State of New South Wales v Stokes

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:	State of New South Wales v Stokes [2014] NSWWCCPD 78
APPELLANT:	State of New South Wales
RESPONDENT:	Elizabeth Kathleen Stokes
INSURER:	Employers Mutual Ltd
FILE NUMBER:	A1-16983/12
ARBITRATOR:	Mr P Sweeney
DATE OF ARBITRATOR’S DECISION:	12 August 2014
DATE OF APPEAL DECISION:	26 November 2014
SUBJECT MATTER OF DECISION:	Psychological injury; reasonable action with respect to discipline; whether employer discharged onus of proof; s 11A of the Workers Compensation Act 1987; failure to comply with Practice Direction No 6
PRESIDENTIAL MEMBER:	Deputy President Bill Roche
HEARING:	On the papers
REPRESENTATION:	Appellant:	Hicksons Lawyers
Respondent:	Herbert Weller
ORDERS MADE ON APPEAL:	1. The appellant’s name is amended to be State of New South Wales. 2. The Arbitrator’s determination of 12 August 2014 is confirmed. 3. The appellant employer is to pay the respondent worker’s costs the appeal, assessed at $2,530 plus GST.

INTRODUCTION

This appeal involves a claim for weekly compensation for an admitted psychological injury. The essential issue on appeal is whether the Arbitrator erred in finding that the employer had not discharged its onus of establishing that the worker’s injury had been wholly or predominantly caused by reasonable action with respect to discipline.

FACTUAL BACKGROUND

The respondent worker, Elizabeth Stokes, started work as a student nurse in 1983. She worked in a number of hospitals in Australia and overseas. She started work on a permanent part-time basis for the appellant employer at Royal Prince Alfred Hospital (the Hospital) in June 1991.
Though the appellant was sued as Sydney Local Health District, as that entity is identified in Schedule 1 of the Health Services Act 1997, its correct legal identity is State of New South Wales (State of New South Wales v Bishop [2014] NSWCA 354 at [26]–[28]) and the Commission’s file will be amended accordingly.
In 1997, Ms Stokes received a Bachelor of Nursing from the University of Sydney. Since then she has undertaken a number of postgraduate courses, including obtaining a graduate certificate in perioperative nursing in 2007.
At the time of the events giving rise to this claim, Ms Stokes was working at the John Lowenstein Theatre at the Hospital. She first experienced difficulties at work in 2008. She said that she was “not accepted as part of the team at the hospital”. On 5 July 2008, Ms Stokes saw her general practitioner, Dr Candace Newberry, complaining of anxiety, and was prescribed Cipramil (an anti-depressant). At or about this time, Ms Stokes also experienced stress due to a separation and divorce.
Because of issues with Stella Pellai, the nurse unit manager at John Lowenstein Theatre, Ms Stokes sought a transfer. It was informally agreed that Ms Stokes would be moved to another position in the Hospital, identified in the evidence as “IRO”. At the same time, because of financial difficulties due to her separation and divorce, Ms Stokes wanted to work longer than her usual 24 hours per week. Before the transfer could be effected, a number of events occurred that are relevant to the current claim.
On 26 February 2009, Ms Stokes again saw another general practitioner, Dr Kiely Kim, at the same practice as Dr Newberry. She complained of ongoing work stressors, which had a “flare-up this week”. She was “upset and teary”. She was given a certificate for one week and Cipramil was increased from one 20 mg tablet per day to two 20 mg tablets per day.
On 24 August 2009, Dr Kim recorded that things had been going well for Ms Stokes until a recent break-up with her boyfriend. Also, Ms Stokes had missed three tablets of Cipramil. Her work situation was better “but still tense”. She was still working in the same area but was dealing with it and taking regular breaks as required.
In September 2009, Ms Pillai and Linda Furness, a nurse manager at John Lowenstein Theatre, alleged that Ms Stokes had engaged in unprofessional conduct in her interaction with an operations assistant. Ms Stokes denied the allegations. The complaint was discussed at a meeting on either 4 or 8 September 2008.
On 10 September 2009, Ms Stokes saw Dr Kim. The notes record “has had another work ‘incident’”. Ms Stokes was upset and felt “bullied”. She had received a letter without warning. She felt that her immediate supervisors were acting with threatening behaviour making it difficult to work together. She had seen a counsellor at work, which she felt was helpful. She was advised to stay on Cipramil.
After extensive correspondence between the parties, in which Ms Stokes asserted that the appellant’s record of interview of the meeting was incorrect, Mr Alan Gardo, the acting operational nurse manager, wrote to Ms Stokes on 5 November 2009.
Notwithstanding Ms Stokes’s denials, Mr Gardo’s letter said that the investigation by Ms Furness and Ms Pillai substantiated that Ms Stokes had acted in an unprofessional manner during an interaction with an operations assistant and in the presence of a conscious patient. These matters involved breaches of the Policy Directive: Code of Conduct – NSW Health, Section 1.1 Personal and Professional Behaviour. The letter included “a first formal warning for the breach”. Ms Stokes was required to read the NSW Health Code of Conduct and to confirm in writing by 19 November 2009 that she had done so.
On 31 May 2010, Ms Toby Taylor, nurse manager at the appellant’s human resources department, wrote to Ms Stokes identifying six complaints by other nurses about Ms Stokes’s conduct on 11, 13 and 17 May 2010 and called on Ms Stokes to respond. In summary, the allegations were that Ms Stokes made inappropriate comments to another nurse when asked to take a patient to the ward; that, while in the recovery unit, Ms Stokes was openly crying and distressed in the presence of patients; that Ms Stokes had failed to take over the charge of a patient as directed by the nurse in charge, and that she failed to take direction from a person in authority. The letter concluded, in bold type, that Ms Stokes was reminded that she was not to speak to, or approach, any member of staff over the complaint and not to speak to any person in the workplace in relation to the matter.
On 7 June 2010, Ms Furness wrote to Ms Stokes requiring her to respond in writing by 15 June 2010 to further allegations. The further allegations were that on 3 June 2010 Ms Stokes had attempted to leave work early without seeking permission; that on 31 May 2010 Ms Stokes had behaved in an inappropriate manner during an interaction with Ms Furness when asked to take a telephone call; and that on 7 June 2010 Ms Stokes behaved in an inappropriate manner during an interaction with Ms Pillai. The appellant convened a meeting, to be held on 7 July 2010, to discuss these matters.
Meanwhile, Ms Stokes had instructed her solicitor, Herbert Weller, to respond to the six allegations in Ms Taylor’s letter of 31 May 2010. In his letter of 24 June 2010, Mr Weller said that Ms Stokes denied each of the allegations and he set out her version of what happened in each incident.
On 10 June 2010, Ms Stokes saw Dr Sidney Tong, another general practitioner at her usual practice. Dr Tong noted that there were work issues with alleged multiple incidents against Ms Stokes for not following commands. Ms Stokes was anxious, depressed, teary and not coping well. She said she had done nothing wrong and all the nurses were ganging up on her. Dr Tong recorded that Ms Stokes was “clinically depressed” and was unfit for work in her emotional state.
On 2 July 2010, Mr Weller wrote to Ms Emma Lutwyche, the operational nurse manager, responding to the matters raised in Ms Furness’s letter of 7 June 2010. He advised that Ms Stokes admitted that she had left early on 3 June 2010 and that that was an oversight. The second and third allegations were denied and Mr Weller set out Ms Stokes’s response to them.
At the meeting on 7 July 2010, the complaints, and Ms Stokes’s response to them, were discussed. Ms Stokes was told that the appellant had developed a performance management plan for her that involved her working in a “scrubs role in POD 4” and possibly moving to POD 3 in six weeks. Ms Stokes was asked to attend a course in working in teams and dealing with conflict. Ms Stokes signed the performance management plan on 8 July 2010.
Provision was made for an appraisal and feedback of Ms Stokes’s performance management plan in six weeks’ time and to have a performance review. Ms Stokes was also asked to undergo counselling with the “EAP” (employee assistance program), Ms Lutwyche stating that she was worried about Ms Stokes’s emotional wellbeing and that she felt that EAP could help with some strategies on how to deal with stressful situations in the workplace. Ms Stokes was told that she would not be transferred to IRO, contrary to a previous indication that she would be. That job was to be re-advertised.
On 12 July 2010, Ms Stokes was transferred to work in POD 4.
On 13 July 2010, Ms Stokes was found in a room in the John Lowenstein Theatre, where she had collapsed after having injected herself with four ampules of intravenous Tramadol, which she had obtained (without authorisation) at the Hospital.
On 19 July 2010, Ms Lutwyche wrote to Ms Stokes about the incident on 13 July 2010 and issued a “first and final warning” due to breaches by Ms Stokes of the NSW Health Code of Conduct relating to not presenting for work under the influence of alcohol or drugs that could affect work safety and efficiency, and not using official resources other than for official purposes. The letter said that any further misdemeanours would result in immediate termination.
Ms Stokes was to return to John Lowenstein Theatre to continue her performance management plan, which included education and skill development to allow Ms Stokes to work in “scout and scrub roles”. Ms Stokes would be supervised, undergo counselling through the employee assistance program, participate in regular performance reviews, and attend a course on teamwork and managing conflict in the workplace.
On 22 July 2010, Ms Lutwyche again wrote to Ms Stokes imposing additional requirements. The letter stated that, to maintain the safety of patients, staff and Ms Stokes, and for Ms Stokes to safely return to the operating theatre environment, Ms Stokes was required to work morning shifts, where she could be appropriately supervised, and to comply with a random drug screening program for three months with a review at the end of that period. The letter said that Ms Stokes was “reminded again of the seriousness of this incident” and concluded:
“I sincerely hope that you take this opportunity to improve your circumstances. I understand that you have assured me that you will remain committed to learning a new role and you will comply with the specifications set out in this letter.”
On 2 November 2010, it was alleged that, while working as a scrub nurse, Ms Stokes refused to check her instrument tray list with her scout nurse. The formal allegation arising from this incident was that Ms Stokes had not complied with NSW Health Policy PD2005_571 Operating Suite & Other Procedural Areas – Handling of Accountable Items – Standard Procedures (for convenience, I will refer to this episode as the PD 571 incident). When confronted over the matter by Ms Furness on 4 November 2010, Ms Stokes responded that she had counted the tray by herself, as she knew the instruments by heart. She said that she did not realise that it was serious or formal as it was “only a D & C tray”. Ms Stokes apologised and said she would never do it again.
On 9 November 2010, Ms Taylor wrote to Ms Stokes about the PD 571 incident and requested her response. Ms Stokes responded, in a letter dated 16 November 2010, that she had checked the D & C tray list twice but did not check it with the particular scout nurse at the end of the case. Ms Stokes’s reasons were that the scout nurse kept telling her to hurry up and she decided that she would not co-operate with “this bully-like behaviour” which “harassed, insulted and made judgments about” her.
On 11 November 2010, as part of the requirements listed in the letter of 22 July 2010, Ms Stokes provided a urine sample to be tested for the presence of drugs.
On 22 November 2010, without prior notice of the purpose of the meeting, Ms Stokes attended a meeting with Emma Kerr, the operational nurse manager, and Ms Furness. Ms Stokes recounted what happened at that meeting in a statutory declaration sworn on 12 December 2012:
“10. On the 22^nd November 2010, I was called into the executive suite. In the suite were Emma Kerr and Sister Furness. I was not told the reason for the meeting. When I entered the room Emma Kerr said: ‘We want to talk to you about your urine test’. I said: ‘It is negative of course.’ Ms Kerr said: ‘Actually it has come back positive’. I said: ‘For what?’ Ms Kerr said: ‘Methadone’. I said: ‘I have never taken methadone’. I began to cry. I became distressed. Ms Kerr then said: ‘Now is the time to tell the truth’. I said: ‘But I am’.
11. I felt that I could not help myself. I felt I could not cope. I continued to cry, unabated. I felt completely overwhelmed with emotions of despair and hopelessness. I felt humiliated, retched and as though I was stripped of all dignity.
12. Ms Kerr said: ‘I have always been honest with you Liz. Now you need to be honest with me. Are you on a methadone program? Now is the time to say so.’ I said: ‘No I am not. I have never taken methadone. Can I speak to Dr Chris Thompson, about the result?’ Ms Kerr said: ‘No, you cannot. The result is confidential.’
13. Ms Kerr said: ‘Because this is so serious and because you are putting patients and yourself at risk, we have no choice but to refer this to the Nurses Registration Board.’
14. I felt like hell. I wanted to die. Ms Kerr then said: ‘I am placing you on long service leave on compassionate grounds’.
15. Ms Kerr then telephoned the drug and alcohol unit. I then went downstairs and undertook another urine test.
16. Because I felt so ill, I was unable to return to work as a nurse.”
Ms Stokes’s evidence about this meeting has not been challenged and the appellant has put forward no contrary version of this conversation. She did not return to work at the Hospital after the meeting on 22 November 2010.
Ms Stokes added, in her statement of 9 June 2014:
“27. I was devastated by this information [about the positive drug test]. I knew that this was particularly bad because of the Tramadol incident. I knew that it would mean that I would lose my registration. I knew that I had never taken methadone in my life and I couldn’t believe that a major hospital could make such an error. I lost all faith in my employer’s ability to do the right thing. I felt physically ill and totally lost.
28. I was put on long service leave on that day (22 November 2010).
29. I was later told that there was a mistake and that the methadone reading was false. Ms Emma Kerr rang me and told me the test was negative. She apologized and said she would speak to the Lab about the error. I said that I was happy that I had been cleared but that I was still traumatized about what had happened and that I needed time to think and consider my future.
30. I didn’t feel any better after I received this advice. I still couldn’t believe that such an error could be made. When my 9 weeks [long service leave] expired I made an application for more long service leave which was approved to 20 February 2011. I did not feel physically well enough to return to work.”
I should add here that the date on which Ms Stokes was told that there had been a mistake is not in evidence. Evidence suggests that the mistake was identified on or about 2 December 2010 and I infer that Ms Stokes was told of the mistake shortly after that date.
On 2 March 2011, Ms Kerr wrote to Ms Stokes about the PD 571 incident saying that the investigation had proved that the allegation could be substantiated and that, as a result, Ms Stokes had been found to be in breach of NSW Health Policy. Ms Kerr referred to the “first and final warning” given to Ms Stokes in July 2010 in relation to unprofessional behaviour in the workplace and to the performance management plan, noting that many aspects of the plan had not been successfully achieved or completed within specified timeframes (something that Ms Stokes disputed).
Ms Kerr said that the recent breach of policy by Ms Stokes (referring to the PD 571 incident) was disappointing and Ms Stokes now found herself in a serious situation, given that she had already received a final warning in relation to unprofessional behaviour. Ms Kerr added that the investigation “demonstrated that there was conflict between [Ms Stokes] and another staff member immediately prior to your refusal to follow policy”. Ms Kerr concluded:
“[Ms Stokes], we have worked together for over 6 months in an attempt to provide you with an environment whereby you could demonstrate a willingness to improve your performance and professional behaviour. It is unfortunate that your inability to manage conflict situations has contributed to an unacceptable breach in policy which has a potential to impact on the safety of patients under your care.
As a result of the above, you are directed to provide me, in writing, new valid reasons as to why I should not make a recommendation to have your employment terminated. This must be provided to me by close of business Friday 11 March 2011.
If you do not abide by this direction by the above date, I will pursue your termination of employment.”
Mr Weller sought certain documents and particulars of the matters raised in Ms Kerr’s letter. As those documents and particulars had not been provided by 28 March 2011, Mr Weller wrote to the appellant on that date seeking an extension of time to respond to Ms Kerr’s letter.
On 1 May 2011, Ms Stokes returned to work, working as an agency nurse for a different employer.
On or about 3 August 2011, Ms Stokes commenced essentially full-time nursing at the Sydney Adventist Hospital at Wahroonga. She resigned from that employment on 28 May 2012. Since leaving that job, Ms Stokes has worked regularly in retail, though not full-time.
On 30 November 2011, Ms Stokes was advised that her employment with the appellant would be terminated in five weeks.
On 25 January 2012, Ms Stokes commenced proceedings in the Industrial Relations Commission of New South Wales alleging that she was unfairly dismissed. Those proceedings were resolved by a Deed of Release executed on 31 May 2012. The Deed provided that the appellant would convert Ms Stokes’s termination of employment into a resignation and provide her with a statement of service.

PROCEDURAL BACKGROUND

On 1 November 2012, Ms Stokes completed a workers compensation claim form in which she alleged that she suffered a “mental state” due to:
“Ongoing episodes of intimidation harassment misrepresentation and bullying at the workplace of R.P.A Hospital, Theatres. Culminating in a false positive urine test for methadone. At this point 22/11/2010 I was threatened by nursing management that I will be reported to the Nurses Registration Board and was placed on immediate leave as not fit to practice.” (emphasis included in original)
The claim was supported by a report from Dr Patricia Jungfer, consultant psychiatrist, dated 22 September 2011. Dr Jungfer diagnosed Ms Stokes to have a major depressive disorder, in partial remission, and post-traumatic stress symptoms. The psychiatric symptoms arose from the manner in which the (work) situation was dealt with and the continuous harassment and bullying that occurred within the workplace without appropriate support from Ms Stokes’s employer.

On 20 November 2012, the appellant served a s 74 notice in which it disputed liability for the claim on the sole ground that Ms Stokes’s “psychological injury was wholly or predominantly caused by reasonable action taken by the [appellant] with respect to discipline and/or transfer” under s 11A of the Workers Compensation Act 1987. Significantly, for the conduct of the proceedings in the Commission, the notice did not dispute that Ms Stokes had received a psychological injury in the course of or arising out of her employment with the appellant.
In an Application to Resolve a Dispute (the Application) filed in the Commission on 13 December 2012, Ms Stokes alleged that she suffered a major depressive disorder and post-traumatic stress symptoms due to harassment, threats, bullying and intimidation by staff. She claimed weekly compensation from 22 November 2012 to date and continuing.
In a Reply filed on 1 February 2012, the appellant relied on the issue identified in the s 74 notice of 20 November 2012.
On 17 April 2014, Ms Stokes saw Dr Thomas Newlyn, consultant family and child psychiatrist, at the request of the appellant’s solicitors. In a report dated 22 April 2014, Dr Newlyn diagnosed Ms Stokes to have a severe alcohol use disorder. Dr Newlyn expressed no opinion on the s 11A defence.

THE ARBITRATOR’S DECISION

After hearing oral submissions on 1 August 2014, the Arbitrator delivered an oral decision on 6 August 2014. He noted that the appellant had, in essence, admitted liability for the injury and only disputed liability on the ground that Ms Stokes’s psychological injury was wholly or predominantly caused by reasonable action with respect to discipline and/or transfer.
The Arbitrator said there was sufficient evidence to conclude that the appellant was justified in making the allegations they made against Ms Stokes. To accept Ms Stokes’s argument with respect to the PD 571 incident would have been, the Arbitrator said, tantamount to concluding that Ms Taylor and Ms Lutwyche, and others, had fabricated evidence, with a view to expelling Ms Stokes from the Hospital, and the evidence fell very much short of that. The Arbitrator’s impression of the correspondence and the records of interview of the meetings was that the appellant went out of its way to accommodate Ms Stokes and, from time to time, to assist her in what was a difficult time.
Dealing with the drug test, the Arbitrator said that this was an exception to the general view he reached that the appellant, in the various disciplinary procedures, had behaved reasonably. On the drug testing, the Arbitrator said, at T20.26:
“In my opinion, the [appellant] has not proved, on the balance of probability that its conduct in carrying out the drug test, in November 2010 and its behaviour consequent upon the drug test, was reasonable.”
(Unless otherwise stated all references to the transcript in this decision are to the transcript of the Arbitrator’s decision on 6 August 2014.)
The Arbitrator continued, at T21.3:
“While false positives occur, there is no evidence as to why it occurred in this case. It may have been the result of gross negligence or it may have been an unavoidable oversight. I simply do not know, as the [appellant] has not tendered any evidence on the subject.
Then there is the subsequent meeting with [Ms Stokes] which, on her evidence, involved her in being accused of being on a methadone program and being told that she would be reported to the Nurses Registration Board. I accept that [Ms Stokes] should have been told of the result, but whether raising the matters raised by the respondent, with [Ms Stokes] at the time was reasonable, depends upon a whole number of factors.
Had the [appellant] had previous false positives? Was it best to wait for the second reading, that proved to be negative? What was the protocol for dealing with this situation and did the [appellant] follow it? The consequences, of course, for [Ms Stokes], on her evidence, were, I think she used the word ‘devastating’. She foresaw the end of her career. She was clearly in a very fragile state, for reasons that may partly relate to work, partly to other circumstances at the time. In those circumstances, I do not believe that the [appellant] has discharged its onus in demonstrating that the drug testing, the reporting of the drug testing and the protocol adopted at the time was reasonable.”
The Arbitrator noted that it had emerged at the arbitration that there was, in the appellant’s documents, a statement from a senior member of the Hospital staff that had not been tendered. Though he did not draw any adverse inference against the appellant for the non-tender of the document, he said that it “starkly highlights the [appellant’s] failure to call evidence of [sic, on] this critical issue of the drug testing and the like” (T22.5).
The Arbitrator then quoted paragraph 27 of Ms Stokes’s statement of 9 June 2014 (reproduced at [30] above) and referred to Dr Jungfer’s evidence that the events surrounding the drug testing were one of the important factors that caused Ms Stokes’s psychological symptomatology. He accepted, based on the evidence of Ms Stokes and Dr Jungfer, that the drug testing, which was probably a disciplinary event, significantly contributed to Ms Stokes’s injury. He added, at T23.5:
“the question then becomes, [h]as the [appellant] proved, that the other matters, the disciplinary matters which were reasonable, were the whole or predominant cause of the psychological injury. There is no medical evidence in the [appellant’s] camp that addresses the issue. Dr Newlyn is silent on the point.” (I have listened to the audio recording of the decision and can confirm that the Arbitrator said “has” not “as” in the first sentence of this passage.)
In these circumstances, the Arbitrator said he was unable to accept the submission by the appellant’s counsel, Ms Wood, that he could, as a matter of commonsense, reach a conclusion that those parts of the appellant’s disciplinary procedures that were reasonable were the whole or predominant cause of Ms Stokes’s injury. The Arbitrator then dealt with the issue of incapacity.
The Commission issued a Certificate of Determination on 12 August 2014 in the following terms:
“The determination of the Commission in this matter is as follows:
1.On and prior to 21 November 2010 the applicant suffered psychological injury arising out of and in the course of her employment to which her employment was a substantial contributing factor.
2.The respondent has not established that the applicant’s psychological injury was wholly or predominantly caused by reasonable action taken by the employer within section 11A.
3. From 21 November 2010 the applicant was partially incapacitated for work.
4.The applicant’s probable weekly earnings but for injury for the purposes of the former section 40 is $942 per week from 22 November 2010 to 30 June 2011 and $955 per week from 1 July 2012 to 31 December 2012 and her average weekly earnings for the purposes of section 37 $942 per week.
5.The applicant has not established that she is entitled to compensation between 1 July 2011 and 30 June 2012.
6.Applicant’s ability to earn for the purposes of section 40 between 21 November 2010 and 30 June 2011 and from 1 July 2012 to 31 December 2012 $650 per week.
7.Applicant’s ability to earn for the purposes of S37 from 1 January 2013 and continuing $700 per week.
8.Award for the applicant at the rate of $292 per week from 22 November 2010 to 30 June 2011 and at the rate of $305 per week from one July 2012 to 31 December 2012 pursuant to the former section 40 and at the rate of $195 per week from 1 January 2013 to 21 May 2014.
9.Liberty to apply in respect of the calculations referred to above, including the calculation of the correct number of weeks prior to commencement of the third entitlement period in the weekly payments provisions.
10. Respondent to pay the applicant’s costs as agreed or assessed.
11.Certify the matter as complex and order an uplift of 30% on the costs of each party.”
The appellant has challenged the Arbitrator’s findings on the reasonableness issue with respect to the drug testing.

ON THE PAPERS

Section 354(6) of the Workplace Injury Management and Workers Compensation Act 1998 provides:
“(6) If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”
Having regard to Practice Directions Nos 1 and 6, the documents that are before me, and the submissions by the parties that the appeal can proceed to be determined on the basis of these documents, I am satisfied that I have sufficient information to proceed ‘on the papers’ without holding any conference or formal hearing and that this is the appropriate course in the circumstances.

ISSUES IN DISPUTE

The issues identified in the appeal as being in dispute are whether the Arbitrator erred in:
(a)     finding that the appellant had not adduced evidence to establish that its action with respect to the drug test in November 2010 and its consequent actions were reasonable;
(b)     failing to find that the appellant’s actions in respect of the drug test and the consequent actions were reasonable, and
(c)     finding that Ms Stokes’s injury resulted from harassment, threats, bullying and intimidation by staff.
Rather than directing submissions to these grounds of appeal, counsel for the appellant on appeal, Mr Phillip Perry, has made general submissions in which he raised a range of different matters. That was most unsatisfactory and did not comply with Practice Direction No 6. The appellant’s specific allegations of error are buried in the body of Mr Perry’s submissions. Notwithstanding his non-compliance with the Practice Direction, I have dealt with all of Mr Perry’s points, as they appear in his submissions. For completeness, I have also considered the second ground of appeal, but, as it was not strictly necessary for the determination of the appeal, have done so under a separate heading.

SUBMISSIONS

Mr Perry first dealt with the following statement by the Arbitrator, at T20.25:
“The drug testing, in my opinion, is an exception to that conclusion [that the appellant’s conduct had been reasonable]. In my opinion, the [appellant] has not proved, on the balance of probability that its conduct in carrying out the drug test, in November 2010 and its behaviour consequent upon the drug test, was reasonable.”
Mr Perry contended that two problems arise. First, the Arbitrator stated that carrying out a drug test on Ms Stokes was something the appellant had failed to prove was reasonable. However, there was no challenge to the proposition that it was reasonable for the operator of a hospital to require that an employee undergo drug testing. That is particularly so when the employee had acknowledged the previous theft and intravenous self-administration of drugs on the Hospital’s premises.
Mr Perry said that the Arbitrator did not articulate the basis for his conclusion that the requirement for the drug test was unreasonable, yet that was his finding and that finding was an error that has “blighted the arbitrator’s reasoning regarding the reasonableness of the appellant’s conduct”.
Second, Mr Perry dealt with the Arbitrator’s statement at T21.4:
“While false positives occur, there is no evidence as to why it occurred in this case. It may have been the result of gross negligence or it may have been an unavoidable oversight. I simply do not know, as the respondent has not tendered any evidence on the subject.”
Mr Perry said that it appeared (from this statement) that the Arbitrator has proceeded on the assumption that the false positive was prima facie evidence of unreasonable action and that he therefore concluded that it was incumbent on the appellant to call evidence as to how a false positive may have occurred. The Arbitrator considered “gross negligence” and “unreasonable oversight” and it was clearly his view that if the technician conducting the test was guilty of negligence then the appellant’s action was unreasonable. This reasoning was fallacious. If the test miscarried, for whatever reason, and gave a false positive, it did not follow that the actions of the appellant were unreasonable.
Mr Perry submitted that the Arbitrator erred in saying that the appellant tendered no evidence on the subject (of the cause of the false positive). He pointed to the evidence of a review (of the test) in an email on 2 December 2010, which recorded:
“On review of the original chromatogram it was suspected that the methadone and metabolite peaks identified were most likely a carry-over from the previous sample (previous sample high concentration). The chromatogram also identified Citalopram and its metabolite due to an analyst oversight. Upon re-extraction of the urine sample and repeat analysis the sample was shown to contain only Citalopram and its metabolite.” (emphasis included in original)
The email continued, “[w]e perform 15 syringe washes between samples analysis (5 lots of washes from three different solvents. We will investigate this further”.
Next, Mr Perry said that the Arbitrator “refers to the potential adverse consequences to [Ms Stokes] of a positive” drug test. He referred to the Arbitrator’s statement at T21.22:
“The consequences, of course, for [Ms Stokes], on her evidence, were, I think she used the word ‘devastating’. She foresaw the end of her career. She was clearly in a very fragile state, for reasons that may partly relate to work, partly to other circumstances at the time. In those circumstances, I do not believe that the respondent has discharged its onus …”
Mr Perry contended there is a “parallel” here with Northern NSW Local Health Network v Heggie [2013] NSWCA 255 (Heggie) where Basten JA referred (at [21]) to the fact that the Deputy President had noted the “dire” consequences from the employer’s actions (suspending the worker and initiating an investigation into an alleged assault on a patient). Mr Perry argued that, as was the case in Heggie, there was no challenge to the proposition that the matter in the present case was serious and warranted investigation.
The fact that the consequences of a potential adverse finding were very serious for Mr Heggie did not undermine the reasonableness of the conduct of the decision maker in that case. In the same way, so Mr Perry argued, the consequences referred to by the Arbitrator in the present matter did not diminish the reasonableness of Ms Kerr’s conduct and it was an error for the Arbitrator to fail to balance against the adverse consequences for Ms Stokes of an investigation, on the one hand, against the serious implications for the appellant of a positive finding, on the other hand.
Last, Mr Perry submitted that the Arbitrator erred in finding that Ms Stokes was injured by Ms Kerr’s actions on 22 November 2010. The injury pleaded was “[h]arassment, threats, bullying and intimidation by staff” and it is clear from the decision that not one of these four allegations was made out. The Arbitrator’s findings are against any harassment, any threat, any bullying, or any intimidation. The events on 22 November 2010 could not be characterised as “harassment, threats, bullying and intimidation”. No application was made to amend the pleadings and it was not open to the Arbitrator to make an award in Ms Stokes’s favour.
In submissions in reply, Mr Perry contended:
(a)     it was “nonsense” to say that the appellant conceded that Ms Stokes was the subject of harassment, threats, bullying and intimidation, as Mr Daley’s submissions appeared to suggest. If the matter had proceeded on the basis that the appellant had made that concession, there would be no case to argue and the Commission would simply have noted that the appellant had conceded harassment, threats, bullying and intimidation, and entered an award in favour of Ms Stokes. By contrast, the Arbitrator considered as the “determining issue” the question of whether or not the appellant’s action on 22 November 2010 was reasonable;
(b)     the s 74 notice said that the appellant did not accept any cause of injury “save for the employer’s action with respect to discipline and/or transfer”, which it asserted was reasonable action;
(c)     it was incorrect to assert, as Mr Daley asserted, that the appellant lacked expert evidence as to the cause of Ms Stokes’s injury. Dr Jungfer noted that “disciplinary procedures were extended” and that Ms Stokes was told that her drug test had yielded positive for methadone. Dr Jungfer observed “[t]his obviously caused her a substantive degree of distress”. That the employer’s actions, as identified, were the cause of Ms Stokes’s distress was confirmed by Dr Jungfer. The Arbitrator’s comments from T17.10 to T20.32 indicate that he concluded, as a matter of fact, that the appellant’s injury arose from the employer’s actions with respect to discipline. The issue was the reasonableness or otherwise of the appellant’s actions;
(d)     the Arbitrator made a clear error of fact in finding that the appellant’s action in requiring Ms Stokes to submit to (drug) testing was unreasonable action;
(e)     the Arbitrator did not articulate why the appellant should demonstrate how the false positive came about. The appellant’s complaint is that the Arbitrator regarded the appellant as having failed to discharge its onus because it did not bring evidence as to the manner in which the test came to be positive, in the same manner as the employer in Heggie did not bring evidence as to its reasoning in determining to suspend Mr Heggie and institute an inquiry. No such onus lay on the employer in Heggie and no such onus lay on the appellant. In determining otherwise, the Arbitrator erred, and
(f)      there is “not a breath of support in the [A]rbitrator’s reasoning for the allegations of bullying, etcetera”. The Arbitrator found, through reasoning that was flawed, that the employer had failed to prove its actions were reasonable. That is a far cry from a finding that the employer had bullied its worker.

Discussion and findings

As submitted by counsel for Ms Stokes, Mr Mark Daley, Mr Perry’s submissions have misconstrued the Arbitrator’s findings. The Arbitrator did not find that it was inappropriate or unreasonable that the appellant require Ms Stokes to submit to drug testing. His decision was that, first, the appellant had not proved that the test itself (the urine analysis) had been done reasonably, given that the evidence established that it was in fact a false positive and, second, the appellant’s conduct in respect of that false positive was not established as being reasonable, given Ms Stokes’s denials that she had ever taken methadone.
At the arbitration, Mr Daley submitted that the Arbitrator would infer that the drug testing was done by the appellant’s own hospital. The Arbitrator clearly accepted that submission, noting (at T21.2) that the totality of the evidence supported it. (I note that the evidence in the email of 2 December 2010 appears to confirm this conclusion, though it was not relied on at the arbitration.)
The Arbitrator added that, while false positives occur, there was no evidence as to why it occurred in this case. The Arbitrator’s statement that there was no evidence as to why the false positive occurred was not accurate. However, for the reasons discussed below (at [84]–[89]), his statement was not an error that has affected the result.
Contrary to Mr Perry’s submission, the Arbitrator’s decision did not proceed on the assumption (express or implied) that the false positive was prima facie evidence of unreasonable action by the appellant. His decision proceeded on the (correct) basis that the appellant carried the onus of proof to establish its defence under s 11A. The Arbitrator’s reasoning, as Mr Daley highlighted in his submissions on appeal, was that to rely on the results of the drug test, in circumstances where the appellant did the testing (that is, the urine analysis), the appellant had to prove that its actions (with regard to the urine analysis and the meeting on 22 November 2010) were reasonable. It failed to do so.

There was no evidence (to which the Arbitrator had been taken) of why a false positive might occur, how often it occurred, whether the false positive was a result of gross negligence or an unavoidable oversight, or a problem with blood testing generally, or whether it occurred through an absence of fault. These points were all important in assessing the reasonableness of the appellant’s actions and the Arbitrator quite properly observed that the false result might have been the result of gross negligence or an unavoidable oversight, but he did not know.
The appellant carried the onus of proving that the testing (that is, the urine analysis) was done reasonably and with proper safe guards to reduce or eliminate the risk of a false result. The appellant also carried the onus of proving that it was reasonable for it to act on the test results, despite those results later being shown to be false. The appellant took the Arbitrator to no evidence on, and made no submissions about, these critical issues.
Mr Perry’s reliance on Heggie, in his submissions in reply, has not advanced the appellant’s position. Heggie involved completely different facts. As reasonableness is an objective test, an employer’s subjective opinion will be of “little significance” (Basten JA in Heggie at [11]; see also Sackville AJA at [159]). Those observations were made in the context of a finding that the employer had failed to call evidence from a manager as to why a worker was suspended and an inquiry commenced into the circumstances of an alleged assault. As long as the manager had not been motivated by malice, or other irrelevant factors, which was not suggested, her opinion was of little significance to determining if the objective test of reasonableness had been satisfied. Therefore, the absence of evidence from the manager was not significant.
The present case involves the employer subjecting the worker to a drug test. The result of that test would (obviously) have serious consequences for her, if it proved positive. The test result was positive, but was wrong. Acting on the wrong result, the appellant disciplined the worker. In these circumstances, which bear no comparison to the events in Heggie, it was perfectly appropriate for the Arbitrator, in assessing reasonableness, to ask the questions he asked. That is especially so where the appellant carries the onus of proof. Moreover, the present case does not involve the state of mind of the appellant’s managers, which Heggie makes clear will not usually be relevant, it concerns whether the appellant’s actions were reasonable in light of a false result on an issue that would have significant consequences for those involved.
The Arbitrator did not have to articulate, in any detail, why the appellant should demonstrate how the false result occurred (it should be noted that, as discussed below, that was not the only matter he considered). It being clear, from the decision overall, that the results of the test would have serious consequences for the worker (and the hospital), it was (obviously) appropriate that the appellant ensure that the test be conducted with reasonable care to reduce the risk of a false result. In the circumstances, considering the Arbitrator’s reasons as a whole, it was not necessary for the Arbitrator to say more on the issue, he having noted that the appellant carried the onus of proof. It is not an error to omit to state expressly a finding that is clear on a fair reading of the whole decision (Polglaze v Veterinary Practitioners Board of NSW [2009] NSWSC 347 at [56], applied in Vitaz v Westform (NSW) Pty Ltd [2010] NSWSC 667).
It is clear that the reasonableness of an employer’s action is to be determined by the facts known to the employer at the time “or that could have been ascertained by reasonably diligent inquires” (Sackville AJA in Heggie at [61]). His Honour added (also at [61]) that, ordinarily, the reasonableness of a person’s actions is assessed by reference to the circumstances known to that person at the time, “taking into account relevant information that the person could have obtained had he or she made reasonable inquiries or exercised reasonable care” (emphasis added).
The emphasised words in the preceding paragraph are particularly relevant in the present case because, first, a reasonable inquiry would have revealed that the test result was false, and, second, the appellant called no evidence that it made any inquiries about the accuracy of the drug analysis prior to the meeting on 22 November 2010 or that it exercised reasonable care in its handling of the test. It follows that the Arbitrator’s reference to the absence of evidence from the appellant was appropriate and disclosed no error.
Mr Perry’s submission that the Arbitrator failed to articulate the basis for his conclusion that the “requirement for the drug test was unreasonable” is based on the false assumption that the Arbitrator expressed that conclusion. A fair reading of the decision reveals that the Arbitrator did not express such a conclusion, or anything like it. He said that the appellant had not proved, on the balance of probability, that its conduct in carrying out the drug test, or its behaviour consequent upon the test, was reasonable. The Arbitrator’s reference to the appellant’s “conduct in carrying out the drug test” was a clear reference to the analysis of the urine sample, not to the fact the appellant required Ms Stokes to submit to a test. The Arbitrator did not have to articulate a basis for a conclusion he did not express. It follows that this submission is without any foundation and does not establish error.
Mr Perry’s submission that it was clearly the Arbitrator’s view that if the technician conducting the test had been negligent then the appellant’s action was unreasonable is plainly wrong and is rejected. The Arbitrator made no finding, express or implied, that the appellant’s actions would have been unreasonable if the false positive had resulted from the negligence of the tester.
Had the Arbitrator approached the matter in that way, he would (arguably) have applied an incorrect test. The test is not simply whether the appellant’s actions were unreasonable but whether the injury was wholly or predominantly caused by reasonable action with respect to, in this case, discipline. The Arbitrator merely observed that the false positive “may” have resulted from gross negligence or been an unavoidable oversight. He did not know and he did not express a conclusion on the reasonableness of the appellant’s actions, other than to say that the appellant had not established its defence under s 11A. On the evidence to which the Arbitrator had been taken, that approach was open and disclosed no error.
Dealing with Mr Perry’s submission that the Arbitrator erred in saying the appellant tendered no evidence as to why the false positive occurred, Mr Daley pointed out that Ms Wood had not relied on the email of 2 December 2010 (reproduced at [63]–[64] above), or drawn the Arbitrator’s attention to it, and it was not for the Arbitrator to go through the documents to try and find material that supported the appellant’s case. I agree.
The documentary evidence tendered in this case comprises over 1,150 pages. Apart from Ms Stokes’s statement of 9 June 2014, none of it is in any particular order or properly indexed. Much of it is irrelevant. A lot of it has been unnecessarily duplicated. In these circumstances, in the absence of relevant submissions, an Arbitrator is not obliged to search through a mass of apparently non-supportive evidence to find supportive material (Gamester Pty Ltd v Lockhart [1993] HCA 79; 112 ALR 623; 67 ALJR 547).
It was for the appellant, or its legal advisors, to take the Arbitrator to relevant material. They did not refer to the email of 2 December 2010 and it is not open to argue that an Arbitrator erred in not referring to material upon which the appellant placed no reliance at the hearing (Coulton v Holcombe [1986] HCA 33; 162 CLR 1; University of Wollongong v Metwally (No 2) [1985] HCA 28; 59 ALJR 481; Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418; Water Board v Moustakas [1988] HCA 12; 180 CLR 491).
Had the appellant relied on the email of 2 December 2010, Mr Daley could have made further submissions or called further evidence as to the nature of the error made by the analyst and how easy or otherwise it might have been to have avoided the error or to have checked the results so that the error might have been discovered prior to telling Ms Stokes of the wrong results.
In any event, as Mr Daley has submitted, the email effectively confirms that the false result came about because of negligence by those who did the analysis. It follows that, as it appears to be the negligence of the appellant, through its servants or agents, that led to Ms Stokes being confronted with a serious (but false) allegation (which the appellant would or should have known would occur), it is difficult to see how the evidence of the explanation for the false positive advances the appellant’s position.
I agree with Mr Daley’s submission that the email seems to suggest that the error that occurred in the testing was readily identified, once the review was done, and, had the appellant done that simple review prior to confronting Ms Stokes, nothing would have been said to her and she would not have been put off work. In other words, if the appellant had exercised reasonable care and diligence, by having the results checked and confirmed before confronting Ms Stokes, no problem would have arisen. It follows that, if the Arbitrator erred in not referring to the email of 2 December 2010, it makes no difference to the outcome.
Mr Perry’s further reliance on Heggie (in his main submissions) is also misplaced. In that case, it was held that the potential serious consequences of the employer’s actions did not affect the reasonableness of those actions because all of the “dire” consequences identified by the Deputy President required action, beyond the disciplinary action taken by the employer, before they could come to pass (Sackville AJA at [156]).
In the present case, contrary to Mr Perry’s submission, the Arbitrator did not refer to the “potential adverse consequences” (emphasis added) for Ms Stokes of a positive drug test. In the passage quoted by Mr Perry, the Arbitrator referred to the actual impact on Ms Stokes when Ms Kerr told her the test was positive for methadone. He said the consequences for Ms Stokes “on her evidence, were … ‘devastating’”. In other words, the Arbitrator was saying that the consequences for Ms Stokes, on being told of the positive test, were in fact “devastating”. That statement was consistent with Ms Stokes’s evidence, which was unchallenged, and disclosed no error. It follows that one of the “dire” consequences of a false positive, namely, a devastating effect on Ms Stokes, had occurred. The Arbitrator was entitled to consider that consequence in his assessment of whether the appellant had discharged its onus of proof.
Mr Perry’s submission that there was no challenge to the proposition that “the matter” (presumably the matter of drug use) was serious and warranted investigation completely misrepresents the Arbitrator’s reasons and the issues involved. There was no issue that, given Ms Stokes’s history, the appellant was entitled to conduct the drug test. The issue was whether the appellant acted reasonably in the analysis of the urine sample (which the Arbitrator described as “its conduct in carrying out the drug test”) and in its conduct after the analysis came back positive (which the Arbitrator described as “its behaviour consequent upon the drug test”).
When the test came back positive, Ms Kerr did not say that “the matter” had to be investigated. She said, “[b]ecause this [the positive test] is so serious and because you are putting patients and yourself at risk, we have no choice but to refer this to the Nurses Registration Board”. That was quite a different thing to saying, as was said in Heggie, that the matter needed to be investigated.
As part of the performance management plan, the drug test was “the investigation”. It was investigating whether Ms Stokes was taking substances likely to affect her performance as a nurse. In the circumstances of this case, that was an accepted and reasonable part of the management plan. However, the difficulty in the present case is that Ms Kerr clearly assumed, despite Ms Stokes’s vigorous denials, that the test result was accurate, with no (apparent) regard to the possibility of a false positive.
The Arbitrator accepted that Ms Stokes should have been told of the result. However, whether Ms Kerr’s comments to Ms Stokes were, at the time they were made, reasonable, depended on a “whole number of factors” (T21.17). It was in this context that the Arbitrator raised the following questions:
(a)     Had the appellant had previous false positives?
(b)     Was it best to wait for the second reading (before Ms Kerr spoke to Ms Stokes and told her the matter would be reported to the Nurses Registration Board)?
(c)     What was the protocol for dealing with this situation?
(d)     Did the appellant follow that protocol?
The Arbitrator correctly noted that the appellant tendered no evidence on these matters. It was appropriate, in the circumstances of this case, that the evidence address these matters. The fact that it did not was a proper matter that led the Arbitrator to conclude that the appellant had not established its defence. That disclosed no error.
Moreover, as Mr Daley submitted, Heggie is not authority for the proposition that the consequences of the potential adverse findings for the worker are irrelevant. It is authority for the fact that such consequences, of themselves, do not necessarily undermine the reasonableness of the action taken. It is a fact sensitive exercise. This follows from point (vi) made by Sackville AJA (Ward JA agreeing) in Heggie at [59], where his Honour said:
“The assessment of reasonableness should take into account the rights of the employee, but the extent to which these rights are to be given weight in a particular case depends on the circumstances.”
This statement is consistent with the following statement by Geraghty CCJ in Irwin v Director General of School Education (unreported, Compensation Court of NSW, Geraghty CCJ, 18 June 1998, No 14068 of 1997):
“The question of reasonableness is one of fact, weighing all the relevant factors. The test is less demanding than the test of necessity, but more demanding than a test of convenience. The test of ‘reasonableness’ is objective, and must weigh the rights of employees against the objective of the employer. Whether an action is reasonable should be attended, in all the circumstances, by a question of fairness.”
This passage was quoted and approved by Foster AJA (Sheller and Santow JJA agreeing) in Commissioner of Police v Minahan [2003] NSWCA 239; 1 DDCR 57 (Minahan) and its correctness was not challenged in Heggie, though Minahan was discussed and distinguished on a different issue.
Mr Perry’s complaint that the Arbitrator erred in failing to balance the adverse consequences for Ms Stokes of an investigation against the serious implications for the appellant of a positive finding raises two issues. First, it is unclear what “investigation” Mr Perry is talking about. As I have said, the drug test was the investigation. It was not suggested that it was not reasonable for the appellant to conduct that test. The problem arose in the aftermath of the test, namely, the false result and Ms Kerr’s actions and comments based on that false result.
Second, Ms Wood made no submission along the lines now sought to be argued by Mr Perry about the need to balance the parties’ respective rights. She submitted, at T15.15:
“[Ms Wood:] Now, [Ms Stokes] then complains of an event on 22 November 2010 where she has undergone a drug test that came back positive. It came back positive. What is the employer supposed to do? The employer has stood her down on compassionate leave in order to address yet again another issue with [Ms Stokes’s] performance and then it turns out that that drug test may have been a false positive and an apology ensued.
ARBITRATOR: It certainly was, wasn’t it, as I read it? I don’t think there was any doubt that it was a false positive.
MS WOOD: It suggests that it only got as far as it may have been a false positive and the hospital apologised to [Ms Stokes], but standing [Ms Stokes] down on compassionate leave, while that is being investigated, is in my submission a reasonable action taken by the employer in respect of discipline. It clearly falls within discipline.” (emphasis added)
The submission that the result “may have been a false positive” was surprising, to say the least. It was a false positive. The submission that Ms Stokes was stood down while the result was “being investigated” was not consistent with the evidence. Ms Kerr said nothing of the sort to Ms Stokes at the meeting on 22 November 2010. It follows that, given the way the case was presented at arbitration, it is not open to argue on appeal that the Arbitrator erred in failing to deal with an issue never put (Brambles Industries Ltd v Bell [2010] NSWCA 162).
Mr Perry’s last submission is that the Arbitrator erred in finding that Ms Stokes was injured by Ms Kerr’s actions on 22 November 2010. This submission is rejected.
This complaint is based on a misunderstanding of the Arbitrator’s findings, the issues in dispute, and how the arbitration was conducted. It has also ignored the fact that the appellant carried the onus under s 11A. The Arbitrator did not find that Ms Stokes was injured by Ms Kerr’s actions on 22 November 2010. He found that it was fairly clear, even discounting Ms Stokes’s evidence to some extent, that the drug testing “contributed towards her psychological injury, which injury had been admitted by the appellant” (emphasis added) (T22.11). (This finding is discussed further at [115] below.)
The appellant did not dispute that Ms Stokes had suffered a psychological injury arising out of or in the course of her employment. This followed from the s 74 notice, which only disputed the claim on the ground that Ms Stokes’s injury had been wholly or predominantly caused by reasonable action taken by the appellant with respect to discipline and/or transfer. It was never suggested by Mr Daley that the appellant conceded that Ms Stokes was the subject of harassment, threats, bullying and intimidation. Mr Perry’s assertion to that effect in his submissions in reply was wrong.
The Arbitrator expressly noted the terms of the s 74 notice, which dealt exclusively with s 11A. Ms Wood did not seek leave to put any other matters in dispute and her submissions were directed solely to the s 11A issues. As a consequence, the Arbitrator said that Ms Stokes was “relieved of the necessity to establish that she sustained a psychological injury by the fact that the [appellant] has, in essence, admitted liability for such an injury, by not raising it in its s 74 notice” (T2.22). That statement was clearly correct.
It follows that Mr Perry’s submission that “it is completely clear from the Arbitrator’s decision that not one of these four allegations [the allegations of harassment, threats, bullying and intimidation by staff in the Application] was made out” totally misses the point. The Arbitrator said (at T2.18) that if Ms Stokes had had to prove she was the subject of harassment, threats, bullying and intimidation by staff, she would, on the evidence, not have succeeded. As she did not have to prove those matters, Mr Perry’s submission that the events of 22 November 2010 were not, and could not, be characterised as “harassment, threats, bullying and intimidation” is irrelevant. To succeed, Ms Stokes did not have to establish that they were.
However, the Arbitrator’s statement noted in the preceding paragraph did not relieve the appellant of the obligation of establishing its defence under s 11A (Department of Education and Training v Sinclair [2005] NSWCA 465; 4 DDCR 206 at [18]; Minahan at [25]). That meant not only that the appellant had to prove that its actions were reasonable, which it failed to do, but also that those reasonable actions were the whole or predominant cause of the injury (the causation issue). It follows that, contrary to Mr Perry’s submission in reply, the Arbitrator did not consider the “determining issue” to be the question of whether or not the appellant’s action on 22 November 2010 was reasonable. He also considered, consistent with the way the parties presented the case at arbitration, the causation issue.

On the causation issue, the following exchanges took place at the arbitration, starting at T23.4 on 1 August 2014:
“ARBITRATOR: There are two things. Is there any evidence? You say that discipline or other matters referred to in 11A are the whole cause of her incapacity? There is no medical evidence? I have got to infer that, have I, in your case?
MS WOOD: No. It’s plain that those events are the events that [Ms Stokes] complains of as causative of her condition.
ARBITRATOR: Do you accept, Mr Daley, that the incapacity, the psychological injury, is wholly or predominantly caused by action taken by the employer in the form of discipline and/or whatever else might be relevant or not?
MR DALEY: No.” (emphasis added)
Later, Mr Daley submitted (at T25.33 on 1 August 2014) that:
“The onus first and last on this issue is on the [appellant]. They need to identify which events fall within the statutory definition of discipline and performance management and which of those caused or predominantly caused [Ms Stokes’s] psychiatric illness. There is no evidence from a medical practitioner. It is not a matter, in my submission, that you can take judicial notice of. It’s purely a medical question.”
Starting at T45.19, Ms Wood submitted:
MS WOOD: - - - in my submission, [the things that happened in 2011] are not relevant to the question that is before you. What was the cause of [Ms Stokes’s] incapacity? [Ms Stokes] is saying that she was victimised. What events is she relying on in terms of what she perceives to be victimisation? It’s these very events that people are complaining about her.
ARBITRATOR: It would put the injury in issue and it might be put in the case but that is not the issue, is it?
MS WOOD: No. It is relevant that [Ms Stokes] frames her claim that she has suffered a psychological injury because of this conduct. That is how she frames her case, so that if the conduct is reasonable action taken by the employer in respect of discipline - and that is logging of complaints, investigating complaints, making a determination in relation to whether those complaints are substantiated and if they are, then proceeding to discipline [Ms Stokes] in the manner in which they have done, then it clearly is a case that falls within s 11A and it is clearly a case that falls from these events and no other events.
[Ms Stokes] doesn’t point to any other events as being causative. They are clearly all of these events that have been recorded from March 2009 through to November 2010 and in my submission if she perceives those as victimisation then the defence is still open to the respondent. If the [appellant] acted reasonably then it is not compensable, even if it is a perception of [Ms Stokes], so in my submission you would have to accept that.”
The Arbitrator said Ms Wood had submitted that, as a matter of commonsense, Ms Stokes’s psychological injury resulted from discipline or transfer or performance appraisal (T17.14). That was not an unreasonable summary of Ms Wood’s submissions. The Arbitrator noted Mr Daley’s submission that there was no evidence upon which the Commission could be persuaded that the appellant’s actions were reasonable and said that it was not enough for the appellant to simply say that it has suspended or disciplined a worker. (In fact, Mr Daley submitted that there was no evidence that reasonable action with respect to discipline had caused or predominantly caused Ms Stokes’s psychological illness.) The Arbitrator added the appellant “must put on evidence to show that it was an objectively reasonable act” (T18.5).
The Arbitrator’s last statement in the preceding paragraph may be apt to mislead. That is because it will always be open to infer from the surrounding circumstances that conduct was reasonable, even if there is no direct evidence addressing that issue. Moreover, as previously noted, as reasonableness is an objective test, an employer’s subjective opinion will be of “little significance” (Basten JA in Heggie at [11]; see also Sackville AJA at [159]).
Further, Mr Daley’s submission that it is “purely a medical question” was not accurate. Whether the causation has been established will depend on the totality of the evidence, both expert and lay (Guthrie v Spence [2009] NSWCA 369; 78 NSWLR 225 at [194] to [199]). In any event, the point is of no consequence in the present matter because the Arbitrator said that, ultimately, he was not sure that Mr Daley’s submission carried the day (T18.6). He thought that some of the disciplinary action was “clearly reasonable” (T18.9), and he dealt with the evidence that led him to that conclusion.
The Arbitrator then turned to the drug testing (the urine analysis and its aftermath) and, for the reasons canvassed above, determined that the appellant had not established that its actions with respect to it were reasonable. He said it was fairly clear, even discounting Ms Stokes’s evidence to some extent, that the drug testing (and, I infer, the aftermath of the testing) contributed towards her psychological injury, which had been admitted by the appellant (T22.11). The Arbitrator’s reference to the appellant’s admission was to an admission of injury, not to an admission as to the cause of the injury. He then noted that Ms Stokes was “devastated” when told of the positive test and he referred to Dr Jungfer’s evidence that the drug testing and its aftermath was one of the important factors that caused Ms Stokes’s psychological symptomatology. Those statements were open on the evidence, and disclosed no error.
Having reached the conclusion that there was one employment event (the drug testing and its aftermath) that significantly contributed to Ms Stokes’s psychological injury, the Arbitrator said that the question was whether the appellant had proved that the other disciplinary matters, which he had found were reasonable, were the whole or predominant cause of the psychological injury. He correctly concluded that there was no medical evidence in the appellant’s “camp” (T23.10) that addressed that issue, noting that Dr Newlyn did not comment on the issue at all.
Dr Jungfer did not address the causation issue by isolating the reasonable actions from the actions that were found not to be reasonable and, contrary to Mr Perry’s submissions in reply, her evidence does not support the appellant’s position. At the arbitration, Ms Wood did not suggest that it did. There is no lay evidence from which the Arbitrator could or should have inferred that the appellant’s reasonable actions with respect to discipline (as opposed to its actions with respect to the drug testing and its aftermath) had wholly or predominantly caused Ms Stokes’s psychological injury. Thus, there is no persuasive evidence on the relevant causation issue.
In these circumstances, the Arbitrator was unable to accept Ms Wood’s submission that he could conclude, as a matter of commonsense, that those parts of the appellant’s disciplinary procedures that were reasonable were the whole or predominant cause of Ms Stokes’s psychological injury. In other words, the appellant had failed to discharge the onus of proof on the causation issue in s 11A. That approach and conclusion was consistent with the evidence and disclosed no error.

Did the Arbitrator err in failing to find that the appellant’s actions in respect of the drug test and the consequent actions were reasonable?

Though Mr Perry made no relevant submissions in support of this “ground” of appeal, Mr Daley addressed it at length. As the appeal is unsuccessful, because the appellant has not established any material error that has affected the outcome, it is not strictly necessary for me to deal with this issue. However, I make the following additional observations on why this ground, which effectively invites a review or rehearing on the merits but without identifying error, is not made out.
First, given the serious consequences of a positive test for a nurse, an employer, acting reasonably, would take proper steps to ensure that the test was performed competently and that there was a protocol in place to deal with the possibility of a false positive. The appellant did not take those steps in this case and called no evidence of any protocol to deal with a false positive. These factors are not conclusive but point strongly against a finding that the appellant’s actions were reasonable.
Second, Ms Stokes’s prompt and firm denials that she had ever taken methadone should have alerted a reasonable employer to suspend taking further action against her until it took the very simple (and obvious) step of checking the test results. Instead, Ms Kerr said that, because the matter was so serious, she had no choice but to refer the matter to the Nurses Registration Board and to place Ms Stokes on long service leave for compassionate grounds. The appellant called no evidence of any urgency that required Ms Stokes to be confronted and told that the matter would have to be reported and that she was to go on (forced) leave, prior to the results being checked.
Third, as Mr Daley submitted, “[a]t a base level[,] there was a failure of testing procedures and no evidence that that failure was reasonable or [that] the conduct flowing from it was reasonable and in accordance with protocols etc”. I agree.
Fourth, this is an entirely different case from Heggie. In that case, there was a violent incident, the occurrence of which was not disputed. There was no suggestion that Mr Heggie was fragile emotionally or that his pre-existing emotional health had to be considered in terms of the form of discipline that was administered. Mr Heggie was aware of the violent act (and had filed a report about it) before the employer advised him that he was suspended and that there would be an inquiry into the allegations.
In the present case, Ms Stokes did not even know the purpose of the meeting on 22 November 2010, was given no opportunity to have a support person present, and, on the evidence, the appellant took no steps to ensure the accuracy of the test results before confronting her. In light of Ms Stokes’s denials, the accuracy of which could easily have been checked (by checking the test results), the denial of the opportunity to discuss the matter with a colleague (Dr Thompson) was not reasonable.
Fifth, Ms Stokes’s request that she speak with Dr Thompson about the result was denied because, Ms Kerr asserted, the result was “confidential”. Mr Daley asked, rhetorically, why was Ms Stokes prevented from obtaining advice, given the serious circumstances that the appellant had wrongly put her in. Mr Daley also asked why was it reasonable to leave Ms Stokes isolated and distraught, facing serious allegations, in a fragile emotional state with no support and, at the same time, deny her any ability to obtain it? The appellant called no evidence that addressed these questions. Viewing the matter objectively, what was done was not reasonable. That is because, on the doubtful ground that the result was “confidential”, it denied Ms Stokes the basic fairness of having support and advice.
Sixth, there is no evidence of the date on which Ms Stokes was informed that the original result was false and whether the appellant made it clear to Ms Stokes that they would not be continuing with their threat to refer the matter to the Nurses Registration Board.
Seventh, it is relevant to note, in assessing reasonableness of an employer’s conduct, as the Arbitrator did, Ms Stokes’s “very fragile [emotional] state” (T21.26), which was something that the appellant was or should have been well aware of. There is no evidence that the appellant took that into account in the meeting on 22 November 2010.
All of the above matters, taken individually or together, point strongly to the conclusion that the appellant’s actions with respect to the drug testing (the urine analysis) and the meeting on 22 November 2010 were not reasonable. It follows that, on the evidence presented, the contention that the Arbitrator erred in failing to find that the appellant’s actions in respect of the drug test and the consequent actions were reasonable is unsustainable and is rejected.

CONCLUSION

It follows that, for the reasons identified above, Mr Perry’s submissions involved a sustained misreading of the Arbitrator’s decision and a surprising misunderstanding of how the case was presented at the arbitration. The Arbitrator’s determination – that the appellant failed to discharge its onus of demonstrating that the drug testing (the actual analysis as opposed to merely requiring Ms Stokes to submit to the test), the reporting of the results and the protocol adopted were reasonable – disclosed no error. If, contrary to my view, the Arbitrator erred in failing to consider the email of 2 December 2010, that error has not affected the outcome.

DECISION

The Arbitrator’s determination of 12 August 2014 is confirmed.

COSTS

The appellant employer is to pay the respondent worker’s costs of the appeal, assessed at $2,530 plus GST.

Bill Roche
Deputy President

26 November 2014

I, JACQUELINE HAGGER, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

ASSOCIATE

[2014] NSWWCCPD 78

26 November 2014

Key Legal Topics

Areas of Law

Workers Compensation Law

Legal Concepts

Causation

Unconscionable Conduct

Compensatory Damages