Cornel Adrian Fernandez v State of South Australia No. SCGRG 93/1558 Judgment No. 4705 Number of Pages 9 Workers' Compensation

[1994] SASC 4705

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA MOHR(1), DEBELLE(2) AND NYLAND(3) JJ

CWDS
Workers' compensation - appeal from Workers Compensation Appeal Tribunal - appellant was an employee in the Public Service - appellant was charged with and ultimately acquitted of larceny as a public servant - in the course of investigating the charges, the employer discovered the appellant had previous convictions for larceny - the appellant was called to a meeting with his manager who informed him of their intention to dismiss him - the appellant thereafter did not attend work, was ultimately dismissed and claimed compensation as a result of mental stress caused by the meeting with the manager - whether appellant's previous convictions for larceny constitute serious and wilful misconduct so barring any right to compensation. WorkersRehabilitation and Compensation Act, 1986 s56 and Government Management and Employment Act, 1986 s70. Johnson v Marshall Sons and Co Limited (1906) AC
409; Richards v Faulls Pty Ltd (1971) WAR 129 and Smith v Wemyss Coal Co Limited (1927) 21 BWCC 483, applied.

HRNG ADELAIDE, 12 July 1994 #DATE 28:7:1994

Counsel for appellant:     Mr F Di Fasio

Solicitors for appellant:    Kirk Roberts and Co

Counsel for respondent:     Mr A Moss

Solicitors for respondent: Crown Solicitor (SA)

ORDER
Appeal dismissed.

JUDGE1 MOHR J I agree with the decision of Debelle J in this matter.

JUDGE2 DEBELLE J Appeal from Workers Compensation Appeal Tribunal. This is an appeal from a decision of the Workers Compensation Appeal Tribunal which had upheld the respondent's appeal from a decision of a review officer. On 30 July 1992 a review officer had found that the appellant was entitled to weekly payments of income maintenance in respect of "mental stress" which had arisen out of or in the course of his employment. On appeal, the Tribunal found that, although the appellant had a compensable disability pursuant to s.30 of the Workers Rehabilitation and Compensation Act, 1986, his claim for compensation was barred by s.56 of the Act because the disability was attributable to serious and wilful misconduct on the part of the appellant. The only issue in this appeal is whether the claim for compensation was barred by s.56.

2. The appellant was employed by the Engineering and Water Supply Department, a department of the Government of South Australia. As it is an agency or instrumentality of the Crown, the Department is an exempt employer under s.60 of the Act. The appellant had been employed by the Department for some 20 years. During that time his life had been punctuated by a number of difficulties both in his personal life and in his employment. On occasions he had been counselled or disciplined concerning his conduct towards other employees, his attitude to work and his work performance. So far as his personal life was concerned, he was married in 1975, separated in 1982, divorced in 1985, declared bankrupt in 1987 and discharged from bankruptcy in 1990. He has been convicted of offences of dishonesty on four occasions. Those offences, which occurred outside his employment, were as follows:
    Date of Offence Nature of Offence Date of Conviction
    30 July 1986 Larceny (Shoplifting)     18 July 1988
                 goods of the value of     fined $75
  $19.72
    16 July 1987 Larceny (Shoplifting)     18 July 1988
                 goods of the value of     fined $125
                 $5.42
    8 Feb 1990     Larceny (Shoplifting)     28 June 1990
                 goods of the value of     fined $150
                 $39.99
    23 April 1990 Larceny goods to the     23 August 1990
                 value of $3.20             fined $250

3. In addition to these offences, he had been charged on 23 March 1990 with the offence of larceny of a carpet of the value of $5,000. He was acquitted of this offence on 3 July 1991. This charge also related to an alleged incident outside his employment.

4. The appellant had also been charged with offences alleged to have occurred in the course of his employment. In February 1989, while engaged on duties in the Customer Services Branch he was investigated concerning some money which was found to be missing. He was charged with four offences of larceny as a public servant. He was committed for trial in January 1990. In May 1990 he was tried by a jury and acquitted. Between the time of his committal and the trial, the appellant saw his general practitioner who certified him unfit for work from 13 February to 16 February 1990 as a result of "stress due to ongoing work factors". The appellant made a claim for compensation which, although rejected at first, was later accepted by the Department which paid compensation for a short period of incapacity as claimed. After his acquittal in May 1990 the appellant was placed in the Survey section of the Department where he remained without further incident until 29 April 1991.

5. In the course of investigating the charges of larceny as a public servant, the Department had become aware of the appellant's earlier convictions for larceny. The Department decided to take disciplinary action against the appellant pursuant to s.70 of the Government Management and Employment Act, 1986 in relation to those convictions. Section 70(1) of the Act provides:
    "If an employee is convicted of a serious offence, or is
    sentenced to imprisonment for an offence, the
    disciplinary authority may recommend to the Governor -
    (a) that the employee be transferred to some other
    position in the Public Service; or
    (b) that the employee be dismissed from the Public
    Service."

6. The Act defines a "serious offence" to mean an indictable offence, or an offence punishable by imprisonment for two years or more. The disciplinary authority in this case was a Chief Executive Officer of the Department. There is a right of appeal from a decision of the Chief Executive Officer to transfer an employee or dismiss him from the Public Service where the employee is sentenced to imprisonment for an offence. However, the employee does not have a right of appeal in relation to disciplinary action recommended as a result of a conviction for a serious offence: s.72(4). A meeting was arranged for 29 April 1991 between the appellant, a representative of the Public Service Association and three managers within the Department. The appellant was informed of the Department's intention to act pursuant to the Government Management and Employment Act. The appellant was handed a letter from the Chief Executive Officer of the Department giving him notice that his four previous convictions for dishonesty constituted "serious offences" within the meaning of the Act and that pursuant to s.70 the Chief Executive Officer intended to recommend to the Governor that the appellant be dismissed from the Public Service. The letter gave the appellant fourteen days in which to show cause why the recommendation should not be made.

7. Thereafter the appellant did not attend work. He did not respond to the letter of 29 April 1991. On 3 May 1991 he consulted his general practitioner who certified him unfit for work as a result of "mental stress". The appellant sent the certificate to the Department on 9 May 1991. On 31 May 1991 the appellant was given another written notice by the Chief Executive Officer of the Department that, as he had not responded to the letter of 29 April 1991, he intended to proceed with his recommendation to dismiss the appellant. On 4 June 1991 the appellant completed a notice of disability and a claim for compensation alleging "mental stress" as a result of an "office confrontation with three managers". On 6 June 1991 the appellant was dismissed from the Public Service by the Governor in Council. On the same day, a letter was sent to the appellant advising him of his dismissal. The appellant filed a claim in the Industrial Commission asserting that his dismissal was harsh, unjust or unreasonable but did not prosecute the claim.

8. Section 56 of the Workers Rehabilitation and Compensation Act provides:
    "(1) Subject to subsection (2), the fact that a
    disability is attributable to misconduct on the part of
    a worker -
    (a) in a case of death or serious and permanent
    disability - is not a bar to a claim for compensation
    under this Act;
    and
    (b) in any other case - is not a bar to a claim for
    compensation under this Act unless the misconduct
    amounts to serious and wilful misconduct.

(2) In any proceedings under this Act in which a claim
    for compensation is alleged to be barred by the
    misconduct of the worker, the onus of proving that
    allegation lies on the person by whom the allegation is
    made."

9. It was common ground before the Tribunal that the appellant's disability was not a serious and permanent disability. It was also common ground that the fact of the four convictions for larceny was the basis for the decision to dismiss the appellant and hence the subject of the meeting on 29 April 1991 and that, in the sense that the convictions were the first link of a chain of events resulting in the appellant's dismissal, the appellant was suffering from anxiety and a depressive state which was occasioned by the meeting of 29 April 1991 and could be said to be attributable to the appellant's misconduct. It was common ground that the convictions for larceny constituted misconduct and that the misconduct was wilful. The only issue, therefore, was whether the conduct was serious misconduct within the meaning of s.56.

10. The Tribunal first considered whether misconduct for the purposes of s.56 could consist of actions of a worker outside his employment. It held that provided the conduct struck at an essential element in the contract of service it could constitute misconduct for the purposes of s.56. It held that the Government Management and Employment Act 1986 determined the employment relationship between the appellant and the Department. As s.70 of the Act rendered the appellant liable to disciplinary action in relation to convictions for serious criminal offences which did not occur in the course of the appellant's duties as an employee in the Department, offending of that kind could constitute misconduct within the meaning of the WorkersRehabilitation and Compensation Act.

11. The Tribunal then turned to the question whether the misconduct was serious. It held that, although it had been well established that one criterion for the measurement of the seriousness of the misconduct was the likelihood of it increasing the risk of injury or damage: Johnson v Marshall Sons and Co Limited (1906) AC 409 and Richards v Faulls Pty ltd (1971) WAR
129, that was not the sole criterion. Each case, it said ,must depend on its facts. In this case, the meeting on 29 April 1991, which precipitated the worker's anxiety depressive state, had resulted from the four convictions each of which was a serious offence pursuant to s.30 of the Government Management and Employment Act 1986. Not only was each offence a serious offence capable of warranting a recommendation of dismissal but, objectively speaking, four convictions for dishonesty committed successively by a public servant outside his actual employment was serious conduct in the sense that the misconduct was quite inconsistent with the required standard of conduct of a public servant and contrary to the interests of his employer, tending to bring the Public Service into disrepute. The Tribunal saw the conduct as striking at an essential element of the employment relationship. It therefore concluded that the appellant's convictions for four successive offences of larceny constituted serious misconduct.

12. Although it had been conceded that the worker's anxiety and depressive state occasioned by the meeting of 29 April 1991 could be attributable to the worker's misconduct, the Tribunal went on to make its own finding on that issue. It said:
    "On an evaluation of the evidence the compelling
    inference is that the serious and wilful misconduct
    played a dominant role in causing or contributing to the
    worker's stress reaction. He suffered the anxiety and
    depression as a direct result of attending the meeting
    of 29 April 1991 the purpose of which was to admonish
    him for his previous convictions for larceny and to
advise him of the recommendation pursuant to s.70 of the
    relevant Act based on the existence of the four
    convictions. It can therefore be said that there was a
    chain of causation linking the commission of the
    offences for larceny, the resultant convictions, the
    meeting of 29 April 1991 and the worker's anxiety
    depressive state. In other words the anxiety depressive
    state complained of by the worker at that time was
    attributable to the worker's serious and wilful
    misconduct."

13. Two issues fall for consideration on this appeal. The first is whether the Tribunal was correct in holding that the misconduct to which s.56 refers may relate to events which have occurred outside the employment of the worker. The second is whether the Tribunal was correct in holding that the misconduct was serious.

14. Mr di Fasio, who appeared for the appellant, properly conceded that misconduct which strikes at essential elements of the relationship between employer and employee could constitute misconduct for the purpose of s.56 and that included misconduct which gives grounds for instant dismissal. He conceded also that misconduct occurring outside the employment may constitute misconduct for the purposes of s.56.

15. In this case the answer to the question whether the misconduct struck at the essential elements of the contract of service was to be found in the terms of the Government Management and Employment Act. As the long title of the Act states, one of its purposes is to provide for and regulate employment in the Public Service. The Act includes provisions governing the terms of the employment contract and specifying some general rules of conduct. Section 7 of the Act imposes an obligation on all officers of the Public Service to conduct themselves in their private capacities in a manner that would not reflect seriously and adversely on their employers or fellow employees; s.67 provides for general rules of conduct by providing that an officer of the Public Service is liable to disciplinary action if, among other things, he is guilty in a private capacity of disgraceful or improper conduct that reflects seriously and adversely on the Public Service; and there are provisions such as s.70 which permit disciplinary action where an officer has been convicted of an offence, disciplinary action which may result in dismissal. The Act spells out in clear and unmistakable terms that the employment of an officer of the Public Service is at real risk if he is convicted of a serious offence. Conduct which renders an employee liable to dismissal is conduct which strikes at an essential element of the contract of service, a conclusion which the Act emphasises by providing that the commission of serious offences will render an officer in the Public Service liable to dismissal. Misconduct which strikes at the essential elements of the relationship of employer and employee is, therefore, capable of being misconduct for the purposes of s.56, whether the misconduct occurs at the workplace or elsewhere.

16. The Tribunal was therefore correct in holding that the misconduct by the appellant outside his employment constituted misconduct for the purposes of s.56.

17. Mr di Fasio submitted that the Tribunal had, however, erred in holding that the misconduct was serious and in having regard only to the seriousness of the offending. In his submission, an essential element of serious misconduct is its tendency to increase the risk of injury to the worker or the extent of damage: see Richards v Faulls Pty Ltd (1971) WAR 129. Absent the tendency to increase injury to the worker or the extent of damage, misconduct could not be serious misconduct within the meaning of s.56. This submission misconstrues the authorities and must fail.

18. The test stated in Richards v Faulls Pty Ltd (supra) is well established and has a long history. It had been formulated much earlier by the House of Lords in Johnson v Marshall, Sons and Co Ltd (1906) AC 409. There is nothing in Richards v Faulls Pty Ltd to suggest that the test is the sole criterion by which to determine whether a worker has been guilty of serious misconduct or that it is an essential element of serious misconduct that the misconduct had a tendency to cause serious injury or serious damage. The position is correctly stated in Willis's Workmen's Compensation (37th ed) at page 153: "No general principle or rule can be enunciated which will enable one to discriminate between an act which is 'serious' and one which cannot be so termed. Each case must depend on its peculiar facts."

19. Indeed, the House of Lords in Johnson v Marshall, Sons and Co Limited emphasised that it is impossible to give any general definition of the expression "serious and wilful misconduct" and that it is a question of fact to be determined in every case as it arises: see for example Lord James at 412.

20. The seriousness of the misconduct must be assessed by reference to the misconduct itself not by reference to its consequences: Johnson v Marshall Sons and Co Limited (supra) at 411 and 414. At p.414 Lord James illustrates the proposition in this way:
    "A man may be told not to walk on the grass. He does
    so, slips up and breaks his leg. The consequences are
    serious, but the misconduct is not so."

21. Misconduct might consist of in a breach of rules or instructions as to the use of plant or machinery or in a breach of other rules governing the workplace. It might consist of a single act or a series of acts. Furthermore, it is not limited to the contravention or a series of contraventions by the worker of his employer's orders or instructions. It may arise out of actions on the part of the worker which show disregard for the duty of care he owes to his own safety and to the safety of others: Smith v Wemyss Coal Co Limited (1927) 21 BWCC 483, 491. It is also necessary to keep in mind that it is impossible to view any of the particular acts or stages, into which the worker's behaviour may (upon a logical analysis) be broken up, in isolation. In other words, the quality of any particular act cannot be determined apart from the circumstances surrounding it: Smith v Wemyss Coal Co Limited (supra).

22. What triggers the operation of s.56 is a disability attributable to misconduct on the part of the worker. The Tribunal has found that the appellant's disability was attributable to his misconduct. That finding is not challenged. The only question remaining is whether the conduct was serious, a matter which will be determined according to the facts of each case.

23. It is possible to determine the seriousness of the misconduct without reference to its tendency to cause physical injury. The test in Richards v Faulls Pty Ltd (supra) is suitable where the claim for compensation is related to physical injury. But it is not necessarily suitable for claims for mental stress, which were unknown when the test was first formulated. In an appropriate case, the seriousness of the conduct can, I think, be determined by examining the conduct itself without considering its tendency to cause injury. However, it is unlikely that misconduct will be serious unless it strikes at an essential element in the relationship of employer and employee.

24. The Tribunal's reasoning did not proceed on the footing that misconduct which was a serious offence as defined by the Government Management and Employment Act and which would result in a warning of dismissal would, of itself, necessarily constitute serious misconduct. Nor is there anything in its reasons which suggests that the mere fact that a worker has committed offences which are defined by the Act as serious offences will be sufficient to constitute serious misconduct within the meaning of s.56. The Tribunal was also careful to avoid interpreting an expression in one Act by reference to the meaning of the same expression in another Act. Instead, the Tribunal examined the nature of the offending and determined whether it constituted serious misconduct. It concluded that, viewed objectively, four convictions for dishonesty committed successively by a public servant outside his actual employment was serious misconduct in the sense that the misconduct was quite inconsistent with the required standard of conduct of a public servant and contrary to the interests of his employer as it tended to bring the Public Service into disrepute. As the Tribunal held, the seriousness of the misconduct can be established by the occurrence of some event which strikes at an essential element of the employment relationship or disregards any essential condition of that relationship. I can see no reason for departing from the Tribunal's decision.

25. Although the Tribunal held that the test in Richards v Faulls Pty Ltd was not the appropriate test in the circumstances of this case, I nevertheless think that the misconduct in this case satisfied the test. As already mentioned, misconduct includes disregard by the worker for his own safety. If a worker, who is prone to stress, misconducts himself in a way which he knows has a real likelihood that he will be called upon to show cause why he should not be dismissed, he is acting in disregard of his mental health. If he suffers stress because he is called upon to explain his conduct, the worker has brought the disability upon himself in much the same way as a worker, who suffers physical injury because he disobeyed a safety instruction, has acted in disregard of his own safety. The appellant is a person prone to stress. In committing the offences, he acted in a way which had a real potential to lead to the very situation in which he found himself on 29 April 1991. The appellant's misconduct here had a real tendency to cause the disability of which the plaintiff complains and so it can be properly classified as serious.

26. For these reasons, I would dismiss the appeal.

JUDGE3 NYLAND J I agree with the reasons expressed by Debelle J.