New South Wales Court of Appeal CITATION: Irving & Ors. v. Kleinman [2005] NSWCA 116 HEARING DATE(S): 22 March 2005 JUDGMENT DATE: 18 April 2005 JUDGMENT OF: Hodgson JA at 1; Ipp JA at 36; Tobias JA at 37 DECISION: 1. Leave to appeal granted, Notice of Appeal to be filed within 7 days. 2. Appeal allowed. 3. Paragraphs 16, 17, 19 and 20 of the Amended Statement of Claim struck out, the opponent to have liberty to re-plead the contract and tort claims generally in accordance with these reasons. 4. Opponent to pay claimants' costs of the leave application and the appeal, and to have a Suitors' Fund Act certificate if otherwise eligible. CATCHWORDS: EMPLOYMENT LAW - Employment and conditions of service - Contract of employment - Implied terms - Terms concerning relationship of trust - Whether applies to disciplinary proceedings - Whether employer might have a duty of care relevant to such proceedings. Teaching Services Act 1980, ss.37, 38, 82-84 LEGISLATION CITED: Teaching Services (Education Teaching Service) Regulation 1994, regs.13-16 Eastwood v. Magnox Electric plc [2004] 3 WLR 322 General Steel Industries Inc. v. The Commissioner for Railways (NSW) (1964) 112 CLR 125 CASES CITED: Heptonstall v. Gaskin (no.2) [2005] NSWSC 30 Hollingsworth v. Commissioner of Police (1999) 47 NSWLR 151 State of New South Wales v. Paige [2002] NSWCA 235, 60 NSWLR 371 Paul Irving - 1st claimant Jennifer Williamson - 2nd claimant PARTIES: State of New South Wales - 3rd claimant Monica Kleinman - opponent FILE NUMBER(S): CA 40458/04 Mr. P. Menzies QC with E. Krug for the claimants COUNSEL: Mr. D. Kennedy SC with A. Hourigan for the opponent I.V. Knight, Crown Solicitor, for claimants SOLICITORS: MacMahon Associates, Surry Hills for opponent LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 6616/04 LOWER COURT JUDICIAL OFFICER: Robison DCJ IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40458/04 DC 6616/04 HODGSON JA IPP JA TOBIAS JA Monday 18 April 2005 IRVING & ORS. V. KLEINMAN Judgment 1 HODGSON AJ: On 18 May 2004, Robison DCJ made orders disposing of a Notice of Motion brought by the claimants (Mr. Irving, Ms. Williamson and the State of New South Wales), in which he did not strike out paragraphs 16-21 of the opponent's Amended Statement of Claim, as had been sought by the claimants. The claimants seek leave to appeal from that part of the primary judge's decision. 2 The application for leave to appeal has been argued on the basis that, if leave is granted, the appeal will be disposed of without further submissions. CIRCUMSTANCES 3 The circumstances giving rise to the opponent's claim, as in substance alleged in paragraphs 1-15 of her Amended Statement of Claim, are as follows. 4 The opponent was at material times employed by the Department of Education. She had been a school teacher since about 1970, and worked mainly in the area of counselling. In 1996, she was appointed as the District Guidance Officer of the Department in respect of the Central Coast region. 5 In 1984, the then Director of Education had approved of her engaging in private psychological work outside her normal hours of work. In September 1997, she was appointed as a clinical psychologist for the New South Wales Rural Fire Service. 6 In 1999, following investigations involving Ms. Williamson, she was charged by Mr. Irving (on behalf of the State of New South Wales) with four charges, with 28 specific particulars. The charges related to allegations that the opponent was at times not discharging her duties for the Department of Education, but was engaged in work for the New South Wales Rural Fire Service; that when in outside employment she claimed and received sick leave entitlements from the Department; that she failed to comply with her stated itinerary; and that she claimed travel expenses from the Department when engaged in activities on behalf of the New South Wales Rural Fire Service. 7 On 2 September 1999, a prescribed officer, namely Ms. Carol McDiamid, was appointed to deal with the charges, and she decided to deal with them under cl.15(2)(a) of the Teaching Services (Education Teaching Service) Regulation 1994 (the Regulation). 8 On 3 April 2000, Ms. McDiamid found all 28 particulars not proven and all four charges were dismissed. 9 The Amended Statement of Claim asserted four causes of action: (1) breach of contract (paragraphs 16-18); (2) negligence (paragraphs 19-21); (3) misfeasance in public office (paragraphs 22-24); and (4) malicious prosecution (paragraphs 25-28). 10 The Amended Statement of Claim asserted injuries including psychological injuries, and also claimed aggravated and exemplary damages. 11 The present application concerns only the first two of those four causes of action. 12 The terms of the contract relied on are set out in paragraphs 16 of the Amended Statement of Claim, which is in the following terms: 16. The plaintiff says that there were implied terms and conditions of the contract of employment between herself and the Department that in relation to allegations of impropriety, any investigations of such allegations and/or any laying of charges and/or prosecution of disciplinary proceedings consequent upon such allegations or investigations would be carried out: (i) expeditiously and with due diligence, (ii) fairly and objectively, (iii) thoroughly, (iv) confidentially, (v) with all relevant information being supplied by those investigating the allegations and departmental charges to relevant officers who were responsible for deciding whether the plaintiff ought to be charged and to the prescribed officer, (vi) by full and proper inquiry and investigation prior to the laying of disciplinary charges against the plaintiff, (vii) in accordance with Departmental guidelines and/or codes of conduct, (viii) that statements would have been obtained from relevant witnesses prior to, or prior to recommending, that the plaintiff be charged with disciplinary offences, (ix) that relevant officers with the Department of Education having regard to all relevant information before charges were laid against the plaintiff, (x) that the Department of Education would institute, maintain and supervise a system of investigation and charging of members of the teaching profession which was fair and without bias, (xi) that the department of Education would lay down adequate guidelines for the fair and objective investigation of allegations against members of the teaching profession, and have in place guidelines in relation to the circumstances in which charges should be made and prosecuted. (xii) that the Department of Education in relation to allegations of impropriety, any investigations of such allegations and/or any laying of charges and/or prosecution of disciplinary proceedings consequent upon such allegations or investigations would act in a manner not likely to destroy or seriously damage the relationship of trust and confidence between the plaintiff and her employer. 13 Paragraph 17 then alleges breaches, in terms of each of the subparagraphs of paragraph 16; and paragraph 18 alleges consequential injury loss and damage. 14 The allegation of negligence is contained in paragraph 19 of the Statement of Claim, which is in the following terms: 19. Further and/or in the alternative, the plaintiff says that the Department, by its servants and agents who investigated, laid charges and prosecuted the disciplinary proceedings were negligent. 15 Otherwise than by alleging the relationship of employment, and the terms of the contract to which I have referred, there is no allegation of facts said to give rise to a duty of care, nor is there any specification of what any alleged duty of care is. 16 Paragraph 20 then gives particulars of negligence along similar lines to the allegations of breach of contract; and paragraph 21 alleges consequential damage. DECISION OF PRIMARY JUDGE 17 Before the primary judge, the claimants relied, inter alia, on State of New South Wales v. Paige [2002] NSWCA 235, 60 NSWLR 371, in which it was held that the duty of care of an employer to provide an employee with a safe system of work did not extend to provision of a safe system of investigation and decision-making with respect to procedures for discipline and termination of employment under the Teaching Services Act 1980 (the Act) and the Regulation, so as to avoid psychiatric injury. However, the primary judge held that Paige was distinguishable, apparently on the basis that the present case, unlike Paige, did not involve allegations of sexual abuse of children. The primary judge also relied on cases supporting the existence of an implied term that an employer would not destroy mutual trust and confidence in carrying out disciplinary proceedings. Accordingly, he held it was inappropriate to strike out and summarily dismiss the relevant parts of the proceedings. GROUNDS OF APPEAL 18 The claimant seeks leave to appeal on the following grounds: 1. His Honour was wrong in declining to strike out paragraphs 16, 17 and 18 of the plaintiff's Amended Statement of Claim, which alleged breaches of the terms allegedly implied in the Contract of Employment between the plaintiff and the third defendant (State of New South Wales). 2. His Honour was wrong in not finding that the contract of employment between the plaintiff and the third defendant (state of New South Wales) did not contain the terms asserted to be implied in the contract. 3. His Honour was wrong in refusing to strike out paragraphs 19, 20 and 21 of the plaintiff's Amended Statement of Claim, which alleged breaches of an asserted duty of care. 4. His Honour's finding that there existed a duty of care as particularized in paragraph 20 of the Amended Statement of Claim was wrong. STATUTORY PROVISIONS 19 We were referred to ss.37, 38(1)(i) and 82-84 of the Act, as in force at the relevant time. They are as follows: 37 General responsibility (1) The Director-General of Education is responsible to the Minister for the general conduct and the efficient, effective and economical management of the functions and activities of the Education Teaching Service. (2) For the purpose of exercising responsibility under subsection (1), the Director-General of Education may take such action as he or she deems appropriate and as is not inconsistent with any function of the Secretary or any function, specified in this Act, of the Public Employment Industrial Relations Authority. (3) Nothing in this section limits or affects the operation of section 11 of the Public Sector Management Act 1988. 38 Functions (1) The Director-General of Education shall, subject to the provisions of this Act and the regulations: … (i) maintain discipline in the Education Teaching Service. 82 Definition In this Division, prescribed officer means: (a) a person who is the holder of, or is acting in, any position in the Teaching Service or in the Public Service that is prescribed as a position for the purposes of this Division, and (b) an officer of the Teaching Service, or a member of staff of a Department within the meaning of the Public Sector Employment and Management Act 2002, who is prescribed as an officer for the purposes of this Division. 83 Breaches of discipline (1) An officer or temporary employee of the Teaching Service who: (a) commits any breach of this Act or the regulations, (b) engages in any misconduct, (c) uses intoxicating beverages or drugs to excess, (d) wilfully disobeys, or wilfully disregards, any lawful order made or given by a person having authority to make or give the order, (e) is negligent, careless, inefficient or incompetent in the discharge of his or her duties, or (f) engages in any disgraceful or improper conduct, is guilty of a breach of discipline. (2) Subsection (1) does not apply in relation to a school principal to the extent that the principal is inefficient or incompetent in the discharge of his or her duties. 84 Procedure for dealing with breaches of discipline (1) A breach of discipline alleged to have been committed by an officer or temporary employee of the Teaching Service shall be dealt with by the Director-General or a prescribed officer. (2) Subject to this Division, the regulations made under section 100 may: (a) make provision for or with respect to the manner of dealing with alleged breaches of discipline, and (b) prescribe all matters that are necessary or convenient to be prescribed for carrying out or giving effect to this Division. 20 We were also referred to regs.13-16 of the Regulation, as in force at the relevant time. Those regulations are as follows: Officers who may deal with breaches of discipline: sec. 82 13. In accordance with paragraph (a) of the definition of "prescribed officer" in section 82 of the Act, the following positions in the Public Service (being positions within the Department) are prescribed as positions for the purposes of Division 6 of Part 4 of the Act in its application to the Education Teaching Service: Deputy Director-General Assistant Director-General Director Laying of charges 14.(1) If it appears to a disciplinary authority that a member of staff may have committed a breach of discipline, the member may be charged by the authority with the breach. (2) The charge may be laid orally or in writing but, if laid orally, the member of staff must be furnished with a written copy of the charge within a reasonable time. (3) At the time the member of staff is charged by a disciplinary authority in writing or furnished with a written copy of the charge, the member must be directed to send a written reply to the authority within such time (being at least 14 days) as is specified in the direction. (4) The reply: (a) must admit or deny the truth of the charge; and (b) may give any explanation that the person wishes to make in regard to the charge. (5) If a reply is not received by the disciplinary authority within the time specified in the direction, the member of staff is to be taken to have denied the truth of the charge. Dealing with charges 15.(1) If a member of staff denies the truth of a charge, the Director-General (or some other disciplinary authority appointed by the Director-General) is to deal with the charge. (2) A disciplinary authority may deal with the charge: (a) by directing the member of staff to furnish an explanation in writing within such time (being at least 14 days) as is specified in the direction; or (b) by conducting an inquiry. (3) If a disciplinary authority takes action under subclause (2)(a): (a) the authority may make a finding after considering any reports relating to the breach of discipline and any replies or explanations of the member of staff; or (b) the authority may decide to deal with the charge by conducting an inquiry under subclause (2)(b). (4) If 2 or more charges are laid against a member of staff at the one time and the member admits to the truth of one or more but not all of the charges, all of the charges may be dealt with in the manner prescribed by subclause (2). Conduct of inquiries 16.(1) If it is decided to conduct an inquiry, the disciplinary authority must give written notice to the member of staff charged of the time, date and place at which the inquiry is to be conducted. (2) If the member of staff does not., without reasonable cause, appear at the time, date and place notified, the charge may be inquired into and dealt with in the member's absence. (3) For the purposes of an inquiry, a disciplinary authority may call on any person to appear and to give such evidence, and produce such documents, as appear to the authority to be relevant to the inquiry. (4) A member of staff must not, without reasonable cause: (a) fail to appear, give evidence or produce documents at an inquiry when called on to do so; or (b) knowingly give false or misleading evidence at an inquiry. (5) A member of staff may be represented at an inquiry by a barrister, solicitor or agent employed at the member's expense. (6) A disciplinary authority may conduct an inquiry without regard to legal formality, and is not bound by any law or practice as to evidence, but may inform himself or herself of any matter in such manner as he or she thinks fit. (7) However, a disciplinary authority must not inform himself or herself of, or take into consideration, any matter that has not been disclosed in evidence at a sitting of the inquiry if the matter is one that ought, in the interests of justice, to be available for challenge or testing by the persons entitled to be present at the inquiry. (8) Nothing in subclause (7) prevents a disciplinary authority: (a) from informing himself or herself of, or taking into consideration, any matter of which a court would be entitled to take judicial notice; or (b) when deciding whether or how to punish a member of staff found to have committed a breach of discipline, from taking into consideration any previous breach of discipline that has been found by a disciplinary authority to have been committed by the person charged. SUBMISSIONS 21 Mr. Menzies QC for the claimants submitted that the decision in Paige did not turn on the circumstance that it involved allegations of sexual abuse of children, and that since there was no relevant distinction between that case and the present, the claim in negligence should be struck out. In those circumstance, he submitted that it was untenable to suggest that there were implied terms in the contract that would in substance reinstate the same claim. Mr. Menzies also referred to Sullivan v. Moody (2001) 207 CLR 562. 22 Mr. Menzies further submitted that the relevant provisions of the Act and Regulation required actions inconsistent with the existence of the duties relied on by the opponent. 23 Mr. Kennedy SC for the opponent referred to cases dealing with the stringency of the test to be satisfied to justify summary dismissal of a cause of action, including General Steel Industries Inc. v. The Commissioner for Railways (NSW) (1964) 112 CLR 125 and Webster v. Lampard (1993) 177 CLR 598. 24 He also referred to Eastwood v. Magnox Electric plc [2004] 3 WLR 322, in which the House of Lords supported the existence of an implied term in a contract of employment that "the employer will not, without reasonable and proper cause, conduct himself in a manner likely to destroy or seriously damage the relationship of trust between employer and employee"; and held that although such duty could not apply to dismissal of the employee, because of the statutory code concerning unfair dismissal, it did apply to the conduct of an employer prior to dismissal. Mr. Kennedy submitted that such an implied term was not excluded by Paige (see [135]) and was supported in New South Wales by Hollingsworth v. Commissioner of Police (1999) 47 NSWLR 151 at 190 (Full Bench of Industrial Relations Commission) and by Heptonstall v. Gaskin (No.2) [2005] NSWSC 30. 25 As regards tort, he submitted that Paige was distinguishable because it involved alleged abuse of children, which was also the case in Sullivan, where relevant legislation provided for the paramountcy of the interests of children. Also, he submitted, Paige concerned dismissal, as to which there were applicable statutory provisions so that special conditions apply. 26 Mr. Kennedy submitted that the duty of care relied on was the ordinary duty of care of employer to employee, and that the tort claim should not be struck out. DECISION 27 In my opinion, the cases of Eastwood and Hollingsworth are sufficient to show that a pleading alleging an implied term that the employer will not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust between employer and employee, should not be struck out or summarily dismissed. However, the relevant pleading in this case in paragraph 16(xii) omits the vital words "without reasonable and proper cause" (as did the pleading allowed in Heptonstall), and in my opinion that subparagraph should be struck out so that the implied term can be correctly pleaded. 28 In my opinion, there is no authority supporting implied terms as alleged in subparagraphs (i) to (xi) of paragraph 16; and in my opinion these are not terms such as would be implied either from the nature of the relationship or on the basis of business efficacy. If they were permitted to stand, they would greatly and wrongly expand the issues for trial. In my opinion, these subparagraphs should also be struck out. 29 In my opinion, paragraph 17 should also be struck out. The allegation of breach must identify conduct of the employer in breach of the relevant implied term. In my opinion, acts of employees would not necessarily be attributed to the employer so as to put the employer in breach of this term; so that, at least unless the acts alleged are of senior employees having the responsibility of carrying out the employer's duties, there would need to be grounds alleged for attributing the acts complained of to the employer itself. In this regard, the provisions of the Act concerning the Director-General (ss.37, 38) and prescribed officers (ss.82, 84), and of the Regulation concerning disciplinary authorities (regs.14-16) could be relevant. 30 As regards tort, the existing pleading neither clearly alleges facts giving rise to the duty of care, nor does it formulate the content of the duty of care. In my opinion, paragraphs 19 and 20 should be struck out. 31 In my opinion, Paige is authority against the interpretation of the employer's duty to provide a safe system of work as extending to a duty to provide a safe system of investigation and decision-making in relation to discipline. However, Paige might not altogether exclude the possibility of the existence of a duty of care which could have application in this case. In the absence of an appropriate pleading it is not possible to decide this question. 32 For example, I might not at the strike-out stage altogether exclude the possibility of a duty, arising from the relationship of employer and employee and perhaps other circumstances in the case, to exercise reasonable skill and care with a view to reasonably minimising foreseeable risks of harm in carrying out disciplinary procedures. I am doubtful if any such duty (if it existed) would have the stringent non-delegable character of the ordinary duty to provide a safe system of work, or if a breach could be established otherwise than by the conduct of persons discharging the employer's responsibility in the matter. 33 In my opinion, any amended pleading should clearly state the factual basis on which a duty of care is alleged and the content of the duty, and should also make clear the basis on which the acts complained of are legally attributed to the employer. It is only if and when this is done that informed consideration can be given as to whether the alleged duty of care is sustainable. CONCLUSIONS 34 This appeal did raise questions of principle, and in my opinion, it is appropriate that leave be granted, because the existing pleadings could have greatly and wrongly added to the length and the costs of the case. In my opinion, the success of the claimants is sufficient to carry the costs of the appeal, but not sufficient to disturb the costs order below, which in effect gave the claimants half their costs of their application. 35 Accordingly, in my opinion the following orders should be made: 1. Leave to appeal granted, Notice of Appeal to be filed within 7 days. 2. Appeal allowed. 3. Paragraphs 16, 17, 19 and 20 of the Amended Statement of Claim struck out, the opponent to have liberty to re-plead the contract and tort claims generally in accordance with these reasons. 4. Opponent to pay claimants' costs of the leave application and the appeal, and to have a Suitors' Fund Act certificate if otherwise eligible. 36 IPP JA: I agree with Hodgson JA. 37 TOBIAS JA: I agree with Hodgson JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.