JK v State of New South Wales

The pleading framework 7It is necessary that I briefly refer to the pleadings.

The statement of claim 8On 5 June 2010, by way of statement of claim, JK commenced these proceedings against the State of New South Wales, its employees the second and third defendants, and QR alleging that: (a) QR assaulted and sexually assaulted JK in the circumstances set out in paragraphs 5, 18(a), 18(c) 19A, 19B, 19C, 19D, 19E and 19F of the amended statement of claim ("ASC"), and caused her injury loss or damage thereby; and (b) QR acted in the manner set out in the particulars relating to paragraphs 10, 14 and 17 of the ASC which I need not reproduce here. (c) The State of New South Wales is vicariously liable for the acts of QR; and (d) The State of New South Wales allowed or permitted QR to engage in the said assaults and sexual assaults or failed to stop the said assaults and sexual assaults as a result of breaches of its duty of care, including breaches of the duties of care required of the second and third defendants.

The cross claim 9By cross claim filed 22 August 2011, the State of New South Wales seeks as against QR firstly, indemnity for the judgment entered against the defendants; secondly, in the alternative, contribution to the judgment entered against the defendants; thirdly, damages for breach of contract; fourthly, interest; and lastly, costs of JK's action including the defence costs of the State of New South Wales and the second and third defendants. So far as the claim for contribution is concerned, the State of New South Wales seeks 100% from QR. 10In its cross claim, the State of New South Wales argued that QR's conduct, as pleaded by JK, was criminal conduct that was in breach of his contract and conditions of employment as well as the provisions of the State of New South Wales' Codes of Conduct and Teacher's Handbook. It was also alleged that such conduct was in breach of the Teaching Service Act 1980 (NSW) including, without limitation, Part 4 Division 6 of the Act and in breach of the Children and Young Persons (Care and Protection) Act 1998 (NSW). It was also pleaded that QR engaged in serious and wilful misconduct that was not within or for the purposes of QR's employment with the State of New South Wales and was deliberately concealed from the State of New South Wales and his supervisors [at XC [9]]. In response QR admitted in his defence these allegations set out in [9] of the cross claim. 11There are three main issues to be determined here. They are first, whether the settlement was reasonable; second, whether QR should indemnify the State of New South Wales; and finally, whether there should be contribution by QR to the State of New South Wales and if so, to what percentage amount.

Was the settlement reasonable? The first issue to be determined is whether the settlement between the State of New South Wales and JK was reasonable. Liability and the assessment of damages are governed by the provisions of the Civil Liability Act 2002 (NSW). 12Section 5B of the Civil Liability Act 2002 (NSW) sets out the general principles of negligence. Section 5B reads: "5B General principles (1) A person is not negligent in failing to take precautions against a risk of harm unless: (a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and (b) the risk was not insignificant, and (c) in the circumstances, a reasonable person in the person's position would have taken those precautions. (2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): (a) the probability that the harm would occur if care were not taken, (b) the likely seriousness of the harm, (c) the burden of taking precautions to avoid the risk of harm, (d) the social utility of the activity that creates the risk of harm." 13In Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603, Hayne J set out the principles regarding the assessment of whether a compromise of a claim was reasonable. His Honour stated at [129] and [130]: "[129] Whether the compromise of a claim was reasonable must be judged objectively, not subjectively. ... [130] Next, the question whether the settlement was reasonable must be judged by reference to the material the parties had available to them at the time the compromise was reached. It is not to be judged according to whether material which was obtained later shows that the opposite party could or could not have prosecuted or defended the claim successfully but according to the assessment which could properly be made at the time of settlement of the chances of success or failure." 14The State of New South Wales relied upon the reports of two psychiatrists, namely Dr Lisa Brown, dated 23 March 2011 and Dr Mark Kneebone, dated 27 August 2007. QR disputed some of the contents of Dr Brown's report. Dr Brown opined (CB 89): "... that [JK] has probably developed a mild to moderate combined Post Traumatic Stress Disorder/Borderline Personality Disorder as a result of experiences of sexual abuse perpetrated by teacher [QR] during her early to mid high school years." 15The consent judgment was for the sum of $525,000. Of that $208,630.00 was for solicitor/client costs. Taking into account the medical evidence of the plaintiff's psychiatric injuries and her age when the sexual assaults occurred, it is my view that the settlement sum that included costs incurred in prosecuting these proceedings was a reasonable one.

Indemnity and contribution 16The second issue to be determined is that of indemnity. 17Section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) sets out contribution and is also relevant to the issue of indemnity. Section 5 reads: "5 Proceedings against and contribution between joint and several tort-feasors (1) Where damage is suffered by any person as a result of a tort (whether a crime or not): (a) judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage, ... (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought. (2) In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity." 18As can be seen, s 5(2) of the Law Reform (Miscellaneous Provisions) Act provides that where damage is suffered by any person as a result of a tort (whether a crime or not) the Court shall have power to direct that the contribution to be recovered from any person shall amount to a complete indemnity. The Court also has the power to exempt any person from liability to make contribution. 19So far as indemnity is concerned, in McGrath v Fairfield Municipal Council [1985] HCA 33; (1985) 156 CLR 672; (1985) 59 ALR 18, the High Court referred to the UK equivalent of s 5(2), and stated at 678-680: "Section 5(1)(c) confers a right to 'contribution' to be assessed, having regard to the respective responsibility of the concurrent tortfeasors for the damage (s 5(2)), but does s 5(1)(c) entitle an employer who is guilty of no personal responsibility to an indemnity? In Ryan v Fildes [1938] 3 All ER 517, Tucker J (as he then was), speaking of the UK equivalent of s 5(2) of the NSW Law Reform Act said (at 524-5): That sub-section makes it clear that, although the section is dealing with contribution, and the word 'contribution' finally indicates the payment of some smaller sum towards a larger sum, payable by some other person, none the less the section contemplates cases in which either or both of two defendants have been found liable to pay damages in law, and none the less one of them may be exempted by the order of the court from making any contribution whatever. That is to say, two persons having been found legally liable to pay, prima facie, the whole of the damage, one of them, for reasons which may appear sufficient to the court, may be exempted altogether from his liability. On the other hand, although the section is dealing with contribution, it is said in terms that the court may direct that a contribution to be recovered from any person shall amount to a complete indemnity. It is clearly contemplated in that case that a contribution may amount to 100 per cent contribution, and may become in effect an indemnity. Whether or not that is precisely the correct way to describe a contribution is immaterial, because the meaning is clear. On the facts of that case, his Lordship saw no reason 'for making any order other than what would, prima facie, appear to be the proper order - namely, that the person actually responsible for the commission of the tort should contribute the full amount of the damages recovered against the master'. In Lister v Romford Ice, Viscount Simonds expressed the same opinion (at 579-80): '... I see no reason to doubt that under the Act ... the respondents would be entitled to recover contribution from the appellant to the extent of 100 per cent. Ryan v Fildes was, I think, rightly decided.' That was the view of Finnemore J in Semtex Ltd v Gladstone [1954] 1 WLR 945 at 949 and of McNair J in Harvey v R G O'Dell Ltd [1958] 2 QB 78 at 107. The English view was followed in New South Wales by Hope J in Northern Assurance v Coal Mines Insurance (1970) 91 WN (NSW) 293 at 301, despite some doubts which he entertained. This court has not settled that question (cf Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 at 380-1). In New Zealand, Henry J, following the English view, held in Richardson v O'Neill [1959] NZLR 540 at 544, that a defendant for whose negligence another party was vicariously liable should 'completely indemnify' that party. ... It further appears that the term 'indemnity' had been used to describe the employee's liability to contribute the whole of the damages for which the employer is vicariously liable. Although the term 'indemnity' has been used in some contexts to mean only a contractual liability (see, for example, Speller v Bristol Steam Navigation Co (1884) 13 QBD 96 at 101, its use was not so restricted in the context of an employee's liability to his employer in respect of the employer's vicarious liability for the employee's negligence." 20The State of New South Wales accepted that generally speaking schools have a non delegable duty to its students. This is uncontroversial as in The Commonwealth of Australia v Introvigne [1982] HCA 40; (1982) 150 CLR 258 at 270, the High Court held that schools owe a non delegable duty of care to students. However, the school authority's non delegable duty of care does not extend to cover criminal actions such as sexual assaults upon a student committed by the school's employee, a teacher. The issue here is whether the school authority is vicariously liable for this type of behaviour by the teacher. 21The State of New South Wales submitted that its obligation is to exercise no more than reasonable care. It argued that the school is not the insurer of its pupils and in support of this proposition referred to The Trustees of the Roman Catholic Church for the Archdiocese of Sydney v Kondrajian [2001] NSWCA 308 at [54]. It was further submitted that it is neither practicable nor desirable to maintain a system of education that seeks to exclude every risk of injury and referred to Kretschmar v State of Queensland (1989) Aust Torts Reports 80-272 at 68,892. 22However, the State of New South Wales conceded that a school authority in certain circumstances may be vicariously liable for criminal actions, including sexual assaults committed by an employee. However, it submitted that this does not apply to the factual situation in these proceedings. It claimed that in criminal conduct cases, vicarious liability will be imposed if the conduct was done with an intention to "further the interests of" or "perform the duty for" the employer or if it at least appeared to be done for that purpose or under the employer's authority. 23All but one of QR's criminal acts committed upon JK occurred outside of school hours and off school premises. The fact that wrongdoing occurs away from the workplace, or outside normal working hours, is not conclusive against liability: State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511 at [40]. It is necessary to determine whether QR's conduct outside of school hours and off school premises can be held to be "in the course of employment" as formulated in numerous ways by their Honours in Lepore. 24In Lepore, the High Court considered whether a school authority owed a student a non delegable duty of care or was vicariously liable for the intentional criminal conduct by a teacher against a pupil. The High Court, by majority, held that the liability of a school authority under its non delegable duty of care owed to pupils does not extend to intentional criminal conduct against a pupil by a teacher employed by the authority. Thus, the State of New South Wales does not owe JK a non delegable duty of care for the acts of QR. However, the position as to whether the school is vicariously liable for the criminal conduct of QR is not so clear. 25In Lepore their Honours used different formulations to determine whether the school authority was vicariously liable in these circumstances. There was no clear majority view. In his article, "Vicarious Liability: A comparative review of the common law after Ffrench" (2008) 16 Tort L Rev 39, Joshua Teague analysed the approaches by the Judges in Lepore and identified at least four or possibly five formulations as to when a school authority can be held to be vicariously liable. They were summarised by Joshua Teague as follows (at p 40-41):

• "Gleeson CJ's approach: When a special responsibility of an employee is a protective function, and an intentional wrongful act causes harm, it is crucial for the court to scrutinise the specific responsibilities of the employee. Through such scrutiny, the court can determine whether a sufficient connection exists between the employment and the wrongful act so as to found vicarious liability.
• Gaudron J's approach: After applying Gleeson CJ's sufficient connection test, the employer may be estopped from denying liability.
• Gummow and Hayne JJ's approach: Situations in which vicarious liability could arise should be limited to those where there was an activity in the intended pursuit or performance of the contract of employment actively done with ostensible authority.
• Kirby J's approach: Policy is the decisive factor. Vicarious liability could exist for an intentional act if there is a sufficiently close connection between the employee's actions and the duties of her or his employment, the employer materially increases the risk of the particular wrongdoing, and the wrong is done against vulnerable people put at risk by the employer's enterprise.
• Callinan J's approach: The imposition of vicarious liability for an intentional criminal act would place an unreasonable burden on an employer (Gaudron J's estoppel approach also take this view as a starting premise)." 26In Lepore, McHugh J delivered a dissenting judgment. McHugh J, in dismissing the appeal, held that the State of New South Wales had a duty to ensure that reasonable care was taken of pupils due to its compulsory education system. To carry out this duty it employed the teacher. The assault by that teacher was a breach of the State's duty to take reasonable care of the pupil (at [161]). McHugh J's view was that school authorities owe a non delegable duty of care but acknowledged that the doctrine of non delegable duty creates difficulties for school authorities. His Honour nonetheless said that they are not prevented from implementing courses of action to ensure that their teachers do not assault students (at [164]). His Honour continued at [165]: "But whether or not there are any reasonably practicable methods by which education authorities can eliminate or reduce the incidence of abuse, long established legal principle and this Court's decisions require that they carry the legal responsibility for any abuse that occurs. Given the potential - often permanent - consequences of the sexual abuse of children, this result does not seem unjust." 27The State of New South Wales submitted that whether or not it can be held that the school authority is vicariously liable for the actions of QR requires a consideration of the relationship and connection between the offending acts performed and the nature and scope of the culprit's employment. According to the State of New South Wales, consideration of that issue warrants contemplation of whether the wrongful acts are unauthorised modes of doing authorised acts as per the test approved by Gleeson CJ, Gaudron and Kirby JJ in Lepore at [51], [107] and [315]-[316] or whether the wrongful acts are done in "the intended pursuit of the employer's interests or in the intended performance of the contract of employment", or "in the ostensible pursuit of the employer's business or the apparent execution of the authority which the employer held out the employee as having" as expressed by Gummow and Hayne JJ at [239] of Lepore. The State of New South Wales contended that QR's conduct did not occur in the course of and did not arise out of its employment of QR. 28The State of New South Wales also relied on the provisions of s 5 of the Employees Liability Act 1991 (NSW). 29Sections 3 and 5 of the Employees Liability Act read: "3 Employee not liable where employer also liable (1) If an employee commits a tort for which his or her employer is also liable: (a) the employee is not liable to indemnify, or to pay any contribution to, the employer in respect of the liability incurred by the employer, and (b) the employer is liable to indemnify the employee in respect of liability incurred by the employee for the tort (unless the employee is otherwise entitled to an indemnity in respect of that liability). (2) Contribution under this section includes contribution as joint tortfeasor or otherwise. 5 Act not to apply to serious misconduct of employee or to conduct not related to employment This Act does not apply to a tort committed by an employee if the conduct constituting the tort: (a) was serious and wilful misconduct, or (b) did not occur in the course of, and did not arise out of, the employment of the employee." 30Section 5 provides that the Employees Liability Act does not apply to a tort committed by an employee if the conduct constituting the tort was serious and wilful misconduct, or did not occur in the course of, and did not arise out of, the employment of the employee. The actions of QR did not occur in the course of his employment as a teacher. Therefore, s 3 is not applicable. Hence, the State of New South Wales is not liable for the actions of its employee QR under the Employees Liability Act. 31QR says that in September 2003, other teachers became aware that JK "had a crush on him". QR says that he was approached by a counsellor at the school and was told that JK's friends had reported "the crush" and QR was told not to have contact with JK. QR says that he was instructed to swap roll call classes with another teacher who was not told of the relevance of the swap. Nevertheless, according to QR, at the start of 2004, JK was placed in a computer studies class that was taught by him. According to the State of New South Wales the direction that QR was not to have contact with JK did not mean that she could not be a student in a class that was taught by him as it is not reasonable to isolate a student from a teacher in a school. 32In addition QR stated that the head teacher of the faculty bullied and intimidated him, was autocratic and his management of the faculty led to a high staff turnover rate, withheld resources, prescribed tasks that were difficult or impossible for the students to complete and was arbitrary and inconsistent in dealing with discipline. These actions QR says caused him to lose confidence in being a teacher. Despite numerous complaints from himself and other teachers at the school he says that the principal and deputy principal failed to adequately deal with the abuse QR alleges he suffered from the head teacher. Apparently, the only action the school took was to place the head teacher in an ongoing improvement program. QR's view is that the abuse from the head teacher resulted in him developing a major depressive illness that affected his judgment at the time of the offences. There is no medical evidence before this Court to establish that QR was diagnosed with a major depressive illness at that time. 33QR claimed that JK had an ambivalent attachment towards him and referred to the report of Dr Brown (CB 92) that JK did not suffer from PTSD until after she had been informed by the psychiatrist of the significance of the offences (CB 91) and had been depressed before the relationship between them started. While the report of Dr Brown does refer to an ambivalent attachment (CB 88, 92) Dr Brown also recorded that JK "denied ever having suffered from anxiety or depressive type symptoms prior to her high school attendance and said that she had never been seen by a school counsellor, nor had she ever taken medications for nervous complaints" (CB 78). The State of New South Wales says the fact that QR knew of JK's depression and the school did not, lends weight to its claim for indemnity. 34QR also stated that JK's mother acknowledged that JK's academic results improved when he was her teacher in year 9 (Ex 1). As to JK's performance in the Higher School Certificate, QR says that her results were affected by other factors. He submitted that JK had transferred schools in year 11 and she was unable to study the same subjects that she had been studying at her previous school. What is important to appreciate is that JK's proceedings concerned the psychiatric injuries she suffered as a result of the school authority and QR's actions. Her claim did not solely involve her academic performance at school. 35QR says that he has been served with an order of restitution for the maximum amount of $50,000 from Victim's Services. He stated that he would have to pay this off by instalments when he was released from prison [D [12]]. The order is not in evidence before this Court. Nor is there any evidence to suggest that he has paid any of this amount since his release. 36QR also made oral submissions regarding his present circumstances, including his living arrangements and family situation, his son's medical issues and need to financially contribute to his son's ongoing medical expenses. 37I have taken QR's submissions into account most of which are without merit and self-serving. JK was a 13 year old student when he commenced a sexual relationship with her. QR knew he was engaging in criminal conduct and such conduct was in breach of the conditions of his contract of employment. His misconduct falls within the category of serious and wilful. This much he has admitted (D [9]). QR also deliberately concealed his relationship with JK from the school authority. 38While the school authority may have been aware of the "crush" that JK had on QR, that is a wholly different situation from the school being aware of the sexual assaults taking place off school premises and outside school hours. Without all the facts and circumstances having been elicited at trial, it is difficult to determine whether or not the State of New South Wales would have been found to have been vicariously liable for the acts of QR. QR may have argued that after the school authority became aware of the "crush" that JK had on QR it was obliged to closely monitor the interaction between both QR and JK during school hours and not place JK in a class where QR was her teacher. QR may have also argued that the school authority bears some responsibility for the sexual assault that occurred at school. 39It seems unlikely that the Court would have been satisfied that there was a sufficient connection between QR's employment and QR's wrongful acts. I accept that it was more likely that the Court would have been found that the school authority was not aware that QR was involved in sexual assaults committed upon JK which took place off school premises and outside school hours and was not vicariously liable for QR's behaviour. In these circumstances QR, is ordered to indemnify the State of New South Wales.

Contribution 40The final issue to be determined is that of contribution. The State of New South Wales submitted that based on QR's conduct no culpability can be attributed to the State. It was further submitted that it was just and equitable that the entirety of any finding of negligence that would have been found against the State of New South Wales (but for the resolution of the claim) should be 100% attributable to QR. 41Counsel for the State of New South Wales referred to Amaca Pty Ltd v New South Wales [2003] HCA 44; (2003) 199 ALR 596; (2003) 77 ALJR 1509 and Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; (1985) 59 ALR 529. In Amaca the High Court considered s 5 of the Law Reform (Miscellaneous Provisions) Act and stated at [15] to [16]: "[15] ... Section 5(2) provides for three different outcomes in contribution proceedings: (i) recovery of an amount such as may be found by the court to be just and equitable having regard to the extent of the contributing party's responsibility for the damage; (ii) an order exempting any person from liability to make contribution; and (iii) a direction that the contribution to be recovered should amount to a complete indemnity. ... [16] Those three outcomes of proceedings for contribution are predicated upon the claimant being entitled to recover contribution. The circumstances in which that entitlement arises are specified in s 5(1)(c). Two matters must be established: (i) that the claimant is a tortfeasor liable in respect of particular damage; and (ii) that the person against whom the claim is made is another tortfeasor 'who is, or would if sued have been, liable in respect of the same damage'." 42In Podrebersek, the High Court stated at 532 to 533: "The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, ie of the degree of departure from the standard of care of the reasonable man ... and of the relative importance of the acts of the parties in causing the damage... It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case..." [Citations omitted]. 43The State of New South Wales submitted that this Court in determining what is just and equitable must make a comparison of the culpability and of the acts of the parties causing damage. Thus, this would allow for the relative blameworthiness and the relevant causal potency of the negligence of each party to be compared to the whole of the conduct of each negligent party in relation to the circumstances of the 'accident'. 44The State of New South Wales contended that all fault lies with QR. Alternatively, it claimed that if the conduct alleged by JK against the State of New South Wales is or would amount to tortious conduct, then the State of New South Wales and QR are joint tortfeasors for the purposes of s 5 of the Law Reform (Miscellaneous Provisions) Act. According to the State of New South Wales, if it is found liable to JK for loss or damage sustained by her, such loss or damage was caused by reason of the conduct of QR solely or, in the alternative, as a joint tortfeasor. I have referred to the arguments QR would have made in relation to the school's liability earlier in this judgment at [37] and [38]. After taking these matters into account I am of the view that nearly all of the fault can be attributed to the actions of QR. It is just and equitable that QR pay 90% of the judgment sum. 45QR is to pay the State of New South Wales the sum of $472,500 by way of indemnity and contribution. 46The State of New South Wales has sought the defence costs of the first, second and third defendants. Had these proceedings gone to trial the State of New South Wales would have argued their defences. Hence, I decline to order QR to pay the costs of the first to third defendants' defences. The State of New South Wales has also sought that QR pay interest. I order that QR is to pay interest on the sum of $472,500 as from today's date. 47Costs are discretionary. Costs usually follow the event. The cross defendant is to pay the cross claimant's costs including interest of this application.

The Court orders that: (1) The cross defendant is to pay the cross claimant the sum of $472,500. (2) The cross defendant is to pay interest on the sum of $472,500 as from today's date. (3) The cross defendant is to pay the cross claimant's costs of this application as agreed or assessed.

Amendments 18 August 2014 - Changed "JK" to "QR" Amended paragraphs: Para [2] - last line DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 August 2014