Jeffery v Lintipal Pty Ltd - [2008] NSWCA 138

NEW SOUTH WALES COURT OF APPEAL

CITATION:
JEFFERY v LINTIPAL PTY LTD [2008] NSWCA 138

FILE NUMBER(S):
40391/07

HEARING DATE(S):
30 May 2008

JUDGMENT DATE:
17 June 2008

PARTIES:
Peter Lewis Jeffery (Appellant)
Lintipal Pty Ltd (Respondent)

JUDGMENT OF:
Hodgson JA Basten JA Rein J

LOWER COURT JURISDICTION:
Workers Compensation Commission

LOWER COURT FILE NUMBER(S):
WCC 14994/06

LOWER COURT JUDICIAL OFFICER:
Deputy President Bill Roche

LOWER COURT DATE OF DECISION:
23 May 2007

LOWER COURT MEDIUM NEUTRAL CITATION:
[Lintipal Pty Ltd v Jeffery] [2007] NSWWCCPD 118

COUNSEL:
W Carney (Appellant)
L King SC/P Rickard (Respondent)

SOLICITORS:
Higgins & Higgins, Lithgow (Appellant)
Goldbergs, Sydney (Respondent)

CATCHWORDS:
ADMINISTRATIVE LAW – judicial review – error “in point of law” – non-interference with factual findings – [Workplace Injury Management and Workers Compensation Act] 1998 (NSW) s 353
COSTS – non-compliance with rules relating to preparation of appeal books
WORDS & PHRASES – “in point of law” – “reasonable action”
WORKERS’ COMPENSATION – entitlement to compensation – exclusions – transfer of employee – whether reasonable action taken by employer – objective assessment of reasonableness – belief in reasonableness of third party’s actions – whether direction to transfer was contractually binding – [Workplace Injury Management and Workers Compensation Act] 1998 (NSW) s 234
WORKERS’ COMPENSATION – transfer of employee – employer acting on direction of education authority – employer contractually obliged to act on direction – whether contracting out of workers’ compensation legislation –[Workers Compensation Act] 1987 (NSW) s 11A

LEGISLATION CITED:
[Anti-Discrimination Act] 1977 (NSW), s 49I
Uniform Civil Procedure Rules 2005 (NSW), Pt 51, Div 5, Subdiv 3
[Workers Compensation Act] 1987 (NSW), ss 11A, 40
[Workplace Injury Management and Workers Compensation Act] 1998 (NSW), ss 234, 352, 353

CATEGORY:
Principal judgment

CASES CITED:
[Aluminium Louvres & Ceilings Pty Ltd v Xue Qin Zheng] [2006] NSWCA 34
[Boston Clothing Co Pty Ltd v Margaronis] (1992) 27 NSWLR 580
[Coulton v Holcombe](1986) 162 CLR 1
[Jamal v Secretary, Department of Health] (1988) 14 NSWLR 252
[Manly Pacific International Hotel Pty Ltd v Doyle] [1999] NSWCA 465; 19 NSWCCR 181
[O’Brien v Komesaroff] (1982) 150 CLR 310
[State Transit Authority of New South Wales v Chemler] [2007] NSWCA 249
[Suttor v Gundowda Pty Ltd] (1950) 81 CLR 418
[Townsend v Commissioner of Police] (1992) 25 NSWCCR 9

TEXTS CITED:

DECISION:
(1) Allow the appeal and set aside the decision of Deputy President Roche made on 23 May 2007. (2) Remit the employer’s appeal against the decision of the Arbitrator of 11 January 2007 to the Workers Compensation Commission, constituted by a Presidential member, for further consideration according to law. (3) Order the respondent to pay the appellant’s costs of the proceedings in this Court. (4) Grant the respondent a certificate under the [Suitors’ Fund Act] 1951 (NSW), unless disqualified pursuant to s 6(7).

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40391/07
WCC 14994/06
HODGSON JA
BASTEN JA
REIN J
17 June 2008

Peter Lewis JEFFERY v LINTIPAL PTY LTD

Headnote

Prior to 2 November 2005, Mr Jeffery (“the appellant”) was a cleaner employed by the respondent at Katoomba Public School. There were a number of complaints about the appellant’s conduct at work; specifically, leaving work early and being rude to staff and students. In accordance with a direction given by the school principal, presumably on the basis of the complaints, the respondent transferred the appellant to Hazelbrook Public School as a cleaner. On 4 November 2005, the appellant obtained a certificate from a general practitioner that he was unfit to work due to psychological injury. He did not return to work thereafter.

The appellant made an application for workers’ compensation for his psychological injury, which was not accepted. He then made an application to the Workers Compensation Commission, which proceeded to arbitration. The appellant was successful. On appeal, Deputy President Roche overturned the Arbitrator’s decision in favour of the appellant. Relevantly, the Deputy President found that no compensation was payable because the respondent’s action with respect to the transfer was reasonable, pursuant to s 11A of the Workers Compensation Act 1987 (NSW). The appellant appealed to the Court of Appeal against the Deputy President’s decision.

The issues for determination on appeal were:

whether the employer acted reasonably in transferring the appellant at the direction of the school principal; and

whether the Deputy President erred “in point of law” in his approach to determining whether the respondent’s action in transferring the appellant was reasonable for the purposes of s 11A.

The Court held, allowing the appeal:

In relation to (i)

(per Hodgson JA)

Whether the school’s direction was reasonable would be a relevant factor in assessing the reasonableness of the employer’s action; but, it would not be essential for the employer to prove the school’s direction was reasonable: [3].

If the school’s direction was not objectively reasonable, s 11A could still be satisfied if the respondent believed the direction was reasonable: [3]–[4].

(per Basten JA)

Section 11A requires an objective assessment by the Commission of the reasonableness of the action of the employer: [50]. The reasonableness of the action should be assessed by reference to the facts giving rise to the transfer: [44].

Where the employer acts on the basis of concerns of the education authority, an assessment of the reasonableness of the action may need to take account of two elements. The first is whether it is contractually reasonable for the employer to accept an obligation to comply with a direction given by a responsible officer of the education authority. The second is whether the direction of the education authority is reasonable in the circumstances: [46]–[47].

(per Rein JA)

There are a number of factors which should be considered in determining whether an employer has acted reasonably in taking action against an employee, including: whether there was a proper basis for the third party’s direction; whether the employer’s relevant officers believed on reasonable grounds that there was a proper basis for the third party’s direction; complaints made against the employee, supporting material and actions taken in response to the complaints: [79].

Reasonableness could be satisfied if the employer believed on reasonable grounds that there was a proper basis for the third party’s direction: [86].

In relation to (ii)
(per Basten JA, Hodgson JA agreeing and Rein JA)

There was an error “in point of law” because the Deputy President failed to undertake a proper assessment of reasonableness under s 11A, by deciding that the question of reasonableness was satisfied by compliance with a contractual obligation: [1]–[2], [43]–[44], [47]–[48], [52]–[53], [57], [79]–[81], [84].

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40391/07
WCC 14994/06
HODGSON JA
BASTEN JA
REIN J
17 June 2008

Peter Lewis JEFFERY v LINTIPAL PTY LTD

Judgment

HODGSON JA: I agree with the orders proposed by Basten JA and, subject to what I say below, I agree substantially with his reasons. I also agree substantially with the reasons of Rein J.
The question in issue in this case was whether the transfer of Mr Jeffery was “reasonable action taken … by or on behalf of the employer” within s 11A of the Workers Compensation Act 1987. On the facts of this case, the direction given by the school to the respondent was a factor relevant to the issue of whether or not the transfer was such “reasonable action”; but it was an error of law for the Deputy President to treat it effectively as determinative.
The question whether or not the school’s direction itself was reasonable is a factor relevant to the question whether or not the transfer was “reasonable action taken … by or on behalf of the employer”; but in my opinion, it would not be essential in this case for the respondent to prove that the direction given by the school was reasonable action taken by the school. The issue is the reasonableness of action taken by or on behalf of the employer; and even if the Deputy President was not affirmatively satisfied that the school’s direction was objectively reasonable action taken by the school, he still could be satisfied that the respondent’s action in transferring Mr Jeffery was reasonable action taken by or on behalf of the employer.
Such a finding could for example, in my opinion, conceivably be open on the basis that the respondent reasonably saw the direction as based on reasonable concerns of the school which either were adequately investigated or were such that it was unlikely they could be allayed by further investigation, and reasonably considered transfer as an option carrying little detriment to the worker while resolving a situation of concern and conflict. I am not asserting that it would be sufficient that the transfer appeared reasonable to the employer. The assessment of reasonableness is an objective one for the Commission; but in my opinion it is the reasonableness of action taken by or on behalf of the employer that is in issue, not the reasonableness of action taken by any other person.
BASTEN JA: Prior to 2 November 2005 the appellant, Mr Jeffery, was a cleaner employed by the respondent, then known as Tempo Cleaning Services Pty Ltd, at Katoomba Public School. In accordance with a direction given by the principal of Katoomba Public School, the respondent sought to transfer Mr Jeffery to a position as cleaner at Hazelbrook Public School. On 4 November 2005 Mr Jeffery obtained a certificate from a general practitioner that he was unfit to work, due to psychological injury, and did not return to work thereafter. Mr Jeffery made an application for workers’ compensation which was not accepted. Consequently, he made an application to the Workers Compensation Commission, which proceeded to arbitration. The Arbitrator’s decision in favour of Mr Jeffery was overturned on appeal by Deputy President Bill Roche: Lintipal Pty Ltd v Jeffery [2007] NSWWCCPD 118.
Mr Jeffery has appealed to this Court against that decision. He has challenged two findings made by the Deputy President in the course of his reasons, namely:
(a)that his psychological injury was caused wholly or predominantly by the action taken by his employer to transfer him; and
(b)to the extent that his injury was caused by such action, the action was “reasonable” for the purposes of s 11A of the Workers Compensation Act 1987 (NSW) (“the 1987 Act”).
As will be explained below, the appellant has demonstrated that the decision of the Deputy President was affected by a material error of law and accordingly should be set aside. The relevant error concerned the application of s 11A, on a basis largely contained within grounds 2 and 3 of the notice of appeal.

Jurisdiction of this Court

A right of appeal is conferred on a party to proceedings before a Deputy President of the Commission if the party is “aggrieved” by the decision “in point of law”: Workplace Injury Management and Workers Compensation Act 1998 (NSW) (“the Workplace Injury Act”), s 353(1). Leave is required in relation to an appeal where the amount of compensation in dispute is less than $20,000: s 353(4)(c). The award of the Arbitrator allowed Mr Jeffery an amount of $580 per week for 26 weeks and thereafter the maximum amount of compensation pursuant to s 40 of the 1987 Act, to the date of the Arbitrator’s decision, which was 11 January 2007. Other amounts were also awarded. The requirement for leave was not engaged in the present case.
It is necessary for the appellant to identify an error on the part of the Deputy President “in point of law”. This does not mean that the Deputy President must have identified and determined a question of law in express terms. It is sufficient that an appellant can demonstrate that the decision under appeal was materially affected by a point of law and that the Deputy President proceeded on an erroneous basis in that respect.
Not all errors in point of law will result in the decision being set aside. The Court will not intervene unless satisfied that the error materially affected the outcome. Accordingly, if the decision did not involve an exercise of discretion and was justified by findings unaffected by error, the decision would not be set aside.

Grounds of appeal

The first ground of appeal alleged error in law on the part of the Deputy President in “rehearing the matter when the Arbitrator’s decision was not affected by any legal, factual or discretionary error”. The employer was entitled to appeal against the decision of the Arbitrator with leave of the Commission: Workplace Injury Act, s 352(1). The Deputy President considered whether the statutory preconditions to a grant of leave were satisfied and held that they were: at [12]. There could be no challenge to this decision. Pursuant to s 352(5), the appeal to the Deputy President was to be “by way of review of the decision appealed against”. Whether the Deputy President required to be satisfied of “error” on the part of the Arbitrator, before revoking his decision, is doubtful: see State Transit Authority of New South Wales v Chemler [2007] NSWCA 249 at [28]-[29] (Spigelman CJ, Bryson JA agreeing) and [63]-[66]; see also Watson v Hanimex Colour Services Pty Ltd (1991) 8 NSWCCR 190 at 205-206 (Kirby P) and 210-211 (Handley JA and Hope AJA); Boston Clothing Co Pty Ltd v Margaronis (1992) 27 NSWLR 580 at 584-585 (Kirby P, Waddell AJA and Samuels AJA agreeing) and Aluminium Louvres & Ceilings Pty Ltd v Xue Qin Zheng [2006] NSWCA 34 at [38] (Bryson JA, Handley JA and Bell J agreeing). In any event, this ground was abandoned at the hearing of the appeal.
The second ground of appeal challenged the finding of the Deputy President that the action which caused the injury was taken “by or on behalf of the employer”, the Arbitrator having found that the injury resulted from action taken by a third party, presumably the principal of Katoomba Public School who directed the employer to transfer the appellant. Although the complaint appears to be concerned with a finding of fact, it is possible to infer a point of law underlying the factual finding. That conclusion is supported by ground 3 which asserted error on the part of the Deputy President in “concluding that the Respondent was entitled to rely on contractual obligations to avoid the requirement to act reasonably with respect to the transfer of the Appellant”. Taking grounds 2 and 3 together, a ground which identifies an error in point of law may be discerned.
The fourth ground also somewhat elliptically alleged error of law on the part of the Deputy President in concluding that there was “insufficient evidence to support the Arbitrator’s findings as to the cause of the Appellant’s injury, or that the finding was against the evidence”. Complaints based on weight given to the evidence will rarely be capable of founding an error in point of law. As will be seen, the gravamen of this challenge appeared to be that the Arbitrator had identified the cause of the psychological injury as the handling of complaints about the appellant’s conduct, rather than the action taken to transfer the appellant. The Deputy President treated the complaint-handling process as part of the action of transfer. Unless this approach could be demonstrated to reveal an error of statutory interpretation of the relevant provision, it would not constitute an error in point of law. This ground was abandoned at the hearing of the appeal.
In order to give appropriate consideration to such errors of law as may have been raised in the notice of appeal, it is necessary to provide some further factual background in relation to the issues before the Deputy President and to set out the manner in which he dealt with them.

Background

In October 2005, the appellant was 54 years old. He had been a cleaner at Katoomba High School for a period of some five years, employed in the Government Cleaning Service. He then worked for a further 20 years as a cleaner at Katoomba Public School. According to the appellant’s statement of 14 February 2006, a private contractor took over the cleaning contract for the school in about 1996 and employed the appellant for about three years, until it lost the cleaning contract to the respondent.
The appellant retained his job, thereafter employed by the respondent.
In his statement of 14 February 2006, the appellant asserted that the first knowledge he had of any concern in relation to his work followed an occasion on which his supervisor saw him driving through Katoomba when he had “finished work 8 minutes early”. On the following day he received a warning letter in respect of that incident, threatening that if his performance did not improve, the company “will take further disciplinary action which will take the form of dismissal”. In fact the letter alleged four matters, each involving his work attendance on 22 September 2005, namely not signing off from the morning shift, not signing on for the afternoon shift, not signing off from the afternoon shift and leaving before 4.45pm.
Whether coincidentally or not, a document signed by the “grievance officer” at the school and dated 21 September 2005 listed a number of complaints in relation to the appellant including making threatening remarks “about” a number of teachers; repeatedly using “offensive, rude and inappropriate language” to describe some staff members and students; presenting himself in a “very angry and almost hostile state when addressing staff members”; using “rude and offensive language to students”; intimidating students in the manner in which he spoke to and approached them; standing outside a room near the canteen and watching students at the end of second break. There was also a complaint that he had “smelt of alcohol and various staff members have made comments about it”.
There were two anonymous documents which provided some support to this summary of complaints. One involved an incident on 24 August 2005 in which a student had felt intimidated by the appellant and complained that the following day “he would not stop staring at me when I was playing with my friends”. An anonymous complaint from a teacher stated that he had “made a large number of derogatory remarks and angry comments about other teachers and the condition of their classrooms”. It further asserted that some of his language had been “extremely rude and each time his tone was angry”.
The number of incidents involved in the complaints, the time over which the incidents might have occurred and the number of individuals who had raised concerns were all left vague. However, it appears that the principal of the school decided, presumably on the basis of that material, to request his transfer to another school. The principal conveyed this view to senior officers of the respondent at a meeting held on 24 October 2005. A statement by Mr Kassim, the operations manager of the respondent, noted that the principal was concerned in particular about a letter from a parent of a pupil of the school. Although the letter was not included in the materials before the Commission, it may well have been from the parent of the student whose complaint was included.
On 25 October 2005 a meeting was held which was attended by representatives of the respondent, the appellant and his union representative. Precisely what matters were put to the appellant at that meeting is unclear from the evidence. However, in his statement of 14 February 2006, the appellant said (par 13):
“During my meeting … it was alleged that I was rude to a teacher (Sue Wallace) and that I swore at one of the pupils. I denied both of these allegations as in the entire time that I was employed at the school, I have never had any altercations with anyone. I did get cranky with Sue Wallace but at no time did I abuse her. These were the only incidents brought up at the meeting.”

In a written statement, Ms Victoria Carroll, the Human Resources Manager for the respondent, said:
“As a result of the complaints received about Mr Jeffery’s behaviour, a meeting was held between Barry Purssell, Marianne Berrier, myself, Peter Jeffery and his Union Representative, (Amelia Sereno) in our office at Blacktown on the following day being 25 October 2005. During this meeting, we advised Mr Jeffery of the allegations against him and he denied these. He was informed that he would be transferred to another school. From my recollection, he stated quite strongly that he did not want to be moved from the site. He was supported by his Union Representative in this matter who agreed with him in that he should not be required to move. After some discussions, Barry Purssell said that at this time he could return to Katoomba Public School.”
Mr Purssell was the General Manager of the respondent. It appears that Mr Purssell’s conciliatory approach was not successful with the school principal who directed that the appellant be transferred to another school. As a result, Ms Carroll drafted a letter on instruction from Mr Purssell which notified the appellant of the intention to transfer him to Hazelbrook Public School. The letter was dated 2 November 2005, at which stage he was already at Hazelbrook. The appellant’s statement asserts that following the meeting on 25 October, he was given a letter by Ms Marianne Berrier, the Area Manager for the respondent in the Penrith/Blue Mountains zone, advising him of the proposed transfer. That letter apparently gave him seven days notice of the transfer. To give such notice effectively, it must have been provided on the day following the meeting. Curiously, Ms Berrier does not refer to the letter in her statement, although that may be because the copy of the statement in the appeal papers is incomplete.
On 4 November 2005, two days after his transfer to Hazelbrook, the appellant saw his general practitioner, Dr Shah. He diagnosed acute depression and, apparently, “Post Traumatic Stress Disorder”, although his report of 23 June 2006 contains no details to support the latter diagnosis.
In a report dated 23 February 2006, Ms Costantini, a clinical psychologist, concluded that he suffered from “Adjustment Disorder with Depressed Mood, Acute”. In carrying out her assessment, she obtained information from various people involved with the transfer, as well as from her interview with the appellant. She concluded that “the whole contributing factor to the development of Mr Jeffery’s psychological condition was related to the process of Transfer” (emphasis in original). She noted that he felt “unfairly treated through this process” and developed the condition “after he was advised that he would be required to transfer to a different school in early November 2005”: report, pp 11 and 16.
A further psychological report prepared by C R Camacho, a cognitive behavioural psychologist, reached a diagnosis of depression and anxiety, accompanied by sleep disturbance and adjustment disorder: report, p 11.

Decision of Deputy President

The Deputy President detailed the history set out above in his decision of 23 May 2007. A number of issues raised by the employer before the Deputy President were resolved favourably to Mr Jeffery.
First, the employer asserted that Mr Jeffery’s condition did not arise out of his employment, but from his erroneous perception of external events. The employer argued that Mr Jeffery had wrongly perceived there to be a “vendetta” against him, relying upon the reasoning in Townsend v Commissioner of Police (1992) 25 NSWCCR 9. That contention was rejected by the Deputy President at [23]:
“The evidence supported a finding that Mr Jeffery suffered an injury in the course of or arising out of his employment with Tempo and that his employment was a substantial factor to that injury. Mr Jeffery’s injury is a psychological condition in the nature of depression with severe anxiety … or an adjustment disorder with depressed mood ….”
The Deputy President’s reasoning in this respect may now be supported by reference to State Transit Authority of New South Wales v Chemler [2007] NSWCA 249, a decision of this Court delivered after the decisions of both the Arbitrator and the Deputy President in the present matter, at [34]-[55] (Spigelman CJ) and at [67]-[69].
The second matter addressed by the Deputy President was a complaint that the Arbitrator had found, erroneously, that Mr Jeffery suffered injury as a result of “actions taken or not taken by Katoomba Public rather than as a consequence of his transfer to Hazelbrook”: it was contended that he should have concluded that the injury was wholly or predominantly caused by the reasonable action of his employer with respect to the transfer: at [19]. This ground invoked s 11A of the 1987 Act, which was at the time of the incident, and remains, in the following terms:
“11A No compensation for psychological injury caused by reasonable actions of employer
(1)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 ….”
The Arbitrator had upheld Mr Jeffery’s contention that the injury “did not arise wholly or predominantly from the administrative action of the Respondent in effecting the transfer, but from the sense of injustice reasonably felt by Mr Jeffery because of the unfairness of the activity against him leading up to the transfer”. The complaint as to the finding of the Arbitrator clearly involved a factual issue relating to causation. In addressing that matter, the Deputy President considered whether Mr Jeffery’s condition had resulted wholly or predominantly from the transfer or whether it had been contributed to by other factors, namely the unfair treatment arising from the complaints about his conduct at Katoomba Public School. The Deputy President rejected the Arbitrator’s finding in the following passage from [40]:
“The evidence quoted above does not support the Arbitrator’s conclusion on this issue. Mr Jeffery’s complaint about the ‘sense of injustice’ he felt because of the ‘unfairness of the activity against him leading up to the transfer’ relates specifically to the transfer process and the reasons given for it. It is not possible to separate Mr Jeffery’s sense of injustice from the transfer process, which arose directly from the complaints which Mr Jeffery felt were unfair and unjustified. His medical case does not suggest that his injury resulted from the letter of 23 September 2005 or from the clash with Sue Wallace. What was critical was the effect on him of the process of the transfer, namely, the communication to him of the complaints and his feeling that it was unfair that he should be transferred.”
Next, the Deputy President considered whether the action with respect to the transfer was “reasonable”. He noted the remarks of Fitzgerald JA (with whom Mason P agreed) in Manly Pacific International Hotel Pty Ltd v Doyle [1999] NSWCA 465; 19 NSWCCR 181 at [6]:
“The worker is entitled to be compensated for psychological injury caused or predominantly caused by the communication of a decision or proposal to transfer him or her where the decision or proposal or the manner in which the decision or proposal is communicated were unreasonable.”
Whether questions of onus of proof have any significant bearing on the conduct of proceedings in the Commission need not be considered for present purposes; nevertheless, it is unwise to take such statements out of context, the statute not requiring that the action be demonstrated to be “unreasonable” in order for the claimant to succeed, but rather providing that compensation will not be payable if the action were “reasonable”. It is clear from the surrounding paragraphs in the judgment in Doyle that his Honour was not seeking to depart from the statutory language. As his Honour also noted, s 11A(1) raised “a question of fact and degree” for the Compensation Court (now the Commission), although failure to undertake the assessment required by the statute could give rise to an error in point of law: at [8] and [9].
The Deputy President held that the employer’s action was reasonable by considering it in three specific respects. The first and critical respect was that the employer had no legal option but to comply with a requirement of the principal of the school: at [46], [61]. The second was that, although it may have been open to the employer to seek to mediate a dispute between the appellant and the school principal, because the principal had adopted an “inflexible attitude” an attempt at mediation would have been futile: at [57]. Although the Deputy President did not refer to the evidence in that context, there was, as noted above, some suggestion that Mr Purssell had attempted to negotiate a different approach with the principal following the meeting on 25 October 2005. In any event, that was a factual issue as to which no appeal is available.
The third aspect of the action taken was the manner in which the decision to transfer was conveyed. The Deputy President set out in full the letter to Mr Jeffery of 2 November 2005 signed by Mr Purssell: at [50]-[51]. He concluded at [52]:
“In my view the general tone and style of this letter was constructive, encouraging and supportive. In terms of the legislation it was ‘reasonable’ and, in the circumstances, appropriate.”
This too was a factual finding about which the appellant cannot complain in this Court. In any event, the characterisation of the letter was entirely justified. It might be said that the manner of transfer was not restricted to the sending of the letter, but there was no other conduct of the employer relied on to indicate any unreasonableness in the manner of executing the decision.
It remains to note how the Deputy President identified the reason for the transfer, as that is the sole basis on which there could, on the facts of this case, be a challenge in point of law.
The Deputy President stated a number of matters which were said to be relevant to the decision. At [46], he said:
“First, the Appellant Employer’s contract with the Department of Education expressly provided that a school principal may ‘without being required to give any reason direct the Contractor not to engage a particular person as staff at a Contract Facility and the Contractor must comply with such direction’ (emphasis added). The Principal at Katoomba Public gave such a direction to the Appellant Employer. Though she was not obliged to do so, she also provided written material that set out the reasons for her direction. That request was not something the Appellant Employer was entitled to ignore. It was not based solely or even mainly on the altercation between Mr Jeffery and Sue Wallace though that was certainly one of the issues.”
The Deputy President then considered a number of factors relating to the procedures adopted, as set out above. He then turned to a complaint that Mr Jeffery had not been accorded procedural fairness in that the detail of the complaints had not been revealed to him, and, despite his denials of inappropriate conduct (with the exception of the disagreement with Ms Wallace, which he said was justifiable), his denials were simply ignored. At [54], the Deputy President commented:
“Exactly what Mr Jeffery was told of the complaints against him was the subject of conflicting and incomplete evidence. Ms Carroll stated, ‘we advised Mr Jeffery of the allegations against him’. She did not identify the complaints communicated to Mr Jeffery. Mr Jeffery stated that the only complaints he was informed of were those about the conflict with Sue Wallace and that he allegedly swore at a student, both of which he denied. However, the Respondent Worker’s submissions on this issue miss the point: assuming that Mr Jeffery’s recollection is correct as to the complaints related to him, Tempo was not in a position to investigate the complaints and there was no purpose to be served by telling Mr Jeffery about all of the allegations. If Tempo was intending to take disciplinary action against Mr Jeffery, that would be a different matter. However, it did not take any such action. Tempo merely complied with a direction the Principal was entitled to give and it was contractually bound to follow.”
At [61], the Deputy President returned to this issue, stating:
“I agree that there is an element of unfairness in a situation where a third party can dictate to an employer that one of the employer’s employees must be moved from a particular work site. However, the relationship between Tempo and the Department of Education gives rise to special considerations requiring unusual provisions. Tempo agreed to be bound by those terms. Had Tempo been motivated by irrelevant or totally capricious matters, then it would be open to argue that its transfer of Mr Jeffery was unreasonable within the terms of section 11A. That argument cannot be sustained in the present matter. The Principal gave reasons in support of her direction that Mr Jeffery be transferred. She supported those reasons with written evidence of complaints that directly related to Mr Jeffery’s duties with Tempo. Under the terms of the contract with Tempo the Principal was entitled to issue that direction. Tempo had no practical option but to comply with it.”

Errors relied on

For the reasons explained above, the appellant could succeed only if he demonstrated an error in point of law on the part of the Deputy President in his approach to the questions in issue. In the course of argument, it became clear that the critical issue was whether the contractual obligation to comply with a direction provided a complete answer because the action of the respondent, taken in compliance with a contractual obligation, was necessarily reasonable action for the purposes of s 11A. The issue was, therefore, whether the Deputy President approached the matter in this way.
Counsel for the respondent contended that the Deputy President addressed the issue in two ways. First, whatever the precise effect of the contract between the Department of Education and the respondent, he found that its officers had acted upon the genuine belief that they were bound to give effect to a direction from a school principal to transfer a cleaner to another site. Secondly, because the school principal had an unfettered power to give such a direction, without revealing particular reasons, officers of the respondent were entitled to treat the direction as proper and acted reasonably in giving effect to it.
In relation to the first approach, the fact that the respondent’s officers held a bona fide belief in the propriety of their action would not necessarily demonstrate that the action was “reasonable” for the purposes of s 11A. However, and more importantly, the submission is not supported by an analysis of the reasons given by the Deputy President. Thus, in the passage set out at [38] above, the words from the contract which were emphasised were that the respondent “must comply with such direction”. In the last sentence of the passage set out at [39], the Deputy President emphasised that the employer “merely complied with a direction the principal was entitled to give and it was contractually bound to follow”. In the passage set out at [40] above, he described the situation as one “where a third party can dictate to an employer” that an employee must be moved. In the last sentence of that passage he repeated the view that the respondent “had no practical option but to comply with” the direction. At [62] of his reasons, he also described the action of the respondent as not only “reasonable” but “necessary”. All of these passages reveal that the Deputy President treated the question of reasonableness as being satisfied by compliance with a contractual obligation. Further, the Deputy President did not make any specific finding that the views held by officers of the respondent were reasonable; he merely noted (in the passage set out at [40] above) that had they been motivated by irrelevant or totally capricious matters, the action may not have been reasonable.
As appears from the extracts from the reasons of the Deputy President set out above, he in fact followed the second approach, namely that the respondent acted reasonably because it complied with a contractual obligation. This approach, in my view, demonstrated legal error. His Honour’s recognition that there was “an element of unfairness in a situation where a third party can dictate to an employer that one of the employer’s employees must be moved from a particular worksite” invited further consideration as to whether there might not also be a lack of reasonable action in such circumstances for the purposes of s 11A. Section 11A is a provision which removes a right to compensation otherwise available in respect of a psychological injury arising out of or in the course of employment. It is concerned with reasonable action on the part of an employer which may have such a consequence. The reasonableness of the action should properly be assessed by reference to the facts giving rise to the transfer, rather than the contractual relationship between the employer and a third party. The contractual relationship is not, of course, irrelevant: it may mean that the conduct of the third party becomes a relevant factor in assessing the reasonableness of the transfer.
It is beyond doubt that an education authority has a legitimate interest in controlling persons who come onto the school grounds in the course of their employment. Those legitimate concerns will be taken into account in considering the reasonableness of any action taken in relation to an employee, whether he or she is employed directly by the school authority or by a subcontractor. Where a subcontractor is engaged, it may well have similar concerns, but also additional concerns relating to its relationship with its own employee. That point is nicely illustrated by the present case: the first set of concerns were those of the respondent itself, arising from compliance with specified work hours and record keeping. The latter set of concerns were those of the education authority and the school principal and involved the relationship between the employee and teachers and students at the school.
Where the employer takes action on the basis of concerns of the education authority, the reasonableness of the action may need to take account of two elements. The first is whether it is contractually reasonable for the employer to accept an obligation to comply with a direction given by a responsible officer of the education authority. The second is whether the direction itself is reasonable in the circumstances. There was no suggestion in the present case that the contractual arrangement was not a reasonable one.
In the absence of an improper motive, the officers of the employer may be acting reasonably in complying with what they believed were the contractual obligations of the employer. Nevertheless, if the direction given by the school principal were unreasonable, the action of transferring the employee may itself not be reasonable. The statutory purpose is effected by having regard to the action of transfer as a whole, including, where part of the responsibility is exercised by a third party with the agreement of the employer, the reasonableness of the conduct of the third party.
Against this approach it may be argued that a reasonable contractual arrangement, which devolves part of the responsibility on to a third party, may leave the employer in an invidious position where, in the case of an unreasonable direction, it will either incur liability to its employee, or will incur liability to the third party for breach of contract. However, that concern cannot override the clear statutory purpose requiring that the reasonableness of the transfer be judged in accordance with all the circumstances involved. The practical answer is that an employer which accepts a contractual obligation to deal with its employees at the behest of a third party might be expected to negotiate an indemnity if, acting in accordance with its contract, it may incur a statutory liability to an employee.

The alternative approach would allow the employer to divest its responsibility to employees by entering into a contractual obligation which conferred power on a third party to direct that action be taken with respect to an employee. Such an arrangement would involve the employer evading its statutory responsibility by contract. That result, if attempted, is avoided by s 234 of the Workplace Injury Act, which provides that it and the 1987 Act (including s 11A) apply despite any contract to the contrary.
There is a clear distinction to be drawn between a statutory test which requires an objective assessment by the Commission of the reasonableness of the action of the employer and a test by which it is sufficient for the employer to demonstrate to the Commission that, in all the circumstances, the action appeared to it to be reasonable. In my view, the present statutory provision engages the former test. An example of the latter may be found in the Anti-Discrimination Act 1977 (NSW), s 49I(1), discussed in Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 at 256-7 and 262E-263A (Kirby P). If it were sufficient that the employer took action because it appeared to the employer, on grounds upon which it was reasonable to rely, to be reasonable action, the legislature could have said so. However, it did not. In my view, if, in the view of the Commission, the action taken by the employer in transferring an employee is not reasonable in all the circumstances, the employer cannot rely upon s 11A because it held a genuine belief, based on reasonable grounds, that its action was reasonable.
In many cases the distinction will not have practical significance, but in some it may. For example, if the education authority gave a direction hastily and without good cause, and the employer made no inquiry as to the basis of the direction, it would probably fail on either test. On the other hand, if the education authority gave a direction hastily and without good cause but, on appropriate inquiry from the employer, misled the employer into believing that the direction was reasonable, the distinction may be significant.
A purposive approach to the operation of s 11A, in the circumstances of this case, therefore required the Deputy President to assess the reasonableness of the action of the school principal in directing a transfer. That would have required an additional finding, which was not made by the Deputy President. The reasoning of the Deputy President in this regard was restricted to a conclusion that the officers of the employer acted upon a contractual obligation to transfer the appellant and did not otherwise fail to act reasonably in effecting the transfer. Had the Deputy President considered the reasonableness of the direction, he would have needed to undertake an objective assessment of the following circumstances.
First, the basis of the direction would need to have been identified. If the appropriate decision-maker were the principal of the school, there was evidence that she had received complaints, but no evidence from her as to what view she had formed about the appellant. The statement of Mr Kassim dated 16 February 2006 included the following material relating to the meeting on 24 October 2005 (at par 6):
“During this meeting, the Principal (Janet McCarthey) requested that we move Mr Jeffery from the school but she did not want him to know that she made this request.”
It appears that there was a further conversation between Mr Purssell and Ms McCarthey after the meeting, but neither party to that conversation gave evidence as to what direction, if any, was given. There was no statement from Ms McCarthey, nor from Mr Purssell, in the material provided to the Commission.
So far as the respondent was concerned, Mr Purssell appears to have taken responsibility for the action taken by it, in that he signed the letter of 2 November 2005 to the appellant. That letter stated in part:
“During recent discussions with you, both individually and at a meeting with Amelia Sereno (LHMU), Victoria Carroll, Marianne Berrier and myself, you were advised there were a number of serious concerns raised by our client at Katoomba Primary School regarding your behaviour in the workplace. You denied there was any substance to those concerns.
You were advised that as a result of this we would be transferring you to another site in your local area.
In all the circumstances we believe that the transfer to Hazelbrook Public School that you commenced today, 2 November 2005, will be beneficial to you in your on-going employment.”
There was then specific reference in the letter to the company’s policies in respect of child protection, relationship with others in the workplace, working hours, consumption of drugs and alcohol and communications with teachers.
As found by the Deputy President, this letter was broadly conciliatory in its terms. However, it does not, on its face, demonstrate that the action of the respondent in transferring the appellant was reasonable. The nature of the inquiries which may need to be made by an employer in relation to allegations of inappropriate conduct in a workplace, will no doubt vary depending upon the contractual circumstances, the nature of the workplace and the nature of the allegations. Whether it is reasonable for an employer to move a person from a workplace without any attempt to determine the validity of allegations, beyond ascertaining that they are denied by the worker, will also be a matter for judgment in the circumstances of the particular case.
Whether the action was reasonable or not, was a matter to be determined by the Commission, not this Court. Because the Commission addressed the wrong question, its decision must be set aside. Because it is by no means inevitable that the same result would be reached on a consideration of the question posed by s 11A, properly construed, and in the light of the contract, properly construed, the matter must be reconsidered. The matters referred to above will need to be considered by the Commission on remittal of the appeal from the decision of the Arbitrator.

Other legal issues

In so stating the matters to be considered, it should be noted that a number of assumptions have been made which might require further consideration, but which did not form part of the grounds of appeal.
First, the Deputy President appears to have assumed that “the Principal” for the purposes of the contract, and thus the person entitled to give a direction, was the school principal at Katoomba Public School: at [46]. This assumption is implausible: cl 3.1.6 of the contract provided that the Principal would “provide the Contractor on a monthly basis with a copy of the Demountable Movements Report for each School Education Area, prepared by the Department of Education and Training”. Clearly that obligation cannot have been imposed upon the principal of a specific primary school. There are other indications in the contractual material contained in the appeal papers which suggest that the contract was not restricted to a particular school.
The confusion which appears to have arisen in this regard followed from the fact that the material before the Commission (and before this Court) contained only extracts from the contract. Significantly, there was no dictionary of defined terms, although it is almost certain that the contract contained such a section. Whether under the contract, or by some administrative arrangement, the school principal had power to give a direction is a matter which is impossible to determine on the materials which were before the Commission.
Secondly, the Deputy President quoted a paragraph in cl 4.2 of the contract providing that the Principal may direct the Contractor “not to engage a particular person as staff”. Read in the context of the preceding paragraphs of the clause, that paragraph would appear to apply to an initial engagement of staff. The relevant paragraph of cl 4.2 appears to be the following paragraph which read:
“If any person engaged as employee/subcontractor by the Contractor is in the opinion of the Principal guilty of misconduct in or in the vicinity of the Site or otherwise is in the opinion of the Principal unsuitable to be engaged as employee/subcontractor the Principal may direct the Contractor to no longer engage that person as employee/subcontractor and the Contractor must comply with such direction.”
There must be real doubts as to the application of this power in the present case. There was no evidence before the Commission to suggest that any person held an opinion that the appellant had been “guilty of misconduct” at or near the school or, that he was “unsuitable” to be engaged as an employee, in a sense which would justify termination. The direction provided by that clause is that the Contractor “no longer engage” that person as an employee. Although the actual direction is only known by inference, it seems clear that it required a transfer to another school and not the termination of employment. Whether such a direction fell within the clause at all is at least doubtful.
Thirdly, it seems unlikely that an opinion of the kind which would warrant a direction is not subject to some implied qualifications. For example, it seems unlikely that an opinion formed for an improper purpose, arbitrarily, capriciously, or based on considerations irrelevant to the employment of an individual, would satisfy the clause, so as to provide the necessary precondition to a valid direction. Indeed, given that it was expected to operate in a statutory context which included s 11A of the 1987 Act, a proper construction of the contract may have required that a valid direction was limited to one requiring reasonable action for the purposes of s 11A. If the power were read in that manner, no conflict would arise between the obligation of the employer with respect to payment of compensation and its contractual obligations to the school authority.
In any event, these matters were not raised by way of grounds of appeal, and need not be determined. Whether or not they are relevant to be considered by the Commission on remittal, will be a matter for the parties.

Costs

The appellant having been successful in challenging the decision of the Commission, the respondent should pay his costs of the proceedings in this Court.
As counsel for the appellant accepted in the course of the hearing, the preparation of the appeal books paid scant regard to the requirements of the Uniform Civil Procedure Rules 2005 (NSW), Pt 51, Div 5, Subdiv 3. Almost all of the material was contained in two volumes of the red appeal books, and without any useful index.
This Court has remarked on more than one occasion that it may decline to order the recovery of costs of preparation of appeal books that fail to comply with the relevant Court rules. The Court may also direct that the costs of preparing the appeal books not be recoverable by solicitors from their client. No limitation of the usual costs’ order having been sought by the respondent, no limitation should be imposed. Nevertheless, the concern may be noted in the hope that continued statements by the Court will reduce the extent to which the relevant Court rules are honoured in the breach rather than the observance, particularly when combined with the risk that a defaulting solicitor may be deprived of his or her costs.
Conclusions
Accordingly, I propose the following orders:
(1)Allow the appeal and set aside the decision of Deputy President Roche made on 23 May 2007.
(2)Remit the employer’s appeal against the decision of the Arbitrator of 11 January 2007 to the Workers Compensation Commission, constituted by a Presidential member, for further consideration according to law.
(3)Order the respondent to pay the appellant’s costs of the proceedings in this Court.
(4)Grant the respondent a certificate under the Suitors’ Fund Act 1951 (NSW), unless disqualified pursuant to s 6(7).
REIN J: Section 11A of the Workers Compensation Act 1987 (“the Act”) is in the following terms:
“No compensation for psychological injury caused by reasonable actions of employer
(1) 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.”
This case throws up the question of how “reasonable action taken or proposed to be taken by or on behalf of the employer” is to be determined in circumstances where the employee in question is engaged in work exclusively at the premises of a client of the employer.
As Basten JA has outlined, the Deputy President concluded that the employer’s conduct had been reasonable and hence by virtue of s 11A of the Act, that no compensation was payable.
The grounds of appeal had included a contention that the psychological injury caused by the Appellant had not been caused by the transfer and hence that s 11A could not apply at all but this ground was abandoned at the commencement of the hearing of the appeal : see T1 (30 May 2008).
The Appellant also accepted that the test of reasonableness was an objective test and that the Deputy President had correctly summarised the law on this aspect in [42]-[44] of his judgment, see Red Book pp 468-9.

The Appellant asserted that the Deputy President had erred in law in his approach to the matter because he had acted on the basis that if the employer had not followed the direction given by the Department it would have been in breach of contract and that even if the employer was in breach of its contract with the Department, that ought not be determinative of reasonableness because an employer is not permitted to contract out of its obligations under the Act by virtue of s 234 of the Workplace Injury Management and Workers Compensation Act 1998, which provides:
“No contracting out
(cf 1926 s 45; 1987 s 272)
This Act and the 1987 Act apply despite any contract to the contrary.”
(See T5, 30 May 2008).

The entire contract between the employer and the Department of Education was not placed before the Deputy President, nor was it before this Court. The only pages of the contract provided to the Commission and this Court are found at Red Book pp386-390 and it is clearly not a complete contract. The subclause referred to by the Deputy President is cited at [42] of his judgment, but I shall set out all of the paragraphs of the clause in which that subclause sits, adding for ease of reference an internal numbering:
“Employees
(1) The Contractor must not employ or permit to be employed on work under the Contract at the [sic.] any Contract Facility a person where the Principal advises the Contractor that, in the opinion of the Principal, that person poses unacceptable security risks and risks to children or other vulnerable people cared for at that site.
The Contractor must not employ or permit to be employed on work under the Contract at any Contract Facility a person who has been convicted of a serious sex offence and is a prohibited person under the Child Protection (Prohibited Employment) Act 1998.
(2) The Contractor must obtain completed and signed Prohibited Employment and Security Declarations and consent to Screening Forms from all employees and/or subcontractors. The Contractor must also sight the originals of identity documents. All forms are to be retained by the Contractor.
(3) A listing of employees/subcontractors to be screened is to be forwarded to the Principal with a Working with Children and Security Check request form signed by the Contractor.
(4) The Principal will inform the Contractor the results for its records and/or action, and advise the suitability of the engagement of the nominated employees/contractor after the screening.
(5) The Principal may without being required to give any reason direct the Contractor not to engage a particular person as staff at a Contract Facility and the Contractor must comply with such direction.
(6) If any person engaged as employee/subcontractor by the Contractor is in the opinion of the Principal guilty of misconduct in or in the vicinity of the Site or otherwise is in the opinion of the Principal unsuitable to be engaged as employee/subcontractor the Principal may direct the Contractor to no longer engage that person as employee/subcontractor and the Contractor must comply with such direction.”
Basten JA has noted that questions arise as to whether subclause (5) relates only to persons who have not yet commenced work at a school facility, as opposed to someone who is already working at a school, and as to whether a school principal was authorised to issue a direction to the Respondent. If subclause (6) is the only relevant subclause, and I express no view on that matter, there is a question as to how that is to operate where the Department does not direct that an employee no longer be engaged, but only transferred. There is a further issue which is that clause 3.2.1 (see Red Book, p 386) emphasises the importance of job security for ‘Existing Staff’, and does not appear to have been considered.

I think it is clear that the employer was acting on the basis of receipt of a direction under subclause (5) and it appears that no argument was addressed to the Deputy President that the Department was not entitled contractually to issue a direction to the employer to transfer the Appellant to another facility, or that the Respondent viz a viz the Department was contractually not obliged to act upon the direction or that the school principal was not acting with the authority of the Department. Nevertheless it does appear that Mr Jeffrey’s case before the Commission was founded on unfairness in the manner with which he was dealt: see Red Book, pp.454T-455O.
The following passages appearing in the Deputy President’s judgment (but with emphasis added) point to reliance on the fact that the contract permitted the school to give a direction which the Respondent was required to follow:
(1)“Tempo was not in a position to investigate the complaints and there was no purpose to be served by telling Mr Jeffrey about all of the allegations. If Tempo was intending to take disciplinary action against Mr Jeffrey, that would be a different matter. However, it did not take any such action. Tempo merely complied with a direction the Principal was entitled to give and it was contractually bound to follow.” at [54].
(2)“Tempo did not have control of the work environment or the manner in which the complaints were handled. The failure to arrange mediation was not evidence of unreasonable behaviour by Tempo.” at [57]
(3)“The Principal was not entitled to ignore them [the allegations]” and “Tempo was not entitled to ignore the Principal’s direction.” at [60]
(4)“I agree that there is an element of unfairness in a situation where a third party can dictate to an employer that one of the employer’s employees must be moved from a particular work site. However, the relationship between Tempo and the Department of Education gives rise to special considerations requiring unusual provisions. Tempo agreed to be bound by those terms. Had Tempo been motivated by irrelevant or totally capricious matters, then it would be open to argue that its transfer of Mr Jeffrey was unreasonable within the terms of s 11A. That argument cannot be sustained in the present matter. The Principal gave reasons in support of her direction that Mr Jeffrey be transferred. She supported those reasons with written evidence of complaints that related directly to Mr Jeffrey’s duties with Tempo. Under the terms of the contract with Tempo the Principal was entitled to issue that direction. Tempo had no practical option but to comply with it …” at [61].
(5)“the action taken with respect to transfer was not only ‘reasonable’ but also met the more demanding test referred to by Judge Geraghty of ‘necessary’.” at [62]

There are comments of the Deputy President which point to him considering wider issues (see [55] and [57] at Red Book, p 472) and in the portion of [61] set out above he could be viewed as considering whether the Department, as opposed to the Respondent, was acting reasonably, but he does not expressly state that the Department was obliged to act reasonably, nor that in fact it had acted reasonably, and the reference to Tempo (as the Respondent was then known) being motivated by irrelevant or totally capricious matters is significant because the Deputy President does not refer to the school principal, or the Department, not acting capriciously or being motivated by irrelevancies. The Deputy President proceeds on the basis that the direction was contractually valid and could be relied on by the Respondent for the purposes of s 11A.
Basten JA has noted in [42] the arguments of Mr King SC for the Respondent, and at [43] he explains why the factual basis of the first of the two arguments in not made out. So far as the second basis asserted is concerned (and it is articulated at paras 13, 16 and 18 of the Respondent’s written submissions at Orange Book, pp12-13), if it correctly describes the approach taken by the Deputy President, then it encapsulates the error of which the Appellant complains, namely, as Basten JA points out, that it amounts to a conclusion that the employer acted reasonably because it complied with a contractual obligation to a third party.

In coming to a view as to whether an employer has acted reasonably in taking action against an employee, in my opinion the following are matters that could properly be taken into account:
(1)The nature of the complaints made and the material available to support them;
(2)The express contractual arrangements between the third party and the employer, and whether there was an implied term requiring any rights given to the third party to be exercised only on proper grounds;
(3)Whether there was a proper basis in fact for the third party’s direction;
(4)Whether the employer’s relevant officers believed on reasonable grounds that there was a proper basis for the third party’s direction;
(5)What steps if any, were practically available to the employer to either prevent the third party from issuing a direction or to persuade the third party to withdraw the direction; and what steps were taken;
(6)The seriousness of the action to be taken i.e. transfer as opposed to dismissal;
(7)The form of the investigation by the third party and or the employer and of the communication to the employee of complaints and of the action determined to be taken;
(8)Whether there existed other factors extraneous to the direction from the third party that lead the employer to take the impugned action, that were not reasonably taken into account;
(9)The conditions of the contract between the employer and employee.

If the employer has agreed to accept directions that its employee no longer work at a particular school without the need for reasons (i.e. as per subclause (5)), then it is difficult to view that as subject to an implied term that the right to give a direction will only be exercised on reasonable grounds. In my view, an employer, in acting upon such a direction where no reasons are given and without any knowledge itself of the reasons, at least in the absence of an express acknowledgement by an employee as part of the employment contract that that could occur, would not be acting reasonably viz a viz the employee. On the other hand, I think that it is not unreasonable to have regard to the views of the third party when the third party, and not the employer, has the main or only significant contact with the employee and is best placed to investigate complaints or conduct and where the third party has provided information to the employer as to its reasons for requiring transfer or other action.
Overall I am persuaded that the Deputy President in considering the reasonableness of the Respondent’s conduct in this case, treated the fact that the Respondent had received a direction which it was contractually obliged to follow as an overriding consideration and hence has fallen into error.
In the judgments of Hodgson JA and Basten JA can be discerned two differing views on how reasonableness is to be determined in circumstances where the employer has agreed to accept a direction from a third party as to action to be taken against an employee. Basten JA is of the view that an employer cannot establish reasonableness pursuant to s 11A unless it establishes that the third party has acted reasonably and Hodgson JA is of the view that the employer’s conduct can be reasonable even if the third party has not acted reasonably, provided the employer has itself acted reasonably in assessing the validity of the direction by the third party.
It follows from what I have said in [82] and [83] above that, in my view, if the employer relies solely on the fact that the third party issued a direction, this will not establish reasonableness on the part of the employer for the purposes of s 11A of the Act, but if the employer believes on reasonable grounds that there was a proper basis for the third party’s direction, then this could be sufficient.
Mr King accepted that if this Court was of the view that there had been an error of law the consequence was that the matter should be remitted to the Commission, to determine the matter afresh rather than this Court deciding the matter. Consideration of all of the matters to which I have adverted in [82]-[83] above, will not necessarily lead to the same result as that reached by the Deputy President and accordingly, I agree with the orders proposed by Basten JA.
Mr King contended that in effect, the arguments advanced by the Appellant in this Court were new points not advanced before the Commission. There may be force in that submission, but the reasonableness of the Respondent’s conduct was in issue before the Commission, the point with which this Court is concerned is one of law and no prejudice was asserted or identified: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; O’Brien v Komesaroff (1982) 150 CLR 310 at 319; and Coulton v Holcombe (1986) 162 CLR 1, at pp 7-11.

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LAST UPDATED:
17 June 2008