Larner v George Weston Foods Ltd

SUPREME COURT OF VICTORIA
COURT OF APPEAL

S APCI 2012 0101

DAVID LARNER	Appellant
	v
GEORGE WESTON FOODS LTD	Respondent

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JUDGES	REDLICH, TATE and SANTAMARIA JJA
WHERE HELD	MELBOURNE
DATE OF HEARING	24 October 2013
DATE OF JUDGMENT	9 April 2014
MEDIUM NEUTRAL CITATION	[2014] VSCA 62
JUDGMENT APPEALED FROM	Larner v George Weston Foods Ltd (Unreported, County Court of Victoria, Judge Coish, 10 May 2012)

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NEGLIGENCE – Psychiatric injury suffered by employee – Whether employer breached duty of care – Whether warning signs to employer that employee was at risk of psychological collapse – Employer entitled to assume employee capable of performing contract in absence of warning signs – Operation of contract not qualified by hindsight – Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44 applied.

CONTRACT – Contract of employment – Alleged breach of express and implied terms – Whether statements were promissory – Oscar Chess Ltd v Williams [1957] 1 WLR 370 and Upper HunterCounty District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 referred to – Whether psychiatric injury and disorder flowed naturally from any breach or should have been within the contemplation of the employer – Remoteness – Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 and Baltic Shipping Company v Dillon (1993) 176 CLR 344 applied.

EVIDENCE – Whether trial judge erred in preferring the evidence of some witnesses to that of others – Whether finding by the judge about lack of reliability and gross exaggeration was inconsistent with facts incontrovertibly established, glaringly improbable, or was contrary to compelling inferences in the case – Fox v Percy (2003) 214 CLR 118 and TAC v Cuthbertson [2013] VSCA 29 referred to – Rule in Jones v Dunkel (1959) 101 CLR 298 – Whether trial judge erred in accepting explanation for failure to call witnesses and refusing to draw adverse inferences.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr A G Uren QC with Mr A D B Ingram	Slater & Gordon
For the Respondent	Mr J Noonan SC with Ms M Norton	Herbert Geer

REDLICH JA
TATE JA
SANTAMARIA JA:

TABLE OF CONTENTS

Introduction ....................................................................................................... 2

Employment as GWF Logistics Manager....................................................... 3

(1)        Short-term contract with GWF .................................................... 3

(2)        Approach to take on permanent role.............................................. 5

(3)        Contractual negotiations ............................................................... 7

(4)        Larner’s qualifications for the role ................................................ 11

(5)        Permanent position as Logistics Manager (Vic/SA)... 12

(6)        Psychological breakdown ……………………………………….. 16

(a)       Hours of work ………………………………………… 16

(b)      The absence of a 2IC ………………………….............. 18

(c)       The South Australian operations ……………………. 21

             (d)      The disarray of the Victorian business ……………… 21

             (e)       Complaints about psychological distress …………... 22

             (f)       Psychological collapse ………………………………... 24

             (g)      Meetings following psychological collapse ………… 25

The disposition by the trial judge..................................................................... 27

Grounds of Appeal………….......................................................... ................... 33

(1)        Rejection of Amendment to Statement of Claim ....... ................... 34

(2)        Breach of the rule in Jones v Dunkel ............................................. 37

(3)        Rejection of Larner’s evidence ………………............................... 39

(4)        Rejection of Goodman’s evidence................................................... 45

(5)        Placing limited weight on Green’s evidence ................................. 47

(6)        Acceptance of Jeffries’ evidence …………………………………. 48

(7)        Acceptance of McKay’s evidence ……………………………….. 49

(8)        Exhibit 2 ………………………………………………………… 56

(9)        Breach of contract ……………………………………………….. 60

             (a)       Was there a contractual promise of a 2IC? …………. 63

             (b)      Was there a promise of a Manager with an inclusive style? ……………………………………………………………
68

             (c)       Was there a promise of a PD? ……………….............. 69

             (d)      Was there a promise about South Australia? ………. 69

(10)      Remoteness ……………………………………………………… 71

(11)      Breach of duty of care …………………………………………… 75

(12)      Absence of External Standard …………………………………... 86

Conclusion ………….......................................................................................... 87

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Introduction

The appellant, David Larner, (‘Larner’), appeals against a judgment entered by a judge of the County Court in favour of his former employer, George Weston Foods Limited (‘GWF’), the respondent to the appeal. Larner had brought proceedings alleging that between 1 February and 26 April 2002, when he was employed as GWF’s Logistics Manager for Victoria and South Australia, he suffered injury as a result of negligence by GWF and/or breach of a duty of care it owed to him.[1] Further, or in the alternative, Larner alleged that GWF had breached express and implied terms in his contract of employment.[2] He alleged that he was required to perform work which was unduly onerous and which exposed him to undue stresses and strain.[3] He was overloaded with work and not provided with guidance or assistance despite frequent requests and/or agreement to do so.[4] Larner pleaded that as a result of those breaches, he suffered severe injuries, including major depressive disorder and panic disorder with agoraphobia.[5] He abandoned his claim for pecuniary loss damages on the first day of trial.
[1]Further Further Amended Statement of Claim, [7].
[2]Ibid [14].
[3]Ibid [5].
[4]Ibid [12].
[5]Ibid [6], [7] and [16A]. The Further Further Amended Statement of Claim refers to ‘agrophobia’ in [6], but we take it that this should be ‘agoraphobia’.

The trial originally commenced before a judge sitting with a jury of six. At the conclusion of the evidence the judge granted an application by GWF to discharge the jury without a verdict on the grounds that the issues of fact and law were of such complexity as to preclude the jury being charged. He subsequently dismissed the proceeding finding that Larner had failed to establish negligence or breach of contract.[6]
[6]Larner v George Weston Foods Limited (unreported, County Court of Victoria, 10 May 2012) (‘Reasons’).

For the reasons that follow, we would dismiss the appeal.

Employment as GWF Logistics Manager

Larner alleged that he suffered the injuries complained of while employed in a permanent position by GWF, having been initially employed by GWF on a short-term contract basis for three months and then accepting an offer to join GWF permanently.

(1) Short-term contract with GWF

Larner held the short-term contract position with GWF as its Victorian Logistics Manager in the Don Smallgoods division from 30 November 2001 until about 1 February 2002. He was based at GWF’s Altona premises. This was distinct from its corporate head office in Flemington. During the Christmas period there was high demand for smallgoods, especially Christmas hams, and a need to ensure there was proper distribution. Both Larner and his then supervisor, Tim Goodman, (‘Goodman’), were engaged on short-term contracts. It was Goodman who hired Larner in November 2001 based on his résumé.

Goodman gave Larner an initial outline about GWF’s processes and told him that the company was ‘basically in disarray’, with antiquated systems and poorly experienced staff and managers. Larner also received some information from the person he was replacing, Angus Baland, about how things worked on a daily basis through which he also became aware of logistical problems. But his interaction with Baland was limited and he did not receive any formal induction or thorough explanation of GWF’s work processes. According to Larner, the problems included the working culture, the lack of work practices, staffing levels, problems with profitability, and the ineffectiveness in the way the perishable goods were being stored, distributed and then disposed of at the end of their shelf life. Larner’s evidence at trial was that even though they were aware of these problems with GWF’s systems and set up, he and Goodman were ‘essentially babysitters’: their main focus was on simply getting the stock out prior to Christmas. As a short-term contractor, his involvement in meetings was limited and he had only basic knowledge of the processes employed by GWF, and the budget.

In the short-term position, Larner attempted to work the contracted eight-hour day, but this almost immediately became impossible and, as Christmas approached and the work intensified, he had to work longer hours. After negotiations through Entec, the engineering and technical recruitment company that arranged the short-term position, his rate of pay was increased several times: from $288 a day initially, to $325 a day by 10 December, then to $416 a day by 7 January and $550 a day on weekends, which he found he needed to work. Although he was willing to accept an extension of his short-term contract to 29 March 2002, he said that his intention was to fulfil his contract as agreed and then move on. He did not think that either the position or the company was ‘a good fit for me’ because he thought ‘the company was antiquated in their systems and their staffing and the way they performed their operation’.

Goodman gave evidence that he had been employed on a short term contract from October 2001 with the task of making sure the warehouse worked effectively through the Christmas period, it seems to avoid a repetition of a ‘mess’ that occurred over the previous Christmas period. He wrote a ‘Christmas plan’ and outsourced a warehouse to store the Christmas hams. Everything, as far as his responsibilities were concerned, ‘worked almost perfectly’ until two days before Christmas, when they were instructed to bring the hams back into the warehouse. He described those two days as ‘a shemozzle’. He also gave evidence about other problems with GWF’s processes: (1) it was untidy; the receiving process from the factory into the warehouse was ‘appalling’, with stock arriving and then sitting without the records being updated; (2) the cages used to cook products were dirty; (3) use-by date stickers fell off products, raising concerns about out-of-date stock and potential health implications; (4) he was told about theft within the warehouse; (5) there were broken hired pallets which were unusable but for which GWF was still being charged, causing a $750,000 loss; (6) there were no key performance indicators (‘KPI’s’) in the warehouse; and (7) little thought had gone into tailoring production to meet client needs, with the result that the right products were not being made.

(2) Approach to take on permanent role

In late December 2001 Larner was approached by Craig Jeffries, (‘Jeffries’), GWF’s Regional Human Resources Manager for Victoria and South Australia, about whether he was interested in taking on the role he was performing on a full-time basis. He gave evidence that he said: ‘I do not have an interest in taking on the full-time role’. He explained to Jeffries that he did not feel comfortable because he thought GWF was in disarray, and he outlined the various problems he had encountered. In particular, he told Jeffries that the problems included stock losses and theft; difficulties with keeping track of staff attendance levels due to time clocks which had been tampered with, and the practice of staff staying on in the canteen beyond their shift and then clocking off; the lack of KPI’s or job descriptions in the dispatch area; broken or missing hand scanners which were meant to be used to keep track of stock; occupational health and safety issues arising from failure to separate pedestrian traffic from forklifts; broken warning systems between areas to prevent forklift collisions; old and dysfunctional buildings with overhead pipes hanging down which people had to duck under; problems obtaining information about the 30 to 40 cool-rooms used by GWF and what they contained; problems with stock rotation and expiry with use-by stickers falling off; the failure by staff to use the internal systems to keep track of stock movements; the absence of any central computer database (exacerbated by the problems with the hand scanners); and the absence of staff records to enable him to assess employees’ employment history or qualifications or experience.

In cross-examination, Larner acknowledged that when he was first invited to apply for the permanent position he did not say he was not interested; instead, he asked Jeffries why he should have to apply when he had already been doing the job. He said to Jeffries that he should only have to submit his résumé. Jeffries also gave evidence to that effect and said that at no stage did he recall Larner expressing reluctance to accept the position.

Jeffries said he had no recollection of Larner saying there were chronic and systematic problems with GWF that would make him reluctant to take on the role. Jeffries’ evidence was that, from his perspective, while the business ‘had certain pressures on it’ and it ‘hadn’t necessarily been achieving financial results’, it ‘was structured and working in an appropriate way’. Like any business, it had its problems and could be improved, but he disagreed that GWF was ‘virtually dysfunctional and was out of control’ or was a ‘shemozzle’ and a ‘disaster’.

It was Goodman who recommended that Larner be offered the permanent role. Goodman gave evidence that he

… was exceedingly happy with [Larner]. I liked him. He was keen, he was eager and he listened. I had a lot to teach people such as David from my background and we worked well together. I was very impressed with him.

Larner gave evidence that throughout the short-term contract period he and Goodman worked closely together. Larner said he would meet Goodman first thing on site each day, and then they would meet on at least two or three occasions later every day, and have five or six telephone conversations each day. Goodman’s evidence was that they talked regularly, every day. On a typical day he would meet Larner ‘at least once’, but there was no reason to meet beyond that ‘because he was competent’. Once they had agreed on what Larner was to do, he did it. They formed a good working relationship.

Larner said a number of GWF’s officers then spoke to him about staying on. In particular, he was approached by GWF’s National Human Resources Manager, Ian Viney (‘Viney’). He was asked about this at trial:

Q: What happened when you first met Ian Viney?
A:Ian Viney came into the dispatch area. He introduced himself. He said, ‘Can we have a discussion in your office?’ I said, ‘Absolutely.’ He said, ‘We want you to take this position.’ He said, ‘We’ve made some inquiries. We’ve spoken to people you’ve worked for in the past. We’ve spoken to Tim Goodman. You’re the guy we want. What do we have to do?’

Q: What did you say to him?
A:By his ‘What do we have to do?’ my understanding was what remuneration did I want. I explained to him once again at that time, it’s not a remuneration based rejection, it’s predominantly based on the way the operation runs ‘and I’m just not confident that it’s the right fit for me based on what I’ve seen and what I’ve heard while I’ve been here in a contract role.’

Goodman recalled that Larner was initially unwilling to take on the permanent role:

My memory is that he was reluctant to take it, but I sold him into it on the basis that I felt he would be good for it and it would be good for him.
(3) Contractual negotiations

On or about 1 February 2002, Larner met again with Viney, this time with the new CEO Meat & Dairy, Kevin Clayton, (‘Clayton’). The meeting, which was held at head office in Flemington, took some two and a half hours during which Larner said he discussed at length and in some detail the issues he had raised with Jeffries, as well as other matters such as the staff’s lack of skill, problems with those who did not speak English, and shift supervision. He said he told them that the proposed permanent position was not a one-person role and that he would need a 2IC (a second-in-command) from the start; indeed, if he were to accept the position, it was conditional on that being done. According to Larner:

Kevin Clayton agreed to the position and he said, ‘I’ll give you an undertaking that you can now move forward if and when you’ve accepted this position, and you can source the person you want to do it.’

In cross-examination he was not able to explain why he did not mention negotiations about a 2IC in his answer to interrogatory 2(b) in which he deposed that:

There was no negotiation or agreement as such in relation to the increased duties which I was required to perform.

Larner said in evidence that when Jeffries asked him what made him change his mind about accepting the position, he responded, ‘the 2IC position which I saw as imperative and conditional upon me accepting this position today.’ Jeffries could not recall Larner telling him he had been promised a 2IC by Viney and Clayton, nor did he receive any brief to take steps to engage a 2IC, despite being the Human Resources Manager.

Larner said that he sounded out Viney and Clayton about the hours they were expecting him to work, given that the hours he had been working in the short-term position had continuously increased. He gave the following evidence:

Q:When you had your discussions with either Mr Viney, Mr Clayton or Mr Jeffries, did you receive any undertaking or agreement from them as to setting hours of work in a permanent position?
A:In regard to the setting of hours, no, but I was assured that it wouldn’t be in the realm of 15 hours or 12 to 15 hours a day.

He said he was told by Viney and Clayton that they were close to appointing a National Logistics Manager, who was described to him as being ‘in the mould of a Tim Goodman and he will work with you … “hand in glove”.‘ Scott McKay, (‘McKay’), was eventually appointed as National Logistics Manager.

Larner alleged that during the meeting with Viney and Clayton nothing was said to him about the permanent position including responsibility for GWF’s South Australian operations. He said that it was Jeffries who mentioned that the permanent position included both Victoria and South Australia. This was in a separate meeting 30 or 40 minutes after the meeting with Viney and Clayton when Larner was formally offered the permanent position. Larner says he was initially surprised because he thought he would have enough to do dealing with the Victorian operation. He said that Jeffries told him, ‘Don’t worry about South Australia. You’ll basically fly there once a month, have a cup of coffee with them, say “hello”, and that will be it. You’ll fly back.’ Larner was cross-examined on the issue in the light of the earlier admission he had made that he was aware, before he accepted the permanent position, that it involved responsibility for South Australia:

Q:And you deny, as I understand it, that the South Australian position, you were told about that prior to acceptance of the full-time position?

A:That’s correct.
…
Q:If you have a look at this document, please … if you could return the document to me, please. My question is: have you previously said that the South Australian position was indicated to you as being part of the Victorian position prior to you accepting the Victorian position?
A:I believe that there was some document at some stage that indicated that it was prior.

Larner gave evidence that he and Jeffries, in their discussion before his acceptance of the permanent position, ‘discussed what he and I both thought were appropriate remuneration packages within the industry of my previous knowledge and we ultimately settled around this figure’, that is $118,000 per annum. Jeffries confirmed that he was instructed by Viney to offer Larner the permanent position with a package of $118,000 per annum.

Jeffries provided Larner with a written job offer for the position of ‘Logistics Manager (Vic/SA)’ in the form of a letter dated 1 February 2002, which Larner signed on 5 February 2002.[7] The letter of offer stated that the

… duties and responsibilities will be as discussed during interview and in accordance with those listed in the outline Position Description. A full Position Description will be developed with you once you have commenced.

The total remuneration package was stated to be $118,000 per annum. The letter made no mention of any terms such as provision of a 2IC, or the nature of the working relationship with the National Logistics Manager, or the hours expected to be worked.

[7]Exhibit 6. Although the letter is dated 5 April 2002, Larner’s evidence was that this is a mistake and he signed it on 5 February 2002.

Despite the reference in the written offer to the ‘outline Position Description’, Larner gave evidence that no such document was in existence at the time of his interview, nor at the time he signed the offer, nor was one ever subsequently developed. His understanding of a Position Description (‘PD’) was that it ‘would fully outline the company’s expectations and their goals, give you a full understanding of their requirement of you and your requirement to them; I guess the obligations on both parties and expectations.’

Jeffries accepted that he did not prepare a PD for the permanent position, although he recognised that a PD is an important document. However, he said that at no stage did Larner express any confusion about his role or responsibilities or the nature of what he was required to do and that essentially he was doing the same job that he had performed on the short term contract, which involved overseeing the distribution centre, supervising the 48 full-time staff over three shifts, engaging casual staff as needed, negotiating freight contracts, attending management meetings, and being responsible for stocktaking and distribution of budgetary expenditure. He explained that:

The function of the logistics manager was an integral part of the leadership team and looked after the distribution of the product and it was a short shelf-life product which means there’s only so much time from when it’s manufactured till it gets to the end user, so you have to be fairly much on the ball to ensure that the supply chain was moving through quickly, so it was a reasonably responsible position.

McKay also gave evidence that he could not recall Larner being confused about his role. He said that it ‘was a role that had the overall responsibility and certainly a high salary which went with that role.’

(4) Larner’s qualifications for the role

At the time Larner was appointed permanently as the Logistics Manager (Vic/SA) he was 35 years old.[8] He left school mid-way through Year 12 for economic reasons. He worked in the area of logistics from 1987, holding positions between 1987 and 2001 variously described as ‘warehouse manager’, ‘logistics manager’ or ‘operations manager’.[9] In 1988, while working as a warehouse distribution manager with a wholesale and retail computer company, he undertook a course at a business college.[10] He held logistical roles with Scan Audio, Vivid Australia, Fritz Logistics, and Able Storage Systems.
[8]Larner’s date of birth is 27 March 1966.
[9]Larner’s résumé (exhibit 17).
[10]The course was part-time, two nights a week, over eight to 10 weeks.

He gave evidence that in the year before working with GWF, he obtained work through William Tee & Associates, a recruitment company specialising in the logistics industry, requiring him to evaluate the procedures of companies and giving advice on how to improve them including introducing new systems to handle better the flow of business. On two separate occasions he had been asked to ‘set up a distribution centre from scratch’, with IPS Logistics and PC Telesales, respectively. The position with IPS Logistics, which he held for two to three months, involved establishing a 50,000 square foot distribution centre, hiring staff and obtaining equipment to manage the arrival of stock. The other position, with PC Telesales, which he also held for a few months, involved evaluating the existing systems and structures of the company because it was not coping with the volume of business. Larner implemented changes including upgrading telephones and computers, extending offices and warehousing, and purchasing new equipment to enable stock to be tracked.

Larner conceded during cross-examination that the permanent position with GWF had a higher salary than anything he had earned in the past — a $118,000 package compared to around $50,000 to $60,000. This was confirmed by a summary of his gross earnings based on his tax returns between 1996 and 2001 tendered at trial by GWF.[11] He also conceded that for a salary package of $118,000 an employer could expect a manager to take on substantial responsibility. He expected the job to be demanding and he saw himself in February 2002 as a person capable of senior management. He acknowledged that he had held himself out — and regarded himself — as capable of undertaking major warehouse logistics, someone who could implement and manage strategies in relation to warehouse management and staffing, able to negotiate contracts with freighters and other external contractors, as ‘a bit of a fixer’. He conceded that ‘in broad terms’ there was ‘the expectation that I would overhaul the distribution centre including staff daily work from the ground up and put in place more modern systems for the operation of that centre.’[12]
[11]Exhibit 18. That document showed earnings of $44,317 in 1996/97, $25,625 in 1997/98, $26,057 in 98/99, $54,262 in 1999/2000 and $29,524 in 2000/2001.
[12]Exhibit 15, answer to interrogatory 9.

Larner’s partner, Paula Green, (‘Green’), also gave evidence that Larner was ‘a very ambitious, energetic person … who loved a challenge’ and was very outgoing in life, got things done, could look ahead to work out how things could be improved and was not shy of long work hours. She said that in the time she had known him before he took on the permanent position at GWF he was ‘perfectly healthy’, both physically and mentally.

(5) Permanent position as Logistics Manager (Vic/SA)

On the day that Larner took up his new position, McKay also started as GWF’s National Logistics Manager, bringing with him ‘a wealth of experience in senior roles within accounting and manufacturing industries’.[13]
[13]Exhibit 7.

McKay was initially based at the corporate head office in Flemington, which Larner said made it ‘horrendously difficult’ to communicate with him. The evidence given by McKay is that he too found being based at Flemington ‘hopelessly inefficient’. Although he was available to the staff who reported to him, he felt he was unable to perform his role effectively from head office and ‘needed to be really closer to the point of action, where the manufacturing and logistics were’ especially since the Victorian operation was 30 per cent of GWF’s revenue and activity. He made it his business to visit the Altona operation and during April he had set up a workstation in an office shared with Joe Foti, (‘Foti’), and a couple of others next door to Larner’s. He would then spend on average two days a week at Altona.

Larner’s evidence was that in the period February to April 2002 he had only between six to 10 meetings with McKay, of which only two or three were sit down, one-to-one interactions. He felt that McKay was not ‘putting in the time that was needed and promised.’ In cross-examination, however, Larner said that he saw McKay around six to seven times on a formal one-to-one basis. According to Larner, the sporadic interactions with McKay meant that he did not know what McKay expected of him and he was hampered in his ability properly to evaluate GWF’s current systems and to implement many of the changes he thought should be made. He had no authority to spend money to introduce new office systems, or purchase new equipment (such as security cameras), or contract with an external company.

On one occasion when both men were scheduled to attend a meeting in South Australia, Larner suggested to McKay that this would be an opportunity to discuss many of the things he had raised, or needed answers to, during the plane trip. McKay told him he had already booked his flight and would see him there. When Larner raised the issue of the lack of accessibility to McKay and his need to discuss the Victorian situation, he says that McKay told him:

I’ve been employed in the national position and I’ve got other areas of concern. My main concern at the moment is New South Wales, it’s in bigger disarray than Victoria, and at the moment you’re just going to have to deal with it.

McKay gave evidence that soon after he started he had to deal with two urgent problems in Western Australia and New South Wales. In both instances a major customer expressed dissatisfaction with the standard of the warehousing used by GWF and alternative arrangements had to be put into place at short notice. That required McKay to spend on average two to three days a week away from Victoria. Nonetheless, McKay said that he frequently maintained contact with Larner by email, and also by telephone ‘probably every second day if not daily.’ His recollection was that he had about 10 formal face-to-face meetings with Larner over the relevant period. Given his industry experience, he said weekly formal meetings would be the norm. Although early in his evidence he said that he was unable to say whether those meetings were all face-to-face, or whether some of them may have been by telephone while he was interstate, later after looking at his schedule for other meetings on site on the same day, he said that he was in Altona for at least four or five of the 11 meetings for which he had records.

During those meetings McKay said that he and Larner familiarised themselves with the business, documented the tasks they needed to perform, prioritised them and then took note of their progress. Because of the experience Larner had gained while in the short-term contract position, he was able to brief McKay about the problems he had observed and to suggest improvements, for example, to layouts in the warehouse and the organisational structure, including reviewing the work being performed by people against their role descriptions, and changing lines of reporting to have people answerable to Larner rather than to the manufacturing manager. The facility was an old one and work practices had not been changed for some time. McKay’s evidence was that he and Larner had been brought in ‘as a turnaround team to address the changes’ that needed to be made to deal with those issues and the losses the business was experiencing.

During his initial interview McKay had been made aware that the company needed to improve its logistics, especially after the experience with the Christmas rush, to move to more modern warehousing and that he was to be part of a team to outsource warehousing to third parties and consolidate transport providers. He said that some of the changes that were on the drawing board were to place all products into cartons, bring in standard weights and measures, and re-organise the management of shifts, including reviewing overtime and absenteeism. These changes were commenced during March and April 2002 and implemented beyond April 2002, after Larner had left. And while he felt that GWF’s operations needed a number of changes, there was ‘nothing that was insurmountable, and that was proven six to nine months later when we had outsourced and turned it around.’ He acknowledged there were issues with staff not properly clocking on and off, and with broken hand scanners and time clocks, but he considered these were minor, not endemic. He said:

[T]hey were just the facts of the environment and all of them were changeable through good management and subsequently were [changed]. … the challenges were definitely not insurmountable and subsequently people on less experience and lower salaries were able to turn the business around.

McKay said that early in the course of working together, Larner asked McKay about his expectations for the role. They also discussed the preparation of KPI’s. McKay gave evidence, based on notes he took of the meetings, that on 13 February 2002 Larner was asked to review the KPI’s for the operation and to provide McKay with a copy of the organisational chart. The KPI’s centred around key areas such as safety, delivering products on time, and cost. McKay gave evidence that it was a normal expectation that someone in a role as senior as Larner’s role would be capable of preparing KPIs:

[KPI’s are] a tool of the trade that we take with us as managers … Somebody at that level in the organisation we would have expected to have had that training somewhere along their career.

McKay said that during all his discussions with Larner, it was never suggested that Larner did not understand what a KPI was or how to set them. McKay understood that Larner’s salary was twice as high as the next highest state logistics manager, and given his experience, ‘I was trusting very much that … would mean that I didn’t need to be alongside of him all the time.’

(6) Psychological breakdown

Larner gave evidence that within a few weeks of taking up the permanent position he started to feel unwell. He felt that the job was ‘draining me down extensively’. Factors that he identified as contributing to this deterioration were (a) the hours of work; (b) the absence of a 2IC; (c) the South Australian operations; and (d) the disarray of the Victorian business. This led him to make complaints about his psychological distress, and ultimately to suffer from psychological collapse, after which there were meetings following Larner’s breakdown.
(a) Hours of work
Larner said that generally he was on site from 7.00 or 7.30am and would leave at 6.00 or 7.00pm. The earliest he was on site was at 5.00am and the latest time he left work was 9.30 or 10.00pm. These early morning and late night attendances were necessary to evaluate shift changeover processes.[14] He was dealing with between 70 to 100 emails a day. When he explained that he was not able to get to all the emails on his PC at work, he was ultimately given a laptop to enable him to work from home, and in particular to catch up on emails he did not have a chance to read during the day. This may have been only in the last two weeks before he ceased work. Larner estimated that he would work three to four hours in the evening on his laptop, and five to eight hours on the weekend. He agreed in cross-examination that in a sworn answer to an interrogatory he said that he commenced work between 7.00 and 8.00am and usually left for the day by 6.00pm, although he would then do work at home on his laptop.[15]
[14]Reasons, [32].
[15]Exhibit 15, answer to interrogatory 11(b).

Green gave evidence that after Larner took on the permanent position his average workday increased so that on average Larner would arrive at work around 7.00am and leave work by 6.00 pm. She said that she and Larner moved to live in Romsey before he started work with GWF. It took about an hour to drive from their home to the Altona premises. She said that the earliest time he started was 5.00am, while the latest was around 9.00pm. He would also work at home on his laptop for about three or four hours after dinner in the evening, and went into work on Saturdays and Sundays. She said that weekend work ‘would need to be balanced in with when we had the boys [his sons from an earlier marriage], so it was pretty much as required, and when he could.’ Her evidence was that the two boys spent ‘every weekend, if not every second weekend’ with them.

Dr Mills, a registered psychologist who treated Larner in 2003, gave evidence that Larner had told her he was working, as a regular pattern, 18 hours a day and was on call 24 hours a day.

McKay said Larner told him that he was working ‘longish’ hours and that he had a reasonable travelling distance to get to and from home. He used this as a reason to be given a laptop to enable him to work from home, where he would be able to work without interruption. McKay said that the request for a laptop seemed a perfectly normal request for someone as senior as Larner. However, he did advise Larner that the company did not encourage people working out of hours, but the laptop was justified for occasional use. In McKay’s view, Larner’s role would not demand a hundred hours a week work. He was aware that Larner often attended work by 8.00am and was there until 5.30pm or so, and there were occasions when he worked at home, but he did not regard these as long hours given Larner’s position of responsibility. He thought Larner may have been working in the order of 50 hours a week, which, he said:

… is typical of somebody in that … level of role and somebody who had only recently entered the organisation and was keen to tackle a whole range of matters and bring about improvement as early as possible as the rest of us were.

Jeffries, who reported to the same manager as Larner and so was his ‘peer’, was not aware of the hours that Larner was working. He said that the normal hours were 8.00am to 5.30pm. As Jeffries explained:

I didn’t check him [Larner] as he came in and came out. Salaried staff positions don’t sign any timecard or punch a clock or anything else like that. They’re paid a salary to do a job.

He therefore had no knowledge of whether Larner came in at 5.00am or was working until 10.00pm, or on weekends, or at home in the evenings on his laptop, unless Larner volunteered that information. He could not recall Larner telling him about working outside normal hours.
(b) The absence of a 2IC

Larner said he raised the issue of getting a 2IC with McKay shortly after he was appointed. According to Larner, McKay’s response was, ‘It will not be happening.’ Larner also said Jeffries told him, ‘What I’ve now been told is it’s not in the budget’, although Jeffries could not recall having said that. Larner agreed in cross-examination that McKay encouraged him to develop a PD for his 2IC, and said that McKay raised the question of his progress on that task on a number of occasions. Larner explained that the failure to appoint a 2IC meant that instead of concentrating on evaluating current processes and taking steps to implement new systems, he was preoccupied with day-to-day operational issues: putting out fires, instead of looking at the big picture.

By contrast, McKay’s evidence was that Larner only raised the need for a 2IC on 20 or 28 March 2002,[16] sometime after the two of them started in their positions. Larner said he needed support beyond that which was in place and asked that GWF recruit or promote someone into the deputy role. McKay asked Larner to prepare a PD for the role. In his view, it was appropriate for Larner to be responsible for defining the role, because he was the one who was pressing for this assistance. He rejected the suggestion that he (McKay) squashed the idea of filling such a role until the next budget cycle after 30 June. His evidence was that they ‘were actively looking to develop this [PD] to refine exactly what the role would be, including considering internal people for promoting into that role.’ Although he agreed there was a hiring freeze,

we were able to with appropriate justification raise a requisition for resources where we felt there was a benefit that could achieve a short payback. From my memory that was one of the roles where it was felt there could be a solid benefit gained.

[16]However, to the contrary see [156] below.

The development of a PD for a 2IC then became an agenda item in each successive meeting Larner had with McKay. Larner made little progress with it. McKay said that he ‘was sympathetic that it was taking a little bit of time and recommended [that Larner] work … with Craig Jeffries and people in human resources’ to at least get a template so he would not need to start from scratch. He did not believe that Larner was incapable of drawing up a PD, especially with the benefit of a template. Nor did Larner indicate to him that the reason he kept deferring it was he did not have the expertise or training to do it. McKay expected that someone in Larner’s position, with responsibility for hiring staff in his previous employment, would be able to write up a job description.

In McKay’s view, the creation of the PD for the 2IC ‘was a task that Mr Larner just was unable to prioritise and deal with and didn’t get to it.’ He gave evidence that:

I recall that the need for this role in Mr Larner’s eyes was urgent and therefore we sought to prioritise some other activities to enable him to be able to develop the [PD] and develop his own justification for the role. One of the mechanisms for doing that was to approve the use of the laptop so Mr Larner could work on the position description at home.

The ‘other activities’ to which McKay referred included Larner’s daily operational matters, such as staff and shift supervision, rosters and customer service meetings, and stocktake reconciliations (with the assistance of at least one full-time inventory controller). He said it was a matter of talking through these priorities and helping Larner with delegation and offering other resources to assist with them. Indeed, McKay took it upon himself to deal with some of Larner’s outstanding items himself, such as transport, being involved in the ‘cartonisation’ of the plant, the management of the pallet account, and going to production meetings. Some of these involvements were ones he took over ‘because there was a national element to them as a way of taking things off his [Larner’s] plate.’ He said that it was a case of:
getting in and … all helping out. There was lots to be done. We were part of a turnaround team, we were all new. So demarcation was not an issue. We were all getting in there to try and make improvements.

McKay did not at any stage believe that Larner required physical examination.

McKay could not recall Larner telling him at any point that he had been given an undertaking by Clayton or Viney about having a 2IC. By 19 April 2002, McKay had noted ‘We’ll lose DL if don’t replace’, which McKay said meant that if ‘we didn’t put in place the distribution and supervisor role that Larner would be at risk of leaving the organisation.’ Item 5 of a meeting scheduled between Larner and McKay for 23 April indicated that Larner had reviewed the job description that had been provided to him by human resources for the distribution centre supervisor and was to make adjustments to it before a meeting to be held with Viney and Jeffries on 26 April.

Although the 2IC position had not materialised, there was evidence about the other forms of existing support. Jeffries gave evidence that Larner had seven roles reporting to him, including Foti whom he described as a ‘statistical analyst’ and the shift supervisors for each of the three shifts.[17] McKay gave evidence that Larner had four people reporting directly to him that had warehouse management or inventory management transport responsibilities, who in turn had people reporting to them. There was also Geoff Gillam, who was the Distribution Manager. There was the person in South Australia who reported directly to him. He described Foti as the inventory controller. In cross-examination Larner said that Foti was a logistics analyst with GWF, but he rejected the suggestion that Foti either reported to him or was in a position to provide him with backup or support, although he saw him most days and looked to him for assistance and information.
(c) The South Australian operations
[17]Jeffries said that ‘he would have thought’ that Larner understood that Joe Foti reported to him.
Larner gave evidence that his South Australian responsibilities were much more onerous than he was led to believe they would be. He visited that operation twice in the first five weeks of his job. He found that the operation was being run by a young woman who was a junior 2IC and, in his view, it was in as much disarray as the Victorian one. She was not able to answer his questions and said she was just concentrating on getting stock in and out. Proper documentation was lacking.

McKay’s evidence was that the South Australian operation was just a distribution business, with no manufacturing, and was smaller than the Victorian one. He believed that Larner’s role in relation to South Australia was not a demanding one: ‘the lady had been managing South Australia for some time before Mr Larner or I joined [GWF] and the operation was running reasonably smoothly.’ McKay said the young woman running the South Australian operation was ‘very capable’ and she continued to run the operation after Larner left. McKay denied that the operations of GWF in South Australia were out of control or a ‘shemozzle’. After GWF recruited Colin Meade to fill Larner’s role in June 2002, when it became apparent that he would not be returning to work, further improvements were made to the South Australian business to outsource the warehousing, which made it a simpler business to manage, although McKay said that some of these third party arrangements were in place before Larner left.
(d) The disarray of the Victorian business
Larner gave evidence about the level of losses being made by GWF. Although, while he was still on his short-term contract, he had been told by Goodman that the business was not profitable, it was only after he took on the permanent role that Jeffries told him that the losses were in the range of $600,000 to $800,000 per month. With a total turnover of $26 to $27 million, this represented almost 30 per cent, or $9 million, per annum. Much of this was considered to be through wastage, as well as theft.

There was other evidence that indicated the losses were not as big as Larner recalled. Jeffries gave evidence that while he was aware of a problem with stock losses and was not able to recall how big the losses were, he did not believe they were $600,000 per month or $9 million per annum. That seemed ‘like an excessively high figure’ and, if that had been the case, ‘you would have had certainly a hell of a lot of discussion at the leadership team about that level of stock loss.’ Although Goodman gave evidence about stock wastage and theft, he did not quantify it. McKay said that while there were discrepancies in the inventory, he did not recall them being anywhere near as high as $600,000 per month. His recollection was that the Victorian business was losing in the vicinity of $1.1 million per annum. Although there was speculation at the time that the unexplained variances in stock were the result of theft, GWF ultimately found that the majority of the discrepancies were of an accounting nature as opposed to actual theft. The apparent losses were the result of inaccurate inventory recording and a mass variance largely due to inaccurate scales. As McKay explained: ‘Once the inventory record accuracy processes were changed, those losses all but disappeared, albeit the same people were still working there.’
(e) Complaints about psychological distress
Larner said he told McKay that he was feeling unwell on two or three occasions. He gave evidence that three to four weeks into his new position he said to McKay: ‘The amount of work I’m doing at this present point in time, it is starting to seriously affect my health.’ In cross-examination, Larner said that he told McKay that he was ‘starting to feel unwell’ not in any formal meeting, but during brief encounters as they passed each other in the corridor or were in meetings with other people. He did not tell McKay that he was suffering from headaches or eye- strain; he made those complaints to Jeffries on more frequent occasions. When he received no satisfactory response, he sent several emails to Jeffries, copied in to McKay and Viney, outlining the lack of support and reiterating that it was affecting his health. At one point he said he wrote in an email, ‘I’m drowning and something has to be done about this and very swiftly.’

Jeffries had no recollection of being told by Larner that he was ‘drowning’, or that he was experiencing headaches or problems with his eyes, or that his work was otherwise adversely affecting his health. This was despite Jeffries seeing Larner almost every day on site at Altona. No copies of these emails were in evidence or produced on discovery by GWF, Larner’s laptop having been removed by GWF after Larner collapsed and the laptop then becoming lost. Jeffries’ evidence was that, if an employee had said he or she was drowning, he would have done some investigation to see if the work was excessive and to see if any intervention was warranted. Moreover, if an employee had complained about his or her health being affected:

[T]he first step would have been to refer them off to the medical practitioner via the nurse to get some assessment. So I would have referred or asked the person to go and see Barbara who was the nurse and she was probably a little more qualified to deal with anything than I would be.

Jeffries said he did not observe any change in Larner’s physical or mental health which would suggest anything was amiss; Larner remained ‘as enthusiastic and upbeat and eager and keen’ as he had always been. Jeffries knew that Larner was busy — as indeed everyone was — but he ‘seemed to be managing the challenges and the activities down in that area.’ Jeffries was aware that Larner had ‘issues’ with McKay and he asked Larner whether he wanted him to intervene or participate. According to Jeffries, Larner said no, he had it under control and did not need any assistance to talk to McKay.

McKay also said he could not recall Larner ever informing him that he was suffering from ill health as result of his work, or that he was ‘drowning’. He said he knew that Larner was frustrated with the people he was working with and the work practices, but he did not express any discontent or unhappiness about his position, or indicate that he could not cope. He said:

I recall conversations where Mr Larner was frustrated, unable to keep up, unable to tackle all the tasks in the manner in which he wanted to do them. I don’t remember the ‘drowning’, I can’t recall that, but I do recall his frustrations, that he was unable to make the changes that he wanted to make in such a short period of time.

As he explained, the frustrations Larner was experiencing arose from ‘actually being accountable for putting in place the things that you may have provided advice on previously as a consultant.’ In cross-examination he said that he observed that Larner was not coping ‘in part’ but when asked in re-examination to explain what he meant, he said:
I think I could see that Mr Larner was digesting the various tasks that had to be undertaken and the process of working through the list of priorities to reallocate tasks, focus on the important, as a way of helping him focus on the immediate priorities.

According to McKay, ‘[w]e had an openness in our relationship for him to confide if things weren’t working.’ He refuted the suggestion that Larner reproached him with never being around and said that:
I certainly offered support through that period either by phone, physically or in any way I possibly could to help support David in his role.

He said he did not observe anything to suggest that Larner was suffering from any injury:
I certainly didn’t ever believe that it got to the stage of requiring any physical examination. There had been no hint to me or statement from Mr Larner that he felt as though he was physically impaired through any of that time.

He also said that Larner did not exhibit any ‘mental signs’ that suggested he ought to see a doctor, nor did he present with any sign of psychiatric injury.

Larner said he also complained to GWF’s National Procurement Manager, Sue Pascoe, (‘Pascoe’), in late March or early April 2002. After one meeting, he recalled she said to him, ‘You look like hell. They’re killing you.’ He also recalled that on another occasion she came into his office, grabbed him by the arm and said, ‘We’re going out for a bite of lunch.’ When he protested he did not have time for lunch, he said that she replied, ‘We’re going for lunch. You and I are going out now. You can’t work 12 hours plus without taking a break.’ And they went off site for lunch.
(f) Psychological collapse
Larner gave evidence that all these stresses came to a head on 25 April 2002, when he was working at home. He had been working on his laptop for four or five hours and started to feel clammy, very hot and developed an intense headache. His hands were shaking and his heart palpitating. He said Green told him to stop working and slammed the lid of his laptop down. The following day (26 April 2002) he was still feeling unwell, with a severe headache and trouble with his eyes blinking excessively, but he went to work anyway. He attended a number of meetings through the morning, but his symptoms returned, so he tried to make an appointment with his general practitioner, Dr Ross Jeffrey. Larner was on a telephone call to a colleague when he started to gasp for air, had severe pain in his chest and his hands were cramping. He thought he was having a heart attack or a stroke. He collapsed and was taken to Sunshine Hospital, where he spent the remainder of the day undergoing tests. The doctors diagnosed an extreme reaction to stress-related work and he was certified unfit for return to work by his GP. Larner has not returned to work since then.
(g) Meetings following psychological collapse
Larner gave evidence that on 6 May 2002 he received a visit at home from GWF’s nurse, Barbara Eyre, (‘Eyre’), and Brian Grace, (‘Grace’), GWF’s WorkCover Manager. He said they suggested he not lodge a WorkCover claim at that stage. His evidence was:

She (Eyre) said that ‘We know that we are responsible for this and we want to support you through your recovery,’ hence not to put in the WorkCover form, ‘and we will pay you as normal as long as it takes until you're fit for duties again.’

Green also remembered Eyre and Grace coming to the house:

They came to the house and we had a general chat about how David was going and Barbara asked that we don’t put in a WorkCover claim or David doesn’t put a WorkCover claim in, that they knew they were responsible for what had happened to him and they would support him through it.

In cross-examination Green agreed that later, when it became obvious that Larner would not be returning to work, Larner was told he would need to put in a WorkCover claim. Green agreed to the proposition that when it was said that GWF had some responsibility, that ‘was said in the sense it happened at work.’ In re-examination she repeated that she understood Eyre to mean that initially GWF did not want a WorkCover claim submitted because ‘they knew they were responsible for what had happened to David.’

On 3 June 2002 a meeting was held between McKay, Jeffries, Grace, and another GWF employee, Anne Coxall, (‘Coxall’). Larner was not present at the meeting. Handwritten notes of that meeting were created, it appears by Coxall. These notes formed Exhibit 2 at the trial. McKay’s recollection was that this was a meeting ‘to have a discussion about David’s departure from the business and to probably receive an update of David’s progress.’ He agreed it could be described as ‘a post-mortem of the circumstances in which his psychiatric breakdown occurred.’ The following words appear in the notes:

As a manager did you have concerns about David’s performance?
– David was placed in a role tactically, strategically, operationally.
– David was not given the resources to allow him to manage the process.[18]

These words appear a second time in the notes, in almost identical form, save that the word ’this’ appears before ‘process’ rather than ‘the’.[19]

[18]Exhibit 2.

[19]Ibid.

McKay explained the reference to Larner being placed in a role ‘tactically, strategically, operationally’ in the following terms:

That the seniority of the role required not just day-to-day management in the business, it was about looking forward to next month, the next six months, the next year, as to how tactically the business could be improved and it also involved inputs into business strategy and strategic planning on at least an annual basis.

McKay rejected the suggestion that Larner’s role was ‘an exceedingly difficult one’, saying:
No, I think there was the opportunity in that role to make a difference to get out of the daily grind of those matters that you talk about to actually work beyond those issues. That’s a privilege afforded to such a senior manager; you have the chance to actually shape the future of the business.

In relation to the words ‘David was not given the resources to allow him to manage the process’ in Exhibit 2, McKay rejected the suggestion that it was a frank acknowledgement by senior managers that Larner lacked the resources to do the job he was given to do.

The disposition by the trial judge

In dismissing Larner’s claims for breach of contract and in negligence, the trial judge emphasised the proposition upheld by the High Court in Koehler v Cerebos (Australia) Limited[20] that, when considering the principles relevant to an employer’s duty of care to avoid psychiatric injury to an employee, the duty owed by an employer to an employee is informed by the obligations between the parties under the contract of employment:

The content of the duty which an employer owes an employee to take reasonable care to avoid psychiatric injury cannot be considered without taking account of the obligations which the parties owe one another under the contract of employment, the obligations arising from that relationship which equity would enforce and, of course, any applicable statutory provisions.[21]

[20](2005) 222 CLR 44 (‘Koehler v Cerebos’).

[21]Koehlerv Cerebos (2005) 222 CLR 44, 53 [21].

Larner had argued at trial that his employment contract contained express terms (which were designated ‘the specific terms’) and an implied term. The ‘specific terms’ were as follows:

1.The plaintiff would be provided immediately or shortly after the commencement of the plaintiff’s contract with the defendant with a 21C to assist him in the performance of his work;
2.A National Logistics manager either appointed by the defendant already at the time of the making of its contract with the plaintiff and to commence his employment with the defendant shortly thereafter, or to be appointed by the defendant shortly after the contract with the plaintiff was made would work in an inclusive style and would work as closely with the plaintiff and would provide as much support to the plaintiff as had the previous National Logistics Manager, Mr Tim Goodman;
3.The plaintiff would be provided with a Position Description for the role of Victorian Logistics Manager;
4.He would not be required to spend any significant time or effort managing logistics at the defendant’s South Australian operations.

The only implied term relied upon was a term that GWF would take reasonable care to provide a safe place of work and a safe system of work.

Larner alleged that GWF had breached the specific terms and the implied term and, as a result, he had suffered psychiatric injury. His injury was particularised as:

(a) Development of Major Depressive Disorder and Panic Disorder with Agoraphobia;
(b)Severe depression and anxiety;
(c)Impairment of memory and concentration;
(d)Insomnia;
(e) Loss of appetite;
(f)Impaired libido;
(g)Persistent fatigue.

GWF admitted the contract of employment, but denied that it contained the specific terms.

The judge held that there was no express term of the contract to the effect that a 2IC would be provided immediately, or shortly after Larner commenced the permanent position.[22] He also rejected the proposition that it was a term of the contract that the new National Logistics Manager would have an inclusive style or would provide as much support to Larner as had Goodman.[23] The judge accepted that it was an express term of the contract that Larner would be provided with a PD but he considered that the failure to provide a PD within the time period Larner occupied the permanent position ‘was of no consequence’.[24] He accepted the evidence of McKay and Jeffries that Larner understood his role. He did not accept that it was a term of the contract that Larner would not be required to spend any significant time or effort managing logistics in South Australia. It followed that he found no breach of contract.
[22]Reasons, [120].
[23]Ibid [123].
[24]Ibid [126].

In dismissing the cause of action in negligence, the judge found that Larner had been performing similar duties in his short-term position to that required of him in the permanent role.[25] He also concluded that Larner had not established that the duties and responsibilities associated with the permanent role were unduly onerous or exposed him to undue stresses and strain.[26] He identified as a ‘critical gap in the evidence’[27] the failure by Larner to call evidence in respect of an external industry standard by reference to which it could be determined if the work he was required to perform was unduly onerous.
[25]Ibid [129](2).
[26]Ibid [129](3).
[27]Ibid [129](3).

In this context, faced with a conflict in the evidence both as to how onerous Larner’s responsibilities were as Logistics Manager (Vic/SA) at GWF and the state of disarray of GWF’s operations, the judge preferred the evidence of Jeffries and McKay over that of Larner and Goodman. He said:

Insofar as there is conflict between the evidence of the plaintiff and Goodman on the one hand and McKay and Jeffries on the other, I prefer and accept the evidence of McKay and Jeffries for these reasons. I found McKay to have been a most impressive witness. I do not accept the submission made on behalf of the plaintiff that he was evasive and prevaricated, rather in my opinion he was careful in his responses to all questions. He had retained contemporaneous notes of meetings and conversations with the plaintiff. These notes supported his evidence that he met the plaintiff regularly and discussed issues with the plaintiff on a regular basis. … I accept McKay’s evidence that he travelled to Perth but was not there for a three to four week block, but rather travelled to and from Victoria and Western Australia. In my opinion McKay has … provided a comprehensive, unbiased and impartial account of the circumstances of the Plaintiff’s employment between 1 February 2002 and 26 April 2002.
McKay impressed me as a straightforward, honest, truthful and reliable witness. I accept his evidence on the circumstances of the plaintiff’s employment, the nature of the difficulties confronting the defendant’s logistical operations and the actions he took in communicating with, supporting and assisting the plaintiff.
I also found Jeffries to have been an impressive straightforward and honest witness of truth. I accept his evidence on his dealings with the plaintiff, his observations of the plaintiff and in particular the absence of any complaint by the plaintiff.[28]

[28]Ibid [112]-[114].

Not only did the judge prefer the evidence of McKay and Jeffries over that of Larner and Goodman, but he also found that Larner was an unreliable witness prone to exaggeration. He said:

The plaintiff has clearly focussed much attention on this litigation over many years. This is demonstrated by the large number of references to this litigation in histories recorded by doctors, particularly the plaintiff’s general practitioner. As early as December 2003 the plaintiff’s psychologist, Dr Mills, noted the plaintiff had provided a history of a claim with a reference to damages and a two year battle. The plaintiff appeared intent on providing what I consider to have been a grossly exaggerated description of the defendant’s operations, his conditions of work, his lack of support and symptoms whilst working between 1 February and 26 April 2002.[29]

[29]Ibid [115](1).

In particular, the judge rejected Larner’s evidence of the hours he worked on the ground that Larner’s evidence on the issue was inconsistent and exaggerated, as was apparent from the evidence Dr Mills gave with respect to what Larner had told her about his hours of work:

The plaintiff has given a number of different versions of his hours of work (a most important issue) in his evidence, Answers to Interrogatories and histories to doctors, particularly Dr Mills. It is relevant that it was at the consultation with Dr Mills in December 2003 that the plaintiff provided Dr Mills with a history that he was working 18 hours per day, he was on call for 24 hours a day, he would come home from work at 8.00pm then work on his laptop till 11.00pm and he would commence work again at 4.00am. Dr Mills was led to believe that these hours of work were a regular pattern. Dr Mills also noted that the plaintiff was expressing considerable anger at the defendant and this remained a feature of their consultations. In my opinion this history of extreme hours of work on a regular basis was an exaggerated account of the plaintiff’s hours of work.[30]

[30]Ibid [115](2).

Importantly, the judge also rejected Larner’s evidence that he had sufficiently conveyed to McKay and Jeffries his psychological distress so as to render his breakdown foreseeable to them. The judge rejected Larner’s evidence because of inconsistencies between his evidence and the answer he gave to an interrogatory:

In my opinion the plaintiff’s evidence about the complaints he made at work was inconsistent with his Answers to Interrogatories. In his evidence the plaintiff described both stating and sending emails which stated that he was ‘drowning’ in his work, and he complained that his work was having an adverse effect on his health. There was, however, only a brief reference to these matters in the plaintiff’s Answer to Interrogatory 7, he advised Jeffries of his concerns that the volume of work he was required to undertake was starting to affect him.
It was submitted … that omissions from the plaintiff’s Answers to Interrogatories should not undermine the plaintiff’s evidence. I do not accept this submission. In my opinion there is a clear inconsistency between the plaintiff’s Answer to Interrogatory 7 and his evidence in respect of the complaints made at work. [31]

[31]Ibid [115](3).

Furthermore, he rejected the evidence of Goodman as exaggerated:

I was unimpressed with the evidence of Goodman. He stated that the defendant’s operations were a disaster. It was Goodman who recommended the plaintiff for the permanent position. There was no suggestion from Goodman that the plaintiff was not able to cope with his work, rather Goodman felt the permanent position was the right fit for the plaintiff and the right fit for the company. I consider Goodman’s description of the defendant’s logistical operations as a disaster to have been an exaggeration.[32]

[32]Ibid [116].

Ultimately, he found that McKay had provided all reasonable support, assistance and guidance to Larner and that he and Larner had a good working relationship with appropriate and regular communication.[33] He considered that Exhibit 2 had little probative value:

Exhibit 2 is of no assistance to [Larner]. It represents nothing more than a note made by a person at a meeting at which [Larner’s] breakdown was discussed.[34]

[33]Ibid [129](7).

[34]Ibid [129](10).

In particular, he found that the record in the notes that ‘David was not given the resources to allow him to manage the processes’ was not an admission:

I accept this meeting was a post mortem in respect of the plaintiff’s breakdown.
It is recorded in these notes, ‘David was not given the resources to allow him to manage the processes’. I accept the evidence of McKay that this was a proposition being put forward on behalf of the plaintiff which was being addressed by those present at the meeting. I do not accept that this represented any admission by the defendant.[35]

[35]Ibid [129](10).

The judge concluded that Larner had not established negligence and/or breach of duty on the part of GWF.

The judge did not accept that GWF knew or ought to have known that Larner was at risk of psychiatric injury. In particular he did not accept that ‘stress’ was a ‘recognisable psychiatric illness’[36] and thus rejected the view that reasonable foreseeability of a risk of stress amounted to reasonable foreseeability of a risk of psychiatric illness. He emphasised that no referral had been made by Jeffries to GWF’s on-site nurse or to a medical practitioner from which the inference could be drawn that Jeffries had received no complaint by Larner about his psychological health:

I accept the plaintiff’s evidence that in late March or early April Susan Pascoe said to the plaintiff, ‘you look like hell. They’re killing you’… . In my opinion this observation could not be taken literally but rather was an expression of concern and that the plaintiff did appear stressed. This evidence must be considered in light of the other evidence which I have accepted. Neither McKay nor Jeffries had any knowledge of any matter that alerted them to the risk of the plaintiff suffering psychiatric injury. Both McKay and Jeffries had no recollection of the plaintiff complaining about any effect his work was having upon his health or that he was ‘drowning’ in his work. Jeffries stated that if he had received a complaint from a senior manager about his health he would have referred the person off to a medical practitioner via the nurse. This did not happen in respect of the plaintiff. Further if he had received a complaint that a colleague was complaining that he or she was ‘drowning’ in work he would look into the situation to see if the work was excessive, he would conduct some investigation to see if any intervention was required. No such action was taken by him in respect of the plaintiff. [37]

[36]Ibid [135].

[37]Ibid [136].

He further emphasised that McKay had seen no signs of psychological ill-health and that Larner had taken no time off from work:

Further McKay stated there was nothing about the plaintiff’s presentation to suggest he was likely to suffer psychiatric injury of the nature he was now presenting at court. McKay stated that there were no physical or mental signs to suggest the plaintiff ought see a doctor or nurse.
It is also relevant that the plaintiff himself did not have any time off work during the relevant period as a consequence of any physical or mental symptoms nor did he believe he was having a psychiatric breakdown on 26 April 2002, rather he thought he was having a heart attack or stroke.[38]

[38]Ibid [136]-[137].

He concluded that a reasonable person in the position of GWF, as an employer, would not have foreseen the risk of psychiatric injury to Larner.

Grounds of Appeal

Larner relied upon 30 grounds of appeal, many of which were directed to findings on evidence. In addition, at the conclusion of the hearing of the appeal leave was granted for a further ground of appeal to be added raising the issue of remoteness, alleging that his Honour had erred in finding that Larner had not established that the relevant loss was sufficiently likely to result from the breach of contract to conclude that it should have been within the contemplation of a reasonable person in the position of GWF.[39] Ultimately, the grounds of appeal can be grouped under 12 headings:
[39]Reasons, [139].

(1) Rejection of Amendment to Statement of Claim;[40]
[40]Ground 1.

(2) Breach of the rule in Jones v Dunkel;[41]
[41]Grounds 2-5.

(3) Rejection of Larner’s evidence;[42]
[42]Grounds 6-9.

(4) Rejection of Goodman’s evidence;[43]
[43]Ground 10.

(5) Placing limited weight on Green’s evidence;[44]
[44]Ground 11.

(6) Acceptance of Jeffries’ evidence;[45]
[45]Grounds 12-14.

(7) Acceptance of McKay’s evidence;[46]
[46]Grounds 15-16.

(8) Exhibit 2;[47]
[47]Grounds 17-19.

(9) Breach of Contract;[48]
[48]Grounds 26-30. Although the grounds alleging breach of contract came after the grounds for negligence in the Notice of Appeal, it is more sensible to consider the contractual issues first given the reliance upon Koehler v Cerebos and the inter-action between the obligations under the contract and in tort.

(10) Remoteness;[49]
[49]Ground 28A. The parties were permitted to file written submissions on the additional ground of appeal.

(11) Breach of Duty of Care;[50]

(12) Absence of External Standard.[51]

[50]Grounds 20-23.

[51]Grounds 24-25. The Notice of Appeal initially contained as Ground 31 the allegation that his Honour erred in the exercise of his discretion in discharging the jury without a verdict on the tenth day of trial because the issues of fact and law were of such complexity as to preclude the jury being charged. However, this was abandoned at the hearing of the appeal.

It is useful to consider these issues in turn.

(1) Rejection of Amendment to Statement of Claim

On the second day of the hearing, the judge refused an application by Larner to add to his pleading a further express term of his contract of employment. The proposed term was:

8A(3). The plaintiff would not be required to work for hours as long as he had previously been working whilst working for and/or with the defendant.

The proposed term reflects the circumstance that Larner had been working for GWF on a short-term contract since 30 November 2001, some two months before he was offered the permanent position. In refusing to permit the amendment, the judge took the view that it was a new allegation, no notice had been given, and GWF would be prejudiced by the amendment:

[13] Mr Rush on behalf of the defendant objected to the amendment to include the express term of the contract of employment that, ‘8A(3). The plaintiff would not be required to work for hours as long as he had previously been working whilst working for and/or with the defendant’. It was submitted on behalf of the defendant that this was a new allegation. It referred to allegations concerning the hours the plaintiff was working for or with the defendant prior to 1 February 2002 and it apparently arose from discussions between the plaintiff and the defendant. Mr Rush submitted that this was effectively an allegation that the plaintiff had been working long hours prior to 1 February 2002 and he had been told by the defendant’s management prior to his acceptance of the offer of permanent employment on or about 1 February 2002 that he would not have to work those long hours any more.
[14] It was submitted on behalf of the defendant that whilst the particulars of negligence had always alleged that the plaintiff was required to perform work between 1 February 2002 and 26 April 2002 which was unduly onerous and stressful the allegation contained in paragraph 8A(3) was a new allegation. The defendant had at all times been aware that the nature of the plaintiff’s case was that he was performing onerous and stressful work and he was working long hours, however the new allegation was that it was a specific term of the contract of employment agreed upon in discussions between the plaintiff and the defendant that the plaintiff would not be required to work hours as long as he had previously been performing whilst working for and/or with the defendant.
[15] I accept the submission … that this proposed amendment to paragraph 8A to incorporate as an express term of the contract of employment that the plaintiff would not be required to work for hours as long as he had previously been performing whilst working for and/or with the defendant is a new allegation. It has been made at a late stage, the second day of the hearing, and I accept that there is prejudice to the defendant. No Notice has been provided of this proposed amendment. I find that the defendant is prejudiced by this late amendment.[52]

[52]Larner v George Weston Foods Limited (Ruling No 1) (Unreported, County Court of Victoria, 8 March 2012), [13]-[15].

Larner says that the ruling was erroneous. The judge did not say what the prejudice was; and, it is contended, there was none.

It is true that the judge did not identify the prejudice in his ruling. But it is nevertheless clear enough what prejudice the judge must have had in mind:

(1) The events the subject of the claim had occurred more than 10 years before the trial. At all stages until the trial, the proceeding concerned events that had occurred between February and April 2002.

(2) Further, although the statement of claim annexed to the writ was dated 3 December 2004, the writ was not issued until 28 October 2005. The claim in the original statement of claim was that Larner had suffered psychiatric injury as a result of the negligence and/or breach of duty of GWF. On 12 May 2008, the pleading was amended by the inclusion of an action in which it was alleged that Larner was injured as a result of the breach by GWF of the contract of employment.

(3) Further, the proceeding was first listed for trial on 22 November 2006. That date was vacated. It was then fixed for hearing on 21 September 2010. That date was also vacated and the proceeding was fixed for hearing on 7 March 2012.

(4) On the first day of the trial, Larner applied to further amend his statement of claim so as to extend the relevant period of employment in which it was alleged that Larner was required to perform work which was unduly onerous from the period February 2002 to 26 April 2002 to the longer period between 30 November 2001 to 26 April 2002. Until then, all the allegations were confined to the period 1 February 2002 to 26 April 2002. GWF objected to those amendments on the basis that the whole preparation of its case had been confined to the latter period: that was the period about which its lawyers had sought instructions, that was the period to which it had addressed its interrogatories; that was the period to which it had referred its medico-legal experts. GWF opposed the amendment on the basis that, if it were allowed, GWF would be required to ‘go back and reinvestigate and go back to witnesses to put into perspective a new case’. The judge refused the application to amend and the ruling was not appealed.

In our view, the prejudice identified by the judge in refusing the proposed amendment put forward on the second day of the trial is in substance the same form of prejudice that GWF would have suffered had the amendment sought on the first day of trial been granted. That prejudice arose because GWF had prepared for trial on the basis that there was no complaint in the proceeding about the work performed by Larner during the short-term contract. The amendment to insert paragraph 8A(3) would have had the effect that the relevant period of employment at issue included the period of the short-term contract as well as the duration of the permanent position. There would have been a need to investigate precisely the terms upon which he was recruited on a short term basis, the negotiations which led to the various pay rises he was given, what Larner’s hours of work were during the short-term contract and what was discussed during the negotiations that led up to the permanent position about the hours of work that applied during the period of the short-term contract. Just as with the proposed amendment on the first day of trial, so too the proposed amendment on the second day of trial would have required GWF to ‘go back and reinvestigate and go back to witnesses to put into perspective a new case’. It was not sufficient for Larner to argue that he always intended to call evidence about the whole of the conversation he had had with Viney and Clayton. GWF had prepared its case on the basis that the terms of the contract alleged included the specific terms and the implied term, all of which referred to the period of permanent employment. In our view, to propose a new contractual term that was dependent upon an inquiry about the hours Larner had worked in the short-term contract position unfairly extended the field of inquiry beyond the scope of the case GWF had prepared its response to, and did so at a very late stage.

The High Court affirmed the decision of the Full Court of the Supreme Court of Western Australia that the absence of any material available to the employer which would have alerted it to a specific risk of psychiatric injury meant that such a risk was not foreseeable. A reasonable person in the position of the employer would not have foreseen the risk of psychiatric injury to Ms Koehler. In a joint judgment delivered by McHugh, Gummow, Hayne and Heydon JJ,[146] their Honours observed that simply because a claim is framed in negligence, it invites error to begin the inquiry by focusing upon the question of whether there was a breach of the duty to take all reasonable steps to provide a safe system of work, and the associated issues of foreseeability and the reasonable response to risk as laid down in Wyong Shire Council v Shirt,[147] because to do so may fail to take into account ‘fundamental aspects of the relationship between the parties.’[148]
[146]Callinan J delivered a separate concurring judgment.
[147](1980) 146 CLR 40, 47-8.
[148]Koehler v Cerebos (2005) 222 CLR 44, 53 [19].

The Court held that the parties’ obligations under a contract of employment will necessarily have a bearing on the content of the employer’s duty of care and what may be required from the employer to discharge that duty:

The content of the duty which an employer owes an employee to take reasonable care to avoid psychiatric injury cannot be considered without taking account of the obligations which the parties owe one another under the contract of employment, the obligations arising from the relationship which equity would enforce and, of course, any applicable statutory provisions. … Consideration of those obligations will reveal a number of questions that bear upon whether … an employer’s duty of care to take reasonable care to avoid psychiatric injury requires the employer to modify the work to be performed by an employee.
…
What is important is that questions of the content of the duty of care, and what satisfaction of that duty may require, are not to be examined without considering the other obligations which exist between the parties.[149]

[149]Ibid 53-4 [21]-[22], as mentioned, [67] above.

The Court emphatically repudiated the view that there is ‘only one question’[150] to ask where an employee claims damages from an employer for negligently inflicted psychiatric injury, namely, ‘whether this kind of harm to this particular employee was reasonably foreseeable’,[151] stating: ‘That proposition should be rejected.’[152] The initial question must lie in determining the content of the duty of care and the kinds of steps required of an employer in the particular circumstances of the case, informed, in particular, by the terms of the contract of employment.
[150]Ibid 54 [23].
[151]Ibid 54 [23].
[152]Ibid 54 [23]. In doing so, the Court disapproved of the approach adopted by the English Court of Appeal in Sutherland v Hatton [2002] 2 All ER 1.

The factors that are most likely to be relevant in determining the content of the duty of care, and what is required of an employer to satisfy the duty of care it owes, include both the nature and extent of the work being done by the particular employee; ‘and the signs from the employee concerned — whether in the form of express warnings or the implicit warning that may come from frequent or prolonged absences that are uncharacteristic’.[153]
[153]Ibid 54 [24].

An employee’s agreement to perform those very duties which are later found to be a cause of psychiatric injury may be of considerable significance in determining whether an employer has breached its duty of care. As the High Court said:

An employer may not be liable for psychiatric injury to an employee brought about by the employee’s performance of the duties originally stipulated in the contract of employment. In such a case, notions of ‘overwork’, ‘excessive work’ or the like have meaning only if they appeal to some external standard. … Insistence upon performance of a contract cannot be in breach of a duty of care.[154]

[154]Ibid 56 [29].

An employer’s obligations under a contract are not to be read subject to a duty to excuse performance if performance is injurious to psychological health, nor to be qualified by hindsight. In the absence of warning signs, an employer can assume that someone who enters into a contract of employment believes himself or herself to be capable of performing its duties:

[S]eeking to read an employer’s obligations under a contract as subject to a qualification which would excuse performance, if performance is or may be injurious to psychiatric health, encounters two difficulties. First, the employer engaging an employee to perform stated duties is entitled to assume, in the absence of evident signs warning of the possibility of psychiatric injury, that the employee considers that he or she is able to do the job. Implying some qualification upon what otherwise is expressly stipulated by the contract would contradict basic principle. Secondly, seeking to qualify the operation of the contract as a result of information the employer later acquires about the vulnerability of the employee to psychiatric harm would be no less contradictory of basic principle. The obligations of the parties are fixed at the time of the contract unless and until they are varied.[155]

[155]Ibid 57-8 [36], citing Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 347; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.

The employer thus had a right to assume that Ms Koehler could perform the tasks she had agreed to perform without injury to her psychological health and it had no reason to suspect that she was at risk of psychiatric injury. Her complaints about the lack of time to cover the relevant territory did not, at the time they were made, give rise to any suspicion that her duties were putting her health at risk or the possibility of psychiatric injury. Rather,

[H]er complaints may have been understood as suggesting an industrial relations problem. They did not suggest danger to her psychiatric health. When she did go off sick, she (and her doctor) thought that the illness was physical, not psychiatric.[156]

[156]Ibid 59, [41].

We have already concluded that here, the contractual relationship between the parties was one in which there was no obligation on GWF to provide Larner with a 2IC; no obligation to appoint a National Logistics manager with an inclusive style who would work ‘hand in glove’ with Larner; and no obligation to ensure that Larner would not be required to spend any significant time or effort managing logistics at GWF’s South Australian operations. The obligation Larner assumed when he entered into the contract was to fulfil the role of Logistics Manager for Victoria and South Australia, a role carrying significant seniority, managerial responsibility and autonomy. GWF was entitled to assume, at the time of entering into the contract, that Larner was capable of doing the job for which he was appointed.

At the time the contract was made, on or about 1 February 2002, there were no signs warning of the possibility of psychiatric injury. On the contrary, the circumstances suggested that Larner would be fully capable of discharging the nature and extent of the work to be done:

(1) he came to the workplace with a résumé which indicated that he had a background and expertise in fixing logistics problems and rebuilding dysfunctional businesses;[157]
[157]See [28] above.

(2) he had held himself out — and regarded himself — as capable of undertaking major warehouse logistics;[158]
[158]See [29] above.

(3) he had experience of GWF’s operations by reason of his short-term contract position and had already identified areas to be addressed and discussed those with GWF officers;[159]
[159]See [6], [9] and [16] above.

(4) he accepted that ‘in broad terms’ there was ‘the expectation that I would overhaul the distribution centre including staff daily work from the ground up and put in place more modern systems for the operation of that centre;’[160] he was to be part of a ‘turnaround team’ and be part of fixing problems and improving efficiency;[161]
[160]See [29] above. Exhibit 15, answer to interrogatory 9.
[161]See [36] above.

(5) he had been recommended for the job by Goodman, (because ‘he would be good for it and it would be good for him’) with whom he had a close daily working relationship and who had formed a positive impression of Larner’s capabilities;[162]
[162]See [12] and [15] above.

(6) he was described by both his partner and by his work colleagues as being keen, ambitious, proactive and acknowledged that he presented as ‘a bit of a fixer’;[163]

(7) he was regarded as so desirable that GWF was prepared to pay him a comparatively generous salary package, which it appeared was twice that of the next highest paid of his State counterparts.[164]

[163]See [29] above.

[164]See [39] above.

Given the general assumption that an employer is entitled to make that if someone enters into a contract of employment, that employee considers himself or herself able to do the job, these factors run counter to any suggestion that GWF ought reasonably to have appreciated that Larner was at risk of psychiatric illness in performing his duties. Far from there being any indication that he was vulnerable to psychiatric injury, Larner gave every appearance, at the time he agreed to take on the permanent position, of being capable of carrying out the work required. Not only was there such an appearance but, indeed, Larner clearly considered himself capable of the job because he was already performing much the same job and queried why, in those circumstances, there was a need for him to formally apply for the permanent position, believing that providing his résumé should be sufficient.[165]
[165]See [10] above.

Larner submitted that during the course of his employment, there were signs that were apparent to GWF, or ought to have been apparent, that Larner was being mentally affected adversely by his work. There were signs that he was becoming dysfunctional and this was being ignored by GWF. He claimed that these were completely or largely uncontradicted by the evidence. In our view, the submission is untenable and fails to grapple with the evidence that was accepted by the judge, and which we have indicated above, it was open for him to accept. Larner relied on the following:

(1) Larner’s dependence on McKay for guidance. — The difficulty is that McKay did not give evidence that he found Larner was unable to take steps to progress matters without seeking guidance from him; he rather identified a frustration in Larner in his being ‘unable to make the changes that he wanted to make’ as a matter of implementation.[166] Indeed, he considered that the short-term contract position had enabled Larner to identify what needed to be done; and that he was ‘by far the most experienced of the state logistics managers’ which engendered McKay to trust ‘that David's experience would mean that I didn't need to be alongside him all the time’.[167] McKay did not accept that there was a relationship of dependency. Jeffries said that Larner expressed no confusion as to his role.[168]
[166]See [59] above (emphasis added).
[167]See [39] above.
[168]See [25] above.

(2) Larner’s inability to get things done, including preparing the 2IC PD or the KPI’s. — However, Larner never indicated to McKay that the reason he had not prepared the 2IC PD was because he was unable to complete it.[169] While he kept deferring its completion, he did not indicate to McKay that he lacked the expertise or training to do it.[170] Larner never suggested to McKay that he did not understand what a KPI was or how to set them.
[169]See [39] above.
[170]See [48] above.

(3) Larner’s expressing frustration and becoming increasingly agitated. — However, the frustration expressed was similar to Ms Koehler’s in that it related to work and not being able to implement changes within his chosen timeframes; so too, the agitation was directed at a lack of achievement in implementing change.[171]
[171]See [145] above and see further below.

(4) Larner’s long hours of work, thought to be unnecessary. — However, the evidence of the hours Larner worked left the issue disputed and uncertain. Larner’s own evidence of the hours he was working was unsatisfactory as he had exaggerated his hours to the psychologist, Dr Mills, and there were inconsistencies between his evidence and his answer to interrogatories.[172] The disputed state of the evidence precludes reliance on the hours Larner worked as a sign that Larner was not coping.
[172]See [76] and [41] above.

(5) his complaints to Jeffries and McKay of feeling unwell, and drowning. — The difficulty is that both Jeffries and McKay disputed that Larner made complaints about his health or claimed that he was ‘drowning’.[173] Larner did not have any time off work for mental or physical problems. There was an on-site nurse and Jeffries, who as the Human Resources Manager was responsible for the health of all the staff, stated that if Larner had complained about his health he would have referred him to a medical practitioner via the nurse.[174] Jeffries said he did not recall any complaint from Larner about headaches, or eye-strain, or that he was not coping, despite seeing him every day at Altona.[175] Jeffries maintained that Larner remained enthusiastic and up-beat when employed by GWF, as he had been when he was interviewed.[176] McKay did not at any stage believe Larner required medical examination. He saw no signs that Larner required referral to a nurse; no sign that he suffered from psychiatric injury. McKay did not feel that Larner was not coping except in the sense of needing help to focus on immediate priorities.[177] Moreover, the question arises, if it was so readily apparent that his health was suffering, why did Larner not seek any medical assistance himself, either from his own general practitioner or from the on-site nurse?
[173]See [57] and [59] above.
[174]See [57] above.
[175]See [57] above.
[176]See [128] above.
[177]See [49] and [59] above.

(6) his physical appearance at work, apparent to Pascoe.[178] — However, the incidents were isolated ones and while it may have been evidence that Larner appeared to be stressed, an observation of stress does not entail that an employer, without any particular relevant expertise, is to be taken to have recognised the risk of psychiatric injury.[179]
[178]See [60] above.
[179]Koehler v Cerebos (2005) 222 CLR 44, 57 [34].

(7) the evidence that Eyre had said that ‘We know we are responsible for this’ and Green’s evidence that Eyre and Grace had said words to the same effect.[180] — However, Eyre’s statement was said in the context of a discussion about whether or not Larner would need to complete a WorkCover claim and in the context of an acknowledgement that Larner had suffered a work-related injury for which GWF would have to accept responsibility. Green accepted in cross-examination that the statement made by Eyre ‘was said in the sense it happened at work’ although she maintained in re-examination that it was an acknowledgement that ‘they knew they were responsible for what had happened to David.’ While we consider that the judge ought to have expressly dealt with the statement made by Eyre in his reasons, which he did not, we consider that the statement was readily explicable and the reasons were not rendered inadequate by its omission.

(8) the effect on Larner’s psychological health, as referred to in Exhibits 24 and 2. — We have already dealt with both Exhibits 24 and 2. Suffice it to say that, relevantly, while in McKay’s statement (Exhibit 24) he spoke of Larner being agitated[181] this was explained as being in the context of Larner making ‘the transition from observer (contractor) to doer (permanent) and being unable to achieve things within his timeframes’[182] and not of a sufficient order that it ought to have alerted GWF to the risk of psychological collapse or enlivened an obligation on GWF to take steps to avoid that risk. There was no observed concern to Larner’s mental health that McKay was able to identify. Exhibit 2 focused upon Larner’s performance and whether adequate resources were provided to him and while there was mention of the meetings between McKay and Larner as having ‘varied’ results because, in what must have been a reference to Larner, ‘often would not say what he was doing’ and ‘had to be prompted’ there was no mention of signs of a risk of psychiatric injury.

[180]See [62]–[63] above.

[181]See [145] above.

[182]Ibid.

It is not to the point in relation to the claim in negligence that there is medical evidence that Larner has an obsessional personality, which is more susceptible to breakdown and to finding it difficult to cope with stressors which threaten his sense of control. The evidence offers only an insight gathered in hindsight as it was not known by GWF at the time Larner entered into the contract or at any time during Larner’s employment.[183] Koehler v Cerebos is unequivocal in rejecting the relevance of such hindsight to the determination of an employer’s negligence.
[183]Dr Nathar, a psychiatrist called on behalf of Larner at trial, first saw Larner in December 2002.

The absence of warning signs is reinforced by the fact that the initial diagnosis after the collapse was of a physical and not psychological collapse, just as in Koehler v Cerebos. Larner thought he was having a heart attack or a stroke.[184]
[184]See [61] above.

We consider that the judge was correct in his application of Koehler v Cerebos and, more generally, that there was no error in the judge’s conclusion that the claim in negligence was not made out and that his reasons were adequate in demonstrating how he arrived at that conclusion.

Associated with the claim that the judge erred in failing to find that GWF was negligent was the claim that the judge erred in finding that the problems with GWF’s logistics operations were of a minor nature when Larner gave evidence that there were stock losses of $600,000 or more a month, which, Larner submitted, was not challenged on cross-examination. Larner also claimed that the judge’s findings were inconsistent with Goodman’s evidence that the operations were a ‘shemozzle’ and a ‘disaster’, which, Larner submitted, was also not challenged on cross-examination.

We make two responses to this claim: the first is that, as mentioned above, ultimately the problem of stock losses appeared to be attributable to errors in calculation and the problems in the logistics operations were resolved, after Larner left, within a relatively short time-frame.[185] That in itself suggests that the problems were relatively minor. The second is that there was no need to challenge Goodman’s evidence on the state of GWF’s logistical operations because his evidence that it was a ‘shemozzle’ was qualified by the evidence that everything ‘worked almost perfectly’ until two days before Christmas whereupon it became a ‘shemozzle’. The juxtaposition of the two notions itself suggests the word ‘shemozzle’ was an overstatement. Such qualified evidence could not bear the reliance Larner wished to place upon it. There was also ample contradictory evidence that although there were problems, they were not insurmountable or a ‘disaster’. In our view, it was open to the judge to characterise the difficulties of GWF’s logistical operations as ’minor’.
[185]See [37] above.

We reject those grounds of appeal that challenge the judge’s finding that Larner had failed to establish negligence on behalf of GWF.
(12) Absence of External Standard
The final grounds of appeal challenge the observation by the judge that Larner’s case suffered from an absence of any evidence of an external standard against which one could determine whether the work Larner was required to perform under his contract was unduly onerous. Larner submitted that in the present case, the matter of an external standard is irrelevant and the judge erred in requiring him to lead such evidence where there was evidence that GWF had not discharged its contractual obligations, that it had reason to suspect that he was at risk of suffering recognisable psychiatric illness, or alternatively, that it knew of such a risk through its servants or agents such as Pascoe. Alternatively, Larner submitted that if he was required to lead evidence of an external standard, he fulfilled this requirement by tendering GWF’s employment policies created in February 2006[186] and the judge erred in finding no evidence had been adduced and that the absence of similar employment policies in 2002 was of no consequence.
[186]Exhibits 20, 21 and 22.

As mentioned above, in Koehler v Cerebos the High Court made it clear that the question of whether or not the duties performed are ‘onerous’ or ‘excessive’ is relative, and needs to be assessed by having regard to an external standard, such as evidence of industry practice.[187] The judge found that Larner called no evidence about any external standard to enable a finding to be made that the work Larner was required to undertake was unduly onerous or stressful.
[187]Koehler v Cerebos (2005) 222 CLR 44, 56 [29].

In the absence of any evidence of an external standard from Larner, the evidence before the judge about industry practice and expectations came from GWF, namely: (a) McKay’s evidence that he would expect someone at Larner’s level of seniority to be capable of preparing KPI’s and PD’s, that longish hours would be expected, and that someone in Larner’s position would not be expected to need to have his or her supervisor alongside all the time; and (b) Jeffries’ evidence that senior managers do not clock on and off, but manage their own time and are paid to do a job.

It might be expected that a responsible position at management level, where the employee is engaged as part of a ‘turnaround team’, would inevitably entail some level of stress. That, after all, is why such an employee gets paid a relatively generous amount. The question is the point at which an employer could reasonable anticipate that the work is so onerous, and the level of stress is so great, that it raises a foreseeable risk of psychiatric illness. It might be said that this is the point at which the abilities and capacities of the employee are no longer matched by the work to be performed thereby creating a foreseeable risk of breakdown.

We have already concluded that, in the circumstances of the case, it was not reasonably foreseeable to GWF that there was a risk of Larner’s breakdown. The absence of evidence of an external standard against which the judge could assess whether Larner was obliged to engage in ‘overwork’ or ‘excessive work’ was an important contributing factor in the judge’s reasoning that the risk of psychological collapse was not foreseeable to GWF. We consider that it was open to the judge to take the absence of an external standard into account as a relevant consideration and to consider its omission as a ‘critical gap’[188] in the evidence.
[188]Reasons, 129(3).

We reject those grounds of appeal based upon the absence of evidence of an external standard.

Conclusion

Larner failed to establish that a reasonable person in the position of GWF would have foreseen the risk of psychiatric injury through his performance of the obligations which he had contracted to undertake. Based upon the findings of the judge which have not been successfully impugned, Larner has not established that his employer ought reasonably to have anticipated that it would expose him to psychiatric injury by requesting him to perform his contractual obligations. That is to say, the content of his employer’s duty of care was informed by the nature of the contractual obligations which he had undertaken to perform.[189]
[189]Koehler v Cerebos (2005) 222 CLR 44, 53 [19], 53-4 [21]-[22].

Larner challenged the judge’s findings of fact which rested largely upon credibility findings concerning Larner and his primary witnesses. Larner contended that the credibility findings made by the judge do not insulate his reasons from proper analysis.[190] No facts, however, have been identified which are ‘incontrovertible’ or ‘glaringly improbable’ or ‘contrary to compelling inferences’ or that demonstrate that the judge ‘failed to use or has palpably misused his advantage’ so as to demonstrate that his conclusions are erroneous.[191] There is also no substance in Larner’s contention that the judge did not subject the important evidence to adequate analysis in his reasons for decision. The judge in his comprehensive reasons carefully evaluated all of the important evidence.
[190]Jew v Holloway [2013] VSCA 260, [33].
[191]Fox v Percy (2003) 214 CLR 118; Jew v Holloway [2013] VSCA 260, [33].

The appeal should be dismissed.

---

*Introduction* .......................................................................................................	2
*Employment as GWF Logistics Manager.*......................................................	3
(1) Short-term contract with GWF ....................................................	3
(2) Approach to take on permanent role..............................................	5
(3) Contractual negotiations ...............................................................	7
(4) Larner’s qualifications for the role ................................................	11
(5) Permanent position as Logistics Manager (Vic/SA)...	12
(6) Psychological breakdown ………………………………………..	16
(a) Hours of work …………………………………………	16
(b) The absence of a 2IC …………………………..............	18
(c) The South Australian operations …………………….	21
(d) The disarray of the Victorian business ………………	21
(e) Complaints about psychological distress …………...	22
(f) Psychological collapse ………………………………...	24
(g) Meetings following psychological collapse …………	25
*The disposition by the trial judge*.....................................................................	27
*Grounds of Appeal………….*......................................................... ...................	33
(1) Rejection of Amendment to Statement of Claim ....... ...................	34
(2) Breach of the rule in Jones v Dunkel .............................................	37
(3) Rejection of Larner’s evidence ………………...............................	39
(4) Rejection of Goodman’s evidence...................................................	45
(5) Placing limited weight on Green’s evidence .................................	47
(6) Acceptance of Jeffries’ evidence ………………………………….	48
(7) Acceptance of McKay’s evidence ………………………………..	49
(8) Exhibit 2 …………………………………………………………	56
(9) Breach of contract ………………………………………………..	60
(a) Was there a contractual promise of a 2IC? ………….	63
(b) Was there a promise of a Manager with an inclusive style? ……………………………………………………………	68
(c) Was there a promise of a PD? ………………..............	69
(d) Was there a promise about South Australia? ……….	69
(10) Remoteness ………………………………………………………	71
(11) Breach of duty of care ……………………………………………	75
(12) Absence of External Standard …………………………………...	86
*Conclusion …………*..........................................................................................	87

[2014] VSCA 62

9 April 2014