Shaw v State of New South Wales

Cowell v Rosehill Racecourse Co Ltd [1937] HCA 17: (1937) 56 CLR 605 Coyne v Commercial Equity Corporation Ltd (1998) 20 WAR 109 Delohery v Permanent Trustee Co of NSW [1904] HCA 10; (1904) 1 CLR 283 Delooze v Healey [2007] WASCA 157 Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 Dye v Commonwealth Securities Ltd [2012] FCA 242 Eastwood v Magnox Electric Plc [2004] UKHL 35; [2005] 1 AC 503 Faamau v Samoa Breweries Ltd [2009] WSSC 85 Fidler v Sun Life Assurance Co. of Canada [2006] 2 SCR 3 Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393 Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125 Hadley v Baxendale (1854) 9 Ex 341; 156 E.R. 145 Hamlin v Great Northern Railway Co (1856) 1 H & N 408; 156 ER 1261 Harding v Teperoi Timbers Pty Ltd [1988] PNGLR 128 Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd [1974] HCA 32; (1974) 132 CLR 1 Irving v Kleinman [2005] NSWCA 116 Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 Keays v Honda Canada Inc (2008) 294 DLR (4th) 577 Koehler v Cerebos (Australia) Ltd [2005] HCA 15; (2005) 222 CLR 44 Lai v Chamberlain [2006] NZSC 70; [2007] 2 NZLR 7 Lennon v State of South Australia [2010] SASC 272 Malik v Bank of Credit & Commerce International SA [1997] UKHL 23; [1998] AC 20 Moti v The Queen [2011] HCA 50; (2011) 86 ALJR 117 Ogilvy and Mather (New Zealand) Ltd v Turner [1994] 1 NZLR 641 Ogilvy and Mather (New Zealand) Ltd v Turner [1996] 1 NZLR 641 Peso Silver Mines Ltd. (NPL) v Cropper (1966) 58 DLR (2d) 1 Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104; (2007) 69 NSWLR 198 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217; (2008) 72 NSWLR 559 Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 State of South Australia v McDonald [2009] SASC 219; (2009) 104 SASR 344 Stuart v Armourguard Security Ltd [1996] 1 NZLR 484 Thorpe v Lochel [2005] WASCA 85; (2005) 31 WAR 500 Torres v Point Lisas Industrial Port Development Corporation Ltd (unreported, Court of Appeal of Trinidad and Tobago, 10 May 2007) Visnik v Sywak [2009] NSWCA 173 Vorvis v Insurance Corporation of British Columbia (1989) 58 DLR (4th) 193 Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1 Whelan v Waitaki Meats Ltd [1991] 2 NZLR 74 Wright v Groves [2011] QSC 66 Texts Cited: Kelly Godfrey, "Contracts of employment: Renaissance of the implied term of trust and confidence" (2003) 74 ALJ 764 E D Ventose, "Yesterday's heresy, today's orthodoxy" (2010) 9 Oxford University Commonwealth Law Journal 149 "Aspects of Damages: Employment Contracts and the Rule in Addis v Gramophone Co", The Law Commission of New Zealand, Report No 18, Category: Principal judgment Parties: Ezekiel Ephraphroditus Shaw - First Appellant Alison Margaret Salt - Second Appellant State of New South Wales - Respondent Representation: Dr J Berwick - Appellants Mr M J Kimber SC; Ms K T Nomchong - Respondent Eddy Neumann Lawyers - Appellants Hicksons Lawyers - Respondent File Number(s): 2005/00298445 Decision under appeal Citation: Shaw and Salt v State of New South Wales Date of Decision: 2011-02-18 00:00:00 Before: Elkaim SC DCJ File Number(s): 2005/00298445

JUDGMENT 1BEAZLEY JA: I agree with Barrett JA. 2McCOLL JA: I have had the privilege of reading Barrett JA's reasons, with which I agree. I also agree with the orders his Honour proposes. 3MACFARLAN JA: I agree with Barrett JA. 4BARRETT JA: This appeal is brought, by leave, from orders of His Honour Judge Elkaim SC striking out certain paragraphs of the third further amended statement of claim filed by the appellants as plaintiffs in their District Court action. 5The orders subject to appeal were made on 18 February 2011. The primary judge's reasons for making the orders were published on that day. 6Because of the possibility of an outcome inconsistent with observations in Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217; (2008) 72 NSWLR 559 ("Russell"), the appeal was heard by a Court consisting of five judges.

7Each appellant was, in 1999, appointed an "officer" (as defined by the Teaching Service Act 1980) of the Education Teaching Service of New South Wales. Each appointment was made under that Act and, as a result, each appellant was employed by the Crown in right of New South Wales. Each was also subject to the Teaching Service Regulation 2007. 8The appointment of each appellant was, pursuant to the applicable legislation, subject to a mandatory probationary period of twelve months. The appellants were assigned to Bourke Public School and commenced working there. 9The appointment of each appellant was annulled by the Director-General of Education on 20 March 2000. Each annulment was in accordance with the Teaching Service Act and resulted in the person concerned ceasing to be an officer of the Education Teaching Service and a Crown employee.

The proceedings and pleading 10In the District Court proceedings, the appellants as plaintiffs sue the respondent, the State of New South Wales, as defendant. In the third further amended statement of claim filed on 22 May 2009, each appellant alleges against the State breach of contract, negligence and breach of statutory duty and claims damages. 11It is necessary to set out parts of the third further amended statement of claim. First, an implied term of the employment contract is pleaded in paragraph 4 in this way: "4. It was a term of the contracts of employment between the First and Second Plaintiff and the Defendant that the Defendant, through its officers would not act in a manner likely to destroy or seriously damage the relationship of mutual trust and confidence between the Plaintiffs and the Defendant. Particulars The maintenance of mutual trust and confidence between the Plaintiffs and the Defendant required that: (a) the Defendant would give each of the Plaintiffs reasonable notice of any material critical of them provided by staff to the Principal by staff; (b) the Defendant would provide each Plaintiff with adequate counselling and support in regard to any difficulties experienced as probationary teachers; (c) that the Defendant would not distress and humiliate the Plaintiffs; (d) that the Defendant would afford procedural fairness to the Plaintiffs." 12Then follow in paragraphs 5, 6 and 7 allegations that, between 3 February 1999 and 26 November 1999, the respondent accumulated material critical of the appellants; that, during that period, the appellants carried out their duties conscientiously and adequately; and that, on 14 September 1999, the respondent sent letters to the appellants informing them that their probationary status was at risk. 13Subsequent paragraphs of relevance to the claims in contract are: "8. On or about 26 November 1999 the principal of Bourke Public School provided the Second Plaintiff with a petition signed by staff and an associated collection of documents prepared by individual members of staff which was critical of both Plaintiffs. 9. The documents were provided to the Second Plaintiff in response to a request by her for an explanation as to why her probationary status was in jeopardy. 10. After the provision of the document referred to in paragraph 9 above, the Plaintiffs left the school. 11. By reason of its actions as referred to in paragraph 8 above of the above [sic] the Defendant destroyed the mutual trust and confidence between itself and the Plaintiffs. Particulars (a) The Defendant did not give any, or any reasonable notice of the Principal's accumulation of material critical of them which had been provided to him by staff members. (b) The Defendant provided the material critical of both of them to the Plaintiffs in circumstances which caused them distress and humiliation. (c) The Defendant provided neither of the Plaintiffs with any or any adequate counselling or support. (d) The Defendant provided the material to the Plaintiffs as a response to a request from the Second Plaintiff for an explanation as to why their probationary status was in jeopardy. (e) That in providing the material without any warning, the Defendant failed to afford procedural fairness to either of the Plaintiffs. (f) But for the behaviour of the Defendant as aforesaid the Plaintiffs would not have left their employment. 11A. By virtue of the destruction of the term of mutual trust and confidence between the parties, the Defendant repudiated the Plaintiffs' contract of employment. It was therefore open to the Plaintiffs to accept that repudiation which they did by leaving the school on 26 November 1999. 11B. Further or in the alternative the behaviour of the Defendant on 26 November 1999 amounted to a constructive dismissal of the Plaintiffs. Particulars See paragraph 11 above. 11C. In the alternative to 11A above, the Defendant destroyed the term of good faith and mutual trust and confidence between the parties by annulling their appointment on 20 March 2000. Particulars See paragraph 11 above. 11D. Further the Defendant damaged the future employment prospects of the Plaintiffs by: (a) placing both the First and Second Plaintiffs on a list which designated them as not to be employed by the Defendant in the future thereby wrongfully depriving them of any employment appointment in either the public or private sector. (b) in regard to the first Plaintiff, advising his employer the NSW Country Rugby League either orally or in writing that the first Plaintiff would not be allowed in to [sic] New South Wales schools, thereby causing him to lose that employment, and the chance of future employment as a teacher. (c) in regard to the second Plaintiff, by advising either orally or in writing the Open Training and Education Network - Distance Education, a division of TAFE, that she was not allowed to work in New South Wales educational establishments thereby causing her to lose that employment. 11E. (a) Further, or in the alternative, the provisions of the 1993 Teachers Handbook and the February 1995 document entitled 'Performance Appraisal for Teachers and Executive Staff other than Principals' were part of the employment contract of both the First and Second Plaintiff. (b) The Defendant breached the employment contract of each of the Plaintiffs by failing to implement the scheme of management specified in the two documents referred to above. 14Paragraph 11F sets out particulars of the breaches alleged in paragraph 11E - in other words, breaches of what are said to have been express terms. 15The claim in negligence is pleaded in paragraph 11G "11G a) Further or in the alternative, the Defendant owed a duty of care to the Plaintiffs to adequately apply the procedures set down in the 1993 Teachers Handbook specifically those at 1.2.2 headed 'Efficiency of Certificated Teachers' and those set down in the February 1995 document entitled 'Performance Appraisal for Teachers and Executive Staff other than Principals'. Particulars of Duty of Care a) The Defendant had assigned a probationary status to the First and Second Plaintiffs thereby assuming a responsibility for implementing procedures which would afford them a reasonable opportunity of developing a teaching career. b) In failing to adequately implement the procedures referred to above the Defendant breached its duty of care whereby the First and Second Plaintiff suffered loss and damage. Particulars of Negligence See particulars for Breach of Contract."

16The primary judge ordered that paragraphs 11, 11A, 11C and 11G of the third further amended statement of claim be struck out. His Honour dealt with paragraphs 11, 11A and 11C together and then separately with paragraph 11G. 17His decision was that all the paragraphs should be struck out pursuant to rule 14.28 of the Uniform Civil Procedure Rules. 18In relation to paragraphs 11, 11A and 11C, the primary judge noted a reference in an earlier judgment given by him in the proceedings to the appellants' acceptance of the proposition that, if they were successful in establishing an implied term of "mutual trust and confidence" and breach thereof, they would not be entitled to damages. That was said to be the effect of the decision of this Court in Russell. The primary judge then referred to "two main points" raised to displace "the previous concession".

1. The appellants were not "regular employees" but probationary teachers.
2. The facts in Russell - and also in State of South Australia v McDonald [2009] SASC 219; (2009) 104 SASR 344 ("McDonald") - "revealed respective plaintiffs who had considerably less merit than the plaintiffs here". 19The primary judge said that he had no evidence of the conditions of the appellants' probationary status and could see no basis for treating them differently from any other teacher working under a contract of employment. 20Then, proceeding on the basis that he should take at face value the allegations of fact in the statement of claim (and also assume that a breach of the implied term could be established), the primary judge held that, because the decision in Russell (and also the reasoning in McDonald) would preclude recovery of damages for any such breach, paragraphs 11, 11A and 11C should be struck out. This was on the basis that the unavailability of damages would mean that pursuit of the claims was "a significant waste of time and costs" amounting to an abuse of process and also "contrary to the intent embodied in" ss 56 and 57 of the Civil Procedure Act 2005. 21In relation to paragraph 11G, the primary judge accepted the submission of the respondent that, having regard to State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 ("Paige") and Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 ("Johnson"), a duty of care in negligence does not attend the termination of a contract of employment and that, particularly in a context of applicable industrial relations regulation, damages claims arising from such termination are confined to the law of contract. He regarded the absence of a cause of action in negligence as "obvious" and identified rule 14.28 of the Uniform Civil Procedure Rules, supplemented by ss 56 and 57 of the Civil Procedure Act, as the source of the power under which he struck out paragraph 11G.

22The appellants say in relation to paragraphs 11, 11A and 11C (considered in the light of an assumption that a breach of the implied term of mutual trust and confidence had been established) that the primary judge erred in several respects. 23The principal argument is that the law as it stands today is not in a state where the unavailability of damages for such breach is so clear as to justify the drastic step of preventing a claim going to trial. Reference is made to the observation of Basten JA in Russell (at [34]) that the unavailability of damages for a breach of the term of mutual trust and confidence is "unclear" in light of the principle in Addis v Gramophone Co Ltd [1909] AC 488 ("Addis"). 24The appellants further say that since the third further amended statement of claim raises the proposition that Addis no longer represents the law in Australia, a District Court judge is entitled to guidance as to how to approach the lack of clarity referred to by Basten JA in Russell. 25In relation to paragraph 11G, the appellants contend that the primary judge failed to give any or adequate weight to the submission that their probationary status removed them from considerations raised in Johnson and therefore from the ambit of relevant remarks of Spigelman CJ in Paige. The mere fact of probationary status should have been seen as sufficient to raise at least an argument that the appellants were outside the system of industrial relations regulation from which a finding of negation of a cause of action in negligence might otherwise arise.

26Although no attempt to do so was made before the primary judge, the respondent now seeks to say that paragraph 4 of the third amended statement of claim (and the parts of the pleading flowing from it) should also be struck out. 27To that end, the respondent filed a notice of contention to the effect that the primary judge's decision should be upheld because the alleged term of mutual trust and confidence is not implied. In the course of the hearing of the appeal, the respondent filed a notice of motion in this Court seeking an order that the pleading of the implied term be struck out.

The issues 28Having regard to both the notice of appeal and the notice of contention and notice of motion just mentioned, the parties should be regarded as having put in issue the triable quality of: (a) the existence of the implied term pleaded in paragraph 4; (b) the proposition that the statutory basis of the employment of the appellants and the statutory incidents of that employment leave no scope for the operation of any such implied term; and (c) the availability of damages, even if the implied term is included in the contracts and breach of it established. 29These questions arise in relation to the case the appellants seek to make in contract. I leave to one side for the moment the claim in tort.

30I have said that the "triable quality" of the three matters just mentioned is in issue. There is no dispute that the central inquiry is that indicated by Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125 and, more recently, Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 where Gaudron, McHugh, Gummow and Hayne JJ said at [57]: "Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." 31That formulation has since been re-affirmed: see Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46]; Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]; and, while it was said in Batistatos that the General Steel formulation should not be given "canonical force", it is convenient, for present purposes, to refer to the criteria laid down by the case law I have mentioned as the "General Steel test". 32The question is therefore whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated. 33It was submitted on behalf of the respondent that this test requires refinement in the light of provisions of the Civil Procedure Act 2005. The substance of the submission is that statutory directives about case management may sometimes require the court to put an end to a claim even though it is not found to be of the doomed or hopeless quality indicated by the General Steel test; and that the question of what I have termed "triable quality" may be affected accordingly. 34I shall return to this submission. At this point, I proceed to consider whether the claims are of the doomed or hopeless quality indicated by the General Steel test.

35The question whether a term compendiously described as one of "mutual trust and confidence" is, in the ordinary course, implied in every employment contract has received considerable attention in recent years. A positive answer for Australia may be indicated by the reference in Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312 at [51] to "implied duties of loyalty, honesty, confidentiality and mutual trust" as incidents of the "ordinary relationship of employer and employee at common law"; and by an observation in Koehler v Cerebos (Australia) Ltd [2005] HCA 15; (2005) 222 CLR 44 at [24] where, in a discussion of matters relevant to ascertainment of the content of an employer's duty of care in negligence, McHugh, Gummow, Hayne and Heydon JJ referred to the need for a full exploration of "the contractual position between the parties (including the implied duty of trust and confidence between them)". 36It was not submitted that a term of this kind is to be implied from some presumed or imputed intention of the particular parties on the approach stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPCHCA 1; (1977) 180 CLR 266 at 283. Rather, it is said that the term is what Mason J, in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 345, referred to as "a legal incident of a particular class of contract". In Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 453, McHugh and Gummow JJ saw the basis for implication of this kind as being "lest the contract be deprived of its substance, seriously undermined or drastically devalued in an important respect". Implication of the term must thus be necessary to the maintenance of the integrity of contracts of the class to which the particular contract belongs. 37The existence of a term of mutual trust and confidence as a legal incident of employment contracts has been recognised in England. In Malik v Bank of Credit & Commerce International SA [1997] UKHL 23; [1998] AC 20 ("Malik") at 45, Lord Steyn saw the implied term as requiring that an employer should not "without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee" (there has since been debate as to whether "calculated and likely" should properly be "calculated or likely"). 38In Eastwood v Magnox Electric Plc [2004] UKHL 35; [2005] 1 AC 503 ("Eastwood"), the House of Lords supported the existence of an implied term that "the employer will not, without reasonable and proper cause, conduct himself in a manner likely to destroy or seriously damage the relationship of trust between employer and employee"; and held that although a statutory code governing unfair dismissal precluded application of the term to the dismissal of the employee, it did apply to the employer's conduct before dismissal. 39An article by Kelly Godfrey, "Contracts of employment: Renaissance of the implied term of trust and confidence" (2003) 74 ALJ 764 refers to a number of Australian cases which, at the time of writing in 2003, had indicated the existence of such an implied term as part of employment contracts. More recent conspectuses may be found in the judgment of Rothman J at first instance in Russell (Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104; (2007) 69 NSWLR 198), in the judgment of Peter Lyons J in Wright v Groves [2011] QSC 66 and, in particular, in the analysis by the Full Court of the Supreme Court of South Australia in McDonald. In the last-mentioned case, Doyle CJ, White J and Kelly J said in their joint judgment (at [231] - [233], omitting citations): "The development of the implied term can be seen as consistent with the contemporary view of the employment relationship as involving elements of common interest and partnership, rather than of conflict and subordination. It is plain that the duties which may be required of an employer under the implied term of mutual trust and confidence, or perhaps the conduct from which an employer should refrain, are still being developed. This seems inevitable given the open-ended nature of the way in which the duty is expressed. In England, the implied term of mutual trust and confidence has evolved into a duty by employers to treat their employees fairly. Basten JA appeared to approve of this evolution in Russell. But other authorities have resisted the notion that the implied term connotes an obligation which is closely related to that of fairness, namely, an obligation by employers to treat employees reasonably. It may be that the better view is that the implied term operates in a variety of circumstances within an employment relationship to restrain abuses of an employer's power. This purpose of the term is suggested by the authors of Macken's Law of Employment: 'Whilst the duty may add little to the obligations of the employee, its importance lies in the extent of obligations it imposes on the employer. It provides a means by which "a balance [is] struck between an employer's interest in managing his business as he sees fit and the employee's interest in not being unfairly and improperly exploited". In a climate of reduced collective bargaining, it protects the vulnerable employee by imposing limits on the managerial prerogative.'" 40In Delooze v Healey [2007] WASCA 157,Wheeler JA (with whom Steytler P agreed) said (at [32]): "So far as employers are concerned, there is implied in contracts of employment, a term that 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 (Easling v Mahoney Insurance Brokers (2001) 78 SASR 489 at 514 per Olsson J; Thomson v Orica Australia Pty Ltd (2002) 116 IR 186 at [141] per Allsop J)." 41Reservations and contrary views have been expressed in a number of cases. Reference may be made, in particular, to Aldersea v Public Transport Corporation [2001] VSC 169; (2001) 3 VR 499 (Ashley J) and, most recently, Dye v Commonwealth Securities Ltd [2012] FCA 242 (Buchanan J). 42In neither Paige nor Russell was this Court required to come to any firm conclusion on the question of the implied term of trust and confidence. It was sufficient to assume its existence. 43In Irving v Kleinman [2005] NSWCA 116, Hodgson JA held (with the concurrence of Ipp and Tobias JJA) that a pleading alleging an implied term that the employer would not, without reasonable and proper cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust between employer and employee should not be struck out or summarily dismissed. The particular pleading in that case omitted what Hodgson JA described as "the vital words" (that is, "without reasonable and proper cause"), with the result that re-pleading was necessary. 44The conclusion in Irving v Kleinman, viewed in the light of the subsequent decisions of the Court of Appeal of Western Australia in Delooze v Healey and the Full Court of the Supreme Court of South Australia in McDonald, is sufficient for present purposes. It is not necessary to decide definitively that a term of the kind in question is a legal incident of employment contracts as a class of contracts. Irving v Kleinman was decided before the commencement of the Civil Procedure Act. The question there was accordingly the question I am now addressing, that is, whether a pleading founded on the implied term of trust and confidence should be regarded as disclosing an issue that is triable in the sense to which I have indicated by reference to the General Steel test. The answer must be that it does.

Whether excluded or inoperative in the particular circumstances

45On the approach the appellants take, the term of mutual trust and confidence, as a term implied by law, is a legal incident of every employment contract, regardless of any presumption about the parties' intention. The implied term will therefore fail to operate in a particular case only if it is overriden by the parties themselves or if exclusion is otherwise indicated by "the circumstances of the making of the contract". These are words used by Jacobs J in Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd [1974] HCA 32; (1974) 132 CLR 1 at 17. And as Hope JA said in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 492, the question of exclusion of a term implied by law is to be addressed by reference to the particular contract and the actual circumstances, not contracts of a class and general circumstances. 46The party who seeks to rely on the term must show that the contract is of the relevant class so as to attract the concern that the implication by law is intended to allay, that is, that rights conferred by contracts of the class will otherwise be undermined: Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 at [59]. Any competing contention that the implication is excluded must come from the party against whom the implication is pleaded: it is "still open to the defendants to show such a state of facts as will exclude the implication" Delohery v Permanent Trustee Co of NSW [1904] HCA 10; (1904) 1 CLR 283 at 314. 47In the present case, the respondent says that such a state of facts is found in the whole of the statutory context in which the appellants' contracts were made. The proposition advanced by the respondent is that the legislation governing the appointment and tenure of officers of the Education Teaching Service of New South Wales is so detailed and comprehensive that there is no room for the operation of any term of mutual trust and confidence. The necessity that is the source of the implication is said, for that reason, to be absent. What I have termed the "triable quality" of the appellants' case based on the implied term therefore depends on a finding that that proposition is incorrect. 48This leads to further consideration of the decision in McDonald. After reaching the conclusion already noticed regarding the implied term, the Full Court of the Supreme Court of South Australia proceeded to consider whether the implication was excluded by the circumstances of the particular case. In doing so, it embarked upon a detailed analysis of the statutory provisions governing the employment of teachers in the State's schools. 49The court noted (at [269]) that such employment was "heavily regulated by statute, regulation and by binding industrial instruments". Particular reference was made to extensive provisions for involvement by teachers in decision-making and policy development within schools and for appeal and review in relation to almost any matter about which a teacher may be aggrieved, including appeal against any decision involving termination of employment and against classification decisions, promotion decisions and any other decisions in respect of which they considered that they had just cause of complaint. There were also well-developed dispute resolution and grievance procedures. 50The analysis of the statutory scheme led the court to a conclusion stated in this way (at [270]): "In our opinion, the statutory and regulatory context in which Mr McDonald's contract of employment operated made the implication of a term concerning mutual trust and confidence unnecessary." 51And then: "The statutory and regulatory framework itself provided restraints on the exercise of power by the Minister and by those exercising supervisory or other powers under the Education Act which could affect Mr McDonald adversely. The existence of the means of redress can be taken to operate as a normative influence on the behaviour of the Minister and of others in positions of responsibility. Teachers are provided with means of redress in those cases in which powers are exercised unfairly, or are perceived to have been exercised unfairly. In this way, teachers such as Mr McDonald obtain the kind of protection to which, as we understand it, the implied term as to mutual trust and confidence is directed. The statutory and regulatory context in which Mr McDonald was employed provided, by a variety of means, for the achievement of a balance between the Minister's interests in discharging the obligations imposed by the Education Act and the teacher's interests in not being unfairly or improperly treated." 52Another basis for a like conclusion was then stated (at [271]): "We appreciate that it could be said that the remedies which the Education Act, the Education Regulations, the industrial awards and the Certified Agreement provided to Mr McDonald do not preclude the implication of a term relating to mutual trust and confidence but instead simply provide part of the context to be considered in the event that recourse is had to those remedies. However, such an approach would mean that the necessity for the implication of the term would have to be found in other circumstances. It is not easy to identify such other circumstances. We do not consider that the relationship between implied term and the statutory award context of Mr McDonald's employment should be rationalised in this way." 53In the result, it was held that, in the particular statutory context, the implied term did not operate. The necessity that is the foundation of the implication was absent. 54The South Australian court proceeded on the same basis as the House of Lords in Johnson. The main claim of the employee in Johnson was for financial loss flowing from a psychiatric condition alleged to be a consequence of the unfair manner of his dismissal. He sued for damages for breach of the implied term of trust and confidence. The House of Lords examined statutory provisions under which an industrial tribunal could award "such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer". It was held, by majority, that implication of a term of mutual trust and confidence would be contrary to the evident intention of Parliament that the plaintiff's loss should be compensated, if at all, through the statutory process. That process applied to a particular class of persons, entailed a limit on sums recoverable and depended upon decision making by a specialist tribunal. Again, the necessity that is the foundation of the implication was absent. 55A different conclusion was reached in Lennon v State of South Australia [2010] SASC 272. It was there held that the implied term of trust and confidence formed part of the employment contract of a senior civil servant. Layton J acknowledged (at [177]) that there was "ample authority to support that a term of mutual trust and confidence can be implied into employment contracts at law". The point of distinction from McDonald was then explained (also at [177]): "Having regard to the statutory context of the plaintiff's employment, I consider that the PSM Act [Public Sector Management Act 1995 (SA)] is not a regulatory framework of the kind described in McDonald. Section 12 of the PSM Act sets out the situations in which the contract may come to an end, but it is silent on the manner in which the parties are to conduct themselves towards each other and it provides no avenue for appeal in the case of a disappointed employee. Whilst there may have been at one time, a technical possibility for the plaintiff to bring judicial review proceedings of a decision by the Government (or one of its agents), I do not consider this to be the sort of "means of redress" to which the Court was referring in McDonald. It must be remembered that even if judicial review was possible, it does not provide the same sort of protection and regulation as did the scheme in McDonald nor the same remedies as are sought in this case. I conclude that a term of mutual trust and confidence is implied in law in the plaintiff's contract of employment." 56In the present case, the respondent pointed to very significant similarities between the South Australian legislation considered in McDonald and the New South Wales legislation in force when the appellants were officers of the Education Teaching Service of New South Wales. It is unnecessary to go into detail. It is sufficient to note that a table comparing the legislation of the two States provided to the court by the respondent (and agreed by the appellants) showed that every provision of any consequence in force in South Australia at the time relevant to the McDonald decision had a clear counterpart in New South Wales at the time relevant to these proceedings. 57Assuming that McDonald is correct (a matter on which it is unnecessary to express any concluded view), it is distinguishable because of one notable difference between the circumstances under consideration there and those of this case. It comes from a feature of the New South Wales statutory provisions that had no counterpart in South Australia. The appellants held probationary appointments, a species of tenure not provided for in the South Australian legislation. They were therefore governed by s 48 of the Teaching Service Act which, as in force at the relevant time, was in these terms: "(1) Unless the Director-General of Education, in a particular case or class of cases, otherwise determines, a person who is not an officer of the Education Teaching Service when the person is appointed by the Director-General to a permanent position in that service shall be appointed on probation, which shall be for a period of 12 months or such longer period as the Director-General may in any particular case or class of cases determine. (2) The Director-General of Education may: (a) after the expiration of the period of probation for which a person is so appointed, confirm or annul the appointment, or (b) during the period of probation for which a person is so appointed, extend the period of probation or annul the appointment. (3) Where the appointment of a person is so annulled, the person shall thereupon cease to be employed under this Division as an officer of the Education Teaching Service and shall, unless the Director-General of Education makes a determination under subsection (4), be deemed to be a temporary employee of the Education Teaching Service under this Act. (4) Where the appointment of a person is so annulled, the Director-General of Education may determine that the person shall cease to be employed in the Education Teaching Service upon a day specified in the determination and the person shall cease to be so employed on that day. (5) A person who, by reason of the annulment of an appointment, ceases to be a member of the Education Teaching Service under this section is not entitled to appeal to the Government and Related Employees Appeal Tribunal against the annulment or against any determination of the Director-General made under subsection (4). (6) Nothing in section 85 prevents the Director-General of Education from exercising, at any time, the power to annul an appointment under subsection (2). (7) This section does not apply to the appointment of a senior executive officer to a position in the Education Teaching Service." 58Annulment of the appointment of each appellant was made under s 48(2). The date specified pursuant s 48(4) was, in each case, 20 March 2000. Because of their probationary status and the deployment against them of the annulment process, the appellants ceased to be Crown employees (and members of the Education Teaching Service) on 20 March 2000 and were denied by s 48(5) access to appeal procedures in respect of both the annulment and every associated determination. In addition, the effect of s 48(6) was to make inapplicable provisions of s 85 under which involuntary separation might be achieved by enforced or negotiated resignation as an alternative to dismissal (or annulment). 59Certain protective incidents favourable to employees that formed part of the regime applicable to other teachers thus did not apply to the appellants as probationary employees. The denial of the favourable incidents means one of two things: that effect must simply be given in an unqualified way to a statutory intention that their employer may treat persons of the relevant kind in a way that is, by comparison, disadvantageous; or that the absence of the protective incidents in relation to those persons leaves, in those respects, a gap in the statutory coverage that allows potential scope for the operation of the implied term of mutual trust and confidence. 60The correctness of the latter approach rather than the former is, in my opinion, arguable with sufficient cogency to establish the triable quality of the proposition that the implied term forms part of the appellants' contracts. There is a plausible basis for arguing that the gap in the statutory coverage in relation to probationary teachers is of the kind that caused Layton J to conclude in Lennon v South Australia that the implied term applied. All-embracing statutory substitutes of the kind on which the decision in Johnson turned are arguably absent. 61In Paige, Spigelman CJ referred (at [150]) to the statutory arrangements concerning dismissal of New South Wales teachers, including the availability of unfair dismissal proceedings, and saw the existence of those arrangements as a reason for not recognising "a parallel remedy of unlimited scope " at common law. The exceptions affecting probationary teachers are arguably sufficient to render that thinking inapplicable to this case.

62A summary of the principle for which Addis is said to stand appears in the speech of Lord Nicholls of Birkenhead in Malik at 38: "Mr Addis, it will be recalled, was wrongfully and contumeliously dismissed from his post as the defendant's manager in Calcutta. At trial he was awarded damages exceeding the amount of his salary for the period of notice to which he was entitled. The case is generally regarded as having decided, echoing the words of Lord Loreburn L.C., at p.491, that an employee cannot recover damages for the manner in which the wrongful dismissal took place, for injured feelings or for any loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment. In particular, Addis's case is generally understood to have decided that any loss suffered by the adverse impact on the employee's chances of obtaining alternative employment is to be excluded from an assessment of damages for wrongful dismissal." 63In Addis, the manager was remunerated by both salary and commission. The employment contract provided for termination by six months notice. The employer gave six months notice but immediately appointed someone to replace the plaintiff and took steps to prevent his continuing to act as manager. The House of Lords held, by majority, that damages for breach of contract were limited to the remuneration that would have accrued to the plaintiff during the notice period; and that damages could not be awarded as compensation for injured feelings, difficulties that the dismissal might put in the way of obtaining new employment or otherwise for what was described by Lord James of Hereford as "aggravation of the injury in consequence of the manner of dismissal", by Lord Atkinson as "the harsh and humiliating way in which he was dismissed, including, presumably the pain he experienced by reason, it is alleged, of the imputation upon him conveyed by the manner of his dismissal" and by Lord Shaw of Dunfermline as "sharp and oppressive proceeding, importing in the commercial community of Calcutta possible obloquy and permanent loss." 64Lord Loreburn LC's characterisation of the employer's breach of contract was as follows (at 489-490): "If what happened in October, 1905, did not amount to a wrongful dismissal, it was, at all events, a breach of the plaintiff's right to act as manager during the six months and to earn the best commission he could make." 65His Lordship later said (at 490-491): "To my mind it signifies nothing in the present case whether the claim is to be treated as for wrongful dismissal or not. In any case there was a breach of contract in not allowing the plaintiff to discharge his duties as manager, and the damages are exactly the same in either view. They are, in my opinion, the salary to which the plaintiff was entitled for the six months between October, 1905, and April, 1906, together with the commission which the jury think he would have earned had he been allowed to manage the business himself." 66Then followed this statement: "I cannot agree that the manner of dismissal affects these damages. Such considerations have never been allowed to influence damages in this kind of case. . . . If there be a dismissal without notice the employer must pay an indemnity; but that indemnity cannot include compensation either for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment."

The current view of Addis in England 67In England, Addis arguably no longer precludes the recovery of contract damages for things such as loss of reputation and diminished chances of obtaining new employment. In the House of Lords, there has been express approval (in Malik at 40 and Johnson at [21]) of the following statement of Hallet J in Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393: "". . . a claim for mere loss of reputation is the proper subject of an action for defamation, and cannot ordinarily be sustained by means of any other form of action . . . However . . . if pecuniary loss can be established, the mere fact that the pecuniary loss is brought about by the loss of reputation caused by a breach of contract is not sufficient to preclude the plaintiffs from recovering in respect of that pecuniary loss." 68In Malik, the approval was that of a majority of their Lordships: Lord Steyn, Lord Goff of Chieveley, Lord Mackay of Clashfern and Lord Mustill. In Johnson, the approval was that of Lord Steyn alone. 69In Malik, Lord Nicholls, with the concurrence of Lord Goff of Chieveley and Lord Mackay of Clashfern, said (at 39) of Lord Loreburn's observations in Addis: "In my view these observations cannot be read as precluding the recovery of damages where the manner of dismissal involved a breach of the trust and confidence term and this caused financial loss. Addis v. Gramophone Co. Ltd. was decided in the days before this implied term was adumbrated. Now that this term exists and is normally implied in every contract of employment, damages for its breach should be assessed in accordance with ordinary contractual principles. This is as much true if the breach occurs before or in connection with dismissal as at any other time." 70Lord Nicholls then addressed the possibility that damages for such breach might extend to the consequences of damage to reputation: "Furthermore, the fact that the breach of contract injures the plaintiff's reputation in circumstances where no claim for defamation would lie is not, by itself, a reason for excluding from the damages recoverable for breach of contract compensation for financial loss which on ordinary principles would be recoverable. An award of damages for breach of contract has a different objective: compensation for financial loss suffered by a breach of contract, not compensation for injury to reputation." 71He continued (at 40): "Sometimes, in practice, the distinction between damage to reputation and financial loss can become blurred. Damage to the reputation of professional persons, or persons carrying on a business, frequently causes financial loss. Nonetheless, the distinction is fundamentally sound, and when awarding damages for breach of contract courts take care to confine the damages to their proper ambit: making good financial loss." 72Lord Steyn (with the concurrence of the three other Law Lords already mentioned) referred to several cases illustrating the principle that damages may be awarded for loss of reputation caused by breach of contract. His conclusion (at 52) was: "Provided that a relevant breach of contract can be established, and the requirements of causation, remoteness and mitigation can be satisfied, there is no good reason why in the field of employment law recovery of financial loss in respect of damage to reputation caused by breach of contract is necessarily excluded." 73Lord Steyn then pointed out difficulties that might stand in the way of recovery of damages in a particular case: "Earlier, I drew attention to the fact that the implied mutual obligation of trust and confidence applies only where there is 'no reasonable and proper cause' for the employer's conduct, and then only if the conduct is calculated to destroy or seriously damage the relationship of trust and confidence. That circumscribes the potential reach and scope of the implied obligation. Moreover, even if the employee can establish a breach of this obligation, it does not follow that he will be able to recover damages for injury to his employment prospects. The Law Commission has pointed out that loss of reputation is inherently difficult to prove: Law Commission, Consulation Paper No. 132 on Aggravated, Exemplary and Restitutionary Damages, p. 22, para 2.15. It is, therefore, improbable that many employees would be able to prove 'stigma compensation'. The limiting principles of causation, remoteness and mitigation present formidable practical obstacles to such claims succeeding. But difficulties of proof cannot alter the legal principles which permit, in appropriate cases, such claims for financial loss caused by breach of contract being put forward for consideration." 74In Johnson, Lord Hoffmann said (at [44]): "[I]f wrongful dismissal is the only cause of action, nothing can be recovered for mental distress or damage to reputation. On the other hand, if such damage is loss flowing from a breach of another implied term of the contract, Addis's case does not stand in the way." 75Lord Millett (at [70]) expressed this opinion about the effect of Malik: "The supposed rule that damages are not recoverable for financial loss arising from injury to reputation (or in a case of wrongful dismissal for making it more difficult for the plaintiff to find employment) is not easy to defend and may no longer be the law after Mahmud [Malik] v Bank of Credit and Commerce International SA." 76Lord Steyn, in Johnson, took matters beyond the point he had reached in Malik. He propounded a theory that the proposition for which Addis had been thought to be authority was never the law and was taken from a headnote that did not correctly state the reasons for the decision. 77In both Malik and Johnson, the House of Lords tended to confine Addis to wrongful dismissal cases involving breach of the implied term requiring reasonable notice of termination or payment in lieu. In particular, the House of Lords proceeded in those cases on the basis that damages might be awarded for breach of the implied term of trust and confidence, even if termination of the employment is the occasion of such breach and it is the manner of dismissal that constitutes the breach. But the heads of damage that may be compensated are limited.

Addis in Canada 78The law has developed differently in Canada. In Vorvis v Insurance Corporation of British Columbia (1989) 58 DLR (4th) 193 at 212), two members of the Supreme Court (Wilson J and L'Heureux-Dube J) took the view that that the absolute rule laid down in Addis and applied by the Supreme Court itself in Peso Silver Mines Ltd. (NPL) v Cropper (1966) 58 DLR (2d) 1 was no longer the law. They said that what binds "the numerous English and Canadian authorities ... in which damages have been awarded for mental suffering in a variety of different contractual situations" is "the notion that the parties should reasonably have foreseen mental suffering as a consequence of a breach of the contract at the time the contract was entered into". 79In Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, it was accepted by the Supreme Court that damages for injuries such as humiliation and embarrassment may be available to a dismissed employee. Iacobucci J, with the concurrence of five other members of the court, said that employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, while McLachlin J (with whom two other judges agreed) was of the opinion that the law had evolved to permit recognition of an implied duty of good faith in termination of the employment. Failure to perform the obligation or duty was held to be a factor properly reflected in assessment of the period of reasonable notice of dismissal, with an extended period being appropriate to compensate for such failure. 80It was explained by the Supreme Court in the later case of Fidler v Sun Life Assurance Co. of Canada [2006] 2 SCR 3 that the allowing of an extended period of notice was an application of the general principles regarding damages for breach of contract derived from Hadley v Baxendale (1854) 9 Ex 341; 156 E.R. 145 ("Hadley"). The principle stated in Fidler was as follows (at [54]-[55]): "[T]here is only one rule by which compensatory damages for breach of contract should be assessed: the rule in Hadley v. Baxendale. The Hadley test unites all forms of contractual damages under a single principle. It explains why damages may be awarded where an object of the contract is to secure a psychological benefit, just as they may be awarded where an object of the contract is to secure a material one. It also explains why an extended period of notice may have been awarded upon wrongful dismissal in employment law: see Wallace v. United Grain Growers Ltd [1997] 3 SCR 701 (SCC). In all cases, these results are based on what was in the reasonable contemplation of the parties at the time of contract formation. They are not true aggravated damages awards. The recognition that Hadley is the single and controlling test for compensatory damages in cases of breach of contract therefore refutes any argument that an "independent actionable wrong" is a prerequisite for the recovery of mental distress damages. Where losses arise from the breach of contract itself, damages will be determined according to what was in the reasonable contemplation of the parties at the time of contract formation. An independent cause of action will only need to be proved where damages are of a different sort entirely: where they are being sought on the basis of aggravating circumstances that extend beyond what the parties expected when they concluded the contract." 81In Keays v Honda Canada Inc (2008) 294 DLR (4th) 577, the Supreme Court took the matter further by observing that extension of the notice period is not the appropriate way of compensating breach of the implied duty applicable to termination of employment. Bastarache J, speaking for the majority, said at [59]: "To be perfectly clear, I will conclude this analysis of our jurisprudence by saying that there is no reason to retain the distinction between 'true aggravated damages' resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination. Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle. Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee's reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance (see also the examples in Wallace, at paras. 99100)."

Addis in New Zealand 82The position occupied by Addis in the law of New Zealand in 1991 was considered by The Law Commission in its Report No 18, "Aspects of Damages: Employment Contracts and the Rule in Addis v Gramophone Co". Reference was made to Whelan v Waitaki Meats Ltd [1991] 2 NZLR 74 where a dismissed employee was awarded $50,000 general damages for mental distress. It was held that an implied term of the contract had been breached. Gallen J said (at 89-90): "In this case as I have already concluded, the plaintiff occupied a senior position with substantial responsibilities. The position was one which because of the involvement of the company in the community generally and in sponsorship activities particularly, involved him in maintaining a high public profile. He was I think seen as an important man holding a significant position within the commercial community. The nature and extent of his service was such that combined with the position he held, I think he was entitled to assume that he would be treated by his employer in such a manner as to enable him to retain his dignity within the community and not to have his status affected by a precipitate act open to misinterpretation. I think these matters taken together become implied terms of his contract of service with the defendant and that the defendant in the circumstances in its turn had an obligation to observe them. ... In my view the action of the defendant amounted to a clear breach of the contractual obligations which it had towards the plaintiff having regard to all the circumstances. ... I find therefore that the action of the defendant in terminating the employment of the plaintiff in the manner in which it did was such as to cause the plaintiff undue mental distress, anxiety, humiliation, loss of dignity and injury to his feelings." 83The New Zealand Court of Appeal dealt with the matter in Ogilvy and Mather (New Zealand) Ltd v Turner [1996] 1 NZLR 641. It upheld a finding at first instance that an implied term as to preserving trust and confidence prevailed over the employer's right to terminate on notice (itself an implied term). The Court of Appeal confirmed, without referring to Addis (but approving Whelan v Waitaki Meats Ltd), the availability of general damages for breach of such a term. 84At an earlier stage of the same litigation (Ogilvy and Mather (New Zealand) Ltd v Turner [1994] 1 NZLR 641), the Court of Appeal had dealt with Addis in this way (at 653-654): "That authority has not in recent years been regarded as precluding damages for injury to feelings and for humiliation where an implied term is alleged of the kind put forward in the present case, or where loss of that kind can be regarded as being within the reasonable contemplation of the parties: Whelan v Waitaki Meats Ltd [1991] 2 NZLR 74, Mawson v Auckland Area Health Board [1991] 3 NZLR 599, Brandt v Nixdorf Computer Ltd [1991] 3 NZLR 750, Rowlands v Collow [1992] 1 NZLR 178." 85In Stuart v Armourguard Security Ltd [1996] 1 NZLR 484, the New Zealand High Court held that it was an implied term of the employment contract that an employee should not be dismissed in a manner likely to cause distress or loss of reputation, without proper cause. A regional manager who was peremptorily dismissed after he declined to tender his "non-negotiable resignation" was awarded general damages not limited by the Addis principle. 86By 2006, the status of Addis in New Zealand was such as to cause the Supreme Court, in Lai v Chamberlain [2006] NZSC 70; [2007] 2 NZLR 7, to cite it, along with Foss v Harbottle (1843) 2 Hare 461; 67 ER 189, in connection with this proposition: "The common law, of course, owns many more exceptions to rules than it does rules. Indeed, at times the exceptions become so extensive that the exceptions become the rule."

Addis in other countries 87The Supreme Court of the Fiji Islands (Fatiaki CJ, Blanchard J and Weinberg J), in Central Manufacturing Company Ltd v Kant [2003] FJSC 5, dealt with Addis shortly: "This Court is required to declare the common law as it applies in Fiji. In our view, Addis has no place in a modern system of employment law. It should now be consigned to history. . . In our view, the respondent was entitled to some compensation for the distress and humiliation that was needlessly inflicted upon him by his employer in the manner in which he was dismissed." 88A more cautious approach was taken by the Supreme Court of Samoa (Sapolu CJ) in Faamau v Samoa Breweries Ltd [2009] WSSC 85: "Thus the question whether damages can be awarded for undue distress, anxiety, humiliation, loss of dignity or injury to feelings which arise from the termination of an employment contract is not black and white as it appears from the defendant's strike out motion. The question is at least arguable at this stage of the development of Samoan employment law." 89The Court of Appeal of Trinidad and Tobago has rejected Addis and expressed a preference for the Canadian approaches in holding that exemplary damages are available for wrongful dismissal: Torres v Point Lisas Industrial Port Development Corporation Ltd (10 May 2007, unreported but available at Caribbean Law Online and noted in E D Ventose, "Yesterday's heresy, today's orthodoxy" (2010) 9 Oxford University Commonwealth Law Journal 149). The National Court of Papua New Guinea, in a series of cases that began in 1988 with Harding v Teperoi Timbers Pty Ltd [1988] PNGLR 128, has also rejected Addis and allowed damages for injured reputation and mental distress in dismissal cases by applying the second limb of Hadley. 90The decision of the Hong Kong Court of Appeal in Bachicha v Henry [2000] HKCA 493; [2000] 2 HKLRD 833 is instructive. The case was one of wrongful dismissal. The employer repudiated the contract by physical abuse that forced a domestic worker to leave the workplace. The court (Ribeiro JA; Godfrey VP and Rogers JA concurring) proceeded on the basis (at [47]) that a given set of facts may constitute both breach of the implied term as to reasonable notice of termination and breach of the implied term of trust and confidence. The two breaches, it was said, might give rise "simultaneously to separate entitlements to damages, each independently computed, but subject obviously to the avoidance of any double recovery": "The employer's wrongful conduct might constitute a wrongful dismissal (particularly in the form of a constructive dismissal) and at the same time, a breach of the implied trust and confidence term, the latter causing continuing financial loss not confined by the usual wrongful dismissal measure." 91The Hong Kong court saw Addis as a wrongful dismissal case in which recovery was confined to payment for a period of reasonable notice. The court said (at [46]): "That decision therefore does not encompass and should not be taken to exclude the recoverability of differently calculated damages based on breach of a different obligation, resulting in a different kind of pecuniary loss." 92This is consistent with the decision of the House of Lords in Eastwood. Lord Nicholls there (at [31]) referred to a need, in constructive dismissal cases, to distinguish between loss flowing from antecedent breaches of the trust and confidence term and loss flowing from the employee's acceptance of these breaches as a repudiation of the contract. The Hong Kong court was willing to accept that particular acts of the employer might constitute both repudiatory conduct enabling the employee to terminate and sue for damages and a breach of the implied term giving rise to a separate claim for damages.

93I have left until this point discussion of the status of Addis in Australia. 94Addis has been referred to by the High Court on three occasions. It was mentioned in passing in Cowell v Rosehill Racecourse Co Ltd [1937] HCA 17: (1937) 56 CLR 605 in connection with the proposition that a remedy for breach of contract does not include damages for assault. In Byrne v Australian Airlines Ltd (above), Addis was referred to briefly in relation to the availability of damages for wrongful dismissal because of the absence of reasonable notice. 95Direct and detailed attention was given to Addis in Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344 ("Baltic Shipping"). All members of the court accepted that there is, in general, no room in a contract case for damages for disappointment of mind, distress or injured feelings occasioned by breach of contract. That general rule is subject to exceptions so that, for example, where, as in Baltic Shipping itself, the giving of pleasure and enjoyment is the object of the contract (the particular contract was for the provision of a pleasure cruise), disappointment of mind, distress and injured feelings are compensable in damages. This is because, in that kind of case, those adverse consequences must be taken to have been in the contemplation of the parties. McHugh J was prepared to think that it was still open to the High Court to declare that damages for distress and disappointment are not subject to any special rules; and that the matter might be argued in some appropriate case in the future. No such occasion has yet arisen. 96In Baltic Shipping, the members of the High Court quoted Lord Loreburn's observation in Addis that damages awarded to a dismissed employee for breach of contract "cannot include compensation either for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment". But Baltic Shipping itself was concerned with only compensation for injured feelings. There was no occasion to deal directly with the compensability of "the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment". 97Expressly approved by all members of the High Court was the observation of Pollock CB in Hamlin v Great Northern Railway Co (1856) 1 H & N 408; 156 ER 1261 at 1262 (earlier approved by Dixon J and McTiernan J in Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 at 143-143) that a plaintiff suing for damages for breach of contract is not entitled to "damages for the disappointment of mind occasioned by the breach of the contract". The issues in Baltic Shipping itself were confined to the compensability of that kind of disappointment following curtailment of the pleasure cruise that was the subject of the contract. 98That brings me to Russell in which Basten JA delivered the leading judgment. Giles JA and Campbell JA agreed with his Honour's decision on the matters of relevance to the present case. Basten JA said (at [34]) that the unavailability of damages for a breach of the term of mutual trust and confidence is "unclear" in light of the principle in Addis: "As explained by the Full Court of the former Industrial Relations Court of Australia in Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 at 151-154, per Wilcox CJ, von Doussa J and Marshall J, it is unclear to what extent the breach of such a term may permit relief by way of damages, consistently with the principle in Addis v Gramophone Co Ltd [1909] AC 488, precluding damages for the manner of a wrongful dismissal and the distress thereby occasioned to the employee, except in the limited circumstances identified in Baltic Shipping Company v Dillon (1993) 176 CLR 344, discussed below."

99The employment contract in Russell was oral and, as Basten JA put it (at [29]), "bereft of detail". It had been held at first instance that there were separate implied terms binding on the employer, one requiring that the employer act in good faith and the other requiring that the employer not act, without reasonable and proper cause, in a manner calculated to destroy or seriously damage the relationship of confidence and trust between employer and employee. Basten JA considered it sufficient to regard the two implied terms as a single obligation. He quoted with approval what was said by Lord Nicholls of Birkenhead in Eastwood at [11]: ""The trust and confidence implied term means, in short, that an employer must treat his employees fairly. In his conduct of his business, and in his treatment of his employees, an employer must act responsibly and in good faith. In principle, this obligation should apply as much when an employer exercises his right to dismiss as it does to his exercise of other powers of his which affect a subsisting employment relationship. It makes little sense, for instance, that the implied obligation to act fairly should apply when an employer is considering whether to suspend an employee but not when the employer is proposing to take the more drastic step of dismissing him." 100Basten JA noted, referring to several decided cases, that acceptance of any such implication has been more cautious in Australia. Then followed the passage (at [34]) that has already been set out. 101Basten JA went on to refer to three heads of loss claimed by reference to breach of implied term: (a) costs incurred by the plaintiff employee in pursuing remedies in an industrial tribunal: (b) damages for loss of reputation and (c) damages for injury to feelings. The question was whether, if the postulated terms were truly implied terms of the contract and there had been breach of them, damages could be recovered for the breach. The submission made on behalf of the employee was that Addis means no more than the wrongfully dismissed employee cannot recover contract damages in respect of injured feelings and loss of employment prospects arising from the harsh and humiliating manner of dismissal. By contrast, it was said, such damages could be recovered if they flowed from breach of a term other than that requiring reasonable notice - including, of course, the implied terms of good faith and trust and confidence. 102In approaching these propositions, Basten JA (at [60]) took as the starting point what he described as "the limitation on recovery of damages for breach of contract traditionally ascribed to the rules in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 at 151 per Alderson B". He continued: "In the words of Mason CJ and Dawson J in The Commonwealth v Amann Aviation Pty Ltd (1991)174 CLR 64 at 91-92, those rules provide that "the plaintiff is entitled to recover such damages as arise naturally, that is, according to the usual course of things, from the breach, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach". Their Honours noted that the statement is now seen as a single principle, expressed by Lord Reid in Koufos v C Czarnikow Ltd [1969] 1 AC 350 at 385 as "whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation". 103Basten JA then referred to three consequences of accepting a claim for damages because of steps taken by an employer leading up to a dismissal. First, the fact that the loss will almost inevitably flow from the termination of employment, rather than the manner in which the decision to terminate was made, means that there will be a sidestepping of the rule in Addis and hence such authoritative support as it has in Australia. Second, such a course is likely to be inconsistent with the statutory remedies for unfair dismissal, a matter of significance in the light of the principle applied by this Court in Paige in the context of a postulated duty of care in tort. Third, the awarding of damages for breach of such an implied term otherwise than in relation to termination of employment creates significant anomalies, for example, by creating a right to recover in the less serious case of suspension of employment but not in the case of dismissal. The following conclusion was then stated: "It follows that, even assuming success in relation to the existence of the implied term and breach thereof, there was no basis for an award in the present case of general damages for distress, humiliation, injury to feelings or loss of 'reputation'." 104Basten JA's discussion of the availability of damages was, as he noted at [58], predicated on "the basis, contrary to the preferred reasoning set out above, that such terms should relevantly be implied in the contract and were breached." 105In Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144, Wilcox CJ, von Doussa and Marshall JJ of the Industrial Relations Court of Australia expressed doubt whether any implied term of trust and confidence had a capacity to give rise to liability in damages, as distinct from affording the employee a right to terminate for repudiatory conduct of the employer. This is because the term "is intended to bolster an ongoing relationship" and to permit an action for damages during the currency of the relationship would arguably be antithetical to the reason for implying the term. The action itself would presumably cause a further deterioration of the relationship. 106The Industrial Relations Court also expressed an opinion that if, contrary to its preferred view, an action for damages could be maintained, the case would be one in which Addis was displaced by the reasoning in Baltic Shipping. The purpose of the implied term is to protect the employee from oppression, harassment and loss of job satisfaction, so that it may be regarded as a term designed to provide peace of mind or freedom from distress, as in Baltic Shipping. 107Addis has been referred to in decisions of other intermediate appellate courts in Australia but substantive consideration of it has been necessary only in Western Australia. In both Coyne v Commercial Equity Corporation Ltd (1998) 20 WAR 109 and Thorpe v Lochel [2005] WASCA 85; (2005) 31 WAR 500, as in Baltic Shipping and Russell, the court was concerned only with the part of Lord Loreburn's formulation that deals with compensation for distress or disappointment of mind.

108Paragraph 11 of the third further amended statement of claim alleges breach of the implied term of trust and confidence. The actions of the respondent said by the appellants to have amounted to breach are those in paragraph 8. Particulars to paragraph 11 then refer to other conduct of the respondent which is also put forward as part of the factual basis for alleging breach of the implied term. Both the paragraph 8 conduct and the paragraph 11(a) to 11(e) conduct was engaged in before annulment of the appellants' appointments and during the currency of their employment. 109Paragraph 11C alleges a separate and distinct breach of the implied term. The relevant conduct of the respondent alleged in that paragraph to have constituted breach is the annulment itself. The particulars to paragraph 11 are then incorporated by reference and in a way that is confusing, given that the conduct alleged in paragraph 11(a) to 11(e) occurred before the annulment. 110The claim for damages is pleaded in paragraph 13 of the third further amended statement of claim. The introductory words - which, by referring to "the above conduct", draw in every act and omission alleged against the respondent and every cause of action pleaded - are: "By reason of the above conduct the Defendant caused the Plaintiffs loss of future earnings and loss of earning capacity in the period 20 March 2000 to 19 March 2003 and the Plaintiffs' claim ...." 111Then follow separate calculations for the two appellants. The same basis of calculation is employed in each case and it is sufficient to set out the calculation in respect of the first appellant: "In the case of the First Plaintiff: i. Loss of earnings and earning capacity based on the common incremental scale in the amount of $119,226.40 plus superannuation (as varied by law) of $9,744.77 plus allowances of $3,025.92 total $131,997.09 plus interest; or in the alternative ii. Loss of earnings and earning capacity based on the first Plaintiffs rate of pay as at 29 November 1999 in the amount of $100,769.44 plus superannuation (at rate of 7% as at 26.11.99) of $7,053.86 plus allowances of $3,025.92 plus interest total $110,876.22." 112It is the claim thus formulated and advanced as a claim for damages for breach of contract that needs to be assessed against the principles discussed above. 113Given the way in which the claims in contract are pleaded, this is not a case in which damages are sought for distress or injured feelings. Nor is the claim for damage to reputation as such. To the extent that there is a claim for damages for breach of the implied term, the claim relates to loss of earnings and earning capacity, on the basis that the conduct of the respondent in breach of the implied term deprived the appellants of the ability to earn remuneration and related benefits during the period stipulated in paragraph 13 and that that deprivation came home to the plaintiffs in the form of earnings actually lost. 114Such a claim does not obviously conflict with anything decided in Baltic Shipping, Coyne v Commercial Equity Corporation Ltd (above) or Thorpe v Lochel (above). Nor does it obviously conflict with considered dicta in those cases and Russell. The damages at issue in Baltic Shipping and the two cases from Western Australia were for distress or disappointment of mind. The main components in Russell were for loss of reputation and injury to feelings (the third component - costs of pursuing industrial tribunal proceedings - involved considerations not relevant to the present discussion). Here, by contrast, the appellants claim financial loss actually sustained (in the form of salary or other remuneration not obtained) which, they say, flowed from the breach of contract. Such a claim is arguably consistent with the principle that damages are intended to "put the injured party in the financial position the party would have been in had the breach of contract not taken place" (these are the words of Mason CJ in Baltic Shipping at 361). Recovery of such damages would prima facie be in accordance with: (a) the observation in Foaminol Laboratories Ltd v British Artid Plastics Ltd (above), approved by a majority of the House of Lords in Malik (and by Lord Steyn in Johnson), that "if pecuniary loss can be established, the mere fact that the pecuniary loss is brought about by the loss of reputation caused by a breach of contract is not sufficient to preclude the plaintiffs from recovering in respect of that pecuniary loss"; (b) the observation of the majority in Malik that recovery of financial loss in respect of damage to reputation caused by breach of contract is not necessarily excluded; (c) the observation of Lord Nicholls (with the concurrence of two other Law Lords) in Malik that Addis does not preclude the recovery of damages where the manner of dismissal involved breach of the trust and confidence term and this caused financial loss; and (c) his Lordship's further observation that damages for breach of contract are for "making good financial loss". 115There is also the point that the paragraph 8 conduct and the paragraph 11(a) to 11(e) conduct alleged against the respondent occurred during the currency of the employment and before the annulment of the appellants' appointments. Thus, to the extent that breach of the implied term alleged in paragraph 11 is relied on as a basis for claiming damages, it arises from alleged matters distinct from the annulment (or dismissal) itself. 116There is, as I have said, a confusing aspect of paragraph 11C in that the adoption by reference of the particulars to paragraph 11 implies that conduct pre-dating the annulment forms the basis of the case that the act of annulment was itself a breach of the implied term. On that, I think it is sufficient to say that the decision of the Hong Kong Court of Appeal in Bachicha v Henry (above) provides a cogent basis for advancing such a claim without infringement of the Addis principle. 117At large in both Baltic Shipping and Russell was the question whether, if a dismissed employee establishes breach of contract on the part of the employer and shows that he or she, despite reasonable efforts, did not find new employment for a particular period, the financial loss actually sustained through unemployment for that period is compensable (assuming that a causal link is proved). It is arguable that loss of that kind is, in the words of Alderson B in Hadley (at 355), loss which "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 both parties at the time they made the contract, as the probable result of the breach of it" 118Assuming that the former employee can deal satisfactorily with matters of causation, remoteness and mitigation, the only obstacle to his or her success can be Lord Loreburn's statement that denies the recoverability of loss that may be sustained because the fact of dismissal makes the obtaining of new employment more difficult. The former employee's chances of achieving such recovery are, however, enhanced by three factors: first, the fact that neither the High Court nor any intermediate appellate court in Australia has been called upon to give effect to the particular part of the Addis formulation dealing with difficulty of obtaining fresh employment; second, the substantial undermining of Addis by subsequent decisions of the House of Lords itself; and, third, the fact that Addis has been distinguished, expressly disapproved or simply cast off by appellate courts in other parts of the common law world. 119In summary, there is no authority of the High Court or an intermediate appeal court in Australia that will unquestionably compel dismissal of the claim for damages for breach of contract advanced in paragraph 13 of the third further amended statement of claim; and, even if the trial judge felt some obligation not to depart from decisions of the House of Lords (and there is no reason why he or she should: Moti v The Queen [2011] HCA 50; (2011) 86 ALJR 117 at [69]), the significant qualifications upon Addis created by Malik and Johnson will leave room for the appellants' claim to be addressed. There is a cogent basis for arguing that damages for breach of contract may be awarded as claimed in paragraph 13 if the existence of the implied term and breach of it are established. That is not to deny, however, that, as Lord Steyn pointed out in Malik, the "limiting principles of causation, remoteness and mitigation" may "present formidable practical obstacles to such claims succeeding". I must say, however, that I consider to be remote the possibility that, as postulated in Burazin v Blacktown City Guardian Pty Ltd, breach of the particular species of contractual term cannot ever sound in damages.

Conclusion on the contract aspects 120None of the potential obstacles is sufficient to make the appellants' presently pleaded claims for financial loss caused by breach of the implied term so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial. The following propositions arising from that part of the pleading should therefore be allowed to go to trial: (a) that the employment contract included the implied term pleaded in paragraph 4 of the third further amended statement of claim; (b) that the implied term operated despite the statutory basis of the employment of the appellants and the statutory incidents of that employment; and (c) that damages as claimed in paragraph 13 are recoverable if breach of the implied term is established. 121It follows that, subject to any contrary indication that may arise from s 56 or s 58 of the Civil Procedure Act, the primary judge's orders striking out paragraphs 11, 11A and 11C of the third further amended statement of claim should be set aside and the respondent's notice of motion seeking an order striking out paragraph 4 should be dismissed. I shall return to the Civil Procedure Act matters after considering the appellants' tort claim and the striking out of paragraph 11G.

122Paragraph 11G of the third further amended statement of claim was struck out by the primary judge. It pleaded a duty of care in negligence on the part of the respondent, as employer, "to adequately apply the procedures set down in" two internal publications of the respondent, namely, the 1993 Teachers Handbook and the 1995 Performance Appraisal document. The particulars of the duty are set out above. Under the heading "Particulars of the Negligence" appears "See particulars for Breach of Contract". 123I am of the opinion that the primary judge's decision on the tort claim represents a correct application of the law as stated by this Court in Paige and, for that reason, should stand. 124Paige concerned the dismissal of a school principal. The dismissed employee brought claims in both negligence and contract for damages for psychological damage suffered as a result of the manner of dismissal. He succeeded at trial on both bases and received an award of damages adjusted to eliminate double recovery. This Court upheld the employer's appeal in respect of liability for negligence. 125The duty of care pleaded by the plaintiff was said by Spigelman CJ (at [78]) to be "a novel category of duty" that "involves an extension of employers' duties". As described by the Chief Justice, the duty of care accepted by the trial judge was twofold: first, a duty of care "to take reasonable steps to prevent psychological injury to its employees"; and, second, a duty of care to "provide a safe system of work encompasses the provision of a safe system of investigation and decision making", relevantly, with respect to procedures for discipline and termination of employment. 126The postulated duty arose in the statutory context concerning the employment, tenure, disciplining and dismissal of State school teachers already noted. In the result, it was held that recognition of any such duty was precluded by incompatibility with the law applicable to termination of employment (being the law of contract as modified by statute) and administrative law. In substance, applicable employment law (in both its contract aspects and its statutory aspects), coupled with administrative law procedures, occupied the relevant field in such a way as to leave no scope for the development of a novel duty of care based on a new concept of what is involved in a safe system of work. 127That, to my mind, is the correct outcome in this case as well. It would, in the words of Spigelman CJ in Visnik v Sywak [2009] NSWCA 173 (at [44]), "undermine the coherence of the law" to extend the scope of negligence into a field already sufficiently occupied and regulated by the particular statutory regime and its contractual supplements. The appellants will be allowed to progress to trial all their contract claims (including those based on the implied term of trust and confidence) and all their claims of breach of statutory duty. To the extent that the statutory coverage may leave them exposed to the possibility of lack of remedy because of their probationary status, the contract claims will fill the gap in the way already noticed. As in Paige, no room is left for some novel species of duty of care in negligence.

128I return now to the submission that what I have called the General Steel test requires revision or re-appraisal in the light of s 56 and s 58 of the Civil Procedure Act. 129The relevant paragraphs of the third further amended statement of claim were struck out under rule 14.28 of the Uniform Civil Procedure Rules. The primary judge may therefore be taken to have decided that all of the paragraphs disclosed no reasonable cause of action or had a tendency to cause prejudice, embarrassment or delay in the proceedings or were otherwise an abuse of the process of the court. The power exercised by the court was one given to it by the rules, with the result that s 56(2) required the court, when exercising the power, to give effect to the "overriding purpose" stated in s 56(1): "The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings." 130Furthermore, it was submitted, s 58(1) required the court to seek to act in accordance with the dictates of justice, with the matter referred to in s 56(1) being one of the considerations required by s 58(2) to be taken into account. 131Similar submissions were made to the primary judge and are referred to in his judgment. It is clear that he paid attention to the s 56(1) objective in deciding to strike out the paragraphs in question. 132The primary judge undoubtedly had a discretion in relation to the striking out of those paragraphs. I have already stated my conclusion that, according to what I have called the General Steel test, the discretion miscarried as to paragraphs 11, 11A and 11C of the third further amended statement of claim (but not as to paragraph 11G). Do the statutory directives require some different conclusion? 133Those directives may require and justify steps which, although not otherwise imperatively indicated, will contribute to the timely and efficient dispatch of the court's business: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. In the present case, however, it is not suggested that retention of the claims based on paragraphs 4, 11, 11A and 11C will entail expansion of the factual inquiry or entail time and effort that would otherwise be saved. There is no submission by the respondent that the parts of the third further amended statement of claim alleging constructive dismissal, breach of express contractual terms and breach of statutory duty are susceptible to being struck out or summarily dismissed. That, plus the fact that the claim for damages in paragraph 13 is advanced in the same terms in respect of all the pleaded causes of action, means that the course of the proceedings with paragraphs 4, 11, 11A and 11C retained will be very substantially the same as it would have been had they been struck out. 134For that reason in particular, it is not shown that the Civil Procedure Act provisions warrant any result different from that indicated by the General Steel test.

135For the reasons I have stated, I am of the opinion that all but one of the claims pleaded in the third further amended statement of claim should be allowed to proceed to trial. The exception is the claim in paragraph 11G. I would make the following orders:

1. That the notice of motion filed in this Court by the respondent on 27 February 2012 be dismissed.
2. Appeal allowed.
3. That order 1 made by the court below on 18 February 2011 be set aside to the extent that it orders that paragraphs 11, 11A and 11C of the third further amended statement of claim filed on 22 May 2009 be struck out.
4. That the respondent pay the appellants' costs of the notice of motion and of the appeal. 136McCLELLAN CJ at CL: I agree with Barrett JA.

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: 19 April 2012