General protections and adverse action

This lengthy extract from a recent judgement of the Federal Court is an excellent summary of the legal principles which arise for determination in a general protections case involving allegations of the taking of adverse action against an employee for inter alia having and exercising workplace rights.

 

“In cross-examination, Mr Schatz also denied that the change in Mr Nuttall’s position was a demotion as “technical roles are the most valued in the organisation” and were not “subservient to management roles”.

  1. I do not accept the characterisation that Mr Moran and Mr Schatz attributed to Mr Nuttall’s change in position.  Mr Moran intended to change Mr Nuttall’s position until Mr Moran was satisfied Mr Nuttall demonstrated improvement in his performance.  The restructure was a change in formal reporting lines that was communicated to the organisation as a whole.  It was in an organisational sense, a demotion.
  1. I accept that Hatch took adverse action against Mr Nuttall for the purpose of s 342(1) (item 1(c)).

3.5      Did Mr Nuttall possess and exercise workplace rights?

  1. Mr Nuttall contends that he exercised workplace rights by making four complaints or inquiries in relation to his employment and those complaints or inquiries were ones which he was able to make.

3.5.1    The complaints and inquiries that are relied upon

3.5.1.1 First Complaint

  1. The first “complaint” relied upon was the content of the discussion Mr Nuttall had with Mr D’Cruz on 7 August 2018 in which Mr Nuttall expressed to Mr D’Cruz the difficulties he was experiencing with Mr Moran and the stress he was suffering.  Mr D’Cruz and Mr Nuttall’s evidence of the content of that discussion was broadly consistent.
  1. I accept that the discussion took place along the lines set out at [53] above.

3.5.1.2 Second Complaint

  1. The second “complaint” relied upon was the content of the discussion Mr Nuttall had with Mr Kwak on or about 22 August 2018 in which Mr Nuttall told Mr Kwak that Mr Nuttall was struggling with Mr Moran’s management style, that Mr Moran was not communicating clearly or consulting Mr Nuttall appropriately, that Mr Moran’s demands were not in Mr Nuttall’s view reasonable or consistent with what Mr Nuttall considered to be appropriate priorities and that there was stress across the infrastructure team.
  1. I accept that the discussion took place as set out at [67][73] above.

3.5.1.3 Third Complaint

  1. The third “complaint” relied upon by Mr Nuttall was the content of the discussion Mr Nuttall had with Mr Moran on or about 23 August where he informed Mr Moran of his wife’s need to travel to Portugal and that he would need to work flexibly the following week in order to take his children to and from school. Mr Nuttall contends that the content of this discussion constituted an “inquiry” for the purposes of s 341(1)(c).
  1. I accept that a discussion along those lines took place as set at [75] above.

3.5.1.4 Fourth Complaint

  1. The fourth “complaint” relied upon by Mr Nuttall was the content of his discussion with Mr Wild on 3 September 2018 upon Mr Wild’s return from extended leave where Mr Nuttall told Mr Wild that Mr Moran’s approach to management was making matters difficult for Mr Nuttall and causing Mr Nuttall stress.  Mr Nuttall contends that the contents of the discussion constituted a “complaint” and an inquiry by which Mr Nuttall requested Mr Wild’s support.
  1. I accept that a discussion along these lines took place on 3 September 2018.

3.5.2    Did Mr Nuttall make a complaint or inquiry?

  1. Hatch contends that none of the “Complaints” relied upon by Mr Nuttall had the character of a “complaint or inquiry” as required by s 341(1)(c). The First, Second and Fourth “Complaints” were said to be no more than instances of Mr Nuttall “letting off steam” rather than making a complaint. The Third “Complaint” was not in the nature of an inquiry or question asked of Mr Moran but rather informing Mr Moran of a state of affairs.
  1. As Snaden J said in Wong at [153], it “may be accepted that not every interaction by which one person communicates to another the existence of some suboptimal state of affairs will qualify as a ‘complaint’, as that term is properly understood”.  The reasons for the communication are important.  A complaint in this context is an expression of grievance made with the purpose of seeking consideration, redress or relief from the matter about which there is aggrievance (Alam v National Australia Bank Limited [2021] FCAFC 178; (2021) 288 FCR 301 at [59] (White, O’Callaghan and Colvin JJ)).
  1. The First Complaint was made in the course of discussions between Mr Nuttall and Mr D’Cruz.  Mr Nuttall did not report to Mr D’Cruz.  Nor did Mr D’Cruz have any management responsibilities in relation to the matters in respect of which Mr Nuttall was expressing dissatisfaction.  Mr Nuttall was communicating with a colleague who held a position in the organisation which meant Mr D’Cruz had very limited ability to assist in providing a remedy.  Mr D’Cruz considered the expression of grievance by suggesting Mr Nuttall speak to Mr Kwak.
  1. The Second Complaint followed chronologically from the First Complaint.
  1. In the conversation with Mr Kwak, Mr Nuttall told Mr Kwak that he was stressed by the demands Mr Moran was placing on him, that Mr Moran was not consulting with Mr Nuttall before making decisions that Mr Nuttall considered affected his work and a concern that Mr Moran was making decisions that Mr Nuttall did not consider to be consistent with the business plan for the Infrastructure group.  Mr Nuttall expressed his concern to Mr Kwak about the work environment under Mr Moran.
  1. The matters raised by Mr Nuttall in his discussion with Mr Kwak were in the nature of grievances.  They were communicated to Mr Kwak for the purpose of obtaining Mr Kwak’s assistance in resolving them.  They were in the nature of “complaints”.  They were made in response to an open invitation by Mr Kwak to Mr Nuttall to raise any matters of concern.  Mr Kwak offered to help.
  1. I do not accept Mr Kwak’s characterisation of his discussion with Mr Nuttall on 22 August 2018 as Mr Nuttall “letting off steam”.  Whilst Mr Nuttall had not invoked or sought to invoke the formal complaints procedure set out in Hatch’s complaints policy, Mr Nuttall was seeking resolution of his grievance through an informal process (as that policy document recognised may be appropriate).  The fact that Mr Kwak did not perceive Mr Nuttall as making a formal complaint is not to the point.
  1. The Third “Complaint” was said to be an “inquiry” relating to Mr Nuttall’s need to work flexibly for a week whilst his wife was in Portugal.  Mr Nuttall contends that there was in this discussion an implicit request to work flexibly which Mr Moran could have refused.
  1. By his conversation with Mr Moran on or about 24 August 2018 Mr Nuttall was conveying to Mr Moran information about his personal circumstances (his wife being overseas) and of his need and intention to work flexibly for that week.  He was not making a request or inquiry of Mr Moran but informing Mr Moran of a state of affairs.  I do not accept that there was an implicit or “in substance” inquiry being made of Mr Moran.
  1. The Fourth “Complaint” was said to have occurred on 3 September 2018 in the course of a discussion Mr Nuttall had with Mr Wild.
  1. Mr Wild did not give evidence in these proceedings as explained further at [208].
  1. I accept that Mr Nuttall informed Mr Wild of his state of discontent. I have some reservations about whether a discussion had with an individual on the afternoon of his return from extended sick leave was had with the object of seeking Mr Wild take notice of and consider the unsatisfactory state of affairs that Mr Nuttall perceived as existing in respect of his interactions with Mr Moran. Notwithstanding this reservation, I proceed on the basis that the Fourth Complaint constituted a “complaint” for the purposes of s 341(1)(c).
  1. I also proceed on the basis that Mr Nuttall made an inquiry of Mr Wild in the form of a request for Mr Wild to assist and support him in Mr Nuttall’s interactions with Mr Moran.

3.5.3    Were the complaints or inquiries related to Mr Nuttall’s employment?

  1. I accept that each of the First to Fourth “Complaints” were communications made in relation to Mr Nuttall’s employment.  I do not understand Hatch to have contended otherwise.

3.5.4    Was Mr Nuttall “able to make” the complaints or inquiries?

  1. As explained above, in order for Mr Nuttall to be able to make the complaints or inquiries, the right or entitlement to make the complaint or inquiry must be founded on a source of entitlement.  Where the complaint or inquiry relates to a contractual right or entitlement, the ability to complain is sourced in the common law relating to contracts.
  1. Mr Nuttall contended that his complaints ought to be characterised as complaints relating to Mr Moran’s interference with his ability to discharge his contractual obligations to perform his role as Manager Infrastructure – Southern Region.  Accordingly the source of Mr Nuttall’s ability to complain was to be found in his contract of employment.
  1. Hatch contended that for Mr Nuttall to have an ability to make the complaint or inquiry it is necessary to show that his contract of employment provided for the right to complain or the complaint must relate to the non-observance of an express term of employment.  A complaint that relates to an employee’s duty of fidelity (to discharge employment duties in the best interests of the employer) is not such a complaint because “[a] term of that type cannot provide a relevant source of entitlement: were that the case, any complaint arising in an employment context would be one that the employee is ‘able’ to make”.  Hatch relied upon Wong at [173]–‍[175].
  1. It is important to understand the nature of the First, Second and Fourth Complaints made here.  Unlike Wong, here the complaints about Mr Moran’s management went further than complaints made “in aid of [him] discharging obligations that arose both contractually and as a matter of expectation”: Wong at [173] (Snaden J).  Amongst other things, Mr Nuttall was complaining about what Nuttall perceived to be Mr Moran’s direct interference with Mr Nuttall’s ability to perform his employment duties, by reason of what Mr Nuttall perceived as unreasonable demands that were not consistent with the core of Mr Nuttall’s role.
  1. As Snaden J recognised in Wong, “potential sources of that right or entitlement are not limited to contracts, awards, statutes or other instruments. But some such source there must be, nonetheless”: [175].
  1. Based on the approach of the majority in PIA, the source of Mr Nuttall’s right to complain about direct interference with Mr Nuttall’s ability to discharge the duties of his role is in the general law related to contracts.  The First, Second and Fourth Complaints were not merely connected to the contract of employment or made in aid of an ability to discharge a contractual obligation (such as a complaint about level of resources) but related to a perceived direct interference with Mr Nuttall’s ability to discharge the role.
  1. A significant part of the difficulties in this case arose from the lack of clarity with which the scope and responsibilities of Mr Nuttall’s role as Manager Infrastructure – Southern Region was defined in the contract of employment.  That lack of clarity does not change the character of the nature or the subject matter of the complaints made by Mr Nuttall.
  1. At least in so far as the Second and Fourth Complaints are concerned, Mr Nuttall’s right to complain about Mr Moran’s approach to managing Mr Nuttall was also sourced in Hatch’s Workplace Grievance Resolution Procedure.  In his discussion with Mr Kwak, Mr Nuttall expressed a “grievance” as defined in that policy document.  The fact that Mr Kwak may not have subjectively perceived Mr Nuttall’s issues as being in the nature of a grievance as defined in the Procedure document or as Mr Nuttall invoking that Procedure is not relevant.  Similarly, the fact that Mr Nuttall may not have been consciously aware of, or expressly referred to, that Procedure is not relevant.  By its published document, Hatch gratuitously bequeathed Mr Nuttall an ability to complain about personality conflicts.  By expressing his issues with Mr Moran’s management of him to Mr Kwak, Mr Nuttall exercised that ability.
  1. In his discussion with Mr Wild, based on the findings made above, Mr Nuttall was reporting a “grievance” as defined in the Procedure document to his manager.  However, Mr Nuttall’s “inquiry” of Mr Wild for Mr Wild’s support, was not an “inquiry” which Mr Nuttall was relevantly “able to make”.  By his request, Mr Nuttall was asking Mr Wild to essentially take his side.  Hatch’s Procedure did not confer on Mr Nuttall an entitlement to request an advocate to assist him.

3.5.5    Conclusions

  1. I find that the First, Second and Fourth “Complaints” were each a “complaint or inquiry” made by Mr Nuttall in relation to his employment and each of the Second and Fourth “Complaint” was a complaint Mr Nuttall was relevantly “able to make”. The making of the Second and Fourth Complaint was an exercise by Mr Nuttall of a workplace right for the purposes of s 340(1)(a)(ii).
  1. Based on the views expressed by the majority in PIA at [19], the First Complaint may be regarded as one Mr Nuttall was “able to make” because of the connection between the complaint and Mr Nuttall’s contract of employment.

3.6      Was adverse action taken because of Mr Nuttall’s complaints and inquiries?

  1. Mr Nuttall alleges that the adverse action taken against him was actuated or partly actuated by the Complaints he made.
  1. For the purposes of the analysis that follows, I have assumed that each of the First to Fourth Complaints constituted the exercise of a workplace right for the purposes of s 340(1)(a)(ii).

3.6.1    The nature of the action taken

  1. Based on the finding set out above, adverse action was taken against Mr Nuttall by Hatch by the announcement of the alteration to Mr Nuttall’s position within the Infrastructure group.  The fact that the alteration was not ultimately given effect to does not change the fact that Mr Nuttall suffered prejudice as a result of the announcement of that alteration both in the meeting of 4 September and in the email sent shortly thereafter.  The restructure announced by Mr Moran to Mr Nuttall in the presence of Mr Wild and later by email to the Infrastructure group would have resulted in Mr Nuttall ceasing to be primarily responsible for securing new business across the Southern Region and reducing his responsibilities for managing staff.  By diminishing his responsibilities, the prestige of his position was prejudicially altered.
  1. There is no direct evidence that tends directly to prove that the adverse action was taken because Mr Nuttall made any of the Complaints. Rather, Mr Nuttall relies upon the statutory presumption in s 361 of the FW Act.
  1. By his pleadings Mr Nuttall nominated Mr Moran, Mr Wild, Mr Kwak and Mr D’Cruz as the human agents through whom Hatch resolved to engage in the conduct that it did.  In opening submissions, Mr Nuttall also nominated Mr Schatz.  By closing submissions Mr Nuttall abandoned his nomination of Mr D’Cruz but nominated Ms Rowena Gamble as another individual who “had a material influence on the decision to demote” Mr Nuttall.
  1. Each of Mr Moran, Mr Schatz and Mr Kwak gave evidence.  Neither Mr Wild nor Ms Gamble gave evidence.  As explained below, the effect of Mr Moran’s evidence was that he was the sole individual who made the decision to restructure Mr Nuttall’s position and that although he spoke to Mr Schatz, Mr Kwak and Ms Gamble prior to announcing the decision, he did not seek their approval for the making of the decision or seek their recommendations in relation to the restructure.
  1. Mr Nuttall urged the Court to infer that Mr Wild did not give evidence because his evidence would not have been helpful to Hatch’s case: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.  Mr Nuttall contends that the evidence of Mr Moran as to the nature of the involvement of Mr Schatz, Mr Kwak and Ms Gamble ought to be rejected.  Mr Nuttall also contends that the evidence of Mr Schatz and Mr Kwak ought to be rejected and given that Ms Gamble was not called to give evidence, it follows that Hatch has not adduced evidence that rebuts the presumption that the adverse action was taken because of a proscribed reason or for reasons that include a proscribed reason.
  1. Hatch contends that the direct evidence of Mr Moran, Mr Kwak and Mr Schatz is sufficient to support a finding that any action taken against Mr Nuttall was not taken by Hatch for reasons that included a proscribed reason.  Hatch contends that the direct evidence also evidences the reasons why the action was taken.  Hatch contends that the direct evidence — both positive (that is, about what did actuate the conduct) and negative (that is, about what did not) — suffices to rebut the statutory presumption.
  1. As explained in Wong at [189], in determining whether Hatch has displaced the presumption that adverse action was taken for a proscribed reason, there are two questions to be addressed:

(1)          Who within Hatch should be understood to have decided that Mr Nuttall should be treated in the way he was?

(2)          Does the evidence rebut the statutory presumption that that person or those people made that decision (wholly or partly) because of the fact that Mr Nuttall had made one or more of the First to Fourth Complaints?

3.6.2    Who made the decision?

  1. Each of Mr Moran, Mr Kwak and Mr Schatz gave evidence that Mr Moran alone made the decision to remove Mr Nuttall from his role as Manager Infrastructure – Southern Region.  Mr Nuttall does not dispute that Mr Moran was a decision-maker.  He contends however that other persons were also relevantly involved in the process that led to his demotion, sufficient to constitute the state of mind that actuated the action taken.

3.6.2.1 Mr Moran’s reasons for the decision

  1. Mr Moran’s evidence was that he made the decision to restructure Mr Nuttall’s position because of concerns he had about Mr Nuttall’s performance.
  1. As the chronology of events summarised above demonstrates, Mr Moran developed concerns about Mr Nuttall’s performance from at least February 2018.  Mr Moran considered that part of Mr Nuttall’s role was to be across the details of project performance (including budgetary performance) and issues that were emerging with project delivery.  Mr Moran was not satisfied that Mr Nuttall was adequately performing this aspect of the role.  Mr Moran was also frustrated by what he perceived to be a lack of Mr Nuttall’s physical presence in the workplace.  As evidenced by his emailed note to himself on 13 July 2018, Mr Nuttall subjectively had an awareness of Mr Moran’s frustrations, though Mr Nuttall considered them to be unfair and unwarranted.
  1. In so far as the First Complaint is concerned, there is no evidence to support a conclusion that Mr Moran was aware of Mr Nuttall’s discussion with Mr D’Cruz that took place on or about 7 August 2018.  Indeed, the evidence was that Mr Moran was not in the country at the time of that discussion and there is no evidence that Mr Moran learnt of that discussion prior to the events of 4 September 2018.  I find that Mr Moran’s decision to take the adverse action against Mr Nuttall was not made wholly or partly because of the making of the First Complaint.
  1. In so far as the Second Complaint is concerned, I find that following his discussion with Mr Nuttall, Mr Kwak spoke with Mr Moran on or about 24 August 2018 to “better understand the working relationship between the two of them”.  Mr Kwak’s evidence was that he did not disclose to Mr Moran that Mr Nuttall had expressed frustrations with Mr Moran.  Mr Moran’s evidence was that Mr Kwak did not inform Mr Moran of Mr Nuttall having raised any specific issue or complaint about Mr Moran in a meeting on 22 August 2018 or at any other time.  Mr Kwak was concerned to investigate the state of the working relationship between Mr Nuttall and Mr Moran.  Mr Kwak’s evidence was that he did not “share specific concerns or frustrations one employee may have expressed about another as this may impede subsequent conversations between them”.  I accept the evidence of Mr Moran and Mr Kwak’s evidence that Mr Kwak did not share with Mr Moran the specific nature of Mr Nuttall’s complaints about Mr Moran in Mr Kwak’s discussion with Mr Moran on 24 August 2018.  Mr Kwak spoke to Mr Moran in order “to figure out what is the story…not a side of the story”.  Following his discussion with Mr Nuttall, Mr Kwak:

smelled that something doesn’t smell right.  Something is not working right.  There’s misalignment, and all you had to do was ask questions, and, slowly, things come out.

Mr Kwak’s evidence is consistent with Mr Moran’s evidence and broadly consistent with the Workplace Grievance Resolution Procedure process.

  1. I find that Mr Moran’s decision to restructure Mr Nuttall’s position was not made wholly or partly because Mr Nuttall had made the Second Complaint to Mr Kwak.  I do not accept that Mr Moran’s evidence that Mr Kwak did not inform Mr Moran that Mr Nuttall had “raised any specific issue or complaint” about Mr Moran to be “nuanced” or contrived.  I find that Mr Moran was aware that his relationship with Mr Nuttall was strained and that Mr Moran was cognisant of Mr Kwak having a similar awareness.  By the time Mr Moran had discussions with Mr Kwak after Mr Kwak’s meeting with Mr Nuttall, Mr Moran had formed strong views about Mr Nuttall’s performance.  It was those views, rather than any awareness or suspicion that Mr Nuttall had spoken to Mr Kwak about Mr Moran, that were the cause of Mr Moran’s decision to restructure Mr Nuttall’s position.
  1. As explained above, Mr Nuttall sought to characterise the Third Complaint as in the nature of an inquiry to work flexibly for one week.  Even if I were to accept that characterisation (which I do not), I do not accept that Mr Moran’s decision to restructure Mr Nuttall’s position was made wholly or partly because Mr Nuttall had made the Third Complaint.  The evidence is that Mr Moran expressed neither agreement nor objection when informed by Mr Nuttall of his need to work flexibly for a week.  I find that Mr Moran’s decision to demote Mr Nuttall by restructuring part of an organisation was not made wholly or partly because Mr Nuttall informed Mr Moran of his need to work flexibly for a week.
  1. In relation to the Fourth Complaint, I accept Mr Moran’s evidence that he was not aware of Mr Nuttall complaining to Mr Wild about him or of the content of the discussion between Mr Nuttall and Mr Wild on 3 September 2018.  Having regard to the chronology of events, I do not accept that any discussion Mr Nuttall had with Mr Wild on the afternoon of 3 September 2018 contributed in any way to the decision announced by Mr Moran to Mr Nuttall on 4 September 2018.  It was agreed (as recorded in the agreed chronology filed by the parties) that on or about 20 August 2018, Mr Moran asked Mr Nuttall about his experience in design management.  Mr Moran had made notes of his concerns about Mr Nuttall’s performance on 28 August 2018.  I find that Mr Moran had already made the decision to restructure in the lead up to Mr Wild’s return to work.
  1. I do not draw any Jones v Dunkel inference that Mr Wild was not called because his evidence would not assist Hatch.  Whilst Mr Wild was not called to give evidence, the evidence before the Court supports a finding that Mr Wild, at least as at June 2021, continued to suffer serious mental health issues.  I do not consider Mr Wild to be in “Hatch’s camp” or under their control or direction.

3.6.2.2 Conclusions about Mr Moran

  1. Mr Moran was subjected to cross-examination.  Mr Moran gave his answers in a composed and focused manner and did not attempt to evade difficult questions.  He was direct.  He agreed with propositions even when the propositions painted him as lacking in empathy.  For example:

(1)          In relation to the discussion held on 21 August 2018, in which Mr Nuttall raised the message he received from Mr Taylor and the concerns he had about staff stress levels:

COUNSEL FOR MR NUTTALL: So you said to [Mr Nuttall], I suggest, that, in response to these mental health issues, “We would just – we will just have to do everything and cope.” That’s what you said to [Mr Nuttall]. Do you agree?

MR MORAN:—Yes.

COUNSEL FOR MR NUTTALL: You told [Mr Nuttall] that he just had to roll his sleeves up. Does that sound right?—

MR MORAN: —More likely I would have said, “Just go to – get into the project.”

(2)          In relation to a conversation Mr Moran had with Mr Nuttall also on or about 21 August in which Mr Nuttall raised with Mr Moran a number of issues, including the issue of the retention of staff due to stress-related issues:

MR MORAN: —Yes. It was an ongoing issue that he was raising with me.  Yes.

COUNSEL FOR MR NUTTALL: Yes, and he – your response to that was that [Mr Nuttall] needed to let go of those issues and focus on the WRU structures delivery?

MR MORAN: —Yes.

COUNSEL FOR MR NUTTALL: Remember saying that?

MR MORAN: —Yes.

(3)          In relation to the 4 September Meeting, Mr Moran accepted that notwithstanding he was intending to tell Mr Nuttall of the restructure and his reasons for implementing it at that meeting, Mr Moran gave Mr Nuttall no indication that the meeting was to be anything other than a “catch-up”.

  1. I accept that Mr Moran’s answers were an honest account of his perceptions and his state of mind.  I do not accept that Mr Moran concocted “a list of supposed performance issues” to use as justification for demoting Mr Nuttall.  Mr Moran’s evidence is consistent with the history of his relationship with Mr Nuttall which discloses a series of frustrations held by Mr Moran in respect of Mr Nuttall over a considerable period of time.
  1. I am satisfied that Mr Moran’s decision to restructure Mr Nuttall’s role was not made (either wholly or in part) because Mr Nuttall made any of the First to Fourth Complaints.  I accept Mr Moran’s evidence.  I accept that Mr Moran genuinely formed views about the adequacy of Mr Nuttall’s performance and that he acted upon those views.  There was no obvious disconnect between the views Mr Moran claimed to have formed and the circumstances, particularly given Mr Moran’s intense focus on project performance and his subjective expectations of Mr Nuttall’s role.  I find that in making the decision to restructure and in announcing that restructure Mr Moran was not subjectively conscious of other considerations beyond his perception of a need to improve Mr Nuttall’s performance to align with Mr Moran’s expectations of the role Mr Nuttall held.
  1. I do not accept Mr Nuttall’s submission that the decision to restructure his position could not have been made by Mr Moran because of concerns with Mr Nuttall’s performance.  It was submitted that such a restructure would not be a rational way of addressing performance concerns.  The proposition was that “the way to cure performance concerns, or have an employee improve, is to leave them in their current role and perhaps mentor them in that current role to get better”.  I do not accept that proposition, having regard to Mr Moran’s perception of the role and his perception of Mr Nuttall’s performance.  The submission made by Mr Nuttall that the restructure would not develop his skills as Manager Infrastructure – Southern Region reflects Mr Nuttall’s perception of the role as being directed at business development.  On that perception the restructure could not logically contribute to the development of business development skills.  But that was not how Mr Moran perceived the Southern Region role.  Mr Moran was concerned about a specific aspect of Mr Nuttall’s performance — in particular, his ability to be across the detail of projects.  The restructure was intended to focus Mr Nuttall on the details of a particular project to improve what Mr Moran perceived to be a deficiency.  Given Mr Moran’s perception of Mr Nuttall’s performance, Mr Moran’s actions were not irrational.  Whether the actions were fair, or Mr Moran’s perception of Mr Nuttall’s performance was warranted or correct, is not the question.

3.6.2.3 Mr Kwak

  1. Mr Nuttall contends that Mr Kwak was either a joint decision‑maker in respect of the decision to demote Mr Nuttall or was a person who had a material influence on that decision.
  1. Hatch contends that it was Mr Moran’s decision alone.
  1. The evidence was that prior to informing Mr Nuttall of the restructure and prior to the meeting of 4 September, Mr Moran informed Mr Kwak of the restructure to give Mr Kwak an opportunity to voice any concerns he had.  Mr Kwak denied that he was a joint decision‑maker or contributed to the decision.  I understood his evidence to be that in making key decisions, it was usual practice to “bounce it off a couple of people”.  Mr Kwak’s evidence was that Mr Moran spoke to him about the restructure and Mr Kwak did “not have a problem with it”.
  1. I find that Mr Kwak’s involvement in the process that led to the restructure decision was not sufficient to constitute Mr Kwak as a decision‑maker or otherwise to constitute Mr Kwak’s state of mind as part of the corporate state of mind of Hatch.  Mr Moran had the power and authority to make the restructure decision.  Mr Moran had made the decision to demote Mr Nuttall.  Mr Moran accorded Mr Kwak the opportunity to discuss or even dissuade Mr Moran from implementing the decision to restructure but Mr Kwak’s did not intervene.  Mr Kwak’s involvement did not actuate the decision, nor amount to material influence in the making of the decision to restructure Mr Nuttall’s position.  That decision was Mr Moran’s alone.
  1. This conclusion is consistent with Mr Moran’s evidence that he told Mr Kwak what he was doing because Mr Kwak had a superior position in the company in order to give Mr Kwak an opportunity to suggest that maybe he should not do it or suggest that he do something else.  Mr Kwak accepted Mr Moran’s judgement to undertake the restructure and the decision made reflected Mr Moran’s judgement.

3.6.2.4 Mr Schatz

  1. Mr Nuttall contends that Mr Schatz was either a joint decision‑maker in respect of the decision to demote Mr Nuttall or was a person who had a material influence on that decision.
  1. I find that Mr Schatz’s involvement in the process that led to the restructure decision was not sufficient to constitute Mr Schatz as a decision‑maker or otherwise to constitute Mr Schatz’s state of mind as part of the corporate state of mind of Hatch.  Mr Moran informed Mr Schatz of his decision to accord Mr Schatz the opportunity of voicing any concerns.  Mr Schatz did not express any concerns.  Mr Schatz’s involvement did not actuate the decision to restructure Mr Nuttall’s position nor have a material influence in the making of the decision.  That decision was Mr Moran’s alone.
  1. Mr Nuttall submitted that Mr Schatz was an unsatisfactory witness because he did not concede that the restructure involved a demotion.  Although I have concluded that the restructure did involve a demotion, I accept Mr Schatz’s evidence that he had no regular dealings with Mr Nuttall.  Mr Schatz was based in Canada.  He relied upon management in Australia and the Asia Pacific in relation to matters involving the Australian infrastructure team.  Mr Schatz accepted Mr Moran’s judgement to reassign Mr Nuttall to a Structural Team leader’s role.  The decision to reassign was made by Mr Moran and not actuated by Mr Schatz.
  1. This conclusion is consistent with Mr Moran’s evidence.

3.6.2.5 Other “decision‑makers”

  1. Mr Nuttall contends that Mr Wild influenced the making of the decision to change Mr Nuttall’s position in the Hatch organisation in the discussions between Mr Moran and Mr Wild on 3 September 2018.
  1. Mr Moran’s evidence was that he had “already made the decision on how I was going to restructure, and I was having [Mr Wild] review it”.
  1. I conclude that Mr Wild did not relevantly influence the making of the decision to alter Mr Nuttall’s position.  At the time of the 4 September Meeting, Mr Wild had just returned from extended sick leave.  Mr Wild had not been directly involved in or observed Mr Nuttall’s performance over the period during which he had been away.  Mr Moran informed Mr Wild of the decision Mr Moran had made based on Mr Moran’s direct experiences with Mr Nuttall and also informed Mr Wild of the reasons he had made that decision.  I accept Mr Moran’s evidence that Mr Wild did not contribute to the making of the decision.
  1. For the reasons set out above, I do not draw any inference that Mr Wild’s evidence would not have assisted Hatch.
  1. Mr Nuttall further contends that Ms Gamble, a human resources employee of Hatch, had a material influence on the decision to demote Mr Nuttall.  Mr Nuttall did not identify Ms Gamble as a decision‑maker or a person relevantly involved in the decision to take adverse action against him.  Nor was Ms Gamble identified in Mr Nuttall’s written or oral opening submissions.  Mr Nuttall’s submission as to Ms Gamble’s involvement is based on the following exchange in Mr Moran’s cross-examination:

COUNSEL FOR MR NUTTALL: Were you talking with Human Resources before 4 September about the restructure?

MR MORAN: Yes.

COUNSEL FOR MR NUTTALL: Who were you talking to?

MR MORAN: Rowena Gamble.

COUNSEL FOR MR NUTTALL: And did she give input into the reasons for demoting [Mr Nuttall]?

MR MORAN: I don’t agree it was a demotion.

COUNSEL FOR MR NUTTALL: Sorry, changing his position, if you prefer?

MR MORAN: She was aware, yes.

COUNSEL FOR MR NUTTALL: Yes, and she was involved in setting up that restructured arrangement, was she?

MR MORAN: She was informed.

COUNSEL FOR MR NUTTALL: She was informed. Did she help you put the chart together – the organisation chart?

MR MORAN: No.

  1. Ms Gamble was not called by Hatch to give evidence.
  1. It may not be necessary for the applicant to identify a particular individual by name in order to engage the statutory presumption.  As the Full Court said most recently in Monash Health v Singh [2023] FCAFC 166 at [113]–[115] (Katzmann, Snaden and Raper JJ):

[113]        …To engage the statutory presumption, an applicant must allege that ‘a person took, or is taking action for a particular reason or with a particular intent’: s 361(1)(a). A ‘person’ includes a body corporate. By operation of s 793, the conduct of a body corporate inheres in the conduct of the human officers, employees or agents through whom it acts.

[114]        Here again it is important to note that the case did not proceed by pleadings. The claim form identified the body corporate, rather than individuals who made the decision or materially influenced the decision to terminate. Monash Health did not apply to strike out the claim, require pleadings or request further and better particulars (including particulars of the identities of the decision makers).

[115]        There is a distinction between what a litigant must do in order to invoke the statutory presumption for which s 361 of the FW Act provides (on the one hand) and the circumstances in which a pleading might be vulnerable to attack in the usual ways (on the other). In this case, as is explained above, it was squarely put that Monash Health did things (most significantly, dismissed Mr Singh) for a reason or reasons proscribed by Pt 3-1 of the FW Act: that suffices to invoke the statutory presumption. The relevant actor — that is to say, the perpetrator of the adverse action — is the corporate entity and its state of mind was very clearly alleged.

  1. Mr Nuttall contended that it followed that having engaged the presumption, Hatch could not rebut the presumption in the absence of calling Ms Gamble, relying on the following passage from Wong (Full Court) at [25]:

As the decisions in Wood, Voigtsberger and Roberts demonstrate, the word ‘because’ as it appears in s 340 of the FW Act directs attention to the reason for an action, which is to be found in the state of mind of the person alleged to have taken the adverse action. Where (as here) that person is a corporate entity, it will in all cases be necessary to examine the state of mind of the human actor or actors who (alone or together) caused the corporation to take the action that it did or, to adopt a phrase from Wood, who ‘played the decision-making part in the joint administrative activities’ culminating in the actual act that constitutes the adverse action. It may be convenient to refer to the person whose conduct directly visited the adverse action on the employee as the ‘decision-maker’ but his or her decision-making process may incorporate the state of mind of other people, including by adopting facts or opinions asserted by them.

  1. I find that Ms Gamble did not actuate the decision to demote Mr Nuttall.  Nor did she materially contribute to the making of the decision.  I accept Mr Moran’s evidence that he informed Human Resources about the restructure.  That is not unexpected.  I accept that Mr Moran had authority to make the decision to restructure and he exercised that authority.  He did not make the decision jointly with a representative from Human Resources.  Ms Gamble did not actuate the decision to restructure or materially influence its making.  She was informed of Mr Moran’s decision but Mr Moran did not consult with her or involve her in the making of his decision.  I am satisfied that Ms Gamble did not have a material influence on the making of the decision based on the evidence of Mr Moran and the objective facts and circumstances.  She thus did not play a “decision-making part” in the sense referred to by the Full Court in Wong (see also Dorsch v HEAD Oceania Pty Ltd [2024] FCA 162 at [222]–[223]).
  1. Furthermore, there is no evidence or allegation that Ms Gamble was aware of Mr Nuttall making any of the First to Fourth Complaints.  Ms Gamble was not a party to any of the discussions.  None of the parties to those discussions had reason to speak to Ms Gamble about those discussions and there is no allegation that they did so.  Having regard to the entirety of the circumstances, any involvement Ms Gamble may have had in the restructure was not influenced by Mr Nuttall exercising any of the workplace rights on which he relies.

3.7      Conclusions relating to Hatch’s conduct

  1. The decision to demote Mr Nuttall was made by Mr Moran alone.  He informed Mr Schatz and Mr Kwak before informing Mr Nuttall of his decision in order to give them an opportunity to raise any concerns they may have had with the decision.  Neither Mr Schatz nor Mr Kwak had any problems with Mr Moran’s decision.  They did not relevantly materially influence the making of the decision by Mr Moran.
  1. I do not accept that the repositioning of Mr Nuttall was undertaken in order to put Mr Nuttall in a position where he could no longer cause problems by complaining about Mr Moran or that there was a view within Hatch that Mr Nuttall’s complaints about Mr Moran were undermining Mr Moran’s position in the company.  The evidence does not support a conclusion that Mr Nuttall was regarded within Hatch as a troublemaker.  The restructure did not remove Mr Nuttall from the organisation or reduce his contact with other employees.  I do not accept that the restructure was undertaken so that Mr Nuttall could “no longer cause problems” for Mr Moran.
  1. I do not accept that the restructure was undertaken as retribution for Mr Nuttall making any of the First to Fourth Complaints.  The restructure would not have reduced Mr Nuttall’s pay or entitlements.  Following the restructure, Mr Nuttall was to retain his shareholding in both Hatch and its parent.  There were significant problems with some of Hatch’s projects in the Southern Region, including the Western Roads Upgrade.  Whether fairly or not, particularly given the lack of clarity around the scope of Mr Nuttall’s role when Mr Nuttall commenced his employment, Mr Moran had formed the view that the problems were at least partially attributable to what he perceived to be deficiencies in Mr Nuttall’s knowledge of the details of those projects.  From Mr Moran’s perspective, the restructure would address these issues.
  1. I am satisfied that on the balance of probabilities Mr Nuttall was to be repositioned because Mr Moran had concerns about Mr Nuttall’s performance in his role. I am satisfied that Hatch did not reposition Mr Nuttall (either wholly or in part) because he made any of the First to Fourth complaints. I am satisfied that Hatch has discharged its onus of disproving that a substantial and operative reason for the decision to restructure was because Mr Nuttall had exercised a workplace right or because Mr Nuttall had a workplace right. The requirements of s 340 of the FW Act are not made out.

3.8      Causation

  1. Because I have found that s 340 was not contravened, the question of whether adverse action caused Mr Nuttall loss or damage does not arise.
  1. If I am wrong, for the reasons set out at [146] above, I am satisfied that the adverse action taken in the form of restructuring Mr Nuttall’s position and announcing that restructure during and after the meeting of 4 September 2018 aggravated Mr Nuttall’s psychiatric condition to the point where Mr Nuttall could no longer cope or attend work at Hatch. I accept that the existence of Mr Nuttall’s condition was caused by a number of stress factors that Mr Nuttall experienced in 2017 after he sold his business to Hatch and after he changed his work role to become an employee of Hatch, his fixation with the 4 September Meeting and complex issues in his personal life. However, what caused Mr Nuttall to cease to be able to perform his employment duties was the aggravation of that existing condition which occurred as a result of the 4 September 2018 Meeting.
  1. Mr Moran’s own evidence was that he had been planning since 22 August 2018 to have a performance management discussion with Mr Nuttall.  That was the purpose and intent of the 4 September Meeting.  When Mr Moran asked Mr Nuttall to arrange a meeting for 4 September 2018, he did not tell Mr Nuttall of the nature of the meeting.  The psychiatric evidence was that because Mr Nuttall was not prepared for the discussion as it eventuated, Mr Nuttall felt he was ambushed and it impeded Mr Nuttall’s ability to deal with the meeting.  That sense of ambush contributed to the deterioration in Mr Nuttall’s psychiatric condition.
  1. Mr Nuttall has since 20 September 2018 not earned wages by performing services for Hatch.  The extent to which Mr Nuttall may have been able to make a claim under income protection insurance was not explored in evidence.
  1. I do not accept Hatch’s submission that Mr Nuttall may have mitigated his loss had he agreed to take anti-depressant or anti-anxiety medication.  The psychiatric evidence, which I accept, was that Mr Nuttall suffers from a mood disorder which in the absence of any medication, has persisted and therefore has become entrenched, or harder to shift.  The mood disorder means that Mr Nuttall’s sense of well-being does not improve by being away from Hatch.  The psychiatric evidence was that medication is available that:

corrects that imbalance, and then the person’s cognition may become more positive, and they can problem solve ….. negative cognitions, you have work problems ….. problems here, but he’s – he’s not able to solve them. The antidepressant is not going to solve their life problems. It’s not going to solve his relationship problem, nor it is it going to solve his financial problem, but it will put him in a better frame of mind to think positively and look at problem solving his problems.

However, the psychiatric evidence was also that counselling and medication would not be sufficient to overcome a breakdown in Mr Nuttall’s employment relationship with Hatch.  Medication was not going to address the sense of mistrust between Mr Nuttall and Hatch in a way that would have enabled Mr Nuttall to return to work at Hatch.

  1. Mr Nuttall was reluctant to take such forms of medication because of concerns he had about side-effects.  He had seen his ex-wife suffer from side-effects from similar forms of medication.  The psychiatric evidence was that such medication can have material side-effects.  Mr Nuttall was not acting irrationally in his reluctance to take such medication.
  1. I find that Mr Nuttall’s refusal to take medication was not a cause of his loss.

PART 4: THE SHAREHOLDER AGREEMENT CLAIM AND CROSS-CLAIM

4.1      Mr Nuttall’s Claim in respect of the Shareholder Agreement

  1. Mr Nuttall claims that the purported exercise of the call option by Motus was a breach of cl 5(d) of the shareholder agreement because no Option Event had occurred as at 6 September 2019 when the option was purportedly exercised.  Mr Nuttall contends that as at 6 September 2019 he had not been absent from active employment for a continuous period of 12 months or for more than 14 months in a 24-month period; rather, Mr Nuttall had been on extended unpaid leave.

4.2      The Cross-Claim

  1. Mr Nuttall retains the share certificate for his shareholding in Hatchcos Holdings.  By cross‑claim, Motus seeks specific performance of the shareholder agreement and in particular, the return of the share certificate.  Alternatively, it was claimed that if the Exercise Notice was not valid, Mr Nuttall ought to be ordered to repay the sum of $1,475,000 he had received.
  1. By the time of the hearing, Mr Nuttall accepted that if his contentions as to breach of the shareholder agreement were accepted, he would be obliged to refund the amount paid to him as the purchase price of the shares.

4.3      Had an Option Event occurred?

  1. The crux of the issue in relation to the shareholder agreement is whether, as at 6 September 2019, an Option Event had occurred.  The Option Event relied upon by Motus was that provided for in cl 1(i)(iv), namely that Mr Nuttall had been absent from active employment for a continuous period of 12 months or more or for an aggregate period of 14 months or more in any 24-month period.
  1. It is not contended that Mr Nuttall was absent from active employment for an aggregate period of 24 months or more in any 24-month period. The issue is whether as at 6 September 2019 Mr Nuttall had been absent from “active employment” for a continuous period of 12 months or more. Mr Nuttall contends that he was not so absent because he had been on paid sick leave for the period at least from 5 September to 9 September 2018 and thereafter has been on approved leave. Under the FW Act, Mr Nuttall had a statutory entitlement to a period of paid personal/carer leave. By reason of s 22 of the FW Act, the period of paid personal leave was “a period of service” by Mr Nuttall with Hatch. It followed, says Mr Nuttall, that he was not absent from active employment whilst on paid personal leave.
  1. Mr Nuttall further submitted that a period of authorised leave did not result in Mr Nuttall being “absent from active employment”.  Clause 1(i)(iv) should be interpreted as not applying to periods of authorised leave as “leave of absences” were the subject of cl 1(i)(v).  Hatch could not rely upon cl 1(i)(v) because as at 6 September 2019 Mr Nuttall’s leave of absence had included a period of leave to which Mr Nuttall was entitled by law (being his period of paid personal leave).
  1. I do not consider that the term “active employment” necessarily bears the same meaning as “period of service” in s 22 of the FW Act. I accept that Mr Nuttall remains employed by Hatch and that he has been continuously employed by Hatch. However, the issue is whether he has been “actively employed” as that term is to be construed in the context of the shareholder agreement as a whole.
  1. Interpreting cl 1(i)(iv) in the context of the shareholder agreement as a whole, I consider that the term “absent from active employment” applies to a period during which the employee is on any leave, whether approved or otherwise.  So much is apparent from cl 1(i)(vii).  A period of absence from active employment is a period during which an employee is not actively performing employment services.  An absence from active employment conveys a state from which an employee might “return”.  It is not synonymous with a state of being employed.
  1. In the context of cl 1(i)(iv), “absent from active employment” does not require that an employee be on unauthorised leave.  It makes no commercial sense for an employee to be granted an option to trigger an Option Event (noting that cl 1(i)(iv) can be triggered “at the option of either party”) when on unauthorised leave.  Clause (1)(i)(v) does not require that cl 1(i)(iv) be construed as requiring that an employee be on unauthorised leave.  The scope of cl (1)(i)(v) is different from cl 1(i)(iv) because cl (1)(i)(v) contains no requirement for a continuous period or for an examination of any 24-month period.  Furthermore, unlike cl 1(i)(v), there is no carve out in cl 1(i)(iv) for leave to which an employee is entitled by law.
  1. The recitals to the shareholder agreement provide:

WHEREAS the Shareholder is the owner of shares in Hatchcos Holdings and may acquire additional shares in Hatchcos Holdings;

AND WHEREAS the Shareholder is one of the principal shareholders of Hatchcos Holdings and, as an Employee, is engaged in performing valuable engineering and consulting services for Hatchcos Holdings or one of the corporations associated with Hatchcos;

AND WHEREAS the parties hereto deem that it is in the interests of Hatchcos Holdings and its shareholders and corporations associated with Hatchcos that shares of Hatchcos Holdings to be held by the Shareholder shall be held subject to and in accordance with the provisions of this Agreement;

  1. I am satisfied that as at 6 September 2019 an Option Event had occurred.  As is apparent from the recitals, Mr Nuttall’s shareholding in Hatchcos Holdings was provided to him in a context of him being engaged to perform valuable services to corporations associated with Hatchcos Holdings.  Mr Nuttall had been unable to attend work or perform active employment duties for a continuous period of 12 months.  In accordance with the contract, Mr Nuttall was taken to have been given notice on the third next business day following the date on which the notice was mailed by prepaid registered mail.  Motus is entitled to the order for specific performance requiring Mr Nuttall to deliver the share certificates for the Hatchcos Holdings shares.  Damages are not an adequate remedy.  Mr Nuttall has been removed from the list of registered shareholders.  Mr Nuttall is not entitled to retain the share certificate to shares in an unlisted company that he was contractually obliged to sell and for which he has been paid.
  1. I appreciate that the outcome appears to Mr Nuttall to be unfair.  He had sold his business to Hatch, a business he had built by his own endeavours.  He was in a colloquial (not psychiatric sense) traumatised by the meeting of 4 September 2018.  Barely 12 months later he has shares that were issued to him in consideration for the sale of his business compulsorily acquired.  The psychiatric evidence before the Court was that Mr Nuttall continues to suffer because he cannot move on.  None of these matters, however, are relevant to the construction of the shareholder agreement.

DISPOSITION

  1. A large part of the issues between Mr Nuttall and Hatch arose from a misalignment of expectations and poor communication.  The evidence demonstrates a discordant workplace with high levels of stress.  At the relevant times, Mr Moran’s strengths were in technical and financial performance management rather than people management.  Mr Nuttall’s strengths were in people and relationship management.  Instead of complementing each other, their differences resulted in a breakdown in their working relationship, with frustration on both sides.
  1. From Mr Nuttall’s perspective, the results have been emotionally devastating.  The business he established has been subsumed into an organization in which he no longer participates.  He has been left in emotional and psychological pain and continues to struggle to move on with his life.  He feels he has been treated unfairly and unjustly.
  1. Whether Mr Nuttall was dealt with fairly by Mr Moran is not a question that is required to be resolved in these proceedings.  Adverse action is not a statutory claim for unfair treatment.  Its parameters are statutorily defined and this case does not sit within those statutory confines.
  1. Mr Nuttall’s application is dismissed.  The cross-claim is allowed and an order is to be made for specific performance requiring Mr Nuttall to deliver the share certificates for the shares the subject of the Exercise Notice to Hatchcos Holdings Share Registry Office.”

 

Nuttall v Hatch Pty Ltd [2024] FCA 339 delivered 9 April 2024 per Hespe J