addition, it is to be presumed that Mr Martinez continued to have the support of the senior partners in the respondent’s practice group.”
These circumstances “make it most likely”, Justice Meagher continued, that the equity partners would have supported Mr Martinez’s recommendation that the termination be by payment in lieu of notice, especially where Mr Griffiths did not have a ‘right’ to receive notice instead of payment and there was no good reason why Mr Griffiths should be required to work out his notice period.
“The only matter about which there could be doubt on 17 August, 2015, was as to when a teleconference meeting of the partners could be arranged. The fact that the partnership deed included a provision for a teleconference meeting provides a sufficient basis for inferring that such a meeting was able to be arranged, if the circumstances were considered to justify it,” His Honour said.
“Where Mr Martinez, as managing partner, had made a decision that Mr Griffiths’ employment should be terminated immediately, and that decision was supported by the senior partners in Mr Griffiths’ practice group, the overwhelming likelihood is that Mr Martinez would have secured the support necessary to convene the meeting, and have done so within a week or so after 17 August, 2015.”
It thus followed, Justice Meagher held, that HWL Ebsworth’s ground of appeal should be upheld and the damages award of $145,000 be reduced by $18,000.
Loss of chance to seek other employment with benefit of incumbency
Mr Griffiths had contended that his loss of the chance to seek other employment while still working for HWL Ebsworth under a three-month notice period amounted to a loss of commercial advantage. Justice Robb found as such and deemed it “accordingly compensable”.
“However, performance of the respondent’s employment contract would not have resulted in his securing the commercial advantage for which he contends, because the firm would have performed by terminating him by payment in lieu of notice,” Justice Meagher held.
“It follows that an opportunity to acquire that advantage was not lost by reason of the firm’s breach. Accordingly, the primary judge erred in awarding damages for the alleged loss of the ‘benefit of incumbency’.”
As such, the damages of $305,375 was set aside.
Whether benefit of incumbency was a compensable commercial advantage
On this point, the Court of appeal said that Mr Griffiths “gave no evidence” supporting the idea that his search for comparable employment had been impeded by the fact that he no longer held a position with HWL Ebsworth or because of the circumstances of his employment, nor was there evidence from the “job search firms” saying that his recruitment prospects would have been improved if Mr Griffiths was in a notice period with HWL.
“For the employee, [a notice period] provides an opportunity to secure ongoing employment, albeit with a different employer. However, the fact that the employer is often given the election to make a payment in lieu of notice suggests that from the employee’s perspective, ordinarily there is no value difference between receiving a period of notice or payment in lieu of such notice,” Justice Meagher said.
“Although the respondent did not formulate his claim for damages as one for financial loss arising from injury to reputation or from the manner of his termination, as the foregoing analysis shows, the primary judge dealt with the claim by reference to such matters, and at the same time did not address whether the benefit of incumbency represented a substantial and not merely speculative prospect of securing a benefit.
“In these circumstances the loss of that prospect, had it occurred, was not the loss of a ‘distinct commercial benefit’, which was compensable.”
Ultimately, the Court of Appeal set aside two orders made by Justice Robb and made a judgment for Mr Griffiths as the plaintiff against HWL Ebsworth as the defendant, in the sum of $127,000, together with pre-judgment interest.
A separate ground of appeal, pertaining to Mr Griffiths’ alleged lack of candour in using firm precedents thereby entitling the firm to terminate his employment summarily, was not upheld.
The full case citation is Martinez as trustee for Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers v Griffiths as trustee for the Griffiths HWL Practice Trust  NSWCA 310 and it can be found on Caselaw NSW.
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