Nikolich v Goldman Sachs J B Were Services Pty Ltd
[2006] FCA 784
•23 JUNE 2006
FEDERAL COURT OF AUSTRALIA
Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784
EMPLOYMENT – Claim for breach of contract of employment – Applicant was employed by respondent as a client financial adviser – Nature of conduct of respondent’s office manager in connection with reallocation of clients following resignation of another adviser with whom applicant was working in a partnership team – Conduct of respondent’s employees in relation to complaint made by applicant – Whether applicant suffered a major depressive disorder as a result of conduct of respondent’s employees, including the office manager – Whether that conduct constituted a breach of applicant’s contract of employment – Whether damages are recoverable in respect of the distress and mental illness suffered by applicant – Assessment of damages.
WORKPLACE RELATIONS – Whether applicant’s employment was terminated by employer – Whether termination was for a prohibited reason – Application to the case of the statutory definition of temporary absence from work – Whether termination on ground of mental disability – Whether the reason was based on the inherent requirements of the applicant’s particular position.
TRADE PRACTICES – Whether damages are recoverable, assuming misleading conduct by employer.
Workplace Relations Act 1996 (Cth): ss 170CK, 170CP, 170CQ
Workplace Relations Regulations 1996 (Cth): reg 30C
Trade Practices Act 1974 (Cth): ss 52, 53B, 82
Fair Trading Act 1987 (NSW): s 42PETER NIKOLICH v GOLDMAN SACHS J B WERE SERVICES PTY LIMITED
NSD 416 OF 2005
WILCOX J
23 JUNE 2006
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 416 of 2005
BETWEEN:
PETER NIKOLICH
APPLICANTAND:
GOLDMAN SACHS J B WERE SERVICES PTY LIMITED
RESPONDENTJUDGE:
WILCOX J
DATE OF ORDER:
23 JUNE 2006
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Judgment be entered in favour of the applicant, Peter Nikolich, against the respondent, Goldman Sachs J B Were Services Pty Limited, in the sum of $515,869.
2. If the respondent:
(a) does not file an appeal against this judgment; and
(b) pays to the applicant the sum of $465,869 within 28 days;
the said payment shall be taken fully to satisfy the judgment referred to in order 1.3. The respondent pay the applicant’s costs of the proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 416 of 2005
BETWEEN:
PETER NIKOLICH
APPLICANTAND:
GOLDMAN SACHS J B WERE SERVICES PTY LIMITED
RESPONDENT
JUDGE:
WILCOX J
DATE:
23 JUNE 2006
PLACE:
SYDNEY
REASONS FOR JUDGMENT
WILCOX J:
In this proceeding, Peter Nikolich seeks compensation and/or damages against Goldman Sachs J B Were Services Pty Limited, his former employer.
The applicant’s claims
The claims made by the applicant varied from time to time. Ultimately, three claims were pressed in submissions:
(a)The respondent unlawfully terminated the applicant’s employment by reason of:
(A)his temporary absence from work because of illness, in breach of section 170CK(2)(a) of the Workplace Relations Act 1996 (Cth) [‘the WR Act’]; or
(B)a mental disability in breach of section 170CK(2)(f) of the WR Act.
(b)The respondent breached the applicant’s contract of employment.
(c)The respondent engaged in misleading and deceptive conduct prior to the alteration of the terms and conditions of the applicant’s contract of employment contrary to the provisions of sections 52 and/or 53B of the Trade Practices Act 1974 (Cth) [‘the TP Act’] or s 42 of the Fair Trading Act 1987 (NSW) [‘the FT Act’].
The evidence
(i) Mr Nikolich joins the respondent
Mr Nikolich was born on 7 August 1965. He grew up in Wollongong. After he left school, Mr Nikolich obtained employment with the Commonwealth Bank of Australia, ending up as a Business-Superannuation Consultant for the Australian Capital Territory and Southern New South Wales.
In May 2000, Mr Nikolich accepted an offer of employment in the Canberra office of Were Holdings Limited. This company subsequently changed its name to Goldman Sachs JB Were Services Pty Limited. It is the present respondent. I will use the abbreviation ‘GSJBWS’ to refer to the company under either name.
When he accepted the offer of employment, Mr Nikolich was provided with several GSJBWS documents, including one called ‘Working With Us’ (‘WWU’). This 119 page document sets out information about GSJBWS and contains a number of provisions which are argued by the applicant’s counsel, Ms K Nomchong and Ms K Edwards, to constitute conditions of employment binding on both the relevant employee and GSJBWS. It will be necessary for me, later on, to refer to some of these provisions.
At the request of a human resources officer of GSJBWS, Mr Nikolich signed and returned a copy of the letter containing his offer of employment. The letter included at least some of the terms of his employment and contained an acknowledgment that will be referred to later. Mr Nikolich was not asked to sign a copy of WWU.
Mr Nikolich commenced employment with GSJBWS on 15 May 2000. He was then classified as an Associate Investment Adviser. On 1 July 2001, he was upgraded to the position of Investment Adviser. This position is also sometimes called a ‘Private Client Adviser’. In this role, he was required to provide investment advice to existing clients and to develop new client relationships.
Both as an Associate Investment Adviser and an Investment Adviser, Mr Nikolich reported to the manager of GSJBWS’s Canberra branch. Initially, this was Colin MacKenzie. However, in March 2001, Roderick Sutherland, another Canberra Investment Adviser, was appointed also to be the Canberra branch manager and, therefore, Mr Nikolich’s immediate supervisor.
As an Investment Adviser, Mr Nikolich received a base salary of $81,495 per annum. He was entitled, in addition, to incentive payments calculated by reference to the nature and extent of the fees he earned for his employer. Investment Advisers often received incentive payments that dwarfed their base salaries.
When he commenced with GSJBWS, Mr Nikolich was given a list of clients for whose business he was responsible. Other names were given to him from time to time. He himself added names. Mr Nikolich said he actively cultivated all the clients on the list and sought to recruit others. In the financial year 1 July 2001 to 30 June 2002, his total remuneration (base salary and incentive payments) was $161,178.
(ii) The partnership concept
In December 2001, Mr Sutherland presented a paper to a meeting of the financial advisers in the Canberra office, of whom there were about ten. The paper was entitled Establishment of a partnership approach to client management within the Canberra Office. It seems the partnership concept had been brought to Australia from the United States. Mr Sutherland announced that he and two other Canberra financial advisers, Stephen Johnston and Lee Scott, would ‘trial a partnership approach to client management’. He said ‘all clients and revenues will be pooled under a newly formed “RSL” adviser code, with the remuneration structure reflecting each partner’s level of experience and capacity to contribute to the future growth of the partnership’.
Mr Sutherland identified the following advantages of the partnership approach:
‘•Clients will have access to a greater range of adviser skills and styles;
•Clients will be able to benefit from different specialisations within the team, such as options trading, Select, Premium, etc;
•Clients will gradually build rapport with more than one adviser, which is especially important when the “primary” adviser is on leave, interstate, sick, etc;
•Lower value clients will receive more attention that [sic] they receive presently; and
•Clients will benefit from the transfer of knowledge and sharing of ideas between partners.’
Mr Sutherland claimed the partnership arrangement would enable him to devote more time to office management. He argued it will ‘greatly enhance business efficiency and profitability’ in these ways:
‘•Partners will be able to dedicate more time to genuine business development activities, secure in the knowledge that their clients are being properly serviced by other members of the partnership;
•Partners will be able to cross-sell/leverage off the specific skill sets/interest within the team;
•Consistency of marketing strategies across the partnership should produce better outcomes;
•Working in unison rather than in competition should enhance the sharing of information and ideas, with direct benefits in terms of profitability;
•Follow-up to mail-outs, marketing initiatives, etc will be shared, thereby alleviating some of the burden on each partner and increasing the likelihood of success from each initiative pursued; and
•The creation of centralised mailing, e-mail and research lists will improve efficiency and consistency of client contact.’
Mr Sutherland devoted a section of his paper to what he called ‘Responses to Criticisms & Frequently Asked Questions’. One of the ‘questions’ was: ‘What if a member of the team wants to leave the partnership’. Mr Sutherland responded in this way:
‘Exit from a partnership will prove extremely disruptive to our clients and is, therefore, highly discouraged. As I see it, a partnership is similar to a marriage in that it is a long-term commitment where, once established, partners cannot opt in and out on a whim. I would urge anyone contemplating entering into a partnership to carefully consider the extent and duration of the commitment involved.
In the rare case that a partner insists on leaving the partnership, that partner will leave his/her clients behind with the partnership, with the exception of any clients who insist on dealing with the exiting partner.’
In response to a ‘question’ on remuneration, Mr Sutherland said:
‘One of the benefits of entering into a partnership is that the aggregation of revenues will result in each partner’s remuneration being based on a higher grid level than may have been achieved on a stand-alone basis.’
Mr Nikolich gave evidence that, at the meeting in which he presented his paper, Mr Sutherland spoke enthusiastically about the partnership approach. He said he understood from Mr Sutherland’s presentation that he would be able to increase his earnings: ‘by reason of the exchange of information, the ability to rely on other members of the team for assistance in administering my portfolios and being able to obtain assistance in conducting transactions about which I previously was unable to participate in.’
In his affidavit evidence, Mr Nikolich said:
‘When I was reading the document prepared by Mr Sutherland I took particular notice of what would happen if a team member left the partnership. I noted that if a partnership had been established and one of the partners left then the clientele of that team member would be redistributed amongst the existing members of the partnership team. It was certainly an attractive proposition to me that I would be able to obtain a number of additional clients by reason of participation in a partnership team.’
Mr Nikolich said he believed ‘that since [GSJBWS] was encouraging the team or partnership based employment arrangement then any team arrangement would be honoured and enforced by [GSJBWS]’.
(iii) The DKN partnership
Mr Nikolich had discussions with two other Investment Advisers, Mark Keogh and Gabrielle Dal Bon. The three advisers decided to form a team named ‘DKN’. They drafted a business plan for the team which was ‘based to some degree on the materials contained in Mr Sutherland’s presentation document’ and, in particular, the RSL team business plan.
The DKN business plan was intended to operate from 1 July 2002. The document identified advantages of a team approach, both for clients and the team members. Among the claimed advantages was that clients will ‘have access to a greater range of skills and services’ and ‘will be able to deal with a secondary adviser if their key adviser is unavailable’.
The draft business plan contained performance targets for the first three years of its operation. The targets included revenue targets that commenced by exceeding the total of the three partners’ current year projected revenues. The first year’s revenue projection ($1,900,000) was then split amongst the three partners as follows: Dal Bon 39.90%, Keogh 33.24% and Nikolich 26.85%. This split was reflected in a net earnings projection for each partner; in Mr Nikolich’s case $181,956. As I understand the situation, that would be his total income, including his base salary. It was projected that both revenue and earnings would increase by about 16% over the three year period. That would have brought Mr Nikolich’s income to about $211,000 per year.
The business plan set out the primary and secondary roles of each team member. It also included a paragraph, headed ‘Exit Strategies’, that read:
‘The decision to enter into a team arrangement has not been taken lightly. Under the team arrangement, if a team member decides to exit the partnership, then all clients will remain within the team structure with subsequent revenue to be split 50:50.’
Mr Nikolich said that, in February 2002, the members of the team discussed the proposed business plan with Mr Sutherland. They showed the draft document to him. Mr Sutherland emphasised that formation of the partnership was a serious step that ought to be considered carefully; however, he raised no objection to the terms of the document. In particular, Mr Nikolich said, Mr Sutherland did not indicate that the ‘exit strategies’ paragraph was contrary to GSJBWS policy or suggest that a retiring team member’s clients might not remain with the team.
In his affidavit, Mr Sutherland agreed he was shown the draft business plan. He said he ‘glanced at’ it and handed it back. He did not keep a copy of the business plan. He said he did not recall that the draft business plan contained information about the agreed revenue split between the team members. He also said:
‘At no time did I approve or endorse this business plan. I was not required to approve or endorse the plan because it was merely an internal working document for the members of the team.’
In his affidavit, Mr Sutherland did not say whether he noted the ‘exit strategies’ paragraph when he ‘glanced at’ the draft business plan. However, he commented:
‘This wording is similar to wording contained in the paper that I distributed to advisers in relation to Team RSL ... I have referred in paragraphs 10 and 11 of this Affidavit to my purpose in including this wording in the Team RSL paper.’
The explanation contained in paras 10 and 11 of the affidavit was as follows:
‘In this section of the [the partnership presentation] document, I was referring to a situation where one of the members of the team left the team, not when one of the members of the team left the employment of GSJBW. When forming a team, the expectation was that the team would remain working together. Accordingly, the intention of this section was to state that, with certain exceptions, if a member of the team left the team, that person would not have the right to retain the clients serviced by the team.
This section of the paper was not intended to deal with the arrangements that would be put into place when an adviser leaves the firm. This is because, based on my understanding of GSJBW policy and practice, when an adviser leaves the firm, the clients previously serviced by that adviser remain clients of the firm and it is the responsibility of the Manager of the relevant office to reallocate those clients to other advisers at his discretion. Clients are clients of GSJBW and do not “belong” to individual advisers. In particular, clients sign engagement agreements with the firm, not with the advisers individually.’
Under cross-examination in this case, Mr Sutherland maintained that he ‘only quickly glanced at’ the draft business plan. His evidence went on:
‘I am going to put it to you, Mr Sutherland, that you were the manager of the Canberra office, is that correct?---Correct.
And you were concerned to understand the way in which your investment advisers who reported to you were going to do their business?---Correct.
That was your role and duty and responsibility as a manager wasn’t it?---Correct.
So when Ms Dal Bon, Mr Keogh and Mr Nikolich brought you this business plan you were interested to understand how it was they were going to conduct the business of Goldman Sachs from the Canberra office weren’t you?---Correct.
You didn’t just glance at this document you went through it paragraph by paragraph to understand what was being anticipated didn’t you?---No. The purpose of my asking them to think about drawing up a business plan was to demonstrate the seriousness of their intention to form a team rather than the specific document itself.
Are you seriously telling this court, Mr Sutherland, that a business plan was drawn up and you did no more than give it a cursory glance, is that your evidence?---Yes.
I see, and you say that that complied with your responsibility as the manager of the Canberra office do you?---Yes.’
Mr Sutherland said he could not say whether or not he saw the ‘exit strategies’ paragraph.
Mr Nikolich also mentioned a later meeting, in April 2002, between the three DKN team members, on the one hand, and David Evans and Chris Voigt on the other. At that time Mr Evans and Mr Voigt were, respectively, Managing Director-Retail for New South Wales and for Victoria. The meeting was on the occasion of a regular performance review of the Canberra employees. Mr Nikolich said in his affidavit:
‘During the course of that meeting, which was conducted in Canberra, we discussed the Team DKN Business Plan with them and went through our particular thoughts and ideas about how the strategy would work. At no time during that meeting did Mr Evans or Mr Voight indicate to me or anyone else in the team whilst I was present that any of the paragraphs or provisions of the Business Plan were contrary to the Respondent’s policy. In particular, nothing was said to us to the effect that the paragraph entitled “Exit Strategies” would not be honoured in the event that one of the team members left the partnership.’
Mr Evans agreed in evidence that he ‘went through the proposed DKN business plan with Mr Nikolich’. He said he did this with Mr Voigt - or possibly Paul Heath, who was then Manager, New South Wales Private Clients, he could not remember which man. He recalled going through the team targets and goals.
Mr Nikolich accepted, in his evidence, that neither Mr Sutherland or Mr Evans said anything that indicated he considered the business plan to be a binding document.
The DKN partnership commenced to operate on 1 July 2002. Mr Nikolich gave evidence that the clients of each team member were notified of the change and advised to contact an alternative team member if their usual adviser was unavailable. He said each team member took all available opportunities to introduce their clients to the other team members. The team members shared information, became familiar with each other’s client portfolio and looked after each other’s clients during the other’s absences from work. According to Mr Nikolich, the team system worked well. However, in the financial year to 30 June 2003, Mr Nikolich’s total earnings (base salary plus incentive payments) were less than in the previous year, being only $96,650.
It should be noted that receipts in a particular year may understate actual earnings for that year. It was the practice of GSJBWS to hold back, until the following quarter, 50% of any incentive payment that was earned by an adviser in a particular quarter.
(iv) The resignation of Ms Dal Bon
On about 2 May 2003, Ms Dal Bon announced she would leave GSJBWS on 30 June 2003. Her announcement precipitated a number of meetings between Mr Nikolich, Mr Keogh and Mr Sutherland about client allocation. Mr Nikolich and Mr Keogh believed their team was entitled to retain all Ms Dal Bon’s clients. However, they recognised that, with only two people, they would be unable to provide proper service to all the people on the combined list. Accordingly, they proposed – and, Mr Nikolich said, Mr Sutherland agreed – that they transfer 250 relatively inactive family groups to a GSJBWS on-line service, Were@Call, or to more junior staff members, reducing the DKN client base to about 600 family groups. The transfer was apparently not to include any clients in the five categories that generated the most revenue: gold, A clients, options, funds under management and marginal lending.
At a later meeting, Mr Nikolich said, Mr Sutherland suggested the transfer of more family groups; he and Mr Keogh agreed.
Mr Nikolich said that, after this later meeting, Mr Sutherland prepared a list of clients to be transferred and distributed it to all advisers within the office. Arrangements were made to forward letters to all affected clients. However, according to Mr Nikolich, Mr Johnston (a member of team RSL) was unhappy about the situation and, on 9 June 2003, approached Mr Sutherland about it. Mr Sutherland denied he was approached by Mr Johnston, but he did say he was ‘approached by other advisers in the Canberra office who … told me that they were concerned that Peter Nikolich and Mark Keogh were going to try to corral all of the clients that Gabrielle Dal Bon had dealt with’. Mr Sutherland also agreed that, on 10 June 2003, he told Mr Nikolich he had changed his mind, that there would be a reallocation of all Ms Dal Bon’s clients and he would let Mr Nikolich know which ones he could keep. Mr Sutherland directed that letters to clients not be sent at that stage.
Shortly afterwards, Mr Sutherland announced a reallocation. According to Mr Nikolich, it included transfer to Mr Scott (Mr Sutherland’s partner in team RSL) of a large proportion of Ms Dal Bon’s clients, including some high revenue generating clients. It is common ground that Mr Nikolich protested to Mr Sutherland about this reallocation and claimed Mr Sutherland had gone back on his word.
The terms of the protest conversation are in dispute. On Mr Nikolich’s account of the matter, the conversation was acrimonious; Mr Sutherland made a number of critical and offensive comments, including telling Mr Nikolich he was ‘disgusted’ with his ‘greed’, that he was ‘lazy’ and ‘whingeing’. Mr Nikolich claimed in evidence that he felt Mr Sutherland had a conflict of interest, being both the person allocating clients and a member of team RSL, and that he suggested Mr Sutherland appoint an independent person to mediate the dispute over allocation.
Mr Nikolich said in his affidavit that he thought Mr Sutherland was breaching the team DKN business plan. In para 87 of his affidavit, he quoted himself as saying:
‘What about Team RSL’s Business Plan that no clients are to leave the team if someone resigns. How does that work?’
Mr Nikolich said that Mr Sutherland ‘just shrugged’. [Although the matter was not picked up at the trial, the reference to ‘Team RSL’ may have been an error for team DKN.]
Mr Nikolich said he then told Mr Sutherland that he wished to speak to Mr Heath and Mr Sutherland replied: ‘You speak to Paul Heath and you’ll get nothing’.
Mr Sutherland denied most of the specifics of Mr Nikolich’s account, but it is clear the relationship between the two men was fractured that day. Mr Sutherland said he had no recollection of Mr Nikolich suggesting a mediator; in any event, no mediator was appointed.
The last four paragraphs are written as if there was only one conversation on these matters. However, there may have been multiple conversations, within a short space of time, dealing with the matters I have set out.
Mr Sutherland subsequently told Mr Nikolich and Mr Keogh that he was allocating to them 40 out of the 120 ‘gold’ and ‘A’ clients that were on the DKN client list; he listed all 120 clients in order of their fee-generating value, and put a line under every third name; he then invited Mr Nikolich and Mr Keogh to select one name out of each group of three. Mr Nikolich and Mr Keogh reluctantly did this. Mr Sutherland then allocated the remainder of the ‘gold’ and ‘A’ clients to other financial advisers. For each client given to one of the individual advisers, he allocated three clients to the RSL team, no doubt on the basis that it included three members.
In his affidavit, Mr Nikolich described the aftermath to Mr Sutherland’s decision. He said that, from the date of the reallocation decision, ‘Mr Sutherland’s attitude toward me was intimidating and threatening. He was belligerent and aggressive’. He said he felt ‘angered and betrayed, bullied, discriminated against and was beginning to feel very stressed both at work and at home’.
(v) The complaint to Mr Heath
Mr Nikolich and Mr Keogh decided to contact Mr Heath. On 25 June 2003, they telephoned him from outside the GSJBWS office. Subject to one qualification, it is common ground between Mr Nikolich and Mr Heath – Mr Keogh did not give evidence – that the conversation substantially accorded with a file note made by Mr Heath that day. The note reads:
‘Took a call this am from Mark Keogh and Peter Nicolich [sic]. They were calling from outside the office, and indicated they were reluctant and nervous about calling.
They were concerned about the process by which Rod had allocated Gabriel Dal Bon’s client book. After 4 weeks of negotiating to what they felt was the right solution, Rod had indicated early this week that he had drawn a line under every third client, and said choose 1.
They were reluctant to call because they had asked Rod if they could call me to discuss their concerns, but that Rod had said if they did that, they would get no clients at all.
Their concerns were based around:
1. They did not understand the reasons for the allocation policy
2. They did not feel it was in the best interests of clients
3.They were concerned about their relationship with Rod (they were very upset that Rod had called them greedy)
They did not have any solutions to the above (I asked) so I asked them to come back to me later with what they wanted me to do. I made it clear that I did not want to interfere with Rod’s right to run the office, and that I would not offer an opinion without asking Rod his point of view.’
The qualification to which I referred is that Mr Nikolich claimed he and Mr Keogh ‘clearly stated to Mr Heath that we had agreed to distribute Ms Dal Bon’s clients between us because of the Business Plan.’
Mr Heath also noted two later telephone calls on the same day. The first was from Ms Dal Bon, who was ‘concerned that the 1:3 allocation policy would “rip apart” the remainder of the team, and that the clients would not want to be allocated this way’. Ms Dal Bon ‘wanted the existing relationships between her clients and Mark/Peter recognised, and that “due process” was followed’.
The other file note relates to a further call from Mr Keogh. It was in these terms:
‘Mark Keogh called. He said he did not have an answer to what he wanted me to do.
He wanted:
1. a fair outcome
2. one that was in the best interest of clients
He explained he felt he had been encouraged into a team, and to cross sell to Gabriels [sic] clients, but that now the team was being penalised.
We discussed his relationship with Rod – he was very worried about the ongoing relationship – felt that Rods decision was personal.
I suggested that I could speak to Rod – and let him know there was a problem. I told Mark that he was entitled to speak about his concerns, as long as he understood that Rod ran the office, and he needed, in the end, to accept Rods decision. I said the firm would always ensure he was treated fairly despite raising concerns as long as he was sensible, and worked with Rod to ensure the relationship was good.
We agreed that Mark would tell Rod that we have spoken, and that I would then call Rod to let him know of the discussions I had had today.’
Mr Heath did telephone Mr Sutherland, but apparently not until the following day. In the meantime, Mr Heath received an email from Mr Keogh in which he said:
‘I spoke with Rod and told him that I had spoken with you earlier in the day. I raised my concerns again that relationships had been formed with clients and that the current allocation policy of 1 from every 3 clients caused us to have to choose between these relationships. I mentioned that many clients were already expecting to deal with either Peter or myself and that I would also hope that they would prefer to do so. I also asked for an explanation as to the sudden change in his allocation policy. Rod listened to what we had to say, he explained that the change in policy was simply as a result of him changing his mind overnight and as such he has decided to stick to his current allocation policy. He feels that this is the fairest way to hand out clients to advisers within this office. In my view still not necessarily the fairest way or most ideal result for some clients. Rod did say that any client that raises the concern that they wish to deal specifically with either Peter or myself will be re-allocated after this concern has been aired to Rod.
I am not aware of any intention of Rod to speak with you on this issue following our discussion with him. My view on the matter is that unfortunately reason has not won the day which is disappointing however we did decide before going ahead with talking with you, that we would accept any decision as final and we have to accept that. If you think that any issue needs to be raised as a result of our discussions with you please feel free to do so as everything is now out in the open, otherwise I guess it is a closed matter.’
It appears that Mr Keogh sent a copy of this email to Mr Nikolich. Mr Nikolich took no action in relation to it.
After receipt of the email, Mr Heath telephoned Mr Sutherland. Mr Sutherland told him that ‘the issue has now been sorted out’. Mr Heath gave evidence that he responded:
‘I told Mark and Peter that I did not want to interfere but that I would have been concerned if you had said to them, “don’t call Paul”. We will always support you however you must not shut down the staff.’
(vi) Later conflict in the Canberra office
Unfortunately, at least from Mr Nikolich’s point of view, the issue had not been sorted out.
Mr Nikolich gave evidence of a meeting on 8 July 2003, at which Mr Sutherland announced the distribution of the new client lists and said, ‘if I become aware of any adviser having had previous contact with clients without my authorisation there will be trouble’. Mr Nikolich observed that:
‘When he said this, Mr Sutherland looked directly at Mr Keogh and me and used a very intimidating tone. I felt extremely intimidated and threatened’
Mr Nikolich also recounted being summoned to a meeting with Mr Sutherland on 10 July 2003, when he was asked why he had met a particular client ‘after being warned on 8 July 2003 not to do so’. Mr Nikolich said he replied:
‘I have discussed [the client’s] affairs with him on previous occasions and in the absence of another adviser being allocated, I was happy to oblige. The client’s request for a meeting had been arranged approximately one week prior to the meeting on 8 July and at the time of my meeting, he had not been allocated to an adviser. I have an association with this client, having conducted business on a variety of occasions in Ms Dal Bon’s absence during the year.’
Mr Nikolich said Mr Sutherland responded that he was ‘tired of seeing you drag your feet around the office’. Mr Nikolich then told Mr Sutherland about the likely financial effect on him of the reallocation decision, to which Mr Sutherland replied:
‘I’m not responsible for your financial situation, I am not your father, and if you have problems at home you shouldn’t bring them to work.’
Mr Nikolich told Mr Sutherland: ‘I do not have problems at home, my difficulties and problems are with you’.
Shortly after this date, Mr Keogh told Mr Nikolich that he had decided to withdraw from team DKN. He explained: ‘With the reallocation there is a lack of quality clients’. Mr Nikolich went on:
‘This had a significant and detrimental affect on my health and my overall state of mind regarding the decisions made by Mr Sutherland and the way I had been treated by him.
After this, I could not talk to Mr Sutherland. Whilst I continued to do my work, I avoided having any contact with him.’
(vii) Mr Nikolich’s formal complaint
On 28 July 2003, Mr Nikolich sent a four-page letter to the Human Resources section of GSJBWS that commenced in this way:
‘It is with a considerable degree of trepidation that I write to express my concern over issues that have occurred in the Canberra Office in recent months. These issues have caused me a significant degree of angst.’
Mr Nikolich then set out much of the historical material summarised above. He included a complaint that Dianne Grunbaum, the assistant attached to team DKN, had been transferred to team RSL, giving that team two assistants for three advisers and leaving only one assistant, who was new to GSJBWS, to service four advisers, including Mr Nikolich and Mr Keogh. The letter also included the following:
‘After considerable thought, it was decided to raise our concerns with Paul Heath. This appeared to aggravate Rod considerably and resulted in the allocation/retention of approximately 40 of 120 “A” clients (total 350 family groups) and being forced to choose one of every three “A” clients to be shared between us. This represented 11% of the total GSD client base. The majority of the remaining quality “A” clients were allocated to the RSL team and primarily to Lee Scott who has gained considerably in direct brokerage and FUM clients. After assuring us on several occasions he would not benefit personally, Rod has quarantined numerous valuable clients for himself and will also benefit from a majority share of business written of those clients transferred to RSL. This is notwithstanding that the RSL client base is considerably larger than DKN and that RSL had culled significantly during the year and would not allow DKN to proceed with a similar exercise to reduce our client numbers.
During a meeting called for all advisers on 8 July 2003, Rod appeared extremely angry and commenced by confirming the new client distribution lists will be provided today and that if he becomes aware of any adviser having had previous contact with clients without his authorisation “there will be trouble”. This comment was aimed at Mark and myself and delivered by Rod turning and looking directly at us. I personally viewed this act as extremely intimidating and threatening.
I was called to a subsequent meeting with Rod on 10 July 03. At this time, I was asked about a client who at the time of conducting an interview on 8 July, had not been allocated to an adviser. I confirmed my association with this client having conducted business on a variety of occasions in Gabrielle's absence during the year. The discussion had become quite heated at the suggestion of my attempt to poach this client. During this discussion, I disclosed to Rod I felt I had been harshly dealt with given the poor quality of my existing client base and sought his managerial direction as to my future as I had made personal and financial decisions based on our business plan. I highlighted that since the revised allocation of DKN clients, I had been forced to reassess my family's future and decided to relocate as existing premises were no longer affordable. Rod responded to this by suggesting he was not responsible for my financial situation as he was not my father and suggested that if I had problems at home, I shouldn't bring those problems to work. I confirmed my problems were not at home but with his decision and his conduct.
Upon further investigating the JB Were Career Mentor Program - Your Role as Manager in Career Development - quoting “since discussions will take place about personal issues, including doubts an individual may have about their future direction or about personal weaknesses, the role demands sensitivity to the individuals feelings. The individual needs to have a relationship of trust and confidence”. Unfortunately, my trust and confidence in Rod is non-existent.’
The letter was referred to Gina Jowett, GSJBWS’s Sydney Human Resources Manager. She read it and noted it was accompanied by a copy of the team DKN business plan. She immediately telephoned Mr Nikolich and arrangements were made to speak at a time when Mr Nikolich was out of the office. Subsequently, she had a long conversation with him in which he amplified his complaints. Ms Jowett made a file note about the conversation that summarised the history of the matter and concluded as follows:
‘•I asked Peter what he wanted out of this particular complaint, he said that if action wasn’t taken he would decide how he wanted to handle it. I asked what did he mean by “action taken”. He said he wants something done and he doesn’t want his position to be jeopardised. He wants management to view his decision and based on what he has said he believes there is a case for discrimination and intimidation. He believes that by saying to HR that he is intimidated that something should be done.
•I explained to Peter that I felt that there were two issues here, the client distribution and the other was the concerns that he had mentioned in regards to the behavioural issues in the office. Peter said that intertwined there was one situation here, they are not separate items. He said that he doesn’t feel that Rod has treated him appropriately.
•He has not been happy, he is stressed. The environment is not conducive to allow him to do his job appropriately and that management have done nothing about it.
•He indicated again that if he continued with the firm that he was worried about his continuation of employment with the organisation. I explained the process of the complaint and asked in relation to this particular complaint what he felt needed to be done.
•Peter indicated that the only way to move forward is for Rod to be removed from the role and he will not be satisfied until this particular action had been taken.
•Explained to Peter that again this was the first discussion that we had had and that it was an opportunity for him to elaborate on the concerns that he had documented in his letter to me.
•Peter wanted my view on the situation. I acknowledged that he was obviously feeling unhappy and felt strongly about his treatment and that it was important the way he was feeling and we needed to work through this. I explained the complaint process.
•Peter indicated we would just wait and see and that as far as he’s concerned that was there was only one option to resolve this.
•Peter kept making references to the fact that the RSL group had monopolised and, in particular, Rod monopolised the obtaining of new clients and the business in the office. He said that all of the estates get sent through the office and were quarantined by RSL. They received the benefit of those estates.
•Peter indicated that he was by no means greedy it was a matter of principal and honesty. He felt that his personal characteristics had been thrown into question by Rod which he felt was inappropriate and felt like he was victimised and harassed as a result.
•I asked Peter about the structure of the DKN team and he spoke about the fact that Gabby was the person who went out to see clients. It was a demographic thing, he is not scared to do the work but Gabby and Mark went to do most of the business development activities. Peter indicated that the whole reason the DKN team had actually been put together in the first place was that they felt that the RSL team was gaining too much control.
•I explained to Peter that I would investigate the situation and he said “You do that because you’ll find that the story will unfold”.’
Apparently, Ms Jowett was concerned about Mr Nikolich’s demeanour during this telephone conversation. She called him two days later to see how he was. In her file note of this conversation, she said:
‘He made few comments but reiterated the following:
•He indicated that it is up to the firm to make decisions surrounding client allocation.
•Peter actually indicated that he felt that Rod had become aggressive and intimidating and he is actually “demonic” and “on fire” and in no mood to negotiate. You could see the whites of his eyes, he’s never seen anyone this out of control before and never seen Rod acting like this before.’
Ms Jowett did not immediately take any steps to contact anyone in GSJBWS’s Canberra office. She did speak to Mr Evans and Mr Heath. In an undated file note, she recorded what they had told her:
‘•Checked with David Evans and Paul Heath regarding client allocation.
•David confirmed that clients are the firms and that he was comfortable with this being the branch managers decision
•Drew attention to the business plan, David felt this was a plan for business approach and not a contract
•Paul agreed that Rod handled this badly (client allocation but it was ultimately his call
•Cant argue business plan was the ultimate as other aspects of the plan had not been delivered.
•Paul and Chris working with Rod to have him step aside – numerous discussions occurring in the background resulting in Rod stepping aside
•All agree morale had suffered and inconsistent decisions.’
There is no evidence explaining Mr Heath’s alleged claim that ‘other aspects of the plan had not been delivered’, presumably by Mr Nikolich and Mr Keogh.
In late August 2003, Ms Jowett spoke to Trish Barber, an investment adviser in the Canberra office, about another matter. In the course of that conversation, Ms Barber said ‘Rod was a nice person but there had been a lack of trust in the office’; ‘[h]e’s a good business writer but just not a good manager’.
At about the same time, Ms Jowett contacted Mr Sutherland. She told him she had received a letter from Mr Nikolich and invited him to come to Sydney to discuss it.
Mr Sutherland attended the Sydney office on 27 August 2003. Ms Jowett showed him the letter, which Mr Sutherland had not previously seen.
Apparently, Mr Sutherland took some time to consider the letter. He made notes on a copy of it. That copy is in evidence in this case (exhibit E). It contains, at the end, a note summarising the allocation of Ms Dal Bon’s clients, confirming what is set out above. The note does not disclose any reasoning process undertaken by Mr Sutherland or any investigation by him of the needs of particular clients or the extent of past contact between any of them and particular financial advisers.
Ms Jowett then had a conversation with Mr Sutherland. Once again, she made a file note of the conversation. According to that note, Mr Sutherland denied most of Mr Nikolich’s substantive allegations but he agreed he had referred to ‘greed of advisers’ at one meeting. He also agreed that ‘morale was bad’.
Mr Heath was then called in. Ms Jowett’s note of the ensuing conversation was as follows:
‘•Paul reiterated the serious nature of the complaint and indicated that at a minimum morale was the worst that it has been and Rod needed to look at the part he played in this. He confirmed that the transparency and consistency of decision making [sic: ‘lack of’?] had caused a loss of trust and confidence in his management style and he needed to consider his position carefully.
•Paul and Chris were looking at what are the next steps for the office and we are all at a loss as to how this situation can be turned around
•Rod acknowledged that he found the role difficult and he loves his work but said he would think about this feedback carefully’
Despite the fact that Ms Jowett now had Mr Sutherland’s responses to Mr Nikolich’s allegations, and Mr Heath’s comment about the serious nature of the complaint, Ms Jowett took no immediate steps either to investigate the factual conflicts in the accounts given by Mr Nikolich and Mr Sutherland or, if she was not going to do this, to bring the ‘investigation’ to a formal conclusion. During September 2003, she apparently did speak to Mr Nikolich by telephone on several occasions. During one conversation, Mr Nikolich says, he asked Ms Jowett to ‘provide written confirmation of what you are doing to investigate my complaint’ and referred to GSJBWS’s grievance policy document. Mr Nikolich explained in his affidavit:
‘I felt angered by the fact that the firm was taking no steps to redress the client reallocation whilst there was still time to do so. To me, time was of the essence and my conversations with Mr. [sic] Jowett were frustrating in that the investigation was taking so long and, in the meantime, I was left in the office with Rod Sutherland as my direct superior. I felt that nothing was being done in a timely way to fix up what was, to me, a clear case of injustice.’
Mr Nikolich said, in his affidavit, that, in one of these telephone conversations, Ms Jowett told him Mr Sutherland ‘is willing to apologise’ but he had responded that he would ‘not accept any form of apology without restitution, that is Rod Sutherland reversing his decision about the client reallocation’. Apparently, that was the end of the proposed apology.
In early October 2003, Ms Jowett asked Mr Nikolich to come to Sydney for a meeting with herself and Mr Heath. The meeting was held on 15 October. Once again, Ms Jowett made a file note of the conversation. It appears the conversation opened by Ms Jowett and Mr Heath telling Mr Nikolich that Mr Sutherland was ‘stepping aside’ from his role as Canberra manager. However, they learned Mr Nikolich already knew that. During the course of the conversation Mr Nikolich raised a new complaint, about the circumstances under which Mr Sutherland had taken over dealings with a client in Mr Nikolich’s list, one Alan Barter. According to Ms Jowett’s file note, Mr Nikolich said a discussion between Mr Keogh and Mr Barter indicated ‘that Alan had some awareness that Rod was going to step aside and that Rod had manipulated Alan to move across to be a client of Rod and was no longer dealing with Peter’. Mr Nikolich presented a letter setting out details of his complaint.
There was also discussion about the original complaints. However, neither Ms Jowett nor Mr Heath stated any conclusions about their validity. Instead, there was discussion about Mr Nikolich’s position. The file note said:
‘•We explained that we wanted him to focus on his job at hand and without actually knowing what his expectations were it is very difficult to work towards an outcome.
•He proceeded to then tell us that he was too stressed to think about the situation. He hadn’t been feeling well and he felt that one of the options that the firm could do was enable him to take some time off. We proceeded to advise Peter that he was welcome to take time. He could either take time as holidays in which he should do that sooner rather than later. If he felt that he needed to take time and felt it was a health issue then we would require a doctors certificate and for him to go to see his local doctor to take that time off. Again we encouraged him to do that and offered that if he needed help addressing his client situations or presentations so he could take some leave that we would provide some assistance on that front. He did not respond on that issue.
•He did indicate that he was feeling quite frustrated about the whole situation. He said that when he came into the office in the morning he felt sick, he actually hated Rod and hated the sight of him – just looking at him made him feel ill.
•I explained that that was a concern to us and that was something unfortunately that he would have to deal with his feelings at a personal level and to try enable him to deal with that situation we offered the employee assistance programme. Explained this was a confidential [counselling service], that are outside and separate to the organisation, for him to actually take advantage of.’
By the date of this meeting, Mr Keogh had withdrawn from the DKN team, leaving Mr Nikolich to operate alone. In his affidavit, Mr Nikolich commented:
‘My employment had changed back to its previous base where I was responsible for all of my own clients. The reallocation of clients had taken most of the quality clients away from me. Moreover, I did not have the collegiate support that I had had in the Team and with the hostile environment caused by Mr Sutherland; the workplace became extremely stressful for me.’
As a result of Mr Nikolich’s allegations about the Barter account, Ms Jowett made four telephone calls: to Mr Sutherland, to Dorian Bontempelli (the new Canberra manager), to Mr Nikolich and to Mr Keogh. Mr Sutherland denied any wrongdoing. Mr Bontempelli thought that representation was a matter for the client to decide but ‘in result of the complications surrounding the communication around the transaction it would be appropriate for Rod to split some of that brokerage’.
Mr Nikolich sent to Ms Jowett a tape of some conversations between Mr Sutherland and Mr Barter which, he contended, would confirm his complaint. Ms Jowett did not listen to the tape. She said she sent it to Adelaide, where there was an appropriate machine for listening to it. She said: ‘Someone attempted to listen to it, and, yes, as far as I’m aware, did’. Ms Jowett had no transcript or, it seems, any definitive report about the content of the tape, but she volunteered the comment that ‘the conversations referred to by Peter I don’t believe were on that tape’. She did not report that belief to Mr Nikolich.
Ms Jowett had a lengthy telephone conversation with Mr Keogh on 8 November 2003 about the Barter complaint. Mr Keogh was not happy about what Mr Sutherland had done. Ms Jowett made this note of his account of the matter:
‘•Mark had a number of phone calls with Alan and discussed what needed to be done, the sorts of forms that needed to be filled out. Alan had actually made some requests for Mark to investigate some Afic Rights.
•Mark did quite a bit of work in the background only to discover that Rod was also doing some work in the background.
•Mark had actually spoken to David Evans about securing enough of the rights for Alan. He asked Alan to send him some of the paperwork which Alan proceeded to do. Said that to Rod, Rod received the form, took action and actually booked the stock and received the brokerage for that particular transaction.
•Mark approached Rod about the issue, he’d approached him on two separate occasions to try and open up communication lines around this particular account. Rod did not provide any assistance in terms of keeping him posted with where he was at with the account. Now Mark as a consequence is extremely frustrated and his trust in any discussions that he may have had with Rod in the future is now lost.’
On the same day, Ms Jowett received an email from Mr Sutherland in which he stated it was Mr Barter who had decided to switch to Mr Sutherland.
Sometime in November 2003, Ms Jowett telephoned Mr Nikolich in order to advise him of the outcome of his complaint. Her file note of that conversation reads as follows:
‘• Gina advised Peter that his concerns had been taken seriously and we had investigated the situation that had been discussed and the incident relating to the Alan Barter client transfer. Whilst we acknowledged that it had been a difficult time for him, we have taken action.
•The action was that Paul Heath, in his capacity as co-head of private clients, has advised and instructed Rod Sutherland that any transfers of clients between any advising in the Canberra office in the future will be referred to Dorian Bontempelli.
•Dorian and Paul Heath would investigate further the situations and make decisions around that.
•Peter proceeded to be disbelieving of the result. He said "What else are you going to do" and I explained to him that under the circumstances we felt that the situation had been addressed in the most appropriate way. Also that a combination of Rod moving from the role and the new manager in the Canberra office being appointed, and the instructions that had been clearly given to Rod, were the most appropriate course of action in this point in time.
•I proceeded to indicate that I would put to him in writing the outcome of the investigation. He asked for that to be done asap and couldn't again express his disbelief that the issues had been swept under the carpet and I again explained to him that we had not swept them under the carpet and reconfirmed the action that had been taken.
•He became quite hostile over the telephone and indicated that he wanted to see the response in writing as soon as possible and that he was not satisfied.
•I explained to him again that I had asked him on numerous occasions, and made alternative suggestions, how he would like the situation to be handled. He had given no further information or feedback around these issues.
•We felt that the situation had been addressed and some of the problems removed for him.
•Again he confirmed that everyday he has to go into the office and everyday he is harassed and he was extremely unhappy and left the phone call with the feeling that he was definitely going to take the matter further.’
On 1 December 2003, Ms Jowett wrote to Mr Nikolich ‘to confirm the outcomes of your letter dated 28 July 2003 regarding the allocation of client accounts to Team DKN in the Canberra office and your subsequent letter dated 10 October 2003 outlining your complaint against Rod Sutherland’. The formal findings were stated in this way:
‘I have now completed an investigation into your complaints. Following my review of the issues you have raised, I acknowledge that an apparent lack of transparency and failure by Rod to clearly communicate his decisions regarding the allocation of client accounts has contributed to the issues you have raised in your complaints concerning your relationship with Rod. However, I confirm that it was necessary and appropriate for Rod in his position as the Canberra Manager to make decisions regarding the operations of the Canberra office. Rod's decisions regarding the allocation of client accounts following the resignation of Gabrielle Dal Bon were appropriate having regard to the needs of the firm's clients and the operations of the Canberra office. Although, I accept that you have felt distressed and upset on occasions as a result of the issues giving rise to your complaints, I am satisfied that Rod has not attempted to intimidate you or cause you stress during his discussions with you about the allocation of client accounts.
As you are aware, Rod has stepped down from the position of Canberra Manager and is now employed in the position of Investment Adviser in the Canberra office. Dorian Bontempelli has subsequently been appointed to the role of Canberra Manager.
In your letter dated 10 October 2003 you make a complaint in relation to the transfer of the Barter account to Mark Keogh. Following my investigation, I have found no evidence to support your claim that the confidential complaint made by you against Rod has been discussed by him with any clients or that Barter’s decision to transfer its account to Mark was related in any way to your complaint against Rod.’
(viii) Further action by Mr Nikolich
Apparently Ms Jowett’s letter was sent to an old address. Mr Nikolich received a copy of the letter on 18 December 2003. He immediately asked Ms Jowett to refer his complaint to Mr Evans and Dianne Jacobs, Group Manager, Human Resources.
Ms Jowett spoke to Ms Jacobs, who was her immediate supervisor, and asked her to contact Mr Nikolich. She gave Ms Jacobs copies of the relevant documents.
Ms Jacobs did not give evidence in this case. However, the documentary evidence includes her file note of a meeting on 17 March 2004 attended by Mr Nikolich, Mr Evans and herself. The note includes the following:
‘Peter went through the issues and background as outlined in prior file notes. Key points were around the allocation of clients. He said he felt his job was under threat. He went on to say that it was a testing time. “I was off my rocker. I won't go there now” (he look [sic] as if he would cry).
He said although he had spoken to Paul Heath, he felt no-one was listeninq to him.
Rod had stepped down for family reasons and not due to his complaint. He felt his complaint was being ignored. David replied that sometimes actions are taken that it may not be obvious as to why. Peter’s concerns were a substantial part, but not the only reason, why Rod stepped down.
Peter then explained that in December 2003 he was very stressed. He sought counselling and was referred to his doctor. He was put on medication. He “was suicidal”. He said he could not face going to work, but his doctor wanted him to return to work in a month so he could “face the reality of returning to work.” He said he is on medication during the day, sleeping pills at night to get through the highs and lows of the day. He feels isolated and not supported.
David told him he was brave, has been through a lot and apologised that he feels this way and that he has obviously been affected by it. David then said that “to say this has not been treated seriously (PH and HR Sydney) is not the case.” The feedback given by Peter to Paul has been considered and formed a real part of the decision regarding Rod not continuing in the role of manager. Dianne pointed out that it was handled in the way it was to help Peter retain confidentiality and dignity.’ (Original emphasis)
The discussion turned to Mr Nikolich’s present condition; he was feeling pressured, unmotivated, depressed and suicidal. Mr Evans and Ms Jacobs suggested he reduce his working hours and spend more time with his family. Mr Evans promised to give thought to a method of subsidising Mr Nikolich to enable him to do this.
On 29 March 2004, Mr Evans wrote to Mr Nikolich offering a minimum bonus payment of $100,000 for the six months to 30 September 2004. This payment was to be a one-off gesture and to be made by instalments on 30 April, 30 July and 30 October 2004. The offer was made against the background that Mr Evans had ascertained that Mr Nikolich ‘is on target to make $192,000 for the year’. However, Mr Evans explained in evidence that the effect of the offer was that Mr Nikolich would have been guaranteed about $140,000 ($100,000 plus half his annual base salary) for the six months.
It is not clear that Mr Nikolich understood the offer in this way. Counsel for the applicant drew attention to the second paragraph in Mr Nikolich’s letter, of 13 May 2004, in which he responded, rejecting the offer. Mr Nikolich said:
‘After considering all aspects of your proposal I feel the firm’s offer, although attractive, does not fully recognise the degree of injustice and harm caused to myself and my family by the events that occurred through mid to late 2003, and in particular the actions of Rod Sutherland.
This is particularly so, when based on my current best projections I anticipate, indeed am aiming, to produce more bonus than this over the three identified quarters absent any guarantee. As such, I currently anticipate that the proposed guarantee arrangement would be of little, if any value to me.
At a very basic level (being the failure of Rod to allocate Gabrielle Dal Bon's clients as had been agreed on her departure and similar to other allocations throughout JB Were), this has conservatively occasioned me a loss of gross annual revenue of $300,000, not to mention the psychological trauma that I have endured as a result of the various events. These losses are ongoing whilst others within the Canberra office continue to benefit from their actions.’
Mr Nikolich went on to propose his own solution:
(i)at least substantial financial compensation for the lost $300,000, ‘backdated to 1 July 2003 and paid with final bonus for financial year ending 30 June 2004’;
(ii)redressing the ongoing impact of ‘the change in the distribution method of clients’:
‘The obvious method would be to undo the unfair distribution and re-transfer clients with annual brokerage/fee revenue totaling $300,000 to my adviser code (P\N) as at 1 July 2004. Obviously, I would suggest that any such transfer be supervised by a mediator to ensure appropriate and suitable relationships are transferred. Alternatively, some other proactive method of JB Were increasing my annual brokerage/fee revenue by this amount would need to be considered.’
(iii)Team RSL to be dissolved and its members relocated to alternate dealing desks.
Mr Evans did not immediately respond to the letter. He arranged a further meeting for 22 June 2004. At the meeting, Mr Evans and Ms Jacobs discussed with Mr Nikolich the state of his health and his ability to resume work. At the conclusion of the meeting, Mr Evans handed Mr Nikolich a letter which contained the following:
‘I regret that you have decided to reject the offer made to you on behalf of Goldman Sachs JBWere in my letter to you dated 29 March 2004.
For the avoidance of doubt, I wish to make it clear that Goldman Sachs JBWere does not accept that it is liable to compensate you in the manner set out in your letter or at all and the “counter-offer” contained in your letter is not acceptable to us. As far as Goldman Sachs JBWere is concerned, these matters are now closed and no further offers of assistance will be made.
Peter, if you are presently fit for work, you will be expected to now carry out your full range of duties and responsibilities. We are concerned about the health issues that you have raised, so I have asked Dianne Jacobs to write to you separately regarding your health and your capacity and fitness for work.’
Mr Nikolich’s earnings (salary and incentive payments) for the year ended 30 June 2004 amounted to $197,485.
(ix) Termination of Mr Nikolich’s employment
In her affidavit, Ms Jowett deposed that Mr Nikolich was absent from work on sick leave from 1 December 2003 until 2 January 2004. Although he was continuing to receive psychological counselling, Mr Nikolich resumed work on Monday, 5 January 2004. He continued to work until 6 August 2004, when he again went on sick leave. He remained on sick leave until 31 August 2004, when his sick leave entitlement ran out. Mr Nikolich then was paid salary for two weeks and had two week’s leave without pay, from 16 September to 1 October 2004. Mr Nikolich then used accrued annual leave until 30 November 2004, when this leave ran out. From 1 December to 6 December 2004, Mr Nikolich was on leave without pay. In all, if it matters – the applicant’s counsel say it does – Mr Nikolich’s total period of leave without pay was less than three weeks.
In July 2004, Ms Jowett arranged for a psychological assessment of Mr Nikolich by Thomas O’Neill, a clinical psychologist. In September 2004, she also contacted Dr Stephen Jamieson, Mr Nikolich’s treating general practitioner. Ms Jowett also had frequent contact with Mr Nikolich himself, concerning his health and leave entitlements. However, she left GSJBWS on 26 November 2004. She was succeeded as Human Resources Manager in GSJBWS’s Sydney office by Paula Ward.
Ms Ward deposed that, as Mr Nikolich had used up all his leave by 1 December 2004 and GSJBWS had not heard from him, he was expected to attend for work on that day. He did not do so. Accordingly, Ms Ward sent him an express letter asking for information, as a matter of urgency, ‘whether you are intending to return to work to resume your normal duties and responsibilities’.
Mr Nikolich responded through a firm of solicitors, Harmers Workplace Lawyers (‘Harmers’). On 6 December 2004, they wrote a letter to Ms Ward that included the following:
‘As you will no doubt be aware, Mr Nikolich has for some time now been unwell because of various actions taken by Goldman Sachs JBWere against him in relation to his employment. At this time we are currently finalising our instructions from Mr Nikolich and expect to respond more fully shortly but are currently advised that if Mr Nikolich were to return to work such would have adverse consequences for his health.’
Ms Ward discussed this letter with Ms Jacobs and Mr Heath. On 7 December 2004, she wrote to Mr Nikolich. After referring to the solicitors’ letter, she said:
‘In the circumstances, it is clear to us that you either do not intend to return to work or are not able to return to work in the foreseeable future or at all. In those circumstances, Goldman Sachs JBWere regards your employment with Goldman Sachs JBWere as having terminated. For this purpose, Goldman Sachs JBWere will treat the termination of your employment as having taken effect on Monday, 6 December 2004.’
On 18 March 2005, Harmers filed an Application in this Court seeking relief in relation to unlawful termination pursuant to ss 170CK(2)(f) and 170CP of the WR Act. After a change of solicitors, the Application was amended to include the other causes of action, mentioned in para 2 above.
In the 2004-05 financial year, Mr Nikolich received from GSJBWS a total sum of $22,928.
(x) The medical/psychological evidence
(a) IntroductoryThe parties jointly tendered, as one exhibit, a number of medical and psychological reports. Counsel told me they had agreed that none of the reports’ authors would be cross-examined. I expressed concern that it might be difficult, without cross-examination, to resolve any significant differences of expert opinion, but I agreed to defer further discussion of that matter until I had read the reports. Having now done so, I accept that cross-examination is not essential. The differences between the experts are differences in professional judgments. They do not need oral elucidation. I will attempt to summarise the views of each of the six experts.
(b) Dr Jamieson
Dr Jamieson is a Canberra general practitioner. He has seen Mr Nikolich on numerous occasions since 1 December 2003. Dr Jamieson reported, in this way, the applicant’s demeanour at the first consultation:
‘Mr Nikolich attended my surgery for the first time on December 1, 2003. He presented in a most distressed state and related to me a 6-month history of work-place conflict. The latter was of such a degree that his career, not just with his firm, but in the industry as a whole, was compromised. This had had a very serious effect on his mental state, on his marriage and family life.
Mr Nikolich presented with symptoms of a major depressive disorder, ie depressed mood, poor self-esteem, an extremely poor view of his future, a great sense of failure and withdrawal. I was very concerned about his mental state at the time and Mr Nikolich accepted to start anti-depressant medication immediately.’
Dr Jamieson said that, over the next few months, ‘there was a moderate lift in his mood but he continued to be consumed by the conflictual problems at work’. In early 2005, Dr Jamieson referred Mr Nikolich to Dr Fatma Lowden, a Canberra psychiatrist, who took over responsibility for Mr Nikolich’s medication. However, Dr Jamieson continued to see Mr Nikolich from time to time. He reported in April 2005 that ‘his mood remains low’. Dr Jamieson related Mr Nikolich’s condition entirely to his conflicts at work. He said that ‘Mr Nikolich’s feeling of injustice and fears that his career would be destroyed were foremost in the development of his clinical disorder’. Dr Jamieson did not think Mr Nikolich was fit to return to work, either with GSJBWS or ‘anywhere else in his field for the moment’.
In a supplementary report dated 4 April 2006, Dr Jamieson detailed Mr Nikolich’s medication. He noted that, since the earlier report, Mr Nikolich’s marriage had failed, having ‘a major detrimental effect on his health’. He thought Mr Nikolich, at that time, was ‘unfit for any professional duties’. He also thought Mr Nikolich ‘is unlikely to improve in the short to medium term’.
(c) Dr Lowden
Dr Lowden first saw Mr Nikolich on 26 April 2005. In a letter to Dr Jamieson of 19 May 2005, Dr Lowden set out the extensive history she had obtained from Mr Nikolich and provided this summary:
‘In summary he is a thirty-nine year old presenting with twenty-three month history of depression at the background of mild family history of psychiatric disorder, possibly early emotional problems but good sense of self, some unresolved losses and separations, relationship difficulties and quite severe work issues. On the other hand his intelligence, his psychological insight and his ability to hold a relationship are his strengths which should be taken into account in his prognostic evaluation.
My provisional diagnosis for Peter Nikolich is major depression anxiety, which could be bipolar in nature but is difficult to differentiate at this stage. This needs to be monitored over the next six to twelve months to clarify this diagnosis. In terms of differential diagnosis I considered organic mood disorder, personality disorder and dysthymia.
In terms of immediate management, first of all I discussed suicide risk management measures with him then explained his condition and it’s management with him in detail. He did not require hospitalisation. I plan to talk to his wife with his consent in the future for further information if necessary. Thank you for organising investigations for him, which revealed no major abnormality. I discussed with him a trial of mood stabilizer for the future in case his bipolar symptoms are present but I asked him to cease the sleeping tablets and instead I initiated quetiapine 25mg po nocte for his insomnia and some of the mild paranoid thinking. I also initiated psychotherapy to improve his self-esteem, to deal with interpersonal issues and for anger management.’
In a later report, dated 13 March 2006, Dr Lowden identified her diagnosis for Mr Nikolich as ‘major depressive disorder according to DSM IV’. This report was prepared after interviewing Mr Nikolich on eight different occasions. Dr Lowden gave the cause of the condition as ‘betrayal of trust and lack of respect, difficulty in conflict resolution at the workplace and a hostile work environment’. In relation to Mr Nikolich’s fitness for work, Dr Lowden said:
‘(a)I do not believe that he could return to work at Goldman Sachs JB Were given the history of events with that company.
(b)He might be able to start a part-time job with another company since there is a significant improvement in his symptoms.
I believe that if Mr Peter Nikolich continues treatment and psychotherapy he will eventually be able to return to work.’
(d) Dr Lucas
Dr William Lucas is a consultant forensic psychiatrist. He was asked to see Mr Nikolich by Pamela Coward and Associates, Mr Nikolich’s present solicitors. Dr Lucas saw Mr Nikolich on 20 April 2005 and reported on 14 June 2005. The report set out an extensive history. That history included complaints by Mr Nikolich about the manner in which GSJBWS had handled his concerns about Mr Sutherland’s conduct. Dr Lucas said:
‘Mr Nikolich went off work about the 2nd Dec 2003. He spoke to the officer mentioned above. He began taking Lovan.
After six months delay he received correspondence from the firm. The officer said the firm did not know how to handle the situation and that procedure may not have been followed. Mr Nikolich became more frustrated and went deeper into depression. He had to face colleagues involved in the problem.’
Dr Lucas accepted that Mr Nikolich had been suffering from major depression when first seen by Dr Jamieson on 1 December 2003. In relation to Mr Nikolich’s current condition, Dr Lucas said:
‘There is no personality diagnosis. Mr Nikolich has some obsessive-compulsive traits but these do not amount to a disorder. They are likely to have been an advantage during his employment, considering the nature of his duties and responsibilities.
His only medical diagnosis is hypertension.
From the information available the onset and continuation of Mr Nikolich’s symptoms appears related to his employment.’
In relation to working capacity, Dr Lucas said:
‘…he could not return to work at Goldman Sachs J B Were. Further, in his present mental state he is probably unfit to return to work of a similar type with another firm. He remains depressed, anxious, has insomnia and concentration is poor.
With further treatment leading to an improvement in his condition Mr Nikolich should be able to return to work but his placement and duties will require careful planning. He obviously has a number of skills in the financial area but while depressed and anxious will have difficulty performing at his previous level. As mentioned, a return to his previous firm will not be possible.’
(e) Mr O’Neill
Mr Thomas O’Neill is a clinical psychologist. He saw Mr Nikolich on 9 July 2004, at the request of Ms Jowett. In a report dated that day, Mr O’Neill set out a history that was consistent with Mr Nikolich’s evidence in this case. He detailed Mr Nikolich’s results in relation to three assessments: Personality Assessment Inventory, Beck Depression Inventory 2nd edition and Beck Anxiety Inventory. Mr O’Neill set out the following conclusions:
‘From a psychological point of view, there is no doubt that Mr. Nikolich was distressed by his perception of how Mr. Sutherland dealt with his concerns last year, and began to find it difficult to function at work by the end of 2003. He met criteria for a Major Depressive Episode by December 2003 and these symptoms definitely interfered with his ability to function both at work and home. He began to receive some therapeutic benefits after commencing antidepressant medication, although continued to report ongoing symptoms of depression that were not as severe as those in the latter part of 2003. Although there was exaggeration noted on personality testing, my overall impression was that he still does have signs of a low-grade depression consistent with a Dysthymic Disorder. This level of depression is also complicated by his conviction that he has been unfairly treated by Mr. Sutherland and his team and also in general by Goldman Sachs and Were. He is also highly sensitive about how his concerns are being dealt with within the organisation and his perception that Mr. Sutherland has been able to get away with some unacceptable unprofessional behaviour. As noted in my report, he wants a resolve to his concerns to include financial remuneration/compensation, attempts to break up Mr. Sutherland's team and reallocation of Ms Dolbann's original clients by an outside mediator.
The presence of a Dysthymic disorder does not preclude the possibility of someone being able to function normally at work. I believe that Mr. Nikolich is fit for normal duties and responsibilities and would be more motivated at work if he perceived that attempts were being made by Goldman Sachs and Were to support his requests for a resolve. I consider these to be industrial issues and are not issues that require clinical attention per se.
It is difficult to comment on Mr. Nikolich's prognosis. He reported to me that his psychological well being in the future will be contingent on the outcome of his negotiations with Goldman Sachs and Were. I do not believe any psychological treatment could assist with this process apart from perhaps reviewing the reasonableness of his requests with a counsellor of his own choice. He has had a positive response to his medication and I would suggest ongoing treatment with this.’
So far as I am aware, Mr O’Neill has not subsequently seen Mr Nikolich.
(f) Dr SynnottDr Inglis Synnott is a Canberra consultant psychiatrist. He saw Mr Nikolich on two occasions, at the request of solicitors then acting for GSJBWS or its insurer.
Dr Synnott first saw Mr Nikolich on 24 October 2005. On that occasion, he took a history, less extensive than that taken by some others but also consistent with Mr Nikolich’s evidence. The history included complaints about the manner in which GSJBWS had handled his concerns about Mr Sutherland’s conduct.
Dr Synnott thought the symptoms described by Mr Nikolich met the diagnostic criteria of a major depressive disorder. However, he said it should not automatically be assumed that Mr Nikolich had a significant psychiatric impairment or was precluded from returning to work. He said:
‘In my opinion, it is the anger of Mr Nikolich and his determination to gain “satisfaction” with regards his former employers meeting his demands (for justice and restitution) that are the major factors in why he is not returning to employment. There is no psychiatric incapacity to work.’
Dr Synnott thought Mr Nikolich would not have a permanent psychiatric impairment but was ‘unlikely to return to employment until he regains satisfaction in his requests’. The ‘prognosis should be good – assuming there is some reasonable industrial solution’.
Dr Synnott saw Mr Nikolich again on 31 March 2006. In a report dated 7 April 2006, he brought the history up to date but thought there had been no significant change in Mr Nikolich’s psychological status.
However, Dr Synnott expressed concern at what he called ‘a considerable shift in the “mindset” of Mr Nikolich’. Dr Synnott explained:
‘In October 2005, Mr Nikolich was of the opinion that, once he received restitution and justice, he could return to the same industry – and in a similar job, although not with his former employer. However, at the consultation on 31 March 2006 that was no longer his position – he is now of the opinion that he is currently incapable of any employment or participating fully in his usual life roles and activities, even if there is satisfaction in the courts.
In my opinion, at the consultation on 31 March 2006, Mr Nikolich described sufficient psychological symptoms to meet the diagnostic criteria of a Major Depressive Disorder – as he did at the initial consultation. However, what has changed in the five months since I first saw him is that he now has a different mindset regarding his capabilities (in employment and other life roles) – this may prove to be a self-fulfilling and self-perpetuating prophecy. It does not augur well for the future.’
Dr Synnott reported that:
‘currently Mr Nikolich is not able to return to any kind of work on a fulltime basis. He said he is psychiatrically incapable of participating in any kind of employment and, in my opinion, his mindset will prove this to be a self-fulfilling and self-perpetuating prophecy’.
(g) Dr Samuell
Dr Doron Samuell is a clinical and forensic psychiatrist. He saw Mr Nikolich on two occasions, at the request of solicitors acting for GSJBWS or its insurer.
The first interview was on 6 September 2005. Dr Samuell took an extensive history on this occasion. Once again, the history included complaints about the way in which GSJBWS had dealt with his concerns about Mr Sutherland.
Dr Samuell thought Mr Nikolich’s psychological state had been ‘unnecessarily medicalised’. He said:
‘A more helpful approach may have been to assist Mr Nikolich develop some perspective about his circumstances. In worrying about incremental changes to his income, he now faces the prospect of having no income. His distress about this is understandable.
I did not make a psychiatric diagnosis. This is because Mr Nikolich’s difficulties should be better understood within the framework of a rigid premorbid personality decompensating in the face of challenges. As such, the remedy for Mr Nikolich’s distress is to obtain perspective about his circumstances and begin the process of finding alternative employment. He needs to abandon the sick roll and relinquish his abnormal illness behaviour. It is unlikely that medication will have any meaningful impact on him.
In my opinion, Mr Nikolich is fully fit to work in any capacity for which he is suitably qualified.
In my opinion, despite that [sic] fact that he has lost confidence, he could perform his normal duties in his usual work environment if those duties were available to him.
In my opinion, the applicant has not suffered from a psychological condition.’
There is no doubt that the complaints made in Mr Nikolich’s letter of 28 July 2003 were genuine. Consequently, as it seems to me, they were covered by GSJBWS’s promise. Mr Nikolich was able to discuss his concerns confidentially; there can be no complaint about that aspect of GSJBWS’s conduct. However, the promise of support necessarily includes, at least, an implied promise to carry out an adequate and timely investigation into the merit of any complaint or grievance, and to endeavour to achieve a result that will resolve the problem and accord with GSJBWS’s culture of each member of the team being ‘able to work positively and productively’, and be ‘treated with respect and courtesy’. That did not happen in this case. The result was to exacerbate the stress that Mr Nikolich was already suffering as a result of Mr Sutherland’s conduct.
I conclude that GSJBWS breached its contract with Mr Nikolich in respect of provisions in WWU concerning health and safety, harassment and the grievance procedures. I will deal later with the issue of quantum of damages for those breaches.
The TP Act claims
The applicant makes two claims pursuant to the TP Act. Both claims concern the likely application of the ‘exit strategies’ paragraph in the team DKN business plan in the event of a departure by one of the three members of the team. First, the applicant says that the respondent, in trade or commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52 of the TP Act or s 42 of the FT Act. Second, the applicant relies on s 53B of the TP Act. That section says:
‘A corporation shall not, in relation to employment that is to be, or may be, offered by the corporation or by another person, engage in conduct that is liable to mislead persons seeking the employment as to the availability, nature, terms or conditions of, or any other matter relating to, the employment.’
These claims are disputed by the respondent, both in terms of their availability in this case and whether they are established by the evidence. However, I have reached the conclusion that I need not resolve those disputes; even if one or both the claims could be established, they would not result in recovery of any damages.
In order to explain that conclusion, it is necessary to refer to the case pleaded by the applicant. Paragraph 36 of the Second Amended Statement of Claim sets out representations said to have been made by the respondent, which representations are said (in para 39) to be misleading and deceptive or likely to mislead or deceive.
The representations pleaded in para 36 are as follows:
‘(a)The Applicant could perform his duties under the contract of employment through the formation of and participation in Team DKN, being a working structure set in place at the initiative of the Respondent;
(b)the business plan for Team DKN was approved by the Respondent;
(c)the formation of Team DKN and the business plan formed part of the terms and conditions of the Applicant’s employment with the Respondent;
(d)the Applicant could perform his duties under the contract of employment through business plan for Team DKN;
(e)the terms of the business plan would be enforced;
(f)in the event of the resignation of any member of Team DKN, that person’s clients would be redistributed on 50:50 basis to the remaining two members of the team.’
Let it be assumed that the applicant has proved that GSJBWS made all of these representations and that some or all of them were false or, being a representation about a future matter, were made without GSJBWS having reasonable grounds for making the representation: see s 51A of the TP Act. What flows from the representations?
In para 43 of his Second Amended Statement of Claim, the applicant alleged that, acting in reliance on the representations and the respondent’s conduct, he entered into ‘the new terms of the contract of employment, being the formation of Team DKN and the adoption of the business plan’. I will treat this paragraph as alleging that, whether or not there were ‘new terms of the contract of employment’, but for the misleading conduct the applicant would not have joined team DKN or agreed to the business plan. Assume that to be so; did the applicant sustain loss because, misled by GSJBWS, he in fact joined team DKN and agreed to the business plan?
No such loss has been demonstrated. Mr Nikolich’s earnings, during the year of operation of the DKN partnership (2002-03), were less than in the previous (or subsequent) year. However, no attempt was made to relate this reduction to the fact of the partnership which, Mr Nikolich said, worked well.
Mr Nikolich’s complaint is that GSJBWS failed to honour the understanding set out in the ‘exit strategies’ paragraph of the team DKN business plan. Undoubtedly, that failure adversely affected his income. However, that is not a loss or damage consequential upon the misleading conduct.
A person’s entitlement to damages for contravention of s 52 or s 53B of the TP Act is governed by s 82(1) of the TP Act. That subsection provides:
‘A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.’
Sections 52 and 53B are contained in Part V of the TP Act.
The fundamental principle of s 82(1) of the TP Act was explained by the High Court in Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1. The appellant in that case had applied to the respondent for the addition to his superannuation policy, and the insertion in his life policy, of a total disability clause. He was misled by the respondent’s agent as to the circumstances under which the total disability benefit would be payable, but there was no evidence that the total disability clause was not worth what he paid for it.
The appellant sustained an injury which resulted in incapacity to carry on his usual occupation. He sued for damages, inter alia, for contravention of s 52 and s 53(g) of the TP Act. The claim was based on what the appellant would have received if the circumstances under which the total disability clause operated were as stated by the agent.
Gibbs CJ said at 6:
‘Actions based on ss. 52 and 53 are analogous to actions in tort and the remedy in damages provided by s. 82(1) appears to adopt the measure of damages applicable in an action in tort. That sub-section refers to loss or damage by the conduct of another that contravened a provision of Pt IV or Pt V; it therefore looks to the loss or damage flowing from the offending act of the other person. The acts referred to in ss. 52 and 53 do not include the breach of a contract, and in awarding damages under s. 82 for a breach of either of those sections, no question can arise of damages for loss of a bargain. The contractual measure of damages is therefore inappropriate in such a case.’
At 11-12, Mason, Wilson and Dawson JJ explained the difference between damages recoverable in contract and those recoverable in tort:
‘The Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Pts IV and V. Accordingly, it is for the courts to determine what is the appropriate measure of damages recoverable by a plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions. Two established measures of damages, those applicable in contract and tort respectively, compete for acceptance. In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss).’
Their Honours said, at 13, that, if the tort measure of damages is applied to a claim under s 82 of the TP Act, ‘it is necessary to determine what the plaintiff would have done had he not relied on the representation’. At 14, they said:
‘there is much to be said for the view that the measure of damages in tort is appropriate in most, if not all, Pt V cases, especially those involving misleading or deceptive conduct and the making of false statements. Such conduct is similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement.’
Mason, Wilson and Dawson JJ made some concluding comments (at [14]-[15]) that have a resonance in the present case, substituting a reference to the business plan for that to the insurance policy:
‘The disappointed expectations of a person induced by a misrepresentation to believe erroneously that his insurance policy entitles him to the payment of benefits on maturity or on the happening of a certain event are sometimes so great as to encourage the thought that compensation on the basis of lost expectations would be appropriate. However, neither authority nor principle offer support for adopting this approach. In all the cases in which a plaintiff has sought to recover damages on the footing that a representation amounts to a collateral contract, a fraudulent misrepresentation or a negligent misstatement, damages for expectation loss have only been awarded when the representation amounted to a collateral contract. Neither the fact that the representation induces entry into a contract nor the fact that it is a statement of the benefits to which the plaintiff will be entitled under that contract is enough to justify compensation for expectation loss.’
The High Court has considered s 82 of the TP Act on several occasions since Gates: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 and Henville v Walker [2001] HCA 52; 206 CLR 459. In these later cases, some members of the Court have argued the undesirability of tying the interpretation of s 82 too firmly to concepts such as the measure of damages in tort or in contract. However, nothing has been said against the distinction made in Gates between a loss caused by the misleading conduct (commonly a misrepresentation) and loss caused by disappointment of an expectation generated by the misleading conduct. McHugh J summarised the position in Henville at [130]:
‘This Court has addressed the question of assessment of damages under s 82 on several occasions. The Court has concluded that in most cases the measure of damages in tort is the appropriate guide in determining an award of damages under s 82. However, in assessing damages under s 82, courts are not bound to choose between the measure of damages in deceit or other torts or contract. In Marks v GIO Australia Holdings Ltd, the Court said that the central issue under s 82 is to establish a causal connection between the loss claimed and the contravening conduct. Once such a connection is found to exist, nothing in s 82 suggests that the recoverable amount should be limited by drawing an analogy with contract, tort or equitable remedies although they will usually be of great assistance.’ (footnotes omitted)
The loss claimed in the present case is the loss of expected income from transactions undertaken by persons on Ms Dal Bon’s client list who were allocated by Mr Sutherland away from team DKN. This loss was not caused by Mr Sutherland’s alleged misleading conduct in conveying to Mr Nikolich (and Mr Keogh) that he would regard himself as bound by the ‘exit strategies’ paragraph in the team DKN business plan; it was a loss caused by his failure to act in accordance with the expectation he thereby generated. There is no evidence that Mr Nikolich would have embarked on a more profitable course had he not been led to believe the exit strategies would be honoured. Conceptually, the position is similar to that in Gates. The principle there enunciated means the present TP Act claims must fail. The same statement must be made about the FT Act claim. The relevant terms of that Act are indistinguishable from those of the TP Act.
For the sake of completeness, I mention that, when pressed in argument about this issue, Ms Nomchong said that, as a result of what Mr Sutherland had said, Mr Nikolich entered into the team DKN business plan, and thereby put himself to trouble in servicing Ms Dal Bon’s clients when she was overseas. No doubt that is factually correct. But loss of that nature was not pleaded. No evidence was led to show that Mr Nikolich was financially disadvantaged by the responsibility he had undertaken in the business plan.
Assessment of damages for breach of contract
(i) What damages are available?
It remains for me to assess the damages that should be awarded to Mr Nikolich in relation to the only cause of action he has established: breaches by GSJBWS of the contractual obligations it undertook in WWU. I have found breaches of three sub-sections in that document: ‘Health and Safety’, ‘Harassment’ and ‘Concerns or Grievances’. It is neither possible nor necessary to separate the effects of the separate breaches. However it is necessary immediately to consider a submission made by Mr Coleman that Mr Nikolich’s psychological problems, and consequential loss of income, were not caused by any such breaches, but rather by his disappointment at the substance of Mr Sutherland’s decision concerning reallocation of Ms Dal Bon’s clients; a decision which I have held not to represent a breach of GSJBWS’s contract with Mr Nikolich. To the extent that Mr Nikolich’s psychological disability stemmed from the reallocation decision, rather than behaviour (of Mr Sutherland, Ms Jowett etc) that constituted a breach or breaches of WWU, it is not compensable in this proceeding.
Undoubtedly, Mr Nikolich was disappointed and distressed by Mr Sutherland’s reallocation decision. However, the expert evidence suggests that his psychological problems stemmed more from the way he was treated than from the decision itself.
The first expert to see Mr Nikolich was Dr Jamieson, on 1 December 2003. He reported that Mr Nikolich ‘presented in a most distressed state and related to me a 6-month history of workplace conflict’: see para 98 above. Dr Jamieson found ‘symptoms of a major depressive disorder, ie depressed mood, poor self-esteem, an extremely poor view of his future, a great sense of failure and withdrawal’. His later reports also relate Mr Nikolich’s problems to his conflicts at work. There is no suggestion that the reallocation decision, in itself, caused the psychological disability diagnosed by Dr Jamieson.
Dr Lowden’s assessment is to similar effect. It will be recalled that, in her report of 13 March 2006, she identified the cause of Mr Nikolich’s major depressive disorder as ‘betrayal of trust and lack of respect, difficulty in conflict resolution at the workplace and lack of respect’.
I put great weight on the opinions of Drs Jamieson and Lowden; they have seen Mr Nikolich on many occasions and have been responsible for his medical treatment. However, they are not alone in distinguishing between the effect of Mr Sutherland’s reallocation decision and the effect of the manner of treatment of Mr Nikolich. Dr Lucas took a full history of Mr Nikolich’s problems at work, including particularly the processing of his complaint against Mr Sutherland, before commenting:
‘From the information available the onset and continuation of Mr Nikolich’s symptoms appears related to his employment.’
Mr O’Neill spoke of Mr Nikolich’s distress ‘by his perception of how Mr Sutherland dealt with his concerns last year’, that he began ‘to find it difficult to function at work by the end of 2003’ and about Mr Nikolich’s sensitivity ‘about how his concerns are being dealt with within the organisation’.
Dr Synnott and Dr Samuell related Mr Nikolich’s problems to the workplace without making any distinction between the reallocation decision and Mr Nikolich’s treatment by Mr Sutherland and others.
Assessing the expert evidence as a whole, I do not think it supports the respondent’s theory that Mr Nikolich’s psychological problems were, and are, the result, only or primarily, of the reallocation decision made by Mr Sutherland. I think the better view is that they stem more from the aftermath of that decision, in the way Mr Nikolich was treated by Mr Sutherland and the failure of Ms Jowett and others to give him proper support in handling his problems with Mr Sutherland. Certainly that seems to be the view of Dr Jamieson and Dr Lowden, the two experts who know him best. I conclude, therefore, that the breaches of the three relevant sub-sections of WWU caused the psychological damage which I summarised in [98]-[119] and [153]-[158] above. This included a major depressive disorder.
In Baltic Shipping Company v Dillon (1993)176 CLR 344, the High Court considered the recoverability of damages for what Mason CJ called ‘disappointment and distress’ at the defendants’ breach of contracts. The members of the Court unanimously held that, ordinarily, such damages are not recoverable. They applied a long-standing rule often associated with the decision of the House of Lords in Addis v Gramophone Co Ltd [1909] AC 488; although the rule goes back much earlier, at least to Hamlin v Great Northern Railway Co (1856) 1 H&N 408; 156 ER 1261.
However, in Dillon, all members of the High Court recognized exceptions to the rule. All the Justices upheld an award of damages to the respondent, which was intended to compensate her for disappointment and distress at the appellants’ breach of contract in respect of a pleasure cruise. Their Honours did so because the ‘very object’ of the contract was to provide enjoyment and relaxation: see per Mason CJ at 365; Brennan J at 371-372; Deane and Dawson JJ at 382; Gaudron J at 387 and McHugh J at 394.
The present case does not concern a pleasure cruise. However, it is strongly arguable that it comes within the principle applied in Dillon. The purpose of the relevant sub-sections of WWU was to provide assurance to existing and prospective GSJBWS employees concerning the manner in which they would be treated in their workplace and, in particular, about the support they would be offered by their employer. The ‘very object’ was to provide peace of mind. It was foreseeable that, if the employer’s promises were broken in relation to a particular employee, that employee might suffer distress. Accordingly, it seems to me this case falls within the principle enunciated by Brennan J at 370:
‘If a contract contains a promise, express or implied, that the promisor will not cause the promisee, or will protect the promisee from, disappointment of mind, it cannot be said that disappointment of mind resulting from breach of the promise is too remote. Such a promise is expressed or implied in many contracts the object of which is to provide a service or facility conducive to peace of mind, tranquility of environment or ease of living and damages have been awarded accordingly.’ (footnotes omitted)
It is not really necessary for me to reach a final view about the matter just discussed. The case clearly comes within another exception to the Addis rule. This exception was explained by McHugh J, in Dillon, at 405:
‘… because damages for personal injury may be recovered in an action for breach of contract and because psychiatric illness constitutes personal injury, damages for mental distress associated with a psychiatric illness or physical injury must also be recoverable in an action for breach of contract.’ (footnotes omitted)
A major depressive disorder constitutes a psychiatric illness. Subject to one matter, it follows that Mr Nikolich is entitled to recover damages in respect of the mental distress he suffered, including the psychiatric illness itself, consequentially upon the respondent’s breaches of the contractual obligations it undertook in WWU.
The qualification to which I referred is that Mr Coleman argued that damages for psychiatric injury are not recoverable because, even if foreseeable, they are too remote: such damages would not have been within the contemplation of the parties at the time of making the contract of employment. Mr Coleman cited the following statement of McHugh JA (as he then was) in Alexander v Cambridge Credit Corporation Ltd [1987] 9 NSWLR 310 at 365:
‘In later cases … there has been a tendency to play down the distinction between reasonable foreseeability and reasonable contemplation as semantic only. However, I think that the difference is a real one which results in a significant narrowing of liability. The word “contemplation” seems to be used in Koufos in the sense of “thoughtful consideration” or perhaps “having in view in the future”. It emphasises that, if the parties had thought about the matter, they would really have considered that the result had at least a “serious possibility” of occurring.’
However, McHugh JA said a little more than this. He went on to explain what he meant by a ‘serious possibility’. At 365-366 (and omitting citations) his Honour said:
‘An important matter in ascertaining whether the loss or damage is too remote is the extent to which the parties may be taken to have contemplated the events giving rise to that loss or damage. The parties need not contemplate the degree or extent of the loss or damage suffered … Nor need they contemplate the precise details of the events giving rise to the loss. It is sufficient that they contemplate the kind or type of loss or damage suffered.
The most difficult question in determining the relevant kind of damage concerns the level of classification of the damage which the parties must have contemplated. Clearly the level must not be so high that the parties are required to contemplate the very loss in question or the precise manner of its occurrence. Nor must it be so low that any loss or damage, no matter how unusual in nature or occurrence, would fall within the classification.’
McHugh JA found ‘helpful guidance’ in some decided cases. Of those cases, the one that comes closest to the present one is Rowe v McCartney [1976] 2 NSWLR 72, a majority decision of the New South Wales Court of Appeal (Moffitt P, Samuels JA; Glass JA dissenting). The plaintiff in that case was the owner of a car. After discussion with a friend, the plaintiff allowed him to drive the car, on the basis that he would be careful. She accompanied him as a passenger. While the friend was driving, the car ran off the road and hit a telegraph pole; the driver was rendered quadriplegic. The plaintiff was awarded damages against the driver in respect of her physical injuries but the trial judge held she was not entitled to recover damages in respect of a depressive neurosis caused by a feeling of guilt at having allowed the friend to drive.
Moffitt P said at 76:
‘The damage in the present case was quite different from that which is ordinarily found to flow from negligence in relation to a vehicle or equipment capable of inflicting physical damage. The damage to the plaintiff would not have occurred but for the impact, which in turn would not have occurred but for the defendant’s negligence. However its only connection with the impact has no rational basis. The sole connection was made illogically and contrary to that which one would expect from a reasonable mind. The damage fell into the class where its sole connection with the negligent act was irrational reasoning in relation to, but external to, the negligent act.’
At 89-90, Samuels JA said:
‘It is necessary, first, to characterize the nature of the harm which the plaintiff did suffer – held in this case to have been unforeseeable – in order to determine whether that harm can reasonably be included in a wider, more general and foreseeable category. The harm which she sustained as a result of the events which happened was the onset of a complex or obsessive feeling of guilt or remorse which manifested itself symptomatically in a depressive illness. No doubt the feeling of guilt was a neurotic reaction to the circumstances, and was thus a mental illness. But I do not consider it to be an adequate answer to the present problem merely to seize upon that description, and allot the plaintiff’s damage, without more, to the category of foreseeable harm. I do not see anything in Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383, for example, which compels such a step; indeed, Windeyer J’s reasoning tends the other way. Certainly, if the infliction of a feeling of guilt was foreseeable, as the infliction of emotional shock was in Mount Isa Mines Ltd v Pusey then the nature of the sequential symptoms would not be determinative; it would not matter what kind of psychiatric disability followed. But the question here, of course, is whether that initial injury was indeed foreseeable.’ (footnotes omitted)
Mount Isa Mines v Pusey was a case in which an engineer employed in a powerhouse suffered a serious mental disturbance, of a kind normally comprehended in the term ‘schizophrenia’, as a result of observing injuries to fellow-employees who were severely burnt while testing a switch-board.
At 388, Barwick CJ summarised the trial judge’s findings:
‘He thought that injuries which the employer ought to have foreseen could result from the employees’ misuse of the multi-meter could include what he described as “gruesome burning injuries”. The trial judge further found that a reasonable employer in the circumstances ought to have foreseen that a fellow employee seeing another employee suffering from such gruesome burning injuries might well suffer some psychological reaction of more than a transient kind. He did not find that the specific psychological reaction which as he thought was the direct result of the respondent having seen Kuskopf’s injuries was foreseeable by the appellant. However, he took the view that to establish liability it was enough that the employer ought to have foreseen the possibility of an employee suffering an injury within the broad category of injury of which the respondent’s condition was a particular manifestation.’
At 389, Barwick CJ said it could be held that an employer could, and ought to, foresee that the sight of a burning, or recently burnt, human might mentally disturb an employee whose proximity to the injured fellow employee ought to be foreseen.
The Chief Justice went on (at 390) to refer to evidence that the particular injury of the respondent ‘was a rare consequence or reaction to follow emotional excitement or stress’. He thought that did not matter: ‘it is sufficient that the class of injury as distinct from the particular injury ought to be foreseen as a possible consequence of particular conduct in order to establish liability for damages for the particular injury’.
Rowe v McCartney and Mount Isa Mines v Pusey are decisions about foreseeability in tort. However, they raise the same problem, in relation to specificity of the foreseeable damage, as occurs in relation to remoteness of damages for breach of contract. The cases each make the point that it is not necessary that the particular damage could have been foreseen (or would have been contemplated); it was sufficient that damage of that general type was foreseeable (or in contemplation).
In the present case, as I have pointed out, the relevant contractual obligations are intended to provide peace of mind to existing and prospective GSJBWS employees. It must be taken to have been within the contemplation of the parties that, if the obligations were not fulfilled, the particular employee to whom the obligations were owed might become upset, stressed and disturbed. It is notorious that stress and disturbance of mind may lead to a psychological disability. It may be unusual for disturbance of mind to lead to a psychological condition as severe as that suffered by Mr Nikolich; there is no evidence on the point. However, that is a statement about the extent of the injury, not its type. This is not a case, as in Rowe v McCartney, of a mental disability arising out of irrational guilt feelings that had only a tenuous connection with the plaintiff’s cause of action. This is a case of a mental disability that was a particularly severe manifestation of the very type of detriment that the WWU promises were designed to prevent.
I reject the argument that the psychological injury suffered by Mr Nikolich was too remote to sound in damages.
(ii) Calculation of damages
Two damages elements require consideration: loss of income and general damages (pain and suffering, distress etc).
During the three completed financial years in which he was working for GSJBWS as an Investment Adviser (2001-02; 2002-03 and 2003-04), Mr Nikolich earned a total of $455,3131; an average of $151,771 per year. In the year 2004-05, he earned $22,923. He has been unemployed throughout the current financial year.
I accept that it has not yet been possible for Mr Nikolich to resume employment. Accordingly, he should be compensated for his loss of income during the whole of the period until now. I calculate that loss as follows:
(a)Two years loss of an average income of
$151,771 ($303,542) less $22,928 received
in 2004-05$280,614
(b)Interest at 9% per annum for one-year
(representing the approximate half-way
point of the loss in para (a)) on $280,614 $ 25,255
Total loss to date $305,869
The figures upon which I have based the above calculations are pre-tax figures. That course is appropriate since damages for lost income are subject to tax in the hands of the recipient: see Cheshire and Fifoot, Law of Contract, 8th Australian ed, LexisNexis Butterworths, 1966 at [23.29].
Upon my reading of the experts’ reports, it ought to be possible for Mr Nikolich to resume work relatively soon after resolution of this case. The experts’ reports strongly suggest that the non-resolution of Mr Nikolich’s claims against GSJBWS has been a major hindrance to his feeling able to return to work. I, therefore, hope that Mr Nikolich will now endeavour to put this experience behind him and search for work with a new employer. However, having been unemployed for two years, work may not be easy for him to find; and it may be necessary for him to commence part-time. Accordingly, I think it is appropriate to allow something for loss of future earnings.
In assessing loss of future earnings, I will assume that Mr Nikolich’s new employment will be within the finance industry and that he will ultimately be able to command a salary equivalent to his average earnings with GSJBWS. These assumptions may not be borne out; however, I do not have evidence that would entitle me to make assumptions less favourable to the respondent.
If I were to assume that it will take Mr Nikolich six months to find a new job and that, thereafter, he will work only part-time for six months, it would be appropriate to allow a figure for future loss of earnings of about three-quarters of one years’ loss of income; that is, $113,828. However, allowance would have to be made for the fact that his earnings would be subject to income tax, whereas this aspect of his damages award will not. Also, he would receive the money sooner than if he earned salary throughout the period. In order to cover those factors, I would reduce the loss of future earnings award to $80,000.
There is a further complication. It will be open to the respondent to appeal against this judgment. That is its right and I do not seek to inhibit exercise of that right. However, in calculating damages, I have to take account of the possibility of such an appeal, with a consequential further delay, probably of about six months, in resolution of the case and, therefore, the date at which it is realistic to expect that Mr Nikolich will feel able seriously to search for work. I refer again to the medical reports that suggest a lack of resolution of his grievance has hindered the applicant’s ability to recover and thus be fit for work. I think I should allow for the possibility that recovery will be further delayed by an appeal by adding a further $50,000 to my assessment of damages for loss of future income, but adding a proviso to my orders that this is not to be payable if the respondent does not file a notice of appeal and satisfies the judgment within 28 days.
The course I propose is unusual. I emphasise that it is not taken to inhibit an appeal, or to punish the respondent for an unsuccessful appeal (if that is what it should turn out to be), but merely to prevent Mr Nikolich being compensated on a basis that turns out to be false.
Assessment of general damages is necessarily a matter of judgment. Mr Nikolich was extremely distressed and disturbed by the way in which he was treated by GSJBWS’s employees. This caused him to suffer a mental illness from which he has yet to fully recover. His psychological condition appears to have been a major factor in the break-up of his marriage and separation from his children. It must have adversely affected his professional reputation. On the other hand, as I read the expert evidence, there is no reason to suppose that Mr Nikolich’s psychological disability will be permanent. Although it may take him some time to do so, there is every prospect that he eventually will obtain employment and return to normal life.
In my judgment, the figure of $80,000 is an appropriate assessment of general damages.
I calculate Mr Nikolich’s damages for breach of contract as follows:
(a) past loss of earnings (including allowance for interest) $305,869
(b) loss of future income $80,000 + $50,000 $130,000
(c) general damages $ 80,000
$515,869I will order that judgment be entered for that amount, with the proviso that, if no notice of appeal is filed by the respondent and the sum of $465,869 is paid to the applicant within 28 days, that payment shall be taken as full payment of the judgment sum.
The respondent will be ordered to pay the applicant’s costs.
I certify that the preceding three hundred and forty-five (345) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox. Associate:
Dated: 23 June 2006
Counsel for the Applicant: Ms K T Nomchong and Ms K A Edwards Solicitor for the Applicant: Pamela Coward & Associates Counsel for the Respondent: Mr A P Coleman Solicitor for the Respondent: Freehills Dates of Hearing: 10, 11, 12, 13 April & 18 May 2006 Date of Judgment: 23 June 2006
Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784
SHADIAC v South Australian Amateur Football League Inc [2014] SADC 124
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