New South Wales Supreme Court CITATION : State of NSW v Wayne Eade [2006] NSWSC 84 HEARING DATE(S) : 22/02/2006 JUDGMENT DATE : 28 February 2006 JUDGMENT OF : Hoeben J at 1 DECISION : Judgment in favour of the State of NSW against Wayne Eade in the sum of $286,828.80. CATCHWORDS : Cross-claim - judgment obtained by plaintiff against State of NSW - cross-claim by State of NSW against police officer - application of Law Reform (Vicarious Liability) Act and Employees' Liability Act to cross-claim - apportionment. Crimes Act 1900 Employees' Liability Act 1991 LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Law Reform (Vicarious Liability) Act 1983 Workers' Compensation Act 1987 Commissioner of Police v Estate of Edward John Russell & Ors [2002] NSWCA 272 New South Wales v Bryant [2005] NSWCA 393 O'Sullivan v The Queen [2002] NSWCCA 98 Podresbersek v Australian Iron & Steel Pty Limited (1985) 59 ALJR 492 at 494 CASES CITED : Police Service of NSW v Honeysett [2001] NSWCA 452 Prior v State of New South Wales [NSWCA, unreported, 23 October 1998] Sawle v Macadamia Processing Co Pty Limited (1999) 18 NSWCCR 109 Tiger Nominees Pty Limited v State Pollution Control Commission (1992) 25 NSWLR 715 at 721 Wynbergen v Hoyts Corporation Pty Limited (1997) 72 ALJR 65 at 68 PARTIES : State of New South Wales - Cross claimant Wayne Eade - Cross defendant FILE NUMBER(S) : SC 20364/2003 COUNSEL : Ms K E Burke - Cross Claimant SOLICITORS : IV Knight, Crown Solicitor - Cross Claimant IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HOEBEN J Tuesday, 28 February 2006 20364/2003 – STATE OF NEW SOUTH WALES v Wayne EADE JUDGMENT 1 HIS HONOUR: Nature of claim On 29 December 2003 the plaintiff, Michael O'Sullivan, commenced proceedings against the State of New South Wales (hereafter called "the State"), Wayne Eade and Stephen McCelland claiming damages for malicious prosecution, wrongful arrest and false imprisonment. At the time of the matters alleged in the statement of claim, Messrs Eade and McCelland were police officers in the New South Wales Police Service. The damages sought were general damages, exemplary damages and aggravated damages. On 2 March 2005 an amended statement of claim was filed with the State as the only defendant. 2 In its defence to the amended statement of claim, the State admitted vicarious liability for the conduct of Messrs Eade and McCelland. I assume that this was done in accordance with the provisions of s8 Law Reform (Vicarious Liability) Act 1983. A cross-claim seeking contribution and/or indemnity from Mr Eade was filed by the State on 11 March 2005. The primary proceedings between the plaintiff and the State were settled. Judgment was entered in favour of the plaintiff against the State in the sum of $358,536 plus costs on 23 September 2005. 3 The matter before me is the cross-claim by the State seeking contribution and/or indemnity from Mr Eade. Background facts 4 The following summary is taken from the statement of facts in O'Sullivan v The Queen [2002] NSWCCA 98 and the affidavits of Michael O'Sullivan sworn 7 February 2002 and 13 December 2005. 5 On 15 November 1991 Messrs McCelland and Eade who were then part of the Major Crime Squad (Drugs) executed a search warrant on the plaintiff's premises on the Central Coast. They apparently had information that a person known as "Mick" was supplying heroin from those premises. When searched no heroin was found. 6 According to a statement prepared by Mr McCelland the plaintiff made admissions concerning the sale of heroin. The plaintiff accompanied the police officers to the Gosford Police Station where he was further interviewed and asked if he wanted to make a statement. There was subsequently produced a handwritten statement signed by the plaintiff which made admissions as to the sale and use by him of heroin. Based on the admissions, charges were laid against the plaintiff – that the plaintiff was supplying and administering a prohibited drug, ie heroin. 7 On 17 January 1992 Mr Butler LCM dealt with the matter. The plaintiff pleaded guilty and was sentenced to 6 months for the supply of a prohibited drug and 3 months for administering a prohibited drug, with both sentences to be served concurrently. 8 The plaintiff was successful in obtaining bail on 18 February 1992. The plaintiff appealed to the District Court against the convictions and the severity of the sentences. When the matter came on for hearing in the District Court on 5 June 1992 the plaintiff abandoned the appeal against conviction. 9 The plaintiff was successful in his appeal against sentence. On 5 June 1992 McGuire DCJ re-sentenced the plaintiff as follows: Sentence deferred on condition that the plaintiff enter into a recognizance for 2 years in the sum of $1,000 and 10 months periodic detention. The plaintiff served that sentence. 10 In January 1996 the plaintiff gave evidence before the Wood Royal Commission. His evidence was that the confession signed by him had been procured by Mr Eade (the cross-defendant) through a series of threats in that the plaintiff would be "loaded up" with heroin if he did not confess. The plaintiff alleged that the threats were made by Mr Eade at his premises and were repeated at the Gosford Police Station. In that evidence, the plaintiff described how Mr Eade showed him a bag of white powder informing him that it contained 10 gms of heroin. Mr Eade then said: "You're going to wear it if you don't write a statement". 11 In evidence before the Royal Commission the plaintiff said that he agreed to write the statement because he was concerned that if he were "loaded up" with the heroin which had been shown to him, he would end up serving a 5 year sentence. 12 In relation to his plea of guilty in the Local Court, the plaintiff told the Royal Commission that the Magistrate was not interested in him being tricked into making a confession. According to the plaintiff, the Magistrate stated that he did not care if the plaintiff was tricked into signing the confession, he was a drug dealer and he would be sentenced. 13 The plaintiff told the Royal Commission that he had abandoned his conviction appeal in the District Court when he learned before the hearing, that the police officers involved in his arrest had been awarded medals. He was worried that he would end up with a larger sentence. 14 The plaintiff first sought legal advice in relation to his position in 1998. He did so because other evidence had been given to the Royal Commission about Mr Eade's conduct as a police officer which supported that of the plaintiff. The plaintiff sought legal advice as to his rights to appeal his convictions. 15 In 1999 and 2000 the plaintiff was unsuccessful in a petition to the Minister and in having the Local Court review the convictions pursuant to s100B of the Justices Act. On 4 July 2001 the plaintiff filed an application under s474D and s474E of the Crimes Act. Hulme J was satisfied that there was doubt as to the plaintiff's guilt and referred the matter to the Court of Criminal Appeal. 16 On 28 February 2002 the Court of Criminal Appeal heard the plaintiff's application and on 28 March 2002 quashed the convictions. The Court of Criminal Appeal accepted the plaintiff's evidence that he signed the confession statement because of the threats made by Mr Eade. Neither Mr Eade nor Mr McCelland was called in the Court of Criminal Appeal proceedings. The plaintiff's case on damages 17 The plaintiff underwent 34 days of imprisonment and served a further 10 months' periodic detention. The plaintiff alleged that during his imprisonment, he suffered burns to his feet and was denied treatment. 18 The plaintiff entered a detoxification program in about 1996 and has apparently been drug free since that time. As of March 2004 he was heavily involved in providing assistance to recovering addicts with the organisation Narcotics Anonymous. 19 Professor Quadrio, a psychiatrist qualified by the plaintiff, examined him in March 2004. She was of the opinion that as of that date the plaintiff had symptoms of post-traumatic stress disorder (PTSD) but had made a marked recovery. While he still had some symptoms of PTSD, she was unable to ascertain the extent of his present disability because of his then involvement with Narcotics Anonymous. 20 Doctor Lisa Brown, psychiatrist, was qualified on behalf of the defendant. In September 2004 she was of the opinion that the plaintiff had developed a mild anxiety disorder of an adjustment type, which had existed for some years. As of the date of her examination, however, she was of the opinion that he was not suffering from a diagnosable psychiatric condition. 21 An opinion from Kim Burke of counsel, dated 14 February 2006, was tendered. Included in that opinion was an assessment of the damages likely to be awarded to the plaintiff had his claim against the State proceeded to judgment. That opinion indicated a modest range of general damages but substantial exemplary damages. I agree with that opinion. To the extent that it is necessary for me to so find, I am of the opinion that the settlement of the plaintiff's claim against the State was for an amount which was within the range of damages likely to be awarded in the plaintiff's favour. Given the nature of the conduct of Mr Eade and the consequences for the plaintiff, a significant amount would inevitably have been awarded for exemplary damages. I find the settlement figure to be reasonable. Issues to be decided 22 The matter proceeded before me ex parte. There was evidence that the cross-claim had been brought to Mr Eade's attention and that his solicitor, Mr Ekstein, had accepted service of it on his behalf (affidavit of Paula Ryan, 17 November 2005). There were also two letters from Mr Eade which were tendered. One was dated 6 April 2005 and referred specifically to the cross-claim. It was addressed to the Registrar of the Supreme Court of NSW and read as follows: "I have just received a copy of a Notice of Cross-Claim, initiated by the State relating to the failed prosecution of the convicted criminal Michael O'Sullivan. Unfortunately I am not in a financial position to defend the proceedings, although I strongly deny any of the allegations set out in the Notice of Cross-Claim. Unless the State is willing to provide legal aid I will take no further part in the proceedings. Having lost my entire estate following my termination from the NSW Police Force subsequent divorce in 2000 loss of business and incarceration in 2001, I no longer hold any estate or make sufficient income to enable me to receive adequate legal representations. Yours faithfully". 23 Mr Eade sent another letter dated 7 October 2005 to the NSW Crown Solicitor's Office with a copy to the Registrar of the Supreme Court, which read as follows: "I acknowledge receipt of your letter dated the 30 September 2005. I refer to my previous advice to you that I have no intention of defending proceedings, although at all times I would dispute your right to bring the action and deny all allegations made by the plaintiff. You have not even paid me the courtesy of advising of the details of your settlement to the plaintiff. I reiterate my previous advice that I have no assets. I look forward to your further advices. Yours faithfully," 24 I am satisfied that the fact of the cross-claim has been brought to the attention of Mr Eade. I am satisfied that had he been advised that the matter was going to proceed ex parte before me today (22 February 2006) he would not have attended. 25 The claim against the cross-defendant relies upon s5(3A) of the Law Reform (Miscellaneous Provisions) Act 1946. That subsection provides: "(3A) For the purposes of this section, where a person commits a tort and the Crown is vicariously liable under section 8 of the Law Reform (Vicarious Liability) Act 1983 in respect of that tort, the Crown and the person are joint tortfeasors." 26 For that subsection to apply, two matters have to be established. (a) The commission of a tort by a person; (b) Vicarious liability on the part of the Crown under section 8 of the Law Reform (Vicarious Liability) Act 1983. 27 There seems little doubt that Mr Eade falsely imprisoned the plaintiff when he was wrongfully detained and wrongfully arrested. Mr Eade was a party to the malicious prosecution of the plaintiff in that he, without evidence, brought charges against the plaintiff in respect of the matters for which he was ultimately convicted. I am satisfied on the evidence before me, in particular the affidavits of the plaintiff, that Mr Eade did commit the torts of wrongful arrest, wrongful imprisonment and malicious prosecution. 28 Section 8 of the Law Reform (Vicarious Liability) Act 1983 provides: "8(1) Notwithstanding any law to the contrary, the Crown is vicariously liable in respect of the tort committed by a person in the service of the Crown in the performance or purported performance by the person of a function (including an independent function) where the performance or purported performance of the function: (a) is in the course of the person's service with the Crown or is an incident of the person's service (whether or not it was a term of the person's appointment to the service of the Crown that the person perform the function), or (b) is directed to or is incidental to the carrying on of any business, enterprise, undertaking or activity of the Crown. (2) Subsection (1) does not apply to or in respect of a tort committed by a person in the conduct of any business, enterprise, undertaking or activity which is: (a) carried on by the person on the person's own account, or (b) carried on by any partnership, of which the person is a member, on account of the partnership." 29 The leading case on the application of s8 is Prior v State of New South Wales [NSWCA, unreported, 23 October 1998]. The Court held that three ingredients had to be made out for the section to apply. First there must be a tort committed by a person in the service of the Crown. As indicated, that has been established. Next it must be found that the person was actually or purportedly performing a "function". In this case the function was executing the search warrant, carrying out the investigation and ultimately making the arrest and charging the plaintiff. 30 Lastly, it needs to be established that the tort was committed by that person in the performance or purported performance of a function. "Function" is defined by s5(2) to include a reference to a power authority or duty and "performance of a function" includes a reference to the exercise of the function and the failure to perform or exercise the function. 31 The torts relied upon by the plaintiff were wrongful arrest, wrongful imprisonment and malicious prosecution. At the heart of each of those torts was the conduct of the cross-defendant in arresting the plaintiff on a false basis and then subsequently proceeding to charge him. It seems to me that those activities involved the performance of a function as defined by a police officer. 32 This is not one of those cases where it could be said that the acts of Mr Eade so clearly departed from the scope of his service with the Crown that the Crown was not liable for those wrongful acts. The particular vice associated with his conduct was that it involved the exercise of his power and authority as a police officer in the purported performance of his duty, but in a corrupt way. 33 The relevant distinction was set out in Tiger Nominees Pty Limited v State Pollution Control Commission (1992) 25 NSWLR 715 at 721: "Between a mode, albeit improper, of doing that which the employee is employed to do and conduct which is outside the scope of the employee's employment." 34 That case had under consideration the vicarious criminal responsibility attaching to an employer. Accordingly, it seems to me that the actions of Mr Eade in wrongfully arresting and wrongfully imprisoning the plaintiff and in maliciously bringing charges against him, can be properly characterised as incidents of a police officer's function but carried out in an improper manner. 35 I am of the opinion that for the purposes of s5(3A) of the Law Reform (Miscellaneous Provisions) Act 1946 the State was vicariously liable under s8 of the Law Reform (Vicarious Liability) Act 1983 for the actions of Mr Eade. 36 If they were the only considerations it is clear that as joint tortfeasors, judgment having been obtained by the plaintiff against the State, it in turn could bring proceedings for contribution and/or indemnity against Mr Eade as a person who if sued would have been found liable as a joint tortfeasor in respect of the same damage. That approach is supported by subs 9E(b) of the Law Reform (Vicarious Liability) Act 1983 which provides: "Nothing in this part: (b) prevents the Crown from bringing legal proceedings against, or claiming damages or a contribution or indemnity in any legal proceedings from, a police officer for a tort committed by the officer …" 37 The fact that most of the damages which would have been awarded to the plaintiff would have comprised exemplary damages does not prevent recovery of that component of the judgment by the State. New South Wales v Bryant [2005] NSWCA 393 decided that the vicarious liability of the Crown under s8 of the Law Reform (Vicarious Liability) Act 1983 included the obligation to pay exemplary and/or aggravated damages to a plaintiff. It follows that if such damages are properly payable under s8 of that Act, there is nothing to prevent their recovery pursuant to s5 of the Law Reform (Miscellaneous Provisions) Act 1946. Employees' Liability Act 1991 38 There is, however, another difficulty to be overcome by the State in its cross-claim. This arises from the provisions of the Employees' Liability Act 1991. That Act relevantly provides: "3(1) If an employee commits a tort for which his or her employer is also liable: (a) The employee is not liable to indemnify, or pay any contribution to, the employer in respect of the liability incurred by the employer, and (b) the employer is liable to indemnify the employee in respect of liability incurred by the employee for the tort (unless the employee is otherwise entitled to an indemnity in respect of that liability). (2) Contribution under this section includes contribution as joint tortfeasor or otherwise." 39 The Court of Appeal decided in Police Service of NSW v Honeysett [2001] NSWCA 452 that for the purposes of the Employees' Liability Act 1991 a police officer was an employee of the Police Service and was entitled to the protection of that Act. That was certainly the situation from 1 July 1990 onwards when the Police Service Act 1990 came into operation. The decision in Honeysett was affirmed in Commissioner of Police v Estate of Edward John Russell & Ors [2002] NSWCA 272. 40 A claim for contribution and/or indemnity by the State against Mr Eade is barred by s3 of the Employees' Liability Act 1991 unless the State can bring itself within the exception in s5 of that Act. Section 5 provides: "(5) This Act does not apply to a tort committed by an employee if the conduct constituting the tort: (a) was serious and wilful misconduct; or (b) did not occur in the course of, and did not arise out of, the employment of the employee." 41 Quite clearly subs 5(b) does not assist the State. To succeed the State has to rely upon subs 5(a). 42 The concept of "serious and wilful misconduct" has not been judicially considered in the context of the Employees' Liability Act 1991, but it has been considered on a number of occasions when used in subs 14(2) of the Workers' Compensation Act 1987. That subsection provides: "14(2) If it is proved that an injury to a worker is solely attributable to the serious and wilful misconduct of the worker, compensation is not payable in respect of that injury, unless the injury results in death or serious and permanent disablement." 43 In Sawle v Macadamia Processing Co Pty Limited (1999) 18 NSWCCR 109 O'Meally J considered the meaning of "serious and wilful misconduct" in s14(2): "…conduct beyond negligence, even beyond culpable or gross negligence. In order to establish serious and wilful misconduct, it must be demonstrated that the person performing an act or suffering an omission knows that it will cause risk of injury, or acts in disregard of consideration whether it will cause injury. The word "wilful" connotes that the applicant must have acted deliberately. As it seems to me, in order to establish serious and wilful misconduct, a person accused of it must be shown to have knowledge of the risk of injury and, in the light of that knowledge, proceeded without regard to the risk." 44 After allowing for the concept of injury, which permeates decisions relating to the Workers' Compensation Act, it seems to me that the meaning suggested by O'Meally J for "serious and wilful misconduct" is appropriate for the Employees' Liability Act. 45 The Act refers to "the conduct constituting the tort" amounting to "serious and wilful misconduct". In relation to the torts of wrongful arrest and imprisonment, the conduct constituting the tort would include not only the arrest and detention of the plaintiff, but the threats which led up to those actions. It was the fact of those threats which produced the confession that made the arrest and subsequent detention wrongful. 46 Quite clearly that conduct was carried out deliberately by Mr Eade. Equally such actions would by any reasonable standard be regarded as serious misconduct. 47 The same analysis is applicable to the tort of malicious prosecution. The necessary malice and falsity associated with the charges pursued against the plaintiff was integrally connected to the initial threats which produced the admissions. The subsequent charges and prosecution were based on those admissions. For the same reason, therefore, the conduct associated with the malicious prosecution of the plaintiff was deliberate and involved serious misconduct. 48 There is, in my opinion, no contradiction or inconsistency in the fact that vicarious liability was properly accepted by the State pursuant to s8 of the Law Reform (Vicarious Liability) Act 1983 for the conduct of the cross-defendant and the fact that such conduct constituting the tort was also serious and wilful misconduct within s5 of the Employees' Liability Act 1991. It seems to me that conduct can constitute serious and wilful misconduct and yet still form part of the tort committed by a person in the service of the Crown in the performance or purported performance by that person of a function, that function being one performed in the course of that person's service with the Crown. 49 Accordingly I am of the opinion that the exception in s5 of the Employees' Liability Act 1991 applies and that Act does not prevent the State successfully pursuing its cross-claim against Mr Eade. Apportionment 50 The last matter to be considered is the extent of any contribution to be made by Mr Eade to the State, or whether the facts of the matter require him to fully indemnify the State. 51 The relevant cases are Podresbersek v Australian Iron & Steel Pty Limited (1985) 59 ALJR 492 at 494 and Wynbergen v Hoyts Corporation Pty Limited (1997) 72 ALJR 65 at 68. 52 In assessing what is an appropriate contribution, or whether an indemnity is appropriate, a court has regard to what is just and equitable. In accordance with the above authorities that means the court has regard to the relative culpability of the tortfeasors and the relative importance of their acts in the commission of the tort. 53 Although the amended statement of claim relied entirely upon the conduct of Mr McCelland and Mr Eade and did not make allegations involving personal responsibility for the torts on the part of the State of NSW, it would have been open to Mr Eade, had he defended the proceedings, to argue that there was some personal responsibility on the part of the State. The basis for that argument would be that there had been a failure to properly supervise and monitor the behaviour of persons such as himself and Mr McCelland. It is difficult to evaluate such a submission in the absence of any representation on behalf of Mr Eade. Nevertheless, there is sufficient evidence before me to suggest some systemic weaknesses in the way in which the Police Service was conducting itself in or about 1992. That emerges from the affidavits of the plaintiff. Accordingly, I do not propose to grant a complete indemnity to the State because in my opinion it must accept some responsibility, more by way of omission than commission, in relation to the conduct of Mr Eade and the injuries suffered by the plaintiff. 54 I propose to apportion contribution as to 80% against the cross-defendant and 20% against the State of NSW. 55 For the reasons set out above, I enter judgment in favour of the State of NSW against the cross-defendant, Wayne Eade, in the sum of $286,828.80. Since the only order sought in the cross-claim was contribution or indemnity in respect of the plaintiff's judgment, I make no order as to costs. 56 The formal order which I make is as follows: (1) Judgment in favour of the State of NSW against Wayne Eade in the sum of $286,828.80. ********** 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.