Chisholm v Thakral Finance Pty Ltd t/as Novotel Brighton Beach - [2011] NSWWCCPD 39

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:		Chisholm v Thakral Finance Pty Ltd t/as Novotel Brighton Beach [2011] NSWWCCPD 39
APPELLANT:		Rodney Chisholm
RESPONDENT:		Thakral Finance Pty Ltd t/as Novotel Brighton Beach
INSURER:		Hotel Employers Mutual Limited
FILE NUMBER:		A1-6066/10
ARBITRATOR:	Ms J Scott
DATE OF ARBITRATOR’S DECISION:		24 February 2011
DATE OF APPEAL DECISION:		2 August 2011
SUBJECT MATTER OF DECISION:		Psychological injury; causation; whether injury due to reasonable action with respect to discipline, performance appraisal and or dismissal; meaning of “dismissal” in s 11A Workers Compensation Act 1987
PRESIDENTIAL MEMBER:		Deputy President Bill Roche
HEARING:		19 July 2011
REPRESENTATION:		Appellant:	Mr A Campbell, instructed by Carro & Associates
Respondent:	Mr P Perry, instructed by Duncan Cotterill
ORDERS MADE ON APPEAL:		The Arbitrator’s decision of 24 February 2011 is revoked and the following order made in its place: “1. The respondent employer is to pay the applicant worker’s costs of the arbitration. The matter is certified as complex with an uplift of 30 per cent.” The matter is remitted to a different Arbitrator for determination of the applicant worker’s entitlement to weekly and other compensation. The respondent employer is to pay the appellant worker’s costs of the appeal, assessed at $2,200 plus GST.

BACKGROUND

The appellant worker, Rodney Chisholm, started work for the respondent employer, Thakral Finance Pty Ltd t/as Novotel Brighton Beach (Novotel), in July 2006 as the assistant chief engineer, and became its chief engineer in February 2007. His duties involved coordinating subcontractors engaged in plant maintenance at the hotel and the testing of all essential emergency equipment.
His case is that his employment was satisfactory until a new executive assistant manager, Artur Pachecki, started work for the hotel in August 2008. He alleged that he suffered a psychological injury in the form of anxiety and depression as a result of being bullied and harassed by Mr Pachecki between October 2008 and 15 February 2010.
Novotel conceded that Mr Chisholm has suffered a psychological injury in the course of or arising out of his employment, and that his employment was a substantial contributing factor to that injury. Its defence is that no bullying or harassment occurred and the injury was wholly or predominantly caused by reasonable action taken by it with respect to discipline and/or performance appraisal and/or dismissal.
In essence, the discipline or performance appraisal was alleged to have been the act of suspending Mr Chisholm from work on 10 February 2010, pending an investigation, after the hotel (and the area where the hotel is located) suffered a power failure on 27 January 2010 and its backup generator failed. Mr Chisholm argued that the suspension was not discipline within the terms of the legislation and, if it was, it was not the whole or predominant cause of his injury and, if it was, it was not reasonable.
The circumstances of the action taken with respect to the alleged dismissal are as follows. At a meeting on 1 March 2010, which, it was argued, had to be considered in light of an earlier statement by Mr Chisholm that he would not work under Mr Pachecki, the hotel’s human resources manager, Ms Holdsworth, told the worker that the hotel had lost confidence in him and that the working relationship was permanently flawed. She said that the hotel could make a payment to end the employment. Negotiations to reach an agreement on ending the employment failed and Mr Chisholm remained employed until the hotel terminated his employment by letter dated 28 July 2010.
The Commission listed the matter for conciliation and arbitration on 27 October 2010. The Arbitrator heard no evidence on that day and the matter was listed for further hearing on 19 January 2011. The parties called oral evidence from several witnesses on 19 January 2011 and made submissions on 9 February 2011.
In a reserved decision delivered on 24 February 2011, the Arbitrator identified the issues in dispute to be:
“(a) Whether the injury was caused by:
(i)Bullying and/or harassment and/or
(ii)The actions of the respondent in disciplining, performance appraisal and/or suspending and dismissing Mr Chisholm; and if so, whether those actions were reasonable
(b) Has the injury caused an incapacity for work?”
The Arbitrator determined that the suspension was an act with respect to discipline and that the meeting on 1 March 2010 was a constructive dismissal. She made an award for Novotel on the grounds that Mr Chisholm’s injury had been predominantly caused by his “suspension and dismissal”, and that the employer’s “actions both in the performance management and disciplinary action of suspension and the dismissal were reasonable”. The Commission issued a Certificate of Determination on 24 February 2011 in the following terms:
“The Commission determines:
1. Award in favour of the Respondent in respect of Applicant’s claim for weekly payments of compensation.
2. Award in favour of the Respondent in respect of the Applicant’s claim for expenses under section 60 of the Workers Compensation Act 1987.
3. That each party pay their own costs. I certify this case to have a level of complexity for the Respondent and uplift costs by 30 per cent.”
In an appeal filed on 24 March 2011, Mr Chisholm has challenged the Arbitrator’s determination. It is not in issue that the monetary thresholds in s 352(2) of the Workplace Injury Management and Workers Compensation Act 1998 (the 1998 Act) are satisfied.
As the Arbitrator delivered her decision after 1 February 2011, the appeal is to be determined under the new s 352 introduced by the Workers Compensation Legislation Amendment Act 2010. Section 352(5) now provides:
“An appeal under this section is limited to a determination of whether the decision appealed against was or was not affected by any error of fact, law or discretion, and to the correction of any such error. The appeal is not a review or new hearing.”

ISSUES IN DISPUTE

At the oral hearing of the appeal, counsel for Mr Chisholm, Mr Campbell, identified the following issues to be in dispute, namely, whether the Arbitrator erred in:
(a)     finding the suspension was a disciplinary measure (suspension);
(b)     failing to find that Mr Pachecki had at any time bullied or harassed Mr Chisholm, and finding that the injury had been caused predominantly by his suspension and dismissal (causation);
(c)     finding that the employer’s actions in suspending Mr Chisholm were reasonable (reasonableness), and
(d)     finding that the employer’s actions in dismissing Mr Chisholm were reasonable (reasonableness).
An issue also arose at the hearing of the appeal as to whether the meeting on 1 March 2010 was an action with respect to dismissal or was a constructive dismissal.

PRELIMINARY MATTERS

The Arbitrator heard lengthy oral evidence on 19 January 2011 and submissions on 9 February 2011. The transcript for 19 January 2011 is in two parts. The first part is numbered from 1 to 36 and the second part from 1 to 69. When referring to the transcript, I will refer to the transcript page and line, and whether the entry is in part one or part two. There is no transcript of the submissions before the Arbitrator, but neither party submitted that the lack of that transcript has impeded the appeal. The appeal transcript is referred to as “AT”.

MR CHISHOLM’S CASE

Mr Chisholm started work with Novotel as the assistant chief engineer in July 2006. He had previously worked as a self-employed builder/carpenter. In February 2007, he became the hotel’s chief engineer. His duties involved coordinating on-site trades and external subcontractors for plant maintenance, and testing all essential emergency equipment. He was also the managerial representative on the OH & S committee and chairperson of the environmental committee. He was responsible for all equipment in the hotel.
He answered to the general manager, Marcus Tait, with whom he had daily meetings. He also had weekly meetings with other department heads, such as housekeeping, food and beverage, front office, maintenance and engineering, conferences and sales. Meetings were always very amicable, productive and cooperative. If Mr Chisholm was on holidays and a breakdown occurred, staff would call a contractor. In an emergency, he could be contacted at home.
In August 2008, the hotel hired a new executive assistant manager, Artur Pachecki. When Mr Tait left in February or March 2009, Mr Pachecki became the general manager. Mr Chisholm found Mr Pachecki to be “arrogant and negative” and complains of several incidents in which Mr Pachecki’s conduct or comments caused him to be depressed or anxious. Mr Chisholm first noticed Mr Pachecki’s “negative attitude” towards him at a morning briefing in approximately October 2008 concerning a breakdown of the air-conditioning system. Mr Pachecki allegedly rolled his eyes and shook his head, which greatly upset Mr Chisholm because his team had done everything possible to alleviate the problem.
On 18 December 2008, Mr Pachecki said, as Mr Chisholm walked past him, “here’s Rod walking around doing nothing”. Mr Chisholm felt the comment was “malicious and totally unwarranted”. He was stunned.
On another occasion, on a date not identified, Mr Pachecki twice said to Mr Chisholm, in an aggressive manner and in front of another member of staff (Hussein Abdallah), “Are you alright?”. Mr Chisholm found this intimidating and said “Do you have a problem with me Artur?” to which Mr Pachecki said “Always”. Mr Chisholm then walked down the stairs. When he looked back, he saw Mr Pachecki “glaring threateningly” at him. He felt that Mr Pachecki’s conduct was deliberate, as he knew it upset him. Mr Pachecki’s conduct was affecting Mr Chisholm and he noticed problems sleeping. He was stressed and anxious. He felt lethargic and did not want to go to work.
Mr Chisholm spoke to Di Vidler, the executive housekeeper, who had also allegedly had problems with Mr Pachecki.
In another incident, again on a date not identified, an inspection by the council health inspector revealed cockroaches in the kitchen and bar areas. Mr Chisholm suggested some potential solutions, which failed to resolve the problem, and the kitchen failed another inspection. Mr Pachecki held a meeting at which he said “well, if the maintenance department were doing their job we would not be sitting here today”. Mr Chisholm felt this comment was directed to him, because he was in charge of the maintenance department, and that it was “malicious”, as he was not in charge of cleaning. He felt belittled and that Mr Pachecki had picked on him in front of others. This increased his anxiety and depression.
On another occasion, Mr Pachecki accused Mr Chisholm of “passing the buck” when the dirty garbage area was being discussed by the committee, implying (incorrectly) that Mr Chisholm was responsible for that area. Mr Pachecki belittled Mr Chisholm, particularly in front of other people, at any opportunity he could, and the worker’s anxiety symptoms increased. He said that his work environment was intolerable. He started avoiding function areas, kitchens, the main office area, and restaurants and bars in the hotel for fear of running into Mr Pachecki and being exposed to his “barbs”. He also started avoiding the weekly hotel inspections done by Mr Pachecki.
In late 2009, Mr Chisholm was informed that Mr Pachecki would be placed in different hotels in a relief capacity. Mr Pachecki left on 14 December 2009. Mr Chisholm started four weeks’ leave from 9 January 2010. On his return to work on 8 February 2010, he was informed that a performance review had been organised for 10 February 2010 and that Mr Pachecki would be resuming at the hotel from 16 February 2010.
Prior to the review, Alan Burrows, the new general manager, and Tracy Holdsworth, the human resources manager, handed Mr Chisholm a letter dated 10 February 2010 suspending his employment pending an “investigation of hotel and owner concerns relating to contractor management and plant maintenance in the hotel”. Mr Burrows told the worker that a blackout had occurred while he (the worker) had been on holidays. Mr Chisholm said that he felt he had been “hung out to dry”, which Mr Burrows and Ms Holdsworth denied. Mr Chisholm was asked to tell his team that he was going on extra leave. The performance review scheduled for 10 February 2010 never took place.
Mr Chisholm said that his depression was increasing and he was unable to sleep. He saw his general practitioner, Dr Yohendran, on 15 February 2010. She certified him unfit for two weeks, prescribed sleeping tablets, and referred him for counselling. Also on 15 February 2010, Mr Chisholm made a formal written complaint about Mr Pachecki, which he handed to Ms Holdsworth. He attended a meeting at which he provided certain compliance documents and the suspension was lifted.
On 24 February 2010, Ms Holdsworth telephoned Mr Chisholm to see if he was returning to work the following week. He said he was and she asked him to obtain a (medical) clearance certificate. He obtained a certificate from his doctor, though he had an appointment with a psychologist on 27 March 2010, but Ms Holdsworth refused to accept it because it did not clear Mr Chisholm for all duties. She said that Mr Chisholm’s position at the hotel was untenable and it was necessary to negotiate a settlement. Mr Chisholm said he would take “26 weeks” (pay) and left feeling “deeply depressed”.
Ms Holdsworth telephoned Mr Chisholm the next day and said the offer of 26 weeks was rejected and offered 16 weeks. Mr Chisholm rejected that offer and said that he was returning to work. She advised against that and said, “you don’t want to be escorted off the property”. Mr Chisholm went to work and completed an incident form and attached his handwritten complaint about Mr Pachecki and handed it to Ms Holdsworth.
Mr Chisholm continued to see Dr Yohendran because he was “unable to deal with any of this”, was losing his appetite, unable to sleep, unable to talk to his wife and was not communicating.
Mr Chisholm said in his statement of 14 July 2010, in which he commented on the statements from Ms Holdsworth, Mr Pachecki and Mr Burrows, that, even though his “so-called” performance concerns had been cleared, his complaints against Mr Pachecki were “the reason for [his] inability to return to work”.

NOVOTEL’S CASE

Novotel’s case was that Mr Pachecki never acted inappropriately towards Mr Chisholm and the first time Mr Chisholm raised an allegation of bullying and harassment was on 15 February 2010, that is, after he had been suspended pending investigation into the power failure and plant maintenance. It argued that Mr Chisholm’s psychological injury was wholly or predominantly caused by reasonable action taken by it with respect to performance appraisal and/or discipline and/or dismissal. It said that the suspension was a step with respect to discipline and/or performance appraisal. With respect to the dismissal, its ultimate position was that the meeting on 1 March 2010 was action with respect to dismissal or a constructive dismissal, and that the actions taken were reasonable.

CHRONOLOGY

To understand this case and the parties’ positions, it is necessary to set out a detailed chronology of the relevant events. In preparing the following chronology, I have essentially relied on the documentary evidence. While that evidence conflicts in some respects with Mr Chisholm’s recollection, those conflicts are not critical to the outcome and any preference for the account in the documents does not reflect on Mr Chisholm’s credit.
In mid-2009, Mr Pachecki conducted Mr Chisholm’s “Performance Annual Review”. Though Mr Chisholm was unhappy with aspects of that review, and the Arbitrator heard considerable evidence about the circumstances in which it was conducted, the parties have conceded on appeal that the review did not cause Mr Chisholm’s injury.
In November 2009, Novotel had its biannual external audit of its risk management procedures. Mr Burrows knew the auditor to be very pedantic and he told all department heads (including Mr Chisholm) to ensure their departments were ready for the audit. In his statement of 11 March 2011, Mr Burrows said there were aspects of the audit that disappointed him: the kitchen equipment had expired “test and tagging” and the auditor commented how messy the workshop was and that “PPE” was missing in Mr Chisholm’s areas and “MSDSs” (Material Safety Datasheet) were outdated. He added that there “were other issues as well”, but did not elaborate. Mr Burrows spoke to Mr Chisholm about the two main issues and expressed his disappointment that he had not taken the appropriate action. He said that Mr Chisholm could not believe the findings and did not take it “as seriously as the situation warranted”. He was aware that the issues were his responsibility. This discussion was essentially consistent with a file note dated 27 November 2009, which Mr Burrows prepared.
Mr Chisholm disputes that he did not take the matters arising from the November 2009 audit seriously. As for the maintenance workshop being messy, Mr Chisholm said in his statement of 14 July 2010 that the quote from the auditor’s report was “poor storage in the Engineering Workshop” and it related to pictures stacked on a shelf in the painter’s room that the auditor felt could fall. He said that at no time during the inspection or in the report was it described as “messy”.
In mid-December 2009, Mr Pachecki was seconded to another hotel.
Between 9 January 2010 and 8 February 2010, Mr Chisholm was on annual leave.
On Wednesday 27 January 2010, the hotel had a power outage between 17.45 and 19.50 and the emergency generator did not start.
On Thursday 28 January 2010, Mr Burrows wrote an email to Mr Whittome, the owner’s representative, and Mr Simmons, Novotel’s regional manager, informing them of the power outage. He said that no guests relocated (though one had checked out), the emergency generator did not start, guests were offered complimentary drinks and a BBQ, and there was no food spoilage.
On Friday 29 January 2010, Mr Whittome replied to Mr Burrows and Mr Simmons, saying, “the generator should be tested each week so were you aware there was an issue orb [sic] was it OK when last tested?”
On Monday 1 February 2010, Mr Burrows again wrote to Mr Whittome by email stating that, during a simulation on the previous Friday, the generator failed again while under load “when the lifts kick in”. The company that tested the generator was contracted to do so every three months, which they believed was sufficient. The only check they did was to ensure that the generator came on when the power supply was cut. Once a year, they did a full test under load.
On 2 February 2010, Mr Whittome wrote to Mr Burrows by email (copy to Mr Simmons) in the following terms:
“Emergency lifts operate under emergency power .. so unless you have a secret source of power somewhere .. it will be the generator.
The contractor who has been claiming to test your generator under load is incompetent.
The Hotel Engineer [Mr Chisholm] who presides over said contractor and does not know what is connected to emergency power is also incompetent.
The condition of plant changes over time and being aware of the operating condition (no matter what it is) of all plant at any time is a matter of necessity .. any level of doubt is unacceptable.

Accordingly you are requested to
1)Have the operating condition of all plant in the hotel confirmed by a third party (another accor engineer will be fine) immediately

2)Terminate the contractor involved.. today
3)Relieve / suspend or terminate your chief engineer and with the assistance of the regional Engineer identify a temporary or permanent replacement .. today
4)Have a proposal from a reliable Accor sourced contractor to rectify the generator problem ready for the meeting on Friday” (emphasis added)

On 4 February 2010, Mr Burrows wrote an email to all department heads advising that Mr Pachecki would be returning from secondment on Tuesday 16 February 2010. Mr Chisholm became aware of this email on his return to work on 8 February 2010.
At 10.30 am on Wednesday 10 February 2010, Mr Burrows spoke with Mr Chisholm in the presence of Ms Holdsworth. He told the worker that his mid-year performance review (due to be conducted on that day) would be rescheduled to a later date because of “serious concerns in performance which were to be investigated” (see “Discussion/Interview Record” 10 February 2010). Mr Burrows said that the hotel and owners were concerned over “plant maintenance (eg recent emergency generator failure)” and “contractor management (eg testing and tagging of electrical equipment, failed results in audit in Dec 2009 and guest iron reported today which had not been tested since 2007)”.
The hotel made arrangements for the regional chief engineer, Trevor McCarren, to conduct a review of plant maintenance and contractor management, which would start Thursday 11 February 2010. Mr Chisholm said to Mr Burrows “I am being hung out to dry then”, that he had previously expressed concerns about the generator set-up and that he “had copies of work orders with Schindler that could be looked at during the investigation”. Mr Burrows told the worker that he was “suspended for the remainder of the week” and this would not be discussed in the hotel, only that he “would be taking leave”. Mr Chisholm said, “you can tell the guys whatever you like, they may as well know the truth”. Mr Burrows said that the message would be that Mr Chisholm had taken leave for the week. Ms Holdsworth said that no decision had been made in relation to what action the hotel would take. The process was to identify the facts and allow Mr Chisholm an opportunity to respond and explain once the audit was completed. At the end of the meeting, Mr Burrows handed Mr Chisholm a letter dated 10 February 2010.
The letter from Mr Burrows to Mr Chisholm dated 10 February 2010 said that it was “confirmation of our performance discussion today” and that further time was required to “investigate Hotel and Owner concerns relating to contractor management and plant maintenance in the Hotel”. It added:
“While we are investigating this matter you are not required to attend work for 72 hours. You will continue to receive your usual pay during this period. At this stage you are not required to attend work for the remainder of this week, however this may change depending on the complexity of the investigation. We will contact you if it is expected that you will not be required to attend work beyond this period.
During this period, you are advised not to attend work for any reason, unless asked to do so for the purpose of attending a meeting in relation to the investigation. You are directed not to contact any work colleagues throughout this process without prior approval of the General Manager.
We anticipate a meeting will be schedule[d] on Friday, 12 February to discuss this matter. We will contact you to confirm a time for the meeting. You may bring a support person to this meeting and are asked to advise the Hotel in advance.”
On 11 February 2010, Mr McCarren wrote to Mr Burrows saying that he had attended the hotel and “performed an Engineering Department operational audit”. He made the following observations:
(a)     the hotel was compliant with its annual fire safety statement;
(b)     under “Test & Tag”, the hotel was compliant;
(c)     under “RCD’s”, the hotel was compliant, though the total of appliances and RCDs for the hotel could not be verified in relation to two certificates;
(d)     under “Switchboards”, a thermoscan inspection report was sighted;
(e)     under “Chemical Water Treatment”, the hotel was compliant;
(f)      under “Anchor Points”, annual certification to “the Hotels Anchor points last test date – 11^th Dec 2008”, no recent certification was sighted;
(g)     under “Apparatus Licence”, the annual certification for the “Hotels Apparatus licence was 28^th Feb 07”, no recent certification was sighted;
(h)     under “Elevator Registration”, a certificate of registration for elevators was dated expiry 16 January 2011;
(i)      under “Backflow Prevention”, the backflow prevention devices were due for renewal on 15 February 2010 and a request had been made to Sydney Water for renewal;
(j)      the hotel’s “Asbestos/SMF Register” was last dated 10 January 2009, and
(k)     under “Emergency Generator”, the hotel had a “12 month maintenance agreement offer”, dated March 2009, for the service and maintenance of the emergency generator. The last service report for the generator, dated 18 February 2009, was sighted. No recent service reports were sighted.
Under “Summary”, Mr McCarren said:
“The hotel is compliant where the next Annual Statement is due 31^st March 2010. The statement should be approved by the building owner and or representative. Currently the Chief Engineer is approving and submitting the statement.
Further investigations are required with the current fault on the emergency generator. The Hotel should request the assistance from Schindler Elevators and an Electrical contractor to investigate the exact load on the generator in relation to the Hotels single line diagram.
Missing documentation to the relevant above items to be sourced and filed accordingly.
Alan, if assistance and or Engineering support for the Chief Engineer is required at the Hotel, I am more than willing to offer this to ensure a smooth operation for all parties.”
On 12 February 2010, Mr Burrows wrote to Mr Chisholm confirming a telephone conversation with him, Mr Chisholm and Ms Holdsworth on that day. The letter said, among other things:
“As discussed, the Hotel has conducted an investigation and audit into contractor management and plant maintenance. This has been performed by the Regional Chief Engineer, Trevor McCarren.
The purpose of this investigation was to identify operational compliance with plant and equipment management, following previously raised concerns.
During this investigation, Trevor McCarren was unable to locate some documentation relating to the operations.
You are requested to attend a meeting at 2.00 pm on Monday 15 February with Trevor and I. During this meeting the results of the audit will be discussed in detail with you. You will be given an opportunity to locate relevant documentation and evidence that shows Hotel compliance.
Rod, be assured that the Hotel has made no decision in relation to your employment.
Your cooperation during this process is appreciated and we will endeavour to come to a resolution as soon as practicable.”
Mr Chisholm attended the hotel on 15 February 2010 and located the documents Mr McCarren had been unable to locate.
At about 10.38 am on 15 February 2010, Mr Chisholm saw Dr Yohendran, complaining of “tummy churning” and “early morning awakening”. Dr Yohendran prescribed the sleeping tablet Normison and referred Mr Chisholm to the Wellbeing Clinic for counselling. She recorded in her notes “past 1 week – immediate boss – bullying and harassment at workplace”. This note is significant and, as the Arbitrator referred to it in her assessment of the causation issue, it is considered in more detail later in this decision.
At about 11.45 am on Monday 15 February 2010, Mr Chisholm rang Ms Holdsworth and asked to speak with her prior to the 2.00 pm meeting. She agreed and saw him at about 12.30. In a “Record of Meeting” dated 15 February 2010 prepared by Ms Holdsworth, she said that Mr Chisholm appeared “anxious about what had happened last week”. He wanted to put in a harassment and bullying complaint about Mr Pachecki. Mr Chisholm said that he was “being stitched up, and that man is part of this”. He alleged that Mr Pachecki had made his life “miserable the way he goes around”. Ms Holdsworth asked Mr Chisholm to consider the timing of his complaint, to which Mr Chisholm said, “this is all part of it”. He added that he had heard Mr Pachecki was returning and he could not work under him. Mr Chisholm said:
“I never had a problem with my performance before but now they are expecting too much. Richard was a great manager to work for before, Marcus was too confrontational and now look what we have with Alan [Burrows] and Artur [Pachecki].”
Ms Holdsworth’s note added that Mr Chisholm said he had not been treated with respect during this process. He asked why he could not have been asked to provide what was required without being suspended. Ms Holdsworth asked him to consider putting his focus and efforts into providing the information needed today, and then address his concerns regarding Mr Pachecki. Mr Chisholm said that his future at the hotel had already been decided and that putting the complaint in against Mr Pachecki was important to him. Though I do not believe it is critical, I note that Mr Chisholm denies saying that his future had already been decided. He has consistently maintained that he had been “hung out to dry” and that there was “another agenda”. That agenda was that the hotel wanted to get rid of him because of his complaint against Mr Pachecki.
Ms Holdsworth asked Mr Chisholm to put his complaint in writing. He talked about his frustration about the performance review Mr Pachecki did in June 2009 and said he felt he was being asked to deliver too much, without adequate staff resources and with budget cuts. Mr Chisholm then produced a medical certificate from Dr Yohendran stating that he was unfit from 15 February to 26 February 2010 because of anxiety. He said, according to Ms Holdsworth, it was because of what he was being put through. He was not sleeping and showed signs of being “quite worked up”. Ms Holdsworth asked if he was well enough to attend the meeting at 2.00 pm. He said he would go through with it. She also asked if he wanted to make use of the hotel “EAP” (employee assistance program). He said his doctor had referred him somewhere. Mr Chisholm then completed his written complaint about Mr Pachecki and handed it to Ms Holdsworth. He then waited in the meeting room until 2.00 pm.
In his written complaint, Mr Chisholm essentially listed the complaints set out at [16] to [21] above and concluded:
“Due to these incidents I do not want to be answerable to Artur, as I feel he is not capable of being fair and reasonable in our dealings.”
Mr Burrows and Ms Holdsworth met Mr Chisholm at 2.00 pm on 15 February 2010. In a document headed “Discussion/Interview Record”, it is recorded that Mr Burrows said the investigation into essential services and safety compliance was complete. The purpose of the investigation was due to concern with hotel services. Mr McCarren’s audit indicated that the relevant documents were in place and met general building compliance and safety requirements. Mr Burrows said that Mr Chisholm would be required back at work when he was fit. The notes recorded that Mr Chisholm said his illness was genuine and caused by the whole process of suspension. Mr Chisholm has denied making that statement. In his statement of 14 July 2010, he said his work environment caused the stress and anxiety. Mr Chisholm asked why he could not have been just asked to produce what was needed. Mr Burrows said the hotel took the matter of building maintenance and essential services very seriously and followed a standard practice when such serious concerns were raised. He added that Mr Chisholm would be required to attend a rescheduled mid-year performance review to discuss his overall performance over the past six months. Mr Burrows confirmed the main points of this conversation in a letter to Mr Chisholm dated 15 February 2010.
At 7.57 am on Wednesday 17 February 2010, Mr Burrows wrote an email to Mr Whittome (copy to Mr Simmons) to “update” him on the situation with Mr Chisholm. He said:
“• Rod returned from annual leave on 8^th Feb & was asked for [an] explanation as to [the] generator, he believed it had been tested. A line drawing was provided showing what is connected to the generator.
Due to concerns about the hotels compliance from a risk management perspective Rod was suspended the next day pending an audit.
Trevor McCarren audited the hotel on Thurs 11^th concentrating on evidence of compliance. Whilst most documentation was available some was missing.
Rod was asked to a meeting on Mon 15^th & presented with [the] audit. Rod, Trevor & myself attended the engineering office for Rod to provide all missing documentation.
All required documentation was able to be produced to the satisfaction of Trevor.
Regarding the generator, a documented test under load was sighted with the hotel passing. This was an annual test which has been the procedure at the hotel for a number of years, ongoing quarterly service reports were also available. It is the opinion of Trevor that we have a ‘dead short’ in the system however he does not believe it is as a result of any action or inaction by Rod. This will be investigated immediately.
As the audit did not find anything to suggest Rod is not compliant in the maintenance of essential services, I removed him from suspension.
Prior to the meeting Rod asked to see HR where he presented a medical certificate giving him two weeks off due to stress. Among other things he has claimed harassment & bullying by Artur [Pachecki].
Rod is now on sick leave until 1^st March. No investigation of his claims will be conducted until he returns to work.”
Mr Whittome wrote an email in response to Mr Burrows at 9.13 am the same day. He said:
“Firstly we do not accept or agree with Trevor that any ‘short’ or deficiency is not the responsibility of the engineer.
We cannot rely on Rod and have lost confidence in him. We also understand you have issues with his attitude.
We are not prepared to take any further risk with the reliability of the operation of the property and the safety of the staff and guests therein.
You are hereby requested to immediately appoint someone to temporarily take over responsibility for the Chief Engineers [sic] duties and to contact David Sefton at Blakes to oranise [sic] the appropriate separation of Rods [sic] services.” (emphasis added)
Ms Holdsworth rang Mr Chisholm at 2.00 pm on Wednesday 24 February 2010 to follow up on his wellbeing and to discuss his return to work on the following Monday. A detailed note of the conversation is in evidence. It records, consistent with Ms Holdsworth’s statement, that Mr Chisholm said he was good and would be back at work on Monday. He was looking forward to getting back to work as he had been just hanging around the house. He had not been back to his doctor but had attended an appointment following a referral from his doctor. Ms Holdsworth asked Mr Chisholm to get a fitness certificate for next Monday.
On Thursday 25 February 2010, Mr Chisholm saw Jane Cartwright, clinical psychologist at the Wellbeing Clinic, on referral from Dr Yohendran for “anxiety due to a work situation”. She recorded that, during the time that Mr Chisholm had been at home, he had trouble sleeping, had reduced appetite and, though he occupied himself at home doing work, he was constantly worrying. He was worrying about losing his job and how they were going to pay the mortgage and how difficult it would be for him to get a new job.
Ms Holdsworth saw Mr Chisholm on Monday 1 March 2010. The “Discussion/Interview Record” records that Mr Chisholm had arrived at work at 9.00 am without a medical certificate, but had an appointment to see Dr Yohendran at 11.00 am. He was asked to return once he had a certificate. Mr Chisholm saw Dr Yohendran at 12.06 pm. The doctor’s notes record:
“Letter Created – going back to work from today
also having conference at work today
has seen psychologist once so far – next appt - in 5 days – sat”
Mr Chisholm produced a certificate to Ms Holdsworth at about 1 pm on 1 March 2010 stating that he was “going to attempt full time work from today (continue with ongoing appointments)”. Mr Chisholm said that he was seeing a counsellor in relation to anxiety caused by the suspension and also to do with issues with Mr Pachecki. Ms Holdsworth recorded, though Mr Chisholm disputes, that he said he felt fine and preferred to be at work. Ms Holdsworth discussed Mr Chisholm’s position and said, among other things, “there had been a loss of confidence from the Hotel and the working relationship is permanently flawed”. She said, among other things, the hotel could “make a payment to end the employment”. Further discussions ensued about ending the employment with an agreed payment. This conversation is of critical importance to the action with respect to the alleged dismissal and is referred to in more detail below.
On 2 March 2010, Ms Holdsworth advised Mr Burrows by email that she had rung Mr Chisholm and offered him “16 weeks’ pay to end employment”. He refused that offer and said he would be coming back to work as he was still employed. Ms Holdsworth told him he was on paid leave so they could negotiate a payment agreement. Mr Chisholm became agitated and raised the issue of his complaint against Mr Pachecki saying that “this whole situation had come about because of that”. Ms Holdsworth said it would be addressed and she asked Mr Chisholm to seek advice from a solicitor. When Mr Chisholm said he was coming into work, Ms Holdsworth cautioned him against making the situation escalate like that and that if he arrived at work he would be directed to leave.
Ms Holdsworth wrote two letters to Mr Chisholm on 2 March 2010. One related to “Fitness for work”. It said that “a number of issues need to be resolved that require your consideration and reflection”. Mr Chisholm was “required to take paid leave from 1 March to 5 March”. The other letter related to “termination payment”, and to “resolving your employment with the Hotel by a termination payment”. It offered a “termination payment” of 16 weeks and said that it was in Mr Chisholm’s best interests to have the matter resolved as soon as possible. It was recommended that Mr Chisholm obtain legal advice.
Mr Burrows also wrote to Mr Chisholm on 2 March 2010 stating that the complaint against Mr Pachecki would be investigated, with Mr Chisholm’s involvement, when he was fit for work.
Mr Chisholm saw Dr Yohendran on 3 March 2010. So far as is relevant, the doctor’s notes record:
“Reason for contact:
Anxiety – workplace conflict
discussed work conflict
anxiety ++
has seen a psychologist
will continue at that clinic
Actions:
wishes to convert past 2 certificates to WC certs – done”

On 3 March 2010, Mr Chisholm submitted a WorkCover medical certificate from Dr Yohendran in which she certified him unfit because of anxiety as a result of “verbal harassment and bullying by an individual”. Ms Holdsworth acknowledged receipt of this certificate in a letter dated 3 March 2010. In a second letter of the same date, Ms Holdsworth said that, on receipt of the WorkCover medical certificate, the offer of a termination payment and settlement was withdrawn.
On 6 March 2010, Mr Chisholm saw Mr Judge, social worker at the Wellbeing Clinic with “considerable clinical experience in a wide variety of psychological difficulties within different age groups” (see report from Dr Moore dated 22 September 2010). In his report of 18 May 2010, Mr Judge said that Mr Chisholm initially appeared to be “deeply distressed”, but relaxed during the interview. He exhibited “significant symptoms of emotional distress whilst recalling the details of his workplace situation”. He said that his supervisor’s behaviour towards him included incidents of harassment, verbal abuse and vilification. Mr Chisholm had become increasingly distressed in the workplace, which was exacerbated by the failure by his employer to facilitate appropriate communication and resolution of workplace difficulties through discussion and mediation. His symptoms included difficulty falling asleep due to excessive rumination about his workplace situation; depressed mood at all times (with suicidal thoughts); increasing irritability; anger towards his workplace supervisor; inability to concentrate on anything because of unremitting thoughts about his workplace situation; constant tiredness and fatigue; difficulty with his appetite, and being disoriented and confused.

On 12 March 2010, Mr Burrows wrote to Mr Chisholm responding to his complaints about Mr Pachecki. He said that the hotel had conducted a formal investigation into the allegations regarding bullying and harassment, which included taking formal statements from witnesses. There was “some difficulty” in investigating the allegations because of the time it took Mr Chisholm to raise them, some allegations going back 14 months. Dealing with each complaint, Mr Burrows said:
(a)     the hotel was unable to confirm the allegation that on 18 December 2008 Mr Pachecki said “here’s Rod walking around doing nothing”;
(b)     as to the conversation in the presence of Mr Abdallah (see [17] above), Mr Abdallah confirmed that the conversation took place, but the allegations of aggression and intimidation were not supported. It was confirmed that Mr Pachecki said “Always”. The hotel warned Mr Pachecki that that comment was “not acceptable”;
(c)     Mr Pachecki agreed that he said to Mr Chisholm, and other members of staff, “Are you alright?” as part of his normal communications. He apologised if the question upset Mr Chisholm, but said that the comment was not intended to upset him. Mr Pachecki had been provided feedback on his phraseology, particularly taking into account that English is his second language;
(d)     the hotel found no evidence of bullying and harassment at the meeting about the presence of cockroaches in the kitchen (see [19] above). It was a work performance issue where negative feedback was provided to the group;
(e)     because no date had been provided, the hotel was unable to confirm Mr Chisholm’s complaint about a comment by Mr Pachecki at an OH & S meeting;
(f)      as to Mr Chisholm’s complaint about the performance review done in mid-2009, the hotel investigated the review process and determined that it was conducted in a fair and consistent manner. Mr Chisholm had the opportunity to raise issues with Mr Pachecki and Mr Pachecki provided positive and negative feedback.
Mr Burrows concluded that the investigation found that Mr Pachecki had performed his duties in directing and following up work-related requests of a reasonable nature. The hotel considered the investigation closed.
Mr Chisholm completed a claim form on 31 March 2010 in which he described his injury as “anxiety/depression” due to “workplace verbal harassment and bullying”. In a document attached to the claim form and marked “Annex A”, Mr Chisholm said:
“I have been experiencing problems with another employee. These problems commenced on December 18, 2008. This employee has been harassing and bullying me on a regular basis since. I have discussed this with another work colleague, Executive Housekeeper Di Vidler. One of the incidents was witnessed by the Front Office Manager Hussein Abdullah.
This individual left the Hotel on 14^th December 2009 and I hoped this would be a permanent arrangement. On my return from 4 weeks annual leave on the 8^th February 2010, I learnt, via email, that this individual would be returning to the Hotel on February 16^th 2010.
Given my concerns to [sic] his harassment and bullying towards me, I made my formal complaint to the Hotel Human Resources Manager Tracy Holdsworth.”
On 21 May 2010, Ms Holdsworth wrote to Mr Chisholm stating that the hotel had been advised that his claim had been declined and she understood that he was certified unfit until 28 May 2010. She wanted to discuss with him his “medical condition and employment” and asked him to contact her or Mr Burrows. She also asked him to provide a copy of his medical certificates.
On 24 June 2010, Ms Holdsworth wrote to Mr Chisholm and, referring to her letter of 21 May 2010, advised she had not had any recent contact from him. She acknowledged receipt of a medical certificate certifying Mr Chisholm unfit until 18 July 2010. In the context that Mr Chisholm had been away from work for five months, Ms Holdsworth wanted to meet to better understand his situation and his prospects of returning to work. In Mr Chisholm’s absence, the hotel had been in a difficult position in managing his responsibilities. Under “Request to meet”, Ms Holdsworth said:
“Rod the Hotel wants to do the right thing by you and understand your situation. To achieve this you are requested to meet with Alan Burrows, General Manager and me on Tuesday, 29 June at 11.00 am. This meeting will be held in the ‘Supply’ room on level 2. You are encouraged to bring a support person with you to this meeting. If you do wish to bring a support person, please advise us in advance.”
Mr Chisholm’s solicitors, Carro & Associates, responded to this letter on 25 June 2010 stating that Mr Chisholm was still certified unfit for work and that he was not in a position to discuss a return to work. Ms Holdsworth wrote to Carro & Associates on 1 July 2010 stating that she sought to speak with Mr Chisholm about a number of significant issues relating to his employment and his prospects of returning to work. Carro & Associates responded on 5 July 2010 that Mr Chisholm continued to receive treatment and was unfit for work. Novotel terminated Mr Chisholm’s employment by letter dated 28 July 2010, effective on 4 August 2010.

THE LEGISLATION AND AUTHORITIES

Section 11A(1) of the Workers Compensation Act 1987 provides:
“No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers.”
In a claim for compensation for psychological injury, the Commission has to decide whether the whole or predominant cause of the psychological injury was the employer’s action or proposed action with respect to one or more of the actions listed in s 11A(1), and, if so, whether the action or proposed action was reasonable (Manly Pacific International Hotel Pty Ltd v Doyle [1999] NSWCA 465; 19 NSWCCR 181 at [4]).
The onus of establishing a s 11A defence is on the employer (Ritchie v Department of Community Services [1998] NSWCC 40; (1998) 16 NSWCCR 727; Department of Education and Training v Sinclair [2005] NSWCA 465; 4 DDCR 206; (Sinclair)).
On the causation question, the Commission has held that “predominantly caused” means “mainly or principally caused” (Ponnan v George Weston Foods Ltd [2007] NSWWCCPD 92).
On the reasonableness question, the Court of Appeal considered the meaning of the words “reasonable action” in Commissioner of Police v Minahan [2003] NSWCA 239; 1 DDCR 57, where Foster AJA (with Sheller JA agreeing) cited with approval the following passage from Irwin v Director-General of School Education (Unreported, NSW Compensation Court, Matter No. 14068/97, Geraghty CCJ, 18 June 1998) where Judge Geraghty said:
“The question of reasonableness is one of fact, weighing all the relevant factors. The test is less demanding than the test of necessity, but more demanding than a test of convenience. The test of ‘reasonableness’ is objective, and must weigh the rights of employees against the objective of the employer. Whether an action is reasonable should be attended, in all the circumstances, by a question of fairness.”
The assessment of whether an employer has acted reasonably requires an objective assessment of the conduct involved (Jeffery v Lintipal Pty Ltd [2008] NSWCA 138 at [50]).
I intend to apply the above principles in Mr Chisholm’s case.

SUBMISSIONS, DISCUSSION AND FINDINGS

Suspension

The Arbitrator said (at [36] of her Statement of Reasons (Reasons)) that neither party had addressed her on whether suspension could be seen as a disciplinary measure. She added:
“In assessing the background of a previous failed external audit in November 2009, and the seriousness of the failure of the emergency generator, I am satisfied that the action of suspension was a disciplinary measure as the investigation was concerning a potential safety and compliance breach.”
Mr Campbell has submitted that Mr Chisholm was suspended on pay pending an investigation to see if he would be disciplined. He relied on evidence from Mr Burrows to the effect that Mr Chisholm was requested not to attend work so an audit could be conducted to “see whether there was [sic] any major issues” (T8.48 Pt 2). He submitted that a decision on whether Mr Chisholm was to be disciplined would be taken after the audit.
He also relied on the letter from Novotel to Mr Chisholm dated 10 February 2010, which did not refer to suspension, but merely requested Mr Chisholm not to attend work unless asked to do so. He said that s 11A does not refer to suspension and the Arbitrator therefore erred in finding that the request not to come to work was discipline. He submitted that no question of discipline arose until the completion of the investigation.
I do not accept these submissions.
It is necessary to consider the process involved and the steps taken, or proposed to be taken, in determining whether the action being considered is discipline within the terms of s 11A. I accept that the inquiry into the power failure was action taken to establish whether the failure resulted from a failure by Mr Chisholm in discharging his role as the hotel’s chief engineer. The suspension was a step in a process to determine what action, if any, the hotel needed to take “with respect to” discipline.
I do not believe the Arbitrator erred in finding that the suspension was a disciplinary measure. More accurately, she should have found that the suspension was an action with respect to discipline, but nothing turns on that point. The relevance of the November 2009 audit is another matter that is considered in detail below.

Causation

The Arbitrator identified the first issue to be “[w]hether the injury was caused by bullying and harassment or whether the injury was wholly or predominantly caused by the actions of the respondent in disciplining, performance appraisal and/or suspending and dismissing Mr Chisholm”. On this issue, she concluded (at [25]) that, though the conflict with Mr Pachecki may have been stressful, Mr Chisholm’s injury “was predominantly caused by his suspension and dismissal”.
She correctly stated that Mr Chisholm had not complained to Novotel about harassment and bullying until he spoke to Ms Holdsworth on 15 February 2010, though he had expressed his concerns to two co-workers, Di Vidler and Hussein Abdullah.
The Arbitrator noted (at [19]) the entry in Dr Yohendran’s notes for 15 February 2010 in the following terms:
“past 1 week – immediate boss – bullying and harassment”
She said that the week before 15 February 2010 had been stressful for Mr Chisholm “due to the investigation and suspension” (Reasons at [19]), but Dr Yohendran’s clinical notes did not indicate that Mr Chisholm’s sleep disturbance or stress existed prior to February 2010. She also referred to Dr Yohendran’s report of 31 August 2010, which said that Mr Chisholm had been stressed for two years, which was “inconsistent with the doctor’s own notes which limit the stress to the week before 15 February 2010” (Reasons at [19]).
She added that, though Mr Chisholm had provided a history of bullying and harassment to his counsellor, Kevin Judge, and his psychiatrist, Dr Zhang, those histories did not outline the emergency generator failure incident or the subsequent suspension, investigation and dismissal. She said that Mr Judge’s report was “vague with respect to how the injury occurred” (Reasons at [20]), though he did refer to the treatment by his employer and insurer, and the traumatic impact of that treatment. She noted, and Mr Campbell has conceded, that Dr Zhang had not provided any opinion on causation.
The Arbitrator referred to Ms Holdsworth’s evidence and said that, in the meeting with Mr Chisholm at 12.30 pm on 15 February 2010, Ms Holdsworth had asked Mr Chisholm about the cause of his anxiety and he responded that it was “from what he was being put through”.
The Arbitrator accepted that there had been incidents of “disagreement between Mr Chisholm and Mr Pachecki”, but said “I find there is insufficient evidence to satisfy me that Mr Pachecki had at any time bullied or harassed Mr Chisholm” (Reasons at [23]). She said that Mr Chisholm had not sought any medical assistance for sleeplessness or stress in 2008 or 2009 and that the contemporaneous medical evidence did not “support any work stress until February 2010” (Reasons at [24]). Though Mr Chisholm complained of bullying and harassment at that time (February 2010), his “focus” was on the “events around the suspension and his future employment” (Reasons at [24]).
In considering the causation issue, the Arbitrator said nothing about the effect of the dismissal on Mr Chisholm. Mr Perry submitted that the Arbitrator considered the causative effect of the dismissal when she dealt with the second issue, namely, whether the employer’s conduct was reasonable. On that issue, she said that it had been submitted by Novotel that the dismissal was “in effect a constructive dismissal, beginning with the meeting of 1 March 2010, where Mr Chisholm made it very clear to Ms Holdsworth that he would not work under Mr Pachecki” (Reasons at [28]). She added that, as a result (of the meeting of 1 March 2010), Mr Chisholm stayed off work. Mr Perry, who appeared at the arbitration, could not recall making a submission about constructive dismissal. The transcript of the arbitration proceedings reveals otherwise.
The Arbitrator recorded (at T2.51 Pt 1) that the issue in dispute was whether the injury had been caused by reasonable performance appraisal and discipline. However, at T67.40 Pt 2 Mr Perry said, referring to the conversation between Ms Holdsworth and Mr Chisholm on 1 March 2010, “part of the anxiety appears to result from these steps it would seem” and “it may expand the 11A point to incorporate dismissal as well”. This led to the following exchange at T67.49 Pt 2:
“ARBITRATOR: – at the very beginning when you commented about this wasn’t a dismissal, it’s a resignation.
MR PERRY: Yes, we talked about that and—
ARBITRATOR: And I was wondering if there was more classed – not that I’m making any judgment on it.
MR PERRY: No.
ARBITRATOR: Please make that clear but I – it brought to my thoughts the concept of constructive dismissal.
MR PERRY: Yes, yes and I think you’re right. It’s right so – so I would ask that we do expand it to that extent that in other words that 11A point is [unclear 2:56:31.0].
MR CAMPBELL: I don’t have any objection to that.
MR PERRY: It just seems realistic so if we just formally note that we link section 11A on which we rely and performance appraisal, discipline and dismissal and it would technically be constructive dismissal but it just incorporates all the issues that way [unclear 2:56:51.6], thanks. We need a date.” (emphasis added)
What submissions Mr Perry ultimately made at the arbitration about the constructive dismissal are not known because there is no transcript of the submissions before the Arbitrator. However, the exchange noted at [94] makes it clear that Mr Perry embraced the notion of constructive dismissal and, consistent with the Arbitrator’s decision, submitted that “part of the anxiety” resulted from that constructive dismissal. At the appeal hearing on 19 July 2011, Mr Perry submitted at length that the dismissal did not occur until July 2010 (AT72.25) and that “the suggestion that the Appellant was terminated or his employment was terminated in March 2010 is in error” (AT72.30).
Given the exchange between Mr Perry and the Arbitrator I have noted above, it appeared to me that Mr Perry’s submissions on appeal were inconsistent with the approach he took at the arbitration. He had in fact urged the Arbitrator to find that Mr Chisholm’s injury had resulted from a constructive dismissal that allegedly occurred on 1 March 2010. As neither party drew my attention to the relevant part of the transcript at the appeal hearing, I listed the matter for a teleconference on 27 July 2011 to hear further submissions on the cause of Mr Chisholm’s psychological injury, having particular regard to the alleged dismissal and the meeting on 1 March 2010. At that teleconference, both parties made submissions that were inconsistent with the positions they had adopted at the appeal hearing on 19 July 2011.
Mr Perry conceded at the teleconference that, as recorded in the Arbitrator’s decision, he had made submissions that Mr Chisholm’s injury had resulted from a constructive dismissal on 1 March 2010. He submitted that the events at the meeting on 1 March 2010 with Ms Holdsworth were more accurately characterised as actions taken with respect to the dismissal of Mr Chisholm. He argued that there were two causes of Mr Chisholm’s injury: the meeting on 10 February 2010 (the suspension) and the meeting on 1 March 2010 (the constructive dismissal, or the action taken with respect to dismissal). He referred to Ms Holdsworth’s evidence in her statement of 11 March 2010 that, at the meeting on 1 March 2010, Mr Chisholm became “really angry” and “clenched his jaw” and to the change in Dr Yohendran’s certificates from fit on 1 March to unfit on 3 March. He submitted that, on a proper reading of the Arbitrator’s decision, she accepted that there had been a constructive dismissal on 1 March 2010 and that Mr Chisholm’s injury had resulted from that dismissal and the suspension.
Mr Campbell submitted at the teleconference, contrary to his submissions at the appeal hearing, that the meeting on 1 March 2010 could not be characterised as a dismissal and that Mr Chisholm had not been dismissed until July 2010. However, he said that the meeting made Mr Chisholm feel “deeply depressed” and contributed to his injury. In these circumstances, he submitted that the Arbitrator erred in finding that the predominant cause of the injury was the “suspension and dismissal”.
There are three potential work-related causes of Mr Chisholm’s psychological injury: the alleged bullying and harassment by Mr Pachecki, the action taken with respect to the suspension, and the action taken on 1 March 2010. The Arbitrator’s approach to each must be considered to determine if she erred in determining that the predominant cause of the injury was the “suspension and dismissal”.
Mr Campbell referred to Mr Chisholm’s evidence of what he said were several proven work stressors, apart from the suspension, and submitted that the Arbitrator erred in finding that Mr Pachecki had not at any time bullied or harassed Mr Chisholm. The stressors were:
(a)     in October 2008, Mr Pachecki rolled his eyes and shook his head in response to Mr Chisholm’s reaction to a breakdown of the air-conditioning system;
(b)     on 18 December 2008, Mr Pachecki said in a sarcastic manner “here’s Rod walking around doing nothing”;
(c)     Mr Pachecki approached Mr Chisholm and said in an aggressive manner “Are you alright?” and, when asked by Mr Chisholm if he had a problem with him, Mr Pachecki replied aggressively “Always”;
(d)     Mr Pachecki made a malicious comment about the maintenance department (of which Mr Chisholm was the manager) in respect to a pest inspection, and
(e)     the annual performance review in mid-2009 (when Mr Pachecki reviewed Mr Chisholm) was not signed by Mr Chisholm because Mr Pachecki had written things under behavioural examples with which Mr Chisholm did not agree.
Mr Campbell has challenged the Arbitrator’s reliance on Dr Yohendran’s notes, which he said were equivocal and could be read in other ways. He also relied on Dr Yohendran’s report of 31 August 2010, in which the doctor recorded that, over the years, she found Mr Chisholm to be a consistent and reliable patient who had a “pleasant and laid back nature”. The doctor added:
“However over the past two years he has been embroiled in a work place issue. He detailed to me harassment and bullying by his supervisor at work over the past two years. The work place issues continued and escalated, culminating in him seeing me with anxiety and depression. He was very down and looked sad and depressed. It was unusual to see Rodney like this and we discussed treating his depression with talk therapy (psychologist and psychiatrist) together with medication therapy.”

The Arbitrator therefore erred in saying (at [40]) that the employer did not want Mr Chisholm present during the investigation because of the previous non-compliance and audit failures. Notwithstanding the note of the meeting of 10 February 2010, the November 2009 audit was not a relevant or motivating factor that led to the suspension, or even the investigation. The employer’s stated reason for not wanting Mr Chisholm present during the investigation was because of the “seriousness of the situation”.
It is readily conceded that the blackout (which was not Mr Chisholm’s fault) and failure of the emergency generator (which did come within his area of responsibility) raised important issues for the proper running of the hotel. However, I do not accept that the seriousness of the situation meant that it was reasonable that Mr Chisholm be suspended during the investigation. There was no allegation of misconduct or impropriety by Mr Chisholm. At the most, there might have been a lack of diligence in contractor management and/or plant maintenance. There was no suggestion of potential interference with evidence or witnesses relevant to the investigation. Mr McCarren’s job was to conduct an “operational audit”. That involved checking documents, not interviewing witnesses. It was never suggested that Mr Chisholm had to be suspended because there was a perceived risk that he might have backdated or manufactured documents.
Mr Campbell also submitted that the employer’s actions were not reasonable because the hotel failed to follow its own procedures with respect to performance management. Mr Perry submitted that it had followed those procedures.
The relevant procedures are set out in a document titled “Human Resources Performance Management Policy” (the Performance Management Policy), effective 2009, attached to the Application to Admit Late Documents filed on 23 December 2010. The Arbitrator did not refer to this document and it is unclear if counsel addressed on it. Nevertheless, it was agreed at the appeal hearing that it was in evidence and neither side objected to the Commission referring to it.
The Performance Management Policy states that the company aims to:
“(a)   follow a process of timely, structured, corrective counselling appropriate to each situation;
(b)     treat employees fairly with the objective of improving behaviour/performance;
(c)     explain the standard of behaviour/performance expected of employees and the consequences of failing to meet that standard;
(d)     give employees an opportunity to respond to concerns about their behaviour/performance before making a decision that may prejudice the employee’s employment; and
(e)     give employees an opportunity to have a support person present during any discussion where disciplinary action may be taken against employees.”
The policy acknowledges that it was impossible to prescribe a procedure to fit every situation and that the procedure set out should be “tailored to the particular circumstances”. For example, in some instances, it may be appropriate to proceed to a “final warning”. Prior approval had to be sought from the regional human resources manager for any departure from the procedures in the policy document.
The “procedure” to be followed involves a five-step process:
(a)     corrective coaching discussion;
(b)     verbal warning;
(c)     first written warning;
(d)     final written warning, and
(e)     termination.
Each step has a detailed process to be followed. At the corrective coaching stage, a “semi-formal meeting” is held where the supervisor or manager clarifies his or her expectations of how an employee should be behaving or performing at work. Advice or further training may be offered. The manager is to outline “areas of concern” and give specific examples of the employee’s behaviour or performance and the hotel’s expectations. The employee is asked to respond to the concerns. The discussion is to be documented and the employee asked to sign and date both copies.
If the employee does not show any improvement, the manager may ask to have a more formal discussion and, depending on the problem, an action plan with review dates might be created to “assist the employee in resolving the problem”. Depending on the circumstances, it may be appropriate to give a verbal warning where no corrective coaching has been held. The verbal warning stage involves 13 steps, which includes advising the employee that his or her performance is unsatisfactory, reiterating the hotel’s expectations, and explaining the consequences of not meeting those expectations. If appropriate, an “action plan”, with review dates, is created. The discussion is to be documented and copies signed. A similar process is involved with the first and final written warnings.
Termination may occur immediately “in the case of serious misconduct” or in the case of “continued unsatisfactory behaviour/performance over a reasonable period of time”. Again, 13 steps are involved. Inquiries are to be conducted and areas of concern outlined. The employee is to be asked to respond to the concerns. It may, “depending on the severity of the concern, be preferable to suspend the employee on full pay while the concern is being investigated”. Mr Burrows and Ms Holdsworth both said that Mr Chisholm was suspended because of the “seriousness of the situation”. However, for the reasons stated earlier, I do not accept that the failure of the backup generator was so serious that suspension was a reasonable first step without first conducting inquiries and outlining the areas of concern to Mr Chisholm so he could respond.
The hotel never alleged that Mr Chisholm had been guilty of misconduct, let alone “serious misconduct”. Nor did it suggest that Mr Chisholm had been guilty of “continued unsatisfactory behaviour/performance over a reasonable period of time”. The evidence from Mr Pachecki was that Mr Chisholm did the job required by the company (T29.20 Pt 2). Mr Burrows said that Mr Chisholm was a “reasonable engineer”, though there were some areas where he thought there could be some improvement (T10.1 Pt 2). This evidence was consistent with the performance annual review dated 14 August 2009 in which Mr Pachecki assessed Mr Chisholm’s performance to be: “meets expectations”.
In all the circumstances, the Arbitrator erred in failing to refer to the hotel’s Performance Management Policy and the hotel’s conduct with respect to the suspension, when measured against its own policy, was not reasonable.
Turning to the dismissal, on the assumption that, contrary to my finding, the hotel’s actions on 1 March 2010 were actions with respect to dismissal, I make the following observations.
Mr Campbell referred to Mr Whittome’s email of 17 February 2010 (see [56] above) in which he said:
(a)     he did not accept or agree with Mr McCarren that any “short” or deficiency was not the responsibility of the engineer;
(b)     he could not rely on Mr Chisholm and had lost confidence in him, and understood that Mr Burrows had “issues” with his attitude;
(c)     he was not prepared to take any further risk with the reliability of the operation of the hotel and the safety of the staff and guests;
(d)     Mr Burrows was requested to “immediately appoint someone to temporarily take over responsibility for the Chief Engineers [sic] duties and to contact David Sefton at Blakes to oranise [sic] the appropriate separation of Rods [sic] services”.
Mr Campbell then referred to Ms Holdsworth’s evidence at T64.22 Pt 2:
“Q. The loss of confidence from the hotel, that I want to suggest to you, is similar to what appears in an email received from the representative from the owner after the audit was conducted. So the loss of confidence that you were talking about is a loss of confidence in him being able to do his job despite the fact that he’d been cleared, is that right?
A. As I understand it, yes.
Q. That’s a bit unfair, I want to suggest, if someone’s been cleared in the internal investigation to still have a loss of confidence in their ability to do their job. Would you agree?
A. The decision was made. I won’t agree or disagree. I just think the decision was made and I wasn’t involved in that decision.
Q. The purposes of this meeting, I suppose, is to try to come to some sort of arrangement where he could be paid some money and leave quietly, is that right?
A. There was a decision made to put a payment to Rod to end the employment.”
Based on this evidence, Mr Campbell submitted that action with respect to dismissal, if there was such action, was not reasonable. Mr Perry submitted that, having regard to the history of the matter and, in particular, Mr Chisholm’s statement that he would not work with Mr Pachecki, the hotel’s actions were reasonable.
If the actions on 1 March 2010 were actions “with respect to” dismissal, I do not accept that those actions were reasonable. Though Mr McCarren, an engineer selected by the hotel, had cleared Mr Chisholm of any mistakes or lack of diligence, the hotel still chose to attempt to negotiate a termination payment on the doubtful basis that the there had been a “loss of confidence” by the hotel and the working relationship was “permanently flawed”. It is interesting to note that, in referring to a loss of confidence, Ms Holdsworth used virtually the same language as used by Mr Whittome in his email of 17 February 2010.
The attempts to negotiate an end of the employment began with Mr Whittome’s email of 17 February 2010, in which he said that he did not accept Mr McCarren’s report and that “we cannot rely on Rod and have lost confidence in him”. He requested that Mr Burrows appoint someone else to take over Mr Chisholm’s duties and to contact David Sefton, a solicitor, to organise “the appropriate separation” of Mr Chisholm’s services. The refusal to accept Mr McCarren’s report was unexplained and was unreasonable. The basis for the alleged loss of confidence was also unexplained. There is no evidence that Mr Whittome was aware of Mr Chisholm’s complaints about Mr Pachecki and no suggestion that the complaint contributed to his loss of confidence. Mr Whittome’s statement “we understand you have issues with his attitude”, suggests that he was not aware of the complaint.
The evidence does not support the Arbitrator’s conclusion that it was only when Mr Chisholm provided what was “tantamount to an ultimatum on 1 March 2010 that he would not work with Mr Pachecki that discussions took place about terminating the employment relationship” and the Arbitrator erred in reaching that conclusion. Mr Chisholm gave no such “ultimatum”. While Mr Chisholm said in his complaint about Mr Pachecki that he did not “want to be answerable to Artur”, that statement must be read with the evidence that Mr Chisholm had obtained a clearance from Dr Yohendran to return to work on 1 March and wanted to do so, knowing that Mr Pachecki had returned to work at the hotel. Clearly, he still had issues with Mr Pachecki, but rather than attempting to resolve those differences through mediation and counselling, Ms Holdsworth made it clear that, whether it was fair or not, a decision had been made to put a payment to Mr Chisholm to end the employment.
Ms Holdsworth’s statement that there were a few considerations before “we can move forward”, which was made very early in the discussions on 1 March 2010, was also consistent with the hotel having decided that it wanted to negotiate a termination payment, regardless of Mr Chisholm’s relationship with Mr Pachecki. That was clearly the purpose of the meeting. It was not suggested by Ms Holdsworth that, when she said that the need to report to Mr Pachecki would not change, Mr Chisholm said he would not work with Mr Pachecki, or anything like that. He merely indicated that the complaint was important to him and he wanted it dealt with. There was no proper basis for Ms Holdsworth’s assertion that the “working relationship had permanently broken down”. More importantly, Ms Holdsworth’s statement and oral evidence indicate that the question of what to do with Mr Chisholm had been determined before any investigation of Mr Chisholm’s complaints about Mr Pachecki. That was unreasonable.
On an objective view of the hotel’s conduct, the actions taken on 1 March 2010 were not reasonable.

CONCLUSION

The Arbitrator erred:
(a)     in finding that there had been a constructive dismissal that began with the meeting on 1 March 2010, when there had been no dismissal or action with respect to dismissal;
(b)     in finding, if there had been a constructive dismissal, that the discussions about terminating the employment only began when Mr Chisholm said he would not work with Mr Pachecki;
(c) in finding that the predominant cause of Mr Chisholm’s psychological injury was the “suspension and dismissal”, when the injury had been caused by the combined effect of the suspension, to which s 11A applies, and the events on 1 March 2010, to which s 11A does not apply, and, though it was not necessary for the determination of the appeal;
(d)     in her approach to the reasonableness issue, by asking the wrong question, and in failing to consider and properly weigh relevant evidence.
For the reasons explained above, Novotel has failed to establish its defence under s 11A and the Arbitrator erred in making an award for the respondent employer. As the receipt of injury is not in issue, the parties agreed that, if the appeal succeeded, I should remit the matter to another Arbitrator for determination of Mr Chisholm’s entitlement to weekly and other compensation, and that is the course I propose to adopt. The only outstanding issue is the quantification of Mr Chisholm’s entitlements. For the purpose of assessing and calculating costs, the second arbitration is to be treated as a separate resolution.

DECISION

The Arbitrator’s decision of 24 February 2011 is revoked and the following order made in its place:
“1. The respondent employer is to pay the applicant worker’s costs of the arbitration. The matter is certified as complex with an uplift of 30 per cent.”
The matter is remitted to a different Arbitrator for determination of the applicant worker’s entitlement to weekly and other compensation.

COSTS

The respondent employer is to pay the appellant worker’s costs of the appeal, assessed at $2,200 plus GST.

Bill Roche

Deputy President
2 August 2011

I, PENELOPE FLEMING, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE