Practice and procedure - Application to strike out statement of claim - Contract of employment - Whether term as to reasonable notice before termination implied - Whether term of trust and confidence implied - Whether implied term of trust and confidence survives termination of employment - Relevance of post­termination conduct of employer - Whether employer owes duty of care to employee regarding procedures for termination of employment - Availability of exemplary damages in contract claims

Workplace Relations Act 1996 (Cth)

Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66

Bowker v Prophecy Technologies Pty Limited [1999] NSWIRComm 248

Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144

Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78

Byrnes v Treloar, unreported, NSWCA, 10 December 1997

Coyne v Commercial Equity Corporation Ltd & Ors (1998) 20 WAR 109

Eastwood v Magnox Electric Plc [2004] UKHL 35; [2004] 3 All ER 991

Gambotto v John Fairfax Publications Pty Ltd (2001) 104 IR 303

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Gray v Motor Accident Commission (1998) 196 CLR 1

Heptonstall v Gaskin (No 2) [2005] NSWSC 30

Hospital Contribution Fund Australia v Hunt (1983) 44 ALR 365

Intico (Vic) Pty Ltd v Walmsley [2004] VSCA 90

Irving and Ors v Kleinman [2005] NSWCA 116

Loughridge v Lavery [1969] VicRp 112; [1969] VR 912

Malik v Bank of Credit and Commerce International SA (In Liq) [1997] UKHL 23; [1998] AC 20

North v Television Corporation Ltd (1976) 11 ALR 599

Nund v McWaters [1982] VicRp 60; [1982] VR 575

Poort v Development Underwriting (Vic) Pty Ltd (No 2) [1977] VicRp 52; [1977] VR 454

Rigg v Lee Loy Seng [1987] WAR 333

Sinnatamby v Cooper Corporation Pty Ltd [1986] WAR 36

State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371

Sullivan v Moody (2001) 207 CLR 562

Thomson v Orica Australia Pty Ltd [2002] FCA 939

Thornton v Bassett [1975] VicRp 41; [1975] VR 407

Walters v Cooper [1967] VicRp 64; [1967] VR 583

Whitfeld v De Lauret & Co Pty Ltd [1920] HCA 75; (1920) 29 CLR 71

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Chandler & Ors v Water Corporation [2001] WASC 166

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [1997] HCA 8; (1997) 188 CLR 241

Heptonstall v Gaskin [2004] NSWSC 80

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

McCabe v Cornwall County Council [2004] UKHL 35; [2004] 3 All ER 991

NRMA Insurance Ltd v AW Edwards Pty Ltd (1995) BCL 200

Preston v Star City Pty Ltd [1999] NSWSC 1273

Q-Vis Ltd v Gordon (2002) 82 WAIG 210

Quinn v Jack Chia (Australia) Ltd (1992) 43 IR 91

Uren v John Fairfax & Sons (1996) 197 CLR 118

1 MASTER NEWNES: This is an application to strike out the statement of claim, or parts of it, on the ground that it does not disclose a reasonable cause of action, or alternatively is embarrassing.

2 In an amended statement of claim dated 4 April 2005 (the "statement of claim"), the plaintiff pleads that, in about September 1996, he entered into a written contract of employment (the "service agreement") with the defendant, pursuant to which he was employed by the defendant as Headmaster of Wesley College, commencing at the start of the fourth school term in 1996 and terminating on 31 December 2001. It is pleaded that cl 12 of the service agreement provided that, except in certain circumstances specified in cl 10 of the service agreement, the defendant was required to give written notice of an intention to terminate the plaintiff's employment and to follow the process of mediation, conciliation and arbitration set out in the service agreement before terminating his employment.

3 The plaintiff pleads in par 7 of the statement of claim that it was an implied term of the service agreement that the defendant would not terminate the plaintiff's contract of employment in a manner or on terms that were not provided for in cl 10 and cl 12 of the service agreement. The term is alleged to be implied in order to give business efficacy to the service agreement or, alternatively, by reason of the nature of the contract of employment and the obligations it imposed on the parties.

4 The plaintiff alleges that by an agreement made on or about 10 December 2001, the plaintiff and the defendant agreed the defendant would extend the service agreement for a further term of three years, commencing on 1 January 2002 (the "extended service agreement"). It is alleged, in the alternative, in par 11 of the statement of claim that by an agreement (the "substituted contract of employment") made on or about 10 December 2001, the plaintiff and the defendant agreed that the defendant would employ the plaintiff under a contract of employment for a period of three years commencing on 1 January 2002.

5 The plaintiff pleads that the extended service agreement incorporated the terms of the service agreement in respect of the termination of the plaintiff's employment and the implied term to which I have referred.

6 The plaintiff pleads, in the alternative, in par 14 of the statement of claim that the extended service agreement, or the substituted contract of employment, included an implied term that the defendant could not terminate the plaintiff's employment without providing him with reasonable notice. That term is said to be necessary to give business efficacy to the contract, or alternatively is implied by reason of the nature of the contract of employment and the obligations it imposed on the parties. In that connection it is alleged in the particulars that the plaintiff was 55 years of age, had been employed by the defendant as Headmaster since 1996, had a large remuneration package and was one of the most senior educators of boys in Australia.

7 It is then pleaded in par 15 of the statement of claim that the extended service agreement, and/or the substituted contract of employment, included an implied term of trust and confidence. As this plea was the subject of detailed argument it is appropriate to set it out in full:

"15. The Extended Service Agreement and/or the Substituted Contract of Employment included an implied term ('the Implied Term as to Trust and Confidence') to the effect that the Defendant would:

(a) not without reasonable cause, conduct itself in a manner likely to damage or destroy the relationship of trust and confidence between the parties as employer and employee;

(b) not without reasonable cause conduct itself in a manner likely to destroy or seriously damage the reputation and professional standing of the Plaintiff;

(c) act towards the Plaintiff in good faith;

(d) not to terminate the Plaintiff's employment without following procedures set out in clause 12 of the Service Agreement.

Particulars as to Implied Term

(a) the term is implied:

(i) in that it is reasonable and equitable, necessary to give business efficacy to the contract of employment, obvious, consistent with the express terms of the Contract of Employment, capable of clear expression and reasonably certain in its operation;

(ii) alternatively from the nature of the contract of employment and the obligation which it imposed on the parties."

8 In pars 16 and 17 of the statement of claim the plaintiff pleads an incident at the school which led to defamation proceedings being commenced by a student and his parents against the plaintiff and the defendant. In par 18 the plaintiff pleads that in December 2001 he was diagnosed with an illness which caused him to be hospitalised in July 2002 and to take two weeks sick leave thereafter.

9 The subsequent pleas in par 19 to par 28 go to the heart of one of the principal issues on this application and it is appropriate that I set them out in full:

"19. On or about 30 July 2002, the Council [of the defendant] decided to notify the Western Australia Police Service of an allegation that the Plaintiff had engaged in criminal conduct involving accessing child pornography on the internet. ('the alleged conduct')

20. On or about 30 July, the Council of the Defendant decided to terminate the Plaintiff's employment:

(a) On the grounds of and without notice to the Plaintiff of the alleged conduct;

(b) by requiring the Plaintiff to resign or in the absence of resignation to dismiss the Plaintiff;

(c) without giving the Plaintiff notice of termination in accordance with the Extended Service Agreement or the Substitute [sic] Contract of Employment;

(d) without following the process set out in the clause 12 of the Service Agreement;

(e) without any payment to the Plaintiff of notice or in lieu of notice.

21. The Defendant ceased payment of the Plaintiff's remuneration on 2 August 2002 and has not paid the Plaintiff any sum for notice or in lieu of notice of termination of his contract of employment.

22. The Defendant knew or ought to have known that the Plaintiff could have had an explanation for the alleged conduct which:

(a) was consistent with the contract of employment;

(b) was inconsistent with any alleged criminal conduct;

(c) would not justify summary dismissal;

Particulars of Knowledge

(a) the Plaintiff's contract of employment required him to have regard to the overall welfare of the students at Wesley College;

(b) the Plaintiff had an international and national reputation as an educator of boys;

(c) the Plaintiff had an international and national reputation as having expertise in the area of moral issues, technology, boys education and the growth and development of adolescent boys;

(d) the Plaintiff had previously advised the Council and staff at Wesley College of a range of issues involving the internet, students at Wesley College and potential issues of concern both for the College and students;

(e) the Plaintiff had prepared the College policy as to appropriate access to internet sites;

(f) the Plaintiff had allowed repeated access to computers used by him to a number of staff members who had responsibilities to monitor internet access on behalf of the Defendant;

(g) it was unlikely that the Plaintiff would have been using computers owned by the Defendant to access inappropriate sites for illegal purposes or for the purpose of inappropriate personal gratification;

(h) it was likely that any recording of access to internet sites was:

(i) in pursuit of possible references to Wesley College on undesirable internet sites;

(ii) in pursuit of possible references to students of Wesley College on undesirable internet sites;

(iii) a result of technical recording of access due to the phenomena of 'pop-ups' even though no actual access had occurred.

23. (a) On or about before 1 August 2002, agents or officers of the Defendant made a complaint to the Western Australian Police Service ('the Police') alleging that the Plaintiff had engaged in criminal conduct involving child pornography.

(b) The Defendant did not at that time inform the Plaintiff that such a complaint was made.

24. On 2 August 2002, the Chairman of the Council Mr Craig Readhead ('the Chairman') and Mr Len Blyth, member of the Council, acting on behalf of the Defendant met with the Plaintiff at the Plaintiff's home. The Chairman on behalf of the Defendant:

(a) confirmed that the Police had been notified by members of or on behalf of the Council;

(b) confirmed that the Council had made a choice not to seek an explanation from the Plaintiff before such notification to the Police;

(c) advised the Plaintiff that the Defendant was seeking his immediate resignation, failing which his employment would be suspended;

(d) advised that either by way of resignation or suspension, the Plaintiff's employment was at an end.

25. At the meeting on 2 August 2002 and at all times thereafter, no person acting with the actual or apparent authority of the Defendant specified or detailed to the Plaintiff the alleged inappropriate internet sites that were allegedly accessed by the Plaintiff or when the alleged conduct took place.

26. By reason of the conduct by or on behalf of the Defendant as pleaded in paragraphs 19-22, 23(b), 24 and/or 25 the Defendant evinced an intention to no longer to be bound by the Extended Service Agreement and/or the Substituted Contract of Employment and repudiated the same.

27. The Defendant:

(a) dismissed the Plaintiff and terminated the Plaintiff's employment as headmaster with immediate effect and without notice;

(b) terminated the Extended Service Agreement and/or the Substituted Contract of Employment.

28. Alternatively to paragraph 27, the Plaintiff, as he was entitled, accepted the said repudiation expressly and/or by implication and resigned from his employment under the Extended Service Agreement and/or the Substituted Contract of Employment."

10 In par 29 to par 37 of the statement of claim the plaintiff complains about the nature and circumstances of certain publications, for which it is alleged the defendant was responsible, relating to the termination of the plaintiff's employment. In substance, the plaintiff pleads that on 2 August 2002 he agreed with the defendant the basis upon which the termination of his employment would be publicised. It is alleged that a media statement was subsequently issued by the defendant without the plaintiff's agreement or consent and that it contained statements derogatory of the plaintiff and "various inaccuracies". Similarly, it is alleged that on or about 8 August 2002 a letter was sent by the defendant to parents of all children at Wesley College in the same or similar terms to the media statement. It is further pleaded that, contrary to the agreement with the plaintiff, the defendant caused an article to be published in "The West Australian" newspaper on 9 August 2002, the Acting Head of the School wrote to parents in the same or similar terms to the media statement, and at about the end of August 2002 the council of the defendant caused an article to be published in the official newspaper of the Uniting Church and the defendant caused an article "containing numerous inaccuracies" to be published in the Hobart "Mercury". It is alleged in par 38 that the latter two newspaper articles destroyed the plaintiff's career and reputation.

11 The plaintiff pleads in pars 39 to 43 of the statement of claim the alleged circumstances of the settlement of the defamation proceedings referred to in pars 16 and 17. The plaintiff alleges that, on or about 6 August 2002, the chairman of the council of the defendant informed him that the defamation proceedings had been settled. The plaintiff says he informed the chairman that the proceedings had been settled without the plaintiff's instructions and that the terms of settlement contained matters that were untrue. The plaintiff alleges that, in or about September 2002, without consulting the plaintiff, the chairman sent to the plaintiffs in the defamation action a letter containing statements that were inaccurate and untrue, thereby damaging the plaintiff's reputation and career.

12 It is pleaded at par 44 of the statement of claim that, in breach of the implied term as to reasonable notice pleaded in par 14, the defendant failed to provide the plaintiff with two years' notice of termination; alternatively, it is pleaded in par 45 that the defendant failed to pay him a sum in lieu of reasonable notice. It is pleaded in the alternative in par 46 that if the extended service agreement applied at the relevant time, the defendant failed to comply with cl 12 and/or the implied term that the termination of the plaintiff's employment would be on notice.

13 The plaintiff pleads at par 47 and par 48 as follows:

"47. By virtue of the conduct of the Defendant as pleaded in paragraphs 19-22, 23(b), 24-26 and 30-43 and in breach of the Implied Term of Trust and Confidence the Defendant destroyed the relationship of trust between the Plaintiff and the Defendant in that:

(a) The Defendant failed to notify the Plaintiff of any alleged misconduct as required by clause 12 of the Service Agreement or at all;

(b) The Defendant published or caused to be published untrue and/or inaccurate allegations against the Plaintiff;

(c) The allegations published by the Defendant of and concerning the Plaintiff were derogatory of the Plaintiff and calculated to cause the Plaintiff embarrassment and adversely affect his professional standing career and reputation;

(d) The Defendant settled the Defamation Proceedings without the consent or approval of the Plaintiff the effect of which was to damage the Plaintiff's career and reputation.

(e) The conduct of the Defendant was engaged in for the purpose of causing the Plaintiff to resign from his employment;

(f) the Defendant has treated the Plaintiff unfairly and not in good faith

48. By reason of the conduct of the Defendant as pleaded in paragraphs 19-22, 23(b), 24-26 and 30-43 and in breach of the Implied Term as to Trust and Confidence the Defendant has seriously damaged the reputation and professional standing of the Plaintiff.

Particulars

(a) The Plaintiff's international and national reputation as an educator of boys has been irreparably damaged;

(b) the Plaintiff's international and national reputation as having expertise in the area of moral issues, technology, boys education and the growth and development of adolescent boys had been irreparably damaged."

14 The plaintiff also pleads a claim in negligence. The plaintiff pleads at par 49 of the statement of claim that the defendant owed to him a duty to take reasonable care to ensure that he did not suffer physical, mental or economic harm or damage in the course of or arising out of his employment. The plaintiff pleads in par 50 that the plaintiff breached the duty of care by making a complaint to the police alleging that the plaintiff had engaged in criminal conduct, namely accessing child pornography, without first informing the plaintiff that such a complaint was to be made and without informing him that it had been made; by deciding to terminate the plaintiff's employment without seeking an explanation from the plaintiff of the alleged conduct, in circumstances where the defendant knew or ought to have known that the plaintiff could have an explanation for the alleged conduct which was not inconsistent with his contract of employment and did not justify summary dismissal; by advising the plaintiff that his employment was at an end without seeking an explanation from the plaintiff of the alleged conduct or providing him with adequate details as to what internet sites were allegedly accessed and when; and by the conduct of the defendant in relation to the publications concerning the termination of his employment and in relation to the settlement of the defamation proceedings.

15 The plaintiff alleges in par 51 that he has suffered loss and damage.

16 In par 52 of the statement of claim the plaintiff claims aggravated and/or exemplary damages. He pleads that the conduct of the defendant in connection with the termination of his dismissal aggravated the loss and damage he suffered and was carried out with contumelious disregard for his interests.

17 There are, therefore, apparently four causes of action pleaded: first, breach of the implied term pleaded in par 7 that the plaintiff's employment would not be terminated except in accordance with cl 12 of the service agreement; secondly, breach of the implied term pleaded in par 14 that the plaintiff's employment would not be terminated except on reasonable notice; thirdly, breach of the implied term of trust and confidence pleaded in par 15; and fourthly, breach of a duty of care. The defendant seeks to strike out each of the causes of action on the ground that it is plainly untenable and, in addition or alternatively, seeks to strike out a number of paragraphs of the statement of claim on the ground that the pleas are embarrassing.

18 The principles to be applied on an application of this sort are well known. A plea will be struck out only if it is so obviously untenable that it cannot succeed and great care must be exercised to ensure that a party is not improperly deprived of their opportunity to put their case at trial: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130. In that regard, Courts at first instance should be careful not to risk stifling the development of the law: Hospital Contribution Fund Australia v Hunt (1983) 44 ALR 365 at 373.

19 Against that background, I turn to the specific objections taken by the defendant to the statement of claim.

The objection to the implied terms as to termination

20 The first objection of the defendant was to the plea of the implied term in par 7, alleged in par 13 to be incorporated into the extended service agreement and the substituted contract of employment, that the defendant would not terminate the plaintiff's contract of employment in a manner or on terms which were not otherwise provided for in cl 10 and cl 12 of the service agreement, and as to the implied term pleaded in the alternative in par 14, that the defendant would not terminate the plaintiff's contract of employment without providing reasonable notice.

21 In relation to the plea in par 7, a copy of the service agreement was tendered on this application and it was agreed that I may have regard to it. Clause 10 of the service agreement provides that the defendant may terminate the agreement by reason of the plaintiff's illness or incapacity of a specified duration, breach of the agreement, conviction of a criminal offence which in the reasonable opinion of the Council of the defendant brings the plaintiff or the defendant into disrepute, insolvency, unsoundness of mind, continual or significant absence, or neglect or incompetence in the performance of his duties under the agreement. The agreement provides for summary dismissal in only three of those circumstances, namely conviction of a criminal offence, insolvency, or unsoundness of mind. Apart from those, in the case of illness or incapacity the defendant must pay six months salary in lieu of notice and otherwise may terminate the service agreement only after following the process of mediation, conciliation and arbitration set out in cl 12.

22 Senior counsel for the defendant submitted that the alleged implied terms are plainly untenable. The term pleaded in par 7 would simply preclude the right of the defendant summarily to terminate the contract of employment for any reason other than the three circumstances for which that was specifically provided in cl 10, no matter how serious any misconduct of the plaintiff might be. The term pleaded in par 14 would preclude the defendant from summarily terminating the contract of employment for any reason at all. It was submitted that this was contrary to established principle. The defendant would always be entitled to accept repudiatory conduct by the plaintiff and to summarily terminate the employment agreement on that ground. There was nothing pleaded which could give rise to an implied term that would preclude the defendant from doing so.

23 The effect of contractual provisions requiring notice to be given before a party was entitled to terminate the contract has been considered in a number of cases, generally in relation to contracts for the sale of land. In Western Australia it has been considered by the Full Court in Sinnatamby v Cooper Corporation Pty Ltd [1986] WAR 36 and Rigg v Lee Loy Seng [1987] WAR 333.

24 In Sinnatamby v Cooper Corporation Pty Ltd, the question was whether the provision of the Real Estate Institute of Western Australia general conditions of sale which required that 14 days' notice be given to a defaulting party before the contract was terminated, applied where the purchaser had repudiated the contract. It was held that where a party elects to bring the contract to an end because it has been repudiated by the other party, it is not necessary to give such notice.

25 In Rigg v Lee Loy Seng, the question was whether the provision of the contract, on this occasion under the Law Society general conditions of sale, which required that 14 days' notice be given to a defaulting party before the contract was terminated, applied in the event of a repudiatory breach. Brinsden J (with whom Smith J agreed) held (at 354) it was well settled that where a contract includes such a clause but the contract is repudiated by the promisor the promisee need not give the 14 day notice. His Honour referred as authority for that proposition to: Walters v Cooper [1967] VicRp 64; [1967] VR 583 at 584 - 587; Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 at 923 - 925; Thornton v Bassett [1975] VicRp 41; [1975] VR 407 at 431; Poort v Development Underwriting (Vic) Pty Ltd (No 2) [1977] VicRp 52; [1977] VR 454 at 457, 458 - 460; Nund v McWaters [1982] VicRp 60; [1982] VR 575 at 583 - 584 and Sinnatamby v Cooper Corporation Pty Ltd (supra).

26 The common law principles with respect to repudiation of a contract apply to an employment contract: North v Television Corporation Ltd (1976) 11 ALR 599.

27 As I understand the plaintiff's case, the implied terms pleaded are alleged to have the effect described by senior counsel for the defendant. That is, even if the plaintiff repudiated the contract of employment the defendant would be required to adhere to the requirements for termination set out in cl 10 and cl 12 of the agreement, or, pursuant to par 14, to give notice of termination. I accept the defendant's submission that the matters relied upon by the plaintiff are incapable of giving rise to the implication of such terms. I would therefore strike out pars 7, 13 and 14 of the statement of claim.

The objection to the implied term of trust and confidence

28 The defendant submitted that the plea in par 15 of the statement of claim, as to the implied term of trust and confidence, disclosed no reasonable cause of action.

29 It is clearly arguable that a term of trust and confidence may be implied in a contract of employment: see Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144; Thomson v Orica Australia Pty Ltd [2002] FCA 939 per Alsopp J at [141]; Heptonstall v Gaskin (No 2) [2005] NSWSC 30; Irving and Ors v Kleinman [2005] NSWCA 116. On this application the defendant did not contend otherwise, but submitted that the plea as formulated in the statement of claim was simply untenable.

30 It was contended on behalf of the defendant that there is no arguable basis for the implication of the term alleged at par 15(b), that the defendant would not without reasonable cause act in a way likely adversely to affect the plaintiff's reputation, or the term pleaded in par 15(d), that the defendant would not terminate the plaintiff's employment except in accordance with cl 12 of the service agreement.

31 In respect of par 15(d), the defendant reiterated its submission that the plaintiff would always be entitled to accept repudiatory conduct of the plaintiff and thereby terminate the agreement without regard to the requirements for termination set out in the agreement. For the reasons I have given above, I accept that submission. In my view the allegation in par 15(d) is manifestly untenable and should be struck out.

32 I would not, however, regard the plea in par 15(b), that the defendant would not without reasonable cause act in a way likely adversely to affect the plaintiff's reputation, in the same light.

33 In Malik v Bank of Credit and Commerce International SA (In Liq) [1997] UKHL 23; [1998] AC 20 the House of Lords held that, as part of the employer's general obligation not to engage in conduct likely to undermine the trust and confidence required by the employment relationship, the employer was under an implied obligation to its employees not to conduct a dishonest or corrupt business, and damages were recoverable by an employee who it was foreseeable would be, and was, handicapped in his or her future employment prospects by the employer's dishonest or corrupt business practices.

34 The term pleaded in par 15(b) does not, of course, relate to dishonesty or corruption, but conceptually it is not so far removed from the general nature of the term found in that case that it can be said, on a pleading application, to be unarguable. I would not strike it out. However, for reasons I will come to, in my view the term would not survive termination of the contract of employment.

35 The defendant conceded that the implied terms pleaded in par 15(a) and (c) were arguable, albeit it submitted they were essentially to the same effect.

The objection to pars 16 to 18 of the statement of claim

36 The defendant submitted that par 16 and par 17 of the statement of claim, dealing with an incident at the school in November 1999 which led to defamation proceedings being commenced against the plaintiff were irrelevant and should be struck out on that basis. Those allegations appear to be relied upon for the later plea of a breach of a duty of care, to which I will turn in due course. For reasons I will come to, in my view that plea should be struck out and, accordingly, par 16 and par 17 should fall with it.

37 The defendant attacked par 18 of the statement of claim, which pleads an illness suffered by the plaintiff in 2001 and 2002, as irrelevant to the plaintiff's claim. It seems the plea is relied upon only in par 53(c) of the statement of claim, where it is called in aid of a plea for aggravated and exemplary damages. For reasons I will come to in due course, in my view that plea should be struck out and par 18 must fall with it.

The objection to the plea of the defendant's alleged repudiation of the employment agreement

38 The defendant objected to the pleas in pars 19 and 20 on the basis that they were irrelevant to the plaintiff's claim. In relation to par 19, it was submitted that the allegation that the council of the defendant "decided to notify" the police of an allegation that the plaintiff had accessed child pornography was irrelevant. Similarly, it was submitted that the plea in par 20, that on or about the same date the council "decided to terminate" the plaintiff's employment without notice to the plaintiff of the alleged conduct and without notice or payment in lieu, was irrelevant. Counsel for the defendant submitted that what (if anything) was relevant in respect of those matters was what was actually done, not what the defendant "decided" to do.

39 The defendant objected to the plea in par 22 of the statement of claim, that the defendant was aware the plaintiff could have an explanation for the alleged misconduct, on the ground it was embarrassing in that the purpose of the plea was not clear. Moreover, it was submitted, it seemed to be based upon the (untenable) proposition that the defendant had an obligation to give the plaintiff a right to be heard in answer to the alleged misconduct before acting on it.

40 The defendant says that the pleas in pars 23, 24 and 25, as to the complaint to the police, the meeting with the plaintiff at which he was informed that his employment was at an end, and the failure to detail to the plaintiff what sites were allegedly accessed and when, are irrelevant to the plaintiff's claim.

41 It was submitted by senior counsel for the defendant that the plea in par 26 of the statement of claim, that by purporting to terminate the plaintiff's employment on the ground of the alleged misconduct, the defendant had repudiated the employment contract, carried with it an implicit assertion that the alleged misconduct did not provide grounds for the plaintiff's summary dismissal. What, however, was not explained in the pleading was the basis of that implied assertion. It was not, therefore, evident whether the plaintiff contended that the alleged conduct had not occurred, or whether the plaintiff admitted that he had accessed internet sites of the nature alleged but had done so for reasons that did not constitute a breach of the law and were not inconsistent with his obligations under his employment contract.

42 It was submitted on behalf of the defendant that the latter is hinted at in par 22 of the statement of claim where it is pleaded that the defendant knew, or ought to have known that the plaintiff "could" have had an explanation for accessing such sites in that "it was unlikely that the plaintiff would have been using [the defendant's computers] to access inappropriate internet sites for illegal purposes or for the purpose of inappropriate personal satisfaction" and that it was likely that any recording of access of such sites was in pursuit of possible references to Wesley College or its students on undesirable sites, or was an incorrect recording of access to sites.

43 Senior counsel for the defendant acknowledged that if the plaintiff had simply pleaded that his employment had been terminated without the requisite notice, or without following the procedure set out in the contract, it would have been up to the defendant to plead the matters it said justified it in taking that course. But counsel submitted that where the plaintiff himself raises the issue, by pleading a purported termination by the defendant on the ground of serious misconduct and alleging that that constituted repudiatory conduct on the part of the defendant, it is the plaintiff who must say why the defendant's purported termination on that ground amounted to a repudiation of the contract.

44 As I understand this part of the defendant's case, the matters alleged in pars 19 to 22 and 23(b) to 25 are relied upon in par 26 as evincing an intention on the part of the defendant no longer to be bound by the contract of employment. That is to say, the defendant's repudiatory conduct consisted, in substance, of its decision to make a complaint to the police and summarily to terminate the plaintiff's employment on the ground of the alleged misconduct, making the complaint to the police (without informing the plaintiff at the time of it), and informing the plaintiff on 2 August 2002 that his employment was at an end, all without having given the plaintiff an opportunity to answer the allegations of misconduct in circumstances where the defendant knew, or ought to have known, that the plaintiff could have an answer to them.

45 The gravamen of the plaintiff's claim therefore appears to be first, that in deciding and then proceeding summarily to terminate the plaintiff's employment, the defendant was acting contrary to the implied term which required the defendant, before terminating the plaintiff's employment, to comply with cl 12 of the employment contract or the implied term as to reasonable notice, and secondly, that the defendant's conduct pleaded in pars 19 to 22 and 23(b) to 25 of the statement of claim was contrary to the implied term of trust and confidence.

46 On the first ground, as I understand the plaintiff's case it is put simply on the basis that the defendant was not entitled to dismiss the plaintiff except in accordance with the contractual provisions for termination or alternatively on reasonable notice, so that in summarily dismissing the plaintiff, the defendant would necessarily be in breach of the contract. It is irrelevant on what grounds the defendant proposed summarily to dismiss the plaintiff.

47 The difficulty, however, it seems to me, is that such a case rests on a contention that the contractual, or notice, provisions for termination were the exclusive means by which the defendant could terminate the plaintiff's employment. For the reasons I have given, I do not consider such a contention is arguable; the contractual provisions would not exclude the right of summary dismissal for repudiatory conduct by the plaintiff.

48 It is clear that at common law a contract of employment may be summarily terminated if, for instance, the employee has acted in a manner which is incompatible with the employees' duty, inconsistent with her or his duty to the employer or in a manner which is destructive of the confidence between the parties: Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66 at 72 and 81; Byrnes v Treloar, unreported, NSWCA, 10 December 1997, per Stein JA (with whom Gleeson CJ and Powell JA agreed) at [6].

49 In the present case, once it is accepted that a right of summary dismissal exists, the plea in par 26, that by acting on the basis of the alleged misconduct the defendant repudiated the contract, is embarrassing. It is embarrassing because it fails to identify why the plaintiff contends that in acting on the basis of the alleged misconduct the defendant repudiated the contract.

50 That is, it is not evident from par 26 of the statement of claim whether, in alleging that by acting on the alleged misconduct the defendant repudiated the employment contract, the plaintiff contends that the alleged misconduct did not occur, or whether the plaintiff admits that he had accessed internet sites of the nature alleged but had done so for reasons that did not constitute a breach of the law and were not inconsistent with his obligations under his employment contract, or whether he contends that the alleged conduct was not of such a nature as to justify summary termination.

51 Moreover, it appears that this part of the plaintiff's case is put specifically on the basis that the defendant's alleged conduct evinced an intention to act without regard to its obligations under the implied term of trust and confidence pleaded in par 15. Paragraph 15(a) and (b) expressly, and par 15(c) by necessary implication, provide that the defendant will be in breach if its conduct is "without reasonable cause". It is not, however, apparent on what basis the plaintiff contends that the defendant's alleged conduct was without reasonable cause; that is, it is not apparent, for instance, whether the plaintiff says it was without reasonable cause because the plaintiff had not engaged in the alleged conduct and reasonable enquiry by the defendant would have revealed that, or whether he says that he engaged in the alleged conduct but reasonable enquiries would have revealed that it was for a legitimate purpose, or whether he says he engaged in the alleged conduct but that it did not warrant the steps taken by the defendant.

52 I do not consider that a breach of the implied term of trust and confidence is arguably made out simply by showing that the plaintiff was not given an opportunity to answer the allegations. In Intico (Vic) Pty Ltd v Walmsley [2004] VSCA 90, the respondent, a senior employee of the appellant, had been summarily dismissed for sexual harassment. The trial Judge did not determine whether the alleged sexual harassment had occurred but held that the employee had been denied an opportunity to be heard and so could not be summarily dismissed. That decision was reversed on appeal it being held, by Ormiston JA at [3] and Buchanan JA at [17], that at common law, and absent a specific stipulation, an employer was not bound to afford an employee an opportunity to be heard before dismissing the employee for misconduct. The respondent contended that the appellant had seized the opportunity to dismiss the respondent, whose employment it wished to terminate for other reasons, and in so acting the appellants were in breach of an implied term of the contract of employment that the appellants would not "without reasonable cause conduct themselves in a manner likely to damage or destroy the relationship of confidence and trust between them and the [respondent] as employee and employer" and that the appellants would act towards the respondent in good faith. That was rejected. Buchanan JA (with whom Ormiston JA and Eames JA agreed) said at [23]:

"I think no want of good faith or destruction of the relationship of confidence and trust between employer and employee is constituted by an employer relying upon facts which do entitle the employer to dismiss an employee when the employer wishes to dismiss the employee for reasons that have nothing to do with those facts. The duty of good faith does not qualify an employer's right to summarily dismiss an employee for misconduct."

53 See also Irving v Kleinman (supra) at [28].

54 It follows, in my view, that an employer is not under an obligation to give an employee an opportunity to be heard before summarily dismissing the employee for misconduct, and the mere failure to give such an opportunity could not, in my view, arguably amount to a breach of the alleged term.

55 In any event, I consider it could not be a breach of the alleged obligation of trust and confidence to fail to give an employee an opportunity to be heard before acting on alleged misconduct simply because, as pleaded in par 22, the employee "could" have a satisfactory explanation for it. If an obligation to give such an opportunity existed it could only be breached in the normal course if in fact the employee had a satisfactory explanation for the alleged misconduct. Put another way, an employee who was alleged to be guilty of misconduct could hardly be heard to say that the employer had destroyed the relationship of trust and confidence, or damaged his reputation, by failing first to give him an opportunity to answer the allegations, if, had the opportunity been offered, he could not have answered them. Nor, in my view, in those circumstances could it be said that the employer had failed to act in good faith. The position may be otherwise if, had the opportunity been afforded, the employee could have provided a satisfactory answer to the allegations. As the statement of claims stands, the plaintiff simply does not plead whether or not he had a satisfactory answer to the allegations.

56 I therefore accept the defendant's submission that the plea in par 26, that by acting as it did on the alleged misconduct, the defendant repudiated the contract of employment, is embarrassing. It is necessarily implicit in that plea that the defendant was not entitled to act as it did, but it is not apparent why the plaintiff contends that the defendant was not entitled to do so

57 The defendant objected to par 27 on the basis that no material facts are pleaded in support of the plea. The plea simply asserts that the defendant dismissed the plaintiff and terminated the agreement. It is pleaded, in the alternative, in par 28 that the plaintiff accepted the defendant's alleged repudiation pleaded in par 26 as bringing the contract to an end. Accordingly, the plea in par 27 appears to be based on grounds other than the alleged repudiation by the defendant and its acceptance by the plaintiff. On what the plea in par 27 is based does not appear from the statement of claim. In my view, the plea is embarrassing and I would strike it out.

The relevance of the post-termination conduct pleaded in pars 30 - 43 to the breach of contract claim

The alleged breach of the implied term of trust and confidence

58 It appears from the plea in par 29 of the statement of claim that the plaintiff's contract with the defendant came to an end as at 2 August 2002. The conduct then pleaded, in pars 30 to 43 of the statement of claim, is alleged to have occurred between 6 August and September 2002; that is, after the contract of employment was at an end. That conduct is nevertheless alleged in pars 47 and 48 to have been in breach of the implied term of trust and confidence by destroying the relationship of trust between the plaintiff and the defendant, and seriously damaging the plaintiff's reputation and professional standing. It is alleged in par 51, among other things, that the plaintiff has thereby suffered loss and damage.

59 It was submitted on behalf of the defendant that conduct which occurred after the employment relationship had ended could not constitute a breach of the implied term of trust and confidence. The term did not survive termination of the employment contract. Accordingly, the pleas in pars 47, 48 and 51 disclose no reasonable cause of action, alternatively are embarrassing and should be struck out.

60 In Malik v Bank of Credit and Commerce International SA (supra), the appellants had worked for the respondent bank for a number of years before it collapsed and before what was said to be the respondent's corruption and dishonesty became publicly known. The appellants had not been involved in the corruption and dishonesty and became aware of it only after their employment had been terminated. The appellants claimed against the respondent damages for the loss they said the stigma of working for the respondent had caused them in obtaining alternative employment. It was held that, as part of its general obligation not to engage in conduct likely to undermine the trust and confidence required by the employment relationship, the respondent was under an implied obligation to its employees not to conduct a dishonest or corrupt business. The fact that the employee first learned of the trust-destroying conduct after the employment relationship had ended for other reasons did not preclude the employee from recovering damages for it. Lord Nicholls noted (at 34) "... the purpose of the trust and confidence implied term is to facilitate the proper functioning of the contract." His Lordship went on to say (at 37):

"Although the underlying purpose of the trust and confidence term is to protect the employment relationship, there can be nothing unfair or onerous in requiring an employer who breaches the trust and confidence term to be liable if he thereby causes continuing financial loss of a nature that was reasonably foreseeable."

61 The breach of the term in that case, however, occurred during the employment relationship, although the breach was only discovered after the relationship had ended for other reasons. There is nothing, in my view, in that case that suggests that a cause of action lies for conduct occurring after the relationship has ended. On the contrary, it would be inconsistent with the notion that the term was to protect the employment relationship.

62 In Burazin v Blacktown City Guardian Pty Ltd (supra), the Full Court of the Industrial Relations Court of Australia, after the reviewing the authorities, concluded (at 151) that damages for distress for wrongful dismissal were not available at common law in Australia. The Court also considered a claim for damages for breach of an implied term of trust and confidence. It agreed with the trial Judge that there was ample English authority for the implication of such a term in a contract of employment. It concluded, however, from a review of the English authorities that none of the cases supported the view that damages were available for a breach of the term. Although the Court ultimately left the question open, having found that the appellant was entitled to statutory compensation for distress, the Court said (at 154):

"Although it might seem strange to concede the existence of an implied contractual term but deny its capacity to give rise to liability in damages, it must be remembered that the term is intended to bolster an ongoing relationship. To permit an action for damages during the currency of the employment relationship, it might be argued, would be antithetical to the reason for implying the term; the action itself would presumably cause a further deterioration in the relationship."

63 Again, that case supports the defendant's contention that an implied term of trust and confidence term does not survive termination of the contract. The survival of the term would be inconsistent with the reason that the term is implied, namely, in order "to bolster an ongoing [employment] relationship".

64 In Johnson v Unisys Ltd [2003] 1 AC 518, Lord Millett said (at 825) that the implied term of trust and confidence "is an inherent feature of the relationship of employer and employee which does not survive the ending of the relationship. The implied obligation cannot sensibly be used to extend the relationship beyond its agreed duration."

65 The defendant also submitted that it had been established by the decision of the House of Lords in Johnson v Unisys Ltd (supra), that in general there is no right of action at common law to recover financial losses arising from the unfair manner of dismissal. That principle is subject to what was said by the House of Lords in Eastwood v Magnox Electric Plc [2004] UKHL 35; [2004] 3 All ER 991. In the latter case Lord Nicholls reiterated that if, before his dismissal, an employee has acquired a cause of action for breach of contract or otherwise, in the ordinary course that cause of action remains unimpaired by his subsequent unfair dismissal. However, an employer's failure to act fairly in the steps leading to dismissal does not itself cause the employee loss, save in exceptional cases where financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal, such as financial loss from suspension, or where an employee suffers financial loss from illness caused by his pre-dismissal unfair treatment. Any claim would be limited to losses of the latter kind.

66 Counsel for the plaintiff, in his written outline of submissions, referred to Bowker v Prophecy Technologies Pty Limited [1999] NSWIRComm 248, as authority for what he described as a duty of care owed by an employer not to publish views which would unreasonably injure an employee with respect to future employment prospects after the employment has ended. In that case Marks J accepted that it was permissible to imply, and did imply, "as a matter of policy a term into [the] contract of employment to the effect that [the] employer should not unreasonably injure [the] employee with respect to the employee's future employment prospects and that the provisions of such a term would not merge on the termination of the employment relationship or the termination of the underlying contract of employment."

67 There are several things that I should say about the plaintiff's submission. First, in this case the plaintiff does not plead an obligation of the nature referred to. Secondly, in Bowker, Marks J implied the term referred to apparently without opposition from counsel for the employer and therefore without argument on the point. Thirdly, with respect to his Honour, the authorities on which he relied do not, in my view, support such a term. Fourthly, in any event, in order to make out a basis for such a case the plaintiff would have to plead that the defendant had "unreasonably" injured the plaintiff's future employment prospects.

68 The first authority relied upon by Marks J was Malik v Bank of Credit and Commerce International SA (supra). That case, of course, was not concerned with the liability of an employer for its conduct after the employment contract had come to an end. As the speeches of Lord Nicholls (at 36, 37 - 38) and Lord Steyn (at 49) make clear, the Court there held that an employer may be liable for damage caused to an employee's future employment prospects by a breach of the implied term by the employer during the currency of the contract of employment.

69 The other authority referred to by Marks J was Spring v Guardian Assurance Plc [1995] 2 AC 296, which was concerned with a reference given by the former employer. A majority of the House of Lords held that an employer who provided a reference concerning a former employee owed the employee a duty to take reasonable care in its formulation and preparation. The majority also held there was an implied term in the contract of employment that the employer would take reasonable care in providing a reference. With respect, the case does not, therefore, support the implication of the much more general term referred to by Marks J nor does it support the contention that an implied term of trust and confidence survives termination of the contract of employment.

70 Counsel for the plaintiff also relied upon Gambotto v John Fairfax Publications Pty Ltd (2001) 104 IR 303, which concerned an interlocutory application to dismiss the applicant's claim under s 106 of the Industrial Relations Act 1966 (NSW), dealing with unfair contracts, on the ground that the Commission did not have jurisdiction to hear it. In that case, the applicant, a journalist and writer, had been employed by the respondent. Some months after the applicant had left the respondent's employment, and up to 2 years later, she was the subject of articles published by the respondent which were disparaging of her in relation to work she had since published. The applicant argued that the contract of employment with the respondent was unfair under s 106 of the Act in that it had not contained a clause preventing the respondent from acting in this way. The applicant sought a variation to the contract to impose duties of that sort on the respondent. Peterson J found that such a claim, being referable to the contract of employment itself, fell within the jurisdiction of the Commission. In the course of doing so, Peterson J said that the publication of the articles was arguably in breach of the respondent's implied duty of trust and confidence under the contract of employment. His Honour did not, however, articulate the nature and extent of the specific obligation arguably breached by the publication of the articles.

71 I do not, with respect, find that case of assistance on the current application. The case turned on the specific issues under s 106 of the Industrial Relations Act that were before the Court. To the extent that Peterson J made observations about the position at common law as to the availability of a claim for damages for breach of the implied term of trust and confidence for post-termination conduct, those observations, with respect, cannot stand against the weight of English authority, including Johnson v Unisys Ltd (supra), and the comments of the Full Court of the Industrial Court in Burazin v Blacktown City Guardian Pty Ltd (supra). It seems that Peterson J was not referred to either of those decisions.

72 It is, in my view, clear that post-termination conduct cannot constitute a breach of an implied term of trust and confidence. That term, as the cases make clear, is to protect and bolster the on-going employment relationship. It does not survive termination. It follows that to the extent the plaintiff relies in pars 47, 48 and 51 upon the matters pleaded in pars 30 to 43 of the statement of claim as constituting a breach of the contract of employment, the statement of claim discloses no reasonable cause of action and pars 47, 48 and the reference to them in par 51 should be struck out.

73 I should also note that, in any event, it is also not clear what specific obligation the plaintiff says the defendant owed to him after the employment relationship ceased. The plea in par 15(b), that the defendant would "not without reasonable cause conduct itself in a manner likely to destroy or seriously damage the reputation and professional standing of the Plaintiff", if applied to post-termination conduct, would impose upon the defendant, in respect of a former employee, a duty of a broad nature and of indefinite duration which goes much further than could be regarded as reasonably necessary.

74 That leaves the question of whether the plaintiff may have a cause of action in respect of loss or damage which occurred before termination of the contract of employment. In that regard, it is not clear from the statement of claim whether it is alleged the plaintiff suffered loss or damage by reason of anything done before the termination of his employment. So far as can be ascertained from the pleading, the losses claimed are largely, if not entirely, said to arise as a result of the termination and things done subsequently by the defendant.

The adequacy of the pleading in pars 30 to 43

75 The defendant also complained that the pleas in pars 35, 37, 38 and 40 to 43 were in themselves embarrassing.

76 In relation to par 35, the defendant submitted that the plea that the defendant "published or caused to be published an article containing numerous inaccuracies in The West Australian Newspaper [sic]" was so vague as to be embarrassing. Neither the manner in which the defendant allegedly "published or caused [the article] to be published" nor the "numerous inaccuracies" were identified. Similar complaints were made about the plea in par 37 that the defendant published or caused to be published an article in the official newspaper of the Uniting Church and an article "containing numerous inaccuracies" in the Hobart "Mercury" newspaper. It is further pleaded in par 38 that both articles "were inaccurate". Those inaccuracies are also not identified.

77 It was submitted on behalf of the plaintiff that those were matters properly dealt with on an application for further and better particulars. I do not agree. In the circumstances of this case, where the alleged inaccuracies are essential to the plaintiff's complaint, I consider that if pleas in such terms are to be made they should be properly particularised in the statement of claim.

78 It is pleaded in par 40 that, following advice from the chairman of the council of the defendant that the defamation proceedings had been settled, the plaintiff informed the chairman that the proceedings had been settled without his consent and "that the terms of settlement contain matters that were not true and correct". It was submitted on behalf of the defendant that, once again, the plea is embarrassing because the inaccuracies are not identified. Furthermore, it is not apparent whether it is the defendant's case that the terms of settlement were in fact "not true and correct" or whether that was simply what the plaintiff told the chairman of the defendant's council. In that respect it is to be contrasted with the plea in par 43, where it is alleged that a subsequent letter by the chairman to the plaintiff in the defamation proceedings contained material that was (in fact) incorrect, although once again the alleged errors are not identified. I might add that it is also not apparent whether the errors which the plaintiff alleges he identified to the chairman are the same as the errors allegedly contained in the chairman's subsequent letter.

79 I accept that the pleas in pars 35, 37, 38 and 40 to 43 are embarrassing in form for the reasons submitted by the defendant. I would therefore strike out those paragraphs on that ground.

80 The defendant submitted that the plea in par 44, that in breach of the implied term as to reasonable notice pleaded in par 14 the defendant failed to give the plaintiff two years notice of termination, falls with par 14. I accept that submission. I accept, too, that the plea in par 45 falls with the pleas as to the implied term as to reasonable notice. Paragraph 46 should be struck out for similar reasons.

81 For the reasons I have given earlier, I would strike out par 47 of the statement of claim. I should, however, deal with some additional objections raised by the defendant.

82 In relation to par 47(a), which pleads that the defendant breached the term by failing to notify the plaintiff of any alleged misconduct "as required by cl 12 of the Service Agreement", the defendant submitted that the plea was untenable because cl 12 of the service agreement did not require the defendant to notify the plaintiff of any alleged misconduct. I accept that submission.

83 The defendant says the allegations in par 47(b) and (c), that the defendant published or caused to be published untrue and derogatory allegations about the plaintiff is so vague as to be embarrassing. I accept that submission.

84 It was submitted that the pleas in par 47(e), that "the conduct of the defendant" was engaged in for the purpose of causing the plaintiff to resign, and in par 47(f), that the defendant "treated the plaintiff unfairly and not in good faith", were so vague as to be embarrassing. Moreover, it is implicit in those pleas that the conduct of the defendant was unwarranted, but the basis upon which that implied assertion is made is not apparent. I accept those submissions.

85 I would therefore strike out par 47(a), (b), (c), (e) and (f) on those additional grounds.

86 The defendant submitted that the pleas in par 49 and par 50, as to the alleged duty of care and the breach of it, are defective for a number of reasons. First, it was submitted the plea in par 49 as to the duty of care did not recognise the differing requirements to give rise to a duty of care to avoid physical, mental and "economic" harm. Secondly, it was submitted that it had been established in State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 that an employee owes no duty of care to an employer with respect to procedures for discipline or the termination of his employment. Thirdly, the pleas relied upon the earlier pleas as to the defendant's conduct, which pleas were defective. Fourthly, the plea that the defendant breached the alleged duty of care, in that it "failed to act with fairness or good faith to the plaintiff", was untenable and also so vague as to be embarrassing.

87 It is convenient to turn first to the decision of the New South Wales Court of Appeal in State of New South Wales v Paige (supra). In that case the trial Judge had found that the appellant employer owed to the respondent employee a duty of care to provide a safe system of investigation and decision-making with respect to procedures for discipline and termination of employment. Spigelman CJ (with whom Mason P and Giles JA agreed on this issue), concluded that no such duty of care arose. His Honour referred to Sullivan v Moody (2001) 207 CLR 562, where the plaintiffs had brought actions in negligence against medical practitioners who had reported to authorities that the plaintiffs' children appeared to have been sexually abused, and in particular to the discussion in that case of the relevance of considerations of the coherence of legal principles. Spigelman CJ (at 388) cited the following passage from the judgment of the High Court (at 579 - 80 [50]):

"Different classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care ... Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships. The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle."

88 Spigelman CJ observed that when the High Court came to assess the considerations relevant to determining whether or not a duty of care existed in the case before it, the Court had noted that the injury to the fathers arose by reason of what each father and others had been told. The High Court said (at 581 [54]):

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

89 His Honour noted (at 389) that the High Court went on to consider the functions, powers and responsibilities of the persons and authorities alleged to owe a duty to the fathers in the course of investigating and reporting on the allegations made against them, and observed that statutory obligations are not necessarily inconsistent with the existence of a duty of care because, as the High Court said (at 582 [60]):

"People may be subject to a number of duties, at least provided they are not irreconcilable."

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

"When considering the issue of coherence it is necessary to give close consideration to the statutory scheme: specifically whether a common law duty is 'inconsistent' or 'incompatible' with the statute and, relevantly in this case, the regulations. ... However, issues of coherence may arise even if there is no direct inconsistency. It may be enough if the effect of imposing civil liability is to 'distort [the] focus' of the statutory decision-making process."

"Of particular significance for the present case is the need for coherence in the law, in view of the interaction and interrelation between the proposed duty in tort and the law applicable to termination of employment, that is, the law of contract as modified by statute. In my opinion, the possibility of incoherence in the system of law applicable in this State is such that the proposed duty should not be recognised.

In the context of contracts of employment, Addis v Gramophone Co Ltd [1909] UKHL 1; [1909] AC 488 has long been cited as authority against recovery of damages for the manner of dismissal. That restriction would not apply where there is physical injury. (Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 at 362, 381, 405.) It is suggested the reference in this line of authority to 'anxiety, disappointment and distress' should not extend to psychiatric damage, on the basis that the latter is a form of physical injury. (Aldersea v Public Transport Corporation [2001] VSC 169; (2001) 3 VR 499 especially at 510 and 515. However, psychiatric damage is regarded as a category distinct from personal injury for other purposes, such as foreseeability (see Morgan v Tame (at 24 [5] - [7])). As presently advised, I would not extend the observations in Baltic Shipping v Dillon about physical injury to psychiatric damage.

In recent years the authority of Addis v Gramophone Co has been challenged, but not undermined, by creative use of implied terms, notably the obligation of mutual trust and confidence. (See for example Malik & Mahmud v BCCI [1997] UKHL 23; [1997] 3 WLR 95; cf Husain v BCCI [2002] EWCA Civ 82. See also Burazin v Blacktown City Guardian [1996] IRCA 371; (1996) 142 ALR 144; R Naughton 'The Industrial Relations Court and the Contract of Employment' (1998) 17 Aust Bar Rev 140, at 149 - 159)."

93 Spigelman CJ then considered the decision of the House of Lords in Johnson v Unisys (supra), noting that it had been held in that case that there was no cause of action in contract or in tort for psychiatric injury arising from the manner in which an employee was dismissed. His Honour observed that four members of the House of Lords had decided that the determining factor preventing the cause of action in tort or contract was the legislative intervention by Parliament in the area of unfair or wrongful dismissals. Their Lordships considered that the implied obligation of trust and confidence was applicable only to an on-going employment relationship. In cases of dismissal it would be necessary to imply a term or obligation akin to a requirement to exercise the power of dismissal in good faith and with due regard to any known sensitivities of the employee. Such an obligation could not be consistent with the right of an employer to dismiss an employee on any ground.

94 Spigelman CJ said that similar considerations apply to the Australian industrial relations context and similar purposes as those imputed to the UK Parliament are discernible in the legislation governing unfair dismissals in Australia. His Honour then reviewed the relevant provisions of the Industrial Relations Act 1996 (NSW) and the Workplace Relations Act 1996 (Cth) and went on (at 399 [153]):

"The law of tort is part of the unified common law of Australia. In a different context it may be difficult to conclude that the development of the law of tort should be inhibited by the existence of statutory provision in only some of the component parts of our federal system. Although I have concentrated on the statutes in New South Wales and the Commonwealth, some form of special provision is found in all States."

95 I should interpose that the relevant legislation in this State is the Industrial Relations Act 1979 (NSW), which, so far as relevant, is in all material respects to the same effect as the legislation referred to by his Honour.

"The area of unfair dismissals is heavily regulated in both the State and Commonwealth contexts. It represents a particular and carefully calibrated balancing of the conflicting interests involved namely, between preserving the expectations of employees on the one hand and enabling employers to create jobs and wealth, on the other hand. The arguments and factors accepted in Johnson v Unisys are directly applicable to the legislation examined above and the same conclusion, namely a refusal to expand the duty of care in negligence to provide an alternative cause of action for unfair dismissals, should be the result.

The expansion of the law of tort to matters concerning the creation and termination of a contract of employment, as distinct from performance under the contract, may distort the balance of conflicting interests found to be appropriate as a matter of contract or by intervention of statute. Where, as here, the courts are asked to create a novel duty of care, the courts should refrain from doing so where there is such a well developed alternative mechanism for adjusting the interests involved. Matters concerning the creation and termination of a contract of employment can, in my opinion, properly be left to the law of contract, subject to the extensive statutory modification that the parliaments have introduced into this specific area of contract law."

97 While that decision is not binding on this Court, it is a recent decision of an appellate Court in Australia, and the considerations which led the Court to the conclusion that no such duty arose apply in Western Australia. I would respectfully follow it.

98 It follows, in my view, that in the ordinary course an employer does not owe to an employee a duty of care of the nature alleged in respect of the termination of the employee's employment, including as to the manner of investigation and decision-making preceding the termination.

99 That is not to say that a relevant duty of care could never arise, but I accept the defendant's submission that there is nothing pleaded in the present case that is capable of giving rise to such a duty, nor are the particulars of breach in par 50 capable of making out a case for the breach of any duty of care owed by the defendant. Particular (a), that the defendant did not comply with cl 10 and cl 12 of the Service Agreement, assumes, without an arguable basis, that the defendant had an obligation to do so. Particular (b), that the defendant failed first to notify the plaintiff of the alleged misconduct, assumes an obligation to do so which on the pleading is not sustainable in law. Particular (c), that the defendant breached the implied term of trust and confidence, to the extent it might be relevant to a duty of care, is defective for the reasons I have previously given. Particular (d), that the manner of termination was likely to cause damage to the plaintiff, is so vague as to be embarrassing but appears to assume obligations of an employer in respect of the manner of termination that on the pleading are not sustainable in law. Particular (e), that in the manner of termination was indifferent to the likelihood of damage to the plaintiff, is unsustainable for the same reason. Particular (f), that the defendant settled the defamation proceedings without the plaintiff's consent, the effect of which was to destroy his reputation, is conduct after the employment relationship had ceased and assumes a duty which on the pleading is not sustainable at law. Particular (g), that the defendant failed to act with fairness and good faith, is so vague as to be embarrassing and moreover assumes, without a pleaded basis, that the defendant was not entitled to act on the basis of the alleged misconduct.

100 I would accordingly strike out pars 49, 50 and 51.

The claim for aggravated and exemplary damages

101 In par 52 and par 53 the plaintiff claims aggravated and exemplary damages. The defendant says the pleas are untenable. First, it was submitted that those pleas rely on preceding pleas that are themselves defective and untenable. Secondly, no facts capable of establishing an entitlement to an award of aggravated or exemplary damages have been made out. Thirdly, the pleas do not identify in respect of what causes of action such damages are sought.

102 In my view, the plea is plainly defective in failing to identify the cause of action, or causes of action, in respect of which such damages are sought. As it stands, the plea appears to make such a claim in respect of each of the alleged causes of action in contract and tort. To the extent it claims exemplary damages for breach of contract, in my view it is plainly untenable. It is clear that exemplary damages are not available for breach of contract. In Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 Griffiths CJ said at 89:

"... The measure of damages in an action for breach of contract is well settled. It is such loss as may fairly and reasonably be considered as arising according to the usual course of things or may reasonably be supposed to have been in the contemplation of the parties at the time of making the contract as the probable result of a breach. The motive or state of mind of a person who is guilty of a breach of contract is not relevant to the question of damages for the breach, although if the contract itself were fraudulent the question of fraud might be material (see per Lord Chelmsford in Bain v. Fothergill [LR 7 H.L 158 at pp 206-207]). A breach of contract may be innocent, even accidental or unconscious. Or it may arise from a wrong view of the obligations created by the contract. Or it may be wilful, and even malicious and committed with the express intention of injuring the other party. But the measure of damages is not affected by any such considerations. A statement of claim which alleged that the defendant wilfully or maliciously or fraudulently committed a breach of contract would not gain any additional effect from the vituperative epithets, which would indeed be as irrelevant to the case as the ancient averment that a person accused of an offence acted at the instigation of the devil."

103 See also Whitfeld v De Lauret & Co Pty Ltd [1920] HCA 75; (1920) 29 CLR 71 at 80; Coyne v Commercial Equity Corporation Ltd & Ors (1998) 20 WAR 109 at 121-2; Gray v Motor Accident Commission (1998) 196 CLR 1 at 6.

104 I also accept the defendant's submission that the claim is defective in other ways. It relies in subpar (b) on an obligation under the service agreement to give written notice to the plaintiff "of any issue, other than the specified grounds, if the Defendant was considering terminating the Plaintiff's employment", when no such term appears in the agreement or is pleaded; it pleads that the defendant "decided" to terminate the plaintiff's employment but it is not apparent how that decision, as opposed to its implementation, is relevant; it pleads post termination conduct in subpars (g) and (h), both of which are, moreover, in such vague terms as to be embarrassing; and it pleads the plaintiff's previous illness without any indication of the alleged relevance of that to the claim. I would strike out the plea on those additional grounds.

105 I should also deal with an objection to par 11 of the statement of claim. Senior counsel for the defendant submitted that, in its terms, par 11 pleaded that the substituted contract of employment was an agreement to agree a contract of employment, but it was not alleged that any such contract was subsequently agreed. I understood counsel for the plaintiff to accept that the plea required amendment. In my view, the plea as currently formulated is embarrassing and I would strike it out.

106 In my view, the statement of claim is so substantially defective that the proper course is to strike it out in its entirety. I would allow the plaintiff leave to replead. I will hear the parties on the time within which that should be done.