Category Archives: damages

Employers beware as the FWA takes flight

It’s not at all uncommon for a worker to sustain a compensable psychiatric injury due to mistreatment in the workplace. Whether it be dismissal, bullying or a significant alteration of their working conditions, these things can open up a whole suite of claims against an employer.

Let’s take the hot button issue of bullying as a hypothetical. Unbeknownst to the board of directors or business owner/s, a couple of longstanding, perhaps overly territorial, employees decide they will make life as difficult, even unpleasant, as they can for a fellow worker who they consider less competent or committed than them, or simply just unlikeable. One of them is a middle manager who decides to give the outcast employee artificially low ratings at consecutive performance reviews. Eventually, on the commendation of these protagonists, the pariah employee is made redundant. The business owners/directors think they’ve done the right thing – all in the name of efficiency and productivity!

Meanwhile, the sacked employee has seen a psychiatrist a couple of times whilst they remain an employee, as they labour under the stress caused by the mistreatment. In the beginning, the victim maybe doesn’t even say anything to anyone at work for fear of reprisal, or simply because they wonder whether they are just being too sensitive about it. By the time they do speak up, it’s near the time their termination is announced, which is the proverbial straw that breaks the camel’s back.

Six months later, the business finds itself in the Federal Court of Australia with an adverse action suit in respect of the termination, which also includes a claim for negligence in respect of a failure to have adequate protections in place to prevent the bullying the aggrieved employee has suffered at the hands of the two employees. There are also workers compensation claims by way of statutory and modified common law (“Work Injury”) damages available to the complainant. In these, the law heavily favours the employee and therefore a finding that the employer is liable for a breach of its non-delegable and quite rigorous, duty of care as well as being found vicariously liable for the two employees’ conduct towards their victim, is likely. There may also have been breaches of the employee’s employment contract and the two employees might themselves face claims personally for accessorial liability under the Fair Work Act 2009 (FWA)or as concurrent tortfeasors. Ouch! 

And recent applications of the law indicate that the employee holds all the cards here.

First of all, section 361 of the FWA gives the employee the benefit of that most delightful of evidentiary devices, the rebuttable presumption; at least for those who sit on the right side of it. That is, once the employee is able to establish on the objective facts that it appears one of the reasons the “adverse action” (eg. their dismissal) was taken is because they have exercised a “workplace right” eg. such as the right to complain about being bullied (see FWA s340), the employer must then prove otherwise. 

There is no questioning the rationale for the rule. The employee can’t possibly know what was truly in the mind of the employer in acting the way it did and therefore it is properly a matter for the latter to establish, or rebut in this case. But it still makes it hard for the employer.   

That brings me to the second little advantage the employee enjoys here. The reason for the adverse action the employee seeks to impugn need only be one among a number that were in fact at play when the employer reached the decision to act as it did (FWA s360). At least however for the employer’s sake, the objective material will need to establish that the impugned reason was a “a substantial and operative factor” in its decision making (Australian Building and Construction Commissioner v Hall [2018] FCAFC 83; 261 FCR 347). 

Thirdly, in rebutting the rebuttable presumption, the employer must demonstrate that the subjectively held belief of the key decision-maker/s, ie. manager or other superior, who carried out the action, was not that which the employee alleges. This will almost invariably lead to evidence having to be called from one or a number of persons (possibly no longer) within its organisation who are said to have been involved in the action alleged against it by the employee. All very uncomfortable and somewhat unpredictable. And it’s those persons’ subjectively held belief, not the Court’s objective view of the circumstances, that matters (Board of Bendigo Regional Institute of Technical and Further Education v Barclay (2012) 248 CLR 500).  

The cases where all of this gets interesting are when the Court is forced to look behind the context, ie. employee complains, employee then gets sacked/demoted/etc. – to establish whether in the true order of events, the employer really has engaged in adverse action contrary to the law.

And now the recent decision of Rares J in Leggett v Hawkesbury Race Club Limited (no. 3) [2021] FCA 1658  offers the employee even more aces in this regard. That case was argued in the Federal Court on the basis that the worker had both a Work Injury (modified common law) damages claim (negligence on the part of the employer resulting in damages payable only in respect of past and future economic loss, as dictated by the Workers Compensation Act 1987 (WCA)) and an adverse action claim under the FWA.

Firstly, in cases of this kind, the question of whether the psychiatric injury “arose out of the employment” and when that happened are matters which will normally already have been determined by an arbitrator at the Workers Compensation Commission when the issue of statutory weekly workers compensation is decided. In Leggett, the Court ruled that this created an issue estoppel on these two key questions in the successive Federal Court proceedings. 1-nil to the Applicant worker.

Then, in Leggett (no 4) [2022] FCA 622, the Court was asked to decide how damages should be dealt with. If they were dealt with under the WCA, as the Respondent employer urged, they would be subject to the relevant statutory caps on weekly earnings and no pain and suffering damages could be awarded (given the WCA only allows for awards of past and future economic loss).

Applying s109 of the Constitution, Rares J deemed that the WCA, as a State Act being inconsistent with the FCA, a Federal Act, had no work to do on the issue of damages and that therefore the Federal statute covered the field. The broad scope of compensation that can be awarded under s545 of the FWA meant the worker got full freight on her past and future economic loss (less the weekly compensation payments she had already received) and a significant award for pain and suffering – plus interest. Another win for the worker.       

The only thing to be decided in Leggett now is costs. In adverse action claims under the FWA they are only awarded in limited circumstances (s570); they do not just follow the event. Given that the award of damages took place under the FWA but the Applicant also had success on her negligence and contract claims, it will be interesting to see what the Court does on this front.

Regardless, employers beware. Take care of them workers and if you need to dismiss, make sure the reasons are sound.               

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Filed under Civil, damages, Industrial, Negligence, statutory interpretation

What might now be: Lost opportunity damages and the decision in Mal Owen

In my experience, lost opportunity damages claims are often fraught and the recent NSW Court of Appeal decision in Mal Owen Consulting Pty Limited v Ashcroft [2018] NSWCA 135 is no exception; though the appellant did get there in the end.

Mal Owen retained a solicitor to chase down some unpaid monies under a sale of business arrangement who did little or nothing about the case for about 3 years. They then retained new lawyers who eventually obtained a judgment and then bankrupted the debtor, a guarantor of the sale monies.

Mal Owen then sued the first solicitor on the basis that had he pursued the claim in a timely manner, the monies would have been recovered. Crucial to the claim was the allegation that the debtor’s financial circumstances had worsened considerably over time, ie. had he been sued earlier, the guarantor would more than likely have had the money to pay.

The claim against the solicitor was brought in both tort and contract (breach of retainer) and breaches in both were ultimately admitted. Sounds simple so far, right?

Each of the three Appeal Court judges then took largely different approaches to the case with Basten JA and Barrett AJA ultimately reaching the same result.

Basten JA reviewed the law on loss of an opportunity and concluded that the tortious standard for causation in lost opportunity cases was different to that applicable to a claim in contract, the latter being that which is applicable under trade practices statutes.

The tortious standard, his Honour opined, following the High Court in Badenach v Calvert (involving another negligence action against a solicitor), required the plaintiff to prove that it was “more probable than not that they would have received a valuable opportunity.”

This is the standard the trial judge had applied in finding that that on the evidence the plaintiff had not shown that the position would have been any different had the first solicitor acted expeditiously in seeking to recover the debt.

Justice Basten then went on to find that whilst the lost opportunity needed to be identifed with precision, the claim in contract only required that there be a “possibility of recovery of some damages”. Then the well-known principles set down by the High Court in Sellars were to be applied in applying a percentage reduction to the likely full value of the chance to account for the relevant contingencies. For various reasons, his Honour thought full recovery unlikely, even if the first proceedings had been pursued expeditiously. He therefore applied a 50% reduction.

Macfarlan JA, in dissent, found that the Court was bound by the High Court’s decision in Badenach, which required the causation issue, being a fact, to be proven on the civil standard just like any other. In reviewing the evidence, his Honour found that he couldn’t be satisfied that the debtor’s financial position would have been better at the time when the first solicitor was meant to be pursuing him for the money. His Honour didn’t deal with the contract and tort claims separately.

Nor did Barrett AJA, who applied Badenach and in particular the judgment of French CJ, Kiefel and Keene JJ describing the plaintiff’s onus as being proof on balance that there was a “substantial prospect of a beneficial outcome”, a test which itself seems fairly ambiguous. Be that as it may, his Honour Justice Barrett was satisfied that the test for causation had been met because he characterised the evidence regarding the debtor’s financial circumstances differently to the manner in which Macfarlan JA had done. But it was the way that his Honour characterised the relevant test for causation that is most interesting, stating (at [101]):

“At the first stage concerned with causation, the task is no more than to confirm the value is not in the realms of the merely theoretical or negligible – in other words, to establish, according to the balance of probabilities, that there is some colour of value to the lost opportunity.”

Once the causation gateway had been opened, the second stage of the process, ie. assessment was his Honour found necessarily “a process of estimating extending even to guesswork.”

This led his Honour to the same conclusion (including with regard to the applicable percentage reduction of 50%) as that which was reached by Basten JA and so the appeal succeeded.

Those negligence cases with a claim in contract in the alternative that involve an allegation of a lost opportunity will no doubt find Basten JA’s decision helpful. It seems as though as long as the opportunity can be identified with a fair degree of specificity, some damages will flow. It also appears to take a considerable degree of pressure off with regard to the evidence required to make out the claim, which is often the hardest part. Justice Barrett’s decision would also appear helpful even if there is only a claim in tort available.

Maybe the prospects for the poor old lost opportunity damages claim are now looking a little brighter.

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Filed under causation, Civil, Crime, damages, evidence, Negligence

Pure PTSD claims and the decision in Pel-Air: a body blow for plaintiffs

Whilst I realise that for most members of the public a juicy set of facts is far more compelling than even the most irresistibly cogent legal precept, I am often disappointed by the scarcity of legal context given in news stories these days. I did however come across one the other day that had enough of both to pique my interest.

 

It involves a man who has sued an airline alleging that he found the tip of a hypodermic needle in his inflight meal of butter chicken with cauli pea masala. The man alleges that he only discovered the needle once it was inside his mouth.

 

The story immediately brought to mind the quintessential and if true, makes the escargot in Donoghue seem like a delicacy by comparison.

 

Based on what was reported, it would seem that whilst the man may have sustained some physical injuries to the inside of his mouth, the focus of his damages claim will be in respect of alleged depression and post-traumatic stress.

 

The interesting bit of law came from a quote of what the man’s solicitor said, which was to the effect that the plaintiff is seeking damages under the Australian Consumer Law (ACL) and the Civil Aviation (Carrier’s Liability) Act, which for ease of reference I’ll give the somewhat unfortunate acronym of CACLA.

 

Negligence actions framed as a breach of the ACL provide a useful means of circumventing the various liability hurdles and damages caps contained in the Civil Liability Act 2002 and its cognate provisions in other states (cf: Nair-Smith v Perisher). For this reason, it has become a common cause of action where a contractual relationship exists between the relevant parties such as there would have been here.

 

Though not specified in the article, the implied term of due skill and care may be the go-to, or with respect to the supplier sub-contracted to prepare the meal (ie. the “manufacturer”, as defined in the ACL), which the article reports has also been sued, a breach of the statutory obligation to supply safe and/or merchantable goods.

 

There is a defence to that latter action if the manufacturer can show the alleged defect wasn’t there at the time of supply. The airline’s claim, also referred to in the article, that the meal went through a metal detector twice before it made it onto the plane may well assist both it and the supplier in this regard. Similar issues arose in a case called Effem Foods v Nicholls [2004] NSWCA 332 where a consumer was injured by a safety pin concealed within a chocolate bar.

 

The article’s lack of detail regarding that aspect of the claim (there’s that problem again) deems any further comment on this part of the claim otiose (such a judge’s word that I feel a little bit of an imposter in using it). But it’s the CACLA part of the claim that interested me more anyway. CACLA is applicable where a person sustains “bodily injury” whilst on an aircraft or during the course of embarking or disembarking.

 

It was no doubt a particularly appealing basis upon which to claim in the context of these facts because CACLA imposes strict liability, thereby removing the need for the claimant to prove negligence to complete his cause of action.

 

However, if a plaintiff claims for pure psychiatric injuries under CACLA, a decision of the NSW Court of Appeal handed down in March 2017 has now made things more difficult. In Pel-Air Aviation Pty Ltd v Casey [2017] NSWCA 32 the Court was asked to deal with the question of whether PTSD is a “bodily injury” as that term is understood by CACLA.

 

At this point I should say that the decision may also prove to be of some moment in the interpretation of other statutes incorporating those words, of which there are a few. Section 25 of the Companion Animals Act 1998 (NSW), which deals with the (strict) liability of dog owners for injuries caused by their pooches, is one that immediately comes to mind.

 

The plaintiff in Pel-Air was a passenger in a small plane that the pilot was forced to ‘ditch’ into the sea off Norfolk island due to bad weather. As a result, she spent about 90 minutes in the water, suffering multiple injuries including PTSD.

 

It is accepted law that where a physical injury and psychological injury are connected, this kind of psychiatric injury will meet the “bodily injury” requirement. Some of the plaintiff’s psychiatric injuries in Pel-Air fell into this category. However, for what is often termed “pure” psychiatric injury, such as the PTSD suffered by the plaintiff in Pel-Air something more would be required.

 

Nevertheless, at first instance, Justice Schmidt of the NSW Supreme Court determined that given the plaintiff’s PTSD had resulted in ongoing dysfunction that was “consistent with chemical changes in her brain and body and alterations in her brain’s neurotransmitter pathways, which [had] prevented a return to normal brain function”, this was enough for it to be properly categorised as a “bodily injury”.

 

On appeal, Justice Macfarlan (with whom Justices Ward and Gleeson agreed) undertook a detailed analysis of the evidence provided by the experts commissioned by each party and in particular, the joint document produced by them after they had ‘conclaved’, which read (quoted at judgment [21]):

 

“There is meta-analytic research evidence to suggest that in some persons suffering from PTSD or Generalised Anxiety Disorder can suffer from physical changes to specific areas on the brain [sic], [eg.] shrinkage of the hippocampus…[or] changes to the prefrontal areas of the brain… [However], the experts agree that there is no evidence available to them (i.e. imaging) that will prove that the plaintiff has structural changes to her brain.” [emphasis added]

 

His Honour then undertook an interesting review of the case authorities in the United Kingdom, the United States and Canada on the point, which were all highly relevant given that their legislation, in the same way as CACLA, includes the words “bodily injury”, as a result of them all having incorporating the unifying Montreal Convention into their domestic law.

 

Consistent with those authorities, the Court found that something more than malfunctioning or chemical change must to be shown for a claim to be made out in respect of pure psychiatric injury under CACLA. For example, structural or what his Honour referred to as “actual physical damage” (at [47]). It seems that a plaintiff alleging pure psychiatric injury under CACLA will now need brain imaging showing a change in brain architecture in order to succeed.

 

Excuse the pun, but to me this would seem like a bit of a body blow to what might otherwise be a rather straightforward statutory claim.

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Filed under Civil, Crime, damages, evidence, Negligence, statutory interpretation