Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney CaseBase | (2007) 69 NSWLR 198 | (2007) 167 IR 121 | [2007] NSWSC 104 | BC200700695 RUSSELL v THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY BC200700695 Unreported Judgments NSW · 185 Paragraphs Supreme Court of New South Wales — Common Law Division Rothman J 20021/2005 6, 7, 8, 9, 10, 14 March 2006, 19 February 2007 Russell v the Trustees of the Roman Catholic Church for the Archdiocese of Sydney and Anor [2007] NSWSC 104 Headnotes EMPLOYMENT — contract of employment — implied duty of good faith — implied duty on employer not, without proper or reasonable cause, to conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the parties — employer’s right to dismiss where reasonable risk of damage to children in its care. DAMAGES — reasonable damages in mitigation — costs of proceedings in Industrial Relations Commission — not available as reasonable expenses in mitigation of damage from wrongful dismissal. (UK) Employment Rights Act 1996 (NSW) Industrial Relations Act 1996 (NSW) Ombudsman Act 1974 (CTH) Racial Discrimination Act 1975 (NSW) Roman Catholic Church Trust Property Act 1936 Addis v Gramophone [1909] AC 488; Attorney General for New South Wales v Perpetual Trustee Company (1952) 85 CLR 237; Baltic Shipping v Dillon (1993) 176 CLR 344; Blackadder v Ramsay Butchering (2005) 221 CLR 539; Blaikie v South Australian Superannuation Board (1995) 65 SASR 85; Blyth Chemicals v Bushnell (1933) 49 CLR 66; BP Refinery (Westernport) v Hastings Shire Council (1977) 180 CLR 266; Briginshaw v Briginshaw (1938) 60 CLR 336; Bropho v Human Rights and Equal Opportunity Commission (2004) 135 FCR 105; Burazin v Blacktown City Guardian (1996) 142 ALR 144; Byrne v Australian Airlines (1995) 185 CLR 410; Codelfa Construction v SRA (1982) 149 CLR 337; Concut v Worrell (2000) 75 ALJR 312; Delaney v Staples [1992] 1 AC 687 ; Easling v Mahoney Insurance Brokers Pty Ltd [2001] SASC 22; Eastwood v Magnox Electric plc, McCabe v Cornwall County Council [2004] 3 All ER 991 [2005] 1 AC 503 ; Electrolux Home Products v AWU (2004) 221 CLR 309; English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700 ; Esso Australia Resources v Southern Pacific Petroleum [2005] VSCA 228; Fox v Wood (1981) 148 CLR 438; George Wimpey & Co Ltd v British Overseas Airways CorporationGeyer v Downs (1977) 138 CLR 91; Gifford v Strang Patrick Stevedoring Pty Limited (2003) 214 CLR 269; Gogay v Hertfordshire CC (2000) IRLR 703; TLR 677; Heptonstall v Gaskin (No 2) [2005] NSWSC 30; Hern v Nichols (1701) 1 Salk 289; Hollingsworth v Commissioner of Police (1999) 47 NSWLR 151; Hollis v Vabu (2001) 207 CLR 21; Hospital Products v United States Surgical Corporation (1984) 156 CLR 41; Imperial Group Pension Trust v Imperial Tobacco [1991] 1 WLR 589 ; Irving v Kleinman [2005] NSWSC 30; Johnson v Unisys Ltd [2003] 1 AC 518 Page 2 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 ; Jones v Gordon (1877) 2 App Cas 616 ; Lewis v Motorworld Garages [1986] ICR 157 ; M v M (1988) 166 CLR 69; Mahmud v Bank of Credit and Commerce International (BCCI) [1998] AC 20 ; Maitland Main Collieries v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235; Malik and Mahmud v BCCI (1998) AC 21 ; Malik v Bcci SA (in liq) [1997] 3 WLR 95 ; 3 All ER 1; Malloch v Aberdeen Corporation [1971] 1 WLR at 1578; Mannall v State of NSW [2001] NSWCA 327; Mid Density Developments v Rockdale Municipal Council (1993) 44 FCR 290; Miller v University of New South Wales (2003) 127 IR 432; Noranda Australia v Lachlan Resources (1988) 14 NSWLR 1; Pearce v Foster (1886) 17 QBD 536; Power Packing Casemakers v Faust [1983] ICR 292 ; Public Service Board of New South Wales v Osmond (1986) 159 CLR 656; R v Home Secretary; Ex parte Pierson R v Keite (1697) 1 Ld. Raym. 138; Renard Constructions v Minister for Public Works (1992) 26 NSWLR 234Robb v Green [1895] 2 QB 315 at 317; Royle v Trafford Borough Council [1984] IRLR 184; Sanders v Snell (1998) 196 CLR 329 Seaman's Union of Australia v Utah Development (1978) 144 CLR 120; Secretary Of State for Employment v Associated Society of Locomotive Engineers and Firemen (No 2) [1972] 2 QB 455 ; Secured Income Real Estate (Australia) v St Martins Investments (1979) 144 CLR 596; Sim v Rotherham Metropolitan Borough Council [1987] Ch 216 ; Simonius Vischer v Holt & Thomson [1979] 2 NSWLR 322; Smith v Morrison [1974] 1 WLR 659 ; State of NSW v Jeffery & Anor [2000] NSWCA 171; State of New South Wales v Paige (2004) 60 NSWLR 371; State of NSW v Seedsman [2000] NSWCA 119; Stratton v Illawarra County Council [1979] 2 NSWLR 701; T. A. Miller v Minister of Housing [1968] 1 WLR 992 ; Tame v NSW (2002) 211 CLR 317; The Commonwealth v Introvigne (1982) 150 CLR 258; The Zamora No 2 [1921] 1 AC 80 Thomson v Orika Australia Pty Ltd [2002] FCA 939; Timber Engineering v Anderson [1980] 2 NSWLR 488; United States Surgical Corporation v Hospital Products International [1982] 2 NSWLR 766; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15; Waters v Police Board of New South Wales (1989) 34 IR 146; White v Chief Constable of South Yorkshire Police (1999) 2 AC 455 ; Woods v W. M. Car Services (Peterborough) [1981] ICR 666 , cited Rothman J. [1] The plaintiff, David Russell, seeks damages from his employer, the first defendant (hereinafter “the Church”), and to the extent that the Church is not the employer, from the second defendant, for breach of his employment contract, being a breach of allegedly implied terms of good faith and/or mutual trust and confidence and/or for wrongful dismissal. [2] While the factual background to these proceedings is not particularly controversial, it is necessary to set out those circumstances in order to determine the controversial issues, being the existence of the alleged implied terms, the content of such terms if they exist, whether there has been a breach of the terms (again assuming that they exist), and, if there has been breach, the assessment of damage, if any. Further, it is necessary to ascertain whether, if there has been a wrongful dismissal in contravention of the employment contract, the amount of damage may include costs of proceedings brought by the plaintiff, Mr Russell, in the Industrial Relations Commission of New South Wales (“the Commission”) in order to secure his reinstatement. Background Circumstances/Facts [3] David Russell was born on 6 May 1937 and holds a Diploma in Music Education (Syd), a Bachelor of Music (Syd) and a Master of Music (Wurzburg). From 1974 to 1977 the University of Sydney employed the plaintiff as a lecturer at the Conservatorium of Music. On the material before the Court, it is undeniable that Mr Russell is an extremely talented musician and is universally accepted as such. [4] Mr Russell had been involved in music at St Mary’s Cathedral, in some form or other, since 1954. The level of involvement included as a chorister and at some stage Mr Russell became involved in directing the choir. In or about 1975 Mr Russell had a conversation with the then Archbishop, Cardinal Freeman in which words were said to the following effect: CARDINAL FREEMAN: Look, you have been doing the job. I was wondering whether you would consider taking on the position? MR RUSSELL: It’s a big responsibility; I will accept for 12 months and we can have another discussion. [5] Other than the above conversation and, it seems, a cursory conversation regarding the duties to be performed and the wages to be paid, there was no other discussion about the terms and conditions of employment. In 1976, following this discussion, the plaintiff commenced employment as Director of Music at St Mary’s Cathedral. Page 3 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [6] For the purposes of these proceedings the parties accept that the corporate entity established by the Roman Catholic Church Trust Property Act 1936 (NSW) (which is the first defendant) is the employer. It follows that to the extent that there is a liability for damages, the parties accept it is the first defendant to whom that liability attaches. Hereinafter I will not differentiate between the first and second defendants and on the basis of the above acceptance by the first defendant will treat the Church as the employer. I should add that it is not only the acceptance by the Church of any liability that allows me to take that course but also my view that the first defendant, the Church, is, in law, the employer of the plaintiff pursuant to the powers vested in the first defendant by section 4(3)(b) of the aforesaid Act and the status effected thereby. [7] Other than any terms arising from the short discussion to which I have referred, there are no express provisions of the contract of employment. There is no documentation, either by way of letter of appointment or written contract. [8] As Director of Music, Mr Russell was responsible for the general management of the St Mary’s Cathedral Choir; he taught and trained members of the Choir, conducted for the Choir at church services and other events, directed concerts and performances and conducted rehearsals. [9] In 1982, Mr Russell arranged and led the Choir on an international concert tour through Belgium and Germany. There were later tours to the United States in 1985 and to Italy, Germany, France and England in 1991. It is unnecessary for me to detail all of the attributes of the Choir and the special and extraordinary nature of the position held by the plaintiff. It is accepted that the position held by Mr Russell was unique. [10] The position was a permanent part-time position and, apart from church services and events, required rehearsals on Monday, Tuesday, Wednesday and Thursday mornings and Thursday afternoons and evenings. [11] The Choir consisted of male choristers of all ages, about 60% of whom were students at St Mary’s Cathedral School. [12] In or about 1982, Mr David O’Grady came to work as a sacristan at St Mary’s Cathedral. At or about that time, possibly in early 1983, Mr Russell had a conversation with the then Dean of the Cathedral. The plaintiff’s affidavit attests to a conversation in or to the following effect: DEAN: David, it is not appropriate that David O’Grady continues living in the Cathedral Presbytery. He has no money. Would there be anyone in the Choir who could give him some accommodation until he has enough money for a bond? DAVID RUSSELL: That is a difficult one, father. I’ve got two empty bedrooms, but I work two jobs and he would have to look after himself. There is no way I can supply anything else but shelter. DEAN: I’ll talk to him! [13] In the interview of the plaintiff on 10 October 2002 (to which interview I will return) the plaintiff referred to Mr O’Grady’s residence with the plaintiff as being “at the request of the Dean” who had asked the plaintiff whether he or anyone in the choir could help. I accept, and find as a fact, that the Dean, who for relevant purposes was the agent of the Church, requested the plaintiff to accommodate Mr O’Grady. [14] There is no material or evidence indicating how it was Mr David O’Grady came to work in the position of Sacristan for the Church; nor is there any material that explains the history of Mr David O’Grady or the Church’s knowledge of any such history. [15] The Church continued to employ Mr Russell, seemingly without incident, until 1999. In 1999 Mr Russell was arrested and voluntarily stood down as the Director of Music. Mr Russell’s arrest was for charges that arose from a statement provided to police by Mr Daniel Buckley, a former member of the Choir. Mr Buckley alleged conduct by Mr Russell that, according to the Police, gave rise to three counts of sexual misconduct. Mr Buckley’s first relevant statement to the Police was made on 22 April 1998 and a subsequent statement was provided on 19 January 1999. [16] Another member of the Choir, for the purposes of these proceedings and the proceedings before the Commission, referred to as Mr X, provided a statement to the Police on 20 January 1999. Essentially, the statement provided by Mr X dealt with misconduct by Mr O’Grady while Mr O’Grady was living in Mr Russell’s premises. However, one particular allegation was made regarding Mr Russell. Mr X alleged that during the course of Mr O’Grady’s misconduct Mr Russell entered the room, saw the conduct and said words to the effect: “I see that you’re busy, I’ll come back later!” This incident became known as the “walking in” incident. [17] Mr O’Grady was also charged and, unlike the plaintiff, was convicted. The walking in incident did not form part of any charge against Mr O’Grady. Nor did the incident form the basis of any criminal charges against Mr Russell. Further, no charge proffered against Mr O’Grady arises from conduct that allegedly involved Mr Russell. The conduct which constituted the foundation for the allegations against Mr O’Grady however occurred during the time that Mr O’Grady was staying with Mr Russell or in his house. [18] As already stated the plaintiff was charged and at that time arrested. He was granted bail. He was later provided with charge sheets and briefs of evidence. The members of the Choir were informed that the plaintiff had Page 4 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 stood down from his position. All of this occurred in July 1999. On 19 October 1999 the Church wrote to the New South Wales Ombudsman’s Office, notifying it of the allegations against the plaintiff. [19] On 17 August 1999 legal representatives of Mr Russell wrote to the Church detailing the conditions of the bail that had been granted to Mr Russell. A condition of the bail, granted by Newtown Local Court, was that the plaintiff would not “conduct at St Mary’s Cathedral except in the company of a responsible adult.” The letter of 17 August 1999 requested a return to duty under that condition; namely, that at all times that Mr Russell conducted the choir he was in the company of a responsible adult. The request was granted. [20] On 13 March 2000, the committal proceedings were before Newtown Local Court. Mr Buckley, who had been subpoenaed to attend to give evidence at the committal proceeding and who was out of the jurisdiction, failed to attend. Consequently, all charges against Mr Russell were dismissed. On or immediately after 13 March 2000, Mr Russell resumed full duties with the Choir without any conditions or restrictions. [21] On 15 February 2002, Mr McDonald, Executive Director of the Catholic Commission for Employment Relations (CCER), on behalf of the Church, wrote to the New South Wales Ombudsman’s Office detailing the result of the charges against Mr Russell in what purported to be the “the final report into this matter”. [22] On 13 March 2002, the New South Wales Ombudsman’s Office replied expressing the view that the Church was required to conduct an internal investigation into the matter, complete the investigation, and determine for itself whether the alleged child abuse had or had not occurred. [23] On 23 May 2002, the New South Wales Ombudsman’s Office wrote, once more, in relation to these issues, reminding Mr McDonald of the request for further information, and noting that it had no record of having received the information requested. [24] On 22 July 2002, Mr McDonald, on behalf of the Church, wrote to the New South Wales Ombudsman’s Office setting out the current circumstances in which Mr Russell performed duties and detailing, in diary form, that which had occurred between Friday 11 June 1999 and 23 August 1999. [25] On 31 July 2002, Mr McDonald, the Dean of the Cathedral, and Mr John Davoren met in relation to the request of the New South Wales Ombudsman's Office in the matter relating to Mr Russell. The minutes of that meeting recite the approach by the New South Wales Ombudsman's Office concerning the adequacy of the investigation, that a request has been made of the New South Wales Ombudsman's Office for the Police Report on Mr Russell, that a further meeting will be held between the same persons, and that when the Police Report is received it may be necessary to hold an independent investigation. [26] By letter dated 13 August 2002, the New South Wales Ombudsman’s Office wrote, once more, to Mr McDonald reiterating the history of the issues associated with Mr Russell as perceived by the New South Wales Ombudsman’s Office and giving notice that the Office was to investigate the conduct of the Catholic Commission for Employment Relations and in particular the adequacy of the CCER’s handling of, and decision making in relation to, child protection issues associated with Mr Russell’s current employment, the use made of information CCER had in relation to child abuse allegations, and CCER’s response to the request of the New South Wales Ombudsman’s Office. It required the production of certain documents and records and certain information relating to checks on Mr Russell’s performance of duties. [27] On 15 August 2002, Father Doherty, by then the Dean of the Cathedral, who had been involved in the resumption of duties by Mr Russell with and without conditions, requested Mr Russell to attend his office. The following conversation occurred: FATHER DOHERTY: The Ombudsman’s Office has been in touch. They were catching up on some housekeeping matters and found that there was no Church report on your case. We have to do an investigation to satisfy this requirement. MR RUSSELL: I have been told that a letter has been forwarded to the school claiming a breach of duty of care by two teachers. FATHER DOHERTY: No, that letter has got nothing to do with it. MR RUSSELL: Are they putting in a claim for money? FATHER DOHERTY: No. But we will require you to be supervised during choir practices like before. I don’t really understand these lawyer’s terms, but the Court before required proof beyond a reasonable doubt, whilst the Ombudsman wants proof on the balance of probabilities. … MR RUSSELL: Am I at risk? Page 5 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 FATHER DOHERTY: Yes, you Are. [28] Mr Russell thereafter performed full duties but under the same condition that existed during the period on which he was on bail. Mr Russell, as a result of the conversation with the Dean, contacted Mr Chris Mitchell of Corrs Chambers Westgarth who had previously assisted in his representation in respect of the criminal charges. [29] In the morning of 16 August 2002 the following conversation occurred: MR RUSSELL: Can this process be speeded up? I had a year of turmoil in 1999. I don’t want that again. Can my lawyer contact the investigator to get things moving and get more information? FATHER DOHERTY: No, there are procedures which we have to go through and it will take another week to 10 days. [30] Mr Russell (by letter sent over his signature, drafted by Mr Mitchell and dated 5 September 2002) put to the Church the position of the plaintiff on the proposed investigation. Also on 5 September 2002, the Church wrote to Mr John Cooke appointing, or confirming the appointment of, him to investigate the matters. Relevantly, the letter was in the following terms: Following your agreement I wish to appoint you to act as an assessor in a matter of the complaint of Daniel Buckley against David Russell. I believe you already have the documents which are relevant to this matter. … The responsible authorities in the Church in this matter are the Archbishop of Sydney and Mr Michael McDonald, Executive Director, CCER, … who are your client for this exercise, and your report and your account should be sent to them. This letter will serve as your authorisation to carry out the assessment and to make such inquiries and examine any material you judge to be pertinent to the matter of the complaint. If there is an objection from within the Church to your examining any material, the most direct way of proceeding will be to refer the person raising the objection to the Church authority’s office. This is an out-of-the-ordinary matter and I am aware that you have already been briefed by Michael McDonald. The complaint reached this office via the NSW Police and, therefore, there is no ‘Contact Person’ as such. The person who is the subject of this complaint is David Russell, choirmaster at St Mary’s Cathedral, Sydney. At this stage, however, it is suggested that you restrict your investigation to the complainant alone. In your carrying out this assessment you are asked to address the following: Are there grounds for concluding, on the balance of probabilities that the complaint is justified — either in whole or in part? Are there any factors that you see as relevant that you have been unable to address and, if so what are those factors, and why could they not be addressed? Are there any other matters that came to your notice that could have some bearing on the final determination of this matter? What are those matters? On the basis of your assessment report it will be the (sic) Mr Michael McDonald’s task to determine, on the balance of probabilities, whether the alleged incidents occurred and what response is called for in the respective interests of the complainant, the accused and any other person affected in this matter. You understand that the assessment is to be carried out with all due discretion but without limiting its scope. You are asked to confine your interviews initially to the complainant, the accused person and to anyone whose knowledge of the circumstances makes it likely that he or she would have some relevant information on the matter. [31] By letter dated 13 September 2002, Mr McDonald replied to Mr Russell’s letter of 5 September informing him that there had been an extension of the time limit given by the New South Wales Ombudsman’s Office and that at Page 6 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 an appropriate time there would be a meeting with Mr Russell in order to discuss the issues. The letter assures Mr Russell that “the process to be undertaken will comply with the principles of natural justice. You will be given the opportunity to respond to the issues raised.” [32] The Church and Mr Russell exchanged correspondence, as one would expect. Part of that exchange was a letter dated 26 September 2002 from Father Doherty, Dean of the Cathedral, which referred to the meeting between the Dean and Mr Russell on 15 August 2002 in which advice had been given of the investigation to be conducted. The letter stated: In particular, the issues relate to three separate occasions when it is alleged that you indecently assaulted Mr Daniel Buckley at your home at Stanmore. The indecent assaults allegedly involved placing your hand on Mr Buckley’s penis. The letter invited Mr Russell to attend a meeting at the office of the CCER and identified that Mr Cooke was the person undertaking the investigation. [33] On 8 October 2002, Mr Russell expressed, by letter, his concern at the lack of information that had been provided to him in preparation for the matter. He referred to previous requests for information and sought the previously requested information being: copies of all materials received and sent by the Church’s office in the matter; a response as to the status of his employment; and whether the matter is being dealt with under the ‘Towards Healing’ protocols. [34] Further information was also sought, namely: confirmation as to whether the meeting is proposed to be an assessment in accordance with the abovementioned protocols; details of Mr Cooke’s curriculum vitae, including his experience in dealing with matters of this nature; whether legal representation was desirable for Mr Russell; confirmation of the confidentiality of the contents of the meeting other than to the New South Wales Ombudsman’s Office; an indication as to whether an opportunity would be given for written submissions and the provision of evidence and materials following the meeting; confirmation of the independence of Mr Cooke; and confirmation that a record of the meeting will be taken. [35] By letter dated 9 October 2002, the Church responded to Mr Russell. The Church was unable to provide all the materials sent and received but made clear that there would be a preliminary finding at which time Mr Russell would be able to access his investigation file. It confirmed that Mr Russell was still an employee of the Archdiocese of Sydney on a common law contract of employment and that the matter was not being dealt with under the “Towards Healing” protocols of the Church. It was, according to the response of the Church, being dealt with under Pt 3A of the Ombudsman Act 1974 (NSW) and according to the guidelines produced by the New South Wales Ombudsman’s Office. [36] In that letter of 9 October 2002, the Church confirmed that Mr Cooke was a lawyer who had undertaken such investigations for many years for the Church’s Professional Standards Office. It recommended that a “support person”, who may be a legal representative, should accompany Mr Russell. The letter confirmed the requested confidentiality and the capacity to make written submissions and provide evidence and materials following the meeting. [37] The meeting occurred on 10 October 2002. With the consent of the participants, a tape recording was made of the meeting, the transcription of which is in evidence before the Court. Present at the meeting were the Dean of the Cathedral (Father Tony Doherty), Mr John Cooke (the Investigator), Mr Russell (the plaintiff) and Mr Chris Mitchell (the plaintiff’s legal adviser). Because part of the complaint made by the plaintiff relates to a denial of natural justice, it is necessary to summarise, and in part recite, the discussion at the meeting. [38] After a general introduction, Mr Cooke, who conducted the meeting discussed with the other parties the nature of the exercise being undertaken and its relationship to the requirements of the New South Wales Ombudsman’s Office. There was then a discussion concerning that which Mr Cooke was investigating. Relevantly it was in the following terms: COOKE: The Ombudsman seems to have seen its jurisdiction perhaps arising out of the investigation conducted previously which perhaps wasn’t done to its satisfaction. The Ombudsman seems perhaps looking at that aspect of it. MITCHELL: Did … I suppose our next question then was just to ask are these the same three complaints that were the subject of the criminal …. COOKE: Well that’s what, hopefully one of the things we’re ‘gonna’ establish here today because we at this stage assume although we’re not even sure what the original complaints were because we don’t have any material. [39] Mr Mitchell then summarised the dismissal of the committal proceedings and offered to provide all of the information that was in the Police Brief because, they had assumed, the Church may not have all of that material. Page 7 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 That offer was accepted. Mr Mitchell also summarised the “three original incidents” proffered against Mr Russell. He did that, essentially, in chronological order “because that’s part of our big way in which we [Mr Mitchell and the plaintiff] refuted them.” [40] The three instances of alleged indecent assault were said to have occurred between 28 January 1981 and 25 March 1982 at Mr Russell’s house at Stanmore. [41] Mr Mitchell then made reference to the statement by a student other than Mr Buckley described as “another ex-student or ex-choirboy”, Mr X, whose name was then provided and whose statement was described as “supposedly corroborating the complaints”. The following conversation occurred: COOKE: You have a copy of that? MITCHELL: Yeah, we can definitely do that and then there’s some other statements which we’re very happy to give you those because each of the statements again has inconsistencies with Buckley’s own evidence, I think there was one by his mother and one by his father. [42] After what is described as a “snapshot” of the charges and an answer to them, the following is said: RUSSELL: The whole process is linked to another party a man called David O’Grady. David O’Grady was employed to the best of mine and everyone else’s knowledge as Cathedral sacristan at that time. David O’Grady did not arrive at the Cathedral until well into 1982. All the accusations of linking me with him etc collapse upon this fact there. The original interviews that we got from the police notebook and that it seems that the person they were after was David O’Grady — there was only ever one person mentioned. In the last of their five attempts to get Daniel Buckley to make a statement and that is admitted by the police in their notebook that took them five attempts to get out of him he suddenly out of the blue throws my name in. I just need to say that because around these allegations these people were not anywhere near my life. [43] After a discussion about the nature of Daniel Buckley and his record as the school pupil the following exchange occurs: COOKE: Probably then before you do that is to clarify these incidents so we know exactly what we’re talking about. MITCHELL: Yes. COOKE: As far as I am aware, either there was one particular incident involving a O’Grady and three boys in the house at Stanmore when you arrived, walked in the room and saw the resting [this should be ‘wrestling’] around in a state of undress, and he left saying, ‘I’ll leave it to you then’, or words to that effect, now that’s one. And as far as I am aware, there were two other isolated incidents involving just the two of you in the house at Stanmore when he alleges that you placed your hand on his penis and one instance involved watching a video called ‘Raiders of the Lost Ark’ and the other incident involved a game of chess. They are the ones that I am aware of. There was no suggestion there was anything else. [44] After discussion about whether ‘Raiders of the Lost Ark’ existed at the time that the incidents were said to have occurred and whether Mr Russell owned a video player at all, the following exchange occurs: COOKE: What is your attitude to each of those allegations then, your reaction to each of them? RUSSELL: But they’re nonsense! COOKE: So you deny in each case. RUSSELL: Yeah. After further discussion, which is not presently directly relevant, Mr Russell said: David O’Grady resided in my house for a period of I don’t know how long. I can’t be specific, but it’s not long. He was there at the request of the Dean of the Cathedral then who, he had arrived as Sacristan. According to the Dean, ‘he had no money for bond money, he needed somewhere to live. Could I or anyone in the choir help?’ My response was ‘well, I’ve got spare room, you can have one, you know, that’s fine.’ There was someone else living in the house at the time as I remember; Dennis Elliott, who was in the choir. Page 8 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [45] After a discussion as to the inconsistencies between the version given by Mr X and by Daniel Buckley of the “walking in” incident and another statement contained in the Police Brief, the following exchange occurred: MITCHELL: And you’ll see when you see Butler’s statement. Butler actually says as the main point of his statement he says that he was never there in a group with Buckley and [Mr X], as claimed by Buckley, at any time. That’s the really important point. COOKE: Butler was supposedly one of the boys there when you burst into the room.; [In context, this was a question.] MITCHELL: That’s the point. COOKE: Yes. And you recall Butler and [Mr X], do you? RUSSELL: Oh, of course. And a little later: COOKE: Alright, we were just talking about, you mentioned, [Mr X] and Butler and we were getting a copy of Butler’s statement, and also one from [Mr X] …. RUSSELL: And who makes it very clear if he is prepared to say something, but he is not prepared to … . he makes an accusation of being abused I think by O’Grady but he is not prepared to go to court about it …. RUSSELL: And when you read the report it’s like a cockatoo talking. … MITCHELL: The other thing about [X]’s statement, I think David’s right, will [we’ll] give your [you a] copy. I think his claim mentions. RUSSELL: It’s not an accusation against me, you know. COOKE: Right. MITCHELL: I think it’s largely intended to corroborate the first of them which was the event claimed that there was O’Grady in the room with the three people. RUSSELL: That’s one of them. MITCHELL: And that’s the extent of his evidence. COOKE: That’s pretty well all what it had to say about that I suppose. … RUSSELL: He says that someone — look I have to have the statement but I think he says that he corroborates Buckley’s story that it was me. [46] During the course of this meeting, which was relatively lengthy, there were a number of matters discussed. Mr Cooke inquired of Mr Russell as to when, if ever, Mr Russell was aware of the activities of Mr O'Grady. The response to that question is, in direct terms, “about 1988/89”. However, the date is, at best, an estimate and relates to a factual circumstance which is irrelevant to the matters then under investigation. Knowledge of the activity, or propensity, of Mr O'Grady arose from the confession of a parent whose spouse and son went on holidays with Mr O'Grady. During the course of the holidays “something untoward [was] going on in the tents in which they put David O'Grady and their son, and the police were called, and O'Grady was charged and he went off to gaol”. The marriage thereafter broke down and it was in this context that this parent confessed this story to Mr Russell. However, it was not until 1998 or 1999 that the Church became aware of the complaint of Mr X. [47] After recounting the above story the following most relevant exchange occurs: Page 9 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 COOKE: So until that time [1988/89], you weren’t aware of anything okay, that’s fine. To summarise this, you deny the allegation specifically that he made, that you burst in upon O’Grady and three boys doing anything in your home and you. RUSSELL: That’s not one of the locations, so don’t confuse me. COOKE: Well in my concern, that Buckley’s allegations, one of them is that he, and three other boys were in a room with O’Grady in your house and they were wrestling and they were undressed, wearing underpants or something that you burst in by accident, discovered this going on and made some comments like ‘I’ll leave you to it then’ and walked out. RUSSELL: Why, if I can ask you a question here, because I don’t think that’s correct. COOKE: That’s the allegations anyway. RUSSELL: I thought the allegations that I was made days before was for indecent assault. RUSSELL: Let me explain okay, in the charges, there were two allegations of indecent assault. Right? COOKE: Right. [48] Mr Mitchell then read from the charges and/or from a statement relating to the charges for description of the two indecent assault allegations each of which concerned an allegation that Mr Russell had placed his hand on Mr Buckley’s penis. During the course of reading from that statement Mr Mitchell said: I [being a reference to Mr Buckley in the statement being read by Mr Mitchell] went to David Russell’s house after choir practice and David Russell and David O’Grady had an arrangement because when I was with David Russell, David O’Grady was never around, when I was with David O’Grady, David Russell was never around. I remember being at the back of David Russell’s house, in a dining room. [49] Mr Mitchell continued to read the statement and described the second incident of touching and, after some short exchange, the third incident that was the subject of charge. The meeting then continues in the following way: MITCHELL: That is the third allegation of indecent assault, so. COOKE: Yes. Right. RUSSELL: You will go crazy as you try to match these. COOKE: So, they were the three allegations of indecent assault. The event with the three boys is. RUSSELL: That’s not an allegation against me. COOKE: No. No. Buckley alleges that he was assaulted by this as paraphrasing, sorry. Buckley alleges he was assaulted by David O’Grady on ‘one particular night during the school year’ in 1979. Also present allegedly were Edward [last name omitted], [first name omitted] Butler and Mr X. ‘I would have been eight years old at the time. Buckley and the other boys were allegedly wrestling with O’Grady whilst watching a video, Raiders of the Lost Ark. O’Grady was on the floor in his underpants.’ Buckley alleges he was eight years old at the time. He alleges Russell walked in and said ‘I’ll leave you to it then.’ So, that is the event that doesn’t ground indecent assault. So, just so we have got it clear to the record, you have denied all three allegations of indecent assault? RUSSELL: I had to clear that up. COOKE: Yeah sure. COOKE: And you have denied the events of walking in. RUSSELL: Well, the video wasn’t available. I didn’t have a video machine. We could go on. Page 10 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 COOKE: Do you ever recall walking in on them wrestling and make … at all, ever, with the boy … O’Grady with any boys? RUSSELL: Not O’Grady with any boys. No. No. No. But, you know, we’ve had events in the house that Chris spoke about where I could have gone in with the kids getting rowdy and told them to sort of behave themselves with the parents there and that, but …. COOKE: We’re talking O’Grady here in his underpants. RUSSELL: Oh, no! No! I have already said that I have no … I have no. COOKE: So, that’s it. RUSSELL: O’Grady … this is what sends me mad. O’Grady wasn’t even on the scene! COOKE: Even if the dates were wrong, you know, did any incident like it happen at any time. That’s what I am trying to clarify. MITCHELL: See, that’s the point of view. He never walked in on O’Grady in his underpants wrestling with those three kids and that. RUSSELL: Do you think …. COOKE: No. You have got to say. RUSSELL: No. COOKE: So, you deny that as absolutely as you deny the other three allegations? RUSSELL: Absolutely! COOKE: Alright. Well, that covers the things that I wanted to specifically raise. They have all been covered by what you have spoken about the introduction and what you, we, have clarified subsequently I think. [50] In accordance with the agreement reached at the meeting of 10 October 2002, the plaintiff provided the Church with copies of the Charge Sheets and the Brief of Evidence on or about 11 October 2002. Further, pursuant to the agreement as to process the plaintiff provided written submissions to the Church on or about 21 October 2002. [51] The written submissions denied the allegations made by Mr Buckley and described them as “completely untrue”. In particular, Mr Russell submitted: that the assaults alleged by Mr Buckley did not occur; that Mr Russell was never in the situation claimed by Mr Buckley such that the assaults could have occurred; that the “walking in” incident did not occur; and denied that Mr Buckley ever stayed overnight at Mr Russell’s house in Stanmore. The written submissions were seven pages in length and dealt in detail with the conduct of the police investigation; the response of Mr Russell to the allegations of Mr Buckley; the allegation of Mr X; the alleged probability of concoction between Mr X and Mr Buckley; inconsistencies between the various statements in the Police Brief; and the non- inclusion by the Police of exculpatory statements of students alleged to have been involved in the incident with Mr O’Grady, which Mr Russell was said to have witnessed. [52] On 5 December 2002, officers of the Church met to discuss the situation regarding Mr Russell. This was an internal meeting the content of which was not discussed with Mr Russell; nor was he invited to attend. Mr Michael McDonald, Mr John Davoren and the Dean of the Cathedral attended the meeting. After dealing with the process to be adopted, the meeting discussed “the evidence” that had emerged. An opinion was expressed that the evidence of Mr X was “starker” than that of Mr Buckley. It asks, and answers in the negative, the question whether the Church can trust Mr Russell in the face of this evidence. It also comes to a conclusion that Mr Russell is a possible risk to children under his care. Mr Cooke was not in attendance at the meeting; nor, it seems, was he involved in any discussion as to its outcome. The meeting resolved that Mr McDonald should write, under the Dean’s signature, to Mr Russell and invite him to a meeting on 10 December. Page 11 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [53] By letter dated 6 December 2002, the Dean requested the attendance of Mr Russell at a meeting on 10 December 2002. By letter dated 9 December 2002, and delivered personally at the meeting on 10 December 2002, the Dean of the Cathedral informed Mr Russell that the allegation of indecent assault, on the balance of probabilities, had not been sustained, but that the preliminary finding of neglect (namely, that Mr Russell had walked in on Mr O’Grady indecently assaulting children) had been sustained, again on the balance of probabilities. [54] The letter of 9 December 2002 also informed Mr Russell that a review of his suitability to continue employment had been recommended as disciplinary action. Mr Russell was invited to make a written response. At the meeting of 10 December, Mr Russell, or Mr Mitchell on his behalf, requested to see the investigation report by Mr Cooke. This was accommodated on 13 December 2002. [55] The report of Mr Cooke, marked confidential and not for further distribution, was titled “Final Report regarding Mr David Russell” (“the Report”). I do not repeat, or attempt to summarise, the content. [56] Mr Russell, by letter (hereinafter “the response submissions”) dated 18 December 2002, drafted by Mr Mitchell, but sent over Mr Russell’s signature, dealt at length with the Report, which was described as a “draft report and preliminary findings”. [57] The response submissions dated 18 December 2002 defined the allegations against Mr Russell. It described the three incidents of alleged indecent assault as the “Primary Allegations”. These Primary Allegations were described as not sustained. It described an incident involving Mr O’Grady and Mr Buckley, being an incident other than the Primary Allegations, being Mr Buckley’s version of the walking in incident, as not sustained. Further, it described the walking in incident in the statement of Mr X as the “Secondary Matter” and as having been sustained in the view of Mr Cooke. [58] The response submissions alleged that the process conducted by Mr Cooke was a denial of natural justice and of procedural fairness in that Mr Russell was not afforded an opportunity to answer the Secondary Allegations. The response submissions alleged (and on the evidence before me, it is the case) that the investigator did not interview Mr X face-to-face. It also alleged that the statement of Mr Buckley is not and could not be corroborative of the allegation of Mr X and presents argument in support thereof. Further, apart from some other matters which are not relevant to the proceedings before this Court, the response submissions threatened a request of the New South Wales Ombudsman's Office for an investigation into Mr O'Grady and raised jurisdictional issues associated with the role of the New South Wales Ombudsman's Office in relation to a person employed by the Cathedral providing services to students of the College. [59] The Church considered the response submissions. In the expressed view of Mr Russell, for far too long. On 13 January 2003 Mr Cooke replied to the response submissions in a document entitled “Observations”. While informative on the substantive issues alleged, this document, and its contents, is not particularly relevant to the issues before this Court. [60] A further internal meeting was held on 29 January 2003 at which the attendees came to the view, according to the notes, that Mr Russell had a case to answer in relation to the walking in incident. On that day the Church wrote to Mr Russell and invited him to attend a meeting to be held on 31 January 2003. [61] On 31 January 2003 Mr Russell, once more accompanied by Mr Mitchell, met with the Dean of the Cathedral (Fr Doherty) and Mr McDonald. On enquiry from Mr Mitchell, Mr McDonald said: There is an issue about the walking in incident — no conclusion yet; but it is now resolved that it has been sustained. The Cathedral regards this as serious and wants to know whether anything else has to be considered. Father Doherty then said: “no verdict has been reached on the matter by the employer. I am the employer and I represent the Church.” After some further short discussion, Fr Doherty said: “We want to hear from you as to what you want to tell us by way of mitigation.” At this point it is clear that the Church had made its decision as to the substance of the allegations, but was considering, and invited submissions on, what should occur as a result and, in particular, whether Mr Russell should be dismissed. [62] The meeting adjourned for a short time (about five minutes) to allow Mr Mitchell and Mr Russell to consider any submissions in mitigation that they may wish to put. Certain submissions were then put, expressly without prejudice to any other rights Mr Russell may have. A further adjournment occurred, for a period of approximately 30 minutes, during which time the Dean of the Cathedral consulted with the Cardinal Archbishop and on his return, the Dean informed Mr Russell that the Cardinal had “approved the decision to terminate your employment”. [63] The decision to terminate Mr Russell was not without controversy. The Church received representations from members of the Choir. Page 12 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [64] On 17 February 2003, Mr Russell commenced proceedings under s 84 of the Industrial Relations Act 1996 (NSW) for reinstatement in his employment. For this purpose Mr Russell engaged Harmers Workplace Lawyers who briefed Mr Ian Neil, then of junior counsel, to represent him. In the course of those proceedings, Mr Cooke swore an affidavit (as did Fr Doherty) which stated that he remained “satisfied that there are grounds for concluding, on the balance of probabilities, that the incident occurred as stated by [Mr X] in his initial statement to the Police, and as confirmed with me.” [65] The hearing of the application proceeded over 14 hearing days before Deputy President Harrison between 23 June 2003 and 2 December 2003 (inclusive). Reasons for Judgment were delivered on 1 June 2004 and formal orders issued shortly thereafter. Deputy President Harrison found that Mr Russell’s termination was harsh, unreasonable and unjust, did not consider reinstatement “impractical” and ordered reinstatement “with restitution of wages and continuity of service for all purposes.” [66] Mr Russell has continued employment, having been reinstated by the Church, since 1 June 2004. At the time of his dismissal his annual salary was $25,000 per annum. Independent of his income and the benefits from the Church he received a pension entitlement from his previous employment. As a result of the orders made by the Commission, the Church paid Mr Russell the income not received between 31 January 2003 and 1 June 2004. [67] In the proceedings before this Court, Mr Russell, in his affidavit, said: [68] My dismissal from my employment and the events relating thereto including the proceedings in the Industrial Relations Commission were very upsetting and distressing to me. My dismissal attracted a considerable degree of media attention and I was extremely distressed, embarrassed and humiliated by the conduct of the Defendants in respect of the events leading up to and my dismissal from my employment. Such distress, embarrassment, and humiliation has continued to be experienced by me throughout the Industrial Relations Commission proceedings which I found to be extremely difficult indeed. I further say that the Industrial Relations Commission proceedings were conducted in such a way that virtually every issue raised by me was the subject of strict proof and the said proceedings became quite protracted and to put it bluntly, in my respectful opinion, bitter. [68] The costs of the proceedings before the Commission were in excess of $350,000 (including interest thereon). [69] After attesting to medical conditions suffered by him, Mr Russell said: [71] The [Commission] proceedings have and continue to cause me considerable anxiety and stress. There is not a day that I do not become upset about the manner in which I was dismissed from my employment nor the associated problems that are ongoing about seeking to have the matter finalised in this Honourable Court. I find that I am very depressed and have considerable difficulties sleeping and living on a daily basis. I am taking Efexor-XR (anti-depressant) morning and night. I am also concerned that the stress of the proceedings is impacting upon my heart condition and in particular high blood pressure and atrial fibrillation. I was diagnosed as a diabetic around the time that I was dismissed from my employment with the Defendants. [72] I also am very worried about the ongoing amounts that I owe to the mortgagees in respect to the costs of my legal representation in the Industrial Relations Commission of New South Wales. Interest is accruing at a significant rate. The Present Proceedings [70] The proceedings in this Court were commenced by Statement of Claim on 7 February 2005, the latest version of which, the Second Amended Statement of Claim (2ASoC), was filed, by leave, on 7 March 2006. [71] As earlier stated, the claim alleges the existence of an implied term in the contract of employment that the Church (or persons making decisions on behalf of it) would act in good faith toward Mr Russell in and about the administration of his contract of employment. It also claims an implied term in the contract that the Church would not conduct itself “in a manner likely to destroy or seriously damage the relationship of confidence and trust” between it and Mr Russell, or, alternatively (if it be different), that the Church would not conduct itself in such a manner “without reasonable and proper cause”. [72] The Second Amended Statement of Claim also claims that the termination of Mr Russell’s employment was wrongful and in breach of contract, the particulars of which were that “no grounds for dismissal existed”. [73] Mr Russell claims damages for the wrongful termination and for breaches of the two implied terms referred to above. Those damages include the cost of the proceedings before the Commission, on an indemnity basis, and the expenses of a media consultant, injury to reputation and damages for distress, embarrassment, humiliation and hurt to feelings. Further damages are claimed for negligence. Aggravated and exemplary damages are claimed. [74] One other matter needs to be recited. It was suggested in cross-examination in the proceedings in this Court that Mr Buckley had committed suicide in Thailand prior to the proceedings in the Commission (but after the Page 13 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 criminal proceedings). The evidence, however, does not permit such a finding. Mr Buckley is deceased and was deceased when the matter was heard in this Court. Provisions of the Industrial Relations Act [75] In order to deal with the damages relating to the costs of the proceedings before the Commission, it is necessary to understand the nature of the proceedings before the Commission and the statutory provisions relating to the jurisdiction being exercised and the jurisdiction or power reposed in the Commission to grant costs. [76] The most relevant provisions are: [83] (1) This Part applies to the dismissal of: … (b) any other employee, except an employee for whom conditions of employment are not set by an industrial instrument and whose annual remuneration is greater than $62,200 (or such greater amount as is prescribed by the regulations). … (5) In this Part: ‘dismissal’ includes: (a) the threat of dismissal, and (b) in the case of a public sector employee-dispensing with the services of the employee, dismissing the employee as a consequence of disciplinary proceedings against, or the commission of an offence by, the employee or annulling the appointment of the employee. … [84] (1) If an employer dismisses an employee and the employee claims that the dismissal is harsh, unreasonable or unjust, the employee may apply to the Commission for the claim to be dealt with under this Part. … (4) An application may be made under this Part even though the applicant does not specify the nature of the remedy sought or requests compensation only. However, this subsection does not affect the requirement under this Part that compensation is available only if the Commission considers that reinstatement or re- employment would be impracticable. … [86] The Commission must endeavour, by all means it considers proper and necessary, to settle the applicant’s claim by conciliation. [87] (1) When, in the opinion of the Commission, all reasonable attempts to settle the applicant’s claim by conciliation have been made but have been unsuccessful, the Commission is to determine the claim by making an order under section 89, dismissing the application or making any other order it is authorised to make under this Act. (2) Nothing in this section prevents further conciliation from being attempted at any time before the Commission makes such an order. [88] In determining the applicant’s claim, the Commission may, if appropriate, take into account: Page 14 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 (a) whether a reason for the dismissal was given to the applicant and, if the applicant sought but was refused reinstatement or re-employment with the employer, whether a reason was given for the refusal to reinstate or re-employ, and (b) if any such reason was given-its nature, whether it had a basis in fact, and whether the applicant was given an opportunity to make out a defence or give an explanation for his or her behaviour or to justify his or her reinstatement or re-employment, and (c) whether a warning of unsatisfactory performance was given before the dismissal, and (d) the nature of the duties of the applicant immediately before the dismissal and, if the applicant sought but was refused reinstatement or re-employment, the likely nature of those duties if the applicant were to be reinstated or re-employed, and (e) whether or not the applicant requested reinstatement or re-employment with the employer, and (f) such other matters as the Commission considers relevant. [89] (1) Reinstatement The Commission may order the employer to reinstate the applicant in his or her former position on terms not less favourable to the applicant than those that would have been applicable if the applicant had not been dismissed. (2) Re-employment If the Commission considers that it would be impracticable to reinstate the applicant, the Commission may order the employer to re-employ the applicant in another position that the employer has available and that, in the Commission’s opinion, is suitable. (3) Remuneration If the Commission orders reinstatement or re-employment, it may order the employer to pay to the applicant an amount stated in the order that does not exceed the remuneration the applicant would, but for being dismissed, have received before being reinstated or re-employed in accordance with the order. (4) Continuity If the Commission orders reinstatement or re-employment, it may order that the period of employment of the applicant with the employer is taken not to have been broken by the dismissal. (5) Compensation If the Commission considers that it would be impracticable to make an order for reinstatement or re-employment, the Commission may order the employer to pay to the applicant an amount of compensation not exceeding the amount of remuneration of the applicant during the period of 6 months immediately before being dismissed. If the applicant was on leave without full pay during any part of that period, the maximum amount of compensation is to be determined as if the applicant had received full pay while on leave. (6) When assessing any compensation payable, the Commission is to take into account whether the applicant made a reasonable attempt to find alternative employment and the remuneration received in alternative employment, or that would have been payable if the applicant had succeeded in obtaining alternative employment. (7) Threat of dismissal In determining a claim relating to a threat of dismissal, the Commission may order the employer not to dismiss the employee in accordance with that threat. (8) An order under this section may be made on such terms and conditions as the Commission determines. [90] The Commission must not determine an applicant’s claim by making an order under section 89 if: (a) another Act or a statutory instrument provides for redress to the person in relation to the dismissal, and (b) the person has commenced proceedings under the other Act or instrument or has not lodged a written undertaking not to proceed under the other Act or instrument. … [181] (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and Page 15 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (2) However, the Commission when it is not in Court Session may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or (c1) the Commission may award costs against an industrial agent representing an applicant or employer in proceedings under Part 6 of Chapter 2 if: (i) the industrial agent fails to file a certificate as required by section 90A, or (ii) the Commission finds that the industrial agent has filed a certificate under that section certifying that the agent has reasonable grounds for believing, on the basis of provable facts, that the applicant’s claim or employer’s response to the claim had reasonable prospects of success when the agent did not have reasonable grounds for believing, on the basis of provable facts, that it had reasonable prospects of success, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373. [77] The provisions of s 153 of the Industrial Relations Act 1996 (NSW), read with the other provisions of that Act, make clear that the jurisdiction reposed in the Commission to deal with an application made under s 84 is exercised by the Commission simpliciter and not the Commission in Court Session. This is not a jurisdiction exercised by a body described as a court. The Act requires that the Commission take into account the public interest. It is not intended to be, nor is it, the exercise of judicial power. Any order made by the Commission under s 89 of the Act is not an order enforcing existing rights but the creation or variation of rights. [78] With the exception of the specific Acts or statutory instruments described in s 90 (which does not include the common law), the determination of a claim under s 84 has no effect on any right otherwise possessed by the applicant. [79] It has been urged on behalf of the plaintiff in these proceedings that the provisions of the Industrial Relations Act 1996 (NSW) do not abrogate common law rights that would otherwise apply. This submission is made in the context of seeking to persuade the Court that the costs of the proceedings in the Commission are expenses in mitigation of damage that are recoverable in these proceedings. I will return to that submission at a later point in this judgment, but here deal with the proper interpretation of the Act and the alleged presumption against the alteration of common law rights. [80] The issue of abrogation of common law rights was significantly qualified by Gleeson CJ in Electrolux Home Products v AWU (2004) 221 CLR 309. His Honour said: [19] Reliance was placed in argument upon what was said to be a general principle of construction that, where a statute takes away or interferes with common law rights, then it should be given, if possible, a narrow interpretation [49]. The generality of that assertion of principle requires some qualification. It is true that courts do not impute to the legislature an intention to abrogate or curtail fundamental rights or freedoms unless such an intention is clearly manifested by unmistakable and unambiguous language [50]. It is also true that there is a presumption, relevant for example to the construction of privative clauses, that the legislature does not intend to deprive the citizen of access to the courts, other than to the extent expressly stated or necessarily to be implied [51]. However, as McHugh J pointed out in Gifford v Strang Patrick Stevedoring Pty Ltd [52] modern legislatures regularly enact laws that take away or modify common law rights. The assistance to be gained from a presumption will vary with the context in which it is applied. For example, in George Wimpey & Co Ltd v British Overseas Airways Corporation [53], Lord Reid said that in a case where the language of a statute is capable of applying to a situation that was unforeseen, and the arguments are fairly evenly balanced, ‘it is … right to hold Page 16 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 that … that interpretation should be chosen which involves the least alteration of the existing law’. That was a highly qualified statement and, if it reflects a presumption, then the presumption is weak and operates only in limited circumstances. [20] In Coco v R [54], Mason CJ, Brennan, Gaudron and McHugh JJ said: The insistence on express authorisation of an abrogation or curtailment of a fundamental right, freedom or immunity must be understood as a requirement for some manifestation or indication that the legislature has not only directed its attention to the question of the abrogation or curtailment of such basic rights, freedoms or immunities but has also determined upon abrogation or curtailment of them. The courts should not impute to the legislature an intention to interfere with fundamental rights. Such an intention must be clearly manifested by unmistakable and unambiguous language. General words will rarely be sufficient for that purpose if they do not specifically deal with the question because, in the context in which they appear, they will often be ambiguous on the aspect of interference with fundamental rights. (Footnote omitted.) [21] The joint judgment in Coco went on to identify as the rationale for the presumption against modification or abrogation of fundamental rights an assumption that it is highly improbable that Parliament would ‘overthrow fundamental principles, infringe rights, or depart from the general system of law’ without expressing its intention with ‘irresistible clearness’ [55]. In R v Home Secretary; Ex parte Pierson [56], Lord Steyn described the presumption as an aspect of the principle of legality which governs the relations between Parliament, the executive and the courts. The presumption is not merely a common sense guide to what a Parliament in a liberal democracy is likely to have intended; it is a working hypothesis, the existence of which is known both to Parliament and the courts, upon which statutory language will be interpreted. The hypothesis is an aspect of the rule of law. [22] We are here concerned with the meaning of provisions (ss 170ML and 170MT) which have as their immediate purpose and effect the conferring of an immunity from civil liability for a certain kind of conduct. The legislature, recognising that parties to disputes, and third parties, might suffer actionable damage as a result of such conduct, has conferred a limited immunity from action. The immunity given by s 170MT(2) is qualified by paras (a)-(c). The rights of action taken away are common law rights of a kind frequently modified by statute in the industrial context with which the legislation is concerned. [81] The provisions of Ch 2 Pt 6 of the Industrial Relations Act 1996 (NSW) provide a remedy unrelated to the common law. The additional rights granted do not allow a dismissed employee to insist upon a determination in her or his favour if certain facts are proven. The only “right” is the right to make application under s 84. Thereafter, provided the Commission considers all relevant matters and only relevant matters and there are no other errors of law, a successful outcome for an applicant is dependent wholly on an exercise of discretion. [82] The legislative scheme is intended to protect employees by the provision of a real and practical, not illusory and theoretical, arbitral resolution: see Blackadder v Ramsay Butchering (2005) 221 CLR 539 at [33]. While the provisions of s 166 of the Industrial Relations Act 1996 (NSW) allow a party to be represented by a legal practitioner or by an agent, it is clear that, every day, proceedings before the Commission, excluding the Commission in Court Session, are conducted without legal representation. The scheme is intended to provide a prompt and fair manner of resolving industrial disputes, including reinstatement, with a minimum of legal technicality. [83] The provisions of s 181 of the Act are intended to facilitate that purpose. While it is understandable that some applications for reinstatement, inter alia because of complexity or importance, will involve legal representation, the scheme of the Act provides for extra curial remedies on a limited cost basis. The legislature has “interfered” with common law rights (in particular the right to dismiss) on a basis that envisages that such interference will not also occasion, in the general run of cases, the imposition of costs. The exceptions to that basis are adumbrated in s 181(2) of the Act. I will leave to later in this judgment whether that policy and construction prevents or inhibits an award of damages by this Court of the costs of the proceedings before the Commission. Development of Contract of Employment [84] In order to deal adequately with the claims for implied terms, it is necessary to deal briefly, by way of introduction, with the development and essence of the contract of employment. [85] While this judgment is not the appropriate occasion for a dissertation on the history of the contract of employment, it is necessary to have an understanding of that history to appreciate the special rules that are necessary in such contracts. Page 17 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [86] Historically, the contract of employment arose out of the formation of rural and city workers at or about the time of the breakdown of the feudal system. At that stage, Roman law had some influence. Under Roman law, a person’s status was dependent upon the degree of freedom that the person had the capacity to exercise. The slave was at the lowest end. Until the emperors Constantine and Justinian forbade it, a master had total control over a slave and had the power to put the slave to death. At the upper end (leaving aside holders of public office) was the citizen who had, subject to the laws, total freedom. In rural society especially, there were a number of classes between slave and a citizen, which were differentiated by the degree of freedom they could exercise. [87] In feudal England, likewise, a person holding land under the tenure of villeinage was under the total control of his lord and if he left the land to which he was assigned he could be captured and compelled to observe the obligations arising from his tenure. The disintegration of the feudal system was hastened by the Black Plague of 1348 which created a shortage of workers and increased the demand for those that survived. Economic pressures for wage increases and demands for freedom were resisted and the Parliament enacted the Statutes of Labourers 1349 and 1350, which sought to freeze wages at pre-plague levels. Justices of the Peace were given embryonic arbitral powers to fix wages. [88] In the “middle classes” or city environs similar developments were occurring. Status was determined by the power and freedom to operate without control. Artisans moved to master craftsman after a lengthy apprenticeship and an often lengthier period at tradesperson or journeyman level. The equivalent enactment in this area was the Statute of Artificers 1562, which restrained persons from performing work in a trade if they had not completed an apprenticeship. The Master and Servants Acts, like the Statute of Labourers, were based upon the fundamental premise that a working person was required to work. While the rural worker who escaped would be captured and obliged to perform work in accordance with the contract, the servant who left employment in breach of contract, was imprisoned. [89] It is in that context that Holt CJ remarked: “If a master gives correction to his servant, it ought to be with a proper instrument, as a cudgel. And then if by accident a blow gives death, this would be but manslaughter. The same law of a schoolmaster. But a sword is not a proper instrument for correction, and the cruelty of the cut will make a malice implied.” (R v Keite (1697) 1 Ld. Raym. 138 at 144.) The above summary, although brief, may seem critical of the system. It is not intended to be. It is irrelevant to make value judgments of historical attitudes through the modern lens. It is a trite exposition for anyone familiar with employment law. The above short history is more fully summarised in Macken, O’Grady, Sappideen & Warburton, The Law of Employment, 5th Edition, (2002) Lawbook Co, to which I referred for this purpose and which formed the basis of the above. [90] I do not further trace the history of status that has marked the master/servant relationship. Nor do I suggest that there is, in modern times, any lack of freedom (except economic compulsion) in the decision as to whether or not to enter into a contract of employment. A person may not be compelled to enter into such a contract: Seamen's Union of Australia v Utah Development (1978) 144 CLR 120 at 157.8. [91] However, fundamental to the existence of a contract of employment, and one of its indicia, is that an employee (the modern terminology for servant) contracts away absolute freedom to the employer. The employee contracts to devolve to the employer the right to control the manner in which the employee shall work. Lord Wedderburn in The Worker and the Law, 3rd Edition, 1986, Penguin, cited in Employee Protection at Common Law, Associate Professor Joellen Riley, Federation Press, 2005, at 49, said: Here then is an ancient tension in the system. For the common law assumes it is dealing with a contract made between equals, but in reality, save in exceptional circumstances, the individual worker brings no equality of bargaining power to the labour market and to this transaction central to his life whereby the employer buys his labour power. This individual relationship, in its inception, ‘is an act of submission, in its operation it is a condition of subordination, however much the submission and the subordination may be concealed by that indispensable figment of the legal mind known as the contract of employment’. (Wedderburn, op cit, at 5, quoting Sir Otto Kahn-Freund, Blackstone’s Neglected Child: the Contract of Employment, 93 Law Quarterly Review 503). [92] Whether or not there is an equality of bargaining power between employer and employee is irrelevant for any purpose currently before the Court. Whether or not there is an equality of bargaining power, on entering a contract of employment, there is submission by the employee to the employer within the terms of that contract, and in performing work under the contract of employment there is subordination to the will of the employer to the extent of the terms of that contract. That is the essence of and the effect of the right of control. [93] The right of control is the essential distinguishing feature of a contract of employment: It will be seen that three elements are involved: first, the relationship must entail, on the part of the servant, obedience to orders; secondly, the obedience to orders that is required is obedience to orders in doing work; and, thirdly, the doing of the work must be for the benefit of the master, that is, it must relate to his own affairs. As to the first, no more need be said than Page 18 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 this, that the obligation of obedience exists while the relationship continues. The relationship may be voluntary, and whether voluntary or not, it may be determinable at the will of either party; but without the obligation to obey orders there can be no meaning in the relationship, and it therefore cannot subsist. As to the second element, that the obedience entailed must be obedience to orders in doing work, the point which is vital is that the master’s authority must extend both to ordering that the work shall be done and to directing how it shall be done … As to the third element, the statement that the doing of the work must be for the benefit of the master does not mean, of course, that the direct benefit from the work itself must necessarily accrue to the master; he may, without altering the relationship, direct his servant to do work which will benefit another. (Attorney General for New South Wales v Perpetual Trustee Company (1952) 85 CLR 237 at 299–300, per Kitto J.) [94] While “control” has, as a matter of practicality, been confined by the growing expertise of the workforce, and such confinement has been recognised by the common law, control is still the discrimen by which the contract of employment is identified: Hollis v Vabu (2001) 207 CLR 21 at [43]–[44]. The above general exposition is sufficient to understand that which follows. An Implied Duty of Good Faith [95] As pleaded, the plaintiff claims that the contract contained a term implied by law that the Church would act in good faith to Mr Russell in and about the administration of the contract. This is pleaded as a separate term to what is alleged to be another implication of law, namely, that the Church would not conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between the parties. I will deal with that latter implication separately. As ultimately pleaded the latter duty was said to be an implication of a duty on the employer not to conduct itself in such a manner without reasonable and proper cause. [96] As argued, little distinction was attempted between the two alleged implications. The written submission in chief can be shortly repeated: [18] The Plaintiff also claims damages for breaches by his employers of the implied obligations to act in good faith and not to conduct themselves, or not to conduct themselves without reasonable and proper cause, in a manner so as to damage or destroy the relationship of trust and confidence between employer and employee: see 2ASoC paras 11 and 12. [19] These obligations are recognised as implied in contracts of employment in England and in Australia: Eastwood v Magnox Electric plc; McCabe v Cornwall County Council [2004] 3 All ER 991 ; [2005] 1 AC 503 ; Malik v Bcci SA (in liq) [1997] 3 WLR 95 ; 3 All ER 1; Irving v Kleinman [2005] NSWSC 30; Gogay v Hertfordshire CC [2000] ILR 703; TLR 677. [20] The damages claimed are in respect of breaches of these implied obligations which are anterior to and separate from the actual wrongful termination of contract. [97] As can be seen from the above submission, which was expanded in the course of oral submissions and in reply, the assertion is made, somewhat boldly, that the obligation to act in good faith has been recognised as implied in contracts of employment in Australia. I am unaware of such recognition. There has been some muted acceptance, generally for the purpose of determining an interlocutory application, that, in relation to contracts of employment, such a proposition is arguable, although usually the proposition is examined in the context of the alleged implied term not to act so as to destroy mutual trust and confidence. Further, there is little, if any, clarity on the content of any such implied duty of good faith. It is necessary to examine the contention. [98] The only Australian authority to which reference is made in the extract of the submissions in chief of the plaintiff is Irving v Kleinman. Reference was also made, in reply, to Heptonstall v Gaskin (No 2) [2005] NSWSC 30. No other authority was cited as authority for this implication in Australian law. In Irving v Kleinman the Court of Appeal deals with the implication of a term that the employer will not conduct itself, without reasonable and proper cause, in a manner likely to destroy or seriously damage the relationship of trust. So too does the judgment of Hoeben J in Heptonstall. [99] The Court of Appeal in Irving goes no further than determining that the claim for the said implication should not be struck out or summarily dismissed: see Irving at [27]. Justice Hoeben in Heptonstall deals with the matter more fully, but to the same effect. He said: [17] It is submitted on behalf of the plaintiff that decisions in the United Kingdom make it clear that as a matter of law there is now to be implied into a contract of employment a term of mutual trust and confidence. Such an approach is the law of Australia, or alternatively is arguably the law of Australia. Page 19 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [18] It seems beyond argument that the implication of such a term is now part of the law of the United Kingdom: Malik and Mahmud v BCCI (1998) AC 21 ; Johnson v Unisys Ltd (2001) 1 AC 518 ; Gogay v Hertfordshire County Council (2000) IRLR 703 and Eastwood & Anor v Magnox Electric plc, McCabe v Cornwall County Council & Anor (2004) 3 WLR 322 . [19] Because of the provisions of the Employment Rights Act 1996 (UK) with its remedies for unfair dismissal, a distinction has been drawn by the House of Lords between psychiatric injury brought about by an employer’s actions during the actual course of employment and psychiatric injury brought about by dismissal from employment or by circumstances directly related to that dismissal. That is the essential distinction between Malik and Mahmud, Gogay and McCabe on the one hand and Johnson v Unisys on the other. As was explained by Lord Nicholls in McCabe (paras 4–6; 27–32) the particular statutory context which exists in the United Kingdom brought about the development of the ‘trust and confidence’ implied term in a contract of employment. Without such a term, deserving plaintiffs would have no legal right to claim against employers in respect of conduct which occurred before they were dismissed and which was not directly related to that dismissal. [20] The background to the implication of such a term in the United Kingdom is important. It contrasts with the situation in Australia. In Australia the same result has been brought about by the tort of negligence. Such cases as State of NSW v Seedsman [2000] NSWCA 119; State of NSW v Jeffery & Anor [2000] NSWCA 171 and Mannall v State of NSW [2001] NSWCA 327 make that clear. A similar reliance upon the tort of negligence was not possible in the United Kingdom as a result of the decision of the House of Lords in White v Chief Constable of South Yorkshire Police (1999) 2 AC 455 . There the House of Lords held that an employer’s duty of care for the safety of employees and to take reasonable steps to protect them from physical harm did not extend to protecting them from psychiatric injury when there was no breach of the duty to protect from physical injury; and that the general rules restricting the recovery of damages for pure psychiatric harm applied to claims by employees. [21] Accordingly there has been no need in Australia to rely upon a ‘trust and confidence’ implied term in the contract of employment to enable employees to succeed in claims against employers for purely psychiatric injury suffered in the course of employment. This difference in approach to that in the United Kingdom is apparent in Tame v NSW (2002) 211 CLR 317 and Gifford v Strang Patrick Stevedoring Pty Limited (2003) 214 CLR 269. [22] What is not at all clear is whether a ‘trust and confidence’ implied term in the contract of employment forms part of the law of Australia. In Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 the full Federal Court left open the question of the existence of such an implied term (p 154). Similarly, Spigelman CJ in Paige (para 135) left that same question open. In a somewhat different context the full bench of the Industrial Relations Commission of NSW in Court Session implicitly approved the implication of such a term (Hollingsworth v Commissioner of Police(1999) 47 NSWLR 151 at 190) as did Allsop J in Thomson v Orika Australia Pty Ltd [2002] FCA 939 para 141. The implication of such a term in employment contracts in Australia remains controversial and awaits clarification by an appellate court. [23] Given the way in which the ‘trust and confidence’ implied term has evolved in the United Kingdom against a legislative background and an approach to tort law different to that in Australia I doubt whether such an implied term in a contract of employment does form part of the law of Australia. I cannot, however, say that such is not the case and I certainly cannot say that the existence of such an implied term is not arguable. [100] Particularly in light of the last paragraph cited from Heptonstall, it would be drawing too long a bow to suggest that the implication of good faith, or for that matter the implied duty not to conduct oneself so as to destroy trust and confidence, is recognised as part of the law relating to contract of employment in Australia. [101] Nevertheless, the plaintiff submits that the implication arises and that it has been breached. It is necessary for the Court to deal with it. The plaintiff has referred the Court, and relied upon, an extract from the monograph of Associate Professor Joellen Riley, Employee Protection at Common Law, Federation Press, 2005. The learned author discusses at length the juridical nature of the obligation of good faith and refers to learned articles and authority. There is much force in her argument. [102] The progression, if it be a progression, of the contract of employment from one primarily concerned with status to one of contract has seen a trend which results in the treatment of a contract of employment in the same way as any other contract. There are, of course, differences. [103] Those differences arise from the nature of contract of employment, its historical development and the incidents that mark it as a contract of a particular type. Nevertheless, to the extent that the particular and peculiar features of a contract of employment do not require differentiation, a contract of employment should be treated no differently from any other contract. Page 20 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [104] Even in those matters that require differentiation to take account of the special nature of the contract of employment, there must be coherence between the principles adopted in relation to a contract of employment and other contracts. Some of the matters of differentiation will be such that the contract of employment will be treated identically with some other special contracts. [105] An implication of good faith in a contract of employment is not novel. Some of the implied terms and fiduciary obligations imposed upon an employee that we now take for granted were based upon the obligation to act in good faith, which was said to be an incident of the contract of employment. On this issue, in 1895 the Court of Appeal in England said: The question is whether such conduct was not what any person of ordinary honesty would look upon as dishonest conduct towards his employer and a dereliction from the duty which the defendant owed to his employer to act towards him with good faith … . That depends upon the question whether in a contract of service the Court can imply a stipulation that the servant will act with good faith towards his master. In this case it said that the contract of service was in writing; but there is nothing in the express terms of the contract that contradicts such an implication. I think that in a contract of service the Court must imply such a stipulation as I have mentioned, because it is a thing which must necessarily have been in view of both parties when they entered into the contract. It is impossible to suppose that a master would have put a servant into a confidential position of this kind, unless he thought that the servant would be bound to use good faith towards him. (Robb v Green [1895] 2 QB 315 at 317 per Lord Esher MR) [106] There is no reason to expect that the obligations imposed on an employer under the contract are any less likely to require an act in good faith than the obligations imposed on an employee. It is necessary, however, to look at the areas in which there has been implied a duty of good faith and the rationale for such implication to determine whether it is appropriate to imply such a term, on a mutual basis, in the contract of employment. [107] The most obvious starting point for such a comparison is the implication of a contractual duty of good faith in commercial contracts. In this area, as in others, the duty is said to arise because it is reasonable and equitable, necessary for business efficacy, obvious, capable of clear expression, and must not contradict any express term of the contract: see Renard Constructions v Minister for Public Works (1992) 26 NSWLR 234 at 256, citing BP Refinery (Westernport) v Hastings Shire Council (1977) 180 CLR 266; Secured Income Real Estate (Australia) v St Martins Investments (1979) 144 CLR 596; Codelfa Construction v SRA (1982) 149 CLR 337, and Hospital Products v United States Surgical Corporation (1984) 156 CLR 41. [108] In Renard, supra, Priestley JA implied a duty of good faith but as both an implication of fact and an implication of law. The distinction was discussed by the High Court in Byrne v Australian Airlines (1995) 185 CLR 410. In the joint judgment of McHugh and Gummow JJ, the distinction between the two was analysed and their Honours referred to the rules as “rules of construction applied to the express terms of the contract” (at 448) and (at 449) said: However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in a sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain. There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description. [109] Whether terms arise by construction or implication may be a distinction without difference. In Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15, Giles JA referred to the construction approach and in particular to the approach adopted by Dr E. Peden in Good Faith in the Performance of Contracts, 2003, LexisNexis Butterworths, Sydney, who takes the same approach. Professor Riley, supra, also relies upon Dr Peden’s work. After referring to the judgment of Mason J in Secured Income Real Estate, supra, and the reference by the High Court to the work of Dr Peden, Giles JA said: [205] As so often in the law, it is necessary to make sure that words are the servants, not the master. It is said that, in determining the full import of [the clause], as a matter of law the power conferred on Vodafone must be exercised in good faith and reasonably, and if that is described as a process of construction, so be it. But it is not construction by regard to the ordinary meaning of the words used in the agreement. There is an imposition of law, as explained by McHugh and Gummow JJ in Byrne [supra] by attribution of a contractual intent to the parties, and the rule of construction to which their Honours refer is a rule for imposing in law a meaning on the parties. I have no difficulty in using, in that situation, the accepted description of a term implied by law. Page 21 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [110] If the test for interference in contractual activity is that the relationship between the parties is unbalanced and one party is at a substantial disadvantage or particularly vulnerable, then the employment relationship would generally qualify. It has been said that the foregoing needs to be the test because of the interests in certainty in contractual activity: Esso Australia Resources v Southern Pacific Petroleum [2005] VSCA 228, per Warren CJ. [111] Whatever the original intention of Priestley JA in Renard, supra, as to the basis of the implication of the duty of good faith in commercial contracts, there can be little doubt that the duty was, in later cases, implied as a matter of law. But I accept, with great respect, the logic that it is impossible to determine whether the duty is necessary to render the contract efficacious, or whether the duty is inconsistent with the other requirements of the contract, unless one has in mind “a content for the obligation of good faith and reasonableness”: Vodafone, supra, at [192] per Giles JA, with whose judgment Sheller and Ipp JJA agreed. [112] It is perhaps important to start with what such a duty is not. A duty of good faith is not a duty of utmost good faith. Further, a duty of good faith is something less than a fiduciary duty. The existence of the duty of good faith allows the parties to retain their economic autonomy or economic liberty: Noranda Australia v Lachlan Resources (1988) 14 NSWLR 1 at 15.B, per Bryson J. See also, with unfeigned respect, the excellent discussion on the duty of good faith by Bergin J in Maitland Main Collieries v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235 at the [54] et seq, in which her honour confines the duty to acts necessary for the parties to have the benefit of the contract or deed. I accept that such a confining is appropriate. [113] While I have sought to make clear that the duty of good faith is not a fiduciary duty, the context in which it arises may be informed by the comments of Mason J in Hospital Products Ltd, supra: That contractual and fiduciary relationships may coexist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. (Hospital Products, supra, at 97 per Mason J.) [114] There have been many definitions or descriptions of good faith. It is used in many contexts. It is inappropriate for me to seek to give an exhaustive exposition of the meaning of good faith as it would apply if it existed in a contract of employment. In the United States, the Restatement (Second) of Contracts ¶ 205 defined “good faith” as follows: The phrase ‘good faith’ is used in a variety of contexts, and its meaning varies somewhat with the context. Good faith performance or enforcement of a contract emphasises faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterised as involving ‘bad faith’ because they violate community standards of decency, fairness or reasonableness. The appropriate remedy for a breach of the duty of good faith also varies with the circumstances. [115] While the above definition may well suffice for present purposes, there is one better suited to the contract of employment, if it were to be held that the implication or construction were to arise therein: ‘Good faith’ in some contexts identifies an actual state of mind, irrespective of the quality or character of its inducing causes; something will be done or omitted in good faith if the party was honest, albeit careless: see, for example, Smith v Morrison [1974] 1 WLR 659 . (Abstinence from inquiry which amounts to a wilful shutting of the eyes may be a circumstance from which dishonesty may be inferred: Jones v Gordon (1877) 2 App Cas 616 at 625 ; English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700 at 707–708 ; The Zamora No 2 [1921] 1 AC 801 at 803 , 812 .) On the other hand, ‘good faith’ may require that exercise of caution and diligence to be expected of an honest person of ordinary prudence.” (Mid Density Developments v Rockdale Municipal Council (1993) 44 FCR 290 at 298, per Gummow, Hill and Drummond JJ) [116] The above definition was said in the context of the statutory construction of a duty imposed upon the Council. It was taken up and utilised in the context of the racial vilification legislation enacted by the Commonwealth. There it was said of s 18D of the Racial Discrimination Act 1975 (Cth): The words ‘good faith’ as used in s 18D involve more than the absence of bad faith, dishonesty, fraud or malice. Having regard to the context provided by the Act, the requirement to act in good faith imposes a duty on a person who does an act because of race, an act reasonably likely to inflict the harm referred to in s 18C, to show that before so acting that person Page 22 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 considered the likelihood of the occurrence of that harm and the degree of harm reasonably likely to result. In short the risk of harm from the act of publication must be shown to have been balanced by other considerations. The words ‘in good faith’ as used in s 18D import a requirement that the person doing the act exercise prudence, caution and diligence, which, in the context of the Act would mean due care to avoid or minimise consequences identified by s 18C. (Bropho v Human Rights and Equal Opportunity Commission (2004) 135 FCR 105 at [144] per Lee J. See also the judgment of French J at [83] to [103]) [117] In the context of an employment relationship, if there exists a duty to act in good faith it “imports a requirement that the person doing the act exercise prudence, caution and diligence,” which would mean due care to avoid or minimise adverse consequences to the other party. [118] In the circumstances before the Court, with the exception of terms relating to wages and an initial trial period, there are no express terms of the contract which would allow the parties to regulate their relationship. The parties envisaged (as would be the case in most contracts of employment) a continuing, indefinite period of employment. During the period of employment, the Church was required to exercise its rights under the contract in a manner which directly affected Mr Russell and which were not discussed, and perhaps not foreseen, when the contract was formed. Likewise, Mr Russell was required to perform work in circumstances which had a direct and binding effect on the Church and which work would be performed in the absence of direct full-time supervision. One need only mention the overseas tours as an obvious example. In those circumstances, it is impossible to imagine that the contract of employment could operate without a duty of good faith. And in those circumstances, the rights and/or duties reposed in either the employer or the employee would need to be exercised honestly and reasonably; with prudence, caution and diligence, and with “due care to avoid or minimise adverse consequences” to the other party that are inconsistent with the agreed common purpose and expectations of the parties to the contract. But all the while, the parties have the capacity to exercise their rights in their own interests. [119] Moreover, the proposition that there does not exist a duty, at least in employees, of good faith in employment contract is contrary to significant authority. Thus if employees (or an employee) were to seek to work strictly in accordance with the terms of an express contract (often called “work to rule”) without exercising good faith, such an employee or such employees would be engaged in industrial action and in breach of their contract of employment: see Secretary Of State for Employment v Associated Society of Locomotive Engineers and Firemen (No 2) [1972] 2 QB 455 ; Sim v Rotherham Metropolitan Borough Council [1987] Ch 216 ; Power Packing Casemakers v Faust [1983] ICR 292 ; Royle v Trafford Borough Council [1984] IRLR 184. Mutual Trust and Confidence [120] Much of what has been said on the duty to act in good faith is relevant to an analysis of whether there exists a duty not, without reasonable and proper cause, to act in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. [121] Much academic debate and some judicial analysis have occurred on this question. I have already referred to some of the judicial pronouncements. Justice Hoeben cites Allsop J in Thomson v Orica Australia [2002] FCA 939. His Honour Allsop J said: [141] However, if one is to approach the matter in straightforward contractual terms there is ample authority for the implication of a term in a contract of employment that the employer will not, without reasonable cause, conduct itself in a manner likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee: Burazin v Blacktown City Guardian (1996) 142 ALR 144 , 151 and the English cases there cited and Daw v Flinton Pty Ltd (1998) 85 IR 1 , 3. Breach of that implied term will entitle the employee to treat himself or herself as wrongfully dismissed. Olson J (sitting at first instance) in Blaikie v South Australian Superannuation Board (1995) 65 SASR 85 , 102–106 and (sitting on the Full Court, though in dissent) in Easling v Mahoney Insurance Brokers Pty Ltd [2001] SASC 22 at [99], if I may say so, expressed the principle with clarity. The principle expressed by Olson J in Easling at [99] was not the subject of any criticism from the majority (Doyle CJ and Bleby J). His Honour said: … Suffice to reiterate that the notion of constructive dismissal implies the existence of conduct on the part of an employer which is plainly inimical to a continuance of a contract of employment according to its express or implied terms. The authorities establish the concept that there is implied in a contract of employment a term that the employer will not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. An intention to repudiate need not be proved. Rather, it is a matter of objectively looking at the employer's conduct as a Page 23 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 whole and determining whether its effect, Judged reasonably and sensibly, is such that the employee cannot be expected to put up with it. [122] As has been earlier mentioned, this implied duty is settled law in the common law of England. There is abundant authority for that proposition. It is often referred to as “the implied duty of trust and confidence”, but like all shorthand expressions such a description glosses over a number of issues. A most interesting aspect of the duty as it is properly expressed is that the conduct that is rendered unlawful has been described as both conduct in a “manner calculated or likely to destroy” and in a “manner calculated and likely to destroy” the relationship of confidence and trust. [123] Another most interesting aspect of the duty is that it is seen to imply a duty not to destroy a particularly described relationship, being the relationship of trust and confidence between employer and employee. The duty is dependent upon the existence of the relationship. But there has been little substantial discussion on the existence of the relationship. [124] That there must exist a relationship of trust and confidence between employer and employee is, again, not a novel concept. At one stage, before recent developments relating to public policy eg Hollis v Vabu, supra, it formed the rationale for vicarious liability. In Hern v Nichols (1701) 1 Salk 289, Holt CJ, in one of the earlier vicarious liability cases, said: The merchant was answerable for the deceit of his factor, though not criminaliter, yet civiliter; for seeing somebody must be a loser by this deceit, it is more reason that he that employs and puts the trust and confidence in the deceiver should be a loser, than a stranger. This is an early example, developed in even stronger language in later years, of the proposition that vicarious liability, in its early days, depended upon a vicarious responsibility for the acts of those agents who were reposed with the trust and confidence of the principal. Those “agents” were employees. [125] At para [91] et seq, infra, I traced the submission and subordination that is involved in an employee entering, and performing work under, a contract of employment. While modern society discourages the use of cudgels, an employee must have confidence in the employer and must trust the capacity of the employer to give directions and conduct operations in a manner which will allow the employee to carry out the work in safety and without harm. It is more than the implied duty for a safe system of work; it is a recognition that for the employee to perform work under the contract, the employee submits to surrounding environments, co-workers and directions over which the worker has no control. Even the most skilled employee depends upon the employer to ensure that the ceiling in the office will not collapse. In that regard the employee places a trust and confidence in the employer. Likewise, the employee depends upon the employer for equipment. It may be only a telephone, or pen and paper. It is impossible, in a theoretical or practical sense, for an employee to perform work independent of the employer and in that regard, and every other, the employee places trust and confidence in the employer. [126] Likewise, the employer reposes trust and confidence in the employee. In the present proceedings, for example, the employee is required to conduct the Choir and supervise a number of people on behalf of the employer. In everything the employee does, in the course of employment, the employer must trust the employee’s judgment, honesty, care and the like because it will bind the employer. Trust and confidence, reposed by each of the employer and employee in the other, is a necessary concomitant of the right to control. It is essential to the contract of employment. [127] In that regard, the second of the implications may be quite different from the first. If one destroys trust and confidence, and trust and confidence is a necessary and essential ingredient of a contract of employment, then the contract of employment is destroyed. Similarly, if one sought to exclude, expressly, the relationship of trust and confidence, if it were a necessary and essential ingredient of employment, one may still have a contract, but it is unlikely to be a contract of employment. Without trust and confidence there is no submission and subordination and no right of control. Without trust and confidence there is no contract of employment. [128] Such an analysis renders the duty not to act in a manner calculated or likely to destroy the relationship of trust and confidence in a fundamentally different position. Unlike most other implied duties, it cannot be excluded unless one does not want to have a contract of employment. If an employee destroys the trust of the employer necessary for the carrying out of the work, the employer would be unable to allow the employee to work and bind the employer. Similarly, if the employer destroyed the trust of the employee necessary for the giving of directions, the whole basis of the employment relationship ceases. [129] The relationship of employer and employee has been described, by the highest authority in his country, as one “importing implied duties of loyalty, honesty, confidentiality and mutual trust.” (Concut v Worrell (2000) 75 ALJR 312 at [51] (3) per Kirby J.) In Concut, the High Court had occasion to examine the common law contract of employment. The majority judgment said: Page 24 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [17] The issues which must be determined are to be understood in the context of the law respecting employment relationships. It would be unusual for this to be purely contractual. Statute may impose obligations to observe industrial awards and agreements (Byrne, supra), and in some instances the relevant terms of the employment relationship may be found in the industrial award which binds the parties at the relevant time (see, e.g., Stratton v Illawarra County Council [1979] 2 NSWLR 701 at 705-706). Further, as Mason J pointed out in Hospital Products, supra, the relationship between employee and employer is one of the accepted fiduciary relationships; their critical feature is that the fiduciary undertakes or agrees to act for or on behalf of, or in the interests of, another person in the exercise of a power or discretion that will affect the interests of that other person in a legal or practical sense. An illustration respecting employer and employee is provided by the decision of Kearney J in Timber Engineering v Anderson [1980] 2 NSWLR 488. … [26] Contractual obligations and fiduciary duties and different conceptual origins, ‘the former’, in the words of McLelland J (United States Surgical Corporation v Hospital Products International [1982] 2 NSWLR 766 at 799), ‘representing express or implied common intentions manifested by the mutual assents of contracting parties, and the latter being descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies’. Formulations of the obligations of an employee in terms of such as those in Pearce and Blyth Chemicals may be understood, Professor Finn has pointed out, as the re-expression of equitable obligations in terms of implied contracts (Finn, Fiduciary Obligations (1977) at page 267). If so, the importation is well established and beneficial, and nothing turns upon it for present purposes. [130] The reference in the foregoing citation to Pearce is a reference to Pearce v Foster (1886) 17 QBD 536 at 539 and the reference to Blyth Chemicals is a reference to Blyth Chemicals v Bushnell (1933) 49 CLR 66. In Blyth, Dixon and McTiernan JJ said, in a passage quoted by the majority in Concut: Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal. (emphasis added) [131] In Concut each of the members of the High Court, other than McHugh J who did not discuss the issue, came to the view, uncontroversially, that there existed as part of the contract of employment a necessary confidence between employer and employee and/or that the relationship of employer and employee at common law is one importing implied duties which included mutual trust. [132] As earlier stated, this is consistent with the approach in England. The leading case in England is Mahmud v Bank of Credit and Commerce International (BCCI) [1998] AC 20 . In that judgment, Lord Nicholls of Birkenhead (with whom Lord Goff of Chieveley, Lord Mackay of Clashfern and Lord Mustill agreed) said: Two points can be noted here. First, as a matter of legal analysis, the innocent employee’s entitlement to leave at once must derive from the bank being in breach of a term of the contract of employment which the employee is entitled to treat as a repudiation by the bank of its contractual obligations. That is the source of his right to step away from the contract forthwith. In other words, and this is a necessary corollary of the employee’s right to leave at once, the bank was under an implied obligation to its employees not to conduct a dishonest or corrupt business. This implied obligation is no more than one particular aspect of the portmanteau, general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages. (at 99) [133] In Mahmud, there were two majority judgments, Lords Goff, Mackay and Mustill also concur in the judgment of Lord Steyn. Lord Steyn said: The employer’s primary case is based on a formulation of the implied term that has been applied at first instance and in the Court of Appeal. It imposes reciprocal duties on the employer and employee. Given that this case is concerned with alleged obligations of an employer I will concentrate on its effect on the position of employers. For convenience I will set out the term again. It is expressed to impose an obligation that the employer shall not: Page 25 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 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:’ see Woods v W. M. Car Services (Peterborough) [1981] ICR 666 , 670 (Browne-Wilkinson J) approved in Lewis v Motorworld Garages [1986] ICR 157 and Imperial Group Pension Trust v Imperial Tobacco [1991] 1 WLR 589 . … [After reference to an anthology of cases on the question and the development of the duty] the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be 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. The evolution of the implied term of trust and confidence is a fact. It has not yet been endorsed by your Lordships’ House. It has proved a workable principle in practice. It has not been the subject of a adverse criticism in any decided cases and it has been welcomed in academic writings. I regard the emergence of the implied obligation of mutual trust and confidence as a sound development. (at 109–110) (Emphasis added). Lord Steyn approved a number of statements in other judgments and learned articles to the effect that: • what is significant is the impact of the employer’s behaviour on the employee rather than what the employer intended; • the aforesaid impact will be assessed objectively; and • the obligation may be broken not only by an act directed at a particular employee but also by conduct which, when viewed objectively, is likely to damage seriously the relationship of employer and employee. [134] I reiterate the comments of Hoeben J that these issues await definitive clarification by an appellate court. In the meantime, the plaintiff claims the existence of both implied terms and part at least of their claim depends on that existence. It is, therefore, necessary for me to determine whether, under the common law of Australia, such implications arise. I determine that they do. Effect of Implied Terms on Termination [135] The employer or employee may terminate a contract of employment by the giving reasonable notice of termination, except to the extent that there is an express provision to the contrary in the contract. The foregoing discussion and conclusion on the existence of the implied terms of good faith and of a duty, without reasonable and proper cause, not to conduct oneself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee, does not deal with the question of whether, and if so how, such duties impact upon the capacity of the employer (or employee) to terminate on reasonable notice. [136] The English cases establish that the implied duties do not touch upon termination: Johnson v Unisys Ltd [2003] 1 AC 518 . Although Lord Hoffmann (with whom Lord Bingham of Cornhill, Lord Nicholls of Birkenhead and Lord Millet agreed) took the view that the courts could imply an obligation to exercise the power of dismissal in good faith. This, he said, “did not mean that the employer could not dismiss without cause. The contract entitled him to do so. But in so doing, he should be honest with the employee and refrain from untruthful, unfair or insensitive conduct. He should recognise that an employee losing his or her job was exceptionally vulnerable and behave accordingly.” [137] In Johnson, there was an express provision in the contract relating to termination of employment. But the existence of an express provision, apart from setting the period of notice, does not alter the rights of either party to terminate on notice. [138] There is no authority, in Australia or in England, for the proposition that the implied terms to which I have referred apply to affect the right to terminate. The plaintiff accepts that limitation and submits that it is possible for the Court to separate out the dismissal from the conduct leading up to the dismissal, namely, the conduct of the investigation and events surrounding it. [139] Apart from the judgment of the House of Lords in Johnson, the matter has been the subject of comment by Spigelman CJ in State of New South Wales v Paige (2004) 60 NSWLR 371. His Honour the Chief Justice, in examining whether psychological injury damages arose for a breach of duty and the developments in the law relating to the contract of employment, discussed the doctrine of coherence and the judgment of a House of Lords in Johnson. His Honour came to the conclusion, as did the House of Lords in Johnson, that no implied duty arose in relation to the termination of employment and that damages for psychological injury did not flow. Page 26 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 [140] The doctrine of coherence to which his Honour the Chief Justice referred may well require such an outcome. It is unnecessary for me to decide that question. First, the plaintiff does not claim an outcome inconsistent with the approach of the Chief Justice. Secondly, the rationale for the implication of the implied terms is a necessity to cooperate in the fulfilment of the contract of employment and/or the necessity to have such implied duties in order to make the contract of employment efficacious. [141] By its nature, an act terminating the contract of employment is inconsistent with the fulfilment of the contract of employment, its continuation, and the necessity to make it efficacious. Almost by definition, the implied duty, not to act to destroy the relationship of trust and confidence, will not interfere with the right of a party to a contract of employment to terminate the contract. It may be that the implied duty of good faith can operate at the point of termination, but it cannot operate in circumstances where the termination is, as a matter of fact and as a matter of law, without cause. [142] In the current circumstances, the Church purported to determine a cause for termination and it is alleged that in the investigation of the truth of that cause, an act prior to the decision to terminate and the termination, both implied terms operate. Denial of Natural Justice [143] The plaintiff alleges that he was denied natural justice in the investigation of the complaint against him. Generally, and disregarding for present purposes the implied duties already discussed, there is no duty, under the common law, to afford natural justice in employment. See, by way of analogy, Public Service Board of New South Wales v Osmond (1986) 159 CLR 656. The law is summarised in Johnson, supra (at 540), by reference to Malloch v Aberdeen Corporation [1971] 1 WLR at 1578, where, at 1581, Lord Reid said: At common law a master is not bound to hear his servant before he dismisses him. He can act unreasonably or capriciously if he so chooses but the dismissal is valid. The servant has no remedy unless the dismissal is in breach of contract and then the servant’s only remedy is damages for breach of contract. [144] If, in the present circumstances, and leaving aside any good faith implication, the Church had chosen, for no reason, to terminate the employment of Mr Russell, it could have done so lawfully by the giving reasonable notice of termination. It could have done so, at common law, without giving a reason and without proving fault. However, this is not how the Church acted. [145] The Church conducted an inquiry as to the allegations that were made against Mr Russell. In doing so it purported to act under the provisions of the Ombudsman Act 1974 (NSW). The Ombudsman Act 1974 (NSW) requires natural justice. Further, the Church represented to Mr Russell that it would abide the rules of procedural fairness (see above). [146] I have set out the circumstances of that inquiry. I do not repeat them. The Church was unaware of the criminal charges against Mr Russell and the circumstances of their dismissal. The Church was unaware of the allegation concerning the “walking in” incident. The Church became aware of the details of these incidents during the meeting on 10 October 2002 and when Mr Russell delivered them some of the material from the Police Brief on 11 October 2002. At the meeting on 10 October 2002, Mr Cooke made clear that one of his concerns was the walking in incident “even if the dates were wrong”. [147] The “walking in” incident was addressed in the written submissions of 21 October 2002 and all of the allegations, and the report of Mr Cooke, were addressed in the submissions of 18 December 2002. It cannot be said, reasonably, in those circumstances, that the plaintiff was denied the opportunity to know and address the matters of concern to the Church and its investigator. [148] Mr Russell’s legal representative and friend, Mr Mitchell, accepted such. It was, on his evidence, “crystal clear” that the “walking in” incident, described by either Mr Buckley or Mr X, was the subject of investigation and that Mr Russell and Mr Mitchell were required to answer it in a manner satisfactory to the Church. [149] As a matter of fact, there is no substance in the allegation that there was a denial of natural justice to Mr Russell. The content of the rules of natural justice depend on the task that is being performed by the decision maker. In an informal context such as employment, even if the rules of natural justice applied, there would not usually be a right of a party to cross-examine. The right of cross-examination is not a necessary element of the rules of natural justice in every context: T. A. Miller v Minister of Housing [1968] 1 WLR 992 at 995 . Wrongful Dismissal [150] As stated previously, there were no express provisions of the contract of employment dealing with the termination of the contract. In those circumstances there is implied in a contract of employment the right of either party to terminate the contract on reasonable notice. The common law does not give a right to terminate a contract of employment on payment in lieu of reasonable notice. In those circumstances, the immediate termination of employment by the Church, and payment purportedly in lieu of reasonable notice, was a breach of the contract for Page 27 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 which, subject to the rules of mitigation, damages are payable. This is a trite proposition and to the extent that authority is required it is best summarised by the High Court in Sanders v Snell (1998) 196 CLR 329: The contract being cast in these terms, it is not possible to implied in it some term that would permit… payment to the respondent in lieu of notice …. That termination was a breach of the contract, for it brought the contract to an end then and there, without first giving the stipulated notice. This was not a case of an employer giving notice of intention to terminate the contract in two months, paying the employee in advance for those two months and saying to the employee that he or she need not attend work during that time (Delaney v Staples [1992] 1 AC 687 at 692 , per Lord Browne-Wilkinson). The payment that was made to the respondent was payment in lieu of notice in the sense of being a payment made after the contract was brought to an end and intended to be set off against, and to extinguish, the damages that ordinarily would be payable for the wrongful termination of the agreement. (Sanders, supra, at 337, 338, [16], [19]). [151] The Church terminated the contract of Mr Russell in breach of contract. Such a finding is relatively obvious and probably uncontroversial. The difficulty arises in assessing what flows from that finding, namely, what if any damages are payable. Any alternative breach of Either Implied Duty [152] The plaintiff, apart from the denial of natural justice, alleges breaches of the implied conditions on the basis of the delay by the Church in responding to the New South Wales Ombudsman's Office, and the failure to inform the plaintiff of the inquiries of the New South Wales Ombudsman's Office between the period from the time it was first contacted until 15 August 2002. Further, the plaintiff complains that for Church did not respond, or did not fully respond, to the New South Wales Ombudsman's Office in a timely fashion. As a matter of fact, the evidence discloses that the plaintiff was first informed on 15 August 2002. Further, the Church could have responded to the New South Wales Ombudsman's Office in a more timely fashion and more fully. But what flows from that? [153] Unless it can be said that the result would have been different (or even may have been different) the timeliness of the response, and the timeliness of the information to Mr Russell, cannot have caused damage. [154] However, the plaintiff alleges that the Church did not establish an inquiry with appropriate terms of reference and procedures to achieve a resolution. In submissions, the plaintiff makes clear that by that allegation the plaintiff intends that the investigation should have been framed in a way which would have led to a final conclusion “whether there had been on the balance of probabilities relevant abuse or improper conduct”. [155] The Church takes the view that the inquiry by Mr Cooke resulted in a finding that, on the balance of probabilities, there were grounds for concluding that the allegation was established. The Church differentiates the role of Mr Cooke, who was to determine whether there were facts sufficient to justify a conclusion that the allegations were correct, and the role of the Dean (and, to some extent, the Cardinal Archbishop), on the advice of others, who is required to make a final decision to dismiss Mr Russell. [156] There is no allegation of bad faith against the Dean. There is no requirement, in the duty of good faith or in order to preserve trust and confidence, for the process to be conducted by one person. The Dean was entitled to have an investigator determine whether there were grounds to justify a conclusion that the allegations were correct and thereafter determine for himself and on behalf of the Church, having heard the plaintiff's response, whether to act upon that report and to terminate the contract of employment. [157] The above paragraph does not determine that the report of the investigator was correct. That is a different question with which I will now deal. [158] During the course of this trial, the Church has not sought to cavil with a finding of the Industrial Relations Commission as to the correctness of the allegation made by Mr X. It could have done so, if it had so chosen, even if the result would have been no different: Miller v University of New South Wales (2003) 127 IR 432. [159] The common law does not allow a court to exercise the functions of the employer. The Commission, in its judgment in this matter, determined that the allegations against Mr Russell were not substantiated and reinstated Mr Russell. In so doing, the Commission determined for itself whether the allegations of sexual abuse were made out. It did this notwithstanding that the focus of s 84(1) of the Industrial Relations Act is the act of the employer in dismissing the employee. It also did this notwithstanding that the criteria in s 88(a) and (b) of the Act focus on the reason of the employer, whether the reason was communicated, its nature and whether it had "a basis in fact". I do not state any of the above by way of cavilling with the approach of the Commission. Its approach seems to be the same as the approach of other industrial tribunals. [160] However the common law must deal with the issue differently. The implied duties, of good faith and/or not, without reasonable or proper cause, to conduct itself in a manner calculated or likely to destroy or damage the mutual trust and confidence between employer and employee, require a balancing, in good faith, of the interests of Page 28 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 the employer against adverse effects it may have on the employee. The Church owed a non-delegable duty to the children who attended St Mary's College to ensure that reasonable care is taken of them while they are on the school premises, including in the circumstances of this case, attendance at St Mary's Choir, participation in which was a condition of their scholarship to attend the College: Geyer v Downs (1977) 138 CLR 91; The Commonwealth v Introvigne (1982) 150 CLR 258. [161] In order for the Church to take the action it did, it was required only to satisfy itself that the continued employment of Mr Russell presented for it an unacceptable risk of injury or harm to the children in its care. Once Mr Cooke concluded, on behalf of the Church, that there were grounds for establishing that the allegations were correct, it was required only to determine that there was a real suspicion. At that point there were grounds for it to dismiss Mr Russell. See, by analogy, Waters v Police Board of New South Wales (1989) 34 IR 146; M v M (1988) 166 CLR 69. [162] Given the nature of the allegations where an employer acts, in circumstances such as this, on suspicion, it is incumbent that the "suspicion" be proven, and its reasonableness be proven, in accordance with the principle and standard explained in Briginshaw v Briginshaw (1938) 60 CLR 336. [163] There was more than sufficient material upon which the Church could have come to the conclusion that it did, on the standards referred to in Briginshaw, namely that there was a real risk to children in its charge and which risk it was not prepared to take. [164] The plaintiff also complains that the Church failed to interview Mr X face-to-face and chose to interview him by telephone. The plaintiff says that such a failure was a breach of the duty of good faith. Whether that is so would depend upon whether the employer, in this case the Church, would in conducting the investigation reasonably be expected, as a matter of prudence, caution and diligence, to undertake the expenditure of travelling to Perth (the location of Mr X) to interview him. This, in turn, would also depend upon the size of the employer, its capacity to operate interstate and its resources. Given the Church's resources and infrastructure, it should have, as a matter of prudence, caution and diligence, and taking into account the significant prejudicial effect of any such investigation, interviewed Mr X face-to-face. It was a breach of the Church's duties to do otherwise. [165] Having found that the Church was in breach of its duties, the question arises as to what damage, if any, flows from that determination. Damages [166] I have found that the Church acted in breach of its duties in failing to do that which an employer acting with prudence, caution and diligence, and balancing its rights against the potential disadvantage to its employee, should have done. [167] The material before the Court includes the entire transcript before the Commission. It also includes the statements tendered in those proceedings. I have read that transcript and those statements and, particularly in this regard, I have read the statement of Mr X and the transcript of his cross-examination. The cross-examination was effective and thorough. However, there is nothing to suggest that absent cross-examination, a different outcome to the inquiry was possible, and certainly no different outcome was more probable than not. Even with such an effective and thorough cross-examination, the result in the Commission as to the allegations is a matter upon which reasonable minds might have differed. [168] In those circumstances, the breach of this duty by the Church has occasioned no damage and none is awarded. Further, the basis of that finding means that there is no consequential damage that might otherwise flow if there had been a breach which may have affected the result of the inquiry. [169] I turn then to the wrongful dismissal. The Church terminated in breach of contract by purporting to pay in lieu of notice. As a consequence, the plaintiff alleges that damages flow. In ordinary circumstances damages would be the reasonable notice that ought to have been given. If the payment of the six months' pay were the payment of reasonable notice, then no damages would flow. [170] Given the unique nature of the position held by Mr Russell, his seniority and the length of service previously enjoyed, reasonable notice ought properly have been no less than 12 months. Of course, because Mr Russell was reinstated, there was in fact no loss of income. [171] Mr Russell claims that, as a consequence, the cost of the reinstatement proceedings before the Commission were reasonable costs of mitigating the damage. [172] The Church submits that the remedy of reinstatement sought and obtained from the Commission is a separate statutory remedy, which grants more than the damage suffered, and that the costs of the reinstatement proceedings are not expenses in mitigating damage. [173] I am of the view that the commencement of the reinstatement proceedings was a reasonable step for the plaintiff. This would be so, even if the proceedings had been resolved unsuccessfully from his perspective. It is a fortiori the case in circumstances where, we now know, the proceedings were successful for the plaintiff. [174] Once the commencement of the reinstatement proceedings is found to be reasonable, without more, the defendants would be bound to make good the expenses associated with those proceedings. This is because the Page 29 of 29 Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney, [2007] NSWSC 104 proceedings are expenses sustained by the plaintiff in mitigating his loss: see Simonius Vischer v Holt & Thomson [1979] 2 NSWLR 322 at 356; Fox v Wood (1981) 148 CLR 438 at 446–447. [175] It seems that this may be treated in two distinct ways. First, it may be said that because reinstatement is not a remedy for breach of contract and goes beyond the normal measure of damage for wrongful dismissal, the reinstatement application was not a step in mitigation of damage. This ignores the fact that as a matter of practicality the damages have been mitigated. Secondly, it may be said that because reinstatement occurred and mitigated the damage, the expenses are recoverable. [176] I refer to the comments of the Chief Justice, previously cited, in State of New South Wales v Paige, supra, relating to coherence. An order for reinstatement mitigates the damage for the wrongful dismissal, but the proceedings and the order arise from a statutory regime, for which the award of costs is exceptional. It would be inconsistent with the purpose of the legislation and the operation of the legislative scheme envisaged by Parliament for this Court to award the costs of those proceedings as a head of damage. [177] If I am wrong in the way that I have treated mitigation, the alternative that I would take is to ignore the reinstatement and its effect and award the payment of reasonable notice, without regard to any payment received as a consequence of the effect of the statutory regime. [178] There are a number of ancillary matters with which I must deal. First, I deal with the expenses of the public relations consultant. The evidence discloses that the public relations consultant was engaged primarily to overcome the damage caused by bad publicity. I make it clear that I find that engaging the public relations consultant was a reasonable step. However, the publicity which was his main focus was publicity generated by the proceedings in the Commission. In those circumstances the expenses of the public relations consultant are not expenses in mitigation of the damage. [179] The underlying assumption in the foregoing is that any injury to reputation was occasioned by the publicity of the proceedings not the fact of dismissal. In those circumstances no damages arise as a result of any injury to reputation. [180] I have outlined at the outset the evidence before me in relation to injured feelings. It is unnecessary, given the state of that evidence, for me to reconcile Addis v Gramophone [1909] AC 488, Johnson, supra, Baltic Shipping v Dillon (1993) 176 CLR 344 and State of New South Wales v Paige, supra. On any view of any of those judgments the evidence does not go far enough to allow general damages for the kind of “injured feelings” to which the plaintiff refers. [181] No negligence can arise without damage and no question arises as to exemplary damages or aggravated damages. Conclusion [182] I find that the contract of employment had implied into it a duty of good faith. There was also an implied duty that the Church would not, without proper and reasonable cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between the parties. [183] I have found that to the extent that there has been a breach of either one of those implied terms, the plaintiff has sustained no damage as a result. [184] I have also found that the Church wrongfully dismissed the plaintiff in that the manner of its dismissal was inconsistent with the implied term that termination could occur on reasonable notice. I find that as a result of that breach, no damage has been sustained. Order [185] In those circumstances I make the following orders: (i) verdict for the defendants; (ii) the plaintiff shall pay the defendants’ costs of and incidental to the proceedings, as agreed or assessed. Counsel for the plaintiff: J J Garnsey QC, R C Titterton Counsel for the defendant: R M Smith SC, A B Gotting Solicitors for the plaintiff: G A Walsh, Greg Walsh & Co Solicitors for the defendants: S Price, Corrs Chambers Westgarth End of Document