Snell v Sanders
[2000] NFSC 5
•24 November 2000
SUPREME COURT OF NORFOLK ISLAND
Snell v Sanders [2000] NFSC 5
TORT – misfeasance in public office – whether requisite intent established.
DAMAGES – exemplary damages – whether pre-judgment interest should be allowed.
Sanders v Snell (1998) 196 CLR 329 cons.
Northern Territory v Mengel (1995) 185 CLR 307 cons.
Three Rivers District Council v Governor and Company of the Bank of England [2000] 2 WLR 1220 cons.LISLE DENIS SNELL v WILLIAM WINTON SANDERS
SC 3 of 1993
CORAM: BEAUMONT CJ
DATE: 24 NOVEMBER 2000
IN THE SUPREME COURT OF )
) SC 3 of 1993
NORFOLK ISLAND )BETWEEN LISLE DENIS SNELL
Plaintiff
AND WILLIAM WINTON SANDERS
Defendant
ORDERS
CORAM: BEAUMONT CJ
DATE: 24 NOVEMBER 2000
THE COURT ORDERS:
1.Verdict and judgment for the plaintiff against the defendant in the sum of $83,000, including interest up to the date of judgment.
2.Defendant to pay the plaintiff’s costs of the whole of the proceedings in this Court, including the costs of the first trial.
IN THE SUPREME COURT OF )
) SC 3 of 1993
NORFOLK ISLAND )BETWEEN LISLE DENIS SNELL
Plaintiff
AND WILLIAM WINTON SANDERS
Defendant
REASONS FOR JUDGMENT
(ON RETRIAL OF CLAIM OF MISFEASANCE IN PUBLIC OFFICE)
CORAM: BEAUMONT CJ
DATE: ** 2000
INTRODUCTION
The plaintiff, Lisle Denis Snell, sued the defendant, William Winton Sanders, in this Court for damages, including exemplary damages on two claims: one a claim in tort of intentional interference with a contractual relationship; the other a claim in tort of misfeasance in public office. The first claim was of intentional interference with the contractual relationship between the plaintiff and his former employer, the Norfolk Island Government Tourist Bureau (“the Bureau”). The second claim was of misfeasance by the defendant in his public office of Executive Member (Minister) of the Norfolk Island Legislative Assembly, in which capacity he administered the Norfolk Island Government Tourist Bureau Act 1980 (“the Act”). The defendant denied both claims. (There was also a third party claim which is no longer an issue here.) For reasons given in my reasons for judgment dated 19 April 1996, I found that the first cause of action had been established, and awarded the plaintiff damages, including exemplary damages, in the sum of $17,000.
With respect to the plaintiff’s second (alternative) claim, in my reasons I noted the observations of the majority (Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ in Northern Territory v Mengel (1995) 185 CLR 307 that “in important respects” the “precise limits” of the tort of misfeasance in public office were then still “undefined”. I further noted the doubts expressed by Smith J in Farrington v Thomson & Bridgland [1959] VR 286 at 291, with respect to the claim for exemplary damages. In this connection I said (at 55):
“Given these uncertainties and complexities, I prefer not to express a view on this alleged cause of action in the absence of full argument on the point. As has been noted, both causes of action relied on by the plaintiff are said to have arisen from the same circumstances, and for the reasons just given, the plaintiff could not recover more damages under the second cause of action alleged.”
Mr Sanders appealed to the Full Federal Court against my findings on the inducement claim on both liability and damages. Mr Snell cross-appealed, contending first, that both the general and exemplary damages were inadequate, and secondly, that the claim for misfeasance should have been decided in his favour. The Full Court (Wilcox, O’Loughlin and Lindgren JJ) dismissed the appeal and allowed the cross-appeal (see Sanders v Snell (1997) 73 FCR 569). The Full Court held that the tort of inducement of breach of contract had not been established, but that misfeasance in public office had been committed; and that the amounts of general and exemplary damages should be increased by substituting the amount of $70,000, including interest.
Mr Sanders appealed to the High Court of Australia. The High Court (Gleeson CJ, Gaudron, Kirby, Hayne and Callinan JJ) held that there had been no inducement of breach of contract. On the claim of misfeasance in public office, a majority of the High Court (Gleeson CJ, Gaudron, Kirby and Hayne JJ, Callinan J dissenting) allowed the appeal in part and allowed the cross-appeal in part. The relevant orders of the High Court were that the award of damages ordered by the Full Federal Court be set aside, and that there be a new trial limited to the misfeasance claim (see Sanders v Snell (1998) 196 CLR 329). The majority said (at 350):
“The trial judge not having considered the allegations of misfeasance in public office, and the Full Court having erred in deciding that that cause of action was made out, the judgment entered by the Full Court cannot stand. But should this aspect of the matter go back for retrial so that findings can be made? That any matter should have to be remitted for retrial is unfortunate. The costs of prolonging any matter, let alone a matter such as this which arises from within a small community, are not just financial costs. But no findings of fact having been made on this aspect of the matter, there is no choice but to remit the matter for retrial on the claim for misfeasance in public office.
Because there should be an order for retrial of the claim for misfeasance in public office, it is not appropriate to say anything about the assessments of damages made by the Full Court. Those are matters for the trial judge at the new trial. We are not, however, to be taken as endorsing in its entirety the approach adopted by the Full Court in making those assessments or in allowing, as it did, interest on amounts allowed for exemplary damages.”
I have now had the benefit of written submissions from the parties supplementing their arguments at the trial. At my direction, for the reasons I then gave, no further evidence was adduced on the retrial.
In order to understand the issues that arise on the retrial of the misfeasance claim, it will be necessary to refer to the relevant claims, background and findings made at the trial as follows.
THE CLAIMS, BACKGROUND AND FINDINGS MADE AT THE TRIAL
(a) The claims pleaded
In his statement of claim, the plaintiff alleged, relevantly, the following:
“2. For some time prior to the 2nd day of April 1992 the Plaintiff was employed under a contract of employment as Executive Officer by the … Bureau.
3. At all material times the … Bureau … was a body corporate … established under the provisions of [the Act].
4. The … Bureau employed the Plaintiff … pursuant to the provisions of Section 12 of the … Act.
[Section 12 provides as follows:
“12. (1) The bureau may employ such persons as it thinks fit and necessary for the purposes of the Bureau.
(2) The Public Service Ordinance 1979 and the Provident Account Ordinance 1958 do not apply to persons employed by the Bureau.”]
5. At all material times the Plaintiff carried out his work and discharged his duties as the … Executive Officer to the satisfaction of and without complaint from the … Bureau.
6. On and from the 2nd day of April 1992 the … Bureau and the Plaintiff entered into a new contract of employment pursuant to the provisions of … Section 12 of the … Act. Under the terms and conditions of the … contract of employment the Plaintiff, as Executive Officer, was employed for an unlimited period of time subject to the terms of Clause 9 of the … contract of employment.
7. Under the terms of … clause 9 the employment of the Plaintiff could be terminated by the … Bureau where … the plaintiff was absent from duty without authority or was guilty of misconduct. In those circumstances the … Bureau was enabled to dismiss the Plaintiff on one month’s notice in writing of its intention to terminate his appointment as Executive Officer or on payment to him of one month’s salary in lieu of such notice.
8. It was further provided by clause 9 of the … contract of employment that subject to the other provisions of … clause 9 either the … Bureau or the Plaintiff could furnish the other with two months’ notice of intention to terminate the employment of the Plaintiff with the … Bureau.
[Clause 9 is in these terms:
“9. Termination of Employment
(a)Where in the opinion of the Bureau the employee is absent from duty without authority or is guilty of misconduct, the Bureau may dismiss the employee by giving him one months’ notice in writing of its intention to terminate the appointment or on payment of one month’s salary in lieu of such notice.
(b)Subject to 9(a) above, two months’ notice of intention to terminate the employment shall be given by either the Bureau or the employee.”]
9. At all material times the Plaintiff did his work and discharged his duties with the … Bureau as its Executive Officer pursuant to and under the terms of the said new contract of employment to the satisfaction of and without complaint from the … Bureau.
10. At all material times the Defendant was duly elected to be a Member of the Sixth Legislative Assembly of Norfolk Island and in due course was duly appointed the executive member/Minister having responsibility to administer [the Act].
11. At all material times the Defendant as such executive member/Minister was aware of and had knowledge of the terms and provisions of the said new contract of employment of the Plaintiff with the … Bureau.
12. On or about the 16th day of June 1992 the Defendant had a conversation with the then Chairman of the …Bureau and in the … conversation requested the … Chairman to obtain the Plaintiff’s resignation from his employment with the … Bureau.
13. On or about the 17th day of June 1992 the Defendant purporting to act under Section 15 (1) of [the Act] gave a written notice or direction to the … Bureau to take such steps, prior to 4pm on that day, as were necessary to terminate, at the earliest practicable date, the employment of the plaintiff with the … Bureau.
[Section 15 provides as follows:
“15.(1) The executive member may give to the Bureau directions as to –
(a)the conduct of the business or affairs of the Bureau; and
(b)the manner in which the Bureau carries out its functions or exercises its powers,
and the Bureau shall give effect to those directions.
(2)The executive member shall lay a copy of any directions given under subsection (1) before the Legislative Assembly at its first meeting after the giving of the directions.”]
14. On or about the 17th day of June 1992 the said Chairman requested the Defendant in writing for a meeting to take place in which matters relating to the employment of the Plaintiff and the said notice or direction to terminate the employment of the Plaintiff with the … Bureau could be fully properly and fairly discussed.
15. On or about the 17th day of June 1992 the Defendant after receipt of the … request from the … Chairman in purported exercise of powers claimed by the Defendant to be available to him under Section 4(2) of [the Act] and Section 36(4) of the Interpretation Ordinance 1979 revoked with effect from the 18th day of June 1992 the appointments of all of the then members of the … Bureau to the … Bureau.
[Section 4(2) of the Act provides:
“2.Members of the Bureau shall be appointed by the executive member.”
Section 36(4) of the Interpretation Ordinance 1979 contains the usual provision to the effect that a power to appoint includes a power to revoke the appointment.]
16. Following upon the … purported exercise of powers to revoke the appointments of all of the then members of the … Bureau the Defendant purported to appoint new members to the … Bureau and gave certain notices and directions to the … new members of the … Bureau to terminate immediately the employment of the Plaintiff as Executive Officer of the … Bureau and to dismiss him at once from such employment.
17. On or about the 19th day of June 1992 certain members of the … Bureau so appointed as stated above attended at the office accommodation of the Plaintiff at the … Bureau and informed the Plaintiff that they were present pursuant to a purported direction of the Defendant given to them to terminate the employment of the Plaintiff with the … Bureau and to dismiss him immediately from that employment. Those … members thereupon by spoken words purported to terminate immediately the employment of the Plaintiff contrary to and against the terms and provisions of the contract of employment of the Plaintiff with the … Bureau and required the Plaintiff to vacate his …office accommodation without any delay.
18. The Plaintiff thereupon vacated the … office accommodation and the Plaintiff did not or has not engaged in any further employment with the … Bureau. At the time the Plaintiff vacated the … office accommodation and ceased to be engaged in work for the … Bureau the Plaintiff, while he did not accept that the termination of and the dismissal from his employment was fair, just, proper and in accordance with law and equity, considered that he could take no other course at that time than to comply with the demand of the … members of the … Bureau made to him at his office accommodation.”
(b) The background facts
(i) The plaintiff’s initial contract of employment
On 2 July 1990, the plaintiff was initially appointed Executive Officer of the Bureau. By a letter of that date, the Chair of the Bureau wrote to the plaintiff confirming his appointment as its Executive Officer. Attached to the letter was a document detailing the plaintiff’s terms and conditions of employment (“the initial contract”) which was signed and dated by the plaintiff.
The terms of the initial contract provided, relevantly, as follows:
· Clause 1 of the contract recognised the engagement of the Executive Officer by the Board of the Bureau. It stated that the Executive Officer was to undertake the duties set out in the Duty Statement attached to the contract and to pursue the strategy objectives set out in a separate, attached document.
· Clause 2 provided that
“[t]he term of employment shall be for two years commencing on 1 July 1990 and ending on 30 June 1992. Subject to the approval of the Executive Member of the Norfolk Island Government responsible for Tourism and the Norfolk Island Government Tourist Bureau Board, the term of employment may be extended.”
· Clause 10 detailed the manner in which employment could be terminated as follows:
“(a)Where in the opinion of the board of [the Bureau] the employee is absent from duty without authority or is guilty of misconduct, the Board may recommend the dismissal of the employee to the Executive Member responsible for tourism in the Norfolk Island Government. The Executive Member may dismiss the employee by giving to the employee one month’s notice in writing of his/her intention to terminate the appointment or on payment of one month’s salary in lieu of such notice.
(b)Subject to 10(a) above, two months’ notice of intention to terminate the employment shall be given by either the Board or the employee.”
The Duty Statement, referred to in clause one, provided that the Executive Officer of the Bureau was responsible for effective implementation of Government and Board policies and investigation and initiation of promotional opportunities, together with the day to day running of the Bureau. In particular, the following duties were specified in cl 4:
“Sound Financial Management including responsibility for forward Financial planning.
Preparation of timely monthly and annual financial reports, and stock control.”
The plaintiff acted as Executive Officer under this contract until approximately the middle of 1992.
(ii) Mr Smith’s suggestions at the Board meeting of the Bureau in July 1991
A year after entering into the contract, the Board again discussed the plaintiff’s term of employment as its Executive Officer. At the Bureau’s Board meeting on 2 July 1991, Mr Smith, then Minister for Tourism, raised the question about the timing of the appointments of members to the Board. He mentioned the possibility, subject to legal constraints (and see the summary of the statute below), of “staggering” his appointments of Board members throughout the year. He also raised the possibility that the Board extend the term of the Executive Officer to three years so as to “coincide” with the Legislative Assembly elections.
(iii) Review of the plaintiff’s contract by the Board in March 1992
The plaintiff’s contract was formally reviewed by the Board in March 1992. A notice of motion relating to the plaintiff’s contract was placed before the Board in these terms:
“That the contract of employment presently in force for the Executive Officer of the [the Bureau] be terminated with effect 1 April 1992 and a new contract be entered into on that date between [the Bureau] and the Executive Officer, the contract to contain the same terms and conditions as the terminated contract with the exception of paragraph 2 which shall not be included.”
It was put to the Board that the Executive Officer’s contract should be open-ended and remain in force “ad infinitum unless [the Bureau], or the Executive Officer, decide[d] to terminate the contract by giving two months’ notice in writing.” It was suggested that it was in the best interests of tourism on Norfolk Island that the Board, the Executive Officer, and the Fifth Legislative Assembly not conclude all within a matter of weeks of each other so as to reduce disruption of and improve continuity in the administration of the Bureau’s affairs. The Minutes of the Board Meeting held on 3 March 1992 record the following discussion:
“Appoint [sic] of Executive Officer – At present this contract runs for two years. The conclusion of contract coincides with changeover of Board and Legislative Assembly. Minister [Mr Smith] explained that there could not be a worse scenario than everyone changing at once.
A change is required to remove time frame from Executive Officer’s contract.
…
[A Member of the Board] explained that E.O. is not appointed by the Minister, but rather the Board. Removing the time-frame from the contract does not give any more security. Either party may terminate the contract with two months’ notice.
The contract should be performance based and the Board is indicating that they are happy with the present arrangement in the interest of the Executive Officer.
Lisle Snell said he felt that under the current arrangement he was unable to dictate the policies of the Board knowing that he may no longer be employed after June.
[A member of the Bureau] said that the Board was under the impression that the E.O. had responsibility for staff etc. It has been pointed out that the “Bureau” has these responsibilities, therefore these points should be rectified by delegating power and functions of Board to the Executive Officer. This just regularises the existing policy.
Minister, George Smith said he felt the Executive Officer’s role should not be a position that can be destroyed at the whim of a Board.”
(iv) The Board’s delegation to the plaintiff
On 3 March, the Board also discussed the question of delegating to the plaintiff select powers and functions of the Bureau under the terms of the Act. Upon advice from the Secretary to the Government, the Board resolved to delegate certain functions and powers to the plaintiff by an Instrument of Delegation dated 3 March 1992 and executed by the Chair of the Bureau and five other Board Members. It provided that the Bureau, acting under s 14(1) of the Act (see below), delegated to the plaintiff “all its powers and functions under sections 10, 11, 12 and 16 of the Act”.
(v) The scheme of the Act
The legislative scheme may be summarised as follows:
· Section 3 of the Act provides for the establishment of the Bureau. The Bureau must consist of seven members, each member holding office for one year (s 4). The members shall be appointed by the Executive Member (s 4(2)) who has the power to remove from office a member for misbehaviour or incapacity (s 7).
· Section 10 describes the functions of the Bureau. It is to encourage visits to and travel within Norfolk Island; to handle comments and complaints relating to tourism; to advise the executive member on tourism and how it might be improved; to consider any matters relating to Norfolk Island that the Executive Member may refer to it; and to carry out any directions given to the Bureau by the Executive Member under s 15.
· The powers of the Bureau are dealt with by s 11 of the Act. The Bureau has power to do all things that are necessary or convenient to be done for or in connection with the performance of its functions. In particular, it has the power to enter into contracts (s 11(a)). As has been noted, s 12 provides that the Bureau may employ such persons as it thinks fit and necessary for the purposes of the Bureau.
· The power to delegate is provided for in s 14. The Bureau may delegate to a person all or any of its powers and functions under the Act (s 14(1)), such delegation being revocable at will and no delegation preventing the exercise of a power or the carrying out of a function by the Bureau (s 14(2)).
· Under s 15, the Executive Member may give the Bureau directions as to the conduct of the business or affairs of the Bureau and the manner in which the Bureau should carry out its functions or exercise its powers. The Bureau “shall give effect to” those directions.
· Sections 16-19 deal with the financial aspects of the Bureau, i.e. the financial operations, the accounts, audits and reporting. By s 16(1) the Bureau shall (a) open and maintain a bank account with such bank as the Executive Member may approve; and (b) pay all money received by it into that account, and may, subject to s 16, operate that account as the Bureau sees fit. Section 16(2) provides that the Bureau shall not expend money except in discharge of expenses, obligations and liabilities arising from the carrying out of its functions or the exercise of its powers under the Act. Proper accounts and records of its transactions and affairs must be kept in order to ensure that all payments are properly authorised and that adequate control is maintained over its incurring of liabilities (s 17).
· Under s 18(1) and (2) the Executive Member shall appoint an auditor to inspect and to audit the accounts and records of the financial transactions of the Bureau and to draw the Executive Member’s attention to any irregularity of sufficient importance. The auditor shall, at least once a year, report to the Executive Member. The auditor is entitled to “full and free access” to all the Bureau’s records which relate to its receipt or payment of moneys. The auditor may require a member or employee of the Bureau to furnish information (s 18(6)). It is an offence to obstruct or to hinder an auditor’s inspection (s 18(7)).
· With respect to reporting, s 19(1) provides that the Bureau shall submit to the Executive Member by 30 March of each year particulars of its proposed expenditures for the next financial year. By the end of each September in every year, the Bureau must also forward to the Executive Member a report and financial statement in respect of the preceding financial year. A copy of the report shall be laid before the Legislative Assembly by the Executive Member (s 19(2)).
(vi)Legislative Assembly elections on 13 May 1992 and the swearing in of the defendant as Minister on 21 May
On 13 May 1992, elections were held for the Sixth Legislative Assembly. Mr Smith, the Minister for Tourism, was not re‑elected but he remained in charge of administering the Act until the new Minister was officially appointed. In the following week, on 20 May, the new Legislative Assembly resolved to nominate the defendant, who had been a member of previous Assemblies, for appointment to the Executive Office of Minister for Immigration and Tourism; he was sworn in by the Administrator on 21 May.
(vii) The entry into the plaintiff's new contract on 19 May 1992
Shortly before the defendant's swearing‑in, a further meeting was held by the Board, on 19 May. The Bureau then resolved to proceed with its plan to draft a new contract, incorporating substantial amendments to some clauses.
The minutes of that meeting record the discussion about the plaintiff entering into a new contract of employment as follows:
“CONTRACT (EXECUTIVE OFFICER)
The Chairman [Mr. Kenneth Nobbs] explained to the Board that the Executive Officer's contract was originally due to expire at the end of June which was the same time the board were [sic] due to changeover. It had been decided that there was not enough continuity and that the Executive Officer should remain with new Board.
Changes had been implemented and these were started in December '91. These changes were to remove the time‑frame from the contract. This leaves the contract ‘open-ended’. All other terms and conditions remain the same.
MOTION ‑ [a board member] MOVED THAT THE MOTION STATED IN PAGE 4 OF THE MINUTES DATED 3.3.92 BE REAFFIRMED. ‑ ALL IN FAVOUR.
EXECUTIVE OFFICER'S CONTRACT WAS SIGNED IN DUPLICATE BEFORE THE BOARD.”
Annexed to those minutes was a document headed "Terms and Conditions of Employment (“the second contract”) signed by the plaintiff and Mr Nobbs, as Chair of the Bureau, and dated 19 May 1992. This second contract made no provision for a specified term of employment with the Bureau. The relevant clauses provided as follows:
· Clause 1 stated that the plaintiff was engaged by the Bureau “as and from the 2nd of April 1992 to undertake the duties set out in [the duty statement], and to pursue the strategy objectives”.
· As has been noted, cl. 9 dealt with the manner in which the plaintiff's employment was to be terminated:
“9. Termination of Employment
(a)Where in the opinion of the Bureau the employee is absent from duty without authority or is guilty of misconduct, the Bureau may dismiss the employee by giving him one month's notice in writing of its intention to terminate the appointment or on payment of one month's salary in lieu of such notice.
(b)Subject to 9(a) above, two months’ notice of intention to terminate the employment shall be given by either the Bureau or the employee.”
(viii) The function at the Hillcrest Hotel on 22 May 1992
Shortly after the May Legislative Assembly elections, a social event was held at a local hotel, the Hillcrest, on 22 May 1992. There was some dispute about the events which took place at the Hillcrest that evening; however, it became clear at the trial that relations between the two men deteriorated considerably after this point. In their oral evidence, the plaintiff and the defendant (both of whom were present) gave slightly different accounts of the events which then transpired.
The evening was intended as a “welcome function” for those persons attending Norfolk Island’s Tourist Minister’s Conference. After the Commonwealth Minister for Tourism delivered a speech, and at some stage late in the evening, the defendant delivered a brief, impromptu speech thanking those in attendance.
It is with regard to the events leading up to the delivery of the defendant’s speech that the parties’ accounts differed.
The plaintiff’s version in his evidence was that he approached the defendant saying that he thought it would be appropriate for him, as the new Minister, to respond to the Commonwealth Minister’s speech. It appeared that, after seeking the advice of a friend (a Mr Horton) the defendant declined, on the ground that such a speech should have been organised earlier. Nevertheless, the plaintiff again approached the defendant later in the evening; again the defendant declined. Approximately forty-five minutes later still, the plaintiff, using a microphone, publicly invited the defendant for the third time to “say a few words”. Apparently believing that he was left with no other option, the defendant briefly thanked those in attendance for coming.
The defendant’s evidence was that he emphatically and repeatedly told the plaintiff on each occasion that he did not care to speak; he said that he had earlier been told he would not be required to do so because it was not on the agenda, and he had no intention of departing from this. He claimed that the plaintiff’s persistence publicly embarrassed him and his wife.
The parties’ respective accounts differed also in that each contends that the behaviour of the other had been affected by alcohol. The plaintiff claimed that the defendant’s speech was slurred, whereas the defendant claimed that the plaintiff’s persistence, embarrassing in itself for the defendant, was aggravated by the effects of liquor.
(ix) Renewal of the plaintiff’s contract
On 2 June 1992, the Board held another meeting – the first attended by the defendant as the new Minister responsible for the Bureau. He expressed his disapproval that the second contract with the plaintiff had been entered into before the election of the new Legislative Assembly; in his oral evidence, he stated that he believed that the Bureau should have acted as “caretakers” only. The minutes recorded the discussion as follows:
“CONFIRMATION OF MINUTES:
Minutes 19.5.92 – Minister Sanders registered disapproval that the Executive Officer’s contract was signed prior to election of new assembly. He said he felt it should have been left over for the new minister, who may have had a different view.
The Chairman affirmed that there had been a number of things considered before renewing the contract:
-the change in time frame
-possibility of a new minister and a new board and a new executive officer at the same time – not allowing for any continuity.
[Board member] said it should be noted that it was never intended to sign the contract just prior to the election but proceedings had been initiated in November and the documents had been with the Legal Department for changes to be implemented.
[Board member] said the Board had taken this action because when the new Board were appointed in 1990 the Minister was new, the E/O was new and the Board were new and it [had] been a very difficult period for everyone.
The chairman emphasized that the signing of the contract did not guarantee the position any more or less. The action had already been initiated.
The Minister said he felt that it had been improper for the board to agree to such action. Copies of the contract were provided for the Minister’s benefit. (Emphasis supplied)
Two days after the meeting, on 4 June 1992, the plaintiff wrote to the defendant attaching his report to the Board for May 1992 (“the May report”) and welcoming the defendant as Minister.
It was apparently believed by the Bureau that the defendant had reservations about aspects of the Bureau’s accounts and that, as its new Minister, he intended to give attention to this area. The May report, in fact, purported to address some of the items about which the defendant was apparently concerned; it detailed, amongst other things, the financial affairs of the Bureau including a list of airfare and travel allowances allowed to its members since June 1988. The defendant did not respond to the report or to the letter.
(x) The involvement of auditors in the Bureau’s affairs
Soon after his appointment as the new Minister, the defendant embarked on a course of arranging for an examination of the Bureau’s financial operations. The firm of Ernst & Young, New Zealand (“the New Zealand Office”) was appointed as auditors of the Bureau for the year ending 30 June 1992, which appointment was confirmed by a letter from a Mr Emerson, a partner at the New Zealand Office, to the defendant dated 26 May 1992. A copy of this letter was sent to the plaintiff. In that letter, Mr Emerson noted that, after discussions with the Bureau’s current auditor, Mr Donaldson, he could confirm that the present general ledger system was producing effective management reports on a monthly basis and that it was also capable of producing annual financial statements.
On 3 June 1992, the defendant also employed Mr Summerson of Ernst & Young, Brisbane (“the Brisbane Office”) to investigate certain concerns he had about the Bureau’s financial operations; he arranged for them to conduct a “spot audit” in June which, in his view, was an investigation into the Bureau’s financial status with a view to either confirming or denying suspicions which the defendant held as a result of accusations which had been made to him by one of the Bureau’s own staff, Mrs Davis.
In the following week, the defendant implemented a new travel allowance policy in the form of a direction made under s 15(1) of the Act. The direction, which was delivered by the defendant personally to the plaintiff at the Bureau on 9 June 1992, read as follows:
“I, William Winton Sanders, Minister for Immigration and Tourism, under subsection 15(1) of [the Act], direct [the Bureau] to pay travelling allowance to its members and employees in accordance with Administration Policy and Guidelines Circular No. 21, as amended and in force from time to time, and not on any other basis.”
Also, on 9 June 1992, the defendant met with members of the Brisbane Office and with Mrs Davis, the staff member of the Bureau who had accused the Bureau of mismanaging its affairs. Mrs Davis repeated her accusations about the lack of accountability in the Bureau, especially with regard to the travel allowances. In the light of Mrs Davis’s concerns, the defendant instructed Mr Summerson to examine the Bureau’s accounting system to check that all allowances paid to the Bureau’s employees had been accounted for and to prepare a report detailing his findings and recommendations.
The audit was conducted by two auditors from the Brisbane Office on 10 June 1992. The plaintiff co-operated with the auditors and made available to them all accounting records; however, when asked to produce the receipts for travel allowances and expenses, the plaintiff explained that it was not the Bureau’s practice to maintain these records.
In a memorandum dated 15 June 1992, Mr Rodin of the Brisbane Office reported to the defendant that a practice had developed at the Bureau whereby cheques needing two signatures were signed by one authorised party (usually by the Chair of the Bureau, Mr Nobbs) and left blank, with the risk that the second signature could be affixed and the amount filled in at any time.
On 16 June 1992 Mr Summerson faxed to the defendant a draft report detailing what, in his view, were the Bureau’s deficient financial practices. In his summary of findings, he stated that the Bureau and its members had “failed to implement appropriate policies and procedures to ensure that all payments by the Bureau [were] properly authorised”. (This draft, both in its draft and final versions, was admitted into evidence on a limited basis only in the absence from the witness box of its author. It was admitted as evidence of the fact that its statements were made, itself a material consideration here, but not as evidence of the truth of those statements.) Upon receipt of the report, the defendant telephoned the chair of the Bureau, Mr Nobbs. Two somewhat different versions of their conversation were given at the trial. Mr Nobbs claimed that the defendant said words to the effect, “if you don’t sack him [the plaintiff] I will.” Mr Nobbs further claimed that the defendant agreed, in substance, to keep the whole affair private if Mr Nobbs would only dismiss the plaintiff; Mr Nobbs said that he needed some time to review the report. The defendant, however, denied that he offered to ignore the whole affair if Mr Nobbs would terminate the plaintiff’s contract. Rather, he claimed, in his evidence, that he agreed only that he would not table the direction in Parliament if Mr Nobbs secured the plaintiff’s resignation, so that, in this way the matter would not be made public. Common to both versions was the expression by the defendant of his wish to see the plaintiff out of office.
On the morning of 17 June 1992, Mr Nobbs informed the plaintiff that he had received a direction from the defendant to terminate his employment or, alternatively, that he could instead choose to resign. On that afternoon, the defendant sent a direction to Mr Nobbs which directed that the Bureau “take such steps, prior to 4:00pm on Wednesday 17 June 1992, as [were] necessary to terminate, at the earliest practicable date, the employment, under section 12 of the Act, of [the plaintiff].” Mr Nobbs then faxed the defendant a letter asking him to reconsider his direction in light of the fact that he had not had ample opportunity fully to digest the report.
The defendant decided to proceed with his plan. He requested the Secretary to the Government, Mr Wright, to draft a revocation of the appointments of the Bureau’s members. The draft revocation stated that the defendant, acting under s 4(2) of the Act and s 36(4) of the Interpretation Ordinance 1979, revoked, with effect from 18 June 1992, the appointment of the members of the Bureau.
Meanwhile, the Bureau convened to discuss the Auditors’ Report from the Brisbane Office, the letter from Mr Nobbs to the defendant which he had sent earlier in the day, and the direction to the Bureau, under s 15(1) of the Act, to move to revoke the plaintiff’s appointment.
In a letter dated the same day, 17 June 1992, Mr Nobbs stated that the Board had unanimously endorsed the view expressed by him in his earlier letter to the defendant; he continued:
“In view of the seriousness of the allegations and aspersions contained in the Auditors’ Report, it is the view of the Board that, before the Board carries out your direction, a meeting of Board Members and the Executive Officer should be convened by you, such meeting to include all your Assembly colleagues, so that the matter can be fully and properly discussed in context.
If you are unable to accede to this request, you leave us, as members of the Board, no alternative other than to resign from office.
We do not believe that the action required in your direction has been properly considered, and if carried out may have unwarranted and harmful effects.”
This letter was then faxed to the defendant. Shortly thereafter, the signed revocation of appointment of members of the Bureau, which revoked the appointments of all the members of the Bureau from 18 June 1992, was delivered to Mr Nobbs.
By an instrument of appointment dated 18 June 1992, the defendant appointed four new members to the Bureau under s 8(1) of the Act. By a further direction under s 15(1) of the Act, the defendant directed his new Bureau to “take such steps, prior to 10:00am on Friday, 19 June 1992, as [were] necessary to terminate, at the earliest practicable date, the employment, under section 12 of the Act of [the plaintiff].”
By an instrument of revocation made under s 18(1) of the Act and in accordance with the resolution of the Legislative Assembly, purportedly dated 11 June 1992 (but it was now agreed that it should have been dated 18 June) the defendant revoked all previous appointments of auditors and, mistakenly, purported to appoint Mr Summerson of Ernst & Young to be the auditor in respect of the financial year ending 30 June 1992 and subsequent financial years. Later realising the error, the defendant revoked that appointment, and appointed Mr Emerson by a further instrument dated 29 June 1992.
On 19 June 1992, the new members of the Bureau, with Mr Horton as its Chair, convened and resolved to terminate the defendant’s employment. The minutes, which indicated that the Crown Solicitor, Mr Foulds, was present, record their decision as follows:
“Executive Officer
It was resolved to terminate forthwith the employment of [the defendant] as Executive Officer and to pay him two months’ pay in lieu of notice, pursuant to Clause 9(b) of his contract of employment.”
But the minutes showed that at this meeting, Mr Foulds advised the Bureau, inter alia, of the requirements of cl 9 of the second contract. Later that day, Mr Foulds, according to his file note in evidence (Mr Foulds was not called) advised Mr Horton that, if the Board decided to terminate the plaintiff’s employment using clause 9(b), it “can only give pay in lieu by agreement”. Although Mr Horton said in evidence that he could not recall Mr Foulds’ subsequent advice, the defendant did not dispute the accuracy of Mr Foulds’ file note. That is, the Bureau had been advised that instant dismissal could only be achieved if the plaintiff were prepared to agree to it. The minutes of their meeting also made it clear that the Bureau was not prepared to act under cl 9(a).
(xi) The termination of the plaintiff’s employment
In the afternoon of 19 June 1992, Mr Horton and Mr Brown, the President of the Legislative Assembly (one of the new Board members appointed by the defendant) attended the Bureau’s office. The plaintiff, with their permission, taped their conversation; the transcript reads, in part:
“Horton:[I am here to terminate your employment] [u]nder clause 9(b) of your Employment Contract. In that clause, we are required to offer you two months’ notice and it was the Board’s decision to offer you payment in lieu of time and that’s what we’re here to do.
Snell:Well I accept what you’ve said Steve under sufferance and duress, I have no other alternative of course as you’ve explained and that’s the end of story.
…
Horton:The two months’ wages will be available in about an hour ….”
The defendant said in his evidence that he was unaware of the method by which Mr Horton and Mr Brown resolved to terminate the defendant’s contract and that he learnt of the actual dismissal after it had occurred. Following the dismissal, the defendant issued a press statement which read:
“On the evening of 17 June 1992 I dismissed the [Bureau] after its Members refused to comply with a certain direction which I had issued.
On 18 June 1992 I appointed new Members to the Bureau, and issued to them a similar direction.
Subsequently, on 19 June 1992 the employment of the Executive Officer of the Bureau … was terminated.
Certain matters may well be referred by me to the N.I. Police, and it is therefore not appropriate for me to comment further at this time.” (Emphasis added)
Although the defendant then contacted the police, and although the plaintiff was interviewed by a police officer, no further action was taken by the police or by any other authority against the plaintiff.
(xii) The defendant’s intentions
As has been mentioned, at the meeting of the members of the Bureau held on 2 June 1992, the defendant protested against the signing of the plaintiff’s fresh contract on 19 May. The defendant was given a copy of the contract at this meeting. It appeared that for some considerable time prior to this, Mrs Davis had been expressing to the defendant her anxieties about aspects of the financial management of the Bureau. It further appeared that by 2 June 1992, at the latest, the defendant shared her concerns. By this time, in my view, the defendant had decided that he would bring about the termination of the plaintiff’s contract at the earliest possible date, either by obtaining the plaintiff’s resignation or, if this was not forthcoming, by directing that the plaintiff be “sacked” forthwith. The defendant made his intentions clear when, according to Mr Nobbs’s evidence, which I accepted on this point, the defendant said to Mr Nobbs that if he (Mr Nobbs) did not “sack” the plaintiff, he (the defendant) would do so. This could only have meant that the defendant intended that the plaintiff’s contract be terminated at the earliest possible date.
It is true that the actual termination of the plaintiff’s contract was effected by Mr Horton and Mr Brown on 19 June at their meeting with the plaintiff at his office; that the defendant was not then present; and that the defendant’s course of action had to proceed in stages, by virtue of the attitude of the former members of the Bureau. But clearly, the defendant’s plan was (1) to remove immediately those (recalcitrant) members (notwithstanding that their term of office was shortly (i.e. by 30 June) to expire in any event); (2) to replace them with new members; and (3) to direct the new Bureau to terminate the plaintiff’s employment contract at the earliest date.
As a matter of substance, if not also of form, Messrs Horton and Brown were merely intermediaries, acting as agents to do the bidding of the defendant as the Minister.
It was for the purpose of implementing this plan that the defendant sought the assistance of Mr Wright, the Secretary to the Government, who, it should be noted, had a legal background. But as Mr Foulds’ (the Crown Solicitor who, along with Mr Wright, was not called) file note indicated, Mr Foulds had advised, in the end, that two months’ notice should be given under cl 9(b) and that payment of two months’ salary in lieu of notice could only be made if the plaintiff agreed to accept such a payment.
There was no suggestion that Mr Wright expressed a different view to the defendant on the point, and Mr Foulds’s advice was clearly correct. Indeed, it appeared that Mr Wright’s instructions did not extend into this area. What the defendant required of Mr Wright was to draw the necessary documentation to achieve steps (1), (2) and (3) of the above plan. In particular, Mr Wright was not asked by the defendant whether the plaintiff could insist upon being given two months’ notice under cl 9(b).
In my view, the defendant had no interest in seeking, and did not seek, advice in that area. According to his perception of the circumstances, it was simply not material. At all times, in my opinion, the defendant held the firm conviction that the Bureau, and its Executive Officer especially, were, in the words of the defendant’s own evidence, “incompetent” and that he, the defendant, should procure the termination of the plaintiff’s employment at the earliest date. In other words, in my opinion, the possibility that the plaintiff might be entitled to two months’ notice, or that his agreement might be required before payment in lieu of notice could be given, were scenarios which the defendant, in the vigorous pursuit of his own agenda, did not wish even to contemplate, let alone explore with Mr Wright.
I found that the defendant’s instructions to Mr Wright were specifically, and consciously, limited to drafting the documentation required for the appointments of the auditors; for the removal of the former members of the Bureau (by revocation of their appointments) and their replacement; and, importantly, for directing the new Bureau to terminate the plaintiff’s employment at the earliest date. (It will be recalled that a similar direction to the last-mentioned was given to the former Bureau, but it was not acted on.)
It was possible that, at some stage, the defendant had become aware that Mr Foulds had advised (on 19 June) that the plaintiff’s agreement required a payment in lieu of notice, but the evidence did not allow for a specific finding on this aspect. Evidence, which I accepted, was given by Mr Patrick Brown, then Chief Administrative Officer to the Administration, that on 18 June the defendant telephoned him and said that there had been a special audit examination of the Bureau; that he had asked the Bureau “to sack” the plaintiff; and that he (Mr Brown) told the defendant that he ought to talk to Mr Foulds, Crown Solicitor, about this matter. It appeared that the defendant did not seek Mr Foulds’s advice.
It followed, in my opinion, that the defendant intended to bring about a situation whereby the plaintiff was, in effect, summarily and immediately dismissed.
(xiii) Was there a breach of contract?
As has been said, in my view, the only lawful method of termination of the contract was by the Bureau’s giving of two months’ notice under cl 9(b), unless the defendant waived that right. No waiver was pleaded and, in any event, waiver was not, in my view, open in any event.
No reasons for dismissal were ever given and, as has been said, no attempt was made in these proceedings to “justify” the termination of the plaintiff’s employment by alleging, and by seeking to prove, his incompetence or misconduct. (Counsel for the defendant sought to have the auditor’s report admitted as a business record and, thus, evidence of the truth of its statements. But, as has been said, the authors of the report were not called and, in those circumstances, their absence from the witness box not being explained, I do not think it fair that I give the report any real weight as a business record. The report was, as I have said, properly admissible for the other limited purposes mentioned.)
Although the payment of two months’ salary was made, its receipt should not, in my view, be seen as an election by the plaintiff, in the words of Isaacs J in Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 (at 326), “to get some advantage to which he would otherwise have been entitled …”. The plaintiff made his position clear at all times that his preference was to remain in his position, but that he was forced to accept the reality that the defendant, as the Minister administering the Act, wanted to remove him immediately. Faced with that reality, the plaintiff moved out. But it would be wrong to characterise his conduct as an acquiescence in what had been done to him, or as a waiver of his rights. The plaintiff was not afforded any free choice in the matter. True, the plaintiff might have declined the payment made, but he had not then sought legal advice, and he must have felt that, in the circumstances, he ought to be compensated for more than the amount then paid (two months’ salary). When he did seek legal advice, not long thereafter, his lawyer demanded compensation from the defendant.
In any event, as has been seen, waiver was not pleaded by the defendant.
Nor was it pleaded by the defendant, in line with the tenor of Mr Foulds’ advice, that the plaintiff had agreed to accept the payment in lieu of notice. For the reasons already given in discussing whether there had been a waiver, in my view, it would not be proper, in all the circumstances, to infer that any such agreement had been made by the plaintiff.
I found that the defendant, acting by himself and acting through Messrs Horton and Brown, his intermediaries and agents for this purpose, purported to summarily determine the plaintiff’s employment contract without recourse to cl 9(a).
(xiv) Did the plaintiff suffer damage as a consequence of the defendant’s actions?
In my opinion, the plaintiff had shown that some damage can be inferred from the possibility that, but for the defendant’s inducement, the contract might have continued, not merely for the period which was what its terms required, but for a considerably longer period. Moreover, the plaintiff suffered more than “nominal” damage (see Rookes v Barnard [1964] AC 1129 at 1212; Greig v Insole [1978] 1 WLR 302 at 332). For one thing, he had suffered the indignity of a public announcement by the defendant that he had been, in effect, summarily dismissed in circumstances where the plaintiff’s incompetence or misconduct would be readily inferred by those reading or hearing of the defendant’s press statement (see Brasyer v Maclean [1875] 6 LR PC 398 at 404).
With respect to immediate pecuniary loss, the plaintiff’s salary at the time of his dismissal was approximately $600 per week ($596.41). Upon his dismissal he obtained employment driving a tourist bus. For the balance of 1992, his earnings averaged $400 per week, a prima facie difference of $200 per week. However, the plaintiff did, of course, receive “2 months’ termination wages”, i.e. $4,771.30, and the defendant must receive credit for this.
In my view, given the nature of the relationship that had developed between the plaintiff and the defendant, it was unlikely that the plaintiff would have continued as Executive Officer of the Bureau beyond the end of 1992. The likelihood, I thought, if the contract had not been breached, was that in about October 1992, the plaintiff would have been given the requisite two months’ notice, to expire towards the end of the year. I chose October because of the time needed by the Bureau to plan for a replacement as Executive Officer. Thus, taking a period of six months (end of June to the end of December, say 26 weeks at $200 per week (ie, $600 - $400) gave, say, $5,200, less the credit mentioned of $4,771.30. I rounded this off at $500.
I turned next to the claim for loss of reputation, including prospects of re-employment at a senior executive level.
Reference had already been made to the defendant’s statement released to the press on 19 June stating that the members of the Bureau had been dismissed after failing to comply with “a certain direction” issued by the defendant; that on 18 June the defendant had appointed new members and issued a similar direction to them; that on 19 June the plaintiff’s employment was terminated; and that as “certain matters may well be referred by me to the N.I. Police … it is therefore not appropriate for me to comment at this time.”
Such a statement, which was bound to damage the plaintiff’s reputation and his prospects for any future senior appointment, was republished in a leading article in the “Norfolk Islander” newspaper dated 20 June. Although the article also referred to an interview with Mr Snell in which he denied any shortcomings, the penultimate paragraph of the article cited the defendant’s reference in his press statement to the potential involvement of the police.
However, in the last paragraph of the article, attention was also drawn to a letter written by Mr Nobbs published in the correspondence section of the paper. This letter, which, to some extent, must have lessened the impact of the defendant’s press statement, and which should be taken into account in assessing the loss of reputation suffered by the plaintiff, reads:
“For the past two years I have been chairman of the Board of the Norfolk Island Government Tourist Bureau. The Board has had a disagreement with the new Minister for Tourism, Hon. W.W. Sanders. Last Wednesday night he delivered to my home a legal document stating that he revoked, with effect from 18th June 1992, the appointments of all six members of the Board.
The document did not include any reason for this revocation, and it was not necessary to do so. However, there may be speculation in the community about what caused this sudden action, and for the benefit of those interested, I would like to give a brief account of what happened.
As part of taking over his new duties, Mr Sanders arranged for independent auditors to make a review of the Bureau’s accounting systems and controls, with special emphasis on travel advances and expense reimbursements. The Board and the Bureau staff of course, co-operated fully with this review.
It appears that, after receiving a preliminary report from the auditors, Mr Sanders formed the opinion that the Executive Officer of the Bureau, Lisle Snell, should go. The Executive Officer is appointed and employed by the Board. His contract has a standard clause in it saying that the contract may be terminated on two months’ notice. This can be done either by the Executive Officer giving notice to the Board, or the Board giving notice to the Executive Officer. It is not necessary for either side to give any reason.
Under the Tourist Bureau Act, the Minister for Tourism does not have authority to give notice to any employee of the Bureau; this can only be done by the Board. However, the Minister can give a formal direction to the Board, requiring the Board to act as he directs. Mr Sanders said that if we could not arrange for Mr Snell to give notice, he would issue such a formal direction to the Board. He did this on Wednesday morning.
It appeared to me that the grounds for his doing this was the report of the auditors. When I examined the report I was not favourably impressed. It seemed hastily prepared and it included some misinformation. It appeared to me to be a report that should be examined and discussed, and certainly should not be the basis for making any snap decisions.
I therefore faxed Mr Sanders a letter, at about the same time that he was issuing his direction to the Board to give Mr Snell notice. My letter said, in part, that ‘there are numerous ‘facts’ in Ernst & Young’s Report which should not be accepted at face value, but should be considered in the light of facts that are not included in their Report. I have started preparing a memo for you, setting out some of these other related matters … I strongly urge that you wait to see it before taking any precipitate action, because I believe it will include information which would be essential to you in forming a balanced view of the situation’.
My letter went on to say that I hoped Mr Sanders would not make any immediate decision about issuing any direction to the Board concerning the Executive Officer – ‘it would seem contrary to natural justice to do such a thing without giving the Executive Officer an opportunity to hear what he is accused of, and to give his side of the story’.
However, the formal direction from Mr Sanders was issued. The Board met as promptly as possible to consider it. We believed it would be unjust to give notice to the Executive Officer, simply on the basis of a questionable Report. At about 7pm Wednesday evening the Board faxed Mr Sanders a formal letter saying the Board believed Mr Sanders should meet with the Board Members and the Executive Officer so that the situation could be fully and properly discussed in context. The letter said ‘If you are unable to accede to this request, you leave us, as Members of the Board, no alternative other than to resign from office. We do not believe the action required in your direction has been properly considered, and if carried out may have unwarranted and harmful effects’.
Mr Sanders’ reply to this was to revoke all of our appointments as Members of the Board. He said he hoped this action would not be taken personally.
There are two main issues in question, it seems to me. First of all, all of the other (former) Board members and I have respect and admiration for Lisle Snell, and think he has handled a very difficult job with real dedication. I trust that the new Board will want to weigh all the facts carefully and avoid taking any precipitate action concerning its Executive Officer. (Emphasis added)
There is also the issue of Assembly control over a community board of members serving as volunteers. There are many such boards and they are a vital part of how Norfolk Island functions. Should they be required to take any action directed by the Assembly, even if they think the action is wrong? If so, Norfolk Island could end up with weak voluntary boards, made up only of ‘Yes’ men and women. That would be a sad day for the island.
In conclusion, may I thank my former fellow Board Members, the Executive Officer, and the Tourist Bureau staff for their tremendous help over the past two years. I wish them, and the new Board and the Minister for Tourism, every success in working for the good of Norfolk Island. Yours, etc. Ken Nobbs”
Accepting, as I did, that the publication of Mr Nobbs’s version of events would, to a degree, mitigate the plaintiff’s loss of reputation, I was nonetheless of the view that publicity of his dismissal by the Minister and the Bureau in an apparently summary fashion, suggestive as it necessarily was of incompetence or misconduct, coupled with the suggestion of possible criminality, must have caused the plaintiff some, not insubstantial, loss. In my view, a proper measure of compensatory damages for that loss, taking into account the time that has elapsed since the plaintiff’s dismissal (and thus including a notional amount by way of interest) was the sum of $15,000.
(xv) The plaintiff’s claim for exemplary damages
In my opinion, the defendant’s conduct, even if it fell short of malicious action (in the sense that the defendant apparently believed that the Bureau was not soundly managed) was contumelious behaviour which entirely disregarded the rights of the members of the Bureau, and of the plaintiff, to be given a reasonable opportunity to be heard in answer to the criticisms that had been made. Although there was no basis for claiming that a real emergency existed, the defendant sought to impose deadlines on the Bureau, and on the plaintiff, by which they had to “respond” to complex questions raised by the auditors, including issues of policy, which could not possibly be complied with in such a short time. These impossible demands were made by the defendant after he had been advised (perhaps warned) by Mr King, another Minister, that the defendant should ensure that the plaintiff receive natural justice. Although the defendant denied that Mr King had said this, I think that his recollection is faulty. I prefer Mr King’s evidence, which was given convincingly. This unfair conduct, which inevitably led to the equally unfair dismissal of the plaintiff, should be reflected in an award of exemplary damages (see Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 637 at 662). I then assessed a sum of $1,500 to be appropriate.
THE FULL FEDERAL COURT’S DECISION ON THE MISFEASANCE CLAIM
As the head note (1997) 73 FCR at 570 – 571 states, on the issue of liability, the Full Federal Court held (1) that the defendant could direct the Bureau, pursuant to s 15(1), to take action directly adverse to a particular individual only after giving an opportunity to be heard; and (2) that misfeasance in public office had been committed because (a) in directing termination of the plaintiff’s employment without observing the requirements of natural justice, there was an invalid and unauthorised act; (b) after being warned of the obligation to accord natural justice, and after being warned against acceptance at face value of criticism of the plaintiff, and by deliberately not delaying the direction to terminate, the direction was made maliciously; (c) the defendant was a public officer and acted in the purported discharge of his public duties; and (d) the direction caused the plaintiff loss or harm, being the termination itself. On the question of damages, the Full Court held (1) that the defendant having made outrageous and unjustified public allegations of possible criminality against the plaintiff, the compensatory damages were to be damages aggravated by the injury to the plaintiff's feelings caused by the insult, humiliation, and the like, occasioned by the allegations; and (2) that the defendant should receive condign punishment and exemplary damages were to be awarded in addition to compensatory damages. The Full Court awarded damages of $50,000, including exemplary damages of $10,000, together with pre-judgment interest of $20,000, a total of $70,000.
On the issue of liability, the Full Court referred to the statement of the Privy Council in Dunlop v Woollahra Municipal Council [1982] AC 158 at 172 that “in the absence of malice, passing without knowledge of its invalidity a resolution which is devoid of any legal effect is not … itself … capable of amounting to … ‘misfeasance’ … .” The Full Court said (at 589 – 590):
“The Judicial Committee’s elliptical statement was interpreted as an indication that the tort required either malice or knowledge of the invalidity: see H W R Wade, Administrative Law (6th ed. 1988), 780 and Bourgoin SA v Ministry of Agriculture, Fisheries and Food [1986] QB 716 at 740 per Mann J and at 777 per Oliver LJ. Brennan J accepted this interpretation in Northern Territory v Mengel. He said (at 357):
‘… the mental element is satisfied when the public officer engages in the impugned conduct with the intention of inflicting injury or with knowledge that there is no power to engage in that conduct and that that conduct is calculated to produce injury. These are states of mind which are inconsistent with an honest attempt by a public officer to perform the functions of the office. Another state of mind which is inconsistent with an honest attempt to perform the functions of a public office is reckless indifference as to the availability of power to support the impugned conduct and as to the injury which the impugned conduct is calculated to produce.’
He went on to deal specifically with denial of procedural fairness, a complaint in this case (also at 357):
‘For example, the officer’s administrative act may be invalid because he or she did not treat the plaintiff with procedural fairness. It is the absence of an honest attempt to perform the functions of the office that constitutes the abuse of the office. 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. Malice, knowledge and reckless indifference are states of mind that stamp on a purported but invalid exercise of power the character of abuse of or misfeasance in public office. If the impugned conduct then causes injury, the cause of action is complete.’
Deane J expressed general agreement with Brennan J and added some additional comments. He summarised the elements of the tort as being (at 370):
‘(i) an invalid or unauthorised act; (ii) done maliciously; (iii) by a public officer; (iv) in the purported discharge of his or her public duties; (v) which causes loss or harm to the plaintiff.’
Deane J explained that, in the context of misfeasance in public office, the focus of the element of malice is injury to, or affecting, the plaintiff. He said (at 370-371):
‘Such malice will exist if the act was done with an actual intention to cause such injury. The requirement of malice will also be satisfied if the act was done with knowledge of invalidity or lack of power and with knowledge that it would cause or be likely to cause such injury. Finally, malice will exist if the act is done with reckless indifference or deliberate blindness to that invalidity or lack of power and that likely injury. Absent such an intention, such knowledge and such reckless indifference or deliberate blindness, the requirement of malice will not be satisfied.’
The remaining members of the Court (Mason CJ, Dawson J, Toohey J, Gaudron J and McHugh J) delivered a joint judgment in which they said that the ‘cases do not establish that misfeasance in public office is constituted simply by an act of a public officer which he or she knows is beyond power and which results in damage’ (at 347). They said (at 347):
‘… principle suggests that misfeasance in public office is a counterpart to, and should be confined in the same way as, those torts which impose liability on private individuals for the intentional infliction of harm. For present purposes, we include in that concept acts which are calculated in the ordinary course to cause harm, … or which are done with reckless indifference to the harm that is likely to ensue, as is the case where a person, having recklessly ignored the means of ascertaining the existence of a contract, acts in a way that procures its breach.’
Later, they added (also at 347):
‘If misfeasance in public office is viewed as a counterpart to the torts imposing liability on private individuals for the intentional infliction of harm, there is much to be said for the view that, just as with the tort of inducing a breach of contract, misfeasance in public office is not confined to actual knowledge but extends to the situation in which a public officer recklessly disregards the means of ascertaining the extent of his or her power.’”
The Full Court went on to say (at 593):
“It seems to us the case falls squarely within the principles enunciated in Mengel. Having been warned of his obligation to give natural justice to Mr Snell, and knowing that the correctness of the report on which he was relying was challenged by Mr Nobbs, Mr Sanders gave to the Bureau a statutory direction to take steps that same day to terminate Mr Snell’s employment. When the original members of the Bureau requested more time, he removed them from office and appointed members who, he expected, would carry out his wishes. The time limits he imposed made it impossible for anybody to put before him a response to the report. But Mr Sanders was not interested in anybody else’s views; there ‘was not going to be a debate’. Mr Sanders’ acts were ‘calculated in the ordinary course to cause harm’ and ‘done with reckless indifference to the harm that [was] likely to ensue’, to use the words of the Mengel joint judgment. This is a case of a public officer recklessly disregarding both a known constraint on his power and an obvious means of fulfilling his known duty of fairness.”
Then the Full Court said (at 593 – 594):
“It is interesting to note that, in the context of discussing the mental element necessary to sustain a claim of misfeasance in office, Brennan J in Mengel cited, as an example of invalidity, a case of denial of procedural fairness. His Honour did not say, of course, that all actions that breach an obligation of procedural fairness will constitute misfeasance in public office. Something more is required. The additional ingredient was described by Brennan J in words that fit perfectly Mr Sanders' position on 17 and 18 June 1992: ‘the absence of an honest attempt to perform the functions of the office’.
It is useful to refer, by reference to the facts of the present case, to the five elements of the tort of misfeasance in public office identified by Deane J in Mengel’s case. (i) The ‘invalid or unauthorised act’ of Mr Sanders was the giving of the second direction to the Bureau to terminate Mr Snell’s employment without prior observance of the requirements of natural justice in favour of Mr Snell. (ii) That act was done ‘maliciously’ in that Mr Sanders was warned of the obligation incumbent upon him, was cautioned against accepting the auditor’s report at face value, yet deliberately disregarded any plea which would delay the removal of Mr Snell. (iii) Clearly, Mr Sanders was, and relevantly acted as, a ‘public officer’. (iv) Clearly, he acted ‘in the purported discharge of his public duties’. (v) His act ‘cause[d] loss or harm to’ Mr Snell.
The relevant loss or harm was not the termination of Mr Snell’s employment in breach of his contract of employment. Rather, it was the termination of his employment at all. The effect of Mr Sanders’ actions was to remove the Bureau's discretion about terminating Mr Snell’s contract. The direction did not countenance the possibility that Mr Snell’s employment might not be terminated. Given Mr Nobbs’ reaction to the Ernst & Young Report, the views expressed by him in his letters to Mr Sanders and to The Norfolk Islander, and the support for his position indicated by the other Bureau members on 17 June, it is most unlikely that, in the absence of a direction from Mr Sanders, the original Bureau members would have taken any action to terminate Mr Snell's employment. And, in the absence of Mr Sanders' actions, there would have been no substitute members placed in an apparent position to do so. Once it is appreciated that the loss or harm suffered by Mr Snell flowed from the fact of Mr Sanders' intervention, it becomes apparent that this loss or harm would have been suffered even if Mr Snell's contract of employment had been terminated by the giving of two months' notice. Thus, it is no answer that the Bureau terminated Mr Snell's employment in breach of contract rather than, as it might have done consistently with Mr Sanders' direction, in conformity with the contract. It suffices that the termination of Mr Snell's employment by the Bureau was caused by Mr Sanders' having given the direction to the Bureau without observance of the requirements of natural justice. If Mr Snell had been given an opportunity to be heard, he may not have lost his employment at all.”
THE REASONS OF THE HIGH COURT
Gleeson CJ, Gaudron, Kirby and Hayne JJ said (at 346 – 347):
“Again it must be accepted that the precise limits of this tort are still undefined. It is an intentional tort. As was said in Mengel:
‘… 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 either there is an intention to cause harm or the officer concerned knowingly acts in excess of his or her power.’”
Their Honours went on to hold (at 348) that the power to give directions under s 15 should be read “as requiring the giving of procedural fairness to those whose rights or legitimate expectations are affected by its exercise”; and that, although the plaintiff was such a person because his livelihood was affected, the defendant took no step to permit the plaintiff to say anything about the proposal to direct the Bureau to terminate his employment. Their Honours then cited (at 348) the passage from the reasons of the Full Federal Court (at 593) (cited above at par 75) ending with the following words, which their Honours emphasised:
“This is a case of a public officer recklessly disregarding both a known constraint on his power and an obvious means of fulfilling his known duty of fairness.”
The High Court majority then said (at 348 – 349):
“A little later in their reasons the Full Court referred to the judgment of Brennan J in Mengel in which he said that not all actions that breach an obligation of procedural fairness will constitute misfeasance in public office and that something more is required. The Full Court said that ‘[t]he additional ingredient was described by Brennan J in words that fit perfectly [the appellant’s] position on 17 and 18 June 1992: ‘the absence of an honest attempt to perform the functions of the office’’.
The trial judge having made no findings about the claim of misfeasance in public office, it is surprising that the Full Court felt able to make findings about the honesty of the appellant’s conduct. The only finding of the trial judge that it was suggested warranted the Full Court’s finding on this matter was what the trial judge said in connection with exemplary damages.”
Their Honours then cited (at 349) a passage from my reasons (cited above at par 72). Their Honours said (at 349 – 350):
“Leaving aside the unwarranted translation of that finding by the Full Court from ‘advised (perhaps warned)’ into a finding of warning, it is of the first importance to recall what it was that had happened in this regard. The appellant, who had no legal training, was found to have been told by Mr King (and for that matter was told, in writing, by Mr Nobbs) that he should give the respondent ‘natural justice’ or a chance to put his side of the story. Neither Mr King nor Mr Nobbs was a lawyer and neither of them pretended to give legal advice to the appellant. They counselled him to give the respondent a chance to put his side of the story because they thought that was the fair thing to do, not because they thought that giving a hearing was necessary as a matter of law to the valid exercise of the power to give directions. And all that the trial judge found was that the appellant had been given this advice but ignored it. The judge made no finding about what the appellant knew about his power (or the asserted lack of it) to give the second direction before giving the chance to the respondent to put his side of the story.
At most, the trial judge’s finding (made in the context of his conclusion that the appellant had procured a breach of the respondent’s contract) was that the appellant had acted peremptorily and with no regard to what he had been told would be fair. That is very different from finding that the appellant knew that he was acting beyond power. Nothing in what was found by the judge to have happened, and nothing that was revealed in the evidence, warranted the Full Court in making a finding that the appellant knew or was reckless to the possibility that what he was doing was without power for want of procedural fairness let alone making a finding of want of honesty on his part. And yet that is what the Full Court found.”
Then their Honours made the observations (at 350) cited above at par 80.
CONCLUSIONS ON THE RETRIAL OF THE MISFEASANCE CLAIM
Since the High Court decided this matter, the House of Lords has considered the nature of the tort of misfeasance in public office in Three Rivers District Council v Governor and Company of the Bank of England [2000] 2 WLR 1220. It was there held, following Mengel, that the tort involved an element of bad faith and arose when a public officer exercised a power, specifically intending to injure the plaintiff; or when the officer acted in the knowledge of, or with reckless indifference to, the illegality of the act and in the knowledge of, or with reckless indifference to, the probability of causing injury to the plaintiff; and that subjective recklessness in the sense of not caring whether the act was illegal, or whether the consequences happened, was sufficient.
Lord Steyn, with the agreement of Lord Hope and Lord Millett, said (at 1231):
“The case law reveals two different forms of liability for misfeasance in public office. First there is the case of targeted malice by a public officer, i.e. conduct specifically intended to injure a person or persons. This type of case involves bad faith in the sense of the exercise of public power for an improper or ulterior motive. The second form is where a public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff. It involves bad faith inasmuch as the public officer does not have an honest belief that his act is lawful.
…
These decisions [then cited] laid the foundation of the modern tort: they established the two different forms of liability and revealed the unifying element of conduct amounting to an abuse of power accompanied by subjective bad faith.” (Emphasis added)
Lord Steyn went on to say (at 1232) that, in the second class of case, the plaintiff must prove that the public officer “acted with a state of mind of reckless indifference to the illegality of [the] act”.
Lord Hutton, again with the agreement of Lord Hope and Lord Millett, said (at 1266):
“… I consider that dishonesty is a necessary ingredient of the tort, and it is clear from the authorities that in this context dishonesty means acting in bad faith. In some cases the term ‘dishonesty’ is not used and the term ‘in bad faith’ or acting from ‘a corrupt motive’ or ‘an improper motive’ is used, or the term ‘in bad faith’ is used together with the term ‘dishonesty’. In Cullen v. Morris, 2 Stark. 577, 589 Lord Abbott C.J. in directing the jury said:
‘The question for your consideration is, whether the refusal of the vote in this instance, was founded on an improper motive on the part of the defendant, it is for you to pronounce your opinion, whether the defendant’s conduct proceeded from an improper motive, or from an honest intention to discharge his duty acting under professional advice.’
The judgment of Buxton L.J. in Barnard v. Restormel Borough Council [1998] 3 P.L.R. 27 is a modern example of how the terms ‘dishonesty’ and ‘bad faith’ are used interchangeably. In that case where misfeasance in public office was alleged Buxton L.J. in delivering his judgment said, at p. 33: ‘We bear in mind the need to establish dishonesty’ and later, at p. 37, he referred to the strong emphasis placed ‘in the tort of misfeasance on the requirement of subjective bad faith.’ However, as the term ‘dishonesty’ in some contexts implies a financial motive, I consider that the term ‘in bad faith’ is a preferable term to use and, as I have stated, I consider that it is an essential ingredient in the tort.”
Lord Hobhouse (also expressing (at 1267) “substantial agreement” with Lord Steyn and Lord Hutton) said (at 1269 – 1270):
“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. In the Mengel case, at p. 546, the expression honest attempt is used. Another way of putting it is that he must be shown either to have known that he was acting unlawfully; or to have wilfully disregarded the risk that his act was unlawful. This requirement is therefore one which applies to the state of mind of the official concerning the lawfulness of his act and covers both a conscious and a subjectively reckless state of mind, either of which could be described as bad faith or dishonest.
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.
First, there is what has been called ‘targeted malice.’ Here the official does the act intentionally with the purpose of causing loss to the plaintiff, being a person who is at the time identified or identifiable. This limb does not call for explanation. The specific purpose of causing loss to a particular person is extremely likely to be consistent only with the official not having an honest belief that he was exercising the relevant power lawfully. If the loss is inflicted intentionally, there is no problem in allowing a remedy to the person so injured.
Secondly, there is what is sometimes called ‘untargeted malice.’ Here the official does the act intentionally being aware that it will in the ordinary course directly cause loss to the plaintiff or an identifiable class to which the plaintiff belongs. The element of knowledge is an actual awareness but is not the knowledge of an existing fact or an inevitable certainty. It relates to a result which has yet to occur. It is the awareness that a certain consequence will follow as a result of the act unless something out of the ordinary intervenes. The act is not done with the intention or purpose of causing such a loss but is an unlawful act which is intentionally done for a different purpose notwithstanding that the official is aware that such injury will, in the ordinary course, be one of the consequences: Garrett v. Attorney-General [1997] 2 N.Z.L.R. 332, 349-350.
Thirdly there is reckless untargeted malice. The official does the act intentionally being aware that it risks directly causing loss to the plaintiff or an identifiable class to which the plaintiff belongs and the official wilfully disregards that risk. What the official is here aware of is that there is a risk of loss involved in the intended act. His recklessness arises because he cho[o]ses wilfully to disregard that risk.
It is necessary to add some footnotes. I have used the word ‘intentionally’. This relates to the doing of the act and covers a similar point to that referred to earlier in relation to acts and omissions. It indicates that the mind must go with the act. It does not require any specific intent (except in so far as having a specific purpose under the first limb imports an intent).” (Emphasis added)
Lord Millett (after expressing (at 1273) “full agreement” with Lord Steyn and Lord Hutton) said (at 1274):
“The tort is generally regarded as having two limbs. The first limb, traditionally described as ‘targeted malice,’ covers the case where the official acts with intent to harm the plaintiff or a class of which the plaintiff is a member. The second is said to cover the case where the official acts without such intention but in the knowledge that his conduct will harm the plaintiff or such a class. I do not agree with this formulation. In my view the two limbs are merely different ways in which the necessary element of intention is established. In the first limb it is established by evidence; in the second by inference.
The rationale underlying the first limb is straightforward. Every power granted to a public official is granted for a public purpose. For him to exercise it for his own private purposes, whether out of spite, malice, revenge, or merely self-advancement, is an abuse of the power. It is immaterial in such a case whether the official exceeds his powers or acts according to the letter of the power: see Jones v. Swansea City Council [1990] 1 W.L.R. 1453. His deliberate use of the power of his office to injure the plaintiff takes his conduct outside the power, constitutes an abuse of the power, and satisfies any possible requirements of proximity and causation.
The rationale of the second limb is not so transparent. The element of knowledge which it involves is, in my opinion, a means of establishing the necessary intention, not a substitute for it. But intention does not have to be proved by positive evidence. It can be inferred. Proof that the official concerned knew that he had no power to act as he did and that his conduct would injure the plaintiff is only the first step in establishing the tort. But it may and will usually be enough for the necessary intention, and therefore of the requisite state of mind, to be inferred. The question is: why did the official act as he did if he knew or suspected that he had no power to do so and that his conduct would injure the plaintiff? As Oliver L.J. said in Bourgoin S.A. v. Ministry of Agriculture, Fisheries and Food [1986] Q.B. 716, 777:
‘If an act is done deliberately and with knowledge of its consequences, I do not think that the actor can sensibly say that he did not ‘intend’ the consequences or that the act was not ‘aimed’ at the person who, it is know, will suffer loss.’
As that case demonstrates, the inference cannot be rebutted by showing that the official acted not for his own personal purposes but for the benefit of other members of the public. An official must not knowingly exceed his powers in order to promote some public benefit at the expense of the plaintiff.’” (Emphasis added)
On behalf of the plaintiff, it is submitted that both or either of the two limbs were satisfied here. I will now turn to consider the claim made under the first limb.
In my opinion, the law in this country (and in England) in this particular respect may now be taken to be settled by the decisions of the High Court in Mengel and this case itself, and by the decision of the House of Lords in Three Rivers. That is to say, it is now settled that the first limb will be satisfied (relevantly) if the plaintiff can show that there has been an abuse of power accompanied by subjective bad faith, specifically, an actual intention to cause harm to a plaintiff. In the present case, it is clear, as the High Court has here held, that there was an abuse (in the sense of a failure to afford due procedural fairness) of the power to give directions under s 15. The remaining question is whether the plaintiff has established the requisite subjective (i.e. actual) intention. To use Lord Hobhouse’s words, did the defendant’s mind go with his act (that is, of termination of the plaintiff’s employment through the defendant’s appointed intermediaries, Messrs Horton and Brown)?
In approaching this question, a number of matters ought to be borne in mind.
First, as Oliver LJ noted (at 777) in Bourgoin, above (at 87), if an act (here the direction to terminate the plaintiff’s employment) is done deliberately (as this was) and with knowledge of its consequences (i.e. the termination of the plaintiff’s employment), the defendant cannot be heard to say that he did not “intend” the consequences or that the act was not “aimed” at the person (the plaintiff) who will suffer loss (upon loss of his employment).
Secondly, there can be no doubt that the defendant intended to cause harm (through loss of employment) to the plaintiff. Further, if it be needed, the publication of the reference to the police indicates the defendant’s intention to harm the plaintiff’s reputation. In the words of Lord Hobhouse, this was a case of “targeted malice”.
Thirdly, as Lord Millett pointed out, an inference of actual intention to harm the plaintiff cannot be rebutted by showing that the defendant acting beyond power acted not for his own personal purposes (i.e. spitefully or maliciously) but for the public benefit.
I find that the defendant actually intended to cause harm to the plaintiff by peremptorily and unlawfully removing him from office. The defendant’s actions and statements at the time are consistent with no other conclusion.
It follows that the first limb of the tort of misfeasance is established. I need not consider the second limb.
I turn next to consider the question of (unliquidated) compensatory damages. In all the circumstances, I think that I should defer to, and adopt, the measure of damages fixed by the Full Federal Court, that is, the sum of $40,000.
I turn next to the question of exemplary damages. Here also, I have concluded that the appropriate course is to defer to, and adopt, the measure fixed by the Full Court, that is, $10,000.
With respect to pre-judgment interest on compensatory damages, I will adopt the rate (10% p.a.) applied by the Full Court – from June 1992 to date. Rounded off, this produces an amount of $33,000.
The claim for pre-judgment interest on exemplary damages was the subject of a specific reservation by the High Court. In these circumstances, I would not, in the exercise of my discretion, be prepared to allow this claim.
On the question of costs, it is true that the claim for inducing a breach of contract failed, but before me the evidence and the submissions on the misfeasance claim covered similar ground. This is not a case where an apportionment of costs between issues is appropriate.
Accordingly, there will be a verdict for the plaintiff in the sum of $83,000 with costs, including the costs of the first trial.
I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Beaumont. Associate:
Dated: 24 November 2000
Counsel for the Plaintiff: A Cook QC Counsel for the Defendant: P R Garling SC Solicitor for the Defendant: McIntyres Date of submissions on behalf of Plaintiff:: 30 August 2000 and 17 November 2000 Date of submissions on behalf of Defendant: 8 September 2000 and 6 October 2000 Date of Judgment: 24 November 2000
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