Shire of Kellerberrin v Nyoni & Ors

[2018] HCATrans 27

[2018] HCATrans 027

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P18 of 2017

B e t w e e n -

SHIRE OF KELLERBERRIN

Applicant

and

EMSON NYONI

First Respondent

DARREN FRIEND

Second Respondent

STAN McDONNEL

Third Respondent

FRANK PECZKA

Fourth Respondent

PETER MITCHELL

Fifth Respondent

Application for special leave to appeal

NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO PERTH

ON FRIDAY, 16 FEBRUARY 2018, AT 12.01 PM

Copyright in the High Court of Australia

____________________

MR B. DHARMANANDA, SC:   May it please the Court, I appear with MS C.V. WREN for the applicant.  (instructed by DLA Piper Australia)

MR D.I. STAR, QC:  If the Court pleases, I appear with my learned friend, MR R. CHAILE, for the first respondent.  (instructed by Corrs Chambers Westgarth)

NETTLE J:   Mr Dharmananda.

MR DHARMANANDA:   Your Honour, four points of principle, we submit, arise from the majority decision of the Full Court.  We say there were four errors of law made.  May I deal with each of them in turn?  The first point is that Mr Friend, the CEO of the Shire, did not exercise power attaching to public office.  The majority said at paragraph 103 in application book 136 that it is inherent in the performance of the most senior executive of a local government authority that he must communicate on its behalf.  The majority found that Mr Friend, as CEO of the Shire, used a power of his office to make an official complaint, and that is at paragraphs 113 and 138. 

We submit the tort of misfeasance in public office is committed only if the impugned act is an act attaching to that public office and not every act of a public officer has that characteristic.  The starting point for that proposition is Calveley v Chief Constable of the Merseyside Police [1989] 1 AC 1228. At 1240 Lord Bridge said that the act must be done by the public officer in the exercise:

of some power or authority with which he is clothed by virtue of the office he holds ‑ ‑ ‑

NETTLE J:   Is this point resolved down to one of fact as to whether or not he was acting in office because he was in such close contact with other councillors?

MR DHARMANANDA:   In our submission, the point does descend into a fact issue.  However, there is a point of principle as to what is involved in the issue of what attaches and does not attach and, in a sense, the way in which the Full Court approached that topic submerged that inquiry by simply saying an officer can communicate on behalf of the Shire.  Whenever that occurs, it must be attaching.  In our submission, determining whether it attaches or not is ‑ ‑ ‑

NETTLE J:   It is a fact question.

MR DHARMANANDA:   It is a fact question informed by a principle.

GORDON J:   The principle is right.  It is a question of application of the principle.

MR DHARMANANDA:   True it is, but we submit the principle is not sufficiently clear.  It is not in any way articulated by the analysis in the Full Court nor, when one looks at the authorities in the courts below, both in the New South Wales Court of Appeal and also in the Court of Appeal in Victoria ‑ ‑ ‑

NETTLE J:   Assume you are right for the sake of argument about that that there has been an error constituted of saying whatever the man does must be in the course of his duties and therefore it is misfeasance in public office, would that require a question of fact then to be decided about whether he was acting in the course of his duties, or has that been decided sufficiently already?

MR DHARMANANDA:   Well, in our submission, what has been decided is insufficient to make good the conclusion.  Once the principle is articulated by the court, then one applies it.  There is no sufficient finding of fact to draw the conclusion that this activity was in the exercise of public office.

NETTLE J:   What is the second point?

MR DHARMANANDA:   Before I get to the second point, may I just draw your Honours’ attention – we have done so in our written submissions – but if one looks at the Local Government Act the relevant power of the CEO of the Shire is “could communicate only with the agreement of the president.  In this case there are findings of fact that the president was not in any way involved – and can I just give you references to that ‑ ‑ ‑

NETTLE J:   You have it set out in your written submissions, have you not?

MR DHARMANANDA:   Yes, save that there is a further paragraph we would add.

NETTLE J:   Yes.

MR DHARMANANDA:   The paragraphs are in the trial judge’s judgment - 327, 328 at application book 63 and at 355 application book 69.  The second point is, if we are wrong about the first point, its alternative and that is that even with respect to the first so‑called category of the tort you have to have an element of knowledge.  The majority held that the tort may be committed if a pubic officer intends to harm a particular person, even if there was no misuse of any public….. 

The majority disagreed with what Justice Harper analysed the position to be in Grimwade v Victoria, which is referred to in paragraph 87 of the Full Court’s judgment and…..Justice Harper suggested that tort cannot be committed if there is an intention to hurt but no knowledge of any unlawful act.

GORDON J:   Your short point is intention to harm alone is not sufficient?

MR DHARMANANDA:   It is.  That is our point.  We submit that that point is supported not only by strenuous academic…..but what Emeritus Professor Mark Aronson has said and we…..in our primary submissions at paragraph 38 and in reply at 13 and 14.  The point also is supported by authority in the Three Rivers decision…..on a proper understanding and a close reading of what Lord Hobhouse said in that case. I would wish to take your Honours to that passage, if I may. May I ask your Honours to go to page 229 of the report, which is [2003] 2 AC 1. At the top of the page, between point A and B, his Lordship effectively said that:

The use of the word “malice” also causes confusion -

and confusion it does cause for the reasons that come out in this case itself.  Then at page 229 at point G, his Lordship said that – and I am reading the third sentence:

It applies –

that is, this tort:

to the holder of public office who does not honestly believe that what he is doing is lawful, hence the statements that bad faith or abuse of power is at the heart of this tort.

Then going on to the bottom of that page, the last sentence:

The official must have dishonestly exceeded his powers and he must thereby have caused loss to the plaintiff which has the requisite connection with his dishonest state of mind.

Further down that page, in the middle of the page, between D and E:

The relevant act (or omission, in the sense described) must be unlawful –

The next paragraph:

The official concerned must be shown not to have had an honest belief that he was acting lawfully; this is sometimes referred to as not having acted in good faith -

and then further down.  So the first element is always an element that involves both unlawfulness and dishonesty, as it is stated here, or some knowledge “I am using or misusing power”.  Then there is the next element which is ‑ ‑ ‑

GORDON J:   But we are only dealing with the second element, are we not?

MR DHARMANANDA:   No, we say that there are two elements.  One is unlawful act with knowledge.  The second is targeted at someone.

GORDON J:   That is what I am talking about.  We are dealing with targeted here.

MR DHARMANANDA:   But the first element involves both intention but also knowledge of abuse of power.  The second element is – if I take your Honour to 230 ‑ ‑ ‑

NETTLE J:   Your point is that you require both – you require an intention to harm and also for an improper purpose known to you or believed ‑ ‑ ‑

MR DHARMANANDA:   Correct.  The second element is what his Lordship refers to between F and G, in the new paragraph:

The next requirement also relates to the official’s state of mind but with regard to the effect of his act upon other people.  It has three limbs which are alternatives and any one of which suffices.

It is at that point that there is a reference to the three limbs:  targeted malice and, as his Lordship would put it, “untargeted malice” and then over the page, “reckless untargeted malice”.  But before you get to those categorisations we say you have the two elements that I have described that need to be satisfied.

NETTLE J:   Yes.

MR DHARMANANDA:   The same analysis is made by Lord Millett, which I will not go to.  It is in our written submissions at page…..  His Lordship in fact says it is not right to break these things up in that way.  It is actually about inferences of proof, and remembering that ‑ ‑ ‑

GORDON J:   But he still has the two elements that you rely upon.

MR DHARMANANDA:   He does, but in the first element there is always a knowledge on the part – and that is what he emphasised.  That is our second point.  It is supported also by the Canadian case, which is in our written submissions – I will not go there.  The third point, which is a short point, namely this, that you cannot presume a damage – this is an action on the case, actual damage has to be there.  The Full Federal Court at 101 and 102 in application book 135 effectively said that damage can be presumed by analogy with slander cases and pointing to reputation without pointing to financial loss flowing from reputation, we submit, extends the tort in a manner entirely inconsistent with the way in which the House of Lords analysed it relatively recently in Watkins v Secretary of State for the Home Department [2006] 2 AC 395.

GORDON J:   Does the remitter make any difference to that argument?

MR DHARMANANDA:   In our submission, no, because the cause of action has to be complete.  Damages is the gist of the cause.  You cannot say there has been a trial, there has been no proof of that financial loss but yet there has been a tort committed, in our submission.

The last point is the point about whether the Shire should be directly liable for the acts of Mr Friend and, in our submission, we say no.  We rely on Northern Territory v Mengel where the joint judgment would say it is personal liability, not direct liability unless there is de facto authority.  Here there is no finding sufficient, we submit, of any de facto authority.  The fact that the Shire is said to have had a campaign against Mr Nyoni is not sufficient for any inference to be drawn that ‑ ‑ ‑

GORDON J:   Why?

NETTLE J:   What about all the telephone calls with the aldermen, each side of the action?  It might be the basis of an inference, might it not?

MR DHARMANANDA:   Well, your Honour, one has to look at it, making assumptions that there has in fact been a tort committed.  You make that assumption, then the inquiry whether that is part of the campaign is slightly more delicate than he is just carrying on with what they always wanted him to carry on.  We say not so, bearing in mind findings of actual fact made that the president was in no way involved in the impugned activity.

NETTLE J:   Can the fourth point be sufficiently divorced from factual questions to be decided as a point of principle in this case?

MR DHARMANANDA:   In our submission, yes, in that there is still law to analyse the extent to which there can be liability on the part of a corporation for activities not directly condoned by the corporation but that is said to be somehow sheeted home to the corporation because of its general imprimatur.  May it please your Honours, those are our submissions.

NETTLE J:   Yes, thank you.  Mr Star.

MR STAR:   Special leave should not be granted on any of the four issues.  I will address the issues in the order addressed by my learned friend.  Going directly to issue 1, whether Mr Friend exercised power of public office, special leave should primarily be refused because there is no error in the majority’s judgment on this issue.  The ultimate, relevant, and we say correct finding is that in paragraph 103, application book page 136, where the majority state:

It is inherent in the performance of the most senior executive office of a governmental institution –

and they give, by way of example, a local government such as this Shire:

that the office‑holder must make representations and communications on behalf, or as the voice, of that institution to others, including other organs of government responsible for exercising functions or powers –

and these are…..in the majority’s conclusion:

that affect the office‑holder’s employer.

Now, the majority reached this analysis after considering the statutory context.  Your Honours see that at application book 127, paragraph 69, where they refer to the relevant provisions in the Local Government Act (WA) which were, as you would expect, broadly expressed and provide for general functions for the Shire and its CEO.

Now, of course, an express legislative power is not necessary in any event for there to be an exercise of power for the purpose of misfeasance.  I think we all agree it shows that there is no point of principle here, that all that needs to be shown is that the public officer is exercising an incident of the office occupied by them. 

The written submissions from both sides refer to Cannon v Tahche, a Court of Appeal decision in Victoria, a decision from which this Court has refused special leave, which makes clear that this tort for this element is concerned with misuse of a relevant power which is an incident of public office.

At the end of paragraph 109 in the majority’s judgment, at application book 137, they are applying this in terms about is this an incident of Mr Friend’s office?  With respect to the Shire it has not been crystal clear whether their special leave point is whether this…..existed or whether it has been exercised.  On both fronts the majority were correct.

I have focused…..paragraph 103, application book 136 on those words of limitation which the majority carefully framed as being one which affects the Shire.  If it has been seriously put in issue whether this power was exercised, that would be inconsistent with the clear factual findings.  This case is about Mr Friend’s two communications on 14 October 2010 to the Health Department and the Pharmaceutical Council.  It is clear from the terms, substance and the context of those communications that they were about local government matters affecting the Shire.

Furthermore, there were clear factual findings that these communications formed part of a broader campaign.  Your Honours will see that in the majority’s written reasons at paragraph 46, application book 121.  I apologise:  paragraph 104, application book 136.  That was based on the clear factual finding of the trial judge, application book page 61, paragraph 314, where he referred to the campaign that was being maintained together by the CEO and the Shire against Mr Nyoni in relation to local government matters.

The second point against special leave, still in this first issue, is that there is no issue of general importance between what the majority decided on the one hand and what the trial judge and the dissenting judge did on the other.  It is apparent, really, that there was a difference in reasoning as to whether the CEO’s conduct was analogous or not to the conduct in issue in Calveley v Chief Constable of the Merseyside Police and Emanuele v Hedley.  We say the majority was correct in reaching the conclusion it did that the exercise of power in this particular case was…..from the category of conduct that was in play in Merseyside Police and Emanuele v Hedley.

It is just not a special leave point.  The difference in reasoning is not one of principle; it is simply a difference as to whether the factual scenario in the present case was covered by or distinguishable from the category of conduct in that case.

The last point against special leave, still on issue 1, is we do say that there is a defect of substance in the proposed special leave question.  That question is found in application book 162, paragraph 4.  The defect of substance in paragraph 4 is that it is erroneously ignoring that the purpose of the communications, as found, was for matters affecting the Shire, so it is glossing over ‑ ‑ ‑

GORDON J:   Paragraph 103.

MR STAR:   And 106.  I turn now to the second issue, which is put as an alternative point, of whether Mr Friend acted with the requisite malice or knowledge.  Special leave should be refused for three reasons.  First, there is no issue of public importance and no error in the majority’s analysis of the elements for targeted malice.  In fact, the Shire’s argument involves a radical departure from the established authority, here and overseas, in the leading misfeasance cases and will have…..prospects of success.  Two, it is an inappropriate vehicle and, thirdly, the same defect in the special leave question, which I have referred to a moment ago, is also in the special leave question in paragraph 5 on page 162.

The main reason against special leave is no public importance and no error by the majority in the elements for targeted malice.  This Court has already stated clearly the correct principles as to when there is and is not misuse of public power by a public officer.  Can I ask your Honours to turn to the bundle of cases which, hopefully, your Honours have on the Bench, to tab 2 in Mengel and, relevantly, to page 345.  It is the last paragraph on page 345 in the joint judgment.  When speaking generally about misfeasance the plurality state:

the weight of authority here and in the United Kingdom is clearly to the effect that it is a deliberate tort in the sense that there is no liability unless –

and now what is being referred to is the so‑called first limb:

there is an intention to cause harm or –

now referring to the second limb:

the officer concerned knowingly acts in excess of his or her power.

As the majority in Mr Nyoni’s case state, in paragraph 76, application book 128, the High Court majority, only three years later, in Sanders v Snell adopts this passage.

Can I ask your Honours next to turn, still in Mengel, to page 348.  The majority there reject the concept of constructive knowledge – that is, a concept that there should be a reformulation to capture a public officer who ought to know of his or her lack of power and in doing so, they say – and this is at about point 6 on the page:

And it serves no purpose if the public officer is actuated by an intention to harm the plaintiff for that constitutes misfeasance in public office whether or not the officer knows that he or she lacks authority.

These statements of the High Court, on a proper reading of the authorities in the United Kingdom and also in Canada, to which we have referred in our submissions, are all on the same page.  The Shire is erroneously conflating the two limbs for misfeasance and, contrary to authority and good principle, to which I will come, it is arguing that a particular state of knowledge on the part of the tortfeasor, namely, knowledge of unlawful conduct, is a necessary element for targeted malice.

Now, not only is this inconsistent with the passages to which I have taken your Honours, the intermediate appellate courts in Australia have clearly understood the law of misfeasance in the manner in which I have explained.  Can I ask your Honours to turn to tab 3 in the bundle of authorities.  That is the Full Court of the South Australian Supreme Court in Cornwall & Ors v Rowan, another case which this Court refused special leave to appeal.  Relevantly, at page 325, if I could direct your Honours to paragraph 215 the Full Court state that:

It was not suggested in the joint judgment in Northern Territory of Australia v Mengel (supra) that there needs to be additional invalidity in order to satisfy the first limb of malice.

And more relevantly, at paragraph 216:

Engaging in conduct with the intention of inflicting injury would almost invariably amount to use of power for an improper purpose, thereby satisfying the first element of the tort at the same time.

Now, the decision in Cornwall is instructive because it was a limb one “targeted malice” case and it succeeded on that basis, even though it was not necessary for Dr Cornwall to have known and have knowledge of the unlawfulness of the exercise of his power.

Next, can I ask your Honours to turn to tab 4 in the bundle of cases, which is the Full Federal Court in Sanders v Snell (No 2) and, relevantly, in paragraph [107] on page 177, Chief Justice Black and Justices French and von Doussa state:

It is true that actual knowledge of unlawfulness on the part of the public officer is not an element of the first form of the tort based on targeted malice.

Whilst there are some musings academically that the frontiers of misfeasance are not fully clarified, there is no uncertainty at all about this first element of targeted malice, and for good reason.  Two limbs of misuse of public power are carefully crafted for what they capture, what they include and what they exclude.  The first limb already has a very high threshold by requiring proof of actual intent to cause harm.

To add in on top of that another layer that the tortfeasor also has to have knowledge of that would skewer the relationships between limb one and limb two, and would protect misuses of power which ought not to be protected.  Underlying this of course is that limb one is dealing with valid exercises of power.  What the law provides protection for is a valid exercise of power with an intent to cause harm.

Limb two is dealing with ultra vires acts and in that context there is a requirement for the tortfeasor to have knowledge of or recklessness to the lack of power and the likely harm.  But the role of knowledge in limb two is irrelevant for limb one.  It has a different role to play.            So, ultimately, on this issue the majority correctly applied the principles to which I have referred in a detailed manner.  There was, without doubt, a clear factual finding that there was intent to harm Mr Nyoni and that was sufficient for this element of targeted malice to be satisfied.

Now, the last point on the second issue is it is an inappropriate vehicle for this reason.  The trial judge did not make a positive or express finding that Mr Friend – that is, the CEO – was in fact unaware that the disconnection of electricity to the pharmacy was unauthorised.  Now, we see our learned friends in the written document say well, based on a whole lot of other factual findings, an inference should be drawn in a particular way in their favour.  Our point to your Honours is that if we are in the realm of inferences and what would be contestable inferences that is demonstrating that even if there was a point of principle this is not the case to explore it. 

GORDON J:   Are you going to deal with the damage point?

MR STAR:   Yes.  On the damage point we say that the majority have proceeded on the correct basis.  If I direct your Honours’ attention to paragraphs 97 and 98, application book page 134, the majority correctly proceed on the basis that special damage is an element of the tort.  But what the majority also observe is that there are recognised contexts with intentional torts.  The element of suffering material damage may operate in a qualified manner where there is harm to reputation. 

The majority refer to the situation with “injurious falsehood” and the majority also refer to established principle with slander.  They could have gone on and given other examples.  Take the tort of malicious prosecution.  In that scenario there is authority that damage to reputation will be presumed.  Ultimately, the majority applied a conventional approach which applies with other intentional torts where there is harm to reputation; to misfeasance, which is an intentional tort; in a case where the harm, as found, was reputational to Mr Nyoni.  There are ample factual findings that this was a case about harm to his reputation.

We also make the point that there is going to be, if special leave is refused – remitter to the trial judge for assessment of damages in the conventional way and that also counts against any…..

Now, the final point is whether the Shire is directly liable for Mr Friend’s tort.  Special leave should be refused because there, again, is no error by the majority.  The majority took an orthodox approach to determining whether Mr Friend was acting as the Shire and accordingly is liable.  That was to apply the reasoning of this Court in Hamilton v Whitehead.  Your Honours will see that in paragraph 85, application book 130 to 131, and also paragraph 118, application book 139, where the majority have simply applied the principles in Hamilton v Whitehead.

Now, ultimately, it is a question of law whether, on the facts as found, Mr Friend was to be regarded as the Shire.  The Shire seems to be suggesting there is a missing category of fact findings.  We say there are no missing fact findings and it was open, for instance, for the majority to conclude, as they do in paragraph 117, application book 139 ‑ ‑ ‑

NETTLE J:   Mr Star, you are out of time.

MR STAR:   Yes.

NETTLE J:   Thank you.  Mr Dharmananda, is there any reply?

MR DHARMANANDA:   A few short points.  As to the first point, the communication could have been made by any private individual.  Nothing in the nature of a public function was involved in the mere communication of a mistaken belief of fact to the two regulatory bodies.  Justice Dowsett in his dissent, at paragraphs 160 to 165 made similar points.  At 160, he said providing information not directly related to a public function is not doing something as part of a public office.  At 165, the conduct was “not conduct which could adversely affect anybody”.

Can I deal with the damage point.  There has been no finding that financial loss flowed from reputation.  One regulatory body was disbanded on 15 October – it did nothing; the Health Department did nothing – causing adverse financial loss.  So there is only a presumption of loss, not actual loss and actual loss is needed.

My learned friend took your Honours to Mengel.  Can I take your Honours back to Mengel very quickly and point out what Justice Brennan said at page 357, at about point 9 on the page, where his Honour said:

Misfeasance in public office consists of a purported exercise of some power or authority by a public officer otherwise than in an honest attempt to perform the functions of his or her office whereby loss is caused to a plaintiff.

My learned friend took your Honours to Sanders in the Full Federal Court when it went back down from the High Court and he took you to paragraph [107] where the joint judgment starts with “It is true,” but then they refer to Lord Hobhouse’s decision, to which I have already referred.  Then, can I take your Honours to paragraph [108], about two‑thirds down, after the reference to McKellar, their Honours say:

Since the essence of the tort in each of its form is the “dishonest abuse of power”, it cannot be sufficient merely to show that harm was intended when the harm of that nature would necessarily result from the proper exercise of power -

and there is a reference to Mengel.  So they start by saying it is true this is what has been said about targeted malice but then on their analysis in their ultimate finding in this case add an extra element.  That is the element we say ought to be expressly stated.  May it please, your Honours, those are our submissions in reply.

NETTLE J:   In this matter the Court is of the view that the decision of the Full Court of the Federal Court of Australia is not attended by sufficient doubt to warrant the grant of special leave to appeal.  The application for special leave is dismissed with costs.

AT 12.36 PM THE MATTER WAS CONCLUDED