State of New South Wales v Paige - [2002] NSWCA 235

No judgment structure available for this case.

Reported Decision:
60 NSWLR 371
(2002) Aust Torts Reports 81-676

New South Wales

Court of Appeal

CITATION: STATE OF NEW SOUTH WALES v PAIGE [2002] NSWCA 235

FILE NUMBER(S): CA 40293/01

HEARING DATE(S): 31/1/02

JUDGMENT DATE:
19 July 2002

PARTIES :

State of New South Wales
Peter Rankin Paige

JUDGMENT OF: Spigelman CJ at 1; Mason P at 329; Giles JA at 357

LOWER COURT JURISDICTION : District Court

LOWER COURT
FILE NUMBER(S) : DC 3492/99

LOWER COURT
JUDICIAL OFFICER : Graham DCJ

COUNSEL: P Menzies QC / B J A Shields (Appellant)
G B Hall QC / C Locke (Respondent)

SOLICITORS: Moray & Agnew (Appellant)
Velleley & Associates (Respondent)

CATCHWORDS: TORTS - negligence - novel duty of care - interaction with administrative law - interaction with employment law - whether novel duty of care would infringe legal coherence - whether duty of care to conduct disciplinary proceedings so as to avoid psychological injury to teacher - TORTS - negligence - causation - whether evidence of causation goes to alleged breach of duty - CONTRACT - employment contract - interaction with provisions of statute - whether resignation received - whether resignation validly acted upon - whether resignation effectively withdrawn

LEGISLATION CITED: Education Commission Act 1980
Industrial Relations Act 1996
Public Sector Management Act 1988
Teaching Services Act 1980
Teaching Services (Education Teaching Service) Regulation 1994
Workplace Relations Act 1996 (Cth)

CASES CITED:
Achal v Electrolux Pty Limited (1993) 50 IR 236
Addis v Gramophone Co [1909] AC 488
Aldersea v Public Transport Corporation (2001) 183 ALR 545
Annetts v Australian Stations Pty Limited (2000) 23 WAR 35
Attorney General (NSW) v Quin (1990) 170 CLR 1
Attorney-General v Prince and Gardner [1998] 1 NZLR 262
B v Attorney General [1999] 2 NZLR 296
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Bankstown Foundry Pty Ltd v Braistina (1986) 160 CLR 301
Barrett v Enfield LBC [2001] 2 AC 550
Bienke v Minister for Primary Industries & Energy (1994) 125 ALR 151
Bienke v Minister for Primary Industries & Energy (1996) 63 FCR 567
Birrell v Australian National Airlines Commission (1984) 5 FCR 447
Brodie v Singleton Shire Council (2001) 75 ALJR 992
Burazin v Blacktown City Guardian (1996) 142 ALR 144
Caparo Industries Plc v Dickman [1990] 2 AC 605
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1
Director-General of Education v Suttling (1986) 162 CLR 427
Dunlop v Woollahra Municipal Council (No 2) (1978) 40 LGRA 218
Dunlop v Woollahra Municipal Council [1982] AC 158
EMI (Australia) Ltd v Bes [1970] 2 NSWR 238
Fernandez v Tubemakers of Australia [1975] 2 NSWLR 190
Finch v Oake [1896] 1 Ch 409
Gifford v Strang Patrick Stevedoring Pty Ltd (2001) 51 NSWLR 606
Gogay v Hertfordshire County Council [2000] IRLR 703
Gould v Stuart [1896] AC 575
Hill v Chief Constable of West Yorkshire [1989] 1 AC 53
Hill v Green (1999) 48 NSWLR 161
Hill v Van Erp (1997) 188 CLR 159
Husain v BCCI [2002] EWCA Civ 82
Johnson v Unisys [2001] 2 WLR 1076
Kioa v West (1985) 159 CLR 550.
Lucy v The Commonwealth (1923) 33 CLR 229
Lustre Hosiery Ltd v York (1935) 54 CLR 134
Macksville & District Hospital v Mayze (1987) 10 NSWLR 708
Malik & Mahmud v BCCI [1997] 3 WLR 95
Marks v The Commonwealth (1964) 111 CLR 549
Martin v Yeoman Aggregates Limited [1983] ICR 314
McVicar v Commissioner for Railways (NSW) (1951) 83 CLR 528
Morgan v Tame (2000) 49 NSWLR 21
Ngo v Link Printing Pty Limited (1999) 94 IR 375
Northern Territory v Mengel (1996) 185 CLR 307
Park Oh Ho v Minister for Immigration and Ethnic Affairs (1989) 167 CLR 637
Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679
Phelps v London Borough of Hillingdon [2001] 2 AC 619
Pyrenees Shire Council v Day (1998) 192 CLR 330
R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546
R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598
Redhead Grange Incorporated v Brett Davidson [2002] NSWSC 90
Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43
Riordan v War Office [1959] 1 WLR 1046
Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431
Rowling v Takaro Properties Limited [1988] 1 AC 473
Russell v Duke or Norfolk (1949) 1 All ER 109
Sanders v Snell (1998) 196 CLR 329
Sayali v Rangi [1986] 4 ACLC 239
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262
South Australia v The Commonwealth (1962) 108 CLR 130
State of New South Wales v Seedsman [2000] NSWCA 119
Sullivan v Moody (2001) 75 ALJR 1570
Sutherland Shire Council v Heyman (1985) 157 CLR 424
Suttling v Director-General of Education (1985) 3 NSWLR 427
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Waverley Council v Lodge [2001] NSWCA 439
Welbridge Holdings Ltd v Metropolitan Corporation of Greater Winnipeg (1972) 22 DLR (3d) 470
Williamson v The Commonwealth (1907) 5 CLR 174
Wiswell v Metropolitan Corporation of Greater Winnipeg (1965) 51 DLR 2ND 754
Wyong Shire Council v Shirt (1979) 146 CLR 40
X (Minors) v Bedfordshire County Council [1995] 2 AC 633

DECISION: The appeal on negligence is upheld. The appeal on contract is dismissed. The award of damages below is quashed and damages for breach of contract as assessed below substituted.

- 27 -IN THE SUPREME COURT

CA 40293/01
DC 3492/99

SPIGELMAN CJ
MASON P
GILES JA
Friday 19 July 2002

STATE OF NEW SOUTH WALES v Peter Rankin PAIGE

Facts

Mr Paige (“the Respondent”) was the Principal of a Sydney high school from 1992 to 1998. In 1992, he received complaints from students regarding sexual misconduct of a teacher at the school occurring before the Respondent’s appointment. He notified the New South Wales Department of Education (“the Department”) of some complaints, but dealt with the complaints by a direct approach to the teacher and arranged to have him transferred from the school. In 1997, the Director-General of the Department issued a statement requesting a re-notification of sexual misconduct cases that had not been adequately investigated. The Respondent re-notified the complaints and notified some other complaints for the first time.

The Respondent’s conduct was investigated under Division 6 of Part 4 of the Teaching Services Act 1980. The Respondent was charged with a breach of his duties for non-compliance with Departmental procedures in the way he had handled the complaints. The charges were determined, pursuant to Clause 15 of the Teaching Services (Education Teaching Service) Regulation 1994, on written submissions only.

In October 1997, the Respondent submitted, and subsequently withdrew, a notice of retirement. The prescribed officer found the Respondent guilty of the charges and the Director-General purported to accept the original notice of retirement. The Respondent concluded his service on 2 March 1998.

The Respondent suffered psychiatric harm and lost income. The trial judge found that the Department had breached its duty of care to the Respondent. His Honour also found that the Department had not effectively terminated the Respondent’s contract of employment. The trial judge awarded damages in both tort and contract, adjusting the award to eliminate double-recovery.

HELD

A. Duty of care
(per Spigelman CJ, Mason P and Giles JA agreeing)

The Appellant did not owe a duty of care to conduct its disciplinary procedures so as to avoid psychiatric harm to the Respondent.

In deciding whether to impose a novel duty of care, issues of legal coherence, including the consistency and compatibility of a proposed duty of care with a statutory scheme, must be considered. Sullivan v Moody (2001) 75 ALJR 1570 applied. Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 referred to.

It is not appropriate to pose the issue in administrative law terms e.g. was there a denial of procedural fairness in the conduct of the Appellant’s disciplinary procedures. A duty of care would involve an element of incompatibility with the statutory scheme. The imposition of such a duty would have an inhibiting effect on expeditious investigation and decision under the statute. Sullivan v Moody, supra , applied. X (Minors) v Bedfordshire County Council [1995] 2 AC 633; Rowling v Takaro Properties Limited [1988] 1 AC 473; Hill v Chief Constable of West Yorkshire [1989] 1 AC 53; Crimmins, supra, referred to.

The duty contended for involves incoherence with the law applicable to termination of employment. Statutes provide a well-developed mechanism for adjusting the interests of employer and employee. Johnson v Unisys [2001] 2 WLR 1076 applied. Aldersea v Public Transport Corporation (2001) 183 ALR 545; Malik & Mahmud v BCCI [1997] 3 WLR 95; Burazin v Blacktown City Guardian (1996) 142 ALR 144; Morgan v Tame (2000) 49 NSWLR 21; Addis v Gramophone Co [1909] AC 488; Baltic Shipping Co v Dillon (1993) 176 CLR 344; Gogay v Hertfordshire County Council [2000] IRLR 703; referred to.

The duty contended for involves incoherence with administrative law, in which context compensatory damages are available only in limited circumstances. Recovery in negligence could, in substance, remove the substantive decision to the courts from the decision-maker in whom the decision is reposed. Welbridge Holdings Ltd v Metropolitan Corporation of Greater Winnipeg (1972) 22 DLR (3d) 470; Dunlop v Woollahra Municipal Council [1982] AC 158 discussed. Pyrenees Shire Council v Day (1998) 192 CLR 330; Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431; Attorney General (NSW) v Quin (1990) 170 CLR 1; Macksville & District Hospital v Mayze (1987) 10 NSWLR 708; X v Bedfordshire CC, supra; Northern Territory v Mengel (1996) 185 CLR 307 referred to.

Considerations of control and vulnerability do not outweigh, in this case, concerns about coherence and compatibility. Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43; Sutherland Shire Council v Heyman (1985) 157 CLR 424 referred to.

B. Breach

Even if a duty of care existed, the trial judge erred, on four of the five alleged breaches, in finding that the conduct of the Appellant was a breach of the duty. As to the fifth, it was inappropriate to decide whether there was a breach.

C. Causation

There was insufficient evidence for the finding that the alleged breaches of the duty of care, as opposed to the fact of the charge and dismissal, was the cause of the Respondent’s injuries. Johnson v Unisys, supra, referred to.

D. Contract
Appeal on the contract case dismissed.

(per curiam)

1. The resignation was not submitted “in the heat of the moment” giving rise to any right of withdrawal. Birrell v Australian National Airlines Commission (1984) 5 FCR 447; Martin v Yeoman Aggregates Limited [1983] ICR 314 referred to.

2. The Respondent’s evidence of a Departmental practice allowing resignations to be withdrawn until the day of cessation of service was inadequate to establish a contractual effect. Redhead Grange Incorporated v Brett Davidson [2002] NSWSC 90 referred to.

3. (per Giles JA, Mason P agreeing)

The resignation was received by the District Superintendent as agent for the Director-General. Riordon v The War Office [1959] 1 WLR 1046 applied.

(per Spigelman CJ dissenting)

The resignation was never effectively received by the Crown in the manner for which the contract of employment provided. There was no inhibition on its withdrawal. Riordon v War Office [1959] 1 WLR 1046; Finch v Oake [1896] 1 Ch 409 referred to.

4. (per Mason P, Spigelman CJ not deciding)

The deliberate holding back of the Respondent’s resignation by his superiors prevented it from being delivered to and accepted by the Director-General within the meaning of s78 of the Teaching Services Act 1980. There was no inhibition on its withdrawal.

(per Giles JA)

Section 78 addresses only an officer’s position, not the officer’s employment in the Teaching Service. The Respondent’s resignation took effect in the usual way. Marks v Commonwealth (1964) 111 CLR 549 referred to.

5. (per Spigelman CJ, Mason P and Giles JA agreeing)

No conduct of the Director-General purported to rely upon s97(1) of the Teaching Services Act 1980 which preserves the Crown prerogative to dispense with the services of a teacher. The Appellant may not now rely on that power. Suttling v Director-General of Education (1985) 3 NSWLR 427; Director-General of Education v Suttling (1986) 162 CLR 427 discussed. Gould v Stuart [1896] AC 575 referred to. The Appellant may not rely on s97(2) to deny compensation to the Respondent as the Respondent’s services were not “dispensed with” within the meaning of that section.

ORDERS

CA 40293/01
DC 3492/99

SPIGELMAN CJ
MASON P
GILES JA

Friday 19 July 2002

STATE OF NEW SOUTH WALES v Peter Rankin PAIGE

Judgment

1 SPIGELMAN CJ: This is an appeal from a judgment of Graham DCJ. The Respondent succeeded in a claim in negligence with respect to psychological damage he suffered as a result of the manner in which he was dismissed as the principal of a public high school in Sydney. He was also successful in a claim in contract. His Honour adjusted the damages award to eliminate double counting.

The Factual Background

2 The Respondent was appointed principal of the relevant school in February 1992. Mr N was a teacher at the school. In March 1992, the Respondent received two complaints of alleged sexual misconduct against Mr N (“the March complaints”). The written accounts of the complainants revealed that most of the incidents took place in 1991, before the Respondent was appointed as principal, and that one incident occurred shortly after he had commenced at the school. In August 1992, the Respondent received information about two further complaints against Mr N, relating to events in 1991 (“the August complaints”).

3 The Respondent notified the March complaints to the Department of Education but was dissatisfied with the Department’s response. He dealt with the March complaints, after interviews with the complainants, by discussion with Mr N and a request to the Department to transfer Mr N from the school. Mr N was transferred.

4 In February 1997, after the Royal Commission into the New South Wales Police Force had raised doubts about the adequacy of the Department’s treatment of complaints of sexual misconduct by teachers, the Director-General of the Department of Education issued a statement indicating, inter alia, that past cases of such misconduct that had not been adequately investigated should be re-notified. The statement of the Director-General included the following:

“The identity of the complainant will not be revealed and there will be full protection against legal action.”

5 The Respondent replied by informing the District Superintendent of the March complaints. He did not refer to the August complaints.

6 In May 1997, the Respondent was informed of an investigation by the Department of Education into the March complaints and advised that he was not the subject of investigation. This assurance was reiterated in a letter of June 1997. In May and June 1997, the Respondent was interviewed by a District Inspector and disclosed the August complaints for the first time.

7 In August 1997, an investigation was conducted in relation to the actions of the Respondent in 1992. In a report prepared by officers of the Department for the Director of Employee Relations, the allegations against the Respondent were discussed. The report noted that the alleged failures to notify certain of the complaints would form the basis of a charge under s83(e) of the Teaching Services Act. It then said:

“In order for Employee Relations Services to draft charges it is considered that further independent investigation is required to establish the chronology of events in all matters, to take statements from appropriate DSE, DOCS and Police Service Officers, and complete details in relation to the management of the … allegations.”

8 Accordingly, the recommendation that was made was:

“1 That the facts of the matter be further established by an independent investigation.

NSW

Teaching Services

Act

9 The Director of Employee Relations did not approve this recommendation. He wrote on the document:

“Approved – move to charge ASAP.”

10 The Respondent was charged with a breach of discipline under s83(e) of the Teaching Services Act 1980 for negligence in the discharge of his duties. The particulars provided referred to his alleged failure to follow Departmental policy with respect to the March and August complaints, his failure to inform others of the complaints and the fact that he had revealed the complaints, and sometimes the identity of the complainant, to the teacher involved.

11 By letter of 9 December 1997, the person appointed to conduct the investigation advised the Respondent’s solicitors as follows:

“In view of the clear expectation by the Department of School Education that a Principal of considerable experience should have a clear knowledge of policy and procedure relating to improper conduct of a sexual nature and child sexual assault; and that there is strong evidence of deliberate actions in contravention of Department of School Education policy and procedures with the potential for placing students’ welfare at risk, I have decided to recommend to the Director-General of Education and Training that Mr Peter Paige be allowed to tender his resignation to be effective no later than 27 January 1998.”

12 By letter of 23 December 1997, the Director-General of Education and Training wrote to the Respondent’s solicitor referring to the finding, but noting that he proposed not to accept the recommendation to the effect that Mr Paige be allowed to resign and, in lieu thereof, pursuant to s85(2)(a) of the Teaching Services Act 1980, the Director-General proposed “to direct Mr Paige to resign”.

13 The following was said in the report from the inspector that was before the Director-General:

“Mr Paige has sought to resign from the Department of Education and Training to be effective from March 1998. This application for resignation has not been processed whilst the investigation was being conducted.”

14 The Respondent had completed and submitted to the District Superintendent a form entitled “Teachers Resignation / Retirement” on 13 October 1997 nominating the date of cessation of teaching as 2 March 1998. By letter of 16 December 1997, the Respondent wrote to the Department withdrawing what he called his “notice of retirement” and indicating that he intended to remain in the job for another two or three years.

15 MacMahon Drake Balding, solicitors for the Respondent, wrote to the Director-General on 14 January 1998, referring to the Director-General’s letter of 23 December 1997. The letter noted the decision to direct Mr Paige to resign, rather than to accept the inspector’s recommendation, and referred to the absence of any reasons for rejecting that recommendation. The letter went on to put a case for Mr Paige. It also stated that he had instructed the solicitor that he would not resign and added:

“Before he was charged, Mr Paige had notified the Department that he wished to retire on 1 March 1998. He has, in indignation at the treatment he has received from the Department, withdrawn that application, as he wishes to conclude his long and successful teaching career with his excellent reputation intact.”

16 Internal memoranda were prepared for the Director-General of Education and Training setting out the history of the matter and noting the following:

“Representation by MacMahon Drake Balding and general comment within the school community indicates support for Mr Paige. He has spoken publicly to both the executive and significant members of his school community about his perception of being victimised by the disciplinary procedures. It is likely that the matter will go to appeal.

Mr Paige has already submitted a retirement application to take effect from 2 March 1998. The Director-General need not accept Mr Paige’s request to withdraw his retirement application and allow him to resign from 2 March 1998.

This would allow the school community to mark the end of Mr Paige’s service as they choose and enable the implementation of the decision on penalty without further direction. This may also minimise negative media impact.

Furthermore, if the Director-General allows Mr Paige to resign by accepting a previously tendered retirement form it is unlikely that the matter would go before the Industrial Relation Commission. He may still choose to appeal against the severity of the penalty in GREAT but would be conscious of the fact that one outcome could be reinstatement in a demoted position which would have significant impact on his superannuation.”

17 Accordingly, the recommendation was made that:

“The Director-General reconsiders his decision and allow Mr Paige to resign by accepting his previously tendered retirement form.”

18 On 23 January 1998, the Director-General wrote to the solicitors for the Respondent in the following terms:

“I refer to your letter dated 14 January 1998 asking me to reconsider the proposed penalty imposed on your client Mr Paige.

I have reviewed all the relevant information relating the matter, and have determined that Mr Paige will be allowed to resign.

I have accepted Mr Paige’s application for resignation, submitted in October 1997, to be effective from 2 March 1998.”

19 This letter was, to say the least, disingenuous. It purported to accept a submission and suggested that the Director-General was now accepting the recommendation of the inspector, when the actual conclusion purported acceptance of a resignation which had, to the knowledge of the Director-General, not only been withdrawn, but the withdrawal of which had been emphasised and reiterated in the very submission which the Director-General was purporting to accept.

20 The Respondent rejected this purported acceptance of his resignation. Nevertheless, having been informed that the Department believed such a notice could not be withdrawn and that the Director-General could still dismiss him, he ceased working on 2 March 1998, the previously notified date of resignation.

Findings on Negligence

21 The trial judge found in favour of the Respondent on the cause of action in tort. Initially his Honour expressed the duty of care in the following way:

“…an employer is under a duty of care to take reasonable steps to prevent psychological injury to its employees.”

State of New South Wales v Seedsman

Seedsman

“…the conduct of investigations, disciplinary proceedings and the manner by which employment is terminated …”

22 His Honour formulated the duty of care that he applied in more specific terms than his initial formulation which I have set out in [21] above:

“Subject to the necessity imposed by the obligation of the defendant to carry out investigations and, where appropriate, to take action against employees who are in breach of the terms of their employment, for example, by the commission of disciplinary offences, it seems to me that the general duty of care resting on an employer to provide a safe system of work encompasses the provision of a safe system of investigation and decision making in the way described in the Statement of Claim.

… that is subject to the necessity involved in discharging contractual, common law or statutory obligations in relation to the conducting of inquiries. Any teacher who is subject to a disciplinary inquiry is likely to suffer stress and, possibly psychiatric injury, as a result of the conduct of such an inquiry.

The breach of the duty of care in those circumstances will only come about where the system of investigation or decision making is not a proper or reasonable system or is carried out otherwise than in accordance with the rights of the employer to regulate its activities in accordance with contract, common law or statute”.

23 His Honour then dealt with the issue of breach of duty in terms of conduct which “fell short of the obligations of the duty of care imposed on an employer and which were not justified by the requirements of the law and statutes governing this form of employment”. His Honour at first identified four such matters and, subsequently in his judgment, added a fifth.

24 The five matters are as follows:

(1) “… the plaintiff was misled and given a false sense of assurance by the reference in the Director General’s memorandum of 18 February 1997 to the legal protection which would be afforded.”

(2) “…he was assured that he was not the subject of investigation or allegation when he was interviewed by Mr Chandler and when he signed the statement which he did at the request of Mr Chandler.”

(3) “…the decision to override the recommendation of a full investigation prior to a decision on charging was one which was negligent in the circumstances because he failed to properly consider the basis upon which charges could be laid.”

(4) “…the manner in which the inquiry was held was one which was in breach of principles of procedural fairness or natural justice. In that regard there was a request for an inquiry rather than for a paper or explanation type inquiry.”

25 The first, second, third and fifth matters have been referred to in my outline of the factual background above.

26 The fourth itemised matter relates to a choice available under the relevant statutory regime, to which I will further refer below. The conduct of an investigation may be by way of a full hearing, on the one hand, or by way of written submissions, on the other hand. (Referred to as the “inquiry route” and the ”explanation route” respectively. See Hill v Green (1999) 48 NSWLR 161 at [14].)

27 His Honour considered this issue in terms of whether, in all the circumstances, the Respondent had been denied procedural fairness. After analysing a number of defects, his Honour concluded there had been a denial of procedural fairness, with the consequence that the Respondent had been denied the opportunity of putting his case before the investigation.

28 His Honour referred to a submission made to him that it was not necessary in this case to choose the “inquiry route” rather than the “explanation route”, by reason of the fact that the plaintiff admitted the particulars in the charges and that submissions were directed only to the effect of the conduct. His Honour accepted the force of this submission but noted that in his opinion the distinction was not “of itself sufficient to preclude the need for an inquiry”. His Honour went on to explain:

“The plaintiff, for example, had never met the prescribed officer. The prescribed officer was, accordingly, weighing up explanations and, ultimately, made decisions concerning the motivation and intention of the plaintiff without having the opportunity of seeing him for himself, and assessing for himself the validity of the explanations offered by the plaintiff for his course of conduct, or of assessing for himself the likelihood or otherwise that the plaintiff would in future comply with the Department’s policy concerning the reporting of misconduct by teachers to principals. And perhaps just as importantly, of putting to the plaintiff a number of matters upon which findings were made and which, in my view, the plaintiff was not given a proper opportunity to meet because of the way in which the charges were determined.”

29 His Honour noted that detailed written submissions on behalf of the Respondent had been made on a number of occasions, but found that further material would have been put before an oral inquiry. In this context his Honour had in mind a submission to the effect that a number of matters had been determined without what, it had been submitted to him, was “proper consideration of all of the relevant facts” and that an oral hearing would have given the plaintiff an opportunity to put those matters before the inquiry.

30 Amongst these “facts” was the proposition that the Respondent’s failure in 1992 to follow Departmental directions had not in fact caused harm to anyone. Furthermore, there was evidence that the teacher about whom the complaints had been made was not the subject of any further complaints within four years thereafter. His Honour concluded that matters supporting this proposition “would have been capable of being … at least more fully brought before an inquiry conducted orally”.

31 His Honour also referred to certain findings of the officer conducting the inquiry that were never put to the Respondent, namely, findings that the Respondent “would have concealed evidence”; “that he was electing to independently create policy” and “that he took deliberate actions in contravention of departmental policy with a potential to place students at risk”.

32 His Honour found that these were serious findings “which an oral inquiry would have had the opportunity of putting to the plaintiff for his consideration and, if possible, for his answer”.

33 His Honour concluded that in an inquiry the officer would have had the opportunity of “making a first hand assessment of the attitude and intentions of the plaintiff” and that he may have come to the same view as the trial judge had come, i.e. that the Respondent would not have been guilty of concealing evidence or of seeking to independently create policy.

34 His Honour concluded, on the basis of his own observations of the Respondent, that:

“I have no doubt – and I have little doubt that a prescribed officer would have come to the same conclusion – that the unorthodox but effective action of the plaintiff represented a very effective means of dealing with the situation.”

35 His Honour concluded that the final report of the prescribed officer, both in terms of the actual findings and “the tone of [the] findings”, would have been different and said:

“The effect of making those findings purely on the documentary evidence was to deprive the plaintiff of the opportunity of fully understanding the case which was being made against him.”

36 His Honour also noted that the actual report failed to “give any significant acknowledgement” to what his Honour found to be the case, namely, that the conduct of the Respondent was designed to ensure that the teacher was transferred from the school in circumstances which “would have had a favourable result for the students who had complained and would also represent some advantage to the teacher himself”.

37 In conclusion, his Honour said:

“… It seems to me, in all of those areas, there were breaches of the principles of procedural fairness in the conduct of the inquiry leading to severe adverse findings against the plaintiff which, in my view, were not adequately informed by an examination of the plaintiff’s motives and did not properly address the question of the extent to which any such conduct would be repeated on his part.”

“The result of the procedure adopted was that decisions were made about whether the charges had been made out and as to what consequences should flow from them in the absence of an opportunity for the plaintiff to have the prescribed officer fully consider the circumstances of the plaintiff. Those in my view represent breaches of the principles of procedural fairness.”

Findings on Causation

38 His Honour accepted the medical evidence tendered by the Respondent to the effect that the Respondent suffered from depression and anxiety. His Honour also relied on the expert reports on the issue of causation.

39 The earliest expert report in time was that of a consultant psychologist, Ms Martha Knox, dated 13 February 1998. She made a diagnosis of depression and expressly stated that the Respondent’s “symptoms” date from the time of the presentation of charges on 26 August 1997. His Honour relied on this report.

40 Mr W John Taylor, a clinical forensic psychologist, also referred to the Respondent’s treatment in the course of his employment as the origins of the “depressive disorder with some anxiety” which he diagnosed. Furthermore, Professor Alexander McFarlane, a professor of psychiatry at the University of Adelaide, reported on the Respondent in terms which attributed the depressive disorder he diagnosed to treatment he described in the following way:

“Mr Paige’s depression is directly attributable to the administrative procedures of the Department of Education, which led up to his premature retirement.”

41 His Honour referred to the evidence of Dr Robbie, called for the Appellant. Dr Robbie expressed the opinion that the plaintiff was not suffering from a discernible psychiatric illness.

42 His Honour concluded:

“The bulk of the evidence is in favour of the proposition that the plaintiff has an ongoing depressive disorder with features of anxiety as well. More importantly, for present purposes, each of those experts, with the exception of Dr Robbie, trace the condition diagnosed to the handling of the investigation and disciplinary proceedings concerning the plaintiff.”

43 His Honour’s final conclusion on causation was expressed as follows:

“The medical evidence, which I accept, is that the reason for the depressive disorder which the plaintiff suffers is the course of treatment of him by the Department of Education which I have found was a breach of its duty of care. The element of causation is therefore established.”

Findings on Contract

44 With respect to the cause of action in contract, his Honour noted that there were alternative claims. There was a claim based on wrongful dismissal in early 1998. The alternative claim was that the contract was not effectively terminated and, accordingly, that the Appellant was still in employment. The claims were real alternatives in the sense that if one succeeded, the other could not.

45 His Honour noted that the position at common law was that a resignation was effective as a unilateral act and could not be withdrawn. Accordingly, resignation requires no acceptance by the employer and cannot be withdrawn.

46 His Honour noted that, in exceptional circumstances, a resignation could be withdrawn. His Honour concluded that the circumstances in which the Respondent’s resignation was submitted in October 1997 fell within this exception. His Honour said:

“The resignation could be said to have been given ‘in heat’, or, more particularly, in a state of emotional stress. The symptoms of depression which I have referred to, coupled with a sense almost of betrayal which the plaintiff felt, it seems to me would constitute the type of emotional stress which would allow the exception to the general rule to come into operation.”

47 His Honour found a second basis upon which the resignation could not be acted upon by the Director-General. His Honour referred to s78 of the Teaching Services Act which provides that a resignation operates so as to deem a position vacant if the officer resigns and the resignation is accepted by the Director-General. His Honour said that s78 does not permit the Director-General to defer consideration of the resignation indefinitely. What had happened in the present case, his Honour found, was that the resignation was put “on hold” until the disciplinary proceedings had been finalised. His Honour concluded that this decision to defer was a “constructive refusal to accept that resignation”. Accordingly, his Honour concluded that on this alternative basis, there was no extant resignation at the time that the Director-General purported to accept it.

48 His Honour noted that the Director-General did not purport to rely upon the provisions of s85 of the Teaching Services Act, that empowered the imposition of punishment after a finding that a breach of discipline has occurred. Nor did he act in accordance with s85 when accepting the withdrawn resignation. His Honour concluded that the Respondent could not be retired by virtue of an acceptance of the resignation that had been withdrawn. Nor could the provisions of s85 be applied.

49 His Honour then dealt with an alternative submission put on behalf of the Appellant relying upon s97 of the Teaching Services Act (set out in par [67] below). His Honour noted that there had been no purported reliance on this provision at any time. The issue had arisen by means of a late amendment to the defence, in the course of submissions before him. His Honour found that the Appellant did not purport to rely on s97 in order to “dispense” with the services of the Respondent. His Honour further held that it was unconscionable for the Appellant to rely on s97 for some form of constructive dismissal, when it had purported to act on a different basis, i.e. that the Respondent had voluntarily resigned. Accordingly, the Appellant would be estopped from making any such assertion. His Honour referred to Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, and subsequent authorities, as determining the principles of estoppel that he applied.

50 His Honour concluded that the contract of employment had never been validly terminated. Accordingly, his Honour said the Respondent remained employed under the Teaching Services Act.

51 The Respondent did in fact leave the employment. He accepted superannuation entitlements as a former employee. In a sense this was done under protest. Nevertheless, his Honour did not determine the alternative claim in contract for wrongful termination of the contract of employment. Indeed, as noted, he found that the Appellant was estopped from asserting a constructive dismissal.

The Statutory Scheme

52 The Teaching Services Act 1980 (“the Act”) was originally enacted as the Education Commission Act 1980. The Act makes provision for two parallel administrative structures relating to two different spheres of education, including the appointment of two Directors-General and the creation of two Teaching Services - referred to, respectively, as the Education Teaching Service and the Technical and Further Education Teaching Service. These proceedings are concerned with the former Teaching Service, covering teachers employed in primary and secondary schools. Under the Act, certain functions are also performed by the Secretary of the Ministry of Education and Youth Affairs.

53 Section 37 of the Act provides:

“(1) The Director-General of Education is responsible to the Minister for the general conduct and the efficient, effective and economical management of the functions and activities of the Education Teaching Service.

(2) For the purpose of exercising responsibility under subsection (1), the Director-General of Education may take such action as he or she deems appropriate and as is not inconsistent with any function of the Secretary or any function, specified in this Act, of the Public Employment Industrial Relations Authority.”

54 Section 38(1) confers a number of functions on the Director-General:

“(1) The Director-General of Education shall, subject to the provisions of this Act and the regulations:

(a) classify the schools in which members of the Education Teaching Service are employed,

(b) determine the teaching staff establishments for those schools,

(c) determine the staff establishments for the positions of staff inspectors and inspectors of schools,

(d) determine the staff establishments for positions (other than positions within the staff establishments referred to in paragraphs (b) and (c)) which the Director-General and the Public Employment Industrial Relations Authority agree are positions:

(i) which are concerned with advising, controlling or supervising teachers in schools, and

(e) determine the method of classifying and grading officers employed in the Education Teaching Service,

(f) prepare and maintain, in respect of different classes of positions, being the positions of teachers in public schools, lists of officers eligible for appointment or promotion to those positions,

(g) determine the qualifications required for appointment to the Education Teaching Service or for an officer to be included on any promotions list prepared and maintained as referred to in paragraph (f),

(h) determine promotions and transfers of officers and transfers of temporary employees, and

(i) maintain discipline in the Education Teaching Service.

(2) Before exercising any functions under subsection (1)(a), (b), (c), (d) or (e), the Director-General of Education shall, unless otherwise directed by the Secretary, consult with the Secretary and have regard to any principles recommended by the Secretary to be applied in the exercise of those functions.”

55 By s47(1), the Director-General of Education is empowered to appoint persons with the appropriate qualifications to permanent positions in the Education Teaching Service. Appointments are made on probation, unless the Director-General otherwise determines (s48). Such appointments may be made on a temporary basis (s50). By s50(5)(b) a person appointed temporarily “may be dismissed at any time”. No such provision is found in s47 relating to appointment to permanent positions.

56 Subdivision 1 of Div 4 in Pt 4 of the Act is concerned with the filling of vacancies in the Education Teaching Service, specifically positions for which there is in existence a promotions list. The Director-General of Education may appoint a person to fill a vacancy for such a position (s59B). The Subdivision makes provision for appointment on merit, including a system of appeals.

57 Section 78 arises for consideration in these proceedings. It provides:

“An officer of a Teaching Service shall be deemed to have vacated the officer’s position if:

(a) the officer dies, or

(b) the officer resigns the officer’s position by writing signed by the officer and delivered to the appropriate Director-General and the officer’s resignation is accepted by that Director-General.”

58 Division 6 of Pt 4 makes provision for disciplinary conduct. Section 83 relevantly provides:

“An officer or temporary employee of a Teaching Service who:

(a) commits any breach of this Act or the regulations,

(b) engages in any misconduct,

(c) uses intoxicating beverages or drugs to excess,

(d) wilfully disobeys, or wilfully disregards, any lawful order made or given by a person having authority to make or give the order,

(e) is negligent, careless, inefficient or incompetent in the discharge of his or her duties, or

(f) engages in any disgraceful or improper conduct,

is guilty of a breach of discipline.”

59 Section 84 provides that an alleged breach of discipline “shall be dealt with by the appropriate Director-General or a prescribed officer”. It authorises regulations to be made with respect to “the manner of dealing with alleged breaches of discipline”. That power has been exercised in the Teaching Services (Education Teaching Service) Regulation 1994.

60 Regulation 14 provides for the laying of charges:

“14(1) If it appears to a disciplinary authority that a member of staff may have committed a breach of discipline, the member may be charged by the authority with the breach.

(2) The charge may be laid orally or in writing but, if laid orally, the member of staff must be furnished with a written copy of the charge within a reasonable time.

(3) At the time the member of staff is charged by a disciplinary authority in writing or furnished with a written copy of the charge, the member must be directed to send a written reply to the authority within such time (being at least 14 days) as is specified in the direction.

(4) The reply:

(a) must admit or deny the truth of the charge; and

(b) may give any explanation that the person wishes to make in regard to the charge.

(5) If a reply is not received by the disciplinary authority within the time specified in the direction, the member of staff is to be taken to have denied the truth of the charge.”

61 “Disciplinary authority” is defined to mean the Director-General and certain senior officers.

62 Section 85 authorises the Director-General to impose certain punishments in cases where a breach of discipline has been established:

“85(1) Where a breach of discipline is dealt with by the appropriate Director-General or a prescribed officer in accordance with the regulations and the Director-General or prescribed officer, as the case may be, finds that the officer or temporary employee charged has committed the breach or the officer or temporary employee admits to the Director-General or prescribed officer that he or she committed the breach, the Director-General or prescribed officer:

(a) may decide to impose on the officer or temporary employee any one or more of the following punishments, that is to say, may decide to:

(i) caution the officer or temporary employee,

(ii) reprimand him or her,

(iii) fine him or her,

(iv) except in the case of a senior executive officer, reduce his or her rate of salary or wages, or

(v) except in the case of a senior executive officer, reduce him or her to a lower classification or position in the Teaching Service of which he or she is a member,

(b) may decide to impose any one of the following punishments, that is to say:

(i) where the breach is dealt with by the Director-General, the Director-General may decide to dismiss him or her from the Teaching Service of which he or she is a member, direct that he or she resign from that service within such period as may be specified in the direction or direct that his or her resignation from that service, if tendered within a period specified in the direction, be accepted, or

(c) in the case of an officer on probation – may decide to annul his or her appointment.

(2) Where a prescribed officer makes a recommendation referred to in subsection (1)(b)(ii), the Director-General to whom the recommendation is made may decide to:

(a) impose any one of the punishments referred to in subsection (1)(b)(i), or

(b) impose any one or more of the punishments that may be imposed under subsection (1)(a).

(3) Where a Director-General, in the exercise of the powers under this section, directs:

(a) that an officer or temporary employee resign from a Teaching Service within a period specified in the direction, or

(b) that the resignation from a Teaching Service of an officer or temporary employee, if tendered within a period specified in the direction, be accepted,

and the officer or temporary employee does not resign or tender his or her resignation, as the case may be, within the period specified in the direction, the Director-General may decide to dismiss that officer or temporary employee from the Teaching Service.”

63 In the present case, the investigation was undertaken by a “prescribed officer” who made a recommendation under s85(1)(b)(ii).

64 The position of teachers as employees of the Crown is affirmed by s42 which provides:

“Except as provided by section 24, a member of a Teaching Service shall be deemed to be employed by the Government of New South Wales in the service of the Crown.”

65 Section 24 to which reference is made in s42, is found in Pt 2 Div 2 of the Act which is entitled “Functions of the Secretary”. By s25 the Secretary is authorised to determine conditions of employment including salaries, wages and other remuneration of members of the Teaching Service. Section 24 states that for the purposes of exercising the powers under s25, or in any proceedings in a tribunal relating to industrial matters, the Secretary “shall … be deemed to be the employer of those members”.

66 Notwithstanding this deeming provision, by s23A it is provided that:

“The Secretary, in exercising the function under this Part, acts for the Crown.”

67 This context is of some significance for the purposes of the construction of s97 on which the Appellant relies in these proceedings. Section 97 relevantly provides:

“97(1) … nothing in this Act shall be construed or held to abrogate or restrict the right or power of the Crown to dispense with the services of any person employed in a Teaching Service.

(2) An officer or temporary employee of a Teaching Service shall not be entitled to any compensation by reason of any reduction in salary or of his or her services being dispensed with, whether under this section or otherwise.”

68 No express provision is made as to who acts for the Crown in this respect, in contrast with the express reference in s23A.

69 As indicated above, one of the issues that arises in this appeal concerns the options available for the conduct of disciplinary proceedings against a teacher. The distinction between the “explanation route” and the “inquiry route” is set out, relevantly, in Reg 15(2)(a) and (b) of the Teaching Services (Education Teaching Service) Regulation 1994. The relevant regulations are:

“15 Dealing with charges

(1) If a member of staff denies the truth of a charge, the Director-General (or some other disciplinary authority appointed by the Director-General) is to deal with the charge.

(2) A disciplinary authority may deal with the charge:

(a) by directing the member of staff to furnish an explanation in writing within such time (being at least 14 days) as is specified in the direction; or

(b) by conducting an inquiry.

(3) If a disciplinary authority takes action under subclause (2)(a):

(a) the authority may make a finding after considering any reports relating to the breach of discipline and any replies or explanations of the member of staff; or

(b) the authority may decide to deal with the charge by conducting an inquiry under subclause (2)(b).

(4) If 2 or more charges are laid against a member of staff at the one time and the member admits to the truth of one or more but not all of the charges, all of the charges may be dealt with in the manner prescribed by subclause (2).

16 Conduct of inquiries

(1) If it is decided to conduct an inquiry, the disciplinary authority must give written notice to the member of staff charged of the time, date and place at which the inquiry is to be conducted.

(2) If the member of staff does not, without reasonable cause, appear at the time, date and place notified, the charge may be inquired into and dealt with in the member's absence.

(3) For the purposes of an inquiry, a disciplinary authority may call on any person to appear and to give such evidence, and produce such documents, as appear to the authority to be relevant to the inquiry.

(4) A member of staff must not, without reasonable cause:

(a) fail to appear, give evidence or produce documents at an inquiry when called on to do so; or

(b) knowingly give false or misleading evidence at an inquiry.

(5) A member of staff may be represented at an inquiry by a barrister, solicitor or agent employed at the member's expense.

(6) A disciplinary authority may conduct an inquiry without regard to legal formality, and is not bound by any law or practice as to evidence, but may inform himself or herself of any matter in such manner as he or she thinks fit.

(7) However, a disciplinary authority must not inform himself or herself of, or take into consideration, any matter that has not been disclosed in evidence at a sitting of the inquiry if the matter is one that ought, in the interests of justice, to be available for challenge or testing by the persons entitled to be present at the inquiry.

(8) Nothing in subclause (7) prevents a disciplinary authority:

(a) from informing himself or herself of, or taking into consideration, any matter of which a court would be entitled to take judicial notice; or

(b) when deciding whether or how to punish a member of staff found to have committed a breach of discipline, from taking into consideration any previous breach of discipline that has been found by a disciplinary authority to have been committed by the person charged “.

70 The relationship between these regulations and the principles of procedural fairness was discussed by this Court in Hill v Green (1999) 48 NSWLR 161.

Issues on the Appeal

71 The Appellant challenged his Honour’s findings both with respect to the case in tort and the case in contract. A number of distinct grounds were relied upon.

72 With respect to the case in tort the Appellant submitted that there was no relevant duty of care and, alternatively, that there was no breach. The finding of the trial judge on breach was challenged on a number of specific bases. Particular attention was directed to the element in the trial judge’s finding of breach that turned on the issue of procedural fairness. The Appellant submitted that the trial judge erred in finding that the Respondent had not been afforded procedural fairness.

73 With respect to the case in tort the Appellant also challenged the trial judge’s findings as to causation. It submitted that his Honour erred in finding that the Appellant’s conduct was the cause of the Respondent’s depressive illness and further submitted that there was no evidence that any injury was caused by the conduct found to be in breach of procedural fairness. It submitted specifically that there was no evidence which permitted the trial judge to infer that if the inquiry route had been followed, rather than the explanation route, that this would have made a material difference to the result.

74 There were four grounds of appeal relevant to the contract case:

“3 The trial judge erred in finding that the Appellant was in breach of any contractual obligation to the Respondent.

Teaching Services Act

…

10. The trial judge erred in finding that at all material times the Respondent remained an employee of the Appellant.

11. The trial judge erred in finding that the Director-General was not entitled to defer accepting the Respondent’s resignation.”

75 There was no ground of appeal relating to the quantification of damages. Furthermore, there was no ground of appeal which invoked the relevant case law restricting recovery for mental trauma. The Appellant did not assert that a person of normal fortitude would not have suffered any such injury (cf Morgan v Tame (2000) 49 NSWLR 21 at [13]-[19], [166] and Annetts v Australian Stations Pty Limited (2000) 23 WAR 35 – in both cases the appeals to the High Court are reserved). Nor did the Appellant challenge the finding of negligence on the basis that there was no sudden assault on the senses (see Morgan v Tame, supra at [48]-[61], [145]-[158], [167]; Gifford v Strang Patrick Stevedoring Pty Ltd (2001) 51 NSWLR 606 at [50]-[51], [68]-[73] and cf State of New South Wales v Seedsman [2000] NSWCA 119 per Mason P, (Spigelman CJ and Meagher JA not deciding).) Nor did the Appellant assert that psychiatric injury was not reasonably foreseeable (see Morgan v Tame at [60]-[62] per Mason P and [160] per Handley JA).

Duty of Care

76 In his reasons, his Honour expressed the duty of care owed by the Appellant as the employer in two interrelated ways. First, his Honour said there was a duty of care “to take reasonable steps to prevent psychological injury to its employees”. Secondly, his Honour said the duty to “provide a safe system of work encompasses the provision of a safe system of investigation and decision making”, relevantly, with respect to procedures for discipline and termination of employment.

77 In its submissions to this Court, the Appellant accepted that it had a duty to avoid the risk of foreseeable injury and that there were circumstances in which psychiatric injury was relevantly foreseeable. Nevertheless, it submitted that there was no duty of a character relevant to the present proceedings.

78 The trial judge’s reference to the well known category of duty to provide a “safe system of work”, conceals the novelty of the duty his Honour identified in this case. There is an ambiguity inherent in the word “system”. The body of case law with respect to a “safe system of work” has been, so far as I am aware, exclusively concerned with the conduct of tasks for which an employee is engaged. (See e.g. Bankstown Foundry Pty Ltd v Braistina (1986) 160 CLR 301 at 308-309.) His Honour made no reference to any authority, nor was any authority drawn to the attention of this Court, that extended the concept of a “system of work” to matters concerning the incidents of the contract of employment, such as the disciplinary procedures under consideration in the present case. This is a novel category of duty and involves an extension of employers’ duties. In the present context, it raises important considerations concerning the interrelationship between duties of care and statutory powers and duties.

79 The Appellant’s basic contention is that there was no duty that extended to encompass the conduct on behalf of the Appellant in issue in these proceedings. The Appellant relied on the recent decision of the High Court in Sullivan v Moody (2001) 75 ALJR 1570.

80 In Sullivan v Moody, two fathers, each of whom had been accused of sexual assault on their children, sued the medical practitioners who had examined their children and reported to the Department of Community Welfare that the boys appeared to have been sexually abused. Further investigations were carried out by officers of the Department who reached the same conclusion. They referred the matter to the police and the police charged the two fathers with sexual offences. Those charges were ultimately dropped. The fathers asserted that they had suffered shock, distress and psychiatric harm. The fathers asserted that the medical practitioners had acted negligently in their examination and diagnosis. The State of South Australia, as employer of the officers in the Department of Community Welfare, was said to be liable for the negligent investigation and reporting of those officers.

81 The fathers did not assert that a duty of care relating to investigation and reporting was owed to every member of the community the subject of an investigation of a possible crime. They submitted that the particular parental relationship between themselves and their children was such as to create a duty with respect to conduct, a duty which may not arise in the usual case. A negligent finding with respect to parental abuse of the child was likely to disrupt the parent/child relationship against the very interests of the children that the investigation process seeks to protect.

82 In Sullivan v Moody, the joint judgment of the Court referred to the proposition that foreseeability alone is not sufficient and in that context, the Court said that, if it were otherwise:

“… the tort of negligence would subvert many other principles of law, and statutory provisions, which strike a balance of rights and obligations, duties and freedoms.” (at [42])

83 The Court also said at [50]:

“Different classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care.”

84 After noting certain problems that may arise, the Court continued, relevantly for present purposes at [50]:

“Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships. The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle.” (footnote omitted)

85 When the Court came to assess the considerations relevant to determining whether or not a duty of care existed in the case before it, the Court noted that the injury to the fathers arose by reason of what each father and others had been told. The Court said at [54]:

“At once, then, it can be seen that there is an intersection with the law of defamation which resolves the competing interests of the parties through well-developed principles about privilege and the like. To apply the law of negligence in the present case would resolve that competition on an altogether different basis. It would allow recovery of damages for publishing statements to the discredit of a person where the law of defamation would not.” (footnote omitted)

86 Similarly, in the present case the application of the law of negligence to the current relationship would intersect with two other areas of the law: judicial review of administrative action and the law of contract, as modified by statute, with respect to wrongful dismissal under a contract of employment.

87 The joint judgment again referred to the “coherence of the law” and added at [55]:

“Considering whether the persons who reported their suspicions about each appellant owed that appellant a duty of care must begin from the recognition that those who made the report had other responsibilities. A duty of the kind alleged should not be found if that duty would not be compatible with other duties which the respondents owed.”

88 Their Honours went on to consider the functions, powers and responsibilities of the persons and authorities alleged to owe a duty to the fathers in the course of investigating and reporting on the allegations made against them. Their Honours noted that statutory obligations are not necessarily inconsistent with the existence of a duty of care because:

“People may be subject to a number of duties, at least provided they are not irreconcilable.” (at [60])

89 Their Honours went on to say at [60]:

“But if a suggested duty of care would give rise to inconsistent obligations, that would ordinarily be a reason for denying that the duty exists. Similarly, when public authorities, or their officers, are charged with the responsibility of conducting investigations, or exercising powers, in the public interest, or in the interests of a specified class of persons, the law would not ordinarily subject them to a duty to have regard to the interests of another class of persons where that would impose upon them conflicting claims or obligations.”

90 Their Honours concluded at [62]:

“The statutory scheme that formed the background of the activities of the present respondents was, relevantly, a scheme for the protection of children. It required the respondents to treat the interests of the children as paramount. Their professional or statutory responsibilities involved investigating and reporting upon, allegations that the children had suffered, and were under threat of, serious harm. It would be inconsistent with the proper and effective discharge of those responsibilities that they should be subjected to a legal duty, breach of which would sound in damages, to take care to protect persons who were suspected of being the sources of that harm. The duty for which the appellants contend cannot be reconciled satisfactorily, either with the nature of the functions being exercised by the respondents, or with their statutory obligation to treat the interests of the children as paramount. As to the former, the functions of examination, and reporting, require, for their effective discharge, an investigation into the facts without apprehension as to possible adverse consequences for people in the position of the appellants or legal liability to such persons. As to the latter, the interests of the children, and those suspected of causing their harm, are diverse, and irreconcilable.”

91 The determination of whether a common law duty of care exists with respect to the exercise of statutory powers is not the subject of authoritative guidance from the High Court. A number of different approaches is discernible in recent authority. (See Pyrenees Shire Council v Day (1998) 192 CLR 330; Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1; Brodie v Singleton Shire Council (2001) 75 ALJR 992.) The joint judgment in Sullivan v Moody does not reconcile the different approaches, save by rejecting the three stage test previously applied by Kirby J.

92 However, as Gleeson CJ has noted in Brodie supra at [31]:

“Legislation and the common law are not separate and independent sources of law; the one the concern of parliaments, the other the concern of courts. They exist in a symbiotic relationship.”

93 When considering the issue of coherence it is necessary to give close consideration to the statutory scheme: specifically whether a common law duty is “inconsistent” or “incompatible” with the statute and, relevantly in this case, the regulations. (See e.g. Crimmins at [3], [18], [93 at 6], [114], [203]-[213]; Sullivan v Moody at [60].) However, issues of coherence may arise even if there is no direct inconsistency. It may be enough if the effect of imposing civil liability is to “distort [the] focus” of the statutory decision-making process. (Crimmins at [292] per Hayne J.)

94 Similar issues have arisen in New Zealand with respect to investigations by social workers into the suitability of prospective adopting parents and into allegations of child sexual abuse. However, in New Zealand law the three stage test in Caparo Industries Plc v Dickman [1990] 2 AC 605 at 617-618, is applied. The New Zealand cases ask whether imposing a duty of care is “fair, just and reasonable”. This is not the law in Australia. (Sullivan v Moody at [49].) Nevertheless, the cases do indicate the variety of considerations that suggest a relevant incompatibility between a statutory scheme and a common law duty. (See Attorney-General v Prince and Gardner [1998] 1 NZLR 262; B v Attorney General [1999] 2 NZLR 296; see generally Todd “Liability in Tort of Public Bodies” in Mullany & Linden (eds) Torts Tomorrow: A Tribute to John Fleming 1998 at 48-49.) Recent English authority on civil liability for the exercise of a statutory power also applies the three stage Caparo test and is, similarly, of little assistance. (See e.g. Barrett v Enfield LBC [2001] 2 AC 550; Phelps v London Borough of Hillingdon [2001] 2 AC 619.)

95 When in Sullivan v Moody at [50], the joint judgment referred to “the need to preserve the coherence of other legal principles, or of a statutory scheme”, the authority referred to was Hill v Van Erp (1997) 188 CLR 159 at 231, where Gummow J had referred to “one coherent system of law”. The present case raises issues of compatibility and coherence both between the law of tort and statutes and between the law of tort and the law of contract, as modified by statute and between the law of tort and administrative law.

96 This case is not concerned with the difficulties that have arisen when it is alleged that a decision-maker was obliged to exercise a statutory power. This case is concerned with how statutory powers, relevantly in the regulations under s84 and in s85 of the Act, were exercised. Nor is this case concerned with a quasi-legislative power or a “policy” decision, in the sense that word is used in the problematic policy/operational dichotomy. (See e.g. Pyrenees supra at [62]-[68] per Toohey J and [180]-[182] per Gummow J; Crimmins at [27]-[44] per Gaudron J and [84]-[87] per McHugh J.)

Compatibility

97 Graham DCJ was aware of issues of coherence and compatibility when he said that the duty to provide a “safe system of investigation and decision making” was subject to the performance of “contractual, common law or statutory obligations”, at least where the system of decision-making is “a proper or reasonable system”. The reasoning in Sullivan v Moody, handed down since his Honour’s judgment in this case, makes it clear that the recognition of a new category of duty for purposes of the law of negligence, must consider the requirements of a coherent system of law in Australia. (Issues of coherence can arise in many legal contexts. See Mason P writing extra-judicially, “The Unity of the Law” (1998) 4 The Judicial Review 1.)

98 His Honour’s approach appears to take a common law duty as the starting point and then to ask whether the statute has modified it. That approach is consistent with some recent statements in the High Court, but inconsistent with that of others, which focus on the statute in the first instance. (See Davies “Common law liability of statutory authorities” (2000) 8 Tort Law J 133 at 138-141.)

99 As noted above Sullivan v Moody directs attention to the compatibility of a duty of care with other duties. The particular aspect of the statutory context to which their Honours gave emphasis was the express statutory provision that the interests of a child would be the paramount consideration. In the present proceedings, the Appellant did not draw the Court’s attention to any particular statutory provision relating to the provision of education which was similar to that considered in Sullivan v Moody. The submissions in this Court were restricted to the terms of the Teaching Services Act itself.

100 Section 37(1) of the Act imposes upon the Director-General of Education a responsibility for “the efficient, effective and economical management of the functions and activities of the Education Teaching Service”. One of the functions conferred upon the Director-General is to “maintain discipline in the Education Teaching Service” (38(1)(i)). For purposes of the present case, the relevant breach of discipline is that found in s83(e) of the Act concerned with “negligent, careless, inefficient or incompetent” discharge of duties. However, when considering the imposition of a duty of care with respect to disciplinary proceedings, the Court must be concerned with the full range of breaches of discipline set out in s83, including misconduct, alcohol and drug abuse, breach of regulations, disobedience of lawful orders and disgraceful or improper conduct.

101 Within the confines of the limited range of statutory provisions upon which the Appellant relied in submissions in this case, the conflict of responsibilities is not as stark as that found in the legislation under consideration in Sullivan v Moody. Nevertheless, there is at least a level of tension, and perhaps of conflict, between the duty imposed upon the Director-General and his or her officers, a duty owed to both the public at large and to the particular school community, to ensure the efficient and effective operation of the State education system, on the one hand, and a duty to provide a “safe” disciplinary process with respect to such matters, on the other hand.

102 Although the Court’s attention was not drawn to any specific duty, it can be readily accepted that a duty exists to have proper systems in place for investigating improper handling of allegations of sexual misconduct by teachers. The Director-General’s statement of 18 February 1999 commenced with a reference to evidence before the Royal Commission into the NSW Police Service and said:

“Evidence given by teachers and other departmental officers revealed a totally unacceptable response to allegations of professional misconduct and criminal behaviour by several teachers in a number of schools in one of the former DSE regions.”

103 The statement concluded with the following:

“The care and protection of young people is our first and fundamental responsibility.”

104 A number of Departmental documents establishing procedures for handling allegations of child sexual assault are in evidence. The tension between the Department’s various duties is highlighted in the covering circular for the first such document of March 1988:

“This Department has an obligation to take seriously all allegations of misconduct on the part of employees and to act promptly in the interests of students. On the other hand, every effort will be taken to protect the rights and reputation of employees.”

105 The issue of inconsistency or incompatibility may arise, like many other elements, at both the level of duty and the level of breach. The conflict or tension between duties must be placed in the balance with the range of factors pertinent to duty to determine whether a duty of care existed.

106 Issues of compatibility at the level of duty arise with respect to each of the three stages of the statutory decision-making process with which his Honour was concerned. The five matters identified as breaches of duty by his Honour can be analysed in terms of three stages; charge, inquiry and decision.

107 The first three matters – the assurance of legal protection and the statement that he was not the subject of investigation, together with the decision to proceed to a charge without further investigation – preceded the formal act of charging.

108 The second stage, the fourth matter, was the failure to accord procedural fairness.

109 These four matters, his Honour found:

“… fell short of the obligations … imposed on an employer and which were not justified by the requirements of the law and statutes…”

110 The third stage encompassed the fifth breach identified by his Honour – the decision to act on the withdrawn resignation. This, his Honour said, “went beyond the bounds of what the [Appellant] was entitled to do…”

111 As to the first stage, the steps required to be taken prior to a charge are found in Regulation 14, made pursuant to s84(2) and s100(h) of the Act. Under Regulation 14(1) a member of staff may be charged “If it appears to a disciplinary authority that a member of staff may have committed a breach of discipline”. Wherever a member of staff denies the truth of a charge, the Director-General is required by s84(1) and Regulation 15(1) “to deal with the charge”.

112 As to the second stage, the statutory decision-maker may choose either the explanation route or the inquiry route, under Regulations 15 and 16. In either event there is a supervening obligation to accord procedural fairness as a matter of administrative law. (See Hill v Green supra esp at [39]-[45], [83] and [94]-[95], [98].)

113 As to the third stage, it is not clear whether the limitation on the authority of the Director-General was regarded by his Honour to arise from statute or contract.

114 One factor that is common to all three stages is the inhibiting effect on the process of investigation and decision that would arise if the law were to impose a duty of care to avoid the risk of mental trauma to the person whose conduct was being investigated.

115 As a general rule, in my opinion, it is undesirable to inhibit an investigation into the exercise of a statutory power which protects public interests by imposing the chilling effect of a risk of civil liability. As Lord Keith of Kinkel said with reference to police investigation of crime:

“In some instances the imposition of liability may lead to the exercise of a function being carried on in a detrimentally defensive frame of mind.”

Hill v Chief Constable of West Yorkshire

116 In X (Minors) v Bedfordshire County Council [1995] 2 AC 633, Lord Browne-Wilkinson said:

“… a common law duty of care cannot be imposed on a statutory duty if the observance of such common law duty of care would be inconsistent with, or have a tendency to discourage, the due performance by the local authority of its statutory duties.” (at 739)

“… the task of the local authority and its servants in dealing with children at risk is extraordinarily delicate. Legislation requires the local authority to have regard not only to the physical wellbeing of the child but also to the advantages of not disrupting the child’s family environment … if a liability in damages were to be imposed, it might well be that local authorities would adopt a more cautious and defensive approach to their duties. … If the authority is to be made liable in damages for a negligent decision … there would be a substantial temptation to postpone making such a decision until further inquiries have been made in the hope of getting more concrete facts. Not only would the child in fact being abused be prejudiced by such delay: the increased workload inherent in making such investigations would reduce the time available to deal with other cases and other children.” (at 750)

117 These passages were relied on in the South Australian Supreme Court in Sullivan v Moody and implicitly referred to with approval in the High Court. (See at [30], [39] and [59]. Cf Barrett v Enfield London Borough Council, supra, at 568.)

118 In Rowling v Takaro Properties Limited [1988] 1 AC 473 the Privy Council had before it a claim for damages said to have been caused by an ultra vires decision made by a Minister pursuant to a statutory power. The Privy Council identified a number of factors that militated against the imposition of any duty of care. A number of these considerations are material in the present context. These factors include the following at 502:

“… in the nature of things, it is likely to be very rare indeed that an error of law of this kind by a minister or other public authority can properly be categorised as negligent. As is well known, anybody, even a judge, can be capable of misconstruing a statute; and such misconstruction, when it occurs, can be severely criticised without it attracting the epithet ‘negligent’. Obviously, this simple fact points rather to the extreme unlikelihood of a breach of duty being established in these cases, … but it is nevertheless a relevant factor to be taken into account when considering whether liability in negligence should properly be imposed.”

119 Their Lordships went on to refer, as a further consideration, to “the danger of overkill” by reference to certain circumstances in which “the imposition of liability may even lead to harmful consequences”, about which their Lordships elaborated at 502:

“… once it became known that liability in negligence may be imposed on the ground that a minister has misconstrued a statute and so acted ultra vires, the cautious civil servant may go to extreme lengths in ensuring that legal advice, or even the opinion of the court, is obtained before decisions are taken, thereby leading to unnecessary delay in a considerable number of cases.”

Williamson v The Commonwealth

Lucy v The Commonwealth

McVicar v Commissioner for Railways (NSW)

308 His Honour set out the provisions that may have constituted such an overriding power, including s97, that was then in the same form as it is now. The consideration of s97 in Suttling is not determinative of the present case because, as Brennan J said at 442, even if the Crown’s right to dispense with services is not restricted, that is not determinative of whether or not there is a power to summarily dismiss a Crown employee. There was nothing capable of constituting a dismissal and reappointment on the facts of that case.

309 In the course of his reasoning in Suttling in this Court, McHugh JA, with whom Glass JA agreed (Kirby P dissenting), referred to s97 of the Act at 447G-448A:

Education Commission Act,

Gould v Stuart

Education

Commission Act

310 The argument in Gould v Stuart [1896] AC 575 to which his Honour was referring was the finding that in that case the prerogative right of dismissal had been abrogated by statute. (See McHugh JA in Suttling at 445 E.)

311 His Honour went on to refer to the statutory provisions authorising the Director-General to terminate the employment, indicating that none were applicable on the facts of the case. His Honour concluded that even if the appointment was terminable at the pleasure of the Crown, “the appointment was not properly terminated” (450G). Nothing in the judgment in the High Court detracts from this conclusion.

312 The purpose of s97 is to preserve to the Crown the prerogative that it traditionally enjoyed with respect to servants of the Crown and to provide for the consequences, or rather the lack thereof, of an exercise of such power. The focus is on the acts of the Crown.

313 It is by no means clear that the Director-General has any statutory or other authority to act in the name of or on behalf of the Crown, in this relevant respect. This position is contrasted with the express provision in the qualificatory introductory words of s52 and the express terminology of s23A, both quoted above, providing that, in the respects to which those sections refer, the Secretary of the Department of Education and Youth Affairs acts for the Crown.

314 In Suttling at 450E, McHugh JA noted that the conduct in question in that case was that of the Director-General and not of the Crown. His Honour added:

“It does not follow that, because a person has authority to employ on behalf of the Crown, he has an independent authority to dismiss on behalf of the Crown.”

315 In the High Court, Brennan J at 442.5 distinguished the Crown from the Director-General, by noting that, on the facts of that case, it was not the Crown but the Director-General who purported to prematurely terminate appointment to a particular office.

316 In my opinion, the Appellant has not established any right on the part of the Director-General to act on behalf of the Crown. Section 97(1) has no application.

317 In any event, s97(1) was never invoked. The Appellant apparently realised at a late stage of the proceedings before the trial judge, that it had exercised the Crown prerogative to dispense with the services of an employee, without knowing it. The Appellant’s submissions place the Director-General in the position of Monsieur Jourdain in Moliere’s Le Bourgeois Gentilehomme, who realised one day that he had spoken prose all his life, without knowing it.

318 As indicated above, the first decision of the Director-General was to reject a recommendation to the effect that the Respondent be permitted to resign. He made a decision that the Respondent be directed to resign. The Director-General of Education was empowered to do this by s85(2) of the Act as set out above. The Director-General subsequently accepted the recommendation that he vary his earlier decision and simply accept the Respondent’s previous resignation. There is no proper basis for any inference that, in some way, the Crown prerogative, affirmed by s97(1), had been exercised.

319 The facts and matters pertinent to the consideration of whether or not to exercise the power conferred by s85(2) differ from those that may be relevant to accepting a resignation with consequences at common law, and differ once again from the exercise of a Crown prerogative which, although affirmed in its existence by s97, raises important issues relating to the executive arm of government. The scope of considerations pertinent to the decision-making process under the three different regimes varies so much that there is no proper basis for the submission that the Director-General of Education, even if he had the authority to “exercise the Crown prerogative”, would necessarily have done so. The Appellant called no evidence.

320 This conclusion is reinforced in the present situation, where the recommendations to the Director-General – he giving no explanation of his own thought processes – proffered reasons for not acting on his original decision to direct a resignation involving matters of importance to the Teaching Service in its relations with the particular community served by the school in question and also with the teachers of the school. The change of approach was, it appears, at least in part, based on a recognition that the best interests of the administration of the education system would be served by permitting the Respondent to resign in circumstances of dignity, where he could return to the school, have the appropriate farewells and allow his resignation to take effect. These were interests of the Service to be served by the adoption of what may have appeared to be a more lenient course. Furthermore, the Director-General was advised that the Respondent’s rights to review the decision particularly before the Industrial Relations Commission and, possibly, on appeal to GREAT Tribunal, would be adversely affected, again, it appears, with perceived advantage to the educational bureaucracy.

321 There is no foundation of an evidentiary character for the proposition put to this Court that the Director-General was so determined to get rid of the Respondent that either he, or the Crown at his instigation, would have taken whatever steps were available to effect that result.

322 That is, in any event, an extraordinary submission to be made with respect to the exercise of a statutory or prerogative power. This is not only so because there was no evidence of any such determination, although that would be enough. It is because the submission is made on a basis that the holder of a statutory office, or representative of the Crown, would act in any way necessary to achieve a result, irrespective of the procedural or substantive requirements that attach to the power being exercised. This is not an appropriate assumption to be made in the case of the State of New South Wales.

323 The Appellant’s submissions on s97(1) should be rejected.

324 At the conclusion of its oral submissions in reply, the Appellant invoked s97(2) that prohibits compensation by reason of “his services being dispensed with” whether under s97(1) “or otherwise”. The Appellant was given leave to rely on s97 by the trial judge during the course of the trial. No amended defence has ever been filed. I would not myself give the Appellant leave to invoke this provision in the way it sought to do in this Court in reply.

325 In any event, s97(2) requires services to have been “dispensed with”, relevantly, otherwise than under s97(1). The only basis for the submission that there had been such an act was the conduct said to constitute the acceptance of the resignation. For the reasons discussed above, that conduct did not “dispense with” the services of the Respondent. Accordingly, s97(2) is of no assistance to the Appellant.

Conclusion

326 For the above reasons the appeal should be allowed with respect to the finding in negligence.

327 The contract case was put before this Court on a narrow and, in some respects, artificial basis. The submissions that challenged the trial judge’s finding that the Respondent’s employment was never terminated should be rejected. No appeal was pursued in this Court to interfere with his Honour’s award of damages on this basis. I would not wish to be taken to approve the trial judge’s award of stigma damages. That issue was not raised in this Court.

328 The orders I propose are:

1. Appeal allowed in part.

2. Set aside his Honour’s order for judgment in the sum of $307,439.

4. Order the Appellant to pay one half of the Respondent’s costs of the appeal.

329 MASON P: I have had the advantage of reading the reasons of Spigelman CJ and Giles JA in draft.

330 I agree that the appeal should be upheld in relation to the negligence claim. I agree with the reasons of Spigelman CJ.

331 Those reasons also explain the (limited) issues fought at trial on the two alternative contract claims.

332 I agree with the Chief Justice’s reasons explaining why s97 of the Teaching Services Act 1983 (the Act) does not assist the appellant.

333 Graham DCJ found in the respondent’s favour that his contract of employment was never lawfully terminated, with the consequence that the appellant’s breach consisted of non-payment of salary and other entitlements as they fell due up until 1 March 2001. This, despite the fact that the respondent ceased working on 2 March 1998, being his previously notified date of resignation, and thereafter received superannuation benefits accordingly. And (in light of this Court’s conclusions in the tort claim) despite his proven disabilities for which the State bears no legal responsibility. The damages awarded included a “stigma damages” component. Nevertheless, there is no appeal on quantum of contractual damages.

334 On 13 October 1997 the respondent signed a notice of resignation which was stated to take effect from 2 March 1998. He filled out a printed form that referred to his “position” as Principal at Cromer High School which stated “Retirement” as his “Reasons for Resignation”. He forwarded the form to the District Superintendent for the Northern Beaches District Office of the Department of School Education. She received it “for processing”. She in turn sent it to the Manager, Employee Relations by letter of 20 October 1997. The letter continued:

Greg Watkins, our Senior Industrial Officer, has advised today not to forward the retirement form to Teacher Services until Mr Paige’s case has been finalised by the Employee Relations Unit.

I hereby enclose Mr Paige’s Retirement Form for you to forward to Teacher Services for processing when the timing is appropriate.

335 On 16 December 1997 the respondent purported to withdraw his “notice of retirement” by letter to the Officer-in-Charge, School Staffing Unit.

336 It is common ground that the respondent was an officer permanently employed in the Education Teaching Services. Subject to statutory modification, his rights and obligations as an employee stemmed from this employment relationship with its common law incidents (see generally Suttling v Director-General of Education (1985) 3 NSWLR 427).

337 It is also common ground that a normal incident of an employment relationship is that it is unilaterally terminable by either party upon due notice (see generally Marks v The Commonwealth (1964) 111 CLR 549 at 570-1, Birrell v Australian National Airlines Commission (1984) 5 FCR 447 at 457-8).

338 Why then did the resignation notice not bring about the effective termination of the respondent’s employment (with its attendant emolument rights) as at 2 March 1998? No one suggests that the period of notice was inadequate.

339 As Spigelman CJ points out, four arguments have been suggested as to why the general principle was displaced. I deal with them in an alternative sequence and state the propositions slightly more fully than the Chief Justice’s summation of them.

(i) The resignation never took effect because notice was not given to the Department

340 In my view, the respondent’s letter of 13 October 1997 reached his employer.

341 I agree with Giles JA, adding the following observations. First, such a conclusion gives effect to the respondent’s apparent intention. Nothing in the form indicates that the respondent was treating it as held in suspense or escrow. It was sent to his District Superintendent without evident qualification on the respondent’s part. Second, his solicitor’s letter of 14 January 1998 states that “Before he was charged, Mr Paige had notified the Department that he wished to retire on 1 March 1998” (Blue 91). Third, the letter of 11 December 1997 purporting to “withdraw” the notice of retirement implicitly accepts that it had previously been delivered to the employer and therefore may be treated as an admission to that effect (Lustre Hosiery Ltd v York (1935) 54 CLR 134 at 143).

342 The Chief Justice describes the issue as being whether or not the resignation reached the employer in the manner for which the contract of employment provided. I do not see the need for such a restricted qualification, either in the cases or in principle. A contract of employment may be silent as to the procedure to be followed in relation to termination, or that procedure may be by-passed deliberately or through oversight. The general rules as to agency and the receipt of notice in the course of agency are capable of adaptation to the issue (see eg Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679).

(ii) Since the notice of resignation was tendered in “the heat of the moment” it was capable of being withdrawn, as occurred on 16 December 1997

343 If such a principle exists, it did not apply in the present case. I agree with the reasons of Spigelman CJ and Giles JA.

(iii) Section 78 of the Teaching Services Act 1983 modified the common law so that the resignation could not take effect unless and until it was accepted by the Director-General: this did not occur until it was too late because it was constructively rejected and/or withdrawn before acceptance

344 Section 78 provides:

78 Vacation of position

An officer of a Teaching Service shall be deemed to have vacated the officer’s position if:

(a) the officer dies, or

(b) the officer resigns the officer’s position by writing signed by the officer and delivered to the appropriate Director-General and the officer’s resignation is accepted by that Director-General.

345 Giles JA refers to several provisions in the Act which distinguish between the teacher’s employment and the “position” or “office” to which he or she may be appointed at a particular time. I respectfully agree with his conclusion that “an officer, that is, a person employed in a Teaching Service, will normally hold a position, but the position may change. The promotions system, with its appellate rights, is a monument to the distinction”.

346 I am less comfortable with his Honour’s conclusions as to the limited impact of s78 in cases where an officer tenders his or her resignation from the Teaching Service in unequivocal terms. It is a matter on which I would have hoped the Court might have received fuller assistance from the appellant, especially since s78 has counterparts in other public sector employment legislation in this State (eg s37 of the Public Sector Management Act 1988).

347 In the events which have occurred, a proper understanding of s78 has become central to the resolution of the contract claim in light of the approach adopted by Giles JA and myself on all other matters. It is unfortunate that the appellant (or its insurer) has not thought fit to approach the office of the Crown Solicitor for access to accumulated wisdom on a rather vital provision.

348 The upshot is that the Court has largely had to grapple as best it may with the issues thrown up by s78 and the possible distinction in this context between the contractual relationship of employment (with statutory overlay) and the statutory regime governing “positions” and “offices” in the Teaching Service.

349 I share Giles JA’s reluctance to equate public sector employment with enslavement “with hope only in either death or manumission” by the Director-General. But s78 obviously has some work to do. In Marks at 571-3 Windeyer J gives several examples of Commonwealth enactments expressed in similar terms to s78, describing them (at 573) as examples of situations where vacation by resignation of an office or place may require or await consent. If one of its functions is to prevent disciplinary proceedings being thwarted by a non-directed resignation (cf s85), then it may be that it governs any attempt by the holder of a position to resign from the Teaching Service unilaterally.

350 The harshness of the potential impact of s78 can be controlled to some degree by administrative law principles which would undoubtedly impose a duty of reasonably prompt attention and exclude the intrusion of irrelevant considerations or conduct unreasonable in the Wednesbury sense. Thus controlled, it is possible that s78 may not have to be read down further, as suggested by Giles JA. I prefer to leave that matter until it arises squarely.

351 If one turns to the facts of the present case, it is clear that the respondent purported to give notice of intention to resign from his employment and his position concurrently. His notice of resignation/retirement referred to his position as Principal of Cromer High School. I find it impossible to accept that he intended the Department to have the option of accepting the laying down of the position while retaining him as an employee. The converse is also negated implicitly by the terms of the notice, as well as by a matter to which Giles JA adverts, namely the inevitable falling vacant of a position that accompanies an effective resignation.

352 It is possible that the presence of s78 or some practice surrounding its operation was the basis of the respondent’s belief that there was some capacity to revoke his notice of resignation. Unfortunately, this is mere speculation in light of the evidence.

353 The respondent’s expressed intentions do not of course control the common law principle about the unilateral effect of due termination by notice or the operation of s78 itself. What is however sufficiently clear is that the respondent tendered notice of his resignation/retirement from both his employment in the Teaching Service and his position as Principal of Cromer High School. The two roles were coincident to him at this (terminal) stage of his career. His notice did not purport to offer the Director-General the choice of splitting the notice into two parts.

354 Section 78 is quite explicit in stipulating that the resignation from the position could not take effect until it had been both delivered to the Director-General of Education and accepted by that Director-General. Neither event happened before the resignation was withdrawn. In the absence of submissions to the contrary based upon the legislation (as distinct from the common law principle), I am prepared to hold that it was open for the respondent to withdraw the resignation in the circumstances of this case where the “processing” of the resignation was deliberately held back by the respondent’s superiors pending disciplinary action by the Director-General. I do not have to decide what would be the situation if the notice were withdrawn before being dealt with by the Director-General within a reasonable time and in the normal course. Neither happened here. The “Department’s” delay and deliberate stalling gave the respondent a locus penitentiae which he accepted by withdrawing the resignation (cf McGarry, “Termination of Employment Contracts by Notice” (1986) 60 ALJ 78 at pp80-1).

(iv) There was a Departmental practice permitting withdrawal of resignation.

355 I agree with Spigelman CJ and Giles JA that this has not been established on the evidence.

356 I agree with the orders proposed by the Chief Justice.

357 GILES JA: I have had the advantage of reading the reasons of Spigelman CJ in draft.

358 I agree that the appeal should be upheld in relation to the respondent’s claim in negligence, and with one qualification with his Honour’s reasons in that respect. The qualification is that, assuming the duty of care, I do not think that the respondent established that proceeding by the explanation route rather than the inquiry route was a breach of the duty of care. Since the claim in negligence fails for many other reasons, it is unnecessary to elaborate.

359 For the reasons which follow, in my opinion the appeal should also be upheld in relation to the respondent’s claim in contract. My reasons assume familiarity with those of Spigelman CJ.

360 The claim in contract was pleaded in the alternative. Common to both alternatives was the allegation that the respondent was employed by the appellant pursuant to a contract of employment between them. This allegation was admitted. As one alternative, it was alleged that on 23 January 1998 the appellant terminated the contract of employment and that by doing so it breached the contract. As the other alternative, it was alleged that the contract of employment had not been lawfully terminated at any time, as a separate allegation that the purported termination on 23 January 1998 was void and of no legal effect, and that the appellant breached the contract by failing to pay the respondent his salary and other benefits on and from 2 March 1998. All these allegations were not admitted.

361 The breaches of contract alleged for the claim in contract were quite different. One was (wrongful) termination of the contract of employment. The other was failure to perform the contract of employment by paying the respondent his salary and other benefits.

362 Graham DCJ found for the respondent on the second alternative. The breach of contract depended on the continuance of the contract of employment.

363 The respondent had alleged that the purported termination on 23 January 1998 was ineffective, but had alleged more widely that the contract of employment had not been terminated at any time. As the hearing was conducted, one of the issues was whether the contract of employment had been terminated by reason of the respondent’s resignation of 13 October 1997, so that he was not entitled to be paid his salary and other benefits on and from 2 March 1998. The appellant’s arguments included that the resignation could not be withdrawn and took effect as of 1 March 1998, thereby terminating the contract of employment. Although linked with whether there was an extant resignation which the Director-General could accept, in truth this was independent of any question of acceptance of the resignation on 23 January 1998.

364 Graham DCJ did not accept the appellant’s argument in this respect, for two reasons. Underlying both reasons was acceptance that generally in a contractual context a resignation once conveyed can not be withdrawn: that it is a unilateral act effective in accordance with its terms, and that although reference is sometimes made to acceptance of a resignation it is not necessary for effectiveness that the party to whom the resignation is conveyed accept the resignation. The general principle is explained by Spigelman CJ. It does not appear to have been in contention at the trial, and was not in contention in the appeal.

365 The first of Graham DCJ’s reasons was that the respondent’s resignation fell within an exception to this general principle, whereby there may be withdrawal of a resignation “given in heat or in a state of emotional stress or as a result of being jostled into a decision by the employer”: his Honour cited from Achal v Electrolux Pty Ltd (1993) 50 IR 236 at 238.

366 The second of Graham DCJ’s reasons was that s 78 of the Teaching Services Act 1983 modified the general principle by making acceptance of the resignation by the Director-General necessary for its effectiveness. That led on to whether there had been acceptance of the resignation by the Director-General, and his Honour held that there had not because it had not been open to the Director-General to defer acceptance and there had been a constructive refusal to accept the resignation.

367 The appellant’s ground of appeal, “The trial judge erred in finding that at all material times the Respondent remained an employee of the Appellant” raised these reasons for consideration. In addition, the reasons of Spigelman CJ raise for consideration two other reasons why the general principle might not have applied.

368 I do not think that the respondent’s resignation fell within the exception concerning heat of the moment or emotional stress.

369 The respondent explained that as the investigation into his conduct evolved -

“ … it started to become to me that it just wasn’t going to be a slap on the wrist for me. I was being manoeuvred into a position where something fairly drastic was going to happen and it was in a moment of weakness on my part that I said to myself to hell with this, why should I carry on in this sort of situation, I’ll retire on my next birthday and that was some time in October, I think.”

370 The respondent then sent in his resignation. Later in his evidence he said that it was in his mind that he could withdraw the resignation if he “didn’t want to go ahead”, that his resignation was not a final decision, but a possibility, because he “knew I could withdraw it at a later date if I wanted to”, and that he would “wait and see what happened … but not just as far as the charges were concerned. There were a lot of other things.” Later again he said that he thought that he could withdraw his resignation at his discretion.

371 The resignation was withdrawn by a letter of 16 December 1997. The respondent explained why he withdrew it. There had been a “very, very successful” final presentation night at his school, and many of his staff and parents pressed him not to retire. He had recently received the recommendation that he be allowed to resign, which had made him angry. The respondent said that it was a combination of those matters plus the fact that he finally seemed to “be reaching the top of the hill”, that is, that a number of things he had worked for at the school were coming to fruition and he was proud of them. He described these matters, which justified his pride.

372 The respondent’s resignation was not a resignation which, in the circumstances in which it occurred, should be regarded as other than a voluntary act, or should be regarded as something to which it would be unconscionable to hold him. It was a conscious choice, for reasons which seemed good at the time and according to the respondent in the belief that it could be withdrawn. There was nothing to show that the appellant had engendered that belief. The choice was maintained for two months. The decision to withdraw the resignation was not because it had been the product of stress or emotional disturbance, but because of a change of mind. The change of mind was in large part by reason of later events. On the widest reasonable view of the exception, it did not apply.

373 Spigelman CJ has considered s 78 of the Teaching Services Act, but has found it unnecessary to come to a final view. My conclusions as to the other reasons mean that I must do so.

374 It is convenient to repeat s 78 -

“78. An officer of a Teaching Service shall be deemed to have vacated his position if -

(a) he dies; or

375 “Officer” is relevantly defined in s 4(1) as meaning a person employed in a Teaching Service other than a temporary employee. There is no definition of “position”, save that in s 4(1) it is said that it “includes office”. There is no definition of “office”. It is clear, however, that there is a distinction between being an officer and having a position. There are different classes of positions and different positions, and officers are appointed, promoted or transferred to positions, see for example ss 38(1)(f), (g), (h); 59D; 59E; 60; 71; 74; 75; 76 and 96. An officer, that is, a person employed in a Teaching Service, will normally hold a position, but the position may change. The promotions system, with its appellate rights, is a monument to the distinction.

376 A range of provisions prior to s 74 are concerned with the filling of positions by officers in the Teaching Service, by appointment, promotion or transfer. By s 74, declining an offered appointment or promotion does not prejudice an officer’s rights in resect of any future appointment or promotion, but by s 75 an officer’s refusal of a direction for removal from one position to another without valid and sufficient reason gives grounds for dismissal from the Teaching Service. Section 76 deals with the consequences of invalidity or incapacity by which an officer can not perform the duties of his or her position, the consequences including either compulsory retirement or consensual transfer to another position. Section 78 then provides for an officer’s deemed vacation of a position, by death or by accepted resignation.

377 The evident purpose, in my view, is that in the interests of the proper functioning of the Teaching Service the Director-General have control, subject to appellate rights, over what officer holds what position. Subject to appellate rights, an officer can not dictate what position the officer will fill. Nor can an officer dictate that the officer will not change the officer’s position, in that refusal to change when directed exposes the officer to dismissal. Nor short of death can an officer dictate that the officer will vacate the officer’s position, leaving the officer a person employed in the Teaching Service to whom another position must be given, because there must be the Director-General’s concurrence expressed through acceptance of a resignation from the position. Section 78 addresses only an officer’s position, not the officer’s employment in the Teaching Service. It would be another and more significant step if the Director-General could in effect forbid an officer to leave the officer’s employment in the Teaching Service as distinct from the position held by the officer in the Teaching Service.

378 An officer can cease to be employed in the Teaching Service by resigning in the usual way. If the officer resigns from the officer’s employment the position will fall vacant, but because the officer is no longer an officer and not because the officer resigned the position. For the deemed vacation of a position it is necessary that there be acceptance of a resignation from the position, but that does not mean that the employment in the Teaching Service comes to an end. Acceptance of a resignation is not necessary to bring the employment to an end. If it were, every employee would be enslaved, with hope only in either death or manumission by the Director-General.

379 In my opinion, s 78 is better understood in this way than as a recognition of the common law principle that resignation from an office in the service of the Crown only takes effect upon acceptance, see the discussion by Windeyer J in Marks v The Commonwealth (1964) 111 CLR 549 at 567-76. Members of a Teaching Service are deemed to be employed by the Government of New South Wales in the service of the Crown (s 42), but employment in a Teaching Service is far distant from the holding of an office as an assignable item of property on which that principle is founded. As Windeyer J says of resignation from an office (at 570), “that there cannot be unilateral resignation has in modern times become attenuated”. The rights of persons such as the respondent must be ascertained from the legislation. Having a position is distinct from and additional to being an officer, and s 78 has appropriate effect confined to resignation from a position.

380 Spigelman CJ addresses two other reasons for not accepting the appellant’s argument that the resignation could not be withdrawn and took effect as of 1 March 1998.

381 The first reason is that the general principle was modified in the particular relationship between the respondent and the appellant. His Honour says that there was uncontradicted evidence from the respondent to the effect that the practice was to permit resignations to be withdrawn, regarding the evidence as evidence of practice and not merely of the respondent’s belief. But his Honour considers that the evidence did not go far enough for a legal consequence favourable to the respondent. I agree in the result, but on rather different reasoning.

382 As I have indicated, the respondent alleged and the appellant admitted employment pursuant to a contract of employment. There was not a jot of evidence to establish the terms and conditions of the contract of employment.

383 The respondent’s resignation was by completion of a printed form bearing the notations “Detailed advice is contained in the Handbook (2.20)” and, a few lines later, “At least one month’s notice should be given. If retiring at the end of the school year the notice is required by 1st September”. When in the course of the respondent’s evidence he said that “[a]ny teacher has the right to withdraw a retirement or resignation I believe up until the date or the day before”, Graham DCJ drew attention to the reference to the Handbook and asked if he was to be referred “to anything in there that might shed any light on the belief or practice”. Counsel for the respondent said, “We’ll see if we can find one”, and elicited that the respondent was “not relying on any advice in any handbook”. That is where the matter was left.

384 Apart from this assertion of a belief, in the evidence already mentioned the respondent said that it was in his mind when he gave his resignation that he could withdraw it if he did not want to go ahead; that his resignation was not a final decision, but a possibility, because he knew he could withdraw it at a later date if he wanted to; and that he thought that he could withdraw his resignation at his discretion. Except that it appears not to have come from the Handbook, there was no evidence of the basis for his state of mind. Whether it was founded on a practice, and if so precisely what practice, was not established. It was not established despite Graham DCJ’s inquiry. That the state of mind was well-founded is belied by the second of the notes on the form to which I have referred, the point of which could only have been that the period of notice was needed and the employer would act upon the resignation.

385 In my opinion, this is altogether too fragile a basis for concluding that, as part of the terms and conditions of the contract of employment or in any other way, in the relationship between the respondent and the appellant the general principle was modified so that the respondent’s resignation was not effective as a unilateral act and was capable of withdrawal. If there were a practice, its legal effect would be open to argument (although I do not suggest that the evidence otherwise would bring a legal consequence favourable to the respondent.) But the practice was not established.

386 The second reason is that the respondent’s resignation could be withdrawn because it did not reach his employer. His Honour considers that the resignation did not reach the employer because it did not reach the employer in the manner for which the contract provided. I am respectfully unable to agree.

387 The printed form had a further notation that it was to be sent direct to “Data Control Officer” at a GPO box number. There was no evidence as to this officer. The respondent sent the resignation to his district superintendent. In the letter of 20 October 1997 set out by Spigelman CJ the district superintendent referred to the resignation as received “for processing”, and said that she had been advised [obviously by a superior] not to forward it to Teacher Services for processing “until Mr Paige’s case has been finalised by the Employee Relations Unit”. In my view the district superintendent received the letter as an emanation of the employer. “Processing” to my mind suggests that, as does the determination without reference to the respondent to place the resignation in some kind of limbo: if she did not represent the employer, the district superintendent would hardly have acceded to the direction not to have it processed. More important, the district superintendent was the respondent’s superior officer in the hierarchy and the person with whom he naturally dealt in, amongst other things, conveying his resignation. She was the equivalent to the stores superintendent in Reardon v The War Office (1959) 1 WLR 1046. In agency terms, she received the resignation not as an agent for the respondent to pass on to the respondent’s employer but as the employer, and I am unable to see anything whereby sending his resignation to his district superintendent was not in accord with what little we know of the respondent’s contract of employment. In my opinion, the resignation reached the respondent’s employer.

388 In the result, therefore, I consider that the appeal should be upheld in relation to the claim in contract because the respondent’s resignation took effect in accordance with its terms despite his purported withdrawal. There was no breach of contract in failing to pay the respondent his salary and other benefits on and from 2 March 1998. The appellant does not need s 97 of the Teaching Services Act, but for completeness I should say that I agree with what Spigelman CJ has said in that respect.

389 I propose the orders -

Citations

State of New South Wales v Paige [2002] NSWCA 235

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CITATION:	STATE OF NEW SOUTH WALES v PAIGE [2002] NSWCA 235
FILE NUMBER(S):	CA 40293/01
HEARING DATE(S):	31/1/02
JUDGMENT DATE:	19 July 2002
PARTIES :	State of New South Wales Peter Rankin Paige
JUDGMENT OF:	Spigelman CJ at 1; Mason P at 329; Giles JA at 357

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	DC 3492/99
LOWER COURT JUDICIAL OFFICER :	Graham DCJ

COUNSEL:	P Menzies QC / B J A Shields (Appellant) G B Hall QC / C Locke (Respondent)
SOLICITORS:	Moray & Agnew (Appellant) Velleley & Associates (Respondent)
CATCHWORDS:	TORTS - negligence - novel duty of care - interaction with administrative law - interaction with employment law - whether novel duty of care would infringe legal coherence - whether duty of care to conduct disciplinary proceedings so as to avoid psychological injury to teacher - TORTS - negligence - causation - whether evidence of causation goes to alleged breach of duty - CONTRACT - employment contract - interaction with provisions of statute - whether resignation received - whether resignation validly acted upon - whether resignation effectively withdrawn
LEGISLATION CITED:	Education Commission Act 1980 Industrial Relations Act 1996 Public Sector Management Act 1988 Teaching Services Act 1980 Teaching Services (Education Teaching Service) Regulation 1994 Workplace Relations Act 1996 (Cth)
CASES CITED:	Achal v Electrolux Pty Limited (1993) 50 IR 236 Addis v Gramophone Co [1909] AC 488 Aldersea v Public Transport Corporation (2001) 183 ALR 545 Annetts v Australian Stations Pty Limited (2000) 23 WAR 35 Attorney General (NSW) v Quin (1990) 170 CLR 1 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 B v Attorney General [1999] 2 NZLR 296 Baltic Shipping Co v Dillon (1993) 176 CLR 344 Bankstown Foundry Pty Ltd v Braistina (1986) 160 CLR 301 Barrett v Enfield LBC [2001] 2 AC 550 Bienke v Minister for Primary Industries & Energy (1994) 125 ALR 151 Bienke v Minister for Primary Industries & Energy (1996) 63 FCR 567 Birrell v Australian National Airlines Commission (1984) 5 FCR 447 Brodie v Singleton Shire Council (2001) 75 ALJR 992 Burazin v Blacktown City Guardian (1996) 142 ALR 144 Caparo Industries Plc v Dickman [1990] 2 AC 605 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 Director-General of Education v Suttling (1986) 162 CLR 427 Dunlop v Woollahra Municipal Council (No 2) (1978) 40 LGRA 218 Dunlop v Woollahra Municipal Council [1982] AC 158 EMI (Australia) Ltd v Bes [1970] 2 NSWR 238 Fernandez v Tubemakers of Australia [1975] 2 NSWLR 190 Finch v Oake [1896] 1 Ch 409 Gifford v Strang Patrick Stevedoring Pty Ltd (2001) 51 NSWLR 606 Gogay v Hertfordshire County Council [2000] IRLR 703 Gould v Stuart [1896] AC 575 Hill v Chief Constable of West Yorkshire [1989] 1 AC 53 Hill v Green (1999) 48 NSWLR 161 Hill v Van Erp (1997) 188 CLR 159 Husain v BCCI [2002] EWCA Civ 82 Johnson v Unisys [2001] 2 WLR 1076 Kioa v West (1985) 159 CLR 550. Lucy v The Commonwealth (1923) 33 CLR 229 Lustre Hosiery Ltd v York (1935) 54 CLR 134 Macksville & District Hospital v Mayze (1987) 10 NSWLR 708 Malik & Mahmud v BCCI [1997] 3 WLR 95 Marks v The Commonwealth (1964) 111 CLR 549 Martin v Yeoman Aggregates Limited [1983] ICR 314 McVicar v Commissioner for Railways (NSW) (1951) 83 CLR 528 Morgan v Tame (2000) 49 NSWLR 21 Ngo v Link Printing Pty Limited (1999) 94 IR 375 Northern Territory v Mengel (1996) 185 CLR 307 Park Oh Ho v Minister for Immigration and Ethnic Affairs (1989) 167 CLR 637 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 Phelps v London Borough of Hillingdon [2001] 2 AC 619 Pyrenees Shire Council v Day (1998) 192 CLR 330 R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 Redhead Grange Incorporated v Brett Davidson [2002] NSWSC 90 Reynolds v Katoomba RSL All Services Club Ltd (2001) 53 NSWLR 43 Riordan v War Office [1959] 1 WLR 1046 Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431 Rowling v Takaro Properties Limited [1988] 1 AC 473 Russell v Duke or Norfolk (1949) 1 All ER 109 Sanders v Snell (1998) 196 CLR 329 Sayali v Rangi [1986] 4 ACLC 239 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 South Australia v The Commonwealth (1962) 108 CLR 130 State of New South Wales v Seedsman [2000] NSWCA 119 Sullivan v Moody (2001) 75 ALJR 1570 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Suttling v Director-General of Education (1985) 3 NSWLR 427 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Waverley Council v Lodge [2001] NSWCA 439 Welbridge Holdings Ltd v Metropolitan Corporation of Greater Winnipeg (1972) 22 DLR (3d) 470 Williamson v The Commonwealth (1907) 5 CLR 174 Wiswell v Metropolitan Corporation of Greater Winnipeg (1965) 51 DLR 2ND 754 Wyong Shire Council v Shirt (1979) 146 CLR 40 X (Minors) v Bedfordshire County Council [1995] 2 AC 633
DECISION:	The appeal on negligence is upheld. The appeal on contract is dismissed. The award of damages below is quashed and damages for breach of contract as assessed below substituted.