Paulson v State of New South Wales

[2023] NSWDC 251

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Paulson v State of New South Wales [2023] NSWDC 251

Hearing dates:

31 May 2023

Date of orders:

10 July 2023

Decision date:

10 July 2023

Jurisdiction:

Civil

Before:

Acting Judge Ainslie-Wallace

Decision:

1. Statement of Claim filed on 22 December 2022 is struck out

2. Grant leave to the Plaintiff to file an Amended Statement of Claim within 28 days of the publication of this order

Catchwords:

CONTRACTS — Breach of employment contract — Implied terms — Terms implied in fact — Terms implied in law — Necessity — Date of breach statute barred

Legislation Cited:

Industrial Relations Act 1996

Government Sector Employees Act 2013

Uniform Civil Procedure Rules

Cases Cited:

Realestate.com.au Pty Ltd v Hardiman [2022] HCA 39

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

Byrne v Australian Airlines Ltd (1995) 185 CLR 410

Commonwealth Bank of Australia v Barker [2014] HCA 32

Paulson v Industrial Relations Secretary (Department of Justice) [2017] NSWIRComm 1037

Category:

Procedural rulings

Parties:

State of NSW (Applicant)
Craig Paulson (Respondent)

Representation:

Counsel:
Michael Whitbread (Applicant)

Solicitors:
Karen Smith, Crown Solicitor
John Capsanis (Respondent)

File Number(s):

2022/386075

Judgment

1. By a Statement of Claim filed on 22 December 2022, Craig Paulson sues the State of New South Wales for breach of an employment contract between him and the Department of Communities and Justice.

2. On 10 March 2023 the defendant filed a Notice of Motion seeking that the proceedings be summarily dismissed pursuant to rule 13.4(1) of the Uniform Civil Procedure Rules 2005 which says:

If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:

…

(b) no reasonable cause of action is disclosed

…

The court may order that the proceedings be dismissed generally or in relation to the claim.

3. Before dealing with the application, it is helpful to set out some background to the action some of which is taken from the decision of Commissioner Murphy in the Industrial Relations Commission of NSW delivered on 7 July 2017, to give context to the issues raised.

4. The plaintiff began employment with the Department of Justice (“the Department”) in about 2000 as an Aboriginal Client Service Specialist attached to Lismore Court. In 2006 he was seconded to another division of the department for 12 weeks and then took two years leave without pay. On his return to work in September 2008, the plaintiff worked as a trainee Sheriff’s officer and after successfully completing training and probation became a Sheriff’s Officer in a Children’s Court in about 2010.

5. In March 2014 an internal investigation was launched to consider allegations of misconduct made against the plaintiff. That report found some of the alleged misconduct made out and others not. In the event, the plaintiff was dismissed from his employment on 20 October 2014.

6. The plaintiff took proceedings in the Anti-Discrimination Board of NSW and in NCAT challenging the termination of his employment.

7. The plaintiff commenced proceedings challenging his dismissal in the Industrial Relations Commission of NSW in November 2014. There, hearing of that application was delayed while the plaintiff agitated his claims in other courts. The matter was heard in the Industrial Relations Commission in March and May 2017 and a decision of Commissioner Murphy was delivered on 7 July 2017. The enquiry was whether the plaintiff’s dismissal was harsh, unjust, or unreasonable and, if so, what remedy resulted.

8. The Commissioner considered of the allegations of misconduct found to be substantiated in the Department investigation and concluded some of them not to be made out however found some of them to be established and which constituted misconduct.

9. The Commissioner turned to the question of whether the plaintiff’s dismissal based on the proven misconduct was “harsh, unreasonable, or unjust” in terms of ss 84 and 89 of the Industrial Relations Act 1996. The Commissioner found that the dismissal of the plaintiff was “… harsh in the sense that the punishment did not fit the crime, or put another way, was ‘too harsh a consequence’ for the applicant’s misconduct.”

10. Turning then to the question of whether reinstatement or re-employment of the plaintiff by the defendant was “impracticable”, the Commissioner found that it would be “… extremely difficult, if not impossible, for a viable working relationship to be re-established…” between the plaintiff and his work supervisor and concluded that reinstatement or re-employment was not practicable.

11. The Commissioner concluded that having found the dismissal harsh but that reinstatement or re-employment not to be practicable, the plaintiff was awarded compensation based on 13 week’s pay.

12. The plaintiff sought leave to appeal the Commissioner’s decision to the Full Court of the Industrial Relations Commission. Leave was refused on 25 January 2018.

The Statement of Claim

13. The plaintiff’s claim is for damages for breach of his contract of employment with the defendant. The asserted breach rests solely on two terms sought to be implied in the contract both by fact and by law arising out of the Government Sector Employees Act 2013.

14. The plaintiff was employed by the defendant from about 2000. The Government Sector Employment Act 2013 came into force in February 2014, and with it, s47 on which the plaintiff’s claim is based.

15. Section 47 of the Government Sector Employment Act is as follows:

47 Termination of employment

(1) The head of a Public Service agency may, by instrument in writing, terminate the employment of a Public Service non-executive employee of the agency on any of the following grounds if the employment is ongoing employment--

….

(h) a finding of misconduct has been made against the employee under section 69,

….

16. The relevant parts of the pleadings are as follows:

4. Under the Act, the head of the Public Service Agency may terminate the employment of a Public Service non-executive employee on any of the grounds set out in Section 47(1) of the Act if the employment is ongoing.

5. At all material times, it was an implied term of the contract of employment between the plaintiff and the defendant that the defendant will comply with the Act regarding any termination of the plaintiff’s employment. It was a further implied term that the defendant would not cause or permit the plaintiff to be exposed to a termination of employment if it knew or ought to have known such exposure was not in conformity with section 47 of the Act (the “implied terms of the contract of employment”)

….

10. In the circumstance, as a result of the Commissioner’s decision:-

(a) The defendant now knew or ought to have known that the defendant had not acted in conformity with the Act in respect of the defendant’s termination of the plaintiff’s employment and that the defendant had breached the implied terms of the contract of employment; and

(b) The defendant, in breach of the implied terms of the contract of employment, has failed to take any or all reasonable steps and measure to ensure the reinstatement and re-employment of the plaintiff as a Sheriff’s Officer.

17. In response to the defendant’s request for clarification as to the assertion of implied terms in paragraph 5 of the Statement of Claim, the plaintiff’s solicitor responded:

i. With reference to the specific implied terms relied upon, the material times commenced from the effective (commencement) date of the Government Sector Employment Act 2013 (the “Act”) on 25 June 2013, and continued until the plaintiff’s application for leave to appeal against Commissioner Murphy’s decision was refused by the Full Bench of the Industrial Relations Commission on 25 January 2018.

ii. They were implied into the contract by fact as they were terms necessary and appropriate for matters sought to be effected in the Government Sector as set out in Clause 4 Objects of the Act and would be understood by the parties as applicable. They were implied by law by reason of statute, namely the Act, which inter alia prescribed legal obligations upon or affected the parties.

18. In relation to paragraph 10 in the Statement of Claim, the plaintiff said:

…Compliance with the Act meant that Section 47 of the Act necessitated the employer to reinstate or reemploy the plaintiff effective on the decision of Commissioner Murphy as the termination, in effect, wasn’t in accordance with Section 47 of the Act. The jurisdiction of the Industrial Commission did not extend to an order for reemployment or reinstatement if it was impracticable. The Industrial Commission had no power to order reinstatement or reemployment based on a breach of section 47 of the Act.

19. The defendant argued that the statement of claim disclosed no reasonable cause of action and should therefore be summarily dismissed. The defendant advanced two arguments to support the application to summarily dismiss the plaintiff’s action. First, the Government Sector Employment Act does not give rise to the claimed implied contractual terms and secondly, the plaintiff’s claim is statute barred.

Implied terms

20. Terms implied into a contract whether by fact or law, are not an addition to the contract but as Edelman J said in Realestate.com.au Pty Ltd v Hardiman [2022] HCA 39 at [112] (“Realestate”):

“… they already exist in the contract. Implied terms are therefore recognised by the court, not created by the court.”

21. A term will be implied by law where it is a matter of “necessity” and where without it “…the enjoyment of the rights conferred would be ‘rendered nugatory, worthless, or …seriously undermined.’” (Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450, referring to Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635)

22. In Byrne v Australian Airlines Ltd (1995) 185 CLR 410, the High Court considered the argument that a clause in the relevant industrial award which provided that “… termination of employment …shall not be harsh unjust or unreasonable…” was implied into a contract of employment and thus gave rise to a right to sue for damages for breach of that term in the contract. In rejecting the proposition, the majority said at page 421:

In a system of industrial regulation where some, but not all, of the incidents of an employment relationship are determined by award, it is plainly unnecessary that the contract of employment should provide for those matters already covered by the award. The contract may provide additional benefits, but cannot derogate from the terms and conditions imposed by the awards and, as we have said, the award operates with statutory force to secure those terms and conditions. Neither from the point of view of the employer nor the employee is there any need to convert those statutory rights and obligations to contractual rights and obligations.

23. Further, at 422 the Court said in relation to the test whether the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case:

This is, we think, the appropriate test to apply in this case and the answer must be that it is not necessary to imply a term in the form of cl11(a) for the reasonable or effective operation of the contract of employment in all the circumstances. In the absence of any provision in the award and of any express provision in the contract of employment the law would regard it as a legal incident of the contract that it should be terminable upon reasonable notice or summarily for serious breach. Clause 11(a) may alter that position, but there is no reason to presume that any alteration was intended by the parties to form a term of their contract, nor any reason to impute such an intention to them. Plainly the fact that the inclusion of such a term would if it were breached, support an action for damages by the employee is no ground for saying that the term is necessary for the reasonable or effective operation of the contract. The contract is capable of operating reasonably and effectively in the absence of such a term and in the presence of an award provision offering limited remedies in the event of breach.

24. More recently in Commonwealth Bank of Australia v Barker [2014] HCA 32 at [29], the majority, referring to Byrne, said (citations omitted):

In Byrne v Australian Airlines Ltd, McHugh and Gummow JJ emphasised that the "necessity" which will support an implied term in law is demonstrated where, absent the implication, "the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined" or the contract would be "deprived of its substance, seriously undermined or drastically devalued". The criterion of "necessity" in this context has been described as "elusive" and the suggestion made that "there is much to be said for abandoning" the concept. Necessity does, however, remind courts that implications in law must be kept within the limits of the judicial function. They are a species of judicial law-making and are not to be made lightly. It is a necessary condition that they are justifiedfunctionally by reference to the effective performance of the class of contract to which they apply, or of contracts generally in cases of universal implications, such as the duty to cooperate. Implications which might be thought reasonable are not, on that account only, necessary. The same constraints apply whether or not such implications are characterised as rules of construction.

25. Five criteria must exist before a term will be implied as a matter of fact. In Realestate Kiefel CJ and Gageler J said referring to BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 238:

[18] The conditions necessary to ground the implication of a term are well known. Apart from being reasonable and equitable, capable of clear expression and non-contradictory of the express terms of the contract, to be implied a term must be necessary to give business efficacy to the contract (which will not be satisfied if the contract is effective without it), and it must be so obvious that "it goes without saying"

Are the terms to be implied?

26. The submissions of the Plaintiff are brief and assert that each of these criteria is present and thus found the implication of the terms. As to the implication of the term as a matter of law, it was merely submitted that it is not a pre-condition to implication that the statute “… would or must require the implication of the terms to be made clear in the statute itself”.

27. Neither the Plaintiff’s written or oral submissions addressed the “necessity” of implying the terms or why the criteria to imply a term as a matter of fact required it and I find no basis in conformity with authority which would cause the terms to be implied into the Plaintiff’s contract of employment with the Defendant.

Is the claim statute barred?

28. However, if the terms were implied in the contract, the plaintiff faces a further hurdle, which is the operation of the limitation period. The plaintiff argued that the defendant breached those implied terms not when it terminated his contract of employment but when the Commissioner found that termination of employment based on the proven misconduct was too harsh. In a submission that was somewhat opaque, the solicitor for the plaintiff argued that the implied terms “survived” the termination of the employment contract only to be breached years later.

29. Counsel for the defendant argued that clearly once the contract was terminated, it and all of its terms whether express or implied came to an end and it was then that the breach of the contract (if any) occurred.

30. There is no dispute that the plaintiff’s contract of employment with the defendant was terminated on 20 October 2014. The breach asserted by the plaintiff is that the contract was terminated unlawfully. However, the plaintiff argued that the alleged breach of the contract of employment was not “established” or “discovered” until the decision of Commissioner Murphy that the plaintiff’s termination was “harsh” which the plaintiff said established that the plaintiff’s employment had been wrongfully terminated.

31. The plaintiff further argued:

After the finding of the NSWIRC about the minimal category of the plaintiff’s misconduct, the plaintiff was now vested with his right not to have been terminated for which he became entitled to claim loss and for which the limitation period commenced.

32. This submission must be rejected. Nothing in the determination of the Commissioner bore on when the plaintiff’s right (if any) to sue for breach of the contract of employment arose. The Commissioner’s decision concerned the consequences of the defendant’s actions in terminating the plaintiff’s employment. The determination of the Commissioner was predicated on the fact that the plaintiff had been dismissed. That the Commissioner considered that termination of the plaintiff’s employment was “harsh” based on the misconduct found by him, but his decision does not speak to the lawfulness of the defendant’s action. The terms of s47 are that the defendant “may” terminate for misconduct, which it did.

33. I thus conclude that, even if the asserted terms were implied in plaintiff’s contract, any action for breach of the contract of employment based on those terms is statute barred.

Should the proceedings be summarily dismissed?

34. Rule 13.4(1) of the Uniform Civil Procedure Rules empowers the court to summarily dismiss proceedings if it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings, no reasonable cause of action is disclosed.

35. It is accepted that the power to summarily dismiss proceedings should be used sparingly and reserved for cases where the cause of action is such that it “cannot possibly succeed”. The Defendant argued that the Statement of Claim revealed no arguable cause of action.

36. There is considerable force in this submission based on the statement of claim as filed and the plaintiff’s solicitor’s response to the defendant’s request for clarification of the claims asserted in the Statement of Claim.

37. However, in all of the circumstances, I am not prepared to summarily dismiss the proceedings but will strike out the Statement of Claim and give leave to the plaintiff to replead the cause of action.

38. The defendant sought an order for costs of the motion and the proceedings generally and that those costs be paid on an indemnity basis. I will direct the parties to provide written submissions on the question of costs generally and in particularly on the issue of indemnity costs to be determined by me in chambers.

Amendments

11 July 2023 - Catchwords amended.

Decision last updated: 11 July 2023