Nationwide News Pty Ltd v Naidu
[2007] NSWCA 377
•21 December 2007
NEW SOUTH WALES COURT OF APPEAL
CITATION: Nationwide News Pty Ltd v Naidu & Anor; ISS Security Pty Ltd v Naidu & Anor [2007] NSWCA 377
This decision has been amended. Please see the end of the judgment for a list of the amendments.
FILE NUMBER(S):
40182/06
40198/06
HEARING DATE(S): 30 and 31 July 2007
JUDGMENT DATE: 21 December 2007
PARTIES:
CA 40182/06
Nationwide News Pty Ltd (Appellant)
Devanar Naidu (First Respondent)
ISS Security Pty Ltd (Second Respondent)
CA 40198/06
ISS Security Pty Ltd (Appellant)
Devandar Naidu (First Respondent)
Nationwide News Pty Ltd (Second Respondent)
JUDGMENT OF: Spigelman CJ Beazley JA Basten JA
LOWER COURT JURISDICTION: Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S): SC 20188/01
LOWER COURT JUDICIAL OFFICER: Adams J
LOWER COURT DATE OF DECISION: 24 June 2005 and 15 March 2006
LOWER COURT MEDIUM NEUTRAL CITATION:
Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618; Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144
Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618; Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144
COUNSEL:
C Bridge SC; S Torrington (Nationwide News Pty Ltd)
G Little SC; G Parker (ISS Security Pty Ltd)
D T Kennedy SC; S E McCarthy (Devandar Naidu)
SOLICITORS:
Lander & Rogers (Nationwide News Pty Ltd)
Turks Legal (ISS Security Pty Ltd)
Albert A Macri Partners (Devandar Naidu)
CATCHWORDS:
CONTRACTS
General contractual principles
Construction and Interpretation of Contracts
Implied terms
Terms essential to enable performance
Employment contract
Whether trial judge erred in finding additional implied terms
DAMAGES
Measure and remoteness of damages in actions for tort
Mental and nervous shock
Failure to provide safe place of work
Whether double compensation for breach of contract and tort
DAMAGES
Exemplary damages
Focus upon conduct of wrongdoer
Whether trial judge erred in awarding exemplary damages
s 151M of Workers Compensation Act 1987 and Pt 33 r 8A of Supreme Court Rules 1970
whether trial judge erred in awarding interest
LIMITATION OF ACTIONS
Contracts, torts and personal actions
Personal injury cases
Workers Compensation Act 1987 s 151D
Whether trial judge erred in granting leave to bring proceedings
Fairness underlying principle as to whether to allow action
TORT
Negligence
Essentials of action for negligence
Where nervous shock or mental disorder
Common law
Reasonable foreseeability of damage
As between employer and employee
Workplace bullying and racial taunts
TORT
Negligence
Essentials of action for negligence
Duty of Care
Special relationships and duties
Employer and Employee
Where employee is subcontracted to workplace where bullying occurs
Third party’s duty to provide safe place and safe system of work
TORT
Negligence
Liability for other’s negligence
Contractors
Direct liability of employer for actions of site supervisor
TORT
Negligence
Apportionment of responsibility and damages
Liability of employer and contracting party
Whether trial judge erred in apportionment
TORT
Negligence
Vicarious liability
Sufficient connection with duties and responsibilities as employee
Site supervisor bullied and intimidated contractor under his control
Whether conduct in course of employment
TORT
Intentional tort
Mental and nervous shock
Requires intention or reckless indifference
LEGISLATION CITED:
Anti-Discrimination Act 1977 s 123
Civil Liability Act 2002 s 3B
Civil Procedure Act 2005 Sch 6 cl 5
Limitation Act 1969 s 13, 14, 18A, 60C, 60E
Racial Discrimination Act 1975
Supreme Court Rules 1970 Pt 33 r 8A, Pt 52 r 17
Uniform Civil Procedure Rules 2005 r 42.14
Workers Compensation Act 1987 s 151D, 151M
CASES CITED:
Arthur Guinness, Son & Company (Dublin) Ltd v The Freshfield (Owners) and Ors: (The Lady Gwendolen) [1965] P 294
Atkinson v Gameco (NSW) Pty Ltd [2005] NSWCA 338
Australian Securities & Investments Commission [2007] NSWCA 75; (2007) 62 ACSR 1
Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344
Bazley v Curry [1999] 2 SCR 534
Beale v Government Insurance Office (1997) 48 NSWLR 430
Beaudesert Shire Council v Smith (1966) 120 CLR 145
Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393
Blackburn Low & Co v Vigors (1887) 12 App Cas 531
Bolton (HL) Engineering Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159
Boodhoo and another v Attorney General of Trinidad and Tobago [2004] UKPC 17; [2004] 1 WLR 1689
Bourke v Hassett [1998] VSCA 24; [1999] 1 VR 189
BP Refinery (Western-Port) Pty Limited v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
Bunyan v Jordan (1937) 57 CLR 1
Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410
Canterbury Bankstown Rugby League Football Club Ltd v Rogers (1993) Aust Torts Reports 81-246
Carrier v Bonham [2001] QCA 234; [2002] 1 Qd R 474
Colonial Mutual Insurance Society Limited v Producers and Citizens Co-Operative Assurance Company of Australia Limited [1931] HCA 53; (1931) 46 CLR 41
Czartyrko v Edith Cowan University [2005] HCA 14; (2005) 79 ALJR 389
Deatons Proprietary Limited v Flew [1949] HCA 60; (1949) 79 CLR 370
Director General, Department of Education and Training v MT [2006] NSWCA 270; (2006) 67 NSWLR 237
El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685
Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
FJ Walker Limited v Webber (Court of Appeal, 16 November 1989, unreported)
Gifford v Strang Patrick Stevedoring Pty Ltd [2003] HCA 33; (2003) 214 CLR 269
Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120
Goose v Wilson Sandford and Co (1998) 142 SJLB 92
Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1
Hadid v Redpath [2001] NSWCA 416
Hall v A&A Sheiban Pty Ltd (1988) 20 FCR 217
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121
Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd [1968] HCA 60; (1968) 121 CLR 584
Hollis v Vabu Pty Limited [2001] HCA 44; (2001) 207 CLR 21
Holt v Wynter [2000] NSWCA 143; (2000) 49 NSWLR 128
Hunter v Canary Wharf Ltd [1997] UKHL 14; [1997] AC 655
James v Hill [2004] NSWCA 301
Janvier v Sweeney [1919] 2 KB 316
Jury v The Commissioner for Railways (New South Wales) [1935] HCA 29; (1935) 53 CLR 273
Koehler v Cerebos (Australia) Limited [2005] HCA 15; (2005) 222 CLR 44
Kondis v State Transport Authority [1984] HCA 61; (1984) 154 CLR 672
Lennard’s Carrying Company Limited v Asiatic Petroleum Company Limited [1915] AC 705
Lepore v State of New South Wales [2001] NSWCA 112; (2001) 52 NSWLR 420
Limpus v London General Omnibus Co (1862) 1 H&C 526; 158 ER 993
Lloyd v Grace, Smith & Co [1912] AC 716
Magill v Magill [2006] HCA 51; (2006) 81 ALJR 254
Marcic v Dalma Formwork (Australia) Pty Ltd [2006] NSWCA 174
McCracken v Melbourne Storm Rugby League Football Club Ltd [2007] NSWCA 353
Mifsud v Campbell (1991) 21 NSWLR 725
Morgan v Johnson (1998) 44 NSWLR 578
Morris v C W Martin & Sons Ltd [1966] 1 QB 716
Moylan & Ors v The Nutrasweet Co [2000] NSWCA 337
Mutton v Howard Haulage Pty Ltd [2007] NSWCA 340
Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618
Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144; (2006) 150 IR 203
New South Wales v Burton [2006] NSWCA 12
New South Wales v Fahy [2007] HCA 20; (2007) 81 ALJR 1021
New South Wales v Harlum [2007] NSWCA 120
New South Wales v Ibbett [2005] NSWCA 445; (2005) 64 NSWLR 168
New South Wales v Ibbett [2006] HCA 57; (2006) 81 ALJR 427
New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511
New South Wales v Mannall [2005] NSWCA 367
New South Wales v Seedsman [2000] NSWCA 119; (2000) 217 ALR 583
North Sydney Council v Roman [2007] NSWCA 27; (2007) 150 LGERA 419
Northern Territory v Mengel (1995) 185 CLR 307
O’Callaghan v Loder [1983] 3 NSWLR 89
O’Connor v The Commissioner for Government Transport [1954] HCA 11; (1954) 100 CLR 225
O’Leary v Oolong Aboriginal Corporation Inc [2004] NSWCA 7
Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388
Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679
Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492
R v Biggin; ex parte Fry [1955] VLR 36R v Maxwell (1998) 217 ALR 452
Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 81 ALJR 1773
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Smits v Roach [2006] HCA 36; (2006) 227 CLR 423
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1
South Eastern Sydney Area Health Service v King [2006] NSWCA 2
State of New South Wales v Ibbett [2005] NSWCA 445
State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511
State of New South Wales v Mannall [2005] NSWCA 367
Starks v RSM Security Pty Ltd & Ors [2004] NSWCA 351
Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442
Sutherland v Hatton [2002] 2 All ER 1
Tame v State of New South Wales [2002] HCA 35; (2002) 211 CLR 317
TCN Channel Nine v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
The Lady Gwendolyn (1965) P 294
TNT Australia Pty Limited v Christie & 2 Ors [2003] NSWCA 47; (2003) 65 NSWLR 1
Trend Management v Borg (1996) 40 NSWLR 500
Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422
Vinidex v Theiss [2000] NSWCA 67
Wainwright v Home Office [2003] UKHL 53; [2004] AC 406
Wilkinson v Downton [1897] 2 QB 57; 66 LJQB 493
Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40
Zorom Enterprises Pty Ltd v Zabow & Ors [2007] NSWCA 106
Elvin, J, “The duty of schools to prevent bullying”, (2003) 11 Tort L Rev 168
Mark Lunney, "Practical Joking and its Penalty: Wilkinson v Downton in Context" (2002) 19(2) Tort L Rev 168
Trindade, Cane and Lunney, The Law of Torts in Australia 4th ed (2007) OUP at [2.43]
Penelope Watson, "Searching the Overfull and Cluttered Shelves: Wilkinson v Downton Rediscovered" (2004) 23(2) UTasLR 264
Peter Handford, Mullany & Handford's Tort Liability for Psychiatric Injury 2nd ed (2006) Lawbook Co, Ch 22
DECISION:
The orders are
(1) In matter No. CA 40182 of 2006 (appeal by Nationwide News Pty Ltd)
(i) dismiss the appeal
(ii) dismiss the cross-appeal of ISS Security Pty Ltd
(iii) order the Appellant to pay the costs of the Respondents of the appeal
(2) In matter No. CA 40198 of 2006 (appeal by ISS Security Pty Ltd)
(i) allow the appeal and set aside the orders of Adams J entered on 12 May 2006
(ii) in place thereof, make the following orders
(a) judgment for the plaintiff against the second defendant, Nationwide News Pty Ltd
(b) order the second defendant to pay the plaintiff $1,946,189.40, such judgment to have effect from 12 May 2006
(c) order the second defendant to pay the plaintiff’s costs of the proceedings in the Common Law Division on an ordinary basis up to 26 March 2004 and thereafter on an indemnity basis
(d) order the plaintiff to pay the first defendant’s costs of the proceedings in the Common Law Division
(3) Dismiss the cross-appeal of Nationwide News Pty Ltd
(4) Order the cross-appellant to pay the costs of the cross-respondents to the cross-appeal
(5) Order the Respondents to pay the Appellant’s costs of the appeal
(6) Grant the First Respondent (Mr Naidu) a certificate under the Suitors’ Fund Act 1951 (NSW) in relation to the costs of the appeal.
JUDGMENT:
- 137 -
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40182/06
CA 40198/06SPIGELMAN CJ
BEAZLEY JA
BASTEN JAFriday 21 December 2007
Nationwide News Pty Limited v Devandar Naidu & Anor
ISS Security Pty Limited v Devandar Naidu & Anor
Judgment
SPIGELMAN CJ: I have read the judgment of Beazley JA in draft. Her Honour sets out the facts, issues and submissions. Subject to the following additional observations I agree with her Honour’s judgment. I have nothing to add to her Honour’s analysis of the limitation, estoppel, causation, exemplary damages, apportionment, damages and indemnity costs issues.
Factual Findings
With respect to the issue of delay I wish to express my agreement with her Honour’s analysis of the judgment of Adams J (Naidu v Group 4 Securitas Pty Ltd [2005] NSWSC 618). His Honour clearly addresses the complex factual issues, particularly of credit, comprehensively, directly and in a manner which indicates that the apprehensions that considerable delay in delivery of judgment can occasion do not apply in the present case. His Honour’s detailed analysis provides no analogy with the cases in which appellate courts have concluded that delay has affected findings of fact. In this regard, the position is the same as that found to exist in Vines v Australian Securities & Investments Commission [2007] NSWCA 75; (2007) 62 ACSR 1 at [26]-[31].
For the reasons given by Beazley JA the appellants’ submissions challenging the primary findings of fact by Adams J should be rejected.
Breach of Contract
As Beazley JA indicates, the trial judge made a number of different findings with respect to the contractual cause of action pleaded by Mr Naidu against ISS. Nothing turns on the implied term imposing an obligation on the employer to provide a safe system of work, because it is co-extensive with the duty in tort.
Insofar as his Honour found an implied term to protect employees from racial or personal vilification based on the ISS corporate policy, as Beazley JA shows, that policy was not in existence at the relevant time.
His Honour also found an implied term that employees are not to be placed in fear of insult or physical harm [200], upon which term his Honour further elaborated in his judgment on damages. In that second judgment he expressed the implied term in a different manner, namely that an employer would not “intimidate, racially or personally vilify, subject to demeaning, harassing or abusive conduct or threats of such conduct or threats of violence and insofar as it was reasonably practicable protect an employee from any such conduct”.
The test for the implication of terms into a contract, including a contract of employment, is well established. (See BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266.) At no stage in his reasoning does his Honour refer to or apply this test.
In my opinion there is no scope for the implication of a term of this character in a contract which already contains an obligation upon the employer to provide a safe system of work. I can see no basis on which it can be said that a term of this character is “necessary to give business efficacy to the contract”. The employment contract is perfectly “effective without” any such term. Furthermore, it cannot be said that the term of this character is so obvious that “it goes without saying”.
I agree with the conclusion of Beazley JA that the appeal should be allowed with respect to his Honour’s award of damages in contract.
Duty of Care
Two months before the delivery of judgment in the present case the High Court handed down its decision in Koehler v Cerebos (Australia) Ltd [2005] HCA 15; (2005) 222 CLR 44. His Honour’s attention was not directed to this case in any supplementary submissions and it is not referred to in his judgment. With respect to the liability of an employer for breach of the duty of care to avoid a risk of psychiatric injury, this case is directly applicable to the situation of ISS. By a close analogy, on the facts of the present case, it is also applicable to the situation of Nationwide News which, in relevant respects became virtually a surrogate employer.
As the joint judgment in Koehler makes clear, issues of duty and breach frequently overlap. In Koehler the High Court determined that that case could be decided at the level of breach of duty. (See at [20], [26] and [42].) However, the joint judgment made it clear that the starting point for analysis was the determination of the content of the duty of care. This required analysis of the relationship between the parties, relevantly, between Mr Naidu and each of ISS and Nationwide News. (See at [19]. [20[, [22], [24] and [25].) In many cases, as in Koehler, the analysis would commence with the particular contract of employment, although that factor does not appear particularly pertinent on the facts of this case. (See at [24] and [26].) It also requires analysis of the relevant statutory context, but no such context was suggested in the present case on appeal.
The joint judgment stated;
“[33] … The central inquiry remains whether, in all the circumstances, the risk of a plaintiff … sustaining a recognisable psychiatric illness was reasonably foreseeable, in the sense that the risk was not far-fetched or fanciful.”
Their Honours referred to Tame v New South Wales; Annetts v Australian Stations Pty Ltd [2002] HCA 35; (2002) 211 CLR 317 at [16], [61]-[62] and [201]. In those paragraphs a majority of the court rejected “normal fortitude” as a test of foreseeability, whilst accepting the relevance of the underlying idea. (See Gifford v Strang Patrick Stevedoring Pty Ltd [2003] HCA 33; (2003) 214 CLR 269 at [98] and [119].) Adams J erred at [185] in referring to “normal fortitude” as a test, but nothing turned on this reference on the appeal.
The joint judgment in Koehler also stated:
“[35] The duty which an employer owes is owed to each employee. The relevant duty of care is engaged if psychiatric injury to the particular employee is reasonably foreseeable … [T]hat invites attention to the nature and extent of the work being done by the particular employee and signs given by the employee concerned.”
The joint judgment made it clear that a range of factors should be considered with respect to determining the issue of reasonable foreseeability at the level of breach. (See eg at [24].) However, particular emphasis was given to any signs from the employee that the risk of psychiatric injury, as distinct from psychological disturbance such as stress, had appeared. In this regard the High Court observed:
“[36] … [T]he 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.”
With respect to the facts of Koehler, the joint judgment stated:
“[26] The Full Court was right to conclude that a reasonable person in the position of the employee would not have foreseen the risk of psychiatric injury to the appellant …”
The Court gave two reasons for this conclusion, but explained that the first had “limited significance” [28]. The reason which was of significance was that:
“[27] … [T]he employer had no reason to suspect that the appellant was at risk of psychiatric injury”.
The joint judgment concluded:
“[41] The conclusion that the employer had no reason to suspect that the appellant was at risk of psychiatric injury is the reason upon which the Full Court’s conclusion hinged. Here there was no indication (explicit or implicit) of any particular vulnerability of the appellant. As noted earlier, she made many complaints to her superiors but none of them suggested (either expressly or impliedly) that her attempts to perform the duties required of her were putting, or would put, her health at risk. She did not suggest at any time that she was vulnerable to psychiatric injury or that the work was putting her at risk of such an injury. None of her many complaints suggested such a possibility. As the Full Court said, her 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 the illness was physical, not psychiatric. There was therefore, in these circumstances, no reason for the employer to suspect risk to the appellant’s psychiatric health.
[42] The Full Court was right to conclude that the employer was not shown to have breached a duty of care.”
In the present case, it is also pertinent to note that the inquiry into breach of duty cannot focus only upon the way in which a particular injury has occurred. As Hayne J said in Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 after posing the question in terms of ”what is to be done in response to the various foreseeable risks of injury”:
“[124] … [B]ecause the inquiry is prospective, it would be wrong to focus exclusively upon the particular way in which the accident that has happened came about … [T]he examination of the causes of an accident that has happened cannot be equated with the examination that is to be undertaken when asking whether there was a breach of a duty of care which was a cause of the plaintiff’s injury. The inquiry into the causes of an accident is wholly retrospective. It seeks to identify what happened and why. The inquiry into breach, although made after the accident, must attempt to answer what response a reasonable person, confronted with a foreseeable risk of injury, would have made to that risk. And one of the possible answers to that inquiry must be ‘nothing’.
[125]There are fundamental reasons why the inquiry cannot be confined to where the accident happened or how it happened. Chief among them is the prospective nature of the inquiry to be made about response to a foreseeable risk.
[126]When a plaintiff sues for damages alleging personal injury has been caused by the defendant’s negligence, the inquiry about breach of duty must attempt to identify the reasonable person’s response to foresight of the risk of occurrence of the injury which the plaintiff suffered. That inquiry must attempt, after the event, to judge what the reasonable person would have done to avoid what is now known to have occurred. Although that judgment must be made after the event it must seek to identify what the response would have been by a person looking forward at the prospect of the risk of injury.”
(See also per Gummow J at [61] and Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 81 ALJR 1773 at [65]-[69].)
The prospective nature of the inquiry as to breach has particular significance in the case of the risk of psychiatric injury. In any organisation, including in employer/employee relationships, situations creating stress will arise. Indeed, some form of tension may be endemic in any form of hierarchy. The law of tort does not require every employer to have procedures to ensure that such relationships do not lead to psychological distress of its employees. There is no breach of duty unless a situation can be seen to arise which requires intervention on a test of reasonableness.
Koehler affirms the line of High Court authority, including, Tame, Annetts and Gifford, which focuses attention on the purpose for which the inquiry as to foreseeability is undertaken, namely, to determine what reasonableness requires by way of response and, therefore, whether legal responsibility for the conduct should be attributed to the defendant for the injury to the plaintiff.
As Gleeson CJ said in Gifford supra at 276: “reasonable foreseeability involves more than mere predictability”. In the same passage his Honour said “advances in medical knowledge have made us aware of the variety of circumstances in which emotional disturbance can trigger, or develop into, recognisable psychiatric injury” and concluded:
“[A]dvances in the predictability of harm to others … do not necessarily result in a co-extensive expansion of the legal obligations imposed on those whose conduct might be a cause of such harm. The limiting consideration is reasonableness, which requires that account be taken both of interests of plaintiffs and of burdens on defendants.”
The reasoning and result in Koehler confirms this analysis. It may well be the case that it is now well established that workplace stress, and specifically bullying, can lead to recognised psychiatric injury. That does not, however, lead to the conclusion that the risk of such injury always requires a response for the purpose of attributing legal responsibility. Predictability is not enough.
It does appear that over recent decades the helping professions and the pharmaceutical industry have medicalised many of the normal stresses of every day life, including working life. The law has not expanded legal responsibility for conduct in the same way. Koehler makes it clear that the common law of Australia will not do so, failing to follow such developments in other common law jurisdictions.
An employer can be liable for negligence because of a failure to protect an employee against bullying and harassment. However, the existence of such conduct does not determine the issue of breach of duty. As Hayne J put it in Tame supra at [296]:
“[A] plaintiff will not recover damages for an injury which psychiatric opinion recognises as a psychiatric injury by demonstrating only that such an injury was reasonably foreseeable and that the defendant’s negligence was a cause of the injury which the plaintiff sustained.”
One of the elements required to be assessed is the degree of probability that the risk of psychiatric injury may occur, even when the reasonable foreseeability test of a risk that is not far fetched and fanciful, has been satisfied.
As the actual employer, the duty owed by ISS to the respondent is that set out in the joint judgment of the High Court in Czartyrko v Edith Cowan University [2005] HCA 14; (2005) 79 ALJR 389 at [12]:
“An employer owes a non-delegable duty of care to its employees to take reasonable care to avoid exposing them to unnecessary risks of injury. If there is a real risk of an injury to an employee in the performance of a task in a workplace, the employer must take reasonable care to avoid the risk by devising a method of operation for the performance of the task that eliminates the risk, or by the provision of adequate safeguards.”
The facts of the particular relationship between, relevantly, Mr Naidu and Nationwide News, or with its related corporations, as set out by Beazley JA, are such as to make it appropriate to characterise Nationwide News as a surrogate employer. In the circumstances of this case the duty set out in the extract from Czartyrko, save perhaps for the reference to the duty being non-delegable, applies to Nationwide News. (See TNT Australia Pty Ltd v Christie [2003] NSWCA 47; (2003) 65 NSWLR 1 esp at [41]-[43].)
Breach of Duty
The relevant factual matrix is fully set out by Beazley JA. For purposes of analysis of the issue of breach it is particularly pertinent to note certain matters.
Mr Naidu worked at premises and in a work environment under the control of Nationwide News, pursuant to a contractual arrangement between ISS and News;
Mr Naidu worked under the direct supervision of Mr Chaloner, in substance as his assistant;
The relevant conduct occurred over a period of five years and, although not continuous, appears to have been sufficiently frequent to be characterised as systematic;
Mr Naidu was employed in security, a form of occupation in which he would expect to be exposed to stressful situations;
Mr Naidu did not complain about Mr Chaloner’s conduct, nor take any other steps to draw his conduct to the attention of persons who could do something about it in either Nationwide News or ISS; and
Save on one occasion in the case of Nationwide News, his fellow employees, who witnessed Mr Chaloner’s conduct, did not do so either.
The fact that the workplace was under the control of Nationwide News is a relevant, but not determinative, factor when deciding whether ISS was in breach. (See Bourke v Hassett [1998] VSCA 24; [1999] 1 VR 189 esp at [41]-[42]; Atkinson v Gameco (NSW) Pty Ltd [2005] NSWCA 338 at [18]-[19]; Mutton v Howard Haulage Pty Ltd [2007] NSWCA 340 at [18], [144]-[145].) The fact that the element of control by the employer is somewhat attenuated may be relevant to determining whether an employer did breach its duty in the particular circumstances. This consideration may be of greater significance where the relevant risk is psychiatric injury than in other cases.
The fact that Mr Naidu was employed in a job which necessarily involved exposure to stressful situations is of significance even though the nature of the stress involved in this case – bullying and harassment by a superior – was not within the scope of his employment.
In the case of both appellants, but particularly ISS, this aspect of his employment requires consideration of a number of the elements emphasised in Koehler, referred to above:
The particular contract of employment [24] and [26];
The nature and extent of the work by the particular employee [35]; and
The assumption that the employee considers he is able to do the job [36].
The facts and matters that may be said to give rise to foreseeability of psychiatric injury involve matters known to Mr Chaloner and matters known to other employees, including two senior executives – Mr Paine in the case of Nationwide News and Mr Blinkworth in the case of ISS. The paragraph references below are to the judgment of Adams J.
There is a substantial body of evidence of racial vilification and personal abuse incorporating a range of insults including “black boy”, “black cunt”, “monkey face”, “curry muncher”, “boofhead”, “poofter”, “hopeless” (see [95], [96], [106], [111], [112], [115]). It is accurate to describe the course of conduct as bullying or harassment. The evidence suggests that the conduct was frequent enough to be characterised as systematic.
On one occasion, an employee of Nationwide News, Mr Kamaledine, drew the racial abuse to the attention of Mr Paine, a senior executive. Mr Kamaledine had observed that the Mr Naidu was “in tears. He was horrified and looked very scared” [95]. Although the evidence of Mr Kamaledine indicates that he spoke to Mr Paine about the incident, it does not indicate clearly whether he informed him both of the content of the abuse and of Mr Naidu’s reaction. He simply states “I told him exactly what had happened”. His Honour’s finding is in similar, but not identical, terms: “he repeated what he had seen to Mr Paine” [95]. On his Honour’s finding this was the only occasion on which Mr Paine was directly informed of the conduct.
His Honour accepted Mr Kamaledine’s evidence that when Mr Naidu first came to work at News: “he was enthusiastic, honest, dedicated, reliable, sincere and also sensitive” but that as the years passed he notice that Mr Naidu “became progressively more quiet and, as it seemed to him, more depressed” and that he saw him “always in tears”, from about mid 1995 [103]. Mr Kamaledine gave evidence that from time to time he observed Mr Naidu to look “depressed”. (See eg [94], [97].)
Similarly, Mr Hassan O’Demis, an employee of ISS, gave evidence that when he first met the respondent he was “a nice cheery and confident person, friendly and gregarious and socialised on the premises with other staff members” but that when he returned to work in 1996 he noticed that Mr Naidu was “quite afraid” of Mr Chaloner and “would always be a bit passive, quiet and afraid to say or do anything wrong in front of him”. He also said that Mr Naidu was “more quiet, looked tired all the time and did not seem to be his ‘old confident self’. He seemed more withdrawn … and he saw him from time to time with red eyes as if he had been crying” and noticed on one occasion that he seemed “very depressed … and very worn out, tired” [106]-[107].
Another employee of ISS who worked at the Surry Hills premises, Ms Tanya Pool, said that when she first met Mr Naidu he was “very relaxed, very nice person and nothing seemed to bother him but by the end of the time that I left he always looked distressed, looked upset and looked tired … and withdrawn … it was like the spark had gone from him” [109].
In my opinion, in the context of determining what reasonableness requires, there is no scope for extending the doctrine of constructive knowledge so as to encompass all the employees of a company. To do so would be, in substance, to impose a duty on all organisations to establish elaborate systems of inquiry and investigation which are unduly burdensome.
Whether a principal is affected by an agent’s knowledge depends upon the context. (See Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 at [47], referring to El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685 at 701-704.) In an agency context the issue turns on actual or ostensible authority. Analogous principles apply in the context of employees in an organisational hierarchy.
Whether the knowledge of a particular person should be imputed to a corporation depends on the scope of that person’s employment. A person in a supervisory position – such as Mr Paine or Mr Blinkworth - has duties which encompass the receipt of the relevant knowledge and accordingly, could be said to have a duty to communicate and/or act upon it. That cannot be said to be the case for the other employee witnesses.
The test of a duty to communicate knowledge as establishing such knowledge in a corporation has been applied in a number of contexts. (See eg South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1 at 23; Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 658; R v Biggin; ex parte Fry [1955] VLR 36 at 39-41; Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 at 404.) Lord Hoffmann has rejected the terminology of duty to communicate and explained the cases on the basis that “communication to the agent is treated, by reason of his authority to receive it, as communication to the principal” (El Ajou at 703). This is a reference to a situation where “the agent has actual or ostensible authority to receive communications”. In this Court, Handley JA has expressed ‘difficulties’ with Lord Hoffmann’s approach in Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679 esp at [76] and see [87]-[88]. At least in the case of an agent acting within the scope of the agency (or, by analogy, within the scope of duty as an employee), the distinction does not appear to me to be material. (See generally Reynolds Bowstead and Reynolds on Agency, 18th ed (2006) Article 95 esp [8-209] and [8-212].)
A felicitous description of a person whose knowledge will be imputed to a corporation is an “agent to know”. (Blackburn Low & Co v Vigors (1887) 12 App Cas 531 at 537.)
Putting aside Mr Chaloner himself, only Mr Paine and Mr Blinkworth could relevantly be characterised as “agent[s] to know” for purposes of determining what reasonableness requires in the context of Mr Chaloner’s conduct towards Mr Naidu. In my opinion, they did not know enough to require them to act.
In the case of Nationwide News, the relevant knowledge was that of Mr Paine. His Honour found:
He accepted Mr Kamaledine’s evidence that he told Mr Paine about one incident [182];
That it was “very likely that Mr Chaloner was adept at concealing any inappropriate conduct from Mr Paine” and “Mr Paine was unaware … of the way in which Mr Chaloner treated the plaintiff” [183];
His Honour subsequently referred to “Mr Paine’s probable knowledge of that conduct” [202], which appears to be a reference to the single occasion involving Mr Kamaledine; and
“[I]t was known to and agreed by News (through Mr Paine) … that … given Mr Chaloner’s personality, [his management style] would be likely to involve unreasonable and possibly excessive demands on the plaintiff” [210].
With respect to ISS, the relevant knowledge was that of Mr Blinkworth. In this regard his Honour’s findings were:
Mr Chaloner’s communications with Mr Blinkworth included “to a significant degree … but perhaps only an occasional one”, Mr Chaloner’s proclivity to employ verbal intimidation including “by way of raised voice and peremptory and contemptuous language” [158].
Mr Naidu did complain to Mr Blinkworth that Mr Chaloner was “difficult, demanding and unreasonable”, but not about “any racial vilification” [159].
This complaint by Mr Naidu to Mr Blinkworth was not of a character that “might have led any reasonable person to apprehend any risk of psychological injury” [161].
However, “Mr Blinkworth was well aware that Mr Chaloner was a bully and would or all should have realised that he frequently used at least verbal intimidation in his relations with staff including, in particular, the plaintiff” [161].
His Honour summarised the state of Mr Blinkworth’s knowledge and concluded that these were not matters that “should have led him to suspect that Mr Chaloner was behaving in such a way as could or might lead to injuring the plaintiff” [189].
Mr Blinkworth knew or should have known that Mr Chaloner would “be demanding and unreasonable towards” Mr Naidu [191].
Mr Blinkworth ought to have known that Mr Chaloner “was likely to use intimidation as one of his techniques of management and that the plaintiff would be the butt of this behaviour. It follows that Mr Blinkworth had responsibility, under the plaintiff’s contract of employment, to make reasonable inquiries of the plaintiff and other co-workers at the site about its nature and extent” [200]. This finding distinguishes the tort from the contract cause of action.
His Honour also referred to the knowledge of other ISS employees on site and attributed that knowledge to ISS [197]. It is not entirely clear how his Honour reached this conclusion and whether it was pertinent to the cause of action in tort or contract.
His Honour held that the circumstances were such that ISS should have investigated Mr Chaloner’s “exercise of control”. Had it done so, his Honour held, “it would have discovered its serious and potentially dangerous extent” [197]. Again it is not clear whether his Honour was dealing with both the cause of action in contract and in tort.
This conclusion appears to be based on his Honour’s finding that: [193] “… even one complaint of serious misconduct should initiate in any employer acting reasonably an enquiry both of the person against whom the allegation is made and about the affected subordinate about the truth of the allegation and the extent of the misconduct. That process should also involve an enquiry of the employee about an employee’s response to an ability to cope with the conduct of which he or she had complained”.
Insofar as his Honour’s analysis of the position of ISS was based on contract, I have dealt with it above. Insofar as his Honour was dealing with breach of the duty of care in tort, in my opinion, the proposition that “even one complaint of serious misconduct”, whether referable to the liability of Nationwide News or of ISS, should lead an employer to initiate an inquiry, states the requirement of reasonableness too generally and too high. What is required depends on the whole of the circumstances including, for example, the failure of the person involved to complain.
It is not clear how his Honour applied this “one complaint test”. His Honour was dealing with the liability of ISS but the single complaint in this case was made by a third party to Mr Paine, who represented Nationwide News. It does not appear that any of the employees of ISS who witnessed relevant events did anything about it. I can see no proper basis on which it can be concluded that ISS failed to act reasonably by not having in place mechanisms which would have disclosed Mr Chaloner’s conduct. Nor, in my opinion, can that be said of Nationwide News. In the case of neither Nationwide News nor ISS, did the imputed knowledge derived, respectively, from Mr Paine or Mr Blinkworth, require any steps to be taken.
To the state of knowledge and the observations made by the respective employees who gave evidence, must be added the knowledge and direct observations made by Mr Chaloner himself. The extent to which Mr Chaloner’s conduct binds either of the appellants is an analytically distinct issue and I will consider it further below. At this point of the analysis the question is the extent to which his knowledge and observations are pertinent to determining whether it was foreseeable on the part of Nationwide News or ISS that Mr Naidu would suffer psychiatric injury, relevantly, from the point of view of determining whether there was a breach of duty by either of the appellants.
Mr Chaloner was in a position that could be characterised as an “agent to know”. To suggest that he had authority to receive communications about the results of his own misconduct, or a duty to communicate these results, strains the idea of imputed knowledge in a way to which I will return.
In this regard the critical finding by his Honour was:
“[187] … [T]he conduct of Mr Chaloner as described by [Mr Naidu] was so brutal, demeaning and unrelenting that it was reasonably foreseeable that, if continued for a significant period of time, certainly the period of the plaintiff’s relationship with Mr Chaloner, it would be likely to cause significant, recognisable psychiatric injury.”
Earlier his Honour had held:
“[17] … I have concluded that so extreme was Mr Chaloner’s behaviour that he well knew, or would have known had he reflected as any reasonable man should have, that prolonged misconduct of the kind he exhibited towards the plaintiff could reasonably be expected to expose him to the real risk of such psychological injury. … I think that the risk of such injury would have been obvious to any objective and reasonable observer.”
In the course of considering the liability of Nationwide News, his Honour also said:
“[205] … I am satisfied that it was reasonably foreseeable that such an illness might well result from the infliction of that conduct upon the plaintiff, whether or not Mr Chaloner was aware, or cared, whether this might be the result. I have no doubt that Mr Chaloner realised that his behaviour would have caused some injury to the plaintiff. If he turned his mind to the risk of inflicting serious injury of the plaintiff, he was, at least, indifferent to the risk.”
It is pertinent to the issue of breach that his Honour found that Mr Naidu did not complain to other persons or, more understandably, to Mr Chaloner, about the extraordinary conduct that continued over a lengthy period of time. His Honour described Mr Naidu’s response as “passive” [13]. Unlike Koehler, in this case there were signs, but there was no complaint.
Mr Chaloner was not called as a witness. The evidence as to what he would have observed about Mr Naidu’s reaction is not systematic. Mr Naidu did, however, give evidence which was not contested and which his Honour appeared to accept. Mr Naidu said that he had on many occasions been reduced to tears in Mr Chaloner’s presence. (See eg the extracts set out in the judgment at [22] and [24], [37], [41].)
On the basis of the findings and the evidence about Mr Paine and Mr Blinkworth, and in the absence of evidence from Mr Chaloner, this is not a case in which it could be concluded that a senior employee had actual knowledge of the risk of psychiatric injury. (As was found to be the case in New South Wales v Mannall [2005] NSWCA 367 at [104], [114].)Nor is this a case in which the exposure to stressful events was anything like the order of magnitude identified in New South Wales v Seedsman [2000] NSWCA 119; (2000) 217 ALR 583, see at [7] and [37].
The evidence suggesting some form of mental disturbance is twofold. First, the frequency and intensity of crying by Mr Naidu. Secondly, the observations by co-workers of a significant change in Mr Naidu’s personal behaviour over the years. The former is clearly linked to Mr Chaloner’s conduct. The latter may be linked, albeit less clearly. However, it does not appear that Mr Blinkworth knew of either and Mr Paine may have known about crying on one occasion.
These signs are of a character which suggest an effect on Mr Naidu’s mind of an adverse character. However, what is required is foreseeability of a recognised psychiatric illness. The signs suggestive of psychiatric illness, rather than psychological disturbance, satisfy the not far fetched and fanciful test of foreseeability. However, they do not, in my opinion, reach the level of possibility which would require the employer or surrogate employer to intervene.
Workers are subject to stress in both their working and personal lives which can affect their mental health. Changes in personal behaviour over a period of years may occur for many reasons. So may the response of crying. These responses did not, in my opinion, indicate psychiatric illness to the degree that required a response from the actual or surrogate employer.
An employer, like ISS, or a surrogate employer, like Nationwide News, are not, in my opinion, required to have in place systems of inquiry and/or response, to manifestations of mental disturbance in order to determine whether or not the disturbance is work related and, if so, to remedy the situation. In the present case, at least via Mr Chaloner, both ISS and Nationwide News can be taken to be aware of the systematic course of conduct by him which created the possibility that the disturbance may be work related. They did not, however, have sufficient information about Mr Naidu’s response, even via Mr Chaloner, that the disturbance could be a recognised psychiatric illness requiring intervention.
In any event, in the face of Mr Chaloner’s intentional course of conduct, which brutalised the respondent, it is artificial to analyse his conduct in terms of a duty of care owed by either appellant, through the agency of Mr Chaloner, based on the foreseeability of psychiatric damage together with the application of a standard of reasonableness as to the steps which should have been taken to avoid psychiatric injury.
The imperial march of the tort of negligence is such that, as a matter of practice, it has led the legal profession to abjure the sometimes more demanding requirements of proof of an intentional tort. This has led to an accompanying lack of rigour in the analysis of the elements of a cause of action.
To treat Mr Chaloner’s knowledge as pertinent to determining what a reasonable employer or surrogate employer should have done appears to me to be so inappropriate as to engage the wrong sphere of legal discourse. That conclusion is reinforced by the artificiality of any suggestion that Mr Chaloner was authorised to receive information about, or had a duty to communicate, the results of his own misconduct and that, on that basis, each appellant had imputed knowledge of whatever he knew.
As Gleeson CJ said in New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511:
“[31] … Furthermore, although deliberately and criminally inflicting injury on another person involves a failure to take care of that person, it involves more. If a member of a hospital's staff with homicidal propensities were to attack and injure a patient, in circumstances where there was no fault on the part of the hospital authorities, or any other person for whose acts or omissions the hospital was vicariously responsible, the common law should not determine the question of the hospital's liability to the patient on the footing that the staff member had neglected to take reasonable care of the patient. It should face up to the fact that the staff member had criminally assaulted the patient, and address the problem of the circumstances in which an employer may be vicariously liable for the criminal acts of an employee. Intentional wrongdoing, especially intentional criminality, introduces a factor of legal relevance beyond a mere failure to take care. Homicide, rape, and theft are all acts that are inconsistent with care of person or property, but to characterise them as failure to take care, for the purpose of assigning tortious responsibility to a third party, would be to evade an issue.”
A similar approach is suggested by the observations of Gummow and Hayne JJ in Lepore at [270]:
“As Williams v Milotin (1957) 97 CLR 465 at 470 makes plain, negligently inflicted injury to the person can, in at least some circumstances, be pleaded as trespass to the person, but the intentional infliction of harm cannot be pleaded as negligence…”
The Intentional Tort
The respondent has sought to uphold his Honour’s award of damages in tort on the basis of the intentional tort it pleaded. This was done by way of notice of contention rather than notice of appeal, so that it arises only if the Court allows the appeal on the finding of negligence which, for the reasons I have given above, should occur.
His Honour’s findings of fact are that Mr Chaloner wilfully committed a series of acts calculated to cause Mr Naidu physical harm, being a recognised psychiatric injury. This could constitute an intentional tort of the character identified in Wilkinson v Downton [1897] 2 QB 57; 66 LJQB 493 affirmed in Janvier v Sweeney [1919] 2 KB 316 and accepted, albeit without affirmation, by the High Court in Bunyan v Jordan (1937) 57 CLR 1 and Northern Territory v Mengel (1995) 185 CLR 307 at 347.
His Honour made all of the findings of primary fact required to establish the tort but refrained from concluding that the cause of action had been made out. He said:
“[186] The acts of Mr Chaloner were, of course, not mere negligence. They were deliberate and intended to demean, offend and injure. Because no particular occasion could be said to have caused the plaintiff’s ultimate psychological illness, the defendants argue that the line of reasoning expressed in Janvier v Sweeney [1919] 2 KB 316 does not apply. It strikes me as extraordinary that, the intention of Mr Chaloner being as I have characterised it, he would not be liable for the actual injury he inflicted on the plaintiff, though he had not actually thought that what he was doing might do more than cause temporary, though acute and painful distress. In fact, I consider that Mr Chaloner was indifferent to the consequences of his malice and was content to cause as much distress as his actions were capable of inflicting, subject, I suppose, to the desirability of the plaintiff being able to continue to work in subjection to him. In this sense, this case is markedly different from the situation under consideration in Tame. If Janvier v Sweeney (supra) be rightly decided – and there is no reason, I think, to suppose otherwise – it appears to follow that the defendants are both liable for such of Mr Chaloner’s misbehaviour as was inflicted in the course of his employment, a matter to which I come in due course. As it happens, however, it seems to me that the defendants are liable in negligence – and Group 4 in contract – for the plaintiff’s psychological injury at Mr Chaloner’s hands and I have not, therefore, found it necessary to consider further the application of this line of authority to the present case.”
His Honour also held:
“[205] … I have no doubt that Mr Chaloner realised that his behaviour would have caused some injury to the plaintiff. If he turned his mind to the risk of inflicting serious injury to the plaintiff, he was, at least, indifferent to the risk.”
A conclusion in a particular case that what was involved was the intentional infliction of personal injury is a matter of significance, eg for deciding whether to award exemplary damages and also for determining any question of contribution between joint tort feasors. Indeed, with respect to a range of matters, notably the availability of exemplary damages, the distinction between an intentional tort and negligence will be of growing significance by reason of the exemption of the intentional torts by s 3B of the Civil Liability Act 2002 from the provisions of that Act, which modify the common law of negligence in a number of significant respects. (See eg New South Wales v Ibbett [2005] NSWCA 445; (2005) 64 NSWLR 168.)
Observations have been made which suggest that the reasons that led the courts to develop the Wilkinson v Downton line of authority have been superseded by the tort of negligence and that therefore Wilkinson v Downton has “no leading role in the modern world”: (Wainwright v Home Office [2003] UKHL 53; [2004] AC 406 at 425; see generally the analysis per Lord Hoffmann at [36]-[47].)
In Australia it has been suggested that the Wilkinson v Downton line of territory has been “subsumed under the unintentional tort of negligence”. (See Magill v Magill [2006] HCA 51; (2006) 81 ALJR 254 at [117].) However, this Court should follow the acceptance by the High Court of the authority of Wilkinson v Downton in Bunyan v Jordan and in the joint judgment in Northern Territory v Mengel supra.
The position in Australia appears to be that identified by Gleeson CJ in Magill v Magill supra at [20]. His Honour referred to Wilkinson v Downton and Janvier v Sweeney as cases which “would probably now be explained either on the basis of negligence, or intentional infliction of personal injury”. As in the case of negligence, the requirement of “personal injury” means the test does not extend to any form of psychological damage but requires a recognised psychiatric condition. (Cf Hunter v Canary Wharf Ltd [1997] UKHL 14;[1997] AC 655 at 707.)
Although in some respects an intentional tort is more difficult to establish than negligence, it is not confined by a test of foreseeability and does not involve an inquiry into reasonableness of response.
The tort of intentional infliction of psychiatric injury has been the subject of significant literature. (See, eg F Trindale, P Cane and M Lunney, The Law of Torts in Australia 4th ed (2007) Oxford Uni Press, Melbourne at 86-95; P Handford, Tort Liability for Psychiatric Damages 2nd ed (2006) Law Book Co, Sydney Ch 28; C Witting, “Tort Liability for Intended Mental Harm” (1998) 21 University of New South Wales Law Journal 55; P Watson “Searching the Overfull and Cluttered Shelves: Wilkinson v Downton Rediscovered” (2004) 23 University of Tasmania Law Review 264.)
One issue that arises is what is meant by the word “calculated” in the Wilkinson v Downton and Janvier v Sweeney formulation of the tort. For the reasons I have set out above, psychiatric injury was reasonably foreseeable on the test of conceivable foreseeability adopted for the law of negligence. Clearly something substantially more certain is required for the intentional tort.
The word “calculated” is notoriously ambiguous: it can either mean a subjective, actual, conscious desire to bring about a specific result or it can mean what is likely, perhaps overwhelmingly likely, to occur considered objectively.
As McPherson JA said in Carrier v Bonham [2001] QCA 234; [2002] 1 Qd R 474 at [25]:
“To my mind, however, the problem is that the expression ‘calculated’ which is used in those passages is one of those weasel words that is capable of meaning either subjectively contemplated and intended, or objectively likely to happen. See, for example, O’Sullivan v Lunnon (1986) 163 CLR 545, 549. The implication I draw from the context in which the word appears in the passages quoted is that it was being used in the latter and not the former sense. That seems plain to be so in what was said by Latham CJ in Bunyan v Jordan (1937) 57 CLR 1, 11, where, reverting to Wilkinson v Downton, his Honour remarked that the words in that case were of such a character and spoken in such circumstances that ‘it was naturally to be expected that they might cause a very severe nervous shock’. Certainly that seems to have been the view of Dixon J who, in contrasting the facts of Bunyan v Jordan with those of Wilkinson v Downton, concluded (57 CLR 1, 17) that the harm which was said in fact to have ensued in the case before the High Court, was ‘not a consequence which might reasonably have been anticipated or foreseen’.”
This issue has not been determined authoritatively. It does appear that an actual subjective intention is not required. Indeed, the formulation in Wilkinson v Downton at 59 refers to an “imputed intention”. (See also the reference by Latham CJ to the result that was “naturally to be expected” in Bunyan v Jordan supra at 11).
It is not necessary, in this case, to decide, as McMurdo P suggests in Carrier v Bonham at [12], that “calculated” means “likely to have that effect”. It may be that it is sufficient if the result satisfied a test of “substantial certainty”. (See Trindade et al supra at 40-41.) However, a test of reckless indifference to a result will, in this context, satisfy the requirement of intention. (See Trindade et al at 41-42, 48, 56.) In the present case, the findings of Adams J establish such reckless indifference and that is sufficient to establish intention, just as it is in the criminal law.
The High Court has authoritatively established the test for recovery of consequential loss in the case of an intentional tort in terms of asking whether the particular head of damage is a natural and probable result of conduct. (See Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388 esp at [13], [73], [114]. See also TCN Channel Nine v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333 at [100].)
There is no finding that Mr Chaloner did actually intend to inflict psychiatric damage. However, the nature and scale of his conduct was such, as the expert evidence confirmed, as to constitute a recognised psychiatric injury as a natural and probable consequence of that course of conduct. The limitations of foresight and remoteness are not applicable. (See Palmer Bruyn at [13] and [78].)
If sued, Mr Chaloner would, in my opinion, have been liable to pay the damages awarded to Mr Naidu on the basis of the intentional infliction of psychiatric injury. The final matter to be determined is whether either, or both, of the appellants are also so liable.
Liability of Nationwide News
I agree with Beazley JA that in relevant respects, Mr Chaloner was Nationwide News. Accordingly, it is not strictly necessary to analyse the matter in terms of vicarious liability. He was responsible for security of the News Limited Group generally, including its subsidiary Nationwide News. He supervised the security contract with ISS and had direct responsibility for seeing how the contract was administered. In response to a question as to why he was not Nationwide News for all relevant purposes, Mr C Bridge SC, who appeared for Nationwide News, submitted that was because he did not have the power to hire and fire, relevantly, Mr Naidu. However, this is not a determinative consideration with respect to the issue whether or not Mr Chaloner’s conduct constituted, of itself, a breach of any duty of care which Nationwide News owed to persons who are not its employees.
For matters relating to security and, in particular, the administration of the contract with ISS, Mr Chaloner was the person of whom, in the words of Wilmer LJ in The Lady Gwendolyn (1965) P 294 at 343: “It can fairly be said that his act or omission is that of the company itself”. There is no complication in the present case, as there was in The Lady Gwendolyn, that the manager of the traffic department, about whom these remarks were made, was in fact knowledgeable about railways, but took little interest in ships where the relevant incident occurred. (See Meridian Global Funds Management Agent Ltd v Securities Commission [1995] 2 AC 500 at 510.)
In the present case, Mr Chaloner was, for relevant purposes, the company irrespective of the existence of lines of authority and reporting to those in the management hierarchy above him.
In the alternative, I agree with Beazley JA that if Nationwide News was not directly liable for Mr Chaloner’s acts then it was vicariously liable. Much, probably most, of his relevant conduct constituted a mode of asserting authority over Mr Naidu whose activities he was expressly required to control. Some aspects of his conduct could not be so classified, particularly the insistence that Mr Naidu perform work of a private nature for Mr Chaloner. Nevertheless, in my opinion, as in the case of a bouncer who uses excessive force, the exercise of a brutalised form of control was the performance of his actual tasks in an inappropriate manner.
A number of different formulations appear in the judgments of the High Court in New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511, in elaboration of the traditional formulation of the “course of employment” ie that the conduct was ‘so connected with authorised acts that it may be regarded as a mode – although an improper modes – of doing them’. In my opinion, the conduct of Mr Chaloner satisfies each of them:
Mr Chaloner’s conduct was so closely connected with his responsibilities as to be in the course of his employment. ([85] per Gleeson CJ).
The conduct of Mr Chaloner was the “doing of an authorised act in an unauthorised way” and vicarious liability can be justified “on the basis of ostensible authority” (at [108] per Gaudron J and see at [130]).
There is here “a close connection between what was done and what that person was engaged to do” (at [131] per Gaudron J).
The “identification of what [Mr Chaloner] was actually employed to do and held out as being employed to do” encompassed, relevantly, control over the services provided under the security contract by Mr Naidu (at [232] per Gummow and Hayne JJ).
Mr Chaloner’s conduct “was done in the ostensible pursuit of the employer’s business or the apparent execution of the authority which the employer held out the employee as having” (at [239] per Gummow and Hayne JJ).
There was a “sufficiently close connection” between the conduct which was not authorised and the acts which were authorised (see at [315] per Kirby J).
Notwithstanding the difficulties that sometimes attend the traditional formulation – the “course of employment” – it is, in my opinion, quite clear that the relationship between Mr Chaloner and Nationwide News was such that most all of his conduct with respect to Mr Naidu did fall within the course of employment and, accordingly, Nationwide News was vicariously liable for his conduct.
Liability of ISS
In the case of ISS it cannot be said that Mr Chaloner was the company. The issue is one of vicarious liability. Imposing liability upon ISS for the conduct of Mr Chaloner raises issues of policy and principle of a kind discussed in the joint judgment in Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at [32]-[45], notably the emphasis given to the element of control which, in part, explained the traditional differentiation between the position of an employee and of an independent contractor.
In the present case, ISS clearly acquiesced in placing Mr Naidu under the direct supervision and authority of Mr Chaloner. Nevertheless, this was in the context in which he was administering a contract on behalf of Nationwide News. ISS had no element of control over Mr Chaloner. His conduct was not closely connected with anything he could be said to be doing for or on behalf of ISS. It should not be fixed with vicarious liability for his conduct.
In my opinion, the appeal of ISS should be allowed.
I agree with the orders proposed by Basten JA.
BEAZLEY JA: The first respondent in both appeals, Devandar Naidu, (Mr Naidu) was a security guard employed by ISS Security Pty Limited (ISS Security), the appellant in CA 40198/06. Mr Naidu’s services were made available to Nationwide News Pty Limited (Nationwide News), the appellant in CA 40182/06, pursuant to a contract between ISS Security and Nationwide News. In 1997, Mr Naidu suffered from a psychiatric injury in the form of Post Traumatic Stress Disorder, depression and anxiety, which he contends was directly caused by the humiliating and harassing treatment to which he was subjected by Nationwide News’ Fire and Safety Officer, Mr Chaloner, whilst providing security services at Nationwide News’ premises.
Mr Naidu brought proceedings against both Nationwide News and ISS Security. In his final pleading against Nationwide News, Mr Naidu pleaded both that Nationwide News had breached its duty of care to him and had committed a number of intentional torts. The duty was framed in terms that Mr Naidu was “the pro hac vice [for this occasion] servant of [Nationwide News]” and as such, it had a duty to him to provide a safe system of work. A number of intentional wrongs were also particularised, including assault and battery. As against ISS Security, Mr Naidu pleaded breach of its duty to him as its employee to provide him with a safe system of work. It also alleged breach of his contract of employment and in particular, a breach of certain implied terms of that contract.
Justice Adams heard Mr Naidu’s claim. His Honour held that Nationwide News and ISS Security each owed and each had breached a duty of care to Mr Naidu. His Honour also held that ISS Security had breached its contract of employment with Mr Naidu. His Honour awarded Mr Naidu damages for economic and non-economic loss. He ordered Nationwide News to pay exemplary damages to Mr Naidu in the sum of $150,000.
His Honour ordered judgment against Nationwide News in the sum of $1,946,189.40, determined that the provisions of s 151Z of the Workers Compensation Act 1987 (NSW) (the Workers Compensation Act) applied and in accordance with the requirements of that section, ordered that there be judgment against ISS Security in the sum of $1,767,050.56.
His Honour determined that liability between ISS Security and Nationwide News be apportioned; 35 per cent to ISS Security and 65 per cent to Nationwide News (to be applied to the award of damages against each respectively).
The appeal
Nationwide News contends that it did not owe a duty of care to Mr Naidu or, if it did, it did not breach that duty. In particular, it alleges that in the circumstances of this case there was no reasonably foreseeable risk of psychiatric injury. Both of those challenges were advanced through a number of grounds of appeal, including his Honour’s acceptance of the evidence of one witness over another. There is also a challenge to his Honour’s award of damages and to his finding of contribution.
ISS Security also contends that there was no reasonably foreseeable risk of psychiatric injury to Mr Naidu.
Specific issues on the appeal:
The specific issues raised by Nationwide News may be summarised as follows:
1.whether the judgment of Adams J was appellably flawed because: first, it was attended by such delay that his Honour could not produce a proper judgment in circumstances where critical factual findings depended upon credit findings; secondly, the reasons for judgment were inadequate; and thirdly, because the fact findings were themselves attended by error;
2.whether his Honour erred in granting an extension of the limitation period (the limitation issue);
3.whether the conduct of Mr Chaloner could be attributed to Nationwide News (the direct liability issue) or alternatively, whether Nationwide News was vicariously liable for the acts of its employee, Mr Chaloner (the vicarious liability issue);
4.whether his Honour erred in finding that Nationwide News was estopped from denying that Mr Chaloner was acting as its servant or agent in respect of the acts complained of (the estoppel issue);
5.whether his Honour erred in finding that the workplace abuse caused Mr Naidu’s psychiatric injury (the causation issue);
6. whether his Honour erred in awarding exemplary damages;
7.whether his Honour erred in apportioning liability in the proportions of 65 per cent to Nationwide News and 35 per cent to ISS Security (the apportionment issue);
8.whether his Honour erred in his assessment of the various heads of damages (the damages issue); and
9.whether his Honour erred in awarding indemnity costs (the indemnity costs issue).
The specific issues raised by ISS Security were:
1.whether his Honour erred in accepting Mr Naidu’s evidence as reliable (the fact finding issue);
2.whether his Honour erred in finding that there was a foreseeable risk of psychiatric injury (the foreseeability issue);
3.whether his Honour erred in finding that ISS Security was estopped from denying that Mr Chaloner was acting as its servant or agent in respect of the acts complained of (the estoppel issue);
4. whether his Honour erred in finding breach of duty;
5. the causation issue;
6. the contract issue;
7. the apportionment issue; and
8. The limitations issue.
To the extent that the issues raise common matters of fact or principle, they will be dealt with together, but I will otherwise deal with the grounds raised in the order set out above.
Background facts
The background facts in this matter, although lengthy, are substantially not in dispute. Accordingly, I will draw directly upon Adams J’s judgment for the purposes of explaining the facts insofar as they are relevant to the issues on the appeal: Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618. Where necessary, I will also refer to additional material in the evidence. The factual background as reviewed below should be understood in the context that the trial judge accepted Mr Naidu’s evidence of the treatment he received at the hands of Mr Chaloner, but did not accept in totality the complaints he said he had made to his employer in respect of that conduct.
It is convenient at this stage to record the statement made on behalf of Nationwide News during the course of final submissions, in respect of Mr Chaloner, who did not give evidence:
“[Nationwide] News does not seek to defend or in any way excuse Mr Chaloner's conduct, which is indefensible and outrageous. The cornerstone of our [defence] is, once we found out about it, we immediately terminated him.” (Judgment [4])
Notwithstanding this admission, Nationwide News denied that it was vicariously liable for his conduct.
Mr Naidu was a Fijian national who came to Australia in 1982. He married in Australia and has two children. He had a number of different jobs in Australia and then, after completing a security industry course, was employed by ISS Security as a security officer in March 1990. ISS Security had a contract with Nationwide News to provide 24 hour on-site security services at its premises at Surry Hills and Chullora. Mr Naidu, in the course of his employment with ISS Security, was required to perform security work at both sites, but mainly at Surry Hills. The security work essentially involved Mr Naidu checking the identity of persons entering the site, patrolling the building and generally ensuring the safety of Nationwide News’ personnel and premises. Mr Naidu received on-the-job training from more experienced security staff employed by ISS Security.
In about September or October 1990, Mr Naidu was promoted to the position of senior security officer and then, about three months later, to the position of leading hand. He was further promoted to the position of supervisor of the site, a position which he held jointly with two other supervisors.
Mr Naidu’s immediate supervisor at ISS Security was Mr Blinkworth. Mr Blinkworth was the liaison officer or manager for ISS Security and was responsible for the security provided to Nationwide News pursuant to the contractual arrangements between ISS Security and Nationwide News. Mr Blinkworth’s assistant, Mr Miles, also had a supervisory role in relation to Mr Naidu. However, Mr Naidu’s work was arranged in such a way that it was not necessary for Mr Naidu to attend ISS Security’s own premises and he in fact did not attend there until after the events with which these proceedings are concerned. Mr Blinkworth attended the Surry Hills premises monthly and was in weekly telephone contact (judgment [11]).
At Nationwide News, Mr Naidu worked under the direction of Mr Chaloner. Mr Chaloner arranged with ISS Security for Mr Naidu to act as his assistant and to report directly to him in respect of his duties. This was conveyed to Mr Naidu at a meeting with Mr Blinkworth and Mr Chaloner. At this time, Mr Naidu was given the title of Assistant Security and Fire Control Manager, News Limited. As part of his duties as Assistant Security and Fire Control Manager, Mr Naidu was required to prepare tender specifications relating to fire protection and security systems. In order to undertake this work, he needed access to a computer which was located in Mr Chaloner’s office.
The trial judge held, at [10] that Mr Naidu was placed in the
“… charge of Mr Chaloner as his subordinate whatever the formalities [of his employment, Nationwide News] took over, on its own behalf, and as agent for [ISS Security], at least joint responsibility for the course, content and character of [Mr Naidu's] employment.”
His Honour, after reviewing all of the evidence, reiterated this finding at [177], where he said:
“The overwhelming evidence about Mr Chaloner's manner of operating and managing his relations with sub-contractors is consistent with [Mr Naidu’s] description of his position (quite apart from the question of abuse) as subordinate to Mr Chaloner.”
His Honour concluded that whatever the formal contractual arrangements between ISS Security and Nationwide News, Mr Naidu
“… was controlled and supervised and subject to the day-to-day directions of Mr Chaloner as though he were his assistant and a [Nationwide] News employee. Moreover, this was known to be the real situation both by [ISS Security], through Mr Blinkworth, and [Nationwide] News, through Mr Paine.”
There was other evidence relevant to the control that Mr Chaloner had over the employment conditions, not only of Mr Naidu, but of ISS Security employees generally. Mr Paine, who was News Limited’s National Properties and Administration Manager and third in the chain of management hierarchy at News Limited, gave evidence of the relationship between ISS Security and Nationwide News. He explained that ISS Security provided a total security service for Nationwide News, including, but not limited to, the provision of staff. The service included security assessments and workplace inspections, which included advice as to appropriate electronic surveillance equipment and the like. Nationwide News paid ISS Security monthly on invoice. He said that Mr Chaloner had the responsibility for negotiating the annual contract costs.
Mr Paine said that Mr Chaloner negotiated the salary levels of all of the guards and all of the services to be provided and that that information would be presented to him on an annual basis as part of Nationwide News’ budgetary process. Mr Paine explained that salaries for individual security guards provided by ISS Security were not negotiated, but rather the salary levels for specific positions were negotiated. He said, however, that once Mr Naidu had progressed through the obvious levels relevant to the position of security guard (for example security guard, senior security guard or supervisor) and became a site manager, his specific salary was the subject of negotiation by Mr Chaloner on behalf of Nationwide News.
Mr Chaloner’s misconduct occurred both inside and outside the workplace. The trial judge found that Mr Chaloner created a structure of oppression that was built on the power that his position with both Nationwide News and ISS Security gave him over the nature and course of Mr Naidu’s employment (judgment [19]).
The abuse to which Mr Naidu was subjected in the workplace may be briefly outlined. The abuse commenced at about Easter 1992, when Mr Chaloner “offered” Mr Naidu the building services of some of Mr Chaloner’s relatives to build a house that Mr Naidu was contemplating constructing on land that he owned on the Central Coast. Mr Chaloner made it clear to Mr Naidu that the offer was not to be refused, and that Mr Naidu was to give him sufficient funds to pay for the work. In a telephone conversation with Mr Chaloner, Mr Naidu refused the offer. Mr Chaloner then abused Mr Naidu with extreme racist language and threatened that he would have him transferred from his job. He threatened that he would ensure that Mr Naidu did not get work anywhere in New South Wales in the security industry. He also threatened him with the words “[I] will do [you]” (judgment [22]). Mr Naidu believed these threats and was frightened by them, particularly by the threat of physical harm.
When Mr Naidu next saw Mr Chaloner at work, Mr Chaloner physically abused him and repeated that he would have him transferred, and it appears, asserted that he had spoken to Mr Deegan, who was Mr Chaloner’s superior and also a director of ISS Security.
Mr Chaloner threatened he would “do” Mr Naidu on other occasions and had once punched a hole in a wall, saying, “this is what I'm going to do to you” (judgment [24]). Mr Naidu’s overall evidence was that Mr Chaloner spoke to him in an aggressive and physically threatening way (judgment [28]).
Following the specific occasion referred to in [25] above, Mr Naidu contacted Mr Blinkworth to ask why Mr Chaloner was having him transferred and asked what was happening. Mr Naidu did not, at that time, inform Mr Blinkworth of the abuse. Mr Blinkworth told Mr Naidu that he did not know anything about a transfer and that he would discuss the matter with Mr Deegan. Mr Deegan contacted Mr Naidu and told him to stay at Nationwide News, as Mr Chaloner had not spoken to him and he knew nothing about any suggested transfer. The communication to Mr Deegan came to the attention of Mr Chaloner, who again abused Mr Naidu, and reminded him that he was not allowed to contact any one except him.
Mr Naidu went to his own office in an extremely upset state and contacted Mr Blinkworth. He told Mr Blinkworth about Mr Chaloner's demand concerning the building of the house. Mr Blinkworth stated that he would speak to Mr Deegan and they would sort the matter out. Again, Mr Chaloner became aware of this communication and once more directed Mr Naidu that he was not allowed to talk to anyone except him.
Mr Deegan again contacted Mr Naidu directly and told him that the client, Nationwide News, wanted his services and to “hang in there” (judgment [24]).
Mr Naidu said that after this incident, Mr Chaloner always appeared very angry with him and was consistently abusive, using racist taunts. He also said that Mr Chaloner continued to threaten him physically, using the phrase “I will do you”; that he would kick chairs and throw things; and that he told Mr Naidu that if he ever left, he would never have another job and that he “would never be able to walk” (judgment [28]).
Mr Chaloner was described in the evidence as a big man who had a black belt in martial arts and had been a boxer (judgment [41]). Mr Naidu said that sometimes the abuse would occur in the presence of other ISS Security officers, including two named supervisors, Terry O'Dwyer and Fred Jones, a senior officer Stuart Windham, and a number of other security officers (judgment [29]). The abuse also extended to abusive comments about Mr Naidu’s wife. Mr Naidu also said that Mr Chaloner could be “very very nice” especially when he wanted something done, and that his mood was very changeable (judgment [31]).
Mr Naidu said that he complained to Mr Blinkworth about Mr Chaloner’s abusive conduct on a regular basis. However, he became aware from Mr Blinkworth that Mr Chaloner was, in effect, threatening Mr Blinkworth with loss of the contract if Mr Chaloner's demands were not met. Mr Naidu understood that the contract was worth close to $1m a year to ISS Security (judgment [30]). The nature and extent of the complaints made by Mr Naidu are the subject of a substantially adverse finding against Mr Naidu which I discuss below.
Mr Chaloner also required Mr Naidu to work extremely long hours. His official work hours were 7am to 4pm. However, he usually finished between 10 and 11pm. This became particularly onerous when Mr Naidu moved to the Central Coast and commuted to work in Sydney. In order to arrive at work at 7am, Mr Naidu caught his train at about 4.30am and if he did not finish work until 11pm, he would not arrive home until some time after 1am. Mr Chaloner also required Mr Naidu to work a 12 hour shift on Sundays. Mr Naidu said that although he recorded the additional hours that he worked, he was never paid for those hours.
Mr Naidu said he complained about this to Mr Blinkworth who, apparently after having spoken to Mr Chaloner, informed Mr Naidu that Mr Chaloner wanted him to do those hours and that Mr Chaloner was the customer. Mr Blinkworth asked Mr Naidu to “hang on there” for the sake of the contract (judgment [32]). In 1995, ISS Security made a vehicle available to Mr Naidu to relieve the travelling pressure he was under because of his long hours. Mr Naidu gave evidence that up until that time, he was always very tired, that he would frequently cry on the train on the way home, that he did not see his children and that his long working hours caused arguments at home. His marriage eventually broke down and his Honour accepted that this was because of the conditions under which Mr Naidu was required to work (both in terms of the abuse and his long hours) and the effect this had on him.
Mr Chaloner directed other controlling and bizarre behaviour towards Mr Naidu. Mr Naidu was required to seek permission from him to go to the toilet; Mr Chaloner would hide Mr Naidu's files; he would throw files on the floor and make Mr Naidu pick them up in front of others (judgment [34]-[37]). The abusive and racist taunts continued in numerous other work situations (judgment [40]). Mr Chaloner, at one stage, also engaged in behaviour towards Mr Naidu of a sexually harassing or confronting kind (judgment [41]).
On another occasion, Mr Chaloner only permitted Mr Naidu to have three days off work to travel to Fiji when his mother was ill and refused him an extension of this period. When he returned to work, Mr Chaloner immediately required Mr Naidu to work on Mr Chaloner’s property (a matter which is discussed further below).
Attention may need to be given to identifying the particular responsibility exercised by the employee. Thus, in Deatons Pty Ltd v Flew (1949) 79 CLR 370, the act of throwing a glass of beer at a customer in a pub might be seen as an act of “personal retribution” on her part, for which the employer was not responsible, because she was not employed to keep order in the bar. On the other hand, the theft committed by a managing clerk of a law firm of property belonging to a client may be viewed differently because the obligation of safekeeping was part of the employer’s contractual obligation to the client, and hence part of the employee’s responsibility: see Lloyd v Grace Smith & Co [1912] AC 716. Similarly, the theft of a fur stole left for cleaning, might be an act of an employee for which the employer was responsible because part of the employee’s responsibility was the safekeeping of the stole: see Morris v CW Martin & Sons Ltd [1966] 1 QB 716. In each case, the unauthorised and criminal act of the employee was to be judged by the closeness of its connection with the responsibilities imposed by the contract of employment.
Gaudron J in Lepore stated that the test must require that “the person against whom liability is asserted is estopped from asserting that the person whose acts are in question was not acting as his or her servant, agent or representative when the acts occurred”: at [130]. Her Honour noted that ordinarily “a close connection between what was done and what that person was engaged to do” will not be the test of estoppel. Rather she said “the test is whether the person in question has acted in such a way that a person in the position of the person seeking the benefit of the estoppel would reasonably assume the existence of a particular state of affairs”: at [131]. Her Honour concluded:
“In the case of vicarious liability, the relevant state of affairs is simply that the person whose acts or omissions are in question was acting as the servant agent or representative of the person against whom liability is asserted.”
This test seeks to establish the basis for a finding of vicarious liability, rather than a means of differentiating particular categories of case. The application of the principle seems to have treated a “close connection” test as not irrelevant: at [132].
Gummow and Hayne JJ, after referring to a critical passage in the judgment of Dixon J in Deatons, identified two elements which were considered significant for the purposes of Lepore at [231]:
“First, vicarious liability may exist if the wrongful act is done in intended pursuit of the employer’s interests or in intended performance of a contract of employment. Secondly, vicarious liability may be imposed where the wrongful act is done in ostensible pursuit of the employer’s business or in the apparent execution of authority which the employer holds out the employee as having.”
This principle was adopted as sufficient for determination of that case at [239].
Kirby J took a potentially broader view of the scope of vicarious liability, than that taken in Deatons. His Honour stated at [324]:
“With the House of Lords and the Supreme Court of Canada, I am of the view that more recent expositions of the law of vicarious liability require the application of a broader formulation to describe those cases where, by the common law, an employer assumes, derivatively, liability for the wrongs committed by an employee occurring on work premises and in work hours against vulnerable people put at risk by the employer’s enterprise although such wrongs were deliberate and even constitute criminal acts on the part of the employee.”
Further, after referring to Bazley v Curry [1999] 2 SCR 534 at 560 [41.3], his Honour stated that “the expression ‘connection’ potentially connotes either a causal or temporal connection between the acts alleged and the employment, or both”: at [326].
There is no doubt, as all members of the majority in Lepore recognised, that the concept of acting in the “course of employment” may extend to “some acts done by an employee in direct contravention of explicit and binding directions given to that employee by the employer”: see, eg, Gummow and Hayne JJ at [225]. The nature of the connection with employment is implicit also in their Honours’ identification of “the apparent execution of the authority” conferred on the employee. What is within the scope of the authority, so as to provide a sufficient connection with the course of employment, may depend, as the Chief Justice noted in Lepore, on the level of generality at which the authority of the employee is to be considered. It may also depend upon the place of the employee within the organisational hierarchy of the employer. Thus, each of the employees in the cases such as Deatons, Morris and Lloyd were at a relatively low level. In the present case, Mr Chaloner was at a high level and may, indeed, have constituted the alter ego of Nationwide News for the purposes of directing and supervising the plaintiff’s work. In these respects, the position of Mr Chaloner was somewhat different from that of each of the employees in the cases referred to in Lepore. First, at a senior executive level, the work relationship is likely to expand beyond usual working hours. Further, as the senior officer at Nationwide News with responsibility for administering the contract by which security services were provided to Nationwide News, Mr Chaloner had broad discretionary powers.
The connection between the unlawful conduct of the immediate tortfeasor and the course of his employment, for the purposes of considering the vicarious liability of the employer, is not determined by the subjective views or motives of the employee. For example, while the occasion for the theft of the fur stole in Morris arose in the course of employment, the employee was not intending to act for the benefit of his employer in stealing the fur; on the contrary, he acted purely in his self-interest and to the disadvantage of the employer and the employer’s customer. The employee’s motive or intention is a critical element of the tort which involves an intentional infliction of harm, but is neither a critical element of, nor a reason for excluding, vicarious liability of the employer.
There remains a question as to whether the trial judge was correct in finding vicarious liability for the whole of the harm suffered by the plaintiff, despite the fact that some of the harm (such as the sexual assault and the work at Mr Chaloner’s private premises) were not seen as having a sufficiently close connection with the course of his employment. In effect, his Honour treated the tort as involving one course of conduct, the elements of which were inextricably intertwined. It was the connection between the course of conduct, taken as a whole, and Mr Chaloner’s employment which needed to be assessed.
Accepting his Honour’s assessment (which was not challenged by the plaintiff) that parts of Mr Chaloner’s conduct were outside the scope of his employment, so that his employer would not be liable for such conduct, the exclusion of those aspects of the conduct did not render the remaining conduct otherwise than tortious. Accordingly, if the relevant conduct were to be unravelled, so that Nationwide News was responsible only for a part, that part was nevertheless a substantial contribution to the harm suffered by the plaintiff. As a result, Nationwide News and Mr Chaloner were concurrent tortfeasors to the extent that Mr Chaloner was solely liable for conduct for which Nationwide News was not liable. Nationwide News was responsible for the whole of the damages suffered: whether it could have recovered any part thereof from Mr Chaloner as a concurrent tortfeasor is not a question which was raised in these proceedings.
It was, therefore, unnecessary to attempt to disentangle the elements of the tortious conduct and his Honour’s approach was not in error. For these reasons, I would dismiss the appeal by Nationwide News on the question of liability to the plaintiff.
In relation to the grounds of appeal concerning the assessment of damages, I agree with Beazley JA.
Liability of ISS
As the plaintiff’s employer, ISS Security admitted that it owed the plaintiff a duty to provide a safe system of work, as alleged in paragraph 7 of the statement of claim. In an amended statement of claim, the plaintiff further alleged that he was “pro hac vice in the service of the second defendant”. That was denied by both defendants. The legal significance of the pleading is somewhat obscure, but if it were intended to assert that Nationwide News owed to the plaintiff the same duties as did his employer, it need not be considered further on the basis that Nationwide News is otherwise liable to the plaintiff, for the reasons set out above.
ISS Security had a contract with Nationwide News pursuant to which it provided security services. No contract was in evidence, but correspondence between the parties in mid-1997, in relation to a number of disputed payments, suggested that there should be a “formal contract”, implying that previously there had been inadequate documentation of the contractual arrangements. There was also, apparently, no written contract between the plaintiff and ISS Security, he having been asked to sign a salary package in about September 1993, but had declined: Tcpt, 24/05/04, p 44(5).
Although it would be possible to construct a contract of employment, with terms implied by law, the liability of ISS Security may be assessed as a matter of tort, rather than breach of contract: c.f. Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120 at [22] and [31] (Black CJ) and [324]-[326] (Jessup J). Putting to one side the remarks of the trial judge in relation to contract, it appears that he found liability in negligence on the part of ISS Security on four separate bases.
First, his Honour approached the matter on the basis that a senior officer of ISS Security, Mr Blinkworth, must have had sufficient information in relation to Mr Chaloner’s conduct to put him on notice that the plaintiff was at risk, thereby engaging an obligation to investigate further. However, at [189] his Honour concluded that Mr Blinkworth was on notice only of Mr Chaloner’s “unreasonable demands”, and then only of “isolated incidents of excessive demands”. His Honour concluded:
“I do not consider that his knowledge of these matters would or should have led him to suspect that Mr Chaloner was behaving in such a way as could or might lead to injuring the plaintiff, subject to a qualification to which I will come shortly.”
The precise nature of the qualification is not entirely clear, although at [193] his Honour held that “even one complaint of serious misconduct should initiate in any employer acting reasonably an enquiry both of the person against whom the allegation is made and of the affected subordinate about the truth of the allegation and the extent of the misconduct”.
The reason for that conclusion was twofold, namely that a failure to investigate might discourage further complaints and that one complaint was unlikely to mean there was only a single incident of misconduct, indeed a failure to investigate that act might not only discourage further complaints, but might encourage a continuation of the conduct. This line of reasoning, however, provided little assistance to the plaintiff who did not say that he was dissuaded or discouraged from complaining, but rather that he complained repeatedly, evidence which was rejected by the trial judge.
The conclusion reached in relation to Mr Blinkworth appears at [200] after referring to the risk of permitting intimidatory conduct, which could give rise to a recognisable psychiatric condition.
“It seems to me that the starting point is that Mr Blinkworth knew or ought to have known from his own relationship with Mr Chaloner that the latter was likely to use intimidation as one of his techniques of management and that the plaintiff would be the butt of misbehaviour. It follows that Mr Blinkworth had a responsibility, under the plaintiff’s contract of employment, to make reasonable enquiries of the plaintiff and other co-workers at the site about its nature and extent. I am satisfied that he did not do so. Had he done so, I think that, more probably than not, the true extent of Mr Chaloner’s misbehaviour would have been mostly, if not entirely, exposed.”
This conclusion is not easy to reconcile with his Honour’s earlier findings as to Mr Blinkworth’s state of knowledge. He held, at [93]:
“At the same time, it is probable that he [the plaintiff] mentioned to Mr Blinkworth at some time or another that Mr Chaloner had insulted or demeaned him in some way. However, I am unable to be satisfied on the balance of probabilities that such occasional complaint would or should have conveyed to Mr Blinkworth any real indication of misconduct (which he should have taken further in the sense of an investigation rather than a merely emollient response) amounting to notice that action was or should have been required.”
As the High Court held in Koehler v Cerebos (Australia) Ltd [2005] HCA 15; 222 CLR 44, the liability of an employer is not engaged unless there is a reasonably foreseeable risk of cognizable psychiatric illness: at [33] and [35]. His Honour’s finding at [200] is not supported by a factual finding engaging an obligation to investigate. Indeed, as it follows shortly after the rejection of the proposition that knowledge of demanding and unreasonable directions would constitute a sufficient trigger for further investigation, it appears that the conclusion at [200] probably follows from other concerns which were addressed in the intervening paragraphs.
The second basis upon which his Honour appears to have found liability on the part of ISS Security is that the company “had not paid sufficient attention to the practical consequences of harassment and bullying in the workplace” with the result that the policy of the company in that respect was inadequate. Whether that was seen as a failure to provide a safe system of work, taken in isolation, is unclear. As no express finding is made in that regard, it was probably only a factor which his Honour took into account, although in what way is not clear.
The third matter upon which his Honour appears to have placed weight, perhaps as a concomitant of the previous finding, is the knowledge of other ISS Security employees working at Nationwide News’ premises as to the manner in which the plaintiff was treated by Mr Chaloner. His Honour held that that knowledge should be attributed to the company “either directly or constructively”: at [197]. To attribute it constructively may have been intended as an appropriate consequence flowing from the absence of an effective policy which would have required such conduct to be reported by company employees, at any level. However, it is not clear that the case was presented quite in that manner and, if it were not, it should not now be adopted as a basis for upholding a finding against the company. As the Chief Justice explains, it is not possible to treat the knowledge of junior employees, who were either subordinate to or at best of equal status to the plaintiff, as knowledge of the company: at [44] above. To treat their knowledge as, constructively, knowledge of the company would require consideration of the circumstances in which the company was obliged to have a policy requiring junior members of staff to report unreasonable demands of supervisory staff at Nationwide News. If they were not as seriously affected by the conduct as one of their fellow ISS Security employees, who was superior to them, it is not possible to impose a legal obligation on the employer to require all its employees to assess the effects on their co-workers and report the conduct to their employer.
Fourthly, the trial judge appears to have treated ISS Security as liable by attributing to it Mr Chaloner’s “own knowledge of his misconduct”: at [198]. That followed from his Honour’s holding that “[i]n effect, and for all practical purposes, Mr Chaloner was the agent jointly of News and [ISS Security] for the purpose of managing the on-site aspects of the security contract between the two companies”. This was the reverse of the pleading that Nationwide News was “pro hac vice” the employer of the plaintiff, so as to make Mr Chaloner “pro hac vice” an employee of ISS Security. In truth, he held no such position. There was no contractual material which supported an obligation on Mr Chaloner to report to ISS Security; nor did Mr Chaloner have any general law obligation in that regard. Further, there is something incongruous about the proposition that an individual has an obligation to report his own misconduct. Either ISS Security was liable for Mr Chaloner’s misconduct, even absent specific knowledge, or it was not. It did not become liable because Mr Chaloner should have reported his own misconduct to it.
It should be accepted that ISS Security, as employer, had a duty at all times in respect of the safety of its employees, even if it did no more than supply the services of those employees to its principal: see TNT Australia Pty Ltd v Christie [2003] NSWCA 47; (2003) 65 NSWLR 1 at [63]-[65] (Mason P) applying Kondis v State Transport Authority (1984) 154 CLR 672 at 687-688 (Mason J); Maricic v Dalma Formwork (Australia) Pty Ltd [2006] NSWCA 174 at [57]-[58] and Goldman Sachs JBWere Services (supra). However, once it was established on the facts that, through its relevant officer, Mr Blinkworth, ISS Security did not have, nor ought to have had, knowledge of circumstances which would give rise to a reasonably foreseeable risk of cognizable psychiatric harm to the plaintiff, its failure to take steps in relation to his safety did not constitute negligence. There was no notice of contention seeking to support the judgment against ISS Security on any other basis. Accordingly, the appeal by ISS Security should be upheld and the judgment against it set aside.
It also follows that the notice of cross-appeal filed by Nationwide News seeking to vary the apportionment as between it and ISS Security should also be dismissed.
I would propose the following orders:
(1)In matter No. CA 40182 of 2006 (appeal by Nationwide News Pty Ltd):
(i) dismiss the appeal;
(ii) dismiss the cross-appeal of ISS Security Pty Ltd;
(iii)order the Appellant to pay the costs of the Respondents of the appeal.
(2) In matter No. CA 40198 of 2006 (appeal by ISS Security Pty Ltd):
(i)allow the appeal and set aside the orders of Adams J entered on 12 May 2006;
(ii) in place thereof, make the following orders:
(a)judgment for the plaintiff against the second defendant, Nationwide News Pty Ltd;
(b)order the second defendant to pay the plaintiff $1,946,189.40, such judgment to have effect from 12 May 2006;
(c)order the second defendant to pay the plaintiff’s costs of the proceedings in the Common Law Division on an ordinary basis up to 26 March 2004 and thereafter on an indemnity basis.
(d)order the plaintiff to pay the first defendant’s costs of the proceedings in the Common Law Division.
(3) Dismiss the cross-appeal of Nationwide News Pty Ltd.
(4)Order the cross-appellant to pay the costs of the cross-respondents to the cross-appeal.
(5) Order the Respondents to pay the Appellant’s costs of the appeal.
(6)Grant the First Respondent (Mr Naidu) a certificate under the Suitors’ Fund Act 1951 (NSW) in relation to the costs of the appeal.
Because the plaintiff has ultimately been successful against one defendant, but not the other, there may be questions as to the appropriate orders in respect of costs in relation to the appeal by ISS Security and in relation to the trial costs of ISS Security. If further or different orders to those proposed are sought, a memorandum of alternative orders may be filed by consent. If agreement cannot be reached, the parties have leave to file one set of submissions each in relation to the orders each proposes, no later than 15 February 2008.
Nationwide News should also have leave to correct in the orders, before they are entered, its name if incorrectly recorded above.
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AMENDMENTS:
12/03/2008 - Judgment paragraph numbers added - Paragraph(s) Coversheet
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