Arthurson v State of Victoria [2001] VSC 244

6. The first plaintiff, David Mark Arthurson ("Sergeant Arthurson"), is a sergeant employed in the Victorian Police Force ("The Force"), stationed at Hurstbridge.

9. The second plaintiff, Malcolm Peter Davey ("Sergeant Davey"), is a senior sergeant employed in the Force, stationed at Kyabram.

12. The third plaintiff, Keith George Walker ("Sergeant Walker"), is a sergeant employed in the Force, stationed at Warrandyte.

15. The fourth plaintiff, Christine Patricia McIntyre ("Sergeant McIntyre"), is a sergeant employed in the Force, stationed at Diamond Creek.

18. Each of the said plaintiffs is in charge of the police station where he or she is stationed. There was a fifth plaintiff but he is no longer a party to the proceeding.

21. The sixth plaintiff, Henry Thomas Button ("Mr Button"), was a chief inspector employed in the Force, in the N-District No. 2 Division at Swan Hill. He retired from the Force on 17 July 1999.

24. The defendant, the State of Victoria ("the State"), is sued representing the Crown in the right of the State of Victoria pursuant to the Crown Proceedings Act (1958) - see s.23.

28. Each of the plaintiffs joined the Force many years ago. Sergeant Arthurson was appointed a constable on 10 March 1981, Sergeant Davey was sworn in as a constable on 14 October 1971, Sergeant Walker was sworn in as a constable on 26 May 1975, Sergeant McIntyre was appointed a constable on 5 June 1972, and Mr Button was sworn in as a constable on 14 November 1966.

31. Sergeant Arthurson was appointed a sergeant in 1990; Sergeant Davey was appointed a sergeant in 1979; Sergeant Walker was appointed a sergeant in January 1987; Sergeant McIntyre was appointed a sergeant in 1981; and Mr Button was appointed a sergeant in 1980, an inspector in 1986, chief inspector in 1989, and retired on 17 July 1999.

34. From time to time, the Force published, in the Victorian Police Gazette, an advertisement inviting members to apply for a position of station commander at a particular police station. Some positions required the successful applicant to occupy the residential premises adjoining the police station.

37. During the period from March 1990 to August 1994, each of the plaintiffs successfully applied to take up the position of station commander at a particular police station. The position required occupancy of the residence adjacent to the station. Each, with their family, moved into a residence provided by the Force.

40. Sergeant Arthurson moved into the premises adjoining the police station at Hurstbridge in November 1994, Sergeant Davey moved into the premises adjoining the police station at Sorrento in July 1990, Sergeant Walker moved into the premises adjoining the police station at Warrandyte in August 1992, Sergeant McIntyre moved into the premises adjoining the police station at Diamond Creek in August 1994, and Mr Button moved into the premises situated in Swan Hill in December 1992.

43. The rental paid by the four plaintiffs, who are sergeants, was 3% of their salary. The Force paid the balance of the rent.

46. Mr Button paid 6% of his salary for rent, and the Force subsidised the balance.

49. On 1 October 1991, the house occupied by Sergeant Davey at Sorrento was transferred to a government authority known as the Government Employees Housing Authority ("G.E.H.A."), which is a body corporate established by the Government Employee Housing Authority Act 1981.

52. The houses that were subsequently leased to the other plaintiffs were owned by G.E.H.A. on and after 1 October 1991.

55. After transfer of the ownership of the houses to G.E.H.A., it was a matter for the Force to make a decision as to whether or not the houses, that were transferred and which were occupied by members of the Force, were houses that were required to be occupied ("R.T.O."). The houses occupied by each of the plaintiffs were classified as R.T.O..

58. Over the 12 months, from about October 1993 through to October 1994, the government of the day applied a policy that State owned residences should be sold, unless required by the Force. The government adopted a policy of selling the residences through G.E.H.A., unless the Force decided that police occupied housing were essential for operational purposes. In that event, the houses would be retained for police occupation.

61. On 12 October 1994, the Acting Chief Commissioner wrote to G.E.H.A. indicating what residences could be sold, and amongst those listed were the ones occupied by each of the plaintiffs.

64. On 10 November 1994, each plaintiff was told that the house he or she occupied was to be sold and could be purchased by the plaintiff.

67. The result was that each of the plaintiffs vacated their houses during the period March to June 1995.

70. After leaving the residences, each plaintiff was given a rental subsidy equivalent to what had been provided when they occupied the police house, and it ceased on 30 June 1996.

73. Each plaintiff contends that it was a term of their contractual arrangement with their employer that, for so long as he or she held the position of station commander, he or she was entitled to subsidised housing. It was alleged that from 1 July 1996, the plaintiffs suffered damage.

76. On 19 December 1997, the plaintiffs issued a writ against the State claiming declaratory relief and damages for breach of contract.

79. Subsequently, the statement of claim was amended, pursuant to which Sergeants Arthurson and McIntyre relied upon a plea of equitable estoppel to the effect that, the State was estopped from denying that a term of their contract of employment was that each was entitled to occupy premises supplied by the Force so long as each was in charge of the police station to which each had been transferred.

83. The pleadings and the rival contentions of the parties raise the following main issues for consideration and determination:

(i) What were the nature and terms of the contract of employment between each plaintiff and his or her employer?

(ii) Was there a term of any contract between each plaintiff and his or her employer with respect to occupation of the police residence?

If so -

(a) Was the term a term of their contract of employment? or

(b) Was there a new and discrete contract between the parties concerning occupation? or

(c) Did the appointment to the position result in a variation of the contract of employment?

(iii) What were the terms of the original contract, or the varied or new contracts, concerning the residence, the right to occupy and the right to subsidy, in the event that the residence was no longer made available to the plaintiff?

(iv) If a new contract or a variation, was there any consideration?

(v) Is the State estopped from denying that it was a term of the contract of employment that Sergeants Arthurson and McIntyre were entitled to occupy the premises at a rental of 3% of their respective salaries, so long as they continued to be in charge of their respective police station or if the premises were no longer available, to be provided with alternative accommodation on the same terms?

(vi) Was there a breach of the said term or terms?

(vii) If there was a breach of any terms, what relief is each plaintiff entitled to?

Facts

89. There was no dispute of any substance concerning the facts, save as to what a Chief Superintendent told Sergeant Arthurson. The State did not call any oral evidence. It tendered documents and a report from an accountant on the issue of damages.

92. I make the following findings, but it will be necessary, when determining the issues, to further consider and determine factual matters.

95. Each of the plaintiffs was appointed a constable and a sergeant as set out in the following table.

99. Mr Button was appointed an inspector on 2 July 1986, and on 11 January 1993, he was appointed Chief Inspector in Charge of the N-District No. 2 Division at Swan Hill. He retired from the Force on 17 July 1999.

102. Each plaintiff, upon appointment as a constable, took and subscribed an oath. As a result, each of the plaintiffs entered into a written agreement with, and was bound to serve, Her Majesty as a member of the Force pursuant to s.13(3) of the Police Regulation Act 1958 ("the Act").

105. The Act contained a number of provisions which regulated the relationship between each plaintiff and the Crown. By the beginning of 1990, the relationship between each plaintiff and the Crown was the subject of the statutory contract under the Act, the provisions of the Act and the regulations made thereunder, and also determinations made by the Police Service Board. It will be necessary hereafter to closely analyse the relationship between each plaintiff and the Crown.

108. At the beginning of 1990, the regulations made pursuant to the Act were the Police Regulations of 1979 (S.R. 389/1979).

111. The Governor-in-Council was empowered by s.130 of the Act to make regulations for or with respect to, inter alia, regulating the conduct of members of the Force, requiring any members of the Force to reside in a district or reside in any particular premises, and any matter necessary or expedient to promote the efficiency of the Force. See s.130(dc), (dd) and (dg).

114. Part IX of the 1979 Regulations dealt with transfers. Regulation 901 provided that -

"901. In order to maintain the discipline and efficiency of the Force, members of the Force are liable to immediate transfer to any part of the State of Victoria."

118. The following regulations set out the procedure which was to be followed in the event of a member of the Force applying for transfer from one district to another. Regulation 904 provided that the Chief Commissioner could cause an advertisement of a vacancy to be published in the Police Gazette.

121. On 19 May 1981, the Government Employee Housing Authority Act ("G.E.H.A. Act") was assented to. It established a body corporate known as the Government Employee Housing Authority ("G.E.H.A.") which, subject to the provisions of the Act and to the control of a Minister of the Crown, was to supply suitable houses for government employees in participating departments. See s.3(2)(a)

124. Section 12 of the said Act gave power to the Governor-in-Council to declare that a department of the Public Service is a participating department for the purposes of the Act, and also empowered the Governor-in-Council to transfer to the Authority, inter alia, premises vested in or held by the Minister of the Crown and used for government employees in the participating department.

127. Section 13 set out the powers of the Authority, which included letting houses, at such rent and on such terms and conditions as the Authority thought fit, to government employees, and entering into arrangements and agreements with any department with respect to, inter alia, letting or renting houses.

130. Section 13(3) gave power to the Authority to sell, let or otherwise dispose of property.

133. Section 13(5) provided that the Authority shall not let a house to an employee unless it is satisfied that the person was unable to obtain, privately, housing accommodation of a reasonable standard, in a reasonable location and at a reasonable rent.

136. That power was subject to sub-s.(6) which provided -

"(6) Notwithstanding anything to the contrary in sub-section (5), where the permanent head of a participating department certifies to the authority that the special nature of an office in the participating department makes it necessary for the government employee holding that office to reside in a particular house vested in ... the authority, the authority may let the house to the government employee notwithstanding that he is or would be able to obtain privately housing accommodation that is of a reasonable standard, in a reasonable location and available at a reasonable rent."

140. In or about September 1991, the government determined to transfer all departmental employee housing to G.E.H.A.

143. By order of the Governor-in-Council dated 18 February 1992, all properties held by the Minister for Police and Emergency Services were transferred to G.E.H.A. The order operated from 23 February 1992. Among the houses transferred were, the house occupied by Sergeant Davey and the houses which were ultimately occupied by the other four plaintiffs.

146. On 17 February 1992, G.E.H.A. and the Force entered into an agreement, pursuant to which the Force transferred 336 residences. The parties agreed that the Force would classify the houses into required to be occupied ("R.T.O.") and not required to be occupied ("NR.T.O."). G.E.H.A. agreed to make available all R.T.O. residences to the police on a first use basis. It was also agreed that from 1 July 1992, the Force was to arrange for rental to be based on 3% or 6% of an officer's salary, as determined by the Force, and the balance was to be invoiced separately and paid by the Force.

149. The Force was a participating department within the meaning of the G.E.H.A. Act.

152. Sergeant Davey was born on 14 April 1953, and is presently aged 48 years.

155. At the beginning of 1990, he was stationed at Rye. On 12 March 1990, an advertisement appeared in the Police Gazette in the following terms -

"Sorrento (595/695) 40/04109/001 - In Charge. Will be required to occupy Government premises (class 'C' (rent 3%)). Will be required to assume responsibility for all operational matters related to the sub-districts. Applicants are required to have a satisfactory standard of physical fitness and capability to perform all aspects of the duties related to this position. Qualifications and experience to be stated. Senior Constables eligible for promotion may also apply. 'C' driver or qualified."

159. Sergeant Davey applied for the position, and ultimately appeared before a selection panel in March/April 1990. Prior to the hearing, he inspected the premises at Sorrento.

162. He was the successful applicant, and his transfer was reported in the Police Gazette on 2 July 1990. It was a condition of his appointment that he reside at the premises provided by the Force at Sorrento. He moved into the premises in July 1990.

165. He gave evidence, which was not disputed, that it was his intention, in moving to Sorrento, to stay as Officer in Charge for a long period of time, and probably until retirement at age 60. He had been at Rye for a period of some three years, enjoyed the area and was happy to work there. He had been divorced in 1987 and was obliged to support two children. The benefit of subsidised housing was extremely attractive to him, and was a matter that motivated him in accepting the Sorrento appointment.

168. On 24 February 1992, after G.E.H.A. acquired ownership of various properties, it wrote to Sergeant Davey, welcoming him as a tenant of the Authority and informing him, as an employee tenant, that rental would continue to be deducted from his fortnightly pay in accordance with the then industrial determinations.

171. He was paying rent at 3% of his salary, and the balance of the rental payable to the Authority was paid by the Force.

174. In November 1994, Sergeant Davey received a letter from Mr G.D. Cliffe, who was the Director of the Corporate Resources Department of the Force. The letter noted that G.E.H.A. had been disposing of government residences because the Authority was not satisfied that the persons occupying the residences were unable to obtain private housing accommodation. The letter went on to provide -

"The Force can only justify retention of a residence where it is 'essential for operational needs'. Section 13(6) of the G.E.H.A. Act enables the Permanent Head of an agency, in this case the Chief Commissioner, to certify that the special nature of the office makes it necessary for the employee to reside in a particular residence. Following a review of the operational needs as they relate to the position you occupy, your 'Required to Occupy' position has now been re-classified as 'Not required to Occupy'. This re-classification will take effect from the date of this letter."

178. He was informed that he could purchase the premises if he wished. The letter went on to provide -

"The issue of a continuing rental subsidy is under consideration by the Chief Commissioner, who is holding discussions with the Police Association on the matter. You will be advised of any decision on this matter as soon as possible. In the interim, your current rental subsidy will continue."

182. Sergeant Davey decided in January 1995 not to purchase the premises.

185. At the end of January 1995, Sergeant Davey purchased a home at Normanby Road, Sorrento. He remained in the Force premises until 25 May 1995, when he moved into his home in Normanby Road. He received a subsidy of $573.96 per month from the Force. On 1 July 1996, the rental subsidy ceased.

188. He was subsequently transferred to Kyabram on 2 August 1998 and promoted to senior sergeant

191. Sergeant Davey was reimbursed for his expenses incurred moving into and out of the police residence.

194. He claims the loss of the rental subsidy from 1 July 1996 to 2 August 1998 at the rate of $573.96 per month, making a total of $14,349. He also claims damages arising from the sale of a property at McCrae and the costs associated with his purchase of the home at 2 Normanby Road, Sorrento.

197. At the time when Sergeant Davey was appointed to the position at Sorrento, namely, 2 July 1990, his relationship with the Force was subject to the Act, the Police Regulations 1979, and parts of Determination No. 179 of the Police Service Board dated 25 January 1972, as amended by Determination No. 245 dated 10 October 1975.

200. On 4 May 1992, an advertisement appeared in the Police Gazette for the vacant position of Officer in Charge of the Warrandyte Police Station. On that day, Sergeant Walker applied for the position. He was born on 24 November 1956 and is presently aged 44 years. He inspected the premises as was required. He appeared before the selection panel. The position was a R.T.O.. He was informed that he was the successful candidate in or about July 1992.

203. In the meantime, on 23 June 1992, a new set of Police Regulations were passed. See S.R. No. 118/1992. Part 5 of the Regulations deals with, inter alia, transfers of officers.

206. He moved into the premises at Warrandyte with his family. He had worked in a country environment and considered a posting to Warrandyte to be in the same category. He intended to remain at Warrandyte as Officer in Charge until retirement, and intended to work until 60 years. He was required to pay 3% of his salary as rental, the balance being paid by the Force to G.E.H.A.. He was satisfied that there were investment advantages for the family if they resided in the premises. 3% of his salary was $48.11 per fortnight, and the Force paid the balance of approximately $128 per week.

209. On 17 February 1994, Sergeant Walker received a message sent to all members of the Force that certain properties had been re-classified as not essential for operational purposes. The station at Warrandyte was not on the list. The message went on to note -

"All other houses currently occupied by members have been classified as 'essential for operational purposes'. G.E.H.A. is expected to object to this classification being applied to some housing in regional centres but the Force will argue for the retention of all such housing. Members occupying houses in regional centres will be kept advised."

213. The message was sent by Assistant Commissioner Graham I. Sinclair.

216. By letter dated 10 November 1994, Sergeant Walker was informed by Mr G.D. Cliffe that his residence had been re-classified as NRO. The letter was the standard letter which had been sent to Sergeant Davey.

219. He was given the opportunity to purchase the residence, which he declined, and he remained at the residence until May 1996. He purchased a home in North Warrandyte in May 1996 and left the police residence. He received a rental subsidy from 16 May 1996 to 30 June 1996.

222. He claims the loss of the rental subsidy at $128 per week from 1 July 1996 to the expected date of his retirement. In the alternative, he claims the interest paid on his mortgage on his residential property less the amount of the subsidy.

225. Sergeant Walker has two children, aged 11 and eight. He stated that it was his intention to work until at least 60 years of age.

228. He was reimbursed for all expenses incurred moving into and out of the police residence.

231. Sergeant Walker was appointed to the position at Warrandyte on 27 July 1992. His relationship with the Force, was subject to the Act, the Regulations of 1992, and parts of the Victoria Police Force Award No. 1 of 1992, made by the Victorian Police Force Conciliation and Arbitration Board on 17 July 1992. The Board was appointed pursuant to the Industrial Relations Act 1979 - see s.24. That Act was made applicable to the Police Force by the Police (Industrial Functions) Act 1992.

234. The Board was given considerable power. Section 7 of the Police (Industrial Functions) Act 1992, inserted s.68A into the Act. Sub-section (3) provided -

"(3) Despite anything to the contrary in this Act, the Police Service Board and the Chief Commissioner do not have power to determine or otherwise deal with any matter that after the commencement of s.7 of the Police (Industrial Functions) Act 1992 is within the powers or duties of the Industrial Relations Commission or a Conciliation and Arbitration Board constituted under the Industrial Relations Act 1979."

238. Section 25(1) of the Police (Industrial Functions) Act 1992 provided -

"(1) An award, order or determination of the Industrial Relations Commission or of a Conciliation and Arbitration Board constituted under the Industrial Relations Act 1979 that applies to a person appointed under s.8, 8A, 103 or 118B of the Police Regulation Act 1958 supersedes any inconsistent provision in regulations or determinations made under the Police Regulation Act 1958 to the extent of the inconsistency."

242. Division XI of the Victoria Police Force Award No. 1 of 1992 dealt with the occupation of government premises. It will be necessary to turn to the provisions later.

245. On 7 September 1992, an advertisement appeared in the Police Gazette, advertising the position of Chief Inspector, Officer in Charge of the Division, being "N" District No. 2 Division at Swan Hill.

248. On 5 October, a correction was published in the Gazette noting that the successful applicant "will be required to occupy government premises".

251. Mr Button applied for the position. On 24 November 1992, he was interviewed by the selection board and was informed, at the time, that he was obliged to occupy the government housing premises situated in Swan Hill. He was confirmed as the successful applicant on 14 December 1992. He moved into the residence in February 1993 and paid 6% of his salary, for rental, to G.E.H.A..

254. Mr Button stated that it was his intention to stay as Officer in Charge for a long period, and possibly until his retirement. He had worked in country areas in the past, and was familiar with the lifestyle and policing work involved in country areas. He was very pleased to be located in the country. It gave him an opportunity to financially benefit his family as he rented out the family home in Melbourne.

257. Like Sergeants Davey and Walker, he received the letter dated 10 November 1994 from Mr Cliffe informing him that the premises had been re-classified.

260. Mr Button did not seek to purchase the residence, and it was sold at auction on 29 March 1995. Mr Button continued to rent the premises from the purchasers. His rental was subsidised to the extent of $112 per week. The subsidy ceased on 30 June 1996.

263. Mr Button was reimbursed for all expenses incurred moving in and out of the police residence. He claims loss of the rental subsidy from 1 July 1996 until his retirement, which occurred on 17 July 1999, at a rate of $112 per week. In the alternative, he claims the cost of interest paid on a mortgage on his rental property less the amount of the subsidy.

266. Mr Button was born on 7 September 1945, and is presently aged 55 years. When he retired from the Force on 17 July 1999, he was aged 53 years and 10 months.

269. On retirement, he received a lump sum superannuation which was calculated at 8.1 times his last year's salary, which was determined by averaging the last two years' salary.

272. Like Sergeant Walker, he was subject to the same provisions of the Act, the Regulations and the Police Force Award of 1992.

275. On 24 November 1992, the Employee Relations Act was assented to. Various sections came into operation in November 1992 and January 1993, and the balance of the Act on 1 March 1993. On and from 27 November 1992, the Act applied to members of the Force - see s.7(1).

278. By reason of s.172(6), all awards relating to members of the Force in operation, in force on 1 March 1993, expired on that day.

281. As a result, s.24(3) applied which provided -

"(3) If an award expires, each employee, who continues to be employed by the employer, and the employer are, unless a new award is made or the employee and the employer make an employment agreement, bound by an individual employment agreement with the same terms and conditions as those that applied to the employee and employer under the expired award."

286. These provisions are of some relevance to the relationship of the two plaintiffs, Sergeants Arthurson and McIntyre, with their employer.

289. In the latter part of 1993, there were rumours within the Force that G.E.H.A. was proposing to sell some of the police residences.

292. On 15 December 1993, Assistant Commissioner Graham I. Sinclair, who was in charge of the Corporate Resources Department, sent a message to all members of the Force.

295. The first paragraph of the message stated that the Ministry of Finance, through G.E.H.A., was moving towards selling off government owned housing throughout Victoria, including police occupied housing.

"The Force is currently surveying police occupied housing to identify those which are essential for operational purposes (E.O.P.). One member stations and (sic) with a station commander's residence adjacent (S.C.R.A.) will all be classified as E.O.P. These premises will then be sold by G.E.H.A. with a ten year commercial lease, with options for further leases by the Force. All 'other' houses are subject to review/negotiation by the Force with G.E.H.A. Members occupying houses in this category will be advised in due course of the outcome of those negotiations."

302. The message then described what was to happen to "other houses" and provided -

"Members should not be concerned by this action and should ensure that local populations understand that policing services will continue."

306. An invitation was extended to members who had queries or concerns to contact the office of Mr Sinclair, the Assistant Commissioner.

309. Sergeant Arthurson was born on 10 November 1956, and is presently aged 44 years. He has three children by his first marriage and one child by his second wife. Another child is due any moment.

312. In early 1994, he spoke to another member of the Force about rumours about the sale of police residences, and he was shown a copy of the patrol message sent out on 15 December 1993. He understood from reading that message that all premises with an adjacent residence would be classified as essential for operational purposes and would not be sold. He also stated that he understood from the message that if premises were sold, he would be entitled to subsidised rental.

315. On 11 January 1994, the position of Station Commander of the Hurstbridge Police Station was advertised in the Police Gazette. The advertisement advertised the position of Station Commander, and stated -

"For initial duty at Hurstbridge Police Station. Will be required to occupy government premises (rent 3%), contact officer in charge of district for further details."

319. Sergeant Arthurson, upon seeing the advertisement, was interested. He had heard the rumours that police residences were being sold, and wished to clarify the position. He had recently been divorced and had three children. His priority was to find a stable and permanent home close to his ex-wife and children. He was also concerned about his financial position and was interested in obtaining a police residence.

322. After seeing the advertisement, he telephoned Chief Superintendent Bateman, who was in charge of the area in which the Hurstbridge Station was located, to ascertain what the position was in relation to the residence. The telephone discussion occurred some time between 11 and 18 July 1994.

325. He told Mr Bateman that he was concerned, as he wished to establish a stable home, and asked whether the residence would be sold. He gave evidence that he was told that the residence was classified as "required to occupy" and "that as a result, it was permanent and would not be sold". He was told by Mr Bateman that he had received confirmation of this from his superiors. He visited Mr Bateman at his office on, or about, 18 July 1994.

328. Having been given the assurance by Mr Bateman and based upon what he understood from the patrol message, he applied for the position at Hurstbridge.

331. Sergeant Arthurson went through the selection panel process, but was unsuccessful. He then appealed to the Police Review Commission. He was successful and was appointed to the position.

334. He transferred to the position of Officer in Charge at Hurstbridge on 6 November 1994.

337. He was paying 3% of his salary for rent and, taking into account the rental subsidy, was receiving a net salary that was equivalent to an inspector. Accordingly, he came to the view that he would not seek promotion to the rank of senior sergeant. At the time when he moved into the house, he thought he would retire at 65. He saw the transfer as giving him financial security.

340. Within a matter of days, he received the standard form letter from Mr Cliffe dated 10 November 1994. Not surprisingly, Sergeant Arthurson was outraged upon receiving the letter.

343. Sergeant Arthurson was fully reimbursed for the expenses incurred moving in and out of the residence. He vacated the residence on 23 March 1995. At that date, he was paying $22 per week to G.E.H.A. for rent and was receiving a rental subsidy of $128. He moved into a rental property in South Morang and thereafter, received a rental subsidy of $155.94 per week up to 30 June 1996.

346. Sergeant Arthurson is still the Officer in Charge of the Hurstbridge Police Station. The residence has now become a police station.

349. He claims loss of the rental subsidy of $156 per week from 1 July 1996 until the date of his retirement. In the alternative, he claims the cost of interest paid on the mortgage on his residential property less the amount of the subsidy.

352. John Stewart Bateman gave evidence. He was a Chief Superintendent of Police who retired on 19 August 1996. He was in charge of Q-District at all relevant times. There were two police stations which had residences supplied for the Sergeant in Charge in his district, namely, Diamond Creek and Hurstbridge.

355. He gave evidence that he received a phone call from Sergeant Arthurson, who was concerned about whether the residence would be retained, and that he told Mr Arthurson that the person appointed had to occupy the residence "and that it was my understanding that both residences at Diamond Creek and Hurstbridge would not be sold". He recalls Sergeant Arthurson visiting his office at Heidelberg to discuss the matter.

358. He also received a call from Sergeant McIntyre, who was concerned about whether or not the residence at Diamond Creek would be sold, and he assured her that it was his understanding that it would not be sold. In giving that information, Mr Bateman had been assured by a senior member of the Property Services Division that the properties would not be sold.

361. There was no dispute that Mr Bateman was authorised to make the representations he did.

364. Counsel for the State did not really challenge any of the evidence of the plaintiffs, save for a piece of evidence given by Sergeant Arthurson.

"He (Mr Bateman) told me that the residence was classified as 'required to occupy' and that as a result, it was permanent and would not be sold. Chief Superintendent Bateman assured me that he received confirmation of this from his superiors."

371. He was challenged that he had been told that "as a result it was permanent". He maintained that it was his memory that Mr Bateman used words to that effect.

374. Mr Bateman, in giving evidence, did not say that the position was permanent. Indeed, he could hardly be in a position to say that. Sergeant Arthurson was relying on his memory of a conversation which took place nearly seven years ago, and he took no notes of the conversation at the time. Mr Hammond QC, who appeared with Mr Rinaldi for the State, submitted that I should not accept the evidence. He emphasised the matters just mentioned, and further stated that the particulars provided by Sergeant Arthurson of the alleged representation were not in those terms, nor in the pleading.

377. In my opinion, Sergeant Arthurson was mistaken as to this and even though, in his own mind, he may have thought that to be the position, I am not persuaded that Mr Bateman stated that "as a result it was permanent and would not be sold".

380. At the date of his appointment, namely, 12 October 1994, Sergeant Arthurson's relationship with his employer, the State, was regulated by the Act, the Regulations made thereunder, and the deemed individual employment agreements arising out of the Employee Relations Act 1992, which incorporated the Victoria Police Force Award of 1992.

383. Sergeant McIntyre was born on 14 June 1951, and turned 50 on 14 June 2001. She is married with two children, aged 18 and 15. Her husband works in Kew.

386. On 11 July 1994, an advertisement appeared in the Police Gazette for a Station Commander at Diamond Creek. The advertisement provided -

"Station Commander. For initial duty at Diamond Creek Police Station. Will be required to occupy government premises (rent 3%), contact Officer in Charge of District for further details."

390. Sergeant McIntyre was interested in applying for the position. It had a number of advantages to her. She was keen to pursue the position in order to broaden her experience and to serve the community in the Force. She had been a sergeant for some 13 years and did not intend to seek promotion to senior sergeant. In order to obtain promotion to senior sergeant, it is not necessary to pursue any course of study. Promotion is available when there is a vacancy for the position. Sergeant McIntyre was attracted to the area, which was some 10 minutes from where she lived at North Eltham with her family. She envisaged that she would remain as Officer in Charge until her retirement, which she thought was at least to the age of 55.

393. At the time, she was aware of the requirement to occupy the premises. She was also aware of rumours that police residences were marked for sale by the government, and she thought that the Diamond Creek residence may be one of them.

396. In May or June 1994, she had a discussion with Sergeant Scully, who was then the Officer in Charge at Diamond Creek, and he showed her a copy of the patrol message dated 15 December 1993. Sergeant McIntyre recalled that she had seen a copy of that message sometime in December 1993.

399. She understood from the message that all police stations with an adjacent residence would be classified as essential for operational purposes, that the residence would not be sold and that this applied to Diamond Creek. She also stated that she understood the message to mean that if the premises were sold, she would get subsidised rental.

402. Having seen the advertisement, she telephoned the District Commander, Chief Superintendent Bateman. She believed this was sometime in July 1994. She discussed the position and raised the question whether she could get an exemption from the requirement to occupy the premises. She, her husband and children had inspected the premises which they found to be in poor condition and too small for the family's needs. Even though the premises were not far from the family home, it would be necessary to transport the children to school. Despite this, she was very keen to apply for the position.

405. Mr Bateman told her that it was a requirement of the position that she occupy the residence as Officer in Charge. She stated that she had heard rumours concerning the sale of residences and that Mr Bateman told her that he had confirmation that the residence would not be sold. She then visited Mr Bateman at Heidelberg and he reiterated that the residence would not be sold.

408. Relying upon what had been in the patrol message, as understood by her, and the statements made to her by Mr Bateman, she applied for the position at Diamond Creek. If she had not had the assurances, she would not have applied for the position.

411. She applied for the position and was interviewed by the selection panel in early August 1994. On 22 August 1994, she was appointed to the position.

414. She moved into the residence on 24 September 1994, having been transferred to the police station on 19 September 1994.

417. Upon moving into the residence, it was necessary to carry out repairs and improvements, which were done. The house was less than comfortable compared with the family home, but the family accepted the position.

420. Some six weeks after Sergeant McIntyre and her family moved into the residence, she received the standard form letter dated 10 November 1994 from Mr Cliffe.

423. The letter was in the same form as that received by the other plaintiffs.

426. Sergeant McIntyre did not take up the option of purchasing the residence, and she and her family moved to rented premises on 15 May 1995. From that time on, she received a $156 subsidy per week from the Force until 30 June 1996.

429. Sergeant McIntyre continues to be the Officer in Charge at Diamond Creek, and she expects to occupy the position until 60, when she intends to retire.

432. She was reimbursed for the costs incurred moving into and out of the police residence. She claims the loss of the subsidy from 1 July 1996, at the rate of $156 per week, until the expected date of her retirement in June 2011. In the alternative, she claims the cost of interest paid on the mortgage on her residential property. In addition, she claims the sum of $1,659, being the cost of breaking the lease on her home, which the family moved back into on 13 July 1996. It was necessary to pay the tenants $1,659 as consideration for surrendering the lease.

435. I am satisfied that Sergeant McIntyre would not have moved into the police residence at Diamond Creek unless she was assured that it was not to be sold. She viewed the move not only to further her career in the Force but also as a commercial venture, because she and her husband were able to lease their family home.

438. In 1972, when she joined the Force, there were 120 females in the Force. There are now in excess of 1,200. She enjoys being in the Force and intends to stay until 55 to 60 years of age. She frankly admitted that police work was stressful and that she did not like working shift work and weekends.

441. She frankly conceded that she was reluctant to move into the home but accepted that she had to. She accepted that she did pursue the position to broaden her experience for future promotion and to serve the community. She said that in a letter to the Police Association on 29 December 1994. In that letter, she stated that she reluctantly gave an undertaking to occupy the premises at Diamond Creek.

444. Sergeant McIntyre's employment was subject to the provisions of the Act, the Regulations made thereunder, and the deemed individual employment agreements arising under the Employee Relations Act 1992, incorporating the Victoria Police Force Award of 1992.

447. Each plaintiff was cross-examined as to the disadvantages of moving into the police residence. The disadvantages were identified as, first, being required to reside in a home which may not be of good standard and in good repair; living in a location which may not be the most satisfactory; being required to obtain permission for renovations, repairs and maintenance from the Force and G.E.H.A.; being effectively on call 24 hours a day because of the close proximity to the police station; and being required to answer phone calls at all hours.

450. The plaintiffs stated that steps were taken with respect to the telephone calls which meant that they were not obliged to answer all calls. But each plaintiff, whilst recognising the so-called disadvantages, was of the one mind, namely, that the benefits clearly outweighed the alleged disadvantages. Each occupied a position of command, each had a number of members of the Force under his or her control, each was working in an area which was attractive and to their liking, namely, country or semi-country positions, and more importantly, each recognised the substantial financial benefits which flowed from occupying the premises.

453. Today, a sergeant receives approximately $55,000 salary. Each plaintiff was able to take advantage of the position by leasing out their own homes. There is no doubt that each recognised that there were considerable financial advantages in taking the position. Each expressed the view, other than Mr Button, that he or she did not intend to seek further promotion because of the attractiveness of the position.

456. Each plaintiff was cross-examined in respect of the incentive to members of the Force, who had completed 30 years' service, to leave the Force because of the attractive superannuation payment at that stage in their careers. At the end of 30 years, the member is entitled to retire. The superannuation pay out is 8.1 times the yearly salary averaged over the previous two years. It is said that there is a real incentive to retire because the superannuation amount peaks at that time and there is no interest payable on the amount thereafter. Whilst in one sense it does peak, it is misleading to view it as the maximum amount. Two consequences flow from continuing in the Force. First, the substantial contribution made each week to the superannuation fund is eliminated. The amount is in excess of $100 per week, which represents a substantial increase in take home pay. Secondly, if the member remains in the Force, the final pay out is 8.1 times the amount of the last year's salary averaged over the two year period and, in accordance with expected pay rises, the amount payable at age, say, 60, would be considerably more.

459. The evidence revealed that a number of police have retired between the ages of 50 to 55, taking with them the substantial lump sum.

462. Despite this evidence, each plaintiff, other than Mr Button who has retired, maintained that he or she would continue in the Force until the age of 60, and in the case of Sergeant Arthurson, until 65. I accept the evidence of each plaintiff, although it must be steadily borne in mind that that was, and is, their intention. Their intention could change in the future.

465. Section 16A of the Act required members of the Force to retire on attaining the age of 60 years.

468. By reason of the Equal Opportunity Act 1995, s.16A was substituted, with the result that there is no retiring age and that members of the Force were entitled to elect to retire upon attaining the age of 50 years or at any time thereafter.

471. Hence, it is open to any of the plaintiffs, other than Mr Button, to retire at 65 years of age.

474. As I stated, there was no real dispute with respect to the evidence given by the plaintiffs, although the inferences that should be drawn were a matter of argument. It will be necessary to further consider and determine some of the factual matters when considering the issues.

478. The claim brought by each plaintiff is in contract. Each alleged that the contract with the State contained a term that the State breached, and caused damage. It is contended that the term was implied.

481. Each contract is put on three alternative bases. First, that the implied term was a term of the contract of employment between each plaintiff and the State, alternatively, that when each plaintiff applied and was appointed to the new position, the contract of employment was varied, and finally, that upon application and appointment, a new contract came into being between each plaintiff and the State.

484. The State denies that there was any implied term, as contended for by the plaintiffs, and further alleges that the term could not be implied into the contractual relationship between each plaintiff and the State, because to do so would be contrary and inconsistent with the statutory powers given to the State and which can be exercised from time to time. In other words, the existence of the implied term would be contrary to the statutory powers given to the State and would fetter their exercise.

487. Sergeants Arthurson and McIntyre have an alternative basis for their claim, namely, that representations were made to them concerning the residences and that the State is estopped from denying the representations and their effect.

490. The implied term pleaded and relied upon by the plaintiffs is -

"That for so long as the plaintiff held the position (as officer in charge of the police station) he or she would:

(a) have the benefit of accommodation in the residence or, in the alternative other appropriate accommodation provided by the defendant; and

(b) pay rental for the occupation of the residence at the rate of 3% or, in the case of the sixth plaintiff, 6% of his or her salary."

(Emphasis added).

497. The reference to the sixth plaintiff is Mr Button.

500. It is noted that the said implied term required the State to provide each plaintiff with the benefit of accommodation in a residence that is attached to the police station or some other appropriate accommodation, and that each plaintiff would pay a minimal rent of 3% or 6%, as the case may be, of his or her salary. Of considerable significance is the contention, that the obligation on the State was to continue so long as the plaintiff held the position of Officer in Charge of the particular police station or, in the case of Mr Button, the district.

503. Each plaintiff was appointed to the position at a certain date, and took up the new position pursuant to a transfer shortly thereafter.

506. The date when the alleged implied term became part of the contractual relationship with the State, will vary according to the circumstances. Insofar as it is alleged that the terms were already part of the contract of employment at the date of application, it is necessary to consider the position as at that date. Insofar as it is alleged that there was a variation to the contract of employment or the creation of a new contract, the relevant dates will be the date when the said variation occurred or when the new contract was created.

509. In order to determine the question whether there was any such implied term, it is necessary to consider and determine what the provisions were which regulated the relationship between each plaintiff and the State and in particular, whether the provisions were contractual. It is clear that each plaintiff has to prove that at the relevant time, the contractual relationship with the State contained the alleged implied term.

512. It is convenient to determine the relationship by considering the position of the first plaintiff in time, namely, Sergeant Malcolm Davey. He applied for his position at Sorrento pursuant to the advertisement which appeared on 12 March 1990, and he was appointed to the position on 2 July 1990.

515. There is no dispute that each plaintiff is a member of the Force and a servant of the Crown in the right of the State.

518. The Force was established at the beginning of 1853 by an Act for the Regulation of the Police Force, passed by Lieutenant-Governor La Trobe of the Colony of Victoria with the advice and consent of the Legislative Council.

521. Up until 1853, the police force in the Colony was the New South Wales Police Force.

524. Section 2 of the Act authorised the Lieutenant-Governor to appoint the Chief Commissioner of Police, who "shall be charged and invested with the general control and management of the police force of the said Colony". The power of appointment of members of the Force was given to the Lieutenant-Governor and the Chief Commissioner. Power was also given to the Lieutenant-Governor, with the advice of the Executive Council, to frame rules, orders and regulations for the government of the Force and with respect to their places of residence. Every member of the Force was required to take an oath before he was permitted to serve.

527. Section XI was an important section because it provided that upon taking an oath, the member of the Force entered into a written agreement with the Crown. It is in similar form today.

530. The Act was repealed and re-enacted a number of times after 1853. It is now the Police Regulation Act 1958.

533. The nature of the contract and the rights given to a member of the Force were discussed by the Full Court in the case of Power v R (1873) 4 AJR 144.

536. A former member of the police force brought a petition of right against the Crown alleging a number of counts. He failed in his claims for wrongful dismissal.

539. At one stage, he was a sergeant, and he was later reduced to the rank of constable. He claimed the difference between his pay as a sergeant and that of a constable prior to his final dismissal, and recovered the sum of £3 8s.

542. The Full Court discussed his right to recover this amount on a quasi contractual claim. The Court said at p.145 -

"His rights depend on the nature of the contract under which he served. Members of the Police Force enter into an engagement to serve by taking and subscribing an oath, which is set out in the Police Regulations Statute 1865."

546. The Full Court accepted that he had a right to recover his pay prior to dismissal.

549. With respect to the right to dismiss, the Court said -

"... We are of the opinion that the agreement created by the statute includes a concurrence between the parties. By it the petitioner promised to serve as long as it would please Her Majesty to employ. On this condition his promise was accepted. But this does not include a mutuality or reciprocity of contract and liability. There is in fact but one contracting party, that is the petitioner. Nothing can be clearer than that the engagement entered into is unilateral only, not mutual. It binds him to serve, but does not oblige Her Majesty to retain him in her service beyond the period which circumstances may render necessary." (Emphases added).

553. In Bertrand v R [1949] VicLawRp 10; (1949) VLR 49, the Full Court said of Power's case -

"The case is thus a definite authority not only that there is an obligation upon the Crown to pay policemen for services rendered, but also the obligation is enforceable by the subject upon the petition of right."

557. In Green v R [1891] VicLawRp 73; (1891) 17 VLR 329, the Full Court said at p.332 -

"The contract entered into by each member of the Police Force, both officers and constables, by virtue of taking and subscribing the oath, is a unilateral contract, and implies no corresponding obligation on the part of the Crown to retain the member in the service: Power v The Queen. The contract is terminable at the pleasure of the Crown."

561. What the Full Court said in Power v The Queen was quoted with approval by Barton J in Ryder v Foley [1906] HCA 61; (1906) 4 CLR 422 at 440-41.

564. The 1853 Police Regulation Act and the following Acts all decreed that upon taking the oath, the member of the Force entered into a written agreement with the Crown. The members of the Force were servants of the Crown and they held their offices during the pleasure of the Crown. A statutory agreement was established. The common law concerning Crown servants applied to that contract. Because the member of the Force held his office during the pleasure of the Crown, he had no remedy for wrongful dismissal. The member had a right to sue for pay, but statute apart, had no rights of substance. At common law, there was no contract between the Crown and servants of the Crown - see Allpine v The Commonwealth [1948] HCA 19; (1948) 77 CLR 62 at 76, Coutts v The Commonwealth [1985] HCA 40; (1984) 157 CLR 91 at 98-99, Marks v The Commonwealth [1964] HCA 45; (1964) 111 CLR 549, and Shenton v Smith (1895) AC 229.

567. The Act establishes a contract, but a contract with very few rights enforceable by a member of the Force.

570. These common law propositions are, of course, subject to any contractual term to the contrary and, of course, subject to statute. See Gould v Stewart (1896) AC 575 at 577.

573. In 1964, in Marks v The Commonwealth [1964] HCA 45; 111 CLR 549, Windeyer J, at p.586, stated the law as follows -

"Servants of the Crown, civil and military, are by the common law employed only during the pleasure of the Crown. Except when modified by statute, that rule has an overriding place in all engagements to serve the Crown ... But it does not need a statute to bring the rule in. It would need a statute to put it out. Its consequence is that the Crown may dismiss its servants at will, without notice at any time."

577. That is the common law position, and the Act creates a statutory contract. The terms of the statutory contract are to some extent governed by the statute, any regulations made thereunder which regulate the relationship, and express or implied terms agreed to by the parties.

580. The Police Regulation Act 1958, as amended at the beginning of 1990, contained considerably more provisions regulating the employment relationship between members of the Force and the Crown, than the Acts of the latter half of the nineteenth century.

583. When Sergeant Davey took the oath as a constable on 14 October 1971, the effect, with respect to his employment, was prescribed by s.13(3) of the Act of 1958. The sub-section provided -

"(3) Every person who has taken and prescribed such oath shall be taken to have, from the day on which such oath has been taken and subscribed, thereby entered into a written agreement with, and shall be thereby bound to serve Her Majesty as a member of the Force, and in whatsoever capacity he is hereinafter required to serve, and at the current rate of pay of any rank to which he is appointed or reduced until legally discharged; and such agreement shall not be set aside cancelled or annulled for want of reciprocity, but every such agreement shall be determined by the discharge dismissal or other removal from office of any such person, or by the acceptance of the resignation of the Chief Commissioner or of any officer by the Governor-in-Council, or by the acceptance of the resignation of any sergeant or constable by the Chief Commissioner."

587. The sub-section was in exactly the same form when Mr Button took the oath, and was amended in November 1971 in respect of the acceptance of the resignation of a member of the Force. The latter amendment is of no consequence in considering the nature of the contract between each of the plaintiffs and the State.

590. In Bertram v The King, supra, Herring CJ considered the authorities relating to legislation similar to s.13(3). His Honour said this at p.53 -

"These authorities, ... make it clear that the contract that arises from the taking of the oath is entirely unilateral, that the obligations arising therefrom are obligations resting upon the member of the police force who takes the oath and not the Crown."

594. But as the sub-section makes clear, and this is supported by the cases of Power v The Queen and Bertram v The King, that although the contract is unilateral, there is an obligation upon the Crown to pay for services rendered at the current rate of pay.

597. It is clear from the wording of s.13(3) and the authorities, that the contract is unilateral and places upon the servant of the Crown, obligations to the Crown. One of the obligations is, that the member of the Force is bound to serve, and to comply with all lawful and reasonable directions, instructions and orders. The Force is a disciplined body and for its efficient and effective operation, obedience to a lawful and reasonable order is paramount.

600. Side by side with the statutory contract are the provisions of the Act and also the Regulations. Although the provisions of the Act and Regulations are not part of the contract of employment, nevertheless, all parties are bound to comply with the Act and Regulations, and the contract of employment is subject to the statutory provisions. The statutory contract is created by statute and hence, has the force of law and must be read with the other provisions of the Act or any other Act which bears on the relationship between a member of the Force and the State.

603. In a contract between an employee and the Crown, at common law, the employee may not terminate the contract at will. Nevertheless, from the very first Police Regulation Act of 1853, power has been given to a member of the Force to resign his office.

606. At the time when Mr Davey and the other plaintiffs, save for Mr Button, took their oath, each could have brought his office to an end by giving one month's notice in writing. When Mr Button took office, the provision required three months' notice to terminate. See s.14 of the Act.

609. Other statutory provisions which had an effect upon the employment relationship are found in Part III, which is concerned with superannuation, retirement, gratuities, pensions and allowances. In addition, there are provisions concerning misconduct and penalties. See Part V of the Act.

612. In addition to the provisions of the Act affecting the employment relationship, the Governor-in-Council was authorised to make rules, orders and regulations for the government of the members of the Force "with respect to all matters necessary for making the Force efficient for the discharge of their respective duties". See s.17. In addition, under s.130, the Governor-in-Council could make regulations with respect to a variety of matters, including "any matter or thing required or permitted to be prescribed or which is necessary or convenient to be prescribed for carrying this Act into effect."

615. Pursuant to the powers, the Governor-in-Council has passed Police Regulations.

618. Police Regulations were passed in the year 1979, and came into operation on 25 October in that year. The Regulations dealt with a variety of matters and were the Regulations which were in force when Sergeant Davey was appointed to the position at Sorrento. The Regulations dealt with, inter alia, appointment to the service, discipline and transfers.

621. The 1979 Regulations were repealed by the Police Regulations 1992 which came into operation on 23 June 1992. These Regulations applied to all the plaintiffs from that date onwards and in particular, applied at the time when each of the other plaintiffs were appointed to their respective positions.

624. At all times, the Chief Commissioner has been the repository of substantial powers concerning appointment, superintendence and control of the Force.

627. According to s.8 of the Act, the Chief Commissioner, subject to the Act and the Regulations, had the power to appoint all members of the Force to their respective positions, subject to the direction of the Governor-in-Council.

"5. The Chief Commissioner shall have, subject to the directions of the Governor-in-Council, the superintendence and control of the Force, and all officers of police shall have the superintendence and control of that portion of the Force which is placed under their charge subject to the authority herein conferred upon the Chief Commissioner and to the regulations made or to be made by the Governor-in-Council as is hereinafter provided."

634. In my opinion, it was clear that the Chief Commissioner had the power to require any member of the Force to serve at a particular location, and this power was no doubt subject to any provisions of the Act or the Regulations. This was confirmed by an amendment to the Act which came into operation on 1 April 1991 - see Act No. 42/1990, s.4(1). The amendment did not apply to Sergeant Davey but, in my opinion, the Chief Commissioner already had the power. It is convenient to set out s.8 as amended. It provided -

"8. Appointments to and promotions and transfers within the force

(1) The Chief Commissioner may, in accordance with the regulations, appoint, promote and transfer -

(a) so many Commanders, Chiefs, Superintendents etc; and

(b) so many Senior Sergeants, Sergeants, Senior Constables and Constables-

642. This provision applied to the other plaintiffs.

645. Part IX of the 1979 Regulations dealt with transfers.

"901. In order to maintain the discipline and efficiency of the Force members of the Force are liable to immediate transfer to any part of the State of Victoria."

652. That general power, in my opinion, merely declares the clear power that the Police Commissioner has under the Act and further, gives effect to the implied term of the contract of employment to obey all lawful and reasonable directions.

655. However, the balance of that part of the Regulations makes it clear that any transfers should be, if possible, the result of application by the member of the Force. The evidence established that at all material times, there was in place a procedure for dealing with vacancies, applications for transfer and appointments to new positions.

"902. A member of the Force may apply for transfer from one district, sub-district or station to another district, sub-district or station, or from one branch of the Force to another branch or from general to special duty."

662. Where premises were available, the Chief Commissioner had power to require occupation of the premises. This is apparent from Regulation 903 which provided -

"903. Where government premises are available for occupation by the member selected or nominated for transfer to fill an advertised vacancy, such transfer shall, if the Chief Commissioner so directs, involve occupation of such premises by the member."

666. Regulation 904 required the Chief Commissioner, subject to exceptions which are presently irrelevant, to advertise a vacancy.

669. Regulation 904 provided that if it was necessary for the maintenance of the efficiency of the Force, the Chief Commissioner, if satisfied there was a vacancy, was obliged to cause an advertisement of the vacancy to be published in the Police Gazette.

672. Regulation 904(3) required a statement to be inserted in the advertisement, if it was necessary to occupy premises.

675. In addition, Regulation 906 gave a member of the Force below the rank of superintendent, who was aggrieved by the failure of the Chief Commissioner to select him for transfer to any vacant position, the right to appeal to the Police Service Board.

678. Mr Davey made application pursuant to the 1979 Regulations.

681. Part V of the Police Regulations 1992 is in similar terms to the 1979 Regulations, and each of the other plaintiffs made application pursuant to those Regulations.

684. In my opinion, the provisions of the Act outside s.13(3) and the Regulations were not contractual, and did not form part of the contract between the plaintiffs and the State. Nevertheless, the provisions applied to the relationship between each plaintiff and the State, and each party was obliged to comply with the provisions of the Act and the Regulations.

687. In addition to those provisions and the statutory contract, from time to time, determinations were made which also had an effect upon the relationship of each plaintiff and the State.

690. In relation to Sergeant Davey, it is submitted, on his behalf, that Determination No. 179 of the Police Service Board, as amended by Determination No. 245, applied to his employment agreement with the State.

693. Unless there is a provision in the statutory instrument, which gives the power to make the determination part of the contract, or an express term of the contract of employment, which incorporates the determination into the contract, the general rule is that the determination is not incorporated into the contract as terms of the employment. Of course, circumstances may establish otherwise.

696. The question was considered by the High Court in Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410. At p.420, Brennan CJ and Dawson and Toohey JJ, after referring to what Dixon J said in Amalgamated Collieries of WA Ltd v True, went on to say -

"However, we do not understand Dixon J to be saying in that passage that 'a term imported by statute into the contract of employment' loses its statutory character and becomes incorporated in the contract as one of its terms. On the contract, he recognises the distinction between an obligation originating in a statute and an obligation arising from a contract. In his view, the distinction was not of importance in that case, but it is crucial in the present one. No doubt there are terms which are incorporated by statute in contracts of a particular kind so that the ordinary remedies for breach of contract are available in relation to them. And apart from statute, the term may be implied by law as an incidence of a particular class of contract ... ". (Emphasis added).

700. Their Honours summarised the position at p.421 when they said -

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

704. It was submitted on behalf of Sergeant Davey that the relevant parts of the Determination No. 179 of the Police Service Board, as amended by Determination No. 245, were express terms of the employment agreement.

707. In 1946, by the Police Regulation Act of that year, the Police Classification Board was established. The function of the Board was to determine the conditions of service for members of the Police Force. Such a determination typically covered salaries, allowances, hours of duty, rates of pay for overtime and annual recreation leave and sick leave.

710. It was subsequently renamed the Police Service Board.

713. Its jurisdiction was subsequently expanded to cover determinations relating to police recruits and the like, and to hear and determine appeals from any member against his or her non-selection for promotion or transfer. See s.69(2)(b).

716. In addition to making determinations and hearing appeals, it also had the power to provide an interpretation of any of its determinations where the State, the Chief Commissioner or the Police Association requested an interpretation.

719. The effect of a determination is set out in s.84(6) of the Act. It provides, in effect, that any salary et cetera, determined by the Board, shall be what the determination says and "any other matters determined by the Board shall, subject to this part, have effect according to the tenor thereof."

722. Copies of a determination had to be laid before both Houses of Parliament and if, within 30 days after any determination had been laid before the Houses of Parliament, each House passed a resolution disallowing a determination or part thereof, "the determination or part so disallowed shall thereupon cease to have effect." See s.84(3).

725. By reason of the Act, the determination had the effect of law and was to be complied with, by the State and members of the Force. But there was nothing in the Act, nor the Determination No. 179 of the Police Service Board made the fourteenth day of December 1971, nor was there any evidence before the Court, which would lead to the conclusion that the determination was incorporated into the contract of employment between the parties.

728. Division XI of the 1971 Award dealt with government premises.

"120. Each married member, who for the performance of his duties, is required by the Chief Commissioner to occupy government premises, shall be provided with such premises for himself and his family."

735. The balance of Division XI dealt with rental, and alternative accommodation where the premises were not available for immediate occupation, and went on to provide for quarters for single members of the Force. Paragraph 128 gave a right to a member, dissatisfied with the amount of the rental, to make a claim to the Police Service Board.

738. The determination was amended on 10 October 1975 to vary the amount of the rental to be paid by the member of the Force. At the time when Sergeant Davey applied for transfer to Sorrento, his relationship with the State was subject to the statutory contract, the provisions of the Act, the Regulations and the 1971 Award, as amended. However, the statutory provisions and the Award were not part of his contract of employment.

741. Later, circumstances changed and when the other plaintiffs applied for transfer, other provisions operated.

744. By the Police (Industrial Functions) Act 1992, which came into operation on 1 July 1992, the Industrial Relations Act 1979 applied to persons appointed to the Force. The powers of the Police Service Board were curtailed as a result. A new body called the Victoria Police Force Conciliation and Arbitration Board came into existence and it was responsible for making awards. On 17 July 1992, it made the first Victoria Police Force Award. Division VI was concerned with Government Premises and was in similar terms to the 1971 Award, as amended.

747. The Police Service Board ceased to exist by reason of Police Regulation (Discipline) Act 1993, which came into operation, insofar as it is relevant to the present matter, on 26 August 1993.

750. The Employee Relations Act was passed in 1992. By s.7(1), it applied to persons appointed to the Force under the Police Regulation Act 1958.

753. The Act came into operation on various dates, but was totally in operation on 1 March 1993. As a result, each plaintiff had a deemed individual employment agreement with the State which contained, inter alia, the terms of the Victoria Police Force Award of 1992, which superseded the earlier determinations.

756. By reason of s.172(6), the Victoria Police Force Award of 1992 expired on the day. By s.24(3), upon expiration, where an employee continues to be employed by the employer, both parties, unless a new award is made or the parties make an employment agreement, are bound by an individual employment agreement with the same terms and conditions as those that apply to the employee and the employer under the expired award.

759. This had the effect of creating an individual employment agreement between members of the Force and the State, which contained the terms of the 1992 Award.

"(1) Employment agreements may contain provisions concerning some or all of the terms and conditions of employment."

766. It is noted that so far as Sergeant Davey, Sergeant Walker and Mr Button are concerned, these deemed individual employment agreements were created after they had taken up their positions involving occupancy of the police residence.

769. In my opinion, the relevant date to determine whether the implied terms relied upon by each of the plaintiffs were terms of their contract of employment, were the dates when each was appointed to the position which required each to occupy the police residence. There was no suggestion in argument, nor is there any evidence, that subsequent to each relevant date, the particular plaintiff and the State entered into any negotiations leading to any contract which varied the existing contract.

772. The statutory agreement created by the Act, the provisions of the Act and the Regulations which governed the relationship of each plaintiff and the State, the provisions of any award regulating and governing their relationship, and the provision of the deemed individual employment agreements applying to Sergeants Arthurson and McIntyre at the relevant time, did not contain any express term concerning the right of any of the plaintiffs to occupy the police residence for any period, or precluded the State from selling the premises. The parties were bound by the said contracts and the provisions of the statutory instruments and awards, but all were silent on the question of tenure of the occupation of the police residence.

775. Mr Hammond QC, who appeared with Mr Rinaldi for the State, submitted that there was no basis for implying the term pleaded by the plaintiffs. Further, he submitted that the plaintiffs were transferred and required to occupy the premises pursuant to the Act and the Regulations; that the alleged implied term, if part of the contract, would have the effect that the Chief Commissioner, who had discretionary powers in relation to transfers and obligation to occupy premises, would be precluded from performing his statutory powers. In addition, G.E.H.A. would be precluded from exercising its statutory powers to sell if the term was implied into the contract and enforced.

778. It is now necessary to go back to 2 July 1990, when Sergeant Davey was appointed to the position of Officer in Charge at Sorrento and was obliged to occupy the police premises. At that time, both parties were subject to the statutory agreement, the Act, the Regulations and Determination No. 179 of the Police Service Board, as amended by Determination No. 245.

781. It is in that setting that it is contended, on behalf of Sergeant Davey, that the alleged term was implied into his contract of employment, or was implied by reason of an alleged variation of his contract upon appointment or was an implied term in a new contract arising out of his application and appointment.

784. In my opinion, by reason of s.5 of the Act, which gave the authority to the Chief Commissioner to superintend and control the Force, and his power of appointment, and the implied obligation under the statutory contract to obey a lawful order, Sergeant Davey could have been required to take up the position at Sorrento and occupy the premises. Further, there was power under Regulation 901 to require him to transfer.

787. Mr Beach QC submitted that the authority of the Chief Commissioner to require a member to take up a position was irrelevant to the question of the implication of the term in the present case, because the facts were that there was no compulsion and each member applied for the vacant position pursuant to the procedures set out in the Regulations.

790. Whilst that is correct, in my opinion, the existence of the power is a factor that must be weighed in considering whether the term should be implied into the relationship between Sergeant Davey and the State. It is an incidence of the contractual relationship which gives very few rights to the member.

793. When Sergeant Davey applied for transfer, by responding to an advertisement, he was exercising a right given to him by the Regulations . The Chief Commissioner had a right under the statutory contract to transfer Sergeant Davey, but the Regulations made it clear that it was appropriate that positions should be advertised and applications sought. That is what happened. In my opinion, in making the application and being appointed to the position, Sergeant Davey was not exercising any contractual right. The transfer did not vary his statutory contract of employment. He was not promoted. He was still a sergeant. Section 13(3) of the Act did not cause any change to his contract of employment. The oaths he took as a constable also applied to his position as sergeant, and he transferred to a position at the same rank.

796. His appointment was pursuant to a right of the Chief Commissioner to transfer members of the Force, and pursuant to a regulatory procedure. His right to subsidised rental and payment of a small amount of rent were pursuant to the Award. His application and appointment did not result in a variation of his contract of employment and did not, in my opinion, involve the creation of a separate and discrete contract.

799. The question is whether the term alleged by Sergeant Davey was implied in his statutory contract of employment, and was a term at the time of his application and appointment.

802. Terms are implied into contracts by the application of a number of principles.

805. First, they may be implied as a matter of law, both statutory and common law. By way of example, there are terms implied by the Goods Act 1958. The common law recognises that in certain relationships, there are terms implied as a matter of law. By way of example, a master/servant contract is one of a class of contract in which certain terms are implied by law, such as reasonable notice before either party can put an end to the contract. Such terms are implied in the absence of an expression of any contrary intention by the parties. See Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312 at 317.

808. Terms sometimes are implied by usage, whether commercial or otherwise. Trade customs may also imply terms.

811. None of the plaintiffs rely upon those principles.

814. The courts have implied a term into a contract to give it, what is described as, "business efficacy". The implication comes about because the parties have failed to properly express their intentions, and unless a term is implied, their common intention may be defeated.

817. The implication of a term to give it business efficacy was discussed by the Privy Council in BP Refinery (Westernport) v The Shire of Hastings (1977) 180 CLR 266. Their Lordships laid down five issues to be addressed in order to determine whether a term should be implied. The five issue test has been applied by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1981) 149 CLR 337 at 347, per Mason J. Stephen and Wilson JJ agreed with Mason J. The five issue test laid down by the Privy Council was adopted by the High Court in Secured Income Real Estate v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 606.

(1) The term must be reasonable and equitable;

(2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3) It must be so obvious that "it goes without saying";

(4) It must be capable of clear expression;

(5) It must not contradict any express term of the contract.

826. Mr Beach QC, on behalf of the plaintiffs, disavowed any reliance upon the five issue test. Instead, he relied upon a different test which focuses on the operation of the contract and determines whether the implied term is necessary for the reasonable or effective operation of the contract.

829. If the five issue test was applied in the present situation, it is my opinion that the term alleged by Sergeant Davey would not be implied into any contractual relationship that he had with the State. The first reason for that conclusion is, that the contract is effective without the implication of any such term. The transfer to the new position and the obligation to occupy the house does not in any way interfere with Sergeant Davey's ability to perform his contract of employment. Equally, if the house is sold and he does not receive any subsidy, his contract of employment is still effective. There is no interference with his ability to perform his contract and comply with the other provisions, which govern his relationship with the State.

832. His employment is effective without the term because the contract can still be performed by both parties, even though the house is no longer available. He still occupies the position of Officer in Charge of the station, and continues to perform his employment.

835. Secondly, the alleged implied term is not so obvious and "goes without saying". If the reasonable officious bystander were to address the question as to what was to happen in the circumstances that prevailed, in my opinion, both parties would not have said words to the effect that it is obvious, and express the view that the position would be in accordance with the alleged term.

838. Thirdly, in my opinion, the alleged implied term would not be reasonable and equitable, because of the fact that the right to occupy must depend upon the views of the government of the day and in particular, the necessity of having accommodation available next to the police station. If it is no longer necessary for the efficient operation of the Force, then in my opinion, it is not reasonable and equitable that the State be obliged to provide alternative accommodation with a subsidy. Circumstances do change, and what is necessary for the efficient operation of the Force on one day may not be necessary on a future day. But Mr Beach QC did not rely upon the test.

841. In Hawkins v Clayton (1987) 164 CLR 539, Sir William Deane stated a different test where the parties have not executed a formal contract in writing.

844. At p.571, His Honour, after noting that the five issue test of the Privy Council was concerned with the question whether a term should be implied in a formal contract which was complete upon its face, went on to say -

"In such cases, the insertion of an additional term effectively involves an alteration to what the parties have formally accepted as the complete written record of the contract between them. As the judgment of Mason J in Codelfa (Stephen and Wilson JJ concurring with His Honour's comments on this aspect of the case) clearly indicates, the cumulative criteria formulated or accepted in such cases cannot be automatically applied to cases such as the present where the parties are not attempting to spell out the terms of their contract but have left most or some of them to be inferred or implied. Where that is so, there is no question of effectively altering the terms in which the parties have seen fit to embody their agreement; the function of the court is, as Lord Wilberforce pointed out in Liverpool City Council v Irwin:

'Simply ... to establish what the contract is, the parties not having themselves fully stated the terms.'

In the performance of that function, considerations of what is 'reasonable', 'necessary to give business efficacy to the contract' and 'so obvious that it goes without saying' ... may be of assistance in ascertaining the terms which should properly be implied in the contract between the parties. There will not, however be the need or the justification for the law to refuse to imply any imputed term which does not clearly satisfy all such requirements. This is particularly so where, as here, the contract has passed from the executory stage and has been executed by one or both parties."

850. What His Honour said was taken up by the High Court in the later case of Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410. Brennan CJ, Dawson and Toohey JJ, at p.422, after referring to what Deane J said in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 121, said -

"He pointed out that a rigid approach should be avoided in cases, such as the present, where there is no formal contract. In those cases the actual terms of the contract must first be inferred before any question of implication arises. That is to say, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention. And the test to be then applied was in the later case formulated by Deane J in these terms - 'The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties'." (Emphases added).

854. In applying that test, the first question is to determine what are the actual terms of the contract. For in order to imply a term, it has to be established that it was necessary for the reasonable operation of a contract of that nature, or necessary for the effective operation of a contract of that nature.

857. Sergeant Davey had the statutory agreement. It gave him very few rights. It gave extensive rights to the State. One of the rights of the State was to require him, in a disciplined Force, to obey lawful directions and orders. This would include being transferred to a position within this State in order to provide an efficient police presence in that area. Under the Act, the Police Commissioner had substantial powers that he could exercise in relation to Sergeant Davey's contract with the State. The Regulations gave power to the Chief Commissioner to require Sergeant Davey to transfer to a position. The Regulations provided a procedure whereby Sergeant Davey could apply for a position and the position could carry with it an obligation to reside in police premises. Further, the Regulations and the Determination affecting the contract of employment set out the terms and conditions of the occupancy, including the amount of the rental.

860. The obligation of the Officer in Charge to occupy the police residence next to a police station resulted in both a benefit and detriment to both parties to the contract of employment. The State gained the benefit of ensuring that it provided an efficient police force in certain areas, and it suffered the detriment of having to subsidise the police officer concerned. The police officer gained a benefit of cheap housing, but suffered the detriment or disadvantage of having to live in premises not of his own choice and not necessarily of a good standard, and more importantly, being required to attend to the demands of the public, 24 hours a day.

863. In my opinion, it was not necessary for the reasonable operation of the contract of employment to imply the term as alleged, nor was it necessary for the effective operation of the contract. Without the term being implied, the operation of the contract was effective, as it was reasonable.

866. His ability to carry out his employment did not depend upon occupation of a house next to the police station or having subsidised accommodation. If the house was sold and he received no subsidy, he was still able to properly, efficiently and adequately perform his contract of employment and comply with all other provisions, which governed his relationship with the State.

869. It was submitted, on behalf of Sergeant Davey and the other plaintiffs, that the implied term was necessary for the reasonable or effective operation of the contract by reason of the following facts -

(a) In its absence, a member would not have applied for the position;

(b) In its absence, a member and his or her family would be put to the major inconvenience and expense of moving to the premises, with no security of tenure, in circumstances where the State could have then, at any time, evicted them, and it is asserted that such a consequence was unreasonable, unjust and draconian;

(c) In its absence, the contents of the obligation "Will be required to occupy government premises" in the Gazettal Notices were unspecified and uncertain both as to the duration of the tenure and the rental obligations.

875. In my opinion, none of the factors relied upon bear on the operation of the contract of employment between Sergeant Davey and the State. The factors are concerned with matters which are outside the contract of employment. It is not possible to say that in their absence, no member would have applied for the position. There was no evidence to support the proposition. Each plaintiff said he or she would not have applied if the premises and subsidised rental had not been provided. So be it. But that does not mean no other member would not have applied. A transfer to a position of Officer in Charge of a station is a career move which results in promotion for some applicants. The fact is that moving from one premises to another, in the course of employment, would always involve some degree of inconvenience, and the fact that members of the Force can be moved from place to place, either compulsorily or of their own volition, will involve a degree of inconvenience and expense.

878. The last factor, in my opinion, is irrelevant to the question of implying the term, as alleged by the plaintiffs. No issue was raised in the case as to the question of the duration of the tenure and the rental obligations. No issue was raised that each plaintiff was entitled to be given notice. The rental obligations would continue insofar as each occupied the premises. Further, the presence of the implied term also made uncertain the length of tenure, and the rental obligations would always be subject to change by award.

881. Mr Beach QC submitted that the implied term was consistent with the actual and presumed intention of the parties. He submitted that the evidence of the plaintiffs demonstrated that it was their intention or understanding that they would have such rights or benefits. He submitted that documentary evidence emanating from the State, of the dealings post alleged contract date, constituted admissions by the State as to the existence and binding nature of the implied term.

884. In order to make good the point, the plaintiffs have to establish that an admission was made by the State, through an employee or agent acting in the cause and scope of the employment or agency; that such person was authorised to make the admission; and, further, that such evidence was admissible on the issue of an implication of a term.

887. Mr Beach QC submitted that certain documents passing between the Force, the State and G.E.H.A. and their conduct, prior to and post the alleged breach of contract date, show that there was an understanding and intention on the part of the Crown that, the term alleged to be implied in the contract between each plaintiff and the State was implied into the contract. In other words, the documents and conduct were admissions of the existence of the implied term.

890. This raises the important issue whether a party to a contract can admit the existence of an implied term. Clearly, it can do so formally in a pleading. The question is, can it informally admit the existence of an implied term? For example, by conduct past contract date?

893. Where parties have agreed to contract, what the express terms of the contract are, and whether the parties have concluded a contract and intend to enter into a binding contract in law, are all questions of fact. A party could make an admission in relation to any of these factual issues. Both parties could make an admission. But whether the issue is an admission by one, or both, parties, the Court must proceed with caution before giving any weight to the alleged admission. In Love and Stewart Ltd v S. K. Stone and Co Ltd (1917) 33 TLR 475, the House of Lords considered the effect of correspondence passing between the parties, in which both parties accepted there was a contract. Lord Parker referred to the mutual admission of a concluded contract, but held that the parties' the admission of a concluded contract was untrue. The House of Lords held that there was no contract.

896. In ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550-57, Gleeson CJ considered the question of admissions by one party, and emphasised that it was not a question of the subjective intention but "their intention as expressed" in determining whether there was a binding contract. However, he also expressed the need for caution when considering an admission.

899. In Sinclair Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310 at 318, Knox CJ, Rich and Dixon JJ, after referring to one party's conduct to the effect that a bargain had been made, said at p.318 -

"... we think this is a matter which affords little or no assistance in forming an opinion ... on the question of a concluded agreement."

903. Isaacs J, in the same case, at p.327, was prepared to accord weight to the admission. In my opinion, an admission with respect to the factual matters concerning the existence and terms of a contract may be admissible in evidence, but caution must be exercised before giving the admission any weight.

906. Mr Beach QC's submission raises a different point. He submits that there is evidence of admissions made by the State which are relevant to the question of the implication of the term, contended for by each of the plaintiffs. His submission raises a number of difficult questions.

909. First, the evidence relied upon is not evidence of statements and conduct of both parties to the agreement post the making of the contract. The evidence relied upon emanates from various employees of the State and a Minister of the Crown prior to and post the alleged contract dates. Mr Beach sought to provide the mutuality of conduct, by stating that each plaintiff agreed with what was written by and on behalf of the State. However, that subjective acceptance does not establish mutual conduct and statements, and the evidence relied upon comes from one side only.

912. Secondly, the question whether a term should be implied into a contract, is not a question of fact, but is a question of law. Often, the issue is complex, and it is difficult to see how a lay person could make such an admission which would have any probative value.

915. Thirdly, whether a term should be implied, in part, is an exercise in interpretation. The Court seeks to determine the presumed intention of the parties to the contract on an objective basis. The law does not permit resort to post contract conduct of the parties in the construction of the agreement. A number of reasons have been advanced for the exclusion, the primary one being that there is a real risk that the parties misunderstood the legal position. The same reasoning suggests exclusion when seeking to determine the implication of a term.

918. What authorities there are in this area, establish that mutual and unambiguous conduct by the parties may provide evidence of their presumed intention with respect to an implied term of a contract.

924. In Port Sudan Cotton Co v G. Chettiar & Sons (1977) 2 Ll. LR 5, Lord Denning MR at p.11, discussed the question of subsequent conduct of the parties in relation to the existence of a contract. After noting that it was not legitimate to look at subsequent conduct in construing a contract, His Lordship said -

"But although we have to exclude subsequent conduct on the construction of contracts, I see no reason to extend it any further. Take the question we have here. It is, whether there was a contract concluded at all; or, if there was, what were the terms of it?"

His Lordship went on to hold that it was appropriate to admit subsequent statements or conduct on the question of whether a contract had been concluded and whether it contained a particular term. He emphasised that an admission is receivable in evidence in those circumstances and that the weight was a matter for the Court. The other members of the Court of Appeal made no reference to what his Lordship said. It is noted that his Lordship was not talking about an implied term. The case does not provide support for a principle that words or conduct by a party to a contract are admissible as an admission of an implied term. .

In Wilson v Maynard Shipbuilding Consultants A.B. (1978) QB 665, the Court of Appeal was concerned with the question of where an employee "ordinarily works" in a contract of employment. At p.675, the Court, after noting that it was not possible to look at what the parties did under an agreement for the purpose of construing its terms, said -

"there would seem, however, to be an exception to the strictness of that doctrine where there must be a relevant term, but what that term is cannot be ascertained otherwise than by looking at what the parties did: ...but such evidence, if admissible in a particular case, must be treated with special care." (Emphasis added).

932. The Court did consider what had happened under the contract to determine what the implied term was.

935. In the later case of Mears v Safecar Security Ltd (1983) QB 54, the Court of Appeal was concerned with a contract of employment and the implication of a term concerning sick pay. An employee was absent from work, because of ill health, for extensive periods during his employment. He did not apply for, nor did he receive, any wages from his employer during his absences. There was no reference to sick pay in the written terms of employment. He was told by other employees, who visited him whilst in hospital, that the company did not pay sick pay. He applied to an industrial tribunal for a determination of the particulars relating to payment of wages during sick leave that ought to have been included in his written employment agreement.

938. At pp.77 et seq, Stephenson LJ considered the admissibility of evidence of the subsequent actions of the parties in determining what the parties had agreed to. At p.77, his Lordship said -

"I have no doubt that the manner in which this contract of employment was in fact carried out or interpreted by both parties was properly considered to see whether it led to the implication of the term to be determined."

It is noted that each party was contending for a different implied term. Under the relevant legislation, that was the question that had to be decided. The employee was seeking an implied term to the effect that he was to be paid sick pay, whereas the employer was seeking the implication of a term that he was not entitled to be paid sick pay. His Lordship referred to a number of cases and said, at p.78 -

"...the House of Lords has laid down that there are contracts which establish a relationship, e.g. of master and servant, landlord and tenant, which demand by their nature and subject matter certain obligations, and those obligations the general law will impose and imply, not as satisfying the business efficacy or officious bystander tests applicable to commercial contracts where there is no such relationship, but as legal incidents of those other kinds of contractual relationship. In considering what obligations to imply into contracts of these kinds which are not complete, the actions of the parties may properly be considered. But the obligation must be a necessary term: that is, required by their relationship. It is not enough that it would be a reasonable term." (Emphasis added)

944. It is noted that his Lordship was confining the admissibility of evidence to, first of all, the conduct of both parties, and secondly, the question of implying into a contract where there was a particular relationship.

947. The facts in that case were obvious. During the course of the employment, the employee was never paid sick pay. Further, he never sought it. One may readily infer the presumed intention of the parties from that conduct. The Court concluded that the facts and circumstances all pointed to a term that no wages were to be paid during absence, because of sickness.

950. The case was followed in Hill v National Bank of New Zealand (1985) 1 NZLR 736 at 738-9, in respect of an alleged oral term. See also National Bank v Murland (1991) 3 NZLR 86 at 93.

953. The authorities establish the principle that evidence of the conduct or statements of parties subsequent to the making of the contract, may be admissible as admissions with respect to implying a term of the contract. However, the cases confine the evidence to the conduct and statements of both parties, in circumstances where there was a particular relationship and the term was necessary. Further, the evidence of the parties' alleged admissions must be clear and unequivocal, and demonstrate the presumed intention with respect to the implication of the term.

956. However, as the cases referred to above clearly demonstrate, the scope for error and misunderstanding is always present, and any such evidence would rarely be of any weight, except in the most obvious circumstances.

959. The position is further complicated by the fact that, whether a term should be implied into a contract, is a question of law.

962. In Comptoir Commercial Anversois v Power Sun and Company (1920) 1 KB 868, Scrutton LJ said at p.899 -

"Exactly the same considerations seem to me to apply to the implication of a term which the parties have not expressed. The Court, and not the jury, are the tribunal to find such a term; they ought not to imply a term merely because it would be a reasonable term to include if the parties had thought about the matter, or because one party, if he had thought about the matter, would not have made the contract unless the term was included; it must be such a necessary term that both parties must have intended that it should be a term of the contract, and have only not expressed it because its necessity was so obvious that it was taken for granted." (Emphasis added)

Lord Denning MR, in O'Brien v Associated Fire Alarms (1968) 1 WLR 1916 at 1923, said -

"The primary facts, of course, and the surrounding circumstances have to be found by the tribunal of fact. But, that being done, the implication of a term is an implication of law."

968. Similarly, the construction of a contract is a question of law. If the construction issue takes the Court outside the four corners of the written agreement, to the surrounding circumstances, the Court, when determining the surrounding circumstances, is performing a fact finding exercise. No doubt admissions made in respect of those factual matters may be admitted into evidence as part of the exercise.

971. The law is clear in this State and it is, that the conduct of the parties subsequent to the contract cannot be taken into account in construing a contract. In this regard, the law in this State is the same as in England. See FAI Insurance Co Ltd v Savoy Pty Ltd [1993] VicRp 76; (1993) 2 VR 343 at 350 per Brooking J. I refer also to Ryan v Textile Clothing and Footwear Union [1996] VicRp 67; (1996) 2 VR 235 at 237-38 and 261-2.

974. In the latter case, Hayne JA, at p.262, emphasised that in construing a contract, the Court is seeking to determine the presumed intention of the parties, and said -

"In my view the subsequent conduct of the parties may reveal their subjective intentions, but it is not those intentions which reveal the nature and extent of the rights and the obligations of the parties, it is "the intention which was reasonably understood by the other parties to be manifested by that party's words or conduct."

978. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1981) 149 CLR 337, the High Court considered the question of the implication of terms in an express contract.

981. At p.345, Mason J observed that "the implication of a term is an exercise in interpretation". He also emphasised that the implication of a term is designed to give effect to the parties' presumed intention. The question of the presumed intention must be determined by an objective test.

"The importance of this evolution of the law as it affects the construction of contracts is that it centres upon the presumed, rather than the actual, intention of the parties. Once it is accepted that in the construction of the contract account is taken of the presumed intention of the parties it naturally follows that account should also be taken of their presumed intention when the court is called upon to decide whether a term is to be implied. The existence of the remedy of rectification and the purpose which it serves makes it obvious that the actual intention of the parties cannot constitute the basis of an implied term." (Emphasis added).

988. Because it is the presumed intention of the parties, this would have to be ascertained on an objective test and accordingly, would tell against admitting evidence of the parties' actual intentions.

991. Nevertheless, as His Honour pointed out at p.353, " in making the enquiry whether a term is to be implied, the court is no more confined than it is when it construes the contract". Accordingly, the surrounding circumstances may be considered, including evidence of discussions between the parties leading up to the contract.

"As it was, the relevant discussions reflect neither the preliminary consensus that merged into the written contract, nor statements made during the course of negotiations indicative of the unilateral intentions of each party. Instead the evidence revealed a matter which was in the common contemplation of the parties yet was not a contractual provision actually agreed upon for the simple reason that it was a matter of common assumption."

998. It follows that an admission made in respect of the factual surrounding circumstances leading up to the entry of the contract would be admissible on the question of the implication of a term.

1001. However, whether the term should be implied and what its effect was, are questions of law for the Court. The Court is concerned to determine the presumed intention of the parties.

1004. A party may admit what turns out to be a question of law or a mixed question of fact and law. In Grey v Australian Motorists & General Insurance Co (1976) 1 NSWLR 669 at 684-5, Mahoney JA discussed the question of making an admission on a question of law. He concluded, at p.685 -

"Such admissions may be made both in civil and in criminal cases, and whether or not the admitting party has personal knowledge of that which he admits. However, the extent of his acquaintance with or recollection of the matters admitted may be relevant in determining whether it is proper to act on the admission to find relevant facts: and, in criminal cases, it may be unsafe to convict upon the basis merely of such evidence." (Emphasis added).

1008. Again, emphasis is being made with respect to the weight that could be attached to any such admission. Forensic experience shows difficulties which courts face in making determinations on questions of law. On what basis could a court, with any confidence, accept an admission on a question of law made by a party to a contract subsequent to the entry into the contract? In the very clear case such as Mears, the evidence may be worthy of weight, but in the absence of such an obvious set of facts, it seems very difficult to place any weight upon such an admission, especially where it does not represent the effect of both parties' conduct.

1011. As Brooking J pointed out in the FAI Insurance Co Ltd case, supra, at p.351, the admission, while theoretically admissible, nevertheless could not be given any weight at all by a court, in construing a contract. This is for the very simple reason that the Court is not concerned with the subjective intention of the parties, but is concerned with the presumed intention of the parties. The same point can be made with respect to the implication of the term. The Court is concerned to ascertain the presumed intention of the parties.

1014. Whilst it is accepted that a party may make an admission of law, it would indeed be a very rare case, that a court could admit into evidence a party's statements or conduct, on the question of whether or not the Court should imply a term into a contract. This must be so, because the implication of a term is the result of the presumed intention of the parties, and is a question of law. It follows that it is difficult to place any probative value on any statements or conduct. First, the party may have an erroneous view as to what the contract meant. Secondly, the party may have an erroneous view as to the effect of the contract. Thirdly, the admission of such evidence would not be permitted if it involved the question of construction, and the implication of a term is a question closely allied to the question of what a contract means. It would be difficult in practice, in most cases, to keep the questions separate. Finally, any such evidence would have to be clear and unequivocal, leading to a clear conclusion that it was the presumed intention of the parties.

1017. In my opinion, as a matter of strict principle, the conduct of the parties subsequent to an alleged contract may be admissible to determine what the terms of the contract were, including an implied term. This would be because their conduct may establish the presumed intention of the parties at the date the contract was made. It must follow again, on principle, that one party to the agreement may make an admission which accords with the presumed intention of the parties. But in considering the evidence, it must be borne in mind that it is not admissible on the construction of the term. Although the evidence of an admission may be admissible, it would be a rare case that any weight could be given to the admission.

1020. It is a trite observation to observe that each case must depend upon its own circumstances, and indeed, it would be a rare case that a court would place any weight upon an admission made by a party, with respect to an implied term, where there was a real contest between the parties as to the implication of a term.

1023. The caution with which a court must approach the exercise of considering the weight that should be attached to such admissions, is emphasised in a Canadian case of Re: Canadian National Railways & Canadian Pacific Ltd (1978) 95 DLR 3(d) 242 in the judgement of Lambert JA at p.262 -

"In the case of evidence of subsequent conduct the evidence is likely to be most cogent where the parties to the agreement are individuals, the acts considered are the acts of both parties, the acts can relate only to the agreement, the acts are intentional and the acts are consistent only with one of the alternative interpretations. Where the parties to the agreement are corporations and the acts are the acts of employees of the corporations, then evidence of subsequent conduct is much less likely to carry weight. In no case is it necessary that weight be given to evidence of subsequent conduct. In some cases it may be most misleading to do so and it is to this danger that allusions are made throughout the recent English cases particularly L. Schuler AG v Wickham Tool Sales [1973] UKHL 2; (1974) AC 235... In England the risks have been considered sufficiently grave that the possibility of illumination from the use of subsequent conduct has been ruled out. In Canada, they have not, but those risks must be carefully assessed in each individual case before determining to give weight to subsequent conduct." (Emphasis added).

1027. In my respectful opinion, the same observations apply when a court is considering so-called admissions with respect to an implied term.

1030. Mr Beach QC said there were a number of documents that contained admissions as to the implied terms contended for by each plaintiff.

1033. The defendant is the Crown in the right of the State of Victoria. It is alleged that the contract of each plaintiff was with the State. Accordingly, any admission which is relevant must be made by or on behalf of the State, by a servant or agent acting in the course or scope of the employment or agency, and with the authority of the State to make the admission. The onus rests upon each plaintiff to establish these matters.

1036. The first piece of evidence relied upon are the contents of the patrol message dated 15 December 1993. It is said that the contents represent admissions made which were pre-contract with respect to Sergeants Arthurson and McIntyre, and represented admissions post-contract in respect of the other plaintiffs.

1039. The message was sent by the Senior Officer in Charge of the Corporate Resources Department, namely, Assistant Commissioner Sinclair. Whilst it is accepted that he was a senior member of the Force, is on the third level below the Chief Commissioner and Deputy Commissioners, and would have been authorised to send out the patrol message, I am by no means persuaded that he had the necessary authority to make any admission to bind the State. But in any event, on a proper reading of the patrol message, in my opinion, there is nothing in the message which amounts to an admission that, so long as each of the plaintiffs occupied the command position, he or she would have the benefit of appropriate subsidised accommodation provided by the Crown. A reading of the whole message, in my opinion, would lead the reasonable reader to believe that the tenure of any house was uncertain, and would depend very much upon the decisions of G.E.H.A. Further, there is no evidence that Mr Sinclair had any knowledge of the pertinent facts concerning the relationship between the State and each plaintiff, or the expertise to make an observation on a question of law. The patrol message does not assist the plaintiffs.

1042. The second piece of evidence is a letter written by the Hon. Ian Smith, Minister for Finance, to the Hon. Mr P. McNamara, Minister for Police, dated 15 June 1993. This document was never sent to any of the plaintiffs, and came to light on discovery in

the proceeding. The plaintiffs rely upon the paragraph which says -

"A stringent review of all housing held by G.E.H.A. as proposed so that only houses absolutely required by agencies for operational reasons in delivery of their programmes are retained. Where houses are occupied under industrial agreements, it will be the responsibility of the agency to negotiate the release of houses occupied by employees under any such agreement." (Emphasis added)

1046. The plaintiffs rely upon the reference to "negotiating a release". But again, reading the document as a whole, there is nothing in it which amounts to an admission that any of the plaintiffs, for so long as they held the position of Officer in Charge, were entitled to the benefit of accommodation in a residence or some other residence at a subsidised rent. There was an appreciation that there may be opposition to the move, and there may be rights under an industrial agreement, but no admission of subsidised accommodation so long as the officer remained in the position

1049. The third piece of evidence is a letter written by Assistant Commissioner Sinclair to Mr Walsh, Secretary of the Police Association of Victoria, dated 4 February 1994. Whilst it was recognised by Mr Sinclair that there was a benefit to the members of the Force occupying the houses, and that there had to be some negotiation concerning the question, in my opinion, on a fair reading of the letter, there is no admission of the implied term alleged by the plaintiffs. Further, I am not persuaded on the evidence that Mr Sinclair had any authority to make an admission binding on the State in respect of that letter, and this is underlined by the fact that it was a letter written in an industrial confrontation context.

1052. The fourth piece of evidence is a letter written by Inspector Dowell, Acting Manager of the Corporate Resources Department, to a Mr John Rickard in the Department of Finance, dated 24 February 1994. Inspector Dowell notes that Force policy had changed with respect to residences which were to be sold, and stated that "the members are still entitled to have a house supplied as part of their original employment conditions."

1055. Again, I am not satisfied that Inspector Dowell had any authority to make an admission which bound the State, but in any event, his observation was erroneous. None of the employment conditions addressed the question of this implied term. Whether or not a term should be implied was a question of law. I am not persuaded that Mr Dowell had the information or the necessary experience or expertise to make any statement concerning the entitlement being part of employment conditions. I do not view the statement as an admission by the State or binding the State.

1058. The fifth piece of evidence concerns a memorandum written by Acting Deputy Commissioner Brown, dated 19 January 1995. This memorandum summarised the position, and was written after each of the plaintiffs was given notice to vacate the residence.

1061. The memorandum does accept that there is some benefit to persons occupying residences, but in my opinion the memorandum does not in any way amount to an admission of the implied term relied upon by each plaintiff.

"The Operations Department, in discussion with Corporate Resources and with Industrial Relations, are considering alternative arrangements (allowance/subsidy) to ensure that the Force can continue to attract high quality candidates to positions which no longer have residences."

1068. The clear thrust of that sentence is the importance of providing an incentive to a member of the Force to go to a position which may not be attractive. It does not amount, in any way, to an admission that there was an implied term of the contract between any of the plaintiffs and the State that, so long as the plaintiff held the position, he or she would have the benefit of subsidised accommodation.

1071. The sixth piece of evidence relied upon, is a letter written on 22 December 1994 to Sergeant Arthurson by Mr Cliffe, the Director of Corporate Resources, who had sent the letter to each plaintiff in November 1994. Reliance is placed upon the fact that Mr Cliffe talks about preserving "the current benefits accruing to members" as being an admission that there was some benefit, and not a detriment. I do not doubt, and the evidence amply supported this, that there was both a benefit and a detriment in the position, which involved occupying police premises. The letter points out that the benefit was to continue for an interim period of 12 months. Indeed, it is important to note that Sergeant Arthurson was told that the Force was not allowed to enter into any leasing or rental arrangement and accordingly, was going to maintain the current level of rental subsidy, for an interim period of 12 months. If there are any admissions contained in any of the documents, this statement would tend to suggest that it was clear that the Force was of the opinion that the plaintiffs were not entitled to the benefit of subsidised accommodation for the period whilst each remained Officer in Charge.

1074. Finally, a number of documents are relied upon which, it was submitted, led to the conclusion that it was recognised by the Force that the decision to terminate the occupancy had a considerable impact on the members. That cannot be doubted. But in my opinion, that does not amount to any admission of an implied term as relied upon by the plaintiffs.

1077. It follows that if it is permissible to look at the statements and conduct of various persons, employed by the State before and after 10 November 1994, to determine whether any admissions have been made with respect to the alleged implied term, in my opinion, none of the evidence amounts to an admission of the implied term relied upon by any of the plaintiffs.

1080. The State pleaded that the alleged implied term was inconsistent, and at variance, with the Act and the Regulations relating to the transfer and occupation of government premises, because each of the plaintiffs was transferred and required to occupy the government premises pursuant to the Act and the Regulations. It was submitted that, it followed that if, there was such an implied term, it fettered the statutory power or discretion of the Chief Commissioner and of G.E.H.A.. It was submitted that the upholding of the implied term would have the effect of interfering with the statutory powers and obligations of the Chief Commissioner, with respect to transferring officers from place to place, and interfering with G.E.H.A.'s statutory powers to sell the premises.

1083. Because of the conclusion that the contract between each plaintiff and the State did not contain the implied term, it is strictly unnecessary for me to further consider this argument. However, as the matter may go further, it is appropriate that I should make some observations with respect to the issue.

1086. In considering this submission, it should be noted that there was no argument put, on behalf of the plaintiffs, that the Chief Commissioner did anything contrary to any Act or Regulations, or that he acted without power. There was no suggestion that the decision made to reclassify each of the houses occupied by the plaintiffs was contrary to law, or made without power. There was no suggestion that G.E.H.A. did not have the authority or power to require the sale of the premises.

1089. In considering this submission, it is important to observe the wording of the alleged implied term. In summary, it was a contention of each of the plaintiffs that so long as he or she held a position as Officer in Charge, he or she would have the benefit of accommodation in the residence next to the police station, or some other appropriate accommodation provided by the State, and pay rental at a minimal rate.

1092. Does the implication of such a term fetter the exercise of the Chief Commissioner's or G.E.H.A.'s discretionary power? It was submitted that the implied term would because, it impeded the Chief Commissioner's power to require the plaintiffs not to occupy government premises, it compelled him to provide the plaintiffs with other appropriate accommodation for a low rental for reasons otherwise than in the public interest, and it hindered or impeded the Chief Commissioner subsequently directing that a different member of the Force occupy government premises. It was also argued that G.E.H.A.'s power to sell or lease to other persons was fettered.

1095. In support of the submissions, reference was made to the High Court decision of Director-General of Education v Suttling [1987] HCA 3; (1987) 162 CLR 427.

1098. Brennan J, with whom Mason CJ and Deane J agreed, said at p.437 -

"If the relationship is contractual, the contract must be consistent with any statutory provision which affects the relationship. No agent of the Crown has authority to engage a servant on terms at variance with the statute. To the extent that the statute governs the relationship, it is idle to enquire whether there is a contract which embodies its positions. The statute itself controls the terms of service."

1102. It is clear that if there is a contract and also a statute, which has a bearing on the relationship between the parties, the contract must of necessity give way to the statute.

1105. In the NSW Court of Appeal, Kirby P summarised the principle as follows -

"Assuming, contrary to my inclination, that it is appropriate to characterise the arrangements made between the Director-General and the appellant by reference to the principles developed for private contracts, it is clear law that no public authority or official can, by a contract, disable itself or himself from performing a statutory duty or from exercising a discretionary power conferred by or under a statute. Any purported attempt by contract on the part of an authority or official to agree not to perform a duty or to exercise a discretion in a particular way in the future will be unenforceable. This is so for the basic reason that such a contract is an attempt to override the will of Parliament, expressed in legislation." - Suttling v Director-General of Education (1985) 3 NSWLR 427 at 435-6.

1109. In my opinion, the implied term would not disable the State or hinder it in exercising any discretion. The Chief Commissioner can still require any of the plaintiffs to be transferred to another position, can re-classify the premises and still agree to the sale by G.E.H.A. of the premises. The implied term would not preclude G.E.H.A. exercising its statutory powers with respect to taking possession and selling the premises. If the term had been implied, it would not stop or hinder the State from performing its functions, or the Chief Commissioner or G.E.H.A. theirs, but on breach, could expose the State to a claim for damages.

1112. There could be circumstances where the exposure to damages would involve the State in a potentially massive pay out, so that it would have a practical effect of disabling or hindering the State in the exercise of a statutory power or discretion, to the point where it would not exercise the powers. But that is not the position here. If each plaintiff had been successful, the amount recovered by each plaintiff would not have been so large that it would have had the practical effect of interfering with the discretion. Indeed, there was no evidence to suggest that the threat of damages would have that effect.

1115. Further, as Mr Beach QC pointed out, the contract was with the State, and the exercise of the power was a matter for the Chief Commissioner and G.E.H.A., and hence, the alleged contractual term could not prevent or hinder either party from performing its functions.

1118. In this respect, Mr Beach QC relied upon what Mason J said in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 at 76 -

"Different considerations will apply when the contract is one to which the government is a party and the contract relates to the grant of a licence or privilege which under the law depends upon the exercise of a statutory discretion by an officer who is not a party to the contract. In these cases at least it has been suggested that the free and unfettered exercise of the discretion is sufficiently preserved if the validity of the contract is upheld, provided that it is enforceable only by way of action for damages and not by order or injunction."

1122. What His Honour said was quoted with approval in the New South Wales Court of Appeal case of Suttling, supra, by McHugh JA at p.449. Glass JA agreed with McHugh JA.

1125. Also, what His Honour said, has been referred to with approval by the Court of Appeal in L'Huillier v State of Victoria [1996] VicRp 79; (1996) 2 VR 465 at 479. Anything written by Mason J is persuasive, and I propose to follow and apply the principle. Further, in my opinion, the principle accords with logic, and basic legal principle.

1128. Mr Hammond QC drew attention to the fact that Mason J referred to "grant of a licence or privilege", and it was submitted by him that the implied term did not amount to the grant of a licence or privilege. However, in considering this matter, it is necessary to proceed on the assumption that there was a term implied, alleged by the plaintiffs, in their contracts of employment, and in my opinion, it would amount to a right of the plaintiffs and would be embraced by the expression "licence or privilege".

1131. I have already expressed the view that one could visualise a situation where the claim for damages was so large, that in a practical way it would threaten or would impede the exercise of the discretion. This point was raised by Callaway JA in L'Huillier's case, supra, at p.479, but as His Honour pointed out, "It would depend on the relationship between the government and the repository of the statutory discretion." I accept the submission by Mr Beach QC that there is no evidence here to suggest that the level of damages would be so great that it would have seriously impeded or fettered the Chief Commissioner's discretion. The evidence of damage did not lead to the conclusion that it would have had any practical effect upon the exercise of the discretion, if it was necessary to exercise it. Further, the existence of the implied term could not have interfered with the exercise of the authority or powers of G.E.H.A..

1134. It follows that in my opinion, if the contract of employment did contain the implied term, it did not impede or fetter the powers of either the Chief Commissioner or G.E.H.A. to deal with the property or the transfer of members of the Force to other positions.

1137. The findings that I have made and the conclusions I have reached concern the claim by Sergeant Davey. I now turn to the claims brought by Sergeant Walker and Mr Button.

1140. The bundle of rights and obligations of Sergeant Walker and Mr Button and their employer, the State, were constituted by the statutory contract under the Act, the provisions of the Act and the Regulations, and the Victoria Police Force Award of 1992.

1143. None of the provisions of the contract, the statutory instruments or the Award provide for the situation arising out of the obligation for each to occupy police premises, and the subsequent sale of the premises and any right to a subsidy.

1146. Sergeant Walker was appointed on 27 July 1992, and Mr Button was appointed to his position on 14 December 1992. On those dates, it is my opinion, for reasons that I have already stated, that their contract of employment did not contain the implied term pleaded in the amended statement of claim. Further, for the same reasons, I am satisfied that each applied for, and was appointed to, his position pursuant to the powers given to the Chief Commissioner and the Regulations, and that the application and appointment did not result in a variation of their contract of employment with the State, nor did it constitute a separate contract.

1149. It follows that they have failed to establish the implied term as alleged.

1152. Sergeant Arthurson and Sergeant McIntyre applied for their positions in July 1994, and were appointed to their positions in October 1994 and 22 August 1994, respectively. The bundle of rights and obligations governing their relationship with the State were the statutory contract, the provisions of the Act and the Regulations, the deemed individual employment agreement arising by reason of the operation of ss.7, 9, 14, 24(3) and 172(6) of the Employee Relations Act 1992, incorporating terms of the Victoria Police Force Award of 1992.

1155. None of the provisions governing their relationship with the State provided for the situation of the obligation to occupy a police residence, and their right to such occupation and subsidised rent whilst they remained Officer in Charge of the police station. For the reasons already stated, it is my opinion that the contracts of employment of Sergeant Arthurson and Sergeant McIntyre did not contain the implied term relied upon. Further, for reasons already stated, it is my opinion that their application and appointment to the position was pursuant to the statutory contract and the powers of the Police Commissioner and the Regulations. Their appointment did not involve a variation of their contract with the State, nor did it constitute a separate and new contract.

1158. It follows that they have failed to establish that it was an implied term that they were entitled to subsidised accommodation whilst each remained Officer in Charge of the police station.

1162. It was submitted, on behalf of the State, that if the application and appointment to the new position constituted a variation to the contract of employment or the creation of a new and separate contract, there was no consideration in law for the contract variation or formation of the separate agreement. This was put on the basis that each of the plaintiffs was obliged to comply with the lawful direction by the Chief Commissioner concerning transfer and occupation of the premises. It must follow that none of the plaintiffs provided any consideration.

1165. As I have found that there was no variation to the employment contract or the creation of a new contract, it is unnecessary to consider this issue.

1169. The plaintiffs, Sergeants Arthurson and McIntyre, have relied upon a plea of equitable estoppel.

1172. It is necessary, at the outset, to identify the effect of the alleged representations pleaded in the amended statement of claim. It is necessary because the two plaintiffs have pleaded that, the State was estopped from denying that the representations made constituted a term of their contract of employment. However, the alleged term of the contract is different to the implied term.

1175. It is said that the State made two representations. The first was constituted by the patrol message, which was sent to members of the Force on or about 15 December 1993. The second representation was said to have been made by Chief Superintendent Bateman to both plaintiffs during July 1994. The second representation is different to the first representation and provides some evidence to support the first representation, but it is the first representation which may provide the basis for a term.

1178. Paragraph 10C of the amended statement of claim provides -

"10C. In making the first representation, the defendant represented to the first named and fourth named plaintiffs that persons who were subsequently appointed to a position requiring and providing accommodation in an associated residence would, so long as he or she held the position:

(a) continue to receive the rights and benefits of that residence whilst holding the position; and

(b) receive appropriate alternative residential accommodation on the same terms in the event that the residence was no longer available for occupation."

1184. Whilst the said representation is not in the same terms as the alleged implied term, nevertheless, it is similar.

1187. The second representation is pleaded in paragraph 10E, to the effect that Chief Superintendent Bateman advised, "That the housing accommodation attached to the Diamond Creek and Hurstbridge Police Stations was not to be sold."

1190. It is alleged that Sergeants Arthurson and McIntyre relied upon the said representations, when they applied for and were subsequently appointed to their positions of officers in charge of the Hurstbridge and Diamond Creek Police Stations respectively.

1193. The principles concerning equitable estoppel were discussed by the High Court in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1987) 164 CLR 387. Brennan J summarised what the representee had to prove, at p.428-29. His Honour said -

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."

1197. The plaintiffs also relied upon what Mason CJ and Wilson J said in that case at p.404 -

"One may therefore discern in the cases as a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it'. (Per Dixon J in Grundt.) "Equity comes to the relief of such plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption."

1201. As the matters relied on by Sergeants Arthurson and McIntyre to establish the estoppel are the same, it is convenient to deal with their cases together.

1204. Before turning to the evidence, it is necessary to identify the relationship that each alleged was expected to exist if their applications were successful. According to the amended statement of claim, the relationship expected was, that so long as he or she held the position of Officer in Charge, first, their respective residences would not be sold; secondly, each would continue to receive the rights and benefits of the residence; and thirdly, that if the residence was no longer available, each would receive alternative residential accommodation - see paragraphs 10C and 10E.

1207. Sergeants Arthurson and McIntyre asserted in their pleading that that was their state of belief, and that it induced them to apply for the position. They state that their state of belief was as a result of reading the patrol message sent to the Force, dated 15 December 1993, and making enquiries of, and receiving information from, Chief Superintendent Bateman that the residence "was not to be sold". I have already rejected the evidence of Sergeant Arthurson that he understood Mr Bateman to have stated that the residence was permanent.

1210. Sergeant Arthurson applied for his position on 18 July 1994 and Sergeant McIntyre applied soon thereafter.

1213. It follows that the relevant dates for their state of belief was in mid-July 1994.

1216. In considering their belief, it is important to take into account the context. The Court can take judicial notice of the fact that the Kennett government adopted a policy of selling off government assets which were not essential. The evidence revealed that the policy was being implemented in respect of premises occupied by the Force, including residential premises, and that this was happening in the year 1993. Members of the Force were aware of the policy, and concerns were being raised, in the latter half of 1993, with respect to the classification of residential premises and the right of the Force to be consulted with respect to classification and in particular, whether the premises were essential for police use.

1219. Both Sergeants Arthurson and McIntyre were aware of rumours concerning the sale of police residences and that some were being sold. Both made their own enquiries in the first half of 1994 and each read the patrol message.

1222. Each gave evidence as to what they understood upon reading the patrol message. They stated that they understood the patrol message as meaning, inter alia, that, "If the premises were sold, I would still be entitled to the provisions of subsidised rental for so long as I held the position." Both said they formed a belief that the residential premises would not be sold.

1225. In considering whether each plaintiff did in fact form the belief that the State was required to provide subsidised housing whilst each held the position, it is necessary to determine how the words would be understood by the average member of the community, using his general knowledge and common sense.

1228. In construing the message, the Court must not overlook the facts that Sergeants Arthurson and McIntyre were not lawyers, would not construe the document as lawyers, and, like many intelligent, educated persons in the community, were more prone to read between the lines and draw inferences than a careful lawyer may draw.

1231. The Court is not to construe the document in a legal sense. The ordinary member of the community does not live in an ivory tower and is not inhibited by rules of construction applied by lawyers. Hence, one does read between the lines in the light of his or her general knowledge and experience of worldly affairs - see Rubber Improvement Ltd v Daily Telegraph Ltd (1964) AC 234 at 258 per Lord Reid.

1234. I have read the patrol message a number of times and in my opinion, it is the second paragraph which specifically refers to the situation concerning the proposed applications by the two sergeants. They were proposing to make application to a position where the station commander's residence was adjacent to the police station. The other important paragraph is paragraph four. But in considering both paragraphs, they must be read in context and after reading the whole message. Parts of the exhibit were difficult to decipher.

"UNDER DIRECTION OF THE MINISTRY OF FINANCE THE GOVERNMENT EMPLOYEE HOUSING AUTHORITY (G.E.H.A.) IS CURRENTLY MOVING TO SELL OFF GOVERNMENT OWNED HOUSING THROUGH VICTORIA, INCLUDING POLICE OCCUPIED HOUSING WITH THE EXCEPTION OF HOUSING AT AVOCA, BRANXHOLME, COHUNA, COLERAINE, GUNBOWER, LAKE BOLAC, LANG LANG, LEXTON, MEREDITH, MIRBOO NORTH, TIMBOON, WARBURTON AND WOODS PONT (sic), WHICH ARE ALL STILL UNDER THE CONTROL OF VICPOL AS THE POLICE STATION IS AN INTEGRAL PART OF THE HOUSE. THE FORCE IS CURRENTLY SURVEYING POLICE OCCUPIED HOUSING TO IDENTIFY THOSE WHICH ARE ESSENTIAL FOR OPERATIONAL PURPOSES (E.O.P.). ONE MEMBER STATIONS AND [??] THOSE STATIONS WITH A STATION COMMANDER'S RESIDENCE ADJACENT (S.C.R.A.) WILL [??] ALL BE CLASSIFIED AS EOP. THESE PREMISES WILL THEN BE SOLD BY G.E.H.A. WITH A TEN YEAR COMMERCIAL LEASE, WITH OPTIONS FOR FURTHER LEASES BY THE FORCE. ALL 'OTHER' HOUSES ARE SUBJECT TO REVIEW/NEGOTIATION BY THE FORCE WITH GEHA. MEMBERS OCCUPYING HOUSES IN THIS CATEGORY WILL BE ADVISED IN DUE COURSE OF THE OUTCOME OF THOSE NEGOTIATIONS. WHETHER OR NOT THE EXISTING 'OTHER' HOUSES ARE RETAINED AS E.O.P. THE FORCE ACCEPTS THAT MEMBERS WHO HAVE OCCUPIED 'REQUIRED TO OCCUPY' (R.T.O.) PREMISES ARE STILL ENTITLED TO THE PROVISION OF HOUSING AS A CONDITION OF THE MEMBERS 'DEEMED INDIVIDUAL EMPLOYMENT AGREEMENT'. THUS THE FORCE WILL BE RESPONSIBLE FOR PROVIDING SUITABLE HOUSING IN THE RELEANT AREA. THUS IF THE FORCE GRADES AN EXISTING HOUSE AS E.O.P. BUT G.E.H.A. INSIST THAT OTHER SUITABLE RENTAL ACCOMMODATION IS AVAILABLE IN THAT AREA AND THEY SELL THE EXISTING HOUSE, THE FORCE WILL HAVE TO PROVIDE ANOTHER HOUSE AT THAT LOCATION. IN ANY EVENT CURRENT RENTAL RATES WILL CONTINUE TO APPLY. BY [??] DECEMBER 31, G.E.H.A. WILL BE ADVISED OF OUR INTENTIONS TO CLASSIFY AS E.O.P. ALL HOUSING ATTACHED TO ONE MEMBER AND S.C.R.A. STATIONS. IN DUE COURSE, G.E.H.A. CONTRACTED ESTATE AGENTS MAY COMMENCE TO ERECT FOR SALE SIGNS IN FRONT OF RELEVANT POLICE HOUSING AND ADVERTISE BY VARIOUS MEANS THESE PROPOSED SALES. MEMBERS SHOULD NOT BE CONCERNED BY THIS ACTION AND SHOULD ASSURE THAT LOCAL POPULATIONS UNDERSTAND THAT POLICING SERVICES WILL CONTINUE. THESE CIRCUMSTANCES WILL APPLY WHERE CLEAR TITLE TO THE RELEVANT HOUSE HAS BEEN OBTAINED BY G.E.H.A.. IN A NUMBER OF CASES THE SURVEYOR HAS NOT BEEN ABLE TO DELINEATE THE LIKELIHOOD OF CLEAR TITLE BETWEEN THE HOUSE AND POLICE STATION. THESE CASES WILL REQUIRE FURTHER DISCUSSION WITH G.E.H.A. FOR THE GREATER MAJORITY OF MEMBERS OCCUPYING G.E.EH.A. HOUSING, NOTHING WILL CHANGE IN THE IMMEDIATE FUTURE. MEMBERS WILL BE KEPT INFORMED OF PROPOSED CHANGES. UNDER THE PROPOSED COMMERCIAL LEASES, G.E.H.A. ADVISES THAT CONDITIONS WILL APPLY FOR PROGRAMMED MAINTENANCE, REPAIRS AND RENOVATION, BY THE LESSOR. THE RESIDENTIAL TENANCIES ACT WILL BE THE CONTROLLING LEGISLATION. MEMBERS WHO HAVE QUERIES OR CONCERNS NOT ADDRESSED IN THIS MESSAGE SHOULD NOT HESITATE TO CONTACT THE OFFICE OF THE ASSISTANT COMMISSIONER - CORPORATE RESOURCES, TELEPHONE 320 35626 OR 320 3443. GRAHAM I SINCLAIR" ASSISTANT COMMISSIONER CORPORATE RESOURCES DEPARTMENT"

1241. On a fair reading, the message is informing the reader, inter alia, that -

* The government, through G.E.H.A., is proceeding to sell off all police occupied housing, save for particular locations. (Hurstbridge and Diamond Creek were not excepted).

* The Force was currently assessing which houses were essential for operational purposes (E.O.P.) A station with a station commander's residence adjacent was to be classified as E.O.P..

* The E.O.P. premises were to be sold with a ten year lease, with options for further leases.

* All other houses were subject to review and negotiation by the Force with G.E.H.A..

* Whether or not "other houses" are retained as E.O.P., the Force accepted that members who have occupied, required to occupy (R.T.O.) positions, are still entitled to the provision of housing as a condition of their deemed individual employment agreements. (No doubt a reference to s.24(3) of the Employee Relations Act 1992.)

* That if G.E.H.A. sells a house which is graded E.O.P., the Force will provide another house and current rental rates will continue.

* By 31 December, the Force will tell G.E.H.A. of its intention to classify as E.O.P. all station commanders' residences adjacent to a police station.

* For a greater majority of members occupying G.E.H.A. housing, nothing will change in the immediate future and members will be kept informed of proposed changes.

1252. The message was published on 15 December 1993. Sergeants Arthurson and McIntyre read it during the first half of 1994 and formed their belief. It is noted that the message informed those who were presently occupying an R.T.O. house, that they were still entitled to the provision of housing as a condition of their employment. But in my opinion, it was not informing any future applicant that, if successful, the applicant had the same right. Further, it was expressing a present intention, and one could not read into that statement that the residences would not be sold in the future and that the members of the Force in charge of a station would always be provided with another house.

1255. In my opinion, one must read the patrol message as saying no more than that was the present intention of the Force, but that circumstances could change. Indeed, common sense and general knowledge would tell Sergeants Arthurson and McIntyre that nothing was permanent, that circumstances can change, that population movements and other considerations could result in the sale of a residence and the upgrading of a particular police station.

1258. In my opinion, it was not reasonably open to either sergeant to conclude that if successful in their application, the residence would not be sold or, alternatively, that if it was, they would continue to receive the rights and benefits of a residence so long as he or she was in charge of the police station.

1261. The evidence of Mr Bateman, which I accept, was that he told Sergeants Arthurson and McIntyre that it was a condition of their appointment that they occupy the residence, and "that it was my understanding that both residences at Diamond Creek and Hurstbridge would not be sold." Indeed, on the information that he had at that time, he could not have said anything more. He no doubt appreciated that circumstances could change.

1264. In my opinion, the information relied upon by Sergeants Arthurson and McIntyre could not reasonably have resulted in the belief alleged by them that the residences would not be sold, that they would continue to receive the rights and benefits of the residence and that if the residence was no longer available, each would receive alternative accommodation so long as he or she continued to be the station commander at Hurstbridge and Diamond Creek respectively. It follows that in my opinion, they could not have assumed that the particular relationship would exist, as asserted by them, if they were successful in their applications. I do not doubt each applied, expecting the residence to be supplied with their appointment. But I reject their evidence that their belief, at the relevant time, was that each would always be supplied with subsidised housing whilst the station commander.

1267. Further, in my opinion, the State did not induce either plaintiffs to adopt the expectation that if successful in their application, they would always have a residence made available, so long as they held the position. In my opinion, the evidence overwhelmingly establishes that the State did not induce that assumption or expectation.

1270. Further, the plaintiffs have failed to prove that the State intended that the plaintiffs should adopt that assumption or expectation.

1273. It follows that Sergeants Arthurson and McIntyre fail in their claim based upon estoppel.

1277. The plaintiffs have failed in their claims and accordingly, the proceeding must be dismissed. Nevertheless, because the proceeding may go further, I will briefly address the question of damages.

1280. In considering the question of damages, I proceed on the assumption that the plaintiffs have succeeded in proving that there was a term of their employment to the effect that, so long as each occupied the position of station commander, each was entitled to receive subsidised accommodation.

1283. Each plaintiff gave evidence as to the value of the subsidy as at 30 June 1996.

1286. Each plaintiff carries the burden of proving both the loss sustained by reason of the alleged breach and the amount of damages for the loss - see The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 99 per Brennan J.

1289. The guiding principle in assessing damages is compensatory. The object of damages is to award the plaintiff an amount of money that will, as nearly as money can, put the plaintiff in the same position as if he had not been injured by the actions of the defendant. This means that the damages are to be calculated on the basis that the contract was in fact performed. The general rule was laid down in Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850; 154 ER 363 by Parke B at p.365. His Lordship said -

"The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same position, with respect to damages, as if the contract had been performed."

1293. See also Butler v Egg and Egg Pulp Marketing Board [1966] HCA 38; (1966) 114 CLR 185 at 191.

1296. The first step in the exercise is to consider what the position would have been if the contract was performed. This is a hypothetical position and has to be compared with what in fact happened - see Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 371; Amann's case, supra, at p.99.

1299. Hence, the plaintiffs have to prove what would have happened if the contract had been performed. The Court is entitled to take into account facts which have subsequently occurred. The law prefers actuality to conjecture - see Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 473.

1302. The amount of damages will be the difference between the hypothetical position compared with what in fact happened. Facts must be established which enable a calculation to be made.

1305. The boundary of recoverable damages is established by the application of the principles stated in Hadley v Baxendale [1854] EngR 296; (1854) 9 Ex 341; 156 ER 145 at 151 -

"The damages ... should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." (Emphasis added).

1309. The rules stated in Hadley v Baxendale concern remoteness, and set the boundaries of what damages may be recovered.

1312. A modern re-statement of the rule appears in the speech of Lord Reid in C. Czarnikow Ltd v Kofos (1969) 1 AC 350 at 385 where his Lordship said -

"The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of the contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation."

1316. In Amann's case, supra, Brennan J, at p.99, summarised the position as follows -

"The measure of damages prescribed by Robinson v Harman ensures that the parties to the contract are kept to the benefits and the burdens of the contract they have made: the plaintiff recovers no more than the net benefit he would have received under the contract; the defendant acquires no right to profit by his breach. The measure of damages for breach of contract is governed by the contract itself."

1320. The general rule is that the date of assessment of damages is the date of the breach. In the present case, the date is 10 November 1994, when Mr Cliffe forwarded his letter informing each plaintiff that the residence was to be sold. This general rule may have to give way to situations where justice demands that a later date be selected - see Johnson v Perez, supra, at pp.355 and 367. But normally, the date of breach is the appropriate date.

1323. In my opinion, that is the position in the present case, although the Court will take into account, in calculating the amount of damages, the events which have occurred since that date.

1326. If the contract had been and was to be performed in the future, each plaintiff would be entitled to subsidised accommodation, so long as he or she occupied the position of Officer in Charge.

1329. Two of the plaintiffs, namely, Sergeant Davey and Mr Button, have moved from their position as Officer in Charge. Sergeant Davey was transferred to Kyabram as Senior Sergeant in Charge of the station, on 2 August 1998. He has the benefit of a police residence and the rental subsidy. Mr Button retired on 17 July 1999.

1332. The other three plaintiffs have put their claim on alternative bases. The first basis is the loss is calculated by the amount of the rental subsidy for the past and for the future. Counsel for the plaintiffs elected, during final address, to rely upon this method of calculating damages. In the alternative, the loss was claimed on the cost of interest paid on mortgages on the residential property of each of the three plaintiffs.

1335. If each contract had not been breached, then the three plaintiffs, Sergeants Arthurson, Walker and McIntyre, would have continued to have the benefit of subsidised housing. As a result of the alleged breach, they have lost the benefit of the subsidised housing. In accordance with the principles stated above, the measure of their loss is in fact calculated by reference to the loss of the subsidy. Each gave evidence as to the value of the subsidy as at 1 July 1996. Each would be entitled to the losses for the past, together with an amount calculated for the future. Sergeant Davey and Mr Button would be entitled to the loss up to the date when each ceased to occupy their position of Officer in Charge.

1338. The amount for the future loss is calculated on the basis of the present value of the amount of the subsidy for a period into the future, discounted in accordance with the 3% tables - see Todorovic v Waller [1981] HCA 72; (1982) 150 CLR 402.

1341. The contentious issue concerning damages was the loss into the future.

1344. Each of the three plaintiffs who presently occupy the same position gave evidence that each intended to remain where he or she is, that there was no question of seeking a promotion, and that it was their present intention to retire at a certain age.

1347. Because the Court is seeking to calculate damages into the future, it is appropriate to take into account the contingencies and vicissitudes of life which may impact upon each plaintiff, and make some allowance in the total calculation for these matters.

1350. In Amann's case in the Full Federal Court[1990] FCA 55; , (1990) 22 FCR 527, Sheppard J, at p.549, summarised the approach in relation to future losses when he said -

"On the other hand, one ought never lose sight of the fact that damages are intended to be compensatory and that an award of damages should neither be extravagant or over-generous nor mean. Moderation is the touchstone. One needs to bear in mind that the task of assessing damages will often give rise to an uncertain and speculative exercise which will not yield the precise result because it may have to be achieved by the selection of amounts or figures which has involved quite an arbitrary process."

"That, in the ordinary run of cases calling for the assessment of damages for breach of contract, contingencies should be taken into account, does not require any substantial reference to authority. It is trite law. The matter is mentioned in the judgment of Lord Denning MR in The Mihalis Angelos, where his Lordship said at p.196, 'You must take into account all contingencies which might have reduced or extinguished the loss'."

1358. Toohey J in the High Court, supra, at pp.146-7, agreed with Sheppard J and concluded his observations by noting -

"The court should have regard to contingencies in assessing such damages. This was the approach taken by the Court of Appeal of New South Wales in Custom Credit Corporation Ltd v Senepro Pty Ltd."

1362. In respect of each of the remaining Officers in Charge, the questions of each remaining in the position and their likely retirement age are clearly matters that have to be taken into account. Mortality before their intended retiring age, change of intention with respect to future promotion, the likelihood that the position will be abolished in the future, and the likelihood of a forced transfer from the position, are all matters that have to be weighed.

1365. Evidence was called which demonstrated that there was a real encouragement for a member of the Force to retire after 30 years in the Force. This was because the superannuation pay out peaked at that time, in the sense that the amount was ascertained on a certain formula, and no interest was payable on the amount thereafter. It was the perceived view that if a member remained in the Force, he or she could improve their superannuation position. The evidence also showed that this "peaking" occurred between the ages of 50 to 55, and a number of officers had in the past retired during that period of their lives. On the other hand, there was an advantage to remain in the Force. Once the 30 years had been completed, the member of the Force was no longer obliged to make any contribution to his or her superannuation. This represented a saving in the order of $90 to $100 per week for the future. Further, the superannuation was calculated on the basis of 8.1 times the last year's salary averaged over the final two year period. Salary would be expected to increase in that period, and hence the pay out would also increase.

1368. Another matter that cannot be overlooked is the fact that police duties bring with them stress and strain, and there would be a real temptation to retire between 50 to 55 and embark on some other occupation. Indeed, Mr Button retired at the age of 53 years and 10 months and is now a primary producer.

1371. Another matter that would have to be taken into account would be leaving the Force before retiring age for other reasons, even though one may consider them to be fairly remote; for example, dismissal for misconduct. The State placed some statistical evidence before the Court in respect of the age of retirement, but I did not find it helpful. I would prefer to rely upon making an assessment of each plaintiff as to his or her intentions of future involvement in the Force.

1374. I now consider each plaintiff's entitlement to compensation, if he or she had been successful in the proceeding.

1378. Sergeant Arthurson gave evidence that he intended to retire at 65 years. In his original witness statement delivered to the State's solicitors, he indicated that he proposed to retire at age 60. The Act was amended some years ago and now Sergeant Arthurson could retire at 65. He stated that he did not wish to seek promotion beyond the rank of sergeant. In order to become a senior sergeant, it would be necessary to apply for a position which may involve moving elsewhere. Sergeant Arthurson was divorced and had three children by his first marriage. He has one child with his current wife and another baby was due very soon.

1381. I accept his evidence as to his present intention. He was of the opinion, and I accept it, that subsidised housing meant a considerable financial reward to him and he wished to continue with it until age 65. The fact that his superannuation benefits will peak at the age of 53.8 years had nothing to do with his decision to continue to work. He is presently aged 44 years. Further, he enjoyed what he was doing. He intends private education for his children. He stated he could not take early retirement as he could not afford it.

1384. He claims that the loss of the rental benefit as at 1 July 1996 was $156 per week.

1387. He is entitled to the sum of $40,560, being $156 per week for five years to 1 July 2001. In calculating the future loss, I will use the 3% tables which do not include mortality.

1390. His loss for the future from 1 July 2001 to 10 November 2021, which is the date when he turns 65, is some 20 years and 4.5 months and the multiplier for 20 years is $788, and for 21 years $816, and rounding it out, I propose to use a multiplier of $800. It must be remembered that the tables provide a method of calculation which is to assist in determining the proper amount of compensation.

1393. The calculation gives an amount of $124,800 for the future loss. It is necessary to take into account contingencies and vicissitudes referred to above. I do so. Given his particular circumstances, namely, a second family, and a young one at that, and his determination to remain as Officer in Charge at Hurstbridge, and in the absence of any evidence that the position may be changed in the future, in my opinion, an appropriate discount in his case is 25%, which gives a total for the future of $93,600.

1396. If Sergeant Arthurson had been successful he would be entitled to a judgment in the total sum of $134,160.

1400. Sergeant Davey moved to Kyabram on 2 August 1998, and claims a rental subsidy of $573.96 per month from 1 July 1996 until 2 August 1998, which calculates out at $14,349.

1403. Sergeant Davey also claimed for a loss he suffered when he sold an investment property at McCrae in August 1996 after he left the Sorrento premises. He said he suffered the loss because with the loss of the subsidised premises, his financial position was altered and he was forced to sell the property in order to purchase another property as a residence. He claimed the loss was in the vicinity of $42,000. In my opinion, he is not entitled to the loss. There is no evidence before the Court that at the time of the incorporation of the alleged implied term, the fact of his investment was made known to his employer. The second limb of the rule in Hadley v Baxendale applies, and he is not entitled to recover the sum.

1406. If he had have been successful in the proceeding, he would be entitled to a judgment of $14,349 for damages.

1410. Sergeant Walker was born on 24 November 1956, and is presently aged 44 years. The amount of the subsidy claimed by him is $128 per week. His loss to 1 July 2001 is $33,280.

1413. He gave evidence that he proposed to work to age 60. I accept that evidence. However, it must be weighed on the basis that that is his present intention. Nevertheless, he has two children aged 11 and eight years, and hence there is a real incentive for him to remain for another 16 years in the Force. He accepts that police work is of a physical nature but that he intends to work to age 60. He enjoys working at Warrandyte which he described as "heaven". It was put to him that his maximum superannuation benefits would be when he turned 55 or 60, but he was of the view that that would not lead him to retire. I accept his evidence. In determining the future loss, I have proceeded on the basis that he has between 15 to 16 years before he retires, and I have adopted a multiplier of $645. This calculates at a future loss of $82,560, and because he proposes to retire at the earlier age of 60, I think the appropriate reduction for contingencies and vicissitudes in his case is 20%, giving a total of $66,052. In arriving at this figure, I have taken into account the factors referred to earlier.

1416. If Sergeant Walker had been successful in his proceeding, I would have assessed total damages at $99,332.

1420. Sergeant McIntyre was born on 14 June 1951, and has just turned 50 years of age. She gave evidence that when she applied for the position, she intended to stay until she reached the age of 55 years. She enjoys the position. She now intends to occupy it until age 60. She has no intention of applying for promotion. She loves the work and intends to work until age 60. She describes herself as fit, healthy and enjoys what she is doing. She admitted that being in the Force was stressful but that did not affect her attitude towards retirement. She agrees that her maximum superannuation benefits will be reached when she turns 54 and a half to 55 years. She is still educating her two children, namely, a son 18 and a daughter 15. She stated that, financially, she would not be in a position to retire at 55. She accepts that there are some benefits of staying on.

1423. She was cross-examined to suggest that she was unhappy in going to the new position and further, that she intended to go into the new position as a stepping stone to further promotion. They may have been her views when she applied for the position, but I accept her evidence, that it is most likely that she will work to age 60 years, that she does enjoy her present position, and that it would have been unlikely that she would have applied for promotion.

1426. On the other hand, I must weigh up the fact that Sergeant McIntyre was one of a very few number of women who joined the Force back in 1974 and that she has progressed in a Force that is dominated by men. I cannot overlook the fact that she did have some ambition for promotion back in 1994, when she applied to go to Diamond Creek. Further, the Chief Commissioner is a female and has already stated that she wishes to see more females in the Force. One might infer from that that Sergeant McIntyre would have been and is likely to be encouraged to apply for further promotion. It is a factor that I must weigh up.

1429. She claims the loss of subsidy at the rate of $156 per week from 1 July 1996, until her retirement in June 2011. Her loss for the past to 1 July 2001 is $40,560. The present value of $1 per week for 10 years on the 3% tables is $452 and hence, Sergeant McIntyre's loss for the future is $70,512. I discount that by 25% for contingencies. I take into account the factors earlier mentioned and also her particular factors. In particular, the fact that the residence was not suitable for her family, the fact that her husband has a well paid job and the fact that she may seek further promotion. She is entitled to $52,884 loss for the future, which together with the loss for the past makes a total sum of damages of $99,444.

1432. Sergeant McIntyre also claimed the sum of $1,659 which had to be paid in order for the family to return to the family home in July 1996. It cost the family $1,659 to break the lease. In my opinion, the amount is irrecoverable. It falls foul of the second limb of the rule in Hadley v Baxendale. There was no evidence to show that the parties to the alleged contract, made in August 1994, had in contemplation the fact that Sergeant McIntyre was proposing to lease out the family home. In other words, the loss is too remote.

1436. Mr Button retired on 17 July 1999 and the amount of his rental subsidy was $112 per week. His loss is calculated at $18,712. He would have been entitled to that amount if he had been successful.

1440. In conclusion, I have found that the plaintiffs have not established their cases and accordingly, the proceeding must be dismissed. Subject to submissions from Counsel, I propose to make the following orders -

(i) That the proceeding be dismissed.

(ii) That the plaintiffs pay the defendant's costs, including any reserved costs.

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