McKerlie v State of New South Wales

[2000] NSWSC 998

CITATION:	McKerlie v State of New South Wales [2000] NSWSC 998
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	SC 20662/97
HEARING DATE(S):	20 March 2000
JUDGMENT DATE:	31 October 2000
PARTIES :	Colin Robert McKerlie (Plaintiff/Appellant) State of New South Wales (Defendant/Respondent)
JUDGMENT OF:	Dunford J

LOWER COURT JURISDICTION :	Supreme Court (Master)
LOWER COURT FILE NUMBER(S) :	20662/97
LOWER COURT JUDICIAL OFFICER :	Master Harrison

COUNSEL :	Plaintiff in person P Menzies QC / D Dickinson
SOLICITORS:	Colin Robert McKerlie (Plaintiff/Appellant) IV Knight (Defendant/Respondent)
CATCHWORDS:	Employment law - Crown employee - on probation - disciplinary proceedings - resignation - implied term in contract of employment of mutual confidence and trust - breach - whether constructive dismissal - bar to compensation for dismissal
LEGISLATION CITED:	Public Sector Management Act 1988, ss 28, 54, 55 Industrial Relations Act 1991 Government and Related Employees Appeal Tribunal Act 1980
CASES CITED:	Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 Mahmud v Bank of Credit and Commerce (in liq.) [1988] AC 20 Post Office v Roberts [1980] IRLR 347 Shenton v Smith [1895] AC 229 Fletcher v Nott (1938) 60 CLR 55 Kaye v Attorney General for Tasmania (1956) 94 CLR 193 Sanders v Snell [1998] HCA 64, 72 ALJR 1508 Northern Territory v Mengel (1995) 185 CLR 307 Racz Home Office [1994] 2 AC 45
DECISION:	Appeal dismissed

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
DUNFORD J
Tuesday, 31 OCTOBER 2000
20662/97 Colin Robert McKERLIE v State of New South Wales
JUDGMENT

1    HIS HONOUR: By Statement of Claim filed 7 July 1997, the appellant / plaintiff sued the Director of Public Prosecutions in respect of matters arising out of his employment in the office of that official and the termination of such employment on 11 July 1991. I shall refer shortly in more detail to the precise nature of the claim. Subsequently the Statement of Claim was amended on 25 July 1997 and such Amended Statement of Claim was struck out by an order of the Court on 13 August 1998, with leave granted to the appellant to re-plead. This was done by an Amended Statement of Claim filed 6 October 1998 which named as defendant the State of New South Wales (see Crown Proceedings Act 1988, s 5). 2 By Notice of Motion filed 4 June 1999, the respondent / defendant applied for an order that such Amended Statement of Claim be struck out pursuant to SCR, Pt 13 r 5 or alternatively that paras 5 to 12 inclusive be struck out. The application was heard by Master Harrison on 19 October 1999 and judgment delivered on 26 October 1999. As the Master pointed out, SCR Pt 13 r 5 refers to summary judgment, and she ordered that the Amended Statement of Claim be dismissed. The plaintiff has appealed. 3 By the Amended Statement of Claim, the appellant claims that he was employed as a Principal Solicitor Grade 5 in the Office of the Director of Public Prosecutions pursuant to the Public Sector Management Act 1988 ("the PSM Act"). He alleges that it was an implied term of the contract of employment that the defendant, "through its servants and agents, would not without reasonable cause, conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee" (para 5), and that on about 4 July 1991 the defendant by separate named employees "wrongfully and in breach of the said implied term falsely alleged misconduct on the part of the plaintiff" (paras 6 & 7) and by a 3rd named employee attempted to coerce a named non permanent employee of the defendant to allege misconduct of the plaintiff (para 8); particulars were supplied. 4    It is further alleged that it was a term of the contract that the defendant would conduct any disciplinary proceedings against the plaintiff in accordance with the provisions of the PSM Act, the Public Sector Regulations made thereunder and the Guidelines for Disciplinary Action promulgated by the Attorney General's Department (para 9) but that on 5 July 1991 the defendant by another named employee failed to conduct disciplinary proceedings against the plaintiff in accordance with such provisions (para 10); once again particulars are supplied including that the defendant unlawfully suspended the plaintiff at the conclusion of the interview. 5    Finally in paras 11 and 12 it is alleged that the defendant by named employees (including the then Director of Public Prosecutions) on about 11 July, wrongfully and in breach of the contract alleged in para 5, induced the appellant to resign his contract of employment by threats that the appellant would be the subject of a complaint to the Law Society and criminal charges, that he would not be afforded a fair hearing in relation to the allegations, and terminated, "and wrongfully constructively dismissed the plaintiff", and refused to employ him any longer. Particulars of the appellant's loss and damages are specified as loss of wages from 11 July to date and continuing, injury to reputation and diminution in his capacity to obtain employment. 6    The evidence on the application shows that the appellant was appointed by the Governor on probation pursuant to the PSM Act and such appointment was notified in the New South Wales Government Gazette No. 50 of 16 April 1992, and that by letter to the Director of Public Prosecutions dated 11 July 1991 he tendered his resignation with immediate effect. Such resignation was accepted the same day and notified in the New South Wales Government Gazette No. 128 of 13 September 1991. 7    The learned Master held that the appellant had no right to claim compensation or damages under the PSM Act and noted that he had not made any claim for dismissal or threatened dismissal pursuant to s 24 of the Industrial Relations Act 1991 ("the IR Act"). In the light of the statutory regime in place relating to employment of public servants the Master held that he had no alternative or additional rights in contract and accordingly ordered that the Amended Statement of Claim was doomed to failure and should be dismissed. As she could see no way in which the plaintiff could reformulate his claim so as to give rise to a valid cause of action she refused an application by the plaintiff to further amend. 8 There are three major obstacles to the appellant maintaining any action in respect of the termination of his employment; firstly, he was at the time employed on probation pursuant to s 28 of the PSM Act; secondly, he was not dismissed or his appointment annulled, but he resigned; and thirdly, that s 55 of the PSM Act expressly provides that no compensation is payable in respect of dismissal. 9 Section 28(1) PSM Act provides that every person admitted to the Public Service as an officer shall, subject to specified exceptions, initially be appointed on probation for a period of 6 months or such longer period as the appropriate Department Head directs and s 29 provides, inter alia, that either during or after the period of probation the Governor may annul the appointment, and such power is not limited by s 75 (which relates to disciplinary proceedings against an officer). It is difficult to see how in these circumstances alone an officer on probation could maintain any proceedings in respect of the cessation of his employment; a fortiori when his appointment on probation was not annulled, but he resigned. 10 It is for this reason that the plaintiff, who is a qualified lawyer and who conducted his case personally before me, submits that the Master erred in treating the true nature of the action as one relating to the termination of his employment, whereas the true nature of the action was the conduct of a number of officers of the respondent which was calculated to intimidate him so that he would resign and not exercise the rights he had under the PSM Act, the Industrial Relations Act 1991, since repealed by the Industrial Relations Act 1996, or the Government and Related Employees Appeal Tribunal Act 1980 ("the GREAT Act"), and it is for this reason that he alleges an implied term in the contract of employment that the respondent would not, without reasonable cause, conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee. Such an implied term has been recognised both in Australia: Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144, and in England: Mahmud v Bank of Credit and Commerce (in liq.) [1998] AC 20, but in the present case the only consequence claimed by the appellant as a result of the alleged breaches of such implied term, and of the further implied term in para 9, is that he was "constructively dismissed". 11 This term has been recognised in England as an appropriate description of the situation where, because of the employer's breach of the implied term of mutual confidence and trust, the employee is justified in resigning: e.g. Post Office v Roberts [1980] IRLR 347 and constructive dismissal was expressly pleaded by the appellant in para 12 of the Amended Statement of Claim. Moreover in para 3 of his affidavit of 16 June 1998 the appellant said:

"I say that in this action I seek redress for conduct on the part of the [respondent] by its servants and agents which was calculated to intimidate me and cause me to resign my position . . . and by which I understood myself to be constructively dismissed . . . " (my italics)

See also paras 37 and 40 of the same affidavit.

12    In Mahmud v Bank of Credit and Commerce (in liq.) the breach of the trust and confidence term allegedly breached by the employer was conducting a dishonest or corrupt business which only became known after the termination of the appellant's employment. When he came to consider the damages recoverable, Lord Nicholls of Birkenhead said at 38:

" . . . the measure of damages recoverable for breach of the trust and confidence term cannot be decided without having some regard to a comparable question which arises regarding the measure of damages recoverable for wrongful dismissal. An employee may elect to treat a sufficiently serious breach of the trust and confidence term as discharging him from the contract and, hence, as a constructive dismissal. The damages in such a case ought, in principle, to be the same as they would be if the employer had expressly dismissed the employee. The employee should be no better off, or worse off, in the two situations. In principle, so far as the recoverability of continuing financial losses are concerned, there is no basis for distinguishing (a) wrongful dismissal following a breach of the trust and confidence term, (b) constructive dismissal following a breach of the trust and confidence term, and (c) a breach of the trust and confidence term which only becomes known after the contract has ended for other reasons."

13 The only way that the appellant can avoid having his resignation treated as simply that, is to allege, as he does, that the breaches by the respondent of the alleged implied terms of the contract of employment constituted a fundamental breach of such contract which he accepted by his resignation, so that such resignation is to be treated not as a resignation but as a constructive wrongful dismissal. It is in respect of such wrongful dismissal that the appellant seeks damages or compensation on account of his services being dispensed with, and regard must therefore be had to the provisions of s 55 PSM Act. 14    At common law, Crown employees, except where special provision has been made in legislation, hold their offices at he pleasure of the Crown and can be dismissed at pleasure: Shenton v Smith [1895] AC 229 at 234-5, Fletcher v Nott (1938) 60 CLR 55 at 67, Kaye v Attorney General for Tasmania (1956) 94 CLR 193 at 198. This principle is now embodied in the PSM Act s 54 which is as follows:

"The right or power of the Crown to dispense with the services of any person employed in the Public Service, as it existed immediately before the commencement of this section, is not abrogated or restricted by any of the provisions of this Act."

Section 55 is as follows:
"An officer or temporary employee is not, except as provided by this or any other Act, entitled to any compensation as a result of the officer's services being dispensed with or the officer's salary being reduced."

15 I agree with the Master that this case falls squarely within the prohibition contained in s 55. If the appellant's contention that he was constructively dismissed is correct, his services were dispensed with and the term compensation is wide enough to include damages. The section does not bar actions by reference to the cause of action pleaded, but by reference to the object of the claim, namely compensation for the officer's services being dispensed with. 16 The appellant submitted that because of their contextual proximity s 55, should be read as only applying where the officer's services are dispensed with under s 54, but although they are successive sections, they can be traced back to the Public Service Act 1902 where the forerunner of s 54 was s 65 in Part II headed Administration of the Public Service which dealt, inter alia, with the appointment, dismissal and resignation of officers, and the forerunner of s 55 was s 76 in Part III headed Pensions, Gratuities, etc 17 The appellant submitted that s 55 of the PSM Act should be read down so as not to apply where, as he claims was the case here, the officers of the respondent have not acted in good faith, but the wording of the section provides no scope for any such reading down. 18 The section does allow for exceptions provided by "this or any other Act" and ss 245-250 IR Act as in force at the time provided a remedy for various employees including employees of the Crown (s 245(1)(b)) who were dismissed or threatened with dismissals which were harsh, unreasonable or unjust (s 246(1)) to obtain orders for re-instatement or compensation equal to up to 6 months salary (s 250). The appellant did not seek to avail himself of this remedy. 19 The appellant further submitted that s 75 of the PSM Act which relates to disciplinary proceedings applied, and that accordingly Part 3 of the GREAT Act was relevant, including s 25 of that Act which preserves any other right of appeal an employee may have or other proceedings which may be instituted by him under any other Act or law. I have some reservations as to whether s 75 of the PSM Act and therefore Part 3 of the GREAT Act applied in any event - as he was on probation and his appointment was not annulled but he resigned - but assuming that it did, s 25 does not confer rights, but merely preserves rights otherwise conferred such as ss 246-50 of the IR Act; and it does not affect the operation of s 55 of the PSM Act. 20 Even if s 55 did not constitute a bar to the proceedings, the appellant would still have a number of difficulties. For example, if the assertions of fact set out in paras 6 and 7 are true, the Director of Public Prosecutions as the responsible Departmental Head pursuant to s 11 of the PSM Act had the responsibility to receive the complaints and set in train the appropriate disciplinary procedure, at that stage having no possible knowledge whether such allegations were true or false; and if the allegations were false, the named individuals who made them could not have been acting on behalf of their employer or in the course of their employment in making them, so although they may have been liable, the State as their employer could not have been vicariously liable. Similar considerations apply to the matters alleged in para 8; the individual complained of may have been personally liable, but not the respondent. 21    It may be that the appellant is attempting to allege the tort of misfeasance in public office on the part of the named officers; but the case is certainly not pleaded as such and the availability to him of this tort was not pressed by the appellant, and if such cause of action were pressed it would be necessary to consider in detail the essential ingredients of that tort: Sanders v Snell [1998] HCA 64, 72 ALJR 1508, Northern Territory v Mengel (1995) 185 CLR 307, but actions for misfeasance in public office lie only against the officer, not against the employer unless it can be established that the officer had de facto authority to act as he or she did: Racz Home Office [1994] 2 AC 45 at 50 - 54, Northern Territory v Mengel at 347. 22 But even if such cause of action were available in circumstances where it could be shown that the respondent was vicariously liable for the individuals' misfeasance in public office, the appellant's complaint is still in relation to the cessation of his employment or his "constructive dismissal"; and accordingly would still be barred by s 55 of the PSM Act, in the same way as his claim for breach of the implied contractual terms of good faith etc is barred. 23    In Written Submissions the appellant claimed that the Master failed to consider whether the facts alleged by him might give rise to a cause of action as yet not known to the law, such as a tort of "corruption in public office". The short answer to that submission is that the Master was, as am I, required to deal with the application in accordance with the existing law; and neither of us have the right or power to go ahead and invent new causes of action. If the appellant's Statement of Claim fails to disclose a cause of action it must be struck out. 24    For these reasons I am satisfied that the Master was correct and accordingly the appeal is dismissed with costs and the orders of the Master confirmed.

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Last Modified: 11/01/2000