General protections, adverse action cases; the legal principles

Here is an extract from a recent decision of the Federal Court which deals with, and applies, the current view of that court to the application of the general protections, and in particularly adverse action for exercising a workplace right, to the facts as found by the trial judge. For a full comprehension of the factual and legal issues of the case, I have included a link to the full decision at the foot of this post. There you will find the contesting factual and legal arguments of the parties.

“FAIR WORK ACT CLAIMS

The statutory scheme

  1. Relevantly, the Fair Work Act provided at the relevant times:

87       Entitlement to annual leave

Amount of leave

(1)          For each year of service with his or her employer, an employee is entitled to:

(a)          4 weeks of paid annual leave; or

(b)          5 weeks of paid annual leave, if:

(i)           a modern award applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(ii)         an enterprise agreement applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(iii)         the employee qualifies for the shiftworker annual leave entitlement under subsection (3) (this relates to award/agreement free employees).

Note: Section 196 affects whether the FWC may approve an enterprise agreement covering an employee, if the employee is covered by a modern award that is in operation and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.

Accrual of leave

(2)          An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

Note: If an employee’s employment ends during what would otherwise have been a year of service, the employee accrues paid annual leave up to when the employment ends.

323      Method and frequency of payment

(1)            An employer must pay an employee amounts payable to the employee in relation to the performance of work:

(a)       in full (except as provided by section 324); and

(b)            in money by one, or a combination, of the methods referred to in subsection (2); and

(c)       at least monthly.

Note 1: This subsection is a civil remedy provision (see Part 4‑1).

Note 2: Amounts referred to in this subsection include the following if they become payable during a relevant period:

(a)        incentive‑based payments and bonuses;

(b)        loadings;

(c)        monetary allowances;

(d)        overtime or penalty rates;

(e)        leave payments.

340      Protection

(1)       A person must not take adverse action against another person:

(a)       because the other person:

(i)           has a workplace right; or

(ii)          has, or has not, exercised a workplace right; or

(iii)         proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or

(b)           to prevent the exercise of a workplace right by the other person.

Note: This subsection is a civil remedy provision (see Part 4-1).

341      Meaning of workplace right

Meaning of workplace right

(1)       A person has a workplace right if the person:

(c)       is able to make a complaint or inquiry:

(ii)          if the person is an employee—in relation to his or her employment.

342      Meaning of adverse action

(1)           The following table sets out circumstances in which a person takes adverse action against another person.

Meaning of adverse action
Item Column 1
Adverse action is taken by …
Column 2
if …
1 an employer against an employee the employer:
(a) dismisses the employee; or
(b) injures the employee in his or her employment; or
(c) alters the position of the employee to the employee’s prejudice; or

 

360      Multiple reasons for action

For the purposes of this Part, a person takes action for a particular reason if the reasons for the action include that reason.

361     Reason for action to be presumed unless proved otherwise

(1)       If:

(a)           in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and

(b)            taking that action for that reason or with that intent would constitute a contravention of this Part;

it is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.

(2)            Subsection (1) does not apply in relation to orders for an interim injunction.

545     Orders that can be made by particular courts

Federal Court and Federal Circuit Court

(1)           The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.

Note 1: For the court’s power to make pecuniary penalty orders, see section 546.

Note 2: For limitations on orders in relation to costs, see section 570.

Note 3: The Federal Court and the Federal Circuit Court may grant injunctions in relation to industrial action under subsections 417(3) and 421(3).

Note 4: There are limitations on orders that can be made in relation to contraventions of subsection 65(5), 76(4), 463(1) or 463(2) (which deal with reasonable business grounds and protected action ballot orders) (see subsections 44(2), 463(3) and 745(2)).

(2)          Without limiting subsection (1), orders the Federal Court or Federal Circuit Court may make include the following:

(b)           an order awarding compensation for loss that a person has suffered because of the contravention;

When orders may be made

(4)       A court may make an order under this section:

(a)       on its own initiative, during proceedings before the court; or

(b)       on application.

  1. A person who contravenes the Fair Work Act is liable to a pecuniary penalty by force of s 546(1).
  1. The Long Service Leave Act provided as at March 2017 in s 4(1) that an employee is entitled to long service leave payable on ordinary pay in respect of his or her service with an employer. Under s 10(1) an employer who contravenes that Act is liable to a penalty not exceeding 20 penalty units.

Applicant’s submissions

  1. Mrs Leggett claimed that the Club had taken adverse action because:

(1)          Mr Rudolph wrote the 10 October email requiring her to attend his office to discuss her work performance and so injured, or threatened to injure her, in her employment in contravention of s 340, because she had exercised her workplace right to make the complaint in her 9 October email (the first s 340 claim);

(2)          Mr Rudolph caused the Club to withhold payments of her entitlements in respect of all race meetings held between 20 October 2016 and 11 December 2016 and again between 25 January 2017 and 13 March 2017, removed her name from the race books for those meetings and informed staff and sponsors that she would not be returning to her job, because, first, she had exercised her workplace right to take sick leave and, secondly, had complained about Mr Rudolph (the second s 340 claim).

  1. Mrs Leggett also pleaded that the Club contravened the Fair Work Act by not paying her annual and long service leave and commissions and that this, in addition, was in contravention of ss 87 and 323. As well, she claimed at the trial that the Club had contravened s 4 of the Long Service Leave Act by not paying her accrued long service leave at the time that she accepted the Club’s repudiation of her contract of employment.

The Club’s submissions

  1. The Club argued that Mrs Leggett had not pleaded and therefore could not rely on the presumption in s 361(1) of the Fair Work Act in support of her claims that the Club had taken adverse action against her. The Club argued that Mr Rudolph’s evidence should be accepted and that he did not take adverse action for any of the reasons Mrs Leggett relied on for both the first and second s 340 claims. It contended that counsel for Mrs Leggett had not put directly to Mr Rudolph that he had acted because she had exercised her workplace rights, as she alleged, and that therefore no adverse finding could be made against the Club. It submitted that Mrs Leggett’s 9 October 2016 email was not a complaint “underpinned by an entitlement or right to make it” as held in PIA Mortgage Services Pty Ltd v King (2020) 274 FCR 225 at 229–230 [13]–[14]. It argued that her complaint was “entirely untethered to any identifiable source or entitlement”. It contended that Mr Rudolph did not know of any bullying allegation and that Mrs Leggett’s description of herself as “downtrodden” was too general and could describe indiscriminately emotions or feelings of any degree that an employee might experience.
  1. While the Club accepted that the calling of the performance meeting could constitute adverse action, as could the failure to pay commission, it argued that merely because Mr Rudolph had sent the 10 October email did not entail that he had taken adverse action because of Mrs Leggett’s alleged complaint.  It argued that his evidence was “unchallenged” that he sent his email because he wanted to discuss how she was feeling and ascertain examples of why she believed that she had been questioned unreasonably.
  1. In relation to the second s 340 claim, the Club accepted that the taking of sick leave can be a workplace right. But, it contended, Mr Rudolph’s evidence explained that the reason he caused Mrs Leggett not to be paid commission was because she “was not taking those bookings, there was no commission to be paid to her” and he was still trying to understand how her commission ought to be calculated. The Club submitted that, on the facts, Mr Rudolph did not make the deliberate decision not to pay commission because Mrs Leggett was on sick leave, but because he thought, rightly or wrongly, that she had not taken the bookings.

Consideration

  1. I reject the Club’s argument on the first and second s 340 claims.
  1. It is not necessary to plead the effect of s 361 of the Fair Work Act.  First, all that s 361 requires is that the applicant allege that a person took, or is taking, action, for a particular reason or with a particular intent, and that taking the action for that reason or with that intent would constitute a contravention of Pt 3-1 of the Act. Once such an allegation is made, s 361(1) creates a presumption that the action was, or was being taken, for that reason or with that intent “unless the person proves otherwise”. The material fact that s 361(1) requires to be pleaded is the allegation that the person took action for a particular reason, or with a particular intent, and that to do so would constitute a contravention of Pt 3-1. The section does not require the pleading of the presumption that it creates once the material fact has been alleged, namely that the action was taken for a reason or with an intent that would constitute the contravention. Thus, once the applicant makes such an allegation, he or she has no onus to prove it. Secondly, s 361(1) also creates an evidentiary onus on the person alleged to have taken action for a particular reason, to negate the existence of that reason forming any substantive part of his decision to take the action. In other words, the applicant’s allegation will be presumed true unless the respondent proves that it is not. Thirdly, the parties fought this case well understanding that Mrs Leggett was relying on the presumption and the Club did not suggest that it would have acted differently if s 361(1) had been pleaded.
  1. In Rumble v Partnership (t/as HWL Ebsworth Lawyers) (2020) 275 FCR 423, Rares and Katzmann JJ said at 430–431 [33]:

The High Court observed that the Parliament intended ss 360 and 361 to provide a balance between the parties to a workplace dispute by, first, establishing a presumption in favour of an employee who alleges that an employer had taken, or is taking, adverse action against him or her because of a particular circumstance or fact of the kind specified in any of ss 340, 346, 351 or 354 and, secondly, enabling the employer to rebut that presumption (Barclay 248 CLR 500 at [61] per French CJ and Crennan J, [103]-[105], [127]-[128] per Gummow and Hayne JJ). The presumption and onus that ss 360 and 361(1) create are necessary because the employee cannot know or prove what was in the decision-maker’s mind when he or she took the adverse action. The court must enquire into, and make findings about, the mental processes of the decision-maker for taking the adverse action complained of (at [44]-[45], [62], [101], and per Heydon J at [140]).

(emphasis added)

  1. The critical issue is about the person’s conscious mental processes in forming the reason or intent for taking the action: i.e. why was the adverse action taken?  The Club’s argument was without substance.
  1. Mr Rudolph’s evidence that he was shocked about Mrs Leggett’s version of events and “concerned as to how she was feeling on Sunday night” was implausible.  His credibility generally was squarely challenged in cross examination.  There was no expression of concern in his reply of 10 October 2016.  He had been taking legal advice in responding to some of Mrs Leggett’s communications since her email of 20 July 2016.  Once again, that earlier cri de coeur received not a word of empathy or concern about her wellbeing.  A requirement that she attend a discussion about work performance is the antithesis of a communication of concern for Mrs Leggett’s welfare.  I do not believe Mr Rudolph’s evidence that he did not understand the 9 October email, requesting him to raise it with the board, as a complaint.  The email was clearly a complaint about his behaviour towards and treatment of her.  What else, one must ask, was the “untenable situation which needs to be resolved” by referring the matter to the board?
  1. In Alam v National Australia Bank Ltd (2021) 393 ALR 629 at 658 [97], White, O’Callaghan and Colvin JJ held that the correct construction of s 341(1)(c) is that applied by Greenwood, Logan and Derrington JJ in Cigarette & Gift Warehouse Pty Ltd v Whelan (2019) 268 FCR 46 at 55–56 [28], who endorsed as “unremarkable and correct” what Collier J had held at the trial in Whelan v Cigarette & Gift Warehouse Pty Ltd (2017) 275 IR 285 at 298 [33]–[34]. In Alam 393 ALR at 653 [81], the Full Court identified the construction of s 341(1)(c) at which Rangiah and Charlesworth JJ arrived in PIA Mortgage 274 FCR 225 at 229–230 [13]–[14] as requiring a complaint within the meaning of s 341(1)(c) to be “underpinned by an entitlement or right” derived from an instrumental source. The Full Court held that this was inconsistent with the ratio decidendi of Whelan 268 FCR 46 at 55–56 [28], that did not require that an instrumental source underpin the right or entitlement to complain: Alam 393 ALR at 653 [81]. White, O’Callaghan and Colvin JJ held that they should follow Whelan 268 FCR 46 so that the right or entitlement to make a complaint or inquiry under s 341(1)(c) did not need to be based on an instrumental source: Alam 393 ALR at 652 [78], 653 [81], 658 [97]–[98].
  1. Accordingly, as Collier J held in Whelan 275 IR at 298 [33]–[34], while the right of an employee to make a complaint or inquiry is not at large in relation to his or her employment, it must be founded on a source of entitlement “whether instrumental or otherwise”, including where the employer may have failed to create or provide for a benefit, such as an incentive bonus scheme.
  1. As I have explained, Mr Rudolph intended to make Mrs Leggett “drop like flies” and his conducted evinced that intention.  If he had intended to acknowledge or explore Mrs Leggett’s concerns, as he asserted in evidence, he would not have described their manifestation as he did in emailing Ms Duff that Mrs Leggett “was to come in for a chat with me and pulled the ‘stress leave’ certificate the night before”.  He regarded her feelings contemptuously, as his use of quotations marks around “stress leave” showed.  Accordingly, the Club has not proved that Mr Rudolph’s reasons for sending the 10 October 2016 email did not include the reason that she made a complaint in relation to her employment.
  1. Moreover, the complaint in her 9 October email was, in substance, that her employer, the Club, was not providing her with a safe system of work, because of Mr Rudolph’s conduct as she described.  A reasonable person would have understood that description of his conduct to suggest bullying: rudeness, harsh tones in speaking to her, failing to ask or wait for an explanation, past instances of her feeling “downtrodden”, excluded and excessively questioned in the context or the very senior role she had and had performed successfully for the Club for 25 years.
  1. The Safe Work Australia “Guide for Preventing and Responding to Workplace Bullying” described workplace bullying as “repeated and unreasonable behaviour directed towards a worker… that creates a risk to health and safety”.  It said that such behaviour includes abusive comments, aggressive or intimidating conduct, unjustified criticism or complaints, setting unreasonable timelines and changing work arrangements to deliberately inconvenience a particular worker.
  1. Mrs Leggett was asking that Mr Rudolph’s conduct be referred to the board.  That was a pellucid indication that she could no longer deal with his behaviour, being what she described as reaching “an untenable situation that needs to be resolved” by the board.
  1. The second s 340 claim asserted that Mr Rudolph deliberately withheld payment to Mrs Leggett of her commissions because she had either taken sick leave or made the complaint in the 9 October email or both.  Although his email of 19 October 2016 foreshadowed that she would be paid sick leave, it was only on 26 October 2016 that Mrs Price revealed that Mr Rudolph was going to sort out her commission payments for the Richmond Club race day “in due course”, despite Mrs Leggett having done the bulk of the work in putting that event together. As I noted at [106] above, this was not an accident, because Mr Rudolph was to meet Mrs Leggett and Mr Cooper the next day and her entitlements, were she to leave, were bargaining chips for him.
  1. It was an agreed fact that Mrs Leggett claimed $2773.18 as commission for the 20 October 2016 race day and was not paid anything for that day until March 2020 when the Club paid $2306.46. As Mr Rudolph wrote to Mr Kean on 22 November 2016, despite what Mrs Leggett expected to earn from the last five meetings in 2016 (including 20 October 2016 and 3 November 2016) he was not going to offer her that amount in the negotiations because, he asserted, others had to do her work while she was on sick leave. However, she had done a lot of the work to generate the sponsorships and revenues for those five race days, as he knew, and he was withholding all payment from her because she was exercising her workplace right under s 97(a) of the Fair Work Act to personal leave because of her illness and because of her complaint of 9 October 2016.
  1. I reject Mr Rudolph’s evidence that he withheld those, and the later, payments of commission because she was not taking the bookings.  That answer is in the teeth of his admission that Mrs Leggett’s claim (made through Shaddicks’ letter of 25 January 2017) for $63,495.81 and 9.5% superannuation in respect of the last five meetings in 2016 “were matters upon which Mrs Leggett was entitled to commission – that had been the arrangement, yes” (see [107] above). I am positively satisfied that Mr Rudolph acted as he did in his email to her on 10 October 2016 requiring her to attend the meeting and in withholding Mrs Leggett’s commissions for reasons that included her making the complaint on 9 October 2016, because she had “pulled the ‘stress leave’ certificate” and exercised her right under s 97(a) to take sick leave.
  1. The Club agreed that it underpaid Mrs Leggett’s entitlement to annual leave at the time of the termination of her contract, but has since paid it and the parties have agreed the amount of interest due.
  1. In final submissions, the Club abandoned its argument that Mrs Leggett had no right to long service leave.  It had raised an untenable argument that this Court had no jurisdiction to make orders under the Long Service Leave Act despite this claim being part of the matter concerning Mrs Leggett’s rights against the Club, as explained in Re Wakim; Ex parte McNally (1999) 198 CLR 511; Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2000) 204 CLR 559. Because the Fair Work Act applied to the employment relationship between Mrs Leggett and the Club, the whole of the dispute was in federal jurisdiction. Accordingly, s 79 of the Judiciary Act 1903 (Cth) “picked up” the State Long Service Leave Act.  As Gleeson CJ, Gaudron and Gummow JJ said in Edensor 204 CLR at 588 [59] (and see too at 612 [137], 613 [141] per McHugh J, 637 [213] per Hayne and Callinan JJ):

It should be emphasised that the law of a State cannot withdraw from this Court federal jurisdiction conferred by s 75 of the Constitution, nor the federal jurisdiction which a court (State or federal) otherwise may exercise under a conferral or investment of jurisdiction by a law made under s 76 or s 77 of the Constitution; nor may a State law otherwise limit the exercise of federal jurisdiction.

(emphasis added)

  1. The Club accepts it is liable to a penalty for its now cured failure to pay Mrs Leggett’s long service leave.
  1. The Club argued that there was no contractual term providing for any time within which Mrs Leggett should be paid commission. I think it accepted in argument that s 323(1) of the Fair Work Act required payment of amounts payable to her in relation to the performance of work in full at least monthly. Thus, the withholding of her commissions for months and, in some cases, years, contravened s 323 in respect of each race day after 9 October 2016, for which Mrs Leggett has claimed. As I have found, Mr Rudolph accepted in cross examination (at [107]) that her claims made in Shaddicks’ letter of 25 January 2017 accorded correctly with what she was due. However, the agreed facts reveal that the Club has not yet paid her a total of $19,382.97 for those claims in breach of both its contractual obligation to do so and s 323(1) of the Fair Work Act.
  1. Mrs Leggett also claimed that the Club still owes her a total of $4099.98 for commission between 25 January 2017 and 13 March 2017. However, there is no evidence as to how that sum was calculated to prove her entitlement. I am not satisfied that she has proved this claim, even though the Club only paid her what it admitted was due for the period, namely, $11,646.36 on 8 November 2019, and so was also in breach of s 323(1) in respect of that sum.
  1. I reject the Club’s argument that Mrs Leggett did not have a contractual right to payment of her commission within any particular time.  First, it was an agreed fact that from 1991 to October 2016 she invoiced the Club for commission due, relevantly, after each race day and was paid soon after that meeting.  As I have found, Mr Fletcher ensured, for nearly 25 years, that she, like other creditors, was paid within 14 days of rendering an invoice.  Accordingly, it was a term of Mrs Leggett’s contract of employment that she would be paid within 14 days of rendering an invoice or claim for commission, or clarifying any reasonable request or query to justify any such claim.  Mr Rudolph inherited that system and knew that it applied to Mrs Leggett’s commission.  Indeed, Ms Porteous said that, when she was a contractor, once Mrs Leggett presented her invoices, she was paid soon after.  Once she became an employee, the Club, through Ms Porteous or Mrs Price, analysed Mrs Leggett’s spreadsheets and paid her promptly after any questions were addressed.  That is why Mr Rudolph told Mrs Price on 26 October 2016 to inform Mrs Leggett that she was not to pay Mrs Leggett commission whilst she was on sick leave.
  1. The Club argued that there was no express or implied term of the contract of employment relating to the time for payment and so what it did, through Mr Rudolph withholding payment, indefinitely as he did, was not a breach of contract.  I reject that argument.  The obligation of an employer under a contract of employment is to pay the employee at the agreed rate for work done, or for being available to do work: cf: Consolidated Press Ltd v Thompson (1952) 52 SR (NSW) 75 at 79 per Street CJ; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 463–464 per Dixon J. Dixon J said (at 465):

A contract for the establishment of the relation of master and servant falls into the same general category of agreements to pay in respect of the consideration when and so often as it is executed, and is, therefore, commonly understood as involving no liability for wages or salary unless earned by service, even though the failure to serve is a consequence of the master’s wrongful act.

(emphasis added)

  1. Dixon J also said “they also serve who only stand and wait” (72 CLR at 466). Here, Mrs Leggett was entitled to payment soon after the relevant race day. Even without the 25 year course of dealing she and the Club had, the law would imply that she be paid within a reasonable time of rendering her calculation of commission and s 323(1) required that this be no later than monthly. In addition, the course of the parties’ dealings created a conventional basis that both were estopped from denying. Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ held in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244 that:

Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.

(emphasis added)

  1. Here, if I were wrong in finding the contract had a 14 day term, the Club is estopped from denying that it had to pay Mrs Leggett within that time.  The conventional basis of their relationship was that Mrs Leggett would be paid commission calculated on her invoices or, later as an employee, her spreadsheets, once the claim was checked within 14 days.

REPUDIATION

  1. Based on my findings above, after 19 October 2016, the Club was paying Mrs Leggett her commission as and when it chose.  Mr Rudolph decided to withhold all commissions, including ones for 20 October 2016 and 3 November 2016 for which Mrs Leggett had done the work and in respect of which he also asked her to help Ms Porteous with whatever needed to be done, as Mrs Leggett did.
  1. In Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 at 351-352, Fullagar J, with whom Dixon CJ, Williams, Webb and Kitto JJ agreed, discussed the situation where a building owner took a number of decisions inconsistent with his building contract (see too, Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378 at 384 per Stephen J, with whom Gibbs and Mason JJ agreed). Fullagar J explained how a party can commit more than one breach of a contract to the point where, although an individual breach, taken by itself, may not have justified the innocent party exercising a right to terminate, cumulatively the totality of the conduct of the party in breach did justify it doing so. He said:

A reasonable man could hardly draw any other inference than that the building owner does not intend to take the contract seriously, that he is prepared to carry out his part of the contract only if and when it suits him. The intention must be judged from acts: Robert A. Munro & Co., Ltd. v. Meyer [[1930] 2 KB 312 at 331]. The intention “evinced” here is an intention not to be bound by the contract. When such an intention is shown, the other party is entitled to rescind the contract. Mr. Berriman thought that such an intention had been shown, and he acted accordingly. In my opinion, he was justified in the view which he took, and acted as he was legally entitled to act.

(emphasis added)

  1. In my opinion, Mr Rudolph made plain to Mrs Leggett, through Mrs Price’s email of 26 October 2016, that her commissions would not be paid when due but would “be sorted out in due course”.  There was no contractual basis for the Club to withhold, first, any commissions earned from 10 October 2016 until 7 February 2017, or the balance of those commissions until March 2020, or, secondly, the commissions due for the race days on 25 January 2017, 9 and 21 February 2017, before 15 March 2017.  Indeed, the latter were not paid until 8 November 2019 with the commissions for the 2 and 13 March 2017 race days.  By 15 March 2017, the Club was evincing an intention not to be bound by the contract of employment that Mrs Leggett was entitled to accept as a repudiation through her solicitors’ letter of that day.
  1. She is entitled to substantial damages for the Club’s breach of contract. However, those damages must be assessed taking into account Mrs Leggett’s psychiatric injury and s 151E(3) of the Workers Compensation Act 1987 (NSW).

THE WORK INJURY DAMAGES CLAIM

The legislative context

  1. Relevantly, the Workers Compensation Act provides in Pt 5 for common law remedies in respect of compensating an employee (or worker) for an injury. Division 3 of Pt 5 modifies the amount recoverable as an award of damages in respect, relevantly, of an injury to an employee caused by the negligence or other tort of his or her employer, including, as s 151E(3) provides, if the claim is based on the employer’s breach of contract. The only damages that can be awarded in an action in respect of such an injury are damages for, first, past economic loss due to loss of earnings and, secondly, future economic loss due to the deprivation or impairment of the workers’ earning capacity (s 151G(1)). There is no dispute that because she has been found to have a permanent impairment of at least 15%, within the meaning of s 151H, Mrs Leggett is able to maintain her claim for work injury damages, as these are styled. The Court must disregard, by force of s 151I(1), the amount, if any, by which the injured worker’s earnings, but for the injury, would have exceeded the maximum amount of weekly payments of compensation payable under s 34 (which prescribes a sum that is adjusted by an indexation mechanism in that Act). Section 151I(2) somewhat delphically provides:

151I     Calculation of past and future loss of earnings

(2)           The maximum amount of weekly payments of compensation under section 34 for a future period is to be the amount that the court considers is likely to be the amount for that period having regard to the operation of Division 6 of Part 3 (Indexation of amounts of benefits).

  1. In addition, s 151IA limits an award for future economic loss to the period in which the injured worker could have worked until he or she reached pension age (being currently 67 years of age). In addition, the Court must consider what steps the worker has taken, or could take, to mitigate his or her damages in accordance with s 151L, the onus of proving that he or she has taken all reasonable steps being cast on the injured worker by s 151L(3).

The Club’s submissions

  1. The Club argued that Mrs Leggett gave no manifestation, such as crying, that would have indicated to a reasonable employer, prior to 10 October 2016, that she was at risk of a psychiatric injury.  It contended that, as in Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44, until her breakdown on the night of 9 October 2016, to all outward appearances, Mrs Leggett was doing her job and doing it well, including answering the CEO’s questions and attending meetings. It submitted that her failure to refer to the crying to the three directors, about which she gave evidence, when speaking to the expert psychiatrists suggested that this claim was inaccurate. It argued that mere manifestations of stress, such as Spigelman CJ noted in Nationwide News Pty Ltd v Naidu (2007) 71 NSWLR 471 at 484 [57]–[60] would not be enough to enable a reasonable employer to appreciate that there was risk that the employee might suffer a psychiatric injury. It emphasised that a complaint about stress is a normal feature of work and cannot be a sufficient basis by itself on which to find an employer liable in negligence.
  1. The Club argued that Mrs Leggett led no medical evidence to suggest her behaviours and statements of her condition ought reasonably to have been seen as a precursor to her injury.  It contended that she gave evidence that there was a major change to her condition on 9 October 2016 and that this change was not reasonably foreseeable from what she had said, done and exhibited beforehand.
  1. It contended that because she had not made a “formal” complaint to any of the three directors to whom she spoke before 9 October 2016, the Club did not have to call them to give evidence.  It argued that her interactions with them were in the nature of a conversational “whinge” and she was a fairly forceful woman whom the directors could expect to be able to stand up for herself.
  1. The Club also argued that its conduct after she began sick leave, between 10 October 2016 and 15 March 2017, did not constitute bullying on Mr Rudolph’s part.  It argued that neither Mrs Leggett nor her representatives complained that he was conducting the negotiations with her and there was no evidence that his presence harmed her.  It noted that the experts agreed in the joint report that the loss of her job was a factor in her condition, but she was already ill then.  It contended that there was no evidence that if the board had taken an active role, any different outcome would have occurred for her.

Consideration

Legal principles

  1. In Koehler 222 CLR 44, the High Court discussed the application of the principles for determining the circumstances in which an employer, who owes an employee a duty of care to take all reasonable steps to provide a safe system of work, might need to take steps to avoid a reasonably foreseeable risk of psychiatric injury. McHugh, Gummow, Hayne and Heydon JJ discussed the content of the employer’s duty. They began their analysis by noting the obligations that each party (employer and employee) owed the other, first, under the contract of employment, secondly, that equity would enforce as arising from their relationship, and thirdly, under any applicable statutory provisions, including enterprise or other industrial agreements or instruments and laws of general application, such as anti-discrimination legislation (222 CLR at 53 [21]). This consideration may be apposite in determining whether those obligations affect an employer’s duty of reasonable care to avoid psychiatric injury by modifying the work that the employee has to perform. Critically, they said of that question (at 54 [22]):

No doubt other questions may arise. It is, however, neither necessary nor appropriate to attempt to identify all of the questions that could arise or to attempt to provide universal answers to them. What is important is that questions of the content of the duty of care, and what satisfaction of that duty may require, are not to be examined without considering the other obligations which exist between the parties.

(emphasis added)

  1. Their Honours’ recognised that a modification of the obligations that the parties to an employment relationship owe each other, including through any change to the employee’s duties, hours of work, pay and position, is a function of the law of contract that requires a variation of their bargain: cf: Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 698–699 [18]–[19] per Gleeson CJ, Gaudron and Gummow JJ; Cohen v iSoft Group Pty Ltd (2013) 298 ALR 516 at 526–527 [35]–[36] per Rares, Cowdroy and Kerr JJ.
  1. The contractual position between the parties and any relevant statutory provisions are critical in giving appropriate content to the duty of an employer to take reasonable care to prevent a reasonably foreseeable risk of an employee suffering a psychiatric illness (Koehler 222 CLR at 55 [24]). McHugh, Gummow, Hayne and Heydon JJ held in Koehler 222 CLR at 55 [26] that, there, the employee “did not prove that the employer ought reasonably to have foreseen that she was at risk of suffering psychiatric injury as a result of performing her duties at work” and that this was because of two reasons (at 55 [27]), namely:

First, the appellant agreed to perform the duties which were a cause of her injury. Secondly, the employer had no reason to suspect that the appellant was at risk of psychiatric injury.

(emphasis added)

  1. There, the employee changed her role from a full time to a part time sales representative consequent on a restructure. She accepted her new position but, when told on her first day of the scope of her duties, she said that she could not perform them in the time required. Her supervisor told her to try it for a month and, if she felt that she could not cope, she should tell him. She agreed to this and began the work. Although she subsequently complained that she had too big an area and too many stores to visit in the part time role, she never complained that she was experiencing any effect on her health (222 CLR at 50–51 [7]–[10]). Thus McHugh, Gummow, Hayne and Heydon JJ analysed her claim in negligence against her employer on the basis that the parties had agreed that her work would comprise the tasks that she performed (222 CLR at 55–57 [28]–[31]).
  1. McHugh, Gummow, Hayne and Heydon JJ held that the scope of the duty of care owed to the particular employee must be assessed in the context of his or her employment relationship, the nature of the work performed and, importantly, any signs that the employee gave as to whether a risk of psychiatric harm was reasonably foreseeable (at 57 [35]).  They said that an employer was entitled to assume “in the absence of evident signs warning of the possibility of psychiatric injury” that the employee considers himself or herself able to do the job (at 57 [36]).  That is why they analysed whether the employer had a duty to modify the operation of the contract, that the parties had agreed, as a result of information that the employer subsequently acquired about the vulnerability of the employee to psychological harm (at 57–58 [36]–[38]).
  1. Importantly, their Honours described the nature of the employee’s complaints in that case as being (51 [10]):

…directed to whether the work could be done; none suggested that the difficulties she was experiencing were affecting her health. She told management that there were two ways to solve the problems she was encountering: to reduce the number of stores she was to visit, or to have her work a fourth day.

(emphasis added)

  1. That is the context in which they concluded (at 58–59 [40]–[41]):

Nor is it necessary to decide this case on the basis that the appellant’s agreement to perform the duties which were a cause of her injuries is conclusive against her claim. The identification of the duties for which the parties stipulated would require much closer attention to the content of the contractual relationship between them than was given in the evidence and argument in the courts below. For present purposes, it is sufficient to notice that her agreement to undertake the tasks stipulated (hesitant as that agreement was) runs contrary to the contention that the employer ought reasonably to have appreciated that the performance of those tasks posed risks to the appellant’s psychiatric health.

…she made many complaints to her superiors but none of them suggested (either expressly or impliedly) that her attempts to perform the duties required of her were putting, or would put, her health at risk. She did not suggest at any time that she was vulnerable to psychiatric injury or that the work was putting her at risk of such an injury. None of her many complaints suggested such a possibility. As the Full Court said, her complaints may have been understood as suggesting an industrial relations problem. They did not suggest danger to her psychiatric health.

(emphasis added)

  1. In Naidu 71 NSWLR 471, the Court of Appeal of the Supreme Court of New South Wales discussed the issue of when an employer (ISS Security Pty Ltd) and or, in that case, a third party at whose premises an ISS employee worked as a security guard (Nationwide News Pty Ltd), could be liable in negligence for causing psychological injury by bullying and a harassment of the guard.  There, a Mr Chaloner, a senior employee of Nationwide, bullied and harassed the guard over several years. As Spigelman CJ noted, a person in a supervisory position in a corporation has duties that encompass receipt of relevant knowledge and can be found to have a duty to communicate and act on that knowledge (71 NSWLR at 480–481 [41]). He held that the only senior persons in Nationwide, apart from Mr Chaloner, who received any information about his behaviour towards the guard “did not know enough to require them to act” (at 481 [44]). He made the point that generalised statements about whether a duty of care in an action for negligence has been breached are unhelpful and that, rather, in any particular case, the whole of the circumstances, including any failure of the employee to complain, have to be considered (482 [47]).
  1. There, the guard manifested to his work colleagues, but not to senior persons who were the employer’s “agents to know”, two signs of mental disturbance, namely, crying and a significant change in his personal behaviour over several years. He had cried only once in front of a senior officer of his actual employer, ISS. While Spigelman CJ recognised that these signs suggested an adverse effect on the employee’s mind, he reasoned (71 NSWLR at 484 [57] – [60]):

However, what is required is foreseeability of a recognised psychiatric illness. The signs suggestive of psychiatric illness, rather than psychological disturbance, satisfy the not far-fetched and fanciful test of foreseeability. However, they do not, in my opinion, reach the level of possibility which would require the employer or surrogate employer to intervene.

Workers are subject to stress in both their working and personal lives which can affect their mental health. Changes in personal behaviour over a period of years may occur for many reasons. So may the response of crying. These responses did not, in my opinion, indicate psychiatric illness to the degree that required a response from the actual or surrogate employer.

An employer, like ISS, or a surrogate employer, like Nationwide News, is not, in my opinion, required to have in place systems of inquiry and/or response, to manifestations of mental disturbance in order to determine whether or not the disturbance is work related and, if so, to remedy the situation. In the present case, at least via Mr Chaloner, both ISS and Nationwide News can be taken to be aware of the systematic course of conduct by him which created the possibility that the disturbance may be work related. They did not, however, have sufficient information about Mr Naidu’s response, even via Mr Chaloner, that the disturbance could be a recognised psychiatric illness requiring intervention.

(emphasis added)

  1. It is not clear what test the Chief Justice was applying.  As the last sentence in [60] of his reasons reads, his Honour appears to be saying that information that would lead a reasonable person in the position of the employer to recognise that there was a foreseeable risk of psychiatric injury is insufficient: rather, he said that the information had to be “that the disturbance [of the employee] could be a recognised psychiatric illness”.  His analysis appears to focus on, first, the employer recognising the fact of the employee having developed already, as opposed to the appreciation that there was a reasonably foreseeable risk that the employee might develop, a psychiatric illness and, secondly, a time after the illness has developed as opposed to the anterior time when an employer ought to have appreciated that the circumstances gave rise to a reasonably foreseeable risk that, if the conduct or situation continued, the employee could develop a psychiatric illness.
  1. Beazley JA noted that Nationwide contended that it did not owe a duty of care to the employee or, if it did, it did not breach it (at 490 [99]).  Her Honour found that Mr Chaloner was, relevantly, Nationwide, and he had the responsibility for supervising the ISS employee.  She held (at 505–506 [237]–[238]):

When that position is reached, the question of reasonable foreseeability for the purposes of establishing the existence of a duty of care, resolves itself in this case fairly readily. Nationwide News, as embodied by Mr Chaloner, perpetrated conduct on Mr Naidu that was prolonged, abusive, intimidating and physically threatening. It was bullying in an extreme form. Bullying has been described in a different context as a “serious and insidious form of violence”: see J Elvin, “The duty of schools to prevent bullying” (2003) 11 Tort Law Review 168 at 169. This is not cutting edge psychology. Any person could reasonably foresee that the conduct engaged in by Mr Chaloner carried with it the risk of psychological or psychiatric harm. But in any event, Mr Naidu exhibited signs of such harm to Mr Chaloner. He was observed to cry and to be scared when Mr Chaloner directed such conduct towards Mr Naidu and threatened him with the loss of his job. In addition, he was observed by others at the workplace to change over a period of time from a happy person to one who appeared depressed. Accordingly, this was not a case like Koehler v Cerebos (Australia) Ltd where the plaintiff gave no outward signs of her emotional state.

It follows that there was a reasonably foreseeable risk of psychiatric injury arising from Mr Chaloner’s conduct to Mr Naidu.

(emphasis added)

  1. Basten JA noted that Nationwide did not challenge on appeal the trial judge’s finding that Mr Chaloner’s conduct was “so brutal, demeaning and unrelenting that it was reasonably foreseeable that, if it continued for a significant period of time… it would be likely to cause significant, recognisable psychiatric injury” (at 529 [397]).  Accordingly, he analysed the issue as involving only whether Nationwide could be liable for Mr Chaloner’s conduct (at 529 [397]).  Basten JA found that Nationwide and Mr Chaloner were concurrent tortfeasors to the extent that any of his conduct was outside the scope of his employment and upheld the trial judge’s finding that both were liable in full for the employee’s damages (at 529 [397], 532 [409]).  His Honour did not discuss whether Nationwide owed a duty of care to the employee and only discussed whether Nationwide was liable for the tort of intentional infliction of harm.  However, Basten JA found that ISS (whose senior employee had seen the bullied employee cry on one occasion) neither had, nor ought to have had, knowledge of circumstances which would give rise to a reasonably foreseeable risk of cognisable psychiatric harm to the employee (at 534–535 [424]).
  1. All three of the judges agreed that Nationwide was liable for Mr Chaloner’s intentional infliction of harm.  Spigelman CJ said that Nationwide was not negligent, Beazley JA said that it was and Basten JA did not make a finding on the issue.  Thus, in Naidu 71 NSWLR 471 there was no ratio decidendi on the negligence issue.
  1. In Tame v New South Wales (2002) 211 CLR 317 at 329 [5], Gleeson CJ explained that the concern of the law in dealing with situations of ordinary life to which the tort of negligence may apply is not only to compensate a person who has suffered an injury but also to address, at policy level, the effect of imposing liability upon the person who is accused of responsibility for the injury. He said that the law must take into account “the effect of [imposing] such liability upon the freedom and security with which people may conduct their ordinary affairs”. His Honour developed this reasoning in Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 214 CLR 269 at 276 [9] saying:

just as advances in medical knowledge have made us aware of the variety of circumstances in which emotional disturbance can trigger, or develop into, recognisable psychiatric injury, so they also make us aware of the implications, for freedom of action and personal security, of subjecting people to a legal requirement to anticipate and guard against any risk to others of psychiatric injury so long as it is not far-fetched or fanciful. In the context of a question of duty of care, reasonable foreseeability involves more than mere predictability. And advances in the predictability of harm to others, whether in the form of economic loss, or psychiatric injury, or in some other form, do not necessarily result in a co-extensive expansion of the legal obligations imposed on those whose conduct might be a cause of such harm. The limiting consideration is reasonableness, which requires that account be taken both of interests of plaintiffs and of burdens on defendants. Rejection of a “control mechanism”, such as the need for direct perception of an incident or its aftermath, originally devised as a means of giving practical content to that consideration, does not involve rejection of the consideration itself.

(emphasis added)

  1. Gummow and Kirby JJ added, as did Hayne J (at 304 [98]), that reasonable foreseeability of mental harm is not the only condition of the existence of a duty of reasonable care (Gifford 214 CLR at 295 [67]). They also pointed to the importance of identifying the interests that will be sufficient to attract the protection of the law in any given field as a condition apposite to the determination of whether a duty of care will exist in any given situation (at 300–301 [88]). They said that an employer had a duty of care in tort and a contractual obligation (either express or implied), to so order its affairs as to avoid causing injury (including psychiatric injury) or death to its employees. And, they said that the law would more readily impose a duty (or contractual obligation) of care where the employer’s conduct constitutes an infringement of otherwise recognised rights of the employee.
  1. Hayne J (at 302 [90]–[92]) reasoned that the test for the imposition of a duty (or obligation) of care needs to include a control mechanism, saying (at 304 [99]):

Control mechanisms developed in this way may have wider applications than just cases of psychiatric injury. But it may also be that, as knowledge about the causes of psychiatric injury and the effects of traumatic events increases, control mechanisms based on that knowledge may become evident and could be applied to claims for damages for psychiatric injury.

  1. Hayne J also held that the employer owed a duty to take reasonable care to avoid harm to an employee because, as Mason J had held in Kondis v State Transport Authority (1984) 154 CLR 672 at 687–688, the employer controlled the work of the employee, and how, where and when he or she did it (214 CLR at 305 [103]).
  1. Gleeson CJ explained that negligence involves “a failure to protect the interests of someone with whose interest a defendant ought to be concerned”.  He said that reasonableness was the essential concept to define the ambit of a legal obligation of overriding a person’s proper concern for others, the breach of which sounds in damages: Tame 211 CLR at 330 [8] (see too at 383 [196] per Gummow and Kirby JJ, with whom Gaudron J agreed on this issue at 339 [44]). He also said that reasonableness is judged in the light of current community standards (at 332 [14]). Thus, the question in such a case is whether the relationship between the parties is such as to make it reasonable to require a defendant to have in contemplation a risk or danger of psychiatric injury to the plaintiff in the circumstances (at 336 [29], [33], 385 [201], 386 [203], 399 [241]).
  1. In Tame 211 CLR at 339 [44], Gaudron J agreed with Gummow and Kirby JJ (see at 382 [193]) that damages are recoverable in negligence only for a recognisable psychiatric injury, but not for emotional distress. She also considered that something more than mere foreseeability of the likelihood of harm must be present in the relationship of the parties for there to be a duty to take care to avoid a risk of pure psychiatric injury (at 339 [45]).
  1. Gummow and Kirby JJ said in Tame 211 CLR at 379 [185]:

Protection of mental integrity from the unreasonable infliction of serious harm, unlike protection from transient distress, answers the ‘‘general public sentiment’’ underlying the tort of negligence that, in the particular case, there has been a wrongdoing for which, in justice, the offender must pay (See Donoghue v Stevenson [1932] AC 562 at 580; Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 at 575; Perre v Apand Pty Ltd (1999) 198 CLR 180 at 242-243 [171]). Moreover, the assessment of reasonableness, which informs each element of the cause of action, is inherently adapted to the vindication of meritorious claims in a tort whose hallmark is flexibility of application. Artificial constrictions on the assessment of reasonableness tend, over time, to have the opposite effect.

(emphasis added)

  1. They held that the particular psychiatric illness need not be reasonably foreseeable, so long as an injury within the class of recognised psychiatric illness was (at 386 [203]).
  1. Hayne J said that the consideration of the control that an employer exercises over the workplace creates a duty to take reasonable care about the place and system of work so as to avoid psychiatric injury (at 413 [281]; see too per Callinan J at 436 [357]).  He discussed the difficulties in distinguishing between mental distress and psychiatric injury (at 415–418 [293]–[296]).  He accepted that the law recognised only a duty to take reasonable care to prevent a recognised psychiatric injury, although he applied a test that the majority rejected, namely that the plaintiff should be a person of ordinary or reasonable fortitude (at 417–418 [296], 419 [304]).
  1. Of course, in the ordinary course of life, the defendant will not be a qualified psychiatrist equipped with the training and expertise to appreciate whether the nature of a plaintiff’s reasonably foreseeable reaction will or may be a particular, or any, recognised psychiatric illness.  The law cannot set a standard of care that is of such specificity.  The reasonable foreseeability of the risk of psychiatric injury must be of an injury that the plaintiff is at risk of suffering of such severity that it would cause a psychiatric condition to develop or occur or warrant psychiatric treatment; that is an injury that goes beyond mere stress, mental distress or emotional upset.

Was the Club negligent?

  1. Here, Mrs Leggett was an employee of the Club.  She had written to Mr Rudolph on 20 July 2016 informing him that his management of her made her feel that he did not trust her in performing her duties.  She said that she was happy to discuss his concerns but “I am losing sleep and constantly thinking about these emails and other question you are raising”.  He did nothing to address her communication of her distress, including that she was losing sleep; indeed, he ignored it, sought legal advice, sent his email of 25 July 2016 and then met with her and Mrs Price on 27 July 2016.
  1. Mrs Leggett was a very senior, long serving employee with a significant job that she had been performing competently for 25 years.  Of course, neither she nor Mr Rudolph could expect that their relationship would be the same as that between Mr Fletcher and her.  They had to understand each other and, initially, Mr Rudolph was not unreasonably curious to understand the unusual and largely unwritten contractual remuneration structure that Mrs Leggett had to reward her for her role.  However, by June 2016 he knew what that structure was, how Mrs Leggett put in and justified her claims for commission and other entitlements and how those claims were verified and paid.  Thus, by 20 July 2016 he was conscious from Mrs Leggett’s email of that day that his behaviour towards, and treatment of, her was causing her significant problems, including loss of sleep, that could be reasonably expected to affect her psychiatric wellbeing if these conditions persisted.
  1. As Mr Rudolph’s initial draft, that he created on 27 July 2016 and, after alterations, sent on 1 August 2016 revealed, he appeared to have serious doubts, which I find had no reasonable basis, about Mrs Leggett’s probity.  In my opinion, the tone of the draft reflected the manner in which Mr Rudolph treated Mrs Leggett, namely, he demeaned and humiliated her, questioning her every act, including spending $15 to park her car when attending a meeting with a sponsor to promote its support of the Club.  His assertions of the need for an audit trail were fatuous, given that he was making them with the benefit of the documents, including receipts, that Mrs Leggett generated and provided.
  1. The fact that Mr Rudolph sought legal advice in relation to how he should respond to Mrs Leggett’s email of 20 July 2016 is telling.  Her email revealed that there was a significant and real problem developing and that it was affecting her psychiatric wellbeing.  She told him that she was losing sleep, constantly thinking about his demands and feeling she was not trusted, a feeling that Mr Rudolph’s behaviour only reinforced, consistently with his state of mind over the next months.  In that context, Mr Rudolph, as the CEO, was the Club.
  1. As Mr Quigley made clear, the board left everything to Mr Rudolph as the CEO, even though Mrs Leggett complained, beginning on 20 July 2016, about Mr Rudolph’s conduct towards her, to three directors personally, explaining to them, while crying, how she was feeling. As I have recounted, by mid-August 2016, Mrs Leggett had broken down crying twice when complaining to Sid Kelly about Mr Rudolph’s conduct. She had told Mr Commerford twice that his pressuring conduct was causing her constant anxiety, loss of sleep and to cry all the time. She had also told Mr Stevens that she was not coping, having trouble sleeping and performing her work because of Mr Rudolph’s behaviour ([59]–[60]). By mid-August 2016, Mr Commerford told her, as Mr Quigley’s evidence confirmed, that members of the board were discussing her situation and relationship with Mr Rudolph ([58], [197]). By late September 2016, Mrs Leggett had told Mr Stevens that things had become worse, she was not coping, could not sleep or work and was being completely ignored ([60]).
  1. Objectively, Mr Rudolph’s behaviour was demeaning of and, at best, insouciant towards, Mrs Leggett.  Prior to 9 October 2016, the board was discussing Mrs Leggett’s complaints, as Mr Quigley said “outside” its formal meetings, but had shut its eyes completely to the problem.  First, despite Mrs Leggett’s expressed distress to three directors, the board did not raise with Mr Rudolph any issue about Mrs Leggett or what was occurring between them.  Secondly, Mr Gollan’s asserted reaction, which I consider was false (given the congruent evidence of Mr Quigley and Mrs Leggett about what Mr Gollan actually told her), to Mrs Leggett’s distress in the carpark on 9 October 2016 was of a piece with Mr Quigley’s evidence, namely they thought “it’s got nothing to do with the directors”. Both directors said that it was for Mr Rudolph to work things out, even though Mrs Leggett was telling them, in clear terms, that he was the source of her loss of sleep, anxiety and feelings that reflected an appearance of having been bullied ([81]–[82], [125]).
  1. I infer that any evidence that Sid Kelly, Mr Commerford and Mr Stevens could have given would not have assisted the Club’s case: Jones v Dunkel (1959) 101 CLR 298; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 385 [64] per Heydon, Crennan and Bell JJ. Mrs Leggett’s statements to members of the board from 20 July 2016 demonstrated she was feeling more than ordinary stress. The fact that she could not stop crying, felt so stressed that she could not eat, sleep or do her work as she explained to them individually, would have caused a reasonable person in their positions to consider that, if Mr Rudolph’s conduct continued, she was at risk of suffering a psychiatric injury. The Club, through its directors as well as its CEO, had a duty in tort and contractual obligation to take reasonable care to provide a safe system of work and workplace environment for its employees, including to take steps to prevent, and to address, workplace bullying. By late September 2016, Mrs Leggett’s descriptions, and her displays of emotion, to each of the three directors actually conveyed, and would have conveyed to a reasonable director in their positions, that she perceived that Mr Rudolph was directing repeated and unreasonable behaviour towards Mrs Leggett that was creating a real and foreseeable risk that she would suffer psychiatric injury if it continued: cf: [#144].
  1. Mr Rudolph’s conduct was in increasingly intense and, in my opinion, intentional, for the reasons I have explained.  By the time that Mrs Leggett spoke to Sid Kelly, Mr Commerford, and Mr Stevens in August 2016, they were already discussing, with Mr Quigley outside the board meetings, Mrs Leggett’s state of mind and the information she gave them about her serious level of distress, inability to sleep, and feeling that the pressure that Mr Rudolph placed on her by his demands and micromanagement was unreasonable, as objectively it was.  He had unjustifiably questioned her integrity, including about having goods delivered to her house and continued to make excessive demands of her.  When Mrs Leggett sent her first sick leave certificate on 10 October 2016, Mr Rudolph’s instant reaction was to boast to his father-in-law “dropping like flies” and to make his comment to Ms Duff that Mrs Leggett had “pulled the stress leave certificate”.  That reaction indicates, as I have found, that his behaviour was intentional; that is, he intended to force her out of her position by making her job unbearable to her.
  1. In my opinion, from and after late July 2016, the continuing of such conduct was calculated to and, in any event, a reasonable person in Mr Rudolph’s position of CEO would have perceived that the conduct did, create a reasonably foreseeable risk that Mrs Leggett, as the employee subjected to that treatment, would suffer serious psychiatric injury as a result.  Mr Rudolph was attempting to strip Mrs Leggett’s authority, senior status and autonomy from her.  As he said, and I accept, he told her when he telephoned her at the barriers on 9 October 2016 that, “You don’t have permission to go to the barriers”.  No other employee needed Mr Rudolph’s permission to accept the starters’ routine invitations to go with them to the barriers that Mr Benson described.  Mr Rudolph knew that his 10 October email response to Mrs Leggett’s 9 October email would convey to her that she had committed some breach of her employment obligations, an allegation which he knew was baseless.
  1. I am of opinion that Mrs Leggett’s descriptions of her state of mind in her email to Mr Rudolph of 20 July 2016, and on the occasions prior to 9 October 2016 to each of the three directors, were warning signs that would convey to a reasonable employer, in the context of her employment relationship, the nature of the work she, up to then, had performed, Mr Rudolph’s micromanagement of her and his attempts to restructure her job without her agreement by exerting his authority, that there was a reasonably foreseeable risk that she would suffer psychiatric injury if Mr Rudolph’s bullying and demeaning behaviour towards her went unchecked.
  1. This position is distinguishable from the situation in Koehler 222 CLR at 55 [27]. There, the employer had no reason to suspect that the employee was at risk of psychiatric injury. It was not necessary for Mrs Leggett to call medical evidence about that risk. Gleeson CJ pointed out in Tame 211 CLR 317 at 329 [5], the concern of the law is to deal with situations in ordinary life to which the tort of negligence must apply. As the Chief Justice said, the limiting consideration is reasonableness, which requires that account be taken both of the interests of plaintiffs and of burdens on defendants in determining whether a duty of care exists and, if so, its extent, in any particular context. An employer has a duty to provide a safe working environment and, as the Safe Work Australia Guide explained, to ensure that this environment does not include the reasonably foreseeable risk or potential for bullying of employees that could inflict psychological or psychiatric injury on them.
  1. In my opinion, the Club was in breach of its duty of care owed, and contractual obligation, to Mrs Leggett to take reasonable care to prevent her being exposed to the risk of psychiatric injury.  This breach occurred from the time of Mrs Leggett’s email to Mr Rudolph on 20 July 2016, or alternatively, after August 2016, by which time she had spoken to three directors about how distressed she was feeling and the basis for those feelings, being the conduct of Mr Rudolph, so as to convey to each of them that, if that conduct continued, there was a reasonably foreseeable risk that she would suffer psychiatric injury in the course of performing her duties at work.
  1. She had been placed in an intolerable position by the way Mr Rudolph had been treating her.  The expert psychiatrists agreed, in Dr Parsonage’s words:

Mrs Leggett’s psychological health was progressively eroded from mid-2016 to 9 October 2016 by at least her perception that she was being treated unfairly, that her integrity was being questioned and that the CEO was deliberately creating circumstances in which she would either be forced to leave or he would have grounds to remove her from her position.

(emphasis added)

  1. As I have found, Dr Parsonage’s description of Mrs Leggett’s perception reflected the fact of Mr Rudolph’s behaviour towards her.  It would have been reasonably foreseeable to a reasonable employer in the Club’s position that an incident, such as occurred on 9 and 10 October 2016, would be “the last straw” and she would break down with a psychiatric injury.  Sustained bullying is well understood in the community as capable of causing psychiatric injury to its victim.
  1. Accordingly, I find that the Club is liable to Mrs Leggett in negligence and in breach of its contractual obligation to take reasonable care to prevent her suffering the reasonably foreseeable risk of psychiatric injury of the kind she suffered on 9 and 10 October 2016.

COMPENSATION

  1. The Club submitted that Dr Roberts’ suggestion in the joint report that, because Mrs Leggett had not had all available treatments, there was a prospect that her condition may improve, meant that a larger allowance in any award of damages ought be made for vicissitudes.
  1. The Club contended that Mrs Leggett’s damages in tort were limited by the Workers Compensation Act and that the correct figure to use in the calculation for s 151I(2) was the current figure for the maximum weekly earnings, as adjusted by consumer price index increases of 2% per annum to the present time, of $2282.90 representing her gross agreed maximum entitlement under that Act in respect of earnings from June 2016. Mrs Leggett argued that I should apply a figure arrived at by using the same increase as had occurred in the past and applying only the ultimate indexed figure she would be earning in the year before she turns 67.
  1. Mrs Leggett argued that her future economic loss under the Workers Compensation Act should be calculated using a discount of 15% for the vicissitudes of life.
  1. Both parties otherwise agreed on the manner of calculation of work injury damages once the figures for s 151I(2) future loss calculations and vicissitudes are known. They agreed that Mrs Leggett had been paid $46,610 for a degree of impairment of 19% as assessed in respect of her general disability under s 66 of the Workers Compensation Act.
  1. The parties were at issue as to the sum to be used as the multiple for the purpose of s 151I(2) of the Workers Compensation Act.  It is likely that, ordinarily, Mrs Leggett would have been able, and would have continued, to work until she was 67, earning an income in the nature of what she was earning as at October 2016.  The Workers Compensation Act contemplates in s 34 and Division 6 of Pt 3 that there will be regular indexation increases of the maximum amount in the future of weekly compensation that is presumably $2282.90. I am of opinion that, under s 151I(2), the Court must take into account that indexed increases in the maximum weekly amount will occur during the period for which the award of damages for future economic loss is being made.
  1. In such a case, one calculus might be the use of a net present value figure to reflect the anticipated increases over the period for which the future loss component of the damages is payable.  In my opinion, the amount of damages should be calculated on the basis either of yearly rests increasing by the anticipated indexed increases over the period or a mid-point of the present and estimated ultimate indexed maxima, provided that the calculations mathematically come to the same result. The parties did not present calculations using these methodologies.
  1. One of the difficulties in evaluating what might happen to a person’s state of mind in the future is, of course, the uncertainty of how life will develop.  I have taken into account Dr Parsonage’s opinion that Mrs Leggett’s condition is well entrenched, and unlikely to change in the foreseeable future and the fact that Mrs Leggett did not feel any sense of apparent vindication sufficient to cure, or ameliorate, her condition when she won successive victories in the Workers Compensation Commission.  It may be that the judgment of this Court could have a better impact.  While Dr Roberts left open the possibility that, with different treatment, were she to undertake it, Mrs Leggett might improve, I think that Dr Parsonage’s view is more likely to be correct.
  1. I am of opinion that I should apply a discount of 17.5% for vicissitudes of life on the uncapped damages component for her future loss of income under s 151I(2) of the Workers Compensation Act.

Compensation under s 545 of the Fair Work Act

  1. As I noted earlier, s 151E of the Workers Compensation Act constrains common law damages both in contract and tort in respect of an injury to a worker caused by the negligence or other tort of the workers’ employer or its breach of a contractual duty of care.
  1. However, in the present case, s 545(1) and (2)(b) of the Fair Work Act enable the Court to make orders that it considers appropriate if satisfied, as I am, that the Club has contravened a civil penalty provision and also order compensation for a loss that a person has suffered, such as underpayments before her injury that Mrs Leggett had proved. The Court also can award penalties for the Club’s contraventions of the Fair Work Act and the Long Service Leave Act.  In addition, the Court is entitled to award compensation for the adverse action to which Mrs Leggett was subjected that I have found.
  1. The Parliament did not limit the Court’s powers to award compensation under s 545(2)(b) or make orders that it considers appropriate under s 545(1). The Parliament contemplated that claims to the Fair Work Commission for an order to stop bullying can be made under Pt 6-4B of the Fair Work Act that will attract the remedies from the Commission that Pt 6-4B provides. The federal Act is not constrained in respect of the compensation that can be awarded by the separate operation, in a different sphere, of the State Workers Compensation Act.

In my opinion, the Club’s conduct, through Mr Rudolph, effectively destroyed Mrs Leggett’s life. She cannot work and, as the joint experts agreed, is permanently incapacitated from doing so because of Mr Rudolph’s and the Club’s conduct. That conduct caused a very serious psychiatric illness that may never be cured, or ameliorated to any significant degree. That injury occurred in no small part because Mrs Leggett’s breaking point was Mr Rudolph’s treatment of her on 9 and 10 October 2016. That included his reaction in his 10 October email that he sent to her because she exercised a workplace right. He subsequently acted to drive the nail home later, as I found on the second s 340 claim, by persisting in his bullying conduct throughout the balance of Mrs Leggett’s employment, ignoring the Club’s contractual and statutory obligations to her and taking adverse action against her because she had both taken sick leave and exercised her workplace right to make a complaint about his behaviour. As Perram J, with whom Collier and Reeves JJ agreed, asked rhetorically in Hughes v Hill (2020) 277 FCR 511 at 521 [47], in a case of sexual harassment contrary to s 28A of the Sex Discrimination Act 1984 (Cth), “what is the ruin of a person’s quality of life worth?” (see too at 521 [47]–[48]).

  1. I am of opinion that Mrs Leggett should be awarded $200,000 pursuant to s 545(1) and (2)(b) of the Fair Work Act for the loss she has suffered by reason of the Club’s contraventions of the Act and in all of the circumstances..

CONCLUSION

  1. For these reasons, Mrs Leggett is entitled to be paid her unpaid entitlements under the Fair Work Act and her contract of employment.  She is also entitled to recover work injury damages for the Club’s negligence in failing to protect her from the risk of psychiatric injury and compensation for its multiple contraventions of the Fair Work Act.  There will need to be a further hearing to fix penalties for the Club’s contraventions of the Fair Work Act and Long Service Leave Act.
  1. The parties should prepare some draft calculations so that I can evaluate whether either method that I have suggested for calculation of Mrs Leggett’s future economic loss claim under s 151I(2) of the Workers Compensation Act would be appropriate. They should also prepare calculations of the other amounts of commissions and leave entitlements, and any work injury damages, in order to quantify the past economic loss today due to Mrs Leggett under s 151I(1), based on my findings, together with prejudgment interest.”

 

Leggett v Hawkesbury Race Club Limited (No 3) [2021] FCA 1658 delivered 24 December 2021 per Rares J

 

https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca1658