State of New South Wales v Shaw CaseBase | (2015) 97 NSWLR 169 | (2015) 248 IR 206 | [2015] NSWCA 97 | BC201502672 NEW SOUTH WALES v SHAW BC201502672 Unreported Judgments NSW · 208 Paragraphs Supreme Court of New South Wales — Court of Appeal Beazley P, Ward and Gleeson JJA 2013/00157047 9 March, 17 April 2015 New South Wales v Shaw [2015] NSWCA 97 Headnotes CONTRACTS — Employment — Probationary teachers — Implied terms — Whether term of mutual trust and confidence implied into employment contract as a matter of law by way of necessity — Whether term of good faith implied into employment contract as a matter of law by way of necessity — Whether breach of any implied term of good faith. CONTRACTS — Employment — Incorporation of extrinsic document — Whether evaluative provisions of Teachers’ Handbook incorporated into employment contract. CONTRACTS — Employment — Repudiation — Whether contract was repudiated — Whether repudiation accepted. COSTS — General rule that costs follow the event. In 1999, Mr Shaw and Ms Salt (the respondents/cross-appellants) were appointed as probationary teachers assigned to the Bourke Public School. The State of New South Wales (the appellant/cross-respondent) was deemed to be their employer pursuant to s 42 of the Teaching Services Act 1980 (NSW) (“the Act”). On 20 March 2000, the respondents’ respective probationary appointments were annulled pursuant to s 48(2) of the Act, and a determination was made pursuant to s 48(4) of the Act that they cease to be employed in the NSW Education Teaching Service. The respondents brought proceedings in the District Court against the State, claiming damages for, among other things, breach of their employment contracts. They alleged, and the primary judge found, that there had been a serious breach by the State of a term of mutual trust and confidence that was implied into the respondents’ contracts of employment. Judgment was entered in their favour but they were awarded no damages. The primary judge rejected their claim that the contracts had been repudiated and, further, accepted the State’s alternative submission that even if there had been such a repudiation, the respondents’ conduct was inconsistent with an acceptance of any such repudiation. His Honour nevertheless awarded costs in favour of the respondents on the basis that they had been the successful parties in establishing a point of legal principle (as to the implication of a term of mutual trust and confidence as a matter of law into contracts of employment). Pursuant to leave granted by the Court of Appeal, the State appealed from the whole of the primary judge’s decision on liability, other than the findings that there was no repudiatory conduct by the State of the contracts of employment, no acceptance by the respondents of any repudiation and no entitlement of the respondents to damages. The State also appealed against the costs decision, other than in respects that were in its favour. The respondents filed a notice of contention seeking to uphold the judgment as to liability and costs and cross- Page 2 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 appealed contending that the primary judge had erred in not finding that their contracts were repudiated by the State and in not finding that they were entitled to damages for the loss of an opportunity to have a teaching career. After the District Court judgment was handed down, the High Court ruled that there was no term of mutual trust and confidence implied as a matter of law into all employment contracts. On this appeal, the respondents nevertheless maintained that such a term was properly found to be implied into their probationary employment contracts and that the primary judge’s decision on liability was correct on the basis that there had been a serious breach of an implied term of good faith, the content of which mirrored (and had been subsumed in the pleading of) the term of mutual trust and confidence. The court (Beazley P, Ward JA and Gleeson JA) held, allowing the appeal and dismissing the cross-appeal: (1) the probationary nature of the respondents’ employment did not require, for the efficacy or worth of their employment contracts, that a term of mutual trust and confidence be implied (Ward JA at [105]; [111], Beazley P at [1] and Gleeson JA at [207] agreeing). Commonwealth Bank of Australia v Barker [2014] HCA 32, applied Commissioner of Police v Eaton [2013] HCA 2, considered (2) it was not demonstrated that a probationary common law contract of employment would be rendered nugatory or worthless or would be seriously undermined or devalued because of the absence of a term of mutual trust and confidence. The fact that employment is of a probationary character does not provide a meaningful point of distinction from the conclusion reached in Commonwealth Bank of Australia v Barker [2014] HCA 32. Such a term does not meet the test in Byrne v Australian Airlines Ltd [1995] HCA 24 ; (1995) 185 CLR 410 (Ward JA at [111], Beazley P at [1] and Gleeson JA at [207] agreeing). Byrne v Australian Airlines Ltd [1995] HCA 24 ; (1995) 185 CLR 410, applied Commonwealth Bank of Australia v Barker [2014] HCA 32, considered (3) had it been necessary to decide whether a duty of good faith was to be implied as a matter of law, by way of necessity, into the respondents’ probationary employment contracts, it would have been concluded that it was not, on the basis that it would not have been necessary that a term of good faith be implied in order to give the respondents’ probationary contracts effective operation in circumstances where a statutory and industrial regime regulated their employment contracts (Ward JA, obiter, at [130], [135]–[136] Beazley P at [1] and Gleeson JA at [207] agreeing). Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104 ; (2007) 69 NSWLR 229, distinguished Commonwealth Bank of Australia v Barker [2014] HCA 32 , considered (4) had a term of good faith, to the effect particularised in the pleading, been found to have been implied by way of necessity into the respondents’ probationary contracts, the findings made by the primary judge did not support a conclusion that there was a breach of any such obligation (Ward JA, obiter, at [137], [155], Beazley P at [1] and Gleeson JA at [207] agreeing). (5) the primary judge erred in finding that the evaluative provisions of the Teacher’s Handbook were incorporated into the respondents’ probationary contracts (Ward JA at [172], Beazley P at [1] and Gleeson JA at [207] agreeing). Goldman Sachs JB Were Services Pty Ltd v Nicholich [2007] FCAFC 120 ; (2007) 163 FCR 6, applied Byrne v Australian Airlines Ltd [1995] HCA 24 ; (1995) 185 CLR 410; Commonwealth Bank of Australia v Barker [2014] HCA 32, reffered to (6) the primary judge did not err in concluding that there was no repudiation of the respondents’ employment contracts by the State. No reasonable person would have concluded that the conduct of the principal was a renunciation either of the probationary employment contracts as a whole or of a fundamental obligation of those contracts (Ward JA at [181]–[183], Beazley P at [1] and Gleeson JA at [207] agreeing). Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 ; (2007) 233 CLR 115, applied Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd [2015] NSWCA 16, referred to (7) the primary judge did not err in concluding that, if there had been a repudiation of the employment contracts by the State as contended for by the respondents, any such repudiation had not been accepted by the respondents as their conduct did not amount to an unequivocal communication that they were treating their contracts of employment as being at an end (Ward JA at [184], [187]–[190]; Beazley P at [1] and Gleeson JA at [207] agreeing). Heyman v Darwins Ltd [1942] AC 356 ; Ryder v Frohlich [2004] NSWCA 472, applied (8) the loss of a teaching career arose not from any acceptance by the respondents of repudiatory conduct by the State but from the annulment of their appointments (with the decision to dispense with their teaching services) and their decision not to make any submissions as to why those decisions should not stand; any damages for breach of an implied duty of good faith would have been limited to the period from 26 November 1999 to the annulment of Page 3 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 their contracts on 20 March 2000 but no such damage was shown or claimed (Ward JA at [193], Beazley P at [1] and Gleeson [JA] agreeing). (9) had the respondents maintained on appeal the finding that there had been a breach of an implied term of mutual trust and confidence on the part of the State, the decision as to costs by the primary judge was so unreasonable, in light of the respondents’ undoubtedly Pyrrhic victory at first instance, as to bespeak error in the House v R sense (Ward JA, obiter, at [203]; Beazley P at [1] and Gleeson JA at [207] agreeing). Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 ; (2009) 76 NSWLR 603, referred to (NSW) Industrial Relations Act 1996 (NSW) Police Act 1990 (NSW) Racial Discrimination Act 1975 (NSW) Teaching Services Act 1980 Agrokor AG v Tradigrain SA [2000] 1 Lloyd’s Rep 497; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd; Automatic Fire Sprinklers v Watson [1946] HCA 25 ; (1946) 72 CLR 435; Beck v LW Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 ; (1977) 52 ALJR 20; Bropho v Human Rights and Equal Opportunity Commission [2004] FCAFC 16 ; (2004) 135 FCR 105; Byrne v Australian Airlines Ltd [1995] HCA 24 ; (1995) 185 CLR 410; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33 ; (2010) 75 NSWLR 245; Commissioner of Police v Eaton [2013] HCA 2; Commonwealth Bank of Australia v Barker [2014] HCA 32; Coulton v Holcombe [1986] HCA 33 ; (1986) 162 CLR 1; Eastwood v Magnox Electric plc [2005] 1 AC 503 ; Ex parte Wurth; Re Tully (1954) 55 SR (NSW) 47; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 ; (2009) 76 NSWLR 603; Goldman Sachs JB Were Services Pty Ltd v Nikolich (2007) FCAFC 120 ; 163 FCR 6; Hawkins v Clayton (1988) 164 CLR 539; Hepstonstall v Gaskin (No 2) [2005] NSWSC 30 ; (2005) 138 IR 103; Heyman v Darwins Ltd [1942] AC 356 ; House v R [1936] HCA 40 ; (1936) 55 CLR 499; Irving v Kleinman [2005] NSWCA 116; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 ; (2007) 233 CLR 115; Lakshmijit v Sherani [1974] AC 605 ; Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 ; McDonald v Dennys Lascelles Ltd [1933] HCA 25 ; (1933) 48 CLR 457; Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65; Norwest Holst Group Administration Ltd v Harrison; Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45 ; (1993) 177 CLR 635; Pacific Brands Sports and Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288; Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd [2015] NSWCA 16; Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 ; (2000) 177 ALR 193; Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104 ; (2007) 69 NSWLR 229; Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217 ; (2008) 72 NSWLR 559 ; (2008) 176 IR 82; Ryder v Frohlich [2004] NSWCA 472; Salt v Director General, Department of Education and Training (EOD) [2007] NSWADTAP 60; Salt v NSW Department of Education and Training [2006] NSWADT 326; Shaw v New South Wales (District Court (NSW), Sorby DCJ, 6 April 2013, unrep); Shaw v New South Wales (District Court (NSW), Sorby DCJ, 10 April 2013, unrep); Shaw v New South Wales [2012] NSWCA 102; Suttling v Director General of Education (1985) 3 NSWLR 427; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165; University of Wollongong v Metwally (No 2) [1985] HCA 28 ; (1985) 60 ALR 68, cited GE Dal Pont, Law of Costs, (2003, LexisNexis Butterworths) GJ McCarry, Aspects of Public Sector Employment Law, (1988, The Law Book Company Ltd) Hamilton, Lindsay and Webster NSW Civil Procedure (2013, Thomson Reuters) MR Freedland, The Personal Employment Contract, (2003, Oxford University Press) Beazley P. [1] I agree with Ward JA. Page 4 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 Ward JA. [2] In 1999, the respondents/cross-appellants (Mr Shaw and Ms Salt) were appointed as probationary teachers assigned to the Bourke Public School. The applicable mandatory probation period was 12 months. Mr Shaw, who had some previous teaching experience, was initially employed from February 1999 at the invitation of the principal as a casual kindergarten teacher and commenced as a permanent probationary teacher in April 1999. Ms Salt, who had no previous teaching experience, was appointed a probationary teacher in January 1999 and was given the role of the Aboriginal Education Resource Teacher at the school. Both are Aboriginal. They were married at the time, with four children, two of whom were students at the school. For convenience, where I refer to the respondents/cross-appellants collectively I will do so simply as the respondents. [3] The appellant is the State of New South Wales (“the State”). The respondents’ appointments as probationary teachers were made under Div 2 Pt 4 of the Teaching Services Act 1980 (NSW) (“the Act”). As such, they were members of the Education Teaching Service and, pursuant to s 42 of the Act, they were deemed to be employed by the Government of New South Wales in the service of the Crown. [4] On 20 March 2000, the respondents’ respective probationary appointments were annulled pursuant to s 48(2) of the Act. At the same time a determination was made pursuant to s 48(4) of the Act that they cease to be employed in the NSW Education Teaching Service from that date. Pursuant to s 48(5) of the Act, there is no entitlement to appeal against such an annulment or any determination made under s 48(4). Section 97(1) of the Act provides, subject to subs (3) which is not here applicable, that nothing in the Act abrogates or restricts the right or power of the Crown to dispense with the services of any person employed in a teaching service. Section 97(2) of the Act provides that any officer whose services have been dispensed with either under s 97(1) or otherwise is not entitled to any compensation. [5] The present proceedings are the latest in a succession of proceedings in which the respondents have sought damages or compensation following the annulment of their probationary appointments. After bringing claims unsuccessfully in the Industrial Relations Commission, before the Anti-Discrimination Board and in the Administrative Decisions Appeal Tribunal, in April 2013 the respondents were successful in obtaining judgment against the State in District Court proceedings (Shaw v New South Wales (District Court (NSW), Sorby DCJ, 10 April 2013, unrep)). [6] In the District Court proceedings, the primary judge found that there had been a serious breach by the State of a term of mutual trust and confidence implied into the respondents’ contracts of employment ([120]). That breach consisted of the act of the school principal (Mr Loxley) in handing to Ms Salt, not in a formal meeting with a support person present but “almost casually in the staffroom or nearby”, an envelope containing a bundle of documents in which there was material “critical of and damaging to” both of the respondents. Included in the material given to Ms Salt was a copy of a letter, sometimes referred to as a petition, signed by other staff expressing concern at their interactions with the respondents. The envelope was given only to Ms Salt but she showed the contents almost immediately to Mr Shaw. Mr Loxley assumed that Mr Shaw would be shown the documents. [7] The primary judge found that both respondents were humiliated by the principal’s act. The respondents announced to the staff that they were walking out of the school. They did so. They did not return to teaching duties. However, they continued to accept payment of their salaries and complied with at least some directions given to them by Department of Education officers until the annulment of their contracts in March 2000. [8] No award of damages was made in their favour. The primary judge rejected the claim that either the State or the respondents had repudiated the teaching contracts ([135]). The primary judge also accepted the State’s alternative submission, which was that even if (which was denied) there had been a repudiation by the State of their contracts, the respondents’ conduct after they walked out of the school was inconsistent with acceptance by the respondents of any such repudiation ([131]–[134]). [9] On 6 June 2013, the primary judge made a costs order in favour of the respondents for all of the costs of the proceedings other than those the subject of existing costs orders. His Honour did so on the basis that the respondents had been successful on the central legal issue in the trial, which his Honour described as the development in the law of the concept of the implied term of mutual trust and confidence. His Honour considered that the respondents could therefore be regarded as the successful parties in the litigation (Shaw v New South Wales (District Court (NSW), Sorby DCJ, 6 April 2013, unrep) at [20]). [10] Pursuant to leave granted by this court on 19 September 2013, the State has appealed from the whole of the primary judge’s decision on liability other than the findings that: there was no repudiatory conduct by the State of the contracts of employment; no acceptance by the respondents of any repudiation; and no entitlement of the respondents to damages. It also appeals from the primary judge’s costs decision, other than insofar as his Honour confirmed both the costs orders made in an earlier interlocutory proceeding before Elkiam DCJ and all the costs orders made prior to 6 June 2013 in the matter. Page 5 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 [11] The respondents have in turn cross-appealed and have filed an amended notice of contention, seeking not only to uphold the primary judgments as to both liability and costs but also contending that his Honour should have found that their contracts were repudiated by the State and that they are entitled to damages as claimed for the loss of the opportunity to have a teaching career. [12] Of relevance to note at the outset is that, after the primary judge’s decisions in this matter, the High Court’s decision in Commonwealth Bank of Australia v Barker [2014] HCA 32 (“Barker”) was handed down. There, the High Court made clear that a term of mutual trust and confidence, such as that which the primary judge in the present case found had been breached by the State, is not as a matter of law implied in all employment contracts. [13] For the reasons that follow, I am of the opinion that the appeal should be allowed and the cross-appeal dismissed. Background [14] As noted, the respondents were appointed as probationary teachers in January and April 1999 respectively. They each commenced work at the school at the beginning of the new school year in February 1999. [15] During the early part of 1999, there were a number of incidents at the school involving interactions between Ms Salt and other teachers. It is not necessary to go into those in any detail. However, mention should be made of a meeting, held at Ms Salt’s request, between Ms Salt and the principal on 31 May 1999, since it shows that by then Ms Salt was aware of issues as to her personal interactions with other staff. [16] Mr Shaw attended the May 1999 meeting as Ms Salt’s “support person”. At that meeting reference was made to Ms Salt’s interaction with other teachers at the school. Mr Loxley says that he mentioned four teachers as examples of staff who felt they were spoken to by Ms Salt in an unacceptable way. Ms Salt referred to “a good few teachers here who are very paternalistic and patronising, and speak down to me as an Aboriginal person”. Mr Shaw’s minutes of the meeting referred to Ms Salt having “targeted” four teachers within the school as having a lack of knowledge of Aboriginal culture and tradition. [17] Before the end of the second term in 1999, there were issues raised by Ms Salt’s supervisor, Mr Sherrard, who was the deputy principal, as to Ms Salt’s performance in her teaching role. Mr Sherrard deposed that he was concerned that Ms Salt was not up to date with her paperwork, particularly in the areas of lesson planning, lesson preparation and programming; and he said that this did not improve. He provided Ms Salt with a note as to matters to be completed by term three week five. [18] Mr Loxley also observed problems between August and November 1999 in relation to Ms Salt’s performance as a teacher. [19] By September 1999, therefore, issues had been raised with Ms Salt both as to her performance as a teacher and as to her interactions with staff. She in turn was complaining about a lack of cultural awareness within the school and a lack of support for her in her role. Mr Shaw maintains that there had been no issues raised as to his teaching performance to that point. [20] A series of incidents then occurred in September 1999 which culminated in the event on 26 November 1999 about which the respondents complain. I summarise the relevant incidents below. 1 September 1999 [21] The respondents were separately involved in incidents at the school on 1 September 1999. The genesis of these was a forthcoming school excursion. The respondents’ son was not on the excursion list. It is not disputed that no parental consent form had been completed by the respondents and no money had been paid by them for the excursion. [22] The first incident involved Ms Salt. She had a conversation with another teacher, Ms Unsworth, in which Ms Salt raised the issue of her son not being on the excursion list. She says that Ms Unsworth told her that the buses were full and that she (Ms Unsworth) had put on the excursion list the children that had paid. Ms Salt told Ms Unsworth that she had put her son’s name down for the excursion a while ago; that she had arranged to pay that day; that they were having financial difficulties; and that she was going to put in the form and pay that day. She says Ms Unsworth did not say anything; just looked at her. Ms Salt says she had a further conversation with Ms Unsworth about five minutes later when she told Ms Unsworth not to be upset and said that she (Ms Salt) was upset that Ms Unsworth did not trust a teacher to pay. Ms Salt then told Mr Shaw about the matter and he said he would “sort it out”. Both Ms Unsworth and another teacher made notes of that incident, copies of which were provided to Ms Salt prior to 26 November 1999. [23] The second incident on that day involved Mr Shaw, who confronted Ms Unsworth in the playground about the issue in a manner that Ms Unsworth found intimidating and aggressive. Mr Sherrard said he became involved in the incident because he was in the playground at the time. There was then a meeting between those three teachers in the principal’s office during which Mr Sherrard says that Mr Shaw complained that his credibility was being questioned and demanded that he be given respect. Mr Shaw was told that his son could take the place of another child on the excursion. The question of payment was raised. Mr Shaw asserted that his son had a right, because he Page 6 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 was Aboriginal, to have the excursion fee paid automatically out of the ASSPA (Aboriginal Student Support and Parent Awareness scheme) funding. Again, notes were made of the relevant incident. [24] Mr Shaw considered that what had happened on 1 September 1999 amounted to racism. He told Mr Sherrard this on 6 September 1999, saying that it was racism “because we are Aboriginal teachers at this school and we had organised to pay for the excursion on pay day, and there were ASSPA funds available anyway, and she [Ms Unsworth] was going to humiliate us, and our son, by not allowing him to go on the excursion”. Nevertheless, in cross-examination, Mr Shaw acknowledged that he had been very irate and angry in his confrontation with Ms Unsworth and that it was inappropriate behaviour “as an Aboriginal parent” but would not concede that it was unacceptable professional behaviour as a teacher toward his colleague. 6 September 1999 [25] The next incident was on 6 September 1999. Ms Salt on that occasion intervened while Mr Sherrard and another teacher, Mr Collins, were disciplining an Aboriginal student. Ms Salt told those teachers, in front of the student, that they were not handling the matter properly. Ms Salt alleged that Mr Collins said “Don’t start with this black fella stuff”. Mr Sherrard and Mr Collins denied that this was said. On their version of events what Mr Collins said was a reference to “white fella stuff”. The incident was reported to the principal. Ms Salt was provided with notes written up of that incident prior to 26 November 1999. Lodgement of various complaints Grievance procedure complaint by Mr Shaw against Ms Unsworth [26] On 7 September 1999, Mr Shaw lodged a “Grievance Procedure Complaint”, described at times as an anti- racism complaint, against Ms Unsworth in relation to the 1 September 1999 incident in which he was involved. Although the complaint was endorsed by Mr Shaw as an “Aboriginal Teacher/Aboriginal Parent”, he insisted that the complaint was lodged on the basis that he was an Aboriginal parent. [27] In his complaint document, Mr Shaw included a section headed “Recommendations” in which he set out three recommendations, each relating to the issue of ASSPA funding. Those were: the provision to all staff of information as to moneys received from the ASSPA by the ASSPA committee; that, as an ASSPA Aboriginal Parent Member, he receive a copy of “the minutes that indicate the motion being accepted moved and seconded by ASSPA Members that Aboriginal students pay monies for school excursions in Bourke Public School by the end of term 3 week 8 1999 school year”; and, as “Acting secretary of the ASSPA Committee”, that every Aboriginal student that attended Bourke Public School excursions during 1999 and paid moneys towards those excursions be reimbursed in full “according to the minutes of the last ASSPA Meeting constructed by the Acting Secretary, which is myself (Mr Shaw)”. [28] After receipt of the complaint, Mr Loxley sought clarification from the chairperson of ASSPA, Mr Dennis, as to the recommendations made by Mr Shaw in respect of ASSPA funding issues. Mr Loxley said (and his Honour accepted this at [77]) that he only spoke to Mr Dennis about the recommendations, not about the complaint of racism itself. [29] Mr Dennis and the ASSPA Treasurer, Mrs Gilby, responded to Mr Loxley in writing on about 13 September 1999 clarifying, inter alia, that it was always the policy of the ASSPA committee that Aboriginal students “pay something for all types of excursions” and that the school used the funds contributed by the ASSPA to subsidise “all the different excursions” throughout the year. The letter also rejected the assertion by Mr Shaw that he was the acting secretary of the ASSPA committee. Mr Loxley provided a copy of this letter to Mr Shaw on 14 September 1999. Mr Shaw subsequently complained that he was humiliated by this (see [31] below). Anti-racism complaint by Ms Salt against Mr Collins [30] On 14 September 1999, Ms Salt informed the principal that she was going to make a complaint about the 6 September 1999 incident with Mr Collins. The following day, Ms Salt lodged an anti-racism complaint against Mr Collins. Mr Loxley was present when Mr Shaw, as the Anti-Racism Contact Officer at the school, subsequently interviewed Ms Salt in relation to the complaint. The respondents refused to provide Mr Loxley with a copy of the complaint, citing confidentiality as the reason. This was regarded by Mr Loxley as an instance of non-compliance by Mr Shaw with lawful directions given by him as the principal of the school. Grievance procedure complaint by Mr Shaw against Mr Loxley [31] On 15 September 1999, Mr Shaw lodged a “Grievance Procedure Complaint” against Mr Loxley alleging a “break [sic] of confidentiality” in respect of his anti-racism grievance complaint against Ms Unsworth. The gravamen of this complaint was that Mr Loxley had handed to Mr Shaw, on 14 September 1999, a brown envelope containing material that Mr Shaw said made him “shocked, utterly disgraced and … humiliated amongst not only the teaching staff … but the whole Aboriginal community of Bourke”. The material to which Mr Shaw referred was not identified Page 7 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 in this complaint. Given the content of Mr Loxley’s 14 September 1999 letter (to which I refer at [35] below), it seems likely that the offending material handed to Mr Shaw on that day included a copy of the letter from the ASSPA chairperson and treasurer responding to Ms Shaw’s recommendations in relation to ASSPA funding issues. [32] On 16 September 1999, Mr Shaw wrote to both the District Superintendent Department of Education and Training, Ms McKerihan, and to Mr Collins, the Teachers’ Federation representative at the school, in relation to “the anti-racism grievance procedure complaint” he had made against Mr Loxley, expressing his “humiliation that Mr Paul Loxley (Bourke Public School Principal/Dubbo District) has created for me as an Aboriginal teacher and an Aboriginal parent”. Mr Shaw wrote that “I will not be an object of ridicule for anyone and I certainly will not be told how to act or be Aboriginal by any non-Aboriginal person”. Other incidents [33] Other incidents around this time should be briefly mentioned. One related to a complaint that Mr Shaw had used the school bus on the evening of 1 September 1999 for private purposes and had not returned it in a clean state. Mr Shaw disputed this. Another related to Ms Salt’s conduct, for which Mr Loxley reprimanded her, in taking a particular child on an excursion to the “Croc Eisteddfod” when that child was on suspension (a fact that Ms Salt said she did not know but which, according to the other teacher involved in the excursion, they both knew). A further incident involved a dispute between Mr Shaw and Mr Loxley as to the calling of a meeting of the AASPA on 20 September 1999. Mr Loxley took issue with Mr Shaw calling the meeting and with Mr Shaw telling him “what [Mr Loxley] could and couldn’t do” in relation to Mr Loxley clarifying the issue as to the convening and venue of the meeting with the chairperson of the ASSPA (Mr Dennis). 14 September 1999 letters raising issues as to the probationary status of each of the respondents [34] On 14 September 1999, Mr Loxley wrote separately to each of Mr Shaw and Ms Salt, expressing his concern as to his (or her) conduct and its impact on his (or her) probationary status. Mr Shaw [35] In his letter to Mr Shaw, Mr Loxley raised the following five issues: (i) the 1 September 1999 incident — the principal asked Mr Shaw to come and discuss the events of that day and what he intended as to Mr Shaw’s new supervision procedures; (ii) a letter from Mr Shaw to the principal on 7 September 1999, in which Mr Shaw had requested Mr Loxley to disregard the formal complaint he had handed to Mr Sherrard on 6 September 1999 as that was incomplete; had referred to the “Anti Grievance Procedures” and indicated that he was seeking an explanation of some kind in relation to this; and had expressed some concern as to the accountability of the whole school team to the policy — Mr Loxley’s letter noted the existence of clear guidelines as to the management of any grievance, and referred Mr Shaw to the policy and the Teachers Handbook; Mr Loxley wrote that they could talk about Mr Shaw’s apparent frustration in the circumstances at the meeting and that he wished to clarify Mr Shaw’s role and responsibility as a teacher and his parental role; (iii) the ASSPA issues raised by Mr Shaw — Mr Loxley attached the letter he had received from the ASSPA on 13 September 1999 and said he wished to clarify in the meeting with Mr Shaw his communication channels as far as the ASSPA committee was concerned and Mr Shaw’s role in the ASSPA committee in relation to his professional responsibilities and his role as a parent; (iv) the school bus issue — Mr Loxley asked for a written response by 16 September 1999 explaining Mr Shaw’s use of the school bus between the time Mr Shaw collected it from school on Wednesday 1 September until he collected students at the school the next morning; and (v) certain advances made to Mr Shaw early in the year, to assist in his move from Brewarrina to Bourke — Mr Loxley said that these had not been repaid in fortnightly instalments as had been promised. (There is no dispute that the bulk of the loans to Mr Shaw and Ms Salt were outstanding as at September 1999.) Ms Salt [36] In the letter to Ms Salt, the principal referred to four issues: (i) the 1 September 1999 incident between Ms Salt and Ms Unsworth “and the incident involving Zeke [Mr Shaw] that followed” — statements from Ms Unsworth and another teacher were attached; (ii) the 6 September 1999 incident involving Mr Collins — statements from both Mr Collins and Mr Sherrard in relation to that incident were attached; Page 8 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 (iii) the Croc Eisteddfod incident; and (iv) the unpaid advances. [37] Mr Loxley asked for a written response from Ms Salt on each of those issues and to have a meeting to discuss her response, at which a support person could be present. [38] After receipt of this letter, Ms Salt asked her supervisor, Mr Sherrard, if he would tell her if there were any problems about her getting her teacher’s certificate. The following day, 15 September 1999, Mr Sherrard wrote to Ms Salt advising that: From what I have noted and the time we have spent looking at programming and working together, I am satisfied that you will have met the requirements if at the end of term your program is up to date as specified on the write up given in week 5 this term. And that you have taught to your timetable. The final decision on whether a Teacher has met the requirements however is made by the Principal. [39] No reference was made in that note to any personal issues that might affect Ms Salt’s probationary status, though by then it appears that Mr Sherrard was aware that a number of the staff had concerns at the interactions between the respondents and members of staff, he having attended a meeting of staff outside the school on or about 13 September 1999 at which issues of that kind were discussed. [40] Contrary to some of the submissions made by the respondents on the appeal, Mr Sherrard’s letter did not amount to a statement that Ms Salt’s progress up to that date was satisfactory or that there were no issues that might affect her probationary status. Rather, Mr Sherrard’s assessment of her progress was expressly made conditional on the satisfactory completion of certain matters and that she had “taught to [her] timetable” by the end of the school year. Mr Sherrard also made clear that the final decision as to Ms Salt’s probationary status rested with the principal. Determination of the various complaints Mr Shaw’s complaints against Ms Unsworth and Mr Loxley [41] On 29 September 1999, the District Superintendent, Ms McKerihan, wrote to Mr Shaw advising him that she had considered all the information provided by him and by Mr Loxley and that she had determined that the incident of 1 September 1999, as described by Mr Shaw, did not fall within the anti-racism grievance procedures and was considered closed. [42] Ms McKerihan also indicated that she did not consider that Mr Loxley’s actions (in clarifying Mr Shaw’s “recommendations” as to the ASSPA funding issues with Mr Dennis) could constitute a breach of confidentiality. Ms McKerihan said that the issues raised by Mr Shaw as a member of staff required investigation. She supported Mr Loxley’s action in establishing the facts of the matter from the most appropriate person (ie, the chairman of the ASSPA committee). She noted that the issues raised by Mr Shaw in this regard concerned the decisions and management of the ASSPA committee. [43] Ms McKerihan’s letter also noted that on 15 September and 22 September 1999 Ms McKerihan had given Mr Shaw verbal directions that he, as a staff member, comply with any instructions given by the principal and she now directed him to ensure he immediately comply with all lawful directions given. Ms Salt’s complaint against Mr Collins [44] As to Ms Salt’s complaint against Mr Collins, by letter dated 11 October 1999 Mr Loxley formally advised Ms Salt that he and Mr Shaw (the Anti-Racism Contact Officer) could not substantiate any racial comment and the complaint against Mr Collins was dismissed. Mr Loxley had apparently earlier conveyed that decision informally to Ms Salt because Ms Salt lodged an appeal with Ms McKerihan from the verbal decision dismissing her complaint on 24 September 1999 and alleged that the principal had not followed the anti-racism grievance procedures properly. Meetings sought by principal with each of Ms Salt and Mr Shaw [45] Between September and November 1999, Mr Loxley was largely unsuccessful in his attempts to arrange a meeting with, or obtain a response from, each of Mr Shaw and Ms Salt to discuss the issues raised in his 14 September 1999 letters. [46] Mr Shaw sent a letter to the principal on 22 September 1999, explaining that other duties apart from his teaching role had taken up much of his time; stating that he could not answer those requests that were currently in a grievance process; responding to the issue in relation to the school bus; and stating that the loan would be “taken Page 9 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 care of in lump sum payments”. On 11 October 1999, Mr Loxley pressed for a response to the issues not mentioned in Mr Shaw’s 22 September 1999 correspondence. No such response was forthcoming. [47] Letters requesting a meeting were sent to Ms Salt on 20 September 1999 and 23 September 1999. Ms Salt’s response was that she considered the letters to be a form of harassment and an unprofessional attempt to intimidate her. Her position was that the issues Mr Loxley wanted clarified were currently being put through the anti- racism grievance procedure. [48] On 23 September 1999, Ms Salt filed an application for compassionate transfer to Brewarrina. Mr Loxley discussed the transfer application with Ms Salt on 24 September 1999 and told her he would not consider the transfer until the issues in his letter of 14 September 1999 had been addressed. [49] By letter dated 24 September 1999, Ms Salt then provided a written response to the four issues raised in the 14 September letter to her. She expressed the belief that the incident involving Ms Unsworth had no reference to her and said that she was in no way rude or unprofessional towards Ms Unsworth. She noted that the issue involving Mr Collins was the subject of the Anti-Racism Grievance Procedure and said nothing further about that. In relation to the Croc Eisteddfod, she stated that she did not know that the child in question was suspended; that she had provided a list of attendees to the principal that morning; and that he had not questioned any of the children attending. As to the advances, Ms Salt said that the moneys would be paid in full “during the next few pays”. [50] On 17 October 1999, Mr Loxley made a notation on Ms Salt’s request for a transfer to the effect that concerns had been identified as to Ms Salt’s probationary status. [51] As at 12 November 1999, Mr Loxley reported to the district superintendent as to his attempts to arrange meetings with each of the respondents. He wrote that Ms Salt had made three appointments to see him but that on the first occasion she went home sick; on the second, her support person could not attend; and on the third she did not sign on again after a strike meeting. He noted that Mr Shaw had made an arrangement to see him but that Mr Shaw had then sent a note to say that no meeting was required to discuss issues. The principal sought Ms McKerihan’s assistance. Ms McKerihan sent a letter to Mr Shaw requesting a meeting with him on 26 November 1999 to discuss his failure to follow lawful instructions. 19 November 1999 meeting with Ms Salt [52] On 19 November 1999, following a request by Mr Loxley for Ms Salt to attend a meeting to discuss her improvement programme, a meeting finally did take place between Mr Loxley and Ms Salt. Ms Salt nominated a “support person”, Ms O’Cheades, to be present at the meeting. Mr Loxley indicated at that meeting that he had concerns with Ms Salt’s work and about the incidents with other teachers, and that he was unable to determine her efficiency as satisfactory for the purposes of the requirements for a teacher’s certificate. [53] The principal specifically raised with Ms Salt the 1 September 1999 incident and that there had been no response to the 14 September 1999 correspondence in that regard. Ms Salt, as acknowledged by her in cross- examination at the hearing, said that she wanted to see all the issues or complaints that were affecting her probation in writing. At the conclusion of the meeting there was discussion about Ms Salt being placed on a formal improvement programme and an extension of her probation into the following year. [54] On 25 November 1999, Mr Loxley signed a principal’s report in relation to Ms Salt in which he recommended that Ms Salt’s efficiency be determined as not satisfying the requirements for the position held and the award of a teacher’s certificate. In evidence there was also an unsigned report containing a similar recommendation in relation to Mr Shaw. In that report, concern was expressed as to Mr Shaw’s ability to program explicitly and systematically for his literacy and numeracy groups; as to his professional relationship at times with other staff members; and as to his non-compliance with lawful directions. 21 September 1999 letter or petition from staff [55] Before outlining what occurred on 26 November 1999, it should also be noted that on 21 September 1999 some 18 members of staff, including the deputy principal, Mr Sherrard, signed a letter to the principal in which they stated, inter alia: As a group some of us are feeling intimidated and concerned by the many incidents that have occurred and seem to continue to occur involving Alison Salt and Zeke Shaw with other members of our staff. [56] The letter stated that the signatories had no problem with any member of staff using the negotiated procedures for conflict prevention and resolution in the Teachers Handbook and referred to the Code of Conduct. The signatories expressed an understanding that certain principles of the Code of Conduct had been breached and said that “write ups” were available on some of the incidents. [57] In its terms, the letter was a written complaint asking for any further issues to go through the appropriate steps of the Teachers Handbook; that the Code of Conduct be examined “as a whole staff”; and that, if that was not successful, an independent chair or nominee come in with a mediator to help address issues. Page 10 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 [58] The signing of the letter followed a meeting of teachers held outside the school at some time in mid- September 1999. Mr Loxley’s evidence was that he did not recall how he received the document or what he did with it. He did not refer to it at the 19 November 1999 meeting with Ms Salt. [59] While neither of the respondents had seen the letter prior to 26 November 1999, in his later interview with Ms McKerihan on 10 December 1999 Mr Shaw is recorded as stating that he had heard the day before (ie, on 25 November 1999) that there was a signed petition or letter “against” Ms Salt and him and that it was “not a very positive note, that revealed no team work at all up to that point”. He also said that he was informed by the Teachers’ Federation representative that there was a petition signed sometime in September. 26 November 1999 [60] It is against the background of the above events, and in particular Ms Salt’s request on 19 November 1999 that she be provided in writing with all issues or complaints that might affect her probationary status, that the conduct of the principal on 26 November 1999 must be understood. Mr Loxley’s evidence was that Ms Salt had made a similar request on 25 November 1999 in the context of a discussion as to why she was not going to get a transfer back to Brewarrina. [61] On 26 November 1999, Mr Loxley gave to Ms Salt an envelope containing a bundle of documents, one of which was a copy of the 21 September 1999 letter. Also included was a copy of the principal’s report on Ms Salt’s performance as well as various notes or “write ups” of incidents involving Ms Salt, copies of at least some of which Ms Salt had already seen. [62] There was a dispute as to precisely where this took place — whether in or just outside the staffroom. The primary judge considered that nothing turned on this. There was no support person present at the time. [63] No issue is taken by the respondents with the primary judge’s analysis (at [106]–[115]) of the event of 26 November 1999 other than the statement at [108] that Ms Salt had already viewed most of those documents. It is submitted that this is incorrect as there were many documents that Ms Salt had not viewed. The main document about which complaint was made, however, was the staff letter or petition. [64] Ms Salt accepted in cross-examination that what Mr Loxley had handed her on 26 November 1999 was the written material that answered the request she had made of him in the 19 November 1999 meeting that he provide all the written material as to complaints or issues that might affect her probationary status. [65] Mr Loxley did not accept that he made an error of judgment giving Ms Salt the envelope in circumstances where he accepted he could understand that Ms Salt would have been worried and concerned about her teaching career. In a portion of the cross-examination to which his Honour referred (at [110]), Mr Loxley said that if he had just given the 21 September 1999 staff petition to Ms Salt when he received it and just walked up to her and said “I need to give you this” that would have been bad judgment on his part. Implicitly, his position was that he had not “just” done so. He said that he had decided to hold out for every chance actually to sit down and hand the document to Ms Salt in a meeting where they could discuss it but that he was not given that opportunity despite having tried everything he could to sit down and discuss a number of issues over a significant length of time. He said: What happened to me on the day of the 26th was it got to the point where Alison wanted to see all the documentation that I had in relation to her probationary status, and — and what was available. I simply did the right thing by then acceding to her request. [66] After being given the bundle of documents, Ms Salt showed them to Mr Shaw, as Mr Loxley accepted he could assume she would do. The respondents then asked the teachers (and the principal, though he did not attend) to meet in the staff room, where Mr Shaw told the teachers present that those who had signed the petition would be held “accountable” and threatened to take the matter to “A Current Affair”. Various teachers made notes of the incident. Ms Salt pointed at one or more of the teachers and said words to the effect that they (she and her husband) had been made to feel as welcome as the Aboriginal children at the school. Mr Shaw then said words to the effect that two Aboriginal staff were walking out of the school that day. The couple left the school without permission and without making arrangements for their classes. Mr Shaw did not attend the meeting that had been arranged that day with Ms McKerihan, who had travelled from Dubbo to Bourke for that purpose. [67] After the respondents walked out of the school, Ms McKerihan wrote to each of them that same day directing them to stay at home on full pay until further notice. (I interpose to note that, on the respondents’ repudiation case, their employment contracts were by now already at an end.) Subsequent events [68] On 8 December 1999, each of the respondents was directed to attend a meeting with Ms McKerihan on 10 December 1999. Each complied with that direction. [69] Ms Salt was advised that an Aboriginal Education consultant would come to support her at Bourke to develop her programme and that, if the probation was extended, a support program would be put in place in consultation Page 11 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 with the Aboriginal Education consultant. Ms Salt said that she could not go back to Bourke School because of the racism. She is recorded in the minutes of the meeting as stating that she would resign rather than go back to Bourke. She made various complaints as to the treatment of her complaint about Mr Collins and about racial discrimination. She described the education department’s policies as amounting to some form of cultural “genocide”. Mr Shaw, in his separate meeting, also made a number of accusations of racism and unfairness. [70] Neither of the respondents is recorded as indicating to Ms McKerihan at their respective meetings that their employment contracts were already at an end. Ms Salt, to the contrary, was raising questions as to what impact there would be on her eligibility for employment again if she were to resign. [71] On 10 December 1999, Ms McKerihan wrote to Ms Salt directing her to return to the school on 14 December 1999. No such direction was made to Mr Shaw. A further direction to Ms Salt to return to the school was made by Ms McKerihan on 13 December 1999. Ms Salt stated that she would not go back until things were sorted out with the principal. Again, this is not consistent with Ms Salt regarding her employment contract as already being at an end by then. [72] On 13 December 1999, Ms McKerihan forwarded to Ms Salt the principal’s report and advised that she was satisfied that Ms Salt did not meet the requirements of a teacher. In that letter, Ms McKerihan said that she recommended a negotiated period of support and extension of probation. She advised that Ms Salt had until 13 January 2000 to request a reconsideration of that decision. Ms Salt did not do so. [73] On 14 December 1999, Ms Salt rang the school reporting that she was sick and was not able to come in. A medical certificate was obtained. Yet again, this is conduct inconsistent with Ms Salt’s employment contract being at an end. [74] Each of the respondents was advised by letter dated 7 January 2000 that the District Superintendent had made a recommendation to the Director-General to annul their probationary appointments. Reasons for that recommendation were provided. On 11 and 13 January 2000, respectively, the respondents were given “show cause” letters in which they were provided with 21 days to make submissions as to why the annulments should not occur. Neither made any response to the letters. [75] By letter dated 20 March 2000, the respondents were advised that the Director-General had annulled their probationary appointments and had determined they would cease to be employed. They did not reply thereto. Tribunal proceedings [76] In April 2000, the respondents commenced unfair dismissal proceedings in the New South Wales Industrial Relations Commission. They subsequently withdrew those proceedings, which were formally dismissed in June 2000. [77] In August 2000, the respondents lodged complaints with the Anti-Discrimination Board of NSW alleging discrimination on the grounds of race. A hearing was held in June 2005. In September 2005, those applications were dismissed (Salt v NSW Dept of Education and Training [2006] NSWADT 326). An appeal therefrom was dismissed by the Appeal Panel in October 2007 (Salt v Director General, Dept of Education and Training (EOD) [2007] NSWADTAP 60). District Court Proceedings [78] On 25 November 2005, the respondents commenced proceedings in the District Court of New South Wales. By reason of the applicable limitation period, the respondents concede that their claim could be based only on events occurring on or after 26 November 1999; ie, from and including the date on which Mr Loxley handed to Ms Salt the bundle of documents containing, among others, the letter signed by staff members. [79] The pleading went through a number of iterations. On 18 February 2011, Elkaim SC DCJ made orders striking out certain paragraphs of what was then the third further amended statement of claim. The respondents sought and were granted leave to appeal from that interlocutory decision. Their appeal was on the whole allowed (Shaw v New South Wales [2012] NSWCA 102) and, with the exception of the negligence claim that had been made in para 11G of the pleading, the orders striking out paragraphs from the third further amended statement of claim were set aside. That had the effect of reinstating the pleaded claim based on an implied term of mutual trust and confidence. [80] By the time of the hearing before Sorby DCJ, the respondents’ pleaded case was as contained in the eighth further amended statement of claim. Relevantly, the respondents pleaded their allegations of breach or repudiation of contract as follows: 4. It was a term of the contracts of employment between the First and Second Plaintiff and the Defendant that the Defendant, through its officers would not act, without just or reasonable cause, in a manner likely to destroy or seriously damage the relationship of mutual trust and confidence between the Plaintiff and the Defendant. Particulars Page 12 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 The maintenance of mutual trust and confidence between the Plaintiff and the Defendant required that: (a) the Defendant would give each of the Plaintiffs reasonable notice of any material critical of them including that provided by staff or others to the Principal; (b) the Defendant would provide each of the Plaintiffs with adequate counselling and support in regard to any difficulties experienced as probationary teachers; (c) the Defendant would not distress and humiliate the Plaintiffs; (d) the Defendant would afford procedural fairness to the Plaintiffs. … 11. By reason of its actions as referred to in paragraph 8 above [the presentation on 26 November of the “petition” signed by staff members], and as detailed below, the Defendant destroyed the mutual trust and confidence between itself and the Plaintiffs. The actions set out in 11 (a), (b), (c) and/or (d) and/or (e) below amounted to a serious breach of the implied term of mutual trust and confidence. Particulars (a) The Defendant did not give any, or any reasonable notice of the Principal’s accumulation of material critical of the Plaintiffs including that which had been provided to him by staff members. (b) The Defendant provided the material critical of both of Plaintiffs to the Plaintiffs in circumstances which caused them distress and humiliation. (c) The Defendant did not provide the Plaintiffs with any or any adequate counselling or support. (d) The Defendant provided the material to the Plaintiffs as a response to a request from the Second Plaintiff for an explanation as to why their probationary status was in jeopardy. (e) That in providing the material without any warning, the Defendant failed to afford procedural fairness to either of the Plaintiffs. 11A.By virtue of the destruction of the term of mutual trust and confidence between the parties, the Defendant repudiated the Plaintiff’s contract of employment. It was therefore open to the Plaintiffs to accept that repudiation which they did by leaving the school on 26 November 1999. … 11C.In the alternative to 11A above, the Defendant destroyed the term of good faith and mutual trust and confidence between the parties by annulling their appointment on 20 March 2000. Particulars See paragraph 11 above. [81] The only reference in the pleading to a term of good faith was that contained in [11C] — an allegation that is not now pressed by the respondents and is inconsistent with the case the respondents maintain as to their acceptance of the repudiation of their contracts on 26 November 1999 (to which I will refer in due course). [82] The particulars provided prior to the hearing of the implied term alleged to have been “destroyed” at [11C] were to the effect that the “term of good faith and mutual trust and confidence” to which reference was there made was the same term as that pleaded in [4]. Those particulars were provided in relation to the sixth further amended statement of claim. There was no subsequent amendment to paras 11C and 4 of the pleading. [83] Alternative allegations were made that the behaviour of the State on 26 November 1999 amounted to a constructive dismissal of the respondents ([11B]); and that the State had breached the employment contract of each of the respondents by failing to implement a scheme of management specified in two documents which it was alleged formed part of the employment contract of the respondents (namely, a 1993 Teachers Handbook and a Page 13 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 February 1995 document entitled “Performance Appraisal for Teachers and Executive Staff other than Principals”) ([11E]). Those allegations appear not to have been separately pressed at the hearing. The Performance Appraisal document, for example, was not tendered at the hearing. Similarly, an allegation of breach of statutory duty was made ([12]) but not pressed at the hearing. In any event they are not issues raised on the appeal. [84] Damages were sought for loss of future earnings and loss of earning capacity. It was alleged that the conduct of the State had damaged the future employment prospects of both the respondents ([11D]). In the case of Mr Shaw an additional sum being an amount equivalent to one year’s pay from 23 March 2007 as an employee development officer in the New South Wales Country Rugby League. That claim related to the allegation that the State had damaged his future employment prospects by advising the New South Wales Country Rugby League, either orally or in writing, that Mr Shaw would not be allowed into New South Wales schools, thereby causing him to lose that employment ([11D(b)]). Appeal [85] As a result of the decision in Barker, the State did not press various of the appeal grounds that had been raised in relation to the issue as to whether there is implied in all employment contracts a term of mutual trust and confidence (see amended notice of appeal). The remaining grounds of appeal that are pressed by the State are grouped in the amended notice of appeal under three headings: the implied term of mutual trust and confidence; the Teachers’ Handbook; and costs. [86] The State seeks to set aside the order for entry of judgment in favour of the respondents that was made by the primary judge and, in lieu, the entry of judgment for the State and an order that the respondents pay its costs of the proceedings and of the appeal. Cross-Appeal/Notice of Contention [87] The respondents, on 27 November 2014, filed an amended notice of cross-appeal, appealing from that part of his Honour’s decision (at [134]–[135]) in which his Honour found that the claim of repudiation was not made out and that the respondents were not entitled to damages. The respondents accept that the grounds of the cross-appeal overlap to a large degree with the issues raised in the amended notice of contention. [88] Broadly, the respondents assert that the cross-appeal is based on four propositions (submissions on the cross-appeal at [4]). First, that a term as particularised at [11] of the pleading was to be implied in the contract by way of necessity (ie, the implied term of mutual trust and confidence). Second, that the pleadings preserved an alternative argument based on good faith. Third, that the primary judge could have proceeded on the basis of repudiation of contract without calling in aid either a term of mutual trust and confidence or a term of good faith. Last, they raise the issue of damages, and contend that damages were available as flowing from “the breach of the particulars set out at para 11 and relied upon for the purposes of 11C” (submissions at [48] for this last proposition). [89] The State submits that if the cross-appeal is restricted to those four issues, then six of the grounds of cross- appeal (1, 2, 3, 4, 5 and 6) must be understood as not being pressed, leaving only those issues adumbrated as grounds 2A, 2B, 2C, 2D and 7. The respondents did not demur from this proposition but neither did they expressly abandon any of their grounds of cross-appeal or contention. The first proposition as identified in their written submissions maintains an argument based on an implied term of mutual trust and confidence by reference to the term particularised at [11]. [90] For that reason, although the respondents did not in oral submissions address the court as to the implication of a term of mutual trust and confidence in the respondents’ probationary employment contracts, it cannot be assumed that it has been abandoned and it will be necessary briefly to address such a proposition in these reasons. That said, the main thrust of the respondents’ oral submissions was that the primary judge’s decision on liability was correct, based on there having been a serious breach by the State of an implied term of good faith — the content of that implied obligation mirroring that which had been particularised in the pleading at [11](a)–(e). [91] The respondents seek orders that the findings in [134]–[135] of the judgment on liability be set aside; and that the State pay damages to them and their costs. In the alternative, an order is sought that the matter be remitted to the District Court with the direction that the trial judge undertake a further hearing of the matter on the basis that the respondents’ cases are each based on a term of good faith implied into each of their probationary contracts. Determination [92] I will address the respective grounds of appeal, cross-appeal and contention under the following headings: (i) implied terms; (ii) the evaluative positions of the Teachers’ Handbook; (iii) repudiation; and (iv) costs. Page 14 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 (i) Implied terms — grounds 2 and 4 of the amended notice of appeal; grounds 2A, 2B, 2C, 2D of the amended notice of cross-appeal; grounds 1, 2 and 2B of the amended notice of contention [93] The primary judge implicitly accepted (at [44]), and noted that in that regard there was no dispute between the parties, that a term of mutual trust and confidence could not be implied in a statutory scheme and that there must be a contract of employment in existence before a term of mutual trust and confidence could be implied in it. Having noted the statutory basis of both the respondents’ appointments (at [45]), his Honour then proceeded, without giving any reasons for his implicit finding to this effect, on the basis that there was a common law contract of employment between each of the respondents and the State (see [61]). [94] The respondents had argued that even though the respondents’ appointments were made under the provisions of the Act there was a common law contract of employment, citing Suttling v Director General of Education (1985) 3 NSWLR 427 and referring to the academic commentary on this issue by G J McCarry, Aspects of Public Sector Employment Law, (1988, The Law Book Company Ltd) at Ch 2. [95] While the State maintains that there was no basis for the finding by the primary judge that there were common law contracts of employment between the State and each of the respondents, it does not press any ground of appeal in relation thereto. There is therefore no issue on this appeal as to the correctness of his Honour’s implicit finding to that effect. [96] What is in issue is whether his Honour correctly found that there was an implied term of mutual trust and confidence in the respondents’ contracts (notwithstanding that he may have done so on the basis, now shown by Barker to be incorrect, that such a term was to be implied in all employment contracts) and, if not, whether his Honour’s decision can be maintained as a finding that there was an implied term of good faith in those contracts which was breached by the State. Implied term of mutual trust and confidence [97] The respondents accept that, following the decision in Barker, a finding that a term of mutual trust and confidence is implied into all employment contracts as a matter of law cannot be maintained. In their amended notice of cross-appeal/amended notice of contention they nevertheless contend that such a term was correctly found by the primary judge to be implied in the respondents’ contracts as a matter of necessity. They maintain that subsumed within such a term is an obligation of good faith. [98] The basis on which the respondents contend that such a term is to be implied as a matter of necessity is the probationary nature of their employment contracts. There is no suggestion that any term is to be implied as a matter of fact; hence it is unnecessary to consider whether the test in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; (1977) 52 ALJR 20 is satisfied. [99] They express the requirement of necessity as follows: The requirement of necessity in regard to the implied term of trust and confidence and which included the term of good faith arises from the fact that the Respondents/Cross Appellants were probationary teachers whose contracts of employment were entered into at the behest of by the Appellant/Cross Respondent. As a matter of necessity the Appellant/Cross Respondent was required to support and nurture the Respondents/Cross Appellants who it had invited to become probationary teachers. [see paragraph 2B of each of the amended notice of cross-appeal and amended notice of contention] [100] There was evidence that the school principal had offered a casual teaching position to Mr Shaw after Ms Salt had been assigned to the school but there was no evidence of any application process entered into by Ms Salt leading up to her assignment to the school nor by Mr Shaw when his casual employment was superseded by his probationary appointment as a teacher at the school. There was, for example, no evidence of any formal application or letters of offer and acceptance leading up to the issue of the letters of appointment. In any event, the significance of the fact, assuming it be the case, that both respondents were “invited” to become probationary teachers or entered into their contracts of employment at the behest of the State was not made clear. [101] The respondents maintain that the term of mutual trust and confidence (which they say was particularised at [11] of the eighth further amended statement of claim though that is in fact a particularisation of the conduct said to amount to a breach of the term), is a necessary incident of a probationary teacher’s contract, on the basis that such a contract consists of the need to develop teaching skills under supervision and instruction. It is submitted that the point of the “bargain” can be characterised as being to the effect that: I will become a probationary teacher, at your invitation because you need indigenous staff at a school such as yours if you promise to give me assistance in developing the necessary skills and behave fairly in assessing my performance. Page 15 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 and that the respondents relied upon the State to provide a fair assessment and management process, without which their positions as probationary teachers were unworkable. [102] Insofar as the respondents’ submissions in this regard focus on the probationary nature of their appointments, this gives rise to the prospect that there would be a disconformity between the content of contracts for the appointment of teachers who were subject to a mandatory period of probation and those who were not, an anomalous result which would be surprising. [103] The circumstances in which a term may be implied by operation of law into a contract were considered in Byrne v Australian Airlines Ltd [1995] HCA 24 ; (1995) 185 CLR 410 (“Byrne”). There, at 450, McHugh and Gummow JJ considered that the concept of “necessity”, as referred to in decisions relating to the implication of terms by law, was one reflecting “the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps be seriously undermined” (there citing Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45 ; (1993) 177 CLR 635 at 647–648, 659). At 453, their Honours referred to the situation where the contract itself would be “deprived of its substance, seriously undermined or drastically devalued”. [104] In Barker, French CJ, Bell and Keane JJ emphasised that the criterion of “necessity” serves to “remind courts that implications in law must be kept within the limits of the judicial function. They are a species of judicial law- making and are not to be made lightly”; hence it is “a necessary condition that [the implied terms] are justified functionally by reference to the effective performance of the class of contract to which they apply, or of contracts generally in cases of universal implications” (at [29]). [105] In the present case, there is nothing in the probationary nature of the respondents’ employment contracts that warrants a conclusion that their employment contracts would be nugatory, worthless, or the like, absent implication of a term of the kind pleaded at [4], the breach of which was particularised at [11]. [106] The employment relationship between the respondents and the State was one that was regulated comprehensively by statute, regulations and binding industrial instruments. As the State points out, under the statutory scheme applicable to probationary members of the Education Teaching Service, the respondents could, during the term of their probation, raise any industrial matter affecting them as a grievance (cl 13 of the relevant award) and there was a process by which an application could be made to the Industrial Relations Commission of New South Wales to hear and determine such a dispute pursuant to the Industrial Relations Act 1996 (NSW) (cl 13.15 of the relevant award). [107] The concept of probationary employment was considered in Commissioner of Police v Eaton [2013] HCA 2 (“Eaton”). There, Heydon J, considering whether the Industrial Relations Commission had jurisdiction under Pt 6 of Ch 2 of the Industrial Relations Act 1996 to determine an unfair dismissal claim in relation to the dismissal of a probationary police officer under s 80(3) of the Police Act 1990 (NSW), considered the import of the word “probationary” ([15]–[16]). His Honour stated that “probation” involves a process of putting to proof; of investigation and examination; “the idea of something in the nature of trial and experiment with a view to determining whether an applicant is to be appointed” (his Honour there quoting what had been said by Street CJ, Roper CJ in Eq concurring, in Ex parteWurth; Re Tully (1954) 55 SR (NSW) 47 at 49). In the present case, there is nothing to suggest that the period of probation for teachers is not for a similar purpose. [108] The statutory regime applicable to members of the teaching service includes a power to extend probation or to annul the appointment at any time during the probationary period or at its conclusion and to do so even if disciplinary processes under s 85 of the Act are on foot. As earlier noted, there is no appeal from a decision to annul a probationary appointment. This tells against the implication of a term of mutual trust and confidence being necessary for the efficacy of the contract. [109] The respondents argue that the present case is distinguishable from Eaton because the latter involved a seeming discordance between two statutory schemes (the Police Act 1990 and the Industrial Relations Act 1996). They submit that the present case concerns the proposition that a statute does not displace a common law right unless there is a clear statement to that effect or the scheme carries within it a necessary implication. Such a submission is, however, predicated on the existence of a common law right — what is yet to be determined is whether there is such a right under the respondents’ employment contracts. [110] The respondents, in the course of argument, accepted that under the applicable statutory regime, a probationary appointment might be annulled, without compensation, for reasons completely removed from a probationary teacher’s performance (say, for economic reasons) (see exchange at T56.49–57). The need for the operation of a term of mutual trust and confidence in those circumstances is by no means apparent. [111] Bearing in mind the caution sounded by the High Court as to the implication of a term of this kind into a broad-ranging class of contracts (see for example their Honours in Barker at [39]), I am not persuaded that the probationary nature of the respondents’ employment required, for the efficacy or worth of their employment contracts, that such a term be implied. If probationary teachers have complaints as to the adequacy of counselling or support in their role or as to the manner in which criticisms of their teaching performance or interpersonal skills Page 16 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 are drawn to their attention or dealt with, there are established grievance procedures which are available to them (as the respondents themselves invoked). It has not been demonstrated that a probationary common law contract of employment would be rendered nugatory or worthless or that it would be seriously undermined or devalued because of the absence of a term of mutual trust and confidence to this effect. The fact that the employment is of a probationary character does not therefore provide a meaningful point of distinction from the conclusion reached in Barker. Such a term does not meet the test in Byrne. [112] Grounds 2 and 4 of the State’s grounds of appeal are made good and, to the extent that the respondents still press their cross-appeal and notice of contention on the basis of an implied term of mutual trust and confidence, the respondents’ grounds on this issue fail. Implied term of good faith [113] The respondents’ principal argument, in oral submissions, was that there was implied in their employment contracts a term of good faith — that being the relevant common law right that they say was not displaced by the statutory appointment regime (see T46.48; T47.1; T47.8-12) and that this could be relied upon as an alternative basis for the primary judge’s finding on liability. Such an argument was raised implicitly by grounds 2C and 2D of the amended notice of cross-appeal, which are predicated on there being in effect a stand-alone term of good faith in their employment contracts: (2C)Further, or in the alternative to the above, the real cause of the First and Second Respondents/Cross-Appellants’ termination of employment and associated loss of teaching career was, in all the circumstances of each case, a fundamental breach of an implied term of good faith. (2D)In all the circumstances, and on the basis of the pleadings as they stood at trial in the Court below, the First and Second Respondents/Cross-Appellants were entitled to mount their case at trial as the law then stood in this Court in regard to the singularity of a term of mutual trust and confidence including the implied term of good faith without losing the right to have their case also considered as a breach of the implied term of good faith alone. [114] The respondents’ position in this regard was that one could simply read the pleaded allegations as if, instead of the phrase “mutual trust and confidence”, where appearing in [4] or elsewhere, there were to be read the words “good faith” (T37.21), the content of which was as identified by reference to the particulars set out in [4](a)–(d) or at [11](a)–(e) of the pleading. [115] The first issue that arises in this context is whether the respondents can, consistently with the principles outlined in University of Wollongong v Metwally (No 2) [1985] HCA 28 ; (1985) 60 ALR 68 at 71 and Coulton v Holcombe [1986] HCA 33 ; (1986) 162 CLR 1 at 8, maintain such an argument on appeal when their case was not so pleaded or run at first instance and/or whether there is an Anshun estoppel that precludes them from so doing, having regard to the principles analysed in Beck v LW Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76 at [94]–[97] and Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33 ; (2010) 75 NSWLR 245. [116] As to the way in which the case was pleaded and run at first instance, I note that on 27 April 2009, the respondents filed a further amended statement of claim, showing the amendments to the amended statement of claim in revision mode. On the same day a document entitled second further amended statement of claim was filed, adopting the amendments that had been shown in revision mode on the further amended statement of claim. [117] Relevantly, what was deleted from the pleading as it had stood before the filing of the April 2009 documents, was the allegation at [3] of the amended statement of claim that it was an implied term of the respondents’ contract of employment that the State, through its officers, would act in good faith towards the respondents. This is clear from the documents to which I have above referred and from the third amended statement of claim which was filed on 22 May 2009, where the relevant allegations were shown as follows: 3. The employment of both the First and Second Plaintiff was at the instigation of the Principal as an officer of the Defendant. 3. It was an implied term of the Plaintiffs’ contract of employment that the Defendant through its officers, would act in good faith towards the Plaintiffs. 4. It was a further term of the contracts of employment between the First and Second Plaintiff and the Defendant that the Defendant, through its officers would not act in a manner likely to destroy or seriously damage the relationship of mutual trust and confidence between the Plaintiffs and the Defendant. Particulars Page 17 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 A term of good faith and The maintenance of mutual trust and confidence between the Plaintiffs and the Defendant required that: (a) the Defendant would give each of the Plaintiffs reasonable notice of any material critical of them provided by staff to the Principal by staff; (b) the Defendant would provide each Plaintiff with adequate counselling and support in regard to any difficulties experienced as probationary teachers; (c) the Defendant would manage the employment of each Plaintiff so as to give them a reasonable opportunity to express their Aboriginality; (d) (c) that the Defendant would not cause distress and humiliation humiliate to the Plaintiffs; (e) (d) that the Defendant would afford procedural fairness to the Plaintiffs. … 11. By reason of its actions as referred to in paragraph 8 above of the above the Defendant breached the term of good faith and destroyed the mutual trust and confidence between itself and the Plaintiffs. … 11A.By virtue of the destruction of the term of good faith and mutual trust and confidence between the parties, the Defendant repudiated the Plaintiff’s contract of employment. It was therefore open to the Plaintiffs to accept that repudiation which they did by leaving the school on 26 November 1999. 11C.In the alternative to 11A above, the Defendant destroyed the term of good faith and mutual trust and confidence between the parties by annulling their appointment on 20 March 2003 2000. Particulars See paragraph 11 above [underlining as per original] [118] The State submits that it can be inferred from the above amendments that the reference to “good faith” in [11C] was simply a typographical error. Whether or not that be so, it must be accepted that the pleading in [11C] as at the time of the hearing in the District Court did include reference to a term of good faith albeit a composite one. I note that, the respondents had advised the State that this was the same term as that pleaded at [4], which is consistent with the pleaded term being a composite term, not with the pleaded term being a stand-alone term of good faith. [119] The decision to plead the implied term in the way it appeared in the final version of the pleading was explained by the respondents’ counsel, from the bar table, as being by reference to the observation made by Basten JA in Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217 ; (2008) 72 NSWLR 559 ; (2008) 176 IR 82 (“Russell”) (at [32]) as to the singularity of the obligation that had in that case been pleaded as two implied terms: the implied term of mutual trust and confidence and the implied term of good faith. [120] At first instance (Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104 ; (2007) 69 NSWLR 229), Rothman J had analysed as two separate terms the alleged implied terms of good faith and of mutual trust and confidence. On appeal, Basten JA considered that it was sufficient to identify them as single obligation, there referring to the statement of Lord Nicholls of Birkenhead in Eastwood v Magnox Electric plc [2005] 1 AC 503 (at 523; [11]), to the effect that the implied term of trust and confidence meant that an employer must treat his employees fairly and must act responsibly and in good faith in his treatment of them. Basten JA (at [33]) then noted the uncertainty as to the scope and extent of the implied duties that had there been alleged and the more limited recognition they had enjoyed in Australia. [121] Clearly, by reference to the substitution of the new [3] in the further amended statement of claim for the pleaded term of good faith and the consequential amendment to [11], there was a forensic decision by the respondents not to rely on a stand-alone obligation of good faith but instead to rely upon a term of mutual trust and Page 18 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 confidence, albeit one that had been recognised in the United Kingdom as encompassing a duty to act fairly and in good faith. To the extent that the retention of the reference to a term of “good faith” in [11C] was intentional, what was pleaded as the alternative allegation at [11C] was a composite term including both good faith and mutual trust and confidence. [122] The respondents argue that they had indicated to the State’s solicitors (in a letter dated 26 July 2007) that in the then proposed amended statement of claim good faith was analysed as a component of mutual trust and confidence. They maintain that the pleading was sufficient to raise an allegation of breach of a term of good faith and that they prosecuted their claim on the basis that the implied term of good faith was an element of the term of mutual trust and confidence. [123] In support of the contention that the conduct of the case in the District Court included an allegation of lack of good faith, reference is made to the respondents’ pre-trial submissions, in which there was an extract from MR Freedland, The Personal Employment Contract, (2003, Oxford University Press) where the author identified the essential private law notion of a requirement of good faith as one of the main bases for the implication of a term of mutual trust and confidence. It is, however, by no means apparent from the inclusion of that extract in the pre-trial submissions that the respondents were to be taken as relying upon an implied term of good faith independent of, or separate from, the implied term of mutual trust and confidence that they maintained included such an obligation. Just such an allegation had initially been pleaded and then deleted. [124] The respondents argue that the central issue in the case was always (T42.8) that the State was not “fair” to them (T25.1). They contend that the primary judge’s findings (at [111] and [120]) amounted to an implicit finding that it was unfair for the principal to have given the bundle of documents to Ms Salt in the manner that he did, given the significant imbalance of power and authority between them. [125] To the extent that a question of reasonableness arises for the purposes of an Anshun estoppel, they argue that it was reasonable for them to proceed on the basis indicated in Russell. Insofar as the case now sought to be run on appeal is different from that agitated below, they contend that the relevant distinction only arose as a result of the majority decision in Barker and that they could not reasonably have been required to maintain a strict separation of mutual trust and confidence and good faith at first instance in the light of appellate authority on that point as it stood at the time. [126] There is force in the submission by the State that, having chosen to plead and argue their case in the way that they did, the respondents should not now be permitted to raise a new case based on some other formulation of the duty said to have been owed to them. Nor can his Honour fairly be criticised for failing to deal with a case based on an implied duty of good faith alone, when that was treated by the respondents as being subsumed by the pleaded term of mutual trust and confidence which his Honour was being urged to accept was implied as a matter of law in their contracts. [127] As to the reasonableness of the respondents not raising a separate or independent allegation of an implied duty of good faith in light of the observations made by Basten JA in Russell, his Honour was not there addressing a pleading issue. He was in effect suggesting that the two implied terms formed part of and could together be considered as a single (or composite) obligation. It was that obligation that the respondents maintained was to be implied into their contracts of employment not some separate obligation (albeit one with precisely the same content). [128] The respondents’ present position appears to be one that focusses on the label to be attached to an obligation that the High Court has said is not to be implied as a matter of law in all employment contracts, so as to argue that, notwithstanding the decision in Barker, their claim for breach of contract can still succeed. The respondents note that in Barker, the High Court did not preclude the implication into particular contracts of a duty of good faith at common law, Kiefel J at [107] observing that the question whether a standard of good faith should be applied generally to contracts has not been resolved in Australia. [129] It is not necessary finally to decide whether, having regard to the manner in which the case was pleaded and run in the District Court, it is now open to the respondents to seek to affirm the judgment on liability on the basis of a breach of an implied obligation of good faith. That is because, for the reasons I come to shortly, even if such a duty were to be implied as a matter of law into their employment contracts (and accepting that such a question has been recognised as still being an unresolved issue — see Kiefel J in Barker at [107]), the findings made by his Honour do not support a conclusion that there was a breach of any such obligation. [130] However, I should note that had it been necessary to decide whether such a duty was to be implied as a matter of law, by way of necessity, into the respondents’ probationary employment contracts, I would have concluded that it was not. [131] Again, the respondents do not contend that the term is to be implied as a matter of fact but as a matter of law and it is the probationary nature of the contracts that the respondents point to as giving rise to the necessity for the implication of such a term. [132] In Russell, at first instance, Rothman J considered the development of the contract of employment (from [84]). His Honour noted that while there had been some “muted acceptance” that in relation to employment Page 19 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 contracts it was arguable that there was an implied obligation to act in good faith ([97]), such a proposition was not generally recognised in Australia; and that it was usually examined in the context of the alleged implied term not to act so as to destroy mutual trust and confidence. His Honour noted that there was little if any clarity as to the content of any such implied duty of good faith. His Honour referred to Irving v Kleinman [2005] NSWCA 116 and Hepstonstall v Gaskin (No 2) [2005] NSWSC 30 ; (2005) 138 IR 103, where what was being considered was the implication of a term of mutual trust and confidence (Russell at [98]). [133] At [117], Rothman J concluded that, in the context of an employment relationship, if (my emphasis) there existed a duty to act in good faith it was one that “ … ‘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”. That language was clearly drawn from Bropho v Human Rights and Equal Opportunity Commission [2004] FCAFC 16 ; (2004) 135 FCR 105 at [143] and [144] where Lee J considered the meaning of the words “good faith” as contained in s 18D of the Racial Discrimination Act 1975 (Cth). [134] In Russell, Rothman J concluded that it was impossible to imagine that the particular contract of employment there in question could operate without a duty of good faith, in circumstances where, with the exception of terms relating to wages and an initial trial period, there were no express terms of the contract which would allow the parties to regulate an employment relationship that the parties envisaged would be a continuing, indefinite period of employment. [135] The present case is distinguishable on its facts from that which led Rothman J in Russell to conclude that it was necessary for the efficacy of the employment contract there under consideration that the alleged terms be implied. Here, there is a statutory and industrial regime which regulated the respondents’ employment contract. Section 25 of the Act provides that, “except in so far as provision is otherwise made by law, the conditions of employment of members of the Teaching Services shall be as may be determined from time to time by the Secretary”. It has not been shown to be necessary, to give the probationary contracts effective operation, that a term of good faith be implied. [136] Nor is it necessary that such a term be implied as an adjunct to the exercise of other contractual rights. Certainly, the respondents did not identify any power exercised by the principal to which an implied duty of good faith was said to attach other than, in oral submissions, to suggest that the principal would presumably have perceived himself to be exercising a management prerogative at the time he handed the documents to Ms Salt. [137] Even if a term of good faith to the effect particularised at [4] (or [11](a)–(e)) were to be implied by way of necessity in the respondents’ probationary contracts, the facts as found by his Honour do not support a conclusion that there was a breach of such a term. [138] The respondents accept that any lack of good faith prior to 26 November 1999 (see for example the particularised conduct at [11](a)) could not found an action for breach because of the applicable limitation period, though they submit that the earlier conduct is relevant in that it manifested itself in the State’s “bad faith” on 26 November 1999 when Mr Loxley handed Ms Salt the bundle of documents. [139] His Honour did not find, nor did the evidence establish, that there was a failure to provide the respondents with counselling or support (11(c)) nor can a complaint of failure to afford procedural fairness (11(e)) be maintained, for the reasons outlined in the State’s submissions on appeal. The conduct particularised at 11(d) does not indicate any basis for a conclusion that there was a breach of an implied duty of good faith. [140] That leaves only the conduct particularised at 11(b) — namely, that material critical to both respondents was provided in circumstances which caused them distress and humiliation. In this regard, the respondents point to his Honour’s reasons at [111] and [120] to argue that there was an implicit finding of a lack of good faith. [141] At [111], the primary judge made reference to the fact that there was “a significant imbalance of power and authority” between Ms Salt and Mr Loxley and said that he understood why Ms Salt would be hurt when she read the letter signed by the 18 teachers, its contents representing “a lack of respect for Ms Salt as a teacher in the school and by way of the use of the word “intimidate” a personal attack as well” (at [112]). This goes no further than to amount to a finding as to the imbalance of power and authority between Ms Salt and the principal. The principal was not a signatory to the offending letter and so cannot be accused of any lack of respect or “personal attack” by reference to the signing by him of such a document. [142] The conclusion by the primary judge at [120] was expressed as follows: Mr Loxley had received complaints about certain behaviour by Mr Shaw and Ms Salt in their roles as teachers inside and outside the classroom. He attempted, on the evidence before me, on a number of occasions, to resolve the issues with Mr Shaw and Ms Salt with limited success. By the morning of 26 November 1999, his frustration, that is what it appeared to be, reached a point where he gave them the bundle of documents containing material critical of and damaging to, both Plaintiffs, to Ms Salt assuming the bundle would be passed on to Mr Shaw. This was an act by the most senior member of staff towards the most junior. It was not done in a formal meeting with a support person, but almost casually in the staffroom or nearby. From the history of the relationship between both Plaintiffs and Mr Loxley in the months preceding, the Page 20 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 act of giving the documents critical of the Plaintiffs, in particular the documents signed by the Plaintiff’s [sic] teaching peers, destroyed the mutual trust and confidence between the Defendant (through Mr Loxley) and both Plaintiffs. Both Plaintiffs were humiliated by the act of Mr Loxley in giving the bundle to Ms Salt. In my view it amounted to a serious breach of the implied term of mutual trust and confidence. [143] I do not read this as a finding that there was any lack of good faith or unfairness in the giving of the documents to Ms Salt. Criticism was certainly made as to the “almost casual” manner in which the documents were handed to Ms Salt and emphasis was placed on the power imbalance between the two. That was clearly the basis of the finding that the effect of Mr Loxley’s actions was to destroy the mutual trust and confidence between the State and the respondents. However, there was no express finding that this constituted a lack of good faith on the part of the principal and the fact that Ms Salt suffered hurt, humiliation or distress on receipt of the documents (or perhaps more likely when she read them) does not of itself bespeak a lack of good faith. One might well suspect that this would have been the respondents’ reaction to the staff letter irrespective of the manner in which it was provided to Ms Salt. [144] The respondents’ position wavered somewhat in the course of oral submissions as to whether the alleged unfairness or lack of good faith lay in the act of giving Ms Salt the bundle of documents in an informal setting (irrespective of the content of the documents) or the act of giving her documents the content of which went “to the heart of her feelings of self-worth in the context of what her colleagues think about her” (see for example, T27.17; T32.37 cf T36.12). Ultimately, however, the respondents’ position must be that it was a combination of the two matters that constituted the lack of good faith, given their acceptance that, had the documents not been critical of Ms Salt, there would have been no issue with the manner in which they were provided to her (see T 36.14) and their implicit acceptance that had the documents been provided at a meeting, such as the 19 November 1999 meeting, when a support person was present there would also have been no such complaint (which follows from the complaint at T 35.25 that this was conduct that “in any run of the mill industrial jurisdiction” could not be explained by reference to the employee having asked for the documents). [145] The respondents assert that the basis of the case that was run before the primary judge was that if the fundamental basis of Ms Salt’s career development was to be questioned it had to be done in a “structured, formal, semi-formal situation, with some support mechanism” and that any employer could not “grab a young employee off the corridor and hand [it] to them in the way that this document was handed to Ms Salt” (see T 35.12–33). [146] The respondents also assert, though this is nowhere to be found in the pleading, that there was bad faith on the part of the State, through Mr Loxley, in his actions on 26 November 1999, having regard to the formulation of the obligation of good faith in Pacific Brands Sports and Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288. There, Finkelstein J suggested that a convenient starting point for considering the content of a covenant of good faith was posing the question whether the impugned conduct was motivated, inter alia, by bad faith. The complaint is that Mr Loxley had not simply done what Ms Salt asked him to do; rather “[h]e used his power and standing and authority over Ms Salt to on 26 November behave in a way that was upsetting and humiliating to her” and to Mr Shaw” (T 35.45). [147] Not only is there nothing in the pleading to warrant a claim now made that there was actual bad faith on the part of the State in the principal’s act in handing the documents to Ms Salt on 26 November 1999, there is nothing in the evidence to support such an allegation. There is no suggestion that Mr Loxley did more than hand Ms Salt the envelope — for example, it is not suggested that he humiliated her by doing so in front of other staff members or that he thrust the staff letter in her face or that he behaved in an aggressive or intimidatory fashion. He simply handed Ms Salt the documents, in an envelope. He said that he did so after she had repeated her request for such material. He recalled that she had made such a request because he said that was why he went back into his office to get the documents. [148] At ground 2(a) of their amended notice of contention, the respondents set out a non-exhaustive list of the reasons by reference to which they contend that his Honour should have found that the State (through the principal) was aware that the bundle of documents would cause hurt, humiliation and distress to the respondents. Those include: that the bundle of documents included the staff letter; that Ms Salt had been told by Mr Sherrard that (apart from what the respondents maintain can only be described as minor issues) her progress was adequate; that the principal’s 14 September 1999 letters “inaccurately represented” the overall performance of both Ms Salt and Mr Shaw; that Mr Shaw was a “more than adequate” teacher and had not been informed of any problems with his performance as a teacher; and that there had been a substantial departure from the criteria and procedure set out in the Teachers’ Handbook (which it is alleged formed part of the employment contracts of each of the respondents). [149] As to the first of those matters, Mr Loxley certainly seems to have foreseen that Ms Salt would not react well to the staff letter since the reason he gave for not handing her the document at the 19 November 1999 meeting was because the intent of that meeting was to extend Ms Salt’s probation and he said he believed that if he had “put all that on the table at that meeting” there was no way he would have been able “to save the situation at all”. However, Page 21 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 there is nothing to suggest that he considered there would be any greater degree of hurt or distress if he handed the document to her in an envelope rather than handing it to her in a meeting such as the 19 November 1999 meeting. [150] As to the significance of Mr Sherrard’s 15 September 1999 “write-up” of Ms Salt’s performance, reliance is placed on this for the assertion that either there was no communication between Mr Loxley and Mr Sherrard or Mr Loxley “chose to ignore Mr Sherrard’s document to pursue his own agenda against Ms Salt”. Apart from the fact that this submission mischaracterises the import of Mr Sherrard’s assessment, there is no basis for the suggestion that Mr Loxley had “his own agenda” against Ms Salt, nor was that put to him. The most that was put to him was that he was “sitting on these documents, waiting to use them at a time of [his] choosing, against Ms Salt” and this was emphatically denied by Mr Loxley. [151] The position as at 26 November 1999 May be summarised as follows. Ms Salt had asked in the meeting on 19 November 1999 that she be given all material in writing that might affect her probationary status. Mr Loxley said she again asked for that material on 25 November 1999. Mr Loxley, having made numerous attempts to meet with Ms Salt to discuss issues including her interactions with other staff, and having sought to put in place an improvement programme and extension of her probation with support for her to achieve satisfactory completion of her probation, did no more than comply with Ms Salt’s request by handing her an envelope containing the documents. [152] Ms Salt found the contents of the documents, some but not all of which she had already seen, upsetting. In particular, she was upset and humiliated by the staff letter or petition, which she had not seen (though Mr Shaw was by that time already aware of its existence). That document put in writing the concerns of staff as to the respondents’ personal interactions with staff matters to which their attention had already been drawn (Ms Salt as early as May 1999). It is clear from the letter that the signatories were seeking to have any further issues dealt with in accordance with established grievance procedures and/or by mediation. [153] Ms Salt was aware that the principal had sought her response (and that of her husband) as to the incidents that had occurred on 1 September 1999 and as to other matters. The principal had sought, without success, on a number of occasions to arrange a meeting with the respondents to discuss the issues raised in his 14 September 1999 correspondence. [154] Both respondents had been made aware that the principal considered there were issues that might affect their probationary status. Ms Salt was aware that there were programming issues that she was required to deal with as well as a requirement that she teach to her timetable for there to be a satisfactory assessment of her progress at the end of the year and that the principal would be the one to make that decision. [155] In those circumstances, no finding could be supported that there was any unfairness or any lack of good faith (let alone a finding of actual bad faith) on the part of Mr Loxley in handing to Ms Salt, otherwise that in the context of a formal meeting, the bundle of documents containing the staff letter. No such finding was expressly or implicitly made by the primary judge. The fact that Ms Salt was humiliated and distressed by the contents of the staff letter, or by being handed that letter in an envelope without a support person present, is not sufficient to amount to a lack of good faith on the part of the principal when handing it to her. There is simply nothing to suggest that this was not a good faith response to Ms Salt’s request to see in writing the material affecting her probationary status. [156] Grounds 2C and 2D of the amended notice of cross-appeal are not made out. (ii) Teachers Handbook [157] The State has raised three grounds of appeal in relation to his Honour’s findings in respect of the evaluative provisions of the Teachers’ Handbook. [158] His Honour considered (from [49]) various provisions of the Teachers’ Handbook and the submissions made by the respective counsel as to whether the Handbook was “contractual in nature in relation to both Plaintiffs’ employment” ([56]). Having done so, his Honour then said at [60]: In my view, applying the dictum of Deane J (as set out in Byrne v Australian Airlines Ltd [1995] HCA 24 at [12]) guided above, the evaluative provisions in the Teachers Handbook I set out earlier, is necessary for the reasonable or effective operation of a contract between both Plaintiffs and the Defendant. [159] The dictum to which his Honour referred was that which was extracted in Byrne at [12], namely that: … in a case where it is apparent that the parties have not attempted to spell out the full terms of the contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular terms is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. Page 22 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 [160] The State maintains that the primary judge erred: 11. in that his Honour misconceived the relevant test for the inclusion of the Teachers Handbook (or parts of it) into the contracts of employment for each of the Respondents; 12. by finding that the “evaluative sections” of the Teachers Handbook formed part of the contracts of employment of the Respondents; 13. by confusing and misapprehending the role of the Teachers Handbook in his determination as to whether common law contracts of employment existed for each of the Respondents. [161] His Honour did not give reasons for his conclusion that it was necessary for the reasonable or effective operation of the probationary contracts that the evaluative terms be included. [162] At the outset, the State raises an argument that the respondents did not plead their case on the basis that the so-called evaluative provisions (cll 1.2.3.7–1.2.3.8) were implied into their contracts of employment, referring to the fact that [11F] of the eighth further amended statement of claim (and the respondents’ further particulars dated 5 March 2009) identified other sections of the Handbook. The State says that his Honour therefore decided the question in a manner inconsistent with the respondents’ pleaded case. [163] However, [11F] of the pleading, as indicated by its heading, appears to be a particularisation of the alleged breaches of contractual conditions contained in the Teachers’ Handbook, not an allegation that only those particular provisions of the Handbook which it was said had been breached were incorporated into the employment contracts. Paragraph 11E, in its terms, appears to plead that the whole of the provisions of the two documents there identified were part of the respondents’ employment contracts. That said, [11F] does not allege any breach of the “evaluative provisions” as such. [164] The State submits that, where the relationship between the parties was comprehensively regulated by the statutory and award scheme, the dictum of Deane J in Hawkins v Clayton (1988) 164 CLR 539 (at 573) (extracted at [159] above) had no application and that the criterion of necessity was not properly applied by his Honour. [165] As to the State’s submission to the effect that regulation of the employment relationship left no room for the implication of terms let alone the incorporation of aspirational and non-contractual policies, the respondents submit that the “suggestions” in the Handbook were necessary in the relevant sense because cl 15 of the Award did not specify the particulars of any performance appraisal scheme. Therefore, it is submitted by the respondents that his Honour’s reference to the dictum of Deane J was correct. [166] The respondents submit that some type of “explicated evaluative system” was necessary in order for performance on probation to be investigated and examined. The respondents, somewhat emotively, submit (at [8]): … The Appellant’s submission essentially is that the Respondents were employed in a vacuum not only without rights but without an entitlement to know how they were being investigated or examined and that the Appellant had no professional responsibility toward them at all. That argument is completely at odds with contemporary standards of employment and personnel management both at law and in human resource management practice. [167] and (at [9]) that: The alleged power of the Director-General to unilaterally annul without the Respondents having any recourse renders nugatory the matters raised at paragraph 6.4 of the Appellant’s Submissions on Appeal [that being a reference to the fact that the award made provision for teacher performance both during and after probationary periods and cl 6 provided that future employment of new employees was dependent upon satisfactory completion of a performance assessment]. [168] The complaint by the State that his Honour failed to give adequate reasons for the conclusion that the evaluative provisions were necessary for the effective operation of the contracts is warranted. It may be inferred from his Honour’s reference to the dictum of Deane J that the basis on which it was concluded that such provisions were necessary was because the contract was incomplete (a finding that would itself be problematic given that, pursuant to s 25 of the Act, the terms and conditions of the employment were to be as determined by the Secretary). However, there is no analysis of how the parties’ imputed intention was determined to be an intention for the incorporation of the evaluative provisions in the Handbook. Insofar as it is suggested that they were necessary because the contracts of employment did not make provision for evaluation and assessment of the progress of a probationary teacher, this again fails to take into account s 25 of the Act. [169] As to whether there was any other basis for the incorporation of those provisions, the State refers to the test in Goldman Sachs JB Were Services Pty Ltd v Nikolich [2007] FCAFC 120 ; (2007) 163 FCR 6 (“Goldman Sachs”) and to Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 ; (2000) 177 ALR 193. Page 23 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 [170] In Goldman Sachs the test as to whether a contract incorporates the provisions of an external document was stated by reference to the parties’ objective intention; namely whether a reasonable person in the position of a promisee would conclude that a promisor intended to be contractually bound by a particular statement (per Black CJ (at [23], there referring to the objective theory of contract as affirmed in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at 179). [171] The primary judge accepted the evidence of both Mr Loxley and Mr Schipp (a permanent officer of the Department of Education and Training in New South Wales who holds the position of Manager of the Staff Efficiency and Conduct Unit, being part of the Employee Performance and Conduct Directorate within the Department), to the effect that the Teachers’ Handbook was not made available to probationary teachers prior to their appointments. [172] The State notes that there was no evidence to support any finding that the respondents had read or relied upon the Teachers’ Handbook in coming to their decision to accept their appointments. The State also points to the language of the evaluative sections of the Teachers’ Handbook as not being promissory in nature. The relevant provisions are described in the Handbook as “suggested criteria” or suggestions. They were aspirational guidelines and no more. [173] Although nothing turns on it for present purposes, in the absence of any finding by his Honour that the State in fact breached any of the evaluative provisions of the Teachers’ Handbook, I am of the opinion that his Honour did err in finding that the evaluative provisions of the Teachers’ Handbook were incorporated into the respondents’ probationary contracts. They were not shown to be necessary in the sense that their absence would render the contracts nugatory or worthless (Byrne and Baker) and there is no basis for a finding that they represented the imputed intention of the parties. Nor is there any basis for a finding that they satisfied the Goldman Sachs test for the incorporation of an extrinsic document into the contracts. [174] Grounds 11–13 of the grounds of appeal are made good. (iii) Repudiation [175] The respondents maintain that his Honour should have found that the conduct of the State, through Mr Loxley, on 26 November 1999 amounted to a repudiation of the contracts of employment, which the respondents accepted as bringing the contract to an end on that date, and that the respondents are entitled to damages for the loss of the opportunity to have a teaching career (see grounds 1, 2, 3–6 of the amended notice of cross-appeal; grounds 3–5 of the amended notice of contention). Further, they contend that such a finding is open without calling in aid a serious breach of either of the alleged implied terms. (As to this last submission, the State maintains that it is not open to the respondents to run such an argument as this was not put below.) [176] In their amended notice of cross-appeal, the respondents contend that acceptance by them of salaries after 26 November 1999 did not reinstate either of their contracts of employment because: in the case of Mr Shaw, he was never directed to return to work, and/or it was not in contemplation of either of the parties that he would so return to work and he did not follow all directions issued by the appellant after 26 November 1999; and in the case of Ms Salt, she did not follow all of the directions issued to her such as returning to work at the school (ground 3 of the amended notice of cross-appeal). [177] Ground 4 of the amended notice of cross-appeal contends that the annulment of the respondents’ appointments was pursuant to the Act, regulations and industrial award, not the contract and therefore his Honour erred in finding that the respondents’ acceptance of moneys, attendance at a meeting on 10 December 1999, and subsequent provision of leave forms reinstated their contracts of employment. [178] Ground 5 of the amended notice of cross-appeal asserts error by his Honour in failing to accept the submission by the respondents that any moneys accepted by them between 26 November 1999 and 20 March 2000 could be dealt with by way of set off as to damages. Ground 6 asserts that the acceptance of moneys from the State “amounted to no more than mitigation of their loss rather than reinstatement of either of their contacts of employment”. [179] The respondents’ contentions in relation to the question of repudiation can be briefly dealt with. Whether there was a repudiation by the State of the respondents’ probationary employment contracts turns on whether the conduct of Mr Loxley, in handing the documents in an envelope to Ms Salt (not in the presence of a support person), and assuming that she would then show the documents to Mr Shaw, was such as to convey to a reasonable person, in the situation of Ms Salt and Mr Shaw respectively, the State’s “renunciation either of the contract as a whole or of a fundamental obligation under it” (Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 ; (2007) 233 CLR 115 (at [44]) per Gleeson CJ, Gummow, Heydon and Crennan JJ; see also Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd [2015] NSWCA 16 at [59] per Barrett JA). [180] “Renunciation”’ in this context refers to “conduct which evinces an unwillingness or inability to render substantial performance of the contract”, or conduct which “evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations” (Koompahtoo Local Page 24 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 Aboriginal Land Council v Sanpine Pty Ltd (at [44]); see also Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd (at [59])). [181] In the present case, the conduct of Mr Loxley was in response to a request made by Ms Salt, first in the course of a meeting to discuss an improvement programme for her and at which an extension of her probationary status had been discussed and then repeated in the context of a query by her as to why her transfer had not been approved. The attempts by Mr Loxley to put an improvement programme in place and to arrange support for Ms Salt so that she could complete her probationary period are wholly inconsistent with the suggestion that there was an unwillingness or inability substantially to perform the employment contract. [182] The fact that the documents in the envelope might cause, or be likely to cause, Ms Salt (and indirectly Mr Shaw) to suffer hurt or distress or humiliation, even coupled with the fact that the documents were being provided to Ms Salt in an informal setting, does not evince an unwillingness or inability on the part of the principal (and hence the State) to render substantial performance of the contract. Still less could it have evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the State’s obligations. [183] No reasonable person could have concluded that the conduct in question was a renunciation either of the probationary employment contracts as a whole or of a fundamental obligation of those contracts. [184] His Honour therefore did not err in concluding that there was no repudiation of the contracts by the State. [185] Nor did his Honour err in concluding that, if there had been a repudiation of the employment contracts by the State, any such repudiation had not been accepted by the respondents’ conduct in walking out of the school. [186] The State submits that if (which it denies) there was any repudiatory conduct by reason of Mr Loxley’s actions on 26 November 1999, the respondents had an election to treat the contract as at an end by accepting the repudiation (McDonald v Dennys Lascelles Ltd [1933] HCA 25 ; (1933) 48 CLR 457 at 469–470; Automatic Fire Sprinklers v Watson [1946] HCA 25 ; (1946) 72 CLR 435 at 450–453; and Byrne at 427–428) and that they affirmed their contracts of employment by: continuing to accept directions from the State; to remain away from the school on full pay, to attend interviews with Ms McKerihan on 10 December 1999 and to submit leave forms to explain earlier unauthorised absences; and by continuing to accept their salaries and entitlements up to 20 March 2000. [187] Whether a repudiation has been accepted by the other contracting party, thus effecting a termination of the contract, is a question of fact unless the alleged acceptance is contained in a document (see Norwest Holst Group Administration Ltd v Harrison [1985] ICR 668 at 679; Agrokor AG v Tradigrain SA [2000] 1 Lloyd’s Rep 497 at 501 per Longmore J). “Acceptance” of repudiation or renunciation of a contract is effected by communicating or making plain to the repudiating party, through either words or conduct, that in view of the wrongful action of that party the innocent party is treating the contract as at an end (Heyman v Darwins Ltd [1942] AC 356 at 361 per Viscount Simon LC; see also Ryder v Frohlich [2004] NSWCA 472 at [117]–[119]). While no particular form of communication is needed, it must be made unequivocally clear that the agreement is being treated as at an end (see Ryder v Frohlich at [117]–[118]; Lakshmijit v Sherani [1974] AC 605 at 616). [188] The conduct of the respondents in walking out of the school was not an unequivocal communication that the respondents were treating their contracts of employment as being at an end. The statement to the effect that “two Aboriginal teachers are walking out of this school” does not make plain that there was no intention on the part of the respondents ever to return or that either of them was treating the contract of employment as at an end. It was conduct that could equally have been consistent with, say, a decision to withhold their services for a time. There had apparently been previous unauthorised absences (for which leave forms were requested and later provided by the respondents). [189] In the absence of an unequivocal acceptance of the alleged repudiatory conduct, the contract was not brought to an end as at 26 November 1999. [190] The equivocal nature of the respondents’ “walk-out” is highlighted by the fact that after the walk-out they continued to accept their salaries (without any suggestion that this was only in mitigation of or by way of set-off against a claim for damages) and they each attended a meeting with Ms McKerihan on 10 December 1999 at which there was no suggestion by either that he or she was no longer subject to an existing contract of employment with the State. Indeed, as previously noted, Ms Salt’s conduct at that meeting was wholly inconsistent with the proposition that there was no longer an employment contract on foot. [191] His Honour therefore did not err in concluding that the conduct of the respondents did not amount to an acceptance of any repudiation that might otherwise have been found to have been constituted by Mr Loxley’s conduct on 26 November 1999. That being so, no question arises as to whether (as raised by ground 4 of the notice of cross-appeal) it was open to the respondents, by accepting payment of their salaries or otherwise, to reinstate a contract of employment in circumstances where that contract related to a teaching appointment made under the provisions of the Act (a somewhat curious proposition in circumstances where there is no suggestion that the statutory appointments had been annulled at that stage). [192] The grounds of cross-appeal and contention relating to the issue of repudiation, whether a repudiation constituted by serious or fundamental breach of one or other of the alleged implied terms or a repudiation arising without reference to any such breach, are not made out. Page 25 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 [193] It follows that it is not necessary to deal with the contentions made by the respondents as to damages (ground 7 of the amended notice of cross-appeal; grounds 4A and 5 of the amended notice of contention). [194] The position of the respondents in this regard is that the damages claimed did not flow from the annulment of the contracts and hence the respondents are not precluded from claiming those damages; rather the damages are consequent on the repudiation of the contracts by the State, as a result of which they lost the opportunity to have a teaching career. Such a submission ignores the fact that on any view of the relevant events the loss of a teaching career arose not from any acceptance by the respondents of repudiatory conduct by the State but from the annulment of their appointments (with the decision to dispense with their teaching services) and their decision not to make any submissions as to why those decisions should not stand. Any damages for breach of an implied duty of good faith would have been limited to the period from 26 November 1999 to the annulment of their contracts and no such damage was claimed (or shown). However, as noted, the question of damages does not arise for determination having regard to the conclusions reached above. (iv) Costs [195] Finally, the State challenges the costs order made by the primary judge in favour of the respondents. Ground 14 of the amended notice of appeal contends that the primary judge erred: 14. by awarding costs in favour of the Respondents in circumstances where: (d) the Respondents had not succeeded in obtaining an award for damages in relation to any cause of action on which they had relied; (e) the Respondents had not succeeded on liability in relation to majority of the causes of action on which they relied; (f) the Respondents put the Appellant to the time and expense of meeting a multiplicity of claims where the majority of claims were not seriously pressed; and/or (g) where the Respondents rejected reasonable offers of settlement that would have avoided the time and expense of the hearing. [196] The respondents maintain in their amended notice of contention that: 6. In addition to the reasons given by His Honour as to his orders as to costs his Honour ought to have found that: In determining judgment in favour of the First and Second Respondents (he did not award nominal damages to the Plaintiffs and it was not necessary that he do so in order to find for the Plaintiffs and or to make an order that the Defendants pay the plaintiffs costs); That the offers of compromise and calderbank offers made by the First and Second Respondents warranted an award of costs in their favour given the following history of offers made by the First and Second Respondents (the Plaintiffs in the Court below): An offer of compromise dated 22 August 2008 being: payment to each plaintiff of $20,000.00 plus costs as agreed or assessed. This was accompanied by an offer of compromise as to costs dated 22 August 2008 being costs in the amount of $45,000.00. An offer of compromise dated 15 February 2011 being: payment to each plaintiff of $20,000.00. This was accompanied by an offer of compromise as to costs dated 15 February 2011 dated 15 February 2011 [sic] being in the amount of $65,000.00. An offer of compromise dated 2 November 2012 being: payment to the first plaintiff of $85,000.00 and payment to the second plaintiff of $75,000.00 plus costs as agreed or assessed. This was accompanied by an offer of compromise as to costs dated 5 November 2012 for the purposes of the above offer dated 2 November 2012 being in the amount of $265,000.00. Page 26 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 A handwritten offer during the trial on 22 November 2012 in the amount of $59,684.00 to the first plaintiff and $62,806.00 to the second plaintiff and costs in the amount of $264,400.00. and/or (c) That the serious breach of the First and Second employment contracts committed by the Appellant warranted an order of costs in their favour. [197] Before the primary judge, the State had pointed to what was said by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 ; (2009) 76 NSWLR 603 (at [685]) (“Franklins”), namely that: If a plaintiff sues for breach of contract and obtains an award of nominal damages, that empty victory usually does not bring with it an entitlement to costs, as the plaintiff usually is not to be regarded as the successful party in the action [198] The State maintained that the respondents had not succeeded in the proceedings as they had failed on causation and had obtained no damages. [199] The respondents maintain that Franklins does not assist the State because that was a case where the plaintiff did not succeed on any issue. They referred to Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 , where Devlin J gave as an example of a case where a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff in the situation where part of the object of the action was to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. [200] On appeal, the respondents point to the fact that they did succeed in obtaining judgment. They submit that it is not the law that a plaintiff who has not succeeded on damages cannot be awarded costs and that the dichotomy of approach historically where it was thought that courts lack jurisdiction to make costs orders against highly successful defendants, only against successful plaintiffs, no longer represents the law (referring to GE Dal Pont, Law of Costs (2003, LexisNexis Butterworths) at [8.48]). [201] In Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65, the court noted that where it is not a primary purpose of proceedings simply to establish or vindicate some legal right, but the primary purpose is to recover substantial damages, ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings. There the court said (at [10]): It would be contrary to modern notions of the efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantively failed in the action. [202] The argument for the respondents is that the “primary event”, for the purpose of determining whether they should have an award of costs, was the making of judgment in favour of both the respondents on the basis that the central context in the litigation was the contention that the implied term of trust and confidence, as comprehended in the judgment in Malik v Bank of Credit and Commerce International SA (In Liq) [1998] AC 20 was a part of Australian law and in apposite circumstances could lead to damages. It was submitted in this regard that the respondents had been successful on the central point in a piece of hard fought litigation extending over approximately seven years and that his Honour had declined to award damages not because a serious breach of the implied term of trust and confidence could not lead to such damages but because in his view the respondents had elected to affirm the contract breached by the State. [203] The appeal from his Honour’s costs order is now moot, in that the outcome of the appeal is that the respondents can no longer contend that they have been the successful party on any relevant issue, let alone the issue they identified before the primary judge (but not on this appeal) as the central issue in the case — ie, whether a term of mutual trust and confidence was to be implied in all employment contracts. [204] Had they maintained such a finding on appeal, the question would have been whether his Honour had erred in the exercise of his discretion in making the costs order that he did. That would have required the State to identify an error in the House v R sense (House v R [1936] HCA 40 ; (1936) 55 CLR 499). I would have been of the view that the decision as to costs was so unreasonable, in the light of the respondents’ undoubtedly Pyrrhic victory, as to bespeak such an error. The offers of compromise to which the respondents themselves point belie the notion that this litigation was primarily about establishing a point of principle. The litigation can only sensibly be understood as having been about the respondents’ claim to compensation or damages for what the respondents maintained was a serious breach and/or repudiation of their employment contracts and in circumstances where it was the latest in a series of attempts by them to obtain such compensation. Page 27 of 27 State of New South Wales v Shaw, [2015] NSWCA 97 [205] In any event, given the conclusions I have reached above, the respondents have not been successful in maintaining the judgment in their favour. There is no reason for the State not to have its costs of the appeal and of the proceedings below. [206] Finally, the State seeks an order that the respondents be jointly and severally liable for the payment of the costs orders sought by it. Unless otherwise specified, an order for costs against two or more parties renders each of them jointly and severally liable to pay the costs concerned (see the cases noted in Hamilton, Lindsay and Webster NSW Civil Procedure (2013, Thomson Reuters) at [r Pt 42.240]). The consequence for which the State contends will follow from the making of the costs orders I have proposed. It is therefore not necessary to make the declaration sought. Orders [207] I propose the following orders: (1) Appeal allowed. (2) Cross-appeal dismissed. (3) Set aside the orders made by Sorby DCJ on 10 April 2013 awarding judgment for both plaintiffs against the defendant and ordering the defendant to pay the plaintiffs’ costs of the trial. (4) In lieu thereof, order that judgment be entered for the defendant against the plaintiffs. (5) Set aside orders 2, 3 and 4 of the orders made by Sorby DCJ on 6 June 2013. (6) Order that the respondents/cross-appellants pay the costs of the appellant/cross-respondent both of the appeal and of the proceedings in the District Court. Gleeson JA. [208] I agree with Ward JA. Order 1. Appeal allowed. 2. Cross-appeal dismissed. 3. Set aside the orders made by Sorby DCJ on 10 April 2013 awarding judgment for both plaintiffs against the defendant and ordering the defendant to pay the plaintiffs’ costs of the trial. 4. In lieu thereof, order that judgment be entered for the defendant against the plaintiffs. 5. Set aside orders 2, 3 and 4 of the orders made by Sorby DCJ on 6 June 2013. 6. Order that the respondents/cross-appellants pay the costs of the appellant/cross-respondent both of the appeal and of the proceedings in the District Court. Counsel for the appellant/cross-respondent: Ms KT Nomchong SC with Y Shariff Counsel for the first and second respondents/first and second cross-appellants: Dr J Berwick Counsel for the appellant/cross-respondent: Hicksons Lawyers Counsel for the first and second respondents/first and second cross-appellants: Eddy Neumann Lawyers End of Document