Police Service of New South Wales v Batton

HEARING DATES: 11/11/1999 DATE OF JUDGMENT: 05/23/2000

APPELLANT Mr P M Kite SC with Ms E Brus of counsel SOLICITOR Michael North Holmes Police Service of New South Wales LEGAL REPRESENTATIVES: RESPONDENT Mr J N Gallagher SC with Mr K G Bennett of counsel SOLICITOR Ms Patricia Robinson P M E Robinson & Co

JUDGMENT:

• 23 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President HUNGERFORD J CONNOR C Tuesday, 23 May 2000 Matter No IRC 4463 of 1999 POLICE SERVICE OF NEW SOUTH WALES v BARRY MICHAEL BATTON Application for leave to appeal and appeal against a decision of Justice Schmidt given on 30 July 1999 in Matter No IRC 448 of 1997 re unfair dismissal. DECISION OF THE COMMISSION 1 The sole issue raised by this appeal was whether, on the unchallenged facts found by the trial judge, a police officer had been "dismissed" from employment so as to enable him to bring a claim for unfair dismissal pursuant to the provisions of Pt 6 - Unfair dismissals (ss 80 to 90B) of Ch 2 of the Industrial Relations Act 1996. 2 At first instance, Schmidt J concluded in all the circumstances that a case of constructive dismissal had been established and then proceeded to find that such dismissal by the employer was harsh, unreasonable or unjust; by way of remedy, her Honour ordered the employer to pay the police officer compensation equal to 6 months' remuneration. Of course, if there was indeed no dismissal within the meaning of that word in s 83(1) of the Industrial Relations Act then the remedial provisions of Pt 6 of Ch 2 would have no application and her Honour's order for the payment of compensation could not have been made. 3 In supporting its application for leave to appeal and, if leave be granted, to appeal, the Police Service of New South Wales set out in the initiating process the questions raised, the reasons for leave and the grounds of appeal as follows : F. The question raised by the appeal:

1. Whether an employee's free decision to seek and take medical retirement can constitute dismissal by the employer.

1. The appeal raises an issue going to the jurisdiction of the Commission.

2. The appeal raises an important issue as to the scope of circumstances which may be properly held to constitute dismissal by the employer.

1. Her Honour erred in law and principle in concluding that Mr Batton was compelled or unduly influenced to seek medical retirement.

2. Her Honour erred in law and principle in concluding that the termination of employment was initiated by the employer.

3. Her Honour failed to give proper consideration to the evidence that the injury/illness suffered by the Respondent arising out of his employment was compensable (whilst employed) and qualified him for on-going pension entitlements.

(Ground 3 above was not pressed) 4 We are constrained to say that the question of leave to appeal, a necessity under s 188(1) of the Industrial Relations Act for a competent appeal, troubled us during the hearing and, for that reason, we permitted argument on both the leave application and the merits of the appeal itself. In the result, albeit with some hesitation for reasons which will become apparent, we have decided to grant leave. In written submissions seeking leave, Mr P M Kite SC and Ms E Brus of counsel for the appellant put it this way : 1. The appellant submits that the error made by Her Honour, Justice Schmidt in upholding the application for relief pursuant to s 84 of the Industrial Relations Act 1996 in Matter No IRC 448 of 1997 goes to the heart of the jurisdiction and the discretionary powers of the Commission. It is matter of public interest that the powers of the Commission are exercised subject to both statute and a jurisprudentially consistent approach to its discretionary powers. It is in the public interest that the appellate structure within the Commission act to restrain error and to create a body of principle that governs the exercise of these powers.

2. The appeal involves important legal principle ie what is a "constructive dismissal" and, can a bona fide medical retirement be determined as being a dismissal which is unfair, harsh or unreasonable within the meaning of s 84 of the Industrial Relations Act 1996.

3. The decision at first instance has the potential for wide application both in the private and public sectors where an employment relationship is terminated on medical grounds. The decision of Her Honour has erroneously extended the concept of a constructive dismissal to include circumstances not previously contemplated as falling within the accepted understanding of "constructive dismissal". The appellant submits that the issues arising in this appeal are such that leave to appeal should be granted. 5 For the respondent, Barry Michael Batton, Mr J N Gallagher SC and Mr K G Bennett of counsel opposed leave to appeal on the basis that the correct test to determine the occurrence of a dismissal had been applied by Schmidt J in a factual situation which was not challenged either at first instance or on appeal. Importantly, as counsel emphasised, the facts of this case were both unusual and extreme; given that cases of this nature turn on their own facts, the drawing of inferences therefrom to reach a conclusion adverse to the appellant did not, without more, justify leave to appeal: see Dun & Bradstreet (Australia) Pty Ltd v Robbie (1999) 91 IR 150 at 151. 6 We think there is much force in the respondent's submission on leave. However, the way in which the appellant's submission was put on this aspect raised a concern that this case may reasonably be seen as within an exception to the general rule against leave to appeal being allowed, described in Dun & Bradstreet as "without more", in that the feature here as attracting leave, as Mr Kite claimed, was that "her Honour manifestly extended the category of employment terminations which may be regarded as dismissal". On balance, we consider it important in the operation of the unfair dismissals scheme in the Industrial Relations Act for there to be certainty as to whether a termination of employment by way of medical retirement is capable of being a dismissal (or a constructive dismissal) within the scope of Pt 6 of Ch 2 thereof. 7 At the outset, we should immediately observe that the appellant's case, as Mr Kite put, rested on the proposition that Schmidt J "erred in law in deciding that there was … a dismissal within the meaning of s 84 of the Act … her Honour erred in law in the application of the law to the facts … her Honour manifestly extended the category of employment terminations which may be regarded as dismissal". In other words, senior counsel posed the essential question to be decided as being one of law. We disagree with the characterisation of the question so posed; the question, in our view, is ultimately one of fact. The distinction thus made between law and fact, and even though we may attend to resolving it howsoever it be described, is nonetheless of quite some importance for present purposes as to the proper approach to adopt on appeal, particularly in light of s 191 of the Industrial Relations Act as to the nature of an appeal. 8 The distinction between a question of law and of fact, indeed a question may be one of both mixed law and fact, is not always easy to make. The learned authors of Halsbury's Laws of England (4th ed 1973), Vol 1, para 63 at pp 74-75 acknowledged the difficulty and said : Errors of law include misinterpretation of a statute or any other legal document or a rule of common law; asking oneself and answering the wrong question, taking irrelevant considerations into account or failing to take relevant considerations into account when purporting to apply the law to the facts; admitting inadmissible evidence or rejecting admissible and relevant evidence; exercising a discretion on the basis of incorrect legal principles; giving reasons which disclose faulty legal reasoning or which are inadequate to fulfil an express duty to give reasons; and misdirecting oneself as to the burden of proof.

There is often difficulty in deciding whether a question should be classified as one of law or as one of fact (or fact and degree). Determination of the primary facts is not a matter of law, but to make a finding unsupported by any evidence is an error of law. Drawing inferences from the facts as found, and in particular determining whether the primary or secondary facts fall within the ambit of a statutory description, are potentially classifiable as questions of law, as questions of fact, or as questions of mixed law and fact. The method of classification may be important, for judicial review of findings of law may entail an independent determination of the matter already decided, whereas review of findings of fact is likely to be more limited. If the question is one which only a trained lawyer can be expected to decide correctly, there is a presumption that it will be categorised as one of law. If the question is treated as one of mixed law and fact, the range of meanings that can reasonably be ascribed to a statutory expression is a question of law; but whether the facts as found fall within the ambit of that expression may be held to be a question of fact, on which the decision of the competent authority will not be disturbed unless it is perverse (or is such that no reasonable authority properly instructed in the law could have arrived at it), or is erroneous because a wrong legal approach has been adopted. In some cases the courts have asserted a slightly wider jurisdiction to hold inferences or conclusions of fact to be erroneous in law if they are clearly unreasonable. (emphasis added) 9 As particularly apt for this case, which concerned as the appellant argued it the meaning and scope of the word "dismissal" appearing in s 84, is what Williams J said in Federal Commissioner of Taxation v Broken Hill South Ltd (1941) 65 CLR 150 at 160 that "The meaning of an ordinary English expression, such as 'mining operations', used in an Act, is one of fact, and the question whether the facts proved in evidence come within the expression is also one of fact". Relevantly also for this case is the observation of Kitto J in NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation (1956) 94 CLR 509 at 512 that "if different conclusions are reasonably possible, it is necessary to decide which is the correct conclusion; and that is a question of fact". In Australian Gas Light Co v The Valuer-General [1940] 40 SR (NSW) 126 at 137, Jordan CJ made it plain that "the question whether a particular set of facts comes within the description of such a word or phrase (as used in a statute) in one of fact". The Chief Justice in that case expanded in some detail the distinction between questions of law and questions of fact and, by reference to the authorities, summarised, in a manner which we respectfully find helpful, the applicable rules in the following way : (1) The question what is the meaning of an ordinary English word or phrase as used in the Statute is one of fact not of law: Girls' Public Day School Trust v Ereaut [1931] AC 12 at 25, 28; Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 78; McQuaker v Goddard [1940] 1 All ER 471. This question is to be resolved by the relevant tribunal itself, by considering the word in its context with the assistance of dictionaries and other books, and not by expert evidence: Camden v Inland Revenue Commissioners [1914] 1 KB 641; In re Ripon (Highfield) Housing Confirmation Order , 1938. White and Collins v Minister of Health [1939] 2 KB 838 at 852; although evidence is receivable as to the meaning of technical terms: Caledonian Railway v Glenboig Union Fireclay Co [1911] AC 290 at 299; Attorney-General for the Isle of Man v Moore [1938] 3 All ER 263 at 267; and the meaning of a technical legal term is a question of law: Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531 at 580.

(2) The question whether a particular set of facts comes within the description of such a word or phrase is one of fact: Girls' Public Day School Trust v Ereaut [1931] AC 12 at 35; Attorney-General for the Isle of Man v Moore [1938] 3 All ER 263 at 267.

(3) A finding of fact by a tribunal of fact cannot be disturbed if the facts inferred by the tribunal, upon which the finding is based, are capable of supporting its finding, and there is evidence capable of supporting its inferences: Farmer v Cotton's Trustees [1915] AC 922 at 931; Currie v Inland Revenue Commissioners [1921] 2 KB 332 at 338-341; Inland Revenue Commissioners v Lysaght [1928] AC 234 at 246-7, 249-251.

(4) Such a finding can be disturbed only (a) if there is no evidence to support its inferences, or (b) if the facts inferred by it and supported by evidence are incapable of justifying the finding of fact based upon those inferences: In re Ripon (Highfield) Housing Confirmation Order, 1938. White & Collins v Minister of Health [1939] 2 KB 838, or (c) if it has misdirected itself in law: Farmer v Cotton's Trustees [1915] AC 922 at 930-1; Colonial Mutual Life Assurance Society Ltd v Federal Commissioner of Taxation (1933) 49 CLR 171 at 175-6. Thus, if the facts inferred by the tribunal from the evidence before it are necessarily within the description of a word or phrase in a statute or necessarily outside that description, a contrary decision is wrong in law: Farmer v Cotton's Trustee [1915] AC 922 at 931; Mersey Docks and Harbour Board v West Derby Assessment Committee and Bottomley, etc [1932] 1 KB 40, 92 at 110-112. If, however, the facts so inferred are capable of being regarded as either within or without the description, according to the relative significance attached to them, a decision either way by a tribunal of fact cannot be disturbed by a superior Court which can determine only questions of law: Farmer v Cotton's Trustees [1915] AC at 922 at 931; Currie v Inland Revenue Commissioners [1921] 2 KB 332 at 338-341; Inland Revenue Commissioners v Lysaght [1928] AC 234 at 246-7, 249-251; Mersey Docks and Harbour Board v West Derby Assessment Committee and Bottomley, etc [1932] 1 KB 40, 92 at 110-112. 10 We are satisfied that the issue before us for determination involves a pure question of fact as comprehending both the meaning of the word "dismissal" and whether the undisputed facts come within the description of a dismissal (as including a "constructive dismissal"). 11 In terms of principle, the proper approach to follow in determining an appeal, both under the present Industrial Relations Act and its predecessor Industrial Relations Act 1991, raising issues of fact has been often stated. In Haynes v CI & D Manufacturing Pty Ltd (1995) 60 IR 149 at 153 a Full Court ( Bauer, Hill and Hungerford JJ) of the former Industrial Court put it this way: Our view is that such an appeal is an appeal stricto sensu on both fact and law, and not, we think, by way of a hearing de novo . As Lord Westbury LC observed in Attorney-General v Sillem (1864) 10 HLC 704 at 724) "(a)n appeal is the right of entering a superior Court and invoking its aid and interposition to redress the error of the Court below" - we regard that as apposite in describing the nature of appeals to the Full Court pursuant to s 297(2)(d) of the IR Act. That principle requires attention by us to the findings of fact made by Schmidt J to determine whether such findings, and the inferences drawn from them by her Honour, revealed any error authorising appellate interference: per Kirby P in Walker v Industrial Court of New South Wales ((1994) 53 IR 121 at 129) and per McHugh J (with whom Mason CJ, Deane, Dawson and Gaudron JJ agreed) in Abalos v Australian Postal Commission ((1990) 171 CLR 167 at 178ff). It is not, of course, we would interpose, every case which would require an appellate court to substitute its views for those of the primary judge, and in that respect we agree with the comment by Hill J sitting on appeal in this Court in Hussmann Australia Pty Ltd v Walker ((1993) 48 IR 396 at 406) to the effect that there should be no interference with "conclusions on facts unless (the Full Court) is of the opinion that they were not reasonable open on the evidence". 12 The approach so stated in Haynes was consistent with what was said, as cited above, by Jordan CJ in Australian Gas Light Co concerning the disturbance, albeit on an appeal as to a question of law (as Mr Kite argued it here), of a finding which was not one of law but truly a finding of fact. 13 The point was further dealt with by a Full Industrial Court ( Fisher CJ, Hungerford and Cullen JJ) in Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 at 59 to the following effect : In addressing error, an appellate court should not interfere with the trial judge's conclusions on facts unless it is of the opinion that they were not reasonably open (or were clearly wrong) on the evidence: Victorian Stevedoring and General Contracting Co Pty Ltd v Dignan (1931) 46 CLR 73 at 107; Clarke & Walker Pty Ltd v Secretary, Department of Industrial Relations (1985) 3 NSWLR 685 at 690-692; 14 IR 269 at 273-274; Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178ff; Hussmann Australia Pty Ltd v Walker (1993) 48 IR 396 at 406; Walker v Industrial Court of New South Wales (1994) 53 IR 121 at 129; and Haynes v CI & D Manufacturing Pty Ltd (1995) 60 IR 149 at 154. 14 In Hollingsworth v Commissioner of Police (No 2) (1999) 47 NSWLR 151, (1999) 88 IR 282, a Full Bench of the Court reviewed the nature of an appeal (per Wright J, President and Hungerford J at pp 180-182, 308-311) and cited with approval what was said in Haynes and Port Macquarie Golf Club . To a similar effect reference may be made to Stone Microsystems (Australia) Pty Ltd v Kwong (1997) 42 NSWLR 160 at 163, (1997) 85 IR 237 at 238-239; Re Government Cleaning Service (Privatisation) Award (No 3) (1995) 59 IR 348 at 349-355; Re Solicitors (State) Award (No 3) (1997) 72 IR 225 at 234-235; Wang v Crestell Industries Pty Ltd (1997) 73 IR 454 at 455-457; CCH Australia Ltd v Bowen (1998) 79 IR 206 at 210; and Dun & Bradstreet (Australia) Pty Ltd v Robbie (1999) 91 IR 150 at 151. In the result, we will approach the present appeal in accordance with the settled view as so set out, namely, to consider whether Schmidt J committed any appellable error by making conclusions of fact which, on the evidence, were not reasonably open or were clearly wrong. 15 The factual circumstances of and the way in which this matter developed were not contested. They may be stated relatively shortly. The respondent in August 1991 was a police officer of more than 20-years standing and a then team leader attached to the Drug Unit, Regional Crime Squad South; he was responsible for large scale drug raid operations, particularly those in the Kings Cross area. In June 1991 he was offered a bribe of $1,000 per week by another detective to refrain from conducting certain operations. He rejected the offer and reported the incident on a confidential basis to senior police officers, who assured him of support, with a request that the incident be investigated. The respondent then heard rumours of threats to his life and of proposals to attack his reputation; he reported those matters to senior officers and, again, was assured of support. However, information was received by him that both he and his police partner were being "set up" and that money had been paid to ensure their transfer from Kings Cross to another area. 16 On 30 August 1991, the appellant through its senior officers advised the respondent he was transferred to another unit and was the subject of investigation by the Police Internal Affairs Unit. At his new station he was to be under the direction of an Inspector Fowler; the appellant refused to discuss with the respondent the transfer or the reasons for it and he became convinced, as Schmidt J observed in her decision (at p 5), "that because of his successful police work in the drug unit, his rejection of the bribe he had been offered and his refusal to be involved with drug dealers and corrupt police officers, that he had been removed from his duties". An officer of Internal Affairs advised the respondent, again as Schmidt J recorded (at p 5), "that enquiries about him were being followed up, that the nature of complaints made against him could not be revealed and that he would not be interviewed by Internal Affairs in the near future". The respondent refused to work with Inspector Fowler and he last performed duties as a police officer on 30 August 1991. 17 The respondent then became very ill to the point of suicide, fearing for his life and that of his family, and his illness was diagnosed as a depressive anxiety state; he was placed under psychiatric care. In January 1992, he was seen by the appellant's Rehabilitation Officer and by the Police Medical Officer - his medical condition continued and rehabilitation was not attempted by the appellant. The appellant's Welfare Section provided no assistance to the respondent at this time. In August 1992, the respondent made an application for medical retirement and he was so retired in August 1993. Before retirement, he was classified as "hurt on duty", that is his illness was accepted by the appellant as being causally related to his employment as a police officer; on retirement he received a pension indexed for life. 18 On the facts, Schmidt J found (at pp 13-14) : As I noted earlier, there was no contest about the matters Mr Batton relied upon. He was not cross examined upon them and no evidence was led to call his evidence into question. It must therefore be accepted that he was offered a bribe by a corrupt police officer; that he reported the offer to senior police and sought the opportunity to investigate those he believed involved in making the offer, who included the officer who had offered the bribe, the former officer Rogerson and the officer Fowler; that he never received a response from the Police Service to that request; that he was later warned of a threat that he was to be stabbed, that he would be set up by way of complaint to the Police Service and that money had been paid to have him transferred away from Kings Cross; that he reported these threats to the Police Service and was assured of the support of the Police Service by senior police officers; that when such complaints were in fact made against him Mr Batton received no such support; rather he was relieved of his duties, made the subject of an Internal Affairs investigation, which came to nothing and was transferred to another police station under the direct supervision of Fowler; and finally, that when he became ill as a result of fears which he then genuinely held for his life he was ostracised by the Police Service, receiving no counselling or other practical support by way of protection for he and his family from it. This treatment continued until these proceedings were initiated, with no practical assistance being provided to Mr Batton in the face of his declining health during a period when Mr Batton provided assistance in interviews to investigators of the Police Royal Commission and the Police Integrity Commission. As a result of the activities of those bodies, the corrupt police officers who had acted against Mr Batton have left the Police Service in one way or another. 19 Her Honour then concluded from those facts : Considered in this way it is not difficult to see why Mr Batton does not regard his application for medical retirement as resulting from circumstances which involved his voluntary resignation from the Police Service, but rather as resulting from the activities of corrupt police officers and criminals, from the failure of the Police Service to protect him from such activities prior to August 1991 and thereafter in failing to take any positive steps to assist him to overcome his fear of retribution from those officers. I accept that his belief that but for the emergence of the Police Royal Commission, his life was in real danger, is genuinely held, with some plausible basis for its existence established on the evidence. I also accept that his circumstances, particularly his depressive illness and consequential resignation from the Police Service, were not of his choosing. 20 In the result, her Honour relevantly found (at p 15) that in the unusual and extreme circumstances "that the conduct of the Police Service towards Mr Batton was such that it can properly be concluded that Mr Batton was thereby compelled or unduly influenced to seek medical retirement in August 1992". Her Honour reasoned that a constructive dismissal had occurred in the following way (at pp 15-16) : The medical opinions at that time as to Mr Batton's prognosis were consistently of the view that there was no realistic rehabilitation possible. On the evidence that conclusion can only have flowed however, from the depression and anxiety which it was accepted by the Police Service genuinely flowed from the circumstances with which Mr Batton had been faced - being the subject of a serious attack by criminals and corrupt police officers and a complete failure by the Police Service to assist him to resist those attacks or to assist him to deal with the anxiety and fears which they caused.

In all of those circumstances, I have concluded that a case of constructive dismissal was made out. I simply cannot conclude on this evidence that Mr Batton's resignation was freely given without undue influence as a result the conduct of the Police Service towards him which I have described. 21 In light of the findings of her Honour it was, it seems to us, inevitable, as her Honour then found (at p 16), that "The circumstances … compel [the] conclusion" that "the dismissal was harsh, unfair or unjust". This finding was not challenged on appeal, argument being limited to whether there was a dismissal which, if there was, then the quality of what occurred was not argued as excluding relief under the remedial unfair dismissal provisions of Pt 6 of Ch 2 of the Industrial Relations Act . 22 The parties, both at first instance and on appeal, accepted the correct test to apply in considering whether a constructive dismissal had occurred to be that as set out in Allison v Bega Valley Council (1995) 63 IR 68 and we will so approach this appeal as a statement of the settled position. In Allison , a Full Bench ( Peterson and Marks JJ, and Connor CC ) of the Commission said (at pp 72-73) : It is a trite observation that a contract of employment like any contract can come to an end in a number of ways. Termination can be "by" the employer where an employee is "dismissed" either with notice in accordance with the provisions of the contract or without notice in the event of serious and wilful misconduct. Both the employer and the employee may mutually agree that the contract of employment should come to an end. In other cases the employee may bring about the termination by resigning.

In some cases the circumstances in which the termination comes about makes it difficult to determine whether there was termination "by" the employer or the employee. There are cases where the courts, after analysis, have determined that although on the face of it an employee has resigned and brought about the termination of the contract of employment, in reality the conduct of the employer has compelled or unduly influenced the employee to resign. The most quoted example is an assertion by an employer to an employee to the effect that the employee must resign or he or she will be dismissed. This situation is commonly referred to in the text books and decided cases as a "constructive dismissal", that is in effect the employer has brought about the termination of the contract of employment.

Although the term "constructive dismissal" is quite commonly used it can deflect attention from the real inquiry. That inquiry should involve an analysis of what occurred. Did the employer behave in such a way so as to render the employer's conduct the real and effective initiator of the termination of the contract of employment and was this so despite on the face of it the employee appears to have given his or her resignation?

It is obvious that a consideration of these matters must be made on a case-by-case basis and that an attempt to formulate general principles in the absence of particular facts will not assist in the overall determination of this issue.

In order to undertake the necessary analysis it is necessary to look carefully at all the relevant facts. It is necessary to determine whether the actual determination was effectively initiated by the employer or by the employee particularly where the dynamics within a factual situation may change. For example, an employer may demand a resignation with a threat of dismissal, negotiations may then ensue and the employee may ultimately be genuinely pleased with the outcome of those negotiations to the extent that any resultant resignation may be said to be given freely and without any undue influence being brought to bear by the employer.

Where an employee initiates the termination of the contract of employment it is necessary to consider whether that ostensible act of termination was give freely and without any undue pressure. If the ostensible resignation is, in effect, a response to and consistent with a desire by an employer that such resignation be forthcoming, then what has occurred may be that the termination has been brought about by the employer and that in this way the employee has been dismissed. 23 The argument against there being a constructive dismissal of the respondent here by the appellant was based on the essential proposition, on the authority of Allison , that the appellant's conduct was not the real and effective initiator of the termination of employment; in this case, so Mr Kite submitted, the active cause of the termination was the medical incapacity of the respondent. In other words, as we understood senior counsel's point, in the case of a medical retirement, as here, the employment is ended because the employee is unable to perform the work - it is a termination akin to frustration of contract - and the will of the employer and the employee simply is not relevant. Against her Honour's finding that the conduct of the appellant compelled or unduly influenced the respondent to seek medical retirement, thereby constituting that conduct the initiator of the termination, senior counsel submitted that "it is wrong to go beyond the circumstances of termination and ask what is the antecedent cause of the incapacity". 24 Mr Kite put the general proposition that "dismissal" as used in Pt 6 of Ch 2 of the Industrial Relations Act does not extend to termination of employment by reason of incapacity of the employee. 25 Mr Gallagher resisted the appeal by adopting the reasoning of Schmidt J. Senior counsel emphasised that her Honour applied the correct test as set out in Allison to the facts, which facts were unusual and extreme as to the conduct of the appellant in leading to the respondent's medical condition thereby making the retirement necessary. The decision made by her Honour was reasonably open on the evidence having regard to the relevant appeal principles and should not, therefore, be disturbed. In joining issue with Mr Kite so as to make relevant here the antecedent facts leading to the respondent's incapacity as being legitimate matters to take into account, Mr Gallagher submitted : There are basically two things to consider in our submission. One is the behaviour of the employer. Two is the resignation, was the resignation brought about in a relevant way as described in the Bega case by the behaviour of the employer. I suppose one could get to a situation and one could speculate about some facts where there would be a tenuous relationship - and I am hypothesising here - a tenuous relationship between the antecedent matters and the resignation. There is no tenuous relationship here. We keep on coming back in my submission to the facts which gave rise to the termination. Where does one draw the line so that the resignation has such a tenuous relationship with that antecedent behaviour of the employee that it can be held there was a constructive dismissal? That is a question on the analysis of the facts.

One cannot put as the Police Service has done here, in our submission, to say the antecedent behaviour is simply irrelevant. What is being said is there is just no relationship between the behaviour and the resignation - none at all. That tenuous position is demonstrated. That is not the case here.

Here we have a position where the trial judge has found that Mr Batton's health and career have been destroyed. Did the employer behave in such a way as to render the employer's conduct the real and effective initiator of the termination of the contract of employment, her Honour has answered that in the affirmative. Was that conclusion reasonably open? In our submission clearly yes. Did her Honour mistake any of the facts? We say no. Did she take into account any irrelevant considerations? No. Did she fail to take into account relevant considerations? No. 26 It is plain, we think, that the task undertaken by Schmidt J concerned an exercise in applying the unchallenged facts to the settled meaning of a constructive dismissal in order to determine whether the respondent had been dismissed by the appellant so as to bring into operation the provisions of Pt 6 of Ch 2. As we stated earlier, that involved her Honour in answering questions of fact. For the appeal to succeed, it would have to be shown that the conclusion reached was not reasonably open on the evidence or that it was clearly wrong. No issue of law was raised that her Honour applied the wrong test, only that the circumstances resulting in the medical retirement of the respondent could not be a constructive dismissal. 27 The operative test as explained in Allison (63 IR at p 72) was predicated on the basis of an analysis of "all the relevant facts" so as "to determine whether the actual determination was effectively initiated by the employer or by the employee". In speaking in Allison of the necessary analysis to be made, the Full Bench posed the question - "Did the employer behave in such a way so as to render the employer's conduct the real and effective initiator of the termination of the contract of employment and was this so despite on the face of it the employee appears to have given his or her resignation?" Schmidt J in this case answered the question in the affirmative. 28 Mr Kite's submission that a medical retirement where sought by the employee could not be a constructive dismissal because it was the notion of incapacity, akin to frustration, which was the effective cause cannot, in our view, be accepted. That would be to deny those circumstances which led to the incapacity. In other words, it seems to us, the incapacity would not have occurred were it not for the antecedent causes of the incapacity - we do not see how it could be said, having in mind the nature and extent of the necessary analysis to be made of the facts as required by Allison , that those antecedent circumstances were irrelevant in determining the real and effective initiator of the termination. Mr Kite's answer that they went, at most, to causing the "illness" suffered by the respondent but not to the relevant condition of his "incapacity" to perform work has no logical support - the distinction, in our view, is far too subtle to have any significance and, in any event, we think it to be a distinction without a difference. 29 The facts found in this matter disclosed a litany of acts and omissions by the appellant which together constituted a failure by it to satisfy its duty to the respondent as required by the contract of employment. In a very real sense, we think such conduct by the appellant represented, not as Mr Kite suggested as leading to a frustration of the contract, but a repudiation of the contract by the appellant which the respondent, in the circumstances, was entitled to accept as ending the relationship by seeking medical retirement. Such a repudiation truly put the respondent in a position where he, as Schmidt J found (at pp 15-16), "was thereby compelled or unduly influenced to seek medical retirement in August 1992 … a case of constructive dismissal was made out … simply cannot conclude on this evidence that [the] resignation was freely given without undue influence as a result of the conduct of the Police Service". We agree with her Honour's finding. 30 That a constructive dismissal may arise from the repudiation of an employment contract by the employer is not surprising as meeting the test laid down in Allison which, after all, is concerned to determine whether it is the employer who was the real and effective initiator of the termination. That, indeed, is what a repudiation is all about. In Sparrow v Little, t/as Milk Plus (1998) 78 IR 365, a Full Commission of the Industrial Relations Commission of South Australia found a constructive dismissal occurred where an employer demoted an employee and reduced her salary to the order of 20 per cent. The Full Commission put it this way (at p 366) : We find that the change in duties from Office Manager to Clerk are of such magnitude as to alter the basis upon which the employment relationship was formed. There was a repudiation of the contract in a substantial way and the appellant was entitled to end the relationship.

Furthermore, we find that the likely or anticipated size of the reduction in salary (being of the order of 20 per cent) is sufficient to be classed as a fundamental alteration to the contract of employment, and one which the appellant was entitled to regard as a repudiation of the contract. The respondent was aware that the reduction in salary was unacceptable to the appellant, as was the four-week extension of her old salary whilst she trained her replacement.

We therefore find that there has been a constructive dismissal as it left the appellant with only one option if she wished to challenge or disagree with the respondent's action, namely, to resign.

In so finding, the Full Commission followed the decision of a Full Court of the Supreme Court of South Australia in Woolworths (SA) Pty Ltd v Russian (1996) 66 IR 13. 31 It is perhaps timely, in light of what Schmidt J considered (at p 15) to be the "unusual and extreme" circumstances of this case and where what occurred to the respondent "was not treatment which a police officer ought to expect from the Police Service … treatment was the antithesis of what should properly have occurred", to repeat what was said by Hungerford J in Day v Lumley Life Ltd (1999) 90 IR 70 at 71-72 as to the nature of the employment relationship and the duties of the parties to it, as follows : The employment relationship, I have to say, is a serious relationship with important incidents for both parties to it. It is a consensual relationship based on contract and with respective rights and obligations. It should not, I think, operate, or to be so seen, in practice in a way which permits one party, here the employer, to act in a one-sided manner contrary to the legitimate expectations and understandings of the other party, here the employee, and particularly where such action damages or detrimentally affects the career interests of the employee. Employees have a corresponding duty to act with fidelity and good faith. The position was stated by Kilner Brown J presiding in Robinson v Crompton Parkinson Ltd [1978] IRLR 61 at 62 in this way : "It seems to us, although there is no direct authority to which we have been referred, that the law is perfectly plain and needs to be re-stated so that there shall be no opportunity for confusion in the future. In a contract of employment, and in conditions of employment, there has to be mutual trust and confidence between master and servant. Although most of the reported cases deal with the master seeking remedy against a servant or former servant for acting in breach of confidence or in breach of trust, that action can only be upon the basis that trust and confidence is mutual. Consequently where a man says of his employer, 'I claim that you have broken your contract because you have clearly shown you have no confidence in me, and you have behaved in a way which is contrary to that mutual trust which ought to exist between master and servant,' he is entitled in those circumstances, it seems to us, to say that there is conduct which amounts to a repudiation of the contract." In Bliss v South East Thames Regional Health Authority [1987] ICR 700 the Court of Appeal (UK) commented as to the implied term of mutual confidence and trust in an employment contract as follows (at 714) : "It is common ground on the pleadings that it was an implied term of the plaintiff's contract that the authority would not without reasonable cause conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee. There is ample authority in employment cases to warrant the implication of such a term." The relationship, as I have said, between the employer and an employee is of a serious nature. Its importance in presently relevant respects may be illustrated by what the Employment Appeal Tribunal (Browne-Wilkinson J presiding) said in Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666 at 670-672 : "In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal's function is to look at the employer's conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it: see British Aircraft Corporation v Austin [1978] IRLR 332 and Post Office v Roberts [1980] IRLR 347. The conduct of the parties has to be looked at as a whole and its cumulative impact assessed: Post Office v Roberts .

We regard this implied term as one of great importance in good industrial relations …

… In our view, an employer who persistently attempts to vary an employee's conditions of service (whether contractual or not) with a view to getting rid of the employee or varying the employee's terms of service does act in a manner calculated or likely to destroy the relationship of confidence and trust between employer and employee. Such an employer has therefore breached the implied term. Any breach of that implied term is a fundamental breach amounting to a repudiation since it necessarily goes to the root of the contract: see Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84." That decision was cited with approval by the majority of the Court in Hollingsworth (No 2) (47 NSWLR at p 190, 88 IR at pp 318-319) and, in describing the conduct of the appellant here towards the respondent as a repudiation of the contract of employment as leading to a constructive dismissal, we think it is directly in point. The comment by Schmidt J as to the treatment a police officer may properly expect to be afforded by the appellant was well made and we agree with it. The appellant, in the treatment it afforded the respondent here from June 1991 to August 1993, was, in our assessment, objectively untenable and a most serious failure of its contractual duty to the respondent. 32 On the evidence, Schmidt J concluded (at p 15) that the respondent's medical condition as requiring retirement from police duties "can only have flowed … from the depression and anxiety which it was accepted by the Police Service genuinely flowed from the circumstances with which Mr Batton had been faced - being the subject of a serious attack by criminals and corrupt police officers and a complete failure by the Police Service to assist him to resist those attacks or to assist him to deal with the anxiety and fears which they caused". Her Honour thereupon found (at p 16) "that a case of constructive dismissal was made out". 33 In our view, the factual conclusions and findings of her Honour were not only reasonably open on the evidence but were compelled by it. We agree with the correctness of her Honour's approach and analysis of the issues. The grounds of appeal have not been established. 34 As extreme as the circumstances of this case have been found to be, we are constrained to say that this appeal, on the facts, was so utterly devoid of merit that it should never have been brought. To the extent we proposed to grant leave to appeal and thus heard full argument on the merits of the appeal itself, that was conditioned by our understanding of the appellant's submission that Schmidt J "manifestly extended the category of employment terminations which may be regarded as dismissal". That understanding, we consider, was nowhere even faintly satisfied by the appellant's argument on appeal. We will grant leave so that the full circumstances of this matter may be the subject of definitive and conclusive attention on appeal. However, the appeal must be dismissed. 35 We grant leave to appeal. We order that the appeal is dismissed and that the stay of the challenged decision granted on 30 August 1999 is discharged, with all monies due to the respondent, including accrued interest thereon, to be paid by the appellant within 14 days of today.

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