Allstate Life Insurance Co v Australia and New Zealand Banking Group Limited

IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No NG 376 of 1996 GENERAL DIVISION ) On appeal from the Supreme Court of Norfolk Island BETWEEN: WILLIAM WINTON SANDERS Appellant/Cross Respondent AND: LISLE DENIS SNELL Respondent/Cross Appellant

CORAM: Wilcox, O'Loughlin, Lindgren JJ PLACE: Sydney DATE: 9 April 1997 MINUTE OF ORDERS THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the respondent's costs of the appeal. 3. The cross-appeal be allowed. 4. Order 1 made on 19 April 1996 in proceeding No SC3 of 1993 in the Supreme Court of Norfolk Island be varied by substituting for the symbol and figures "$17,000" the symbol and figures and words "$70,000 including interest to 19 April 1996". 5. The cross respondent pay the cross-appellant's costs of the cross-appeal. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No NG 376 of 1996 GENERAL DIVISION )

BETWEEN: WILLIAM WINTON SANDERS Appellant/Cross Respondent AND: LISLE DENIS SNELL Respondent/Cross Appellant CORAM: Wilcox, O'Loughlin, Lindgren JJ PLACE: Sydney DATE: 9 April 1997

REASONS FOR JUDGMENT THE COURT: The Court has before it an appeal and cross-appeal against a judgment of the Chief Justice of the Supreme Court of Norfolk Island given on 19 April 1996. His Honour gave judgment for the respondent, Lisle Denis Snell, as plaintiff against the appellant, William Winton Sanders, as defendant for $17,000 with costs. He dismissed with costs a third party action by Mr Sanders against The Administration of Norfolk Island ("The Administration"). The case arose out of the termination on Friday 19 June 1992 of the employment of Mr Snell as Executive Officer of the Norfolk Government Tourist Bureau ("the Bureau") . Mr Sanders was the Minister for Immigration and Tourism in the Sixth Legislative Assembly of Norfolk Island. He was the "executive member" who administered the Norfolk Island Government Tourist Bureau Act 1980 ("the Act"). Pursuant to a statutory power to give directions to the Bureau, he had, on Wednesday 17 June 1992, given a direction to the Bureau to take, by 4 pm that day, the necessary steps to terminate Mr Snell's employment. That direction was not carried out and, on the night of Wednesday 17 June, he purported to revoke the appointments of all six of the then members of the Bureau with effect from the next day, Thursday 18 June. On that day, he purported to appoint four persons in their place. On the same day, 18 June, he gave a fresh direction to the Bureau to take the necessary steps to terminate Mr Snell's employment. The newly constituted Bureau passed a resolution on the following morning, Friday 19 June, pursuant to which two of their number, Mr Stephen Horton and Mr John Brown, effected the termination that afternoon. Mr Snell sued Mr Sanders for damages for inducing the Bureau to breach its contract with him and for misfeasance in public office. The Chief Justice found in Mr Snell's favour on the cause of action of inducing breach of contract and awarded him damages of $17,000 and costs. The amount of $17,000 comprised three elements. The first was $500 representing the salary which his Honour estimated Mr Snell would have earned if the contract had not been breached, minus two months' salary in lieu of notice which the Bureau paid to him. The second element was $15,000 which was awarded to compensate Mr Snell for "loss of reputation, including prospects of re-employment at a senior executive level." The third element, of $1,500, was exemplary damages. His Honour did not find it necessary to determine Mr Snell's claim based on the allegation of misfeasance in public office. Mr Sanders appeals against the Chief Justice's findings on both liability and damages. Mr Snell cross-appeals, complaining that both the general and exemplary damages awarded were inadequate and that the trial Judge should have decided, and in his favour, the claim of misfeasance in public office. He seeks an award of compensatory damages of $50,000 and exemplary damages of $20,000 for that tortious conduct and for the inducement of breach of contract, those awards (totalling $70,000) being in the alternative (non-cumulative) in respect of the two causes of action. It is necessary to refer briefly to Mr Sanders' third party action against The Administration. Its suggested liability to indemnify him arose out of the conduct of Mr Don Wright, the Secretary to the Government of Norfolk Island, who had a legal background, and of Mr Terry Foulds, the Crown Solicitor. Mr Wright drew the instruments of direction, revocation, and appointment signed by Mr Sanders to which we have referred. The trial Judge found that Mr Sanders instructed Mr Wright to draft documents, not to advise him. Mr Foulds attended the meeting of, and advised, the four newly appointed members of the Bureau on the morning of Friday 19 June 1992. His Honour found that Mr Foulds' ultimate advice to the Bureau was that it was not at liberty to pay Mr Snell two months' salary in lieu of giving him two months' notice, unless he consented to that course. Mr Sanders does not appeal against the dismissal of his third party action. FACTS On 2 July 1990, Mr Snell was appointed Executive Officer of the Bureau. In the absence of an extension, his period of employment was two years. On 3 March 1992, with the encouragement of the then Minister, Mr George Smith, the members of the Bureau unanimously resolved that Mr Snell's existing contract be terminated with effect from 1 April 1992 and a new contract be entered into with him on that date. The reason, as recorded in the Bureau's minutes, was that the term of the original contract was due to expire on 30 June 1992 which was within weeks of the expiry of the terms of office of the members of the Bureau and of the members of the incumbent Fifth Legislative Assembly of Norfolk Island, and the interests of tourism on the Island would be served by ensuring some continuity. On 13 May 1992, elections were held for the Sixth Legislative Assembly. Mr Sanders was one of the successful candidates. On 19 May 1992, the Bureau and Mr Snell entered into a new contract. It was signed on behalf of the Bureau by its Chairman, Mr Ken Nobbs, and by Mr Snell. It was recorded that Mr Snell was engaged by the Bureau as from 2 April 1992. The contract specified no period of employment. But cl 9 provided for termination in these terms: "9 Termination of Employment (a) Where in the opinion of the Bureau the employee is absent from duty without authority or is guilty of misconduct, the Bureau may dismiss the employee by giving him one month's notice in writing of its intention to terminate the appointment or on payment of one month's salary in lieu of such notice. (b) Subject to 9(a) above, two months notice of intention to terminate the employment shall be given by either the Bureau or the employee."

The next day, 20 May, Mr Sanders was appointed as Minister for Immigration and Tourism, after a vote in the Assembly, and the following day, 21 May, he was sworn in by the Administrator of Norfolk Island to that office. On 2 June, Mr Sanders attended a meeting of the Bureau. At the meeting he asserted that it had been improper for the Bureau to enter into the new contract with Mr Snell prior to the election of the new Legislative Assembly. He said that in his view, the matter should have been left over for the new Minister who may have had a different view from that of the Bureau. Members of the Bureau explained that the steps towards the signing of a new contract had commenced as early as November 1991, and that the Bureau had wished to avoid a repetition of a situation which had occurred in 1990, when the Bureau, the Minister and the Executive Officer had been newly appointed at about the same time, with consequential difficulties for everyone. In his oral evidence, Mr Sanders said that he believed that the Bureau should have acted as "caretakers" only. The minutes of the meeting record that "copies of the contract were provided for the Minister's benefit." Mr Sanders had reservations about aspects of the Bureau's accounts, and, in particular, about payment of travel allowances. On 3 June, he engaged Mr Summerson of Ernst & Young, Brisbane, to investigate his concerns and to conduct a "spot audit" of the Bureau. Being aware of Mr Sanders' concerns, on 4 June 1992, Mr Snell forwarded to Mr Sanders a copy of his report to the Bureau for May 1992 which, inter alia, detailed the financial affairs of the Bureau, including air fares and travel allowances paid by the Bureau in respect of its members and employees since June 1988. On 9 June, Mr Sanders delivered to Mr Snell at the Bureau a direction from him (Mr Sanders) to the Bureau under sub-s 15 (1) of the Act. That sub-section, which assumes importance in connection with later events, is as follows: "15(1)The executive member may give to the Bureau directions as to - (a) the conduct of the business or affairs of the Bureau; and

(b) the manner in which the Bureau carries out its functions or exercises its powers, and the Bureau shall give effect to those directions."

Mr Sanders' direction dated 9 June was that the Bureau was to pay travelling allowances to its members and employees "in accordance with Administration Policy and Guidelines Circular No 21, as amended and in force from time to time, and not on any other basis." On 9 June, Mr Sanders instructed Mr Summerson to examine the Bureau's accounting system to check that all allowances paid to the Bureau's employees had been accounted for, and to prepare a report detailing his findings and recommendations. On 10 June, the "spot audit" was conducted. Mr Snell cooperated and made available all accounting records. However, when asked to produce receipts for travel allowances and expenses, he said that it was not the Bureau's practice to maintain those records. On 16 June, Mr Summerson faxed to Mr Sanders what was referred to in evidence by Mr Sanders as a "draft" report detailing what, in Mr Summerson's view, were deficient financial practices of the Bureau. The report asserted that the Bureau and its members had "failed to implement appropriate policies and procedures to ensure that all payments by the Bureau [were] properly authorised". Mr Sanders telephoned the Chairman of the Bureau, Mr Nobbs, and had the first of several conversations which are relevant to the misfeasance in public office claim. At this stage, it is sufficient to say that Mr Nobbs gave evidence that Mr Sanders said words to the effect "if you don't sack him [Mr Snell] I will", but agreed to keep the whole affair private if Mr Nobbs would dismiss Mr Snell. Mr Nobbs said that he replied that he needed time to review the report. For his part, Mr Sanders denied that he offered to ignore the whole affair if only Mr Nobbs would terminate Mr Snell's contract. According to Mr Sanders, his offer was that he would not raise the matter in Parliament if Mr Nobbs secured Mr Snell's resignation. Common to both versions is Mr Sanders' expression of his wish to see Mr Snell out of office. On the night of 16 June, Mr Sanders faxed to Mr Nobbs an incomplete copy of Ernst and Young's report (one page was missing). From this time, events of critical importance occurred with some rapidity. On the morning of Wednesday 17 June, Mr Nobbs informed Mr Snell that Mr Sanders had directed him to terminate his employment and that in the alternative he could choose to resign. That afternoon, Mr Sanders gave a written direction to the Bureau under sub-s 15 (1),

"to take such steps, prior to 4.00 pm on Wednesday 17 June 1992, as are necessary to terminate at the earliest practicable date, the employment, under section 12 of the Act, of Lisle Denis Snell."

As noted earlier, the direction was drawn up by Mr Wright, the Secretary to the Norfolk Island Government, pursuant to instructions from Mr Sanders. Apparently, at the time when he received the direction, Mr Nobbs had been on the point of faxing a letter to Mr Sanders. He sent a handwritten note to Mr Sanders informing him of this and enclosing a copy of the letter which he had composed, which was as follows: "Dear Bill, In our discussion day before yesterday, you informed me that you were expecting a formal report from the Tourist Bureau auditors, Ernst & Young. You said that the review of certain aspects of the Bureau, carried out during the past week or so by Ernst & Young, had revealed deficiencies of a financial nature, and that these were such as to warrant the termination of employment of the Bureau's Executive Officer. You asked me to secure the Executive Officer's resignation. You said that if I had not done this by 5pm today, you would issue a formal direction to the Board to terminate the Executive Officer's employment, and you showed me a typewritten draft for such a direction. As Chairman of the Tourist Bureau, I have no authority to dismiss any employee of the Bureau, or to firmly insist on an employee's resigning. These are matters requiring Board consideration and decision. I therefore discussed aspects of the situation with several Board members yesterday. If the Executive Officer suddenly vacates his position, it will quickly be known in the community that Ernst & Young made an examination, and it will likely become common talk in the community that the Executive Officer's departure was because of major financial wrong-doing on his part. This would seriously damage his future employment prospects in Norfolk Island and elsewhere. At my request you faxed to me last night a copy of Ernst & Young's 18-page formal Report. It was incomplete, with page 11 missing, and I received page 11 from you only this morning. I have now had a chance to read Ernst & Young's Report. While I must have more time to digest it thoroughly, I am seriously concerned about its harshly critical general tone, and about a number of specific allegations it makes. It includes certain damaging statements which are false. By clear innuendo it implies misconduct by the members of the Board and by the Executive Officer. I believe it is a defamatory document. I have not given a copy to the Executive Officer or to any member of the Board, and I do not think it should be published to anyone without getting competent legal advice beforehand. On the basis of my own knowledge, there are numerous 'facts' in Ernst & Young's Report which should not be accepted at face value, but should be considered in the light of facts that are not included in their Report. I have started to prepare a memo for you, setting out some of these other related matters. Because of the press of my normal business I do not know if I can complete this by the end of this week, but I will try to do so. I strongly urge that you wait to see it before taking any precipitate action, because I believe it will include information which would be essential to you in forming a balanced view of the situation. I hope that you will not make any immediate decision to issue a formal direction to the Board to terminate the Executive Officer's contract of employment. Amongst other things it would seem contrary to natural justice to do such a thing without giving the Executive Officer an opportunity to hear what he is accused of, and to give his side of the story. Sincerely, [sgd] Ken Nobbs Chairman"

Having received Mr Sanders' direction, Mr Nobbs convened a meeting for 5.30 pm which was attended by five of the six members of the Bureau. In a further letter dated Wednesday 17 June, Mr Nobbs informed Mr Sanders of the stance taken by the Bureau at the meeting. Omitting formal parts, the letter was as follows: "You have today given a direction to the Norfolk Island Government Tourist Bureau (that is, to the Board) under Section 15 of the Tourist Bureau Act. The Board comprising Robin Graham, Allen Partridge, Ken Christian and Marie Bailey and myself (Garry Richards being in Sydney), met at 5.30 pm on 17 June 1992, this being the first opportunity for such a meeting to be convened. At this meeting the Board read the Auditors Report for the first time, the letter to you from the Chairman dated 17 June 1992 and your direction under subsection 15(1) of the Act. The Board unanimously endorses the views expressed in my letter to you abovementioned. In view of the seriousness of the allegations and aspersions contained in the Auditors Report, it is the view of the Board that, before the Board carries out your direction, a meeting of Board Members and the Executive Officer should be convened by you, such meeting to include all your Assembly colleagues, so that the matter can be fully and properly discussed in context. If you are unable to accede to this request, you leave us, as members of the Board, no alternative other than to resign from office. We do not believe that the action required in your direction has been properly considered, and if carried out may have unwarranted and harmful effect. [signed] Ken Nobbs, Chairman."

Mr Sanders perceived the stance of the Bureau as "delaying". He set upon a course of revoking the appointments of all existing members of the Bureau, appointing new members, and giving a fresh direction to the new members relevantly identical to that given to the previous members. The instrument of revocation, also prepared by Mr Wright pursuant to Mr Sanders' request, was delivered to Mr Nobbs at his home at about 8.00 pm on Wednesday 17 June. It was in the following terms: " NORFOLK ISLAND NORFOLK ISLAND GOVERNMENT TOURIST BUREAU ACT 1980 REVOCATION OF APPOINTMENTS OF MEMBERS OF BUREAU I, William Winton Sanders, Minister for Immigration and Tourism, under subsection 4(2) of the Norfolk Island Government Tourist Bureau Act 1980 and subsection 36(4) of the Interpretation Ordinance 1979, revoke, with effect from 18 June 1992, the appointment of - Kenneth John Nobbs; Robin Eleanor Graham; Kenneth Gregory Christian; Gary David Richards; Marie Anne Bailey; and Allen Hutchinson Partridge, as members of the Norfolk Island Government Tourist Bureau. Dated this 17th day of June 1992 [Signed] W.W. Sanders Minister for Immigration and Tourism" This document and the instrument of appointment of the replacement members make it necessary to refer to certain other statutory provisions. The Act establishes the Bureau as a body corporate. Sub-sections 4 (1), (2), (3) and (6) read:

"4. (1)The Bureau shall consist of - (a)7 members; or (b)if another number is prescribed - that number of members. (2)Members of the Bureau shall be appointed by the executive members. (3)Not more than one member of the Legislative Assembly may be appointed a member of the Bureau. ... (6)Proceedings of the Bureau shall not be called into question by reason of a defect or irregularity in connection with the appointment of a member."

It was common ground that "another number" had been prescribed as allowed for by para 4 (1) (b) and that at the relevant time that number was 6. The Interpretation Ordinance 1979, which was referred to in the instrument of revocation, provided in s 5 that it applied to "all enactments". It applied to the Act. Sub-section 36 (4) of the Interpretation Ordinance provides that where an enactment empowers a person to make an appointment to an office, the power includes a power to remove a person appointed. Mr Sanders clearly relied on sub-s 36 (4) when he purported to revoke the appointments of the six members of the Bureau on 17 June. But s 8 of the Interpretation Ordinance provides that s 5, in its application to an enactment, has effect subject to a contrary intention appearing in that or another enactment. On the hearing of the appeal, Mr Snell submitted that a contrary intention was to be found in the Act, by reason of the express provision in sub-s 7 (2) of the Act that: "The executive member may remove from office a member, ... , for misbehaviour or incapacity or if he becomes insolvent."

Mr Sanders did not purport to remove the six members on the ground of misbehaviour, incapacity or insolvency. Nor could it be suggested that, on the evidence, any of those grounds was available. For reasons which will appear later, Mr Sanders submitted that the Court should not permit this point to be pressed on the appeal. The next day, Thursday 18 June 1992, Mr Sanders faxed a letter to Mr Nobbs in response to Mr Nobbs' handwritten note and first letter dated 17 June. Omitting formal parts, Mr Sanders' letter was as follows: "I refer to your fax and letter attached - both dated 17 June 1992. You referred to my asking you to secure the resignation of the Executive Officer. This is partially correct, but you will recall that I suggested that if you could obtain his resignation, rather than a direction from me for his dismissal, that it was possible to avoid embarrassment for the Executive Officer because I would then not have to table the Direction in the Assembly. You then said that you would speak to the Executive Officer after the Board meeting last night and for me to phone you after 7.30 pm. This I did only to be advised by you that you still had not discussed the matter with the Executive Officer because you required a copy of the Ernst & Young report. I agreed to fax you a copy of the report as requested by you and did so immediately after our phone conversation (16.6.92). You then said you would let me know the result of your actions after 7.30 am on 17 June 1992. I contacted you after 7.30 am only to be told that you still needed more time to consider the report. I reminded you that it was not going to be a debate and that even though you considered the report wrong, that I intended to carry out my duty as I saw fit and that I was not seeking approval for my actions by Members of the Bureau. You again, at a little after 10.00 am (17.6.92) asked me not to do anything before the MLA's meeting at 11.00 as you would tell me of your actions at that time. I phoned you at 11.00 am on 17 June 1992 as agreed - you were not available. I then came to the conclusion that you were deliberately delaying me in an effort to have my discretion directed by others which left me (in my opinion) no option other than to have Mrs Evans give to you on my behalf the Direction I had previously shown you. The conclusion that I have foreseen (just mentioned) was proved to be correct as was shown by the receipt of your fax a very short time later." Also on Thursday 18 June, Mr Sanders signed an instrument of appointment of four members of the Bureau in these terms: " NORFOLK ISLAND NORFOLK ISLAND GOVERNMENT TOURIST BUREAU ACT 1980 INSTRUMENT OF APPOINTMENT OF MEMBERS OF THE BUREAU I, William Winton Sanders, Minister for Immigration and Tourism, under subsection 8(1) of the Norfolk Island Government Tourist Bureau Act 1980, appoint - John Terence Brown; Milton George Bradley; Letty Joy Evans; and Stephen Horton, to be members of the Norfolk Island Government Tourist Bureau. Dated this eighteenth day of June 1992 [Signed] W W SANDERS Minister for Immigration and Tourism"

The document was drawn up by Mr Wright. It will be recalled that the prescribed number of members of the Bureau was six. Accordingly, in purporting to appoint four members only on Thursday 18 June, Mr Sanders had appointed less than the prescribed number. If the revocation of the appointments of the six members was invalid, it was not open to Mr Sanders to appoint any further persons to be members of the Bureau, and the steps taken by the four appointed, including the purported termination of Mr Snell's employment, were ineffective as acts of the Bureau. Also on Thursday 18 June, Mr Sanders gave the second direction under sub-s 15 (1) relating to termination of the employment of Mr Snell. That direction, also drawn up by Mr Wright, was in the following terms: " NORFOLK ISLAND NORFOLK ISLAND GOVERNMENT TOURIST BUREAU ACT 1980 DIRECTION UNDER SUBSECTION 15 (1) I, William Winton Sanders, Minister for Immigration and Tourism, under subsection 15(1) of the Norfolk Island Government Tourist Bureau Act 1980, direct the Norfolk Island Government Tourist Bureau to take such steps, prior to 10.00 am on Friday, 19 June 1992, as are necessary to terminate, at the earliest practicable date, the employment, under section 12 of the Act, of Lisle Denis Snell. Dated this 18 day of June 1992 [Signed] W W Sanders Minister for Immigration and Tourism"

(Section 12 of the Act, referred to in the instrument of direction, relevantly empowered the Bureau to employ such persons as it might think fit and necessary for its purposes.) It will be noted that while the direction required the Bureau to take steps by 10.00 am on Friday 19 June, they were only such steps as were "necessary to terminate, at the earliest practicable date", the employment of Mr Snell. Counsel for Mr Sanders submits that the terms of the direction are consistent with a requirement that the Bureau give a one month or two month notice of termination under sub-cl 9 (a) or (b) respectively, of Mr Snell's contract of employment. Friday 19 June, was the fateful day for Mr Snell. At a meeting held at 9.45 am, all four newly appointed members of the Bureau were present as was Mr Foulds, Crown Solicitor, by invitation. It was resolved to appoint Mr Horton a member of the Sixth Legislative Assembly, as chairman. Prior to the passing of any resolution relating to Mr Snell, legal advice was given to those present by Mr Foulds. He made contemporaneous notes of documents he was shown and the advice he gave. He was shown a copy of the instrument of appointment of the four members, a copy of Mr Sanders' second direction under sub-s 15 (1), and a copy of the contract between the Bureau and Mr Snell. He gave advice in relation to cl 9 of the contract. He advised that, in order to rely on sub-cl 9 (a), the Bureau would have to be satisfied that Mr Snell had been guilty of misconduct. He advised that, under sub-cl 9 (b), notice could be given without cause but Mr Snell must be paid "on the spot". According to the minutes, "It was resolved to terminate forthwith the employment of Mr Snell as Executive Officer and to pay him two months' pay in lieu of notice pursuant to clause 9 (b) of his contract of employment."

According to Mr Foulds' notes, the meeting commenced at 9.50 am and concluded at 10.11 am - a 21 minute meeting. The next relevant event was that Mr Foulds telephoned Mr Horton and advised him that there was something which he (Mr Foulds) had overlooked, namely, the requirement in sub-cl 9 (b) that two months' notice had to be given by either party wishing to terminate the contract. According to Mr Foulds' notes, he advised Mr Horton that, if the Bureau was relying on sub-cl 9 (b), it could give Mr Snell a payment in lieu of notice only if Mr Snell agreed to that course. Mr Foulds then gave the same advice to Mr Brown.

At about 2.15 pm the same day, Friday 19 June, Messrs Horton and Brown attended upon Mr Snell at the Bureau's office. They told him that they had come to terminate his employment under cl 9 (b) of his employment contract. They said that they were required to offer him two months' notice and that it was the Board's decision to offer him payment in lieu of time and that that is what they were there to do. Mr Snell replied: "Well I accept what you've said Steve under sufferance and duress, I have no other alternative of course as you've explained and that's the end of story."

Arrangements were made for payment of the cheque due to Mr Snell and for an orderly hand-over of his work. No reasons for dismissal were ever given. No attempt was made at the trial to establish incompetence or misconduct of Mr Snell. Mr Sanders said in evidence that he was unaware of the method by which the termination of Mr Snell's contract had been effected and that he had learned of the actual dismissal after it had occurred. When the Bureau terminated Mr Snell's employment on Friday 19 June 1992, it purported to rely on sub-cl 9 (b), not 9 (a). However, it paid Mr Snell two months' salary in lieu of giving him two months' notice of its intention to terminate his employment. It was common ground at the trial that the Bureau was entitled to take that course only with Mr Snell's consent and that no consent was given. The payment in lieu of notice was accepted, in Mr Snell's words, "under sufferance and duress". Following the dismissal, Mr Sanders issued two press releases, one on the date of the dismissal, Friday 19 June, and the other on the following Friday, 26 June. The first was as follows: "On the evening of 17 June 1992 I dismissed the NIGTB after its Members refused to comply with a certain direction which I had issued. On 18 June 1992 I appointed new Members to the Bureau, and issued to them a similar direction. Subsequently, on 19 June 1992 the employment of the Executive Officer of The Bureau, Mr Lisle Snell, was terminated. Certain matters may well be referred by me to the N.I. Police, and it is therefore not appropriate for me to comment further at this time."

Although Mr Sanders contacted the Police and the Police interviewed Mr Snell, no action was taken by them or by any other authority against Mr Snell. On Saturday 20 June, "The Norfolk Islander", a local newspaper, reported the events of the preceding week. The report included accounts of interviews with Mr Snell and Mr Sanders. Mr Snell was reported as having expressed great disappointment that he and the "sacked" members of the old Bureau had not been given an opportunity to discuss the questions raised in Mr Summerson's report. The newspaper further noted that in the opinion of the previous Chairman, Mr Nobbs, Mr Summerson's report "seemed hastily prepared and it included some misinformation". The newspaper noted that according to Mr Snell, all the points in the report were answerable; everything done in the Bureau had been "done to Policy"; there was no shortage of money; and there was documentation within the Bureau to explain the matters raised in Mr Summerson's report. According to the newspaper, Mr Sanders, for his part, had given a summary of what had happened up until Friday 19 June, and had concluded by saying: "Certain matters may well be referred by me to the Norfolk Island Police, and it is therefore not appropriate for me to comment further at this time."

Mr Snell was asked before the trial Judge about the effect on him of his reading this passage in the newspaper. He replied: "I was devastated. I realised, on a small community like Norfolk Island, that any reference to matters pertaining to the police would affect greatly my standing in the community, my prospects of job employment, the effects on my family and I was absolutely astounded."

Later in his evidence, Mr Snell said: "In the small community of Norfolk Island it doesn't take long for interviews with the police to be known. It circulates and, of course, with the job prospects on the Island, it was damaging to my reputation and to my good - and to my standing in the community. I was very concerned about those aspects."

The newspaper report concluded by directing readers' attention to a letter which appeared in the correspondence section of the newspaper from Mr Nobbs, "the recently dismissed Chairman of the Tourist Board." Mr Nobbs' letter, was as follows: "For the past two years I have been chairman of the Board of the Norfolk Island Government Tourist Bureau. The Board has had a disagreement with the new Minister for Tourism, Hon. W.W. Sanders. Last Wednesday night he delivered to my home a legal document stating that he revoked, with effect from 18th June 1992, the appointments of all six members of the Board. The document did not include any reason for this revocation, and it was not necessary to do so. However, there may be speculation in the community about what caused this sudden action, and for the benefit of those interested, I would like to give a brief account of what happened. As part of taking over his new duties, Mr. Sanders arranged for independent auditors to make a review of the Bureau's accounting systems and controls, with special emphasis on travel advances and expense reimbursements. The Board and the Bureau staff of course, co-operated fully with this review. It appears that, after receiving a preliminary report from the auditors, Mr. Sanders formed the opinion that the Executive Officer of the Bureau, Lisle Snell, should go. The Executive Officer is appointed and employed by the Board. His contract has a standard clause in it saying that the contract may be terminated on two months' notice. This can be done either by the Executive Officer giving notice to the Board, or the Board giving notice to the Executive Officer. It is not necessary for either side to give any reason. Under the Tourist Bureau Act, the Minister for Tourism does not have authority to give notice to any employee of the Bureau; this can only be done by the Board. However, the Minister can give a formal direction to the Board, requiring the Board to act as he directs. Mr. Sanders said that if we could not arrange for Mr. Snell to give notice, he would issue such as [sic] formal direction to the Board. He did this on Wednesday morning. It appeared to me that the grounds for his doing this was the report of the auditors. When I examined the report I was not favourably impressed. It seemed hastily prepared and it included some misinformation. It appeared to me to be a report that should be examined and discussed, and certainly should not be the basis for making any snap decisions. I therefore faxed Mr. Sanders a letter, at about the same time that he was issuing his direction to the Board to give Mr. Snell notice. My letter said, in part, that there are numerous "facts" in Ernst & Young's Report which should not be accepted at face value, but should be considered in the light of facts that are not included in their Report. I have started preparing a memo for you, setting out some of these other related matters ... I strongly urge that you wait to see it before taking any precipitate action, because I believe it will include information which would be essential to you in forming a balanced view of the situation'. My letter went on to say that I hoped Mr. Sanders would not make any immediate decision about issuing any direction to the Board concerning the Executive Officer - it would seem contrary to natural justice to do such a thing without giving the Executive Officer an opportunity to hear what he is accused of, and to give his side of the story'. However, the formal direction from Mr. Sanders was issued. The Board met as promptly as possible to consider it. We believed it would be unjust to give notice to the Executive Officer, simply on the basis of a questionable Report. At about 7 pm Wednesday evening the Board faxed Mr. Sanders a formal letter saying the Board believed Mr. Sanders should meet with the Board Members and the Executive Officer so that the situation could be fully and properly discussed in context. The letter said If you are unable to accede to this request, you leave us, as Members of the Board, no alterative other than to resign from office. We do not believe the action required in your direction has been properly considered, and if carried out may have unwarranted and harmful effects'. Mr. Sanders' reply to this was to revoke all of our appointments as Members of the Board. He said he hoped this action would not be taken personally. There are two main issues in question, it seems to me. First of all, all of the other (former) Board members and I have respect and admiration for Lisle Snell, and think he has handled a very difficult job with real dedication. I trust that the new Board will want to weigh all the facts carefully and avoid taking any precipitate action concerning its Executive Officer. There is also the issue of Assembly control over a community board of members serving as volunteers. There are many such boards and they are a vital part of how Norfolk Island functions. Should they be required to take any action directed by the Assembly, even if they think the action is wrong? If so, Norfolk Island could end up with weak voluntary boards, made up only of Yes' men and women. That would be a sad day for the island. In conclusion, may I thank my former fellow Board Members, the Executive Officer, and the Tourist Bureau staff for their tremendous help over the past two years. I wish them, and the new Board and the Minister for Tourism, every success in working for the good of Norfolk Island. Yours, etc. Ken Nobbs."

Mr Sanders' second press release included an account of his appointment of "an interim auditor" and an assertion that the audit report had been "scathing in its comments". It continued: "I believed that it was my duty to deal firmly and swiftly with the audit results. Consequently on 17 June I issued an instruction to the Tourist Bureau to terminate the services of its executive officer. The Tourist Bureau subsequently declined to give effect to my instruction leaving me with no alternative but to dismiss them. Subsequently, I appointed new members to the Bureau - Mr Milton Bradley, Mrs Joy Evans, Mr Steve Horton and Mr John Brown. I then issued instructions to the new Bureau to dismiss the executive officer, and as most people are aware, my instructions were carried out."

After stating that the new Bureau held office only until 30 June 1992 and inviting readers to suggest nominees for longer term appointment, Mr Sanders concluded: "If the interests of any individual or group are placed ahead of the general best interests of the Island or its tourist industry, then again I will not hesitate in taking whatever steps are necessary to put the Bureau back on its proper course."

There was evidence relating to Mr Snell's employment on Norfolk Island following the termination of his contract. On the following Monday, 22 June, he obtained what he described as "a small part-time job" as a tour bus driver and general office work with Cheri's Tours for which he was paid approximately $100 per week, depending on the hours worked. He said that job lasted for only six to eight weeks; that he undertook any work which he could get, including the painting of fences; that he had applied for work washing cars but was unsuccessful; that he had been concerned for his financial future; and that he eventually obtained employment as a tour bus driver with Pine Tree Tours. He described the nature of that work as: "Conducting group tours around the island by coach, assisting in walks through the national parks, breakfast walks, assisting with meals out on the cliff, fish fries, assisting where directed by the company."

As well, he acted in one of the major roles in the show "The Mutiny on the Bounty", at the Salty Theatre. ISSUES The issues addressed on the appeal can be dealt with conveniently under these headings: 1. Mr Sanders' appeal against the trial Judge's finding of inducement of breach of contract. 2. Mr Snell's cross-appeal in so far as it seeks a finding in his favour of misfeasance in public office. 3. Mr Snell's cross-appeal in so far as it appeals against the trial Judge's award of damages. It is necessary to address the question of the irregularities touching the revocation of the appointment of the members of the original board and the appointment of the four new members in their place. In our view, the express power given to the executive member by sub-s 7 (2) of the Act to remove from office a member of the Bureau "for misbehaviour or incapacity or if he becomes insolvent" shows a legislative intention contrary to the existence of the power to remove which would otherwise have been provided by sub-s 36 (4) of the Interpretation Ordinance. The relevant power given by sub-s 7 (2) of the Act and that which would otherwise have been given by sub-s 36 (4) of the Interpretation Ordinance is identical: it is a power to remove from office. The limitation of that power as given by sub-s 7 (2) of the Act to circumstances of misbehaviour, incapacity or insolvency displaces the availability of the power given, subject to a contrary intention in the Act, in more general terms by sub-s 36 (4) of the Interpretation Ordinance. The power given by sub-s 7 (2) of the Act could not lawfully be exercised without prior observance of requirements, appropriate to the circumstances, of natural justice. Mr Sanders made no attempt to satisfy those requirements. It follows that the purported removal from office of the six original members of the Bureau on 17 June 1992 was invalid. (The power given by both sub-s 7 (2) of the Act and sub-s 36 (4) of the Interpretation Ordinance is, relevantly, a power to remove from office, but Mr Sanders' instrument dated 17 June 1992 purported to revoke the appointment of the six members. This may be a further reason why the instrument was not effective, but the point was not argued on the appeal and we say no more of it.) The six original members of the Bureau remained in office and Mr Sanders lacked power to appoint, as members of the Bureau, the four persons whom he purported to appoint as such on 18 June. Even if the removal of the six members had been valid, further questions would have arisen as to the validity of the subsequent steps taken by Mr Sanders. A question would have arisen as to the effectiveness of appointment of only four rather than six persons to be members of the Bureau (but see sub-s 9 (7) of the Act which seems to contemplate the possibility that the Bureau may act at a particular time although less than six members are in office at that time). A further question would have arisen as to whether Mr Sanders complied with s 8 of the Act. Section 8 provides that if a member appointed on the nomination of a "recognised association" (defined in s 5) ceases to be a member of the Bureau during the term of his or her office, the executive member may fill the vacancy by the appointment of a person nominated by that recognised association, and that if a member who is also a member of the Legislative Assembly so ceases to be a member, the executive member may fill the vacancy by the appointment of another member of the Legislative Assembly. It is not necessary for us to address these matters further because we accept a submission made by counsel for Mr Sanders that it would be unfair to Mr Sanders to decide the appeal against him by reference to these irregularities, having regard to the fact that he has lost any opportunity of seeking indemnity by The Administration in respect of any breach of duty owed to him by Mr Wright in connection with them. Notwithstanding certain oblique references, we are not satisfied that these issues were litigated by Mr Snell against Mr Sanders. They were certainly not raised in Mr Sanders' third party action against The Administration.

INDUCEMENT OF BREACH OF CONTRACT Mr Sanders accepts that the Chief Justice correctly apprehended and described the elements of the tort known as inducement of breach of contract. His Honour referred, in particular, to Short v City Bank of Sydney (1912) 15 CLR 148 at 159-160, Independent Oil Industries Ltd v Shell Company of Australia Ltd (1937) 37 SR (NSW) 394 at 414-415, Northern Territory v Mengel (1995) 69 ALJR 527 at 537-538, Allstate Life Insurance Co v Australian & New Zealand Banking Group Ltd (1995) 130 ALR 469 at 484-486; and News Ltd v Australian Rugby League Ltd (1996) 135 ALR 33 at 121. References to the respective official series of law reports can now be substituted for the above references to unofficial reports, namely, Mengel's case (1995) 185 CLR 307 at 342, the Allstate case (1995) 58 FCR 26 at 42-45, and the News case (1995) 58 FCR 447 at 541-542. On appeal in this last case, the Full Court referred to the elements of the tort at (1996) 64 FCR 410 at 516. In the present case, it was necessary for Mr Snell to prove that Mr Sanders intended to induce the Bureau to terminate Mr Snell's employment in a manner that would involve a breach of contract; that this inducement caused the Bureau to terminate Mr Snell's contract on 19 June without giving two months' notice of intention to terminate; and that the termination caused Mr Snell loss or damage. On the issue of intention, the Chief Justice referred to the evidence of Mr Nobbs that Mr Sanders had said to him, "if you don't sack him [Mr Snell] I will". His Honour inferred from this that Mr Sanders "intended that [Mr Snell's] contract be terminated at the earliest possible date." His Honour said that Messrs Horton and Brown were "acting as agents to do the bidding of [Mr Sanders] as the Minister". His Honour found that Mr Sanders had no interest in seeking, and did not seek, advice from Mr Wright on the question of any entitlement which Mr Snell might have to be given a period of notice. He found that Mr Sanders' instructions to Mr Wright were "specifically, and consciously, limited to the drafting of the documentation." His Honour concluded that Mr Sanders was aware of the terms of Mr Snell's contract and had intended to achieve his summary dismissal without seeking to rely on cl 9 (a), and that the necessary elements of knowledge and intent were present. On the issue of inducement in fact, his Honour's conclusion was that Mr Sanders: "acting by himself and acting through Messrs Horton and Brown, his intermediaries and agents for the purpose, did in fact induce a breach of contract by purporting to summarily determine [Mr Snell's] employment contract without recourse to cl 9 (a)."

It will be recalled that at the meeting of the Bureau on 2 June, "copies of the contract were provided for [Mr Sanders'] benefit." There was no evidence, however, that the terms of cl 9 were present to Mr Sanders' mind at any particular time. Although it is not required that Mr Sanders be shown to have been conscious of the precise terms of Mr Snell's contractual rights, it is required that he be shown to have had some appreciation of the general nature of those rights and of the fact that the course of action which he was advocating would constitute a breach of them. More particularly, it was necessary for Mr Snell to establish that Mr Sanders had some understanding that he (Mr Snell) was entitled not to be dismissed summarily, that is, without being given a period of notice, but nonetheless intended to procure the Bureau to dismiss him summarily. The relevant terms of Mr Sanders' direction dated 18 June to the newly appointed Bureau were "to take such steps, prior to 10.00 am on Friday,, 19 June 1992, as [are] necessary to terminate, at the earliest practicable date, the employment under section 12 of the Act, of [Mr Snell]." The terms of the direction were consistent with compliance with cl 9 (a) or (b). The learned Chief Justice so observed when he came to deal with Mr Sanders' third party claim against The Administration based on an allegation that Mr Wright had been negligent in drawing up the form of direction. His Honour said:

"That [sic - the] crucial word in the direction is the adjective practicable' appearing in the context of the earliest practicable date'. The primary dictionary (Macquarie, 2nd ed.) meaning of the adjective practicable' is: 1. capable of being put into practice, done or effected, esp. with the available means or with reason or prudence; feasible.' In my opinion, where used in the direction, practicable' was meant to have this ordinary meaning. It may thus be distinguished from a hypothetical, but different, direction, say, that the employment be terminated immediately' or forthwith' or summarily'. That is to say, whilst the direction made it clear that the Bureau was not to be dilatory, it was not an order to end the plaintiff's contract instantly, as Messrs. Horton and Brown purported to do. As has been said, they were, in my judgment, acting at the behest of, and entirely in accordance with the frequently expressed wishes of, the defendant that the plaintiff be removed form his office as soon as the Bureau could manage to do so. But their action was not required, either expressly or by implication, by the terms of the direction drafted by Mr. Wright. Under its terms, the Bureau could have legitimately proceeded in either of two ways (assuming, as we should, that cl.9(a) of the contract was not available): (1) by giving the two months' notice required under cl.9(b) (this option, of course, was not exercised); or (2) by securing the plaintiff's agreement to the earlier termination of his contract by, for instance, seeking his consent (a possibility advised by Mr. Foulds, it will be recalled) on the footing that he be paid two months' salary in lieu of notice. (I have found this was not done either.) Instead, the Bureau elected, although not required or authorised by the direction to do so, to do something different, that is, to purport to terminate the plaintiff's employment summarily. It follows, in my opinion, that Mr. Wright was not negligent in drawing the direction."

It may be added that the language "at the earliest practicable date" in the direction contemplates that it may not be practicable to terminate Mr Snell's employment instantly. The language is apt to refer to the giving of a notice of intention under cl 9 (a) or (b) according to which of the two, being "practicable", will result in the earlier termination.

The instrument of direction does not expose an intention by Mr Sanders that the Bureau effect a summary dismissal in breach of Mr Snell's contract. For his conclusion that Mr Sanders had the relevant subjective intention, the Chief Justice relied on other communications from Mr Sanders. As noted earlier, his Honour referred to a conversation between Mr Sanders and Mr Nobbs, as revealing a desire on Mr Sanders' part that the Bureau "sack" Mr Snell. But there is no evidence of a similar communication to any member of the new Board. His Honour also referred to evidence of a conversation which took place between Mr Sanders and Patrick Neathway Brown (this is not the Mr Brown who was appointed by Mr Sanders to be a member of the new Bureau), early on the morning of Thursday 18 June. Mr Brown was, at that time, the Chief Administrative Officer of The Administration. Mr Brown's evidence, which the Chief Justice accepted, was that Mr Sanders telephoned him at about 8.40 am and said that he had asked the Bureau to "sack" Mr Snell, that the Bureau had refused to carry out the direction, and that as a result he had dismissed the Bureau. Again, this is not evidence that Mr Sanders had instructed the new Bureau to "sack" Mr Snell. In any event, the term "sack" is ambiguous. It certainly means that the Bureau was to terminate Mr Snell's employment but not necessarily in such a manner as to constitute a breach of contract. It is important to note that there is no evidence of any communication by Mr Sanders to any of the four members of the Bureau whom he had appointed, outside the terms of the written direction dated 18 June, as to the course of action which he desired them to take in relation to Mr Snell. Of the four newly appointed members of the Bureau, only Mr Horton gave evidence (he was called by Mr Sanders). In the cross examination of Messrs Sanders and Horton, no evidence was elicited suggesting that Mr Sanders had instructed, directed or sought to persuade Mr Horton or any of the other three new appointees to terminate Mr Snell's services in a manner inconsistent with cl 9 of his contract. Nor is there other evidence, in the nature, for example, of an admission by Mr Sanders, that his intention was otherwise than to leave it to the Bureau to decide upon the course by which the terms of his direction dated 18 June would be implemented. In this context, it is necessary to refer to certain post-dismissal conduct of Mr Sanders, namely, his issue of the second press release on Friday 26 June. In that press release he said that he had instructed the original members of the Bureau "to terminate the services of its Executive Officer", that he had "dismissed" the members of the Bureau because they had declined to give effect to his instruction, and that he had "issued instructions to the new Bureau to dismiss the Executive Officer", adding, "and as most people are aware, my instructions were carried out." It is true that the word "dismiss" suggests an action with immediate effect. In the press release itself, Mr Sanders used the word in that sense in relation to the original members of the Bureau. However, we think that it gives undue significance to the language of a person lacking in legal training (Mr Sanders had been a butcher for about 30 years and gave his other full-time occupations as "picture theatre, guest house proprietor, farmer, short period fish factory"), to treat the passage as an admission that Mr Sanders' intention had been that the new Bureau dismiss Mr Snell instantly. The press release itself uses the expression "terminate the services of" in relation to the first direction, yet it can scarcely be suggested that the change to "dismiss" in relation to the second direction signifies an intended shift in meaning. Of course, a dismissal is a form of termination but the use of the different language to refer to the same thing suggests that Mr Sanders was not choosing his words carefully and with an eye to their precise significance. Similarly, for him to say that his "instructions were carried out" does not entail an admission that he gave instructions for instant dismissal that were communicated independently of the written direction and were carried out. The press release is consistent with two propositions: (1) the only intention which Mr Sanders had was that expressed in his direction to the new Bureau; (2) Mr Sanders assumed that the new Bureau had decided that his direction to them to terminate Mr Snell's employment "at the earliest practicable date" could be properly implemented in the way it had been. Even if Mr Sanders harboured an intention to cause the Bureau to dismiss Mr Snell instantly in breach of contract, we do not think, with respect, that it was open to the Chief Justice on the evidence to conclude that the Bureau was in fact induced to act in that way by Mr Sanders. Again, we point to the lack of evidence of any communication from him to them apart from the instrument of direction, and of the incapacity of the instrument to convey that meaning. The four newly appointed members of the Bureau were, moreover, advised at their meeting on the morning of Friday 19 June by Mr Foulds as to the courses available to them, consistently with Mr Snell's contract, to terminate his services, and Mr Foulds subsequently advised Messrs Horton and Brown that the Bureau was not at liberty to make payment in lieu of giving notice unless Mr Snell agreed. The Bureau's breach of contract occurred because it forced Mr Snell to accept payment in lieu of notice. This occurred because Mr Horton and Mr Brown misunderstood, or ignored, Mr Foulds' advice, not because of any instruction given to the Bureau by Mr Sanders. With respect to the learned Chief Justice, we think it was not open to his Honour to conclude that Mr Snell had established either of the first two elements of a case against Mr Sanders of inducement of breach of Mr Snells' contract of employment. MISFEASANCE IN PUBLIC OFFICE In delivering the advice of the Judicial Committee of the Privy Council in Dunlop v Woollahra Municipal Council [1982] AC 158 at 172, Lord Diplock referred to "the well established tort of misfeasance by a public officer in the discharge of his public duties". There is no doubt about the antiquity of the tort; in Farrington v Thomson [1959] VR 286 at 293, Smith J traced it back to Comyns' Digest (1822). However, as Smith J observed, its elements were not clear. In particular, it was not clear what mental element had to be proved before a public officer could be adjudged liable for the tort. The uncertainty was not significantly clarified by Dunlop. In that case the Judicial Committee merely agreed with the trial Judge's conclusion: "that, in the absence of malice, passing without knowledge of its invalidity a resolution which is devoid of any legal effect is not conduct that of itself is capable of amounting to such 'misfeasance' as is a necessary element of this tort".

The Judicial Committee's elliptical statement was interpreted as an indication that the tort required either malice or knowledge of the invalidity: see Wade, Administrative Law (6th ed 1988) at 780 and Bourgoin SA v Ministry of Agriculture, Fisheries and Food [1986] 1 QB 716 at 740 (Mann J) and 777 (Oliver LJ). Brennan J accepted this interpretation in Northern Territory of Australia v Mengel (1995) 185 CLR 307. He said: "... the mental element is satisfied when the public officer engages in the impugned conduct with the intention of inflicting injury or with knowledge that there is no power to engage in that conduct and that that conduct is calculated to produce injury. These are states of mind which are inconsistent with an honest attempt by a public officer to perform the functions of the office. Another state of mind which is inconsistent with an honest attempt to perform the functions of a public office is reckless indifference as to the availability of power to support the impugned conduct and as to the injury which the impugned conduct is calculated to produce." (at 357)

He went on to deal specifically with denial of procedural fairness, a complaint in this case: "For example, the officer's administrative act may be invalid because he or she did not treat the plaintiff with procedural fairness. It is the absence of an honest attempt to perform the functions of the office that constitutes the abuse of the office. Misfeasance in public office consists of a purported exercise of some power or authority by a public officer otherwise than in an honest attempt to perform the functions of his or her office whereby loss is caused to a plaintiff. Malice, knowledge and reckless indifference are states of mind that stamp on a purported but invalid exercise of power the character of abuse of or misfeasance in public office. If the impugned conduct then causes injury, the cause of action is complete." (also at 357) Deane J expressed general agreement with Brennan J and added some additional comments. He summarised the elements of the tort as being: "(i) an invalid or unauthorised act; (ii) done maliciously; (iii) by a public officer; (iv) in the purported discharge of his or her public duties; (v) which causes loss or harm to the plaintiff." (at 370)

Deane J explained that, in the context of misfeasance in public office, the focus of the element of malice is injury to, or affecting, the plaintiff. He said: "Such malice will exist if the act was done with an actual intention to cause such injury. The requirement of malice will also be satisfied if the act was done with knowledge of invalidity or lack of power and with knowledge that it would cause or be likely to cause such injury. Finally, malice will exist if the act is done with reckless indifference or deliberate blindness to that invalidity or lack of power and that likely injury. Absent such an intention, such knowledge and such reckless indifference or deliberate blindness, the requirement of malice will not be satisfied." (at 370-371)

The remaining members of the Court (Mason CJ, Dawson J, Toohey J, Gaudron J and McHugh J) delivered a joint judgment in which they said that the "cases do not establish that misfeasance in public office is constituted simply by an act of a public officer which he or she knows is beyond power and which results in damage" (at 347). They said: "... principle suggests that misfeasance in public office is a counterpart to, and should be confined in the same way as, those torts which impose liability on private individuals for the intentional infliction of harm. For present purposes, we include in that concept acts which are calculated in the ordinary course to cause harm, ... or which are done with reckless indifference to the harm that is likely to ensue, as is the case where a person, having recklessly ignored the means of ascertaining the existence of a contract, acts in a way that procures its breach." (also at 347)

"If misfeasance in public office is viewed as a counterpart to the torts imposing liability on private individuals for the intentional infliction of harm, there is much to be said for the view that, just as with the tort of inducing a breach of contract, misfeasance in public office is not confined to actual knowledge but extends to the situation in which a public officer recklessly disregards the means of ascertaining the extent of his or her power." (also at 347)

As we have observed, several actions of Mr Sanders were legally invalid. However, for the reason stated above, the only invalidity we are prepared to consider in connection with the claim for misfeasance in public office is Mr Sanders' denial of procedural fairness to Mr Snell. In contrast to his other actions mentioned earlier, this issue was directly and clearly raised at the trial. Nor is it a matter in relation to which it could be suggested there was a breach of duty to Mr Sanders by The Administration. Counsel for Mr Snell contends that the second s 15(1) direction - the direction that led directly to Mr Snell's dismissal - would have been invalid even if addressed to duly-appointed Bureau members. Although he accepts that not all s 15(1) directions will attract the requirements of procedural fairness, his argument is that the executive member may give a direction that requires the Bureau to take an action directly adverse to a particular individual only after giving the individual an opportunity to be heard. This seems clearly correct. As a matter of form, the decision that terminated Mr Snell's employment by the Bureau was the resolution passed on 19 June by the four newly "appointed" Bureau members. However, the critical event was Mr Sanders' decision to require the Bureau to terminate Mr Snell's employment. Although there was a two-step mechanism for dismissal in this case, it remains governed by the principles enunciated in cases like Ridge v Baldwin [1964] AC 40, The Queen v Wear Valley DC; ex parte Binks [1985] 2 All ER 699 and The Queen v Civil Service Appeal Board; ex parte Cunningham [1991] 4 All ER 310. The Chief Justice found Mr Sanders was aware of his obligation to afford Mr Snell natural justice. He accepted that Mr Sanders believed that the Bureau was not soundly managed, but concluded that his behaviour "entirely disregarded the rights of the members of the Bureau and of the plaintiff to be given a reasonable opportunity to be heard in answer to the criticisms that had been made". He went on: "Although there was no basis for claiming that a real emergency existed, the defendant sought to impose deadlines on the Bureau and on the plaintiff, by which they had to 'respond' to complex questions raised by the auditors, including issues of policy, which could not possibly be complied with in such a short time. These impossible demands were made by the defendant after he had been advised (perhaps warned) by Mr. King, another Minister, that the defendant should ensure that the plaintiff receive natural justice. Although the defendant denied that Mr. King had said this, I think that his recollection is faulty. I prefer Mr. King's evidence which was given convincingly. This unfair conduct, which inevitably led to the equally unfair dismissal of the plaintiff should be reflected in an award of exemplary damages." There was ample warrant for these findings. Mr Sanders made no attempt to give Mr Snell the opportunity to answer the criticisms contained in the Ernst & Young report. This omission was deliberate. To make the point, it is necessary to amplify the factual account set out above. On the morning of 16 June, after he received the draft report, Mr Sanders saw Mr Nobbs and showed it to him. Mr Nobbs looked quickly through the draft report. Although Mr Nobbs was Chairman of the Bureau and a qualified accountant, Mr Sanders did not invite his response. He instructed Mr Nobbs to see Mr Snell and "tell him that you have seen the audit report (and) that, because of what is in it, he is to give you his resignation immediately". In other words, the demand for resignation was to be presented as Mr Nobbs' reaction to the report, rather than the wish of Mr Sanders. Mr Snell was not to be given the opportunity to assess the report for himself; Mr Sanders specifically instructed Mr Nobbs not to show it to him. Perhaps to ensure that he did not, Mr Sanders declined to give Mr Nobbs a copy of the draft report or to let him make a photocopy of it. But he said to Mr Nobbs on a couple of occasions "if you don't sack him, I will". He then showed Mr Nobbs a document, apparently a draft direction to the Bureau to terminate Mr Snell's employment. It seems that, for reasons that do not appear in the evidence, Mr Nobbs did not speak to Mr Snell that day. That evening Mr Sanders faxed to Mr Nobbs an incomplete copy of the final report; one page was missing. On the following day, at 7.30 am he telephoned Mr Nobbs and demanded to know what he intended to do about getting Mr Snell's resignation. Mr Nobbs said that he needed more time, and that he was "working on it". This response was understandable even if Mr Nobbs had by then received the missing page of the report. Mr Nobbs explained that he was "working on a letter" which he would send Mr Sanders before he signed the direction. Any fair-minded person would have welcomed this, but Mr Sanders responded that "the matter was not for discussion or negotiation". Mr Sanders called Mr Nobbs again about 9.30 am. It seems that, by then, Mr Nobbs had received the missing page. We say this because Mr Sanders opened the conversation by asking "[n]ow that you have the report, why haven't you been to see Lisle Snell and get his resignation as I told you to?". Mr Nobbs replied that he was not prepared to take action on his own, that he needed to contact other members of the board and "sit down and discuss the matter properly". Mr Sanders replied: "I don't care what the board thinks. I don't care what you think, or what Lisle Snell thinks. It's outside of your control. I want Lisle Snell's resignation as a matter of urgency, and if - if you don't get this resignation, I will sign this direction for the bureau to terminate his employment." It is not clear whether Mr Sanders attempted to call Mr Nobbs again that morning. If so, he failed to make contact. What is clear is that, some time that day, he signed the first s 15(1) direction. This direction instructed the Bureau to take such steps, prior to 4.00 pm that day, as were necessary to terminate at the earliest practicable date Mr Snell's employment. It is important to note that counsel for Mr Sanders did not challenge the substance of any of this evidence. Nor did Mr Sanders contradict it when he gave evidence. Consequently, it must be regarded as beyond dispute. In that situation, it must be concluded that, in deciding to give the first direction, Mr Sanders specifically intended not to allow Mr Nobbs the opportunity, before the situation became irretrievable, to consult his fellow Bureau members, provide to Mr Sanders his own comments about the report, or discuss the situation with Mr Snell. Mr Sanders' unfairness did not stop there. Mr Nobbs' letter was ready for dispatch to Mr Sanders when the first direction arrived. He sent it anyway, with a covering fax asking Mr Sanders "to consider it and let me know your advice". He was asking Mr Sanders to think again about his direction. And he gave Mr Sanders information that would have caused any fair- minded person to do so. First, he pointed out to Mr Sanders something that should have already been obvious - the extreme damage to Mr Snell of a forced, urgent departure in the context of Ernst & Young's examination of the Bureau's affairs. Second, he stated he had not given a copy of the report to Mr Snell or any member of the Bureau, apparently because he thought it defamatory. Finally, Mr Nobbs intimated that he thought that the report was wrong: "On the basis of my own knowledge, there are numerous 'facts' in Ernst & Young's Report which should not be accepted at face value, but should be considered in the light of facts that are not included in their Report. I have started to prepare a memo for you, setting out some of these other related matters. Because of the press of my normal business I do not know if I can complete this by the end of this week, but I will try to do so. I strongly urge that you wait to see it before taking any precipitate action, because I believe it will include information which would be essential to you in forming a balanced view of the situation. I hope that you will not make any immediate decision to issue a formal direction to the Board to terminate [Mr Snell's] contract of employment. Amongst other things it would seem contrary to natural justice to do such a thing without giving [Mr Snell] an opportunity to hear what he is accused of, and give his side of the story." (emphasis added) Mr Sanders did not allow any of this to divert him from his path. The Bureau members who received the first direction failed to comply with its command. Instead, they resolved to support Mr Nobbs' position. Far from treating this as an opportunity to pause and rethink his course of action, or obtain better information about the facts, Mr Sanders proceeded to sign a succession of documents terminating the members' appointments, appointing four new members, and directing them under s 15(1) of the Act to take such steps by 10.00 am the following day as might be necessary to terminate at the earliest possible date the employment of Mr Snell. It is difficult to imagine more high-handed treatment of an employee. And it was undertaken with actual knowledge of its high-handedness. It seems to us the case falls squarely within the principles enunciated in Mengel. Having been warned of his obligation to give natural justice to Mr Snell, and knowing that the correctness of the report on which he was relying was challenged by Mr Nobbs, Mr Sanders gave to the Bureau a statutory direction to take steps that same day to terminate Mr Snell's employment. When the original members of the Bureau requested more time, he removed them from office and appointed members who, he expected, would carry out his wishes. The time limits he imposed made it impossible for anybody to put before him a response to the report. But Mr Sanders was not interested in anybody else's views; there "was not going to be a debate". Mr Sanders' acts were "calculated in the ordinary course to cause harm" and "done with reckless indifference to the harm that [was] likely to ensue", to use the words of the Mengel joint judgment. This is a case of a public officer recklessly disregarding both a known constraint on his power and an obvious means of fulfilling his known duty of fairness. It is interesting to note that, in the context of discussing the mental element necessary to sustain a claim of misfeasance in office, Brennan J in Mengel cited, as an example of invalidity, a case of denial of procedural fairness. His Honour did not say, of course, that all actions that breach an obligation of procedural fairness will constitute misfeasance in public office. Something more is required. The additional ingredient was described by Brennan J in words that fit perfectly Mr Sanders' position on 17 and 18 June 1992: "the absence of an honest attempt to perform the functions of the office". It is useful to refer, by reference to the facts of the present case, to the five elements of the tort of misfeasance in public office identified by Deane J in Mengel's case. (i) The "invalid or unauthorised act" of Mr Sanders was the giving of the second direction to the Bureau to terminate Mr Snell's employment without prior observance of the requirements of natural justice in favour of Mr Snell. (ii) That act was done "maliciously" in that Mr Sanders was warned of the obligation incumbent upon him, was cautioned against accepting the auditor's report at face value, yet deliberately disregarded any plea which would delay the removal of Mr Snell. (iii) Clearly, Mr Sanders was, and relevantly acted as, a "public officer". (iv) Clearly, he acted "in the purported discharge of his public duties". (v) His act "cause[d] loss or harm to" Mr Snell. The relevant loss or harm was not the termination of Mr Snell's employment in breach of his contract of employment. Rather, it was the termination of his employment at all. The effect of Mr Sanders' actions was to remove the Bureau's discretion about terminating Mr Snell's contract. The direction did not countenance the possibility that Mr Snell's employment might not be terminated. Given Mr Nobbs' reaction to the Ernst & Young report, the views expressed by him in his letters to Mr Sanders and to "The Norfolk Islander", and the support for his position indicated by the other Bureau members on 17 June, it is most unlikely that, in the absence of a direction from Mr Sanders, the original Bureau members would have taken any action to terminate Mr Snell's employment. And, in the absence of Mr Sanders' actions, there would have been no substitute members placed in an apparent position to do so. Once it is appreciated that the loss or harm suffered by Mr Snell flowed from the fact of Mr Sanders' intervention, it becomes apparent that this loss or harm would have been suffered even if Mr Snell's contract of employment had been terminated by the giving of two months' notice. Thus, it is no answer that the Bureau terminated Mr Snell's employment in breach of contract rather than, as it might have done consistently with Mr Sanders' direction, in conformity with the contract. It suffices that the termination of Mr Snell's employment by the Bureau was caused by Mr Sanders' having given the direction to the Bureau without observance of the requirements of natural justice. If Mr Snell had been given an opportunity to be heard, he may not have lost his employment at all. The claim of misfeasance in public office is established.

DAMAGES The Chief Justice first addressed the subject of specific or special damage by finding that if the employment of Mr Snell had been lawfully terminated, it would have occurred only after a replacement Executive Officer had been found. His Honour allowed a period, in total, of six months for this to occur. He then made an allowance for the two months' salary that had been paid to Mr Snell and his salary as a bus operator and concluded that his actual loss for that six-month period was $500.00. However, as we have come to the conclusion that Mr Sanders' conduct did not amount to an inducement to commit a breach of contract, it follows that this award of $500 cannot stand. Neither can the remaining $16,500 in so far as it represents damages for inducement of breach of contract. His Honour then turned his attention to aggravated damages - or, as he described them - damages for "loss of reputation, including prospects of re-employment at a senior executive level". The pivotal point in a consideration of this topic is the conduct of Mr Sanders in issuing a press release immediately following Mr Snell's dismissal. In that release, after referring to the termination of Mr Snell's appointment, he went on to say, "certain matters may be referred by me to the [Norfolk Island] Police ... it is therefore not appropriate for me to comment at this time." That press release was reproduced in the local paper the next day. Nothing could be clearer to an impartial reader. Mr Snell's dismissal had been occasioned by some activity which Mr Sanders viewed as criminal. As his Honour said: "Such a statement, which was bound to damage the plaintiff's reputation and his prospect for any future senior appointment, was republished in a leading article in the `Norfolk Islander' newspaper dated 20 June. Although the article also referred to an interview with Mr Snell in which he denied any shortcomings, the penultimate paragraph of the article cited the defendant's reference in his press statement to the potential involvement of the police." His Honour concluded this section of his reasons, however, by placing emphasis on "incompetence or misconduct" as the primary ground for dismissal. He said: "... I am nonetheless of the view that publicity of his dismissal by the Minister and the Bureau in an apparently summary fashion, suggestive as it necessarily was of incompetence or misconduct, coupled with the suggestion of possible criminality, must have caused the plaintiff some, not insubstantial, loss. In my view, a proper measure of damages for that loss, taking into account the time that has elapsed since the plaintiff's dismissal (and thus including a notional amount by way of interest) is the sum of $15,000."

With respect, it seems that there are two points about this passage that warrant intervention by this Court. The first, which has already been identified, is the placing of emphasis on "incompetence or misconduct" rather than on "possible criminality". Dismissal for incompetence or misconduct, if unwarranted, is bad enough, but dismissal with an unjustifiable allegation of possible criminal conduct is outrageous. His Honour had made an express finding that "no attempt was made in these proceedings to `justify' the termination of the [Mr Snell's] employment ...". Indeed no reasons for his dismissal were ever given. Yet what would the average Norfolk Islander think when he or she read of Mr Snell's instantaneous dismissal and the reference to the Police? The clear inference - at the least - was that Mr Sanders considered that Mr Snell may have been involved in some criminal activity in his capacity as the Executive Officer of the Bureau. Since Warren v Coombes (1979) 142 CLR 531, it is clear that an appellate court "is to be taken as being in as good a position as the trial judge to decide upon the inferences to be drawn from facts which are undisputed or which, although disputed, are established by the judge's finding": Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 209 per Kirby P. In our opinion the learned trial judge did not place sufficient emphasis on the aspect of alleged criminality. Norfolk Island is a small community of about 1400 people. Mr Snell was born there and apart from a few years schooling in New Zealand has lived there all his life. In that small community, depending, as it does, largely on the tourist industry, he must have had a high profile. It is difficult to imagine a more hurtful, a more humiliating, experience than that suffered by Mr Snell. We have earlier described the manner in which Mr Snell reacted to the newspaper article. His answer that he was "devastated" is, of course in complete harmony with the inference that should be drawn from the newspaper article. The second matter that warrants consideration is that part of his Honour's reasons where he said that he had taken into account "the time that has elapsed since the plaintiff's dismissal and thus includ[ed] a notional amount by way of interest" in fixing upon an amount of $15,000 for aggravated damages. As his Honour did not specify the rate of interest that he considered appropriate, it is not possible to be precise. However, the cause of action arose in June 1992 and judgment was given almost four years later in April 1996. If interest was allowed at 10% simple, it would mean that the actual award would have been only about $10,750. That figure would have increased or decreased, of course, depending upon the rate of interest chosen by the trial judge. But the correct indicator when considering whether this award of damages was manifestly inadequate is nearer $10,000 or $11,000 - not $15,000. In Lamb v Cotogno (1988) 164 CLR 1 the High Court defined aggravated damages in these terms: "Aggravated damages, in contrast to exemplary damages, are compensatory in nature, being awarded for injury to the plaintiff's feelings caused by insult, humiliation and the like." (at 8) This passage follows on from a reference to the well known observations of Lord Reid in Cassell & Co Ltd v Broome [1972] AC 1027: "It has long been recognised that in determining what sum within that bracket should be awarded, a jury, or other tribunal, is entitled to have regard to the conduct of the defendant. He may have behaved in a high-handed, malicious, insulting or oppressive manner in committing the tort or he or his counsel may at the trial have aggravated the injury by what they there said. That would justify going to the top of the bracket and awarding as damages the largest sum that could fairly be regarded as compensation." (at 1085) In Skelton v Collins (1965-1966) 115 CLR 94 at 128 Windeyer J observed on the general topic of damages that: "one principle that is absolutely firm, and which must control all else is that damages for the consequences of mere negligence are compensatory. They are not punitive. They are given to compensate the injured person for what he has suffered and will suffer in mind, body or estate". Those views were expressly endorsed in the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ in Haines v Bendall (1991) 172 CLR 60 where their Honours said:

"The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed." (at 63)

Before an appellate Court interferes with an award of damages it: "should be satisfied that the Judge has acted on a wrong principle of the law, or has misapprehended the facts, or has for these or other reasons, made a wholly erroneous estimate of damage suffered. It is not enough that there is a balance of opinion or preference. The scale must go down heavily against the figure attacked if the appellate court is to interfere, whether on the ground of excess or insufficiency": Davies v Powell Diffryn Associated Collieries Limited (1942) AC 602 at 617. There has been no suggestion that his Honour acted on a wrong principle or law, nor, save for his emphasis on "incompetence or misconduct", could it be said that he misapprehended the facts. Nevertheless it seems to us, standing back with the greatest respect to his Honour, that the award of $15,000 was manifestly inadequate. We would increase it to $40,000. We turn now to the question of exemplary damages. The power of the courts to award exemplary damages was severely curtailed in the United Kingdom as a result of the decision of the House of Lords in Rookes v Barnard [1964] AC 1129. Putting to one side those cases where exemplary damages were authorised by statute, Lord Devlin recognised only two categories of cases in which an award of exemplary damages might be appropriate. His first category was "oppressive, arbitrary or unconstitutional action by the servants of the government" (at 1226). The second category comprised those cases "in which the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff" (at 1226). In Uren v John Fairfax & Sons Pty Ltd (1968) 117 CLR 118 and in Australian Consolidated Press Ltd v Uren (1968) 117 CLR 185, the High Court, in each case comprising the same bench of McTiernan, Taylor, Menzies, Windeyer and Owen JJ, rejected the constraints so imposed by the House of Lords. Menzies J said in the first of these cases:

"Upon full consideration, I do not think that the decision of the House of Lords should force this Court to conclude that the law here is other than what it has for so long been taken to be, viz, that where an action is based upon a personal wrong and the defendant has acted arrogantly, mindful only of its own interests and, to use the phrase of Knox CJ, 'in contumelious disregard' of the rights of the plaintiff, 'damages may be given of a vindictive and uncertain kind, not merely to repay the plaintiff for temporal loss but to punish the defendant in an exemplary manner' for his outrageous conduct." (at 147)

See also 123 (McTiernan J); 139 (Taylor J); 154 (Windeyer J); and 160 (Owen J). The second of the Uren cases went on appeal to the Privy Council. In their advice to Her Majesty, their Lordships said: "... it became a question for the High Court to decide whether the decision in Rookes v Barnard compelled a change in what was a well-settled judicial approach in the law of libel in Australia. Their Lordships are not prepared to say that the High Court were wrong in being unconvinced that a changed approach in Australia was desirable." (117 CLR 221 at 241)

Reflecting the changes brought about by the decision of the House of Lords in Rookes v Barnard , the 15th edition (1988) of McGregor on Damages downgraded exemplary damages to a "possible secondary object" of an award. If it is remembered that such an award retains its former status in Australia, the following definition, appearing at para 406 of the text, is a useful starting point in a discussion of the subject:

"The primary object of an award of damages is to compensate the plaintiff for the harm done to him; a possible secondary object is to punish the defendant for his conduct in inflicting that harm. Such a secondary object can be achieved by awarding, in addition to the normal compensatory damages, damages which are variously called exemplary damages, punitive damages, vindictive damages, even retributory damages, and comes into play whenever the defendant's conduct is sufficiently outrageous to merit punishment, as where it discloses malice, fraud, cruelty, insolence or the like." (at 254)

The position in Australia is, perhaps, better expressed by reverting to the 12th edition (1961) of Mayne & McGregor on Damages (the pre-Rookes v Barnard edition) where it was said that exemplary damages "can apply only where the conduct of the defendant merits punishment, which is only considered to be so where his conduct is wanton, as where it discloses fraud, malice, violence, cruelty, insolence or the like; or as it is sometimes put, where he acts in contumelious disregard of the plaintiff's rights" (at 196). See Coloca v BP Australia Ltd [1992] 2 VR 441 at 448 (O'Bryan J); Luntz, Assessment of Damages, 2nd ed, para 1.7.07. Taylor J explained exemplary damages in Uren v John Fairfax & Sons Pty Ltd in these terms:

"Prior to Rookes v Barnard the law relating to exemplary damages both in England and in this country was that damages of that character might be awarded if it appeared that, in the commission of the wrong complained of, the conduct of the defendant had been high-handed, insolent, vindictive or malicious or had in some other way exhibited a contumelious disregard of the plaintiff's rights. Various expressions had been employed to describe such conduct and the law, though, of necessity invested with a degree of flexibility, was sufficiently certain. The cases in which this principle has been acted upon are numerous and it is sufficient for the present to say that it has been acted upon in this Court on a number of occasions." (at 129) In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 Brennan J emphasised the punitive element of an award of exemplary damages, saying: "As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v Harvey substantial exemplary damages were awarded for a trespass of a high-handed kind which occasioned minimal damage, Gibbs C.J. saying: I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him except large damages?' The social purpose to be served by an award of exemplary damages is, as Lord Diplock said in Broome v. Cassel & Co. to teach a wrong-doer that tort does not pay'." (at 471) Lamb v Cotogno is another decision of the High Court dealing with exemplary damages. In that case, the defendant, a process-server, attended at the home of the plaintiff to serve a summons. There was a dispute between the two men and the defendant retreated to his motor-car. The plaintiff ran towards the car, shouting that he would kill the defendant. The plaintiff was "raging and very angry". As the defendant commenced to drive off, the plaintiff threw himself across the bonnet of the car, holding onto the guttering at the sides of the windscreen. The defendant drove along the road at a speed of 35 to 40 kilometres an hour veering from side to side in an attempt to dislodge the plaintiff. Then the defendant braked sharply. As a result the plaintiff was propelled off the bonnet and onto the roadway. The defendant drove off. The plaintiff was found about half an hour later by a neighbour. He was lying on the road, bloodied and screaming with pain. He had suffered fractures in the bones of both feet and other injuries. In a joint judgment, the High Court made it clear that its earlier decisions in the two Uren cases were not limited to libel: "[t]he well-settled judicial approach in Australia extends exemplary damages to a wider range of torts" (at 8). There are several aspects of the decision in Lamb v Cotogno that warrant comment. First, there was an express finding by the Court of first instance that the defendant had acted without malice. On the other hand, there was a finding that he "did callously abandon the plaintiff on the road and sped off in the night leaving him lying on a darkened road". But the absence of malice was no bar to the claim for exemplary damages and the High Court considered that the use of the word "callously" was "sufficient in its context to indicate that the Master saw the defendant as having behaved in a humiliating manner and in wanton disregard of the plaintiff's welfare" (at 13). Earlier the Court had said that it was open to the Master to regard the conduct of the defendant in abandoning the plaintiff as displaying "a cruel or reckless disregard for the welfare of the plaintiff" and "an indifference to his plight" (at 12). Secondly, the conduct of the plaintiff was clearly provocative; such conduct is to be taken into account but its presence is not an automatic barrier to a claim for exemplary damages. Thirdly, the Court identified exemplary damages primarily as a punishment of the guilty going beyond compensation, adding, however, that the object, or at least the effect, of exemplary damages is not wholly punishment "and the deterrence which is intended extends beyond the actual wrongdoer and the exact nature of his wrongdoing" (at 9). Finally, the Court said that an aspect of exemplary damages is that "they serve to assuage any urge for revenge felt by victims and to discourage any temptation to engage in self-help likely to endanger the peace" (at 9). An additional consideration - one which was self-evident on the facts in Lamb v Cotogno - is that there must be a close factual link between the conduct complained of as justifying an award of exemplary damages and the conduct constituting the cause of action to which it is attached: Davis v Russell McVeach McKenzie Bartlet & Co [1994] 2 NZLR 175 at 178 per Henry J. In Lamb v Cotogno, the conduct was, as Henry J said, "an integral part of one incident, and indicative of the true nature of the assault". In the present case, the Chief Justice's findings with respect to exemplary damages were as follows:

"In my opinion, the defendant's conduct, even if it fell short of malicious action (in the sense that the defendant apparently believed that the Bureau was not soundly managed) was contumelious behaviour which entirely disregarded the rights of the members of the Bureau and of the plaintiff to be given reasonable opportunity to be heard in answer to the criticisms that had been made. Although there was no basis for claiming that a real emergency existed, the defendant sought to impose deadlines on the Bureau and on the plaintiff, by which they had to `respond' to complex questions raised by the auditors, including issues of policy, which could not possibly be complied with in such a short time. These impossible demands were made by the defendant after he had been advised (perhaps warned) by Mr King, another Minister, that the defendant should ensure that the plaintiff receive natural justice. Although the defendant denied that Mr King had said this, I think that his recollection is faulty. I prefer Mr King's evidence which was given convincingly. This unfair conduct, which inevitably led to the equally unfair dismissal of the plaintiff should be reflected in an award of exemplary damages (see Attorney General of St Christopher, Nevis and Anguilla v Reynolds [1980] AC 637 at 662). I assess a sum of $1,500 to be appropriate."

In Lamb v Cotogno, callous though the defendant may have been, he wholly lacked malice and had been severely provoked; yet an award of $5,000 was made as exemplary damages. In the present case his Honour generously fell short of making a specific finding of malice but there was no provocation to temper the size of the award.

In XL Petroleum v Caltex Oil (supra), Caltex Oil had installed underground petrol tanks on a third party's land and thereafter used the site as a petrol service station. In due course it gave up its lease but left the tanks on site. The third party negotiated with XL Petroleum for it to operate a discount petrol service station on the land. Hearing of this, Caltex entered upon the land, without permission, and spiked the tanks. The jury awarded XL Petroleum exemplary damages of $400,000 which were reduced on appeal by the New South Wales Court of Appeal to $150,000. The High Court, by majority, concluded that the original verdict for exemplary damages had been excessive and had been properly reduced by the Court of Appeal. However, the majority declined to interfere with the amount of $150,000.

Henry v Thompson [1989] 2 Qd R 412 was a particularly distasteful case. There were findings that three police officers had beaten and kicked an aboriginal prisoner and that one of them had then urinated on him. The plaintiff was awarded $5,000 for his injuries, plus $10,000 aggravated damages and a further $10,000 exemplary damages. The police officers appealed - their victim did not. Williams J (with whom Connolly and McPherson JJ concurred) delivered the judgment of the Full Court of the Supreme Court of Queensland. He clearly thought that the defendants were fortunate that the conduct did not result in a higher award of exemplary damages. His Honour concluded:

"The fact that the appellants were at the time senior police officers and that they abused their position to commit this cowardly and unseemly assault on the respondent calls for a severe penalty. Bearing in mind the factors to which I have already referred I cannot conclude that it is plain that no reasonable jury properly applying the relevant principles could have awarded $10,000 by way of punitive damages." (at 417) In Canterbury Bankstown Rugby League Football Club Ltd v Rogers; Budgen v Rogers (1993) Aust Torts Reports 81.246, the plaintiff, Mr Rogers, and the defendant, Mr Budgen, were professional rugby league players in opposing teams. There was a finding that the defendant deliberately hit the plaintiff in the face causing him serious injuries. The trial judge declined to make an award of exemplary damages because the defendant had been punished by a fourteen week suspension. The New South Wales Court of Appeal, by majority, allowed the plaintiff's appeal and made an award of $7,500 as exemplary damages. In Backwell v AAA [1997] 1 VR 182 the Victorian Court of Appeal had to consider the size of an award of $125,000 as exemplary damages. In that case, the defendant, a medical practitioner, was responsible for a donor insemination program in which the plaintiff participated. The plaintiff was mistakenly inseminated with semen from a donor of an incompatible blood type. The doctor told the plaintiff of the mistake soon after it occurred and a few weeks later confirmed that the plaintiff was pregnant. The doctor recommended termination, falsely telling the plaintiff, inter alia, that if she miscarried, her identity might be revealed through publicity and that she might have difficulties getting back on a donor insemination program. The doctor conceded that these were threats and that they were untrue. The Court of Appeal reduced the jury's award from $125,000 to $60,000, mainly because the members of the Court did not consider the doctor's early conduct (when the mistake was first discovered) to be conduct warranting an award of exemplary damages, but also, because the trial Judge had misdirected the jury by failing to warn them to display restraint. On the subject of restraint, Ormiston JA (with whom Brooking and Tadgell JJA agreed) referred to a passage in the judgment of Gibbs CJ in XL Petroleum v Caltex Oil (supra):

"Although the limitations which the House of Lords in Rookes v Barnard placed on the circumstances in which exemplary damages may be awarded are not part of the law of Australia, I nevertheless consider that in that case Lord Devlin was correct in pointing to the risk that exemplary damages might amount to a punishment greater than would be likely to be imposed if the conduct were criminal, and in suggesting that in making an award juries should display restraint [[1964] A.C. at pp. 1227-1228]. Lord Hailsham of St. Marylebone L.C., in Broome v. Cassell & Co. [[1972] A.C., at p. 1081], did not agree with the suggestion of Lord Devlin that appellate courts might more readily interfere with jury awards of exemplary damages than in other cases, but he did regard it as extremely important that judges make sure in their direction that the jury is fully aware of the danger of an excessive award." (at 463) In Backwell v AAA (supra) the Victorian Court of Appeal was also of the opinion that the learned trial Judge had erred in not directing the jury that they could award exemplary damages "if, but only if", the sum which they had in mind to award as compensatory damages was inadequate to punish the defendant for her conduct. That aspect of the Court's decision highlights the importance of recognising that compensatory damages, although directed towards making good the losses that a plaintiff has suffered, nevertheless remain "part of the total punishment": Broome v Cassell & Co (supra) at 1089 per Lord Reid. Exemplary damages, which are awarded as punishment and deterrence, will be awarded only if the Court (or the jury as the case may be) is satisfied that the quantum of the compensatory damages does not contain any or any sufficient element of punitive damages. The "if, but only if" test derives from the speech of Lord Devlin in Rookes v Barnard (supra) at 1228 where his Lordship said:

"In a case in which exemplary damages are appropriate, a jury should be directed that if, but only if, the sum which they have in mind to award as compensation (which may, of course, be a sum aggravated by the way in which the defendant has behaved to the plaintiff) is inadequate to punish him for his outrageous conduct, to mark their disapproval of such conduct and to deter him from repeating it, then it can award some larger sum. If a verdict given on such direction has to be reviewed upon appeal, the appellate court will first consider whether the award can be justified as compensation and if it can, there is nothing further to be said. If it cannot, the court must consider whether or not the punishment is, in all the circumstances, excessive." (at 1228)

The "if, but only if" test was referred to by the United Kingdom Court of Appeal in John v MGN Ltd [1996] 2 All ER 35 at 64. In a joint judgment delivered by Sir Thomas Bingham MR, the Court said that notwithstanding its appellate function, it must decide for itself: "... whether that test is satisfied, bearing in mind the quantum of an award of compensatory damages." In the circumstances of that case, a defamation action, the court was of the opinion that the amount awarded for compensatory damages was not sufficient because "we do not think that this sum adequately reflects the gravity of the newspaper's conduct, or that it would deter it or other national newspapers of a similar character from such conduct in future. An award of exemplary damages is therefore, in our judgment, necessary to meet these two requirements" (at 64). It is not possible to discern any pattern in the quantum of awards of exemplary damages, save to say that, with some notable exceptions such as XL Petroleum v Caltex Oil (supra) and Backwell v AAA (supra), they may be described as modest amounts. However, and even though the particular facts of each case are always the governing factor, it can be seen that an amount of $1,500 is substantially less than any other award that has been mentioned. Once a decision has been made that an award is manifestly inadequate, damages are at large and an appellate court is free to substitute its own award for that of the trial Judge. It could not be suggested that his Honour erred in law or misapprehended the facts in his consideration of exemplary damages. However, to adapt the language of Lord Denning in McCarthy v Coldair Ltd [1951] 2 TLR 1226, one's immediate reaction to the contumelious behaviour of Mr Sanders is to say "as little as that?" (In fact, what Lord Denning said was:

"I think that Mr Everett expressed the test graphically and rightly when he said that this Court would interfere if, on seeing the figure, it said to itself: `Good gracious me - as high as that?'") This is a case where the defendant took actions (including the making of statements) calculated to destroy the personal and business reputation of a prominent member of a close-knit community and did so deliberately, knowing the likely effect of his actions. These actions have already been the subject of an award of compensatory damages, but it is not "double dipping" to identify it with the punitive and deterrent elements that are the essential ingredients of exemplary damages. Mr Sanders' conduct calls for condign punishment. Any award must be of a size sufficient to serve as a deterrent to others - particularly to those who abuse a position of public office to the detriment of others. We would increase the award for exemplary damages to $10,000. As a result, damages are increased to $50,000. This leaves the question of interest. The dismissal took place on 19 June 1992. The Chief Justice gave judgment on 19 April 1996 - some four years later. We think that Mr Snell should have interest on the sum of $50,000.00 for four years at 10% per annum, that is, a sum of $20,000. CONCLUSION The appeal will be dismissed with costs. The cross appeal will be allowed with costs. Order 1 made by the Chief Justice will be varied by substituting for the amount of $17,000 the amount of $70,000 including interest to 19 April 1996.

I certify that this and the preceding 66 pages are a true copy of the Reasons for Judgment of the Court.

Heard: 27 February 1997 Place: Sydney Decision: 9 April 1997 Appearances: Mr P M Jacobsen SC instructed by McIntyres, solicitors, appeared for the appellant/cross respondent. Mr Adrian Cook QC of counsel appeared for the respondent/cross appellant.