Wrongful dismissal resulting in $1.59M damages

3 December 2014

Heugh was the Managing Director of Central Petroleum Limited (Central). His role included responsibility for investigating and negotiating farm-out agreements. In 2012, contrary to Heugh’s recommendation, Central resolved that his farm-out agreement duties were to be re-assigned to another employee. The following day Heugh sent the other employee two letters, one of which alleged that the employee lacked an adequate level of professionalism, and the second informed the employee of the Board’s resolution and asked whether he would like to take on those additional responsibilities.

The Board wrote to Heugh informing him that his attempts to circumvent the Board’s decision to re-assign the farm-out responsibilities to another employee breached his employment contract and the company’s Code of Conduct. The Board’s letter required Heugh to remedy the alleged breaches within 14 days. Heugh withdrew the warning letter to the other employee but he did not provide the employee with an apology in the form proposed by the Board. One month later the Board took measures to remove Heugh as an employee, director and managing director of Central by seeking his resignation. Heugh refused to resign. Central then terminated his employment pursuant to his contract.

On 5 September 2014, the Western Australian Supreme Court decided, after careful consideration, which included:

  • discussion of the common law right of dismissal
  • exercise of discretion to dismiss under the contract
  • what reliance can be placed on the other conduct

That Heugh committed a serious breach of conduct when he sought to put pressure on the other employee not to accept responsibility for farm-outs. The Judge held that Central wrongfully dismissed Heugh’s employment and his termination was not one of reasonable discretion on the part of Central.

The Court ordered Central to pay Heugh $1.59M in damages including for loss of remuneration for the the balance of his fixed contract, loss of opportunity for a higher remuneration from salary reviews, unpaid long service leave, loss of opportunity to renew the contract and interest.